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: January, 1999
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 January, 1999
Item 5(a) Other Material Events - Maine Yankee Rate Case Settlement
Filed with the Federal Energy Regulatory Commission
Reference is made to the Company's Form 10-K for December 31,
1997 and Form 10-Q for the quarter ended September 30, 1998,
where the closing of Maine Yankee and the various rate
proceedings associated with the closing and decommissioning of
Maine Yankee were discussed. As previously reported, the
Maine Public Utilities Commission (MPUC) stayed its
investigation of the prudency of the shutdown decision and the
operation of Maine Yankee prior to the shutdown decision,
pending the outcome of Maine Yankee's rate case before the
Federal Energy Regulatory Commission (FERC). The MPUC and the
Maine Office of the Public Advocate (OPA) are actively
participating in the FERC proceeding, as well as 28 municipal
and cooperative utilities in New England who received
approximately 6.2% of the output from Maine Yankee (the
"Secondary Purchasers").
In support of its request for an increase in decommissioning
collections, Maine Yankee submitted with its initial FERC rate
case filing a 1997 decommissioning cost study performed by TLG
Services, Inc. ("TLG"). During 1998, Maine Yankee engaged in
an extensive competitive bid process to hire a Decommissioning
Operations Contractor ("DOC") to perform certain major
decontamination and dismantlement activities at the Plant on
a fixed-price, turnkey basis. As a result of that process, a
consortium headed by Stone & Webster Engineering Corporation
("Stone & Webster") was selected to perform such activities
under a fixed-price contract. The contract provides for,
among other undertakings, construction of an independent spent
fuel storage installation ("ISFSI") and completion of major
decommissioning activities and site restoration by the end of
2004. The DOC process resulted in fixing certain costs that
had been estimated in the earlier decommissioning cost
estimate performed by TLG.
Since the filing of the FERC rate request, Maine Yankee and
the active intervenors, including among others the MPUC Staff,
the OPA, the Company and other owners, the Secondary
Purchasers, and a Maine environmental group (the "Settling
Parties"), engaged in extensive discovery. More recently,
those parties participated in settlement discussions that
resulted in an Offer of Settlement filed by those parties with
the FERC on January 19, 1999, which, if approved by the FERC,
would result in full settlement of all issues raised in the
consolidated FERC proceeding, including decommissioning-cost
issues and issues pertaining to the prudence of the
management, operation, and decision to permanently cease
-2-
Current Report, Form 8-K for Date of Report
Maine Public Service Company January, 1999
Item 5(a) Other Material Events - Maine Yankee Rate Case Settlement
Filed with the Federal Energy Regulatory Commission - Continued
operation of the Plant. Approval of the settlement would also
resolve the issues raised by the Secondary Purchasers by
limiting the amounts they will pay for decommissioning the
Plant and by settling other points of contention affecting
individual Secondary Purchasers.
The Offer of Settlement provides for Maine Yankee to collect
$33.6 million in the aggregate annually, effective January 15,
1998: (1) $26.8 million for estimated decommissioning costs,
and (2) $6.8 million for ISFSI-related costs. The original
filing with FERC on November 6, 1997, called for an aggregate
annual collection rate of $36.4 million for decommissioning
and the ISFSI, based on the TLG estimate. The amount
collected annually could be reduced to approximately $26
million if Maine Yankee is able to (1) use in connection with
the construction of the ISFSI funds held in trust under Maine
law for spent-fuel disposal, and (2) access approximately $6.8
millon being held by the State of Maine for eventual payment
to the State of Texas pursuant to a compact for low-level
nuclear waste disposal, the future of which is now in question
after rejection of the selected disposal site in west Texas by
a Texas regulatory agency. Both would require authorizing
legislation in Maine, which Maine Yankee intends to pursue.
The Offer of Settlement also provides for recovery of all
unamortized investment (including fuel) in the Plant, together
with a return on equity of 6.50 percent, effective January 15,
1998, on equity balances up to maximum allowed equity amounts.
The Settling Parties also agreed in the proposed settlement
not to contest the effectiveness of the Amendatory Agreements
submitted to FERC as part of the original filing, subject to
certain limitations including the right to challenge any
accelerated recovery of unamortized investment under the terms
of the Amendatory Agreements after a required informational
filing with the FERC by Maine Yankee.
As a separate part of the Offer of Settlement, the Company,
Central Maine Power Company, and Bangor Hydro-Electric Company
(the other two Maine owners of Maine Yankee), the MPUC Staff,
and the OPA entered into a further agreement resolving retail
rate issues and other issues specific to the Maine parties,
including those that had been raised concerning the prudence
of the operation and shutdown of the Plant (the "Maine
Agreement"). Under the Maine Agreement, the Company would
continue to recover its Maine Yankee costs in accordance with
-3-
Current Report, Form 8-K for Date of Report
Maine Public Service Company January, 1999
Item 5(a) Other Material Events - Maine Yankee Rate Case Settlement
Filed with the Federal Energy Regulatory Commission - Continued
its most recent Rate Stabilization Plan ("RSP") order from the
MPUC without any adjustment reflecting the outcome of the FERC
proceeding. To the extent that the Company has collected from
its retail customers a return on equity in excess of the 6.50
percent contemplated by the Offer of Settlement, no refunds
would be required, but such excess amounts would be credited
to the customers to the extent required by the RSP.
The final major provision of the Maine Agreement requires the
Maine owners, for the period from March 1, 2000 through
December 1, 2004, to hold their Maine retail ratepayers
harmless from the amounts by which the replacement power costs
for Maine Yankee exceed the replacement power costs assumed in
the report to the Maine Yankee Board of Directors that served
as a basis for the Plant shutdown decision, up to a maximum
cumulative amount of $41 million. The Company's share of that
maximum amount would be $4.1 million for the period. The
Maine Agreement, which was approved by the MPUC on December
22, 1998, also sets forth the methodology for calculating such
replacement power costs.
The Company believes the Offer of Settlement, including the
Maine Agreement, reasonably resolves the issues presented by
the parties in the Maine Yankee FERC proceeding. If the Offer
of Settlement is approved by the FERC, several significant
uncertainties regarding the recovery of Maine Yankee-related
costs are eliminated. Although all of the active parties to
the proceeding have agreed to support or, with respect to
certain individual provisions, not oppose, the Offer of
Settlement, the Company cannot predict with certainty whether
or in what form the Offer of Settlement will be approved by
the FERC.
MAINE PUBLIC SERVICE COMPANY
Registrant
Dated: January 27, 1999 /s/ Larry E. LaPlante
Larry E. LaPlante, Vice President,
Finance, Administration & Treasurer
-4-
