FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 25, 1996
MAINE PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Maine 1-3429 01-0113635
(State, or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) 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
Current Report, Form 8-K for Date of Report:
Maine Public Service Company July 25, 1996
Item 5. Other Material Events
Maine Public Utilities Commission Issues Draft Plan on
Electric Utility Industry Restructuring Study, Docket
No. 95-462.
In 1995, the Maine Legislature passed Resolve 89 "To Require
a Study of Retail Competition in the Electric Utility
Industry" (the "Resolve"), to begin a process for developing
recommendations on the future structure of the electric
utility industry in Maine. The process included the
appointment of a Work Group on Electric Utility Restructuring
to develop a plan for the orderly transition to a competitive
market for retail purchases and sales of electricity. The
Company participated in this Work Group, which was unable to
reach a consensus on a recommended plan by its reporting
deadline.
The Resolve also directed the Maine Public Utilities
Commission (MPUC) to conduct a study to develop at least two
plans for the orderly transition to retail competition in the
electric utility industry in Maine and to submit a report of
its findings by January 1, 1997. One plan would be designed
to achieve "... full retail market competition for purchases
and sales of electric energy by the year 2000" and the other
to achieve a more limited form of competition. The Resolve
also stated that the MPUC's findings would have no legal
effect, but would "... provide the Legislature with
information in order to allow the Legislature to make informal
decisions when it evaluates these plans."
On December 12, 1995, the MPUC issued a Notice of Inquiry (the
"Notice") initiating its study. In the Notice, the MPUC
solicited detailed proposals and plans for achieving retail
competition in Maine by the year 2000 and requested the
proposals include specific plans for an orderly transition to
a more competitive market. The Notice required that plans and
proposals be filed with the MPUC by interested parties no
later than January 31, 1996, and outlined a schedule calling
for submittal of a final report to the Legislature in
December, 1996.
On January 30, 1996, the Company filed its restructuring
proposal with the MPUC. The major elements of this proposal
are:
(a) The separation of the Company's generation assets
(including contracts and entitlements) from its transmission
and distribution assets. The Company suggested this
separation could be accomplished by either a functional
separation of generation from distribution and transmission
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Current Report, Form 8-K for Date of Report:
Maine Public Service Company July 25, 1996
within the Company's existing corporate structure or by
separating generation, on the one hand, and distribution and
transmission, on the other, into two wholly-owned
subsidiaries. The Company strongly opposes any recommendation
that it be required to divest itself of its generation assets.
(b) The economic and resource planning regulation of
generation would cease. The FERC would continue to regulate
transmission, and distribution would remain a franchised
monopoly subject to continued regulation by the MPUC. The
owner of the distribution system would be obligated to connect
all willing customers.
(c) If certain necessary changes in the operation and
management of the regional transmission grid are in place, all
retail customers in Maine would, by the year 2000, be entitled
to purchase electric energy directly from any entity that
wished to supply it to them.
(d) The Company would be entitled to full recovery of all its
stranded costs. This recovery would be accomplished by a
charge on the distribution system that would apply to all
retail customers. In its filing, the Company estimates that
its stranded costs could be as high as $68 million. This
amount consists primarily of the above-market costs of the
Company's contract with Wheelabrator-Sherman, a non-utility
generator, estimated at $44 million and deferred regulatory
assets, such as its Seabrook investment of $24 million.
The Company's proposal, however, was only one of over a dozen
received by the MPUC in response to its Notice, some of which
take positions on these matters that vary substantially from
the Company's.
On July 19, 1996, the MPUC issued its Draft Plan in this
matter, which, in its own terms, represents the MPUC's
"preliminary view" on how to restructure Maine's electric
utility industry. The Draft Plan recommends the following:
. As of January, 2000, all Maine consumers would have
the option to choose an electric power supplier.
. As of January, 2000, Maine would not regulate, as
public utilities, companies producing or selling electric
power.
. Regulated public utilities would continue to provide
electric transmission and distribution services.
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Current Report, Form 8-K for Date of Report:
Maine Public Service Company July 25, 1996
. As of January, 2000, the Company, Central Maine
Power Company (CMP) and Bangor Hydro-Electric Company
(BHE), the State's three largest electric utilities,
would be required to structurally separate their
generation assets and functions from transmission and
distribution functions. CMP and BHE would be required to
fully divest themselves of their generation assets by
2006. The Draft Plan does not recommend generation
divestiture for the Company. Instead, the MPUC requested
additional comment "on whether MPS should be required to
divest its generation assets as described [in this Draft
Plan], by another method, or not at all."
. All contracts between the utilities and any
qualifying facilities under PURPA would remain with the
transmission and distribution companies.
. The utilities should be provided a reasonable
opportunity to fully recover its generation-related
stranded costs. All of the Company's anticipated
stranded costs are generation-related.
The MPUC has requested comment on its Draft Plan by August 30,
1996. These comments could result in the MPUC's modification
of its preliminary recommendations. Moreover, because the
MPUC's final recommendation will not have any binding legal
effect, this issue must ultimately be resolved by the Maine
Legislature. Many parties to this proceeding have taken
positions that vary substantially from those set forth in this
Draft Plan and those parties can be expected to advocate their
positions before the Legislature. The Company cannot,
therefore, predict what form the restructuring of Maine's
electric utility industry will ultimately take or what effect
that restructuring will have on the Company's business
operations or financial results.
MAINE PUBLIC SERVICE COMPANY
Registrant
Dated: July 25, 1996 Larry E. LaPlante
Larry E. LaPlante, Vice President
Finance and Treasurer
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