<PAGE>
File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
MASSACHUSETTS ELECTRIC COMPANY
THE NARRAGANSETT ELECTRIC COMPANY
and
GRANITE STATE ELECTRIC COMPANY
(Name of company filing this statement)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent in system)
Michael E. Jesanis Robert King Wulff
Treasurer Corporation Counsel
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
<PAGE>
Item 1. Description of Proposed Transactions
Massachusetts Electric Company (Mass. Electric), The
Narragansett Electric Company (Narragansett), and Granite State
Electric Company (Granite) are retail electric companies (as a
group the Retail Companies) and wholly owned subsidiaries of New
England Electric System (NEES). NEES is a registered holding
company under the Public Utility Holding Company Act of 1935.
Neither NEES nor any subsidiary has an ownership interest in an
exempt wholesale generator (EWG) or foreign utility company
(FUCO) as defined in Sections 32 and 33 of the Act.
Mass. Electric provides approximately 930,000 customers with
electric service at retail in a service area comprising
approximately 43% of the area of Massachusetts. Narragansett
provides approximately 323,000 customers with electric service at
retail in a service area comprising approximately 80% of Rhode
Island. Granite provides approximately 35,000 customers with
electric service at retail in New Hampshire. The Retail
Companies have demand side management programs to encourage the
efficient use of energy, including electricity, by their
respective customers. The programs are covered under the
umbrella of EnergyFIT, a comprehensive program to deliver quality
energy services to customers of the Retail Companies. In
connection with these programs, state rate regulatory bodies with
rate jurisdiction over the Retail Companies have in some cases
ordered or encouraged the Retail Companies to provide financial
assistance to their customers to encourage broader participation
in these programs. Responding to this encouragement to broaden
participation, Mass. Electric, Narragansett, and Granite request
authority to provide financial assistance to their respective
customers in aggregate amount not to exceed $3,000,000 per annum
for Mass. Electric, $1,500,000 per annum for Narragansett, and
$750,000 per annum for Granite. This assistance would be
independent of electric appliance financing pursuant to the
exemption under Rule 48.
<PAGE>
Citicorp Financing Program
- --------------------------
Design 2000 and Energy Initiative are two programs included
as part of EnergyFIT. (EnergyFIT, Design 2000, and Energy
Initiative are registered trademarks in Massachusetts, New
Hampshire, and Rhode Island. Federal registrations are pending.)
Under Design 2000, the Retail Companies provide rebates to their
respective customers in connection with energy efficiency
measures for new, renovated or remodelled commercial and
industrial buildings, and for replacement of certain failed
equipment. Under Energy Initiative, the Retail Companies provide
rebates to their respective customers in connection with
installation of energy efficient measures in existing commercial
and industrial buildings. These programs were developed by the
Retail Companies with input from a collaborative of state
regulatory participants and consumer groups. The Retail
Companies then had the programs approved by their respective
state ratemaking body. (Copies of the state orders approving
these EnergyFIT programs are included as Exhibits B-1, B-2, and
B-3.) Because electric customers have to make investments to
qualify for rebates, the Retail Companies have been urged by
state regulators, environmental, and/or consumer groups to
provide financing assistance.
Mass. Electric and Narragansett have negotiated separate
arrangements with Citicorp to provide customer financing for
qualifying investments under Design 2000 and Energy Initiative.
Mass. Electric and Narragansett have agreed to direct their
customers to Citicorp on a first refusal basis for the first year
of the financing program. Since Granite has arrangements with
other local financial institutions not involving any financial
assistance from Granite, Granite has decided not to participate
with Citicorp at this time.
<PAGE>
Citicorp has agreed to make available in the first year an
amount not exceeding $3.5 million to Mass. Electric customers and
$1.5 million to Narragansett customers. To qualify for financing
a customer must meet Citicorp's credit requirements. Financing
would be offered in the forms of leases or loans. The terms of
the customer financing is expected to range from two to five
years. The average financing size is expected to be about
$30,000 with a $5,000 minimum. Citicorp would be responsible for
administering all financings.
Subject to receipt of necessary regulatory approvals, Mass.
Electric and Narragansett have agreed to provide financial
assistance through a limited recourse mechanism. They would be
responsible for all losses sustained by Citicorp up to a maximum
of 15% of the total amount financed by Citicorp for a given year.
Discrete annual loan portfolios would be established for Mass.
Electric and Narragansett, with no cross collateralization. The
maximum annual recourse exposure under this mechanism would be
$525,000 per portfolio for Mass. Electric and $225,000 per
portfolio for Narragansett.
Mass. Electric and Narragansett have also agreed, subject to
receipt of necessary regulatory approvals, to pay an arrangement
fee of $35,000 and $15,000 respectively to Citicorp and have
agreed to pay a nonutilization fee of 5/8 of 1% of the difference
between the actual funds under each program and the annual
maximum lending amount.
Mass. Electric has filed a thirty day letter with the
Massachusetts Department of Public Utilities with respect to the
Citicorp transaction. Since the Department did not formally
respond to this filing, it has in essence approved the Citicorp
transaction. (See Exhibit D-4.) Narragansett has discussed this
matter with interested consumer groups in Rhode Island and a
formal filing with the Public Utilities Commission is required.
<PAGE>
Financial Assistance
- --------------------
Mass. Electric, Narragansett, and Granite request authority
to provide financial assistance to their respective customers as
a complement to their demand side management programs. This
financial assistance could take the form of indemnifications
concerning or guarantees of third party loans to, or direct loans
to, their customers. It could also include recourse mechanisms
such as described above, interest rate buydowns, or other
financial support. Mass. Electric and Narragansett are seeking
authority for an annual amount not to exceed $3,000,000 and
$1,500,000, respectively, which would include their maximum
annual recourse commitment to Citicorp described above. Granite
is seeking authority for an annual amount not to exceed $750,000.
Mass. Electric, Narragansett, and Granite are seeking this
authority to enter into arrangements to provide annual financial
assistance through December 31, 1998. No new arrangements would
be entered into after that date without further Commission
authorization.
Item 2. Fees, Commissions and Expenses
Services incidental to the transactions described herein
will be performed by NEPSCO and billed to the Retail Companies at
the actual cost thereof. NEPSCO is an affiliated service company
operating pursuant to Section 13 of the Act and the Commission's
rules thereunder. The cost of such services to be paid by the
Retail Companies is not expected to exceed $5,000, to be incurred
primarily by the Corporate Department (including attorneys) and
the Treasury Department (including accountants). The amounts
include a $2,000 filing fee paid by wire transfer to the
Commission at the time of filing this application/declaration.
<PAGE>
Item 3. Applicable Statutory Provisions
Sections 9(a) and 10 and Rule 40 are believed to be
applicable to the financial assistance.
Item 4. Regulatory Approval
Depending upon the nature of the financial assistance to be
offered, approvals from the Massachusetts Department of Public
Utilities, the Rhode Island Public Utilities Commission and the
New Hampshire Public Utilities Commission may be required. No
Federal regulatory body, other than the Commission, and no other
state commission or regulatory body has jurisdiction over the
proposed transactions.
Item 5. Procedure
The Applicants request that the Commission take action with
respect to this Application/Declaration without a hearing being
held, on or before February 28, 1995.
The Applicants (i) do not request a recommended decision by
a hearing officer, (ii) do not request a recommended decision by
any other responsible officer of the Commission, (iii) hereby
specify that the Division of Investment Management may assist in
the preparation of the Commission's decision, and (iv) hereby
request that there be no 30-day waiting period between the date
of issuance of the Commission's Order and the date on which it is
to become effective.
<PAGE>
Item 6. Exhibits:
(a) Exhibits
*B-1 Agreement with Citicorp
B-2 Term Sheet with Citicorp
D-1 Approval of DSM program by Massachusetts
Department of Public Utilities
D-2 Approval of DSM program by Rhode Island Public
Utilities Commission
*D-3 Approval of DSM program by New Hampshire Public
Utilities Commission
D-4 Filing 30 Day Letter covering Citicorp
Transaction with Massachusetts Department of
Public Utilities
*D-5 Filing covering Citicorp Transaction with Rhode
Island Public Utilities Commission
*F Opinion of Counsel
H Proposed Form of Notice
*To be filed by amendment
(b) Financial Statements
1-a Balance Sheet of Mass. Electric as of September
30, 1994
1-b Statement of Income and Retained Earnings of
Mass. Electric as of September 30, 1994
2-a Balance Sheet of Narragansett as of September
30, 1994
2-b Statement of Income and Retained Earnings of
Narragansett as of September 30, 1994
3-a Balance Sheet of Granite as of September 30,
1994
3-b Statement of Income and Retained Earnings of
Granite as of September 30, 1994
Pro-forma financial statements have been omitted.
<PAGE>
Item 7. Environmental Effects
The transactions proposed by this Application/Declaration do
not involve a major Federal action significantly affecting the
quality of the human environment.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this Application/Declaration on Form U-1 to be signed on their
behalf, as indicated by the undersigned officers thereunto duly
authorized by such companies.
MASSACHUSETTS ELECTRIC COMPANY
s/ Michael E. Jesanis
Michael E. Jesanis
Treasurer
THE NARRAGANSETT ELECTRIC COMPANY
s/ John G. Cochrane
John G. Cochrane
Assistant Treasurer
GRANITE STATE ELECTRIC COMPANY
s/ Marcy L. Reed
Marcy L. Reed
Assistant Treasurer
Dated: January 23, 1995
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
B-1 Agreement with Citicorp To be filed by
amendment
B-2 Term Sheet with Citicorp Filed under cover of
Form SE
D-1 Approval of DSM program Filed under cover of
by Massachusetts Department Form SE
of Public Utilities
D-2 Approval of DSM program Filed under cover of
by Rhode Island Public Form SE
Utilities Commission
D-3 Approval of DSM program To be filed by
by New Hampshire Public amendment
Utilities Commission
D-4 Filing 30 Day Letter Filed under cover of
covering Citicorp Transaction Form SE
with Massachusetts Department
of Public Utilities
D-5 Filing covering Citicorp To be filed by
Transaction with Rhode amendment
Island Public Utilities
Commission
F Opinion of Counsel To be filed by
amendment
H Proposed Form of Notice Filed herewith
Financial
Statement No. Description Page
- ------------- ----------- ----
1-a Balance Sheet of Mass. Electric Filed herewith
as of September 30, 1994
1-b Statement of Income and Filed herewith
Retained Earnings of Mass.
Electric as of September 30,
1994
2-a Balance Sheet of Narragansett Filed herewith
Electric as of September 30,
1994
2-b Statement of Income and Filed herewith
Retained Earnings of
Narragansett as of
September 30, 1994
3-a Balance Sheet of Granite as of Filed herewith
September 30, 1994
3-b Statement of Income and Filed herewith
Retained Earnings of Granite
as of September 30, 1994
<PAGE>
EXHIBIT H
PROPOSED FORM OF NOTICE
Massachusetts Electric Company (Mass. Electric), The
Narragansett Electric Company (Narragansett), and Granite State
Electric Company (Granite), wholly owned subsidiaries of New
England Electric system, a registered holding company, have filed
Form U-1 Application/Declaration File No. 70-_____ under Section
9(a) and 10 and Rule 40.
Mass. Electric, Narragansett, and Granite request authority
to provide financial assistance to their respective customers as
a complement to their demand side management programs. This
financial assistance could take the form of indemnifications
concerning or guarantees of third party loans to, or direct loans
to, their customers. It could also include recourse mechanisms,
interest rate buydowns, or other financial support. Mass.
Electric and Narragansett are seeking authority for an annual
amount not to exceed $3,000,000 and $1,500,000, respectively.
Granite is seeking authority for an annual amount not to exceed
$750,000. Mass. Electric, Narragansett, and Granite are seeking
this authority to enter into arrangements to provide annual
financial assistance through December 31, 1998. No new
arrangements would be entered into after that date without
further Commission authorization.
<PAGE>
Financial Statement 1-a
MASSACHUSETTS ELECTRIC COMPANY
Balance Sheet
As of September 30, 1994
(Unaudited)
ASSETS
------
(In Thousands)
Utility plant, at original cost $1,324,641
Less accumulated provisions for depreciation 369,583
----------
955,058
Construction work in progress 25,025
----------
Net utility plant 980,083
----------
Current assets:
Cash 2,060
Accounts receivable:
From sales of electric energy 129,969
Other (including $2,021,000 from affiliates) 20,617
Less reserves for doubtful accounts 12,733
----------
137,853
Unbilled revenues 35,700
Materials and supplies, at average cost 12,632
Prepaid and other current assets 18,583
----------
Total current assets 206,828
----------
Deferred charges and other assets 59,761
----------
$1,246,672
==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $25 per share, authorized
and outstanding 2,398,111 shares $ 59,953
Premiums on capital stocks 45,862
Other paid-in capital 141,310
Retained earnings 135,372
----------
Total common equity 382,497
Cumulative preferred stock 50,000
Long-term debt 254,653
----------
Total capitalization 687,150
----------
Current liabilities:
Long-term debt due within one year 35,000
Short-term debt (including $2,500,000 to affiliates) 42,570
Accounts payable (including $158,508,000 to affiliates) 174,645
Accrued liabilities:
Taxes 1,845
Interest 6,048
Other accrued expenses 60,016
Customer deposits 5,420
Dividends payable 4,376
----------
Total current liabilities 329,920
----------
Deferred federal and state income taxes 157,660
Unamortized investment tax credits 19,123
Other reserves and deferred credits 52,819
----------
$1,246,672
==========
<PAGE>
Financial Statement 1-b
MASSACHUSETTS ELECTRIC COMPANY
Statement of Income
Twelve Months Ended September 30, 1994
(Unaudited)
(In Thousands)
Operating revenue $1,471,850
----------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 1,078,557
Other operation 208,032
Maintenance 24,766
Depreciation 42,123
Taxes, other than income taxes 28,675
Income taxes 21,205
----------
Total operating expenses 1,403,358
----------
Operating income 68,492
Other income (expense) - net (1,536)
----------
Operating and other income 66,956
----------
Interest:
Interest on long-term debt 20,926
Other interest 7,476
Allowance for borrowed funds used during
construction - credit (323)
----------
Total interest 28,079
----------
Net income $ 38,877
==========
Statement of Retained Earnings
Retained earnings at beginning of period $ 122,122
Net income 38,877
Dividends declared on cumulative preferred stock (3,228)
Dividends declared on common stock (21,583)
Premium on redemption of preferred stock (816)
----------
Retained earnings at end of period $ 135,372
==========
<PAGE>
Financial Statement 2-a
THE NARRAGANSETT ELECTRIC COMPANY
Balance Sheet
As of September 30, 1994
(Unaudited)
ASSETS
------
(In Thousands)
Utility plant, at original cost $596,058
Less accumulated provisions for depreciation 163,077
--------
432,981
Construction work in progress 37,520
--------
Net utility plant 470,501
--------
Current assets:
Cash 328
Accounts receivable:
From sales of electric energy 50,549
Other (including $6,941,000 from affiliates) 22,462
Less reserves for doubtful accounts 4,377
--------
68,634
Unbilled revenues 13,175
Fuel, materials and supplies, at average cost 6,331
Prepaid and other current assets 12,232
--------
Total current assets 100,700
--------
Deferred charges and other assets 55,381
--------
$626,582
========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $50 per share,
authorized and outstanding 1,132,487 shares $ 56,624
Premiums on preferred stocks 170
Other paid-in capital 45,000
Retained earnings 90,318
--------
Total common equity 192,112
Cumulative preferred stock 36,500
Long-term debt 178,893
--------
Total capitalization 407,505
--------
Current liabilities:
Short-term debt (including $23,625,000 to affiliates) 33,625
Accounts payable (including $48,903,000 to affiliates) 55,708
Accrued liabilities:
Taxes 1,979
Interest 3,134
Other accrued expenses 29,520
Customer deposits 5,524
Dividends payable 1,668
--------
Total current liabilities 131,158
--------
Deferred federal income taxes 67,013
Unamortized investment tax credits 8,645
Other reserves and deferred credits 12,261
--------
$626,582
========
<PAGE>
Financial Statement 2-b
THE NARRAGANSETT ELECTRIC COMPANY
Statement of Income
Twelve Months Ended September 30, 1994
(Unaudited)
(In Thousands)
Operating revenue $481,453
--------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 301,952
Other operation 72,537
Maintenance 12,088
Depreciation 23,898
Taxes, other than federal income taxes 35,808
Federal income taxes 4,465
--------
Total operating expenses 450,748
--------
Operating income 30,705
Other income:
Allowance for equity funds used
during construction 1,210
Other income (expense) - net (863)
--------
Operating and other income 31,052
--------
Interest:
Interest on long-term debt 13,751
Other interest 2,623
Allowance for borrowed funds used during
construction - credit (1,399)
--------
Total interest 14,975
--------
Net income $ 16,077
========
Statement of Retained Earnings
Retained earnings at beginning of period $ 79,215
Net income 16,077
Dividends declared on cumulative
preferred stock (2,143)
Dividends declared on common stock (2,831)
--------
Retained earnings at end of period $ 90,318
========
<PAGE>
Financial Statement 3-a
GRANITE STATE ELECTRIC COMPANY
Balance Sheet
As of September 30, 1994
(Unaudited)
ASSETS
------
(In Thousands)
Utility plant, at original cost $59,713
Less accumulated provisions for depreciation 15,458
-------
44,255
Construction work in progress 716
-------
Net utility plant 44,971
-------
Current assets:
Cash and temporary cash investments (including $1,375,000
with affiliated companies) 1,466
Accounts receivable:
From sales of electric energy 4,460
Other (including $79,000 from affiliates) 128
Less reserves for doubtful accounts 244
-------
4,344
Materials and supplies, at average cost 401
Prepaid and other current assets 295
-------
Total current assets 6,506
-------
Deferred charges and other assets 2,186
-------
$53,663
=======
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $100 per share, authorized
and outstanding 60,400 shares $ 6,040
Other paid-in capital 4,000
Retained earnings 8,160
-------
Total common equity 18,200
Long-term notes 14,000
-------
Total capitalization 32,200
-------
Current liabilities:
Long-term notes due within one year 1,400
Accounts payable (including $7,021,000 to affiliates) 7,856
Accrued taxes 222
Other accrued expenses 5,234
Customer deposits 696
-------
Total current liabilities 15,408
-------
Deferred federal income taxes 3,175
Unamortized investment tax credits 1,103
Other reserves and deferred credits 1,777
-------
$53,663
=======
<PAGE>
Financial Statement 3-b
GRANITE STATE ELECTRIC COMPANY
Statement of Income
Twelve Months Ended September 30, 1994
(Unaudited)
(In Thousands)
Operating revenue $63,728
-------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 45,242
Other operation 9,466
Maintenance 1,498
Depreciation 1,922
Taxes, other than federal income 1,780
Federal income taxes 568
-------
Total operating expenses 60,476
-------
Operating income 3,252
Other income (expense) - net, including
related taxes (110)
-------
Operating and other income 3,142
-------
Interest:
Interest on long-term notes 1,407
Other interest 375
Allowance for borrowed funds used during
construction - (credit) (17)
-------
Total interest 1,765
-------
Net income $ 1,377
=======
Statement of Retained Earnings
Retained earnings at beginning of period $ 7,084
Net income 1,377
Dividends declared on common stock (301)
-------
Retained earnings at end of period $ 8,160
=======
