SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarter Ended June 30, 1995 Commission File Number 1-3429
MAINE PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
MAINE 01-0113635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
209 State Street, Presque Isle, Maine 04769
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 207-768-5811
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___.
(APPLICABLE ONLY TO CORPORATE ISSUERS:)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.
Common Stock, $7.00 par value - 1,617,250 shares
Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
See the following exhibits - Maine Public Service Company and
Subsidiary Condensed Consolidated Financial Statements,
including an income statement for the quarter ended June 30,
1995 and for the corresponding period of the preceding year;
a balance sheet as of June 30, 1995, and as of December 31,
1994, the end of the Company's preceding fiscal year; and a
statement of cash flows for the period January 1 (beginning of
the fiscal year) through June 30, 1995, and for the
corresponding period of the preceding year.
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements present fairly the
financial position of the companies at June 30, 1995 and
December 31, 1994, and the results of their operations and
their cash flows for the six months ended June 30, 1995.
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MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Operating Revenues $12,471 $13,829 $28,027 $30,892
Operating Expenses
Purchased Power 6,523 6,515 15,490 13,780
Other Operation and Maintenance 1,765 2,818 4,357 7,333
Depreciation and Amortization (Note 2) 1,070 1,054 2,140 2,108
Taxes Other Than Income 399 401 834 829
Provision for Income Taxes (Note 832 989 1,569 2,236
Total Operating Expenses 10,589 11,777 24,390 26,286
Operating Income 1,882 2,052 3,637 4,606
Other Income (Deductions)
Equity in Income of Associated Cos. 88 90 176 180
Allowance for Equity Funds Used During
Construction 2 1 2 3
Other Income Taxes (Note 3) (32) (22) (53) (37)
Other - Net 5 33 0 (18)
Total 63 102 125 128
Income Before Interest Charges 1,945 2,154 3,762 4,734
Interest Charges
Long-Term Debt and Notes Payable 940 965 1,883 1,929
Less Allowance for Borrowed Funds
Used During Construction (1) 0 (1) (1)
Total 939 965 1,882 1,928
Net Income Available for Common Stock $1,006 $1,189 $1,880 $2,806
Average Shares Outstanding (000's) 1,617 1,617 1,617 1,620
Earnings Per Share of Common Stock $0.62 $0.74 $1.16 $1.73
Dividends Declared per Common Share $0.46 $0.46 $0.92 $0.92
The accompanying notes are an integral part of these financial statements.
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MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
June 30, December 31,
ASSETS 1995 1994
Utility Plant
Electric Plant in Service $89,517 $89,625
Less Accumulated Depreciation 40,744 39,714
Net Electric Plant in Service 48,773 49,911
Construction Work-in-Progress 1,900 571
Total 50,673 50,482
Investment in Associated Companies
Maine Yankee Atomic Power Company 3,479 3,391
Maine Electric Power Company, Inc. 65 65
Total 3,544 3,456
Net Utility Plant and Investments 54,217 53,938
Current Assets
Cash and Temporary Investments 2,709 2,618
Deposits for Interest and Dividends 744 744
Accounts Receivable - Net 4,586 5,070
Unbilled Revenue 1,506 2,414
Deferred Fuel and Purchased Energy 2,713 535
Inventory 1,332 1,289
Prepayments 674 537
Total 14,264 13,207
Other Assets
Recoverable Seabrook Costs 36,214 37,074
Regulatory Asset - SFAS 109 & 106 16,446 16,212
Other 3,886 1,986
Total 56,546 55,272
Total Assets $125,027 $122,417
CAPITALIZATION AND LIABILITIES
Capitalization
Common Shareholders' Equity
Common Stock $13,071 $13,071
Paid-in Capital 38 38
Retained Earnings 40,245 39,853
Treasury Stock, at cost (5,714) (5,714)
Total 47,640 47,248
Long-Term Debt (less current matur.) 37,370 37,435
Current Liabilities
Long-Term Debt Due Within One Year 65 65
Accounts Payable 3,826 4,080
Deferred Income Taxes Related to fuel 1,082 214
Dividends Declared 744 744
Customer Deposits 61 74
Taxes Accrued 593 92
Interest Accrued 1,015 1,021
Total 7,386 6,290
Deferred Credits
Deferred Income Tax 28,727 28,036
Investment Tax Credits 898 937
Provision for Rate Refund 81 0
Miscellaneous 2,925 2,471
Total 32,631 31,444
Total Capitalization and Liabilities $125,027 $122,417
The accompanying notes are an integral part of these financial statements.
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MAINE PUBLIC SERVICE COMPANY AND SUBSIDIARY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Six Months Ended
June 30,
1995 1994
Cash Flow From Operating Activities
Net Income $1,880 $2,806
Adjustments to Reconcile Net Income to Net Cash
Provided by Operations
Depreciation and Amortization 1,286 1,254
Amortization of Seabrook Costs 854 854
Deferred Income Taxes 1,497 (462)
AFUDC (3) (4)
Change in Deferred Regulatory and Debt
Issuance Costs (1,775) 747
Change in Refundable/Deferred Revenues 81 (80)
Change in Benefit Obligation 118 229
Change in Current Assets and Liabilities (739) 2,379
Other 9 66
Net Cash Flow from Operating Activities 3,208 7,789
Cash Flow From Financing Activities
Dividend Payments (1,488) (1,488)
Purchase of Common Stock 0 (1,143)
Drawdown of Tax-Exempt Bonds Proceeds 0 1,111
Retirements on Long-Term Debt (65) (65)
Non Utility Property & Other 0 (1)
Net Cash Flow Used For Financing Activities (1,553) (1,586)
Cash Flow Used For Investing Activities
Withdrawal of (Investment in) Restricted
Funds 0 170
Investment in Electric Plant (1,564) (1,661)
Net Cash Used For Investment Activities (1,564) (1,491)
Increase (Decrease) in Cash and
Temporary Investments 91 4,712
Cash and Temporary Investments at BOY 2,618 1,392
Cash and Temporary Investments at EOY $2,709 $6,104
Change in Current Assets and Liabilities Providing
Cash From Operating Activities
Accounts Receivable $484 $1,528
Unbilled Revenue 908 963
Inventory (43) 161
Deferred Fuel and Purchased Energy (2,177) 217
Other Current Assets (137) (47)
Accounts Payable & Accrued Expenses 240 (422)
Other Current Liabilities (14) (21)
Total Change ($739) $2,379
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year For:
Interest $1,753 $1,797
Income Taxes $282 $3,216
The accompanying notes are an integral part of these financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its wholly-owned Canadian subsidiary, Maine and New
Brunswick Electrical Power Company, Limited (the Subsidiary).
The Company is subject to the regulatory authority of the Maine Public
Utilities Commission (MPUC) and, with respect to wholesale rates, the Federal
Energy Regulatory Commission (FERC).
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1994 Annual Report, an integral part of Form 10-K.
Certain financial statement disclosures have been condensed or omitted but are
an integral part of the 1994 Form 10-K. The Company's significant accounting
policies are described in the Notes to Consolidated Financial Statements of the
Company's Annual Report filed with the Form 10-K. For interim reporting
purposes, these same accounting policies are followed.
2. RECOVERY OF THE SEABROOK INVESTMENT
The Company was an investor in the Seabrook Nuclear Power Project Units 1
and 2 (the "Project") with a 1.46056% ownership interest through November 25,
1986. On November 25, 1986, the Company's investment of approximately $92.1
million was sold for proceeds of $21.4 million.
The Company's remaining investment in Seabrook Units 1 and 2, net of
disallowed costs and sale proceeds, is classified as Recoverable Seabrook Costs.
These costs are principally being amortized over thirty years.
Recoverable Seabrook Costs at June 30, 1995 are as follows:
(Dollars in Thousands)
Recoverable
Seabrook Costs Accumulated
(Net) In Rates Amortization
Unit 1 - Retail $ 26,698 $ 37,141 $ (10,443)
- Wholesale 6,315 8,018 (1,703)
- Total 33,013 45,159 (12,146)
Unit 2 - Retail 3,160 5,995 (2,835)
- Wholesale 41 2,033 (1,992)
- Total 3,201 8,028 (4,827)
TOTAL $ 36,214 $ 53,187 $ (16,973)
3. INCOME TAXES
A summary of Federal and State income taxes charged (credited) to income is
presented below. For accounting and ratemaking purposes, income tax provisions
included in "Operating Expenses" reflect taxes applicable to revenues and
expenses allowable for ratemaking purposes. The tax effect of items not
included in rate base is allocated as "Other Income (Deductions)".
(Dollars in Thousands) Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Current income taxes $ (72) $ 862 $ 125 $ 2,735
Deferred income taxes 955 168 1,535 (424)
Investment credits (19) (19) (38) (38)
Total income taxes $ 864 $ 1,011 $ 1,622 $ 2,273
Allocated to:
Operating income $ 832 $ 989 $ 1,569 $ 2,236
Other income 32 22 53 37
Total $ 864 $ 1,011 $ 1,622 $ 2,273
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In 1993, the Company adopted the provisions of SFAS 109. The Company
reported the implementation of the standard as a change in accounting principle
with no cumulative effect on prior earnings. The adoption of SFAS 109 increased
deferred income taxes by $17.3 million and also resulted in the establishment of
a net regulatory asset of $17.3 million.
The following summarizes accumulated deferred income taxes established on
temporary differences under SFAS 109 as of June 30, 1995 and December 31, 1994.
(Dollars in Thousands)
1995 1994
Seabrook $20,066 $20,214
Property 9,098 8,985
Regulatory expenses 904 142
Investment tax credits (622) (622)
Pension and postretirement benefits (268) (251)
Other (451) (432)
Net accumulated deferred income
taxes $28,727 $28,036
4. POSTRETIREMENT HEALTH CARE BENEFITS
In 1993, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions"(SFAS 106), which requires the accrual of postretirement benefits,
such as health care benefits, during the years an employee provides service to
the Company. The MPUC has adopted a rule which adopts SFAS 106 for ratemaking.
The rule requires the Company to establish and make payments to an independent
external trust fund for the purpose of funding future postretirement health
care costs at such time as customers are paying for these costs in their rates.
The MPUC has issued an accounting order that allows the Company to account for
the implementation of SFAS 106 by deferring these expenses until the Company's
next base rate proceeding. Based on this accounting order, the Company has
established a regulatory asset of approximately $934,000, representing deferred
postretirement benefits subject to future ratemaking.
The Company provides certain health care benefits to eligible employees
and retirees. All employees share in the cost of their medical benefits,
approximately 12% per year. Effective with retirements after January 1, 1995,
only retirees with at least twenty years of service will be eligible for these
benefits. In addition, eligible retirees will contribute to the cost of their
coverage starting at 60% for retirees with twenty years of service with the
contribution phasing out over the next ten years of service so that retirees
with thirty or more years of service do not contribute toward their coverage.
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Item 2. Management's Analysis of Quarterly Income Form 10-Q
Statements
Results of Operations
Earnings per share and related information for the second
quarter and six months ended June 30, 1995 along with the
corresponding information for the previous year are as follows:
Second Quarter Six Months
June 30, Ended June 30,
1995 1994 1995 1994
Earnings per share $ .62 $ .74 $1.16 $1.73
Net income
available for Common
Stock - in Thousands $1,006 $1,189 $1,880 $2,806
For the second quarter of 1995 compared to the same quarter last
year, the decrease in consolidated earnings per share of $.12 is
attributable to the following:
Increase
(Decrease)
Decreased base revenues due to decreased
power marketing sales $ (.11)
Decrease in retail base revenues principally
due to 5,397 MWH decrease in sales. (.10)
Decrease in base revenues-sales for resale (.06)
Decrease in Maine Yankee capacity expenses .17
Other (.02)
Total $ (.12)
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Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 2. Management's Analysis of Quarterly Income Statements
Results of Operations (Continued)
Consolidated operating revenues for the quarter ended
June 30, 1995 and 1994, are as follows:
1995 1994
(Dollars in Thousands) $ MWH $ MWH
Retail:
Base 7,597 7,950
Fuel 2,959 2,745
Total 10,556 116,510 10,695 121,907
Sales for Resale:
Base 862 1,071
Fuel 781 516
Total 1,643 28,028 1,587 26,507
Total Primary Sales 12,199 144,538 12,282 148,414
Secondary Sales 196 6,719 1,099 65,762
Other Revenues/Rev. Adjust. 76 448
Total Operating Revenues 12,471 151,257 13,829 214,176
Primary sales for the second quarter of 1995 of 144,538 MWH
were 3,876 MWH (2.6%) less than sales for the same period in
1994. The closing of Loring Air Force Base (Loring) in
September, 1994 represents 5,186 MWH of the total decrease of
5,397 (4.4%) MWH in retail sales. The Company began to
experience the impact of the closing of Loring in mid-1994
when the aircraft and associated support personnel were
relocated to other air force bases. The loss of the economic
benefits of the air force base also contributed to a decrease
in residential sales of 1,250 MWH (2.9%). Offsetting these
decreases were a 1,039 MWH (3.4%) increase in sales to our
large commercial and industrial customers and a 1,521 MWH
(5.7%) increase in sales for resale.
Retail base revenues for the second quarter of 1995 were
$7,597,000 compared to $7,950,000 for the same period of 1994,
reflecting the decrease in retail sales discussed in the
previous paragraph. Although sales for resale for the quarter
increased, as previously mentioned, base revenues decreased
from $1,071,000 for the second quarter of 1994 to $862,000 for
the second quarter of 1995. The Company has fixed rate
contracts with its three customers served in the United
States, representing 70% of these sales. Revenues collected
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Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 2. Management's Analysis of Quarterly Income Statements
Results of Operations (Continued)
from these customers are first allocated to the recovery of
fuel costs. With the extended outage of Maine Yankee which
continued during the second quarter of 1995, fuel revenues
collected in the quarter were $265,000 higher than last year,
reflecting the collection of the additional replacement power
costs. As previously reported by the Company in its 1994
Annual Report and Form 10-K, Houlton Water Company (Houlton),
the Company's largest customer and a sales for resale
customer, will not be served by the Company starting on
January 1, 1996. For the second quarter of 1995, Houlton
represented 10.7% of total MWH sales and 8.8% of total
operating revenues. During the second quarter of 1994,
secondary sales of the Company's Wyman Unit No. 4 and Maine
Yankee entitlements for varying lengths of time were made at
prevailing market rates. Since Maine Yankee was not available
for the second quarter of 1995, secondary sales for the
quarter were limited to Wyman No. 4 entitlements.
For the second quarter ended June 30, 1995 and 1994, total
operating expenses were $10,589,000 and $11,777,000,
respectively. The changes in operating expenses and energy
sources are as follows:
Increase/(Decrease)
(Dollars in Thousands) $ MWH
Purchased Power Expenses
Maine Yankee (899) (82,941)
Wheelabrator-Sherman 228 565
NB Power 640 24,670
System Purchases 39 503
8 (57,203)
Deferred Fuel ( 790)
Generating Expenses 72 (8,635)
Other Operation & Maint. Expenses (335)
Depreciation and Amortization
Expenses 16
Income Taxes (157)
Taxes Other than Income (2)
Total (1,188) (65,838)
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Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 2. Management's Analysis of Quarterly Income Statements
Results of Operations (Continued)
Maine Yankee was out of service for the entire second quarter
of 1995. After experiencing problems with its steam
generators starting in early January of 1995, Maine Yankee
started its scheduled refueling and maintenance outage. In
late March, Maine Yankee reported an increased rate of
degradation of the plant's steam generator tubes. After
reviewing several options, Maine Yankee has chosen to sleeve
all the steam generator tubes. While this sleeving is done,
Maine Yankee has reduced normal operating expenses. Maine
Yankee is expected to return to normal operations by late
1995. As discussed in the next section, "Maine Yankee", the
Company is deferring these sleeving costs as an element of its
five-year rate plan. Hydro generation decreased by 11,572 MWH
due to abnormally low rain fall. These decreases were
partially offset by a 3,237 MWH increase in production from
Wyman Unit No. 4. Wyman is dispatched by the New England
Power Exchange (NEPEX) and, therefore, is out of the operating
control of the Company. Although Maine Yankee was out of
service, the Company was able to limit additional purchases
from NB Power to 24,670 MWH, compared to the second quarter of
1994. Deferred fuel expenses decreased by $790,000, since
fuel costs, principally Maine Yankee replacement power costs,
exceeded collected fuel revenues. The increase in generating
expenses reflect increased fuel for generation of Wyman. The
reduction in other operation and maintenance expenses reflects
a decrease of $334,000 in transmission and distribution
expenses.
Maine Yankee
Reference is made to the Company's Form 10-K dated March 29,
1995, Part I, "Subsidiaries and Affiliated Companies," in
which the Company reported that Maine Yankee was experiencing
degradation of its steam generator tubes in the form of
circumferential cracking. During the refueling-and-
maintenance shutdown that started in early February of 1995,
Maine Yankee detected an increased rate of degradation of the
Plant's steam generator tubes in excess of the number expected
and started evaluating several courses of action. The Company
owns 5% of the Common Stock of Maine Yankee. In 1994, Maine
Yankee provided 43.3% of the Company's power requirements.
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Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 2. Management's Analysis of Quarterly Income Statements
Results of Operations (Continued)
On May 22, 1995, the Maine Yankee Board of Directors approved
a plan to repair these tubes using welded sleeves. Sleeving
involves the inserting of a tube of slightly smaller diameter
into the defective tube. The sleeve is welded in place and
acts as a new tube. Sleeving is a proven technology and has
been used at other nuclear facilities. In addition to the
extensive technical analysis on the steam generators performed
by the Maine Yankee technical staff, two independent studies
on the overall condition of the plant were also undertaken.
Both studies concluded that the overall mechanical condition
of the plant was very good.
The sleeving of the steam generator tubes is estimated to cost
approximately $40 million, with the Company's share being $2
million. Maine Yankee projects that the plant will return to
service by the end of 1995. While Maine Yankee is being
repaired, the Company estimates that the additional costs for
replacement power can be as high as approximately $500,000 to
$600,000 per month.
These replacement power costs have traditionally been subject
to collection under the fuel adjustment clause. On May 1,
1995, the Company filed its five-year rate plan with the Maine
Public Utilities Commission (MPUC). As an element of that
rate plan, the Company proposes the elimination of the fuel
adjustment clause except for the cost of power purchased from
the Wheelabrator-Sherman Energy Company, an independent power
producer. As proposed, the rate plan also defers the
replacement power costs associated with this Maine Yankee
extended outage. The rate plan also proposes a mechanism to
handle similar unexpected Maine Yankee outages during the rate
plan period. In addition, the rate plan proposes the
amortization of the sleeving expenses over a five-year period.
Caribou Units to be Inactivated
Reference is made to the Company's Form 8-K dated July 13,
1995 in which the Company reported that, at a regular meeting
on July 7, 1995, the Board of Directors authorized placing on
inactive status Steam Units 1 and 2 of the Company's Caribou
Generating Facility in Caribou, Maine. The Company will lay-
up the Units by January 1, 1996 and expects that they will
remain inactive for five years or longer. These two units,
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Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 2. Management's Analysis of Quarterly Income Statements
Results of Operations (Continued)
which represent 23 MW of capacity, have become surplus to the
Company's needs due to the closure of Loring Air Force Base
and the loss in 1996 of the Company's largest customer, the
Houlton Water Company. During the Units' inactive period, the
plant equipment will be protected and maintained by the
installation of a dehumidification system that will permit the
plant to return to service in approximately six months.
Placing Steam Units 1 and 2 on inactive status will save the
Company approximately $3.5 million over the next five years.
These savings result primarily from a savings in operation and
maintenance expense. The Company will be eliminating 12
positions at the plant and has also announced a voluntary
early retirement program that may avoid involuntary
termination of some of the employees whose positions at the
units have been eliminated.
Steam Unit No. 1 went into operation in the early 1950s and
Unit No. 2, in the mid 1950s. The Company still has a diesel
generation station of approximately 7 MW and a hydro facility
of approximately 1 MW and will continue to employ 11 employees
at the Caribou facility.
Financial Condition
The accompanying Statements of Consolidated Cash Flows reflect
the Company's liquidity and the net cash flows generated by or
required for operating, financing and investing activities.
For purposes of the Statements of Consolidated Cash Flows, the
Company considers all highly liquid securities to be cash
equivalents.
Net cash flows from operating activities were $3,208,000 for
the first six months of 1995. For the period, $1,564,000 was
invested in electric plant, $1,488,000 was paid in dividends
and $65,000 was used to reduce long-term debt. Although cash
flows for 1995 have been impacted by the reduction in earnings
and the previously mentioned replacement power purchases
during the Maine Yankee outage, the Company's cash flows have
been sufficient to cover its activities.
For the six months ended June 30, 1994, net cash flows from
operating activities were $7,789,000 and the remaining
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Form 10-Q
PART 1. FINANCIAL INFORMATION
Item 2. Management's Analysis of Quarterly Income Statements
Results of Operations (Continued)
$1,111,000 was withdrawn from its tax-exempt bond escrow
account. For the first six months of 1994, the Company
invested $1,661,000 in electric plant, paid $1,488,000 in
dividends, reduced long term debt by $65,000 and purchased
43,000 shares of common stock for $1,143,000 as the Company
resumed the stock repurchase program.
On May 1, 1995, the Company filed a proposed increase in rates
of approximately $5 million, and as an alternative, a five-
year rate plan with the Maine Public Utilities Commission
(MPUC). See "Legal Proceedings", paragraph (e) for a more
complete description of the plan. If approved by the MPUC,
the proposed rate plan will assist the Company in dealing with
the economic uncertainties that lay ahead with the loss of
Loring and Houlton. The Plan provides stable, predictable
rates for our customers, economic development rates to
encourage investment in our service territory, and competitive
returns for our shareholders.
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FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) Maine Public Service Company, Application for Fuel Cost
Adjustment, MPUC Docket No. 95-001
On January 3, 1995, the Company submitted an application
to the MPUC for an increase of approximately $1.4 million
for the twelve month period ended March 31, 1996. This
increase will result in a total increase in the Company's
retail rates of 3% effective April 1, 1995. In order to
limit the increase to 3%, the Company proposed to defer
recovery of approximately $1.5 million in the cost of
power purchased from the Wheelabrator-Sherman Energy
Company. The deferred amount would be combined with the
additional deferrals of these costs as proposed under the
Company's rate plan (see item (c) below). On March 15,
1995, the Company and the MPUC Staff signed a Stipulation
that embodied the Company's proposal. This Stipulation
was approved by the MPUC on March 27, 1995.
(b) Houlton Water Company's Application for Certificate of
Public Convenience and Necessity for Purchase of Firm
Requirements Service from Central Maine Power Company,
MPUC Docket No. 94-476
Reference is made to the Company's Form 8-K of February
13, 1995, in which the Company reported that its largest
wholesale customer, the Houlton Water Company (HWC), had
executed a long-term power contract with Central Maine
Power Company (CMP) for HWC's power requirements
beginning January 1, 1996 and that HWC was therefore
terminating its contract with the Company effective
December 31, 1995.
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FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Continued
On December 29, 1994, HWC filed with the MPUC for
approval of the purchase from CMP. This proceeding was
given the MPUC Docket No. 94-476. On January 12, 1995,
the Company requested permission to intervene in this
proceeding. This request was granted on February 1,
1995. The Company contended that the MPUC should not
grant HWC's requested approval. The Company based its
contention on CMP's intention to serve HWC's load from a
facility that CMP acquired using State financing. The
Company believed that State energy and regulatory policy
should prohibit CMP from using a facility supported by
State financing to the detriment of the retail customers
of any other utility.
On March 30, 1995, the MPUC issued its decision on the
Company's argument. The MPUC concluded that the statutes
granted it the authority to approve the contract between
CMP and HWC did not confer upon the MPUC authority to
consider the effects of that contract upon the Company
and its customers. The MPUC also found that the statute
granting CMP the right to use State funds to acquire the
facility did not give the MPUC any authority to establish
conditions concerning the operation of the facility. As
a result, the MPUC declined to take into account, in
considering its approval of the CMP-HWC contract, the
effect of that contract upon the Company and its
customers.
(c) Maine Public Service Company Re: Proposed Increase in
Retail Rates, MPUC Docket No. 95-052
On May 1, 1995, Maine Public Service Company filed with
the Maine Public Utilities Commission a proposed increase
in the rates it charges its retail customers. The
Company at the same time filed a five-year rate plan
which, if approved, will result in new rates beginning in
January, 1996 as detailed below.
The Company has taken a number of measures to delay this
action as long as possible but is faced with a period of
declining sales and escalating power costs. In 1996,
when the proposed rates would begin, the Company
anticipates a 10.5% reduction in sales to its primary
customers, compared to 1994 sales, principally Loring Air
Force Base and the Company's largest Wholesale Customer,
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FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Continued
Houlton Water Company. In December of 1994, Houlton
selected a competing offer from Central Maine Power
Company to be served from its newly acquired subsidiary
located in the Company's service territory (see item (b)
above). The 5% contractual annual increase in the cost
of power from the Wheelabrator-Sherman facility also must
be collected from the Company's customers through future
rate increases.
Using traditional ratemaking principles, the Company's
general rate case filing supports an increase in annual
base revenues of approximately $5.0 million, or a 10.8%
increase in total retail rates. However, as an alternate
under such traditional principles, the Company also
proposes a five-year rate plan, which covers the years
1996 to 2000. The rate plan provides the Company with
the rate setting mechanism to meet growing competition in
the electric utility industry while providing stable and
predictable rates to customers without competitive
options. This plan will also eliminate the need to file
for annual rate increases and saves the expenses
associated with such filings. The general elements of
this plan are described below.
Total average retail rates, including fuel, will increase
from 1995 levels in accordance with the following
schedule:
1996 4.5% - $2.2 million
1997 4.5% - $2.3 million
1998 3.5% - $1.9 million
1999 3.0% - $1.7 million
2000 3.0% - $1.7 million
As part of the Plan, the Company proposes to eliminate
the annual fuel adjustment clause except for the cost of
power purchased from the Wheelabrator-Sherman Energy
Company, an independent power producer. During the years
1996-2000, MPS will defer up to $3 million annually of
its power costs from the Wheelabrator-Sherman facility.
In addition, any uncollected fuel costs under the present
fuel clause, designated as Wheelabrator-Sherman costs
based on the Stipulation approved in the fuel clause
proceeding, Docket 95-001 (see item (a) above), will also
be deferred starting with the effective date of the rate
plan. After the current contract with Wheelabrator-
Sherman expires at the end of 2000, the Company will
-17-
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Continued
begin to collect this deferral, along with carrying
charges, when the price for comparable power is expected
to be lower than under the existing contract.
MPS also proposes to write-off and not collect in retail
rates approximately $4.9 million, net of income taxes, of
its remaining investment in the Seabrook project
previously supported by its wholesale customers,
principally Houlton Water Company.
The Plan also includes a sharing mechanism based on the
proposed allowed return on equity (ROE) at 12%. As part
of an annual review process, the allowed ROE will be
adjusted annually based on an index by averaging over a
twelve-month calendar year the dividend yields on Moody's
group of 24 electric utilities and Moody's utility bond
yields. The plan proposes the following sharing:
If earned ROE exceeds the target ROE by more than
200 basis points, 50% of the excess earnings will
be retained by the shareholders and 50% will be
used to reduce any Wheelabrator-Sherman deferral
with any remaining excess to reduce rates on the
next rate implementation date.
If earned ROE exceeds the target ROE by less than
200 basis points, 50% of the excess earnings will
be retained by the shareholders and 50% will be
used to reduce any Wheelabrator-Sherman deferral
with any remaining excess to be retained by the
shareholders.
If earned ROE is less than 200 basis points below
the target ROE, shareholders will bear the loss.
If earned ROE is more than 200 basis points below
target ROE, shareholders will share 50% of the loss
and 50% of the loss will be reflected in customer
rates at the next rate implementation date.
If earned ROE is more than 400 basis points below
target ROE for three consecutive months using
updated twelve month calculations, and if the
annual review is more than two months away, the
Company has the right to request a general rate
increase. Until the general rate increase is
approved, the Company will preserve its right to an
-18-
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Continued
annual rate adjustment under the provisions of this
plan. The plan also includes provisions for an
unscheduled Maine Yankee outage.
The rate plan will also provide the Company with flexible
pricing provisions under which the Company can offer
discounts to individual or to selected rate classes with
only minimum review by the MPUC. These provisions will
enhance its ability to compete with other suppliers of
retail fuel. In addition, the Company will propose
economic development rates for new commercial and
industrial activities.
An adjustment to any element of the plan could require
adjustments to other elements of the plan.
On July 31, 1995, the MPUC approved a Stipulation by the
Company, the MPUC Staff and the Public Advocate that
would permit the Company the ability to offer reduced
prices to industrial customers or targeted customer
classes. The Company is now preparing a reduced rate for
residential space heat customers and special economic
development rates for new industrial and commercial load.
The Company anticipates that it will offer additional
special rates in the future.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Maine Yankee
-19-
FORM 10-Q
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none.
(b) Reports on Form 8-K.
A Form 8-K was filed on May 24, 1995, under Item 5, Other
Material Events, and on July 13, 1995, under Item 5,
Other Material Events.
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 thereunto duly authorized.
MAINE PUBLIC SERVICE COMPANY
(Registrant)
Date: August 11, 1995 Larry E. LaPlante
Larry E. LaPlante, Vice President
Finance and Treasurer
-20-
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