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, 1997
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, 1997
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, 1997 and
December 31, 1996 2
Statements of Income - Three Months and
Nine Months Ended September 30, 1997 and 1996 4
Statements of Cash Flows - Nine Months
Ended September 30, 1997 and 1996 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 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
PART I. FINANCIAL INFORMATION
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
- ------
Utility Plant, at cost:
Electric................................................ $ 1,881,441 $ 1,877,955
Less: Accumulated provision for depreciation......... 580,157 552,780
------------- -------------
1,301,284 1,325,175
Unamortized acquisition costs........................... 424,641 491,709
Construction work in progress........................... 22,614 11,032
Nuclear fuel, net....................................... 1,310 1,313
------------- -------------
Total net utility plant............................. 1,749,849 1,829,229
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 4,011 3,229
Investments in regional nuclear generating
companies and subsidiary company, at equity............ 19,905 19,578
Other, at cost.......................................... 4,233 1,835
------------- -------------
28,149 24,642
------------- -------------
Current Assets:
Cash.................................................... 588 1,015
Notes receivable from affiliated companies.............. 62,850 18,250
Receivables, net........................................ 86,375 105,381
Accounts receivable from affiliated companies........... 34,762 32,452
Accrued utility revenues................................ 34,300 36,317
Fuel, materials, and supplies, at average cost.......... 39,066 44,852
Recoverable energy costs--current portion............... 23,483 -
Prepayments and other................................... 21,498 24,629
------------- -------------
302,922 262,896
------------- -------------
Deferred Charges:
Regulatory assets:
Recoverable energy costs............................... 200,782 211,236
Income taxes, net...................................... 139,687 151,431
Deferred costs, nuclear plant.......................... 284,593 269,233
Unrecovered contractual obligations (Note 2B).......... 89,257 50,271
Other.................................................. 1,989 2,333
Deferred receivable from affiliated company............. 33,284 33,284
Unamortized debt expense................................ 12,003 12,731
Other................................................... 6,222 3,926
------------- -------------
767,817 734,445
------------- -------------
Total Assets........................................ $ 2,848,737 $ 2,851,212
============= =============
</TABLE>
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
------------- -------------
(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................................ 423,568 423,058
Retained earnings....................................... 153,162 174,691
------------- -------------
Total common stockholder's equity.............. 576,731 597,750
Preferred stock subject to mandatory redemption......... 75,000 100,000
Long-term debt.......................................... 516,485 686,485
------------- -------------
Total capitalization........................... 1,168,216 1,384,235
------------- -------------
Obligations Under Seabrook Power Contracts
and Other Capital Leases................................. 832,724 871,707
------------- -------------
Current Liabilities:
Long-term debt and preferred stock--current portion..... 195,000 25,000
Obligations under Seabrook Power Contracts and other
capital leases--current portion........................ 96,308 42,910
Accounts payable........................................ 17,847 37,675
Accounts payable to affiliated companies................ 24,172 31,130
Accrued taxes........................................... 71,378 81
Accrued interest........................................ 16,764 7,992
Accrued pension benefits................................ 46,506 44,790
Other................................................... 10,607 37,516
------------- -------------
478,582 227,094
------------- -------------
Deferred Credits:
Accumulated deferred income taxes....................... 219,585 258,317
Accumulated deferred investment tax credits............. 4,107 4,511
Deferred contractual obligations (Note 2B).............. 89,257 50,271
Deferred revenue from affiliated company................ 33,284 33,284
Other................................................... 22,982 21,793
------------- -------------
369,215 368,176
------------- -------------
Commitments and Contingencies (Note 2)
------------- -------------
Total Capitalization and Liabilities........... $ 2,848,737 $ 2,851,212
============= =============
</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,
--------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues................................. $ 285,390 $ 296,719 $ 820,809 $ 828,156
---------- ---------- ---------- ----------
Operating Expenses:
Operation --
Fuel, purchased and net interchange power..... 96,484 97,559 233,085 256,924
Other......................................... 91,065 83,133 272,044 236,217
Maintenance...................................... 9,855 11,123 27,305 26,546
Depreciation..................................... 11,145 10,808 33,252 32,174
Amortization of regulatory assets, net........... 14,134 14,141 42,416 42,743
Federal and state income taxes................... 18,832 21,687 67,960 64,912
Taxes other than income taxes.................... 11,553 11,334 33,353 34,882
---------- ---------- ---------- ----------
Total operating expenses................... 253,068 249,785 709,415 694,398
---------- ---------- ---------- ----------
Operating Income................................... 32,322 46,934 111,394 133,758
---------- ---------- ---------- ----------
Other Income:
Equity in earnings of regional nuclear
generating companies and subsidary company..... 508 617 1,363 1,648
Other, net....................................... (190) 29 (320) 6,432
Income taxes..................................... (375) (5,105) (1,222) (8,044)
---------- ---------- ---------- ----------
Other income, net.......................... (57) (4,459) (179) 36
---------- ---------- ---------- ----------
Income before interest charges............. 32,265 42,475 111,215 133,794
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt....................... 12,827 12,681 38,371 44,795
Other interest................................... 382 (852) 98 5,822
---------- ---------- ---------- ----------
Interest charges, net...................... 13,209 11,829 38,469 50,617
---------- ---------- ---------- ----------
Net Income......................................... $ 19,056 $ 30,646 $ 72,746 $ 83,177
========== ========== ========== ==========
</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,
-----------------------
1997 1996
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net Income................................................ $ 72,746 $ 83,177
Adjustments to reconcile to net cash
from operating activities:
Depreciation............................................ 33,252 32,174
Deferred income taxes and investment tax credits, net... 14,273 73,614
Recoverable energy costs, net........................... (13,029) 18,088
Amortization of acquisition costs....................... 42,423 42,743
Other sources of cash................................... 18,411 37,530
Other uses of cash...................................... (34,749) (9,517)
Changes in working capital:
Receivables and accrued utility revenues................ 18,712 (2,259)
Fuel, materials, and supplies........................... 5,786 7,615
Accounts payable........................................ (26,786) (25,875)
Accrued taxes........................................... 71,297 17,217
Other working capital (excludes cash)................... (13,290) (26,590)
----------- -----------
Net cash flows from operating activities.................... 189,046 247,917
----------- -----------
Financing Activities:
Reacquisitions and retirements of long-term debt.......... - (172,500)
Reacquisitions and retirements of preferred stock (25,000) -
Cash dividends on preferred stock......................... (9,275) (9,938)
Cash dividends on common stock............................ (85,000) (52,000)
----------- -----------
Net cash flows used for financing activities................ (119,275) (234,438)
----------- -----------
Investment Activities:
Investment in plant:
Electric utility plant.................................. (22,511) (28,554)
Nuclear fuel............................................ 3 133
----------- -----------
Net cash flows used for investments in plant.............. (22,508) (28,421)
NU System Money Pool...................................... (44,600) 16,250
Other investment activities, net.......................... (3,090) (1,364)
----------- -----------
Net cash flows used for investments......................... (70,198) (13,535)
----------- -----------
Net Decrease In Cash For The Period......................... (427) (56)
Cash - beginning of period.................................. 1,015 117
----------- -----------
Cash - end of period........................................ $ 588 $ 61
=========== ===========
</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, 1996 (1996 Form
10-K), the company's Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997, and the company's Form 8-Ks dated August 19, 1997,
September 2, 1997, and October 13, 1997. In the opinion of the
company, the accompanying financial statements contain all adjustments
necessary to present fairly the financial position as of September 30,
1997, the results of operations for the three-month and nine-month
periods ended September 30, 1997 and 1996, and the statements of cash
flows for the nine months ended September 30, 1997 and 1996. All
adjustments are of a normal, recurring, nature except those described
in Note 2B. The results of operations for the three-month and nine-
month periods ended September 30, 1997 and 1996 are not necessarily
indicative of the results expected for a full year.
Northeast Utilities (NU) is the parent company of the Northeast
Utilities system (the system). The system furnishes franchised 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 franchised retail electric
service, the system furnishes firm and other wholesale electric
services to various municipalities and other utilities and, on a pilot
basis pursuant to state regulatory experiments, provides off-system
retail electric service. 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.
Certain reclassifications of prior period data have been made to
conform with the current period presentation.
B. New Accounting Standards
For information regarding the adoption of new accounting
standards, see PSNH's Form 10-Q for the quarters ended June 30, 1997
and March 31, 1997 and PSNH's 1996 Form 10-K.
C. Regulatory Accounting and Assets
For information regarding regulatory accounting and assets, see
the MD&A in this Form 10-Q, PSNH's Form 10-Q for the quarters ended
June 30, 1997 and March 31, 1997 and PSNH's 1996 Form 10-K.
2. COMMITMENTS AND CONTINGENCIES
A. Restructuring
On May 13, 1997, the United States District Court for New Hampshire
(Court) appointed a mediator to the pending case involving PSNH's and
affiliates' challenge to the New Hampshire Public Utilities Commission
(NHPUC) Final Plan on restructuring the electric industry issued on
February 28, 1997. All court proceedings in the case were suspended
during the mediation process. On September 2, 1997, PSNH announced
that the mediation involving its court challenge to the February 28,
1997 restructuring orders of the NHPUC had ended without a resolution.
The Court has suspended the procedural schedule associated with this
court proceeding pending the resolution of appeals of certain
preliminary rulings by the United States Circuit Court of Appeals for
the First Circuit. The temporary restraining order issued by the
Court in March 1997 will remain in effect until further order of
either court. The NHPUC also reopened its proceeding to reconsider
certain matters in its restructuring orders.
For further information on restructuring of the electric utility
industry in New Hampshire, and on the PSNH rate case proceeding, see
the MD&A in this Form 10-Q, PSNH's Form 8-Ks dated October 13, 1997
and September 2, 1997, PSNH's Form 10-Q for the quarters ended June
30, 1997 and March 31, 1997 and PSNH's 1996 Form 10-K.
B. Nuclear Performance
Millstone: PSNH has a 2.85-percent joint 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, and are on the Nuclear Regulatory Commission's (NRC)
watch list. Management has restructured its nuclear organization and
is currently implementing comprehensive plans to restart the units.
NU hopes to restart Millstone 3 to service late in the first quarter
of 1998; Millstone 2 two to three months after Millstone 3; and
Millstone 1 in the second half of 1998. The pace of the recovery
effort at Millstone 1 will continue to be reduced so that resources
can be focused on Millstone units 3 and 2 in the first half of 1998.
Full funding for the recovery of Millstone 1 can be restored after
Millstone 3 is back in service. The actual date of the return to
service is dependent upon the completion of independent inspections
and reviews, inspections and reviews by the NRC and a vote by the NRC
Commissioners, and in the case of Millstone 1, the cost and schedule
of returning the first two units to service.
To date, PSNH's costs related to the Millstone 3 outage have not had a
material impact on the company's financial position or results of
operations. Management expects that, under its current planning
assumptions, Millstone 3's outage-related costs will continue to be
immaterial to the company's results of operations.
Litigation: For information regarding litigation initiated by the
non-NU owners of Millstone 3, see PSNH's Form 10-Q for the quarter
ended June 30, 1997 and PSNH's 1996 Form 10-K.
Maine Yankee Atomic Power Company (MYAPC): PSNH has a five percent
ownership interest in the Maine Yankee nuclear generating facility
(MY). At September 30, 1997, PSNH's equity investment in MYAPC was
approximately $3.8 million. The NU system companies had relied on MY
for approximately two percent of their capacity.
On August 6, 1997, the board of directors of MYAPC voted unanimously
to cease permanently the production of power at MY. During November
1997, MYAPC filed an amendment to its power contracts clarifying the
obligations of its purchasing utilities following the decision to
cease power production. At September 30, 1997, the estimated
obligation, including decommissioning, amounted to approximately $930
million, of which PSNH's share was $46.5 million. Under the terms of
the contracts with MYAPC, the shareholders-sponsor companies,
including PSNH, are responsible for their proportionate share of the
costs of the unit, including decommissioning. Management expects that
PSNH will be allowed to recover these costs from its customers.
Accordingly, PSNH has recognized these costs as a regulatory asset,
with a corresponding obligation, on its balance sheets.
For additional information regarding this and other nuclear
performance matters, see Part II and the MD&A in this Form 10-Q,
PSNH's Form 8-K dated October 13, 1997, PSNH's Form 10-Q for the
quarters ended June 30, 1997 and March 31, 1997, and PSNH's 1996 Form
10-K.
C. Environmental Matters
For information regarding environmental matters, see PSNH's Form 10-Q
for the quarters ended June 30, 1997 and March 31, 1997 and PSNH's
1996 Form 10-K.
D. Nuclear Insurance Contingencies
For information regarding nuclear insurance contingencies, see PSNH's
1996 Form 10-K.
E. Construction Program
For information regarding PSNH's construction program, see PSNH's 1996
Form 10-K.
F. Long-Term Contractual Arrangements
For information regarding long-term contractual arrangements, see
PSNH's 1996 Form 10-K. For information related to the closure of MY,
see the MD&A and Note 2B in this Form 10-Q and PSNH's Form 10-Q for
the quarter ended June 30, 1997.
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 financial statements and footnotes in this Form 10-Q,
the First and Second Quarter 1997 Form 10-Qs, the 1996 Form 10-K, and the Form
8-Ks dated August 19, 1997, September 2, 1997 and October 13, 1997.
FINANCIAL CONDITION
Overview
Net income was approximately $19 million for the three months ended September
30, 1997 compared to approximately $31 million for the same period in 1996. Net
income for the nine months ended September 30, 1997 was approximately $73
million compared to $83 million for the same period in 1996. The decreases in
net income for the three and nine month periods were primarily due to lower
operating revenues and higher operating expenses in 1997.
Restructuring
On May 13, 1997, the United States District Court (Court) of New Hampshire,
appointed a mediator to the pending case involving PSNH's and affiliates'
challenge to the New Hampshire Public Utilities Commission (NHPUC) decision on
February 28, 1997 regarding electric utility restructuring. All court
proceedings on the case were suspended during the mediation process.
On September 2, 1997, PSNH announced that the mediation had ended without a
resolution. The Court has suspended the procedural schedule associated with
this court proceeding pending the resolution of appeals of certain preliminary
rulings by the U.S. Circuit Court of Appeals for the First Circuit. The
temporary restraining order issued by the Court in March 1997 will remain in
effect until further orders by either court.
The NHPUC also reopened its proceeding to reconsider certain limited matters in
its restructuring orders. The NHPUC established a schedule to conduct rehearings
on two PSNH-specific issues - whether the Final Plan would require write-offs
under Statement of Financial Accounting Standards (SFAS) 71 and whether the
Final Plan repudiates the Rate Agreement; and one generic issue - whether energy
efficiency mandates for regulated distribution companies should be continued. On
October 22, 1997, the NHPUC changed the scope of the PSNH-specific re-hearing
proceedings to encompass the alternative rate-setting methodologies proposed by
the intervenors; to decide the appropriate methodology to be used to determine
PSNH's interim stranded costs; and to set PSNH's interim stranded cost charges
utilizing the determined methodology. In testimony filed with the NHPUC on
November 7, 1997, PSNH proposed a new methodology to quantify its stranded
costs. Under this proposal, PSNH would divest all owned generation and
purchased-power obligations via auction. To the extent that the auction fails
to produce sufficient revenues to cover the net book value of owned generation
and contractual payment obligations of purchased-power, the difference would be
recovered from customers through a non-bypassable distribution charge. The new
proposal also relies upon securitization of certain assets to further reduce
rates. Hearings are scheduled to begin on November 20, 1997.
Rate Matters
On September 16, 1997, PSNH filed testimony and exhibits supporting an increase
of just under 10 percent on an annual basis in the Fuel and Purchased Power
Adjustment Clause (FPPAC) rate effective on December 1, 1997. In order to
request as moderate an FPPAC rate as possible, PSNH's filing defers certain
costs for future recovery. A decision is pending.
By Order dated November 6, 1997, the NHPUC ordered a temporary rate reduction
for PSNH at a revenue level 6.87 percent lower than current rates. The
temporary rates will be effective December 1, 1997. The NHPUC also set an
interim return on equity of 11 percent. A final decision in PSNH's permanent
rate proceeding, which will be reconciled to July 1, 1997, is not expected to be
issued until mid-1998.
All or a portion of this reduction may be offset or eliminated by an increase to
rates through the FPPAC, referred to above.
For further information on restructuring issues and rate matters, see PSNH's
1996 Form 10-K and the First and Second Quarter 1997 Form 10-Qs and 8-Ks dated
September 2, 1997 and October 13, 1997.
Millstone Outage
PSNH has a 2.85-percent joint ownership interest in Millstone 3. Millstone 3 has
been out of service since March 30, 1996. NU hopes to return Millstone 3 to
service late in the first quarter of 1998. The actual return to service is
dependent upon the completion of independent inspections and reviews,
inspections and reviews by the Nuclear Regulatory Commission (NRC) and a vote
by the NRC Commissioners.
To date, PSNH's costs related to the Millstone 3 outage have not had a material
impact on the company's financial position or results of operations. Management
expects that, under its current planning assumptions, Millstone 3's outage-
related costs will continue to be immaterial to the company's results of
operations.
For further information on the current Millstone outages, see PSNH's First and
Second Quarter 1997 Form 10-Qs and 1996 Form 10-K.
Maine Yankee
PSNH has a 5 percent ownership interest in the Maine Yankee nuclear generating
facility (MY). On August 6, 1997, the board of directors of Maine Yankee Atomic
Power Company (MYAPC) voted unanimously to cease permanently the production of
power at MY. During November 1997, MYAPC filed an amendment to its power
contracts clarifying the obligations of its purchasing utilities following the
decision to cease power production. At September 30, 1997, the estimated
obligation, including decommissioning, amounted to approximately $930 million,
of which PSNH's share was approximately $46.5 million. Under the terms of the
contracts with MYAPC, the shareholders-sponsor companies, including PSNH, are
responsible for their proportionate share of the costs of the unit, including
decommissioning. Management expects that PSNH will be allowed to recover these
costs from its customers as they are included in the Federal Energy Regulatory
Commission approved wholesale contract. Accordingly, PSNH has recognized these
costs as a regulatory asset, with a corresponding obligation on its balance
sheets.
For further information on MYAPC, see PSNH's 1996 Form 10-K.
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)
under the Seabrook Power Contracts.
Seabrook operated at a capacity factor of 82.7 percent through September 1997,
compared to 95.7% percent for the same period in 1996. The lower 1997 capacity
factor is due primarily to the 50-day scheduled refueling and maintenance
outage, which began on May 10, 1997. The plant returned to service on June 28,
1997.
Liquidity And Capital Resources
Cash provided from operations decreased approximately $59 million in the first
nine months of 1997, from 1996, primarily due to lower recoveries through the
FPPAC as a result of the customer refund ordered by the NHPUC and higher costs
due to the Seabrook outage. Cash used for financing activities decreased
approximately $115 million in the first nine months of 1997, from 1996, due
primarily to the repayment of long-term debt in 1996, partially offset by the
higher payment of cash dividends on common stock in 1997 and the repayment of
preferred stock. Cash used for investments increased approximately $57 million
in the first nine months of 1997, from 1996, primarily due to an increase in
investments in the NU system Money Pool partially offset by lower investment in
utility plant.
Each major company in the NU system finances its own needs. Neither CL&P nor
WMECO have any financing agreements containing cross defaults based on financial
defaults by NU, PSNH or NAEC. Similarly, neither PSNH nor NAEC have any
financing agreements containing cross defaults based on financial defaults by
NU, CL&P or WMECO. Nevertheless, it is possible that investors will take
negative operating results or regulatory developments at one company in the NU
system into account when evaluating other companies in the NU system. That
could, as a practical matter and despite the contractual and legal separations
among the NU companies, negatively affect each company's access to financial
markets.
RESULTS OF OPERATIONS
Income Statement Variances
Increase/(Decrease)
Millions of Dollars
Third Year
Quarter Percent to-Date Percent
Operating revenues $(11) (4)% $(7) (1)%
Fuel, purchased and net
interchange power (1) (1) (24) (9)
Other operation and maintenance 7 7 37 14
Federal and state income taxes (8) (28) (4) (5)
Other income, net - - (7) (105)
Interest on long-term debt - - (6) (14)
Other interest charges 1 12 (6) (98)
Net income (12) (38) (10) (12)
Comparison of the Third Quarter of 1997 to the Third Quarter of 1996
Total operating revenues decreased in the third quarter primarily due to lower
fuel recoveries and lower retail revenues. Fuel recoveries decreased
approximately $8 million, primarily due to lower energy costs reflected in rates
during 1997. Retail revenues decreased approximately $3 million, primarily due
to lower retail sales and higher price discounts to retain customers. Retail
sales decreased 2.0 percent, due to cooler summer weather and the impacts of the
PSNH retail pilot program that began in June 1996.
Other operation and maintenance expense increased in the third quarter primarily
due to higher capacity charges from Seabrook.
Federal and state income taxes decreased in the third quarter primarily due to
lower book taxable income.
Comparison of the First Nine Months of 1997 to the First Nine Months of 1996
Total operating revenues decreased in the first nine months primarily due to
lower fuel recoveries, partially offset by higher retail revenues. Fuel
recoveries decreased approximately $15 million primarily due to the customer
refund ordered by the NHPUC, partially offset by higher energy costs reflected
in rates during 1997. Retail revenues were approximately $8 million higher due
to the June 1996 rate increase partially offset by lower retail sales and higher
price discounts to retain customers. Retail sales decreased 2.1 percent,
primarily due to mild weather in the first quarter of 1997 and the impacts of
the PSNH retail pilot program that began in June 1996.
Fuel, purchased and net interchange power expense decreased in the first nine
months primarily due to the timing in the recognition of fuel expenses under the
FPPAC partially offset by higher purchased power costs.
Other operation and maintenance expense increased in the first nine months
primarily due to higher capacity charges under the Seabrook Power Contract as a
result of the scheduled May 1997 refueling and maintenance outage ($25 million),
higher capacity charges from Maine Yankee ($4 million), higher transmission and
distribution costs ($3 million) and higher costs for PSNH's share of Millstone 3
($2 million).
Federal and state income taxes decreased in the first nine months primarily due
to lower book taxable income.
Other income, net decreased in the first nine months primarily due to the
deferral in 1996 of the interest expense associated with the FPPAC refund.
Interest on long-term debt decreased in the first nine months primarily due to
the repayment of the $172.5 million Series A First-Mortgage Bond in May 1996.
Other interest charges decreased in the first nine months primarily due to 1996
interest expense associated with the FPPAC refund.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
1. The Citizens Awareness Network (CAN) filed a petition with the NRC under
Section 2.206 of the NRC's regulations in November 1996 requesting that the NRC
suspend or revoke the operating licenses for Millstone 1, 2, and 3 and
Connecticut Yankee Atomic Power Company's nuclear generating facility (CY). The
petition also requested that the NRC take enforcement actions and make
investigations based on numerous allegations. On September 12, 1997, the
Director of Nuclear Reactor Regulation (Director) issued a partial decision
granting certain aspects of the petition, denying other aspects and deferring
other aspects of the petition pertaining to possible wrongdoing. The NRC
responded to these requests by relying upon actions that have already been taken
or actions that are currently under way. The NRC also denied petitioners'
request that the Millstone restart decision be postponed until completion of
pending investigations into alleged wrongdoings. However, the NRC decision
indicated that the results of these investigations will be considered by the NRC
Commissioners at the time of restart.
On September 3, 1997, the Director issued a partial decision deferring in
part and denying in part another Section 2.206 petition that had been filed by
CAN and the Nuclear Information Resource Service seeking NRC enforcement action
and placement of certain restrictions on decommissioning activities at CY. The
decision deferred that aspect of the petition requesting that the NRC take
enforcement action with respect to the radiological controls program at the
plant. The petitioners' requests that CY be placed on the NRC's watch list and
that a six-month moratorium be placed on decommissioning activities at CY were
denied.
For additional information relating to this matter, see "Item 3. Legal
Proceedings," in PSNH's 1996 Form 10-K and "Item 5 - Other Information" in
PSNH's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
2. A number of municipalities and cooperatives (Secondary Purchasers) have
notified the sponsors of MY, including CL&P, WMECO, and PSNH, that they consider
their purchase and payment obligations under their purchase agreements to have
been terminated as a result of the decision by the MYAPC Board of Directors (MY
Board) to retire the facility. Accordingly, these Secondary Purchasers have
informed the sponsors that they will be making no further payments under the
contracts for the period following the MY Board's decision. Through such
contracts, the sponsors agreed to deliver a portion of the capacity and
electrical output from the facility until the year 2003 in exchange for payment
by the Secondary Purchasers of a pro rata share of the plant's costs and
expenses. NU's subsidiaries' estimated exposure under these contracts is
approximately $15 million to $20 million over the remaining term of these
agreements. The MY sponsors are reviewing their options on how to proceed
against the Secondary Purchasers in this matter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits:
Exhibit Number Description
10 Description of Certain Management
Compensation Arrangements (Exhibit 10.50, File No. 333-
30911)
27 Financial Data Schedule
(b) Reports on Form 8-K:
1. PSNH filed a Form 8-K dated August 19, 1997 disclosing that Michael G.
Morris has been appointed Chairman, President and Chief Executive
Officer of NU.
2. PSNH filed a Form 8-K dated September 2, 1997 disclosing:
. The NHPUC/PSNH mediation proceedings had ended without resolution.
. In connection with PSNH's temporary rate proceeding, testimony was
filed with the NHPUC disclosing the significant negative
consequences to PSNH if the NHPUC implements a one-year rate
reduction of 11.41 percent.
3. PSNH filed a Form 8-K dated October 13, 1997 disclosing:
. NU's earnings for the quarter ending September 30, 1997 and
information on the Millstone nuclear units restart schedule.
. On October 13, 1997, the NHPUC orally ordered a temporary rate
reduction for PSNH at a revenue level 6.43 percent lower than
current rates, to be effective December 1, 1997.
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, 1997 By: /s/ John H. Forsgren
John H. Forsgren
Executive Vice President,
Chief Financial Officer and
Director
Date: November 12, 1997 By: /s/ John J. Roman
John J. Roman
Vice President and Controller
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