<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-5464
(LOGO) MASSACHUSETTS ELECTRIC COMPANY
(Exact name of registrant as specified in charter)
MASSACHUSETTS 04-1988940
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
Registrant's telephone number, including area code
(508-389-2000)
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 ( )
Common stock, par value $25 per share, authorized and
outstanding: 2,398,111 shares at September 30, 1996.
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1. Financial Statements
- ----------------------------
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Statements of Income
Periods Ended September 30
(Unaudited)
<CAPTION>
Quarter Nine Months
------- -----------
1996 1995 1996 1995
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $398,542 $392,575 $1,147,840 $1,121,098
-------- -------- ---------- ----------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 301,664 296,745 851,057 851,343
Other operation 53,253 56,092 152,855 147,530
Maintenance 7,790 7,373 23,087 22,313
Depreciation 12,037 11,464 36,112 34,394
Taxes, other than income taxes 7,372 7,043 23,855 22,533
Income taxes 2,888 2,059 12,866 6,664
-------- -------- ---------- ----------
Total operating expenses 385,004 380,776 1,099,832 1,084,777
-------- -------- ---------- ----------
Operating income 13,538 11,799 48,008 36,321
Other income (expense), net (439) 58 (2,516) (759)
-------- -------- ---------- ----------
Operating and other income 13,099 11,857 45,492 35,562
-------- -------- ---------- ----------
Interest:
Interest on long-term debt 6,735 6,651 20,196 19,232
Other interest 1,783 1,774 4,989 5,396
Allowance for borrowed funds used during
construction - credit (193) (221) (657) (412)
-------- -------- ---------- ----------
Total interest 8,325 8,204 24,528 24,216
-------- -------- ---------- ----------
Net income $ 4,774 $ 3,653 $ 20,964 $ 11,346
======== ======== ========== ==========
Statements of Retained Earnings
Retained earnings at beginning of period $154,150 $134,654 $ 150,308$ 136,911
Net income 4,774 3,653 20,964 11,346
Dividends declared on cumulative
preferred stock (778) (778) (2,335) (2,335)
Dividends declared on common stock (1,199) (2,998) (11,990) (11,391)
-------- -------- ---------- ----------
Retained earnings at end of period $156,947 $134,531 $ 156,947 $ 134,531
======== ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
</TABLE>
<PAGE>
<TABLE> MASSACHUSETTS ELECTRIC COMPANY
Statements of Income
Twelve Months Ended September 30
(Unaudited)
<CAPTION>
1996 1995
---- ----
(In Thousands)
<S> <C> <C>
Operating revenue $1,532,418 $1,504,988
---------- ----------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 1,113,387 1,106,982
Other operation 211,985 217,551
Maintenance 30,299 33,695
Depreciation 46,547 44,694
Taxes, other than income taxes 31,344 28,200
Income taxes 25,499 17,175
---------- ----------
Total operating expenses 1,459,061 1,448,297
---------- ----------
Operating income 73,357 56,691
Other income (expense), net (2,298) 31
---------- ----------
Operating and other income 71,059 56,722
---------- ----------
Interest:
Interest on long-term debt 26,865 24,699
Other interest 6,377 5,709
Allowance for borrowed funds used during
construction - credit (902) (540)
---------- ----------
Total interest 32,340 29,868
---------- ----------
Net income $ 38,719 $ 26,854
========== ==========
Statements of Retained Earnings
Retained earnings at beginning of period $ 134,531 $ 135,372
Net income 38,719 26,854
Dividends declared on cumulative preferred stock (3,114) (3,114)
Dividends declared on common stock (13,189) (24,581)
---------- ----------
Retained earnings at end of period $ 156,947 $ 134,531
========== ==========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
</TABLE>
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Balance Sheets
(Unaudited)
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $1,486,299 $1,420,069
Less accumulated provisions for depreciation 424,115 399,711
---------- ----------
1,062,184 1,020,358
Construction work in progress 17,897 21,118
---------- ----------
Net utility plant 1,080,081 1,041,476
---------- ----------
Current assets:
Cash 1,525 1,840
Accounts receivable:
From sales of electric energy 152,363 160,795
Other (including $1,693,000 and $1,776,000 from affiliates) 2,804 3,527
Less reserves for doubtful accounts 13,722 12,544
---------- ----------
141,445 151,778
Unbilled revenues 42,500 49,800
Materials and supplies, at average cost 8,929 10,602
Prepaid and other current assets 22,968 22,514
---------- ----------
Total current assets 217,367 236,534
---------- ----------
Deferred charges and other assets 60,519 65,090
---------- ----------
$1,357,967 $1,343,100
========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $25 per share, authorized
and outstanding 2,398,111 shares $ 59,953 $ 59,953
Premiums on capital stocks 45,862 45,862
Other paid-in capital 155,309 155,310
Retained earnings 156,947 150,308
---------- ----------
Total common equity 418,071 411,433
Cumulative preferred stock 50,000 50,000
Long-term debt 323,401 353,267
---------- ----------
Total capitalization 791,472 814,700
---------- ----------
Current liabilities:
Long-term debt due within one year 30,000
Short-term debt (including $7,300,000 and $1,000,000
to affiliates) 24,100 55,450
Accounts payable (including $192,946,000 and $165,515,000
to affiliates) 197,646 181,943
Accrued liabilities:
Taxes 9,592 7,371
Interest 6,983 9,502
Other accrued expenses 53,320 17,136
Customer deposits 4,378 4,633
Dividends payable 1,978 1,977
---------- ----------
Total current liabilities 327,997 278,012
---------- ----------
Deferred federal and state income taxes 173,936 184,575
Unamortized investment tax credits 16,846 17,684
Other reserves and deferred credits 47,716 48,129
---------- ----------
$1,357,967 $1,343,100
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Statements of Cash Flows
Nine Months Ended September 30
(Unaudited)
<CAPTION> 1996 1995
---- ----
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $ 20,964 $ 11,346
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 36,112 34,394
Deferred income taxes and investment tax credit, net (11,458) 910
Allowance for borrowed funds used during construction (657) (412)
Decrease (increase) in accounts receivable, net
and unbilled revenues 17,633 20,439
Decrease (increase) in materials and supplies 1,673 586
Decrease (increase) in prepaid and other current assets (454) 648
Increase (decrease) in accounts payable 15,703 (3,233)
Increase (decrease) in other current liabilities 35,631 4,040
Other, net 4,516 2,323
-------- --------
Net cash provided by operating activities $119,663 $ 71,041
-------- --------
Investing Activities:
Plant expenditures, excluding allowance for
funds used during construction $(74,091) $(66,562)
Other investing activities (211) (1,415)
-------- --------
Net cash used in investing activities $(74,302) $(67,977)
-------- --------
Financing Activities:
Capital contributions from parent $ 10,000
Dividends paid on common stock $(11,991) (21,583)
Dividends paid on preferred stock (2,335) (2,335)
Long-term debt-issues 88,000
Long-term debt-retirements (35,000)
Changes in short-term debt (31,350) (40,170)
-------- --------
Net cash used in financing activities $(45,676) $ (1,088)
-------- --------
Net increase (decrease) in cash and cash equivalents $ (315) $ 1,976
Cash and cash equivalents at beginning of period 1,840 1,225
-------- --------
Cash and cash equivalents at end of period $ 1,525 $ 3,201
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Note A - Hazardous Waste
- ------------------------
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly known as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous substances.
A number of states, including Massachusetts, have enacted similar
laws.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. New England Electric System subsidiaries
currently have in place an internal environmental audit program
and an external waste disposal vendor audit and qualification
program intended to enhance compliance with existing federal,
state, and local requirements regarding the handling of potentially
hazardous products and by-products.
The Company has been named as a potentially responsible party
(PRP) by either the U.S. Environmental Protection Agency or the
Massachusetts Department of Environmental Protection for 19 sites
at which hazardous waste is alleged to have been disposed. Private
parties have also contacted or initiated legal proceedings against
the Company regarding hazardous waste cleanup. The most prevalent
types of hazardous waste sites with which the Company has been
associated are manufactured gas locations. The Company is aware of
approximately 35 such locations in Massachusetts (including eight
of the 19 locations for which the Company is a PRP). The Company is
currently aware of other sites, and may in the future become aware
of additional sites, that it may be held responsible for
remediating.
In 1993, the Massachusetts Department of Public Utilities
approved a rate agreement filed by the Company that allows for
remediation costs of former manufactured gas sites and certain
other hazardous waste sites located in Massachusetts to be met from
a non-rate-recoverable, interest-bearing fund of $30 million
established on the Company's books in 1993. Rate-recoverable
contributions of $3 million, adjusted for inflation, are added to
the fund annually in accordance with the agreement. Any shortfalls
in the fund would be paid by the Company and be recovered through
rates over seven years.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. There are also
significant uncertainties as to the portion, if any, of the
investigation and remediation costs of any particular hazardous
waste site that may ultimately be borne by the Company. Where
appropriate, the Company intends to seek recovery from its insurers
<PAGE>
Note A - Hazardous Waste - Continued
- ------------------------
and from other PRPs, but it is uncertain whether, and to what
extent, such efforts will be successful. At September 30, 1996,
the Company had total reserves for environmental response costs of
$39 million and a related regulatory asset of $16 million. The
Company believes that hazardous waste liabilities for all sites of
which it is aware, and which are not covered by a rate agreement,
are not material to its financial position.
Note B
- ------
In the opinion of the Company, these statements reflect all
adjustments (which include normal recurring adjustments) necessary
for a fair statement of the results of its operations for the
periods presented and should be considered in conjunction with the
notes to the financial statements in the Company's 1995 Annual
Report.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
Condition and Results of Operations
-----------------------------------
This section contains management's assessment of Massachusetts
Electric Company's financial condition and the principal factors
having an impact on the results of operations. This discussion
should be read in conjunction with the Company's financial
statements and footnotes and the 1995 Annual Report on Form 10-K.
This section contains forward-looking statements as defined under
the securities laws. Actual results could differ materially from
those projected. This section, particularly under "Competitive
Conditions - Risk Factors", lists some of the reasons why results
could differ materially from those projected.
Earnings
--------
Net income for the third quarter and first nine months of 1996
increased $1.1 million and $9.6 million, respectively, compared
with the corresponding periods in 1995. The increases are
primarily due to an October 1995 rate increase. Kilowatt-hour
(kWh) sales to ultimate customers also increased 1.8 percent in the
nine-month period which reflects an improving economy, despite a
decrease in third quarter kWh sales of 2.0 percent due to a cooler
summer in 1996. These increases in income were partially offset by
increased other operation and maintenance costs.
Competitive Conditions
----------------------
The electric utility business is being subjected to rapidly
increasing competitive pressures, stemming from a combination of
trends, including the presence of surplus generating capacity, a
disparity in electric rates among regions of the country,
improvements in generation efficiency, increasing demand for
customer choice, and new regulations and legislation intended to
foster competition. See the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
In states across the country, including Massachusetts, there
have been an increasing number of proposals to allow retail
customers to choose their electricity supplier, with incumbent
utilities required to deliver that electricity over their
transmission and distribution systems (also known as "retail
wheeling"). In these competitive circumstances, utilities across
the country that operate generation plants, such as New England
<PAGE>
Power Company (NEP), the Company's affiliated wholesale power
supplier, face the risk that market prices may not be sufficient to
recover the costs of the commitments incurred to supply customers
under a regulated industry structure. The amount by which costs
exceed market prices is commonly referred to as "stranded costs".
Massachusetts Settlement Agreement
In May 1996, the Massachusetts Department of Public Utilities
(MDPU) issued a set of proposed rules and regulations governing the
implementation of retail choice in Massachusetts. The proposed
rules would allow all customers of Massachusetts investor-owned
utilities to choose their electricity supplier beginning in 1998
and would establish a price cap system for regulating the rates for
distribution service that would continue to be provided by local
utilities. The MDPU proposed rules affirm the principle of
stranded cost recovery for utilities over ten years, but create
uncertainties concerning the extent of actual stranded cost
recovery. While the MDPU did not order mandatory divestiture of
generating assets, it stated that it might provide utilities
financial incentives to divest. The MDPU has stated that it will
issue final regulations by year-end 1996 and issue orders on
individual utility plans in 1997.
On October 1, 1996, the Company and NEP, together with the
Massachusetts Attorney General, the Massachusetts Division of
Energy Resources and other parties, filed a comprehensive
settlement agreement with the MDPU. The settlement agreement
provides for the commencement of retail choice on January 1, 1998
(contingent on choice being available to the customers of all
Massachusetts investor-owned utilities), full compensation for
potential stranded costs, and the full divestiture of the NEES
companies' fossil and hydroelectric generating business. Under the
settlement agreement, customers who do not choose an alternative
supplier would receive "Standard Offer" service, which would be
priced to guarantee customers at least a 10 percent savings in 1998
from current electricity prices, therefore resulting in revenue
losses for the Company.
Under the settlement agreement, NEP's wholesale contract with
the Company would be terminated. In return, the cost of NEP's past
generation commitments to serve the Company's customers (estimated
at approximately $3 billion) would be recovered through a
transition access charge on retail distribution rates. Those
commitments consist of (i) generating plant commitments, (ii)
regulatory assets, (iii) the above-market component of purchased
power contracts, and (iv) the operating cost of nuclear plants
which cannot be mitigated by shutting down the plants, including
nuclear decommissioning.
<PAGE>
Sunk costs associated with generating plants and regulatory
assets would be recovered over a period of 12 years. The above-
market component of purchased power contracts and nuclear
decommissioning costs would be recovered as incurred over the
life of those obligations, a period expected to extend beyond 12
years. The transaction access charge would be reduced to reflect
the net proceeds from the sale of the NEES companies' generating
assets. The initial transition access charge, before the
application of those proceeds, would be set at 2.8 cents per kWh
through December 31, 2000, and is expected to decline thereafter.
The settlement agreement also establishes performance-based
rates for the Company. Under the plan, the Company's non-fuel
rates would be frozen at current levels until the commencement of
retail choice. Upon commencement of retail choice, the Company
would receive an approximately $45 million increase in its
distribution rates, with such rates then frozen through the year
2000. The Company's return on equity would be subject to a floor
of 6 percent and a ceiling of 11 percent, effective upon
commencement of retail choice. Earnings over the ceiling would
be shared equally between customers and shareholders up to an
absolute cap of 12.5 percent. To the extent that earnings fall
below the floor, the Company would be authorized to surcharge
customers for the shortfall. In addition, the settlement
agreement provides for changes to the distribution cost of
service that become effective on the retail access date. These
changes include: an $11 million increase in annual depreciation
expense, a $3 million annual contribution to a storm fund, and
increased amortization of unfunded deferred income taxes of $1
million over six years.
The settlement agreement, when approved, would also eliminate
the Company's purchased power cost adjustment mechanism (PPCA) as
of July 31, 1996. This mechanism allows the Company to recover
purchased power rate changes from NEP and the effects of NEP's
seasonal rates. The agreement also stipulates that the Company's
$18 million PPCA refund liability balance at July 31, 1996 will
be used to create a $3 million storm contingency fund with the
remainder being used to offset regulatory assets for hazardous
waste costs.
The MDPU, with the agreement of the parties, has set a
procedural schedule under which it will issue a decision on the
settlement agreement by January 10, 1997. The settlement
agreement is also subject to approval by the Federal Energy
Regulatory Commission (FERC). Additional governmental approvals
would be required for the divestiture of the generating business.
In addition, the implementation of retail choice in Massachusetts
may be the subject of legislation from the Massachusetts
legislature.
<PAGE>
FERC Order
In April 1996, the FERC issued Order No. 888 addressing open
access transmission and required those utilities that own
transmission facilities to file open access tariffs to make
available transmission service to affiliates and nonaffiliates at
fair non-discriminatory rates. Order No. 888 also stated that
public utilities will be allowed to seek recovery of legitimate
and verifiable stranded costs from departing customers as a
result of wholesale competition. The FERC indicated that it will
provide for the recovery of retail stranded costs only if state
regulators lack the legal authority to address those costs at the
time retail wheeling is required. The FERC also stated that it
would permit stranded cost recovery under wholesale requirements
contracts, such as the contracts between NEP and its retail
affiliates.
Accounting Implications
Historically, electric utility rates have been based on a
utility's costs. As a result, electric utilities are subject to
certain accounting standards that are not applicable to other
business enterprises in general. Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation
(FAS 71), requires regulated entities, in appropriate
circumstances, to establish regulatory assets and liabilities,
and thereby defer the income statement impact of certain costs
that are expected to be recovered in future rates. The Company
believes that, if approved by regulators, the Massachusetts
settlement agreement would meet the criteria for continued
application of FAS 71. As a result, no write-off of existing
regulatory assets is expected.
Risk Factors
For a discussion of risk factors in the event that the
Massachusetts settlement agreement is not approved, see "Risk
Factors" in the Company's Form 10-Q for the quarter ended June
30, 1996.
<PAGE>
Operating Revenue
-----------------
The following table summarizes the changes in operating
revenue:
<TABLE>
Increase (Decrease) in Operating Revenue
<CAPTION>
Third Quarter Nine Months
------------- ------------
1996 vs 1995 1996 vs 1995
------------- ------------
(In Millions)
<S> <C> <C>
Sales to ultimate customers $(6) $ 9
Rate changes 8 23
Fuel recovery 7 3
Rate adjustment mechanisms 1 (5)
Demand side management (DSM)
program recovery (6) (6)
Other 2 3
--- ---
$ 6 $27
=== ===
</TABLE>
For a discussion of sales to ultimate customers, see the
"Earnings" section.
The increase in revenues due to rate changes is the result of
a $31 million base rate increase effective in October 1995.
Rate adjustment mechanisms are designed to allow the Company
to pass on to its customers changes in purchased energy costs
resulting from rate increases or decreases by NEP. The
mechanisms are also designed to pass on to customers the effects
of NEP's seasonal rates which lowered purchased power expense
during the nine-month period. The passback to customers of the
impact is reflected as a reduction in revenues for the first nine
months of 1996 under rate adjustment mechanisms. For a
discussion of the effects of the settlement agreement on the
Company's rate adjustment mechanisms, see the "Competitive
Conditions" section.
<PAGE>
Operating Expenses
------------------
The following table summarizes the changes in operating
expenses which are discussed below:
<TABLE>
<CAPTION>
Increase (Decrease) in Operating Expenses
Third Quarter Nine Months
------------- ------------
1996 vs 1995 1996 vs 1995
------------- ------------
(In Millions)
<S> <C> <C>
Purchased electric energy:
Fuel costs $ 7 $ 3
Other (2) (3)
Other operation and maintenance:
DSM (6) (6)
Other 4 12
Depreciation and amortization - 2
Taxes 1 7
--- ---
$ 4 $15
=== ===
</TABLE>
The increase in other operation and maintenance expense in the
third quarter and first nine months of 1996 reflects increased
customer service expenses, increased distribution system-related
expenses, increased uncollectible accounts expense, and increased
postretirement benefit costs due to the inclusion of additional
amounts in rates that were previously deferred.
The change in taxes is primarily due to increased income.
Utility Plant Expenditures and Financings
-----------------------------------------
Cash expenditures for utility plant totaled $74 million in the
first nine months of 1996. The funds necessary for utility plant
expenditures during the period were provided by net cash from
operating activities, after the payment of dividends. The Company
did not issue any long-term debt during the first nine months of
1996. The Company plans to issue $20 million of long-term debt
<PAGE>
later in 1996. In July 1996, Nantucket Electric Company
(Nantucket), a retail affiliate of the Company, issued $28 million
of tax-exempt long-term debt at rates ranging from 4.10 percent to
6.75 percent to fund construction of an undersea cable. The
Company guaranteed the debt on behalf of Nantucket.
At September 30, 1996, the Company had $24 million of short-
term debt outstanding including $17 million of commercial paper
borrowings. The Company currently has lines of credit with banks
totaling $90 million. These lines of credit are available to
provide liquidity support for commercial paper borrowings and other
corporate purposes. There were no borrowings under these lines of
credit at September 30, 1996.
For the twelve-month period ending September 30, 1996, the ratio
of earnings to fixed charges was 2.90.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
Information concerning the restructuring dockets before the
Massachusetts Department of Public Utilities, discussed in Part I
of this report in Management's Discussion and Analysis of Financial
Condition and Results of Operations, is incorporated herein by
reference and made a part hereof.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
The Company is filing the following revised exhibit for
incorporation by reference into its registration statement on Form
S-3, Commission File No. 33-59145.
12 Statement re computation of ratios
The Company is filing Financial Data Schedules.
The Company filed reports on Form 8-K dated September 12, 1996
and October 1, 1996, each containing Item 5, Other Events.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-Q for
the quarter ended September 30, 1996 to be signed on its behalf by
the undersigned thereunto duly authorized.
MASSACHUSETTS ELECTRIC COMPANY
s/Michael E. Jesanis
Michael E. Jesanis, Treasurer,
Authorized Officer, and
Principal Financial Officer
Date: November 8, 1996
Exhibit Index
<PAGE>
Exhibit Index
-------------
Exhibit Description Page
------- ----------- ----
12 Statement re computation of Filed herewith
ratios
27 Financial Data Schedule Filed herewith
Exhibit 12
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
(Unaudited)
<CAPTION>
12 Months
Ended
September 30, 1996 Years Ended December 31,
Actual -------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
-------------- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Income $38,719 $29,101 $34,726 $23,779 $34,905 $25,243
- ----------
Add income taxes and fixed charges
- ----------------------------------
Current federal income taxes 24,928 9,437 (6,762) 5,606 3,977 8,568
Deferred federal income taxes (4,186) 6,156 24,932 3,430 13,451 3,889
Investment tax credits - net (1,121) (1,132) (1,228) (1,228) (1,228) (1,194)
Massachusetts franchise tax 4,982 3,935 4,681 3,348 3,858 2,920
Interest on long-term debt 26,865 25,901 20,967 23,403 21,910 20,157
Interest on short-term debt and other 6,377 6,784 6,366 3,638 3,657 3,643
------- ------- ------- ------- ------- -------
Net earnings available for fixed charges $96,564 $80,182 $83,682 $61,976 $80,530 $63,226
------- ------- ------- ------- ------- -------
Fixed charges:
Interest on long-term debt $26,865 $25,901 20,967 $23,403 $21,910 $20,157
Interest on short-term debt and other 6,377 6,784 6,366 3,638 3,657 3,643
------- ------- ------- ------- ------- -------
Total fixed charges $33,242 $32,685 $27,333 $27,041 $25,567 $23,800
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges $2.90 2.45 3.06 2.29 3.15 2.66
- ----------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED
EARNINGS AND CASH FLOWS OF MASSACHUSETTS ELECTRIC COMPANY, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,080,081
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 217,367
<TOTAL-DEFERRED-CHARGES> 60,519 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,357,967
<COMMON> 59,953
<CAPITAL-SURPLUS-PAID-IN> 201,171
<RETAINED-EARNINGS> 156,947
<TOTAL-COMMON-STOCKHOLDERS-EQ> 418,071
0
50,000
<LONG-TERM-DEBT-NET> 323,401
<SHORT-TERM-NOTES> 24,100 <F2>
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 512,395
<TOT-CAPITALIZATION-AND-LIAB> 1,357,967
<GROSS-OPERATING-REVENUE> 1,147,840
<INCOME-TAX-EXPENSE> 12,866
<OTHER-OPERATING-EXPENSES> 1,086,966
<TOTAL-OPERATING-EXPENSES> 1,099,832
<OPERATING-INCOME-LOSS> 48,008
<OTHER-INCOME-NET> (2,516)
<INCOME-BEFORE-INTEREST-EXPEN> 45,492
<TOTAL-INTEREST-EXPENSE> 24,528
<NET-INCOME> 20,964
2,335
<EARNINGS-AVAILABLE-FOR-COMM> 18,629
<COMMON-STOCK-DIVIDENDS> 11,990
<TOTAL-INTEREST-ON-BONDS> 20,196
<CASH-FLOW-OPERATIONS> 119,663
<EPS-PRIMARY> 0 <F3>
<EPS-DILUTED> 0 <F3>
<FN>
<F1> Total deferred charges includes other assets.
<F2> Short-term notes includes commercial paper obligations and short-term debt
to affiliates.
<F3> Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
</FN>
