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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: August 6, 1997
MASSACHUSETTS ELECTRIC COMPANY
(exact name of registrant as specified in charter)
Massachusetts 0-5464 04-1988940
(state or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
(508) 389-2000
(Registrant's telephone number, including area code)
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Item 5. Other Events
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Industry Restructuring and Sale Agreement
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On August 6, 1997, New England Electric System (NEES), the
parent of Massachusetts Electric Company (the Company), announced
that its subsidiaries, New England Power Company (NEP) and The
Narragansett Electric Company, have reached an agreement to sell
their non-nuclear generating business to U.S. Generating Company
(US Gen), an affiliate of PG & E Corporation, for $1.59 billion
in cash.
The sale is subject to approval by various state and federal
regulatory agencies, which may take at least six to twelve
months. One of the contingencies to the sale is that all
regulatory approvals must be obtained within eighteen months.
The principal terms of the sale are:
(a) US Gen will pay the NEES companies a purchase price of $1.59
billion. There is a holdback of $225 million. If retail choice
is in place by January 1, 1999 (defined as retail choice for
customers representing 89 percent of kilowatt-hour (kWh) sales of
investor owned utilities in Massachusetts or 50 percent of kWh
sales in New England), the NEES companies will be paid the
holdback upon the later of closing or choice date. If retail
choice is delayed beyond January 1, 1999, then US Gen will retain
part of the holdback at the rate of $75 million for the first
year of delay and $50 million per year of delay thereafter. The
portion of any holdback to be retained will be pro rated for any
partial year;
(b) US Gen will reimburse the NEES companies for $85 million of
costs associated with early retirement and special severance
programs for employees impacted by industry restructuring;
(c) US Gen will assume NEP's entitlements to approximately 1,100
megawatts (MW) of capacity procured under power contracts with
other utilities and independent power producers. NEP will make
payments of approximately $150 million to $170 million per year
through 2007 toward the above market portion of power contracts.
These payments have a net present value of approximately $1.1
billion; and
(d) US Gen will assume certain existing collective bargaining
agreements through their expiration.
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Under the Consumers First plan approved by the Massachusetts
Department of Public Utilities earlier this year, the proceeds
from the sale will be used to offset the stranded costs which the
Company has been authorized to recover from customers. A
settlement agreement that would implement the Consumers First
plan is pending before the Federal Energy Regulatory Commission.
The Company estimates that, upon completion of the sale, prices
for its customers will drop on average by approximately 15
percent below today's prices.
The NEES companies non-nuclear generating business includes
three fossil-fuel generating stations and 15 hydroelectric
stations, totaling approximately 4,000 MW of capacity, with a
book value of $1.1 billion.
This Form 8-K contains statements that may be considered
forward looking statements as defined under the securities laws.
Actual results may differ materially. As disclosed in the
Company's Form 10-K for the year ended 1996, there are several
risk factors which could affect actual results. While the NEES
companies believe that this sale agreement and other developments
constitute substantial progress in resolving the uncertainty
regarding the impact from industry restructuring, significant
risks remain. These include, but are not limited to: (i) the
potential that ultimately the Massachusetts settlement will not
be implemented in the manner anticipated by the Company, and (ii)
the possibility of state or federal legislation that would
increase the risks above those contained in the settlement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this Current Report on
Form 8-K to be signed on its behalf by the undersigned thereunto
duly authorized.
MASSACHUSETTS ELECTRIC COMPANY
s/Michael E. Jesanis
By _________________________
Michael E. Jesanis
Treasurer
Date: August 7, 1997
