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: October, 1997
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 October 15, 1997
Item 5. a) Other Material Events - Maine Yankee Audit Report
In the Company's Form 10-K for December 31, 1996 as well as
the Form 10-Q for the quarter ended March 31, 1997, the
Company described the significant regulatory and operational
issues at the Maine Yankee Atomic Power Plant (Maine Yankee),
of which the Company is a 5% owner. As previously reported,
Maine Yankee has been out of service since December 6, 1996
and was not expected to return to service until August, 1997.
In the Form 10-Q for the quarter ended June 30, 1997, the
Company reported that on August 6, 1997, the Board of
Directors of Maine Yankee voted to permanently close power
operations at the plant and begin the process of
decommissioning the plant. The formal vote followed an
announcement by the Maine Yankee Board on August 1, 1997, that
Maine Yankee and Peco Energy Company, after two months of
intensive negotiations, had been unable to arrive at "a
mutually beneficial framework for agreement" on a sale of the
plant to Peco. The decision to shut down the plant was based
on an economic analysis of the costs, risks and uncertainties
associated with operating the plant compared to those
associated with closing and decommissioning the plant.
In a related matter, in early September, 1997, the Maine
Public Utilities Commission (MPUC) released the report of a
consultant it had retained to perform a management audit of
Maine Yankee for the period January 1, 1994 to June 30, 1997.
The report contained both positive and negative conclusions,
the latter explaining that: Maine Yankee's decision in
December, 1996 to proceed with the steps necessary to restart
its nuclear generating plant at Wiscasset, Maine, was
"imprudent"; that Maine Yankee's May 27, 1997, decision to
reduce restart-expenses while exploring a possible sale of the
plant was "inappropriate," based on the consultant's finding
that a more objective and comprehensive competitive analysis
at that time "might have indicated a benefit for restarting"
the plant; and that those decisions resulted in Maine Yankee
incurring $95.9 million in "unreasonable" costs. The Company
believes the report's negative conclusions are unfounded and
may be contradictory but cannot predict how the MPUC plans to
use the consultant's report in determining the Company's
retail rates. The Company plans to vigorously contest the
negative conclusions of the report if they are introduced in
Maine Yankee's anticipated rate proceeding before the Federal
Energy Regulatory Commission, which has exclusive jurisdiction
over Maine Yankee's rates, or in any proceeding before the
MPUC under the Company's multi-year rate plan.
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Current Report, Form 8-K for Date of Report
Maine Public Service Company October 15, 1997
b) Other Material Events - Restructured Purchase Power
Agreement with Wheelabrator-Sherman
The Company has a Power Purchase Agreement (PPA) with the
Wheelabrator-Sherman Energy Company (W/S) under which the
Company is obligated to purchase the entire output (up to
126,582 MWH) of a 17.6 MW biomass plant owned by W/S. The
current term of the PPA runs through December 31, 2000 and may
be renewed by either party for an additional fifteen years at
prices to be determined by mutual agreement or, absent mutual
agreement, by the MPUC.
On October 15, 1997, the Company and W/S agreed to amend the
PPA. Under the terms of this amendment, W/S has agreed to
reductions in the price of purchased power of approximately
$10 million over the PPA's current term. The Company and W/S
have also agreed to renew the PPA for an additional six years
at agreed-upon prices. The Company will also make an upfront
payment to W/S of between $8.6 and $8.7 million, depending
upon the exact date of the transaction. The Company believes
the amended PPA will help relieve its financial pressure
caused by the recent closure of Maine Yankee (see the
Company's Form 10-Q for the period ended June 30, 1997) as
well as the need for substantial increases in its retail
rates, and is therefore in the best interests of the Company,
its customers and shareholders.
The Company intends to finance the upfront payment to W/S from
funds obtained from the Finance Authority of Maine (FAME).
Absent FAME financing, the Company does not believe it will be
able to obtain the funds on terms sufficiently economic to
justify the arrangement with W/S. The amended PPA must be
approved by the MPUC if FAME financing is to be obtained,
which approval is currently being sought. The Company has
also asked the MPUC to allow it to flow through immediately
the agreed-to reduction in power purchase costs under the
current term of the PPA, instead of deferring the reduction
until the year 2000 as required by the Company's Rate
Stabilization Plan approved by the MPUC in November, 1995.
The Company has further asked the MPUC for a determination
that any so-called stranded investment created by the amended
PPA will be recoverable from customers to the extent permitted
by Maine law. The MPUC's decision on this matter is due by
mid-November, 1997. The MPUC's and FAME's favorable action on
these matters is a prerequisite to amending the PPA. The
Company cannot predict either the MPUC's or FAME's ultimate
decisions.
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Current Report, Form 8-K for Date of Report
Maine Public Service Company October 15, 1997
MAINE PUBLIC SERVICE COMPANY
Registrant
Dated: October 15, 1997 /s/ Larry E. LaPlante
Larry E. LaPlante, Vice President
Finance, Administration and Treasurer
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