<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<CAPTION>
Registrant; State of
Incorporation or I.R.S. Employer
Commission Organization; Address; Identification
File Number and Telephone Number Number
------------ ---------------------- ---------------
<S> <C> <C>
1-3446 NEW ENGLAND ELECTRIC SYSTEM 04-1663060
(A Massachusetts voluntary
association)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
1-6564 NEW ENGLAND POWER COMPANY 04-1663070
(A Massachusetts corporation)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
0-5464 MASSACHUSETTS ELECTRIC COMPANY 04-1988940
(A Massachusetts corporation)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
1-7471 THE NARRAGANSETT ELECTRIC COMPANY 05-0187805
(A Rhode Island corporation)
280 Melrose Street
Providence, Rhode Island 02907
Telephone: 401-784-7000
Indicate by check mark whether the registrants (1) have 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 registrants were required to file such
reports), and (2) have been subject to such filing requirements
for the past 90 days.
(X) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
</TABLE>
<PAGE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Outstanding at Name of each exchange
Registrant Title of each class March 18, 1997 on which registered
- ---------- ------------------- -------------- ---------------------
<S> <C> <C> <C>
New England Common Shares 64,826,067 New York Stock Exchange
Electric Boston Stock Exchange
System
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of each class
- ---------- -------------------
New England 6.00% Cumulative Preferred Stock
Power Company Dividend Series Preferred Stock
Massachusetts Cumulative Preferred Stock
Electric Company Preferred Stock - Cumulative
The Narragansett Cumulative Preferred Stock
Electric Company
Aggregate market value
of the voting stock Number of shares of
held by nonaffiliates common stock outstanding
of the registrants at of the registrants at
March 18, 1997 March 18, 1997
---------------------- ------------------------
New England $2,187,879,761 64,826,067 ($1 par value)
Electric System
New England $6,095,375 6,449,896 ($20 par value)
Power Company
Massachusetts None 2,398,111 ($25 par value)
Electric Company
The Narragansett None 1,132,487 ($50 par value)
Electric Company
</TABLE>
<PAGE>
<TABLE>
Documents Incorporated by Reference
<CAPTION>
Part of Form 10-K into which
Description document is incorporated
- ---------------------------------- ----------------------------
<S> <C>
Portions of Annual Reports to Part II
Shareholders for the year ended
December 31, 1996 of the following
companies, as set forth in Part II
New England Electric System
New England Power Company
Massachusetts Electric Company
The Narragansett Electric Company
Portions of Proxy Statement of Part III
New England Electric System
filed in connection with its
annual meeting of shareholders to
be held on April 29, 1997, as set
forth in Part III
This combined Form 10-K is separately filed by New England Electric
System, New England Power Company, Massachusetts Electric Company, and The
Narragansett Electric Company. Information contained herein relating to
any individual company is filed by such company on its own behalf. Each
company makes no representation as to information relating to the other
companies.
</TABLE>
<PAGE>
TABLE OF CONTENTS PAGE
GLOSSARY OF TERMS........................................... iii
FORWARD LOOKING INFORMATION................................. v
PART I
ITEM 1. BUSINESS............................................ 1
THE SYSTEM.................................................. 1
System Organization.................................... 1
Employees.............................................. 3
ELECTRIC UTILITY OPERATIONS................................. 4
Industry Restructuring................................. 4
Massachusetts Settlement Agreement.................. 5
Rhode Island Legislation............................ 7
New Hampshire Proceeding and Settlement Agreement... 8
Federal Activity.................................... 9
1935 Act............................................ 10
Divestiture of Generation Business.................. 10
Risk Factors........................................ 11
Accounting Implications............................. 12
Business Activity...................................... 13
Results of Operations.................................. 17
Rates.................................................. 18
General............................................. 18
NEP Rates........................................... 19
Mass. Electric Rates................................ 20
Narragansett Rates.................................. 21
Granite State Rates................................. 22
Recovery of Demand-Side Management Expenditures..... 22
Electric Utility Properties............................ 23
Divestiture......................................... 23
Energy Mix.......................................... 23
Generation, Transmission, and Distribution
Properties....................................... 24
Map - Electric Utility Properties................... 28
Fuel for Generation................................. 29
Nonutility Power Producer Information............... 32
Nuclear Units....................................... 33
Regulatory and Environmental Matters.................... 43
Regulation.......................................... 43
Hydroelectric Project Licensing..................... 43
Environmental Requirements.......................... 44
Construction and Financing.............................. 49
Research and Development................................ 53
EXECUTIVE OFFICERS........................................... 54
ITEM 2. PROPERTIES........................................... 58
ITEM 3. LEGAL PROCEEDINGS.................................... 58
-i-
<PAGE>
PAGE
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 59
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS..................... 59
ITEM 6. SELECTED FINANCIAL DATA............................. 59
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................. 60
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......... 60
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................. 61
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 61
ITEM 11. EXECUTIVE COMPENSATION............................. 66
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................... 81
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..... 84
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K................... 85
INDEX TO FINANCIAL STATEMENTS............................... 114
-ii-
<PAGE>
GLOSSARY OF TERMS
Term Meaning
---- -------
AFDC allowance for funds used during
construction
AllEnergy AllEnergy Marketing Company, LLC
BUW Brotherhood of Utility Workers of New
England, Inc.
C&LM Conservation and Load Management
Connecticut Yankee Connecticut Yankee Atomic Power Company
Distribution Companies Mass. Electric, Narragansett, Granite
State, and Nantucket
DOE U.S. Department of Energy
DOJ Department of Justice
DSM demand-side management
EMF electric and magnetic fields
EPA U.S. Environmental Protection Agency
FERC Federal Energy Regulatory Commission
FAS 121 Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets
to Be Disposed Of
FAS 71 Financial Accounting Standards No. 71,
Accounting for the Effects of Certain
Types of Regulation
Firm Energy agreement between NEPOOL members and
Contract Hydro-Quebec
Granite State Granite State Electric Company
Granite State Granite State Energy, Inc.
Energy
IBC Intercoastal Bulk Carriers, Inc.
Interconnection transmission interconnection between
participating New England utilities
and Hydro-Quebec
ISA independent safety assessment
ISC International Shipping Company
Keystone Keystone Shipping Company
kWh kilowatt hour
Maine Yankee Maine Yankee Atomic Power Company
Mass. Electric Massachusetts Electric Company
Mass. Hydro New England Hydro-Transmission Electric
Company, Inc.
MDPU Massachusetts Department of Public
Utilities
MRS Monitored Retrievable Storage
Nantucket Nantucket Electric Company
Narragansett The Narragansett Electric Company
NEEI New England Energy Incorporated
NEERI New England Electric Resources, Inc.
NEES New England Electric System
NEESCom NEES Communications, Inc.
NEES companies the subsidiaries of NEES
NEES Energy NEES Energy, Inc.
NEET New England Electric Transmission
Corporation
-iii-
<PAGE>
GLOSSARY OF TERMS
Term Meaning
---- -------
NEP New England Power Company
NEPOOL New England Power Pool
NEUs New England Utilities
N.H. Hydro New England Hydro-Transmission Corporation
NHPUC New Hampshire Public Utilities Commission
North Atlantic North Atlantic Energy Corporation
NOx nitrogen oxide
NRC Nuclear Regulatory Commission
NU Northeast Utilities
NU Companies Public Service Company of New Hampshire,
North Atlantic Energy Corporation, and
Northeast Utilities
OSP Ocean State Power
OSP II Ocean State Power II
PBOPs postretirement benefits other than pensions
PPCA purchased power cost adjustment
PRP potentially responsible party
Pricing Policy SEC approved pricing policy between NEEI and
NEP
PSNH Public Service Company of New Hampshire
Resources Narragansett Energy Resources Company
retail choice retail customers are allowed to choose their
electricity supplier
retail wheeling utilities required to deliver electricity
over their transmission and distribution
systems to retail customers who have
chosen a different electricity supplier
RIDEM Rhode Island Department of Environmental
Management
RIPUC Rhode Island Public Utilities Commission
Samedan Samedan Oil Corporation
Seabrook 1 Seabrook Nuclear Generating Station Unit 1
SEC Securities and Exchange Commission
SED service extension discount
Service Company New England Power Service Company
SO2 sulphur dioxide
spent nuclear fuel high level radioactive waste
SPCC Spill prevention control and counter-measure
stranded costs the amounts by which prudently incurred
costs incurred to supply customers
electricity under a regulated industry
structure exceed market prices under an
unregulated industry structure
System the subsidiaries of NEES collectively
unbilled revenues electricity delivered but not yet billed
Vermont Yankee Vermont Yankee Nuclear Power Corporation
Yankee Atomic Yankee Atomic Electric Company
Yankee Companies Yankee Atomic, Vermont Yankee, Maine Yankee,
and Connecticut Yankee
1935 Act Public Utility Holding Company Act of 1935,
as amended
-iv-
<PAGE>
FORWARD LOOKING INFORMATION
This report and other presentations made by NEES and its
subsidiaries contain forward looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended.
Throughout this report, forward looking statements can be
identified by the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimated",
"project", "believe", or similar expressions. Although NEES and each
of its subsidiaries believe that, in making any such statements,
its expectations are based on reasonable assumptions, any such
statements may be influenced by factors that could cause actual
outcomes and results to be materially different from those
projected. Important factors that could cause actual results to
differ materially from those in the forward looking statements
include, but are not limited to: the impact of general economic
changes in New England; changing fuel prices; the impact of
industry restructuring and increased competition in the electric
utility industry, as more fully set out below under INDUSTRY
RESTRUCTURING, page 4; federal and state regulatory developments
and changes in law which may have a substantial adverse impact on
the value of NEES and the NEES companies' assets; changes in
accounting rules and interpretations which may have an adverse
impact on the NEES companies' statements of financial position and
reported earnings; timing and adequacy of rate relief; adverse
changes in electric load and customer growth; climatic changes or
unexpected changes in weather patterns; generating plant and
distribution facility performance and possible power shortages, as
more fully set out below under Generation, Transmission, and
Distribution Properties, page 24; and decommissioning costs
associated with nuclear generating facilities, as set out under
Nuclear Units below, page 33 (see Risk Factors, page 11, for more
information).
-v-
<PAGE>
PART I
Item 1. BUSINESS
THE SYSTEM
SYSTEM ORGANIZATION
New England Electric System (NEES) is a voluntary association created under
Massachusetts law on January 2, 1926, and is a registered holding company under
the Public Utility Holding Company Act of 1935, as amended (the 1935 Act). NEES
owns voting stock in the amounts indicated of the following companies, which
together constitute the System.
% Voting
Securities
State of Type of Owned by
Name of Company Organization Business NEES
--------------- ------------ -------- ---------
AllEnergy Marketing Company, Mass. Marketing *
L.L.C. (AllEnergy)
Granite State Electric Company N.H. Retail 100
(Granite State) Electric
Granite State Energy, Inc. N.H. Marketing 100
(Granite State Energy)
Massachusetts Electric Company Mass. Retail 100
(Mass. Electric) Electric
Nantucket Electric Company Mass. Retail 100
(Nantucket) Electric
The Narragansett Electric Company R.I. Retail 100
(Narragansett) Electric
Narragansett Energy Resources R.I. Wholesale 100
Company (Resources) Electric
Generation
NEERI International Cayman International **
Islands, Project
B.W.I. Development
NEES Communications, Inc. Mass. Telecommunications 100
(NEESCom)
NEES Energy, Inc. (NEES Energy) Mass. Marketing 100
New England Electric Resources, Mass. Development 100
Inc. (NEERI) Services
New England Electric Transmission N.H. Electric 100
Corporation (NEET) Transmission
New England Energy Incorporated Mass. Oil and Gas 100
(NEEI) Exploration
& Development
New England Hydro Finance Company, Mass. Debt Financing ***
Inc. (N.E. Hydro Finance)
New England Hydro-Transmission N.H. Electric 53.97(a)
Corporation (N.H. Hydro) Transmission
* NEES Energy owns 50% of the voting securities
** NEERI owns 100% of the voting securities
***Mass. Hydro and N.H. Hydro each own 50% of the voting securities
<PAGE>
% Voting
Securities
State of Type of Owned by
Name of Company Organization Business NEES
--------------- ------------ -------- ---------
New England Hydro-Transmission Mass. Electric 53.97(a)
Electric Company, Inc. Transmission
(Mass. Hydro)
New England Power Company (NEP) Mass. Wholesale 98.85(b)
Electric
Generation &
Transmission (c)
New England Power Service Company Mass. Service 100
(Service Company) Company
(a) The common stock of these subsidiaries is owned by NEES and
certain participants (or their parent companies) in the second
phase of the Hydro-Quebec project. See Interconnection with
Quebec, page 32.
(b) Holders of common stock and 6% Cumulative Preferred Stock of
NEP have general voting rights. The 6% Cumulative Preferred
Stock represents 1.15% of the total voting power.
(c) For information on NEP's ownership interest in nuclear
generating units, see Nuclear Units, page 33.
The facilities of NEES' four distribution electric
subsidiaries, Mass. Electric, Narragansett, Granite State, and
Nantucket (collectively referred to as the Distribution Companies),
and of its principal wholesale electric subsidiary, NEP, constitute
a single integrated electric utility system that is directly
interconnected with other utilities in New England and New York
State, and indirectly interconnected with utilities in Canada. See
ELECTRIC UTILITY OPERATIONS, page 4.
Granite State Energy is a wholly-owned, nonutility subsidiary
of NEES which provides a range of energy and related services,
including but not limited to sales of electric energy, audits,
power quality, fuel supply, repair, maintenance, construction,
design, engineering, and consulting.
NEES Energy is a wholly-owned, nonutility marketing subsidiary
of NEES. NEES Energy owns a 50% interest in AllEnergy, an energy
marketing joint venture between NEES Energy and a wholly-owned
subsidiary of Eastern Enterprises, a regional gas holding company.
NEESCom is a wholly-owned, nonutility subsidiary of NEES which
provides telecommunications and information-related products and
services.
<PAGE>
NEET owns and operates a portion of an international
transmission interconnection between the electric systems of
Hydro-Quebec and New England. Mass. Hydro and N.H. Hydro own and
operate facilities in connection with an expanded second phase of
this interconnection. N.E. Hydro Finance provides the debt
financing to Mass. Hydro and N.H. Hydro for the capital costs of
the interconnection. For more information, see Interconnection
with Quebec, page 32.
NEEI is engaged in various activities relating to fuel supply
for the System. These activities primarily include participation
(principally through a partnership with a nonaffiliated oil
company) in domestic oil and gas exploration, development, and
production and the sale to NEP of fuel purchased in the open
market. As part of the NEES companies' plan to divest their
generating business, NEEI is planning to sell its oil and gas
properties. For more information, see INDUSTRY RESTRUCTURING, page
4, and Oil and Gas Operations, page 30.
Resources is a general partner, with a 20% interest, in each
of two partnerships formed in connection with the Ocean State Power
project. NEES' ownership interest in Resources is being offered
for sale as part of the NEES companies' divestiture of their
generating business. For more information, see INDUSTRY
RESTRUCTURING, page 4, and Ocean State Power, page 32.
The Service Company has contracted with NEES and its
subsidiaries to provide, at cost, such administrative, engineering,
construction, legal and financial services as the companies
request.
NEERI is a wholly-owned, nonutility subsidiary of NEES which
provides consulting and independent project development services
domestically and internationally to nonaffiliates. NEERI also
provides maintenance and construction services under contract to
certain nonaffiliated utility customers. NEERI International is a
wholly-owned, nonutility subsidiary of NEERI which will serve as a
holding company for NEERI's capitalized international projects.
EMPLOYEES
At December 31, 1996, NEES subsidiaries had approximately
4,790 employees. At that date, the total number of employees was
approximately 845 at NEP, 1,740 at Mass. Electric, 760 at
Narragansett, 70 at Granite State, 30 at Nantucket and 1,345 at the
Service Company. Of the 4,790 employees, approximately 3,000 are
members of labor organizations. Collective bargaining agreements
with the Brotherhood of Utility Workers of New England, Inc. (BUW),
the International Brotherhood of Electrical Workers, and the
Utility Workers Union of America, AFL-CIO expire in May, 1999. The
NEES companies have reached agreement with the BUW on certain
employee benefits related to industry restructuring and
divestiture, including a voluntary early retirement package and
benefits for displaced employees.
<PAGE>
ELECTRIC UTILITY OPERATIONS
INDUSTRY RESTRUCTURING
On October 1, 1996, the NEES companies announced their
intention to divest their generating business. The decision to
divest the generating business was due to a combination of factors,
discussed below, relating to the restructuring of the electric
utility industry.
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures stemming
from a number 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.
In the recent past, this competition was most prominent in the
bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Massachusetts, Rhode
Island, and New Hampshire, there have been 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"). When electricity customers are allowed to choose their
electricity supplier, utilities across the country will face the
risk that market prices may not be sufficient to recover the costs
of the commitments incurred to supply customers under a regulated
structure. The amounts by which costs exceed market prices are
commonly referred to as "stranded costs."
NEES provides electric service to retail customers through
separate distribution subsidiaries operating in Massachusetts,
Rhode Island, and New Hampshire. Each of the distribution
subsidiaries currently purchases electricity on behalf of its
customers under wholesale all-requirements contracts with NEES's
wholesale generating subsidiary, NEP. NEP also provides all-
requirements service to seven unaffiliated electric utilities. NEP
estimates that at December 31, 1996, its above-market commitments
on behalf of its all-requirements customers are as much as $4.5
billion on a present-value basis (before the application of the
proceeds from the sale of its generating business). Those
commitments consist of (i) the above-market portion of generating
plant commitments, (ii) regulatory assets, (iii) the above-market
<PAGE>
portion of purchased power contracts, and (iv) the operating cost
of nuclear plants that cannot be avoided by shutting down the
plants, including nuclear decommissioning costs.
As described below, comprehensive legislation was enacted in
Rhode Island and a settlement agreement was reached in
Massachusetts which, when all regulatory approvals are in place,
would allow recovery of NEP's above-market commitments to retail
customers in those states, which make up 95% of NEP's all-
requirements sales. In return for that recovery, the NEES
companies have agreed to provide lower rates to customers, as well
as sell their generating business. Efforts are ongoing with New
Hampshire and unaffiliated customers to secure recovery of the
balance of NEP's above-market commitments.
Massachusetts Settlement Agreement
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved a settlement among NEP, its Massachusetts
distribution affiliates Mass. Electric and Nantucket, the
Massachusetts Attorney General, the Massachusetts Division of
Energy Resources, and 12 other parties, which provides for retail
choice for Massachusetts customers and the recovery of NEP's above-
market commitments to serve those customers.
The settlement 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).
Customers who do not choose an alternative supplier would receive
"standard offer" service, which would be priced to guarantee
customers at least a 10% savings in 1998 compared with September
1996 bundled electricity prices.
In accordance with the settlement, NEP's wholesale contracts
with Mass. Electric and Nantucket have been amended to allow for
early termination of all-requirements service under those
contracts. The amendment provides that upon early termination,
Mass. Electric's and Nantucket's share of the cost of NEP's above-
market generation commitments will be recovered through a
transition access charge on distribution facilities.
The above-market portion of costs associated with generating
plants and regulatory assets would be recovered over 12 years and
would earn a return on equity of 9.4%. As the transition access
charge declines, NEP would earn mitigation incentives that would
supplement its return on equity. The incentives are structured
such that NEP believes, based on its expectations of the level of
mitigation it can achieve through divestiture and other means, that
it could earn a cumulative return on equity on unrecovered costs of
approximately 11%. 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. Initially, the transition access charge
<PAGE>
would be set at 2.8 cents per kilowatt-hour (kWh) through December
31, 2000, and is expected to decline thereafter. The initial
transition access charge assumes that the generating plants have no
market value. To measure their actual market value, the NEES
companies agreed to sell their generating business. The net
proceeds from the sale will be used to reduce the transition access
charge.
The settlement also establishes performance-based rates for
Mass. Electric. Under the settlement, Mass. Electric's nonfuel
rates (and NEP's wholesale rates to Mass. Electric) would be frozen
at current levels until the earlier of the commencement of retail
choice or January 1, 2001. Upon commencement of retail choice,
Mass. Electric's distribution rates would be set at a level
approximately $45 million above the level embedded in its current
bundled rates, with such rates then frozen through the year 2000.
This increase reflects changes to the distribution cost of service
that 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. Mass. Electric's return on equity would be
subject to a floor of 6% and a ceiling of 11%, effective upon
commencement of retail choice. Earnings over the ceiling would be
shared equally between customers and shareholders up to a maximum
of 12.5%. This sharing results in an effective cap on the
shareholder's return on equity of 11.75%. To the extent that
earnings fall below the floor, Mass. Electric would be authorized
to surcharge customers for the shortfall.
The settlement would also eliminate Mass. Electric's purchased
power cost adjustment (PPCA) mechanism as of July 31, 1996. This
mechanism allows Mass. Electric to reconcile purchased power rate
changes from NEP and the effects of NEP's seasonal rates. The
settlement also stipulates that Mass. Electric's net $18 million
PPCA refund liability balance at July 31, 1996 will be used to
prefund a storm contingency fund with $3 million, while the
remainder will be used to offset regulatory assets for hazardous
waste costs.
The settlement is subject to approval by the Federal Energy
Regulatory Commission (FERC). The FERC accepted the filing to
become effective February 1, 1997, subject to refund, and ordered
hearings.
The Utility Workers Union of America and the Massachusetts
Alliance of Utility Unions, who intervened in the MDPU proceeding
on the settlement, have indicated they intend to appeal the MDPU's
order approving the settlement to the Massachusetts Supreme
Judicial Court. If an appeal is brought, the NEES companies will
oppose it.
Several bills are pending before the Massachusetts legislature
on electric industry restructuring, including comprehensive
<PAGE>
legislation introduced by Governor William F. Weld and by the
legislature's Joint Committee on Electric Restructuring. These
bills cover many of the topics addressed in the settlement and
could impact the implementation of the settlement.
Among the issues being considered by the legislature is
securitization, whereby a utility would assign to a trust all or a
portion of its rights to receive access charges in exchange for a
lump sum reimbursement of stranded costs.
Rhode Island Legislation
In August 1996, the state of Rhode Island enacted pioneering
legislation that allows customers in that state the opportunity to
choose their electricity supplier. Under the Rhode Island statute,
state accounts, certain new customers, and the largest
manufacturing customers will be able to choose their supplier
beginning on July 1, 1997. These customers represent approximately
2% of NEES's retail customer kWh sales. The balance of Rhode
Island customers will be able to choose their supplier in 1998,
with an additional 10% of customers load having choice on January
1 and the remainder on July 1. All Rhode Island customers would
have choice of supplier at an earlier date if retail access becomes
available to 40% or more of the kWh sales in New England.
The statute calls for NEP's contract with NEES's Rhode Island
distribution subsidiary, Narragansett, to be amended to permit a
gradual, early termination of all-requirements service under this
contract. The amendment provides that, in return, Narragansett's
22% share of the cost of NEP's above-market generation commitments
would be recovered through a transition access charge on
Narragansett's distribution facilities. The specifics of the
transition access charge are similar to, and were a model for,
those contained in the Massachusetts settlement. One difference is
the statute's return on equity, which will be set at 11% as long as
the NEES companies complete the divestiture or other market
valuation of their generating business; otherwise, the return will
be equal to 9.2%. Provisions relative to Narragansett's above-
market generation commitments are parallel to those discussed above
under Massachusetts Settlement Agreement.
The statute also establishes performance-based rates for
distribution utilities, such as Narragansett. Under the statute,
Narragansett increased distribution rates by approximately $11
million in 1997 and is entitled to a similar increase in 1998.
In addition, in 1997, Narragansett's return on equity from
distribution operations, exclusive of any performance standards
factors, will be subject to a floor of 6% and a ceiling of 11%.
Earnings over the ceiling will be shared equally between customers
and shareholders up to a maximum return on equity from distribution
operations of 12.5%. This sharing results in an effective cap on
<PAGE>
the shareholder's return on equity of 11.75%. To the extent that
earnings fall below the floor, Narragansett will be authorized to
surcharge customers for the shortfall.
NEP and Narragansett filed with the FERC an amendment to their
all-requirements contract in order to implement the statute. The
FERC has set down the amendment, along with the Massachusetts
settlement, for hearing. Narragansett has indicated it is willing
to make certain changes to its plan in Rhode Island to parallel
provisions in the Massachusetts settlement. Implementation of other
aspects of the statute is subject to approval of the Rhode Island
Public Utilities Commission (RIPUC). Proposed legislation has also
been introduced in Rhode Island dealing with securitization of
stranded costs.
New Hampshire Proceeding and Settlement Agreement
On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its plan to implement a New Hampshire law
calling for retail access by 1998. Under the plan, utilities such
as Granite State whose rates are below the regional average would
be allowed full recovery of stranded costs as calculated by the
NHPUC. However, the NHPUC indicated that its methodology and
proposed timing of recovery would yield both initial access charges
and total recovery less than that requested by Granite State.
Further, the NHPUC indicated that its decision would not result in
savings for Granite State's customers.
On March 3, 1997, Public Service Company of New Hampshire
(PSNH), the largest utility in New Hampshire, North Atlantic Energy
Corporation (North Atlantic), and Northeast Utilities
(collectively, the NU Companies) filed in federal court to stay the
implementation of the NHPUC's plan. The NU Companies asserted that
the NHPUC plan as applied to them could trigger bankruptcy of North
Atlantic and PSNH. The case was transferred to the United States
District Court of Rhode Island, which issued a temporary
restraining order staying the NHPUC plan as applied to the NU
Companies pending further action. The NHPUC on March 19, 1997,
also granted a temporary stay of its own order. Granite State is
seeking to intervene in the federal action to protect its rights,
and will seek rehearing of the NHPUC plan by the NHPUC.
Prior to the issuance of the NHPUC order, Granite State had
reached an interim settlement with several customers and other
stakeholders that would set initial access charges at 2.8 cents per
kWh for two years, and in other respects would mirror the
Massachusetts settlement described above. Stranded costs to be
recovered after the two-year period would be subject to future
regulatory determination. Unlike the NHPUC order, the interim
agreement would provide all customers with a rate reduction of
approximately 10%. This interim settlement is still pending before
the NHPUC.
<PAGE>
Granite State's all-requirements purchased power contract with
NEP requires either party to give seven years notice prior to
terminating the contract. Termination of the contract would create
stranded costs at NEP that it would seek permission from the FERC
to recover from Granite State pursuant to the contract. However,
it is unclear whether Granite State would be allowed under the
NHPUC's rules to fully recover all of the stranded costs billed to
it by NEP. If the NHPUC did not allow Granite State to fully
recover stranded costs billed to it by NEP pursuant to FERC order,
Granite State would seek a remedy in the courts.
Federal Activity
In April 1996, the FERC issued Order No. 888 requiring
utilities that own transmission facilities to file open access
tariffs to make available transmission service to affiliates and
nonaffiliates at fair, nondiscriminatory 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 all-
requirements contracts, such as those between NEP and its retail
affiliates. However, upon reconsideration, FERC determined that it
will serve as the primary forum for deciding stranded cost recovery
cases if a nonjurisdictional municipal utility annexes territory
currently served by a local retail utility. This move by FERC
fills in a jurisdictional gap that could have arisen under the
original Order No. 888, since municipal utilities are not
necessarily subject to state commission jurisdiction. On February
26, 1997, the FERC announced Order No. 888-A, reaffirming the
principles of Order No. 888, including stranded cost recovery.
Because of the Massachusetts settlement and the Rhode Island
statute, NEP does not expect it will rely exclusively on Order No.
888 to recover stranded costs from its affiliates in Massachusetts
and Rhode Island. NEP cannot predict at this time whether an Order
No. 888 filing will be necessary to fully recover stranded costs
from Granite State or from seven unaffiliated wholesale customers
should any of those customers choose to terminate service under
their contracts with NEP. Granite State and these seven
unaffiliated customers are responsible for approximately 3% and 2%
of NEP's sales, respectively.
In July 1996, NEP, on behalf of the NEES companies, filed a
transmission tariff with the FERC pursuant to Order No. 888. The
FERC accepted the filing, but ordered NEP to refile to conform more
closely with the FERC's requirements under Order No. 888. The
implementation of the tariff in mid-1996 did not have a significant
impact on NEP's revenues.
<PAGE>
A number of proposals for federal legislation related to
industry restructuring have been brought forward for consideration
by the current Congress. The scope and aim of these vary widely;
however, the NEES companies and others will argue that state
settlements should be respected. NEES cannot predict what federal
legislation, if any, may be enacted.
1935 Act
The 1935 Act generally has been construed to limit the
operations of a registered holding company to a single integrated
public utility system, plus such additional businesses as are
functionally related to such system. Among other things, the 1935
Act requires NEES and its subsidiaries to seek prior SEC approval
before effecting mergers and acquisitions or pursuing other types
of nonutility initiatives. Such pervasive regulation may impede or
delay NEES's efforts to achieve its strategic and operating
objectives. Consequently, NEES continues to support efforts to
repeal or modify this legislation.
In 1995, the SEC issued a report to the United States Congress
advocating repeal of the 1935 Act, either on a conditional and
transitional basis or immediate and outright repeal. The basis for
the SEC's recommendation for repeal is that the 1935 Act is no
longer reflective of regulatory and economic conditions. Following
the SEC's report, there were several bills introduced in both the
United States Senate and House of Representatives in 1996 which
would have repealed the 1935 Act on a conditional and transitional
basis and transferred its oversight functions to the FERC and the
states. Although this proposed legislation did not pass, several
bills addressing 1935 Act repeal or amendment have been introduced
in the current legislative session.
Divestiture of Generation Business
Under the Massachusetts settlement and, if such settlement is
approved by the FERC, automatically under the Rhode Island statute,
the NEES companies must complete the divestiture of their
nonnuclear generating business within six months of the later of
the commencement of retail choice in Massachusetts or the receipt
of all necessary regulatory approvals. The NEES companies are in
the process of soliciting proposals for the acquisition of their
nonnuclear generating business with the objective of reaching
definitive purchase and sale agreements by mid-1997. Closing would
follow the receipt of regulatory approvals, which are expected to
take at least six to 12 months following the execution of purchase
and sale agreements. At December 1996, the nonnuclear net book
value of the generating plant was approximately $1.1 billion.
As part of the divestiture plan, NEP will endeavor to sell, or
otherwise transfer, its minority interest in four nuclear power
<PAGE>
plants to nonaffiliates. NEP may retain responsibility for
decommissioning and related expenses, if necessary. To the extent
that NEP is unable to divest its nuclear generating interests, the
Massachusetts settlement provides for a sharing between customers
and shareholders of the revenues associated with the nuclear
interests and the costs not otherwise reflected in the access
charge, with 80% allocated to customers and 20% to shareholders.
This sharing mechanism is not included in the Rhode Island statute
previously discussed.
Narragansett will be compensated by NEP for any difference
between the sale price of Narragansett's share of the Manchester
Street Station and its net book value. In addition, NEEI is
planning to sell its oil and gas properties, the cost of which is
supported by NEP through fuel purchase contracts.
NEP has approximately $740 million of mortgage bonds
outstanding. The bond indenture restricts the sale of the trust
property in its entirety or substantially in its entirety. The
proposed sale of NEP's generating business would likely require
that NEP either amend the bond indenture or either defease or call
the bonds in connection with the proposed sale. Any defeasance of
bonds would be by the deposit of cash representing principal and
interest to the maturity date or interest, principal, and general
redemption premium to an earlier redemption date.
Risk Factors
While substantial progress has been made in resolving the
uncertainty regarding the impact on shareholders from industry
restructuring, significant risks remain. These include, but are
not limited to: (i) the potential that ultimately the Massachusetts
settlement and the Rhode Island statute will not be implemented in
the manner anticipated by NEES, (ii) the possibility of state or
federal legislation that would increase the risks to shareholders
above those contained in the Massachusetts settlement and Rhode
Island statute, and (iii) the potential for adverse stranded cost
recovery decisions involving Granite State and NEP's unaffiliated
customers.
The major risk factors affecting the Distribution Companies
relate to the possibility of adverse regulatory or judicial
decisions or legislation which limits the level of revenues the
Distribution Companies are allowed to charge for their services.
While substantial progress has been made in resolving the
uncertainty regarding recovery by the Distribution Companies of
stranded costs billed to them by NEP, significant risks remain.
These risks are primarily attributable to the potential that
ultimately the Massachusetts settlement and the Rhode Island
statute, referred to above, will not be implemented in the manner
anticipated by the Distribution Companies and/or the possibility of
<PAGE>
other state or federal legislation which would increase the risks
to the Distribution Companies above those contained in the
Massachusetts settlement and the Rhode Island statute.
Even if these risks do not materialize, the implementation of
the Massachusetts settlement and the Rhode Island statute will
negatively impact financial results for NEES, starting in 1998.
The returns on equity permitted on NEES subsidiaries' transmission
and distribution operations (up to 11.75%) and on the unrecovered
commitments in the generating business (generally 9.4% to 11%) are
less than those historically earned by NEES. In addition, starting
in 1998, earnings will be affected by the return on the
reinvestment of the proceeds from the sale of the generation
business. Such reinvestment return is likely, at least in the near
term, to be less than is currently earned by the generation
business. Also, once NEP has divested its generating business and
completed its stranded cost recovery, it will become solely a
provider of transmission services with at least initially a smaller
capital investment than currently exists.
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 thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The NEES companies have recorded
approximately $550 million in regulatory assets in compliance with
FAS 71 of which approximately $75 million relate to the
transmission and distribution business.
Both the Massachusetts settlement and the Rhode Island statute
provide for full recovery of the costs of generating assets and oil
and gas related assets (including regulatory assets) not
recoverable from the proceeds of the divestiture of NEP's
generating business. The costs of these assets would be recovered
as part of a transition access charge imposed on all distribution
customers. After the proposed divestiture, substantially all of
NEP's business, including the recovery of its stranded costs, would
remain under cost-based rate regulation. NEES believes the
Massachusetts settlement and the Rhode Island statute will enable
the NEES distribution companies operating in those states to
recover through rates their specific costs of providing ongoing
distribution services. In addition, FERC Order No. 888 enables
transmission companies to recover their specific costs of providing
transmission service. NEES believes these factors will allow its
principal subsidiaries to continue to apply FAS 71 and that no
impairment of plant assets will exist under Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
<PAGE>
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (FAS
121). Any loss from the divestiture of generating assets and oil
and gas assets will be recorded as a regulatory asset to be
recovered through the ongoing transition access charge.
Although NEES believes that its subsidiaries will continue to
meet the criteria for continued application of FAS 71, NEES
understands that members of the SEC staff have raised questions
concerning the continued applicability of FAS 71 to certain other
electric utilities facing restructuring. In addition, despite the
progress made to date in Massachusetts and Rhode Island, it is
possible that the final restructuring plans ultimately ordered by
regulatory bodies would not reflect full recovery of stranded
costs, including a fair return on those costs as they are being
recovered. In the event that future circumstances should cause the
application of FAS 71 to be discontinued, a noncash write-off of
previously established regulatory assets and liabilities related to
the affected operations would be required. In addition, write-
downs of plant assets under FAS 121 could be required, including a
write-off of any loss from the divestiture of the generating
business.
BUSINESS ACTIVITY
NEP's business is principally generating, purchasing,
transmitting, and selling electric energy in wholesale quantities.
In 1996, 95% of NEP's all-requirement revenue from the sale of
electricity was derived from sales for resale to affiliated
companies and 5% from sales for resale to municipal and other
utilities. NEP is the wholesale supplier of the electric energy
requirements of the Distribution Companies under contracts that,
absent the amendments discussed under Federal Activity above,
require seven years notice of termination. Narragansett receives
credits against its purchases of power from NEP for the cost of
generation from its Providence units, which are functionally
integrated with NEP's facilities to achieve maximum economy and
reliability. Discussions of NEP's generating properties, load
growth, energy mix, and fuel supplies include the related
properties of Narragansett. For details of sales of energy and
operating revenue for the last five years, see OPERATING STATISTICS
on page 29 of the New England Power Company 1996 Annual Report to
Stockholders (the NEP 1996 Annual Report). (For a discussion of
electric utility operations in a more competitive environment, see
INDUSTRY RESTRUCTURING, page 4.)
The combined service area of the Distribution Companies
constitutes the retail service area of the System and covers more
than 4,500 square miles with a population of about 3,000,000 (1990
census). See Map - Electric Utility Properties, page 28. The
largest cities served are Worcester, Mass. (population 170,000) and
Providence, R.I. (population 161,000).
<PAGE>
Mass. Electric provides approximately 960,000 customers with
electric service at retail in a service area comprising
approximately 43% of the area of The Commonwealth of Massachusetts.
The population of the service area is about 2,160,000 or 36% of the
total population of the Commonwealth (1990 Census). Mass.
Electric's service area consists of 146 cities and towns including
the highly diversified commercial and industrial cities of
Worcester, Lowell, and Quincy, the Interstate 495 high technology
belt, suburban communities, and many rural towns. The economy of
the area is diversified. Principal industries served by Mass.
Electric include computer manufacturing and related businesses,
electrical and industrial machinery, plastic goods, fabricated
metals and paper, and chemical products. In addition, a broad
range of professional, banking, medical, and educational
institutions is served. During 1996, 41% of Mass. Electric's
revenue from the sale of electricity was derived from residential
customers, 37% from commercial customers, 21% from industrial
customers, and 1% from others. In 1996, the 20 largest customers
of Mass. Electric accounted for approximately 7% of its electric
revenue. For details of sales of energy and operating revenue for
the last five years, see OPERATING STATISTICS on page 27 of Mass.
Electric's 1996 Annual Report to Stockholders (the Mass. Electric
1996 Annual Report). In February 1997, a settlement agreement
among Mass. Electric and two affiliates, the Massachusetts Attorney
General, the Massachusetts Division of Energy Resources, and 12
other parties was approved by the MDPU. This settlement provides
for retail choice of power supplier by Massachusetts customers
beginning January 1, 1998 (see INDUSTRY RESTRUCTURING, page 4).
Narragansett provides approximately 330,000 customers with
electric service at retail. Its service territory, which includes
urban, suburban, and rural areas, covers about 839 square miles or
80% of the area of Rhode Island, and encompasses 27 cities and
towns including the cities of Providence, East Providence,
Cranston, and Warwick. The population of the area is about 725,000
(1990 Census) which represents about 72% of the total population of
the state. The economy of the territory is diversified. Principal
industries served by Narragansett produce fabricated metal
products, electrical and industrial machinery, transportation
equipment, textiles, jewelry, silverware, and chemical products.
In addition, a broad range of professional, banking, medical, and
educational institutions is served. During 1996, 44% of
Narragansett's revenue from the sale of electricity was derived
from residential customers, 41% from commercial customers, 14% from
industrial customers, and 1% from others. In 1996, the 20 largest
customers of Narragansett accounted for approximately 9% of its
electric revenue. For details of sales of energy and operating
revenue for the last five years, see OPERATING STATISTICS on page
32 of Narragansett's 1996 Annual Report to Stockholders (the
Narragansett 1996 Annual Report). Rhode Island legislation passed
in 1996 allows utility customers to choose their power supplier.
Distribution companies, including Narragansett, would be required
<PAGE>
to deliver the power to their customers. This customer choice is
being phased in over 12 months beginning July 1997 (see INDUSTRY
RESTRUCTURING, page 4).
Granite State provides approximately 36,000 customers in 21 New
Hampshire communities with electric service at retail in the State
of New Hampshire in a service area having a population of about
73,000 (1990 Census), including several communities along the
Connecticut River, especially in the Lebanon and Walpole areas, and
the Salem area in Southern New Hampshire. During 1996, 47% of
Granite State's revenue from the sale of electricity was derived
from commercial customers, 39% from residential customers, 13% from
industrial customers, and 1% from others. In 1996, the 10 largest
customers of Granite State accounted for about 18% of its electric
revenue. Granite State is not subject to the reporting
requirements of the Securities Exchange Act of 1934, and its
financial impact on the System is relatively small. Information on
Granite State is provided herein solely for the purpose of
furnishing a more complete description of System operations. In
February 1997, the NHPUC issued its plan to implement a law calling
for retail access in New Hampshire by 1998 (see INDUSTRY
RESTRUCTURING, page 4).
On March 26, 1996, NEES acquired Nantucket Electric Company for
$3.5 million. Nantucket provides approximately 8,300 customers
with electric service at retail. Its service territory is limited
to the Island and Town of Nantucket, which is located in the
Atlantic Ocean approximately 30 miles off the coast of Cape Cod,
Massachusetts. The Town has a resident population of approximately
7,800 and an estimated average yearly tourist population of
approximately 40,000, peaking in July and August. During 1996, 61%
of Nantucket's revenue from the sale of electricity was derived
from residential customers, 38% from commercial customers, and 1%
from others. During 1996, a 26-mile-long submarine cable
connecting Nantucket Island with the transmission system on the
mainland was constructed. Nantucket is not subject to the
reporting requirements of the Securities Exchange Act of 1934, and
its financial impact on the System is relatively small.
Information on Nantucket is provided herein solely for the purpose
of furnishing a more complete description of System operations.
The electric utility business of NEP and the Distribution
Companies is not highly seasonal. For NEP and the Distribution
Companies, industrial customers are broadly distributed among
standardized industrial classifications. No single industrial
classification exceeds 3% of operating revenue, and no single
customer of the System contributes more than 1% of operating
revenue.
NEESCom was established in August 1996 to allow the NEES
companies to generate revenues from the global telecommunications
industry. This subsidiary is not regulated under the Public
Utility Holding Company Act of 1935 (an exempt telecommunications
<PAGE>
company) and has a license from the Federal Communications
Commission. It will focus on the fiber optics, cable, and personal
communications sectors of the telecommunications industry.
AllEnergy's principal purpose is to sell energy and provide a
range of energy-related services, including but not limited to,
marketing, brokering and sales of energy, audits, fuel supply,
repair, maintenance, construction, operation, design, engineering,
and consulting, to customers in the competitive market in New
England and New York. In December 1996, AllEnergy announced the
acquisition of Texas Liquids, Ltd., Inc. of New Jersey, adding
propane and other petroleum products to AllEnergy's menu of
offerings.
NEERI is a wholly-owned nonutility subsidiary of NEES. Its
principal purpose is to provide consulting and independent project
development services for domestic and international transmission
projects. In December 1996, NEERI proposed a 600-megawatt high
voltage direct current submarine cable transmission connection
between Connecticut and Long Island, which would introduce
competitively attractive sources of power to Long Island. Under
the proposal, NEERI, or an affiliate, would build, operate, own,
and maintain the facilities.
NEES and the NEES companies have from time to time considered,
and expect to consider in the future, various strategies designed
to enhance NEES's competitive position and to increase its ability
to anticipate and adapt to changes in the electric utility
industry. These strategies may include business combinations with
other companies, internal restructurings, acquisitions or
dispositions of assets or lines of business, and additions to or
reductions of franchised service territories. NEES and the NEES
companies may from time to time engage in discussions, either
internally or with third parties, regarding one or more of these
potential strategies. Those discussions may be subject to
confidentiality agreements and NEES's policy is generally not to
comment on such activities. No assurances can be given that any
potential transaction of the type described above may actually
occur, or, if one does occur, the ultimate effect thereof on NEES's
or any NEES company's results of operations, financial condition
or competitive position. See Divestiture of Generation Business,
page 10.
<PAGE>
RESULTS OF OPERATIONS
The following is the detail of consolidated kWh sales and
deliveries and revenue from sales of electricity by the System for
the last five years.
<TABLE>
<CAPTION>
Sales and Deliveries of Electricity
(in thousands of kWh)
------------------------------------
Classification 1996 1995 1994 1993 1992
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Residential 7,993,375 7,837,527 7,879,747 7,749,514 7,666,992
Commercial 8,559,082 8,378,580 8,266,754 8,064,024 7,851,859
Industrial 4,892,524 4,952,217 4,858,638 4,863,059 4,870,612
Other 137,378 142,848 149,724 154,981 164,450
---------- ---------- ---------- ---------- ----------
Total Sales
to Ultimate
Customers 21,582,359 21,311,172 21,154,863 20,831,578 20,553,913
Sales for
Resale 3,611,643 1,592,577 2,289,091 1,958,499 2,125,463
---------- ---------- ---------- ---------- ----------
Total Sales 25,194,002 22,903,749 23,443,954 22,790,077 22,679,376
Deliveries 101,402
---------- ---------- ---------- ---------- ----------
Total Sales
and Deliveries 25,295,404 22,903,749 23,443,954 22,790,077 22,679,376
========== ========== ========== ========== ==========
Revenues from Sales of Electricity
(in thousands of dollars)
----------------------------------
Classification 1996 1995 1994 1993 1992
- -------------- ---- ---- ---- ---- ----
Residential $ 849,070 $ 841,433 $ 811,585 $ 818,120 $ 775,973
Commercial 792,380 773,138 741,194 742,121 728,645
Industrial 383,659 393,174 381,062 401,533 408,243
Other 26,902 25,836 24,580 24,745 24,776
---------- ---------- ---------- ---------- ----------
Total Sales
to Ultimate
Customers 2,052,011 2,033,581 1,958,421 1,986,519 1,937,637
Amortization
of Unbilled
Revenues 8,209 38,458 2,700
Sales for
Resale 140,110 79,452 88,912 80,554 82,580
---------- ---------- ---------- ---------- ----------
Total 2,192,121 2,121,242 2,085,791 2,069,773 2,020,217
Other Operating
Revenue 158,577 150,470 157,238 164,205 161,459
---------- ---------- ---------- ---------- ----------
Total Operating
Revenue $2,350,698 $2,271,712 $2,243,029 $2,233,978 $2,181,676
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
In 1996, kWh deliveries to ultimate customers increased 1.7%,
while total kWh sales increased 1.3%. The difference is the result
of pilot programs in Massachusetts and New Hampshire, whereby the
NEES distribution companies delivered power provided by other
companies. The increase in kWh deliveries reflects the effects of
an improving economy and the acquisition of Nantucket, partially
offset by the effects of milder weather in the last half of the
year.
RATES
General
In 1996, 71% of the System's electric utility revenues was
attributable to NEP, whose rates are subject to regulation by the
FERC. The rates of Mass. Electric and Nantucket, Narragansett, and
Granite State are subject to the respective jurisdictions of the
state regulatory commissions in Massachusetts, Rhode Island, and
New Hampshire.
The rates of each of the Distribution Companies contain a PPCA.
The PPCA is designed to allow the Distribution Companies to pass on
to their customers changes in purchased power expense resulting
from changes allowed by the FERC in NEP's rates. PPCA changes
become effective on the dates specified in the filing of the
adjustments with the state regulatory commission (not earlier than
30 days after such filing) unless the state regulatory commission
orders otherwise. There have been, on occasion, regulatory delays
in permitting PPCA increases. Narragansett and Granite State rates
have PPCA clauses that fully reconcile on an annual basis purchased
power expenses incurred by the companies against purchased power
related revenues. Mass. Electric's PPCA is designed to allow Mass.
Electric to pass on to its customers changes in purchased energy
costs resulting from rate increases or decreases by NEP. Mass.
Electric's PPCA mechanism is also designed to pass on to customers
the effects of NEP's seasonal rates. A settlement approved by the
MDPU on February 26, 1997 and currently pending before the FERC
would terminate Mass. Electric's and Nantucket's PPCA as of July
31, 1996. However, since the Massachusetts settlement had not been
approved at the end of 1996, Mass. Electric accrued refund
provisions of $9 million related to assumed operation of the PPCA
provision during the last five months of 1996. For more
information, see INDUSTRY RESTRUCTURING, page 4.
Under a case decided by the Rhode Island Supreme Court in 1977
(Narragansett v. Burke), NEP's wholesale rates must be accepted as
allowable expenses for rate-making purposes by state commissions in
retail rate proceedings. In 1986 and 1988 the U.S. Supreme Court
reaffirmed this doctrine in two cases that did not involve NEP.
However, the Narragansett v. Burke doctrine has been indirectly
challenged by a number of state regulatory commissions which have
<PAGE>
held that federal preemption of the regulation of wholesale
electric rates does not preclude the state commission from
reviewing the prudence of a utility's decision to purchase power
under a FERC-approved rate, and from disallowing costs if it finds
that the purchase was an imprudent choice among alternative
sources. In a 1985 opinion, the New Hampshire Supreme Court took
this position on the issue of state regulation of wholesale power
purchases. Also, legislation has been filed from time to time in
Congress that would have eroded or repealed the doctrine. If state
commissions were to refuse to allow the Distribution Companies to
include the full cost of power purchased from NEP in their rates,
System earnings could be adversely affected.
The rates of NEP and the Distribution Companies contain fuel
adjustment clauses that allow the rates to be adjusted to reflect
changes in the cost of fuel. NEP's fuel clause is on a current
basis. Mass. Electric has a fuel clause billing procedure that
provides for billing of fuel costs estimated on a quarterly basis,
while fuel costs billed by Narragansett and Granite State are
estimated on a semi-annual basis. Billings are adjusted in the
subsequent period for any excess or deficiency in fuel cost
recovery.
For a discussion of rates in a more competitive environment and
the divestiture of the generation business, see INDUSTRY
RESTRUCTURING, page 4.
NEP Rates
In February 1995, the FERC approved a rate agreement filed
by NEP. Under the agreement, which became effective January 1995,
NEP's base rates were frozen through 1996. Before this rate
agreement, NEP's rate structure contained two surcharges that were
recovering the costs of a coal conversion project and a portion of
NEP's investment in Seabrook 1. These two surcharges fully
recovered their related costs by mid-1995. The agreement also
provides for (i) full recovery of costs associated with the
Manchester Street Station repowering project, which began
commercial operation in late 1995, (ii) the recovery of
approximately $50 million of deferred costs associated with
terminated purchased power contracts and postretirement benefits
other than pensions (PBOPs) over seven years, (iii) full recovery
of currently incurred PBOP costs, (iv) the recovery over three
years of $27 million of costs related to the dismantling of a
retired generating station in Rhode Island and the replacement of
a turbine rotor at one of NEP's generating units, and (v) increased
recovery of depreciation expense by approximately $8 million
annually to recognize costs that will be incurred upon the eventual
dismantling of its Brayton Point and Salem Harbor generating
plants. Under the agreement, approximately $15 million of the $38
million in Seabrook 1 costs scheduled for recovery in 1995 pursuant
to a 1988 settlement agreement were deferred for recovery in 1996
and are now fully recovered.
<PAGE>
Finally, the agreement provided that NEP would reimburse its
wholesale customers for discounts provided by those wholesale
customers to their retail customers under service extension
discount (SED) programs. Under these programs, retail customers
are entitled to such discounts only if they have signed an
agreement not to purchase power from another supplier or generate
any additional power themselves for a three to five-year period.
Reimbursements totaled approximately $12 million in each of 1995
and 1996.
Mass. Electric Rates
Rate schedules applicable to electric services rendered by
Mass. Electric are on file with the MDPU.
In 1993, the MDPU approved a rate agreement filed by Mass.
Electric, the Massachusetts Attorney General, and two groups of
large commercial and industrial customers. Under the agreement,
effective December 1, 1993, Mass. Electric implemented an 11-month
general rate decrease of $26 million (annual basis). This rate
reduction continued in effect through October 31, 1994, at which
time rates increased to the previously approved levels. The
agreement also provided for the recognition of electricity
delivered but not yet billed (unbilled revenues) for accounting
purposes. Unbilled revenues at September 30, 1993 of approximately
$35 million were amortized to income over 13 months ending December
1994. The agreement further provided for rate discounts for large
commercial and industrial customers who signed agreements to give
a five-year notice to Mass. Electric before they purchase power
from another supplier or generate any additional power themselves.
In addition, commencing in 1995 the cost of these discounts is
being passed on to NEP as a result of a NEP rate settlement that
was approved by the FERC in early 1995. Under a settlement
approved by the MDPU on February 26, 1997, and currently pending
before the FERC, these discounts would end when retail choice
commences, and the notice provision would be waived to the extent
that it would limit a customer's ability to purchase electricity
from an alternate supplier.
On February 7, 1997, the MDPU approved a settlement that would
set unbundled distribution rates at a level approximately $45
million above the level embedded in current bundled rates upon the
commencement of retail choice. The settlement is subject to the
approval of the FERC. For more information, see INDUSTRY
RESTRUCTURING, page 4.
The MDPU approved a $31 million increase to base rates for
Mass. Electric, effective October 1, 1995.
<PAGE>
Narragansett Rates
Rate schedules applicable to electric services rendered by
Narragansett are on file with the RIPUC and the Rhode Island
Division of Public Utilities and Carriers.
The RIPUC approved a $10.8 million increase to base rates for
Narragansett effective January 1, 1997 pursuant to the 1996
legislation providing customers the opportunity to choose their
electric supplier. Under this legislation, Narragansett is
entitled to a similar increase in 1998.
The RIPUC approved a settlement agreement that provided for a
$15 million increase to base rates for Narragansett effective
December 1, 1995. The RIPUC also approved $3 million of new
discounts for manufacturing customers.
In February 1995, the FERC approved a rate agreement, effective
in January 1995, for NEP. This rate agreement, among other things,
increased the credits Narragansett receives from NEP for the costs
of owning and operating its generation and transmission facilities
by $14 million on an annual basis. Narragansett supplies all of
the output of its generating facilities to NEP. The increase in
the credits reflects Narragansett's 10% investment in the
Manchester Street Station, which entered commercial operation in
the second half of 1995, and the transmission facilities associated
with the station, which were placed in service in September 1994.
An additional increase in these credits of approximately $2 million
took effect in January 1996.
In 1994, the RIPUC approved a rate agreement between
Narragansett and the Rhode Island Division of Public Utilities and
Carriers that provided for Narragansett to recognize, for
accounting purposes, $14 million of unbilled revenues over a 21-
month period which ended in December 1995. The agreement further
provided for rate discounts for large commercial and industrial
customers who signed agreements to give a five-year notice to
Narragansett before they purchase power from another supplier or
generate any additional power themselves. In addition, commencing
in 1995, the cost of these discounts is being passed on to NEP as
a result of the NEP rate settlement referred to above. Effective
January 1, 1997, the RIPUC approved a settlement that made the
discounts unavailable to customers not already receiving the
discounts. The settlement also provides for terminating the
discounts and five-year notice obligations to existing customers if
those customers begin to purchase their electricity from a
nonregulated power producer. NEP made a filing at the FERC (which
the FERC has accepted, made effective, and set for hearing) waiving
the requirement that NEP consent prior to Narragansett modifying
agreements with its customers that include the discount and notice
provisions.
<PAGE>
Effective January 1993, the RIPUC approved a $1.5 million
increase in rates for Narragansett, representing the first step of
a three-year phase-in of Narragansett's recovery of costs
associated with PBOPs. The second and third $1.5 million increases
took effect in January 1994 and 1995, respectively.
A 1986 Rhode Island Supreme Court decision held that the
RIPUC's rate-making power includes the authority to order refunds
of amounts earned in excess of an allowed return. As a result, the
RIPUC monitors Narragansett's earnings on a regular basis.
However, in 1996, the General Assembly enacted a statute
establishing a floor and ceiling on Narragansett's return on equity
from distribution operations. For more information, see INDUSTRY
RESTRUCTURING, page 4.
Granite State Rates
In May 1996, the NHPUC approved a permanent Granite State rate
increase of $1.1 million, effective June 1, 1996. In October 1995,
the company had received approval to collect an interim increase of
$0.9 million, effective November 1, 1995. Granite State was also
permitted to modify its fuel clause and PPCA mechanisms related to
the treatment of its gross receipts tax. This modification yielded
an additional $0.5 million of increased revenues, which is included
in rate increases.
Commencing in 1995, Granite State began offering discounts to
large commercial and industrial customers who give Granite State a
five-year notice before they purchase power from another supplier
or generate additional power themselves. Granite State is
reimbursed for these discounts by NEP. Under the NHPUC's
restructuring rules, the five-year notice obligations would remain
in effect. However, the restructuring settlement proposed by
Granite State would waive the five-year notice obligations and
terminate the discounts.
Recovery of Demand-Side Management Expenditures
The Distribution Companies offer conservation and load
management programs, usually referred to in the industry as Demand-
Side Management (DSM) programs, which are designed to help
customers use electricity efficiently, as a part of meeting the
NEES companies' regulatory requirements and customers' needs for
energy services.
The Distribution Companies regularly file their DSM programs
with their respective regulatory agencies and have received
approval to recover DSM program expenditures in rates on a current
basis. Mass. Electric's expenditures were $48 million, $53
million, and $59 million in 1996, 1995, and 1994, respectively.
Narragansett's expenditures were $10 million, $9 million, and $10
million in 1996, 1995, and 1994, respectively. Since 1990, the
Distribution Companies have been allowed to earn incentives based
<PAGE>
on the results of their DSM programs. The Distribution Companies
must be able to demonstrate the electricity savings produced by
their DSM programs to their respective state regulatory agencies
before incentives are recorded. Mass. Electric recorded $5.7
million, $5.1 million, and $7.1 million of before-tax incentives in
1996, 1995, and 1994, respectively. Narragansett recorded $0.2
million, $0.5 million, and $0.6 million of before-tax incentives
in 1996, 1995, and 1994, respectively. The Distribution Companies,
other than Narragansett, have received regulatory orders that will
give them the opportunity to continue to earn incentives based on
1997 DSM program results. In Rhode Island, the RIPUC approved
Narragansett's request to recover lost base revenues based on its
1997 DSM programs.
ELECTRIC UTILITY PROPERTIES
Divestiture
On October 1, 1996, the NEES companies announced their
intention to divest their generating business. For more
information, see INDUSTRY RESTRUCTURING, page 4.
Energy Mix
The following table displays the contributions of various fuel
sources and other generation to total net generation of electricity
by NEP during the past three years, as well as an estimate for
1997:
<TABLE>
<CAPTION>
% of Net Generation
------------------------------
Estimated Actual
--------- -------------------
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Coal 37 42 38 37
Nuclear 8 14 14 19
Gas (1) 27 24 22 16
Oil 9 1 10 10
Hydroelectric 7 7 5 6
Hydro-Quebec 6 6 5 6
Renewable Nonutility
Generation (2) 6 6 6 6
--- --- --- ---
100 100 100 100
(1) Gas includes both utility and nonutility generation.
(2) Waste to energy and hydro.
</TABLE>
<PAGE>
Generation, Transmission, and Distribution Properties
The electric utility properties of the System companies consist
of NEP's and Narragansett's fossil-fuel base load and intermediate
load steam and combined cycle generating units, conventional and
pumped storage hydroelectric stations, internal combustion peaking
units, portions of fossil fuel and nuclear generating units, the
ownership interests of NEET, Mass. Hydro, and N.H. Hydro in the
Hydro-Quebec Interconnection, and an integrated system of
transmission lines, substations, and distribution facilities. See
Map - Electric Utility Properties, page 28.
NEP's integrated system consists of 2,277 circuit miles of
transmission lines, 118 substations with an aggregate capacity of
13,876,563 kVA, and 7 pole or conduit miles of distribution lines.
The properties of Mass. Electric and Narragansett include
substations and distribution and transmission lines, which are
interconnected with transmission and other facilities of NEP. At
December 31, 1996, Mass. Electric owned 252 substations, which had
an aggregate capacity of 2,830,614 kVA, 140,141 line transformers
with the capacity of 7,204,723 kVA, and 16,055 pole or conduit
miles of distribution lines. Mass. Electric also owns 83 circuit
miles of transmission lines. At December 31, 1996, Narragansett
owned 240 substations, which had an aggregate capacity of 2,917,267
kVA, 46,854 line transformers with the capacity of 2,009,013 kVA,
and 4,338 pole or conduit miles of distribution lines.
Narragansett, in addition, owns 324 circuit miles of transmission
lines.
Substantially all of the properties and franchises of Mass.
Electric, Narragansett, and NEP are subject to the liens of
indentures under which mortgage bonds have been issued. NEP's
bond indenture restricts the sale of the trust property in its
entirety or substantially in its entirety. The proposed sale of
NEP's generating business would likely require that NEP either
amend the bond indenture or either defease or call the bonds in
connection with the proposed sale. For details of the mortgage
liens on these properties see the long-term debt note in Notes to
Financial Statements in each of these companies' respective 1996
annual reports. The properties of NEET are subject to a mortgage
under its financing arrangements.
<PAGE>
<TABLE>
The net capability at December 31, 1996, and the net generation for the
twelve months ended December 31, 1996, from all sources were as follows:
<CAPTION>
Year(s)
Placed Energy Net Net
Source Location In-Service Source Capability Generation
------ -------- ---------- ------ ---------- -------------
Fossil Fuel Units (MW) (000's of MWh)
<S> <C> <C> <C> <C> <C>
Brayton Point
Station
Units 1,2 & 3 Somerset, 1963-1969 Coal-Oil-Gas(a) 1,130 7,924
Unit 4 Mass. 1974 Oil-Gas 446 569
Salem Harbor
Station
Units 1,2 & 3 Salem, 1952-1958 Coal-Oil(a) 314 2,019
Unit 4 Mass. 1972 Oil 400 932
Manchester St. Prov., 1995 Gas-Oil 495 3,299
Station(b) R.I.
Other System Me., Mass. 1963-1978 Oil 99 110
Units(c)
Hydroelectric Units(d)
Conventional Mass.,N.H. 1909-1987
& Vt. Water 578 1,819
Pumped Storage
Bear Swamp Rowe, Mass. 1974 Water 589 (196)
Nuclear Units(e)
Yankees Me. and Vt. 1972 Nuclear 253 2,015
Millstone 3 Waterford, 1986 Nuclear 140 302
Conn.
Seabrook 1 Seabrook, 1990 Nuclear 116 894
N.H.
Other(f) - - - 716 3,807
----- ------
Total 5,276 23,494
===== ======
</TABLE>
(a) These units currently burn coal, but are also capable of
burning oil. In addition Brayton Point Units 1, 2, and 3 are
capable of limited co-firing of natural gas.
(b) In 1995, NEES subsidiaries completed the approximately 500 MW
repowering of Manchester Street Station in Providence, R.I.
Total costs for the generating station were approximately $440
million, including allowance for funds used during construction
(AFDC).
<PAGE>
(c) Includes (i) an interest in a jointly owned oil-fired unit in
Yarmouth, Maine, and (ii) diesel units at various locations.
(d) See Hydroelectric Project Licensing, page 43.
(e) See Nuclear Units, page 33.
(f) Capability includes contracted purchases (1,313 MW) less
contract sales (597 MW). Net generation includes the effects
of the above contracted purchases and economy interchanges
through the New England Power Exchange (including a 223 MW
capacity credit associated with purchases from Hydro-Quebec and
purchases from nonutility generation). For further information
see Nonutility Power Producer Information, page 32.
NEP and Narragansett are members of the New England Power Pool
(NEPOOL). Mass. Electric, Nantucket, and Granite State
participate in NEPOOL through NEP. The NEPOOL Agreement provides
for coordination of the planning and operation of the generation
and transmission facilities of its members. The NEPOOL Agreement
incorporates generating capacity reserve obligations, provisions
regarding the use of major transmission lines, and provisions for
payment for facilities usage. The NEPOOL Agreement further
provides for New England-wide central dispatch of generation
through the New England Power Exchange. Through NEPOOL, operating
and capital economies are achieved and reserves are established on
a region-wide rather than an individual company basis.
At the end of 1996, NEPOOL filed with the FERC a comprehensive
proposal to restructure NEPOOL. The main elements of the proposal
include: (1) the establishment of a regional transmission tariff
that will ensure open, nondiscriminatory access to the regional
transmission network; (2) the development of wholesale competitive
markets and a power exchange for capacity, energy and several
ancillary services with market-based pricing for these products and
services; (3) a new governance structure for NEPOOL that will allow
for more flexible and representative governance; and (4) the
creation of a new institution, the Independent System Operator,
that will operate the bulk power system, administer the regional
tariff and power exchange. The NEES companies support this
restructuring proposal because they believe it will facilitate the
development of robust competition in the electricity markets in New
England. A number of parties intervened in the proceeding. In
February 1997, the FERC accepted the filing and set the matter down
for hearings.
The 1996 NEPOOL peak demand of 19,507 MW occurred on August 6,
1996. This was below the all time NEPOOL peak demand of 20,519 MW
set on July 21, 1994.
<PAGE>
The 1996 summer peak for the System of 4,091 MW occurred at
the same day as the NEPOOL peak demand. The previous all-time peak
load of 4,385 MW occurred on July 21, 1994. The 1996-1997 winter
peak of 3,868 MW occurred on January 20, 1997.
NEPOOL currently projects a capacity shortfall of approximately
450 MW from long-range planning criteria for the summer of 1997,
assuming normal summer weather. This projection further assumes
that the three Millstone units and the Maine Yankee unit will be
unavailable during the summer. Extensive or extended hot weather
or losses of other major generating units or transmission ties
could further strain the System. NEPOOL participants are working
to mitigate any capacity shortages and prevent disruptions in
electric service this summer. Among the steps being taken are:
(1) acceleration or deferral of planned maintenance outages to
occur outside of the summer period; (2) reactivation of currently
idle generating units; (3) reduction of exposure to peak customer
loads through increased availability of interruptible loads; and
(4) coordination with neighboring power systems to maximize
NEPOOL's ability to purchase and import emergency power as
necessary. The NEES companies cannot predict whether these steps
will be sufficient to prevent service disruptions or, if there are
disruptions, how extensive they might be.
<PAGE>
MAP
(Displays electric utility properties of NEES subsidiaries)
<PAGE>
Fuel for Generation
NEP burned the following amounts of coal, residual oil, and gas
during the past three years:
1996 1995 1994
---- ---- ----
Coal (in millions of tons) 3.8 3.4 3.3
Oil (in millions of barrels) 2.2 1.7 3.4
Natural Gas (in billions of cubic feet) 28.6 16.2 4.0
Coal Procurement Program
Depending on coal-fired generating unit availability and the
degree to which the units are dispatched, NEP's 1997 coal
requirements should range between 3.7 and 3.9 million tons. NEP
obtains its domestic coal under contracts of varying lengths and on
a spot basis from domestic coal producers in Kentucky, West
Virginia, and Virginia, and from mines in Colombia and Venezuela.
Two different rail systems (CSX and Norfolk Southern) transport
coal from domestic sources to loading ports on the east coast.
NEP's coal is transported from east coast ports by ocean-going
collier to Brayton Point and Salem Harbor. NEP has a term charter
with International Shipholding Corporation for the S.S. Energy
Enterprise, a self-unloading collier, which carries most of NEP's
U.S. coal and a portion of foreign coal. NEP also charters other
coal-carrying vessels for the balance of foreign coal, and
presently has contracts of affreightment with Canada Steamship
Lines, International and Marbulk Shipping Inc. As protection
against interruptions in coal deliveries, NEP maintains average
coal inventories at its generating stations of 35 to 55 days.
To meet environmental requirements, NEP uses coal with a
relatively low sulphur content. NEP's average price for coal
burned, including transportation costs, calculated on a 26 million
Btu per ton basis, was $42.90 per ton in 1994, $42.25 in 1995, and
$42.03 in 1996. Based on a 42 gallon barrel of oil producing 6.3
million Btu's, these coal prices were equivalent to approximately
$10.41 per barrel of oil in 1994, $10.25 in 1995, and $10.20 in
1996.
Oil Procurement Program
Depending on unit availability, dispatch, and the relationship
of oil and gas prices, the System's 1997 oil requirements are
expected to be approximately 4.2 to 4.5 million barrels. The
System obtains its oil requirements through short-term contracts
with oil suppliers and purchases on the spot market. The System
currently has a total storage capacity for approximately
1.3 million barrels of residual and diesel fuel oil. The System's
<PAGE>
average cost of oil burned, calculated on a 6.3 million Btu per
barrel basis, was $13.17 in 1994, $14.46 in 1995, and $17.19 in
1996.
Natural Gas
NEP has contracts with two Canadian natural gas suppliers for
a total of 35 million cubic feet per day as well as a 7.5 million
cubic feet per day liquified natural gas supply contract with a
Massachusetts corporation. NEP has service agreements for firm
transportation of natural gas with a number of pipeline companies.
The agreements are sufficient to cover a total delivery to New
England of an aggregate amount of approximately 127.5 million cubic
feet per day. Service under the pipeline agreements and one of the
supply contracts require minimum fixed payments. NEP's minimum
fixed payments under all pipeline and supply agreements are
currently estimated to be approximately $57 million to $60 million
per year from 1997 to 2001. Remaining fixed payments from 2002
through 2014 total approximately $525 million. The amount of the
fixed payments is subject to FERC regulation and will depend on
FERC actions affecting the rates on each of the pipelines. In
connection with managing its fuel supply, NEP uses a portion of
this pipeline capacity to sell natural gas. Proceeds from sales of
natural gas and pipeline capacity of $50.2 million, $71 million,
and $55 million in 1996, 1995, and 1994, respectively, have been
passed on to customers through NEP's fuel clause.
Nuclear Fuel Supply
As noted below, NEP participates with other New England
utilities in the ownership of several nuclear units. See Nuclear
Units, page 33. The utilities responsible for supply for these
units are not experiencing any difficulty in obtaining commitments
for the supply of each element of the nuclear fuel cycle.
Oil and Gas Operations
As part of the NEES companies' divestiture of their generating
business, NEEI is planning to sell its oil and gas properties. For
more information, see INDUSTRY RESTRUCTURING, page 4.
Since 1974, NEEI has engaged in oil and gas exploration and
development, primarily through a partnership with Samedan Oil
Corporation (Samedan), a subsidiary of Noble Affiliates, Inc.
NEEI's oil and gas activities are regulated by the SEC under the
1935 Act.
Under the terms of the Samedan-NEEI partnership agreement,
Samedan is the managing partner and oversees all partnership
operations including the sale of production. Effective January 1,
1987, NEEI decided not to acquire new oil and gas prospects due to
prevailing and expected oil and natural gas market conditions.
This decision did not affect NEEI's interests and commitments in
<PAGE>
oil and gas properties owned as of December 31, 1986 by the
Samedan-NEEI partnership. Samedan continues to explore, develop,
and manage these properties on behalf of the partnership. Thus,
the results of NEEI's operations are substantially affected by the
performance of Samedan. Samedan may elect to terminate the
partnership at the end of any calendar year upon one year's prior
notice.
NEEI is required to obtain SEC approval for further investment
in these oil and gas properties. On December 20, 1994, the SEC
issued an order authorizing NEEI to invest up to $30 million in its
partnership with Samedan for the years 1995-1998. NEEI is winding
down its oil and gas program. The level of expenditures for
exploration and development of existing properties has declined as
a result of the decision not to acquire new oil and gas prospects
after December 31, 1986.
NEEI's activities are primarily rate-regulated and consist of
all prospects entered into prior to 1984. Losses from this
rate-regulated program are being passed on to NEP and ultimately to
retail customers, under an intercompany pricing policy (Pricing
Policy) approved by the SEC. Due to declines in oil and gas
prices, NEEI has incurred operating losses since 1986 and expects
to generate substantial additional losses in the future. NEP's
ability to pass such losses on to its customers was favorably
resolved in NEP's 1988 FERC rate settlement. This settlement
covered all costs incurred by or resulting from commitments made by
NEEI through March 1, 1988. Other subsequent costs incurred by
NEEI are subject to normal regulatory review. NEEI follows the
full cost method of accounting for its oil and gas operations,
under which capitalized costs (including interest paid to banks)
relating to wells and leases determined to be either commercial or
noncommercial are amortized using the unit of production method.
Due to the Pricing Policy, NEEI's rate-regulated program has
not been subject to certain SEC accounting rules, applicable to
non-rate-regulated companies, which limit the costs of oil and gas
property that can be capitalized. The Pricing Policy has allowed
NEEI to capitalize all costs incurred in connection with fuel
exploration activities of its rate regulated program, including
interest paid to banks of which $7 million was capitalized in 1996
and $10 million was capitalized in 1995 and 1994, respectively. In
the absence of the Pricing Policy, the SEC's full cost "ceiling
test" rule requires non-rate-regulated companies to write-down
capitalized costs to a level which approximates the present value
of their proved oil and gas reserves. Based on NEEI's 1996 average
oil and gas selling prices at December 31, 1996, if this test were
applied, it would have resulted in a write-down of approximately
$93 million after-tax.
<PAGE>
Nonutility Power Producer Information
The System companies purchase a portion of the electricity
generated by, or provide back-up or standard service to, 136 small
power producers, cogenerators, or independent power producers (a
total of 6,188,414 MWh of purchases in 1996). As of December 31,
1996, these nonutility generation sources include 24 low-head
hydroelectric plants, 49 wind or solar generators, 9 waste to
energy facilities, 51 cogenerators, and 3 independent power
producers. The total capacity of these sources is as follows:
Source MW at 12/31/96
------ --------------
Hydro 37
Waste to Energy 173
Cogeneration 305
Independent Power Producers 374
----
Total 889
These amounts include 735 MW of long-term capacity, 16 MW of
short-term capacity, and 138 MW treated as load reductions and
includes the Ocean State Power contracts discussed below. These
contracts are being offered for sale pursuant to the NEES
companies' divestiture of their generating business. For more
information, see INDUSTRY RESTRUCTURING, page 4.
Ocean State Power
Ocean State Power (OSP) and Ocean State Power II (OSP II) are
general partnerships that own and operate a two unit gas-fired
combined cycle electric power plant in Burrillville, R.I. The two
units have a combined winter net electrical capability of
approximately 562 MW. Each unit's capacity and energy output is
sold under 20-year unit power agreements to a group of New England
utilities, including NEP, which has contracts for 48.5% of the
output of each unit. NEP is required to make certain minimum fixed
payments to cover capital and fixed operating costs of these units
in amounts estimated to be $75 million per year.
Resources is a general partner with a 20% interest in both OSP
and OSP II and had an equity investment of approximately $35
million at December 31, 1996.
Interconnection with Quebec
NEET, Mass. Hydro, and N.H. Hydro own and operate, on behalf
of NEPOOL participants in the project, a 450 kV direct current
transmission line and related terminals to interconnect the New
England and Quebec transmission systems (the Interconnection). The
transfer capability of the Interconnection is 2,000 MW. Operating
limits implemented by adjacent Power Pools covering New York, New
<PAGE>
Jersey, Pennsylvania, and Maryland often restrict the effective
transfer capability to a lower level. NEPOOL members purchase from
and sell energy to Hydro-Quebec pursuant to several agreements.
The principal agreement calls for NEPOOL members to purchase 7
billion kWh of energy each year for ten years (the Firm Energy
Contract). Purchases under the Firm Energy Contract totaled over
5.3 billion kWh in 1996. Net energy deliveries from Hydro-Quebec
over the Interconnection totaled more than 8.1 billion kWh in 1996.
These additional deliveries reflect the use of the Interconnection
by participants to conduct independent transactions with Hydro-
Quebec on a regular basis.
The Interconnection has two phases. NEP's participation in
both is approximately 18%. NEP and the other participants have
entered into support agreements that end in 2020, to pay monthly
their proportionate share of the total cost of constructing,
owning, and operating the transmission facilities. NEP accounts
for these support agreements as capital leases and accordingly
recorded approximately $69 million in utility plant at December 31,
1996. Under the support agreements, NEP has agreed to guarantee
its share of debt financing for the second phase. At December 31,
1996, NEP had guaranteed approximately $27 million of project debt.
In the event any Interconnection facilities are abandoned for any
reason, each participant is contractually committed to pay its
pro-rata share of the net investment in the abandoned facilities.
On July 11, 1996, various New England utilities which are
members of NEPOOL, including NEP (collectively, the New England
Utilities or NEUs), submitted a dispute to arbitration regarding
their Firm Energy Purchased Power Contract with Hydro-Quebec. The
dispute concerns the components of a pricing formula. Based on
NEP's interpretation of Hydro-Quebec's claims, NEP's share of
additional billings owed to Hydro-Quebec would be approximately
$3.5 million on a retroactive basis and an estimated $3.8 million
per year on a prospective basis through 2001. The arbitrator
denied the NEUs' motion to dismiss Hydro-Quebec's claims as
untimely, without prejudice to their right to raise that motion
later at the conclusion of the evidence. Discovery is under way,
and hearings are expected to commence in June 1997.
Nuclear Units
General
NEP is a stockholder of Yankee Atomic Electric Company (Yankee
Atomic), Vermont Yankee Nuclear Power Corporation (Vermont Yankee),
Maine Yankee Atomic Power Company (Maine Yankee), and Connecticut
Yankee Atomic Power Company (Connecticut Yankee). Each of these
companies (collectively referred to as the Yankee Companies) owns
a single nuclear generating unit. NEP purchases the output of the
Maine Yankee and Vermont Yankee nuclear electric generating plants
in the same percentages as its stock ownership, less small
entitlements taken by municipal utilities. NEP has power contracts
<PAGE>
with each Yankee Company that require NEP to pay an amount equal to
its share of total fixed and operating costs (including
decommissioning costs) of the plant plus a return on equity.
The stockholders of three Yankee Companies (Vermont Yankee,
Maine Yankee, and Connecticut Yankee) have agreed, subject to
regulatory approval, to provide capital requirements in the same
proportion as their ownership percentages of the particular Yankee
Company. Yankee Atomic and Connecticut Yankee have permanently
ceased operations.
In addition, NEP is a joint owner of the Millstone 3 nuclear
generating unit in Connecticut and the Seabrook 1 nuclear
generating unit in New Hampshire. Millstone 3 and Seabrook 1 are
operated by subsidiaries of NU. NEP pays its proportionate share
of costs and receives its proportionate share of output from the
Yankee Companies, Millstone 3, and Seabrook 1. Listed below is
information on each operating nuclear plant in which NEP has an
ownership interest.
<TABLE>
<CAPTION
NEP's Share of
NEP's Net Plant
Ownership Assets
Unit Interest (%) ($ in millions)
---- ------------ ---------------
<S> <C> <C>
Maine Yankee 20 44
Vermont Yankee 20 36
Millstone 3 12 379
Seabrook 1 10 55
</TABLE>
Nuclear Plant Decommissioning
NEP is liable for its share of decommissioning costs for
Millstone 3, Seabrook 1, and each of the Yankee Companies. See
Decommissioning Trust Funds, page 35, regarding a Maine statute
relating to Maine Yankee's decommissioning trust fund.
Decommissioning costs include not only estimated costs to
decontaminate the units as required by the Nuclear Regulatory
Commission (NRC), but also costs to dismantle the uncontaminated
portion of the units. NEP records decommissioning cost expense on
its books consistent with its rate recovery. NEP is recovering its
share of projected decommissioning costs for Millstone 3 and
Seabrook 1 through depreciation expense. In addition, NEP is
paying its portion of projected decommissioning costs for all of
the Yankee Companies through purchased power expense. Such costs
reflect estimates of total decommissioning costs approved by the
FERC.
<PAGE>
Connecticut Yankee
NEP has a 15% equity ownership interest in Connecticut Yankee.
As a result of an economic analysis, the Connecticut Yankee board
of directors voted in December 1996 to permanently shut down and
decommission the plant.
In December 1996, Connecticut Yankee filed with the FERC to
recover all of its approximately $246 million undepreciated
investment in the plant and other costs over the period extending
through June 2007, when the plant's NRC operating license would
have expired. In a 1993 decision, the FERC allowed Yankee Atomic
to recover its undepreciated investment in its permanently shut
down nuclear plant, in part on the grounds that owners should not
be discouraged from closing uneconomic plants. Several parties
have intervened in opposition to Connecticut Yankee's filing. NEP
believes that the FERC will allow NEP to recover from its customers
all costs that the FERC allows Connecticut Yankee to recover from
NEP.
NEP has recorded the estimated future payment obligation to
Connecticut Yankee of $114 million as a liability and as an
offsetting regulatory asset, reflecting NEP's expected future rate
recovery of such costs. The NRC has identified numerous apparent
violations of its regulations, which may result in the assessment
of civil penalties.
Yankee Atomic
NEP has a 30% ownership interest in Yankee Atomic. In 1992,
the Yankee Atomic board of directors decided to permanently cease
power operation of, and decommission, the facility.
Decommissioning is currently under way.
NEP has recorded an estimate of its total future payment
obligations to Yankee Atomic for post operating costs as a
liability and as an offsetting regulatory asset, reflecting its
expected future rate recovery of such costs. This liability and
related regulatory asset are approximately $52 million each at
December 31, 1996.
Decommissioning Trust Funds
Each nuclear unit in which NEP has an ownership interest has
established a decommissioning trust fund or escrow fund into which
payments are being made to meet the projected costs of
decommissioning. Each of the Yankee Companies includes charges for
all or a portion of decommissioning costs in its cost of energy.
These charges vary depending upon rate treatment, the method of
decommissioning assumed, economic assumptions, site and unit
specific variables, and other factors. Any increase in these
charges is subject to FERC approval.
<PAGE>
Estimates of NEP's pro-rata share (based on ownership) of
decommissioning costs, NEP's share of the actual book values of
decommissioning fund balances set aside for each unit at
December 31, 1996, and the expiration date of the operating license
of each plant are as follows:
<TABLE>
<CAPTION>
NEP's share of
($ in millions)
-----------------------------
Estimated Decommissioning
Decommissioning Fund License
Costs Balances (1) Expiration
Unit (in 1996 $) (12/31/96) Date
---- --------------- --------------- ----------
<S> <C> <C> <C>
Maine Yankee $74 $31 2008
Vermont Yankee $75 $30 2012
Millstone 3 $62 $16 2025
Seabrook 1 $45 $ 7 2026
(1) Certain additional amounts are anticipated to be
available through tax deductions.
</TABLE>
NEP is currently collecting through rates amounts for
decommissioning based upon cost estimates and funding methodologies
authorized by FERC. Such estimates are determined periodically for
each plant and may not reflect the current projected cost of
decommissioning.
There is no assurance that decommissioning costs actually
incurred by the Yankee Companies, Millstone 3, or Seabrook 1 will
not substantially exceed these amounts. For example,
decommissioning cost estimates assume the availability of permanent
repositories in the United States for both low-level and high-level
nuclear waste; currently, only low-level waste sites are available.
See Low-Level Waste Disposal, page 41. If any of the units were
shut down prior to the end of their operating licenses, the funds
collected for decommissioning to that point would be insufficient.
NRC rules require that reasonable assurance be provided that
adequate funds will be available for the decommissioning of
commercial nuclear power plants. The rule establishes minimum
funding levels that licensees must satisfy. Each of the units in
which NEP has an interest has filed a report with the NRC providing
assurance that funds will be available to decommission the
facility.
A Maine statute provides that if both Maine Yankee and its
decommissioning trust fund have insufficient assets to pay for the
plant decommissioning, the owners of Maine Yankee are jointly and
<PAGE>
severally liable for the shortfall. The definition of owner under
the statute covers NEP and may cover companies affiliated with it.
NEP and the Distribution Companies cannot determine, at this time,
the constitutionality, applicability, or effect of this statute.
If NEP or the Distribution Companies were required to make payments
under this statute, they would assess their legal remedies at that
time. In any event, NEP and the Distribution Companies would
attempt to recover through rates any payments required. If any
claim in excess of NEP's ownership share were enforced against a
NEES company, that company would seek reimbursement from any other
Maine Yankee stockholder which failed to pay its share of such
costs.
Investments in Nuclear Units
There is widespread concern about the safety of nuclear
generating plants. The NRC regularly reviews the adequacy of its
comprehensive requirements for nuclear plants. In fact, during
1996, the NRC placed heightened emphasis upon assurance that plants
are operating in compliance with their design and licensing bases.
Many local, state, and national public officials have expressed
their opposition to nuclear power in general and to the continued
operation of nuclear power plants. From time to time, various
organizations and individuals file petitions raising safety
concerns at particular nuclear units. It is possible that this
controversy will result in cost increases and modifications to, or
premature shutdown of, the operating nuclear units in which NEP has
an interest.
The Millstone 3 and Maine Yankee nuclear generating units are
currently shut down and have been placed on the NRC "Watch List,"
signifying that their safety performance exhibits sufficient
weakness to warrant increased NRC attention. Neither may restart
without NRC approval. At present, the Vermont Yankee and Seabrook
1 nuclear generating units appear to be operating routinely without
major problems.
On October 9, 1996, the NRC issued letters to operators of
nuclear power plants requiring them to document that the plants are
operated and maintained within their design and licensing bases,
and that any deviations are reconciled in a timely manner. The
Seabrook 1, Maine Yankee, and Vermont Yankee nuclear power plants
responded to the NRC letters in February 1997.
Uncertainties regarding the future of nuclear generating
stations, particularly older units, such as Maine Yankee and
Vermont Yankee, are increasing rapidly and could adversely affect
their service lives, availability, and costs. These uncertainties
stem from a combination of factors, including the acceleration of
competitive pressures in the power generation industry and
increased NRC scrutiny.
<PAGE>
In general, the increased NRC scrutiny on the nuclear plants
mentioned above, coupled with accelerating competitive pressures in
the power generation industry, is expected to have a negative
impact upon NEP's operations and costs and those of co-owners of
the various units. North Atlantic, a subsidiary of Northeast
Utilities (NU) that owns 35.57% of the Seabrook unit, has announced
that it may have to seek protection under the bankruptcy laws due
to the effect of the NHPUC restructuring rules announced February
28, 1997. For more information, see New Hampshire Proceeding and
Settlement Agreement, page 8.
Millstone 3
In April 1996, the NRC ordered Millstone 3, which has
experienced numerous technical and nontechnical problems, to remain
shut down pending verification that the unit's operations are in
accordance with NRC regulations and the unit's operating license.
Millstone 3 is operated by a subsidiary of NU. NEP is not an owner
of the Millstone 1 and 2 nuclear generating units, which are also
shut down under NRC orders.
A number of significant prerequisites must be fulfilled prior
to restart of Millstone 3, including certification by NU that the
unit adequately conforms to its design and licensing bases, an
independent verification of corrective actions taken at the units,
an NRC assessment concluding a culture change has occurred, public
hearings, and a vote of the NRC Commissioners. NU announced in
December 1996 that it expects Millstone 3 to be ready for restart
around the end of 1997, subject to review by the NRC Commissioners.
NEP cannot predict when Millstone 3 will be allowed by the NRC to
restart, but believes that the unit will remain shut down for a
very protracted period.
NEP incurred $10 million of actual costs in 1996 related to
corrective actions associated with the outage. NEP has also
accrued a liability of approximately $3 million for its share of
future corrective action costs. Additional costs may be incurred.
During the outage, NEP is also incurring approximately $1.6 million
per month in incremental replacement power costs, which it has been
recovering from customers through its fuel clause.
Several criminal investigations related to Millstone 3 are
ongoing. The NRC has identified numerous apparent violations of
its regulations which may result in the assessment of civil
penalties. NEP and other minority owners of Millstone 3 are
assessing their legal rights with respect to NU's operation of
Millstone 3.
Maine Yankee
Over the past few years, the Maine Yankee nuclear generating
plant has experienced numerous technical and nontechnical problems.
In 1995, the plant had been shut down for much of the year due to
<PAGE>
the discovery of cracks in its steam generator tubes. The plant is
currently shut down due to a cable routing problem. In addition,
due to leaking nuclear fuel rods, 68 fuel assemblies will be
replaced. As a result, Maine Yankee management does not expect the
unit to restart until summer of 1997.
In late 1995, allegations were made to the NRC that inadequate
analyses of the plant's emergency core cooling system had been
performed. As a result of the allegations, the NRC limited the
plant's operation to 90% of full capacity. In September 1996, the
NRC asked the Department of Justice (DOJ) to review, for potential
criminal violations, an NRC investigatory report on the
allegations. The DOJ is not limited in its investigation to the
matters covered in that report.
During 1996, the NRC conducted an independent safety assessment
(ISA) and identified a number of weaknesses, deficiencies, and
apparent violations which could result in fines. Yankee Atomic
performed professional services for Maine Yankee associated with
the matters being investigated. In response to the ISA results,
Maine Yankee has indicated that it will spend more than $50 million
in 1997 on operational improvements. Additionally, in February
1997, Entergy Corporation, an operator of five nuclear units,
commenced providing management services.
Under a confirmatory action letter issued by the NRC on
December 18, 1996, and supplemented on January 30, 1997, Maine
Yankee must fulfill certain commitments before its plant will be
allowed by the NRC staff to return to service. Because of
regulatory and other uncertainties faced by Maine Yankee, NEP
cannot predict whether or when Maine Yankee will return to service.
During the outage, NEP is incurring approximately $1.8 million
per month in incremental replacement power costs, which it has been
recovering from customers through its fuel clause.
High-Level Waste Disposal
The Nuclear Waste Policy Act of 1982 provides a framework and
timetable for selection of sites for repositories of high-level
radioactive waste (spent nuclear fuel) from United States nuclear
plants. The U.S. Department of Energy (DOE) has entered into
contracts with the Yankee Companies, the Millstone 3 joint owners,
and the Seabrook 1 joint owners for acceptance of title to, and
transportation and storage of, this waste. Under these contracts,
each operating unit will pay fees to the DOE to cover the
development and creation of waste repositories. Fees for fuel
burned since April 1983 have been collected by the DOE on an
ongoing basis at the rate of one tenth of a cent per kWh of net
generation. Fees for generation up through April 1983 were
determined by the DOE as follows: $13.2 million for Yankee Atomic,
$48.7 million for Connecticut Yankee, $50.4 million for Maine
Yankee, and $39.3 million for Vermont Yankee. Neither Millstone 3
<PAGE>
nor Seabrook 1 has been assessed any fees for fuel burned through
April 1983, because they did not enter commercial operation until
1986 and 1990, respectively.
The Yankee Companies had several options to pay these fees.
Yankee Atomic paid its fee to the DOE for the period through April
1983. The other three Yankee Companies elected to defer payment
until a future date, thereby incurring interest expense. However,
payment to the DOE must occur prior to the first delivery of spent
fuel. Connecticut, Maine, and Vermont Yankee have segregated a
portion of their respective DOE obligations in external accounts.
The remainder of the funds have been used to support general
capital requirements. All expect to separately fund in full in
external accounts their DOE obligation (including accrued interest)
prior to payment to the DOE. To the extent that any of the three
Yankee Companies is unable to fully meet its DOE obligation at the
prescribed time, NEP might be required to provide additional funds.
Prior to such time that the DOE takes delivery of a plant's
spent nuclear fuel, it is stored on site in spent fuel pools.
Maine Yankee, Millstone 3, Seabrook 1, and Vermont Yankee are in
the process of reconfiguring their spent fuel pools to allow for
additional storage capability. Upon successful completion of the
reconfiguring, Maine Yankee and Millstone 3 will have sufficient
spent fuel pool capacity to support plant operation through the
expiration of their respective current NRC license. Seabrook 1's
licensed storage capacity will allow a full core discharge until
2011. Vermont Yankee will be able to maintain a full core
discharge capability until 2004. Yankee Atomic has adequate
on-site storage capacity for all its spent fuel.
Federal legislation enacted in 1987 directed the DOE to proceed
with the studies necessary to develop and operate a permanent
high-level waste disposal site at Yucca Mountain, Nevada. There is
local opposition to development of this site. Although originally
scheduled to open in 1998, the DOE currently estimates that the
permanent disposal site is not expected to open before 2015.
Nuclear waste legislation mandating DOE acceptance of spent fuel at
an interim storage site in Nevada by January 1, 1998 was passed by
the U.S. Senate in July 1996, but the House failed to vote on any
waste bill prior to adjourning for the year. Therefore, new
legislation will be considered in the next (105th) Congress. On
July 23, 1996, the U.S. Court of Appeals for the District of
Columbia Circuit issued its decision in a lawsuit petitioning the
Court to declare the 1998 contract date a binding legal obligation.
The Court stated that the DOE is obligated "to start disposing
Spent Nuclear Fuel no later than January 31, 1998." The Court's
decision did not specify a plan for ensuring that the DOE meets its
obligations, but rather noted that it was premature to determine
the appropriate remedy since the DOE had not yet defaulted upon
either its statutory or contractual obligation. The DOE did not
file an appeal by the October 22, 1996 deadline and its next course
of action is unclear.
<PAGE>
On November 12, 1996, a group consisting of 40 agencies from
29 states and several municipal utilities sent a letter to the DOE
asking what procedures and schedule the DOE will implement to
comply with the court decision obligating DOE to begin taking spent
fuel in 1998. On January 31, 1997, 36 utilities and 33 states
filed lawsuits against DOE in the U.S. Court of Appeals for the
District of Columbia Circuit. The plaintiffs want to suspend
payments to the Nuclear Waste Fund until DOE begins taking spent
fuel. The payment would instead be made to special escrow
accounts.
The petitioners in the lawsuits requested that the court review
the above decision in which the same court ruled that the January
31, 1998 contract date was binding and order DOE to prepare a plan
to begin taking spent fuel by that date. They also requested that
the court order DOE to submit that plan to the court within 30 days
of the ruling. Lastly, the plaintiffs requested that the court
protect them from any retaliatory action by DOE by not allowing DOE
to suspend or terminate the waste acceptance contracts of utilities
participating in the lawsuit, or to penalize suspended payments.
The legislation enacted in 1987 also provides for the
development of a Monitored Retrievable Storage (MRS) facility and
abandons plans to identify and select a second, permanent disposal
site. An MRS facility would provide temporary storage for
high-level waste prior to eventual permanent disposal. Pending new
legislation filed in the next Congress, it is not known when an MRS
facility would begin accepting deliveries. Additional delays due
to political and technical problems are likely.
Federal authorities have deferred indefinitely the commercial
reprocessing of spent nuclear fuel.
Low-Level Waste Disposal
Federal law allows the states in which the three existing low-
level waste disposal sites were located to deny access to
nonregional waste generators after 1992. Under the statute,
individual states are responsible for finding local sites for
disposal or forming regional disposal compacts by defined milestone
dates.
None of the states in which NEP holds an interest in a nuclear
facility has met the statutory milestones toward developing
disposal sites. Currently, two low-level waste disposal sites in
the U.S. are accepting nonregional waste, Chem-Nuclear Systems,
Inc.'s site in Barnwell, South Carolina and Envirocare of Utah,
Inc's site in Clive, Utah. The Barnwell facility reopened its
services to most nonregional generators on July 1, 1995 and is
authorized to remain open until July 1, 2005. In 1996, the South
Carolina Supreme Court upheld the constitutionality of the
legislative action that reopened Barnwell to nonregional
generators. Envirocare began accepting Class A low-level waste in
<PAGE>
1995. Class A waste is the least contaminated of the three
categories defining low-level waste. The Barnwell facility accepts
all three categories of waste. Connecticut Yankee, Maine Yankee,
Millstone 3, Seabrook, and Yankee Atomic are currently shipping
low-level waste to these sites.
The states of Maine and Vermont have established a compact with
Texas for the disposal of low-level waste in Hudspeth County,
Texas. The compact agreement has been approved in all three states
and is now before the U.S. Congress. If Congress approves, the
site is expected to begin accepting waste during 1998. While Maine
Yankee has been shipping its low-level waste off-site, Vermont
Yankee has elected to store low-level waste on-site until that
time. The compact releases Maine and Vermont from having to site
an in-state disposal facility. Connecticut, Massachusetts, and New
Hampshire are still required to pursue local or regional low-level
waste disposal facilities. However, Massachusetts suspended its
search for a local disposal facility in 1996.
Nuclear Insurance
The Price-Anderson Act limits the amount of liability claims
that would have to be paid in the event of a single incident at a
nuclear plant to $8.9 billion (based upon 110 licensed reactors).
The maximum amount of commercially available insurance coverage to
pay such claims is $200 million. The remaining $8.7 billion would
be provided by an assessment of up to $79.3 million per incident
levied on each of the participating nuclear units in the United
States, subject to a maximum assessment of $10 million per incident
per nuclear unit in any year. The maximum assessment, which was
most recently adjusted in 1993, is adjusted for inflation at least
every five years. NEP's current interest in Maine Yankee, Vermont
Yankee, Millstone 3, and Seabrook 1 would subject NEP to a $58.0
million maximum assessment per incident. NEP's payment of any such
assessment would be limited to a maximum of $7.3 million per
incident per year. As a result of the permanent cessation of power
operation of the Yankee Atomic plant, Yankee Atomic has received
from the NRC a partial exemption from obligations under the
Price-Anderson Act. However, Yankee Atomic must continue to
maintain $100 million of commercially available nuclear insurance
coverage. Connecticut Yankee is planning to file with the NRC for
a similar exemption.
Each of the nuclear units in which NEP has an ownership
interest also carries nuclear property insurance to cover the costs
of property damage, decontamination or premature decommissioning,
and workers' claims resulting from a nuclear incident. These
policies may require additional premium assessments if losses
relating to nuclear incidents at units covered by this insurance
occurring in a prior six-year period exceed the accumulated funds
available. NEP's maximum potential exposure for these assessments,
either directly, or indirectly through purchased power payments to
the Yankee Companies, is approximately $11 million per year.
<PAGE>
Other Items
Federal legislation requires emergency response plans, approved
by federal authorities, for nuclear generating units. The Yankee
Companies, Seabrook 1, and Millstone 3 are not currently
experiencing difficulty in maintaining approval of their emergency
response plans.
REGULATORY AND ENVIRONMENTAL MATTERS
Regulation
Numerous activities of NEES and its subsidiaries are subject
to regulation by various federal agencies. Under the 1935 Act,
many transactions of NEES and its subsidiaries are subject to the
jurisdiction of the SEC. With the intensifying competitive
pressures within the electric utility industry, there has been
increasing debate about modifying or repealing the 1935 Act. The
System supports its repeal. Under the Federal Power Act, certain
electric subsidiaries of NEES are subject to the jurisdiction of
the FERC with respect to rates, accounting, and hydroelectric
facilities. In addition, the NRC has broad jurisdiction over
nuclear units and federal environmental agencies have broad
jurisdiction over environmental matters. The electric utility
subsidiaries of NEES are also subject to the jurisdiction of
regulatory bodies of the states and municipalities in which they
operate.
For more information, see: INDUSTRY RESTRUCTURING, page 4,
RATES, page 18, Fuel for Generation, page 29, Oil and Gas
Operations, page 30, Nuclear Units, page 33, and Environmental
Requirements, page 44.
Hydroelectric Project Licensing
NEP is the largest operator of conventional hydroelectric
facilities in New England. Most of NEP's hydroelectric projects
are licensed by the FERC. These licenses expire periodically and
the projects must be relicensed at that time. NEP's present
licenses expire over a period from 2001 to 2020, excluding the
Deerfield River Project discussed below. Upon expiration of a FERC
license for a hydro project, the project may be taken over by the
United States or licensed to the existing, or a new licensee. If
the project were taken over, the existing licensee would receive an
amount equal to the lesser of (i) fair value of the project or
(ii) original cost less depreciation and amounts held in
amortization reserves, plus in either case severance damages. The
net book value of NEP's hydroelectric projects was $238 million as
of December 31, 1996.
In the event that a new license is not issued when the existing
license expires, FERC must issue annual licenses to the existing
<PAGE>
licensee which will allow the project to continue operation until
a new license is issued. A new license for a project may
incorporate operational restrictions and requirements for
additional nonpower facilities (e.g., fish passage or recreational
facilities) that could affect operation of the project, and may
also require additional capital investment. For example, NEP has
previously received new licenses for projects on the Connecticut
River that involved construction of an extensive system of fish
ladders.
The license for the 84 MW Deerfield River Project expired at
the end of 1993. NEP filed an application for a new license in
1991. NEP has signed, with 15 governmental agencies and advocacy
groups, an Offer of Settlement which embodies operational,
environmental and recreational conditions acceptable to the
parties. In 1996, FERC issued a final environmental impact
statement which supports the Offer of Settlement. NEP has received
water quality certifications from the Commonwealth of Massachusetts
and the State of Vermont needed to complete the FERC relicensing
processing. The Vermont certificate was appealed by an advocacy
group; however, the appeal has subsequently been settled. On March
25, 1997, the FERC voted to issue NEP a new 40-year license for the
project.
The next NEP project to require a new license will be the 368
MW Fifteen Mile Falls Project on the Connecticut River in New
Hampshire and Vermont. This license expires in 2001. The formal
process of preparing an application for a new license began in 1996
with the filing of a Letter of Intent to Relicense with the FERC.
In 1994, the FERC adopted a policy statement in which it
asserted that it has authority over the decommissioning of licensed
hydroelectric projects being abandoned or denied a new license.
However, the FERC has recognized in the process leading to the
policy statement that mandated project removal would occur in only
rare circumstances. The FERC also declined to require any generic
funding mechanism to cover decommissioning costs. If a project is
decommissioned, the licensee may incur substantial costs.
Environmental Requirements
Existing Operations
The NEES subsidiaries are subject to federal, state, and local
environmental regulation of, among other things, wetlands and flood
plains; air and water quality; storage, transportation, and
disposal of hazardous wastes and substances; underground storage
tanks; and land-use. It is likely that the stringency of
environmental regulation affecting the System and its operations
will increase in the future.
<PAGE>
Siting and Construction Activities for New Facilities
All New England states require, in certain circumstances,
regulatory approval for site selection or construction of electric
generating and major transmission facilities. Connecticut, Maine,
Massachusetts, New Hampshire, and Rhode Island also have programs
of coastal zone management that might restrict construction of
power plants and other electrical facilities in, or potentially
affecting, coastal areas. All agencies of the federal government
must prepare a detailed statement of the environmental impact of
all major federal actions significantly affecting the quality of
the environment. The New England states have environmental laws
which require project proponents to prepare reports of the
environmental impact of certain proposed actions for review by
various agencies. The System is not currently constructing
generating plants or major transmission facilities.
Environmental Expenditures
Total System capital expenditures for environmental protection
facilities have been substantial. System capital expenditures for
such facilities amounted to approximately $51 million in 1994, $39
million in 1995, and $9 million in 1996, including expenditures by
NEP of $44 million, $32 million, and $3 million, respectively, for
those years. The System estimates that capital expenditures for
environmental protection facilities in 1997 and 1998 will not be
material to the System.
Hazardous Substances
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. NEES 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.
NEES and/or its subsidiaries have been named as potentially
responsible parties (PRPs) by either the U.S. Environmental
Protection Agency (EPA) or the Massachusetts Department of
Environmental Protection for 23 sites at which hazardous waste is
alleged to have been disposed. Private parties have also contacted
or initiated legal proceedings against NEES and certain
subsidiaries regarding hazardous waste cleanup. The most prevalent
types of hazardous waste sites with which NEES and its subsidiaries
<PAGE>
have been associated are manufactured gas locations. (Until the
early 1970s, NEES was a combined electric and gas holding company
system.) NEES is aware of approximately 40 such manufactured gas
locations (including nine of the 23 locations for which NEES
companies have been named PRPs) mostly located in Massachusetts.
NEES and its subsidiaries are currently aware of other possible
hazardous waste sites and may in the future become aware of
additional sites, that they may be held responsible for
remediating.
In 1993, the MDPU approved a settlement agreement regarding the
rate recovery of remediation costs of former manufactured gas sites
and certain other hazardous waste sites located in Massachusetts.
Under that agreement, qualified costs related to these sites are
paid out of a special fund established on Mass. Electric's books.
Mass. Electric made an initial $30 million contribution to the
fund. Rate-recoverable contributions of $3 million, adjusted since
1993 for inflation, are added annually to the fund along with
interest and any recoveries from insurance carriers. At December
31, 1996, the fund had a balance of $17 million. Under the 1996
Massachusetts settlement, an additional $15 million will be
transferred to the fund in 1997 out of existing reserves for
refunds.
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 NEES or its
subsidiaries. Where appropriate, the NEES companies intend to seek
recovery from their insurers and from other PRPs, but it is
uncertain whether, and to what extent, such efforts will be
successful. At December 31, 1996, NEES had total reserves for
environmental response costs of $48 million and a related
regulatory asset of $18 million. NEES 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.
In October 1996, the American Institute of Certified Public
Accountants issued new accounting rules for Environmental
Remediation Liabilities which become effective in 1997. NEES does
not believe these new rules will have a material effect on NEES's
financial position or results of operations.
Electric and Magnetic Fields (EMF)
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. In
<PAGE>
October 1996, the National Research Council of the National Academy
of Sciences released a report stating no conclusive and consistent
evidence demonstrates that exposures to residential EMF produce
adverse health effects. It is impossible to predict the ultimate
impact on NEES subsidiaries and the electric utility industry if
further investigations were to demonstrate that the present
electricity delivery system is contributing to increased risk of
cancer or other health problems.
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what the impact on the NEES companies would be if this
cause of action is recognized in the states in which NEES companies
operate and in contexts other than condemnation cases.
Air
Approximately 45% of NEP's electricity is produced at eight
older thermal generating units in Massachusetts. Six are
principally fueled by coal, one by oil, and one by oil and gas.
The federal Clean Air Act requires significant reduction in utility
sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions that
result from burning fossil fuels by the year 2000 to reduce acid
rain and ground-level ozone (smog).
NEP reduced SO2 emissions under Phase 1 of the federal acid
rain program and SO2 and NOx emissions under Massachusetts
regulations, all of which took effect in 1995. The SO2 and NOx
reductions that were made to meet 1995 requirements have resulted
in one-time operation and maintenance costs of $21 million and
capital costs of $113 million through December 31, 1996. Depending
on fuel prices, NEP also expects to incur not more than $5 million
annually in increased costs to purchase cleaner fuels to meet SO2
emission reduction requirements.
All eight of NEP's thermal units will be subject to Phase 2 of
the federal and state acid rain regulations that become effective
in 2000. NEP believes that the SO2 controls already installed for
the 1995 requirements will satisfy the Phase 2 acid rain
regulations.
In connection with the federal ozone emission requirements,
state environmental agencies in ozone nonattainment areas are
developing a second phase of NOx reduction regulations that would
have to be fully implemented by NEP no later than 1999. While the
exact costs are not known, NEP estimates that the cost of
implementing these regulations would not jeopardize continued
operation of NEP's units.
The generation of electricity from fossil fuel also emits trace
amounts of certain hazardous air pollutants and fine particulates.
An EPA study of utility hazardous air pollutant emissions is
<PAGE>
expected to be completed in 1997. The study's conclusions could
lead to new emission standards requiring costly controls or fuel
restrictions on NEP plants. At this time, NEES and its
subsidiaries cannot estimate the impact the findings of this
research might have on NEP's operations.
In 1995, the NEES companies and the DOE executed an accord
pursuant to the Climate Challenge Program, a joint voluntary effort
of the DOE and the electric utility industry. Under the accord,
the NEES companies committed to reduce greenhouse gas emissions 20%
below 1990 levels by 2000. Climate Challenge is a component of
President Clinton's Climate Change Action Plan.
Water
The federal Clean Water Act prohibits the discharge of any
pollutant (including heat), except in compliance with a discharge
permit issued by the states or the EPA for a term of no more than
five years. NEP and Narragansett have received required permits
for all their steam-generating plants. NEET has received its
required surface water discharge permits for all of its current
operations.
NEES facilities store substantial amounts of oil and are
required to have spill prevention control and counter-measure
(SPCC) plans. Currently, major System facilities such as Brayton
Point and Salem Harbor have up-to-date SPCC plans. A comprehensive
study of smaller facilities has been completed to determine the
appropriate plans for these facilities and a five-year
implementation plan is under way.
In October 1996, the EPA announced it was beginning a process
to determine whether to modify or revoke NEP's water discharge
permit for its Brayton Point 1,576 megawatt power plant. This
action came two years before the permit expiration date. The EPA
stated it took this step in response to a request from the Rhode
Island Department of Environmental Management (RIDEM) that action
be taken on the Brayton Point permit prior to its 1998 renewal,
based on concerns raised in a final RIDEM report issued in October
1996. The report asserted a statistical correlation between the
decline in the fish population in Mount Hope Bay and a change in
operations at Brayton Point that occurred in the mid-1980's.
In February 1997, NEP signed a memorandum of agreement
negotiated with the various federal and state environmental
agencies under which NEP will voluntarily operate under more
stringent conditions than under its existing permit. The agreement
is in lieu of any immediate action on the permit, but will cover
only the months of February and March 1997. During this time, the
parties will continue to work toward a longer-term solution. NEP
cannot predict at this time what permit changes will be required or
the impact on Brayton Point's operations and economics. However,
permit changes may substantially impact the plant's capacity and
<PAGE>
ability to produce energy as well as require significant capital
expenditures of tens of millions of dollars to construct equipment
to address the concerns raised by the environmental agencies.
Nuclear
The NRC, along with other federal and state agencies, has
extensive regulations pertaining to environmental aspects of
nuclear reactors. Safety aspects of nuclear reactors, including
design controls and inspection programs to mitigate any possibility
of nuclear accidents and to reduce any damages therefrom, are also
subject to NRC regulation. See Nuclear Units, page 33.
CONSTRUCTION AND FINANCING
Estimated construction expenditures (including nuclear fuel)
for the System's electric utility companies are shown below for
1997 through 1999.
The System conducts a continuing review of its construction and
financing programs. These programs and the estimates shown below
are subject to revision based upon changes in assumptions as to
System load growth, rates of inflation, receipt of adequate and
timely rate relief, the availability and timing of regulatory
approvals, new environmental and legal or regulatory requirements,
total costs of major projects, and the availability and costs of
external sources of capital.
<PAGE>
<TABLE>
<CAPTION>
Estimated Construction Expenditures
-----------------------------------
1997 1998 1999 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
(In Millions - excluding AFDC)
NEP
- ---
Generation (1)(2) 20 20 10 50
Transmission 50 50 50 150
---- ---- ---- ----
Total NEP 70 70 60 200
---- ---- ---- ----
Mass. Electric
- --------------
Distribution 95 90 95 280
Narragansett
- ------------
Transmission 5 5 5 15
Distribution 40 35 35 110
---- ---- ---- ----
Total Narragansett 45 40 40 125
---- ---- ---- ----
Granite State
- -------------
Distribution 5 4 4 13
---- ---- ---- ----
Nantucket
- ---------
Distribution 15 1 1 17
---- ---- ---- ----
Combined Total
- --------------
Generation (1)(2) 20 20 10 50
Transmission 55 55 55 165
Distribution 155 130 135 420
---- ---- ---- ----
Grand Total 230 205 200 635
---- ---- ---- ----
<FN>
(1) Includes nuclear fuel.
(2) Due to the NEES companies' pending divestiture of the generating business,
estimated generation construction expenditures would substantially decrease.
For more information, see INDUSTRY RESTRUCTURING, page 4.
</FN>
</TABLE>
<PAGE>
Financing
All of NEP's construction expenditures during the period from
1997 to 1999 will be financed by internally generated funds. The
proportion of the Distribution Companies' construction expenditures
estimated to be financed by internally generated funds during the
period from 1997 to 1999 is:
Mass. Electric 90%
Narragansett 75%
Granite State 75%
Nantucket 100%
The general practice of the operating subsidiaries of NEES has
been to finance construction expenditures in excess of internally
generated funds initially by issuing unsecured short-term debt.
This short-term debt is subsequently reduced through sales by such
subsidiaries of long-term debt securities and preferred stock, and
through capital contributions from NEES to the subsidiaries. NEES,
in turn, generally has financed capital contributions to the
operating subsidiaries through retained earnings and the sale of
additional NEES shares. Since April 1991, NEES has been meeting
all of the requirements of its dividend reinvestment and common
share purchase plan and employee share plans through open market
purchases. Under these plans, NEES may revert to the issuance of
new common shares at any time.
The ability of NEP and the Distribution Companies to issue
short-term debt is limited by regulatory restrictions, by
provisions contained in their charters, and by certain debt and
other instruments. Under the charters or by-laws of NEP, Mass.
Electric, and Narragansett, short-term debt is limited to 10% of
capitalization. The preferred stockholders authorized these
limitations to be increased to 20% of capitalization until 1998 for
NEP and Narragansett, and until 1999 for Mass. Electric, at which
time the limits will revert to 10% of capitalization. The
following table summarizes the short-term debt limits at
December 31, 1996, and the amount of outstanding short-term debt
and lines of credit and standby bond facilities at such date.
<TABLE>
<CAPTION>
($ millions)
Lines of Credit/
Standby Bond
Limit Outstanding Facilities
----- ----------- ----------------
<S> <C> <C> <C>
NEP 335 94 530
Mass. Electric 150 44 90
Narragansett 100 19 41
Granite State 10 5 7
Nantucket 5 1.5 3
</TABLE>
<PAGE>
NEES and certain subsidiaries, with regulatory approval,
operate a money pool to more effectively utilize cash resources and
to reduce outside short-term borrowings. Short-term borrowing
needs are met first by available funds of the money pool
participants. Borrowing companies pay interest at a rate designed
to approximate the cost of outside short-term borrowings.
Companies which invest in the pool share the interest earned on a
basis proportionate to their average monthly investment in the
money pool. Funds may be withdrawn from or repaid to the pool at
any time without prior notice. At December 31, 1996, NEP, Mass.
Electric, Narragansett, and Granite State each had money pool
borrowings of approximately $5 million.
In order to issue additional long-term debt and preferred
stock, NEP and the Distribution Companies, excluding Nantucket,
must comply with earnings coverage requirements contained in their
respective mortgages, note agreements, and preference provisions.
The most restrictive of these provisions in each instance generally
requires (1) for the issuance of additional mortgage bonds by NEP,
Mass. Electric, and Narragansett, for purposes other than the
refunding of certain outstanding mortgage bonds, a minimum earnings
coverage (before income tax) of twice the pro forma annual interest
charges on mortgage bonds, and (2) for the issuance of additional
preferred stock by NEP, Mass. Electric, and Narragansett, minimum
gross income coverage (after income tax) of one and one-half times
pro forma annual interest charges and preferred stock dividends, in
each case for a period of twelve consecutive calendar months within
the fifteen calendar months immediately preceding the proposed new
issue.
The respective long-term debt and preferred stock coverages of
NEP and the Distribution Companies, excluding Nantucket, under
their respective mortgage indentures, note agreements, and
preference provisions, are stated in the following table for the
past three years:
<PAGE>
<TABLE>
<CAPTION>
Coverage
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NEP
- ---
General and Refunding Mortgage Bonds 4.16 4.05 4.13
Preferred Stock 2.47 2.45 2.60
Mass. Electric
- --------------
First Mortgage Bonds 3.25 2.82 3.65
Preferred Stock 1.93 1.71 2.02
Narragansett
- ------------
First Mortgage Bonds 3.22 3.10 2.16
Preferred Stock 2.04 2.01 1.61
Granite State
- -------------
Notes (1) 2.82 2.38 2.26
(1) As defined under the most restrictive note agreement.
</TABLE>
RESEARCH AND DEVELOPMENT
Expenditures for the System's research and development
activities totaled $8.3 million, $7.5 million, and $5.5 million in
1994, 1995, and 1996, respectively. Total expenditures are
expected to be about $7.6 million in 1997.
About 39% of these expenditures support the Electric Power
Research Institute, which conducts research and development
activities on behalf of its sponsors and provides the System with
access to a wide range of relevant research results at minimum
cost.
The System also directly funds research projects of a more
site-specific concern to the System and its customers. These
projects include:
- creating options to maintain electric service
quality and reliability for customers at the lowest
cost;
- developing conservation, load control, and rate
design measures that will help customers use
electric energy more efficiently; and
- developing, assessing, and demonstrating new
technologies and fuels that will ensure economic,
efficient and environmentally sound production and
delivery of electric energy in the future.
<PAGE>
EXECUTIVE OFFICERS
NEES
- ----
All executive officers are elected to continue in office
subject to Article 19 of the Agreement and Declaration of Trust
until the first meeting of the Board of Directors following the
next annual meeting of shareholders, or the special meeting of
shareholders held in lieu of such annual meeting, and until their
successors are chosen and qualified. The executive officers also
serve as officers and/or directors of various subsidiary companies.
John W. Rowe - Age: 51 - President and Chief Executive Officer
since 1989 - Elected Chairman of NEP in 1993 - President of NEP
from 1991 to 1993 - Chairman of NEP from 1989 to 1991.
Alfred D. Houston - Age: 56 - Executive Vice President since
1994 - Senior Vice President-Finance from 1987 to 1994 - Vice
President of NEP from 1987 to 1994 - Vice President of
Narragansett since 1976 - Treasurer of Narragansett since 1977.
Richard P. Sergel - Age: 47 - Elected Senior Vice President in
1996 - Vice President from 1992 to 1995 - Treasurer from 1990
to 1991 - Chairman of Mass. Electric and Narragansett since
1993 - Treasurer of NEP and Mass. Electric from 1990 to 1991
- Vice President of the Service Company from 1988 to 1993.
Jeffrey D. Tranen - Age: 50 - Elected Senior Vice President in
1996 - Vice President from 1991 to 1995 - President of NEP
since 1993 - Vice President of NEP from 1984 to 1993 -
President of Mass. Hydro, N.H. Hydro, and NEET since 1991.
Cheryl A. LaFleur - Age: 42 - Vice President, Secretary, and
General Counsel since 1995 - Vice President of Mass. Electric
from 1993 to 1995 - Vice President of the Service Company -
1992-1993 and since 1995 - Senior Counsel for the Service
Company from 1989 to 1991 - Elected Vice President of NEP in
1995.
Michael E. Jesanis - Age: 40 - Elected Vice President in 1997 -
Treasurer since 1992 - Director of Corporate Finance from 1990
to 1991.
<PAGE>
NEP
- ---
The Treasurer is elected by the stockholders to hold office
until the next annual meeting of stockholders and until the
successor is duly chosen and qualified. The other executive
officers are elected by the Board of Directors to hold office
subject to the pleasure of the directors and until the first
meeting of directors after the next annual meeting of stockholders
and until their successors are duly chosen and qualified. Certain
officers of NEP are, or at various times in the past have been,
officers and/or directors of the System companies with which NEP
has entered into contracts and had other business relations.
John W. Rowe* - Chairman since 1993 - President from 1991 to
1993 - Chairman from 1989 to 1991.
Jeffrey D. Tranen* - President since 1993 - Vice President from
1984 to 1993.
Andrew H. Aitken - Age: 52 - Vice President since 1995 -
Director of Environmental and Safety for the Service Company
since 1993 - Director, Environmental Affairs for the Service
Company from 1981 to 1993.
Lawrence E. Bailey - Age: 53 - Vice President since 1989 -
Plant Manager of Brayton Point Station from 1987 to 1991.
Jeffrey A. Donahue - Age: 38 - Vice President since 1993 -
Elected President of NEERI in 1996 - various engineering
positions with the Service Company since 1983 - Director of
Construction since 1992 - Chief Electrical Engineer since 1991.
Michael E. Hachey - Age: 43 - Elected Vice President in 1997 -
Manager of Generation Marketing from 1994 to present - Manager
of Independent Power Projects from 1989 to 1993.
Cheryl A. LaFleur* - Vice President since 1995.
John L. Levett - Age: 47 - Elected Vice President in 1996 -
Elected President of NEERI International in 1996 - President
of NEERI from 1994 to 1996 - Manager of Generation Marketing
for the Service Company from 1992 to 1993.
John F. Malley - Age: 48 - Vice President since 1992 - Manager
of Generation Planning for the Service Company from 1986 to
1991.
Arnold H. Turner - Age: 56 - Vice President since 1989 -
Director of Transmission Marketing since 1993.
<PAGE>
Jeffrey W. VanSant - Age: 43 - Vice President since 1993 -
Manager of Oil and Gas Exploration and Development for the
Service Company from 1985 to 1993 - Manager of Oil and Gas
Procurement from 1992 to 1993 - Manager of Natural Gas Supply
from 1989 to 1992.
Michael E. Jesanis* - Treasurer since 1992.
Howard W. McDowell - Age: 53 - Controller since 1987 -
Controller of Mass. Electric and Narragansett since 1987 -
Treasurer of Granite State since 1984.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES for other information regarding this
officer.
Mass. Electric
- --------------
The Treasurer is elected by the stockholders to hold office
until the next annual meeting of stockholders and until the
successor is duly chosen and qualified. The other executive
officers are elected by the board of directors to hold office
subject to the pleasure of the directors and until the first
meeting of the directors after the next annual meeting of
stockholders. Certain officers of Mass. Electric are, or at
various times in the past have been, officers and directors of
System companies with which Mass. Electric has entered into
contracts and had other business relations.
Richard P. Sergel* - Chairman since 1993.
Lawrence J. Reilly - Age: 41 - Elected President in 1996 -
Elected President of Granite State in 1997 - Elected President
of Nantucket in 1996 - Vice President for the Service Company
from 1993 to 1996 - Director of Rates for the Service Company
from 1990 to 1996.
John C. Amoroso - Age: 58 - Vice President since 1993 -
District Manager, Southeast District from 1992 to 1993 -
Manager, Southeast District from 1985 to 1992.
Eric P. Cody - Age: 46 - Vice President since 1995 - Vice
President and Director, Information Services for the Service
Company from 1991 to 1995.
Charles H. Moser - Age: 56 - Vice President since 1993 - Chief
Protection and Planning Engineer for the Service Company from
1984 to 1993.
Lydia M. Pastuszek - Age: 43 - Vice President since 1993 - Vice
President of NEP from 1990 to 1993 - President of Granite State
from 1990 to 1996.
<PAGE>
Anthony C. Pini - Age: 44 - Vice President since 1993 -
Assistant Controller for the Service Company from 1985 to 1993.
Christopher E. Root - Age: 38 - Vice President since 1995 -
Director, Retail Distribution Services for the Service Company
from 1993 to 1995 - Chief of Division Engineering for the
Service Company from 1992 to 1993 - Manager, Distribution
Engineering for Narragansett from 1990 to 1992.
Nancy H. Sala - Age: 45 - Vice President since 1992 - Assistant
to the President of Mass. Electric from 1990 to 1992.
Dennis E. Snay - Age: 55 - Vice President since 1990.
Michael E. Jesanis* - Treasurer since 1992.
Howard W. McDowell - Controller since 1987 and Assistant
Treasurer since 1977 - Reference is made to the material
supplied under the caption EXECUTIVE OFFICERS - NEP for other
information regarding Mr. McDowell.
*Please refer to the material supplied under the caption EXECUTIVE
OFFICERS - NEES for other information regarding this officer.
Narragansett
- ------------
Officers are elected by the board of directors or appointed,
as appropriate, to serve until the meeting of directors following
the annual meeting of stockholders, and until their successors are
chosen and qualified. Officers other than the President,
Treasurer, and Secretary, serve also at the pleasure of the
directors. Certain officers of Narragansett are, or at various
times in the past have been, officers and directors of System
companies with which Narragansett has entered into contracts and
had other business relations.
Richard P. Sergel* - Chairman since 1993.
Robert L. McCabe - Age: 55 - President since 1986.
William Watkins, Jr. - Age: 64 - Executive Vice President since
1992 - Vice President of the Service Company from 1980 to 1992.
Richard W. Frost - Age: 57 - Vice President since 1993 -
District Manager - Southern District from 1990 to 1993.
Alfred D. Houston* - Vice President since 1976 - Treasurer
since 1977.
Shannon M. Larson - Age: 39 - Elected Vice President in 1996 -
Manager of Retail Marketing from 1995 to 1996 - Coordinator of
Emerging Markets from 1994 to 1995 - Manager of Conservation
<PAGE>
and Load Management from 1990 to 1993 - Principal Analyst for
the Service Company from 1993 to 1994.
Richard Nadeau - Age: 61 - Vice President since 1994 - Director
of Customer Service since 1993 - Assistant to the President
from 1990 to 1993.
Michael F. Ryan - Age: 45 - Vice President since 1994 - Rhode
Island Director for U.S. Senator John H. Chafee from 1986 to
1994.
Howard W. McDowell - Controller since 1987 - Reference is made
to the material supplied under the caption EXECUTIVE OFFICERS
- NEP for other information regarding Mr. McDowell.
*Please refer to the material supplied under the caption EXECUTIVE
OFFICERS - NEES for other information regarding this officer.
Item 2. PROPERTIES
See Item 1. Business - Generation, Transmission, and
Distribution Properties, page 24.
Item 3. LEGAL PROCEEDINGS
In August 1995, the Massachusetts Superior Court dismissed a
lawsuit filed against NEP in May 1995 by Keystone Shipping Company
(Keystone), which had challenged NEP's right to terminate NEP's
charter of a ship owned by Keystone's affiliate, Intercoastal Bulk
Carriers (IBC), and to purchase the ship from IBC. In addition,
that month an arbitration panel unanimously ruled against IBC,
holding that NEP had such rights under the charter. Keystone and
IBC challenged both rulings, but in September 1995, the parties
entered into a settlement in which Keystone and IBC dismissed their
claims against NEP. Thereafter, the ship was sold to an affiliate
of International Shipholding Corporation, with whom NEP had entered
into a new charter, and was sent to dry dock for inspection and
routine maintenance. The inspection revealed that further work was
needed to make the ship seaworthy. Under NEP's charter with IBC,
these costs, which are estimated to be in excess of $10 million,
are IBC's responsibility. NEP therefore initiated arbitration
against both IBC and Keystone before the same panel. Keystone has
filed suit in federal district court seeking to stay the
arbitration as to Keystone.
The federal district court denied Keystone's motion to have the
arbitration stayed with respect to Keystone. Keystone has appealed
the denial to the First Circuit Court of Appeals. The First
Circuit heard argument on the matter early in the year; a decision
is awaited. Hearings before the arbitration panel are under way.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the last quarter of 1996.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
NEES information in response to the disclosure requirements
specified by this Item 5. appears under the captions in the NEES
Annual Report indicated below:
Required Information Annual Report Caption
-------------------- ---------------------
(a) Market Information Shareholder Information
(b) Holders Shareholder Information
(c) Dividends Financial Results
The information referred to above is incorporated by reference
in this Item 5.
NEP, Mass. Electric, and Narragansett - The information
required by this item is not applicable as the common stock of all
these companies is held solely by NEES. Information pertaining to
payment of dividends and restrictions on payment of dividends is
incorporated herein by reference to each company's 1996 Annual
Report.
Item 6. SELECTED FINANCIAL DATA
NEES
----
The information required by this item is incorporated herein
by reference to page 26 of the NEES 1996 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to page 46 of the NEP 1996 Annual Report.
<PAGE>
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to page 30 of the Mass. Electric 1996 Annual Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to page 29 of the Narragansett 1996 Annual Report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
NEES
----
The information required by this item is incorporated herein
by reference to pages 16 through 25 of the NEES 1996 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to pages 3 through 16 of the NEP 1996 Annual Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to pages 3 through 9 of the Mass. Electric 1996 Annual
Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to pages 3 through 9 of the Narragansett 1996 Annual
Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NEES
----
The information required by this item is incorporated herein
by reference to pages 26 through 46 of the NEES 1996 Annual Report.
<PAGE>
NEP
---
The information required by this item is incorporated herein
by reference to pages 1, 16 through 44, and 46 of the NEP 1996
Annual Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to pages 1, 10 through 28, and 30 of the Mass.
Electric 1996 Annual Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to pages 1, 10 through 27, and 29 of the Narragansett
1996 Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NEES, NEP, Mass. Electric, and Narragansett - None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
NEES
----
The information required by this item is incorporated herein
by reference to the material under the caption ELECTION OF
DIRECTORS in the definitive proxy statement of NEES, dated
March 10, 1997, for the 1997 Annual Meeting of Shareholders,
provided that the information under the headings "Compensation
Committee Report on Executive Compensation" and "Corporate
Performance" are not so incorporated. Reference is also made to
the information under the caption EXECUTIVE OFFICERS - NEES in Part
I of this report.
NEP
---
The names of the directors of NEP, their ages, and a brief
account of their business experience during the past five years
appear below. Information required by this item for Executive
Officers is provided under the caption EXECUTIVE OFFICERS - NEP in
Part I of this report.
<PAGE>
Directors are elected to hold office until the next annual
meeting of stockholders or special meeting held in lieu thereof and
until their respective successors are chosen and qualified.
Joan T. Bok - Director since 1979 - Age: 67 - Chairman of the
Board of NEES - Chairman or Vice Chairman of the Company from
1988 to 1994 - Chairman of NEES from 1984 to 1994 (Chairman,
President, and Chief Executive Officer from July 26, 1988 until
February 13, 1989). Directorships of NEES System companies:
New England Electric System, Granite State Electric Company,
Granite State Energy, Inc., Massachusetts Electric Company,
Nantucket Electric Company, The Narragansett Electric Company,
Narragansett Energy Resources Company, NEES Communications,
Inc., NEES Energy, Inc., New England Electric Resources, Inc.,
New England Electric Transmission Corporation, New England
Energy Incorporated, New England Hydro Finance Company, Inc.,
New England Hydro-Transmission Corporation, New England
Hydro-Transmission Electric Company, Inc., and New England
Power Service Company. Other directorships: Avery Dennison
Corporation, John Hancock Mutual Life Insurance Company, and
Monsanto Company.
Alfred D. Houston* - Director since 1984. Directorships of
NEES System companies: Granite State Energy, Inc., Nantucket
Electric Company, Narragansett Energy Resources Company, NEERI
International, NEES Communications, Inc., NEES Energy, Inc.,
New England Electric Resources, Inc., New England Electric
Transmission Corporation, New England Energy Incorporated, New
England Hydro Finance Company, Inc., New England
Hydro-Transmission Corporation, New England Hydro-Transmission
Electric Company, Inc., and New England Power Service Company.
Mr. Houston also serves as a member representative for NEES
Energy, Inc. on the Member's Committee of AllEnergy Marketing
Co., LLC.
Cheryl A. LaFleur* - Director since December 31, 1995.
Directorships of NEES System companies: Granite State Energy,
Inc., Narragansett Energy Resources Company, NEES
Communications, Inc., NEES Energy, Inc., New England Electric
Resources, Inc., New England Electric Transmission Corporation,
New England Energy Incorporated, New England Hydro Finance
Company, Inc., New England Hydro-Transmission Corporation, New
England Hydro- Transmission Electric Company, Inc., and New
England Power Service Company. Ms. LaFleur also serves as a
member representative for NEES Energy, Inc. on the Member's
Committee of AllEnergy Marketing Co., LLC.
John W. Rowe* - Director since 1989. Directorships of NEES
System companies and affiliates: Granite State Energy, Inc.,
New England Electric System, Massachusetts Electric Company,
The Narragansett Electric Company, Narragansett Energy
Resources Company, NEES Communications, Inc., NEES Energy,
Inc., New England Electric Resources, Inc., New England
<PAGE>
Electric Transmission Corporation, New England Energy
Incorporated, New England Hydro Finance Company, Inc., New
England Hydro-Transmission Corporation, New England
Hydro-Transmission Electric Company, Inc., New England Power
Service Company, and Maine Yankee Atomic Power Company. Other
directorships: Bank of Boston Corporation and UNUM
Corporation. Mr. Rowe also serves as a member representative
for NEES Energy, Inc. on the Member's Committee of AllEnergy
Marketing Co., LLC.
Jeffrey D. Tranen* - Director since 1991. Directorships of
NEES System affiliates: Granite State Energy, Inc.,
Narragansett Energy Resources Company, NEES Energy, Inc., New
England Electric Resources, Inc., New England Electric
Transmission Corporation, New England Energy Incorporated, New
England Hydro Finance Company, Inc., New England Hydro-
Transmission Corporation, New England Hydro-Transmission
Electric Company, Inc., and New England Power Service Company.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES and EXECUTIVE OFFICERS - NEP in Part
I of this report for other information regarding this director.
Mass. Electric
--------------
The names of the directors of Mass. Electric, their ages, and
a brief account of their business experience during the past five
years appear below. Information required by this item for
Executive Officers is provided under the caption EXECUTIVE OFFICERS
- - Mass. Electric in Part I of this report.
Directors are elected to hold office until the next annual
meeting of stockholders or special meeting held in lieu thereof and
until their respective successors are chosen and qualified.
Urville J. Beaumont - Director since 1984 - Age: 65 -
Treasurer and Director, law firm of Beaumont & Campbell, P.A.
Joan T. Bok* - Director since 1979.
Sally L. Collins - Director since 1976 - Age: 61 - Director of
Workplace Health Services since 1993 - Health Services
Administrator at Kollmorgen Corporation EOD from 1985 to 1993.
Kalyan K. Ghosh - Director since 1995 - Age: 59 - President of
Worcester State College since 1992 - CEO and Acting President,
Worcester State College from 1990 to 1992.
Charles B. Housen - Director since 1979 - Age: 64 - Chairman,
President, and Director of Erving Industries, Inc., Erving,
Mass.
<PAGE>
Patricia McGovern - Director since 1994 - Age: 55 - Director
of law firm of Goulston & Storrs, P.C. since 1995 - Counsel to
Goulston & Storrs, P.C. from 1993 to 1995 - Massachusetts State
Senator and Chair of the Senate Ways and Means Committee from
1985 to 1992.
John F. Reilly - Director since 1988 - Age: 64 - President,
Director, and CEO of Fred C. Church, Inc., Lowell, Mass. -
Other directorships: Colonial Gas Company, Family Bank, and
New England Insurance Co., Ltd.
Lawrence J. Reilly - Elected Director in 1996 - Reference is
made to material supplied under the caption EXECUTIVE OFFICERS
- Mass. Electric for other information regarding Mr. Reilly.
John W. Rowe* - Director since 1989.
Richard P. Sergel* - Director since 1993.
Roslyn M. Watson - Director since 1992 - Age: 47 - President
of Watson Ventures (commercial real estate development and
management) Boston, Mass. since 1993 - Vice President of the
Gunwyn Company (commercial real estate development) Cambridge,
Mass. from 1986 - 1993 - Other directorships: The Dreyfus
Laurel Funds and American Express Centurion Bank.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES in Part I of this report and/or the
material supplied under the caption DIRECTORS AND OFFICERS OF
THE REGISTRANT - NEP in this Item for other information
regarding this director.
Narragansett
------------
The names of the directors of Narragansett, their ages, and a
brief account of their business experience during the past five
years appear below. Information required by this item for
Executive Officers is provided under the caption EXECUTIVE OFFICERS
- - Narragansett in Part I of this report.
Directors are elected to hold office until the next annual
meeting of stockholders or special meeting held in lieu thereof and
until their respective successors are chosen and qualified.
Joan T. Bok* - Director since 1979.
Stephen A. Cardi - Director since 1979 - Age: 55 - Treasurer
of Cardi Corporation (construction), Warwick, R.I.
<PAGE>
Frances H. Gammell - Director since 1992 - Age: 47 - Director,
Senior Vice President, Chief Financial Officer, Treasurer, and
Secretary of Original Bradford Soap Works, Inc.
Joseph J. Kirby - Director since 1988 - Age: 65 - Chairman and
Chief Executive Officer of Washington Trust Bancorp, Inc.,
Westerly, R.I. and Chairman and Chief Executive Officer of the
Washington Trust Company.
Robert L. McCabe - President and Director of Narragansett since
1986 - Other directorship: Citizens Savings Bank - Please refer
to the material supplied under the caption EXECUTIVE OFFICERS
- Narragansett in Part I of this report for other information
regarding Mr. McCabe.
John W. Rowe* - Director since 1989.
Richard P. Sergel* - Chairman and Director since 1993.
William E. Trueheart - Director since 1989 - Age: 54 - Visiting
Scholar, Harvard University Graduate School of Education since
1996 - President of Bryant College, Smithfield, Rhode Island
from 1989 to 1996.
John A. Wilson, Jr. - Director since 1971 - Age: 67 -
Consultant to and former President of Wanskuck Co., Providence,
R.I., - Consultant to Hinckley, Allen, Tobin & Silverstein
(attorneys), Providence, R.I.
*Please refer to the material supplied under the caption
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - NEP in
this Item for other information regarding this director.
Section 16(a) of the Securities Exchange Act of 1934 requires
the System's officers and directors, and persons who own more than
10% of a registered class of the System's equity securities, to
file reports on Forms 3, 4, and 5 of share ownership and changes in
share ownership with the SEC and the New York Stock Exchange and to
furnish the System with copies of all Section 16(a) forms they
file.
Based solely on NEP's, Mass. Electric's, and Narragansett's
review of the copies of such forms received by them, or written
representations from certain reporting persons that such forms were
not required for those persons, NEP, Mass. Electric, and
Narragansett believe that, during 1995, all filing requirements
applicable to its officers, directors, and 10% beneficial owners
were complied with.
<PAGE>
Item 11. EXECUTIVE COMPENSATION
NEES
----
The information required by this item is incorporated herein
by reference to the material under the captions BOARD STRUCTURE AND
COMPENSATION, EXECUTIVE COMPENSATION, PAYMENTS UPON A CHANGE IN
CONTROL, PLAN SUMMARIES, LONG TERM INCENTIVE PLAN - AWARDS IN LAST
FISCAL YEAR, and RETIREMENT PLANS in the definitive proxy statement
of NEES, dated March 10, 1997, for the 1997 Annual Meeting of
Shareholders, provided that the information under the headings
"Compensation Committee Report on Executive Compensation" and
"Corporate Performance" are not so incorporated.
NEP, MASS. ELECTRIC, AND NARRAGANSETT
-------------------------------------
EXECUTIVE COMPENSATION
The following tables give information with respect to all
compensation (whether paid directly by NEP, Mass. Electric, or
Narragansett or billed to it as hourly charges) for services in all
capacities for NEP, Mass. Electric, or Narragansett for the years
1994 through 1996 to or for the benefit of the Chief Executive
Officer and the four other most highly compensated executive
officers for each company.
<PAGE>
NEP
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
John W. 1996 180,096 96,445 3,046 124,047 1,638(g)
Rowe 1995 157,070 124,818 2,795 0 1,387
Chairman 1994 211,598 119,716 4,018 67,966 1,911
Jeffrey D. 1996 200,684 100,548 5,002 125,836 3,358(h)
Tranen 1995 188,884 135,224 4,972 0 3,377
President 1994 187,356 98,357 5,049 45,804 3,466
Lawrence E. 1996 151,956 101,667 116 0 3,776(i)
Bailey 1995 144,720 92,328 116 0 3,598
Vice 1994 140,471 66,510 116 27,484 3,952
President
John F. 1996 133,394 104,885 116 0 3,141(j)
Malley 1995 127,236 96,261 116 0 2,907
Vice 1994 117,169 65,474 116 27,469 2,996
President
Arnold H. 1996 128,172 89,185 116 0 2,849(k)
Turner 1995 128,172 65,439 116 0 2,276
Vice 1994 124,428 52,888 116 21,747 2,849
President
</TABLE>
(a) Certain officers of NEP are also officers of NEES and various
other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the
variable match of the incentive thrift plan, including related
deferred compensation plan matches, special cash bonuses, and
unrestricted shares under the incentive share plan. See
descriptions under Plan Summaries.
(d) Includes amounts reimbursed by NEP for the payment of taxes.
<PAGE>
(e) Special share bonuses were made to a limited number of
executives in 1996. Under the terms of those awards, the
share values were mandatorily deferred until the executives'
termination of employment.
No awards vested during 1996 under the Long-Term Performance
Share Award Plan.
The incentive share awards for the named executives made for
1994 were in the form of restricted shares (with a five-year
restriction) or deferred share equivalents, deferred for
receipt for at least five years, at the executive's option.
In 1996 awards for NEES officers were similarly restricted.
As cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995
were restricted.
As of December 31, 1996, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Rowe 27,022 shares, $942,392 value; Mr. Tranen
7,719 shares, $269,200 value; Mr. Bailey 3,220 shares,
$112,298 value; Mr. Malley 2,834 shares, $98,836 value; and
Mr. Turner 2,774 shares, $96,743 value. The value was
calculated by multiplying the closing market price on December
31, 1996 by the number of shares.
(f) Includes NEP contributions to life insurance and the incentive
thrift plan that are not bonus contributions, including any
related deferred compensation plan match. See description
under Plan Summaries. The life insurance contribution is
calculated based on the value of term life insurance for the
named individuals. The premium costs for most of these
policies have been or will be recovered by NEP.
(g) For Mr. Rowe, the amount and type of compensation in 1996 is
as follows: $1,005 for contributions to the thrift plan and
$633 for life insurance.
(h) For Mr. Tranen, the amount and type of compensation in 1996 is
as follows: $2,735 for contributions to the thrift plan and
$623 for life insurance.
(i) From Mr. Bailey, the amount and type of compensation in 1996
is as follows: $3,000 for contributions to the thrift plan
and $776 for life insurance.
(j) For Mr. Malley, the amount and type of compensation in 1996 is
as follows: $2,668 for contributions to the thrift plan, and
$474 for life insurance.
(k) For Mr. Turner, the amount and type of compensation in 1996 is
as follows: $2,051 for contributions to the thrift plan and
$798 for life insurance.
<PAGE>
MASS. ELECTRIC
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard P. 1996 135,213 70,388 3,411 87,965 2,247(g)
Sergel 1995 123,480 93,047 3,256 0 2,285
Chairman 1994 113,021 63,550 3,307 29,731 2,228
Lawrence J. 1996 96,163 70,177 2,467 46,082 2,250(h)
Reilly 1995 38,561 34,985 37 0 986
President 1994 25,576 16,917 26 6,136 563
Eric P. 1996 124,186 79,124 116 0 2,876(i)
Cody 1995 67,714 40,590 70 0 1,548
Vice 1994 74,318 37,144 74 15,371 1,726
President
Nancy H. 1996 118,251 65,493 116 0 2,730(j)
Sala 1995 115,524 59,932 116 0 2,498
Vice 1994 107,621 39,318 116 16,129 2,493
President
Anthony C. 1996 114,058 66,117 113 17,258 2,580(k)
Pini 1995 111,300 59,993 116 0 2,403
Vice 1994 105,884 43,465 116 17,688 2,454
President
</TABLE>
(a) Certain officers of Mass. Electric are also officers of NEES
and various other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the
variable match of the incentive thrift plan, and unrestricted
shares under the incentive share plan or special share
bonuses. See descriptions under Plan Summaries.
(d) Includes amounts reimbursed by Mass. Electric for the payment
of taxes.
(e) Special share bonuses were made to a limited number of
executives in 1996. Under the terms of those awards, the
<PAGE>
share values were mandatorily deferred until the executives'
termination of employment.
No awards vested during 1996 under the Long-Term Performance
Share Award Plan.
The incentive share awards for the named executives made for
1994 were in the form of restricted shares (with a five-year
restriction) or deferred share equivalents, deferred for
receipt for at least five years, at the executive's option.
In 1996 awards for NEES officers were similarly restricted.
As cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995
were restricted.
As of December 31, 1996, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Sergel 7,471 shares, $260,551 value; Mr.
Reilly 4,677 shares, $163,110 value; Mr. Cody 2,714 shares,
$94,651 value; Ms. Sala 1,639 shares, $57,160 value; and Mr.
Pini 1,640 shares, $57,195 value. The value was calculated by
multiplying the closing market price on December 31, 1996 by
the number of shares.
(f) Includes Mass. Electric contributions to life insurance and
the incentive thrift plan that are not bonus contributions,
including any related deferred compensation plan match. See
description under Plan Summaries. The life insurance
contribution is calculated based on the value of term life
insurance for the named individuals. The premium costs for
most of these policies have been or will be recovered by Mass.
Electric.
(g) For Mr. Sergel, the type and amount of compensation in 1996 is
as follows: $1,907 for contributions to the thrift plan and
$340 for life insurance.
(h) For Mr. Reilly, the type and amount of compensation in 1996 is
as follows: $1,923 for contributions to the thrift plan and
$327 for life insurance.
(i) For Mr. Cody, the type and amount of compensation in 1996 is
as follows: $2,484 for contributions to the thrift plan and
$392 for life insurance.
(j) For Ms. Sala, the type and amount of compensation in 1996 is
as follows: $2,365 for contributions to the thrift plan and
$365 for life insurance.
(k) For Mr. Pini, the type and amount of compensation in 1996 is
as follows: $2,281 for contributions to the thrift plan and
$299 for life insurance.
<PAGE>
NARRAGANSETT
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard P. 1996 70,998 36,959 1,791 46,188 1,180(g)
Sergel 1995 54,821 41,310 1,446 0 1,015
Chairman 1994 50,319 26,293 1,472 13,237 992
Robert L. 1996 127,388 88,905 4,819 50,308 3,424(h)
McCabe 1995 152,407 111,785 4,206 0 4,851
President 1994 140,785 68,784 4,457 28,576 4,256
William 1996 132,012 84,081 119 0 4,509(i)
Watkins, 1995 128,172 77,967 119 0 4,054
Jr. 1994 124,428 62,799 115 26,136 6,186
Executive
Vice
President
Richard W. 1996 108,432 57,680 119 0 2,888(j)
Frost 1995 103,272 48,972 119 0 2,787
Vice 1994 99,300 34,269 115 13,629 2,706
President
Richard 1996 100,884 24,830 119 0 3,004(k)
Nadeau 1995 95,838 15,500 119 0 2,902
Vice 1994 91,572 11,272 115 3,267 3,037
President
</TABLE>
(a) Certain officers of Narragansett are also officers of NEES and
various other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the
variable match of the incentive thrift plan, and unrestricted
shares under the incentive share plan or special share
bonuses. See descriptions under Plan Summaries.
(d) Includes amounts reimbursed by Narragansett for the payment of
taxes.
<PAGE>
(e) Special share bonuses were made to a limited number of
executives in 1996. Under the terms of those awards, the
share values were mandatorily deferred until the executives'
termination of employment.
No awards vested during 1996 under the Long-Term Performance
Share Award Plan.
The incentive share awards for the named executives made for
1994 were in the form of restricted shares (with a five-year
restriction) or deferred share equivalents, deferred for
receipt for at least five years, at the executive's option.
In 1996 awards for NEES officers were similarly restricted.
As cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995
were restricted.
As of December 31, 1996, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Sergel 7,471 shares, $260,551 value; Mr.
McCabe 6,027 shares, $210,192 value; Mr. Watkins 2,490 shares,
$86,839 value; Mr. Frost 895 shares, $31,213 value; and Mr.
Nadeau 201 shares, $7,010 value. The value was calculated by
multiplying the closing market price on December 31, 1996 by
the number of shares.
(f) Includes Narragansett contributions to life insurance and the
incentive thrift plan that are not bonus contributions,
including any related deferred compensation plan match. See
description under Plan Summaries. The life insurance
contribution is calculated based on the value of term life
insurance for the named individuals. The premium costs for
most of these policies have been or will be recovered by
Narragansett.
(g) For Mr. Sergel, the type and amount of compensation in 1996 is
as follows: $1,001 for contributions to the thrift plan and
$179 for life insurance.
(h) For Mr. McCabe, the type and amount of compensation in 1996 is
as follows: $2,165 for contributions to the thrift plan and
$1,259 for life insurance.
(i) For Mr. Watkins, the type and amount of compensation in 1996
is as follows: $2,640 for contributions to the thrift plan
and $1,869 for life insurance.
(j) For Mr. Frost, the type and amount of compensation in 1996 is
as follows: $2,169 for contributions to the thrift plan and
$719 for life insurance.
(k) For Mr. Nadeau, the type and amount of compensation in 1996 is
as follows: $2,018 for contributions to the thrift plan and
$986 for life insurance.
<PAGE>
Directors' Compensation
Members of the Mass. Electric and Narragansett Boards of
Directors, except employees of NEES System companies, i.e., Messrs.
McCabe, L. J. Reilly, Rowe, and Sergel, receive a quarterly
retainer of $1,500, a meeting fee of $600 plus expenses, and 50
NEES common shares each year. Since all members of the NEP Board
are employees of NEES System companies, no fees are paid for
service on the Board except as noted below for Mrs. Bok.
Mrs. Bok retired as an employee of the System on January 1,
1994 (remaining as Chairman of the Board of NEES and a director for
NEES subsidiaries). Mrs. Bok has agreed to waive the normal fees
and annual retainers otherwise payable for services by
nonemployees on NEES subsidiary boards and receives in lieu thereof
a single annual stipend of $60,000. Mrs. Bok also serves as a
consultant to NEES. Under the terms of her contract, she receives
an annual retainer of $100,000.
Mass. Electric and Narragansett permit directors to defer all
or a portion of any cash retainers, meeting fees, and retainer
shares under a deferred compensation plan. A director may elect
to defer to a NEES Share Account or a Prime Rate Account. While
deferred, the shares do not have voting rights or other rights
associated with ownership. At the time of electing to defer
compensation, the director also elects whether to receive payment
after ten years or upon retirement, and, if upon retirement,
whether in ten payments or a lump sum. Special accounts are
maintained on Mass. Electric's and Narragansett's books showing the
amounts deferred and the interest or dividends accrued thereon.
Director contributions to qualified charities are matched by the
Company under a matching gift program, which has a maximum limit of
$3,500.
Other
NEP, Mass. Electric, and Narragansett do not have any share
option plans.
The NEES Compensation Committee administers certain of the
incentive compensation plans, and the Management Committee
administers the others (including the incentive share plan).
Retirement Plans
The following table shows estimated annual benefits payable to
executive officers under the qualified pension plan and the
supplemental retirement plan, assuming retirement at age 65 in
1997.
<PAGE>
<TABLE>
PENSION TABLE
<CAPTION>
Five-Year
Average 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
Compensa- of of of of of of
tion Service Service Service Service Service Service
- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 19,000 27,500 36,100 44,300 52,600 57,600
$150,000 29,400 42,600 55,800 68,600 81,400 89,300
$200,000 39,700 57,600 75,500 92,800 110,200 121,100
$250,000 50,100 72,600 95,200 117,100 139,000 152,800
$300,000 60,400 87,600 114,900 141,300 167,800 184,500
$350,000 70,800 102,700 134,600 165,600 196,600 216,200
$400,000 81,100 117,700 154,300 189,800 225,400 248,000
$500,000 101,800 147,700 193,700 238,300 283,000 311,400
</TABLE>
For purposes of the retirement plans, Messrs. Rowe, Tranen,
Bailey, Malley, and Turner currently have 19, 27, 28, 25, and 31
credited years of service, respectively. Mr. Sergel, Mr. Reilly,
Mr. Cody, Ms. Sala, and Mr. Pini currently have 18, 15, 13, 27, and
18 credited years of service, respectively. Messrs. Sergel,
McCabe, Watkins, Frost, and Nadeau currently have 18, 28, 24, 34,
and 41 credited years of service, respectively.
Benefits under the pension plans are computed using formulae
based on percentages of highest average compensation computed over
five consecutive years. The compensation covered by the pension
plan includes salary, bonus, and incentive share awards. The
benefits listed in the pension table are not subject to deduction
for Social Security and are shown without any joint and survivor
benefits. If the participant elected at age 65 a 100% joint and
survivor benefit with a spouse of the same age, the benefit shown
would be reduced by approximately 16%.
The Pension Table above does not include annuity payments to
be received in lieu of life insurance for Messrs. Rowe and Houston.
The policies are described below under Plan Summaries.
Under the Retirement Supplement Plan, participants receive an
annual adjustment to their pension benefits. The amount of the
adjustment is equal to the rate of interest on AAA bonds for the
prior year less two percent (but in no case more than the increase
in the cost of living). Mr. Rowe is the only active employee now
participating in this plan.
The System contributes the full amount toward post-retirement
health benefits for senior executives.
NEP, MASS. ELECTRIC, AND NARRAGANSETT PAYMENTS UPON A CHANGE OF
CONTROL
NEES has agreements with certain of its executives, including
Messrs. Rowe, Sergel, and Tranen, which provide severance benefits
<PAGE>
in the event of certain terminations of employment following a
Change in Control of NEES (as defined below). (Mr. Tranen's
contracts also provide severance benefits in the event of a
divestiture of all or a substantial portion of the System's fossil
fuel generating assets.) If, following a Change in Control, the
executive's employment is terminated other than for cause (as
defined) or if the executive terminates employment for good reason
(as defined), NEES will pay to the executive a lump sum cash
payment equal to three times (two times for some executives) the
sum of the executive's most recent annual base compensation and the
average of his or her bonus amounts for the prior three years. If
Mr. Rowe receives payments under his severance agreement that would
subject him to any federal excise tax due under section 280G of the
Internal Revenue Code, he will receive a cash "gross-up" payment so
he would be in the same net after-tax position he would have been
in had such excise tax not been applied. In addition, NEES will
provide disability and health benefits to the executive for two to
three years, provide such post-retirement health and welfare
benefits as the executive would have earned within such two to
three years, and grant two or three additional years of pension
credit. Mr. Rowe would become eligible for benefits under the
Retirement Supplement Plan described above prior to the five-year
vesting term.
Change in Control, including potential change of control,
occurs (1) when any person becomes the beneficial owner of 20% of
the voting securities of NEES, (2) when the prior members of the
Board of NEES no longer constitute a 2/3 majority of the Board, or
(3) NEES enters into an agreement that could result in a Change in
Control.
The terms of the agreements are for three years with automatic
annual extensions, unless terminated by NEES.
The System's bonus plans, including the incentive compensation
plans, the Incentive Thrift Plan, and the Goals Program, provide
for payments equal to the average of the bonuses for the three
prior years in the event of a Change of Control. This payment
would be made in lieu of the regular bonuses for the year in which
the Change in Control occurs. The Long-Term Performance Share
Award Plan provides for a cash payment equal to the value of the
performance shares in the participants' account times the average
target achievement percentage for the Incentive Thrift Plan for the
three prior years. The System's Retirees Health and Life Insurance
Plan I has provisions preventing changes in benefits adverse to the
participants for three years following a Change in Control. The
Incentive Share Plan and the related Incentive Share Deferral
Agreements provide that, upon the occurrence of a change in control
(defined more narrowly than in other plans), restrictions on all
shares and account balances would cease.
In light of the changes in the utility industry, NEES
determined that executive officers, including those listed in the
<PAGE>
Summary Compensation Tables, but excluding Mr. Rowe, would receive
a benefit equal to either 1 or 1-1/2 times annual compensation, for
a severance other than one for cause or following a change in
control.
NEP, MASS. ELECTRIC, AND NARRAGANSETT PLAN SUMMARIES
A brief description of the various plans through which
compensation and benefits are provided to the named executive
officers is presented below to better enable shareholders to
understand the information presented in the tables shown earlier.
The amounts of compensation and benefits provided to the named
executive officers under the plans described below (and charged to
NEP, Mass. Electric, or Narragansett) are presented in the Summary
Compensation Tables.
Goals Program
The goals program covers all employees who have completed one
year of service with any NEES subsidiary. Goals are established
annually. For 1996, these goals related to earnings per share,
customer costs, safety, absenteeism, demand-side management
results, generating station availability, transmission reliability,
environmental and OSHA compliance, and customer satisfaction. Some
goals apply to all employees, while others apply to particular
functional groups. Depending upon the number of goals met, and
provided the minimum earnings goal is met, employees may earn a
cash bonus of 1% to 4-1/2% of their compensation.
Incentive Thrift Plan
The incentive thrift plan (a 401(k) program) provides for a
match of 40% of up to the first 5% of base compensation contributed
to the System's incentive thrift plan (shown under All Other
Compensation in the Summary Compensation Tables) and, based on an
incentive formula tied to earnings per share, may fully match the
first 5% of base compensation contributed (the additional amount,
if any, is shown under Bonus in the Summary Compensation Tables).
Under Federal law, contributions to these plans are limited. In
1996, the salary reduction amount was limited to $9,500.
Deferred Compensation Plan
The Deferred Compensation Plan offers executives the
opportunity to defer base pay and bonuses. The plan offers the
option of investing at the prime rate or in NEES shares; however,
share bonuses may only be deferred in a share account. Under
Federal law, the Incentive Thrift Plan, described above, is
required to limit participant base compensation to $150,000 in
calculating the NEES match. Under the Deferred Compensation Plan,
NEES will make a contribution to an executive's share account
equivalent to the resultant reduction in his or her match under the
Incentive Thrift Plan.
<PAGE>
Life Insurance
NEES has established for certain senior executives life
insurance plans funded by individual policies. The combined death
benefit under these insurance plans is three times the
participant's annual salary. These plans are structured so that,
over time, NEES should recover the cost of the insurance premiums.
Messrs. McCabe, Reilly, Rowe, Sergel, and Tranen are participants
in these plans. After termination of employment, Mr. Rowe may
elect, commencing at age 55 or later, to receive an annuity income
equal to 40% of annual salary. In that event, his life insurance
would be reduced over 15 years to an amount equal to his final
annual salary.
Incentive Compensation Plan
The System bonus plan for certain senior employees provides
that in order for cash bonuses to be awarded, NEES must achieve a
return on equity that places NEES in the top 50% of the
approximately 90 electric utilities listed in the utility group
formerly tracked by Duff & Phelps (the National Grouping) or in
the top 50% of the New England/New York regional utilities (the
Regional Grouping). Bonuses are also dependent upon the
achievement of individual goals. In order to provide a long-term
component to the incentive compensation plan, participants may also
be awarded NEES common shares. An individual's award of shares
under the incentive share plan is a fixed percentage of her or his
cash bonus for that year. If no cash award is made, no shares are
distributed.
Long-Term Performance Share Award Plan
This plan was established in 1996. There will be no payments
under the plan until the Spring of 1999. Awards under the plan are
based upon various measures of NEES performance over a three-year
period. Each award factor or measurement functions independently.
The factors include financial and operating performance.
Performance is rated on rolling three-year periods, with a new
cycle beginning each year. An individual's potential award under
the plan is a fixed percentage (ranging from 15% to 50%) of base
pay. At the end of the three-year cycle, the participant receives
NEES shares based upon the performance against the various factors.
Financial Counseling
NEP, Mass. Electric, and Narragansett pay for personal
financial counseling for certain executives. As required by the
IRS, a portion of the amount paid is reported as taxable income for
the executive. Financial counseling is also offered to other
employees through seminars conducted at various locations each
year.
Other
The NEES companies do not have any share option plans.
<PAGE>
NEP
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The following table shows the potential awards, for those
executive officers named in the Summary Compensation Table, under
the Long-Term Performance Share Award Plan for the performance
cycle commencing January 1, 1996. The NEES System's performance
will be measured over the three-year period ending December 31,
1998.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
<TABLE>
<CAPTION>
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
John W. Rowe 6,747 3 years 169 6,747
Jeffrey D. Tranen 2,763 3 years 69 2,763
Lawrence E. Bailey 954 3 years 24 954
John F. Malley 839 3 years 21 839
Arnold H. Turner 805 3 years 21 805
</TABLE>
(a) Amounts are denominated in common share units. No dividends
are attributable to share units. At the end of the cycle,
awards are paid either in shares or in cash (valued at the
five-day average price prior to the January 15 following the
close of the performance cycle).
(b) The awards in this column represent the threshold number of
shares that could be earned if the minimum attainment level is
reached for one factor. The minimum payout upon failure to
achieve any of the goals would be zero.
(c) The awards in this column represent the target (and maximum)
number of shares that could be earned if the maximum
performance is achieved for all factors.
The Long-Term Performance Share Award Plan provides awards
based on various measures of System performance over a three-year
period. Each award factor functions independently. The
performance targets for each cycle are set by the Compensation
Committee of the NEES Board. All participants share the same
factors and factor weights. Performance is rated on rolling three-
year periods, with a new cycle beginning each year. An
individual's potential award under the plan is a fixed percentage
of her or his base salary on January 1 of the first year of the
plan measurement period. The percentage ranges from 15% to 50%.
<PAGE>
No dividends accrue on the allocated shares until awarded. At the
end of the three-year cycle, the participant receives actual shares
based upon the performance against the various factors.
The measures of performance for this cycle are as follows:
return on equity compared to the national group (60th-75th
percentile); kilowatt-hour cost compared to regional group (67th-
90th percentile); total shareholder return compared to the regional
group (60th-75th percentile); maintenance or improvement of bond
ratings; and system service levels, measured by customer
satisfaction, system reliability, system availability, and
regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is
composed of New England/New York regional utilities.
MASS. ELECTRIC
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The following table shows the potential awards, for those
executive officers named in the Summary Compensation Table, under
the Long-Term Performance Share Award Plan for the performance
cycle commencing January 1, 1996. The NEES System's performance
will be measured over the three-year period ending December 31,
1998.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
<TABLE>
<CAPTION>
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Richard P. Sergel 2,670 3 years 67 2,670
Lawrence J. Reilly 804 3 years 21 804
Eric P. Cody 782 3 years 20 782
Nancy H. Sala 448 3 years 12 448
Anthony C. Pini 442 3 years 11 442
</TABLE>
(a) Amounts are denominated in common share units. No dividends
are attributable to share units. At the end of the cycle,
awards are paid either in shares or in cash (valued at the
five-day average price prior to the January 15 following the
close of the performance cycle).
(b) The awards in this column represent the threshold number of
shares that could be earned if the minimum attainment level is
reached for one factor. The minimum payout upon failure to
achieve any of the goals would be zero.
<PAGE>
(c) The awards in this column represent the target (and maximum)
number of shares that could be earned if the maximum
performance is achieved for all factors.
The Long-Term Performance Share Award Plan provides awards
based on various measures of System performance over a three-year
period. Each award factor functions independently. The
performance targets for each cycle are set by the Compensation
Committee of the NEES Board. All participants share the same
factors and factor weights. Performance is rated on rolling three-
year periods, with a new cycle beginning each year. An
individual's potential award under the plan is a fixed percentage
of her or his base salary on January 1 of the first year of the
plan measurement period. The percentage ranges from 15% to 50%.
No dividends accrue on the allocated shares until awarded. At the
end of the three-year cycle, the participant receives actual shares
based upon the performance against the various factors.
The measures of performance for this cycle are as follows:
return on equity compared to the national group (60th-75th
percentile); kilowatt-hour cost compared to regional group (67th-
90th percentile); total shareholder return compared to the regional
group (60th-75th percentile); maintenance or improvement of bond
ratings; and system service levels, measured by customer
satisfaction, system reliability, system availability, and
regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is
composed of New England/New York regional utilities.
NARRAGANSETT
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The following table shows the potential awards, for those
executive officers named in the Summary Compensation Table who
participate in the plan, under the Long-Term Performance Share
Award Plan for the performance cycle commencing January 1, 1996.
The NEES System's performance will be measured over the three-year
period ending December 31, 1998.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
<TABLE>
<CAPTION>
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Richard P. Sergel 2,670 3 years 67 2,670
Robert L. McCabe 1,108 3 years 28 1,108
William Watkins, Jr. 829 3 years 21 829
Richard W. Frost 409 3 years 11 409
</TABLE>
<PAGE>
(a) Amounts are denominated in common share units. No dividends
are attributable to share units. At the end of the cycle,
awards are paid either in shares or in cash (valued at the
five-day average price prior to the January 15 following the
close of the performance cycle).
(b) The awards in this column represent the threshold number of
shares that could be earned if the minimum attainment level is
reached for one factor. The minimum payout upon failure to
achieve any of the goals would be zero.
(c) The awards in this column represent the target (and maximum)
number of shares that could be earned if the maximum
performance is achieved for all factors.
The Long-Term Performance Share Award Plan provides awards
based on various measures of System performance over a three-year
period. Each award factor functions independently. The
performance targets for each cycle are set by the Compensation
Committee of the NEES Board. All participants share the same
factors and factor weights. Performance is rated on rolling three-
year periods, with a new cycle beginning each year. An
individual's potential award under the plan is a fixed percentage
of her or his base salary on January 1 of the first year of the
plan measurement period. The percentage ranges from 15% to 50%.
No dividends accrue on the allocated shares until awarded. At the
end of the three-year cycle, the participant receives actual shares
based upon the performance against the various factors.
The measures of performance for this cycle are as follows:
return on equity compared to the national group (60th-75th
percentile); kilowatt-hour cost compared to regional group (67th-
90th percentile); total shareholder return compared to the regional
group (60th-75th percentile); maintenance or improvement of bond
ratings; and system service levels, measured by customer
satisfaction, system reliability, system availability, and
regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is
composed of New England/New York regional utilities.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
NEES
----
The information required by this item is incorporated herein
by reference to the material under the caption TOTAL COMMON EQUITY
BASED HOLDINGS in the definitive proxy statement of NEES, dated
March 10, 1997, for the 1997 Annual Meeting of Shareholders,
provided that the information under the headings "Compensation
Committee Report on Executive Compensation" and "Corporate
Performance" are not so incorporated.
<PAGE>
NEP, Mass. Electric, and Narragansett
-------------------------------------
NEES owns 100% of the voting securities of Mass. Electric and
Narragansett. NEES owns 98.85% of the voting securities of NEP.
SECURITY OWNERSHIP
The following tables list the holdings of NEES common shares
as of March 1, 1997 by NEP, Mass. Electric, and Narragansett
directors, the executive officers named in the Summary Compensation
Tables, and all directors and executive officers, as a group.
<TABLE>
NEP
---
<CAPTION>
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b)
---- ------------ --------------
<S> <C> <C>
Lawrence E. Bailey 5,200 2,485
Joan T. Bok 17,111
Alfred D. Houston 13,235 8,892
Cheryl A. LaFleur 2,543 4,603
John F. Malley 4,988 2,566
John W. Rowe 22,677 20,419
Jeffrey D. Tranen 8,141 6,764
Arnold H. Turner 4,048 1,985
All directors and
executive officers,
as a group (13 persons) 99,156 (c) 56,370
<PAGE>
Mass. Electric
--------------
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b)
---- ------------ -------------
Urville J. Beaumont 293
Joan T. Bok 17,111
Eric P. Cody 2,435 2,044
Sally L. Collins 295
Kalyan K. Ghosh 51 242
Charles B. Housen 18
Cheryl A. LaFleur 2,543 4,603
Patricia McGovern 161
Anthony C. Pini 8,413 1,113
John F. Reilly 296
Lawrence J. Reilly 2,738 4,469
John W. Rowe 22,677 20,419
Nancy H. Sala 7,749 (d) 1,538
Richard P. Sergel 8,413 6,692
Roslyn M. Watson 296 181
All directors and
executive officers,
as a group (21 persons) 105,521 (c) 50,319
</TABLE>
<TABLE>
Narragansett
------------
<CAPTION>
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b)
---- ------------ -------------
<S> <C> <C>
Joan T. Bok 17,111
Stephen A. Cardi 294
Richard W. Frost 6,805 472
Frances H. Gammell 296 292
Joseph J. Kirby 295
Robert L. McCabe 9,532 5,022
Richard Nadeau 4,115
John W. Rowe 22,677 20,419
Richard P. Sergel 8,413 6,692
William E. Trueheart 296 702
William Watkins, Jr. 5,512 2,185
John A. Wilson, Jr. 658
All directors and
executive officers,
as a group (15 persons) 90,110 (c) 44,841
</TABLE>
<PAGE>
(a) Number of shares beneficially owned includes: (i) shares
directly owned by certain relatives with whom directors or
officers share voting or investment power; (ii) shares held of
record individually by a director or officer or jointly with
others or held in the name of a bank, broker, or nominee for
such individual's account; (iii) shares in which certain
directors or officers maintain exclusive or shared investment
or voting power whether or not the securities are held for
their benefit; and (iv) with respect to the executive officers,
allocated shares in the Incentive Thrift Plan described above.
(b) Deferred share equivalents are held under the Deferred
Compensation Plan or pursuant to individual deferral
agreements. Under the Plan or deferral agreements, executives
may elect to defer cash compensation and share awards. There
are various deferral periods available under the plans. At the
end of the deferral period, the compensation may be paid out
in NEES common shares, cash, or a combination thereof. The
rights of the executives to payment are those of general,
unsecured creditors. While deferred, the shares do not have
voting rights or other rights associated with ownership. As
cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in NEES common shares.
(c) Amount is less than 1% of the total number of shares of NEES
outstanding.
(d) Ms. Sala disclaims a beneficial ownership interest in 260
shares held under the Uniform Gift to Minors Act.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The construction company of Mr. Stephen A. Cardi, a director
of Narragansett, was paid approximately $138,000 in 1996 pursuant
to a contract to provide gravel to Narragansett and approximately
$2 million by NEP in 1996 pursuant to a contract to construct
Collier Point Park at Manchester Street Station.
Mr. John A. Wilson, Jr., a director of Narragansett, is a
consultant to Hinckley, Allen, Snyder & Comen (Attorneys).
Hinckley, Allen, Snyder & Comen was retained by Narragansett and
its affiliates in 1996.
Reference is made to Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT and Item 11. EXECUTIVE COMPENSATION.
<PAGE>
PART IV
Item 14. EXHIBITS AND REPORTS ON FORM 8-K
List of Exhibits
Unless otherwise indicated, the exhibits listed below are
incorporated by reference to the appropriate exhibit numbers and
the Commission file numbers indicated in parentheses.
NEES
----
(3) Agreement and Declaration of Trust dated January 2, 1926,
as amended through April 28, 1992 (Exhibit 3 to 1994 NEES
Form 10-K, File No. 1-3446).
(4) Instruments Defining the Rights of Security Holders
(a) Massachusetts Electric Company First Mortgage
Indenture and Deed of Trust, dated as of July 1,
1949, and twenty-one supplements thereto (Exhibit
7-A, File No. 1-8019; Exhibit 7-B, File No. 2-8836;
Exhibit 4-C, File No. 2-9593; Exhibit 4 to 1980
Form 10-K, File No. 2-8019; Exhibit 4 to 1982 Form
10-K, File No. 0-5464; Exhibit 4 to 1986 Form 10-K,
File No. 0-5464; Exhibit 4(a) to 1988 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1989 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1992 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1993 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1995 Form 10-K,
File No. 1-3446).
(b) The Narragansett Electric Company First Mortgage
Indenture and Deed of Trust, dated as of September
1, 1944, and twenty-two supplements thereto
(Exhibit 7-1, File No. 2-7042; Exhibit 7-B, File
No. 2-7490; Exhibit 4-C, File No. 2-9423; Exhibit
4-D, File No. 2-10056; Exhibit 4 to 1980 Form 10-K,
File No. 0-898; Exhibit 4 to 1982 Form 10-K, File
No. 0-898; Exhibit 4 to 1983 Form 10-K, File No.
0-898; Exhibit 4 to 1985 Form 10-K, File No. 0-898;
Exhibit 4 to 1986 Form 10-K, File No. 0-898;
Exhibit 4 to 1987 Form 10-K, File No. 0-898;
Exhibit 4 to 1991 Form 10-K, File No. 0-898;
Exhibit 4(b) to 1992 Form 10-K, File No. 1-3446;
Exhibit 4(b) to 1993 Form 10-K, File No. 1-3446;
Exhibit 4(b) to 1995 Form 10-K, File No. 1-3446).
<PAGE>
(c) The Narragansett Electric Company Preference
Provisions, as amended, dated March 23, 1993
(Exhibit 4(c) to 1993 NEES Form 10-K, File No. 1-
3446).
(d) New England Power Company Indentures General and
Refunding Mortgage Indenture and Deed of Trust
dated as of January 1, 1977 and twenty supplements
thereto (Exhibit 4(b) to 1980 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1982 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1983 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1985 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1986 Form 10-K, File No.
0-1229; Exhibit 4(c)(ii) to 1988 Form 10-K, File
No. 1-3446; Exhibit 4(c)(ii) to 1989 Form 10-K,
File No. 1-3446; Exhibit 4(c)(ii) to 1990 Form
10-K, File No. 1-3446; Exhibit 4(c)(ii) to 1991
Form 10-K, File No. 1-3446; Exhibit 4(c)(ii) to
1992 Form 10-K, File No. 1-3446; Exhibit 4(d) to
1993 Form 10-K, File No. 1-3446; Exhibit 4(d) to
1995 Form 10-K, File No. 1-3446).
(10) Material Contracts
(a) Boston Edison Company et al. and New England Power
Company: Amended REMVEC Agreement dated August 12,
1977 (Exhibit 5-4(d), File No. 2-61881).
(b) The Connecticut Light and Power Company et al. and
New England Power Company: Sharing Agreement for
Joint Ownership, Construction and Operation of
Millstone Unit No. 3 dated as of September 1, 1973,
and Amendment dated as of August 1, 1974 (Exhibit
10-5, File No. 2-52820); Amendments dated as of
December 15, 1975 and April 1, 1986; (Exhibit
10(b), to 1990 Form 10-K, File No. 1-3446).
Transmission Support Agreement dated August 9,
1974; Instrument of Transfer to NEP with respect to
the 1979 Connecticut Nuclear Unit, and Assumption
of Obligations, dated December 17, 1975 (Exhibit
10-6(b), File No. 2-57831).
(c) Connecticut Yankee Atomic Power Company et al. and
New England Power Company: Stockholders Agreement
dated July 1, 1964 (Exhibit 13-9-A, File No.
2-23006); Power Purchase Contract dated July 1,
1964 (Exhibit 13-9-B, File No. 2-23006); Additional
Power Contract dated as of April 30, 1984 and 1996
Amendatory Agreement dated as of December 4, 1996
(filed herewith); Supplementary Power Contract
dated as of April 1, 1987 (Exhibit 10(c) to 1987
Form 10-K, File No. 1-3446); Capital Funds
Agreement dated September 1, 1964 (Exhibit 13-9-C,
<PAGE>
File No. 2-23006); Transmission Agreement dated
October 1, 1964 (Exhibit 13-9-D, File No. 2-23006);
Agreement revising Transmission Agreement dated
July 1, 1979 (Exhibit to 1979 Form 10-K, File No.
1-3446); Amendment revising Transmission Agreement
dated as of January 19, 1994 (Exhibit 10(c) to 1995
Form 10-K, File No. 1-3446).
(d) Maine Yankee Atomic Power Company et al. and New
England Power Company: Capital Funds Agreement
dated May 20, 1968 and Power Purchase Contract
dated May 20, 1968 (Exhibit 4-5, File No. 2-29145);
Amendments dated as of January 1, 1984, March 1,
1984 (Exhibit 10(d) to 1983 Form 10-K, File No.
1-3446), October 1, 1984, and August 1, 1985
(Exhibit 10(d) to 1985 Form 10-K, File No. 1-3446);
Stockholders Agreement dated May 20, 1968 (Exhibit
10-20, File No. 2-34267); Additional Power Contract
dated as of February 1, 1984 (Exhibit 10(d) to 1985
Form 10-K, File No. 1-3446).
(e) New England Energy Incorporated Contracts
(i) Capital Funds Agreement with NEES dated
November 1, 1974 (Exhibit 10-29(b), File No.
2-52969); Amendment dated July 1, 1976, and
Amendment dated July 26, 1979 (Exhibit
10(g)(i) to 1980 Form 10-K, File No. 1-3446);
Amendment dated August 26, 1981 (Exhibit
10(f)(i) to 1981 Form 10-K, File No. 1-3446);
Amendment dated March 26, 1985 (Exhibit
10(e)(i) to 1985 Form 10-K, File No. 1-3446);
Amendment dated as of April 28, 1989 (Exhibit
10(e)(i) to 1989 Form 10-K, File No. 1-3446);
Amendment dated as of June 1, 1990 (Exhibit
10(e)(i) to 1990 Form 10-K, File No. 1-3446);
Amendment dated as of April 13, 1995 (filed
herewith).
(ii) Loan Agreement with NEES dated July 19, 1978
and effective November 1, 1974, and Amendment
dated July 26, 1979 (Exhibit 10(g)(iii) to
1980 Form 10-K, File No. 1-3446); Amendment
dated August 26, 1981 (Exhibit 10(f)(ii) to
1981 Form 10-K, File No. 1-3446); Amendment
dated March 26, 1985 (Exhibit 10(e)(ii) to
1985 Form 10-K, File No. 1-3446); Amendment
dated as of April 28, 1989 (Exhibit 10(e)(ii)
to 1989 Form 10-K, File No. 1-3446);
Amendment dated as of June 1, 1990 (Exhibit
10(e)(ii) to 1990 Form 10-K, File No.
1-3446); Amendment dated as of April 13, 1995
(filed herewith).
<PAGE>
(iii) Fuel Purchase Contract with New England Power
Company dated July 26, 1979, and Amendment
dated August 26, 1981 (Exhibit 10(f)(iii) to
1981 Form 10-K, File No. 1-3446); Amendment
dated March 26, 1985, and Amendment effective
January 1, 1984 (Exhibit 10(e)(iii) to 1985
Form 10-K, File No. 1-3446); Amendment dated
as of April 28, 1989 (Exhibit 10(e)(iii) to
1989 Form 10-K, File No. 1-3446).
(iv) Partnership Agreement with Samedan Oil
Corporation as Amended and Restated on
February 5, 1985 (Exhibit 10(e)(iv) to 1984
Form 10-K, File No. 1-3446); Amendment dated
as of January 14, 1992 (Exhibit 10(e)(iv) to
1991 Form 10-K, File No. 1- 3446).
(v) Credit Agreement dated as of April 13, 1995
(Exhibit 10(e)(iv) to 1995 Form 10-K, File
No. 1-3446).
(vi) Capital Maintenance Agreement dated November
15, 1985, and Assignment and Security
Agreement dated November 15, 1985 (Exhibit
10(e)(vi) to 1985 Form 10-K, File No.
1-3446); Amendment dated as of April 28, 1989
(Exhibit 10(e)(vi) to 1989 Form 10-K, File
No. 1-3446); Amendment dated as of April 13,
1995 (filed herewith).
(f) New England Power Company and New England Electric
Transmission Corporation et al.: Phase I Terminal
Facility Support Agreement dated as of December 1,
1981 (Exhibit 10(g) to 1981 Form 10-K, File No.
1-3446); Amendments dated as of June 1, 1982, and
November 1, 1982 (Exhibit 10(f) to 1982 Form 10-K,
File No. 1-3446); Agreement with respect to Use of
the Quebec Interconnection dated as of December 1,
1981 (Exhibit 10(g) to 1981 Form 10-K, File No.
1-3446); Amendments dated as of May 1, 1982, and
November 1, 1982 (Exhibit 10(f) to 1982 Form 10-K,
File No. 1-3446); Amendment dated as of January 1,
1986 (Exhibit (10)(f) 1986 Form 10-K, File No.
1-3446); Agreement for Reinforcement and
Improvement of New England Power Company's
Transmission System dated as of April 1, 1983
(Exhibit 10(f) to 1983 Form 10-K, File No. 1-3446);
Lease dated as of May 16, 1983 (Exhibit 10(f) to
1983 Form 10-K, File No. 1-3446); Upper Development
- Lower Development Transmission Line Support
Agreement dated as of May 16, 1983 (Exhibit 10(f)
to 1983 Form 10-K, File No. 1-3446).
<PAGE>
(g) New England Electric Transmission Corporation and
PruCapital Management, Inc. et al: Note Agreement
dated as of September 1, 1986 (Exhibit 10(g) to
1986 Form 10-K, File No. 1-3446); Mortgage, Deed of
Trust and Security Agreement dated as of September
1, 1986 (Exhibit 10(g) to 1986 Form 10-K, File No.
1-3446); Equity Funding Agreement with New England
Electric System dated as of December 1, 1985
(Exhibit 10(g) to 1991 Form 10-K, File No. 1-3446).
(h) Vermont Electric Transmission Company, Inc. et al.
and New England Power Company: Phase I Vermont
Transmission Line Support Agreement dated as of
December 1, 1981; Amendments dated as of June 1,
1982, and November 1, 1982 (Exhibit 10(g) to 1982
Form 10-K, File No. 1-3446); Amendment dated as of
January 1, 1986 (Exhibit 10(h) to 1986 Form 10-K,
File No. 1-3446).
(i) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
and March 1, 1973 (Exhibit 10-15, File No.
2-48543); Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
(Exhibit 10-3, File No. 2-68283); Amendment dated
September 1, 1981 (Exhibit 10(h) to 1981 Form 10-K,
File No. 1-3446); Amendment dated as of December 1,
1981 (Exhibit 10(h) to 1982 Form 10-K, File No.
1-3446); Amendments dated June 1, 1982, June 15,
1983, and October 1, 1983 (Exhibit 10(i) to 1983
Form 10-K, File No. 1-3446); Amendments dated
August 1, 1985, August 15, 1985, September 1, 1985,
and January 1, 1986 (Exhibit 10(i) to 1985 Form
10-K, File No. 1-3446); Amendment dated
September 1, 1986 (Exhibit 10(i) to 1986 Form 10-K,
File No. 1-3446); Amendment dated April 30, 1987
(Exhibit 10(i) to 1987 Form 10-K, File No. 1-3446);
Amendments dated March 1, 1988 and May 1, 1988
(Exhibit 10(i) to 1988 Form 10-K, File No. 1-3446);
Amendment dated March 15, 1989 (Exhibit 10(i) to
1989 Form 10-K, File No. 1-3446); Amendment dated
October 1, 1990 (Exhibit 10(i) to 1990 Form 10-K,
File No. 1-3446); Amendment dated as of September
15, 1992 (Exhibit 10(i) to 1992 Form 10-K, File No.
1-3446); Amendments dated as of June 1, 1993, July
1, 1995, and September 1, 1995 (Exhibit 10(i) to
1995 Form 10-K, File No. 1-3446); Amendment dated
as of December 1, 1996 (filed herewith).
<PAGE>
(j) Public Service Company of New Hampshire et al. and
New England Power Company: Agreement for Joint
Ownership, Construction and Operation of New
Hampshire Nuclear Units dated as of May 1, 1973;
Amendments dated May 24, 1974, June 21, 1974,
September 25, 1974 and October 25, 1974 (Exhibit
10-18(b), File No. 2-52820); Amendment dated
January 31, 1975 (Exhibit 10-16(b), File No.
2-57831); Amendments dated April 18, 1979,
April 25, 1979, June 8, 1979, October 11, 1979,
December 15, 1979, June 16, 1980, December 31, 1980
(Exhibit 10(i) to 1980 Form 10-K, File No. 1-3446);
Amendments dated June 1, 1982, April 27, 1984,
June 15, 1984 (Exhibit 10(j) to 1984 Form 10-K,
File No. 1-3446); Amendments dated March 8, 1985,
March 14, 1986, May 1, 1986 and September 19, 1986
(Exhibit 10(j) to 1986 Form 10-K, File No. 1-3446);
Amendment dated November 12, 1987 (Exhibit 10(j) to
1987 Form 10-K, File No. 1-3446); Amendment dated
January 13, 1989 (Exhibit 10(j) to 1989 Form 10-K,
File No. 1-3446); Amendment dated as of November 1,
1990 (Exhibit 10(j) to 1991 Form 10-K, File No. 1-
3446). Transmission Support Agreement dated as of
May 1, 1973 (Exhibit 10-23, File No. 2-49184);
Instrument of Transfer to NEP with respect to the
New Hampshire Nuclear Units and Assumptions of
Obligations dated December 17, 1975 and Agreement
Among Participants in New Hampshire Nuclear Units,
certain Massachusetts Municipal Systems and
Massachusetts Municipal Wholesale Electric Company
dated May 28, 1976 (Exhibit 10-16(c), File No.
2-57831); Seventh Amendment To and Restated
Agreement for Seabrook Project Disbursing Agent
(Exhibit 10(j) to 1991 Form 10-K, File No. 1-
3446); Amendments dated as of June 29, 1992
(Exhibit 10(j) to 1992 Form 10-K, File No. 1-
3446); Seabrook Project Managing Agent Operating
Agreement dated as of June 29, 1992, and amendment
to Seabrook Project Managing Agent Agreement dated
as of June 29, 1992 (Exhibit 10(j) to 1992 Form 10-
K, File No. 1-3446).
(k) Vermont Yankee Nuclear Power Corporation et al. and
New England Power Company: Capital Funds Agreement
dated February 1, 1968, Amendment dated March 12,
1968, and Power Purchase Contract dated February 1,
1968 (Exhibit 4-6, File No. 2-29145); Amendments
dated as of June 1, 1972 and April 15, 1983
(Exhibit 10(k) to 1983 Form 10-K, File No. 1-3446)
and April 24, 1985 (Exhibit 10(k) to 1985 Form
10-K, File No. 1-3446); Amendment dated as of June
1, 1985 (Exhibit 10(k) to 1987 Form 10-K, File No.
1-3446); Amendments dated as of May 6, 1988
<PAGE>
(Exhibit 10(k) to 1988 Form 10-K, File No. 1-3446);
Amendment dated as of June 15, 1989 (Exhibit 10(k)
to 1989 Form 10-K, File No. 1-3446); Additional
Power Contract dated as of February 1, 1984
(Exhibit 10(k) to 1983 Form 10-K, File No. 1-3446);
Guarantee Agreement dated as of November 5, 1981
(Exhibit 10(j) to 1981 Form 10-K, File No. 1-3446).
(l) Yankee Atomic Electric Company et al. and New
England Power Company: Amended and Restated Power
Contract dated April 1, 1985 (Exhibit 10(l) to 1985
Form 10-K, File No. 1-3446); Amendment dated May 6,
1988 (Exhibit 10(l) to 1988 Form 10-K, File No.
1-3446); Amendments dated as of June 26, 1989 and
July 1, 1989 (Exhibit 10(l) to 1989 Form 10-K, File
No. 1-3446); Amendment dated as of February 1, 1992
(Exhibit 10(l) to 1992 Form 10-K, File No. 1-3446).
*(m) New England Electric Companies' Deferred
Compensation Plan as amended through November 26,
1996 (filed herewith).
*(n) New England Electric System Companies Retirement
Supplement Plan as amended through June 1, 1996
(filed herewith).
*(o) New England Electric Companies' Executive
Supplemental Retirement Plan I as amended through
May 20, 1996 (filed herewith).
*(p) New England Electric Companies' Executive
Supplemental Retirement Plan II as amended through
October 25, 1995 (filed herewith).
*(q) New England Electric Companies' Incentive
Compensation Plan I as amended through October 24,
1995 (filed herewith).
*(r) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to 1995 Form 10-K, File No. 1-
3446).
*(s) New England Electric Companies' Incentive
Compensation Plan III as amended through January
1, 1996 (filed herewith).
*(t) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to 1995 Form 10-K, File No. 1-
3446).
<PAGE>
*(u) New England Electric System Directors Deferred
Compensation Plan as amended through December 1,
1996 (filed herewith).
*(v) Forms of Life Insurance Program (Exhibit 10(s) to
1986 Form 10-K, File No. 1-3446); and Form of Life
Insurance (Collateral Assignment) (Exhibit 10(t) to
1991 Form 10-K, File No. 1-3446).
*(w) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (filed
herewith).
*(x) New England Electric Companies' Long-Term
Performance Share Award Plan amended through
February 24, 1997 (filed herewith).
*(y) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (filed herewith).
*(z) Forms of Severance Protection Agreement (filed
herewith).
*(aa) New England Power Service Company and Joan T. Bok:
Service Credit Letter dated October 21, 1982
(Exhibit 10(cc) to 1992 Form 10-K, File No.
1-3446).
*(bb) New England Electric System and John W. Rowe:
Service Credit Letter dated December 5, 1988
(Exhibit 10(dd) to 1992 Form 10-K, File No.
1-3446).
*(cc) Agreement between New England Electric System and
John W. Rowe dated February 28, 1995 (filed
herewith).
*(dd) New England Power Service Company and the Company:
Form of Supplemental Pension Service Credit
Agreement (Exhibit 10(ee) to 1992 Form 10-K, File
No. 1-3446).
(ee) New England Power Company and New England
Hydro-Transmission Electric Company, Inc. et al:
Phase II Massachusetts Transmission Facilities
Support Agreement dated as of June 1, 1985 (Exhibit
10(t) to 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(t) to
1986 Form 10-K, File No. 1-3446); Amendments dated
as of February 1, 1987, June 1, 1987, September 1,
1987, and October 1, 1987 (Exhibit 10(u) to 1987
Form 10-K, File No. 1-3446); Amendment dated as of
<PAGE>
August 1, 1988 (Exhibit 10(u) to 1988 Form 10-K,
File No. 1-3446); Amendment dated January 1, 1989
(Exhibit 10(u) to 1990 Form 10-K, File No. 1-3446).
(ff) New England Power Company and New England
Hydro-Transmission Corporation et al: Phase II New
Hampshire Transmission Facilities Support Agreement
dated as of June 1, 1985 (Exhibit 10(u) to 1986
Form 10-K, File No. 1-3446); Amendment dated as of
May 1, 1986 (Exhibit 10(u) to 1986 Form 10-K, File
No. 1-3446); Amendments dated as of February 1,
1987, June 1, 1987, September 1, 1987, and
October 1, 1987 (Exhibit 10(v) to 1987 Form 10-K,
File No. 1-3446); Amendment dated as of August
1,1988 (Exhibit 10(v) to 1988 Form 10-K, File No.
1-3446); Amendments dated January 1, 1989 and
January 1, 1990 (Exhibit 10(v) to 1990 Form 10-K,
File No. 1-3446).
(gg) New England Power Company et al: Phase II New
England Power AC Facilities Support Agreement dated
as of June 1, 1985 (Exhibit 10(v) to 1986 Form
10-K, File No. 1-3446); Amendment dated as of May
1, 1986 (Exhibit 10(v) to 1986 Form 10-K, File No.
1-3446); Amendments dated as of February 1, 1987,
June 1, 1987, and September 1, 1987 (Exhibit 10(w)
to 1987 Form 10-K, File No. 1-3446); Amendment
dated as of August 1, 1988 (Exhibit 10(w) to 1988
Form 10-K, File No. 1-3446).
(hh) New England Hydro-Transmission Electric Company,
Inc. and New England Electric System et al: Equity
Funding Agreement dated as of June 1, 1985 (Exhibit
10(w) to 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(w) to
1986 Form 10-K, File No. 1-3446); Amendment dated
as of September 1, 1987 (Exhibit 10(x) to 1987
Form 10-K, File No. 1-3446); Amendment dated as of
August 1, 1988 (Exhibit 10(x) to 1988 Form 10-K,
File No. 1-3446).
(ii) New England Hydro-Transmission Corporation and New
England Electric System et al: Equity Funding
Agreement dated as of June 1, 1985 (Exhibit 10(x)
to 1986 Form 10-K, File No. 1-3446); Amendment
dated as of May 1, 1986 (Exhibit 10(x) to 1986 Form
10-K, File No. 1-3446); Amendment dated as of
September 1, 1987 (Exhibit 10(y) to 1987 Form 10-K,
File No. 1-3446); Amendment dated as of August 1,
1988 (Exhibit 10(y) to 1988 Form 10-K, File No.
1-3446).
<PAGE>
(jj) Ocean State Power, et al., and Narragansett Energy
Resources Company: Equity Contribution Agreement
dated as of December 29, 1988 (Exhibit 10(aa) to
1988 Form 10-K, File No. 1-3446); Amendment dated
as of September 29, 1989 (Exhibit 10(aa) to 1989
Form 10-K File No. 1-3446); Ocean State Power, et
al., and New England Electric System: Equity
Contribution Support Agreement dated as of
December 29, 1988 (Exhibit 10(aa) to 1988 Form
10-K, File No. 1-3446); Amendment dated as of
September 29, 1989 (Exhibit 10(aa) to 1989 Form
10-K, File No. 1-3446); Ocean State Power II, et
al., and Narragansett Energy Resources Company:
Equity Contribution Agreement dated as of September
29, 1989 (Exhibit 10(aa) to 1989 Form 10-K File No.
1-3446); Ocean State Power II, et al., and New
England Electric System: Equity Contribution
Support Agreement dated as of September 29, 1989
(Exhibit 10(aa) to 1989 Form 10-K File No. 1-3446).
(kk) NEES Energy, Inc./AllEnergy Marketing Company,
L.L.C.: Limited Liability Company Agreement dated
as of September 18, 1996 (Exhibit B-1 to Amendment
No. 1 to Form U-1, File No. 70-8921).
* Compensation related plan, contract, or arrangement.
(13) 1996 Annual Report to Shareholders (filed herewith).
(21) Subsidiary list appears in Part I of this document.
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
NEP
---
(3) (a) Articles of Organization as amended through June
27, 1987 (Exhibit 3(a) to 1988 Form 10-K, File No.
0-1229).
(b) By-laws of the Company as amended May 10, 1995
(Exhibit 3(b) to 1995 Form 10-K, File No. 0-1229).
(4) General and Refunding Mortgage Indenture and Deed of Trust
dated as of January 1, 1977 and twenty supplements thereto
(Exhibit 4(b) to 1980 Form 10-K, File No. 0-1229; Exhibit
4(b) to 1982 Form 10-K, File No. 0-1229; Exhibit 4(b) to
1983 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1985 Form
10-K, File No. 0-1229; Exhibit 4(b) to 1986 Form 10-K,
<PAGE>
File No. 0-1229; Exhibit 4(b) to 1986 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1988 Form 10-K, File No. 0-1229;
Exhibit 4(c)(ii) to 1989 NEES Form 10-K, File No. 1-3446;
Exhibit 4(c)(ii) to 1990 NEES Form 10-K, File No. 1-3446;
Exhibit 4(c)(ii) to 1991 NEES Form 10-K, File No. 1-3446;
Exhibit 4(c)(ii) to 1992 NEES Form 10-K, File No. 1-3446;
Exhibit 4(d) to 1993 NEES Form 10-K, File No. 1-3446;
Exhibit 4(d) to 1995 NEES Form 10-K, File No. 1-3446).
(10) Material Contracts
(a) Boston Edison Company et al. and the Company:
Amended REMVEC Agreement dated August 12, 1977
(Exhibit 5-4(d), File No. 2-61881).
(b) The Connecticut Light and Power Company et al. and
the Company: Sharing Agreement for Joint
Ownership, Construction and Operation of Millstone
Unit No. 3 dated as of September 1, 1973, and
Amendment dated as of August 1, 1974 (Exhibit 10-5,
File No. 2-52820); Amendments dated as of December
15, 1975 and April 1, 1986 (Exhibit 10(b) to NEES'
1990 Form 10-K File No. 1-3446). Transmission
Support Agreement dated August 9, 1974; Instrument
of Transfer to the Company with respect to the 1979
Connecticut Nuclear Unit, and Assumption of
Obligations, dated December 17, 1975 (Exhibit
10-6(b), File No. 2-57831).
(c) Connecticut Yankee Atomic Power Company et al. and
the Company: Stockholders Agreement dated July 1,
1964 (Exhibit 13-9-A, File No. 2-2006); Power
Purchase Contract dated July 1, 1964 (Exhibit
13-9-B, File No. 2-23006); Additional Power
Contract dated as of April 30, 1984 and 1996
Amendatory Agreement dated as of December 4, 1996
(Exhibit 10(c) to 1996 Form 10-K, File No. 1-3446);
Supplementary Power Contract dated as of April 1,
1987 (Exhibit 10(c) to 1987 Form 10-K, File No.
0-1229); Capital Funds Agreement dated September 1,
1964 (Exhibit 13-9-C, File No. 2-23006);
Transmission Agreement dated October 1, 1964
(Exhibit 13-9-D, File No. 2-23006); Agreement
revising Transmission Agreement dated July 1, 1979
(Exhibit to NEES' 1979 Form 10-K, File No. 1-3446);
Amendment revising Transmission Agreement dated as
of January 19, 1994 (Exhibit 10(c) to NEES' 1995
Form 10-K, File No. 1-3446; Five Year Capital
Contribution Agreement dated November 1, 1980
(Exhibit 10(e) to NEES' 1980 Form 10-K, File No.
1-3446).
<PAGE>
(d) Maine Yankee Atomic Power Company et al. and the
Company: Capital Funds Agreement dated May 20,
1968 and Power Purchase Contract dated May 20, 1968
(Exhibit 4-5, File No. 2-29145); Amendments dated
as of January 1, 1984, March 1, 1984 (Exhibit 10(d)
to NEES' 1983 Form 10-K, File No. 1-3446); October
1, 1984, and August 1, 1985 (Exhibit 10(d) to NEES'
1985 Form 10-K, File No. 1-3446); Stockholders
Agreement dated May 20, 1968 (Exhibit 10-20; File
No. 2-34267); Additional Power Contract dated as of
February 1, 1984 (Exhibit 10(d) to NEES' 1985 Form
10-K, File No. 1-3446).
(e) Mass. Electric and the Company: Primary Service
for Resale dated February 15, 1974 (Exhibit
5-17(a), File No. 2-52969); Amendment of Service
Agreement dated June 22, 1983 (Exhibit 10(b) to
Mass. Electric's 1986 Form 10-K, File No. 0-5464);
Amendment of Service Agreement effective
November 1, 1993 (Exhibit 10(e) to 1993 Form 10-K,
File No. 0-1229); Memorandum of Understanding
effective May 22, 1994 (Exhibit 10(e) to 1994 Form
10-K, File No. 0-1229).
(f) The Narragansett Electric Company and the Company:
Primary Service for Resale dated February 15, 1974
(Exhibit 4-1(b), File No. 2-51292); Amendment of
Service Agreement dated July 26, 1990 (Exhibit 4(f)
to New England Power Company's 1990 Form 10-K, File
No. 0-1229). Amendment of Service Agreement dated
July 24, 1991 (Exhibit 10(f) to 1991 Form 10-K,
File No. 0-1229); Amendment of Service Agreement
effective November 1, 1993 (Exhibit 10(f) to 1993
Form 10-K, File No. 0- 1229); Memorandum of
Understanding effective May 22, 1994 (Exhibit 10(e)
to 1994 Form 10-K, File No. 0-1229); Amendment of
Service Agreement effective January 1, 1995
(Exhibit 10(f) to 1995 Form 10-K, File No. 0-1229).
(g) Time Charter between International Shipholding
Corp., and New England Power Company dated as of
October 27, 1994; Amendments dated as of September
22, 1995 (Exhibit 10(g) to 1995 Form 10-K, File No.
0-1229).
(h) Consent and Agreement among New England Power
Company, Central Gulf Lines, Inc., Enterprise Ship
Company, Inc., and The Bank of New York dated as of
September 28, 1995 (Exhibit 10(h) to 1995 Form 10-
K, File No. 0-1229).
(i) New England Electric Transmission Corporation et
al. and the Company: Phase I Terminal Facility
<PAGE>
Support Agreement dated as of December 1, 1981
(Exhibit 10(g) to NEES' 1981 Form 10-K, File No.
1-3446); Amendments dated as of June 1, 1982 and
November 1, 1982 (Exhibit 10(f) to NEES' 1982 Form
10-K, File No. 1-3446); Agreement with respect to
Use of the Quebec Interconnection dated as of
December 1, 1981 (Exhibit 10(g) to NEES' 1981 Form
10-K, File No. 1-3446); Amendments dated as of May
1, 1982 and November 1, 1982 (Exhibit 10(f) to
NEES' 1982 Form 10-K, File No. 1-3446); Amendment
dated as of January 1, 1986 (Exhibit 10(f) to NEES'
1986 Form 10-K, File No. 1-3446); Agreement for
Reinforcement and Improvement of the Company's
Transmission System dated as of April 1, 1983
(Exhibit 10(f) to NEES' 1983 Form 10-K, File No.
1-3446); Lease dated as of May 16, 1983 (Exhibit
10(f) to NEES' 1983 Form 10-K, File No. 1-3446);
Upper Development-Lower Development Transmission
Line Support Agreement dated as of May 16, 1983
(Exhibit 10(f) to NEES' 1983 Form 10-K, File No.
1-3446).
(j) Vermont Electric Transmission Company, Inc. et al.
and the Company: Phase I Vermont Transmission Line
Support Agreement dated as of December 1, 1981;
Amendments dated as of June 1, 1982 and November 1,
1982 (Exhibit 10(g) to NEES' 1982 Form 10-K, File
No. 1-3446); Amendment dated as of January 1, 1986
(Exhibit 10(h) to NEES' 1986 Form 10-K, File No.
1-3446).
(k) New England Energy Incorporated and the Company:
Fuel Purchase Contract dated July 26, 1979, and
Amendment dated August 26, 1981 (Exhibit 10(f)(iii)
to NEES' 1981 Form 10-K, File No. 1-3446);
Amendment dated March 26, 1985, and Amendment
effective January 1, 1984 (Exhibit 10(e)(iii) to
NEES' 1985 Form 10-K, File No. 1-3446); Amendment
dated as of April 28, 1989 (Exhibit 10(e)(iii) to
1989 NEES Form 10-K, File No. 1-3446).
(l) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
March 1, 1973 (Exhibit 10-15, File No.
2-48543);Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
(Exhibit 10-3, File No. 2-68283); Amendment dated
<PAGE>
September 1, 1981 (Exhibit 10(h) to NEES' 1981 Form
10-K, File No. 1-3446); Amendment dated December 1,
1981 (Exhibit 10(h) to NEES' 1982 Form 10-K, File
No. 1-3446); Amendments dated June 1, 1982,
June 15, 1983, and October 1, 1983 (Exhibit 10(i)
to NEES' 1983 Form 10-K, File 1-3446); Amendments
dated August 1, 1985, August 15, 1985, September 1,
1985, and January 1, 1986 (Exhibit 10(i) to NEES'
1985 Form 10-K, File No. 1-3446); Amendment dated
September 1, 1986 (Exhibit 10(i) to NEES' 1986 Form
10-K, File No. 1-3446); Amendment dated April 30,
1987 (Exhibit 10(i) to NEES' 1987 Form 10-K, File
No. 1-3446); Amendments dated March 1, 1988 and May
1, 1988 (Exhibit 10(i) to NEES' 1988 Form 10-K,
File No. 1-3446); Amendment dated March 15, 1989
(Exhibit 10(i) to 1989 NEES Form 10-K, File No.
1-3446); Amendment dated October 1, 1990 (Exhibit
10(i) to 1990 NEES Form 10-K, File No. 1-3446);
Amendment dated October 1, 1990 Exhibit 10(i) to
1990 NEES Form 10-K, File No. 1-3446); Amendment
dated as of September 15, 1992 (Exhibit 10(i) to
1992 NEES Form 10-K, File No. 1-3446); Amendments
dated as of June 1, 1993, July 1, 1995, and
September 1, 1995 (Exhibit 10(i) to 1995 NEES Form
10-K, File No. 1-3446); Amendment dated as of
December 1, 1996 (Exhibit 10(i) to 1996 NEES Form
10-K, File No. 1-3446).
(m) New England Power Service Company and the Company:
Specimen of Service Contract (Exhibit 10(l) to 1994
Form 10-K, File No. 0-1229).
(n) Massachusetts Electric Company, et al. and the
Company: Form of Mutual Assistance Agreement (filed
herewith).
(o) Massachusetts Electric Company, et al. and the
Company: Restructuring Settlement Agreement
approved by the Massachusetts Department of Public
Utilities (filed herewith).
(p) Public Service Company of New Hampshire et al. and
the Company: Agreement for Joint Ownership,
Construction and Operation of New Hampshire Nuclear
Units dated as of May 1, 1973; Amendments dated May
24, 1974, June 21, 1974, September 25, 1974 and
October 25, 1974 (Exhibit 10-18(b), File No.
2-52820); Amendment dated January 31, 1975 (Exhibit
10-16(b), File No. 2-57831); Amendments dated April
18, 1979, April 25, 1979, June 8, 1979, October 11,
1979, December 15, 1979, June 16, 1980, and
December 31, 1980 (Exhibit 10(i) to NEES' 1980 Form
10-K, File No. 1-3446); Amendments dated June 1,
<PAGE>
1982, April 27, 1984, and June 15, 1984 (Exhibit
10(j) to NEES' 1984 Form 10-K, File No. 1-3446);
Amendments dated March 8, 1985, March 14, 1986,
May 1, 1986, and September 19, 1986 (Exhibit 10(j)
to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated November 12, 1987 (Exhibit 10(j) to
NEES' 1987 Form 10-K, File No. 1-3446); Amendment
dated January 13, 1989 (Exhibit 10(j) to NEES' 1990
Form 10-K, File No. 1-3446); Seventh Amendment as
of November 1, 1990 (Exhibit 10(m) to NEES' 1991
Form 10-K, File No. 1-3446). Transmission Support
Agreement dated as of May 1, 1973 (Exhibit 10-23,
File No. 2-49184); Instrument of Transfer to the
Company with respect to the New Hampshire Nuclear
Units and Assumptions of Obligations dated December
17, 1975 and Agreement Among Participants in New
Hampshire Nuclear Units, certain Massachusetts
Municipal Systems and Massachusetts Municipal
Wholesale Electric Company dated May 28, 1976
(Exhibit 16(c), File No. 2-57831); Seventh
Amendment To and Restated Agreement for Seabrook
Project Disbursing Agent dated as of November 1,
1990 (Exhibit 10(m) to NEES' 1991 Form 10-K, File
No. 1-3446); Amendments dated as of June 29, 1992
(Exhibit 10(j) to NEES' 1992 Form 10-K, File No. 1-
3446). Settlement Agreement dated as of July 19,
1990 between Northeast Utilities Service Company
and the Company (Exhibit 10(m) to NEES' 1991 Form
10-K, File No. 1-3446). Seabrook Project Managing
Agent Operating Agreement dated as of June 29,
1992, Amendment to Seabrook Project Managing Agent
Operating Agreement dated as of June 29, 1992
(Exhibit 10(j) to NEES' 1992 Form 10-K, File No. 1-
3446).
(q) Vermont Yankee Nuclear Power Corporation et al. and
the Company: Capital Funds Agreement dated
February 1, 1968, Amendment dated March 12, 1968
and Power Purchase Contract dated February 1, 1968
(Exhibit 4-6, File No. 2-29145); Amendments dated
as of June 1, 1972, April 15, 1983 (Exhibit 10(k)
to NEES' 1983 Form 10-K, File No. 0-1229) and
April 24, 1985 (Exhibit 10(n) to NEES' 1985 Form
10-K, File No. 1-3446); Amendment dated as of
June 1, 1985 (Exhibit 10(n) to 1988 Form 10-K, File
No. 0-1229); Amendments dated May 6, 1988 (Exhibit
10(n) to 1988 Form 10-K, File No. 0-1229);
Amendment dated as of June 15, 1989 (Exhibit 10(k)
to 1989 NEES Form 10-K, File No. 1-3446);
Additional Power Contract dated as of February 1,
1984 (Exhibit 10(k) to NEES' 1983 Form 10-K, File
No. 1-3446); Guarantee Agreement dated as of
November 5, 1981 (Exhibit 10(j) to NEES' 1981 Form
10-K, File No. 1-3446).
<PAGE>
(r) Yankee Atomic Electric Company et al. and the
Company: Amended and Restated Power Contract dated
April 1, 1985 (Exhibit 10(l) to NEES' 1985 Form
10-K, File No. 1-3446); Amendment dated May 6, 1988
(Exhibit 10(l) to NEES' 1988 Form 10-K, File No.
1-3446); Amendments dated as of June 26, 1989 and
July 1, 1989 (Exhibit 10(l) to 1989 NEES Form 10-K,
File No. 1-3446); Amendment dated as of February 1,
1992 (Exhibit 10(l) to 1992 NEES Form 10-K, File
No. 1-3446).
*(s) New England Electric Companies' Deferred
Compensation Plan as amended through November 26,
1996 (Exhibit 10(m) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(t) New England Electric System Companies Retirement
Supplement Plan as amended through June 1, 1996
(Exhibit 10(n) to NEES' 1996 Form 10-K, File No.
1-3446).
*(u) New England Electric Companies' Executive
Supplemental Retirement Plan I as amended through
May 20, 1996 (Exhibit 10(o) to NEES' 1996 Form
10-K, File No. 1-3446).
*(v) New England Electric Companies Executive
Supplemental Retirement Plan II as amended through
October 25, 1995 (Exhibit 10(p) to NEES' 1996 Form
10-K, File No. 1-3446).
*(w) New England Electric Companies' Incentive
Compensation Plan I as amended through October 24,
1995 (Exhibit 10(p) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(x) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(y) New England Electric Companies' Incentive
Compensation Plan III as amended through January 1,
1996 (Exhibit 10(s) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(z) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to NEES' 1995 Form 10-K, File
No. 1-3446).
<PAGE>
*(aa) Forms of Life Insurance Program: (Exhibit 10(s) to
NEES' 1986 Form 10-K, File No. 1-3446); and Form of
Life Insurance (Collateral Assignment) (Exhibit
10(t) to NEES' 1991 Form 10-K, File No. 1-3446).
*(bb) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (Exhibit
10 (w) to NEES 1996 Form 10-K, File No. 1-3446).
*(cc) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10(y) to 1996 NEES
Form 10-K, File No. 1-3446.
*(dd) Forms of Severance Protection Agreement (Exhibit 10
(z) to NEES' 1996 Form 10-K, File No. 1-3446).
*(ee) New England Electric Companies' Long-Term
Performance Share Award Plan amended through
February 24, 1997 (Exhibit 10(x) to NEES' 1996 Form
10-K, File No. 1-3446).
(ff) New England Hydro-Transmission Electric Company,
Inc. et al. and the Company: Phase II
Massachusetts Transmission Facilities Support
Agreement dated as of June 1, 1985 (Exhibit 10(t)
to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(t) to
NEES' 1986 Form 10-K, File No. 1-3446); Amendments
dated as of February 1, 1987, June 1, 1987,
September 1, 1987, and October 1, 1987 (Exhibit
10(u) to NEES' 1987 Form 10-K, File No. 1-3446);
Amendment dated as of August 1, 1988 (Exhibit 10(u)
to NEES' 1988 Form 10-K, File No. 1-3446);
Amendment dated January 1, 1989 (Exhibit 10(u) to
NEES' 1990 Form 10-K, File No. 1-3446).
(gg) New England Hydro-Transmission Corporation et al.
and the Company: Phase II New Hampshire
Transmission Facilities Support Agreement dated as
of June 1, 1985 (Exhibit 10(u) to NEES' 1986 Form
10-K, File No. 1-3446); Amendment dated as of
May 1, 1986 (Exhibit 10(u) to NEES' 1986 Form 10-K,
File No. 1-3446); Amendments dated as of February
1, 1987, June 1, 1987, September 1, 1987, and
October 1, 1987 (Exhibit 10(v) to NEES' 1987 Form
10-K, File No. 1-3446). Amendment dated as of
August 1, 1988 (Exhibit 10(v) to NEES' 1988 Form
10-K, File No. 1-3446); Amendments dated January 1,
1989 and January 1, 1990 (Exhibit 10 (v) to NEES'
1990 Form 10-K, File No. 1-3446).
(hh) Vermont Electric Power Company et al. and the
Company: Phase II New England Power AC Facilities
<PAGE>
Support Agreement dated as of June 1, 1985 (Exhibit
10(v) to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(v) to
NEES' 1986 Form 10-K, File No. 1-3446). Amendments
dated as of February 1, 1987, June 1, 1987, and
September 1, 1987 (Exhibit 10(w) to NEES' 1987 Form
10-K, File No. 1-3446); Amendment dated as of
August 1, 1988 (Exhibit 10(w) to NEES' 1988 Form
10-K, File No. 1-3446).
* Compensation related plan, contract, or arrangement.
(13) 1996 Annual Report to Stockholders (filed herewith).
(21) Subsidiary list (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
Mass. Electric
--------------
(3) (a) Articles of Organization of the Company as amended
March 5, 1993, August 11, 1993, September 20, 1993,
and November 15, 1993 (Exhibit 3(a) to 1993 Form
10-K, File No. 0-5464).
(b) By-Laws of the Company as amended February 4, 1993,
July 30, 1993, and September 15, 1993 (Exhibit 3(b)
to 1993 Form 10-K, File No. 0-5464).
(4) First Mortgage Indenture and Deed of Trust, dated as of
July 1, 1949, and twenty-one supplements thereto (Exhibit
7-A, File No. 1-8019; Exhibit 7-B, File No. 2-8836;
Exhibit 4-C, File No. 2-9593; Exhibit 4 to 1980 Form 10-K,
File No. 2-8019; Exhibit 4 to 1982 Form 10-K, File No.
0-5464; Exhibit 4 to 1986 Form 10-K, File No. 0-5464);
Exhibit 4 to 1988 Form 10-K, File No. 0-5464; Exhibit 4(a)
to 1989 NEES Form 10-K, File No. 1-3446; Exhibit 4(a) to
1992 NEES Form 10-K, File No. 1-3446; Exhibit 4(a) to 1993
NEES Form 10-K, File No. 1-3446; Exhibit 4(a) to 1995 NEES
Form 10-K, File No. 1-3446).
(10) Material Contracts
(a) Boston Edison Company et al. and Company: Amended
REMVEC Agreement dated August 12, 1977 (Exhibit
5-4(d), File No. 2-61881).
<PAGE>
(b) New England Power Company and the Company: Primary
Service for Resale dated February 15, 1974 (Exhibit
5-17(a), File No. 2-52969); Amendment of Service
Agreement dated July 22, 1983 (Exhibit 10(b) to
1986 Form 10-K, File No. 0-5464); Amendment of
Service Agreement effective November 1, 1993
(Exhibit 10(e) to 1993 NEP Form 10-K, File No. 0-
1229); Memorandum of Understanding effective May
22, 1994 (Exhibit 10(e) to 1994 NEP Form 10-K, File
No. 0-1229).
(c) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
and March 1, 1973 (Exhibit 10-15, File No.
2-48543); Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
(Exhibit 10-3, File No. 2-68283); Amendment dated
September 1, 1981 (Exhibit 10(h) to NEES' 1981 Form
10-K, File No. 1-3446); Amendment dated as of
December 1, 1981 (Exhibit 10(h) to NEES' 1982 Form
10-K, File No. 1-3446); Amendments dated June 1,
1982, June 15, 1983, and October 1, 1983 (Exhibit
10(i) to NEES' 1983 Form 10-K, File No. 1-3446);
Amendments dated August 1, 1985, August 15, 1985,
September 1, 1985, and January 1, 1986 (Exhibit
10(i) to NEES' 1985 Form 10-K, File No. 1-3446);
Amendment dated September 1, 1986 (Exhibit 10(i) to
NEES' 1986 Form 10-K, File No. 1-3446); Amendments
dated April 30, 1987 (Exhibit 10(i) to NEES' 1987
Form 10-K, File No. 1-3446); Amendments dated
March 1, 1988 and May 1, 1988 (Exhibit 10(i) to
NEES' 1988 Form 10-K, File No. 1-3446); Amendment
dated March 15, 1989 (Exhibit 10(i) to 1989 NEES
Form 10-K, File No. 1-3446). Amendment dated
October 1, 1990 (Exhibit 10(i) to 1990 NEES Form
10-K, File No. 1-3446); Amendment dated as of
September 15, 1992 (Exhibit 10(i) to 1992 NEES Form
10-K, File No. 1-3446). Amendments dated as of
June 1, 1993, July 1, 1995, and September 1, 1995
(Exhibit 10(i) to 1995 NEES Form 10-K, File No. 1-
3446); Amendment dated as of December 1, 1996
(Exhibit 10(i) to 1996 NEES Form 10-K, File No. 1-
3446).
(d) New England Power Service Company and the Company:
Specimen of Service Contract (Exhibit 10(l) to 1994
NEP Form 10-K, File No. 0-1229).
<PAGE>
(e) New England Power Company et al. and the Company:
Form of Mutual Assistance Agreement (Exhibit 10(n)
to 1996 NEP Form 10-K, File No. 0-1229).
(f) New England Power Company et al. and the Company:
Restructuring Settlement Agreement approved by the
Massachusetts Department of Public Utilities
February 26, 1997 (Exhibit 10(o) to 1996 Form 10-K,
File No. 0-1229).
(g) New England Telephone and Telegraph Company and the
Company: Specimen of Joint Ownership Agreement for
Wood Poles (Exhibit 4(e), File No. 2-24458).
*(h) New England Electric Companies' Deferred
Compensation Plan as amended through November 26,
1996 (Exhibit 10(m) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(i) New England Electric System Companies Retirement
Supplement Plan as amended through June 1, 1996
(Exhibit 10(n) to NEES' 1996 Form 10-K, File No.
1-3446).
*(j) New England Electric Companies' Executive
Supplemental Retirement Plan I as amended through
May 20, 1996 (Exhibit 10(o) to NEES' 1996 Form
10-K, File No. 1-3446).
*(k) New England Electric Companies' Executive
Supplemental Retirement Plan II as amended through
October 25, 1995 (Exhibit 10(p) to NEES' 1996 Form
10-K, File No. 1-3446).
*(l) New England Electric Companies' Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(p) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(m) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(n) New England Electric Companies' Incentive
Compensation Plan III as amended through January 1,
1996 (Exhibit 10(s) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(o) New England Electric Companies' Form of Deferred
Compensation Agreement for Directors (Exhibit 10(p)
to NEES' 1980 Form 10-K, File No. 1-3446).
<PAGE>
*(p) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(q) Forms of Life Insurance Program: (Exhibit 10(s) to
NEES' 1986 Form 10-K, File No. 1-3446); and Form of
Life Insurance (Collateral Assignment) (Exhibit
10(t) to NEES' 1991 Form 10-K, File No. 1-3446).
*(r) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (Exhibit
10(w) to NEES' 1996 Form 10-K, File No. 1-3446).
*(s) New England Electric Companies' Long-Term
Performance Share Award Plan amended through
February 24, 1997 (Exhibit 10 (x) to NEES' 1996
Form 10-K, File No. 1-3446).
*(t) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10(y) to NEES' 1996
Form 10-K, File No. 1-3446.
*(u) Forms of Severance Protection Agreement (Exhibit 10
(z) to NEES' 1996 Form 10-K, File No. 1-3446).
*(v) New England Power Service Company and the Company:
Form of Supplemental Pension Service Credit
Agreement (Exhibit 10(ee) to 1992 NEES Form 10-K,
File No. 1-3446).
* Compensation related plan, contract, or arrangement.
(12) Statement re computation of ratios for incorporation by
reference into the Mass. Electric registration statement
on Form S-3, Commission File No. 33-59145 (filed
herewith).
(13) 1996 Annual Report to Stockholders (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
Narragansett
------------
(3) (a) Articles of Incorporation as amended June 9, 1988
(Exhibit 3(a) to 1988 Form 10-K, File No. 0-898).
(b) By-Laws of the Company (Exhibit 3 to 1980 Form
10-K, File No. 0-898).
<PAGE>
(4) (a) First Mortgage Indenture and Deed of Trust, dated
as of September 1, 1944, and twenty-two supplements
thereto (Exhibit 7-1, File No. 2-7042; Exhibit 7-B,
File No. 2-7490; Exhibit 4-C, File No. 2-9423;
Exhibit 4-D, File No. 2-10056; Exhibit 4 to 1980
Form 10-K, File No. 0-898; Exhibit 4 to 1982 Form
10-K, File No. 0-898; Exhibit 4 to 1983 Form 10-K,
File No. 0-898; Exhibit 4 to 1985 Form 10-K, File
No. 0-898; Exhibit 4 to 1986 Form 10-K, File No.
0-898; Exhibit 4 to 1987 Form 10-K, File No. 0-898;
Exhibit 4(b) to 1991 NEES Form 10-K, File No.
1-3446; Exhibit 4(b) to 1992 NEES Form 10-K, File
No. 1-3446; Exhibit 4(b) to 1993 NEES Form 10-K,
File No. 1-3446; Exhibit 4(b) to 1995 NEES Form 10-
K, File No. 1-3446).
(b) The Narragansett Electric Company Preference
Provisions, as amended, dated March 23, 1993
(Exhibit 4(c) to 1993 NEES Form 10-K, File No. 1-
3446).
(10) Material Contracts
(a) Boston Edison Company et al. and the Company:
Amended REMVEC Agreement dated August 12, 1977
(Exhibit 5-4(d), File No. 2-61881).
(b) New England Power Company and the Company: Primary
Service for Resale dated February 15, 1974 (Exhibit
4-1(b), File No. 2-51292); Amendment of Service
Agreement dated July 26, 1990 (Exhibit 10(f) to
1990 NEP Form 10-K, File No. 0-1229); Amendment of
Service Agreement dated July 24, 1991 (Exhibit 4(f)
to 1991 NEP Form 10-K, File No. 0-1229); Amendment
of Service Agreement effective November 1, 1993
(Exhibit 10(f) to 1993 NEP Form 10-K, File No. 0-
1229); Memorandum of Understanding effective May
22, 1994 (Exhibit 10(f) to 1994 NEP Form 10-K, File
No. 0-1229); Amendment of Service Agreement
effective January 1, 1995 (Exhibit 10(f) to 1995
NEP Form 10-K, File No. 0-1229).
(c) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
and March 1, 1973 (Exhibit 10-15, File No.
2-48543); Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
<PAGE>
(Exhibit 10-3, File No. 2-68283); Amendment dated
September 1, 1981 (Exhibit 10(h) to NEES' 1981 Form
10-K, File No. 1-3446); Amendment dated December 1,
1981 (Exhibit 10(h) to NEES' 1982 Form 10-K, File
No. 1-3446); Amendments dated June 1, 1982,
June 15, 1983, and October 1, 1983 (Exhibit 10(i)
to NEES' 1983 Form 10-K, File No. 1-3446);
Amendments dated August 1, 1985, August 15, 1985,
September 1, 1985, and January 1, 1986 (Exhibit 10
(i) to NEES' 1985 Form 10-K, File No. 1-3446);
Amendment dated September 1, 1986 (Exhibit 10(i) to
NEES' 1986 Form 10-K, File No. 1-3446); Amendment
dated April 30, 1987 (Exhibit 10(i) to NEES' 1987
Form 10-K, File No. 1-3446); Amendments dated March
1, 1988 and May 1, 1988 (Exhibit 10(i) to NEES'
1988 Form 10-K, File No. 1-3446); Amendment dated
March 15, 1989 (Exhibit 10(i) to 1989 NEES Form
10-K, File No. 1-3446). Amendment dated October 1,
1990 (Exhibit 10(i) to 1990 NEES' Form 10-K, File
No. 1-3446); Amendment dated as of September 15,
1992 (Exhibit 10(i) to NEES' 1992 Form 10-K, File
No. 1-3446); Amendments dated as of June 1, 1993,
July 1, 1995, and September 1, 1995 (Exhibit 10(i)
to NEES' 1995 Form 10-K, File No. 1-3446);
Amendment dated as of December 1, 1996 (Exhibit
10(i) to 1996 NEES Form 10-K, File No. 1-3446).
(d) New England Power Service Company and the Company:
Specimen of Service Contract (Exhibit 4(l) to 1994
NEP Form 10-K, File No. 0-1229).
(e) New England Power Company et al. and the Company:
Form of Mutual Assistance Agreement (Exhibit 10 (n)
to 1996 Form 10-K, File No. 0-1229).
(f) New England Telephone and Telegraph Company and the
Company: Specimen of Joint Ownership Agreement for
Wood Poles (Exhibit 3(d), File No. 2-24458).
*(g) New England Electric Companies' Deferred
Compensation Plan, as amended through November 26,
1996 (Exhibit 10(m) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(h) New England Electric System Companies Retirement
Supplement Plan, as amended through June 1, 1996
(Exhibit 10(n) to NEES' 1996 Form 10-K, File No.
1-3446).
*(i) New England Electric Companies' Executive
Supplemental Retirement Plan I, as amended through
May 20, 1996 (Exhibit 10(o) to NEES' 1996
Form 10-K, File No. 1-3446).
<PAGE>
*(j) New England Electric Companies' Executive
Supplemental Retirement Plan II, as amended through
October 25, 1995 (Exhibit 10(p) to NEES' 1996
Form 10-K, File No. 1-3446).
*(k) New England Companies' Incentive Compensation Plan,
as amended through January 1, 1995 (Exhibit 10(p)
to NEES' 1995 Form 10-K, File No. 1-3446).
*(l) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(m) New England Electric Companies' Incentive
Compensation Plan III as amended through January 1,
1996 (Exhibit 10(s) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(n) New England Electric Companies' Form of Deferred
Compensation Agreement for Directors (Exhibit 10(p)
to NEES' 1980 Form 10-K, File No. 1-3446).
*(o) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(p) Forms of Life Insurance Program (Exhibit 10(s) to
NEES' 1986 Form 10-K, File No. 1-3446); and Form of
Life Insurance (Collateral Assignment) (Exhibit
10(t) to NEES' 1991 Form 10-K, File No. 1-3446).
*(q) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (Exhibit
10(u) to NEES' 1995 Form 10-K, File No. 1-3446).
*(r) New England Power Service Company and the Company:
Form of Supplemental Pension Service Credit
Agreement (Exhibit 10(ee) to 1992 NEES Form 10-K,
File No. 1-3446).
*(s) New England Electric Companies Long-Term
Performance Share Award Plan amended through
February 24, 1997 (Exhibit 10 (x) to NEES' 1996
Form 10-K, File No. 1-3446).
*(t) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10 (y) to NEES 1996
Form 10-K, File No. 1-3446).
*(u) Forms of Severance Protection Agreement (Exhibit
10(z) to NEES' 1996 Form 10-K, File No. 1-3446).
<PAGE>
* Compensation related plan, contract, or arrangement.
(12) Statement re computation of ratios for incorporation by
reference into the Narragansett registration statement on
Form S-3, Commission File No. 33-61131 (filed herewith).
(13) 1996 Annual Report to Stockholders (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
Reports on Form 8-K
NEES
----
NEES filed reports on Form 8-K dated February 1, 1996, February
16, 1996, May 30, 1996, September 12, 1996, September 18, 1996, and
October 1, 1996, all of which contained Item 5.
NEP
---
NEP filed reports on Form 8-K dated February 1, 1996, February
16, 1996, May 30, 1996, September 12, 1996, and October 1, 1996,
all of which contained Item 5.
Mass. Electric
--------------
Mass. Electric filed reports on Form 8-K dated February 16,
1996, September 12, 1996, and October 1, 1996, all of which
contained Item 5.
Narragansett
------------
Narragansett filed reports on Form 8-K dated February 7, 1996,
May 30, 1996, and October 1, 1996, all of which contained Item 5.
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf, by the undersigned thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM*
s/John W. Rowe
John W. Rowe
President and
Chief Executive Officer
March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
(Signature and Title)
Principal Executive Officer
s/John W. Rowe
John W. Rowe
President and
Chief Executive Officer
Principal Financial Officer
s/Alfred D. Houston
Alfred D. Houston
Executive Vice President and
Chief Financial Officer
Principal Accounting Officer
s/Michael E. Jesanis
Michael E. Jesanis
Vice President and Treasurer
Directors (a majority)
Joan T. Bok
William M. Bulger
Paul L. Joskow
Edward H. Ladd
Joshua A. McClure
John W. Rowe s/John G. Cochrane
George M. Sage All by:
Charles E. Soule John G. Cochrane
Anne Wexler Attorney-in-fact
James Q. Wilson
James R. Winoker
Date (as to all signatures on this page)
March 28, 1997
*The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of the Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer
or agent thereof assumes or shall be held to any liability therefor.
<PAGE>
NEW ENGLAND POWER COMPANY
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. The signature
of the undersigned company shall be deemed to relate only to matters having
reference to such company.
NEW ENGLAND POWER COMPANY
s/Jeffrey D. Tranen
Jeffrey D. Tranen
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated. The signature of
each of the undersigned shall be deemed to relate only to matters having
reference to the above-named company.
(Signature and Title)
Principal Executive Officer
s/Jeffrey D. Tranen
Jeffrey D. Tranen
President
Principal Financial Officer
s/Michael E. Jesanis
Michael E. Jesanis
Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Joan T. Bok
Alfred D. Houston s/John G. Cochrane
Cheryl A. LaFleur
John W. Rowe All by:
Jeffrey D. Tranen John G. Cochrane
Attorney-in-fact
Date (as to all signatures on this page)
March 28, 1997
<PAGE>
MASSACHUSETTS ELECTRIC COMPANY
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. The signature
of the undersigned company shall be deemed to relate only to matters having
reference to such company.
MASSACHUSETTS ELECTRIC COMPANY
s/Lawrence J. Reilly
Lawrence J. Reilly
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated. The signature of
each of the undersigned shall be deemed to relate only to matters having
reference to the above-named company.
(Signature and Title)
Principal Executive Officer
s/Lawrence J. Reilly
Lawrence J. Reilly
President
Principal Financial Officer
s/Michael E. Jesanis
Michael E. Jesanis
Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Urville J. Beaumont
Joan T. Bok
Sally L. Collins
Kalyan K. Ghosh
Patricia McGovern s/John G. Cochrane
John F. Reilly, Jr. All by:
Lawrence J. Reilly John G. Cochrane
John W. Rowe Attorney-in-fact
Richard P. Sergel
Roslyn M. Watson
Date (as to all signatures on this page)
March 28, 1997
<PAGE>
THE NARRAGANSETT ELECTRIC COMPANY
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. The signature
of the undersigned company shall be deemed to relate only to matters having
reference to such company.
THE NARRAGANSETT ELECTRIC COMPANY
s/Robert L. McCabe
Robert L. McCabe
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated. The signature of
each of the undersigned shall be deemed to relate only to matters having
reference to the above-named company.
(Signature and Title)
Principal Executive Officer
s/Robert L. McCabe
Robert L. McCabe
President
Principal Financial Officer
s/Alfred D. Houston
Alfred D. Houston
Vice President and Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Joan T. Bok
Stephen A. Cardi s/John G. Cochrane
Richard W. Frost All by:
Frances H. Gammell
Joseph J. Kirby John G. Cochrane
Robert L. McCabe Attorney-in-fact
Willliam E. Trueheart
Date (as to all signatures on this page)
March 28, 1997
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
References (Page)
-----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
<S> <C> <C>
Report of Independent Accountants........................... 46
Statements of Consolidated Income,
Year Ended December 31, 1996, 1995 and 1994............. 27
Statements of Consolidated Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............. 27
Consolidated Balance Sheets, December 31, 1996 and 1995... 28
Consolidated Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............. 29
Consolidated Statements of Capitalization,
December 31, 1996 and 1995.............................. 30
Notes to Financial Statements............................... 31-45
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants........................ 115
* Incorporated by Reference
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the registration
statements of New England Electric System on Form S-3 of the Dividend
Reinvestment and Common Share Purchase Plan (File No. 33-12313) and on
Forms S-8 of the New England Electric System Companies Incentive Thrift
Plan (File No. 33-26066), the New England Electric System Companies
Incentive Thrift Plan II (File No. 33-35470) and the Yankee Atomic
Electric Company Thrift Plan (File No. 2-67531) of our report dated
February 28, 1997 on our audits of the consolidated financial statements
of New England Electric System and subsidiaries as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31,
1996, which report is incorporated by reference in this Annual Report on
Form 10-K.
We also consent to the incorporation by reference in the registration
statements of New England Power Company on Forms S-3 (File Nos. 33-48257,
33-48897, and 33-49193) Massachusetts Electric Company on Form S-3 (File
No. 33-59145) and The Narragansett Electric Company on Form S-3 (File No.
33-61131) of our reports dated February 28, 1997 on our audits of the
financial statements of New England Power Company, Massachusetts Electric
Company and The Narragansett Electric Company, respectively, as of
December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, which reports are incorporated by reference in
this Annual Report on Form 10-K.
s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
March 28, 1997
<PAGE>
<TABLE>
NEW ENGLAND POWER COMPANY
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
References (Page)
----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
<S> <C> <C>
Report of Independent Accountants........................... 2
Statements of Income,
Year Ended December 31, 1996, 1995 and 1994............... 17
Statements of Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............... 17
Balance Sheets, December 31, 1996 and 1995.................. 18
Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............... 19
Notes to Financial Statements............................... 20-44
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants....................... 115
* Incorporated by Reference
</TABLE>
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
References (Page)
----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
<S> <C> <C>
Report of Independent Accountants........................... 2
Statements of Income,
Year Ended December 31, 1996, 1995 and 1994............... 10
Statements of Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............... 10
Balance Sheets, December 31, 1996 and 1995.................. 11
Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............... 12
Notes to Financial Statements............................... 13-28
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants........................ 115
* Incorporated by Reference
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
References (Page)
----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
<S> <C> <C>
Report of Independent Accountants........................... 2
Statements of Income,
Year Ended December 31, 1996, 1995 and 1994............... 10
Statements of Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............... 10
Balance Sheets, December 31, 1996 and 1995.................. 11
Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............... 12
Notes to Financial Statements............................... 13-27
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants........................ 115
* Incorporated by Reference
</TABLE>
<PAGE>
NEES
EXHIBIT INDEX
---------------
Exhibit No. Description Page
- ----------- ----------- ----
(3) Agreement and Declaration of Incorporated
Trust dated January 2, 1926, by Reference
as amended through April 28,
1992
(4)(a) Massachusetts Electric Company Incorporated
First Mortgage Indenture and by Reference
Deed of Trust, dated as of
July 1, 1949, and twenty-one
supplements thereto
(4)(b) The Narragansett Electric Incorporated
Company First Mortgage Indenture by Reference
and Deed of Trust, dated as of
September 1, 1944, and twenty-two
supplements thereto
(4)(c) The Narragansett Electric Incorporated
Company Preference Provisions, by Reference
as amended, dated March 23, 1993
(4)(d) New England Power Company General Incorporated
and Refunding Mortgage Indenture by Reference
and Deed of Trust dated as of
January 1, 1977 and twenty
supplements thereto
(10)(a) Boston Edison Company et al. and Incorporated
New England Power Company: by Reference
Amended REMVEC Agreement dated
August 12, 1977
(10)(b) The Connecticut Light and Power Incorporated
Company et al. and New England by Reference
Power Company: Sharing Agreement
for Joint Ownership, Construction
and Operation of Millstone Unit No.
3 dated as of September 1, 1973, and
Amendments thereto; Transmission
Support Agreement dated August 9,
1974; Instrument of Transfer to NEP
with respect to the 1979 Connecticut
Nuclear Unit, and Assumption of
Obligations, dated December 17, 1975
<PAGE>
(10)(c) Connecticut Yankee Atomic Power Incorporated
Company et al. and New England by Reference
Power Company: Stockholders
Agreement dated July 1, 1964;
Power Purchase Contract dated
July 1, 1964; Additional
Power Contract dated as of
April 30, 1984; Supplemntary
Power Contract dated as of
April 1, 1987, Capital Funds
Agreement dated September 1,
1964; Transmission Agreement
dated October 1, 1964;
Agreement revising Transmission
Agreement dated July 1, 1979 and
Amendment thereto dated January
19, 1994
1996 Amendatory Agreement dated Filed herewith
as of December 4, 1996
(10)(d) Maine Yankee Atomic Power Company Incorporated
et al. and New England Power by Reference
Company: Capital Funds Agreement
dated May 20, 1968 and Power
Purchase Contract dated May 20,
1968; Amendments dated as of
January 1, 1984, March 1, 1984,
October 1, 1984, and August 1,
1985; Stockholders Agreement
dated May 20, 1968; Additional
Power Contract dated as of
February 1, 1984
(10)(e)(i) New England Energy Incorporated Incorporated
Capital Funds Agreement with by Reference
NEES dated November 1, 1974 and
Amendments thereto
Amendment dated as of April 13, Filed herewith
1995
(10)(e)(ii) New England Energy Incorporated Incorporated
Loan Agreement with NEES dated by Reference
July 19, 1978 and effective
November 1, 1974, and Amendments
thereto
Amendment dated as of April 13, Filed herewith
1995
(10)(e)(iii) New England Energy Incorporated Incorporated
Fuel Purchase Contract with by Reference
New England Power Company dated
July 26, 1979, and Amendments
thereto
<PAGE>
(10)(e)(iv) New England Energy Incorporated Incorporated
Partnership Agreement with by Reference
Samedan Oil Corporation as
Amended and Restated on
February 5, 1985 and Amendment
thereto
(10)(e)(v) New England Energy Incorporated Incorporated
Credit Agreement dated as of by Reference
April 13, 1995
(10)(e)(vi) New England Energy Incorporated Incorporated
Capital Maintenance Agreement by Reference
dated November 15, 1985, and
Assignment and Security Agreement
dated November 15, 1985 and
Amendment dated as of April 28,
1989
Amendment dated as of April 13, Filed herewith
1995
(10)(f) New England Power Company and Incorporated
New England Electric Transmission by Reference
Corporation et al.: Phase I
Terminal Facility Support
Agreement dated as of December 1,
1981 and Amendments thereto;
Agreement with respect to Use
of the Quebec Interconnection
dated as of December 1, 1981
and Amendments thereto; Agreement
for Reinforcement and Improvement
of New England Power Company's
Transmission System dated as of
April 1, 1983; Lease dated as of
May 16, 1983; Upper Development -
Lower Development Transmission
Line Support Agreement dated as
of May 16, 1983
(10)(g) New England Electric Transmission Incorporated
Corporation and PruCapital by Reference
Management, Inc. et al: Note
Agreement dated as of
September 1, 1986; Mortgage,
Deed of Trust and Security
Agreement dated as of
September 1, 1986; Equity
Funding Agreement with New
England Electric System dated
as of December 1, 1985
<PAGE>
(10)(h) Vermont Electric Transmission Incorporated
Company, Inc. et al. and New by Reference
England Power Company: Phase I
Vermont Transmission Line
Support Agreement dated as
of December 1, 1981 and
Amendments thereto
(10)(i) New England Power Pool Incorporated
Agreement and Amendments thereto by Reference
Amendment dated as of December Filed herewith
1, 1996
(10)(j) Public Service Company of New Incorporated
Hampshire et al. and New England by Reference
Power Company: Agreement for
Joint Ownership, Construction
and Operation of New Hampshire
Nuclear Units dated as of
May 1, 1973 and Amendments
thereto; Transmission Support
Agreement dated as of May 1,
1973; Instrument of Transfer
to NEP with respect to the
New Hampshire Nuclear Units
and Assumptions of Obligations
dated December 17, 1975;
Agreement Among Participants
in New Hampshire Nuclear Units,
certain Massachusetts Municipal
Systems and Massachusetts
Municipal Wholesale Electric
Company dated May 28, 1976;
Seventh Amendment To and Restated
Agreement for Seabrook Project
Disbursing Agent and Amendments
thereto; Seabrook Project
Managing Agent Operating
Agreement dated as of June 29,
1992, and Amendment to Seabrook
Project Managing Agent Agreement
dated as of June 29, 1992
(10)(k) Vermont Yankee Nuclear Power Incorporated
Corporation et al. and New by Reference
England Power Company: Capital
Funds Agreement dated
February 1, 1968, Amendment
dated March 12, 1968, and Power
Purchase Contract dated
February 1, 1968 and Amendments
<PAGE>
(10)(k) thereto; Additional Power
(cont.) Contract dated as of February 1,
1984; Guarantee Agreement dated
as of November 5, 1981
(10)(l) Yankee Atomic Electric Company Incorporated
et al. and New England Power by Reference
Company: Amended and Restated
Power Contract dated April 1,
1985 and Amendments thereto
(10)(m) New England Electric Companies' Filed herewith
Deferred Compensation Plan as
amended through November 26, 1996
(10)(n) New England Electric System Filed herewith
Companies Retirement Supplement
Plan as amended through June 1,
1996
(10)(o) New England Electric Companies' Filed herewith
Executive Supplemental Retirement
Plan I as amended through May
20, 1996
(10)(p) New England Electric Companies' Filed herewith
Executive Supplemental Retirement
Plan II as amended through
October 25, 1995
(10)(q) New England Electric Companies' Filed herewith
Incentive Compensation Plan I
as amended through October 24,
1995
(10)(r) New England Electric Companies' Incorporated
Incentive Compensation Plan II by Reference
as amended through January 1,
1995
(10)(s) New England Electric Companies' Filed herewith
Incentive Compensation Plan III
as amended through January 1,
1996
(10)(t) New England Electric Companies' Incorporated
Senior Incentive Compensation by Reference
Plan as amended through January
1, 1995
(10)(u) New England Electric System Filed herewith
Directors Deferred Compensation
Plan as amended through
December 1, 1996
<PAGE>
(10)(v) Forms of Life Insurance Program Incorporated
and Form of Life Insurance by Reference
(Collateral Assignment)
(10)(w) New England Electric Companies' Filed herewith
Incentive Share Plan as amended
through February 24, 1997
(10)(x) New England Electric Companies' Filed herewith
Long-Term Performance Share
Award Plan amended through
February 24, 1997
(10)(y) New England Electric System Filed herewith
Directors' Retirement Plan
dated May 1, 1994
(10)(z) Forms of Severance Protection Filed herewith
Agreement
(10)(aa) New England Power Service Incorporated
Company and Joan T. Bok: by Reference
Service Credit Letter dated
October 21, 1982
(10)(bb) New England Electric System Incorporated
and John W. Rowe: Service by Reference
Credit Letter dated
December 5, 1988
(10)(cc) Agreement between New England Filed herewith
Electric System and John W.
Rowe dated February 28, 1995
(10)(dd) New England Power Service Incorporated
Company and the Company: by Reference
Form of Supplemental Pension
Service Credit Agreement
(10(ee) New England Power Company and Incorporated
New England Hydro-Transmission by Reference
Electric Company, Inc. et al:
Phase II Massachusetts
Transmission Facilities Support
Agreement dated as of June 1,
1985 and Amendments thereto
(10)(ff) New England Power Company and Incorporated
New England Hydro-Transmission by Reference
Corporation et al: Phase II
New Hampshire Transmission
Facilities Support Agreement
dated as of June 1, 1985 and
Amendments thereto
<PAGE>
(10)(gg) New England Power Company et Incorporated
al: Phase II New England Power by Reference
AC Facilities Support Agreement
dated as of June 1, 1985 and
Amendments thereto
(10)(hh) New England Hydro-Transmission Incorporated
Electric Company, Inc. and New by Reference
England Electric System et al:
Equity Funding Agreement dated
as of June 1, 1985 and Amendments
thereto
(10)(ii) New England Hydro-Transmission Incorporated
Corporation and New England by Reference
Electric System et al:
Equity Funding Agreement dated
as of June 1, 1985 and Amendments
thereto
(10)(jj) Ocean State Power, et al., and Incorporated
Narragansett Energy Resources by Reference
Company: Equity Contribution
Agreement dated as of
December 29, 1988; Amendment
dated as of September 29, 1989
Ocean State Power, et al., and Incorporated
New England Electric System: by Reference
Equity Contribution Support
Agreement dated as of
December 29, 1988; Amendment
dated as of September 29, 1989;
Ocean State Power II, et al., Incorporated
and Narragansett Energy Resources by Reference
Company: Equity Contribution
Agreement dated as of September 29,
1989; Ocean State Power II, et al.,
and New England Electric System:
Equity Contribution Support
Agreement dated as of
September 29, 1989
(10)(kk) NEES Energy, Inc./AllEnergy Incorporated
Marketing Company, L.L.C. by Reference
Limited Liability Company
Agreement dated as of
September 18, 1996
(13) 1996 Annual Report to Filed herewith
Shareholders
(21) Subsidiary list Incorporated
by Reference
<PAGE>
(24) Power of Attorney Filed herewith
(27) Financial Data Schedule Filed herewith
<PAGE>
NEP
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
(3)(a) Articles of Organization as Incorporated
amended through June 27, 1987 by Reference
(3)(b) By-laws of the Company as Incorporated
amended May 10, 1995 by Reference
(4) General and Refunding Mortgage Incorporated
Indenture and Deed of Trust by Reference
dated as of January 1, 1977
and twenty supplements
thereto
(10)(a) Boston Edison Company et al. Incorporated
and the Company: Amended by Reference
REMVEC Agreement dated
August 12, 1977
(10)(b) The Connecticut Light and Power Incorporated
Company et al. and the Company: by Reference
Sharing Agreement for Joint
Ownership, Construction and
Operation of Millstone Unit No. 3
dated as of September 1, 1973,
and Amendments thereto;
Transmission Support Agreement
dated August 9, 1974; Instrument
of Transfer to the Company with
respect to the 1979 Connecticut
Nuclear Unit, and Assumption of
Obligations, dated December 17,
1975
(10)(c) Connecticut Yankee Atomic Power Incorporated
Company et al. and the Company: by Reference
Stockholders Agreement dated
July 1, 1964; Power Purchase
Contract dated July 1, 1964;
Supplementary Power Contract
dated as of April 1, 1987;
Capital Funds Agreement dated
September 1, 1964; Transmission
Agreement dated October 1, 1964;
Agreement revising Transmission
Agreement dated July 1, 1979;
Amendment revising Transmission
Agreement dated as of January 19,
1994; Five Year Capital Contribution
<PAGE>
(10)(c) Agreement dated November 1, 1980;
(cont.) Guarantee Agreement dated as of
November 13, 1981; Guarantee
Agreement dated as of August 1,
1985
(10)(d) Maine Yankee Atomic Power Incorporated
Company et al. and the Company: by Reference
Capital Funds Agreement dated
May 20, 1968 and Power Purchase
Contract dated May 20, 1968;
and Amendments thereto;
Stockholders Agreement dated
May 20, 1968; Additional Power
Contract dated as of February 1,
1984; Guarantee Agreement dated
as of September 23, 1985
(10)(e) Mass. Electric and the Company: Incorporated
Primary Service for Resale dated by Reference
February 15, 1974; and Amendments
thereto; Memorandum of Understanding
effective May 22, 1994
(10)(f) The Narragansett Electric Incorporated
Company and the Company: by Reference
Primary Service for Resale
dated February 15, 1974
and Amendments thereto;
Memorandum of Understanding
effective May 22, 1994 and
Amendment therto
(10)(g) Time Charter between Incorporated
International Shipholding, Corp. by Reference
and New England Power Company
dated as of October 27, 1994;
Amendments dated as of September
22, 1995
(10)(h) Consent and Agreement among New Incorporated
England Power Company, Central by Reference
Gulf Lines, Inc., Enterprise Ship
Company, Inc., and The Bank of
New York, dated as of September
28, 1995
(10)(i) New England Electric Incorporated
Transmission Corporation et al. by Reference
and the Company: Phase I
Terminal Facility Support
Agreement dated as of
December 1, 1981; Amendments
dated as of June 1, 1982 and
November 1, 1982; Agreement with
<PAGE>
(10)(i) respect to Use of the Quebec
(cont.) Interconnection dated as of
December 1, 1981; Amendments
dated as of May 1, 1982 and
November 1, 1982; Amendment
dated as of January 1, 1986;
Agreement for Reinforcement
and Improvement of the Company's
Transmission System dated as
of April 1, 1983; Lease dated
as of May 16, 1983; Upper
Development-Lower Development
Transmission Line Support
Agreement dated as of May 16,
1983
(10)(j) Vermont Electric Transmission Incorporated
Company, Inc. et al. and the by Reference
Company: Phase I Vermont
Transmission Line Support
Agreement dated as of
December 1, 1981 and Amendments
thereto
(10)(k) New England Energy Incorporated Incorporated
and the Company: Fuel Purchase by Reference
Contract dated July 26, 1979,
and Amendments thereto
(10)(l) New England Power Pool Incorporated
Agreement and Amendments by Reference
thereto
(10)(m) New England Power Service Incorporated
Company and the Company: by Reference
Specimen of Service Contract
(10)(n) Massachusetts Electric Filed herewith
Company, et al. and the
Company: Form of Mutual
Assistance Agreement
(10)(o) Massachusetts Electric Filed herewith
Company, et al. and the
Company: Restructuring
Settlement Agreement
approved by the Massachusetts
Department of Public Utilities
(10)(p) Public Service Company of New Incorporated
Hampshire et al. and the by Reference
Company: Agreement for Joint
Ownership, Construction and
Operation of New Hampshire
Nuclear Units dated as of
May 1, 1973 and Amendments
<PAGE>
(10)(p) thereto; Seventh Amendment
(cont.) as of November 1, 1990;
Transmission Support Agreement
dated as of May 1, 1973;
Instrument of Transfer to the
Company with respect to the New
Hampshire Nuclear Units and
Assumptions of Obligations
dated December 17, 1975 and
Agreement Among Participants
in New Hampshire Nuclear Units,
certain Massachusetts Municipal
Systems and Massachusetts
Municipal Wholesale Electric
Company dated May 28, 1976;
Seventh Amendment To and
Restated Agreement for Seabrook
Project Disbursing Agent dated
as of November 1, 1990;
Amendments dated as of
June 29, 1992
Settlement Agreement dated as Incorporated
of July 19, 1990 between by Reference
Northeast Utilities Service
Company and the Company
Seabrook Project Managing Incorporated
Agent Operating Agreement by Reference
dated as of June 29, 1992;
and Amendment thereto
(10)(q) Vermont Yankee Nuclear Power Incorporated
Corporation et al. and the by Reference
Company: Capital Funds
Agreement dated February 1,
1968, Amendment dated March 12,
1968 and Power Purchase Contract
dated February 1, 1968 and
Amendments thereto; Additional
Power Contract dated as of
February 1, 1984; Guarantee
Agreement dated as of November 5,
1981
(10)(r) Yankee Atomic Electric Company Incorporated
et al. and the Company: by Reference
Amended and Restated Power
Contract dated April 1, 1985
and Amendments thereto
(10)(s) New England Electric Companies' Incorporated
Deferred Compensation Plan as by Reference
amended through November 26, 1996
<PAGE>
(10)(t) New England Electric System Incorporated
Companies Retirement Supplement by Reference
Plan as amended through June 1,
1996
(10)(u) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan I as amended through May 20,
1996
(10)(v) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan II as amended through October
25, 1995
(10)(w) New England Electric Companies' Incorporated
Incentive Compensation Plan I as by Reference
amended through October 24, 1995
(10)(x) New England Electric Companies' Incorporated
Incentive Compensation Plan II as by Reference
amended through January 1, 1995
(10)(y) New England Electric Companies' Incorporated
Incentive Compensation Plan III as by Reference
amended through January 1, 1996
(10)(z) New England Electric Companies' Incorporated
Senior Incentive Compensation by Reference
Plan as amended through
January 1, 1995
(10)(aa) Forms of Life Insurance Program Incorporated
and Form of Life Insurance by Reference
(Collateral Assignment)
(10)(bb) New England Electric Companies' Incorporated
Incentive Share Plan as amended by Reference
through February 24, 1997
(10)(cc) New England Electric System Incorporated
Directors' Retirement Plan by Reference
dated May 1, 1994
(10)(dd) Forms of Severance Protection Incorporated
Agreement by Reference
(10)(ee) New England Electric Companies' Incorporated
Long-Term Performance Share by Reference
Award Plan amended through
February 24, 1997
<PAGE>
(10)(ff) New England Hydro-Transmission Incorporated
Electric Company, Inc. et al. by Reference
and the Company: Phase II
Massachusetts Transmission
Facilities Support Agreement
dated as of June 1, 1985
and Amendments thereto
(10)(gg) New England Hydro-Transmission Incorporated
Corporation et al. and the by Reference
Company: Phase II New Hampshire
Transmission Facilities Support
Agreement dated as of June 1,
1985 and Amendments thereto
(10)(hh) Vermont Electric Power Company Incorporated
et al. and the Company: Phase by Reference
II New England Power AC
Facilities Support Agreement
dated as of June 1, 1985 and
Amendments thereto
(13) 1996 Annual Report to Filed herewith
Stockholders
(21) Subsidiary list Filed herewith
(24) Power of Attorney Filed herewith
(27) Financial Data Schedule Filed herewith
<PAGE>
Mass. Electric
--------------
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
(3)(a) Articles of Organization of the Incorporated
Company as amended through by Reference
November 15, 1993
(3)(b) By-Laws of the Company as Incorporated
amended through September 15, by Reference
1993
(4) First Mortgage Indenture and Incorporated
Deed of Trust, dated as of by Reference
July 1, 1949, and twenty-one
supplements thereto
(10)(a) Boston Edison Company et al. Incorporated
and Company: Amended REMVEC by Reference
Agreement dated August 12,
1977
(10)(b) New England Power Company Incorporated
and the Company: Primary by Reference
Service for Resale dated
February 15, 1974; Amendment
of Service Agreement dated
July 22, 1983; Amendment of
Service Agreement effective
November 1, 1993; Memorandum
of Understanding effective
May 22, 1994
(10)(c) New England Power Pool Incorporated
Agreement and Amendments by Reference
thereto
(10)(d) New England Power Service Incorporated
Company and the Company: by Reference
Specimen of Service Contract
(10)(e) New England Power Company Incorporated
et al. and the Company: by Reference
Form of Mutual Assistance
Agreement
(10)(f) New England Power Company Incorporated
et al. and the Company: by Reference
Restructuring Settlement
Agreement approved by the
Massachusetts Department of
Public Utilities February
26, 1997
<PAGE>
(10)(g) New England Telephone and Incorporated
Telegraph Company and the by Reference
Company: Specimen of Joint
Ownership Agreement for Wood
Poles
(10)(h) New England Electric Companies' Incorporated
Deferred Compensation Plan as by Reference
amended through November 26, 1996
(10)(i) New England Electric System Incorporated
Companies Retirement Supplement by Reference
Plan as amended through June 1,
1996
(10)(j) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan I as amended dated May 20,
1996
(10)(k) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan II as amended through
October 25, 1995
(10)(l) New England Electric Companies' Incorporated
Incentive Compensation Plan by Reference
as amended through January 1,
1995
(10)(m) New England Electric Companies' Incorporated
Incentive Compensation Plan II by Reference
as amended through January 1,
1995
(10)(n) New England Electric Companies' Incorporated
Incentive Compensation Plan III by Reference
as amended through January 1,
1996
(10)(o) New England Electric Companies' Incorporated
Form of Deferred Compensation by Reference
Agreement for Directors
(10)(p) New England Electric Companies' Incorporated
Senior Incentive Compensation by Reference
Plan as amended through January
1, 1995
(10)(q) Forms of Life Insurance Program Incorporated
and Form of Life Insurance by Reference
(Collateral Assignment)
(10)(r) New England Electric Companies' Incorporated
Incentive Share Plan as amended by Reference
through February 24, 1997
<PAGE>
(10)(s) New England Electric Companies' Incorporated
Long-Term Performance Share by Reference
Award Plan amended through
February 24, 1997
(10)(t) New England Electric System Incorporated
Directors' Retirement by Reference
Plan dated May 1, 1994
(10)(u) Forms of Severance Protection Incorporated
Agreement
(10)(v) New England Power Service Incorporated
Company and the Company: by Reference
Form of Supplemental Pension
Service Credit Agreement
(12) Statement re computation of Filed herewith
ratios for incorporation by
reference into the Mass. Electric
registration statement on Form
S-3, Commission File No. 33-59145
(13) 1996 Annual Report to Filed herewith
Stockholders
(24) Power of Attorney Filed herewith
(27) Financial Data Schedule Filed herewith
<PAGE>
Narragansett
-------------
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
(3)(a) Articles of Incorporation as Incorporated
amended June 9, 1988 by Reference
(3)(b) By-Laws of the Company Incorporated
by Reference
(4)(a) First Mortgage Indenture and Incorporated
Deed of Trust, dated as of by Reference
September 1, 1944, and
twenty-two supplements thereto
(4)(b) The Narragansett Electric Incorporated
Company Preference Provisions, by Reference
as amended, dated March 23, 1993
(10)(a) Boston Edison Company et al. Incorporated
and the Company: Amended REMVEC by Reference
Agreement dated August 12, 1977
(10)(b) New England Power Company and Incorporated
the Company: Primary Service for by Reference
Resale dated February 15, 1974;
Amendments of Service Agreement;
Memorandum of Understanding
effective May 22, 1994; Amendment
of Service Agreement effective
January 1, 1995
(10)(c) New England Power Pool Agreement Incorporated
and Amendments thereto by Reference
(10)(d) New England Power Service Incorporated
Company and the Company: by Reference
Specimen of Service Contract
(10)(e) New England Power Company Incorporated
et al. and the Company: by Reference
Form of Mutual Assistance
Agreement
(10)(f) New England Telephone and Incorporated
Telegraph Company and the by Reference
Company: Specimen of Joint
Ownership Agreement for Wood
Poles
<PAGE>
(10)(g) New England Electric Companies' Incorporated
Deferred Compensation Plan by Reference
as amended through November
26, 1996
(10)(h) New England Electric System Incorporated
Companies Retirement Supplement by Reference
Plan, as amended through June
1, 1996
(10)(i) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan I, as amended through May 20,
1996
(10)(j) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan II, as amended through
October 25, 1995
(10)(k) New England Electric Companies' Incorporated
Incentive Compensation Plan I, by Reference
as amended through January 1,
1995
(10)(l) New England Electric Companies' Incorporated
Incentive Compensation Plan II, by Reference
as amended through January 1,
1995
(10)(m) New England Electric Companies' Incorporated
Incentive Compensation Plan III, by Reference
as amended through January 1,
1996
(10)(n) New England Electric Companies' Incorporated
Form of Deferred Compensation by Reference
Agreement for Directors
(10)(o) New England Electric Companies' Incorporated
Senior Incentive Compensation by Reference
Plan as amended through January 1,
1995
(10)(p) Forms of Life Insurance Program Incorporated
and Form of Life Insurance by Reference
(Collateral Assignment)
(10)(q) New England Electric Companies' Incorporated
Incentive Share Plan as amended by Reference
through February 24, 1997
(10)(r) New England Power Service Incorporated
Company and the Company: by Reference
Form of Supplemental Pension
Service Credit Agreement
<PAGE>
(10)(s) New England Electric Companies' Incorporated
Long-Term Performance Share by Reference
Award Plan as amended through
February 24, 1997
(10)(t) New England Electric System Incorporated
Directors' Retirement Plan by Reference
dated May 1, 1994
(10)(u) Forms of Severance Protection Incorporated
Agreement by Reference
(12) Statement re computation of Filed herewith
ratios for incorporation by
reference into the Narragansett
registration statement on Form
S-3, Commission File No. 33-61131
(13) 1996 Annual Report to Filed herewith
Stockholders
(24) Power of Attorney Filed herewith
(27) Financial Data Schedule Filed herewith
<PAGE>
Exhibit 10(c)
Execution Copy
1996 AMENDATORY AGREEMENT
This Agreement, dated as of the 4th day of December, 1996, is
entered into by and between Connecticut Yankee Atomic Power
Company ("Connecticut Yankee" or "Seller") and New England Power
("Purchaser").
For good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed as follows:
1. BASIC UNDERSTANDINGS
Connecticut Yankee was organized in 1962 to provide for the
supply of power to its sponsoring utility companies, including
the Purchaser (collectively the "Purchasers"). It constructed a
nuclear electric generating unit, having a net capability of
approximately 582 megawatts electric (the "Unit") at a site in
Haddam Neck, Connecticut. Connecticut Yankee was issued a full-
term, Facility Operating License for the Unit by the Nuclear
Regulatory Commission (which, together with any successor
agencies, is hereafter called the "NRC"), which license is now
stated to expire on June 29, 2007. The Unit has been in
commercial operation since January 1, 1968.
The Unit was conceived to supply economic power on a cost of
service formula basis to the Purchasers. Connecticut Yankee and
the Purchaser are parties to a Power Contract dated as of July 1,
<PAGE>
1964 ("Initial Power Contract"). Pursuant to the Initial Power
Contract and other similar contracts (collectively, the "Initial
Power Contracts") between Connecticut Yankee and the other
Purchasers, Connecticut Yankee contracted to supply to the
Purchasers all of the capacity and electric energy available from
the Unit for a term of thirty (30) years following January 1,
1968.
Connecticut Yankee and the Purchaser are also parties to an
Additional Power Contract, dated as of April 30, 1984
("Additional Power Contract"). The Additional Power Contract and
other similar contracts (collectively, the "Additional Power
Contracts") between Connecticut Yankee and the other Purchasers
provide for an operative term stated to commence on January 1,
1998 (when the Initial Power Contracts terminate) and extending
until a date (the "End of Term Date") which is 30 days after the
later of the date on which the last of the financial obligations
of Connecticut Yankee has been extinguished or the date on which
Connecticut Yankee is finally relieved of any obligations under
the last of the licenses (operating or possessory) which it
holds, or hereafter receives, from the NRC with respect to the
Unit. The Additional Power Contracts also provide, in the event
of their earlier cancellation, for the survival of the
<PAGE>
decommissioning cost obligation and for the applicable provisions
thereof to remain in effect to permit final billings of costs
incurred prior to such cancellation.
Pursuant to the Power Contract and the Additional Power
Contract, the Purchaser is entitled and obligated to take its
entitlement percentage of the capacity and net electrical output
of the Unit during the service life of the Unit and is obligated
to pay therefor monthly its entitlement percentage of Connecticut
Yankee's cost of service, including decommissioning costs,
whether or not the Unit is operated.
Connecticut Yankee and the Purchaser are also parties to a
1987 Supplementary Power Contract, dated as of April 1, 1987
("1987 Supplementary Power Contract"). The 1987 Supplementary
Power Contract and other similar contracts (collectively, the
"1987 Supplementary Power Contracts") between Connecticut Yankee
and the other Purchasers restate and supersede earlier
Supplementary Power Contracts and Agreements Amending
Supplementary Power Contracts between Connecticut Yankee and the
Purchasers. Pursuant to the 1987 Supplementary Power Contracts,
the Purchasers make monthly certain supplementary payments to
Connecticut Yankee during the terms of the Initial Power
Contracts and Additional Power Contracts.
<PAGE>
On December 4, 1996, the board of directors of Connecticut
Yankee, after conducting a thorough review of the economics of
continued operation of the Unit for the remainder of the term of
the Facility Operating License for the Unit in light of other
alternatives available to Connecticut Yankee and the Purchasers,
determined that the Unit should be permanently shut down
effective December 4, 1996. The Purchaser concurs in that
decision.
As a consequence of the shutdown decision, Connecticut Yankee
and the Purchaser propose at this time to amend the 1987
Supplementary Power Contract and the Additional Power Contract in
various respects in order to clarify and confirm provisions for
the recovery under said contracts of the full costs previously
incurred by Connecticut Yankee in providing power from the Unit
during its useful life and of all costs of decommissioning the
Unit, including the costs of maintaining the Unit in a safe
condition following the shutdown and prior to its decontamination
and dismantlement.
Connecticut Yankee and each of the other Purchasers are
entering into agreements which are identical to this Agreement
except for necessary changes in the names of the parties.
<PAGE>
2. PARTIES' CONTRACTUAL COMMITMENTS
Connecticut Yankee reconfirms its existing contractual
obligations to protect the Unit, to maintain in effect certain
insurance and to prepare for and implement the decommissioning of
the Unit in accordance with applicable laws and regulations.
Consistent with public safety, Connecticut Yankee shall use its
best efforts to accomplish the shutdown of the Unit, the
protection and any necessary maintenance of the Unit after
shutdown and the decommissioning of the Unit in a cost-effective
manner and shall use its best efforts to ensure that any required
storage and disposal of the nuclear fuel remaining in the reactor
at shutdown and all spent nuclear fuel or other radioactive
materials resulting from operating of the Unit are accomplished
consistent with public health and safety considerations and at
the lowest practicable cost. The Purchaser reconfirms its
obligations under its Initial Power Contract, Additional Power
Contract and 1987 Supplementary Power Contract to pay its
entitlement percentage of Connecticut Yankee's costs as deferred
payment in connection with the capacity and net electrical output
of the Unit previously delivered by Connecticut Yankee and agrees
that the decision to shut down the Unit described in Section 1
<PAGE>
hereof does not give rise to any cancellation right under Section
9 of the Initial Power Contract or Section 10 of the Additional
Power Contract.
Except as expressly modified by this Agreement, the
Provisions of the Additional Power Contract and the 1987
Supplementary Power Contract remain in full force and effect,
recognizing that the mutually accepted decision to shut down the
Unit renders moot those provisions which by their terms relate
solely to continuing operation of the Unit.
3. AMENDMENT OF PAYMENT PROVISIONS OF ADDITIONAL POWER CONTRACT
AND 1987 SUPPLEMENTARY POWER CONTRACT
A. Section 2 of the Additional Power Contract is hereby
amended by deleting the first two paragraphs thereof and by
inserting in lieu thereof the following:
This contract shall become effective upon
receipt by the Purchaser of notice that Connecticut
Yankee has entered into Additional Power Contracts, as
contemplated by Section 1 above, with each of the other
Purchasers. The operative term of this contract shall
commence on such date as may be authorized by the FERC
and shall terminate on the date (the "End of Term
Date") which is the later to occur of (i) 30 days after
the date on which the last of the financial obligations
of Connecticut Yankee which constitute elements of the
payment calculated pursuant to Section 7 of this
contract has been extinguished by Connecticut Yankee,
or (ii) 30 days after the date on which Connecticut
Yankee is finally relieved of all obligations under the
last of any licenses (operating and/or possessory)
<PAGE>
which it now holds from, or which may hereafter be
issued to it by, the NRC with respect to the Unit under
applicable provisions of the Atomic Energy Act of 1954,
as amended from time to time (the "Act").
B. The second paragraph of Section 4 of the Additional
Power Contract is amended by deleting the phrase "Second
Supplementary Power Contracts" wherever it appears and inserting
in lieu thereof the phrase "1987 Supplementary Power Contracts".
C. The first paragraph of Section 7 of the Additional
Power Contract is amended to read as follows:
With respect to each month commencing on or after the
commencement of the operative term of this contract,
whether or not this contract continues fully or
partially in effect, the Purchaser will pay Connecticut
Yankee as deferred payment for the capacity and output
of the Unit provided to the Purchaser by Connecticut
Yankee prior to the permanent shutdown of the Unit on
December 4, 1996, to the extent not otherwise paid in
accordance with the Power Contract, but without
duplication:
D. The eighth paragraph of Section 7 of the Additional
Power Contract is amended by changing the period at the end to a
comma and inserting:
, but including for purposes of this contract:
(i) with respect to each month until the commencement
of decommissioning of the Unit, the Purchaser's
entitlement percentage of all expenses related to
the storage or disposal of nuclear fuel or other
<PAGE>
radioactive materials, and all expenses related to
protection and maintenance of the Unit during such
period, including to the extent applicable all of
the various sorts of expenses included in the
definition of "Decommissioning Expenses", to the
extent incurred during the period prior to the
commencement of decommissioning;
(ii) with respect to each month until expenses
associated with disposal of pre-April 7, 1983
spent nuclear fuel have been fully covered by
amounts which have been collected from Purchasers
and paid to a segregated fund as contemplated by
Section 8 of the 1987 Supplementary Power
Contract, dated as of April 1, 1987, between
Connecticut Yankee and the Purchaser, as amended
(the "1987 Contract"), the Purchaser's entitlement
percentage of previously uncollected expenses
associated with disposal of such prior spent
nuclear fuel, as determined in accordance with
Section 10 of the 1987 Contract; and
(iii) with respect to each month until End of License
Term, the Purchaser's entitlement percentage of
<PAGE>
monthly amortization of (a) the amount of any
unamortized deferred expenses, as permitted from
time to time by the Federal Energy Regulatory
Commission or its successor agency, plus (b) the
remaining unamortized amount of Connecticut
Yankee's investment in plant, nuclear fuel and
materials and supplies and other assets. Such
amortization shall be accrued at a rate sufficient
to amortize fully such unamortized deferred
expenses and Connecticut Yankee's investments in
plant, nuclear fuel and materials and supplies or
other assets over a period extending to June 29,
2007, PROVIDED, that if during any calendar month
ending on or before December 31, 2000 either of
the following events shall occur: (a) Connecticut
Yankee shall become insolvent or (b) Connecticut
Yankee shall be unable, from available cash or
other sources, to meet when due during such month
its obligations to pay principal, interest,
premium (if any) or other fees with respect to any
of its indebtedness of money borrowed, then
Connecticut Yankee may adjust upward the accrual
<PAGE>
for amortization of the unrecovered investment for
such month to an amount not exceeding the
applicable maximum level specified in Appendix A
hereto, provided that concurrently therewith the
net Unit investment shall be reduced by an amount
equal to the amount of such adjustment.
As used herein, "End of License Term" means June 29,
2007 or such later date as may be fixed, by amendment
to the NRC Facility Operating License for the Unit, as
the end of the term of the Facility Operating License.
E. The definitions in Section 7 of the Additional Power
Contract and in Section 3 of the 1987 Supplementary Power
Contract of "Total Decommissioning Costs" and "Decommissioning
Expenses" are hereby amended to read as follows:
"Total Decommissioning Costs" for any month shall mean
the sum of (x) an amount equal to all accruals in such
month to any reserve, as from time to time established
by Connecticut Yankee and approved by its board of
directors, to provide for the ultimate payment of the
Decommissioning Expenses of the Unit, plus (y), during
the Decommissioning Period, the Decommissioning
Expenses for the month, to the extent such
Decommissioning Expenses are not paid with funds from
such reserve, plus (z) Decommissioning Tax Liability
for such month. It is understood (i) that funds
received pursuant to clause (x) may be held by
Connecticut Yankee or by an independent trust or other
separate fund, as determined by said board of
directors, (ii) that, upon compliance with applicable
<PAGE>
regulatory requirements, the amount, custody and/or
timing of such accruals may from time to time during
the term hereof be modified by said board of directors
in its discretion or to comply with applicable
statutory or regulatory requirements or to reflect
changes in the amount, custody or timing of anticipated
Decommissioning Expenses, and (iii) that the use of the
term "to decommission" herein encompasses compliance
with all requirements of the NRC for permanent
cessation of operation of a nuclear facility and any
other activities reasonably related thereto, including
provision for the interim storage of spent nuclear
fuel.
"Decommissioning Expenses" shall include all expenses
of decommissioning the Unit, and all expenses relating
to ownership and protection of the Unit during the
Decommissioning Period, and shall also include the
following:
(1) All costs and expenses of any NRC-approved
method of removing the Unit from service,
including without limitation: dismantling,
mothballing and entombment of the Unit;
removing nuclear fuel and other radioactive
material to temporary and/or permanent
storage sites; construction, operation,
maintenance and dismantling of a spent fuel
storage facility; decontaminating, restoring
and supervising the site; and any costs and
expenses incurred in connection with
proceedings before governmental authorities
relating to any authorization to decommission
the Unit or remove the Unit from service;
(2) All costs of labor and services, whether
directly or indirectly incurred, including
without limitation, services of foremen,
inspectors, supervisors, surveyors,
engineers, security personnel, counsel and
accountants, performed or rendered in
connection with the decommissioning of the
Unit and the removal of the Unit from
<PAGE>
service, and all costs of materials, supplies,
machinery, construction equipment and apparatus
acquired or used (including rental charges for
machinery, equipment or apparatus hired) for or in
connection with the decommissioning of the Unit
and the removal of the Unit from service, and all
administrative costs, including services of
counsel and financial advisers of any applicable
independent trust or other separate fund; it being
understood that any amount, exclusive of proceeds
of insurance, realized by Connecticut Yankee as
salvage on any machinery, construction equipment
and apparatus, the cost of which was charged to
Decommissioning Expense, shall be treated as a
reduction of the amounts otherwise chargeable on
account of the costs of decommissioning of the
Unit; and
(3) All overhead costs applicable to the Unit
during the Decommissioning Period, or accrued
during such period, including without
limiting the generality of the foregoing,
taxes (other than taxes on or in respect of
income), charges, license fees, excises and
assessments, casualties, health care costs,
pension benefits and other employee benefits,
surety bond premiums and insurance premiums.
F. Section 7 of the Additional Power Contract and
Section 3 of the 1987 Supplementary Power Contract are each
hereby amended by adding the following new paragraph after the
definition of "Decommissioning Tax Liability":
"Decommissioning Period" shall mean the period
commencing with the notification by Connecticut Yankee
to the NRC of a decision of the board of directors of
Connecticut Yankee to cease permanently the operating
of the Unit for the purpose of producing electric
energy and ending with the date when Connecticut Yankee
has completed the decommissioning of the Unit and the
restoration of the site and has been relieved of all
its obligations under the last of any licenses issued
to it by the NRC.
G. The first sentence of Section 8 of the Additional Power
Contract is hereby amended to read as follows:
<PAGE>
Connecticut Yankee will bill the Purchaser, no later
than ten (10) days after the end of any month, for all
amounts payable by the Purchaser with respect to such
particular month pursuant to Section 7 hereof.
H. Section 8 of the Additional Power Contract and Section
4 of the 1987 Supplementary Power Contract are each amended to
delete the name "The Connecticut Bank and Trust Company, National
Association" and substitute "Fleet National Bank".
I. Section 5 of the 1987 Supplementary Power Contract is
amended to read as follows:
5. DECOMMISSIONING FUND
Connecticut Yankee agrees to pay to, or cause
to be paid to, the Connecticut Yankee Trust or any
successor trust approved by the board of directors
of Connecticut Yankee all funds collected pursuant
to Section 3 under clause (x) of the definition of
"Total Decommissioning Costs".
J. Section 10 of the Additional Power Contract is amended
to read as follows:
<PAGE>
10. CANCELLATION OF CONTRACT.
If either
(i) the Unit is damaged to the extent of
being completely or substantially completely
destroyed, or
(ii) the Unit is taken by exercise of the
right of eminent domain or a similar right or
power,
then and in any such case, the Purchaser may cancel the
provisions of this contract, except that in all cases
other than those described in clause (ii) above, the
Purchaser shall be obligated to continue to make the
payments of Total Decommissioning Costs and the other
payments required by Section 7 and the provisions of
that Section and the related provisions of this
contract shall remain in full force and effect until
the End of Term Date, it being recognized that the
costs which Purchaser is required to pay pursuant to
Section 7 represent deferred payments in connection
with power heretofore delivered by Connecticut Yankee
hereunder. Such cancellation shall be effected by
written notice given by the Purchaser to Connecticut
Yankee. In the event of such cancellation, all
continuing obligations of the parties hereunder as to
subsequently incurred costs of Connecticut Yankee other
than the obligations of the Purchaser to continue to
make the payments required by Section 7 shall cease
forthwith. Notwithstanding the foregoing, the
applicable provisions of this contract shall continue
in effect after the cancellation hereof to the extent
necessary to permit final billings and adjustments
hereunder with respect to obligations incurred through
the date of cancellation and the collection thereof.
Any dispute as to the Purchaser's right to cancel this
contract pursuant to the foregoing provisions shall be
referred to arbitration in accordance with the
provisions of Section 13.
<PAGE>
Notwithstanding anything in this contract
elsewhere contained, the Purchaser may cancel this
contract or be relieved of its obligations to make
payments hereunder only as provided in the next
preceding paragraph of this Section 10. Further, if
for reasons beyond Connecticut Yankee's reasonable
control, deliveries are not made as contemplated by
this contract, Connecticut Yankee shall have no
liability to the Purchaser on account of such non-
delivery.
K. Section 2 of the 1987 Supplementary Power Agreement is
amended to change the date in the definitions of "operating
expenses" and "M" from "May 26, 2004" to "June 29, 2007".
5. EFFECTIVE DATE
This Agreement shall become effective upon receipt by the
Purchaser of notice that Connecticut Yankee has entered into 1996
Amendatory Agreements, as contemplated by Section 1 hereof, with
each of the other Purchasers.
6. INTERPRETATION
The interpretation and performance of this Agreement shall
be in accordance with and controlled by the laws of the State of
Connecticut.
7. ADDRESS
Except as the parties may otherwise agree, any notice,
request, bill or other communication from one party to the other
relating to this Agreement, or the rights, obligations or
<PAGE>
performance of the parties hereunder, shall be in writing and
shall be effective upon delivery to the other party. Any such
communication shall be considered as duly delivered when mailed
to the respective post office address of the other party shown
following the signatures of such other party hereto, or such
other post office address as may be designated by written notice
given in the manner as provided in this Section.
8. CORPORATE OBLIGATIONS
This Agreement is the corporate act and obligation of the
parties hereto.
9. COUNTERPARTS
This Agreement may be executed in any number of counterparts
and each executed counterpart shall have the same force and
effect as an original instrument and as if all the parties to all
of the counterparts had signed the same instrument. Any
signature page of this Agreement may be detached from any
counterpart without impairing the legal effect of any signatures
thereon, and may be attached to another counterpart of this
Agreement identical in form hereto but having attached to it one
or more signature pages.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Amendatory Agreement by their respective duly authorized officers
as of the day and year first named above.
CONNECTICUT YANKEE ATOMIC POWER
COMPANY
s/John B. Keane
By_______________________________
John B. Keane
Vice President and Treasurer
Address: 107 Selden Street
Berlin, CT 06037
NEW ENGLAND POWER COMPANY
s/Jeffrey D. Tranen
By_______________________________
Jeffrey D. Tranen
President
Address: 25 Research Drive
Westborough, MA 01582
<PAGE>
Appendix A to
1996 Amendatory Agreement
-------------------------
MAXIMUM AMORTIZATION SCHEDULE
-----------------------------
If the event occurs during the
twelve months ending: Maximum Amortization Accrual:
December 31, 1997 $100,000,000.00
December 31, 1998 $80,000,000.00
December 31, 1999 $40,000,000.00
December 31, 2000 $20,000,000.00
<PAGE>
Exhibit 10(e)(i)
AMENDMENT NO. 7 DATED AS OF APRIL 13, 1995
TO
CAPITAL FUNDS AGREEMENT DATED NOVEMBER 1, 1974
BETWEEN
NEW ENGLAND ENERGY INCORPORATED
AND
NEW ENGLAND ELECTRIC SYSTEM
New England Energy Incorporated ("NEEI") and New England Electric System
("NEES") hereby agree to amend the Capital Funds Agreement dated November 1,
1974, between NEEI and NEES, as amended by Amendment No. 1 dated as of July 1,
1976, Amendment No. 2 dated as of July 26, 1979, Amendment No. 3 dated as of
August 26, 1981, Amendment No. 4 dated as of March 26, 1985, and Amendment
No. 5 dated as of April 28, 1989 and Amendment No. 6 dated as of June 1, 1990
(said Capital Funds Agreement as so amended being the "Agreement", the terms
defined therein being used herein as therein defined unless otherwise defined
herein), as hereinafter set forth.
Article II is amended to read in full as follows:
"II. Term.
__ ____
This Agreement shall be effective as of November 1, 1974 and shall
expire on a date (the "Expiration Date") which is the later of (a) April ,
2002, and (b) the date upon which (i) all promissory notes of NEEI issued
pursuant to the Credit Agreement dated as of April 13, 1995 (the "Credit
Agreement") among NEEI, the banks named therein (the "Banks") and Credit
Suisse, as agent (the "Agent"), and all other amounts due and owing under the
Credit Agreement, shall have been paid in full and (ii) none of the Banks
shall have any commitment to lend under the Credit Agreement."
Article IX is amended by deleting the phrase "FPC Hydrocarbon
Properties" each time it appears and inserting in lieu thereof the phrase
"Hydrocarbon Properties subject to the Fuel Purchase Contract".
Except as specifically amended above, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed
The name "New England Electric System" means the trustee or trustees for
the time being (as trustee or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of The Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
7 to the Capital Funds Agreement dated November 1, 1974, as amended by
Amendment No. 1 dated as of July 1, 1976, Amendment No. 2 dated as of July 26,
1979, Amendment No. 3 dated as of August 26, 1981, Amendment No. 4 dated as of
March 26, 1985, and Amendment No. 5 dated as of April 28, 1989, and Amendment
No. 6 dated as of June 1, 1990 by their respective officers thereunto duly
authorized as of the date first above written.
NEW ENGLAND ENERGY INCORPORATED
s/John G. Cochrane
By
Name: John G. Cochrane
Title: Treasurer
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By
Name: Michael E. Jesanis
Title: Treasurer
<PAGE>
Exhibit 10(e)(ii)
AMENDMENT NO. 6 DATED AS OF APRIL 13, 1995
TO
LOAN AGREEMENT DATED JULY 19, 1978
BETWEEN
NEW ENGLAND ENERGY INCORPORATED
AND
NEW ENGLAND ELECTRIC SYSTEM
New England Energy Incorporated ("NEEI") and New England Electric System
("NEES") hereby agree to amend the Loan Agreement dated July 19, 1978, between
NEEI and NEES, as amended by Amendment No. 1 dated as of July 26, 1979,
Amendment No. 2 dated as of August 26, 1981, Amendment No. 3 dated as of March
26, 1985, Amendment No. 4 dated as of April 28, 1989, and Amendment No. 5
dated as of June 1, 1990 (said Loan Agreement as so amended being the "Loan
Agreement", the terms defined therein being used herein as therein defined
unless otherwise defined herein), as hereinafter set forth.
1. Paragraph 1 is amended to read in full as follows:
"1. Effective Date. This Loan Agreement shall be effective as of
November 1, 1974 and shall expire on a date (the "Expiration Date") which is
the later of (a) April , 2002, and (b) the date upon which (i) all
promissory notes of NEEI issued pursuant to the Credit Agreement dated as of
April 13, 1995 (the "Credit Agreement") among NEEI, the banks named therein
(the "Banks") and Credit Suisse, as agent (the "Agent"), and all other amounts
due and owing under the Credit Agreement, shall have been paid in full and
(ii) none of the Banks shall have any commitment to lend under the Credit
Agreement. The terms hereof shall govern (i) retroactively, all loans made by
NEES or NEEI pursuant to this Loan Agreement during the period from November
1, 1974 to the date of execution of Amendment No. 6 to this Loan Agreement,
such loans being listed on Exhibit 1 of Amendment No. 6 to this Loan Agreement
and referred to hereinafter as 'Prior Loans'; and (ii) loans by NEES to NEEI
from and after the date of execution of Amendment No. 6 to this Loan Agreement
referred to hereinafter as 'Subsequent Loans'."
2. Paragraph 2 is amended to read as follows:
"2. Subordinated Promissory Notes. All loans under this Loan Agreement
shall be evidenced by Subordinated Promissory Notes in the forms attached
hereto as Exhibit 2. NEEI has executed a Subordinated Promissory Note for
each of the Prior Loans. Such Prior Loans shall in all respects be governed
by the terms of this Loan Agreement and said Subordinated Promissory Notes, as
amended by Amendment Nos. 1, 2, 3, 4, 5, and 6 hereto."
3. Exhibits 1 and 3 are deleted and replaced by Exhibits 1 and 3
hereto, respectively.
Upon the execution and delivery of this Amendment No. 6 by NEEI and NEES,
NEES shall be obligated to endorse on each Subordinated Promissory Note from
time to time held by it the following legend: "Pursuant to Amendments dated
<PAGE>
as of July 26, 1979, August 26, 1981, March 26, 1985, April 28, 1989, June 1,
1990 and April 13, 1995, the Loan Agreement referred to in this Note was
amended to, among other things, (i) clarify the nature, and extend the
duration, of the maker's right to borrow under the Loan Agreement and (ii)
alter the terms of subordination applicable to this Note", or a legend of
similar effect.
Except as specifically amended above, the Loan Agreement and the
Subordinated Promissory Notes shall remain in full force and effect and are
hereby ratified and confirmed.
The name "New England Electric System" means the trustee or trustees for
the time being (as trustee or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of The Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 6
to the Loan Agreement dated July 19, 1978, as amended by Amendment No. 1 dated
as of July 26, 1979, Amendment No. 2 dated as of August 26, 1981, Amendment
No. 3 dated as of March 26, 1985, Amendment No. 4 dated as of April 28, 1989,
and Amendment No. 5 dated as of June 1, 1990 by their respective officers
thereunto duly authorized as of the date first above written.
NEW ENGLAND ENERGY INCORPORATED
s/John G. Cochrane
By
Name: John G. Cochrane
Title: Treasurer
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By
Name: Michael E. Jesanis
Title: Treasurer
<PAGE>
Exhibit 10(e)(vi)
AMENDMENT NO. 2 DATED AS OF APRIL 13, 1995
TO
CAPITAL MAINTENANCE AGREEMENT DATED AS OF NOVEMBER 15, 1985
BETWEEN
NEW ENGLAND ENERGY INCORPORATED
AND
NEW ENGLAND ELECTRIC SYSTEM
New England Energy Incorporated ("NEEI") and New England Electric System
("NEES") hereby agree to amend the Capital Maintenance Agreement dated as of
November 15, 1985, as amended by Amendment No. 1 dated as of April 28, 1989
(said Capital Maintenance Agreement being the "Capital Maintenance Agreement",
the terms defined therein being used herein as therein defined unless
otherwise defined herein) as hereinafter set forth.
1. The two introductory paragraphs are amended to read in full as
follows:
"CAPITAL MAINTENANCE AGREEMENT, dated as of November 15, 1985, made by
NEW ENGLAND ELECTRIC SYSTEM, a voluntary association of the type commonly
known as a Massachusetts business trust, organized and existing under the laws
of the Commonwealth of Massachusetts (the "Shareholder"), in favor of NEW
ENGLAND ENERGY INCORPORATED, a corporation organized and existing under the
laws of the Commonwealth of Massachusetts (the "Borrower") and in favor of the
Banks (the "Banks") parties to the Credit Agreement (as defined below) and
Credit Suisse, as agent (the "Agent") for the Banks.
PRELIMINARY STATEMENT. The Banks and the Agent have entered into a
Credit Agreement dated as of April 13, 1995, with the Borrower (said
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Credit Agreement", the terms defined therein and not
otherwise defined herein being used herein as therein defined). This
Agreement is intended to provide security for the CMA Advances to be made
under the Credit Agreement, and it is a condition precedent to the making of
Advances by the Banks under the Credit Agreement that the Shareholder, as
owner of 100 percent of the outstanding shares of stock of the Borrower, shall
have executed and delivered this Agreement."
2. Section 1(b) is amended to read in full as follows:
"(b) In addition to, and as a separate and independent obligation
hereunder to the Banks and the Agent, the Shareholder hereby unconditionally
guarantees and agrees to pay to the Agent (for the account of the Banks) on
each Amortization Date (to the extent not paid by the Borrower) the
outstanding principal amount of CMA Advances in excess of the Commitment
(computed after giving effect to any scheduled reductions in the Commitment on
such Amortization Date but, irrespective of, and without giving effect to, any
acceleration, mandatory prepayment or other disposition, adjudication or
settlement that may occur among the Agent, the Banks and the Borrower with
respect to CMA Advances on or prior to any such Amortization Date), together
with all interest thereon and expenses (including counsel fees and expenses)
incurred by the Agent or the Banks for enforcing any rights under this
subsection (b). For purposes only of subsections (e) and (f) below, each
payment by the Shareholder pursuant to this subsection (b) shall be deemed to
be an 'INVESTMENT' ."
3. Section 1(c) is amended to read in full as follows:
<PAGE>
"(c) An 'Investment' shall be any of (i) the purchase by the
Shareholder and sale by the Borrower of capital stock of the Borrower, or (ii)
the purchase by the Shareholder and sale by the Borrower of promissory notes
of the Borrower subject to the terms of subordination annexed to the Credit
Agreement as Exhibit 1.01J, or (iii) the contribution by the Shareholder to
the Borrower of additional equity capital, PROVIDED, HOWEVER, in each such
case, that payment in any such transaction shall be made by the Shareholder in
U.S. Dollars to the Agent (for the Account of the Borrower) at the address
referred to in Section 8.02 of the Credit Agreement and all such payments
shall be applied pursuant to Section 2.11(e) of the Credit Agreement and the
Shareholder shall indicate in a written notice to the Agent whether such
payment is in respect of the current fiscal quarter or the preceding fiscal
quarter. If the Shareholder shall fail to indicate the fiscal quarter in
respect of which such payment is made, such payment shall be conclusively
presumed to be in respect of the current fiscal quarter. Upon receipt of any
such payment, the maximum CMA Borrowing Base shall be reduced by any amount
equal to the principal amount of CMA Advances repaid after the application
pursuant to Section 2.11(e) of the Credit Agreement."
4. Section 7 is amended to read in full as follows:
"SECTION 7. COVENANTS OF SHAREHOLDER. So long as any CMA
Committed Advance, CMA Competitive Advance, or interest thereon, shall remain
unpaid or the Banks shall have any obligation to make CMA Advances under the
Credit Agreement, the Shareholder shall not:
(a) MAINTENANCE OF OWNERSHIP OF BORROWER. Sell or otherwise
dispose of any shares of capital stock of the Borrower or permit the
Borrower to issue, sell or otherwise dispose of any shares of its
capital stock except to the Shareholder.
(b) SUBROGATION. Exercise any rights which it may acquire by
way of subrogation under this Agreement, by any payment made hereunder
or otherwise. If any amount shall be paid to the Shareholder on account
of such subrogation rights at any time prior to the payment in full of
the CMA Committed Advances, CMA Competitive Advances, and interest
thereon, and the termination of the Banks' bligation to make CMA
Advances under the Credit Agreement, such amount shall be held in trust
for the benefit of the Agent and the Banks and shall forthwith be paid
to the Agent to be credited and applied in accordance with Section
2.11(e) of the Credit Agreement. If (i) the Shareholder shall make
payment to the Agent or the Banks of all or any amounts due under the
Committed Notes, the CMA Competitive Notes or the CMA Advances, and (ii)
all amounts due under the Committed Notes, the CMA Advances, all other
amounts payable with respect thereto under the Credit Agreement, and all
other amounts payable under this Agreement shall be paid in full, and
the Banks have no further commitment to make CMA Advances under the
Credit Agreement, the Agents and the Banks will, at the Shareholder's
request, execute and deliver to the Shareholder appropriate documents,
without recourse and without representation or warranty, necessary to
evidence the transfer by subrogation to the Shareholder of an interest
in such amounts resulting from such payment by the Shareholder."
5. Section 12 is amended to read in full as follows:
"SECTION 12. CONTINUING AGREEMENT; TRANSFER OF NOTES. This
Agreement is a continuing agreement and shall (i) remain in full force and
effect until payment in full of the Committed Notes, the CMA Competitive
Notes, all other amounts payable with respect thereto under the Credit
Agreement, and all other amounts payable under this Agreement and the Banks
have no further commitment to make CMA Advances under the Credit Agreement,
(ii) be binding upon the Shareholder, its successors and assigns, and (iii)
inure to the benefit of and be enforceable by the Borrower, the Banks, the
<PAGE>
Agent and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii) , (a) any Bank may
assign all or a portion of its rights and obligations under the Credit
Agreement as described in Section 8.07 of the Credit Agreement and any person
or entity which as been assigned all or a portion of a CMA Advance, a CMA
Committed Note or a CMA Competitive Note shall have the rights in respect
thereof granted to Banks herein and (b) any Bank may grant participations in
any CMA Advance owing to such Bank and any Committed Note or CMA Competitive
Note held by it to any other person or entity, provided that the participants
of such participation shall not have any of the rights in respect thereof
granted to such Bank herein other than to receive the proceeds hereof as and
when received by the participating Bank."
Except as specifically amended above, the Capital Maintenance Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
The name "New England Electric System" means the trustee or trustees for
the time being (as trustee or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of The Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
2 to the Capital Maintenance Agreement dated as of November 15, 1985, as
amended by Amendment No. 1 dated as of April 28, 1989, by their respective
officers thereunto duly authorized as of the date first above written.
NEW ENGLAND ENERGY INCORPORATED
s/John G. Cochrane
_______________________________________
Name: John G. Cochrane
Title: Treasurer
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
_______________________________________
Name: Michael E. Jesanis
Title: Treasurer
<PAGE>
NEES Exhibit 10(i)
THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
THIS THIRTY-THIRD AGREEMENT, dated as of the 1st day of
December, 1996, is entered into by the signatory Participants
for the amendment and restatement by them of the New England
Power Pool Agreement dated as of September, 1, 1971 (the
"NEPOOL Agreement"), as previously amended by thirty (30)
amendments, the most recent of which was dated as of September
1, 1995.
WHEREAS, the signatory Participants propose to restate the
NEPOOL Agreement to provide for a restructured New England
Power Pool and to include as part of such restated pool
agreement a NEPOOL Open Access Transmission Tariff (the
"Tariff");
NOW THEREFORE, the signatory Participants hereby agree as
follows:
<PAGE>
SECTION I
AMENDMENT AND RESTATEMENT OF NEPOOL AGREEMENT
---------------------------------------------
The NEPOOL Agreement as in effect on December 1, 1996
(the "Prior NEPOOL Agreement") is amended and restated, as of
the effective dates provided in Section II, to read as provided
in Exhibit A hereto (the "Restated NEPOOL Agreement").
SECTION II
EFFECTIVENESS OF THE THIRTY-THIRD AGREEMENT
-------------------------------------------
This Thirty-Third Agreement, and the amendment and
restatement provided for above, shall become effective as
follows:
(1) Parts One, Two, Four and Five, of the Restated NEPOOL
Agreement and all of the provisions of the Tariff
shall become effective, and Sections 1 to 8,
inclusive, 10, 11, 13, 14.2, 14.3, 14.4 and 16 of the
Prior NEPOOL Agreement shall cease to be in effect,on
March 1, 1997 or on such other date as the Federal
<PAGE>
Energy Regulatory Commission ("Commission") shall
provide that such portion of the Restated NEPOOL
Agreement shall become effective (the "First
Effective Date"); and
(2) the remaining portions of the Restated NEPOOL
Agreement shall become effective, and Sections 9, 12,
14.1, 14.5, 14.6, 14.7, 14.8 and 15 of the Prior
NEPOOL Agreement together with the related exhibits
and supplements to the Prior NEPOOL Agreement shall
cease to be in effect, on July 1, 1997 or such other
date on or before January 1, 1998 as the NEPOOL
Management Committee may fix, after it has determined
that the necessary detailed criteria, rules and
standards and computer programs to implement such
remaining portions of the Restated NEPOOL Agreement
are in place, or on such other date or dates as the
Federal Energy Regulatory Commission may fix, on its
own or pursuant to the request of the Management
Committee, (the "Second Effective Date").
<PAGE>
SECTION III
INTENT OF AGREEMENT
-------------------
This Thirty-Third Agreement is intended by the signatories
hereto to effect a comprehensive amendment and restatement of
the NEPOOL Agreement and to provide a regional open access
transmission arrangement in accordance with the Restated NEPOOL
Agreement and the Tariff, which is Attachment B to the Restated
NEPOOL Agreement. Subject to the understandings expressed in
the balance of this Section and in Section IV, the signatories
agree to support the acceptance of the Thirty-Third Agreement
by the Commission.
Subject to the understandings expressed in Section IV of
this Agreement, in entering into this Thirty-Third Agreement
the signatories expressly condition their commitment on
acceptance of this Thirty-Third Agreement, including the
Restated NEPOOL Agreement and the Tariff, by the Commission and
any other regulatory body having jurisdiction without
significant conditions or modifications. If significant
conditions are imposed or significant modifications are
<PAGE>
required, the signatories reserve the right to renegotiate the
Thirty-Third Agreement as a whole or to terminate it.
SECTION IV
ALTERNATIVE AMENDMENTS
-----------------------
The signatories have been unable to reach final agreement
on two aspects of the transmission arrangements for a
restructured NEPOOL which would be in effect after the five-
year Transition Period provided for in the Tariff, as follows:
(a) the continued treatment of "grandfathered contracts"
as Excepted Transactions; and
(b) the continuance and treatment of Participant Regional
Network Service rates which differ from an average
Regional Network Service rate.
It is agreed that any Participant which signs this Agreement
shall be entitled to take any position before the Commission
that it deems best with respect to either of these two aspects
of the transmission arrangements.
<PAGE>
However, Participants signing this Agreement are requested
to consider the proposed treatment of these aspects of the
transmission arrangements in the following Alternate A and
Alternate B and to indicate, if they are willing, in the
optional supplemental agreement on the signature page to this
Agreement their position on these alternates. The alternates
are as follows:
Alternate A is as follows:
-------------------------
1. The introductory portion of paragraph (3) of Section
25 of the Tariff shall be amended to read as follows:
(3) for the period from the effective date of the
Tariff until the termination of the transmission
agreement or the end of the Transition Period,
whichever occurs first:
2. The description of the "Participant RNS Rate" in
Schedule 9 to the Tariff shall be amended by modifying the
proviso at the end of the second sentence of paragraph (4) of
the Schedule to read as follows:
<PAGE>
provided that in no event shall its pre-1997
Participant RNS Rate be less than 70% of the pre-1997
Pool PTF Rate until the end of Year Five, and
thereafter shall be equal to the pre-1997 Pool PTF
Rate for Year Six and thereafter.
and by amending the proviso at the end of the third sentence of
paragraph (4) of the Schedule to read as follows:
provided that in no event shall its pre-1997
Participant RNS Rate be greater than 130% of the pre-
1997 Pool PTF Rate until the end of Year Five, and
thereafter shall be equal to the pre-1997 Pool PTF
Rate for Year Six and thereafter.
Alternate B is as follows:
-------------------------
1. The introductory portion of paragraph (3) of Section
25 of the Tariff shall be amended to read as follows:
(3) for the period from the effective date of this
Tariff until the termination of the transmission
agreement:
<PAGE>
2. The description of the "Participant RNS Rate" in
Schedule 9 to the Tariff shall be amended by modifying the
proviso at the end of the second sentence of paragraph (4) of
the Schedule to read as follows:
provided that in no event shall its pre-
1997 Participant RNS Rate be less than 70% of the
pre-1997 Pool PTF Rate until the end of Year Five,
and thereafter shall be no less than 50% of the pre-
1997 Pool PTF Rate for Year Six through Year Ten, and
shall be equal to the pre-1997 Pool PTF Rate for Year
Eleven and thereafter.
and by amending the provison at the end of the third sentence
of paragraph (4) of the Schedule to read as follows:
provided that in no event shall its pre-
1997 Participant RNS Rate be greater than 130% of the
pre-1997 Pool PTF Rate until the end of Year Five and
thereafter shall be no greater than 127% of the pre-
1997 Pool PTF Rate for Year Six, 123% of the pre-1997
Pool PTF Rate for Year Seven, 118% of the pre-1997
Pool PTF Rate for Year Eight, 112% of the pre-1997
Pool PTF Rate for Year Nine, 105% of the pre-1997
Pool PTF Rate for Year Ten, and shall be equal to the
pre-1997 Pool PTF Rate for Year Eleven and
thereafter.
<PAGE>
SECTION V
USAGE OF DEFINED TERMS
----------------------
The usage in this Thirty-Third Agreement of terms which
are defined in the Prior NEPOOL Agreement shall be deemed to be
in accordance with the definitions thereof in the Prior NEPOOL
Agreement.
SECTION VI
COUNTERPARTS
-------------
This Thirty-Third Agreement may be executed in any number
of counterparts and each executed counterpart shall have the
same force and effect as an original instrument and as if all
the parties to all the counterparts had signed the same
instrument. Any signature page of this Thirty-Third Agreement
may be detached from any counterpart of this Thirty-Third
Agreement without impairing the legal effect of any signatures
thereof, and may be attached to another counterpart of this
Thirty-Third Agreement identical in form thereto but having
attached to it one or more signature pages.
<PAGE>
IN WITNESS WHEREOF, each of the signatories has caused a
counterpart signature page to be executed by its duly
authorized representative, as of the 1st day of December, 1996.
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Boston Edison Company
(Participant)
By:
Name:
Title:
Address: 800 Boylston Street
Boston, MA 02199-8001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Boston Edison Company
(Participant)
By:
Name:
Title:
Address: 800 Boylston Street
Boston, MA 02199-8001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Boylston Municipal Light Department
(Participant)
By:
Name:
Title:
Address: Paul X. Tivnan Road
Boylston, MA 01505-0753
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Boylston Municipal Light Department
(Participant)
By:
Name:
Title:
Address: Paul X. Tivnan Road
Boylston, MA 01505-0753
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Central Maine Power Company
(Participant)
By:
Name:
Title:
Address: 83 Edison Drive
Augusta, ME 04336-0001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Central Maine Power Company
(Participant)
By:
Name:
Title:
Address: 83 Edison Drive
Augusta, ME 04336-0001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Central Vermont Public Service
Corporation
(Participant)
By:
Name:
Title:
Address: 77 Grove Street
Rutland, VT 05701-3400
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Central Vermont Public Service
Corporation
(Participant)
By:
Name:
Title:
Address: 77 Grove Street
Rutland, VT 05701-3400
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Chicopee Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 725 Front Street
Chicopee, MA 01021-0405
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Chicopee Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 725 Front Street
Chicopee, MA 01021-0405
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Connecticut Municipal Electric Energy
Cooperative
(Participant)
By:
Name:
Title:
Address: 30 Stott Avenue
Norwich, CT 06360-1535
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Connecticut Municipal Electric Energy
Cooperative
(Participant)
By:
Name:
Title:
Address: 30 Stott Avenue
Norwich, CT 06360-1535
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Fitchburg Gas and Electric Light
Company
(Participant)
By:
Name:
Title:
Address: 6 Liberty Lane West
Hampton, NH 03842-1720
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Fitchburg Gas and Electric Light
Company
(Participant)
By:
Name:
Title:
Address: 6 Liberty Lane West
Hampton, NH 03842-1720
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Hingham Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 19 Elm Street
Hingham, MA 02043-2518
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Hingham Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 19 Elm Street
Hingham, MA 02043-2518
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
New Hampshire Electric Cooperative,
Inc.
(Participant)
By:
Name:
Title:
Address: RFD 4, Box 2100
Tenney Mountain Highway
Plymouth, NH 03264-9420
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
New Hampshire Electric Cooperative,
Inc.
(Participant)
By:
Name:
Title:
Address: RFD 4, Box 2100
Tenney Mountain Highway
Plymouth, NH 03264-9420
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Paxton Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 578 Pleasant Street
Paxton, MA 01612-1365
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Paxton Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 578 Pleasant Street
Paxton, MA 01612-1365
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
The Narragansett Electric Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
The Narragansett Electric Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
The United Illuminating Company
(Participant)
By:
Name:
Title:
Address: 157 Church Street
New Haven, CT 06506-0901
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
The United Illuminating Company
(Participant)
By:
Name:
Title:
Address: 157 Church Street
New Haven, CT 06506-0901
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Bangor Hydro-Electric Company
(Participant)
By:
Name:
Title:
Address: 33 State Street
Bangor, ME 04402-0932
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Bangor Hydro-Electric Company
(Participant)
By:
Name:
Title:
Address: 33 State Street
Bangor, ME 04402-0932
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
EASTERN UTILITIES ASSOCIATES COMPANIES
Blackstone Valley Electric Company
Eastern Edison Company
Montaup Electric Company
Newport Electric Company
(Participants)
By:
Name:
Title:
Address: 750 West Center Street
West Bridgewater, MA 02379-0543
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
EASTERN UTILITIES ASSOCIATES COMPANIES
Blackstone Valley Electric Company
Eastern Edison Company
Montaup Electric Company
Newport Electric Company
(Participants)
By:
Name:
Title:
Address: 750 West Center Street
West Bridgewater, MA 02379-0543
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
NEW ENGLAND ELECTRIC SYSTEM OPERATING COMPANIES
Granite State Electric Company
Massachusetts Electric Company
New England Power Company
(Participants)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
NEW ENGLAND ELECTRIC SYSTEM OPERATING COMPANIES
Granite State Electric Company
Massachusetts Electric Company
New England Power Company
(Participants)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
NORTHEAST UTILITIES SYSTEM COMPANIES
The Connecticut Light and Power Company
Holyoke Power and Electric Company
Holyoke Water Power Company
Public Service Company of New Hampshire
Western Massachusetts Electric Company
(Participants)
By:
Name:
Title:
Address: 107 Selden Street
Berlin, CT 06037-1616
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
NORTHEAST UTILITIES SYSTEM COMPANIES
The Connecticut Light and Power Company
Holyoke Power and Electric Company
Holyoke Water Power Company
Public Service Company of New Hampshire
Western Massachusetts Electric Company
(Participants)
By:
Name:
Title:
Address: 107 Selden Street
Berlin, CT 06037-1616
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
VERMONT UTILITIES
Barton Village, Inc.
City of Burlington Electric Department
Central Vermont Public Service Company
Citizens Utilities Company
Green Mountain Power Corporation
Rochester Electric Light & Power Company
Town of Readsboro Electric Light Department
Vermont Electric Cooperative, Inc.
Vermont Electric Generation & Transmission
Cooperative, Inc.
Vermont Electric Power Company, Inc.
Vermont Marble Company
Vermont Public Power Supply Authority
Village of Enosburg Falls Water & Light
Department
Village of Hardwick Electric Department
Village of Hyde Park, Inc.
Village of Jacksonville
Village of Johnson Electric Light Department
Village of Ludlow Electric Light Department
Village of Lyndonville Electric Department
Village of Morrisville Water & Light
Department
Village of Northfield Electric Department
Village of Orleans Electric Department
Village of Stowe Water & Light Department
Village of Swanton
Washington Electric Cooperative, Inc.
(Participants)
By: Vermont Electric Power Company, Inc.
By:
Name:
Title:
Address: Pinnacle Ridge Avenue
Rutland, VT 05701
<PAGE>
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
VERMONT UTILITIES
Barton Village, Inc.
City of Burlington Electric Department
Central Vermont Public Service Company
Citizens Utilities Company
Green Mountain Power Corporation
Rochester Electric Light & Power Company
Town of Readsboro Electric Light Department
Vermont Electric Cooperative, Inc.
Village of Hyde Park, Inc.
Village of Jacksonville
Village of Johnson Electric Light Department
Village of Ludlow Electric Light Department
Village of Lyndonville Electric Department
Village of Morrisville Water & Light
Department
Village of Northfield Electric Department
Village of Orleans Electric Department
Village of Stowe Water & Light Department
Village of Swanton
Washington Electric Cooperative, Inc.
(Participants)
By: Vermont Electric Power Company, Inc.
By:
Name:
Title:
Address: Pinnacle Ridge Avenue
Rutland, VT 05701
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
UNITIL CORPORATION PARTICIPANT COMPANIES
Concord Electric Company
Exeter & Hampton Electric Company
UNITIL Power Corp.
(Participants)
By:
Name:
Title:
Address: 6 Liberty Lane West
Hampton, NH 03833-4547
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
UNITIL CORPORATION PARTICIPANT COMPANIES
Concord Electric Company
Exeter & Hampton Electric Company
UNITIL Power Corp.
(Participants)
By:
Name:
Title:
Address: 6 Liberty Lane West
Hampton, NH 03833-4547
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
COMMONWEALTH ENERGY SYSTEM COMPANIES
Cambridge Electric Light Company
Canal Electric Company
Commonwealth Electric Company
(Participants)
By:
Name:
Title:
Address: 2421 Cranberry Highway
Wareham, MA 02571-1002
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
COMMONWEALTH ENERGY SYSTEM COMPANIES
Cambridge Electric Light Company
Canal Electric Company
Commonwealth Electric Company
(Participants)
By:
Name:
Title:
Address: 2421 Cranberry Highway
Wareham, MA 92571-1002
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Granite State Electric Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Granite State Electric Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Massachusetts Electric Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Massachusetts Electric Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Massachusetts Municipal Wholesale
Electric Company
(Participant)
By:
Name:
Title:
Address: Moody Street
Ludlow, MA 01056-0426
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Massachusetts Municipal Wholesale
Electric Company
(Participant)
By:
Name:
Title:
Address: Moody Street
Ludlow, MA 01056-0426
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Vermont Electric Power Company, Inc.
(Participant)
By:
Name:
Title:
Address: Pinnacle Ridge Avenue
Rutland, VT 05701
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Vermont Electric Power Company, Inc.
(Participant)
By:
Name:
Title:
Address: Pinnacle Ridge Avenue
Rutland, VT 05701
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
New England Power Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
New England Power Company
(Participant)
By:
Name:
Title:
Address: 25 Research Drive
Westborough, MA 01582-0001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
AGF, Inc.
(Participant)
By:
Name:
Title:
Address: 816 Elm Street
Manchester, NH 03101
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
AGF, Inc.
(Participant)
By:
Name:
Title:
Address: 816 Elm Street
Manchester, NH 03101
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
AIG Trading Corporation
(Participant)
By:
Name:
Title:
Address: One Greenwich Plaza
Greenwich, CT 06830
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
AIG Trading Corporation
(Participant)
By:
Name:
Title:
Address: One Greenwich Plaza
Greenwich, CT 06830
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Alternate Power Source, Inc.
(Participant)
By:
Name:
Title:
Address: 200 Clarendon Street
Boston, MA 02116
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Alternate Power Source, Inc.
(Participant)
By:
Name:
Title:
Address: 200 Clarendon Street
Boston, MA 02116
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
ANP Energy Direct Company
(Participant)
By:
Name:
Title:
Address: 108 National Street
Milford, MA 01757
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
ANP Energy Direct Company
(Participant)
By:
Name:
Title:
Address: 108 National Street
Milford, MA 01757
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Aquila Power Corporation
(Participant)
By:
Name:
Title:
Address: 10700 East 350 Highway
Kansas City, MO 64138
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Aquila Power Corporation
(Participant)
By:
Name:
Title:
Address: 10700 East 350 Highway
Kansas City, MO 64138
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Ashburnham Municipal Light Plant
(Participant)
By:
Name:
Title:
Address: 86 Central Street
Ashburnham, MA 01430-0823
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Ashburnham Municipal Light Plant
(Participant)
By:
Name:
Title:
Address:86 Central Street
Ashburnham, MA 01430-0823
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Belmont Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 450 Concord Avenue
Belmont, MA 02178-0907
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Belmont Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 450 Concord Avenue
Belmont, MA 02178-0907
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Berkshire Power Development, Inc.
(Participant)
By:
Name:
Title:
Address: 50 Rowes Wharf, Suite
400
Boston, MA 02110
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Berkshire Power Development, Inc.
(Participant)
By:
Name:
Title:
Address:50 Rowes Wharf, Suite 400
Boston, MA 02110
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Cincinnati Gas & Electric Company
(Participant)
By:
Name:
Title:
Address: 139 East Fourth Street
Cincinnati, OH 45201
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Cincinnati Gas & Electric Company
(Participant)
By:
Name:
Title:
Address: 139 East Fourth Street
Cincinnati, OH 45201
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Citizens Lehman Power Sales
(Participant)
By:
Name:
Title:
Address: 530 Atlantic Avenue
Boston, MA 02110
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Citizens Lehman Power Sales
(Participant)
By:
Name:
Title:
Address: 530 Atlantic Avenue
Boston, MA 02110
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
CNG Power Services Corporation
(Participant)
By:
Name:
Title:
Address: One Park Ridge Center
Pittsburgh, PA 15244-0746
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
CNG Power Services Corporation
(Participant)
By:
Name:
Title:
Address: One Park Ridge Center
Pittsburgh, PA 15244-0746
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Concord Municipal Light Plant
(Participant)
By:
Name:
Title:
Address: 135 Keyes Road
Concord, MA 01742-1601
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Concord Municipal Light Plant
(Participant)
By:
Name:
Title:
Address: 135 Keyes Road
Concord, MA 01742-1601
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Danvers Electric Department
(Participant)
By:
Name:
Title:
Address: 2 Burroughs Street
Danvers, MA 01923-2702
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Danvers Electric Department
(Participant)
By:
Name:
Title:
Address: 2 Burroughs Street
Danvers, MA 01923-2702
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Duke/Louis Dreyfus Energy Services (New
England) L.L.C.
(Participant)
By:
Name:
Title:
Address: 10 Westport Road
Wilton, CT 06897
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Duke/Louis Dreyfus Energy Services (New
England) L.L.C.
(Participant)
By:
Name:
Title:
Address: 10 Westport Road
Wilton, CT 06897
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Eastern Power Distribution, Inc.
(Participant)
By:
Name:
Title:
Address: 2900 Eisenhower Avenue
Suite 300
Alexandria, VA 22314
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Eastern Power Distribution, Inc.
(Participant)
By:
Name:
Title:
Address: 2900 Eisenhower Avenue
Suite 300
Alexandria, VA 22314
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Electric Clearinghouse, Inc.
(Participant)
By:
Name:
Title:
Address: 13430 Northwest Freeway
Suite 1200
Houston, TX 77040-6095
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Electric Clearinghouse, Inc.
(Participant)
By:
Name:
Title:
Address: 13430 Northwest Freeway
Suite 1200
Houston, TX 77040-6095
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Energy Choice, L.L.C.
(Participant)
By:
Name:
Title:
Address: 6000 Ocean Boulevard
Ocean Ridge, FL 33435
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Energy Choice, L.L.C.
(Participant)
By:
Name:
Title:
Address: 6000 Ocean Boulevard
Ocean Ridge, FL 33435
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Enron Capital & Trade Resources
(Participant)
By:
Name:
Title:
Address: 1400 Smith Street
Houston, TX 77002-7361
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Enron Capital & Trade Resources
(Participant)
By:
Name:
Title:
Address: 1400 Smith Street
Houston, TX 77002-7361
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Federal Energy Sales, Inc.
(Participant)
By:
Name:
Title:
Address: 3222 North Ridge Road
Elyria, OH 44035
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Federal Energy Sales, Inc.
(Participant)
By:
Name:
Title:
Address: 3222 North Ridge Road
Elyria, OH 44035
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Georgetown Municipal Light Department
(Participant)
By:
Name:
Title:
Address: Moulton & West Main
Streets
Georgetown, MA 01833
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Georgetown Municipal Light Department
(Participant)
By:
Name:
Title:
Address: Moulton & West Main Streets
Georgetown, MA 01833
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Global Petroleum Corporation
(Participant)
By:
Name:
Title:
Address: 800 South Street
Waltham, MA 02154
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Global Petroleum Corporation
(Participant)
By:
Name:
Title:
Address: 800 South Street
Waltham, MA 02154
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Great Bay Power Corporation
(Participant)
By:
Name:
Title:
Address: 20 Ladd Street, Suite 202
Portsmouth, NH 03801-4080
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Great Bay Power Corporation
(Participant)
By:
Name:
Title:
Address: 20 Ladd Street, Suite 202
Portsmouth, NH 03801-4080
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Groton Electric Light Department
(Participant)
By:
Name:
Title:
Address: 23 Station Avenue
Groton, MA 01450
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Groton Electric Light Department
(Participant)
By:
Name:
Title:
Address: 23 Station Avenue
Groton, MA 01450
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Holden Municipal Light Department
(Participant)
By:
Name:
Title:
Address: Reservoir Street
Holden, MA 01520
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Holden Municipal Light Department
(Participant)
By:
Name:
Title:
Address: Reservoir Street
Holden, MA 01520
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Holyoke Gas and Electric Department
(Participant)
By:
Name:
Title:
Address: 70 Suffolk Street
Holyoke, MA 01040
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Holyoke Gas and Electric Department
(Participant)
By:
Name:
Title:
Address: 70 Suffolk Street
Holyoke, MA 01040
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Houlton Water Company
(Participant)
By:
Name:
Title:
Address: 21 Bangor Street
Houlton, ME 04730
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Houlton Water Company
(Participant)
By:
Name:
Title:
Address: 21 Bangor Street
Houlton, ME 04730
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Hudson Light and Power Department
(Participant)
By:
Name:
Title:
Address: 49 Forest Avenue
Hudson, MA 01749
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Hudson Light and Power Department
(Participant)
By:
Name:
Title:
Address: 49 Forest Avenue
Hudson, MA 01749
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Hull Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 15 Edgewater Road
Hull, MA 02045-2714
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Hull Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 15 Edgewater Road
Hull, MA 02045-2714
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Indeck-Pepperell Power Associates, Inc.
(Participant)
By:
Name:
Title:
Address: 212 Carnegie Center,
Suite 206
Princeton, NJ 08540
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Indeck-Pepperell Power Associates, Inc.
(Participant)
By:
Name:
Title:
Address: 212 Carnegie Center,
Suite 206
Princeton, NJ 08540
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Ipswich Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 272 High Street
Ipswich, MA 01938-0151
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Ipswich Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 272 High Street
Ipswich, MA 01938-0151
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
KCS Power Marketing, Inc.
(Participant)
By:
Name:
Title:
Address: 379 Thornall Street
Edison, NJ 08837
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
KCS Power Marketing, Inc.
(Participant)
By:
Name:
Title:
Address: 379 Thornall Street
Edison, NJ 08837
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
KOCH Power Services, Inc.
(Participant)
By:
Name:
Title:
Address: 600 Travis Street
Houston, TX 77002
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
KOCH Power Services, Inc.
(Participant)
By:
Name:
Title:
Address: 600 Travis Street
Houston, TX 77002
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
LG&E Power Marketing Inc.
(Participant)
By:
Name:
Title:
Address: 12500 Fair Lakes Circle,
Ste #350
Fairfax, Virginia 22033
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
LG&E Power Marketing Inc.
(Participant)
By:
Name:
Title:
Address: 12500 Fair Lakes Circle,
Ste #350
Fairfax, Virginia 22033
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Littleton Electric Light & Water
Department
(Participant)
By:
Name:
Title:
Address: 39 Ayer Road
Litteton, MA 01460-3406
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Littleton Electric Light & Water
Department
(Participant)
By:
Name:
Title:
Address: 39 Ayer Road
Littleton, MA 01460-3406
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Mansfield Municipal Electric Department
(Participant)
By:
Name:
Title:
Address: 50 West Street
Mansfield, MA 02048-2404
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Mansfield Municipal Electric Department
(Participant)
By:
Name:
Title:
Address: 50 West Street
Mansfield, MA 02048-2404
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Marblehead Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 80 Commercial Street
Marblehead, MA 01945-0369
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Marblehead Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 80 Commercial Street
Marblehead, MA 01945-0369
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Merrimac Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 2 School Street
Merrimac, MA 01860-1915
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Merrimac Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 2 School Street
Merrimac, MA 01860-1915
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Middleborough Gas and Electric Department
(Participant)
By:
Name:
Title:
Address: 32 South Main Street
Middleborough, MA 02346
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Middleborough Gas and Electric Department
(Participant)
By:
Name:
Title:
Address: 32 South Main Street
Middleborough, MA 02346
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Middleton Municipal Electric Department
(Participant)
By:
Name:
Title:
Address: 197 North Main Street
Middleton, MA 01949-0168
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Middleton Municipal Electric Department
(Participant)
By:
Name:
Title:
Address: 197 North Main Street
Middleton, MA 01949-0168
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Milford Power Limited Partnership
(Participant)
By:
Name:
Title:
Address:c/o ENRON Capitol & Trade
1400 Smith Street, Suite 2834
Houston, TX 77002
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Milford Power Limited Partnership
(Participant)
By:
Name:
Title:
Address: c/o ENRON Capitol & Trade
1400 Smith Street, Suite 2834
Houston, TX 77002
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Morgan Stanley & Co., Inc.
(Participant)
By:
Name:
Title:
Address: 1585 Broadway
New York, NY 10036
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Morgan Stanley & Co., Inc.
(Participant)
By:
Name:
Title:
Address: 1585 Broadway
New York, NY 10036
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Multi-Energies USA, Inc.
(Participant)
By:
Name:
Title:
Address: c/o KPMG
2000 McGill College Avenue
Suite 1000
Montreal, Quebec H3A3N4
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Multi-Energies USA, Inc.
(Participant)
By:
Name:
Title:
Address: c/o KPMG
2000 McGill College Avenue
Suite 1000
Montreal, Quebec H3A3N4
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Natural Resources Group
(Participant)
By:
Name:
Title:
Address: 111 Broadway
New York, NY 10006
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Natural Resources Group
(Participant)
By:
Name:
Title:
Address: 111 Broadway
New York, NY 10006
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
North American Energy Conservation, Inc.
(Participant)
By:
Name:
Title:
Address: 100 Clinton Square, Suite 400
126 North Salina Street
Syracuse, NY 13202-1012
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
North American Energy Conservation, Inc.
(Participant)
By:
Name:
Title:
Address: 100 Clinton Square, Suite 400
126 North Salina Street
Syracuse, NY 13202-1012
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
North Attleborough Electric Department
(Participant)
By:
Name:
Title:
Address: 275 Landry Avenue
North Attleborough, MA 02761-0790
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
North Attleborough Electric Department
(Participant)
By:
Name:
Title:
Address: 275 Landry Avenue
North Attleborough, MA 02761-0790
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Norwood Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 206 Central Street
Norwood, MA 02062-3567
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Norwood Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 206 Central Street
Norwood, MA 02062-3567
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
PacifiCorp Power Marketing, Inc.
(Participant)
By:
Name:
Title:
Address: 70 West Red Oak Lane
White Plains, NY 10604-3602
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
PacifiCorp Power Marketing, Inc.
(Participant)
By:
Name:
Title:
Address: 70 West Red Oak Lane
White Plains, NY 10604-3602
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
PanEnergy Power Services, Inc.
(Participant)
By:
Name:
Title:
Address: 5400 Westheimer Court
Houston, TX 77056
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
PanEnergy Power Services, Inc.
(Participant)
By:
Name:
Title:
Address: 5400 Westheimer Court
Houston, TX 77056
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Pascoag Fire District - Electric Department
(Participant)
By:
Name:
Title:
Address: 55 South Main Street
Pascoag, RI 02859-0107
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Pascoag Fire District - Electric Department
(Participant)
By:
Name:
Title:
Address: 55 South Main Street
Pascoag, RI 02859-0107
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Peabody Municipal Light Plant
(Participant)
By:
Name:
Title:
Address: 70 Endicott Street
Peabody, MA 01960-4208
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Peabody Municipal Light Plant
(Participant)
By:
Name:
Title:
Address: 70 Endicott Street
Peabody, MA 01960-4208
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Phibro Inc.
(Participant)
By:
Name:
Title:
Address: 500 Nyala Farms
Westport, CT 06880-6262
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Philbro, Inc.
(Participant)
By:
Name:
Title:
Address: 500 Nyala Farms
Westport, CT 06880-6262
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Plum Street Enterprises, Inc.
(Participant)
By:
Name:
Title:
Address: P.O. Box 5001
Syracuse, NY 13250-5001
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Plum Street Enterprises, Inc.
(Participant)
By:
Name:
Title:
Address: P.O. Box 5001
Syracuse, NY 13250-5001
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Princeton Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 4 Town Hall Drive
Princeton, MA 01541-0247
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Princeton Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 4 Town Hall Drive
Princeton, MA 01541-0247
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
PSI Energy, Inc.
(Participant)
By:
Name:
Title:
Address: 139 East Fourth Street
Cincinnati, OH 45021
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
PSI Energy, Inc.
(Participant)
By:
Name:
Title:
Address: 139 East Fourth Street
Cincinnati, OH 45021
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
QST Energy Trading, Inc.
(Participant)
By:
Name:
Title:
Address: 300 Hamilton Boulevard
Suite 330
Peoria, IL 61602
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
QST Energy Trading, Inc.
(Participant)
By:
Name:
Title:
Address: 300 Hamilton Boulevard
Suite 330
Peoria, IL 61602
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Reading Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 230 Ash Street
Reading, MA 01867-0250
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Reading Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 230 Ash Street
Reading, MA 01867-0250
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Rowley Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 47 Summer Street
Rowley, MA 01969
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Rowley Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 47 Summer Street
Rowley, MA 01969
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Shrewsbury Electric Light Plant
(Participant)
By:
Name:
Title:
Address: 100 Maple Avenue
Shrewsbury, MA 01545-5398
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Shrewsbury Electric Light Plant
(Participant)
By:
Name:
Title:
Address: 100 Maple Avenue
Shrewsbury, MA 01545-5398
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
South Hadley Electric Light Department
(Participant)
By:
Name:
Title:
Address: 85 Main Street
South Hadley, MA 01075-2706
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
South Hadley Electric Light Department
(Participant)
By:
Name:
Title:
Address: 85 Main Street
South Hadley, MA 01075-2706
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Southern Energy Marketing, Inc.
(Participant)
By:
Name:
Title:
Address: 900 Ashwood Parkway
Suite 310
Atlanta, GA 30338
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Southern Energy Marketing, Inc.
(Participant)
By:
Name:
Title:
Address: 900 Ashwood Parkway
Suite 310
Atlanta, GA 30338
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Sterling Municipal Electric Light Department
(Participant)
By:
Name:
Title:
Address: 50 Main Street
Sterling, MA 01564-2129
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Sterling Municipal Electric Light Department
(Participant)
By:
Name:
Title:
Address: 50 Main Street
Sterling, MA 01564-2129
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Strategic Energy, Ltd.
(Participant)
By:
Name:
Title:
Address: Two Gateway Center
Pittsburgh, PA 15222
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Strategic Energy, Ltd.
(Participant)
By:
Name:
Title:
Address: Two Gateway Center
Pittsburgh, PA 15222
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Taunton Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 55 Weir Street
Taunton, MA 02780-0870
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Taunton Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 55 Weir Street
Taunton, MA 02780-0870
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Templeton Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: School Street
Baldwinville, MA 01436
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Templeton Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: School Street
Baldwinville, MA 01436
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Town of Braintree Electric Light Department
(Participant)
By:
Name:
Title:
Address: 44 Allen Street
Braintree, MA 02184-3598
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Town of Braintree Electric Light Department
(Participant)
By:
Name:
Title:
Address: 44 Allen Street
Braintree, MA 02184-3598
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
TransCanada Power Corp.
(Participant)
By:
Name:
Title:
Address: 1400, 421-7th Avenue S.W.
Calgary, Ab T2P 4K9
CANADA
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
TransCanada Power Corp.
(Participant)
By:
Name:
Title:
Address: 1400, 421-7th Avenue S.W.
Calgary, Ab T2P 4K9
CANADA
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
PEPCO Energy Company
(Participant)
By:
Name:
Title:
Address:2004 Renaissance Boulevard
King of Prussia, PA 19406
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
PEPCO Energy Company
(Participant)
By:
Name:
Title:
Address: 2004 Renaissance Boulevard
King of Prussia, PA 19406
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
USGen Power Services, L.P.
(Participant)
By:
Name:
Title:
Address: 7500 Old Georgetown Road
Bethesda, MD 20814
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
USGen Power Services, L.P.
(Participant)
By:
Name:
Title:
Address: 7500 Old Georgetown Road
Bethesda, MD 20814
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Vermont Electric Generation & Transmission
Cooperative, Inc.
(Participant)
By:
Name:
Title:
Address: School Street
Johnson, VT 05656
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Vermont Electric Generation & Transmission
Cooperative, Inc.
(Participant)
By:
Name:
Title:
Address: School Street
Johnson, VT 05656
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Vitol Gas & Electric LLC
(Participant)
By:
Name:
Title:
Address: 470 Atlantic Avenue
Boston, MA 02100-2208
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Vitol Gas & Electric LLC
(Participant)
By:
Name:
Title:
Address: 470 Atlantic Avenue
Boston, MA 02110-2208
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Wakefield Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 9 Albion Street
Wakefield, MA 01880-0390
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Wakefield Municipal Light Department
(Participant)
By:
Name:
Title:
Address: 9 Albion Street
Wakefield, MA 01880-0390
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
West Boylston Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 4 Crescent Street
West Boylston, MA 01583-1310
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
West Boylston Municipal Lighting Plant
(Participant)
By:
Name:
Title:
Address: 4 Crescent Street
West Boylston, MA 01583-1310
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Westfield Gas & Electric Light Department
(Participant)
By:
Name:
Title:
Address: 100 Elm Street
Westfield, MA 01085-2907
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Westfield Gas & Electric Light Department
(Participant)
By:
Name:
Title:
Address: 100 Elm Street
Westfield, MA 01085-2907
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Wheeled Electric Power Company
(Participant)
By:
Name:
Title:
Address: 50 Charles Lindbergh Blvd.
Suite 400
Uniondale, NY 11553
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Wheeled Electric Power Company
(Participant)
By:
Name:
Title:
Address: 50 Charles Lindbergh Blvd.
Suite 400
Uniondale, NY 11553
<PAGE>
COUNTERPART SIGNATURE PAGE
TO THIRTY-THIRD AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF DECEMBER 1, 1996
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by thirty (30) amendments the most
recent of which was dated as of September 1, 1995.
Working Assets Funding Service, Inc.
(Participant)
By:
Name:
Title:
Address: 701 Montgomery Street, #400
San Francisco, CA 94111
SUPPLEMENTAL AGREEMENT WITH RESPECT TO ALTERNATES A & B
The undersigned agrees that either Alternate A or
Alternate B as described in Section IV of the foregoing
Agreement will be acceptable to it if chosen and accepted by
the Commission without significant modifications. Accordingly,
the undersigned further agrees that in the event either
Alternate A or Alternate B, as described in Section IV of the
foregoing Agreement, is chosen and accepted without significant
modifications by the Commission, the Tariff shall be deemed to
be automatically amended, effective 30 days after the issuance
of the Commission's order, to incorporate the accepted
Alternate.
Working Assets Funding Service, Inc.
(Participant)
By:
Name:
Title:
Address: 701 Montgomery Street, #400
San Francisco, CA 94111
<PAGE>
Exhibit 10(m)
NEW ENGLAND ELECTRIC COMPANIES'
DEFERRED COMPENSATION PLAN
Executed June 15-18, 1979
Amended October 12, 1982
Amended July 31, 1984
Amended May 13, 1985
Amended December 8, 1986
Amended November 24, 1992
Amended January 1, 1995
Amended October 24, 1995
Amended October 15, 1996
Amended November 26, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURPOSE; EXISTING BENEFITS . . . . . . . . . . . . .1
II. DEFINITIONS. . . . . . . . . . . . . . . . . . . . .1
2.01 Actuarial Value. . . . . . . . . . . . . . . . . . .1
2.02 Beneficial Owner . . . . . . . . . . . . . . . . . .2
2.03 Beneficiary. . . . . . . . . . . . . . . . . . . . .2
2.04 Benefits Committee . . . . . . . . . . . . . . . . .2
2.05 Board. . . . . . . . . . . . . . . . . . . . . . . .2
2.06 Cash Account . . . . . . . . . . . . . . . . . . . .2
2.07 Cash Account Balance . . . . . . . . . . . . . . . .3
2.08 Change in Control. . . . . . . . . . . . . . . . . .3
2.09 Chief Executive Officer. . . . . . . . . . . . . . .4
2.10 Compensation . . . . . . . . . . . . . . . . . . . .4
2.11 Compensation Committee . . . . . . . . . . . . . . .5
2.12 Deferral Agreement . . . . . . . . . . . . . . . . .5
2.13 Deferred Compensation. . . . . . . . . . . . . . . .5
2.14 Deferred Compensation Account. . . . . . . . . . . .5
2.15 Deferral Match . . . . . . . . . . . . . . . . . . .5
2.16 Deferral Unit. . . . . . . . . . . . . . . . . . . .5
2.17 Disability . . . . . . . . . . . . . . . . . . . . .5
2.18 Dividend . . . . . . . . . . . . . . . . . . . . . .6
2.19 Dividend Reinvestment Plan . . . . . . . . . . . . .6
2.20 Election Period. . . . . . . . . . . . . . . . . . .6
2.21 Employer . . . . . . . . . . . . . . . . . . . . . .6
2.22 Incentive Plans. . . . . . . . . . . . . . . . . . .7
2.23 Incentive Shares . . . . . . . . . . . . . . . . . .7
2.24 Incentive Thrift Plan. . . . . . . . . . . . . . . .7
2.25 Interest . . . . . . . . . . . . . . . . . . . . . .7
2.26 A Major Transaction. . . . . . . . . . . . . . . . .7
2.27 New England Electric System. . . . . . . . . . . . .9
2.28 Other Plans. . . . . . . . . . . . . . . . . . . . .9
2.29 Participant. . . . . . . . . . . . . . . . . . . . 10
2.30 Performance Shares . . . . . . . . . . . . . . . . 10
2.31 Performance Share Plan . . . . . . . . . . . . . . 10
2.32 Person . . . . . . . . . . . . . . . . . . . . . . 10
2.33 Plan Year. . . . . . . . . . . . . . . . . . . . . 11
2.34 Qualified Plan . . . . . . . . . . . . . . . . . . 11
2.35 Related Plan Year. . . . . . . . . . . . . . . . . 11
2.36 Shares . . . . . . . . . . . . . . . . . . . . . . 11
2.37 Share Account. . . . . . . . . . . . . . . . . . . 11
2.38 Share Account Balance. . . . . . . . . . . . . . . 11
2.39 Share Price. . . . . . . . . . . . . . . . . . . . 12
2.40 Subsidiary . . . . . . . . . . . . . . . . . . . . 13
2.41 Termination of Service . . . . . . . . . . . . . . 13
2.42 Vested . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
III. ADMINISTRATION . . . . . . . . . . . . . . . . . . 14
3.01 Benefits Committee . . . . . . . . . . . . . . . . 14
3.02 Liability for Acts . . . . . . . . . . . . . . . . 14
3.03 Minors, Etc. . . . . . . . . . . . . . . . . . . . 14
3.04 Proof. . . . . . . . . . . . . . . . . . . . . . . 15
3.05 Denied Claims. . . . . . . . . . . . . . . . . . . 15
3.06 Participant List . . . . . . . . . . . . . . . . . 17
IV. OPERATION OF THE PLAN . . . . . . . . . . . . . . . . 17
4.01 Deferral Election. . . . . . . . . . . . . . . . . 17
(A) Form of Election . . . . . . . . . . . . . . 17
(B) Time of Election . . . . . . . . . . . . . . 18
4.02 Deferral Match . . . . . . . . . . . . . . . . . 19
4.03 Deferred Compensation Accounts . . . . . . . . . 20
(A) Cash Account . . . . . . . . . . . . . . . . 20
(B) Share Account. . . . . . . . . . . . . . . . 21
4.04 Payment of Balances. . . . . . . . . . . . . . . 22
(A) Election of Time of Payment. . . . . . . . . 22
(B) Payments After Ten Years . . . . . . . . . . 22
(C) Payments at Retirement . . . . . . . . . . . 22
(D) Payments Upon Termination of Service.. . . . 23
(E) Hardship Payments. . . . . . . . . . . . . . 23
(F) Dissolution of Employer; A Major
Transaction; Change in Control . . . . . . . 24
(G) Death or Disability. . . . . . . . . . . . . 25
(H) Form of Payments . . . . . . . . . . . . . . 25
(I) Distributed Shares.. . . . . . . . . . . . . 26
(J) Taxes. . . . . . . . . . . . . . . . . . . . 28
4.05 No Segregation of Assets . . . . . . . . . . . . 28
4.06 Failure of Payments. . . . . . . . . . . . . . . 29
V. AMENDMENT OR TERMINATION. . . . . . . . . . . . . . . . 30
5.01 Right to Amend or Terminate. . . . . . . . . . . 30
<PAGE>
VI. GENERAL PROVISIONS . . . . . . . . . . . . . . . 31
6.01 Nonalienation of Benefits. . . . . . . . . . . . 31
6.02 No Implied Rights. . . . . . . . . . . . . . . . 31
6.03 Effectuation of Interest . . . . . . . . . . . . 31
6.05 Headings . . . . . . . . . . . . . . . . . . . . 32
6.06 Gender and Number. . . . . . . . . . . . . . . . 32
6.07 Separability . . . . . . . . . . . . . . . . . . 32
6.08 Applicability. . . . . . . . . . . . . . . . . . 33
6.09 Governing Law. . . . . . . . . . . . . . . . . . 33
6.10 Effective Date . . . . . . . . . . . . . . . . . 33
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . 33
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
NEW ENGLAND ELECTRIC COMPANIES'
DEFERRED COMPENSATION PLAN
--------------------------
I. PURPOSE; EXISTING BENEFITS
--------------------------
The purpose of the Deferral Plan (the Plan) is to enable
executives to better plan the timing of their receipt of income
by deferring cash compensation and bonus shares, in accordance
with federal tax statutes. The Plan was first executed in June
of 1979, and has been amended on several occasions since.
The Plan is being further amended effective as of
October 24, 1995, in order to reflect changes in executive
benefit plans and to permit additional participations.
Deferrals made under previous versions of the Plan are to
receive benefits and are controlled by the terms of such
versions, except that subsection 4.04(F) will be controlling in
the event of a Change in Control or Major Transaction. Any
deferral elections in effect shall continue through December
31, 1995.
II. DEFINITIONS
-----------
2.01 Actuarial Value will be established using the most
recent assumptions established by the Benefits Committee for
the Qualified Plan.
2.02 Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Securities Exchange Act of 1934.
<PAGE>
2.03 Beneficiary means any person designated in writing
by a Participant (which designation may be changed from time to
time) to receive benefits under the Plan payable upon death of
the Participant. Unless otherwise designated, the Beneficiary
will be the beneficiary under the Participant's Group Life
Insurance enrollment and insurance provided, in whole or in
part, by the Employer. If there is no designated Beneficiary
alive when the Participant dies, the benefit shall be paid to
the estate of the Participant.
2.04 Benefits Committee means the Benefits Committee
established in accordance with the Qualified Plan.
2.05 Board means the Board of Directors of the New
England Electric System.
2.06 Cash Account means the account established for
Participants in accordance with subsection 4.03(A).
2.07 Cash Account Balance means the amount deferred by
the Participant in his or her Cash Account and Interest
thereon, all as provided in subsection 4.03(A), less any
payments or reductions made in accordance with Sections 4.04
and 4.06.
<PAGE>
2.08 Change in Control occurs when the conditions set
forth in either of the following paragraphs shall have been
satisfied:
(a) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of New
England Electric System (not including in the
securities beneficially owned by such Person any
securities acquired directly from New England
Electric System or its affiliates) representing 20%
or more of the combined voting power of New England
Electric System's then outstanding securities; or
(b) during any period of not more than two consecutive
years after January 1, 1995, individuals who at the
beginning of such period constitute the Board and
any new director (other than a director designated
by a Person who has entered into an agreement with
New England Electric System to effect a transaction
described in clause (a) of this Section) whose
election by the Board or nomination for election by
New England Electric System's shareholders was
approved or recommended by a vote of at least two-
thirds of the directors then still in office who
either were directors at the beginning of the
period or whose election or nomination for election
<PAGE>
was previously so approved or recommended, cease
for any reason to constitute a majority of the
Board.
2.09 Chief Executive Officer means the Chief Executive
Officer of the New England Electric System.
2.10 Compensation means
(a) the monthly base pay (including any amount deferred
hereunder) of a Participant,
(b) any Incentive Compensation,
(c) any Incentive and Performance Shares, and
(d) any other bonuses specifically designated by the
Employer at the time of the award as being deferred
under the terms of this Plan.
2.11 Compensation Committee means the Compensation
Committee of the Board.
2.12 Deferral Agreement means the share deferral
agreement, if any, made by the Participant and the Company in
December 1994.
2.13 Deferred Compensation means the Compensation of a
Participant deferred in accordance with the terms of this Plan.
<PAGE>
2.14 Deferred Compensation Account means the special
memorandum account(s) established for a Participant on the
books of his Employer pursuant to Section 4.03.
2.15 Deferral Match means the amount contributed by the
Employer pursuant to Section 4.02.
2.16 Deferral Unit means an insurance related investment
unit established under prior provisions of the Plan.
2.17 Disability means a physical or mental condition of
the Participant which, based on satisfactory medical evidence,
is believed to be permanent and to render the Participant unfit
to perform duties for an Employer.
2.18 Dividend has the meaning set out in subsection
4.03(B).
2.19 Dividend Reinvestment Plan means the New England
Electric System Dividend Reinvestment and Common Share Purchase
Plan, as amended from time to time.
2.20 Election Period is the 365-day period following:
(a) the mailing of the notice to the Participant of his
or her eligibility to make an election due to a
Change of Control or a Major Transaction, or
<PAGE>
(b) Termination of Service, as applicable.
2.21 Employer is the company within the New England
Electric System holding company system which pays the base pay
or fees of the Participant.
2.22 Incentive Plans means:
(a) New England Electric Companies' Senior Incentive
Compensation Plan,
(b) New England Electric Companies' Incentive
Compensation Plan I,
(c) New England Electric Companies' Incentive
Compensation Plan II, and
(d) New England Electric Companies' Incentive
Compensation Plan III,
as they may be amended from time to time.
2.23 Incentive Shares mean annual incentive share awards
under the New England Electric Companies' Incentive Share Plan,
as it may be amended from time to time.
2.24 Incentive Thrift Plan means The New England
Electric System Companies Incentive Thrift Plan as amended from
time to time.
2.25 Interest means the factor described in Subsection
4.03(A).
<PAGE>
2.26 A Major Transaction shall be deemed to have
occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(a) the shareholders of New England Electric System
approve a merger or consolidation with any
corporation or business trust, other than (i) a
merger or consolidation which would result in the
individuals who prior to such merger or
consolidation constitute the Board constituting at
least two-thirds of the board of directors of New
England Electric System or the surviving or
succeeding entity immediately after such merger or
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization (or
similar transaction) in which no Person acquires
more than 20% of the combined voting power of New
England Electric System's then outstanding
securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof; or
(c) the shareholders of New England Electric System
approve an agreement for the sale or disposition of
all or substantially all of New England Electric
System's assets, other than a sale or disposition
which would result in the individuals who prior to
such sale or disposition constitute the Board
<PAGE>
constituting at least two-thirds of the board of
directors of the Person purchasing such assets
immediately after such sale or disposition.
2.27 New England Electric System means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of
The Commonwealth of Massachusetts. Any agreement, obligation,
or liability made, entered into or incurred by or on behalf of
New England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof
assumes or shall be held to any liability therefor.
2.28 Other Plans means the New England Electric
Companies' Executive Supplemental Retirement Plan, the New
England Electric System Companies Retirement Supplement Plan,
the New England Electric System Directors Deferred Compensation
Plan, New England Electric Companies' Senior Incentive
Compensation Plan, New England Electric Companies' Incentive
Compensation Plan I, New England Electric Companies' Incentive
Compensation Plan II, New England Electric Companies' Incentive
Compensation Plan III, or New England Electric Companies Long-
term Performance Share Award Plan.
<PAGE>
2.29 Participant means a Participant in one of the
Incentive Plans.
2.30 Performance Shares means the potential share grants
awarded under the Performance Share Plan.
2.31 Performance Share Plan means the New England
Electric Companies Long-term Performance Share Award Plan.
2.32 Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include
(i) New England Electric System or any subsidiary thereof, (ii)
a trustee or other fiduciary holding securities under an
employee benefit plan of New England Electric System or any
subsidiary thereof, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv)
a corporation owned, directly or indirectly, by the
shareholders of New England Electric System in substantially
the same proportions as their ownership of shares of New
England Electric System.
2.33 Plan Year means a calendar year.
2.34 Qualified Plan means the New England Electric
System Companies' Final Average Pay Pension Plan I.
<PAGE>
2.35 Related Plan Year means, for deferrals under
subsection 4.01(A)(i), the Plan Year in which the Compensation
was earned; for deferrals under subsection 4.01(A)(ii) or
(iii), the Plan Year for which performance is awarded by the
Incentive Compensation or Incentive Shares; and for deferrals
under subsection 4.01(A)(iv), the last year of the Performance
Cycle.
2.36 Shares means common shares of New England Electric
System. After a merger, consolidation, or other similar
restructuring of New England Electric System, Shares shall mean
the common shares of the new entity.
2.37 Share Account means the account established for
Participants in accordance with subsection 4.03(B).
2.38 Share Account Balance means the amount deferred by
the Participant in his or her Share Account and Dividends
thereon, all as provided in subsection 4.03(B), less any
payments or reductions made in accordance with Sections 4.04
and 4.06.
2.39 Share Price for purchases shall be determined using
as a proxy the price of Shares being acquired by the New
England Electric System Dividend Reinvestment Plan during the
time period when the Shares for this Plan would be acquired
<PAGE>
were this Plan a participant in that plan. The Share Price for
Shares being liquidated shall be determined by using the price
actually received by the Rabbi Trust on a sale of Shares
related hereto or by using as a proxy the price received for
those Shares sold by the Dividend Reinvestment Plan next
following the date of determination.
For a Change in Control or Major Transaction, the cash
value of Shares will be established using the highest average
of the high and low prices on the New York Stock Exchange
Composite Transaction as reported in the Wall Street Journal
for any five consecutive trading days in the 60 days preceding
the Change in Control or Major Transaction. If there is no
trading in the Shares on the New York Stock Exchange for a
substantial amount of time during the five-day period, or if
publication by The Wall Street Journal of reports of Share
transactions for any day in the five-day period does not take
place or is subject to reporting error, the value of Shares
shall be determined by the Benefits Committee on the basis of
such market quotations or other method as the Benefits
Committee shall deem appropriate.
2.40 Subsidiary means a company five per centum or more
of whose outstanding voting securities or partnership or
membership interests are owned, controlled, or held with power
to vote, directly or indirectly, by New England Electric System
or any subsidiary thereof.
<PAGE>
2.41 Termination of Service shall occur when the
Participant is neither (i) employed by a Subsidiary nor (ii) a
member of the board of directors of New England Electric System
or any Subsidiary.
2.42 Vested - a Participant will be Vested under the
Qualified Plan when they satisfy the requirements for 100%
vesting in their accrued benefits under that plan.
III. ADMINISTRATION
--------------
3.01 Benefits Committee. This Plan shall be
administered by the Benefits Committee, and interpretations of
the Plan by the Benefits Committee shall be final and binding
on all parties.
3.02 Liability for Acts. Neither the Compensation
Committee, the Benefits Committee, nor the Employers, nor the
members, officers, directors, agents, or employees of any of
the foregoing shall be liable for any error of omission or
commission unless such error results from its, his, or her own
gross negligence, willful misconduct, or lack of good faith;
nor shall any such party be liable for any act of gross
negligence, willful misconduct, or lack of good faith of any
other such party.
<PAGE>
3.03 Minors, Etc. If a minor, person declared
incompetent, or person incapable of handling the disposition of
his or her property is entitled to receive a benefit, make an
application, or make an election hereunder, the Benefits
Committee may direct that such benefits be paid to, or such
application or election be made by, the guardian, legal
representative, or person having the care and custody of such
minor, incompetent, or incapable person. Any payment made,
application allowed, or election implemented in accordance with
this Section shall completely discharge the Plan, the
Compensation Committee, the Benefits Committee, the Employers,
and New England Electric System from all liability with respect
thereto.
3.04 Proof. The Benefits Committee may require proof of
the death, Disability, incompetency, minority, or incapacity of
any Participant or Beneficiary, and of the right of a person to
receive any benefit or make any application or election.
3.05 Denied Claims. The procedures when a claim under
this Plan is denied are as follows:
(A) The Benefits Committee shall:
<PAGE>
(i) notify the claimant within a reasonable
time of such denial, setting forth the
specific reasons therefor; and
(ii) afford the claimant a reasonable
opportunity for a review of the decision.
(B) The notice of such denial shall set forth, in
addition to the specific reasons for the denial, the following:
(i) identification of pertinent provisions of
this Plan;
(ii) such additional information as may be
relevant to denial of claim; and
(iii) an explanation of the claims review
procedure; and advice that the claimant may
request an opportunity to submit a
statement of issues and comments.
(C) Within sixty days following advice of denial of a
claim, upon request made by the claimant, the Benefits
Committee shall take appropriate steps to review its decision
in light of any further information or comments submitted by
the claimant. The Benefits Committee may hold a hearing at
which the claimant may present the basis of any claim for
review.
(D) The Benefits Committee shall render a decision
within a reasonable time (not in excess of 120 days) after the
<PAGE>
claimant's request for review and shall advise the claimant in
writing of its decision, specifying the reasons and identifying
the appropriate provisions of this Plan.
(E) The Benefits Committee shall report to the
Compensation Committee any denials of claims, requests for
review, and actions taken in response to such requests. The
Compensation Committee may review such denials and actions and
may affirm, modify, or reverse same.
3.06 Participant List. The Chief Executive Officer
shall be responsible for maintaining an up-to-date list of the
Participants with copies to Compensation Committee and Benefits
Committee members.
IV. OPERATION OF THE PLAN
---------------------
4.01 Deferral Election.
------------------
(A) Form of Election. For elections made after
September 1, 1995, a Participant may elect to defer
Compensation as follows:
(i) A Participant may elect to have his or her
2.09(a) Compensation reduced by any
percentage - not exceeding 15 percent.
<PAGE>
(ii) A Participant may elect to defer any whole
percentage of his or her Incentive
Compensation.
(iii) A Participant may elect to defer all of his
or her Incentive Shares.
(iv) A Participant may elect to defer all of his
or her Performance Shares.
The amount of deferrals under (i) and (ii) may be reduced by
the amount of the Participant's salary reduction contribution
under the Incentive Thrift Plan. These elections are not
exclusive and a Participant may elect one, or any combination
thereof.
(B) Time of Election. Except as provided in this
section, elections for deferrals under subsection 4.01(A)(i)
shall be made prior to commencement of the Plan Year in which
the Compensation is to be earned; elections for deferrals under
subsections 4.01(A)(ii) or (iii) shall be made prior to the
Plan Year, the performance in which is rewarded by the
Incentive Compensation or Incentive Shares; elections for
deferrals under subsection 4.01(A)(iv) shall be made prior to
commencement of the third year of the performance cycle as
defined in the Performance Share Plan.
<PAGE>
If any individual becomes a Participant or qualifies for a
new form of bonus during a Plan Year, he or she may, at that
time, elect prior to receipt of the related 2.10(a)
Compensation, award of Incentive Compensation or Incentive
Shares, or allocation of Performance Shares to defer
Compensation received or earned in that or a succeeding Plan
Year.
An election once made shall be effective for each
succeeding year until a superseding election is made or until
it is cancelled. Any superseding election shall be effective
for each Plan Year subsequent to the year in which it was made.
Each Participant qualifying for participation on
December 11, 1995, may elect, prior to December 31, 1995, to
make a 4.01(A)(ii) or (iii) deferral with respect to bonuses
rewarding performance in 1995.
4.02 Deferral Match. The Employer shall add to a
Participant's Share Account an amount equal to the difference
between the employer contributions actually made on behalf of
the Participant under the Incentive Thrift Plan and the amount
that would have been made had the Participant's compensation
under that plan not been restricted under Section 4.01(a)(17)
of the Internal Revenue Code. Deferred Match contributions
<PAGE>
will be made at such time or times as the monies would
otherwise have been paid as employer contributions under the
Thrift Plan.
4.03 Deferred Compensation Accounts. Deferrals shall be
allocated to either a Cash Account or a Share Account.
Deferral Match contributions shall be allocated to the
Participant's Share Account. Other deferrals shall be
allocated to the account selected by the Participant at the
time he or she makes an election for the related deferral.
Cash or Share values are to be determined by the Share Price on
the date the cash or Shares would otherwise have been paid to
the Participant. Once a deferral is allocated to the Cash or
Share Account, it may not be reallocated. The Deferred
Compensation Accounts for each Participant shall continue to
reflect amounts deferred under the prior provisions of the
Incentive Plans and any Deferral Agreement.
(A) Cash Account. The Cash Account for each
Participant shall be credited with an amount of Deferred
Compensation as of the date the equivalent cash payment would
otherwise have been made, Incentive Shares awarded, or
Performance Shares first allocated to the Participant
(converting Shares to Cash at the Share Price on said date).
All Cash Accounts shall be increased by a factor (the Interest)
as follows: As of the last day of each Plan Year, the Employer
shall credit to each such account interest on the balance in
such account computed with regard to the amount of time during
<PAGE>
the Plan Year that such amount has been credited to such
account. The rate of interest shall be the twelve-month
average for the Plan Year of the monthly base rates on prime
corporate loans at the principal office of The First National
Bank of Boston in effect on the last day of each month.
(B) Share Account. The Share Account for each
Participant shall be credited with an amount of Deferred
Compensation as of the date the equivalent cash payment would
otherwise have been made (at the Share Price on the next
investment date), Incentive Shares awarded, or Performance
Shares finally awarded to the Participant. Upon each
declaration of cash dividends on Shares, the Participant's
Share Account shall be increased by the number of Shares
equivalent to the dividend declared on a Share (the Dividend)
multiplied by the number of Shares credited to the
Participant's Share Account on the date of record calculated as
if the Shares in the Account had participated in the Dividend
Reinvestment Plan.
4.04 Payment of Balances.
(A) Election of Time of Payment. At the time of
electing to defer Compensation, in accordance with subsection
4.01(A), the Participant shall also elect whether to receive
payment after ten years or upon Termination of Service on or
<PAGE>
after the date when the Participant could first commence
receiving benefits under the Qualified Plan.
(B) Payments After Ten Years. If the Participant has
elected payment after ten years, the full related Cash and
Share Account Balances shall be paid as soon as practicable
after the close of the tenth anniversary of the close of the
Related Plan Year.
(C) Payments at Retirement. If the Participant has
elected payment on the date when the Participant could first
commence receiving benefits under the Qualified Plan, the
Participant's full Cash and Share Account Balances shall be
paid in ten annual payments commencing at such date.
(D) Payments Upon Termination of Service.
Regardless of the payment election previously made
by the Participant, the full Cash and Share Account balances of
a Participant who is not Vested under the Qualified Plan shall
be paid as soon as practicable after a Termination of Service.
Regardless of the payment election previously made by the
Participant, within the Election Period following Termination
of Service, a Participant who is Vested in the Qualified Plan
may elect to receive as soon as practical payment of his full
Cash and Share Account balances, less 10%.
(E) Hardship Payments. Prior to a Participant's
Termination of Service (or completion of a subsection 4.04(C)
<PAGE>
payment stream, if applicable), the Benefits Committee shall
have the power and discretion to make a payment to such
Participant from his or her Deferred Compensation Account at
any time if the Benefits Committee determines that the
Participant is suffering from a serious financial emergency
resulting from circumstances beyond the Participant's control
which would cause a hardship to the Participant unless such
payment was made. Payments will be made first from the Cash
Account, to the extent not in Deferral Units, secondly from the
Share Account, and thirdly from Deferral Units. Benefits
otherwise payable from a partially liquidated Deferral Unit
shall then be actuarially adjusted, using the most recent
assumptions established by the Benefits Committee for the
Qualified Plan, for the payment made. No payments will be made
on account of Deferral Units for which a split-dollar option
has been elected under prior provisions of the Plan.
Any such hardship payment will be in a lump sum and will
not exceed the lesser of (i) the amount necessary to satisfy
the hardship situation or (ii) the balance of the Participant's
Deferred Compensation Accounts.
(F) Dissolution of Employer; A Major Transaction;
Change in Control. In the event of dissolution, liquidation,
or winding up of the business of the Employer or the New
England Electric System, whether voluntary or involuntary, the
Participant shall receive, at the time of such event, a lump
<PAGE>
sum payment equal to the balance in his Cash and Share Accounts
and the Actuarial Value of the maximum value of future benefits
from Deferral Units, unless the New England Electric System has
assumed all the rights, duties, and obligations of the Employer
hereunder.
In the event of a Major Transaction or a Change in
Control, any Participant, whether terminated or active, may
elect at any time during the Election Period to receive, in
lieu of any future benefits hereunder, a lump sum payment equal
to the balance of his Cash and Share Accounts and the Actuarial
Value of the maximum value of future benefits from Deferral
Units, all less 10%. The Employer of each Participant at the
time (or at termination, if applicable) shall, as soon as
practicable after a Major Transaction or a Change in Control
advise the Participant of his rights under this paragraph.
(G) Death or Disability. In the event of the
Participant's death, the full Cash and Share Account Balances
shall be distributed to the Beneficiary as soon as practicable.
At the request of the Participant following his
Disability, the full Cash and Share Account Balances shall be
distributed to the Participant as soon as practicable.
(H) Form of Payments. Except as provided herein, any
distribution from a Cash Account will be in cash. Any
distribution from a Share Account will be in the form of
Shares; however, the Participant may elect, before the 30th day
<PAGE>
preceding the tenth anniversary or Termination of Service, as
the case may be, to receive cash in lieu of Shares for any
percentage up to 100% of said distribution.
All distributions on account of Hardship, death,
Disability, dissolution, Change in Control, Major Transaction,
or Failure of Payments shall be in cash.
(I) Distributed Shares. The date of determination for
the Share Price of Shares distributed or converted hereunder
shall be:
(i) for payments under 4.04(B), December 31 of
the concluding year;
(ii) for payments under 4.04(C) and the first
paragraph of 4.04(D), the last day of the
month prior to the payment date;
(iii) for payments under 4.04(E), the last
trading date of the month prior to the
month in which the Benefits Committee
authorizes the distribution;
(iv) for payments under the first paragraph of
4.04(F), the last trading date of the month
preceding the triggering event;
(v) for payments under the second paragraph of
4.04(F), the highest average of the high
and low prices on the New York Stock
Exchange Composite Transaction as reported
in the Wall Street Journal for any five
<PAGE>
consecutive trading days in the 60 days
preceding the Change in Control or Major
Transaction (if there is no trading in the
Shares on the New York Stock Exchange for a
substantial amount of time during the five-
day period, or if publication by The Wall
Street Journal of reports of Share
transactions for any day in the five-day
period does not take place or is subject to
reporting error, the value of Shares shall
be determined by the Benefits Committee on
the basis of such market quotations or
other method as the Benefits Committee
shall deem appropriate);
(vi) for payments under 4.04(G), the last day of
the month following the triggering event;
(vii) for elections made during an election
period other than under the second
paragraph of 4.04(F), the last day of the
month following filing of the election with
the Company; and
(viii) for payments made under 4.06, the last day
of the month preceding the triggering
event.
<PAGE>
Shares to be distributed shall be purchased on the open
market, unless an officer of the New England Electric System
determines otherwise; provided, however, if the Employer has
placed an appropriate number of Shares in the Rabbi Trust for
the benefit of the Participant, the Employer may satisfy the
requirement by distribution of said Shares.
(J) Taxes. If a distribution is to be made solely in
Shares, the Employer may withhold from such distribution an
amount equal to its withholding obligations under state and
Federal tax laws.
4.05 No Segregation of Assets. The Employer shall not
be required to set aside or segregate any assets of any kind to
meet any obligations under this Plan. All obligations of the
Employer shall be reflected by bookkeeping entries only. The
Participants shall have no rights under this Plan to any
specific assets of the Employer (including any Shares purchased
by the Employer to reflect its obligation hereunder) and
ownership of any insurance policies relating to Deferral Units
shall remain with the Employer. The rights of a Participant
under this Plan shall be those of a general, unsecured creditor
of the Employer.
4.06 Failure of Payments. Any provision of this Plan to
the contrary notwithstanding, if (i) an Employer shall fail to
make any payment to any Participant when due under this Plan or
<PAGE>
(ii) any employer or company shall fail to make any payments to
any Participant due under any of the Other Plans, each
Participant will be paid immediately a lump sum payment equal
to the balance of his Cash and Share Accounts (and the
Actuarial Value of the maximum value of future benefits from
Deferral Units). If any employer or company shall fail to make
a payment as provided in (i) or (ii) due to inadvertence or a
good faith delay to permit processing and shall immediately
upon discovery of such failure or delay make such payment in
full, the original failure to make the payment or payments
shall not, for the purposes of this paragraph, be a failure to
make a payment. If any employer or company shall, in good
faith, contest a claim by a participant under this Plan or any
of the other above-listed plans, the failure to make the
contested payment or payments shall not, for the purpose of
this paragraph, be a failure to make a payment.
Subject to any necessary regulatory approvals, if the
Employer does not make the aforesaid payment, New England
Electric System will make the payment.
V. AMENDMENT OR TERMINATION
------------------------
5.01 Right to Amend or Terminate. The Compensation
Committee may amend or terminate this Plan at any time;
provided, however, that no such action shall affect any right
or obligation with respect to any Compensation previously
<PAGE>
earned; provided, further, that, if the Compensation Committee,
in its sole discretion, determines that (a) changes in Federal
income tax statutes, rules, or regulations, (b) changes in the
Federal tax rate paid by the Employers, or (c) the application
or potential application to the Plan of Section 406 of Title I
of the Employee Retirement Income Security Act of 1974 make it
advisable, existing Deferral Units may be modified or canceled;
and provided further, no amendment or discontinuance in any
manner adverse to a Participant with respect to benefit formula
or optional form of payment may be made for three years
following a Change in Control or a Major Transaction. No such
modification or cancellation shall affect any Participant's
Cash or Share Account Balance. No such modification may reduce
the then established retirement income or death benefit of a
Participant who has had a Termination of Service, but it may
reduce or eliminate any subsequent increases in either or both.
VI. GENERAL PROVISIONS
------------------
6.01 Nonalienation of Benefits. Except as provided in
the split-dollar option under prior provisions of the Plan, a
Participant shall not have the right to commute, sell, assign,
transfer, or otherwise convey the right to receive any payments
under this Plan, which payments and the right thereto shall be
nonassignable and nontransferable, whether voluntarily or
involuntarily.
<PAGE>
6.02 No Implied Rights. Neither this Plan nor the
making of payments or purchases of insurance by an Employer
shall be construed to create any obligation upon an Employer to
continue the Plan or to continue purchases of insurance or to
give any present or future employee any right to continued
employment.
6.03 Effectuation of Interest. In the event it should
become impossible for New England Electric System, the
Employers, the Compensation Committee, or the Benefits
Committee to perform any act required by the Plan, New England
Electric System, the Employers, the Compensation Committee, or
the Benefits Committee may perform such other act as it in good
faith determines will most nearly carry out the intent and
purpose of the Plan.
6.04 Copy of Plan. An executed copy of the Plan shall
be available for inspection by Participants or other persons
entitled to benefits under the Plan at reasonable times at the
Personnel Offices of the Employers.
6.05 Headings. The headings of articles and sections of
the Plan are for convenience of reference only.
6.06 Gender and Number. Unless the context requires
otherwise, the singular shall include the plural; the masculine
gender shall include the feminine; and such words as "herein",
<PAGE>
"hereinafter", "hereof", and "hereunder" shall refer to this
instrument as a whole and not merely to the subdivision in
which such words appear.
6.07 Separability. If any term or provision of this
Plan, as presently in effect or as amended from time to time,
or the application thereof to any payments or circumstances,
shall to any extent be invalid or unenforceable, the remainder
of this Plan and the application of such term or provision to
payments or circumstances other than those as to which it is
invalid or unenforceable shall not be affected thereby, and
each term or provision of this Plan shall be valid and enforced
to the fullest extent permitted by law.
6.08 Applicability. All provisions of this Plan shall
be uniformly applicable to all Participants.
6.09 Governing Law. Except as otherwise required by
law, this Plan and all matters arising thereunder shall be
governed by the laws of The Commonwealth of Massachusetts.
6.10 Effective Date. This Amendment shall be effective
October 24, 1995.
Dated: February 24, 1997
s/George M. Sage
SIGNATURE ______________________________
Chairman
Pursuant to Vote of October 24,
1995, of the Compensation
Committee
<PAGE>
APPENDIX A
ADDITIONAL DEFERRALS
1. By vote of the Compensation Committee of October 15,
1996, certain individuals were granted special performance
bonuses of share grants, said bonuses to be deferred to the
individual's Share Account under the Plan and subject to all
the benefits and limitations of the Plan, except that the
provision for payments after ten years will not apply.
2. By vote of the NEES Board of Directors on November
26, 1996, John W. Rowe was granted a special performance bonus
of 6,000 shares, said bonus to be deferred to his Share Account
under the Plan and subject to all the benefits and limitations
of the Plan, except that the Share Account balance relating to
the 6,000 shares shall no longer be deferred but shall be paid
as soon as practical after a Termination of Service.
<PAGE>
Exhibit 10(n)
NEW ENGLAND ELECTRIC SYSTEM COMPANIES
RETIREMENT SUPPLEMENT PLAN
Executed November 1, 1979
Amended October 12, 1982
November 23, 1982
June 21, 1984
May 27, 1986
April 1, 1991
September 1, 1993
January 1, 1995
December 1, 1995
June 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Definitions. . . . . . . . . . . . . . . . . . . . . . . . .1
1. Actuarial Value . . . . . . . . . . . . . . . . . .1
2. Adjusted Benefit. . . . . . . . . . . . . . . . . .1
3. Adjustment. . . . . . . . . . . . . . . . . . . . .2
4. Adjustment Factor . . . . . . . . . . . . . . . . .2
5. Basic Benefit . . . . . . . . . . . . . . . . . . .2
6. Beneficial Owner. . . . . . . . . . . . . . . . . .2
7. Board . . . . . . . . . . . . . . . . . . . . . . .3
8. Change in Control . . . . . . . . . . . . . . . . .3
9. Committee . . . . . . . . . . . . . . . . . . . . .4
10. Company . . . . . . . . . . . . . . . . . . . . . .4
11. Initial Adjusted Benefit. . . . . . . . . . . . . .4
12. A Major Transaction . . . . . . . . . . . . . . . .5
13. New England Electric System . . . . . . . . . . . .6
14. Participant . . . . . . . . . . . . . . . . . . . .7
15. Person. . . . . . . . . . . . . . . . . . . . . . .7
16. Plan. . . . . . . . . . . . . . . . . . . . . . . .8
17. Qualified Plan. . . . . . . . . . . . . . . . . . .8
18. Qualified Plan Benefit. . . . . . . . . . . . . . .8
19. Retirement. . . . . . . . . . . . . . . . . . . . .8
20. Retirement Income . . . . . . . . . . . . . . . . .8
21. Spouse. . . . . . . . . . . . . . . . . . . . . . .8
22. Supplemental Plan . . . . . . . . . . . . . . . . .9
23. Supplemental Plan Benefit . . . . . . . . . . . . .9
24. Year of Service . . . . . . . . . . . . . . . . . .9
Plan Benefits. . . . . . . . . . . . . . . . . . . . . . . .9
1. Retirement Benefit. . . . . . . . . . . . . . . . .9
2. Form of Payment . . . . . . . . . . . . . . . . . 10
3. Spouse's Death Benefit. . . . . . . . . . . . . . 10
Timing of Payments . . . . . . . . . . . . . . . . . . . . 10
Lump Sum Payments. . . . . . . . . . . . . . . . . . . . . 11
Administration and Claims. . . . . . . . . . . . . . . . . 12
Government Regulations . . . . . . . . . . . . . . . . . . 12
Nonassignment. . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
Provisions of Benefits . . . . . . . . . . . . . . . . . . 13
Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Amendment or Discontinuance. . . . . . . . . . . . . . . . 14
Effective Date . . . . . . . . . . . . . . . . . . . . . . 14
Signature. . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM COMPANIES
-------------------------------------
Retirement Supplement Plan
-------------------------
Definitions
-----------
When used in the Plan, the following words will have the
meaning given below:
1. Actuarial Value will be established using the most
recent assumptions established by the Benefits
Committee for the Qualified Plan.
2. Adjusted Benefit means the product of (a) and (b)
below:
(a) the Adjusted Benefit or the Initial
Adjusted Benefit, as is applicable, for the
prior year and
(b) the Adjustment Factor.
The Adjusted Benefit will be determined as soon as
necessary data is available after the beginning of
each year.
Each year, at the time of the first payment of the
Adjusted Benefit, an appropriate retroactive
payment will be made to adjust amounts due between
January of the current year and the time of the
adjustment.
<PAGE>
3. Adjustment means, for the then current year, (a)
less (b) below:
(a) Moody's AAA Corporate Bond rate for the
prior year
(b) 200 basis points.
In no event, however, may the Adjustment exceed
the percentage increase, if any, in the Consumer
Price Index for the prior year, and in no event
may the Adjustment be less than zero.
4. Adjustment Factor means (a) plus (b) below:
(a) 1.000, and
(b) the Adjustment expressed in decimal form.
5. Basic Benefit means, for retirements on or after
April 1, 1991, an annual retirement benefit equal
to that calculated under the Supplemental Plan
without regard to any domestic relations order
that would otherwise affect the amount of said
benefit.
6. Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Securities Exchange Act of
1934.
<PAGE>
7. Board means the Board of Directors of New England
Electric System.
8. Change in Control occurs when the conditions set
forth in either of the following paragraphs shall
have been satisfied:
(a) any Person is or becomes the Beneficial
Owner, directly or indirectly, of
securities of New England Electric System
(not including in the securities
beneficially owned by such Person any
securities acquired directly from New
England Electric System or its affiliates)
representing 20% or more of the combined
voting power of New England Electric
System's then outstanding securities; or
(b) during any period of not more than two
consecutive years after January 1, 1995,
individuals who at the beginning of such
period constitute the Board and any new
director (other than a director designated
by a Person who has entered into an
agreement with New England Electric System
to effect a transaction described in clause
(a) of this paragraph) whose election by
the Board or nomination for election by New
<PAGE>
England Electric System's shareholders was
approved or recommended by a vote of at
least two-thirds of the directors then
still in office who either were directors
at the beginning of the period or whose
election or nomination for election was
previously so approved or recommended,
cease for any reason to constitute a
majority of the Board.
9. Committee means the Compensation Committee of the
Board of Directors of the New England Electric
System.
10. Company means the subsidiary of New England
Electric System by which the Participant was
employed on the day immediately preceding the date
he has a termination of employment.
11. Initial Adjusted Benefit means the product of (a)
and (b) below:
(a) The Basic Benefit;
(b) the Adjustment Factor.
12. A Major Transaction shall be deemed to have
occurred if the conditions set forth in any one of
<PAGE>
the following paragraphs shall have been
satisfied:
(a) the shareholders of New England Electric
System approve a merger or consolidation
with any corporation or business trust,
other than (i) a merger or consolidation
which would result in the individuals who
prior to such merger or consolidation
constitute the Board constituting at least
two-thirds of the board of directors of New
England Electric System or the surviving or
succeeding entity immediately after such
merger or consolidation, or (ii) a merger
or consolidation effected to implement a
recapitalization (or similar trasaction) in
which no Person acquires more than 20% of
the combined voting power of New England
Electric System's then outstanding
securities;
(b) the shareholders of New England Electric
System approve a plan of complete
liquidation thereof; or
(c) the shareholder of New England Electric
System approve an agreement for the sale or
disposition of all or substantially all of
New England Electric System's assets, other
<PAGE>
than a sale or disposition which would
result in the individuals who prior to such
sale or disposition constitute the Board
constituting at least two-thirds of the
board of directors of the Person purchasing
such assets immediately after such sale or
disposition.
13. New England Electric System means the trustee or
trustees for the time being (as trustee or
trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as
amended, which is hereby referred to, and a copy
of which as amended has been filed with the
Secretary of The Commonwealth of Massachusetts.
Any agreement, obligation, or liability made,
entered into or incurred by or on behalf of New
England Electric System binds only its trust
estate, and no shareholder, director, trustee,
officer, or agent thereof assumes or shall be held
to any liability therefor.
14. Participant means any of those officers of the New
England Electric System who (a) participated in
this Plan as of February 1, 1991, or (b) are
designated as participants in this Plan by the
Committee.
<PAGE>
15. Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof; however, a
Person shall not include (i) New England Electric
System or any subsidiary thereof, (ii) a trustee
or other fiduciary holding securities under an
employee benefit plan of New England Electric
System or any subsidiary thereof, (iii) an
underwriter temporarily holding securities
pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly,
by the shareholders of New England Electric System
in substantially the same proportions as their
ownership of shares of New England Electric
System.
16. Plan means the Retirement Supplement Plan.
17. Qualified Plan means the New England Electric
System Companies' Final Average Pay Pension Plan
I.
18. Qualified Plan Benefit means the annual benefit
payable at Retirement on a straight life annuity
basis under the terms of the Qualified Plan
without regard to any qualified domestic relations
<PAGE>
order that would otherwise affect the amount of
said benefit.
19. Retirement means the date on which retirement
benefits under the Qualified Plan commence.
20. Retirement Income means the monthly benefit for
which a Participant is eligible under this Plan.
21. Spouse shall have the meaning provided in the
Qualified Plan.
22. Supplemental Plan means New England Electric
System Companies' Executive Supplemental
Retirement Plan.
23. Supplemental Plan Benefit means the annual benefit
payable at Retirement on a straight life annuity
basis under the terms of the Supplemental Plan
without regard to any domestic relations order
that would otherwise affect the amount of said
benefit.
24. Year of Service shall have the meaning provided in
the Qualified Plan.
<PAGE>
Plan Benefits
-------------
1. Retirement Benefit
------------------
A Participant shall be entitled to receive under
this Plan an annual retirement benefit equal to
(a) less (b) below:
(a) the Adjusted Benefit for the given year;
(b) the sum of the Qualified Plan Benefit and
the Supplemental Plan Benefit.
2. Form of Payment
---------------
Retirement Income shall be payable in the same
form as that elected under the provisions of the
Qualified Plan; provided, however, to the extent
that the form of benefit was dictated by the terms
of a qualified domestic relations order, the form
may be that which would have applied (or any form
that could have been elected) in the absence of
said order. The annual Retirement Income payment
from this Plan shall be adjusted by the actuarial
equivalent factor used to reduce retirement
<PAGE>
benefits under the Qualified Plan, other than
reductions for retirement before age 65.
3. Spouse's Death Benefit
----------------------
If a Participant has not had a termination of
employment, a Spouse's death benefit shall be
payable under this Plan on the same terms as
provided in the Supplemental Plan.
Timing of Payments
------------------
A Participant shall be eligible for benefits under this
Plan when and if he or she is eligible for benefits under
the Qualified Plan. Benefits shall commence on the first
anniversary of the date on which the Participant first
receives benefits under the Qualified Plan.
Lump Sum Payments
-----------------
Any provision of this Plan to the contrary
notwithstanding, if (i) any company shall fail to make any
payment to any Participant when due under this Plan or
(ii) any company or employer shall fail to make any
payment to any participant due under either of the New
England Electric Companies Deferred Compensation Plan or
the Supplemental Plan, the full amount of the current
Actuarial Value of the Participant's benefits under this
<PAGE>
Plan shall be payable immediately to each Participant as a
lump-sum; provided, however, if any employer or company
shall, in good faith, contest a claim by a participant
under this Plan or any of the other above-listed plans,
the failure to make the contested payment or payments
shall not, for the purpose of this paragraph, be a failure
to make a payment.
At any time following a Change in Control or a Major
Transaction, any Participant who has had a Termination of
Employment, whether before or after the Change in Control
or Major Transaction, may elect to receive, in lieu of any
future benefits hereunder, a lump sum payment equal to the
Actuarial Value of the maximum value of said future
benefits, less 10%.
If the Company does not make the aforesaid lump sum
payments, the New England Electric System will make the
payment for the account of the Company.
Administration and Claims
-------------------------
The Committee shall have for this Plan the same duties,
including, but not limited to, the procedures for denied
claims, as the Benefits Committee and the Benefits Appeal
Committee have for the Qualified Plan.
<PAGE>
Government Regulations
----------------------
It is intended that this Plan will comply with all
applicable laws and governmental regulations, and the
Company shall not be obligated to perform an obligation
hereunder in any case where, in the opinion of the
Company's counsel, such performance would result in
violation of any law or regulation.
Nonassignment
-------------
To the fullest extent permitted by law, no benefit under
the Plan, nor any other interest hereunder of any
Participant or contingent annuitant, may be assigned or
alienated.
Provisions of Benefits
----------------------
This Plan will be unfunded. Benefits will be paid from
the operating revenues of the Company. A Participant's
rights to benefits under this Plan shall be those of an
unsecured, general creditor of the Company.
Vesting
-------
A Participant's accrued benefits shall be 100% vested
after 60 months of participation in this Plan.
<PAGE>
If a Participant should become totally and permanently
disabled or die, prior to the completion of 60 months of
participation in the Plan, the Participant or the
Participant's Spouse shall be entitled to receive a
prorated benefit derived by multiplying the full benefit,
otherwise payable but for the passage of time under the
Plan, by the quotient obtained by dividing the months of
participation by sixty.
Amendment or Discontinuance
---------------------------
The Committee may amend or discontinue the Plan at any
time; provided, no modification shall reduce a benefit
which a Participant was eligible to receive under the Plan
at the time of such amendment or discontinuance; and
provided further, no amendment or discontinuance in any
manner adverse to a Participant with respect to benefit
formula or optional form of payment may be made for three
years following a Change in Control or a Major
Transaction.
<PAGE>
Effective Date
--------------
This Amendment shall be effective June 1, 1996.
Dated: February 24, 1997
s/George M. Sage
__________________________________
Chairman of the Compensation Committee
Pursuant to Vote of the Compensation
Committee of May 20, 1996
<PAGE>
Exhibit 10(o)
NEW ENGLAND ELECTRIC COMPANIES'
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN I
Executed December 4, 1978
Amended November 5, 1979
October 12, 1982
March 14, 1983
June 21, 1984
July 31, 1984
July 23, 1986
April 1, 1991
January 1, 1995
October 25, 1995
May 20, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Plan Purposes and Objectives . . . . . . . . . . . . . . . .1
Definitions. . . . . . . . . . . . . . . . . . . . . . . . .1
1. Actuarial Value. . . . . . . . . . . . . . . . . .2
2. Beneficial Owner . . . . . . . . . . . . . . . . .2
3. Benefits Committee . . . . . . . . . . . . . . . .2
4. Board. . . . . . . . . . . . . . . . . . . . . . .2
5. Change in Control. . . . . . . . . . . . . . . . .2
6. Code . . . . . . . . . . . . . . . . . . . . . . .3
7. Committee. . . . . . . . . . . . . . . . . . . . .3
8. Company. . . . . . . . . . . . . . . . . . . . . .3
9. Early Retirement Date. . . . . . . . . . . . . . .4
10. Final Average Total Compensation . . . . . . . . .4
11. Incentive Compensation . . . . . . . . . . . . . .4
12. Incentive Plan . . . . . . . . . . . . . . . . . .4
13. Incentive Share Awards . . . . . . . . . . . . . .4
14. A Major Transaction. . . . . . . . . . . . . . . .4
15. New England Electric System. . . . . . . . . . . .6
16. Participant. . . . . . . . . . . . . . . . . . . .6
17. Person . . . . . . . . . . . . . . . . . . . . . .7
18. Qualified Compensation . . . . . . . . . . . . . .7
19. Qualified Plan . . . . . . . . . . . . . . . . . .7
20. Qualified Plan Benefit . . . . . . . . . . . . . .7
21. Retirement . . . . . . . . . . . . . . . . . . . .8
22. Retirement Income. . . . . . . . . . . . . . . . .8
23. Spouse . . . . . . . . . . . . . . . . . . . . . .8
24. Termination of Employment. . . . . . . . . . . . .8
25. Total Compensation . . . . . . . . . . . . . . . .8
26. Years of Service . . . . . . . . . . . . . . . . .8
Plan Benefits. . . . . . . . . . . . . . . . . . . . . . . .9
1. Retirement Benefit . . . . . . . . . . . . . . . .9
2. Form of Payment. . . . . . . . . . . . . . . . . 10
3. Spouse's Death Benefit . . . . . . . . . . . . . 11
Timing of Payments . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
Lump Sum Payments. . . . . . . . . . . . . . . . . . . . . 12
Vesting and Forfeiture of Benefits . . . . . . . . . . . . 13
Administration and Claims. . . . . . . . . . . . . . . . . 14
Government Regulations . . . . . . . . . . . . . . . . . . 15
Nonassignment. . . . . . . . . . . . . . . . . . . . . . . 15
Provisions of Benefits . . . . . . . . . . . . . . . . . . 15
Amendment or Discontinuance. . . . . . . . . . . . . . . . 15
Effective Date . . . . . . . . . . . . . . . . . . . . . . 16
Signature. . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
NEW ENGLAND ELECTRIC COMPANIES'
Executive Supplemental Retirement Plan I
----------------------------------------
Plan Purposes and Objectives
----------------------------
The Supplemental Plan I is maintained by the Companies
primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated
employees within the meaning of Title I of the Employee
Retirement Income Security Act.
The objectives of the Executive Supplemental Retirement
Plan I (the Supplemental Plan I) are as follows:
1. to increase the overall effectiveness of the
executive compensation program so as to attract,
retain, and motivate qualified management personnel;
2. to provide retirement benefits related to Total
Compensation; and
3. to soften the financial impact of early retirement
for selected executives.
Definitions
-----------
When used in the Supplemental Plan I, the following words
will have the meanings indicated below:
<PAGE>
1. Actuarial Value will be established using the most
recent assumptions established by the Benefits
Committee for the Qualified Plan.
2. Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Securities Exchange Act of
1934.
3. Benefits Committee means the Benefits Committee
established in accordance with the New England
Electric System Companies Final Average Pay Pension
Plan I.
4. Board means the Board of Directors of New England
Electric System.
5. Change in Control occurs when the conditions set
forth in either of the following paragraphs shall
have been satisfied:
(a) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of New
England Electric System (not including in the
securities beneficially owned by such Person
any securities acquired directly from New
England Electric System or its affiliates)
representing 20% or more of the combined voting
power of New England Electric System's then
outstanding securities; or
<PAGE>
(b) during any period of not more than two
consecutive years after January 1, 1995,
individuals who at the beginning of such period
constitute the Board and any new director
(other than a director designated by a Person
who has entered into an agreement with New
England Electric System to effect a transaction
described in clause (a) of this paragraph)
whose election by the Board or nomination for
election by New England Electric System's
shareholders was approved or recommended by a
vote of at least two-thirds of the directors
then still in office who either were directors
at the beginning of the period or whose
election or nomination for election was
previously so approved or recommended, cease
for any reason to constitute a majority of the
Board.
6. Code means the Internal Revenue Code of 1986, as
amended from time to time.
7. Committee means the Compensation Committee of the
Board.
<PAGE>
8. Company means the subsidiary of New England Electric
System by which the Participant is employed on the
date on which he or she has a Termination of
Employment.
9. Early Retirement Date shall have the meaning
provided in the Qualified Plan.
10. Final Average Total Compensation means the highest
average of the Participant's twelve-month Total
Compensation during any consecutive sixty-month
period of employment (or during total employment if
less than sixty months) within the last 120 months
of employment ending with the last day of the month
next preceding a given date of determination.
11. Incentive Compensation shall have the meaning
provided in the Incentive Plan.
12. Incentive Plan means the New England Electric
Companies' Incentive Compensation Plan I and New
England Electric Companies' Senior Incentive
Compensation Plan.
13. Incentive Share Awards shall mean annual incentive
share awards under the New England Electric
Companies' Incentive Share Plan.
<PAGE>
14. A Major Transaction shall be deemed to have occurred
if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(a) the shareholders of New England Electric System
approve a merger or consolidation with any
corporation or business trust, other than (i) a
merger or consolidation which would result in
the individuals who prior to such merger or
consolidation constitute the Board constituting
at least two-thirds of the board of directors
of New England Electric System or the surviving
or succeeding entity immediately after such
merger or consolidation, or (ii) a merger or
consolidation effected to implement a
recapitalization (or similar trasaction) in
which no Person acquires more than 20% of the
combined voting power of New England Electric
System's then outstanding securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof;
or
<PAGE>
(c) the shareholder of New England Electric System
approve an agreement for the sale or
disposition of all or substantially all of New
England Electric System's assets, other than a
sale or disposition which would result in the
individuals who prior to such sale or
disposition constitute the Board constituting
at least two-thirds of the board of directors
of the Person purchasing such assets
immediately after such sale or disposition.
15. New England Electric System means the trustee or
trustees for the time being (as trustee or trustees
but not personally) under an agreement and
declaration of trust dated January 2, 1926, as
amended, which is hereby referred to, and a copy of
which as amended has been filed with the Secretary
of The Commonwealth of Massachusetts. Any
agreement, obligation, or liability made, entered
into or incurred by or on behalf of New England
Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent
thereof assumes or shall be held to any liability
therefor.
<PAGE>
16. Participant means
a. A Participant in the New England Electric
Companies' Senior Incentive Compensation Plan,
b. A Catetory A or B Participant in the New
England Electric Companies' Incentive
Compensation Plan I, and
c. Any other persons participating in this
Supplemental Plan I as of October 25, 1995.
17. Person shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as
modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include (i) New
England Electric System or any subsidiary thereof,
(ii) a trustee or other fiduciary holding securities
under an employee benefit plan of New England
Electric System or any subsidiary thereof, (iii) an
underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the
shareholders of New England Electric System in
substantially the same proportions as their
ownership of shares of New England Electric System.
<PAGE>
18. Qualified Compensation means compensation as defined
in the Qualified Plan without regard to any
reduction required by Section 4.01(a)(17) of the
code.
19. Qualified Plan means New England Electric System
Companies' Final Average Pay Pension Plan I.
20. Qualified Plan Benefit means the annual benefit
payable at Retirement on a straight life annuity
basis under the terms of the Qualified Plan without
regard to any qualified domestic relations order
that would otherwise affect the amount of said
benefit.
21. Retirement means the date on which retirement
benefits under the Qualified Plan commence.
22. Retirement Income means the monthly benefit for
which a Participant is eligible under the
Supplemental Plan I.
23. Spouse shall have the meaning provided in the
Qualified Plan.
24. Termination of Employment shall occur when the
Participant is no longer employed by a company
participating in the Supplemental Plan I.
25. Total Compensation means Qualified Compensation,
except that Incentive Compensation and Incentive
Share Awards shall be included in the same
twelve-month period for which they are awarded, plus
<PAGE>
any compensation or share awards deferred during the
same twelve-month period under the terms of the New
England Electric System Companies Revised Deferred
Compensation Plan (or its predecessors) during the
same twelve-month period to the extent not included
in Qualified Compensation.
26. Years of Service shall have the meaning provided in
the Qualified Plan.
Plan Benefits
-------------
1. Retirement Benefit
------------------
A Participant shall be entitled to receive from the
Company for retirements on or after April 1, 1991, an annual
retirement benefit equal to (a) plus (b) plus (c) plus (d) plus
(e) less (f) less (g) below:
(a) 1.5% of Final Average Total Compensation for each
Year of Service up to 10 years;
(b) 1.3% of Final Average Total Compensation for each
Year of Service from 11 to 20 years;
<PAGE>
(c) 1.25% of Final Average Total Compensation for each
Year of Service from 21 to 30 years;
(d) .6% of Final Average Total Compensation for each
Year of Service over 30 years;
(e) .57% of Final Average Total Compensation in excess
of the Average Social Security Wage Base for each
Year of Service, up to 35 years;
(f) any benefit payable on a straight life annuity basis
which was accrued, under a plan maintained by an
employer other than a New England Electric System
company, for service granted pursuant to the
additional service credits provision of the
Qualified Plan; and
(g) the Qualified Plan Benefit.
All of the above amounts are to be determined as at the
Participant's Termination of Employment.
2. Form of Payment
---------------
Retirement Income shall be payable in the normal form as
follows:
(a) If a Participant has a Spouse, the normal form of
payment shall be a contingent annuitant option with
the Spouse, as contingent annuitant, entitled to
<PAGE>
receive 50% of the Participant's reduced amount of
Retirement Income.
(b) If a Participant does not have a Spouse, the normal
form of payment shall be a straight life annuity
with no amount of Retirement Income payable after
the Former Participant's death.
If a Participant elects an optional form of payment under
the Qualified Plan, the same option and actuarial equivalent
factors shall apply to Retirement Income payable under the
Supplemental Plan I; provided, however, to the extent the form
of benefit was dictated by the terms of a qualified domestic
relations order, the form may be that which would have applied
(or any form that could have been elected) in the absence of
said order. In calculating the benefit payable under any
option, the same actuarial equivalent factors in the Qualified
Plan shall be used in the Supplemental Plan I, except that no
reduction factors for retirement prior to age 65 shall be
applied against a Participant's Retirement Income.
<PAGE>
3. Spouse's Death Benefit
----------------------
The Spouse of a Participant vested under the Qualified
Plan who has not had a Termination of Employment is entitled to
a pre-retirement spouse benefit, if the Participant dies before
payment of benefits commence.
The Spouse will be entitled to receive an annual benefit
determined as follows:
(a) as if the Participant had retired and elected
Retirement Income payments to begin on the first day
of the month next following the later of the date of
death or Participant's fifty-fifth birthday, and
(b) the Retirement Income was payable in the form of a
contingent annuitant option with the Spouse, as
contingent annuitant, entitled to receive 50% (100%
if the Participant died after his or her 55th
birthday and while an active employee) of the
Participant's amount of Retirement Income subject to
reduction for benefits payable hereunder under a
domestic relations order.
<PAGE>
Timing of Payments
------------------
A Participant shall be eligible for benefits under the
Supplemental Plan I when and if he or she is eligible for
benefits under the Qualified Plan, except as provided herein.
Benefits shall commence on the date on which the Participant or
the Spouse first receives benefits under the Qualified Plan.
Lump Sum Payments
-----------------
Any provision of the Supplemental Plan I to the contrary
notwithstanding, if (i) any company shall fail to make any
payment to any Participant when due under the Supplemental Plan
I or (ii) the employer or company shall fail to make any
payment to any participant due under any of the New England
Electric Companies' Senior Incentive Compensation Plan, the New
England Electric Companies' Incentive Compensation Plan I, the
New England Electric Companies Deferred Compensation Plan, or
the New England Electric System Companies Retirement Supplement
Plan, the full amount of the current Actuarial Value of a
Participant's benefits under the Supplemental Plan I shall be
payable immediately as a lump-sum; provided, however, if any
employer or company shall, in good faith, contest a claim by a
participant under this Supplemental Plan I or any of the other
above-listed plans, the failure to make the contested payment
<PAGE>
or payments shall not, for the purpose of this paragraph, be a
failure to make a payment.
At any time following a Change in Control or Major
Transaction, any Participant who has had a Termination of
Employment, whether before or after the Change in Control or
Major Transaction, may elect to receive, in lieu of any future
benefits hereunder, a lump sum payment equal to the Actuarial
Value of the maximum value of said future benefits, less 10%.
If the Company does not make the aforesaid lump sum
payments, the New England Electric System will make the payment
for the account of the Company.
Vesting and Forfeiture of Benefits
----------------------------------
Except as provided in the following paragraph, a
Participant's accrued benefit shall be 100% vested after five
Years of Service.
A Participant will forfeit his or her benefits under the
Supplemental Plan I if before the earlier of age 65 or five
years following Termination of Employment he or she, without
the prior consent of the New England Electric System's Chief
Executive Officer (the "CEO") [or prior consent of the
Committee in the case of the CEO], enters into or in any manner
takes part in, as an employee, agent, officer, owner, or
otherwise, any business or authority which in the opinion of
the CEO is in competition with, in the same field as, or
regulating the business of New England Electric System or any
<PAGE>
of its subsidiaries, or which in the opinion of the CEO
provides services peculiarly essential to utility operation.
Violation of this provision will result in termination of
payments, and any obligations to make future payments to the
Participant and the Participant's Spouse.
A Participant may request to have the Committee review any
decision made by the CEO under this provision that adversely
affects the Participant. The Committee's decision shall be
final.
Upon the occurrence of a Change in Control or a Major
Transaction, the second paragraph of this section shall no
longer have any effect.
Administration and Claims
-------------------------
The Benefits Committee shall have for the Supplemental
Plan I the same duties as for the Qualified Plan, except as
specifically provided herein. The Benefits Appeal Committee
for the Qualified Plan shall have for the Supplemental Plan I
the same duties relative to denied claims as for the Qualified
Plan, except as may be specifically provided herein.
Government Regulations
----------------------
It is intended that the Supplemental Plan I will comply
with all applicable laws and governmental regulations, and the
Company shall not be obligated to perform an obligation
<PAGE>
hereunder in any case where, in the opinion of the Company's
counsel, such performance would result in violation of any law
or regulation.
Nonassignment
-------------
To the fullest extent permitted by law, no benefit under
the Plan, nor any other interest hereunder of any Participant,
Spouse, or contingent annuitant, shall be assignable,
transferable, or subject to sale, mortgage, pledge,
hypothecation, commutation, anticipation, garnishment,
attachment, execution, or levy of any kind.
Provisions of Benefits
----------------------
The Supplemental Plan I will be unfunded. Benefits will
be paid from the operating revenues of the Company. A
Participant's rights to benefits under the Supplemental Plan I
shall be those of an unsecured, general creditor of the
Company.
Amendment or Discontinuance
---------------------------
The Committee may amend or discontinue the Supplemental
Plan I at any time; provided, no modification shall reduce a
benefit which a Participant was eligible to receive under the
Supplemental Plan I at the time of such amendment or
<PAGE>
discontinuance; and provided further, no amendment or
discontinuance in any manner adverse to a Participant with
respect to benefit formula or optional form of payment may be
made for three years following a Change in Control or a Major
Transaction.
Effective Date
--------------
The Plan, as amended, is to be effective for retirements
on and after May 20, 1996.
s/George M. Sage
_________________________________
Chairman of the Compensation Committee
Pursuant to Votes of October 24, 1995,
and May 20, 1996
<PAGE>
Exhibit 10(p)
NEW ENGLAND ELECTRIC COMPANIES'
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN II
Effective Date: October 25, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Plan Purposes and Objectives . . . . . . . . . . . . . . . .1
Definitions. . . . . . . . . . . . . . . . . . . . . . . . .1
1. Actuarial Value. . . . . . . . . . . . . . . . . .1
2. Beneficial Owner . . . . . . . . . . . . . . . . .1
3. Benefits Committee . . . . . . . . . . . . . . . .1
4. Board. . . . . . . . . . . . . . . . . . . . . . .2
5. Change in Control. . . . . . . . . . . . . . . . .2
6. Code . . . . . . . . . . . . . . . . . . . . . . .3
7. Committee. . . . . . . . . . . . . . . . . . . . .3
8. Company. . . . . . . . . . . . . . . . . . . . . .3
9. Early Retirement Date. . . . . . . . . . . . . . .3
10. Final Average Total Compensation . . . . . . . . .3
11. Incentive Compensation . . . . . . . . . . . . . .3
12. Incentive Plans. . . . . . . . . . . . . . . . . .4
13. Incentive Share Awards . . . . . . . . . . . . . .4
14. Major Transaction. . . . . . . . . . . . . . . . .4
15. Management Committee . . . . . . . . . . . . . . .5
16. New England Electric System. . . . . . . . . . . .5
17. Participant. . . . . . . . . . . . . . . . . . . .6
18. Person . . . . . . . . . . . . . . . . . . . . . .6
19. Qualified Compensation . . . . . . . . . . . . . .6
20. Qualified Plan . . . . . . . . . . . . . . . . . .7
21. Qualified Plan Benefit . . . . . . . . . . . . . .7
22. Retirement . . . . . . . . . . . . . . . . . . . .7
23. Retirement Income. . . . . . . . . . . . . . . . .7
24. Spouse . . . . . . . . . . . . . . . . . . . . . .7
25. Termination of Employment. . . . . . . . . . . . .7
26. Total Compensation . . . . . . . . . . . . . . . .7
27. Years of Service . . . . . . . . . . . . . . . . .8
Plan Benefits. . . . . . . . . . . . . . . . . . . . . . . .8
1. Retirement Benefit . . . . . . . . . . . . . . . .8
2. Form of Payment. . . . . . . . . . . . . . . . . .9
3. Spouse's Death Benefit . . . . . . . . . . . . . 10
Timing of Payments . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
Lump Sum Payments. . . . . . . . . . . . . . . . . . . . . 11
Vesting and Forfeiture of Benefits . . . . . . . . . . . . 12
Administration and Claims. . . . . . . . . . . . . . . . . 13
Government Regulations . . . . . . . . . . . . . . . . . . 13
Nonassignment. . . . . . . . . . . . . . . . . . . . . . . 13
Provisions of Benefits . . . . . . . . . . . . . . . . . . 14
Amendment or Discontinuance. . . . . . . . . . . . . . . . 14
Effective Date . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
NEW ENGLAND ELECTRIC COMPANIES'
Executive Supplemental Retirement Plan II
-----------------------------------------
Plan Purposes and Objectives
----------------------------
The Supplemental Plan II is established by the Companies
primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated
employees within the meaning of Title I of the Employee
Retirement Income Security Act.
The objectives of the Executive Supplemental Retirement
Plan II (the Supplemental Plan II) are as follows:
1. to increase the overall effectiveness of the
executive compensation program so as to attract,
retain, and motivate qualified management personnel;
and
2. to provide retirement benefits related to Total
Compensation.
Definitions
-----------
When used in the Supplemental Plan II, the following words
will have the meanings indicated below:
<PAGE>
1. Actuarial Value will be established using the most
recent assumptions established by the Benefits
Committee for the Qualified Plan.
2. Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Securities Exchange Act of
1934.
3. Benefits Committee means the Benefits Committee
established in accordance with the New England
Electric System Companies Final Average Pay Pension
Plan I.
4. Board means the Board of Directors of New England
Electric System.
5. Change in Control occurs when the conditions set
forth in either of the following paragraphs shall
have been satisfied:
(a) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of New
England Electric System (not including in the
securities beneficially owned by such Person
any securities acquired directly from New
England Electric System or its affiliates)
representing 20% or more of the combined voting
power of New England Electric System's then
outstanding securities; or
<PAGE>
(b) during any period of not more than two
consecutive years after January 1, 1995,
individuals who at the beginning of such period
constitute the Board and any new director
(other than a director designated by a Person
who has entered into an agreement with New
England Electric System to effect a transaction
described in clause (a) of this paragraph)
whose election by the Board or nomination for
election by New England Electric System's
shareholders was approved or recommended by a
vote of at least two-thirds of the directors
then still in office who either were directors
at the beginning of the period or whose
election or nomination for election was
previously so approved or recommended, cease
for any reason to constitute a majority of the
Board.
6. Code means the Internal Revenue Code of 1986, as
amended from time to time.
7. Committee means the Compensation Committee of the
Board of Directors of New England Electric System.
<PAGE>
8. Company means the subsidiary of New England Electric
System by which the Participant is employed on the
date on which he or she has a Termination of
Employment.
9. Early Retirement Date shall have the meaning
provided in the Qualified Plan.
10. Final Average Total Compensation means the highest
average of the Participant's twelve-month Total
Compensation during any consecutive sixty-month
period of employment (or during total employment if
less than sixty months) within the last 120 months
of employment ending with the last day of the month
next preceding a given date of determination.
11. Incentive Compensation shall have the meaning
provided in the Incentive Plans.
12. Incentive Plans mean the New England Electric
Companies' Incentive Compensation Plan I, the New
England Electric Companies' Incentive Compensation
Plan II, and the New England Electric Companies'
Incentive Compensation Plan III.
13. Incentive Share Awards shall mean annual incentive
share awards under the New England Electric
Companies' Incentive Share Plan.
<PAGE>
14. A Major Transaction shall be deemed to have occurred
if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(a) the shareholders of New England Electric System
approve a merger or consolidation with any
corporation or business trust, other than (i) a
merger or consolidation which would result in
the individuals who prior to such merger or
consolidation constitute the Board constituting
at least two-thirds of the board of directors
of New England Electric System or the surviving
or succeeding entity immediately after such
merger or consolidation, or (ii) a merger or
consolidation effected to implement a
recapitalization (or similar transaction) in
which no Person acquires more than 20% of the
combined voting power of New England Electric
System's then outstanding securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof;
or
(c) the shareholder of New England Electric System
approve an agreement for the sale or
disposition of all or substantially all of New
England Electric System's assets, other than a
<PAGE>
sale or disposition which would result in the
individuals who prior to such sale or
disposition constitute the Board constituting
at least two-thirds of the board of directors
of the Person purchasing such assets
immediately after such sale or disposition.
15. Management Committee means the Management Committee
established in accordance with the New England
Electric System Companies' Incentive Compensation
Plan I.
16. New England Electric System means the trustee or
trustees for the time being (as trustee or trustees
but not personally) under an agreement and
declaration of trust dated January 2, 1926, as
amended, which is hereby referred to, and a copy of
which as amended has been filed with the Secretary
of The Commonwealth of Massachusetts. Any
agreement, obligation, or liability made, entered
into or incurred by or on behalf of New England
Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent
thereof assumes or shall be held to any liability
therefor.
<PAGE>
17. Participant means a Category C Participant in the
New England Electric Companies' Incentive
Compensation Plan I who is not a participant in the
New England Electric Companies' Executive
Supplemental Retirement Plan.
18. Person shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934, as
modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include (i) New
England Electric System or any subsidiary thereof,
(ii) a trustee or other fiduciary holding securities
under an employee benefit plan of New England
Electric System or any subsidiary thereof, (iii) an
underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the
shareholders of New England Electric System in
substantially the same proportions as their
ownership of shares of New England Electric System.
<PAGE>
19. Qualified Compensation means compensation as defined
in the Qualified Plan without regard to any
reduction required by section 4.01(a)(17) of the
Code.
20. Qualified Plan means New England Electric System
Companies' Final Average Pay Pension Plan I.
21. Qualified Plan Benefit means the annual benefit
payable at Retirement on a straight life annuity
basis under the terms of the Qualified Plan without
regard to any qualified domestic relations order
that would otherwise affect the amount of said
benefit.
22. Retirement means the date on which retirement
benefits under the Qualified Plan commence.
23. Retirement Income means the monthly benefit for
which a Participant is eligible under the
Supplemental Plan II.
24. Spouse shall have the meaning provided in the
Qualified Plan.
25. Termination of Employment shall occur when the
Participant is no longer employed by a company
participating in the Supplemental Plan II.
26. Total Compensation means Qualified Compensation,
except that Incentive Compensation and Incentive
Share Awards shall be included in the same
<PAGE>
twelve-month period for which they are awarded, plus
any compensation or share awards deferred during the
same twelve-month period under the terms of the New
England Electric System Companies Revised Deferred
Compensation Plan (or its predecessors) during the
same twelve-month period to the extent not included
in Qualified Compensation.
27. Years of Service shall have the meaning provided in
the Qualified Plan.
Plan Benefits
-------------
1. Retirement Benefit
------------------
A Participant shall be entitled to receive from the
Company an annual retirement benefit equal to (a) plus (b) plus
(c) plus (d) plus (e) less (f) less (g) below:
(a) 1.5% of Final Average Total Compensation for each
Year of Service up to 10 years;
(b) 1.3% of Final Average Total Compensation for each
Year of Service from 11 to 20 years;
(c) 1.25% of Final Average Total Compensation for each
Year of Service from 21 to 30 years;
(d) .6% of Final Average Total Compensation for each
Year of Service over 30 years;
<PAGE>
(e) .57% of Final Average Total Compensation in excess
of the Average Social Security Wage Base for each
Year of Service, up to 35 years;
(f) any benefit payable on a straight life annuity basis
which was accrued, under a plan maintained by an
employer other than a New England Electric System
company, for service granted pursuant to the
additional service credits provision of the
Qualified Plan; and
(g) the Qualified Plan Benefit.
All of the above amounts are to be determined as at the
Participant's Termination of Employment.
2. Form of Payment
---------------
Retirement Income shall be payable in the normal form as
follows:
(a) If a Participant has a Spouse, the normal form of
payment shall be a contingent annuitant option with
the Spouse, as contingent annuitant, entitled to
receive 50% of the Participant's reduced amount of
Retirement Income.
<PAGE>
(b) If a Participant does not have a Spouse, the normal
form of payment shall be a straight life annuity
with no amount of Retirement Income payable after
the Former Participant's death.
If a Participant elects an optional form of payment under
the Qualified Plan, the same option and actuarial equivalent
factors shall apply to Retirement Income payable under the
Supplemental Plan II; provided, however, to the extent the form
of benefit was dictated by the terms of a qualified domestic
relations order, the form may be that which would have applied
(or any form that could have been elected) in the absence of
said order. In calculating the benefit payable under any
option, the same actuarial equivalent factors in the Qualified
Plan shall be used in the Supplemental Plan II.
3. Spouse's Death Benefit
----------------------
The Spouse of a Participant vested under the Qualified
Plan who has not had a Termination of Employment is entitled to
a pre-retirement spouse benefit, if the Participant dies before
payment of benefits commence.
<PAGE>
The Spouse will be entitled to receive an annual benefit
determined as follows:
(a) as if the Participant had retired and elected
Retirement Income payments to begin on the first day
of the month next following the later of the date of
death or Participant's fifty-fifth birthday, and
(b) the Retirement Income was payable in the form of a
contingent annuitant option with the Spouse, as
contingent annuitant, entitled to receive 50% (100%
if the Participant died after his or her 55th
birthday and while an active employee) of the
Participant's amount of Retirement Income subject to
reduction for benefits payable hereunder under a
domestic relations order.
Timing of Payments
------------------
A Participant shall be eligible for benefits under the
Supplemental Plan II when and if he or she is eligible for
benefits under the Qualified Plan, except as provided herein.
Benefits shall commence on the date on which the Participant or
the Spouse first receives benefits under the Qualified Plan.
<PAGE>
Lump Sum Payments
-----------------
Any provision of the Supplemental Plan II to the contrary
notwithstanding, if (i) any company shall fail to make any
payment to any Participant when due under the Supplemental Plan
II or (ii) the employer or company shall fail to make any
payment to any participant due under either of the New England
Electric Companies' Incentive Compensation Plan I or the New
England Electric Companies Deferred Compensation Plan, the full
amount of the current Actuarial Value of a Participant's
benefits under the Supplemental Plan II shall be payable
immediately as a lump-sum; provided, however, if any employer
or company shall, in good faith, contest a claim by a
participant under this Supplemental Plan II or any of the other
above-listed plans, the failure to make the contested payment
or payments shall not, for the purpose of this paragraph, be a
failure to make a payment.
At any time following a Change in Control or Major
Transaction, any Participant who has had a Termination of
Employment, whether before or after the Change in Control or
Major Transaction, may elect to receive, in lieu of any future
benefits hereunder, a lump sum payment equal to the Actuarial
Value of the maximum value of said future benefits, less 10%.
<PAGE>
If the Company does not make the aforesaid lump sum
payments, the New England Electric System will make the payment
for the account of the Company.
Vesting and Forfeiture of Benefits
----------------------------------
Except as provided in the following paragraph, a
Participant's accrued benefit shall be 100% vested after five
Years of Service.
A Participant will forfeit his benefits under the
Supplemental Plan II if before the earlier of age 65 or five
years following Termination of Employment he, without the prior
consent of the New England Electric System's Chief Executive
Officer (the "CEO"), enters into or in any manner takes part
in, as an employee, agent, officer, owner, or otherwise, any
business or authority which in the opinion of the CEO is in
competition with, in the same field as, or regulating the
business of New England Electric System or any of its
subsidiaries, or which in the opinion of the CEO provides
services peculiarly essential to utility operation. Violation
of this provision will result in termination of payments, and
any obligations to make future payments to the Participant and
the Participant's Spouse.
<PAGE>
A Participant may request to have the Committee review any
decision made by the CEO under this provision that adversely
affects the Participant. The Committee's decision shall be
final.
Upon the occurrence of a Change in Control or a Major
Transaction, the second paragraph of this section shall no
longer have any effect.
Administration and Claims
-------------------------
The Benefits Committee shall have for the Supplemental
Plan II the same duties as for the Qualified Plan, except as
specifically provided herein. The Benefits Appeal Committee
for the Qualified Plan shall have for the Supplemental Plan II
the same duties relative to denied claims as for the Qualified
Plan, except as may be specifically provided herein.
Government Regulations
----------------------
It is intended that the Supplemental Plan II will comply
with all applicable laws and governmental regulations, and the
Company shall not be obligated to perform an obligation
hereunder in any case where, in the opinion of the Company's
counsel, such performance would result in violation of any law
or regulation.
<PAGE>
Nonassignment
-------------
To the fullest extent permitted by law, no benefit under
the Plan, nor any other interest hereunder of any Participant,
Spouse, or contingent annuitant, shall be assignable, transfer
able, or subject to sale, mortgage, pledge, hypothecation,
commutation, anticipation, garnishment, attachment, execution,
or levy of any kind.
Provisions of Benefits
----------------------
The Supplemental Plan II will be unfunded. Benefits will
be paid from the operating revenues of the Company. A
Participant's rights to benefits under the Supplemental Plan II
shall be those of an unsecured, general creditor of the
Company.
Amendment or Discontinuance
---------------------------
The Management Committee may amend or discontinue the
Supplemental Plan II at any time; provided, no modification
shall reduce a benefit which a Participant was eligible to
receive under the Supplemental Plan II at the time of such
amendment or discontinuance; and provided further, no amendment
or discontinuance in any manner adverse to a Participant with
respect to benefit formula or optional form of payment may be
made for three years following a Change in Control or a Major
Transaction.
<PAGE>
Effective Date
--------------
The Plan, as amended, is to be effective for retirements
on and after October 25, 1995.
s/George M. Sage
________________________________
Chairman of the Compensation Committee
pursuant to vote of the Committee
dated October 24, 1995
<PAGE>
Exhibit 10(q)
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN I
Adopted - August 24, 1977
Amended - December 5, 1978
Amended - May 17, 1982
Amended - July 31, 1984
Amended - July 30, 1985
Amended - February 9, 1987
Amended - May 23, 1990
Amended - December 1, 1991
Amended - January 1, 1992
Amended - January 1, 1994
Amended - February 21, 1994
Amended - January 1, 1995
Amended - October 24, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . .1
II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . .1
2.01 Base Compensation. . . . . . . . . . . . . . . .1
2.02 Beneficial Owner . . . . . . . . . . . . . . . .1
2.03 Board. . . . . . . . . . . . . . . . . . . . . .1
2.04 Category A Participant . . . . . . . . . . . . .2
2.05 Category B Participant . . . . . . . . . . . . .2
2.06 Category C Participants. . . . . . . . . . . . .2
2.07 Change in Control. . . . . . . . . . . . . . . .2
2.08 Committee. . . . . . . . . . . . . . . . . . . .3
2.09 Continuing Directors . . . . . . . . . . . . . .3
2.10 Corporate Targets. . . . . . . . . . . . . . . .4
2.11 Fund . . . . . . . . . . . . . . . . . . . . . .4
2.12 Incentive Compensation . . . . . . . . . . . . .4
2.13 Low Return Target. . . . . . . . . . . . . . . .4
2.14 A Major Transaction. . . . . . . . . . . . . . .5
2.15 Management Committee . . . . . . . . . . . . . .6
2.16 New England Electric System. . . . . . . . . . .6
2.17 Participant. . . . . . . . . . . . . . . . . . .7
2.18 Person . . . . . . . . . . . . . . . . . . . . .7
2.19 Plan Year. . . . . . . . . . . . . . . . . . . .7
2.20 Senior Incentive Compensation Plan . . . . . . .7
III. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . .8
3.01 Administration and Interpretation. . . . . . . .8
3.02 Amendment and Termination. . . . . . . . . . . .8
3.03 Salary Approvals.. . . . . . . . . . . . . . . .8
3.04 No Segregation of Assets; No Assignment. . . . .8
3.05 Accounting.. . . . . . . . . . . . . . . . . . .9
IV. PARTICIPATION . . . . . . . . . . . . . . . . . . . . .9
4.01 Selection. . . . . . . . . . . . . . . . . . . .9
4.02 Notification.. . . . . . . . . . . . . . . . . .9
4.03 Goals. . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
V. PARTICIPANTS' COMPENSATION. . . . . . . . . . . . . . 10
5.01 Base Compensation and Incentive Compensation.. 10
VI. BASE COMPENSATION . . . . . . . . . . . . . . . . . . 10
6.01 Determination. . . . . . . . . . . . . . . . . 10
VII. INCENTIVE COMPENSATION. . . . . . . . . . . . . . . . 10
7.01 Incentive Compensation Amounts.. . . . . . . . 10
7.02 Criteria for Determining Incentive
Compensation.. . . . . . . . . . . . . . . . . 11
7.03 Notification of Award. . . . . . . . . . . . . 11
7.04 Cooperation of Others. . . . . . . . . . . . . 11
VIII. INCENTIVE COMPENSATION FUND . . . . . . . . . . . . 12
8.01 Calculation. . . . . . . . . . . . . . . . . . 12
8.02 Scaling. . . . . . . . . . . . . . . . . . . . 12
8.03 Minimum Performance Requirement. . . . . . . . 13
IX. PAYMENT UPON CHANGE OF CONTROL. . . . . . . . . . . . 13
9.01 Change in Control. . . . . . . . . . . . . . . 13
X. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . 14
10.01 Other Benefit Plans. . . . . . . . . . . . . . 14
10.02 Termination of Participation; Interplan
Transfer.. . . . . . . . . . . . . . . . . . . 14
10.03 Future Employment. . . . . . . . . . . . . . . 15
10.04 Headings.. . . . . . . . . . . . . . . . . . . 15
10.05 Gender and Number. . . . . . . . . . . . . . . 15
10.06 Governing Law. . . . . . . . . . . . . . . . . 15
10.07 Effective Date.. . . . . . . . . . . . . . . . 16
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . 16
ii
<PAGE>
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN I
-----------------------------
I. PURPOSE
-------
The purpose of the Incentive Compensation Plan I (the
Plan) is to achieve and maintain a high level of corporate
performance by making it possible for those selected executives
whose efforts and responsibilities have direct and major
influence on corporate earnings to earn significant
compensation rewards in proportion to (i) measured corporate
performance and (ii) the individual executive's contribution.
II. DEFINITIONS
-----------
2.01 Base Compensation means the compensation referred
to in Section 6.01 and includes all salary, whether received or
deferred.
2.02 Beneficial Owner shall have the meaning defined
in Rule 13d-3 under the Exchange Act.
<PAGE>
2.03 Board means the Board of Directors of New England
Electric System.
2.04 Category A Participant means those Participants
so designated by the Committee.
2.05 Category B Participant means those Participants
so designated by the Committee.
2.06 Category C Participants means all Participants
not designated either Category A or Category B Participants.
2.07 Change in Control occurs when the conditions set
forth in either of the following paragraphs shall have been
satisfied:
(i) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities
of New England Electric System (not
including in the securities beneficially
owned by such Person any securities acquired
directly from New England Electric System or
its affiliates) representing 20% or more of
the combined voting power of New England
Electric System's then outstanding
securities; or
<PAGE>
(ii) during any period of not more than two
consecutive years after January 1, 1995,
individuals who at the beginning of such
period constitute the Board and any new
director (other than a director designated
by a Person who has entered into an
agreement with New England Electric System
to effect a transaction described in clause
(i) of this paragraph) whose election by the
Board or nomination for election by New
England Electric System's shareholders was
approved or recommended by a vote of at
least two-thirds of the directors then still
in office who either were directors at the
beginning of the period or whose election or
nomination for election was previously so
approved or recommended, cease for any
reason to constitute a majority of the
Board.
2.08 Committee means the Compensation Committee of the
Board.
2.09 Continuing Directors means, as of the date of
determination, any director who was a member of the Board on
January 1, 1990, or who was recommended for his initial term of
<PAGE>
office by a majority of the Continuing Directors in office at
the time of such recommendation, but excludes any director who,
together with his affiliates, is the beneficial owner of 20% or
more of the outstanding Shares (excluding securities
beneficially owned by reason of being a trustee of any employee
benefit plan of the System).
2.10 Corporate Targets means the same return on common
equity targets and cents per kilowatthour targets found in
Article IV of the Senior Incentive Compensation Plan for the
Plan Year.
2.11 Fund means the fund established each year as
provided in Section 8.01.
2.12 Incentive Compensation means the award made from
the Fund to each Participant in accordance with Section 7.01.
2.13 Low Return Target means the same low equity
return target provided in the Senior Incentive Compensation
Plan for the Plan Year.
2.14 A Major Transaction shall be deemed to have
occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
<PAGE>
(a) the shareholders of New England Electric System
approve a merger or consolidation with any corporation
or business trust, other than (i) a merger or
consolidation which would result in the individuals
who prior to such merger or consolidation constitute
the Board constituting at least two-thirds of the
board of directors of New England Electric System or
the surviving or succeeding entity immediately after
such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization
(or similar trasaction) in which no Person acquires
more than 20% of the combined voting power of New
England Electric System's then outstanding securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof; or
(c) the shareholder of New England Electric System approve
an agreement for the sale or disposition of all or
substantially all of New England Electric System's
assets, other than a sale or disposition which would
result in the individuals who prior to such sale or
disposition constitute the Board constituting at least
two-thirds of the board of directors of the Person
purchasing such assets immediately after such sale or
disposition.
<PAGE>
2.15 Management Committee means the Chief Executive
Officer of New England Electric System and one or more other
New England Electric System officers as appointed by the
Committee.
2.16 New England Electric System means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of
The Commonwealth of Massachusetts. Any agreement, obligation,
or liability made, entered into or incurred by or on behalf of
New England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof
assumes or shall be held to any liability therefor.
2.17 Participant means an individual who has been
selected, in accordance with Section 4.01, or an equivalent
prior provision, to be a participant in the Plan.
2.18 Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include
(i) New England Electric System or any subsidiary thereof, (ii)
a trustee or other fiduciary holding securities under an
<PAGE>
employee benefit plan of New England Electric System or any
subsidiary thereof, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv)
a corporation owned, directly or indirectly, by the
shareholders of New England Electric System in substantially
the same proportions as their ownership of shares of New
England Electric System.
2.19 Plan Year means a calendar year.
2.20 Senior Incentive Compensation Plan means New
England Electric Companies' Senior Incentive Compensation Plan,
as amended from time to time.
III. ADMINISTRATION
--------------
3.01 Administration and Interpretation. The Plan
shall be administered by the Committee, and interpretations of
the Plan by the Committee shall be final and binding on all
parties.
3.02 Amendment and Termination. The Committee may
amend or terminate the Plan at any time; provided, however,
that no such action shall affect any right or obligation with
respect to any award of Incentive Compensation previously
<PAGE>
granted; and provided, further, the provisions of Article IX
and Sections 2.06 and 2.08 may not be amended without the
written consent of any Participant affected.
3.03 Salary Approvals. The Committee will approve all
salary changes for individual Participants. Where required,
such changes must also receive the approval of the board of
directors of a subsidiary company.
3.04 No Segregation of Assets; No Assignment. New
England Electric System is not required to set aside or
segregate any assets of any kind to meet obligations under this
Plan. A Participant has no rights under this Plan to any
specific assets of New England Electric System. A Participant
may not commute, sell, assign, transfer, or otherwise convey
the right to receive any payments under this Plan, which
payments and the right thereto shall be, to the fullest extent
permitted by law, nonassignable and nontransferable, whether
voluntarily or involuntarily.
3.05 Accounting. The Manager of Internal Audits and
the Controller will be responsible to the Committee for
accounting matters directly affecting the Plan.
<PAGE>
IV. PARTICIPATION
-------------
4.01 Selection. It is anticipated (but not binding)
that the Committee shall select, by December 1 of each year,
the Participants for the following year.
4.02 Notification. The Management Committee shall
notify those Participants who have been included in the Plan
for the following year and those who have been dropped from the
Plan.
4.03 Goals. Individual goals for each Participant
will be made each Plan Year. Participants will be advised of
the goals prior to the Plan Year for which they apply.
V. PARTICIPANTS' COMPENSATION
--------------------------
5.01 Base Compensation and Incentive Compensation.
The compensation for each Participant will consist of two
parts: Base Compensation and Incentive Compensation.
VI. BASE COMPENSATION
-----------------
6.01 Determination. A Participant's performance will
be evaluated and his/her compensation, including any merit or
<PAGE>
promotional increase, will be set in accordance with the New
England Electric Salary Management Program. A Participant's
Base Compensation may be set anywhere within the salary range.
VII. INCENTIVE COMPENSATION
----------------------
7.01 Incentive Compensation Amounts. When the books
are closed at the end of a Plan Year and the amount of the Fund
for that year is determined in accordance with Article VIII,
the Management Committee will make recommendations to the
Committee for amounts of money from the Fund to be awarded to
each Participant. The Committee will act on the
recommendations and the money will be distributed to the
Participants based upon the Committee's determination by the
end of March following the Plan Year.
7.02 Criteria for Determining Incentive Compensation.
Each Participant's award shall be governed, first, by the
degree of success achieved by the Participant in reaching
his/her individual goals established prior to the Plan Year.
The money remaining in the Fund will be allocated among all the
Participants based upon their total individual performances
during the Plan Year.
<PAGE>
7.03 Notification of Award. The Management Committee
shall be responsible for seeing that each Participant is told
the basis for the amount of his/her Incentive Compensation.
7.04 Cooperation of Others. To achieve any of the
established goals will require the close cooperation of all the
Participants. If the Committee feel in any instance that lack
of such cooperation by others is making it difficult for a
Participant to achieve his/her individual goals, the dollars
not paid to this Participant will not be distributed to the
other members of the Plan. Otherwise, all money in the Fund
will be distributed.
VIII. INCENTIVE COMPENSATION FUND
-------------------------------
8.01 Calculation. The Fund for the Plan will be based
on the sum of the percentages for the Corporate Targets reached
multiplied by the sum of all Participants' Base Compensation,
namely:
<PAGE>
Return on
Common Equity - Target A 17.5%
Return on
Common Equity - Target B 8%
Return on
Common Equity - Target C 17.5%
Return on
Common Equity - Target D 8%
Cents Per
Kilowatthour - Target A 10%
Cents Per
Kilowatthour - Target B 5%
8.02 Scaling. Results will be scaled using straight
line interpolation between the Return on Common Equity Targets
A and B and between Return on Common Equity Targets C and D.
In determining whether the Return on Common Equity Targets are
met, the Committee may enhance or curtail the actual return on
equity in response to extraordinary events or other factors
relevant to performance of New England Electric System
companies.
8.03 Minimum Performance Requirement. If the Low
Return Target is not achieved, there will be no Incentive
Compensation for the Plan Year.
<PAGE>
IX. PAYMENT UPON CHANGE OF CONTROL
------------------------------
9.01 Change in Control. In the event of a Change in
Control or Major Transaction, each Participant will receive,
within 30 days, a cash payment equal to the average of the
bonus percentages for this Plan for the last three years prior
to the Change in Control or Major Transaction times the
Participant's annualized Base Compensation. If the Change in
Control or Major Transaction occurs prior to the determination
and payment of the Incentive Compensation for the prior Plan
Year, the Participant will also receive within 30 days a cash
payment equal to said percentage times the Participant's Base
Compensation received in the prior Plan Year; provided,
however, if it is determined that the Fund percentage
calculated in accordance with Sections 8.01 and 8.02 for said
prior Plan Year would have been greater, such higher percentage
will be used. No further benefits will be payable from this
Plan.
<PAGE>
X. GENERAL PROVISIONS
------------------
10.01 Other Benefit Plans. A Participant's Incentive
Compensation will not be used in determining the Participant's
benefits under any group insurance plan or any incentive
program other than New England Electric Companies' Incentive
Share Plan.
10.02 Termination of Participation; Interplan Transfer.
If, for any reason, a Participant should cease to be actively
employed by a subsidiary of New England Electric System prior
to July 1 of a Plan Year, that person will not be deemed a
Participant for that year unless the Management Committee
determines there are extraordinary circumstances which justify
inclusion. A Participant who ceases to be so actively employed
during the last six months of a Plan Year will be deemed a
Participant for that year on a proportional basis. The
Management Committee will also determine the extent, if any, of
participation by the person replacing a Participant. If a
Participant becomes a participant in another incentive
compensation plan during the Plan Year, the Participant will be
deemed to be a Participant for that year on a proportional
basis in each of the Plans, respectively.
<PAGE>
10.03 Future Employment. Neither the Plan nor the
making of awards hereunder shall be construed to create any
obligation to continue the Plan or to give any present or
future employee any right to continued employment.
10.04 Headings. The headings of articles and sections
of the Plan are for convenience of reference only.
10.05 Gender and Number. Unless the context requires
otherwise, the singular shall include the plural; the masculine
gender shall include the feminine; and such words as "herein",
"hereinafter", "hereof", and "hereunder" shall refer to this
instrument as a whole and not merely to the subdivisions in
which such words appear.
10.06 Governing Law. Except as otherwise required by
law, the Plan and all matters arising thereunder shall be
governed by the laws of The Commonwealth of Massachusetts.
10.07 Effective Date. This Amendment shall be
effective January 1, 1995.
s/George M. Sage
SIGNATURE ____________________________
Pursuant to Vote dated
October 24, 1995, of the
Compensation Committee
<PAGE>
Exhibit 10(s)
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN III
Adopted - November 29, 1988
Amended - May 23, 1990
Amended - December 1, 1991
Amended - January 1, 1994
Amended - March 1, 1994
Amended - January 1, 1995
Amended - January 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . .1
II. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . .1
2.01 Base Compensation . . . . . . . . . . . . . . . .1
2.02 Beneficial Owner. . . . . . . . . . . . . . . . .1
2.03 Board . . . . . . . . . . . . . . . . . . . . . .1
2.04 Change in Control . . . . . . . . . . . . . . . .1
2.05 Continuing Directors. . . . . . . . . . . . . . .5
2.06 Corporate Targets . . . . . . . . . . . . . . . .5
2.07 Fund. . . . . . . . . . . . . . . . . . . . . . .5
2.08 Incentive Compensation. . . . . . . . . . . . . .5
2.09 Low Return Target . . . . . . . . . . . . . . . .6
2.10 A Major Transaction . . . . . . . . . . . . . . .6
2.11 Management Committee. . . . . . . . . . . . . . .7
2.12 New England Electric System . . . . . . . . . . .7
2.13 Participant . . . . . . . . . . . . . . . . . . .8
2.14 Person. . . . . . . . . . . . . . . . . . . . . .8
2.15 Plan Year . . . . . . . . . . . . . . . . . . . .8
2.16 SBU . . . . . . . . . . . . . . . . . . . . . . .8
2.17 SBU Head. . . . . . . . . . . . . . . . . . . . .8
2.18 Senior Incentive Compensation Plan. . . . . . . .9
III. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . .9
3.01 Administration and Interpretation.. . . . . . . .9
3.02 Amendment or Termination. . . . . . . . . . . . .9
3.03 No Segregation of Assets; No Assignment.. . . . .9
3.04 Participant List. . . . . . . . . . . . . . . . 10
3.05 Accounting. . . . . . . . . . . . . . . . . . . 10
IV. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . 10
4.01 Selection.. . . . . . . . . . . . . . . . . . . 10
4.02 Notification. . . . . . . . . . . . . . . . . . 10
4.03 Goals.. . . . . . . . . . . . . . . . . . . . . 10
V. PARTICIPANTS' COMPENSATION . . . . . . . . . . . . . . 11
5.01 Base Compensation and Incentive Compensation. . 11
<PAGE>
VI. BASE COMPENSATION. . . . . . . . . . . . . . . . . . . 11
6.01 Performance Evaluation. . . . . . . . . . . . . 11
VII. INCENTIVE COMPENSATION. . . . . . . . . . . . . . . . 11
7.01 Incentive Compensation Amounts. . . . . . . . . 11
7.02 Criteria for Determining Incentive
Compensation. . . . . . . . . . . . . . . . . . 12
7.03 Notification of Award.. . . . . . . . . . . . . 12
7.04 Cooperation of Others.. . . . . . . . . . . . . 12
VIII. INCENTIVE COMPENSATION FUND . . . . . . . . . . 12
8.01 Calculation.. . . . . . . . . . . . . . . . . . 12
8.02 Scaling.. . . . . . . . . . . . . . . . . . . . 13
8.03 Minimum Performance Requirement.. . . . . . . . 13
IX. PAYMENT UPON CHANGE OF CONTROL . . . . . . . . . . . . 14
9.01 Change of Control.. . . . . . . . . . . . . . . 14
X. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 14
10.01 Other Benefit Plans.. . . . . . . . . . . . . . 14
10.02 Termination of Participation;
Interplan Transfer. . . . . . . . . . . . . . . 15
10.03 Future Employment.. . . . . . . . . . . . . . . 15
10.04 Headings. . . . . . . . . . . . . . . . . . . . 15
10.05 Gender and Number.. . . . . . . . . . . . . . . 15
10.06 Governing Law.. . . . . . . . . . . . . . . . . 16
10.07 Effective Date. . . . . . . . . . . . . . . . . 16
SIGNATURE
<PAGE>
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE COMPENSATION PLAN III
-------------------------------
I. PURPOSE
-------
The purpose of this Incentive Compensation Plan III (the
Plan) is to achieve and maintain a high level of corporate
performance by making it possible for executives whose efforts
and responsibilities have an influence on corporate earnings to
earn compensation rewards in proportion to (i) measured
corporate performance and (ii) the individual executive's
contribution.
II. DEFINITIONS
-----------
2.01 Base Compensation means the compensation referred
to in Section 6.01.
2.02 Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Exchange Act.
2.03 Board means the Board of Directors of New England
Electric System.
<PAGE>
2.04 Change in Control occurs when:
(a) Through March 15, 1995:
(i) any person, firm, corporation,
organization, or association of persons
or organizations acting in concert
(excluding any qualified employee
benefit plan of the System) acquires
more than 20% of the outstanding Shares,
whether in whole or in part, by means of
an offer made publicly to the holders of
all or substantially all of the
outstanding Shares to acquire Shares for
cash, other property, or a combination
thereof or by any other means, unless
the transaction is consented to by vote
of a majority of the Continuing
Directors;
(ii) New England Electric System transfers
all or a substantial part of its assets
to another person, firm, corporation,
organization, or association of persons
or organizations acting in concert
<PAGE>
(excluding a subsidiary controlled by
New England Electric System itself),
unless the transaction is consented to
by vote of a majority of the Continuing
Directors;
(iii) New England Electric System consolidates
or merges with or into any person, firm,
corporation, organization, or
association of persons or organizations,
unless the transaction is consented to
by vote of a majority of the Continuing
Directors; or
(iv) during any period of 24 consecutive
months, individuals who at the beginning
of such 24-month period were directors
of New England Electric System shall
cease to constitute a majority of the
Board, unless (a) the remaining
directors who were directors at the
beginning of such period, and (b) any
other directors whose election was
approved in advance by directors
representing a majority of the directors
<PAGE>
then in office who were directors at the
beginning of such period constitute a
majority of the Board; and
(b) After January 1, 1995, the conditions set
forth in either of the following paragraphs
shall have been satisfied:
(i) any Person is or becomes the Beneficial
Owner, directly or indirectly, of
securities of New England Electric
System (not including in the securities
beneficially owned by such Person any
securities acquired directly from New
England Electric System or its
affiliates) representing 20% or more of
the combined voting power of New England
Electric System's then outstanding
securities; or
(ii) during any period of not more than two
consecutive years on or after January 1,
1995, individuals who at the beginning
of such period constitute the Board and
any new director (other than a director
<PAGE>
designated by a Person who has entered
into an agreement with New England
Electric System to effect a transaction
described in clause (i) of this
paragraph) whose election by the Board
or nomination for election by New
England Electric System's shareholders
was approved or recommended by a vote of
at least two-thirds of the directors
then still in office who either were
directors at the beginning of the period
or whose election or nomination for
election was previously so approved or
recommended cease for any reason to
constitute a majority of the Board.
2.05 Continuing Directors means, as of the date of
determination, any director who was a member of the Board on
January 1, 1990, or who was recommended for his initial term of
office by a majority of the Continuing Directors in office at
the time of such recommendation, but excludes any director who,
together with his affiliates, is the beneficial owner of 20% or
more of the outstanding Shares (excluding securities
beneficially owned by reason of being a trustee of any employee
benefit plan of the System).
<PAGE>
2.06 Corporate Targets means the same return on common
equity targets and cents per kilowatthour targets found in
Article IV of the Senior Incentive Compensation Plan for the
Plan Year.
2.07 Fund means the fund established for each SBU for
each year as provided in Section 8.01.
2.08 Incentive Compensation means the award made from
the Fund to each Participant in accordance with Section 7.01.
2.09 Low Return Target means the same low equity return
target provided in the Senior Incentive Compensation Plan for
the Plan Year.
2.10 A Major Transaction shall be deemed to have
occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(a) the shareholders of New England Electric
System approve a merger or consolidation with
any corporation or business trust, other than
(i) a merger or consolidation which would
result in the individuals who prior to such
merger or consolidation constitute the Board
constituting at least two-thirds of the board
<PAGE>
of directors of New England Electric System or
the surviving or succeeding entity immediately
after such merger or consolidation, or (ii) a
merger or consolidation effected to implement
a recapitalization (or similar trasaction) in
which no Person acquires more than 20% of the
combined voting power of New England Electric
System's then outstanding securities;
(b) the shareholders of New England Electric
System approve a plan of complete liquidation
thereof; or
(c) the shareholder of New England Electric System
approve an agreement for the sale or
disposition of all or substantially all of New
England Electric System's assets, other than a
sale or disposition which would result in the
individuals who prior to such sale or
disposition constitute the Board constituting
at least two-thirds of the board of directors
of the Person purchasing such assets
immediately after such sale or disposition.
2.11 Management Committee means the Management Committee
established in accordance with the New England Electric System
Companies' Incentive Compensation Plan I.
<PAGE>
2.12 New England Electric System means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of
The Commonwealth of Massachusetts. Any agreement, obligation,
or liability made, entered into or incurred by or on behalf of
New England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof
assumes or shall be held to any liability therefor.
2.13 Participant means an individual who has been
selected, in accordance with Section 4.01, or an equivalent
prior provision, to be a participant in the Plan.
2.14 Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include
(i) New England Electric System or any subsidiary thereof, (ii)
a trustee or other fiduciary holding securities under an
employee benefit plan of New England Electric System or any
subsidiary thereof, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv)
a corporation owned, directly or indirectly, by the
<PAGE>
shareholders of New England Electric System in substantially
the same proportions as their ownership of shares of New
England Electric System.
2.15 Plan Year means a calendar year.
2.16 SBU means the business unit (administrative
services, retail business, or wholesale business) in which the
Participant is employed. If the Participant joins a different
SBU during the Plan Year, the Participant's service will be
allocated on a proportional basis to each of said SBUs.
2.17 SBU Head means the New England Electric System Vice
President responsible for the SBU.
2.18 Senior Incentive Compensation Plan means New
England Electric Companies' Senior Incentive Compensation Plan,
as amended from time to time.
III. ADMINISTRATION
--------------
3.01 Administration and Interpretation. The Plan shall
be administered by the Management Committee, and
interpretations of the Plan by the Management Committee shall
be final and binding by all parties.
<PAGE>
3.02 Amendment or Termination. The Management Committee
may amend or terminate the Plan at any time; provided, however,
that no such action shall affect any right or obligation with
respect to any Incentive Compensation previously granted; and
provided, further, the provisions of Article IX and Sections
2.04 and 2.05 may not be amended without the written consent of
any Participant affected.
3.03 No Segregation of Assets; No Assignment. New
England Electric System is not required to set aside or
segregate any assets of any kind to meet obligations under this
Plan. A Participant has no rights under this Plan to any
specific assets of New England Electric System. A Participant
may not commute, sell, assign, transfer, or otherwise convey
the right to receive any payments under this Plan, which
payments and the right thereto shall be, to the fullest extent
permited by law, nonassignable and nontransferable, whether
voluntarily or involuntarily.
3.04 Participant List. The Management Committee shall
be responsible for maintaining an up-to-date list of the
Participants in the Plan.
<PAGE>
3.05 Accounting. The Manager of Internal Audits and the
Controller will be responsible to the Management Committee for
accounting matters directly affecting the Plan.
IV. PARTICIPATION
-------------
4.01 Selection. The participants in the Plan will be
selected by the Management Committee.
4.02 Notification. It is anticipated (but not binding)
that the Management Committee shall notify by December 1 of
each year those executives who for the following year have been
included in the Plan and those that may be subsequently dropped
from the Plan.
4.03 Goals. The SBU Head, or his or her designees,
shall establish individual goals for each Participant for each
Plan Year and shall advise each Participant what goals have
been so established.
<PAGE>
V. PARTICIPANTS' COMPENSATION
--------------------------
5.01 Base Compensation and Incentive Compensation. The
compensation for each Participant will consist of two parts:
Base Compensation and Incentive Compensation.
VI. BASE COMPENSATION
-----------------
6.01 Performance Evaluation. A Participant's
performance will be evaluated and his/her compensation,
including any merit or promotional increase, will be set in
accordance with the New England Electric Salary Management
Program. A Participant's Base Compensation may be set anywhere
within the salary range.
VII. INCENTIVE COMPENSATION
----------------------
7.01 Incentive Compensation Amounts. When the books are
closed at the end of a Plan Year and the amount of the Fund for
that year is determined in accordance with Article VIII, the
SBU Head will recommend to the Management Committee and the
Management Committee will determine the appropriate amount to
be awarded each Participant, and this money will be distributed
<PAGE>
to the Participants by the end of March following the Plan
Year.
7.02 Criteria for Determining Incentive Compensation.
In arriving at each Participant's Incentive Compensation, the
SBU Head and the Management Committee shall be governed by the
degree of success achieved by the Participant in reaching
his/her individual goals which were established prior to the
Plan Year. Their decision will be binding. The money
remaining in the Fund will be allocated among all the
Participants based upon their total individual performances
during the Plan Year.
7.03 Notification of Award. The SBU Head shall be
responsible for seeing that each Participant is told the basis
for the size of his/her Incentive Compensation.
7.04 Cooperation of Others. To achieve any of the
established goals will require the close cooperation of all the
Participants. If the SBU Head or the Management Committee
feels in any instance that lack of such cooperation by others
is making it difficult for a Participant to achieve his/her
individual goals, the dollars not paid to this Participant will
not be distributed to the other members of the Plan.
Otherwise, all money in the Fund will be distributed.
<PAGE>
VIII. INCENTIVE COMPENSATION FUND
---------------------------
8.01 Calculation. The Fund for each SBU Plan will be
based on the sum of the percentages for the Corporate Targets
reached multiplied by the sum of the Base Compensation for all
Participants in that SBU, namely:
Return on
Common Equity - Target A 6%
Return on
Common Equity - Target B 2 1/2%
Return on
Common Equity - Target C 6%
Return on
Common Equity - Target D 2 1/2%
Cents Per
Kilowatthour - Target A 3%
Cents Per
Kilowatthour - Target B 2%
8.02 Scaling. Results will be scaled using straight
line interpolation between the Return on Common Equity Targets
A and B and between Return on Common Equity Targets C and D.
In determining whether the Return on Common Equity Targets are
met, the Management Committee may enhance or curtail the actual
return on equity in response to extraordinary events or other
factors relevant to performance of New England Electric System
companies.
<PAGE>
8.03 Minimum Performance Requirement. If the Low Return
Target is not achieved, there will be no Incentive Compensation
for the Plan Year.
IX. PAYMENT UPON CHANGE OF CONTROL
------------------------------
9.01 Change of Control. In the event of a Change in
Control or Major Transaction, each Participant will receive,
within 30 days, a cash payment equal to the average of the
bonus percentages for the last three years (or, if less than
three years, the number of full calendar years since December
31, 1995) for this Plan prior to the Change in Control or Major
Transaction times the Participant's Base Compensation. If the
Change in Control or Major Transaction occurs prior to the
determination and payment of the Incentive Compensation for the
prior Plan Year, the Participant will also receive within 30
days a cash payment equal to said percentage times the
Participant's Base Compensation received in the prior Plan
Year; provided, however, if it is determind that the Fund
percentage calculated in accordance with Sections 8.01 and 8.02
for said prior Plan Year would have been greater, such higher
percentage will be used. No further benefits will be payable
from this Plan.
<PAGE>
X. GENERAL PROVISIONS
------------------
10.01 Other Benefit Plans. A Participant's
Incentive Compensation will not be used in determining a
Participant's benefits under any group insurance plan or any
incentive program other than New England Electric Companies'
Incentive Share Plan.
10.02 Termination of Participation; Interplan
Transfer. If, for any reason, a Participant should cease to be
actively employed by a subsidiary of New England Electric
System prior to July 1 of a Plan Year, that person will not be
deemed a Participant for that year unless the SBU Head
determines there are extraordinary circumstances which justify
inclusion. A Participant who ceases to be so actively employed
during the last six months of a Plan year will be deemed a
Participant for that year on a proportional basis. The SBU
Head will also determine the extent, if any, of participation
by the person replacing a Participant. If a Participant
becomes a participant in another incentive compensation plan
during the Plan Year, the Participant will be deemed to be a
Participant for that year on a proportional basis in each of
the Plans, respectively.
<PAGE>
10.03 Future Employment. Neither the Plan nor the
making of awards hereunder shall be construed to create any
obligation to continue the Plan or to give any present or
future employee any right to continued employment.
10.04 Headings. The headings of articles and
sections of the Plan are for convenience of reference only.
10.05 Gender and Number. Unless the context
requires otherwise, the singular shall include the plural; the
masculine gender shall include the feminine; and such words as
"herein," "hereinafter," "hereof," and "hereunder" shall refer
to this instrument as a whole and not merely to the
subdivisions in which such words appear.
10.06 Governing Law. Except as otherwise required
by law, the Plan and all matters arising thereunder shall be
governed by the laws of The Commonwealth of Massachusetts.
<PAGE>
10.07 Effective Date. This Amendment shall be
effective January 1, 1996.
s/John W. Rowe
Date:
J.W. Rowe
s/J.T. Bok
Date: April 20, 1995
J.T. Bok
The Management Committee
In accordance with votes of the New
England Electric System Compensation
Committee of October 24, 1995
<PAGE>
Exhibit 10(u)
NEW ENGLAND ELECTRIC SYSTEM
DIRECTORS DEFERRED COMPENSATION PLAN
May 13, 1985
Amended June 21, 1985
Amended November 25, 1986
Amended November 24, 1992
Amended May 20, 1996
Amended December 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . .1
II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .1
2.01 Actuarial Value . . . . . . . . . . . . . . . . . .2
2.02 Beneficial Owner. . . . . . . . . . . . . . . . . .2
2.03 Beneficiary . . . . . . . . . . . . . . . . . . . .2
2.04 Benefits Committee. . . . . . . . . . . . . . . . .2
2.05 Board . . . . . . . . . . . . . . . . . . . . . . .2
2.06 Cash Account. . . . . . . . . . . . . . . . . . . .3
2.07 Cash Account Balance. . . . . . . . . . . . . . . .3
2.08 Change in Control . . . . . . . . . . . . . . . . .3
2.09 Company . . . . . . . . . . . . . . . . . . . . . .4
2.10 Compensation. . . . . . . . . . . . . . . . . . . .4
2.11 Compensation Committee. . . . . . . . . . . . . . .5
2.12 Deferred Compensation . . . . . . . . . . . . . . .5
2.13 Deferred Compensation Account . . . . . . . . . . .5
2.14 Deferral Unit . . . . . . . . . . . . . . . . . . .5
2.15 Disability. . . . . . . . . . . . . . . . . . . . .5
2.16 Dividend. . . . . . . . . . . . . . . . . . . . . .5
2.17 Dividend Reinvestment Plan. . . . . . . . . . . . .6
2.18 Election Period . . . . . . . . . . . . . . . . . .6
2.19 Interest. . . . . . . . . . . . . . . . . . . . . .6
2.20 A Major Transaction . . . . . . . . . . . . . . . .6
2.21 New England Electric System . . . . . . . . . . . .8
2.22 Other Plans . . . . . . . . . . . . . . . . . . . .8
2.23 Participant . . . . . . . . . . . . . . . . . . . .9
2.24 Person. . . . . . . . . . . . . . . . . . . . . . .9
2.25 Plan Year . . . . . . . . . . . . . . . . . . . . .9
2.26 Qualified Plan. . . . . . . . . . . . . . . . . . .9
2.27 Retainer Shares . . . . . . . . . . . . . . . . . .9
2.28 Retirement. . . . . . . . . . . . . . . . . . . . 10
2.29 Shares. . . . . . . . . . . . . . . . . . . . . . 10
2.30 Share Account . . . . . . . . . . . . . . . . . . 10
2.31 Share Account Balance . . . . . . . . . . . . . . 11
2.32 Share Price . . . . . . . . . . . . . . . . . . . 11
2.33 Subsidiary. . . . . . . . . . . . . . . . . . . . 12
<PAGE>
III. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . 12
3.01 Benefits Committee. . . . . . . . . . . . . . . . 12
3.02 Liability for Acts. . . . . . . . . . . . . . . . 12
3.03 Minors, Etc.. . . . . . . . . . . . . . . . . . . 13
3.04 Proof.. . . . . . . . . . . . . . . . . . . . . . 13
3.05 Denied Claim. . . . . . . . . . . . . . . . . . . 14
IV. OPERATION OF THE PLAN . . . . . . . . . . . . . . . . . . 15
4.01 Deferral Election.. . . . . . . . . . . . . . . . 15
4.02 Time of Election. . . . . . . . . . . . . . . . . 16
4.03 Deferred Compensation Accounts. . . . . . . . . . 17
A. Cash Account . . . . . . . . . . . . . . . 18
B. Share Account. . . . . . . . . . . . . . . 18
4.04 Payment of Balances . . . . . . . . . . . . . . . 19
A. Election of Time of Payment. . . . . . . . 19
B. Payments After Ten Years . . . . . . . . . 19
C. Payments at Retirement . . . . . . . . . . 19
D. Hardship Payments. . . . . . . . . . . . . 20
E. Dissolution of Company; A Major
Transaction; Change in Control . . . . . . 21
F. Death or Disability. . . . . . . . . . . . 22
G. Form of Payments . . . . . . . . . . . . . 22
H. Distributed Shares . . . . . . . . . . . . 23
I. Taxes. . . . . . . . . . . . . . . . . . . 25
4.05 No Segregation of Assets. . . . . . . . . . . . . 25
4.06 Failure of Payments . . . . . . . . . . . . . . . 26
V. AMENDMENT OR TERMINATION. . . . . . . . . . . . . . . . . 27
5.01 Right to Amend and Terminate. . . . . . . . . . . 27
VI. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . 28
6.01 Nonalienation of Benefits.. . . . . . . . . . . . 28
6.02 Effectuation of Interest. . . . . . . . . . . . . 28
6.03 Copy of Plan. . . . . . . . . . . . . . . . . . . 28
6.04 Headings. . . . . . . . . . . . . . . . . . . . . 29
6.05 Gender and Number.. . . . . . . . . . . . . . . . 29
6.06 Separability. . . . . . . . . . . . . . . . . . . 29
6.07 Applicability.. . . . . . . . . . . . . . . . . . 30
6.08 Governing Law.. . . . . . . . . . . . . . . . . . 30
6.09 Effective Date. . . . . . . . . . . . . . . . . . 30
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ii
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
DIRECTORS DEFERRED COMPENSATION PLAN
------------------------------------
I. EFFECT
------
The Directors Deferred Compensation Plan was first executed
in May of 1985. This instrument constitutes an amendment and
restatement of the Plan. The Plan was further amended as of May
20, 1996, in order to provide additional flexibility and to
encourage additional share equivalent ownership by Directors.
The Plan is being further amended as of December 1, 1996, in
order to permit participation by Directors of Subsidiaries. All
rights to Deferred Compensation of Participants shall be
determined exclusively by the provisions of this instrument.
Deferrals made under previous versions of the Plan and under
individual deferral agreements will provide benefits under, and
are controlled by, the terms of such versions, except that
Subsection 4.04(F) will be controlling in the event of a Change
of Control or a Major Transaction. Any deferral elections in
effect shall continue through December 31, 1996.
II. DEFINITIONS
-----------
2.01 Actuarial Value will be established using the most
recent assumptions established by the Benefits Committee for the
Qualified Plan.
<PAGE>
2.02 Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Exchange Act.
2.03 Beneficiary means any person designated in writing
by a Participant (which designation may be changed from time to
time) to receive benefits under the Plan payable upon death of
the Participant. Unless otherwise designated, the Beneficiary
will be the beneficiary under the Participant's Group Life
Insurance enrollment and insurance provided by the Company or a
subsidiary. If there is no designated Beneficiary alive when the
Participant dies, the benefit shall be paid to the estate of the
Participant.
2.04 Benefits Committee means the Benefits Committee
established in accordance with the Qualified Plan.
2.05 Board means the Board of Directors of the New
England Electric System.
2.06 Cash Account means the account established for a
Participant in accordance with subsection 4.03(A) and the amounts
in individual cash deferral agreements with directors of
Subsidiaries executed prior to their being able to participate in
the Plan.
<PAGE>
2.07 Cash Account Balance means the amount deferred by
the Participant in his or her Cash Account and Interest thereon,
all as provided in Subsection 4.03(A), less any payments or
reductions made in accordance with Section 4.04 or 4.06.
2.08 Change in Control occurs when the conditions set
forth in either of the following paragraphs shall have been
satisfied:
(a) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of New
England Electric System (not including in the
securities beneficially owned by such Person any
securities acquired directly from New England
Electric System or its affiliates) representing 20%
or more of the combined voting power of New England
Electric System's then outstanding securities; or
(b) during any period of not more than two consecutive
years after January 1, 1995, individuals who at the
beginning of such period constitute the Board and
any new director (other than a director designated
by a Person who has entered into an agreement with
New England Electric System to effect a transaction
<PAGE>
described in clause (a) of this Section) whose
election by the Board or nomination for election by
New England Electric System's shareholders was
approved or recommended by a vote of at least two-
thirds of the directors then still in office who
either were directors at the beginning of the
period or whose election or nomination for election
was previously so approved or recommended, cease
for any reason to constitute a majority of the
Board.
2.09 Company means the New England Electric System.
2.10 Compensation means
(a) quarterly retainers for Board and committee
service;
(b) meeting fees for Board and committee service; and
(c) Retainer Shares.
2.11 Compensation Committee means the Compensation
Committee of the Board.
2.12 Deferred Compensation means the Compensation of a
Participant deferred in accordance with the terms of this Plan.
<PAGE>
2.13 Deferred Compensation Account means the special
memorandum account established for a Participant on the books of
the Company or Subsidiary pursuant to Section 4.03.
2.14 Deferral Unit means an investment unit established
under prior provisions of the Plan.
2.15 Disability means a physical or mental condition of
the Participant which, based on satisfactory medical evidence, is
believed to be permanent and to render the Participant unfit to
engage in an occupation for compensation or profit.
2.16 Dividend has the meaning set out in subsection
4.03(B).
2.17 Dividend Reinvestment Plan means the New England
Electric System Dividend Reinvestment and Common Share Purchase
Plan, as amended from time to time.
<PAGE>
2.18 Election Period is the 365-day period following:
(a) the mailing of the notice to the Participant of his
or her eligibility to make an election due to a
Change of Control or a Major Transaction, or
(b) the date when the Participant is no longer a member
of either the Board or the Board of Directors of a
Subsidiary,
as applicable.
2.19 Interest means the factor described in Subsection
4.03(A).
2.20 A Major Transaction shall be deemed to have
occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(a) the shareholders of New England Electric System
approve a merger or consolidation with any
corporation or business trust, other than (i) a
merger or consolidation which would result in the
individuals who prior to such merger or
consolidation constitute the Board constituting at
least two-thirds of the board of directors of New
England Electric System or the surviving or
succeeding entity immediately after such merger or
<PAGE>
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization (or
similar transaction) in which no Person acquires
more than 20% of the combined voting power of New
England Electric System's then outstanding
securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof; or
(c) the shareholder of New England Electric System
approve an agreement for the sale or disposition of
all or substantially all of New England Electric
System's assets, other than a sale or disposition
which would result in the individuals who prior to
such sale or disposition constitute the Board
constituting at least two-thirds of the board of
directors of the Person purchasing such assets
immediately after such sale or disposition.
2.21 New England Electric System means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation, or
liability made, entered into or incurred by or on behalf of New
<PAGE>
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof assumes
or shall be held to any liability therefor.
2.22 Other Plans means the New England Electric
Companies' Executive Supplemental Retirement Plan, the New
England Electric System Companies Retirement Supplement Plan, the
New England Electric System Deferred Compensation Plan, New
England Electric Companies' Senior Incentive Compensation Plan,
New England Electric Companies' Incentive Compensation Plan I,
New England Electric Companies' Incentive Compensation Plan II,
New England Electric Companies' Incentive Compensation Plan III,
or New England Electric Companies Long-term Performance Share
Award Plan.
2.23 Participant means a Director of the Company or a
Subsidiary who is not an employee of the Company or any of its
affiliates and who has completed a participation agreement.
2.24 Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include (i)
New England Electric System or any subsidiary thereof, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of New England Electric System or any subsidiary
<PAGE>
thereof, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of New England
Electric System in substantially the same proportions as their
ownership of shares of New England Electric System.
2.25 Plan Year means a calendar year.
2.26 Qualified Plan means the New England Electric
System Companies' Final Average Pay Pension Plan I.
2.27 Retainer Shares means Shares paid as of each May
for Board service and as of each August.
2.28 Retirement means the date on which a Participant
commences receiving retirement income payments under this Plan.
Such payment will normally commence on the first business day of
the month after the later of the date on which the Participant
reaches age 65 or the date when the Participant is no longer a
member of either the Board or the Board of Directors of a
Subsidiary; however, a Participant may, at any time on or after
he or she has ceased to be a member of the Board of the Company
or any Subsidiary, apply in writing to the Benefits Committee for
approval of an earlier commencement. The decision whether to
<PAGE>
allow such earlier commencement shall be in the sole discretion
of the Benefits Committee.
Retirement under this Plan is not contingent upon retirement
under the Qualified Plan or any other plan maintained by the
Company or a Subsidiary.
2.29 Shares means common shares of New England Electric
System. After a merger, consolidation, or other similar
restructuring of New England Electric System, Shares shall mean
the common shares of the new entity.
2.30 Share Account means the account established for a
Participant in accordance with Subsection 4.03(B).
2.31 Share Account Balance means the amount deferred by
the Participant in his or her Share Account and Dividends
thereon, all as provided in Subsection 4.03(B), less any payments
or reductions made in accordance with Sections 4.04 and 4.06.
2.32 Share Price for purchases shall be determined using
as a proxy the price of Shares being acquired by the New England
Electric System Dividend Reinvestment Plan during the time period
when the Shares for this Plan would be acquired were this Plan a
participant in that plan. The Share Price for Shares being
liquidated shall be determined by using the price actually
<PAGE>
received by the Rabbi Trust on a sale of Shares related hereto or
by using as a proxy the price received for those Shares sold by
the Dividend Reinvestment Plan next following the date of
determination.
For a Change in Control or Major Transaction, the cash value
of Shares will be established using the highest average of the
high and low prices on the New York Stock Exchange Composite
Transaction as reported in the Wall Street Journal for any five
consecutive trading days in the 60 days preceding the Change in
Control or Major Transaction. If there is no trading in the
Shares on the New York Stock Exchange for a substantial amount of
time during the five-day period, or if publication by The Wall
Street Journal of reports of Share transactions for any day in
the five-day period does not take place or is subject to
reporting error, the value of Shares shall be determined by the
Benefits Committee on the basis of such market quotations or
other method as the Benefits Committee shall deem appropriate.
2.33 Subsidiary means Granite State Electric Company,
Massachusetts Electric Company, or The Narragansett Electric
Company.
<PAGE>
III. ADMINISTRATION
---------------
3.01 Benefits Committee. This Plan shall be
administered by the Benefits Committee, and interpretations of
the Plan by the Benefits Committee shall be final and binding on
all parties.
3.02 Liability for Acts. Neither the Compensation
Committee, the Benefits Committee, nor the Company, nor any
Subsidiary nor the members, officers, directors, agents, or
employees of any of the foregoing shall be liable for any error
of omission or commission unless such error results from its,
his, or her own gross negligence, willful misconduct, or lack of
good faith; nor shall any such party be liable for any act of
gross negligence, willful misconduct, or lack of good faith of
any other such party.
3.03 Minors, Etc. If a minor, person declared
incompetent, or person incapable of handling the disposition of
his or her property is entitled to receive a benefit, make an
application, or make an election hereunder, the Benefits
Committee may direct that such benefits be paid to, or such
application or election be made by, the guardian, legal
<PAGE>
representative, or person having the care and custody of such
minor, incompetent, or incapable person. Any payment made,
application allowed, or election implemented in accordance with
this Section shall completely discharge the Plan, the
Compensation Committee, the Benefits Committee, the Company, and
each Subsidiary from all liability with respect thereto.
3.04 Proof. The Benefits Committee may require proof of
the death, Disability, incompetency, minority, or incapacity of
any Participant or Beneficiary, and of the right of a person to
receive any benefit or make any application or election.
3.05 Denied Claim. The procedures when a claim under
this Plan is denied by the Benefits Committee are as follows:
(a) The Benefits Committee shall:
(i) notify the claimant within a reasonable time of
such denial, setting forth the specific reasons
therefor; and
(ii) afford the claimant a reasonable opportunity for
a review of the decision.
(b) The notice of such denial shall set forth, in addition
to the specific reasons for the denial, the following:
<PAGE>
(i) identification of pertinent provisions of this
Plan;
(ii) such additional information as may be relevant
to denial of claim; and
(iii) an explanation of the claims review procedure;
and advice that the claimant may request an
opportunity to submit a statement of issues and
comments.
(c) Within sixty days following advice of denial of a
claim, upon request made by the claimant, the Benefits
Committee shall take appropriate steps to review its
decision in light of any further information or
comments submitted by the claimant. The Benefits
Committee may hold a hearing at which the claimant may
present the basis of any claim for review.
(d) The Benefits Committee shall render a decision within a
reasonable time (not in excess of 120 days) after the
claimant's request for review and shall advise the
claimant in writing of its decision, specifying the
reasons and identifying the appropriate provisions of
this Plan.
<PAGE>
(e) The Benefits Committee shall report to the Compensation
Committee any denials of claims, requests for review,
and actions taken in response to such requests. The
Compensation Committee may review such denials and
actions and may affirm, modify, or reverse same.
IV. OPERATION OF THE PLAN
---------------------
4.01 Deferral Election. A Participant may elect to defer
compensation as follows:
A. A Participant may elect to defer any whole percentage
of his or her quarterly retainer, including any
committee retainer.
B. A Participant may elect to defer any whole percentage
of his or her meeting fees, including committee fees.
C. A Participant may elect to defer all of his or her
Retainer Shares.
These elections are not exclusive and a Participant may
elect one, or any combination thereof.
4.02 Time of Election. Elections for deferrals shall be
made prior to commencement of the Plan Year in which the
Compensation is to be earned. If an individual becomes a
<PAGE>
Participant during a Plan Year, he or she may, at the time, elect
prior to receipt of the related Compensation to defer
Compensation received or earned during that or a succeeding Plan
Year.
An election once made shall be effective for each succeeding
year until a superseding election is made or until it is
cancelled. Any superseding election shall be effective for each
Plan Year subsequent to the year in which it was made.
Each Participant qualifying for participation on April 30,
1996, may elect, prior to July 1, 1996, to make a 4.01 (A) or (B)
deferral with respect to retainers and meeting fees for the last
two quarters of 1996.
4.03 Deferred Compensation Accounts. Deferrals of cash
retainers and meeting fees shall be allocated to either a Cash
Account or a Share Account as selected by the Participant at the
time he or she makes an election for the related deferral.
Deferrals of Retainer Shares shall be allocated to a Share
Account. Share values are to be determined by the Share Price on
the date the cash or Shares would otherwise have been paid to the
Participant.
<PAGE>
Once a deferral is allocated to the Cash or Share Account,
it may not be reallocated; provided, however, prior to July 1,
1996, a Participant may reallocate his or her existing Cash
Account Balance (other than that related to Deferral Units) or
any portion thereof to a Share Account; and, provided further,
that prior to February 1, 1997, a Participant may reallocate his
or her existing Cash Balances relating to service with a
Subsidiary, or any portion thereof, to a Share Account.
A. Cash Account. The Cash Account for each Participant
shall be credited with an amount of Deferred
Compensation as of the date the equivalent cash payment
would otherwise have been made. All Cash Accounts
shall be increased by a factor (the Interest) as
follows: As of the last day of each Plan Year, the
Company shall credit to each such account interest on
the balance in such account computed with regard to the
amount of time during the Plan Year that such amount
has been credited to such account. The rate of
interest shall be the twelve-month average for the Plan
Year of the monthly base rates on prime corporate loans
at the principal office of The First National Bank of
Boston in effect on the last day of each month.
<PAGE>
B. Share Account. The Share Account for each Participant
shall be credited with an amount of Deferred
Compensation as of the date the equivalent cash payment
would otherwise have been made (at the Share Price on
the next investment date) or Retainer Shares awarded to
the Participant. Upon each declaration of cash
dividends on Shares, the Participant's Share Account
shall be increased by the number of Shares equivalent
to the dividend declared on a Share (the Dividend)
multiplied by the number of Shares credited to the
Participant's Share Account on the date of record
calculated as if the Shares in the Account had
participated in the Dividend Reinvestment Plan.
4.04 Payment of Balances.
A. Election of Time of Payment. At the time of electing
to defer Compensation, in accordance with Subsection
4.01, the Participant shall also elect whether to
receive payment after ten years or upon Retirement;
and, if upon Retirement, whether in ten payments or a
lump sum.
<PAGE>
B. Payments After Ten Years. If the Participant has
elected payment after ten years, the full related Cash
and Share Account Balances shall be paid as soon as
practicable after the close of the tenth anniversary of
the close of the related Plan Year.
C. Payments at Retirement. If the Participant has elected
payment at Retirement, the Participant's full Cash and
Share Account Balances shall be paid either
(i) in ten annual payments commencing at Retirement,
or
(ii) in a lump sum as soon as practicable after
Retirement.
D. Hardship Payments. Prior to a Participant's
termination of Board service (or completion of a
subsection 4.04 (C)(i) payment stream, if applicable),
the Compensation Committee shall have the power and
discretion to make a payment to such Participant from
his or her Deferred Compensation Account at any time if
the Compensation Committee determines that the
Participant is suffering from a serious financial
emergency resulting from circumstances beyond the
Participant's control which would cause a hardship to
<PAGE>
the Participant unless such payment was made. Payments
will be made first from the Cash Account, to the extent
not in Deferral Units, secondly from the Share Account,
and thirdly from Deferral Units. Benefits otherwise
payable from a partially liquidated Deferral Unit shall
then be actuarially adjusted, using the most recent
assumptions established by the Benefits Committee for
the Qualified Plan, for the payment made. No payments
will be made on account of Deferral Units for which a
split-dollar option has been elected under prior
provisions of the Plan.
Any such hardship payment will be in a lump sum
and will not exceed the lesser of (i) the amount
necessary to satisfy the hardship situation or (ii) the
balance of the Participant's Deferred Compensation
Accounts.
E. Dissolution of Company; A Major Transaction; Change in
Control. In the event of dissolution, liquidation, or
winding up of the business of the Company or, if
applicable, the Subsidiary, whether voluntary or
involuntary, the Participant shall receive, at the time
of such event, a lump sum payment equal to the balance
<PAGE>
in his Cash and Share Accounts and the Actuarial Value
of the maximum value of future benefits from Deferral
Units.
A Participant may, at any time after either a Change in
Control or a Major Transaction, and when the
Participant has ceased to be a member of the Board or,
if applicable, the Board of Directors of the
Subsidiary, elect to receive, in lieu of any future
benefits hereunder, a lump sum payment equal to the
Cash Accounts and Share Accounts and the Actuarial
Value of the maximum value of future benefits from
Deferral Units, all less 10%. The Company or, if
applicable, the Subsidiary shall as soon as possible
after a Change in Control or Major Transaction advise
the Participant of his rights under this paragraph.
F. Death or Disability. In the event of the Participant's
death, the full Cash and Share Account Balances shall
be distributed to the Beneficiary as soon as
practicable.
At the request of the Participant following his
Disability, the full Cash and Share Account Balances
shall be distributed to the Participant as soon as
practicable.
<PAGE>
G. Form of Payments. Except as provided herein, any
distribution from a Cash Account will be in cash. Any
distribution from a Share Account will be in the form
of Shares; however, the Participant may elect, before
the 30th day preceding the tenth anniversary or
Retirement, as the case may be, to receive cash in lieu
of Shares for any percentage up to 100% of said
distribution.
All distributions on account of Hardship, death,
Disability, dissolution, Change in Control, Major
Transaction, or failure of payments shall be in cash.
H. Distributed Shares. The date of determination for the
Share Price of Shares distributed or converted
hereunder shall be:
(i) for payments under 4.04(B), December 31 of the
concluding year;
(ii) for payments under 4.04(C)(i), the last day of
the month prior to the payment;
(iii) for payments under 4.04(C)(ii), the last day of
the month following Retirement;
<PAGE>
(iv) for payments under 4.04(D), the last trading
date of the month prior to the month in which
the Compensation Committee authorizes the
distribution;
(v) for payments under the first paragraph of
4.04(E), the last trading date of the month
preceding the triggering event;
(vi) for payments under the second paragraph of
4.04(E), the highest average of the high and low
prices on the New York Stock Exchange Composite
Transaction as reported in the Wall Street
Journal for any five consecutive trading days in
the 60 days preceding the Change in Control or
Major Transaction (if there is no trading in the
Shares on the New York Stock Exchange for a
substantial amount of time during the five-day
period, or if publication by the Wall Street
Journal of reports of Share transactions for any
day in the five-day period does not take place
or is subject to reporting error, the value of
Shares shall be determined by the Benefits
Committee on the basis of such market quotations
or other method as the Benefits Committee shall
deem appropriate);
<PAGE>
(vii) for payments under 4.04(F), the last day of the
month following the triggering event;
(viii) for elections made during an election period
other than under the second paragraph of
4.04(F), the last day of the month following
filing of the election with the Company; and
(ix) for payments made under 4.06, the last day of
the month preceding the triggering event.
Shares to be distributed shall be purchased by the Company
or the Subsidiary on the open market, unless an officer of the
Company determines otherwise; provided, however, if the Company
or Subsidiary has placed an appropriate number of Shares in the
Rabbi Trust for the benefit of the Participant, the Company or
Subsidiary may satisfy the requirement by distribution of said
Shares.
I. Taxes. If a distribution is to be made solely in
Shares, the Company or the Subsidiary may withhold from such
distribution an amount equal to its withholding obligations under
state and Federal tax laws.
4.05 No Segregation of Assets. Neither the Company nor any
Subsidiary shall be required to set aside or segregate any assets
of any kind to meet any obligations under this Plan. All
obligations of the Company and the Subsidiaries shall be
<PAGE>
reflected by bookkeeping entries only. The Participants shall
have no rights under this Plan to any specific assets of the
Company or the Subsidiaries (including any Shares purchased by
the Company to reflect its obligation hereunder) and ownership of
any insurance policies relating to Deferral Units shall remain
with the Company. The rights of a Participant under this Plan
shall be those of a general, unsecured creditor of the Company or
the Subsidiary.
4.06 Failure of Payments. Any provision to the contrary,
if, after termination of service on the Board of the Company or
the Subsidiary, as applicable, the Company or a Subsidiary shall
fail to make any payment to a Participant when due under this
Plan or any employer or company shall fail to make payments to
any Participant due under any of the Other Plans, each
Participant will be paid immediately a lump sum payment equal to
the balance of his Cash and Share Accounts (and the Actuarial
Value of the maximum value of future benefits from Deferral
Units). If any employer or company shall fail to make a payment
as provided above due to inadvertence or a good faith delay to
permit processing and shall immediately upon discovery of such
failure or delay make such payment in full, the original failure
to make the payment or payments shall not, for the purposes of
this paragraph, be a failure to make a payment. If any employer
or company shall, in good faith, contest a claim by a participant
<PAGE>
under this Plan or any of the Other Plans, the failure to make
the contested payment or payments shall not, for the purpose of
this paragraph, be a failure to make a payment.
V. AMENDMENT OR TERMINATION
------------------------
5.01 Right to Amend and Terminate. The Compensation
Committee may amend or terminate this Plan at any time; provided,
however, that no such action shall affect any right or obligation
with respect to any Compensation previously earned; provided,
further, that, if the Compensation Committee, in its sole
discretion, determines that (a) changes in Federal income tax
statutes, rules, or regulations, (b) changes in the Federal tax
rate paid by the Company, or (c) the application or potential
application to the Plan of Section 406 of Title I of the Employee
Retirement Income Security Act of 1974 make it advisable,
existing Deferral Units may be modified or cancelled; and
provided further, no amendment or discontinuance in any manner
adverse to a Participant with respect to benefit formula or
optional form of payment may be made for three years following a
Change in Control or a Major Transaction. No such modification
or cancellation shall affect any Participant's Cash or Share
Account Balances. No such modification may reduce the then
<PAGE>
established retirement income or death benefit of a Participant
who has had a Termination of Service, but it may reduce or
eliminate any subsequent increases in either or both.
VI. GENERAL PROVISIONS
------------------
6.01 Nonalienation of Benefits. Except as provided in the
split dollar option under prior provisions of the Plan, to the
fullest extent permitted by law a Participant shall not have the
right to commute, sell, assign, transfer, or otherwise convey the
right to receive any payments under this Plan, which payments and
the right thereto shall be nonassignable and nontransferable,
whether voluntarily or involuntarily.
6.02 Effectuation of Interest. In the event it should
become impossible for the Company, any Subsidiary, the
Compensation Committee, or the Benefits Committee to perform any
act required by the Plan, the Company, any Subsidiary, the
Compensation Committee, or the Benefits Committee may perform
such other act as it in good faith determines will most nearly
carry out the intent and purpose of the Plan.
6.03 Copy of Plan. An executed copy of the Plan shall be
available for inspection by Participants or other persons
entitled to benefits under the Plan at reasonable times at the
offices of the Company.
<PAGE>
6.04 Headings. The headings of articles and sections of the
Plan are for convenience of reference only.
6.05 Gender and Number. Unless the context requires
otherwise, the singular shall include the plural; the masculine
gender shall include the feminine; and such words as "herein",
"hereinafter", "hereof", and "hereunder" shall refer to this
instrument as a whole and not merely to the subdivision in which
such words appear.
6.06 Separability. If any term or provision of this Plan,
as presently in effect or as amended from time to time, or the
application thereof to any payments or circumstances, shall to
any extent be invalid or unenforceable, the remainder of this
Plan and the application of such term or provision to payments or
circumstances other than those as to which it is invalid or
unenforceable shall not be affected thereby, and each term or
provision of this Plan shall be valid and enforced to the fullest
extent permitted by law.
6.07 Applicability. All provisions of this Plan shall be
uniformly applicable to all Participants.
<PAGE>
6.08 Governing Law. Except as otherwise required by law,
this Plan and all matters arising thereunder shall be governed by
the laws of The Commonwealth of Massachusetts.
6.09 Effective Date. This Amendment shall be effective
June 1, 1996 and as to Direction of Subsidiaries December 1,
1996.
s/George M. Sage
______________________________
Chairman
Pursuant to Votes of the
Compensation Committee
<PAGE>
Exhibit 10(w)
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE SHARE PLAN
Adopted February 27, 1990
Effective January 1, 1990
Amended February 8, 1991
Amended January 1, 1994
Amended February 21, 1994
Amended February 22, 1995
Amended February 26, 1996
Amended February 24, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . .1
II. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .1
2.01 Annual Incentive Share Award . . . . . . . . .1
2.02 Beneficial Owner . . . . . . . . . . . . . . .1
2.03 Benefits Committee . . . . . . . . . . . . . .2
2.04 Cash Bonus . . . . . . . . . . . . . . . . . .2
2.05 Change in Control. . . . . . . . . . . . . . .2
2.06 Company. . . . . . . . . . . . . . . . . . . .3
2.07 Compensation Committee . . . . . . . . . . . .4
2.08 Continuing Directors . . . . . . . . . . . . .4
2.09 Hardship . . . . . . . . . . . . . . . . . . .4
2.10 ICP-I. . . . . . . . . . . . . . . . . . . . .4
2.11 ICP-I Category A Participant . . . . . . . . .5
2.12 ICP-I Category B Participant . . . . . . . . .5
2.13 ICP-II . . . . . . . . . . . . . . . . . . . .5
2.14 A Major Transaction. . . . . . . . . . . . . .5
2.15 Management Committee . . . . . . . . . . . . .6
2.16 Matching Percentage. . . . . . . . . . . . . .7
2.17 New England Electric Company Management
Incentive Plan . . . . . . . . . . . . . . . .7
2.18 New England Electric System. . . . . . . . . .8
2.19 NEES Board . . . . . . . . . . . . . . . . . .8
2.20 Participant. . . . . . . . . . . . . . . . . .8
2.21 Incentive Compensation Plan III. . . . . . . .9
2.22 Person . . . . . . . . . . . . . . . . . . . .9
2.23 Plan . . . . . . . . . . . . . . . . . . . . .9
2.24 Plan Year. . . . . . . . . . . . . . . . . . .9
2.25 Restricted Shares. . . . . . . . . . . . . . 10
2.26 Shares . . . . . . . . . . . . . . . . . . . 10
2.27 System . . . . . . . . . . . . . . . . . . . 10
2.28 Trustee. . . . . . . . . . . . . . . . . . . 10
III. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . 10
3.01 Administration and Interpretation. . . . . . 10
3.02 Amendment or Termination.. . . . . . . . . . 11
<PAGE>
IV. ANNUAL INCENTIVE SHARE AWARD . . . . . . . . . . . . . . 11
4.01 Calculation of Award.. . . . . . . . . . . . 11
4.02 Purchase of Shares.. . . . . . . . . . . . . 11
4.03 Timing of Purchase.. . . . . . . . . . . . . 13
4.04 Distribution of Shares.. . . . . . . . . . . 13
4.05 Change in Control. . . . . . . . . . . . . 13
V. RESTRICTED SHARES. . . . . . . . . . . . . . . . . . . . 14
5.01 Assignment and Alienability. . . . . . . . . 14
5.01A Restriction on Shares to Officers. . . . . . 14
5.02 Death or Disability. . . . . . . . . . . . . 15
5.03 Change of Control. . . . . . . . . . . . . . 15
5.04 Hardship.. . . . . . . . . . . . . . . . . . 15
5.05 Voting, Tender, Dividend Rights. . . . . . . 15
5.06 Deferral of Receipt of Shares. . . . . . . . 15
VI. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 16
6.01 Other Benefit Plan.. . . . . . . . . . . . . 16
6.02 Future Employment. . . . . . . . . . . . . . 16
6.03 Headings. . . . . . . . . . . . . . . . . . 16
6.04 Gender and Number. . . . . . . . . . . . . . 16
6.05 Governing Law. . . . . . . . . . . . . . . . 17
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
NEW ENGLAND ELECTRIC COMPANIES'
INCENTIVE SHARE PLAN
--------------------
I. PURPOSE
-------
The purpose of the Incentive Share Plan (the Plan) is to
achieve and maintain a high level of corporate performance and
continue the identification of interest between management and
shareholders by making it possible for those selected executives
and individuals whose efforts and responsibilities have a direct
and major influence on corporate performance to earn significant
compensation, in the form of restricted shares, measured by the
individual's achievements under other NEES company incentive
compensation or bonus plans.
II. DEFINITIONS
-----------
2.01 Annual Incentive Share Award means the award referred
to in Article IV.
2.02 Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Exchange Act.
<PAGE>
2.03 Benefits Committee means the committee established in
accordance with New England Electric System Companies' Final
Average Pay Pension Plan I.
2.04 Cash Bonus means the total cash bonus awarded a
Participant for a Plan Year under a New England Electric Company
Management Incentive Plan, including amounts awarded upon a
Change in Control or a Major Transaction.
2.05 Change in Control occurs when the conditions set
forth in either of the following paragraphs shall have been
satisfied:
(i) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of New
England Electric System (not including in the
securities beneficially owned by such Person
any securities acquired directly from New
England Electric System or its affiliates)
representing 20% or more of the combined voting
power of New England Electric System's then
outstanding securities; or
<PAGE>
(ii) during any period of not more than two
consecutive years on or after January 1, 1995,
individuals who at the beginning of such period
constitute the NEES Board and any new director
(other than a director designated by a Person
who has entered into an agreement with New
England Electric System to effect a transaction
described in clause (i) of this paragraph)
whose election by the NEES Board or nomination
for election by New England Electric System's
shareholders was approved or recommended by a
vote of at least two-thirds of the directors
then still in office who either were directors
at the beginning of the period or whose
election or nomination for election was
previously so approved or recommended cease for
any reason to constitute a majority of the NEES
Board.
2.06 Company means any New England Electric System Company
that has an employee(s) who participates in the Plan.
<PAGE>
2.07 Compensation Committee means the compensation
committee of the NEES Board.
2.08 Continuing Directors means, as of the date of
determination, any director who was a member of the NEES Board as
of January 1, 1990, or who was recommended for his/her initial
term of office by a majority of the Continuing Directors in
office at the time of such recommendation, but excludes any
director who, together with his/her affiliates, is the beneficial
owner of 20% or more of the outstanding Shares (excluding
securities beneficially owned by reason of being a trustee of any
employee benefit plan of the System).
2.09 Hardship means a circumstance where the Benefits
Committee determines that the Participant is suffering from a
serious financial emergency resulting from circumstances beyond
the Participant's control.
2.10 ICP-I means New England Electric System Companies'
Incentive Compensation Plan, as amended from time to time.
<PAGE>
2.11 ICP-I Category A Participant means those participants
designated as such pursuant to ICP-I, as amended from time to
time.
2.12 ICP-I Category B Participant means those participants
designated as such pursuant to ICP-I, as amended from time to
time.
2.13 ICP-II means New England Electric System Companies'
Incentive Compensation Plan II, as amended from to time.
2.14 A Major Transaction shall be deemed to have occurred
if the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(a) the shareholders of New England Electric System
approve a merger or consolidation with any
corporation or business trust, other than (i) a
merger or consolidation which would result in the
individuals who prior to such merger or consolidation
constitute the NEES Board constituting at least two-
thirds of the board of directors of New England
<PAGE>
Electric System or the surviving or succeeding entity
immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement
a recapitalization (or similar trasaction) in which
no Person acquires more than 20% of the combined
voting power of New England Electric System's then
outstanding securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof; or
(c) the shareholder of New England Electric System
approve an agreement for the sale or disposition of
all or substantially all of New England Electric
System's assets, other than a sale or disposition
which would result in the individuals who prior to
such sale or disposition constitute the NEES Board
constituting at least two-thirds of the board of
directors of the Person purchasing such assets
immediately after such sale or disposition.
2.15 Management Committee means the Management Committee
established in accordance with the New England Electric System
Companies' Incentive Compensation Plan I.
<PAGE>
2.16 Matching Percentage means:
60% if the Participant is a participant in New
England Electric Companies' Senior Incentive Compensation
Plan;
50% if the Participant is an ICP-I Category A
Participant;
45% if the Participant is an ICP-I Category B
Participant;
45% if the Participant is an ICP-I Category C
Participant;
45% if the Participant is a participant in ICP-II; or
33% if the Participant is a participant in ICP-III.
2.17 New England Electric Company Management Incentive
Plan means any or all of the following plans as in effect from
time to time: New England Electric Companies' Senior Incentive
Compensation Plan; ICP-I; ICP-II; and ICP-III.
<PAGE>
2.18 New England Electric System means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation, or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, or agent thereof assumes or shall
be held to any liability therefor.
2.19 NEES Board means board of directors of New England
Electric System.
2.20 Participant means any individual who is a participant
in a New England Electric Company Management Incentive Plan.
2.21 Incentive Compensation Plan III means New England
Electric Companies' Incentive Compensation Plan III, as amended
from time to time.
<PAGE>
2.22 Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include (i)
New England Electric System or any subsidiary thereof, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of New England Electric System or any subsidiary
thereof, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of New England
Electric System in substantially the same proportions as their
ownership of shares of New England Electric System.
2.23 Plan means the New England Electric Companies'
Incentive Share Plan, as amended from time to time.
2.24 Plan Year means a calendar year.
2.25 Restricted Shares means Shares issued under the Plan
subject to the restrictions found in Article V.
2.26 Shares means common shares of New England Electric
System.
<PAGE>
2.27 System means the New England Electric System holding
company system.
2.28 Trustee means any bank or other financial institution
so designated by the Management Committee.
III. ADMINISTRATION
--------------
3.01 Administration and Interpretation. The Plan shall be
administered by the Management Committee. Interpretations of the
Plan by the Management Committee shall be final and binding on
all parties; provided, however, any interpretations which would
substantially increase the benefits under the Plan of any member
of the Management Committee shall be referred to the Compensation
Committee.
3.02 Amendment or Termination. The Compensation Committee
may amend or terminate the Plan at any time; provided, however,
that no such action shall affect any right or obligation with
respect to any Annual Incentive Share Award previously granted;
and provided, further, the provisions of Sections 2.05, 2.08, and
<PAGE>
5.03 may not be amended without the written consent of any
Participant affected.
IV. ANNUAL INCENTIVE SHARE AWARD
----------------------------
4.01 Calculation of Award. Each Participant's Annual
Incentive Share Award shall be determined by multiplying the
Participant's Cash Bonus by the applicable Matching Percentage.
4.02 Purchase of Shares. The Annual Incentive Share Award
provided by the Companies shall be used to purchase Shares in the
Participant's name. The number of Shares purchased shall be
rounded up for any award amounts not sufficient to purchase a
whole Share. Shares awarded may, at the option of the
Compensation Committee, be either newly issued or purchased on
the open market.
If Shares are purchased on the open market, the Management
Committee may require each Company to deposit cash in a trust as
needed to buy the requisite number of Shares for awards as they
are determined. The Trustee will invest the cash in Shares as
soon as practicable. Any Shares purchased by the Trustee shall
<PAGE>
be held until all awards have been invested in Shares. Share
awards shall be allocated and distributed to Participants as soon
as practicable after completion of all purchases. Any awards
held in trust shall be held for the exclusive benefit of the
Participants.
The price of Shares, whether purchased from the System or on
the open market, will be computed on the basis of the average of
high and low prices on the New York Stock Exchange - Composite
Transactions as reported in The Wall Street Journal for the five
consecutive trading days ending on the last trading day prior to
the fifteenth day of January following the Plan Year for which
the award applies, or the date of Change in Control, if
applicable. If there is no trading in Shares on the New York
Stock Exchange for a substantial amount of time during the
five-day period, or if publication by The Wall Street Journal of
reports of Share transactions for any day in the five-day period
does not take place or is subject to reporting error, the value
of Shares shall be determined by the System on the basis of such
market quotations or other method as the System shall deem
appropriate.
<PAGE>
The price of Shares purchased on the open market shall not
include commissions. To the extent Shares held by the Trustee
earn cash dividends, said dividends shall be allocated and
distributed to Participants on a pro-rata basis.
4.03 Timing of Purchase. Purchase of Shares under the
Plan shall take place as soon as practicable following the end of
the Plan Year for which the Annual Incentive Share Award applies.
4.04 Distribution of Shares. Shares shall be distributed
to Participants within a reasonable time after purchase is
completed.
4.05 Change in Control. In the event of a Change in
Control or of a Major Transaction, each Participant will receive,
within 30 days, a cash payment calculated in accordance with
Section 4.01. If the Change in Control or Major Transaction
occurs prior to the determination and payment of the
Participant's Cash Bonus for the Prior Year, the Participant will
also receive within 30 days a cash payment calculated in
accordance with Section 4.01 for that year. No further benefits
in either Shares or cash will be payable for this Plan.
<PAGE>
V. RESTRICTED SHARES
-----------------
5.01 Assignment and Alienability. All Shares awarded
under the Plan, in respect of performance prior to 1995, shall
not be commuted, sold, assigned, transferred, or otherwise
conveyed, whether voluntarily or involuntarily, for a period of
five years from issuance.
5.01A Restriction on Shares to Officers. All Shares
awarded under the Plan to officers of New England Electric
System, in respect of performance in 1996 and thereafter, shall
not be commuted, sold, assigned, transferred, or otherwise
conveyed, whether voluntarily or involuntarily, for a period of
five years from issuance; provided, however, said Shares may be
deferred to the New England Electric Companies' Deferred
Compensation Plan.
5.02 Death or Disability. In the event of a Participant's
death or disability, any and all restrictions on Restricted
Shares shall lapse.
<PAGE>
5.03 Change of Control. In the event of a Change of
Control or a Major Transaction, any and all restrictions on
Restricted Shares shall lapse.
5.04 Hardship. In the event of Hardship, the Benefits
Committee may authorize a removal of restrictions on the number
of Restricted Shares necessary to alleviate the Hardship.
5.05 Voting, Tender, Dividend Rights. Participants hold
all voting, tender offer, exchange offer, and dividend rights to
Restricted Shares.
5.06 Deferral of Receipt of Shares. Anything in this Plan
to the contrary notwithstanding, a Participant may elect to defer
receipt of an Annual Incentive Share Award and the related Shares
by means of a separate agreement with the Participant's Company.
Thereafter, the Participant's right to an incentive share award
or shares deferred thereunder shall be governed solely by the
terms of such other agreement.
<PAGE>
VI. GENERAL PROVISIONS
------------------
6.01 Other Benefit Plan. Awards or other distributions
issued under the Plan will not be used in determining a
Participant's benefit under any group insurance plan or any
incentive program.
6.02 Future Employment. Neither the Plan nor the making
of awards hereunder shall be construed to create any obligation
to continue the Plan or to give any present or future employee
any right to continued employment.
6.03 Headings. The headings of articles and sections of
the Plan are for convenience of reference only.
6.04 Gender and Number. Unless the context requires
otherwise, the singular shall include the plural; the masculine
gender shall include the feminine; and such words as "herein",
"hereinafter", "hereof", and "hereunder" shall refer to this
instrument as a whole and not merely to the subdivisions in which
such words appear.
<PAGE>
6.05 Governing Law. Except as otherwise required by law,
the Plan and all matters arising thereunder shall be governed by
the laws of The Commonwealth of Massachusetts.
SIGNATURE February 24, 1997 s/George M. Sage
Date: ______________________ _________________________________
Pursuant to Votes dated February
21, 1994, February 22, 1995,
February 26, 1996, and February
24, 1997, by the Compensation
Committee
<PAGE>
Exhibit 10(x)
NEW ENGLAND ELECTRIC COMPANIES
LONG-TERM PERFORMANCE SHARE AWARD PLAN
Adopted - November 28, 1995
Amended - February 24, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . .1
II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .1
2.01 Base Compensation . . . . . . . . . . . . . . .1
2.02 Beneficial Owner. . . . . . . . . . . . . . . .1
2.03 Beneficiary . . . . . . . . . . . . . . . . . .1
2.04 Board . . . . . . . . . . . . . . . . . . . . .2
2.05 Change in Control . . . . . . . . . . . . . . .2
2.07 Disability. . . . . . . . . . . . . . . . . . .3
2.08 Employer. . . . . . . . . . . . . . . . . . . .4
2.09 Incentive Plans . . . . . . . . . . . . . . . .4
2.10 A Major Transaction . . . . . . . . . . . . . .4
2.11 New England Electric System . . . . . . . . . .6
2.12 Participant . . . . . . . . . . . . . . . . . .6
2.13 Performance Cycle . . . . . . . . . . . . . . .6
2.14 Performance Shares. . . . . . . . . . . . . . .6
2.15 Person. . . . . . . . . . . . . . . . . . . . .6
2.16 Plan Year . . . . . . . . . . . . . . . . . . .7
2.17 Retirement. . . . . . . . . . . . . . . . . . .7
2.18 Shares. . . . . . . . . . . . . . . . . . . . .7
2.19 System. . . . . . . . . . . . . . . . . . . . .7
III. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . .8
3.01 Administration and Interpretation.. . . . . . .8
3.02 Amendment and Termination.. . . . . . . . . . .8
3.03 No Segregation of Assets; No Assignment.. . . .8
3.04 Accounting. . . . . . . . . . . . . . . . . . .9
IV. PERFORMANCE SHARES. . . . . . . . . . . . . . . . . . . .9
4.01 Goals . . . . . . . . . . . . . . . . . . . . .9
4.02 Performance Shares. . . . . . . . . . . . . . .9
4.03 Plan Factor . . . . . . . . . . . . . . . . . 10
4.04 Change in Incentive Plan. . . . . . . . . . . 10
4.05 Determination of Shares to be Received. . . . 11
4.06 Restriction on Shares to Officers . . . . . . 11
<PAGE>
V. PAYMENT UPON CHANGE OF CONTROL OR TERMINATION OF
EMPLOYMENT. . . . . . . . . . . . . . . . . . . . . . . 12
5.01 Change in Control . . . . . . . . . . . . . . 12
5.02 Death . . . . . . . . . . . . . . . . . . . . 13
5.03 Disability, Retirement or Special Severance . 13
5.04 Other Termination . . . . . . . . . . . . . . 14
5.05 Hardship. . . . . . . . . . . . . . . . . . . 14
5.06 Proof . . . . . . . . . . . . . . . . . . . . 14
VI. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . 15
6.01 Other Benefit Plans.. . . . . . . . . . . . . 15
6.02 Future Employment.. . . . . . . . . . . . . . 15
6.03 Headings. . . . . . . . . . . . . . . . . . . 15
6.04 Gender and Number.. . . . . . . . . . . . . . 15
6.05 Governing Law.. . . . . . . . . . . . . . . . 16
6.06 Effective Date. . . . . . . . . . . . . . . . 16
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
NEW ENGLAND ELECTRIC COMPANIES
LONG-TERM PERFORMANCE SHARE AWARD PLAN
---------------------------------------
I. PURPOSE
-------
The purpose of the Long-Term Performance Share Award Plan
(the Plan) is to achieve and maintain a high level of continued
corporate performance by making it possible for those executives
whose efforts and responsibilities have direct and major
influence on corporate activity to earn significant compensation
rewards in proportion to measured corporate performance over a
multi-year period.
II. DEFINITIONS
-----------
2.01 Base Compensation means the Participant's salary
level as in effect on a given date of determination.
2.02 Beneficial Owner shall have the meaning defined in
Rule 13d-3 under the Exchange Act.
<PAGE>
2.03 Beneficiary means any person designated in writing by
the Participant (which designation may be changed from time to
time) to receive benefits under the Plan payable upon death of
the Participant. Unless otherwise designated, the Beneficiary
will be the beneficiary under the Participant's Group Life
Insurance enrollment and insurance provided, in whole or in part,
by the Employer. If there is no designated Beneficiary alive
when the Participant dies, the benefit shall be paid to the
estate of the Participant.
2.04 Board means the Board of Directors of New England
Electric System.
2.05 Change in Control occurs when the conditions set
forth in either of the following paragraphs shall have been
satisfied:
(a) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of New
England Electric System (not including in the
securities beneficially owned by such Person any
securities acquired directly from New England
Electric System or its affiliates) representing
<PAGE>
20% or more of the combined voting power of New
England Electric System's then outstanding
securities; or
(b) during any period of not more than two
consecutive years after January 1, 1995,
individuals who at the beginning of such period
constitute the Board and any new director (other
than a director designated by a Person who has
entered into an agreement with New England
Electric System to effect a transaction
described in clause (i) of this paragraph) whose
election by the Board or nomination for election
by New England Electric System's shareholders
was approved or recommended by a vote of at
least two-thirds of the directors then still in
office who either were directors at the
beginning of the period or whose election or
nomination for election was previously so
approved or recommended, cease for any reason to
constitute a majority of the Board.
<PAGE>
2.06 Committee means the Compensation Committee of the
Board.
2.07 Disability means a physical or mental condition of
the Participant which, based on satisfactory medical evidence, is
believed to be permanent and to render the Participant unfit to
perform duties for an Employer.
2.08 Employer means the company within the New England
Electric System holding company system which pays the base payof
the Participant.
2.09 Incentive Plans means:
(a) the New England Electric Companies' Senior
Incentive Compensation Plan,
(b) the New England Electric Companies' Incentive
Compensation Plan I, and
(c) the New England Electric Companies' Incentive
Compensation Plan II.
<PAGE>
2.10 A Major Transaction shall be deemed to have occurred
if the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(a) the shareholders of New England Electric System
approve a merger or consolidation with any
corporation or business trust, other than (i) a
merger or consolidation which would result in
the individuals who prior to such merger or
consolidation constitute the Board constituting
at least two-thirds of the board of directors of
New England Electric System or the surviving or
succeeding entity immediately after such merger
or consolidation, or (ii) a merger or
consolidation effected to implement a
recapitalization (or similar trasaction) in
which no Person acquires more than 20% of the
combined voting power of New England Electric
System's then outstanding securities;
(b) the shareholders of New England Electric System
approve a plan of complete liquidation thereof;
or
<PAGE>
(c) the shareholders of New England Electric System
approve an agreement for the sale or disposition
of all or substantially all of New England
Electric System's assets, other than a sale or
disposition which would result in the
individuals who prior to such sale or
disposition constitute the Board constituting at
least two-thirds of the board of directors of
the Person purchasing such assets immediately
after such sale or disposition.
2.11 New England Electric System means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation, or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof assumes
or shall be held to any liability therefor.
<PAGE>
2.12 Participant means a participant in one of the
Incentive Plans.
2.13 Performance Cycle means a three-year performance
cycle commencing on January one of a Plan Year. A new,
independent Performance Cycle will commence each Plan Year.
2.14 Performance Shares means the potential share grants
assigned under Section 4.02.
2.15 Person shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include (i)
New England Electric System or any subsidiary thereof, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of New England Electric System or any subsidiary
thereof, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of New England
Electric System in substantially the same proportions as their
ownership of shares of New England Electric System.
2.16 Plan Year means a calendar year.
<PAGE>
2.17 Retirement means termination of service with the
System on or after the date when the Participant could first
commence receiving benefits under the New England Electric System
Companies' Final Average Pay Pension Plan I.
2.18 Shares means common shares of New England Electric
System.
2.19 System means the New England Electric System and its
subsidiaries.
III. ADMINISTRATION
--------------
3.01 Administration and Interpretation. The Plan shall be
administered by the Committee, and interpretations of the Plan by
the Committee shall be final and binding on all parties.
3.02 Amendment and Termination. The Committee may amend
or terminate the Plan at any time; provided, however, that no
such action shall affect any right or obligation with respect to
any Performance Shares allocated to a Participant's account.
<PAGE>
3.03 No Segregation of Assets; No Assignment. Neither New
England Electric System nor any Employer is required to set aside
or segregate any assets of any kind to meet obligations under
this Plan. A Participant has no rights under this Plan to any
specific assets of New England Electric System or any Employer
(including any Shares purchased by the Employer to reflect its
obligations hereunder). A Participant may not commute, sell,
assign, transfer, or otherwise convey the right to receive any
payments under this Plan, which payments and the right thereto
shall be, to the fullest extent permitted by law, nonassignable
and nontransferable, whether voluntarily or involuntarily.
3.04 Accounting. The Manager of Internal Audits and the
Controller will be responsible to the Committee for accounting
matters directly affecting the Plan.
IV. PERFORMANCE SHARES
------------------
4.01 Goals. Prior to commencement of a Performance Cycle,
the Committee shall establish independent goals for that cycle in
<PAGE>
critical areas of System performance.There may be sub-goals
within each goal.
The Committee will identify the performance factor, the
award range, and the weight for each goal. All Participants will
share equally in all goals.
4.02 Performance Shares. For each Performance Cycle, the
account of each Participant will be assigned Performance Shares
of a value equivalent to the Participant's Base Compensation on
January 1 of the Plan Year (except as set forth in Section 4.04)
multiplied by the appropriate plan factor as set out in Section
4.03. The value of a Performance Share, whether purchased from
the System or on the open market, will be computed on the basis
of the average of high and low prices on the New York Stock
Exchange - Composite Transactions as reported in The Wall Street
Journal for the five consecutive trading days ending on the last
trading day prior to the fifteenth day of January of the Plan
Year.
No dividends (either in cash or shares) will be paid on or
accrued to Performance Shares during a Performance Cycle.
<PAGE>
4.03 Plan Factor. The plan factors are as follows:
For Participants in:
--------------------
Senior Incentive Compensation Plan 50%
Incentive Compensation Plan I
- Level A 50%
Incentive Compensation Plan I
- Level B 25%
Incentive Compensation Plan I
- Level C 25%
Incentive Compensation Plan II 15%
4.04 Change in Incentive Plan. If a Participant becomes
eligible for a particular Incentive Plan during the Plan Year or
if a Participant ceases to be a Participant in a particular
Incentive Plan during the Plan Year, his Performance Shares for
that cycle will be adjusted to reflect (i) the ratio of the
months served in that particular Incentive Plan to twelve and
(ii) his Base compensation under the new Incentive Plan.
4.05 Determination of Shares to be Received. As soon as
practicable after the termination of a Performance Cycle, the
Participant will receive Shares equal to the number of
Performance Shares assigned to him at the commencement of the
<PAGE>
cycle multiplied by the sum of the value of the goal achievements
for that cycle. Each goal will be independently measured. Any
fractional Share will be rounded up to the next whole Share.
The Participant may elect, prior to the close of the
Performance Cycle, to receive cash in lieu of 50% of the Shares
so awarded. The value of Shares so converted shall be determined
on the basis of the high and low prices, whether purchased from
the System or on the open market, computed on the basis of the
average of high and low prices on the New York Stock Exchange -
Composite Transactions as reported in The Wall Street Journal for
the five consecutive trading days ending on the last trading day
prior to the fifteenth day of January of the calendar year
following the close of the Performance Cycle.
4.06 Restriction on Shares to Officers. All Shares
awarded under the Plan to officers of New England Electric System
shall not be commuted, sold, assigned, transferred, or otherwise
conveyed, whether voluntarily or involuntarily, for a period of
five years from issuance; provided, however, said Shares may be
deferred to the New England Electric Companies' Deferred
Compensation Plan. In the event of a Change in Control or a
<PAGE>
Major Transaction, the foregoing restriction shall lapse. The
hardship provisions of the Incentive Share Plan shall apply to
these restricted shares.
V. PAYMENT UPON CHANGE OF CONTROL OR TERMINATION OF EMPLOYMENT
-----------------------------------------------------------
5.01 Change in Control. In the event of a Change in
Control or a Major Transaction, each Participant will receive,
within 30 days of such event, a cash payment equal to the product
of "a" times "b" times "c", where:
"a" is the number of Performance Shares in the
Participant's account, and
"b" is the value of a Performance Share determined
using the highest Share price of any Share in the
sixty days preceding the Change in Control or Major
Transaction, and
"c" is, for performance cycles through December 31,
2000, the average of the target achievement
percentages for the Incentive Compensation Plan I for
the last three years prior to the Change in Control
or Major Transaction and, for performance cycles
<PAGE>
ending after December 31, 2000, the average of the
goal achievements for this Plan for the last three
years prior to the Change in Control or Major
Transaction.
5.02 Death. In the event of a Participant's death, the
Beneficiary will receive, by the end of March following the
calendar year in which the death occurs, Shares calculated as
follows: The Performance Shares for the Plan Year in which the
Participant died will be adjusted to reflect the number of months
(or portions thereof) elapsed divided by twelve. For each
Performance Cycle, the Plan Factors will be calculated as if that
Cycle had terminated at the close of the calendar year in which
the Participant died.
5.03 Disability, Retirement or Special Severance. In the
event of his Disability, Retirement, transfer to a direct or
indirect subsidiary of New England Electric System in which the
New England Electric System owns 50% or less equity interest, or
severance as part of a program under which a number of employees
are being severed in connection with a unique event, such as sale
of the System generation or restructuring of the Company as part
<PAGE>
of a restructuring of the electric utility industry, a
Participant will receive, by the end of the March following the
close of the Performance Cycle, a distribution in accordance with
Section 4.05. His Performance Shares for the Plan Year in which
he is disabled, retires, or is transferred will be adjusted to
reflect the number of months (or portions thereof) elapsed
divided by twelve.
5.04 Other Termination. In the event of termination of
employment other than those referred to in Section 5.02 or 5.03,
a Participant will forfeit his Performance Shares.
5.05 Hardship. Other than as provided herein, there will
be no distributions from the Plan to Participants, whether for
hardship or otherwise.
5.06 Proof. The Committee may require proof of the death,
Disability, incompetency, minority, or incapacity of any
Participant or beneficiary, and of the right of a person to
receive any distribution hereunder.
<PAGE>
VI. GENERAL PROVISIONS
------------------
6.01 Other Benefit Plans. Neither a Participant's
Performance Shares nor any cash or Shares distributed hereunder
will be used in determining the Participant's benefits under any
group insurance plan, pension plan, or any other incentive
program.
6.02 Future Employment. Neither the Plan nor the making
of awards hereunder shall be construed to create any obligation
to continue the Plan or to give any present or future employee
any right to continued employment.
6.03 Headings. The headings of articles and sections of
the Plan are for convenience of reference only.
6.04 Gender and Number. Unless the context requires
otherwise, the singular shall include the plural; the masculine
gender shall include the feminine; and such words as "herein",
"hereinafter", "hereof", and "hereunder" shall refer to this
instrument as a whole and not merely to the subdivisions in which
such words appear.
<PAGE>
6.05 Governing Law. Except as otherwise required by law,
the Plan and all matters arising thereunder shall be governed by
the laws of The Commonwealth of Massachusetts.
6.06 Effective Date. This Plan shall be effective for
Plan Years beginning on and after January 1, 1996.
February 24, 1997
Dated:_____________________ s/George M. Sage
___________________________________
Pursuant to vote of November 28,
1995, of the NEES Board and vote of
February 24, 1997, of the
Compensation Committee
<PAGE>
Exhibit 10(y)
NEW ENGLAND ELECTRIC SYSTEM
---------------------------
DIRECTORS RETIREMENT PLAN
-------------------------
May 1, 1994
<PAGE>
New England Electric System
---------------------------
Directors Retirement Plan
-------------------------
TABLE OF CONTENTS
-----------------
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .1
Board . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Committee . . . . . . . . . . . . . . . . . . . . . . . . .1
New England Electric System . . . . . . . . . . . . . . . .1
Participant . . . . . . . . . . . . . . . . . . . . . . . .1
Retainer. . . . . . . . . . . . . . . . . . . . . . . . . .1
Qualified Plan. . . . . . . . . . . . . . . . . . . . . . .1
Quarter of Service. . . . . . . . . . . . . . . . . . . . .1
Plan Benefits. . . . . . . . . . . . . . . . . . . . . . . . . .2
Retirement Benefit. . . . . . . . . . . . . . . . . . . . .2
Form of Payment . . . . . . . . . . . . . . . . . . . . . .2
Termination of Benefits . . . . . . . . . . . . . . . . . .2
No Death Benefits . . . . . . . . . . . . . . . . . . . . .2
Administration and Claims. . . . . . . . . . . . . . . . . . . .2
Government Regulations . . . . . . . . . . . . . . . . . . . . .3
Nonassignment. . . . . . . . . . . . . . . . . . . . . . . . . .3
Provisions of Benefits . . . . . . . . . . . . . . . . . . . . .3
Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Amendment or Discontinuance. . . . . . . . . . . . . . . . . . .3
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . .4
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
---------------------------
DIRECTORS RETIREMENT PLAN
-------------------------
Definitions
- -----------
When used in this Plan, the following words will have the meaning
given below:
1. Board means the Board of Directors of New England Electric
System.
2. Committee means the Compensation Committee of the Board.
3. New England Electric System means the trustee or trustees
for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust
dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the
Secretary of The Commonwealth of Massachusetts. Any
agreement, obligation, or liability made, entered into or
incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director,
trustee, officer, or agent thereof assumes or shall be held
to any liability therefor.
4. Participant means any non-employee director of the New
England Electric System.
5. Retainer means the annualized cash retainer paid for service
on the Board (excluding retainers for service on committees,
retainers for service as an officer of a Committee or the
Board, any meeting fees or expenses, and the value of shares
<PAGE>
granted under the New England Electric System Director Share
Plan) payable for the quarter immediately preceding the
Participant's termination of service.
6. Qualified Plan means the New England Electric System
Companies' Final Average Pay Pension Plan I.
7. Quarter of Service means a calendar quarter for all or any
portion of which the Participant served as a member of the
Board, excluding any quarter during which the Participant
was an employee of the New England Electric System or any of
its subsidiaries.
Plan Benefits
- -------------
1. Retirement Benefit
------------------
A Participant shall be entitled to receive under this plan
an annual retirement benefit (payable on a quarterly basis)
equal to (a) times (b), where:
(a) is the Retainer and
(b) is: (i) 100%, if the Participant has 40 or more
Quarters of Service, or
(ii) 75%, if the Participant has 20 or more
but less than 40 Quarters of Service.
No retirement benefit shall be payable if the Participant
has less than 20 Quarters of Service.
<PAGE>
2. Form of Payment
---------------
Retirement benefits shall be paid in cash on the first
business day of each calendar quarter following the later of
the Participant's termination of service or age 60.
3. Termination of Benefits
-----------------------
Benefits shall cease at the Participant's death.
4. No Death Benefits
-----------------
There are no death benefits hereunder nor any retirement
benefits payable to anyone other than the Participant.
Administration and Claims
- -------------------------
The Committee shall have for this Plan the same powers,
indemnities, and duties, including, but not limited to, the
procedures for denied claims, as the benefits committee and the
benefits appeal committee have for the Qualified Plan.
Government Regulations
- ----------------------
It is intended that this Plan will comply with all applicable
laws and governmental regulations, and the Company shall not be
obligated to perform an obligation hereunder in any case where,
in the opinion of the Company's counsel, such performance would
result in violation of any law or regulation.
<PAGE>
Nonassignment
- -------------
No benefit under the Plan, nor any other interest hereunder of
any Participant or contingent annuitant, may be assigned or
alienated.
Provisions of Benefits
- ----------------------
This Plan will be unfunded. Benefits will be paid from the
operating revenues of the Company. A Participant's rights to
benefits under this Plan shall be those of an unsecured, general
creditor of the Company.
Vesting
- -------
A Participant's accrued benefits shall be 100% vested after
twenty Quarters of Service.
Amendment or Discontinuance
- ---------------------------
The Committee may amend or discontinue the Plan at any time;
provided that no modification shall reduce a benefit which a
Participant was eligible to receive under the Plan if he or she
had terminated service at the time of such amendment or
discontinuance.
<PAGE>
Effective Date
- --------------
This Plan shall be effective May 1, 1994.
May 31, 1994 s/Joan T. Bok
Dated:
<PAGE>
Exhibit 10(z)
AGREEMENT
BETWEEN
NEW ENGLAND ELECTRIC SYSTEM
AND
________________________
Dated __________________
<PAGE>
TABLE OF CONTENTS
----------------------
Page
----
1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
2. Term of Agreement. . . . . . . . . . . . . . . . . . . . . 1
3. Company's Covenants Summarized . . . . . . . . . . . . . . 2
4. The Executive's Covenants. . . . . . . . . . . . . . . . . 2
5. Compensation Other Than Severance Payments . . . . . . . . 3
6. Severance Payments . . . . . . . . . . . . . . . . . . . . 4
7. Termination Procedures and Compensation During Dispute . . 9
8. No Mitigation. . . . . . . . . . . . . . . . . . . . . . . 11
9. Successors; Binding Agreement. . . . . . . . . . . . . . . 12
10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 13
12. Validity. . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 14
14. Settlement of Disputes; Arbitration . . . . . . . . . . . 14
15. Definitions . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
AGREEMENT
---------
THIS AGREEMENT dated February 28, 1995, is made by and between
New England Electric System, a Massachusetts business trust (the "Company"),
and ________________________ (the "Executive").
WHEREAS the Company considers it essential to the best interests
of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held companies, the
possibility of a Change in Control or a Major Transaction (as defined in the
last Section hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the management of the Company and its subsidiaries (collectively,
the "System"), including the Executive, to their assigned duties without
distraction in the face of potentially disruptive circumstances arising from
the possibility of a Change in Control or a Major Transaction;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
<PAGE>
2. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31, 1997; provided, however,
that commencing on January 1, 1996 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one additional year unless,
not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend this Agreement or a Change in
Control or a Major Transaction shall have occurred prior to such January 1;
provided, however, if a Change in Control or a Major Transaction shall have
occurred during the term of this Agreement, this Agreement shall continue in
effect for a period of thirty-six (36) months beyond the month in which such
Change in Control or Major Transaction occurred.
3. Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the NEES Companies and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the "Severance Payments"
described in Section 6.1 hereof and the other payments and benefits described
herein in the event the Executive's employment with the NEES Companies is
terminated following a Change in Control or a Major Transaction and during the
term of this Agreement. The obligations of the Company hereunder shall be
deemed satisfied to the extent payments are made by any NEES Company. No
amount or benefit shall be payable under this Agreement unless there shall
have been (or, under the terms hereof, there shall be deemed to have been) a
termination of the Executive's employment with the NEES Companies following a
Change in Control or a Major Transaction. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the NEES
Companies.
<PAGE>
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control or a Potential Major Transaction during the term of this Agreement,
the Executive will remain in the employ of the NEES Companies until the
earliest of (i) a date which is twelve (12) months from the date of such
Potential Change of Control or Potential Major Transaction, (ii) the date of a
Change in Control or a Major Transaction, (iii) the date of termination by the
Executive of the Executive's employment for Good Reason (determined by
treating the Potential Change in Control or Potential Major Transaction as a
Change in Control or a Major Transaction, as applicable, in applying the
definition of Good Reason), by reason of death or Disability or Retirement, or
(iv) the termination by the NEES Companies of the Executive's employment for
any reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control or a Major Transaction and
during the term of this Agreement, during any period that the Executive fails
to perform the Executive's full-time duties with the NEES Companies as a
result of incapacity due to physical or mental illness, the Company shall
provide the Executive with disability benefits equivalent to those under the
Disability Insurance Plan (without regard to any amendment to such plan made
subsequent to the Change in Control or Major Transaction which amendment
adversely affect the Executive's rights thereunder) until the Executive's
employment is terminated by the Employer for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control or a Major Transaction and during the
term of this Agreement, the Company shall pay the Executive's full salary to
the Executive through the Date of Termination at the rate in effect at the
<PAGE>
time the Notice of Termination is given, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained
by the Employer during such period; except to the extent that the Executive is
receiving payments with respect to such period, or a portion thereof, in
accordance with Section 5.1.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control or a Major Transaction and during the
term of this Agreement, the Company shall pay to the Executive the normal
post-termination compensation and benefits due the Executive as such payments
become due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, the System's applicable
retirement, insurance and other compensation or benefit plans, programs and
arrangements. Provided that the benefits payable to the Executive pursuant to
the Standard Severance Plan for Non-Union Employees (the "Severance Plan") or
its successor do not exceed benefits payable to the Executive under this
Agreement, the Executive hereby waives all rights to benefits pursuant to the
Severance Plan.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, the Company shall pay the
Executive the payments described in this Section 6.1 (the "Severance
Payments") upon the termination of the Executive's employment following a
Change in Control or a Major Transaction and during the term of this
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Employer for Cause, (ii) by
reason of death, Disability or Retirement, or (iii) by the Executive without
Good Reason. The Executive's employment shall be deemed to have been
<PAGE>
terminated following a Change in Control or a Major Transaction by the
Employer without cause or by the Executive with Good Reason if the Executive's
employment is terminated prior to a Change in Control or a Major Transaction
without cause at the direction of a Person who has entered into an agreement
with the Company the consummation of which will constitute a Change in Control
or a Major Transaction, or if the Executive terminates his employment with
Good Reason prior to a Change in Control or a Major Transaction (determined by
treating a Potential Change in Control or Potential Major Transaction as a
Change in Control or a Major Transaction, as applicable, in applying the
definition of Good Reason) if the circumstance or event which constitutes Good
Reason occurs at the direction of such Person.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination, the Company shall pay
to the Executive a lump sum severance payment, in cash, equal to three
times the sum of (i) the higher of the Executive's annual base salary in
effect as of the Date of Termination or in effect immediately prior to
the Change in Control or Major Transaction, and (ii) the higher of the
average amount paid to the Executive pursuant to the New England
Electric Companies' Senior Incentive Compensation Plan, New England
Electric Companies' Incentive Compensation Plan I, New England Electric
Companies' Incentive Compensation Plan II, Performance Based Bonus Plan,
and the Incentive Share Plan or successors of any such plans, with
respect to the three years preceding the year in which the Date of
Termination occurs or the average amount paid with respect to the three
years preceding the year in which the Change in Control or Major
Transaction occurs.
<PAGE>
(B) In addition to the retirement benefits to which the
Executive is entitled under each Pension Plan or any successor plan
thereto, the Company shall pay the Executive a lump sum amount, in cash,
equal to the excess of (x) the actuarial equivalent of the retirement
pension (taking into account any early retirement subsidies associated
therewith and determined as a straight life annuity commencing at the
later of age 55 or the third anniversary of the Date of Termination)
which the Executive would have accrued under the terms of each such
Pension Plan (without regard to any amendment to such Pension Plan made
subsequent to a Change in Control or a Major Transaction, which
amendment adversely affects in any manner the computation of retirement
benefits thereunder), determined as if the Executive were fully vested
thereunder and had accumulated (after the Date of Termination) thirty-
six (36) additional months of service credit thereunder and had been
credited under each such Pension Plan during such period with
compensation at the higher of (a) Executive's compensation (as defined
in such Pension Plan) during the twelve (12) months immediately
preceding the Date of Termination or (b) Executive's compensation (as
defined in such Pension Plan) during the twelve (12) months immediately
preceding the Change in Control or Major Transaction, over (y) the
actuarial equivalent of the retirement pension (taking into account any
early retirement subsidies associated therewith and determined as a
straight life annuity commencing at the later of age 55 or the Date of
Termination) which the Executive had accrued pursuant to the provisions
of each such Pension Plan as of the Date of Termination. For purposes
of this Section 6.1(B), "actuarial equivalent" shall be determined using
the same methods and assumptions utilized under the New England Electric
<PAGE>
Companies' Final Average Pay Plan I (or a successor thereto) immediately
prior to the Date of Termination (without regard to any amendment of
such methods and assumptions made subsequent to a Change in Control or a
Major Transaction, which amendment results in a lower actuarial
equivalent value). The discount rate used for the calculation of
benefits hereunder shall be that used by the System for valuing the
liabilities of the New England Electric Companies' Final Average Pay
Plan I (or a successor thereto) immediately prior to the Date of
Termination.
(C) If the Executive would have become entitled to benefits
under the System's post-retirement health care or life insurance plans
had his employment terminated at any time during the period of thirty-
six (36) months after the Date of Termination, the Company shall pay
such benefits to the Executive commencing on the later of (a) the date
that such coverage would have first become available and (b) the date
the benefits described in (D) below terminate.
(D) For the thirty-six (36) month period immediately
following the Date of Termination, the Company shall arrange to provide
the Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is receiving
immediately prior to the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in Control or a
Major Transaction which reduction constitutes Good Reason). Benefits
otherwise receivable by the Executive pursuant to this Section 6.1(D)
shall be reduced to the extent comparable benefits are actually received
by or made available to the Executive without cost during the thirty-six
(36) month period following the Executive's termination of employment
<PAGE>
(and any such benefits actually received by the Executive shall be
reported to the Company by the Executive). If the benefits provided to
the Executive under this Section 6.1(D) shall result in a decrease,
pursuant to Section 6.2, in the Severance Payments and these Section
6.1(D) benefits are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt of comparable benefits, the
Company shall, at the time of such reduction, pay to the Executive the
lesser of (a) the amount of the decrease made in the Severance Payments
pursuant to Section 6.2, or (b) the maximum amount which can be paid to
the Executive without being, or causing any other payment to be,
nondeductible by reason of section 280G of the Code.
6.2 Notwithstanding any other provisions of this Agreement, in
the event that any payment or benefit received or to be received by the
Executive in connection with a Change in Control or a Major Transaction, or
the termination of the Executive's employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the System,
any Person whose actions result in a Change in Control or a Major Transaction
or any Person affiliated with the System or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called
"Total Payments") would be subject (in whole or part), to the Excise Tax, then
the Severance Payments shall be reduced to the extent necessary so that no
portion of the Total Payments is subject to the Excise Tax (after taking into
account any reduction in the Total Payments provided by reason of section 280G
of the Code in such other plan, arrangement or agreement) if (A) the net
amount of such Total Payments, as so reduced, (and after deduction of the net
amount of federal, state and local income tax on such reduced Total Payments)
is greater than (B) the excess of (i) the net amount of such Total Payments,
<PAGE>
without reduction (but after deduction of the net amount of federal, state and
local income tax on such Total Payments), over (ii) the amount of Excise Tax
to which the Executive would be subject in respect of such Total Payments.
For purposes of determining whether and the extent to which the Total Payments
will be subject to the Excise Tax, (i) no portion of the Total Payments the
receipt or enjoyment of which the Executive shall have effectively waived in
writing prior to the Date of Termination shall be taken into account, (ii) no
portion of the Total Payments shall be taken into account which in the opinion
of tax counsel selected by the Company does not constitute a "parachute
payment" within the meaning of section 280G(b)(2) of the Code, (including by
reason of section 280G(b)(4)(A) of the Code) and, in calculating the Excise
Tax, no portion of such Total Payments shall be taken into account which
constitutes reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, and (iii) the value of any non-cash
benefit or any deferred payment or benefit included in the Total Payments
shall be determined by the Company in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth
in Section 6.3 hereof, the Company shall provide the Executive with its
calculation of the amounts referred to in this Section and such supporting
materials as are reasonably necessary for the Executive to evaluate the
Company's calculations. If the Executive objects to the Company's
calculations, the Company shall pay to the Executive such portion of the
Severance Payments (up to 100% thereof) as the Executive determines is
necessary to result in the Executive receiving the greater of clauses (A) and
(B) of this Section.
<PAGE>
6.3 The payments provided for in Section 6.1 (other than Section
6.1(D)) hereof shall be made not later than the fifth day following the Date
of Termination, provided, however, that if the amounts of such payments, and
the limitation on such payments set forth in Section 6.2 hereof, cannot be
finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest
at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code). At
the time that payments are made under this Section, the Company shall provide
the Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
counsel, auditors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any
termination of his employment hereunder or in seeking in good faith to obtain
or enforce any benefit or right provided by this Agreement or in connection
with any tax audit or proceeding to the extent attributable to the application
<PAGE>
of section 4999 of the Code to any payment or benefit provided hereunder.
Such payments shall be made within five (5) business days after delivery of
the Executive's written requests for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control or a Major
Transaction and during the term of this Agreement, any purported termination
of the Executive's employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is required to include
a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination", with respect to
any purported termination of the Executive's employment after a Change in
Control or a Major Transaction and during the term of this Agreement, shall
mean (i) if the Executive's employment is terminated for Disability, thirty
<PAGE>
(30) days after Notice of Termination is given (provided that the Executive
shall not have returned to the full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Employer, shall not be
less than thirty (30) days (except in the case of a termination for Cause)
and, in the case of a termination by the Executive, shall not be less than
fifteen (15) days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
on which the dispute is finally resolved, either by mutual written agreement
of the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided
further that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control or a Major Transaction and during the
term of this Agreement, and such termination is disputed in accordance with
Section 7.3 hereof, the Company shall pay the Executive the full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, salary) and continue the Executive as a participant in all
<PAGE>
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with Section 7.3 hereof. Amounts
paid under this Section 7.4 are in addition to all other amounts due under
this Agreement (other than those due under Section 5.2 hereof) and shall not
be offset against or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the NEES Companies terminates during the term of this
Agreement, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the
Company pursuant to this Agreement. Further, the amount of any payment or
benefit provided for in this Agreement (other than in Section 6.1(D) hereof)
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the System, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
<PAGE>
employment for Good Reason after a Change in Control or a Major Transaction,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon
the death of the Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
New England Power Service Company
25 Research Drive
Westborough, MA 01582-0099
Attention: Director of Human Resources
To the Executive:
_______________________
_______________________
_______________________
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of The Commonwealth of Massachusetts. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be
paid net of any applicable withholding required under federal, state or local
law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under Sections 6 and 7 shall
survive the expiration of the term of this Agreement.
12. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for
<PAGE>
benefits under this Agreement shall be delivered to the Executive in writing
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford a reasonable
opportunity to the Executive for a review of the decision denying a claim and
shall further allow the Executive to appeal to the Board a decision of the
Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however,
that the Executive shall be entitled to seek specific performance of the
Executive's right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning defined in section
280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
(D) "Cause" for termination by the Employer of the Executive's
employment, after any Change in Control or Major Transaction, shall mean (i)
the willful and continued failure by the Executive to substantially perform
the Executive's duties with the System (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness or any such
<PAGE>
actual or anticipated failure after the issuance of a Notice of Termination
for Good Reason by the Executive pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in conduct which is demonstrably
and materially injurious to the System, monetarily or otherwise. For purposes
of clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the System.
(E) A "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(II) during any period of not more than two consecutive
years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a Person who has entered into an agreement with the
Company to effect a transaction described in clause (I) of this
paragraph) whose election by the Board or nomination for election
<PAGE>
by the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved or recommended, cease for any reason to constitute a
majority thereof.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Company" shall mean New England Electric System and any
successor to its business and/or assets which assumes and agrees to perform
this Agreement by operation of law, or otherwise (except in determining, under
Section 15(E) hereof, whether or not any Change in Control or Major
Transaction has occurred in connection with such succession).
(H) "Date of Termination" shall have the meaning stated in
Section 7.2 hereof.
(I) "Disability" shall be deemed the reason for the termination
by the Employer of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the System for a period of six (6) consecutive months, the Company shall have
given the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
(J) "Disability Insurance Plan" shall mean the Company
Disability Insurance Plan or any successor thereto.
(K) "Employer" shall mean the NEES Company by which the
Executive is employed at the time of determination.
<PAGE>
(L) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(M) "Excise Tax" shall mean any excise tax imposed under section
4999 of the Code.
(N) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(O) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) of any one of the following acts by the System, or
failures by the System to act, unless, in the case of any act or failure to
act described in paragraph (I), (V), (VI), (VII), or (VIII) below, such act or
failure to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(I) the assignment to the Executive of duties substantially
inconsistent with the Executive's status as an executive officer
of the System;
(II) a reduction in the Executive's annual base salary as
in effect on the date hereof or as the same may be increased from
time to time;
(III) requiring the Executive to be based at a location
more than 100 miles from the town of Westborough, Massachusetts,
except for required travel on the System's business to an extent
substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Employer, to pay to the Executive
any portion of the Executive's compensation within seven (7) days
of the date such compensation is due;
<PAGE>
(V) the failure by the System to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control or the Major Transaction which is
material to the Executive's total compensation, including but not
limited to the New England Electric Companies' Incentive
Compensation Plan I, New England Electric Companies' Incentive
Compensation Plan II, New England Electric Companies' Senior
Incentive Compensation Plan, New England Electric Companies'
Incentive Share Plan, New England Electric Systems Companies'
Deferred Compensation Plan and the New England Electric
Companies' Executive Supplemental Retirement Plan or any
substitute plans adopted prior to the Change in Control or Major
Transaction, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the System to continue
the Executive's participation therein (or in such substitute or
alternative plan) on a basis not substantially less favorable,
both in terms of the amount of benefits provided and the level of
the Executive's participation relative to other participants, as
existed at the time of the Change in Control or Major
Transaction;
(VI) the failure by the System to continue to provide the
Executive with benefits substantially similar to those enjoyed by
the Executive under any of the System's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change in Control
or the Major Transaction, the taking of any action by the System
which would directly or indirectly materially reduce any of such
<PAGE>
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control or
Major Transaction, or the failure by the Employer to provide the
Executive with the number of paid vacation days to which the
Executive is entitled on the basis of years of service with the
NEES Companies in accordance with the Employer's normal vacation
policy in effect at the time of the Change in Control or Major
Transaction; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(P) A "Major Transaction" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) the shareholders of the Company approve a merger or
consolidation of the Company with any corporation or business
trust, other than (i) a merger or consolidation which would
result in the individuals who prior to such merger or
consolidation constitute the Board constituting at least two-
thirds (2/3) of the board of directors of the Company or the
surviving or succeeding entity immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person acquires more than 20% of the
combined voting power of the Company's then outstanding
securities; or
<PAGE>
(II) the shareholders of the Company approve a plan of
complete liquidation of the Company; or
(III) the shareholders of the Company approve an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition which would result in the individuals who prior to
such sale or disposition constitute the Board constituting at
least two-thirds (2/3) of the board of directors of the Person
purchasing such assets immediately after such sale or
disposition.
(Q) "NEES Companies" shall mean all NEES Companies,
collectively.
(R) "NEES Company" shall mean a subsidiary of the Company.
(S) "Notice of Termination" shall have the meaning stated in
Section 7.1 hereof.
(T) "Pension Plan" shall mean each of the plans and agreements
listed in Attachment A.
(U) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Company or any NEES Company, (ii)
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or any NEES Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of shares of the
Company.
<PAGE>
(V) "Potential Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
10% or more of the combined voting power of the Company's then
outstanding securities, increases such Person's beneficial
ownership of such securities by 5% or more over the percentage so
owned by such Person on the date hereof unless such Person has
reported or is required to report such ownership (but less than
25%) on Schedule 13G under the Exchange Act (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or
any comparable or successor report) which Schedule 13D does not
state any intention to or reserve the right to control or
influence the management or policies of the Company or engage in
any of the actions specified in Item 4 of such Schedule (other
than the disposition of the common shares) and, within 10
business days of being requested by the Company to advise it
regarding the same, certifies to the Company that such Person
acquired such securities of the Company in excess of 14.9%
inadvertently and who, together with its affiliates, thereafter
does not acquire additional securities while the Beneficial Owner
of 15% or more of the securities then outstanding; provided,
however, that if the Person requested to so certify fails to do
so within 10 business days, then such occurrence shall become a
Potential Change in Control immediately after such 10 business
day period; or
<PAGE>
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(W) "Potential Major Transaction" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Major Transaction;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Major Transaction; or
(III) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Major Transaction has
occurred.
(X) "Retirement" shall be deemed the reason for the termination
by the Employer or the Executive of the Executive's employment if such
employment is terminated in accordance with the Employer's written mandatory
retirement policy, if any, as in effect immediately prior to the Change in
Control or Major Transaction, or in accordance with any retirement arrangement
established with the Executive's written consent with respect to the
Executive.
(Y) "Severance Payments" shall mean those payments described in
Section 6.1 hereof.
<PAGE>
(Z) "System" shall mean the Company and the NEES Companies,
collectively.
(AA) "Total Payments" shall mean those payments described in
Section 6.2 hereof.
New England Electric System
By
Chairman of the Compensation
Committee
<PAGE>
ATTACHMENT A
------------
New England Electric System Companies' Final Average Pay Pension Plan I
New England Electric Companies' Executive Supplemental Retirement Plan
Letter dated February 23, 1994, from John W. Rowe
<PAGE>
AGREEMENT
BETWEEN
NEW ENGLAND ELECTRIC SYSTEM
AND
_________________________
Dated ___________________
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
2. Term of Agreement . . . . . . . . . . . . . . . . . . . . 1
3. Company's Covenants Summarized. . . . . . . . . . . . . . 2
4. The Executive's Covenants . . . . . . . . . . . . . . . . 2
5. Compensation Other Than Severance Payments. . . . . . . . 3
6. Severance Payments. . . . . . . . . . . . . . . . . . . . 4
7. Termination Procedures and Compensation During Dispute. . 10
8. No Mitigation . . . . . . . . . . . . . . . . . . . . . . 11
9. Successors; Binding Agreement . . . . . . . . . . . . . . 12
10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 13
12. Validity. . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 14
14. Settlement of Disputes; Arbitration . . . . . . . . . . . 14
15. Definitions . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
AGREEMENT
---------
THIS AGREEMENT dated February 28, 1995, is made by and between
New England Electric System, a Massachusetts business trust (the "Company"),
and _________________ (the "Executive").
WHEREAS the Company considers it essential to the best interests
of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held companies, the
possibility of a Change in Control or a Major Transaction (as defined in the
last Section hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the management of the Company and its subsidiaries (collectively,
the "System"), including the Executive, to their assigned duties without
distraction in the face of potentially disruptive circumstances arising from
the possibility of a Change in Control or a Major Transaction;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
16. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
<PAGE>
17. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1997; provided,
however, that commencing on January 1, 1996 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend this Agreement or a Change in
Control or a Major Transaction shall have occurred prior to such January 1;
provided, however, if a Change in Control or a Major Transaction shall have
occurred during the term of this Agreement, this Agreement shall continue in
effect for a period of thirty-six (36) months beyond the month in which such
Change in Control or Major Transaction occurred.
18. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the NEES Companies and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the "Severance Payments"
described in Section 6.1 hereof and the other payments and benefits described
herein in the event the Executive's employment with the NEES Companies is
terminated following a Change in Control or a Major Transaction and during the
term of this Agreement. The obligations of the Company hereunder shall be
deemed satisfied to the extent payments are made by any NEES Company. No
amount or benefit shall be payable under this Agreement unless there shall
have been (or, under the terms hereof, there shall be deemed to have been) a
termination of the Executive's employment with the NEES Companies following a
Change in Control or a Major Transaction. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Company, the
<PAGE>
Executive shall not have any right to be retained in the employ of the NEES
Companies.
19. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control or a Potential Major Transaction during the term of this Agreement,
the Executive will remain in the employ of the NEES Companies until the
earliest of (i) a date which is twelve (12) months from the date of such
Potential Change of Control or Potential Major Transaction, (ii) the date of a
Change in Control or a Major Transaction, (iii) the date of termination by the
Executive of the Executive's employment for Good Reason (determined by
treating the Potential Change in Control or Potential Major Transaction as a
Change in Control or a Major Transaction, as applicable, in applying the
definition of Good Reason), by reason of death or Disability or Retirement, or
(iv) the termination by the NEES Companies of the Executive's employment for
any reason.
20. Compensation Other Than Severance Payments.
20.1 Following a Change in Control or a Major Transaction and
during the term of this Agreement, during any period that the Executive fails
to perform the Executive's full-time duties with the NEES Companies as a
result of incapacity due to physical or mental illness, the Company shall
provide the Executive with disability benefits equivalent to those under the
Disability Insurance Plan (without regard to any amendment to such plan made
subsequent to the Change in Control or Major Transaction which amendment
adversely affect the Executive's rights thereunder) until the Executive's
employment is terminated by the Employer for Disability.
<PAGE>
20.2 If the Executive's employment shall be terminated for any
reason following a Change in Control or a Major Transaction and during the
term of this Agreement, the Company shall pay the Executive's full salary to
the Executive through the Date of Termination at the rate in effect at the
time the Notice of Termination is given, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained
by the Employer during such period; except to the extent that the Executive is
receiving payments with respect to such period, or a portion thereof, in
accordance with Section 5.1.
20.3 If the Executive's employment shall be terminated for any
reason following a Change in Control or a Major Transaction and during the
term of this Agreement, the Company shall pay to the Executive the normal
post-termination compensation and benefits due the Executive as such payments
become due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, the System's applicable
retirement, insurance and other compensation or benefit plans, programs and
arrangements. Provided that the benefits payable to the Executive pursuant to
the Standard Severance Plan for Non-Union Employees (the "Severance Plan") or
its successor do not exceed benefits payable to the Executive under this
Agreement, the Executive hereby waives all rights to benefits pursuant to the
Severance Plan.
21. Severance Payments.
21.1 Subject to Section 6.2 hereof, the Company shall pay the
Executive the payments described in this Section 6.1 (the "Severance
Payments") upon the termination of the Executive's employment following a
Change in Control or a Major Transaction and during the term of this
<PAGE>
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Employer for Cause, (ii) by
reason of death, Disability or Retirement, or (iii) by the Executive without
Good Reason. The Executive's employment shall be deemed to have been
terminated following a Change in Control or a Major Transaction by the
Employer without cause or by the Executive with Good Reason if the Executive's
employment is terminated prior to a Change in Control or a Major Transaction
without cause at the direction of a Person who has entered into an agreement
with the Company the consummation of which will constitute a Change in Control
or a Major Transaction, or if the Executive terminates his employment with
Good Reason prior to a Change in Control or a Major Transaction (determined by
treating a Potential Change in Control or Potential Major Transaction as a
Change in Control or a Major Transaction, as applicable, in applying the
definition of Good Reason) if the circumstance or event which constitutes Good
Reason occurs at the direction of such Person.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination, the Company shall pay
to the Executive a lump sum severance payment, in cash, equal to two
times the sum of (i) the higher of the Executive's annual base salary in
effect as of the Date of Termination or in effect immediately prior to
the Change in Control or Major Transaction, and (ii) the higher of the
average amount paid to the Executive pursuant to the New England
Electric Companies' Senior Incentive Compensation Plan, New England
Electric Companies' Incentive Compensation Plan I, New England Electric
Companies' Incentive Compensation Plan II, Performance Based Bonus Plan,
and the Incentive Share Plan or successors of any such plans, with
<PAGE>
respect to the three years preceding the year in which the Date of
Termination occurs or the average amount paid with respect to the three
years preceding the year in which the Change in Control or Major
Transaction occurs.
(B) In addition to the retirement benefits to which the
Executive is entitled under each Pension Plan or any successor plan
thereto, the Company shall pay the Executive a lump sum amount, in cash,
equal to the excess of (x) the actuarial equivalent of the retirement
pension (taking into account any early retirement subsidies associated
therewith and determined as a straight life annuity commencing at the
later of age 55 or the second anniversary of the Date of Termination)
which the Executive would have accrued under the terms of each such
Pension Plan (without regard to any amendment to such Pension Plan made
subsequent to a Change in Control or a Major Transaction, which
amendment adversely affects in any manner the computation of retirement
benefits thereunder), determined as if the Executive were fully vested
thereunder and had accumulated (after the Date of Termination) twenty-
four (24) additional months of service credit thereunder and had been
credited under each such Pension Plan during such period with
compensation at the higher of (a) Executive's compensation (as defined
in such Pension Plan) during the twelve (12) months immediately
preceding the Date of Termination or (b) Executive's compensation (as
defined in such Pension Plan) during the twelve (12) months immediately
preceding the Change in Control or Major Transaction, over (y) the
actuarial equivalent of the retirement pension (taking into account any
early retirement subsidies associated therewith and determined as a
straight life annuity commencing at the later of age 55 or the Date of
<PAGE>
Termination) which the Executive had accrued pursuant to the provisions
of each such Pension Plan as of the Date of Termination. For purposes
of this Section 6.1(B), "actuarial equivalent" shall be determined using
the same methods and assumptions utilized under the New England Electric
Companies' Final Average Pay Plan I (or a successor thereto) immediately
prior to the Date of Termination (without regard to any amendment of
such methods and assumptions made subsequent to a Change in Control or a
Major Transaction, which amendment results in a lower actuarial
equivalent value). The discount rate used for the calculation of
benefits hereunder shall be that used by the System for valuing the
liabilities of the New England Electric Companies' Final Average Pay
Plan I (or a successor thereto) immediately prior to the Date of
Termination.
(C) If the Executive would have become entitled to benefits
under the System's post-retirement health care or life insurance plans
had his employment terminated at any time during the period of twenty-
four months after the Date of Termination, the Company shall pay such
benefits to the Executive commencing on the later of (a) the date that
such coverage would have first become available and (b) the date the
benefits described in (D) below terminate.
(D) For the twenty-four (24) month period immediately
following the Date of Termination, the Company shall arrange to provide
the Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is receiving
immediately prior to the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in Control or a
Major Transaction which reduction constitutes Good Reason). Benefits
<PAGE>
otherwise receivable by the Executive pursuant to this Section 6.1(D)
shall be reduced to the extent comparable benefits are actually received
by or made available to the Executive without cost during the twenty-
four (24) month period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive). If the benefits
provided to the Executive under this Section 6.1(D) shall result in a
decrease, pursuant to Section 6.2, in the Severance Payments and these
Section 6.1(D) benefits are thereafter reduced pursuant to the
immediately preceding sentence because of the receipt of comparable
benefits, the Company shall, at the time of such reduction, pay to the
Executive the lesser of (a) the amount of the decrease made in the
Severance Payments pursuant to Section 6.2, or (b) the maximum amount
which can be paid to the Executive without being, or causing any other
payment to be, nondeductible by reason of section 280G of the Code.
21.2 Notwithstanding any other provisions of this Agreement, in
the event that any payment or benefit received or to be received by the
Executive in connection with a Change in Control or a Major Transaction, or
the termination of the Executive's employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the System,
any Person whose actions result in a Change in Control or a Major Transaction
or any Person affiliated with the System or such Person) (all such payments
and benefits, including the Severance Payments, being hereinafter called
"Total Payments") would not be deductible (in whole or part), by the System,
an affiliate or Person making such payment or providing such benefit as a
result of section 280G of the Code, then, to the extent necessary to eliminate
the nondeductability of such portion of the Total Payments under section 280G
<PAGE>
of the Code (and after taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such other plan, arrangement
or agreement), (A) the cash Severance Payments shall first be reduced (if
necessary, to zero), and (B) all other non-cash Severance Payments shall next
be reduced (if necessary, to zero). For purposes of this limitation (i) no
portion of the Total Payments the receipt or enjoyment of which the Executive
shall have effectively waived in writing prior to the Date of Termination
shall be taken into account, (ii) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the
Company's independent auditors and reasonably acceptable to the Executive does
not constitute a "parachute payment" within the meaning of section 280G(b)(2)
of the Code, including by reason of section 280G(b)(4)(A) of the Code, (iii)
the Severance Payments shall be reduced only to the extent necessary so that
the Total Payments (other than those referred to in clauses (i) or (ii)) in
their entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or are
otherwise not subject to disallowance as deductions pursuant to section 280G
of the Code, in the opinion of the tax counsel referred to in clause (ii); and
(iv) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Company's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code.
If it is established pursuant to a final determination of a court
or an Internal Revenue Service proceeding that, notwithstanding the good faith
of the Executive and the Company in applying the terms of this Section 6.2,
the aggregate "parachute payments" paid to or for the Executive's benefit are
in an amount that would result in any portion of such "parachute payments" not
<PAGE>
being deductible by reason of section 280G of the Code, then the Executive
shall have an obligation to pay the Company upon demand an amount equal to the
sum of (i) the excess of the aggregate "parachute payments" paid to or for the
Executive's benefit over the aggregate "parachute payments" that could have
been paid to or for the Executive's benefit without any portion of such
"parachute payments" not being deductible by reason of section 280G of the
Code; and (ii) interest on the amount set forth in clause (i) of this sentence
at the rate provided in section 1274(b)(2)(B) of the Code from the date of the
Executive's receipt of such excess until the date of such payment.
21.3 The payments provided for in Section 6.1 (other than
Section 6.1(D)) hereof shall be made not later than the fifth day following
the Date of Termination, provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in Section 6.2 hereof,
cannot be finally determined on or before such day, the Company shall pay to
the Executive on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payments to which the Executive is
clearly entitled and shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the Company (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code). At
the time that payments are made under this Section, the Company shall provide
the Executive with a written statement setting forth the manner in which such
<PAGE>
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
counsel, auditors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
21.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any
termination of his employment hereunder or in seeking in good faith to obtain
or enforce any benefit or right provided by this Agreement or in connection
with any tax audit or proceeding to the extent attributable to the application
of section 4999 of the Code to any payment or benefit provided hereunder.
Such payments shall be made within five (5) business days after delivery of
the Executive's written requests for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
22. Termination Procedures and Compensation During Dispute.
22.1 Notice of Termination. After a Change in Control or a
Major Transaction and during the term of this Agreement, any purported
termination of the Executive's employment (other than by reason of death)
shall be communicated by written Notice of Termination from one party hereto
to the other party hereto in accordance with Section 10 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct set forth in clause (i) or (ii) of the
<PAGE>
definition of Cause herein, and specifying the particulars thereof in detail.
22.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Change in
Control or a Major Transaction and during the term of this Agreement, shall
mean (i) if the Executive's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that the Executive
shall not have returned to the full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Employer, shall not be
less than thirty (30) days (except in the case of a termination for Cause)
and, in the case of a termination by the Executive, shall not be less than
fifteen (15) days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
22.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
on which the dispute is finally resolved, either by mutual written agreement
of the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided
further that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
22.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control or a Major Transaction and during the
term of this Agreement, and such termination is disputed in accordance with
Section 7.3 hereof, the Company shall pay the Executive the full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, salary) and continue the Executive as a participant in all
<PAGE>
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with Section 7.3 hereof. Amounts
paid under this Section 7.4 are in addition to all other amounts due under
this Agreement (other than those due under Section 5.2 hereof) and shall not
be offset against or reduce any other amounts due under this Agreement.
23. No Mitigation. The Company agrees that, if the Executive's
employment with the NEES Companies terminates during the term of this
Agreement, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the
Company pursuant to this Agreement. Further, the amount of any payment or
benefit provided for in this Agreement (other than in Section 6.1(D) hereof)
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the System, or otherwise.
24. Successors; Binding Agreement.
24.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control or a Major Transaction,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
24.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
<PAGE>
administrators, successors, heirs, distributees, devisees and legatees. If
the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon
the death of the Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
25. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
New England Power Service Company
25 Research Drive
Westborough, MA 01582-0099
Attention: Director of Human Resources
To the Executive:
_______________________
_______________________
_______________________
26. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
<PAGE>
of The Commonwealth of Massachusetts. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be
paid net of any applicable withholding required under federal, state or local
law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under Sections 6 and 7 shall
survive the expiration of the term of this Agreement.
27. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
28. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
29. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for
benefits under this Agreement shall be delivered to the Executive in writing
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford a reasonable
opportunity to the Executive for a review of the decision denying a claim and
shall further allow the Executive to appeal to the Board a decision of the
Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however,
that the Executive shall be entitled to seek specific performance of the
Executive's right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement.
<PAGE>
30. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act.
(B) "Board" shall mean the Board of Directors of the Company.
(C) "Cause" for termination by the Employer of the Executive's
employment, after any Change in Control or Major Transaction, shall mean (i)
the willful and continued failure by the Executive to substantially perform
the Executive's duties with the System (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination
for Good Reason by the Executive pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in conduct which is demonstrably
and materially injurious to the System, monetarily or otherwise. For purposes
of clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the System.
(D) A "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
<PAGE>
acquired directly from the Company or its affiliates)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(II) during any period of not more than two consecutive
years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a Person who has entered into an agreement with the
Company to effect a transaction described in clause (I) of this
paragraph) whose election by the Board or nomination for election
by the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved or recommended, cease for any reason to constitute a
majority thereof.
(E) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(F) "Company" shall mean New England Electric System and any
successor to its business and/or assets which assumes and agrees to perform
this Agreement by operation of law, or otherwise (except in determining, under
Section 15(E) hereof, whether or not any Change in Control or Major
Transaction has occurred in connection with such succession).
(G) "Date of Termination" shall have the meaning stated in
Section 7.2 hereof.
<PAGE>
(H) "Disability" shall be deemed the reason for the termination
by the Employer of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the System for a period of six (6) consecutive months, the Company shall have
given the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
(I) "Disability Insurance Plan" shall mean the Company
Disability Insurance Plan or any successor thereto.
(J) "Employer" shall mean the NEES Company by which the
Executive is employed at the time of determination.
(K) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(L) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(M) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) of any one of the following acts by the System, or
failures by the System to act, unless, in the case of any act or failure to
act described in paragraph (I), (V), (VI), (VII), or (VIII) below, such act or
failure to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(I) the assignment to the Executive of duties substantially
inconsistent with the Executive's status as an executive officer
of the System;
<PAGE>
(II) a reduction in the Executive's annual base salary as
in effect on the date hereof or as the same may be increased from
time to time;
(III) requiring the Executive to be based at a location
more than 100 miles from the town of Westborough, Massachusetts,
except for required travel on the System's business to an extent
substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Employer, to pay to the Executive
any portion of the Executive's compensation within seven (7) days
of the date such compensation is due;
(V) the failure by the System to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control or the Major Transaction which is
material to the Executive's total compensation, including but not
limited to the New England Electric Companies' Incentive
Compensation Plan I, New England Electric Companies' Incentive
Compensation Plan II, New England Electric Companies' Senior
Incentive Compensation Plan, New England Electric Companies'
Incentive Share Plan, New England Electric Systems Companies'
Deferred Compensation Plan and the New England Electric
Companies' Executive Supplemental Retirement Plan or any
substitute plans adopted prior to the Change in Control or Major
Transaction, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the System to continue
the Executive's participation therein (or in such substitute or
alternative plan)
<PAGE>
on a basis not substantially less favorable, both in terms of the
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at the
time of the Change in Control or Major Transaction;
(VI) the failure by the System to continue to provide the
Executive with benefits substantially similar to those enjoyed by
the Executive under any of the System's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change in Control
or the Major Transaction, the taking of any action by the System
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control or
Major Transaction, or the failure by the Employer to provide the
Executive with the number of paid vacation days to which the
Executive is entitled on the basis of years of service with the
NEES Companies in accordance with the Employer's normal vacation
policy in effect at the time of the Change in Control or Major
Transaction; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
<PAGE>
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(N) A "Major Transaction" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) the shareholders of the Company approve a merger or
consolidation of the Company with any corporation or business
trust, other than (i) a merger or consolidation which would
result in the individuals who prior to such merger or
consolidation constitute the Board constituting at least two-
thirds (2/3) of the board of directors of the Company or the
surviving or succeeding entity immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person acquires more than 20% of the
combined voting power of the Company's then outstanding
securities; or
(II) the shareholders of the Company approve a plan of
complete liquidation of the Company; or
(III) the shareholders of the Company approve an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale or
disposition which would result in the individuals who prior to
such sale or disposition constitute the Board constituting at
least two-thirds (2/3) of the board of directors of the Person
purchasing such assets immediately after such sale or
disposition.
(O) "NEES Companies" shall mean all NEES Companies,
collectively.
<PAGE>
(P) "NEES Company" shall mean a subsidiary of the Company.
(Q) "Notice of Termination" shall have the meaning stated in
Section 7.1 hereof.
(R) "Pension Plan" shall mean each of the plans and agreements
listed in Attachment A.
(S) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Company or any NEES Company, (ii)
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or any NEES Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of shares of the
Company.
(T) "Potential Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
10% or more of the combined voting power of the Company's then
outstanding securities, increases such Person's beneficial
ownership of such securities by 5% or more over the percentage so
<PAGE>
owned by such Person on the date hereof unless such Person has
reported or is required to report such ownership (but less than
25%) on Schedule 13G under the Exchange Act (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or
any comparable or successor report) which Schedule 13D does not
state any intention to or reserve the right to control or
influence the management or policies of the Company or engage in
any of the actions specified in Item 4 of such Schedule (other
than the disposition of the common shares) and, within 10
business days of being requested by the Company to advise it
regarding the same, certifies to the Company that such Person
acquired such securities of the Company in excess of 14.9%
inadvertently and who, together with its affiliates, thereafter
does not acquire additional securities while the Beneficial Owner
of 15% or more of the securities then outstanding; provided,
however, that if the Person requested to so certify fails to do
so within 10 business days, then such occurrence shall become a
Potential Change in Control immediately after such 10 business
day period; or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(U) "Potential Major Transaction" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Major Transaction;
<PAGE>
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Major Transaction; or
(III) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Major Transaction has
occurred.
(V) "Retirement" shall be deemed the reason for the termination
by the Employer or the Executive of the Executive's employment if such
employment is terminated in accordance with the Employer's written mandatory
retirement policy, if any, as in effect immediately prior to the Change in
Control or Major Transaction, or in accordance with any retirement arrangement
established with the Executive's written consent with respect to the
Executive.
(W) "Severance Payments" shall mean those payments described in
Section 6.1 hereof.
(X) "System" shall mean the Company and the NEES Companies,
collectively.
(Y) "Total Payments" shall mean those payments described in
Section 6.2 hereof.
New England Electric System
By
Chairman of the Compensation
Committee
<PAGE>
ATTACHMENT A
------------
New England Electric System Companies' Final Average Pay Pension Plan I
New England Electric Companies' Executive Supplemental Retirement Plan
<PAGE>
Exhibit 10(cc)
AGREEMENT
BETWEEN
NEW ENGLAND ELECTRIC SYSTEM
AND
JOHN W. ROWE
Dated February 28, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
2. Term of Agreement . . . . . . . . . . . . . . . . . . . . 1
3. Company's Covenants Summarized. . . . . . . . . . . . . . 2
4. The Executive's Covenants . . . . . . . . . . . . . . . . 2
5. Compensation Other Than Severance Payments. . . . . . . . 3
6. Severance Payments. . . . . . . . . . . . . . . . . . . . 4
7. Termination Procedures and Compensation During Dispute. . 10
8. No Mitigation . . . . . . . . . . . . . . . . . . . . . . 12
9. Successors; Binding Agreement . . . . . . . . . . . . . . 12
10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 13
12. Validity. . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 14
14. Settlement of Disputes; Arbitration . . . . . . . . . . . 14
15. Definitions . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
AGREEMENT
----------
THIS AGREEMENT dated February 28, 1995, is made by and between New
England Electric System, a Massachusetts business trust (the "Company"), and
John W. Rowe (the "Executive").
WHEREAS the Company considers it essential to the best interests
of its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held companies, the
possibility of a Change in Control or a Major Transaction (as defined in the
last Section hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
shareholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the management of the Company and its subsidiaries (collectively,
the "System"), including the Executive, to their assigned duties without
distraction in the face of potentially disruptive circumstances arising from
the possibility of a Change in Control or a Major Transaction;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
31. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
<PAGE>
32. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1997; provided,
however, that commencing on January 1, 1996 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend this Agreement or a Change in
Control or a Major Transaction shall have occurred prior to such January 1;
provided, however, if a Change in Control or a Major Transaction shall have
occurred during the term of this Agreement, this Agreement shall continue in
effect for a period of thirty-six (36) months beyond the month in which such
Change in Control or Major Transaction occurred.
33. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the NEES Companies and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the "Severance Payments"
described in Section 6.1 hereof and the other payments and benefits described
herein in the event the Executive's employment with the NEES Companies is
terminated following a Change in Control or a Major Transaction and during the
term of this Agreement. The obligations of the Company hereunder shall be
deemed satisfied to the extent payments are made by any NEES Company. No
amount or benefit shall be payable under this Agreement unless there shall
have been (or, under the terms hereof, there shall be deemed to have been) a
termination of the Executive's employment with the NEES Companies following a
Change in Control or a Major Transaction. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the NEES
Companies.
<PAGE>
34. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control or a Potential Major Transaction during the term of this Agreement,
the Executive will remain in the employ of the NEES Companies until the
earliest of (i) a date which is twelve (12) months from the date of such
Potential Change of Control or Potential Major Transaction, (ii) the date of a
Change in Control or a Major Transaction, (iii) the date of termination by the
Executive of the Executive's employment for Good Reason (determined by
treating the Potential Change in Control or Potential Major Transaction as a
Change in Control or a Major Transaction, as applicable, in applying the
definition of Good Reason), by reason of death or Disability or Retirement, or
(iv) the termination by NEES Companies of the Executive's employment for any
reason.
35. Compensation Other Than Severance Payments.
35.1 Following a Change in Control or a Major Transaction and
during the term of this Agreement, during any period that the Executive fails
to perform the Executive's full-time duties with the NEES Companies as a
result of incapacity due to physical or mental illness, the Company shall
provide the Executive with disability benefits equivalent to those under the
Disability Insurance Plan (without regard to any amendment to such plan made
subsequent to the Change in Control or Major Transaction which amendment
adversely affect the Executive's rights thereunder) until the Executive's
employment is terminated by the Employer for Disability.
35.2 If the Executive's employment shall be terminated for any
reason following a Change in Control or a Major Transaction and during the
term of this Agreement, the Company shall pay the Executive's full salary to
<PAGE>
the Executive through the Date of Termination at the rate in effect at the
time the Notice of Termination is given, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained
by the Employer during such period; except to the extent that the Executive is
receiving payments with respect to such period, or a portion thereof, in
accordance with Section 5.1.
35.3 If the Executive's employment shall be terminated for any
reason following a Change in Control or a Major Transaction and during the
term of this Agreement, the Company shall pay to the Executive the normal
post-termination compensation and benefits due the Executive as such payments
become due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, the System's applicable
retirement, insurance and other compensation or benefit plans, programs and
arrangements. Provided that the benefits payable to the Executive pursuant to
the Standard Severance Plan for Non-Union Employees (the "Severance Plan") or
its successor do not exceed benefits payable to the Executive under this
Agreement, the Executive hereby waives all rights to benefits pursuant to the
Severance Plan.
36. Severance Payments.
36.1 The Company shall pay the Executive the payments described
in this Section 6.1 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control or a Major Transaction
and during the term of this Agreement, in addition to the payments and
benefits described in Section 5 hereof, unless such termination is (i) by the
Employer for Cause, (ii) by reason of death, Disability or Retirement, or
(iii) by the Executive without Good Reason. The Executive's employment shall
<PAGE>
be deemed to have been terminated following a Change in Control or a Major
Transaction by the Employer without cause or by the Executive with Good Reason
if the Executive's employment is terminated prior to a Change in Control or a
Major Transaction without cause at the direction of a Person who has entered
into an agreement with the Company the consummation of which will constitute a
Change in Control or a Major Transaction, or if the Executive terminates his
employment with Good Reason prior to a Change in Control or a Major
Transaction (determined by treating a Potential Change in Control or Potential
Major Transaction as a Change in Control or a Major Transaction, as
applicable, in applying the definition of Good Reason) if the circumstance or
event which constitutes Good Reason occurs at the direction of such Person.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination, the Company shall
pay to the Executive a lump sum severance payment, in cash, equal to
three times the sum of (i) the higher of the Executive's annual base
salary in effect as of the Date of Termination or in effect immediately
prior to the Change in Control or Major Transaction, and (ii) the
higher of the average amount paid to the Executive pursuant to the New
England Electric Companies' Senior Incentive Compensation Plan, New
England Electric Companies' Incentive Compensation Plan I, New England
Electric Companies' Incentive Compensation Plan II, Performance Based
Bonus Plan, and Incentive Share Plan or successors of any such plans,
with respect to the three years preceding the year in which the Date of
Termination occurs or the average amount paid with respect to the three
years preceding the year in which the Change in Control or Major
Transaction occurs.
<PAGE>
(B) In addition to the retirement benefits to which the
Executive is entitled under each Pension Plan or any successor plan
thereto, the Company shall pay the Executive a lump sum amount, in
cash, equal to the excess of (x) the actuarial equivalent of the
retirement pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity
commencing at the later of age 55 or the third anniversary of the Date
of Termination) which the Executive would have accrued under the terms
of each such Pension Plan (without regard to any amendment to such
Pension Plan made subsequent to a Change in Control or a Major
Transaction, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if the
Executive were fully vested thereunder and had accumulated (after the
Date of Termination) thirty-six (36) additional months of service
credit thereunder and had been credited under each such Pension Plan
during such period with compensation at the higher of (a) Executive's
compensation (as defined in such Pension Plan) during the twelve (12)
months immediately preceding the Date of Termination or (b) Executive's
compensation (as defined in such Pension Plan) during the twelve (12)
months immediately preceding the Change in Control or Major
Transaction, over (y) the actuarial equivalent of the retirement
pension (taking into account any early retirement subsidies associated
therewith and determined as a straight life annuity commencing at the
later of age 55 or the Date of Termination) which the Executive had
accrued pursuant to the provisions of each such Pension Plan as of the
Date of Termination. For purposes of this Section 6.1(B), "actuarial
equivalent" shall be determined using the same methods and assumptions
utilized under the New England Electric Companies' Final Average Pay
Plan I (or a successor thereto) immediately prior to the Date of
Termination (without regard to any amendment of such methods and
assumptions made subsequent to a Change in Control or a Major
Transaction, which amendment results in a lower actuarial equivalent
<PAGE>
value). The discount rate used for the calculation of benefits
hereunder shall be that used by the System for valuing the liabilities
of the New England Electric Companies' Final Average Pay Plan I (or a
successor thereto) immediately prior to the Date of Termination.
(C) If the Executive would have become entitled to benefits
under the System's post-retirement health care or life insurance plans
had his employment terminated at any time during the period of thirty-
six months after the Date of Termination, the Company shall pay such
benefits to the Executive commencing on the later of (a) the date that
such coverage would have first become available and (b) the date the
benefits described in (D) below terminate.
(D) For the thirty-six (36) month period immediately
following the Date of Termination, the Company shall arrange to provide
the Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits subsequent to a Change
in Control or a Major Transaction which reduction constitutes Good
Reason). Benefits otherwise receivable by the Executive pursuant to
this Section 6.1(D) shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually received by
the Executive shall be reported to the Company by the Executive).
(E) The Company shall pay the Executive the retirement
benefit described in the New England Electric System Companies'
Retirement Supplement Plan (without regard to any amendment made
subsequent to a Change in Control or a Major Transaction which
amendment adversely affects in any manner the computation of retirement
benefits thereunder) as if the Executive were a vested participant
<PAGE>
thereunder; provided, however that such retirement benefit shall be
calculated without regard to the benefits described in Section 6.1(B).
36.2 In the event that the Executive becomes entitled to the
Severance Payments, if any of the Severance Payments will be subject to the
Excise Tax, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Severance Payments and any federal, state
and local income tax and Excise Tax upon the payment provided for by this
Section 6.2, shall be equal to the Severance Payments. For purposes of
determining whether any of the Severance Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) any other payments or
benefits received or to be received by the Executive in connection with a
Change in Control or a Major Transaction, or the Executive's termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the System, any Person whose actions result in a
Change in Control or a Major Transaction or any Person affiliated with the
System or such Person) shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of section 280G(b)(l) of the Code shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Company's independent auditors and reasonably acceptable to the Executive
such other payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of the Code,
or such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, (ii)
the amount of the Severance Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the
Severance Payments or (B) the amount of excess parachute payments within the
meaning of section 280G(b)(l) of the Code (after applying clause (i), above),
<PAGE>
and (iii) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the Date of
Termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes. In the event that
the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of the Executive's
employment, the Executive shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by the Executive to
the extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such excess)
at the time that the amount of such excess is finally determined. The
Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Severance
Payments.
<PAGE>
36.3 The payments provided for in Section 6.1 (other than
Sections 6.1(D) and 6.1(E)) and 6.2 hereof shall be made not later than the
fifth day following the Date of Termination, provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined
in good faith by the Company, of the minimum amount of such payments to which
the Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after demand
by the Company (together with interest at the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under this
Section, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
36.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any
termination of his employment hereunder or in seeking in good faith to obtain
or enforce any benefit or right provided by this Agreement or in connection
with any tax audit or proceeding to the extent attributable to the application
of section 4999 of the Code to any payment or benefit provided hereunder.
Such payments shall be made within five (5) business days after delivery of
the Executive's written requests for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
<PAGE>
37. Termination Procedures and Compensation During Dispute.
37.1 Notice of Termination. After a Change in Control or a Major
Transaction and during the term of this Agreement, any purported termination
of the Executive's employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is required to include
a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
37.2 Date of Termination. "Date of Termination", with respect to
any purported termination of the Executive's employment after a Change in
Control or a Major Transaction and during the term of this Agreement, shall
mean (i) if the Executive's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that the Executive
shall not have returned to the full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Employer, shall not be
less than thirty (30) days (except in the case of a termination for Cause)
and, in the case of a termination by the Executive, shall not be less than
fifteen (15) days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
<PAGE>
37.3 Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
on which the dispute is finally resolved, either by mutual written agreement
of the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided
further that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
37.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control or a Major Transaction and during the
term of this Agreement, and such termination is disputed in accordance with
Section 7.3 hereof, the Company shall pay the Executive the full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with Section 7.3 hereof. Amounts
paid under this Section 7.4 are in addition to all other amounts due under
this Agreement (other than those due under Section 5.2 hereof) and shall not
be offset against or reduce any other amounts due under this Agreement.
38. No Mitigation. The Company agrees that, if the Executive's
employment with the NEES Companies terminates during the term of this
Agreement, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the
Company pursuant to this Agreement. Further, the amount of any payment or
benefit provided for in this Agreement (other than in Section 6.1(D) hereof)
<PAGE>
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the System, or otherwise.
39. Successors; Binding Agreement.
39.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control or a Major Transaction,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
39.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon
the death of the Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
40. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
<PAGE>
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
New England Power Service Company
25 Research Drive
Westborough, MA 01582-0099
Attention: Director of Human Resources
To the Executive:
John W. Rowe
929 Salem End Road
Framingham, MA 01701
41. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of The Commonwealth of Massachusetts. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be
paid net of any applicable withholding required under federal, state or local
law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under Sections 6 and 7 shall
survive the expiration of the term of this Agreement.
<PAGE>
42. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
43. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
44. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for
benefits under this Agreement shall be delivered to the Executive in writing
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford a reasonable
opportunity to the Executive for a review of the decision denying a claim and
shall further allow the Executive to appeal to the Board a decision of the
Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however,
that the Executive shall be entitled to seek specific performance of the
Executive's right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement.
45. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning defined in section
280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
<PAGE>
(D) "Cause" for termination by the Employer of the Executive's
employment, after any Change in Control or Major Transaction, shall mean (i)
the willful and continued failure by the Executive to substantially perform
the Executive's duties with the System (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination
for Good Reason by the Executive pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in conduct which is demonstrably
and materially injurious to the System, monetarily or otherwise. For purposes
of clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the System.
(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing
20% or more of the combined voting power of the Company's then
outstanding securities; or
(II) during any period of not more than two consecutive
years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a Person who has entered into an agreement with the
Company to effect a transaction described in clause (I) of this
<PAGE>
paragraph) whose election by the Board or nomination for election
by the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved or recommended, cease for any reason to constitute a
majority thereof.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Company" shall mean New England Electric System and any
successor to its business and/or assets which assumes and agrees to perform
this Agreement by operation of law, or otherwise (except in determining, under
Section 15(E) hereof, whether or not any Change in Control or Major
Transaction has occurred in connection with such succession).
(H) "Date of Termination" shall have the meaning stated in
Section 7.2 hereof.
(I) "Disability" shall be deemed the reason for the termination
by the Employer of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the System for a period of six (6) consecutive months, the Company shall have
given the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
(J) "Disability Insurance Plan" shall mean the Company Disability
Insurance Plan or any successor thereto.
(K) "Employer" shall mean the NEES Company by which the Executive
is employed at the time of determination.
(L) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
<PAGE>
(M) "Excise Tax" shall mean any excise tax imposed under section
4999 of the Code.
(N) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(O) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) of any one of the following acts by the System, or
failures by the System to act, unless, in the case of any act or failure to
act described in paragraph (I), (V), (VI), (VII), or (VIII) below, such act or
failure to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(I) the assignment to the Executive of duties substantially
inconsistent with the Executive's status as an executive officer
of the System;
(II) a reduction in the Executive's annual base salary as
in effect on the date hereof or as the same may be increased from
time to time;
(III) requiring the Executive to be based at a location
more than 100 miles from the town of Westborough, Massachusetts,
except for required travel on the System's business to an extent
substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Employer, to pay to the Executive
any portion of the Executive's compensation within seven (7) days
of the date such compensation is due;
(V) the failure by the System to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control or the Major Transaction which is
material to the Executive's total compensation, including but not
limited to the New England Electric Companies' Incentive
Compensation Plan I, New England Electric Companies' Incentive
<PAGE>
Compensation Plan II, New England Electric Companies' Senior
Incentive Compensation Plan, New England Electric Companies'
Incentive Share Plan, New England Electric Systems Companies'
Deferred Compensation Plan and the New England Electric Companies'
Executive Supplemental Retirement Plan or any substitute plans
adopted prior to the Change in Control or Major Transaction,
unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or
the failure by the System to continue the Executive's
participation therein (or in such substitute or alternative plan
on a basis not substantially less favorable, both in terms of the
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at the
time of the Change in Control or Major Transaction;
(VI) the failure by the System to continue to provide the
Executive with benefits substantially similar to those enjoyed by
the Executive under any of the System's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change in Control
or the Major Transaction, the taking of any action by the System
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control or
Major Transaction, or the failure by the Employer to provide the
Executive with the number of paid vacation days to which the
Executive is entitled on the basis of years of service with the
NEES Companies in accordance with the Employer's normal vacation
policy in effect at the time of the Change in Control or Major
Transaction; or
<PAGE>
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall be
effective.
The Executive's right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(P) "Gross-Up Payment" shall have the meaning given in Section
6.2 hereof.
(Q) A "Major Transaction" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) the shareholders of the Company approve a merger or
consolidation of the Company with any corporation or business
trust, other than (i) a merger or consolidation which would result
in the individuals who prior to such merger or consolidation
constitute the Board constituting at least two-thirds (2/3) of the
board of directors of the Company or the surviving or succeeding
entity immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no Person
acquires more than 20% of the combined voting power of the
Company's then outstanding securities; or
(II) the shareholders of the Company approve a plan of
complete liquidation of the Company; or
(III) the shareholders of the Company approve an agreement
for the sale or disposition by the Company of all or substantially
all the Company's assets, other than a sale or disposition which
would result in the individuals who prior to such sale or
<PAGE>
disposition constitute the Board constituting at least two-thirds
(2/3) of the board of directors of the Person purchasing such
assets immediately after such sale or disposition.
(R) "NEES Companies" shall mean all NEES Companies, collectively.
(S) "NEES Company" shall mean a subsidiary of the Company.
(T) "Notice of Termination" shall have the meaning stated in
Section 7.1 hereof.
(U) "Pension Plan" shall mean each of the plans and agreements
listed in Attachment A.
(V) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Company or any NEES Company, (ii)
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or any NEES Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of shares of the
Company.
(W) "Potential Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing
10% or more of the combined voting power of the Company's then
outstanding securities, increases such Person's beneficial
<PAGE>
ownership of such securities by 5% or more over the percentage so
owned by such Person on the date hereof unless such Person has
reported or is required to report such ownership (but less than
25%) on Schedule 13G under the Exchange Act (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or
any comparable or successor report) which Schedule 13D does not
state any intention to or reserve the right to control or
influence the management or policies of the Company or engage in
any of the actions specified in Item 4 of such Schedule (other
than the disposition of the common shares) and, within 10 business
days of being requested by the Company to advise it regarding the
same, certifies to the Company that such Person acquired such
securities of the Company in excess of 14.9% inadvertently and
who, together with its affiliates, thereafter does not acquire
additional securities while the Beneficial Owner of 15% or more of
the securities then outstanding; provided, however, that if the
Person requested to so certify fails to do so within 10 business
days, then such occurrence shall become a Potential Change in
Control immediately after such 10 business day period; or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(X) "Potential Major Transaction" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Major Transaction;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Major Transaction; or
<PAGE>
(III) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Major Transaction has
occurred.
(Y) "Retirement" shall be deemed the reason for the termination
by the Employer or the Executive of the Executive's employment if such
employment is terminated in accordance with the Employer's written mandatory
retirement policy, if any, as in effect immediately prior to the Change in
Control or Major Transaction, or in accordance with any retirement arrangement
established with the Executive's written consent with respect to the
Executive.
(Z) "Severance Payments" shall mean those payments described in
Section 6.1 hereof.
(AA) "System" shall mean the Company and the NEES Companies,
collectively.
(BB) "Total Payments" shall mean those payments described in
Section 6.2 hereof.
New England Electric System
s/George M.Sage
By
Chairman of the Compensation
Committee
s/John W. Rowe
John W. Rowe
<PAGE>
ATTACHMENT A
------------
New England Electric System Companies' Final Average Pay Pension Plan I
New England Electric Companies' Executive Supplemental Retirement Plan
Letter dated December 5, 1988, from Joan T. Bok
<PAGE>
[COVER PHOTO]
1996 New England Electric System Annual Report
"Keeping the lights on,
earning our keep -
lasting values in a
changing world."
[NEES LOGO]
<PAGE>
[PHOTO OF LINE DEPARTMENT EMPLOYEES]
About the cover
Line Department employees tend to our more than 22,000 miles of
distribution and transmission wires - the critical infrastructure
of NEES's electricity delivery business.
Clockwise, from left: Narragansett Electric's Jeff Crum, Jack
Hobson, Doug Paul, Marie Sullivan, and Luon Kim.
<PAGE>
1996
NEES has consistently overcome challenges - from the oil
embargoes and inflation of the 1970's, to a severe recession in
the early 1990's - to provide competitive financial performance
for our shareholders. To continue this record, we are adapting
the NEES organization to a restructured industry. We agreed to
sell our generation business, and to shift our primary focus to
the energy delivery or regulated wires business. We also began
to pursue new opportunities in competitive businesses such as
energy services, transmission project management, and
telecommunications.
<PAGE>
<TABLE>
<CAPTION>
Financial Results
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Earnings per average share $ 3.22 $ 3.15 $ 3.07
Dividends declared per share $ 2.360 $ 2.345 $ 2.285
Book value per share at year end $ 25.98 $ 25.13 $ 24.33
Market price per share at year end $34 7/8 $39 5/8 $32 1/8
Growth in kilowatt-hour (kWh)
deliveries to ultimate customers 1.7% 0.7% 1.6%
Cost per kWh sold to ultimate
customers (cents) 9.51 9.54 9.29
</TABLE>
Return on Common Equity
[GRAPH]
New England Electric System 12.6%
Median of U.S. Electric Utilities 11.5%
Median of New England/New York
Electric Utilities 11.1%
New England Electric System (NEES) is a public utility holding
company headquartered in Westborough, Massachusetts. Its
subsidiaries are currently engaged in the generation,
transmission, distribution, and sale of electric energy, and
serve 1.3 million customers in Massachusetts, Rhode Island, and
New Hampshire. Other business activities include independent
transmission projects, telecommunications, and energy marketing
through AllEnergy Marketing Company, L.L.C., a joint venture with
Eastern Enterprises.
<PAGE>
"The actions of our legislators and regulators
will provide substantial long-term benefits
to our customers while treating
NEES investors fairly."
[PICTURE OF UTILITY RESTRUCTURING ACT SIGNING]
Rhode Island makes history as Governor Lincoln Almond (seated)
signs the Utility Restructuring Act. Left to right: Robert
McCabe, president of Narragansett Electric; John Harwood, Speaker
of the House; David Gulvin of Eastern Utilities; Senator Paul
Tavares; Senator William Irons; NEES CEO John Rowe; and House
Majority Leader George Caruolo.
To Our Fellow Shareholders
Changes came, fast and furious, during 1996. But despite the
uneasiness brought on by the restructuring of New England's
electricity industry, NEES employees kept their focus where it
belongs on continuing the outstanding financial record that
investors in NEES have come to expect. We did this by providing
better service at lower cost.
We thank these hard working people for bringing NEES its
eighth consecutive year of solid financial performance. Earnings
per share were $3.22, compared with $3.15 in the previous year.
Return on common equity was 12.6 percent, placing us in the top
third of the nation s electric utilities. We are the only utility
to be in the top third of the New England-New York region in each
of the last eight years, and are pleased that the stock market
has recognized this superior performance, generally with the
highest share-price-to-book ratio in the region.
Competition
As you know, we face growing pressures to modify utility
franchises with new, more competitive structures. These
pressures are particularly powerful in New England where the cost
of electricity has exceeded the national average for many years.
NEES's costs are lower than those of its neighbors, but we are
not immune to these pressures. We are focusing on obtaining fair
treatment for utilities and their shareholders, rather than
attempting to delay trends that we consider inescapable or to
oppose public policies we perceive to be sound.
In 1996, our efforts to make public policy work for our
investors yielded substantial success. In August, Rhode Island
adopted the first detailed, definitive agenda for bringing the
benefits of competition and customer choice to all consumers
while compensating utility shareholders for the harm done to
their existing generating commitments. In September, we achieved
a settlement agreement in Massachusetts with the Attorney
<PAGE>
General, Division of Energy Resources, and a variety of other
interests on a similar plan which the Department of Public
Utilities has now approved.
These breakthroughs are described in more detail on pages
6-8. Their principal features include the opening of our
transmission and distribution systems to retail competition in
1998, rate reductions for customers, and a transition charge to
compensate NEES for investments in generation that cannot be
recovered in the new marketplace or otherwise mitigated. Similar
measures have now been adopted in California and Pennsylvania.
The actions of our legislators and regulators will provide
substantial long-term benefits to our customers while treating
our investors fairly. If we had been required to give our
competitors access to our wires without provision for recovering
past investments, large portions of our generating commitments
would have become unrecoverable, or "stranded," depriving you of
the capital you have invested. These stranded investment issues
must be addressed in each state that chooses a competitive model.
We are grateful that two of our states have addressed these
issues so squarely and we are working to resolve them in New
Hampshire as well.
[PHOTO OF JOHN W. ROWE APPEARS HERE]
John W. Rowe, President and Chief Executive Officer
Restructuring
Adapting to a revolution is never easy or painless. Competition
and guaranteed rate reductions will reduce our revenues in 1998
and require even more substantial cost reductions than we have
previously attained. More fundamentally, in exchange for
stranded cost recovery, NEES has agreed to sell all of its fossil
and hydroelectric power plants and to seek buyers for its nuclear
and purchased power contracts.
Selling our generation is a bold response to new realities,
but is also a major concession. While NEES achieved its present
form in 1947, our roots in generation go back to 1907 when our
corporate predecessors developed hydroelectric generation on the
Connecticut River. So, parting with our power plants is as
emotionally unsettling as selling the family home. We are
compelled to decrease the size of the System. Many of our most
valuable employees will leave to take jobs with the new owners,
and some will need to seek employment elsewhere.
Nevertheless, this tough decision to divest our generation
business was necessary to protect the value of your investment.
By agreeing to divest, we secured a broad base of support from
customers, regulators, and legislative leaders for the recovery
of stranded costs. Further, we will avoid volatile returns and
possible losses from the generating business over the next
<PAGE>
several years, a scenario that is inconsistent with the stable
returns that most investors seek from electric utilities.
As the generation sale process goes forward, we are working
with our labor unions and employees to implement the
organizational changes necessary, and to determine the benefits
to be paid to employees who lose their positions. We are
confident that, whether for a NEES company or for the new owners
of our generating business, NEES people will succeed at meeting
the new challenges of the industry.
[PHOTO OF JOAN T. BOK APPEARS HERE]
Joan T. Bok, Chairman of the Board
Vision
Once the divestiture is complete, a new vision arises for NEES -
to become the region's most profitable, most successful
electricity delivery company. We have the know-how, the
infrastructure, and the skilled people to excel at that business,
and we expect substantial opportunities to expand our electricity
delivery system in coming years. The cash from our generation
sale will give us new capabilities in that regard.
We are seizing new opportunities in the energy industry
through a joint venture with Eastern Enterprises, the parent
company of the largest gas company in Massachusetts. This joint
venture, AllEnergy Marketing Company, L.L.C., positions us to be
a successful marketer of natural gas, electricity, propane, oil,
and energy related services. AllEnergy has a superb management
and sales team, and NEES plans to contribute up to $50 million
over a five-year period to give it the maximum chance of success.
Director
In July 1996, the NEES board of directors elected a new member,
William M. Bulger. Mr. Bulger is president of the University of
Massachusetts, and had served as Massachusetts Senate president
for 18 years. We are delighted that someone of Mr. Bulger's
intellectual force and breadth of experience has joined our
board, and are confident that he will make a substantial
contribution.
Commitment
The year 1996 was clearly one of major change and difficult
decisions for NEES. But the underpinning of NEES's success
remained - and will remain - an unyielding commitment to
shareholder value. This commitment permeates our organization,
from the board room, to the executive suite, to the locker rooms
of our crews. It is founded on employee self-interest and shared
success. From 12 to 46 percent of each employee's total
compensation (depending on position) will hinge on NEES meeting
annual targets for earnings and customer costs. We are one of
<PAGE>
the few U.S. electric utilities to have agreements with labor
unions that base part of compensation on the company's financial
performance for shareholders. Through various investment
programs, our employees collectively are NEES's largest
shareholder.
We thank you for your confidence in NEES and the employees of
our companies, a few of whom are highlighted on the following
pages. The focused efforts and commitment of this kind of people
will continue to make NEES the right utility investment choice.
We also thank you for your investment in our company. We
will strive to make 1997 another successful year, and to be ready
for retail competition when it comes in 1998.
s/John W. Rowe
John W. Rowe
President and Chief Executive Officer
s/Joan T. Bok
Joan T. Bok
Chairman of the Board
February 28, 1997
<PAGE>
Making public policy work for our company
NEES leads New England's electric utilities in shaping the
restructuring of the electricity industry. This leadership
derives from our position as New England's lowest-cost major
electricity provider, our tradition of productive working
relationships with policy makers, and our absolute commitment to
shareholder value.
"The accomplishments of 1996
greatly reduce the uncertainty associated
with industry restructuring."
[PHOTO OF PAM VIAPIANO, JOSE ROTGER, PAIGE GRAENING, AND TERRY
SCHWENNESEN]
Responding to new rules that promote competition among power
suppliers are legal and rates experts, left to right: Pam
Viapiano, Jose Rotger, Paige Graening, and Terry Schwennesen.
Our top priority in negotiations with state legislators,
regulators, and various stakeholders was to obtain rules for
industry restructuring that will allow us to recover our stranded
costs. This is critical, because providing competitors access to
our transmission and distribution systems threatens to reduce the
value of our generation and purchased power contracts by as much
as $4.5 billion. While more work remains to be done, we have
succeeded in establishing a framework for recovering those
investments.
Legislation
Rhode Island's Utility Restructuring Act of 1996 was the first
legislation enacted in the nation to establish precise ground
rules and timetables for competition in retail electricity
markets. The statute phases in choice of electricity supplier
for Rhode Island customers during a 12-month period beginning in
July 1997. It set a precedent for treating utilities fairly by
establishing a transition charge that enables recovery of the
above-market sunk costs of our plants and other obligations. The
transition charge will be set at 2.8 cents per kilowatt-hour for
the first three years, but declines to approximately 0.7 cents
per kilowatt-hour in 12.5 years. Under the statute, the
transition charge will be adjusted to reflect the result of the
sale of our generation business.
We are grateful to the officials of Rhode Island for
reconciling fair treatment of shareholders with real savings and
real choices for customers.
[PHOTO OF LARRY REILLY APPEARS HERE]
Larry Reilly, President of Massachusetts Electric
<PAGE>
Settlement
In September, we were the first electric utility in Massachusetts
to reach agreement with the state's Attorney General and Division
of Energy Resources on a plan called "Consumers First." The plan
would offer Massachusetts customers a choice of electricity
suppliers beginning in 1998 and allow utilities to recover
stranded costs through a charge similar to that in the Rhode
Island statute. Under the agreement, the NEES companies must
divest ownership of our power plants to another company or
companies. The market value of our generation fleet, as
determined by the divestiture, will be deducted from the amount
of stranded investment we can recover, reducing the transition
charge paid by customers.
"Our people and our power plants are
the best in New England, and will be a major force in
the region's energy market as it enters the next century."
[PHOTO OF GENERATOR OVERHAUL]
Working on a generator overhaul at our Bellows Falls hydro
station in Vermont are, left to right: Tim Nelson, Dennis Harty,
and Mike Welch.
Recently, the Massachusetts Department of Public Utilities
(DPU) approved our Consumers First settlement. In addition, it
issued final rules on industry restructuring and a detailed
proposal for enabling legislation. These rules are consistent
with the basic principles contained in Consumers First and
reaffirm the state's commitment to stranded cost recovery.
To effectuate the Rhode Island statute and Massachusetts
settlement, we have filed with the FERC to terminate the
wholesale power contracts between New England Power Company and
Massachusetts Electric, Nantucket Electric, and Narragansett
Electric. FERC Order No. 888, issued in April 1996, opened
wholesale power sales to competition and provided for full
recovery of stranded costs from customers.
In late February 1997, the New Hampshire Public Utilities
Commission (NHPUC) endorsed the principle of full stranded cost
recovery for utilities such as our subsidiary Granite State
Electric whose rates are below regional averages. However, the
NHPUC indicated that the calculation of stranded costs to be
recovered would be less than that proposed by Granite State. The
NHPUC indicated that its decision would not result in savings for
Granite State's customers. Earlier, Granite State had reached an
interim settlement agreement with several customers and other
parties that would provide a guaranteed rate reduction, initial
access charges, and other terms mirroring our Massachusetts
settlement. The New Hampshire interim settlement is pending
before the NHPUC.
<PAGE>
[PHOTO OF LARRY BAILEY APPEARS HERE]
Larry Bailey, Director of Generation Operations
Work remains to be done in obtaining final approvals for our
plan of action, putting the industry rules into effect, and
successfully completing the divestiture of our generation
business. Legislatures or regulators may yet take a detrimental
course. However, the accomplishments of 1996 greatly reduce the
uncertainty associated with industry restructuring.
Focusing on success
Our plans for the future are to focus on the regulated
electricity delivery (or "wires") business, to expand it when and
where possible, and to make targeted investments in unregulated
businesses where we believe we can increase shareholder value.
[PHOTO OF MARILYN FLINT-JACQUES APPEARS HERE]
Marilyn Flint-Jacques, Customer Service Operations Manager
Infrastructure
Our wires infrastructure includes more than 20,000 miles of
distribution lines and 2,400 miles of transmission lines, serving
more than 1.3 million customers in a 4,700 square-mile area of
Massachusetts, Rhode Island, and New Hampshire. While those
customers will look to the competitive marketplace for their
electricity supplier, they will continue to rely on the local
distribution company to deliver that supply to their homes and
businesses and to do so with high reliability.
We believe that the pressures of the new era, including new
performance-based rate structures, will compel the consolidation
of wires companies. Indeed, this could parallel the era of rapid
consolidation through which our present System was built. As we
go forward, we will be opportunistic in merging with or acquiring
companies that allow us to expand our distribution infrastructure
and customer base.
Maintaining and improving our network of power lines and
related equipment will take on increasing importance in coming
years as customers' requirements continue to increase. Both the
Rhode Island statute and the Massachusetts settlement allow our
distribution companies the opportunity to earn fair returns while
providing high-quality customer service. We will draw on
existing strengths to deliver that service - reliable
transmission and distribution systems; highly skilled workers to
build, maintain, dispatch, and fix those systems; information and
communication technologies to support the business; and a
customer service strategy that keeps our people in direct contact
with customers.
<PAGE>
"World class customer service requires
a round-the-clock, state-of-the-art facility.
In 1996, we made that facility a reality."
[PHOTO OF SERVICE REPRESENTATIVES]
150 highly-trained service representatives are a critical link to
customers, both in day-to-day transactions and in
storm-related emergencies. Left to right: Mary Jane Powers,
Steven Soucy, Lee Anne Swanson, and Michael Rossacci.
Service
To better meet the needs of customers in the coming years, we
opened a new, state-of-the-art Customer Service and Operations
Center to take calls and serve customers seven days a week, 24
hours per day. This Northborough, Mass. facility consolidates
the customer service operations of seven Massachusetts locations.
Extensive training of employees, round-the-clock availability,
and sophisticated software allow us to answer customer questions
more easily and quickly, and to handle more than 1.5 million
calls per year. The facility also serves as our new control
center for coordinating repair work to lines and related
equipment during major emergencies. During back-to-back
snowstorms in December 1996, the staff handled more than 70,000
calls and coordinated the efforts of more than 500 line crews,
some from as far away as Canada and Pennsylvania.
Because the center was purposely built to meet needs greater
than our own, it will support our growth strategy. The NEES
companies were leaders in developing billing systems for retail
competition pilot programs, and are marketing our center's
customer and billing services to other energy companies.
[PHOTO OF JEFF DONAHUE APPEARS HERE]
Jeff Donahue, President, NEERI
Transmission
In the area of electricity transmission, we will seek competitive
investment opportunities, within and outside the United States,
that are emerging as utilities around the world respond to
privatization initiatives. Transmission development projects
will be pursued by our subsidiary New England Electric Resources,
Inc. (NEERI). Where appropriate, NEERI will team with its
strategic partner, ABB Power Systems, a global leader in
transmission equipment.
NEERI's strong experience and partnership with ABB will make
it a leading contender for large transmission development
projects. Our extensive experience includes the high voltage
direct current interconnection with Hydro-Quebec that delivers
hydroelectricity from James Bay in Canada to New England, and the
26-mile-long submarine cable that in 1996 connected Nantucket
Island to our transmission grid on the mainland. Both were
completed on time and under budget. The Nantucket cable allows
us to better serve the island, which joined our System in 1996,
and also includes a fiber installation that will allow enhanced
telecommunications service.
<PAGE>
In December, we proposed to build, own, and operate a
600-megawatt high voltage direct current submarine cable
transmission connection between Connecticut and Long Island,
which would introduce competitively attractive sources of power
to Long Island.
"Our expertise in high voltage direct current
transmission positions us for opportunities
on a global scale."
Telecommunications
We established a new subsidiary, NEES Communications, Inc. (NEES
Com), in August 1996 to allow the NEES companies to capture a
portion of the estimated $300 billion per year global
telecommunications industry. This subsidiary, which is an exempt
telecommunications company with a license from the Federal
Communications Commission, will seek to create value for both
customers and shareholders. It will focus on the fiber optics,
cable, and personal communications sectors of the
telecommunications industry. By year-end 1996, three fiber optic
projects, which will over time yield more than $2 million in
customer savings, had been completed.
[PHOTO OF LAYING SUBMARINE CABLE]
In 1996, a NEES company completed the 26-mile-long submarine
cable connecting Nantucket Island to the mainland. It is the
longest underwater power cable in the Northeast.
"AllEnergy will compete with a full range of
fuels and services to help customers
get more value for their
energy dollars."
[PHOTO OF ALLENERGY TEAM]
The AllEnergy team's significant experience in electricity,
natural gas, and other energy products and services is coupled
with strong sales and marketing capabilities. The team includes,
left to right: Bill Heil, Mary Smith, Deborah Chin, and John
Dickson.
Energy marketing
We joined with Eastern Enterprises, the parent company of Boston
Gas, the largest natural gas distributor in New England, to form
AllEnergy Marketing Company, L.L.C. in 1996. This venture
provides energy commodities, products, and services to customers
in the competitive market in New England and New York. In
December, AllEnergy announced the acquisition of Texas Liquids
Ltd, Inc. of New Jersey, adding propane and other petroleum
products to AllEnergy's menu of offerings.
<PAGE>
The strength of this venture is its ability to meet the
unique, evolving energy needs of customers within the region by
offering all energy commodities - electricity, gas, propane, and
oil - as well as value-added services such as energy management
and power supply consulting. It was a successful participant in
retail competition pilot programs in New Hampshire and
Massachusetts during 1996.
Moving forward
As competition approached, NEES promptly recognized that the
value of NEES shareholders' investments could be threatened by
stranded costs. We acted decisively to insure fair treatment for
our shareholders. We made significant progress in this area in
1996 and are further along than most utilities in putting the
stranded cost recovery issue behind us.
Now, we must consolidate these accomplishments into real
revenue streams, and strengthen our wires and other businesses.
Another new chapter is opening, in which we will strive to grow
both our existing and new businesses and to continue delivering
superior utility returns.
[PHOTO OF MARCY REED APPEARS HERE]
Marcy Reed, Chief Financial Officer, AllEnergy
<PAGE>
Financial Review
Industry Restructuring
On October 1, 1996, the New England Electric System (NEES)
companies announced their intention to divest their generating
business. The decision to divest the generating business was due
to a combination of factors, discussed below, relating to the
restructuring of the electric utility industry.
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures
stemming from a number 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.
In the recent past, this competition was most prominent in
the bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Massachusetts, Rhode
Island, and New Hampshire, there have been 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"). When electricity customers are allowed to
choose their electricity supplier, utilities across the country
will face the risk that market prices may not be sufficient to
recover the costs of the commitments incurred to supply customers
under a regulated structure. The amounts by which costs exceed
market prices are commonly referred to as "stranded costs."
[GRAPH APPEARS HERE, EARNINGS PER AVERAGE SHARE]
NEES provides electric service to retail customers through
separate distribution subsidiaries operating in Massachusetts,
Rhode Island, and New Hampshire. Each of the distribution
subsidiaries purchases electricity on behalf of its customers
under wholesale all-requirements contracts with NEES's wholesale
generating subsidiary, New England Power Company (NEP). NEP also
provides all-requirements service to seven unaffiliated electric
utilities. NEP estimates that at December 31, 1996 its
above-market commitments on behalf of its all-requirements
customers are as much as $4.5 billion on a present-value basis
(before the application of the proceeds from the sale of its
generating business).
As described below, comprehensive legislation was enacted in
Rhode Island and a settlement agreement was reached in
Massachusetts which, when all regulatory approvals are in place,
would allow recovery of NEP's above-market commitments to retail
<PAGE>
customers in those states, which make up 95 percent of NEP's
all-requirements sales. In return for that recovery, the NEES
companies have agreed to provide lower rates to customers, as
well as sell their generating business. Efforts are ongoing with
New Hampshire and unaffiliated customers to secure recovery of
the balance of NEP's above-market commitments.
Massachusetts Settlement Agreement
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved a settlement among NEP, its
Massachusetts distribution affiliates Massachusetts Electric
Company (Massachusetts Electric) and Nantucket Electric Company
(Nantucket), the Massachusetts Attorney General, the
Massachusetts Division of Energy Resources, and 12 other parties,
which provides for retail choice by Massachusetts customers and
the recovery of NEP's above-market commitments to serve those
customers.
The settlement 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).
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 compared with
September 1996 bundled electricity prices.
In accordance with the settlement, NEP's wholesale contracts
with Massachusetts Electric and Nantucket have been amended to
allow for early termination of all-requirements service under
those contracts. The amendment provides that upon early
termination, Massachusetts Electric's and Nantucket's share of
the cost of NEP's above-market generation commitments will be
recovered through a transition access charge on distribution
facilities. Those commitments consist of (i) the above-market
portion of generating plant commitments, (ii) regulatory assets,
(iii) the above-market portion of purchased power contracts, and
(iv) the operating costs of nuclear plants that cannot be avoided
by shutting down the plants, including nuclear decommissioning
costs.
The above-market portion of costs associated with generating
plants and regulatory assets would be recovered over 12 years,
and would earn a return on equity of 9.4 percent. As the
transition access charge declines, NEP would earn mitigation
incentives that would supplement its return on equity. The
incentives are structured such that NEP believes, based on its
expectations of the level of mitigation it can achieve through
divestiture and other means, that it could earn a cumulative
return on equity on unrecovered costs of approximately 11
percent. 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. Initially, the transition access charge would
be set at 2.8 cents per kilowatt-hour (kWh) through December 31,
2000, and is expected to decline thereafter. The initial
<PAGE>
transition access charge assumes that the generating plants have
no market value. To measure their actual market value, the NEES
companies agreed to sell their generating business. The net
proceeds from the sale will be used to reduce the transition
access charge.
[GRAPH APPEARS HERE, RETURN ON COMMON EQUITY]
The settlement also establishes performance-based rates for
Massachusetts Electric. Under the settlement, Massachusetts
Electric's nonfuel rates (and NEP's wholesale rates to
Massachusetts Electric) would be frozen at current levels until
the earlier of the commencement of retail choice or January 1,
2001. Upon commencement of retail choice, Massachusetts
Electric's distribution rates would be set at a level
approximately $45 million above the level embedded in its current
bundled rates, with such rates then frozen through the year 2000.
This increase reflects changes to the distribution cost of
service that 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. Massachusetts Electric'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 a maximum of 12.5
percent. This sharing results in an effective cap on
shareholder's return on equity of 11.75 percent. To the extent
that earnings fall below the floor, Massachusetts Electric would
be authorized to surcharge customers for the shortfall.
The settlement would also eliminate Massachusetts Electric's
purchased power cost adjustment (PPCA) mechanism as of July 31,
1996. This mechanism allows Massachusetts Electric to recover
purchased power rate changes from NEP and the effects of NEP's
seasonal rates. The settlement also stipulates that
Massachusetts Electric's net $18 million PPCA refund liability
balance at July 31, 1996 will be used to prefund a storm
contingency fund with $3 million, while the remainder will be
used to offset regulatory assets for hazardous waste costs.
The settlement is subject to approval by the Federal Energy
Regulatory Commission (FERC). The FERC accepted the filing to
become effective February 1, 1997, subject to refund, and ordered
hearings. In addition, various bills are pending before the
Massachusetts legislature relating to utility restructuring
issues that could affect the implementation of the settlement.
Rhode Island Legislation
In August 1996, the state of Rhode Island enacted pioneering
legislation that allows customers in that state the opportunity
to choose their electricity supplier. Under the Rhode Island
statute, state accounts, certain new customers, and the largest
manufacturing customers will be able to choose their supplier
<PAGE>
beginning on July 1, 1997. These customers represent
approximately 2 percent of NEES's retail customer kWh sales. The
balance of Rhode Island customers will be able to choose their
supplier in 1998.
The statute calls for NEP's contract with NEES's Rhode Island
distribution subsidiary, The Narragansett Electric Company
(Narragansett), to be amended to permit a gradual, early
termination of all-requirements service under this contract. The
amendment provides that, in return, Narragansett's 22 percent
share of the cost of NEP's above-market generation commitments
would be recovered through a transition access charge on
Narragansett's distribution facilities. The specifics of the
transition access charge are similar to, and were a model for,
those contained in the Massachusetts settlement. One difference
is the statute's return on equity, which will be set at 11
percent as long as the NEES companies complete the divestiture or
other market valuation of their generating business; otherwise,
the return will be equal to 9.2 percent.
The statute also establishes performance-based rates for
distribution utilities, such as Narragansett. Under the statute,
Narragansett increased distribution rates by approximately $11
million in 1997, and is entitled to a similar increase in 1998.
In addition, in 1997, Narragansett's return on equity from
distribution operations will be subject to a floor of 6 percent
and a ceiling of 11 percent. Earnings over the ceiling will be
shared equally between customers and shareholders up to a maximum
return on equity from distribution operations of 12.5 percent.
This sharing results in an effective cap on shareholder's return
on equity of 11.75 percent. To the extent that earnings fall
below the floor, Narragansett will be authorized to surcharge
customers for the shortfall.
NEP and Narragansett filed with the FERC an amendment to
their all-requirements contract in order to implement the
statute. The FERC has set down the amendment, along with the
Massachusetts settlement, for hearing. Narragansett has
indicated it is willing to make certain changes to its plan in
Rhode Island to parallel provisions in the Massachusetts
settlement. Implementation of other aspects of the statute is
subject to approval of the Rhode Island Public Utilities
Commission (RIPUC).
[GRAPH APPEARS HERE, DIVIDENDS DECLARED PER SHARE ANNUAL RATE]
New Hampshire Proceeding and Settlement Agreement
On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its plan to implement a New Hampshire
law calling for retail access by 1998. Under the plan, utilities
such as Granite State Electric Company (Granite State) whose
rates are below the regional average would be allowed full
recovery of stranded costs as calculated by the NHPUC. However,
the NHPUC indicated that its methodology and proposed timing of
recovery would yield both initial access charges and total
<PAGE>
recovery less than that requested by Granite State although the
NHPUC indicated that its decision would not result in savings for
Granite State's customers.
Prior to the issuance of the NHPUC order, Granite State
reached an interim settlement with several customers and other
stakeholders that would set initial access charges at 2.8 cents
per kWh for two years, and in other respects would mirror the
Massachusetts settlement described previously. Stranded costs to
be recovered after the two-year initial period would be subject
to future regulatory determination. Unlike the NHPUC order, the
interim settlement agreement would provide all customers with a
rate reduction of approximately 10 percent. This interim
settlement is still pending before the NHPUC.
Federal Activity
In April 1996, the FERC issued Order No. 888 requiring utilities
that own transmission facilities to file open access tariffs to
make available transmission service to affiliates and
nonaffiliates at fair, nondiscriminatory 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 all-requirements contracts, such as the contracts
between NEP and its retail affiliates.
Because of the Massachusetts settlement and the Rhode Island
statute, NEP does not expect it will rely exclusively on Order
No. 888 to recover stranded costs from its affiliates in
Massachusetts and Rhode Island. NEP cannot predict at this time
whether an Order No. 888 filing will be necessary to fully
recover stranded costs from Granite State or from seven
unaffiliated wholesale customers should any of those customers
choose to terminate service under their contract with NEP.
Granite State and these seven unaffiliated customers are
responsible for approximately 3 percent and 2 percent of NEP's
sales, respectively.
In July 1996, NEP, on behalf of the NEES companies, filed a
transmission tariff with the FERC pursuant to Order No. 888. The
FERC accepted the filing, but ordered NEP to refile to conform
more closely with the FERC's requirements under Order No. 888.
Implementation of the tariff in mid-1996 did not have a
significant impact on NEP's revenues. On February 26, 1997, the
FERC announced Order No. 888-A, reaffirming the principles of
Order No. 888, including stranded cost recovery.
A number of proposals for legislation related to industry
restructuring have been brought forward for consideration by the
current Congress. The scope and aim of these vary widely;
<PAGE>
however, the NEES companies and others will argue that state
settlements should be respected. NEES cannot predict what
federal legislation, if any, may be enacted.
Divestiture of Generation Business
Under the Massachusetts settlement and thus automatically under
the Rhode Island statute, the NEES companies must complete the
divestiture of their generating business within six months of the
later of the commencement of retail choice in Massachusetts or
the receipt of all necessary regulatory approvals. The NEES
companies are in the process of soliciting proposals for the
acquisition of their nonnuclear generating business with the
objective of reaching definitive purchase and sale agreements by
mid-1997. Closing would follow the receipt of regulatory
approvals, which are expected to take at least six to 12 months
following the execution of purchase and sale agreements. At
December 1996, nonnuclear net generating plant was approximately
$1.1 billion.
As part of the divestiture plan, NEP will endeavor to sell,
or otherwise transfer, its minority interest in four nuclear
power plants to nonaffiliates. NEP may retain responsibility for
decommissioning and related expenses, if necessary. To the
extent that NEP is unable to divest its nuclear generating
interests, the Massachusetts settlement provides for a sharing
between customers and shareholders of the revenues associated
with the nuclear interests and the costs not otherwise reflected
in the access charge, with 80 percent allocated to customers and
20 percent to shareholders. This sharing mechanism is not
included in the Rhode Island statute previously discussed. In
addition, New England Energy Incorporated (NEEI) is planning to
sell its oil and gas properties, the cost of which is supported
by NEP through fuel purchase contracts.
[GRAPH APPEARS HERE, BOOK VALUE PER SHARE AT YEAR END ($)]
Risk Factors
While substantial progress has been made in resolving the
uncertainty regarding the impact on shareholders from industry
restructuring, significant risks remain. These include, but are
not limited to (i) the potential that ultimately the
Massachusetts settlement and the Rhode Island statute will not be
implemented in the manner anticipated by NEES, (ii) the
possibility of state or federal legislation that would increase
the risks to shareholders above those contained in the
Massachusetts settlement and Rhode Island statute, and (iii) the
potential for adverse stranded cost recovery decisions involving
Granite State and NEP's unaffiliated customers.
Even if these risks do not materialize, the implementation of
the Massachusetts settlement and the Rhode Island statute will
negatively impact financial results for NEES starting in 1998.
The returns on equity permitted on NEES subsidiaries'
transmission and distribution operations (up to 11.75 percent)
<PAGE>
and on the unrecovered commitments in the generating business
(generally 9.4 percent to 11 percent) are less than those
historically earned by NEES. In addition, starting in 1998,
earnings will be affected by the return on the reinvestment of
the proceeds from the sale of the generation business. Such
reinvestment return is likely, at least in the near term, to be
less than is currently earned by the generation business.
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 thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The NEES companies have recorded
approximately $550 million in regulatory assets in compliance
with FAS 71 of which approximately $75 million relate to the
transmission and distribution business.
Both the Massachusetts settlement and the Rhode Island
statute provide for full recovery of the costs of generating
assets and oil and gas related assets (including regulatory
assets) not recoverable from the proceeds of the divestiture of
NEP's generating business. The cost of these assets would be
recovered as part of a transition access charge imposed on all
distribution customers. After the proposed divestiture,
substantially all of NEP's business, including the recovery of
its stranded costs, would remain under cost-based rate
regulation. NEES believes the Massachusetts settlement and the
Rhode Island statute will enable the NEES distribution companies
operating in those states to recover through rates their specific
costs of providing ongoing distribution services. In addition,
FERC Order No. 888 enables transmission companies to recover
their specific costs of providing transmission service. NEES
believes these factors will allow its principal subsidiaries to
continue to apply FAS 71 and that no impairment of plant assets
will exist under Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (FAS 121). Any loss from the
divestiture of generating assets and oil and gas assets will be
recorded as a regulatory asset to be recovered through the
ongoing transition access charge.
Although NEES believes that its subsidiaries will continue to
meet the criteria for continued application of FAS 71, NEES
understands that members of the SEC staff have raised questions
concerning the continued applicability of FAS 71 to certain other
electric utilities facing restructuring. In addition, despite
the progress made to date in Massachusetts and Rhode Island, it
is possible that the final restructuring plans ultimately ordered
by regulatory bodies would not reflect full recovery of stranded
costs, including a fair return on those costs as they are being
<PAGE>
recovered. In the event that future circumstances should cause
the application of FAS 71 to be discontinued, a noncash write-off
of previously established regulatory assets and liabilities
related to the affected operations would be required. In
addition, write-downs of plant assets under FAS 121 could be
required, including a write-off of any loss from the divestiture
of the generating business.
[GRAPH APPEARS HERE, 1996 DISTRIBUTION OF REVENUE(%)]
Overview of Financial Results
Earnings were $3.22 per share in 1996 compared with $3.15 and
$3.07 per share in 1995 and 1994, respectively. The return on
common equity was 12.6 percent in 1996, 12.8 percent in 1995, and
12.7 percent in 1994. The market price of NEES common shares was
$34 7/8 per share at the end of 1996 compared with $39 5/8 per
share and $32 1/8 per share at the end of 1995 and 1994,
respectively.
The increase in 1996 earnings reflects retail rate increases
and higher kWh sales as well as decreased purchased power costs.
These increases in income were partially offset by a decreased
allowance for funds used during construction (AFDC) and increased
property tax expense, both primarily due to the completion in the
second half of 1995 of the Manchester Street Station.
The increase in 1995 earnings reflects slightly higher kWh
sales to ultimate customers, decreased depreciation and
amortization expense, and decreased operation and maintenance
expenses, partially offset by higher purchased power and interest
expenses.
Operating Revenue
Operating revenue increased $79 million in 1996 and reflects
retail rate increases and sales growth, partially offset by
decreases in revenues under rate adjustment mechanisms.
Retail rate increases include a Massachusetts Electric $31
million base rate increase effective in October 1995, a
Narragansett $12 million base rate increase effective in December
1995, and a Granite State $1 million increase effective in
November 1995.
Rate adjustment mechanisms referred to above include the
distribution subsidiaries' PPCA mechanisms. The provisions of
the Massachusetts settlement would have caused the PPCA mechanism
for Massachusetts Electric to end, effective July 31, 1996.
However, since the Massachusetts settlement had not been approved
at the end of 1996, Massachusetts Electric accrued refund
provisions of $9 million related to assumed operation of the PPCA
provision during the last five months of 1996.
In 1996, kWh deliveries to ultimate customers increased 1.7
percent, while total kWh sales increased 1.3 percent. The
difference is the result of pilot programs in Massachusetts and
<PAGE>
New Hampshire, whereby the NEES distribution companies delivered
power provided by other companies. The increase in kWh
deliveries reflects the effects of an improving economy and the
acquisition of Nantucket, partially offset by the effects of
milder weather in the last half of the year.
Operating revenue increased $29 million in 1995. This
increase reflected modest sales growth, increased fuel revenues,
the November 1994 expiration of a Massachusetts Electric
temporary rate decrease, and the October 1995 Massachusetts
Electric rate increase. These increases were partially offset by
a decrease in the amortization of unbilled revenues in 1995
compared with 1994.
Kwh sales to ultimate customers increased less than 1 percent
in 1995. This increase was primarily due to a return to more
normal weather in the fourth quarter of 1995, along with a warmer
summer in 1995, partially offset by lower kWh sales in the first
quarter of 1995 due to unusually mild weather.
The distribution companies have received approval from their
respective regulatory agencies to recover demand-side management
(DSM) program expenditures in rates on a current basis. These
expenditures were $59 million, $64 million, and $70 million in
1996, 1995, and 1994, respectively. Since 1990, the distribution
companies have been allowed to earn incentives based on the
results of their DSM programs and have recorded before-tax
incentives of $6.0 million, $5.7 million, and $7.7 million in
1996, 1995, and 1994, respectively.
Operating Expenses
Total operating expenses increased $54 million in 1996 compared
with 1995. This increase reflects increased fuel costs and
increased taxes. These increases were partially offset by
decreased maintenance expense, lower purchased power costs, and
decreased depreciation and amortization expense.
[GRAPH APPEARS HERE, CUSTOMERS SERVED PER EMPLOYEE]
Fuel costs increased in 1996, primarily due to fixed pipeline
demand charges that, prior to the completion of the Manchester
Street Station, were being partially deferred for amortization
and recovery after the unit went into service in the second half
of 1995. The increase in fuel costs also reflects increased
generation as a result of growth in sales to ultimate customers
as well as generation supplied to other utilities.
In 1996 purchased power costs decreased, reflecting the
expiration of certain purchased power contracts. In addition,
purchased power costs in the first half of 1995 included NEP's
share of costs to repair steam generator tubes at the Maine
Yankee nuclear power plant in which NEP has a 20 percent
ownership interest.
<PAGE>
Maintenance expense decreased in 1996, reflecting reduced
thermal and hydro generating plant overhaul activity, partially
offset by $13 million of costs to correct deficiencies at the
Millstone 3 nuclear unit, in which NEP has a 12 percent ownership
interest.
In the fourth quarter of 1996, Massachusetts Electric
incurred approximately $8 million of costs related to a severe
winter storm. The Massachusetts settlement provides for the
recovery of the costs associated with major storms; however, its
application to the 1996 storm is subject to clarification by the
MDPU. Because the Massachusetts settlement had not been approved
as of December 31, 1996, Massachusetts Electric deferred the 1996
storm costs based upon long-standing regulatory practice allowing
the recovery over five years of costs of major storms.
In 1996, depreciation and amortization expense decreased,
reflecting a decrease in oil and gas amortization expense as well
as the completion in mid-1995 of the amortization of a portion of
Seabrook 1 costs and Salem Harbor coal conversion costs. These
decreases were partially offset by increased depreciation of
other utility plant assets, including the Manchester Street
Station.
Taxes, other than income taxes, increased in 1996, primarily
as a result of increased property taxes on the Manchester Street
Station.
Total operating expenses increased $2 million in 1995
compared with 1994, reflecting increased purchased power and fuel
expenses. Purchased power expense increased, reflecting
overhauls and refueling shutdowns at partially-owned nuclear
power facilities, including NEP's share of costs to repair steam
generator tubes at the Maine Yankee nuclear power plant. The
increase in purchased power expense also includes the
amortization of previously deferred purchased power contract
termination costs.
Fuel costs, including the fuel portion of purchased power
expense, increased in 1995, reflecting increased short-term
purchases by NEP due to decreased nuclear generation and
decreased hydro production resulting from low water levels.
In accordance with NEP's 1995 rate agreement, other operation
expense in 1995 reflects the commencement of the amortization
over seven years, of approximately $19 million of previously
deferred costs associated with postretirement benefits other than
pensions (PBOP) and the recognition of currently incurred PBOP
costs.
NEP's 1995 rate agreement also provided for the recovery over
three years of $27 million of costs related to the replacement of
a turbine rotor at one of NEP's generating stations and of
charges described above associated with the dismantlement of a
retired generating facility.
<PAGE>
Depreciation and amortization expense decreased in 1995 due
to reduced amortization of Seabrook 1 in accordance with NEP's
1995 rate agreement, which deferred recognition of $15 million of
such amortization from 1995 to 1996, the completion of the
amortization of the costs of certain coal conversion facilities
in the first half of 1995, and decreased oil and gas amortization
due to decreased production. Partially offsetting these
decreases were increased depreciation rates of approximately $8
million approved in NEP's 1995 rate agreement, increased charges
associated with the dismantlement of a retired generating
facility, and depreciation of new plant expenditures, including
the Manchester Street Station.
Allowance for Funds Used During Construction
The changes in AFDC in 1996 and 1995 are due to the Manchester
Street Station repowering project which began commercial
operation in the second half of 1995.
Investments in Nuclear Units
NEP owns minority interests in six nuclear generating units, two
of which, Yankee Atomic and Connecticut Yankee, have been shut
down permanently. Two others, Millstone 3 and Maine Yankee, are
currently shut down and have been placed on the Nuclear
Regulatory Commission's (NRC) "Watch List," signifying that their
safety performance exhibits sufficient weakness to warrant
increased NRC attention. Neither may restart without NRC
approval. At present, the Vermont Yankee and Seabrook 1 nuclear
generating units appear to be operating routinely without major
problems.
On October 9, 1996, the NRC issued letters to operators of
nuclear power plants requiring them to document that the plants
are operated and maintained within their design and licensing
bases, and that any deviations are reconciled in a timely manner.
The Seabrook 1, Maine Yankee, and Vermont Yankee nuclear power
plants responded to the NRC letters in February 1997.
Uncertainties regarding the future of nuclear generating
stations, particularly older units such as Maine Yankee and
Vermont Yankee, are increasing rapidly and could adversely affect
their service lives, availability, and costs. These
uncertainties stem from a combination of factors, including the
acceleration of competitive pressures in the power generation
industry and increased NRC scrutiny.
Connecticut Yankee
NEP has a 15 percent equity ownership interest in Connecticut
Yankee. As a result of an economic analysis, the Connecticut
Yankee board of directors voted in December 1996 to permanently
shut down and decommission the plant.
In December 1996, Connecticut Yankee filed with the FERC to
recover all of its approximately $246 million undepreciated
investment in the plant and other costs over the period extending
<PAGE>
through June 2007, when the plant's NRC operating license would
have expired. In a 1993 decision, the FERC allowed Yankee Atomic
to recover its undepreciated investment in its permanently shut
down nuclear plant, in part on the grounds that owners should not
be discouraged from closing uneconomic plants. Several parties
have intervened in opposition to Connecticut Yankee's filing.
NEP believes that the FERC will allow NEP to recover from its
customers all costs that the FERC allows Connecticut Yankee to
recover from NEP.
NEP has recorded the estimated future payment obligation to
Connecticut Yankee of $114 million as a liability and as an
offsetting regulatory asset, reflecting NEP's expected future
rate recovery of such costs. The NRC has identified numerous
apparent violations of its regulations, which may result in the
assessment of civil penalties.
Millstone 3
In April 1996, the NRC ordered Millstone 3, which has experienced
numerous technical and nontechnical problems, to remain shut down
pending verification that the unit's operations are in accordance
with NRC regulations and the unit's operating license. Millstone
3 is operated by a subsidiary of Northeast Utilities (NU). NEP
is not an owner of Millstone 1 and 2 nuclear generating units,
which are also shut down under NRC orders.
A number of significant prerequisites must be fulfilled prior
to restart of Millstone 3, including certification by NU that the
unit adequately conforms to its design and licensing bases, an
independent verification of corrective action taken at the unit,
an NRC assessment concluding a culture change has occurred,
public hearings, and a vote of the NRC Commissioners. NU
announced in December 1996 that it expects Millstone 3 to be
ready for restart around the end of 1997, subject to review by
the NRC Commissioners. NEP cannot predict when Millstone 3 will
be allowed by the NRC to restart, but believes that the unit will
remain shut down for a very protracted period.
NEP incurred $10 million of actual costs in 1996 related to
corrective actions associated with the outage. NEP has also
accrued a liability of approximately $3 million for its share of
future corrective action costs. Additional costs may be
incurred. During the outage, NEP is also incurring approximately
$1.6 million per month in incremental replacement power costs,
which it has been recovering from customers through its fuel
clause.
Several criminal investigations related to Millstone 3 are
ongoing. The NRC has identified numerous apparent violations of
its regulations which may result in the assessment of civil
penalties. NEP and other minority owners of Millstone 3 are
assessing their legal rights with respect to NU's operation of
Millstone 3.
<PAGE>
Maine Yankee
Over the past few years, the Maine Yankee nuclear generating
plant has experienced numerous technical and nontechnical
problems. In 1995, the plant had been shut down for much of the
year due to the discovery of cracks in its steam generator tubes.
The plant is currently shut down due to a cable routing problem.
In addition, due to leaking nuclear fuel rods, 68 fuel assemblies
will be replaced. As a result, Maine Yankee management does not
expect the unit to restart until at least summer of 1997.
In late 1995, allegations were made to the NRC that
inadequate analyses of the plant's emergency core cooling system
had been performed. As a result of the allegations, the NRC
limited the plant's operation to 90 percent of full capacity. In
September 1996, the NRC asked the Department of Justice (DOJ) to
review, for potential criminal violations, an NRC investigatory
report on the allegations. The DOJ is not limited in its
investigation to the matters covered in that report.
During 1996, the NRC conducted an independent safety
assessment (ISA) and identified a number of weaknesses,
deficiencies, and apparent violations which could result in
fines. Yankee Atomic performed professional services for Maine
Yankee associated with the matters being investigated. In
response to the ISA results, Maine Yankee has indicated that it
will spend more than $50 million in 1997 on operational
improvements. Additionally, in February 1997, Entergy
Corporation, an operator of five nuclear units, commenced
providing management services.
Under a confirmatory action letter issued by the NRC on
December 18, 1996, and supplemented on January 30, 1997, Maine
Yankee must fulfill certain commitments before its plant will be
allowed by the NRC staff to return to service. Because of
regulatory and other uncertainties faced by Maine Yankee, NEP
cannot predict whether or when Maine Yankee will return to
service.
During the outage, NEP is incurring approximately $1.8
million per month in incremental replacement power costs, which
it has been recovering from customers through its fuel clause.
Brayton Point
In October 1996, the Environmental Protection Agency (EPA)
announced it was beginning a process to determine whether to
modify or revoke NEP's water discharge permit for its Brayton
Point 1,576 megawatt power plant. This action came two years
before the permit expiration date. The EPA stated it took this
step in response to a request from the Rhode Island Department of
Environmental Management (RIDEM) that action be taken on the
Brayton Point permit prior to its 1998 renewal, based on concerns
raised in a final RIDEM report issued in October 1996. The
<PAGE>
report asserted a statistical correlation between the decline in
the fish population in Mount Hope Bay and a change in operations
at Brayton Point that occurred in the mid-1980's.
In February 1997, NEP signed a memorandum of agreement
negotiated with the various federal and state environmental
agencies under which NEP will voluntarily operate under more
stringent conditions than under its existing permit. The
agreement is in lieu of any immediate action on the permit, but
will cover only the months of February and March 1997. During
this time, the parties will continue to work toward a longer-term
solution. NEP cannot predict at this time what permit changes
will be required or the impact on Brayton Point's operations and
economics. However, permit changes may substantially impact the
plant's capacity and ability to produce energy as well as require
significant capital expenditures of tens of millions of dollars
to construct equipment to address the concerns raised by the
environmental agencies.
Hazardous Waste
The electric utility industry typically utilizes and/or generates
in its operations a range of potentially hazardous products and
by-products. The most prevalent types of hazardous waste sites
with which NEES and its subsidiaries have been associated are
manufactured gas locations. (Until the early 1970s, NEES was a
combined electric and gas holding company system.) NEES is aware
of 40 such manufactured gas locations, including nine of the 23
locations for which NEES companies have been identified by either
federal or state environmental regulatory agencies as potentially
responsible parties, mostly located in Massachusetts. In 1993,
the MDPU approved a settlement agreement that provides for rate
recovery of remediation costs of former manufactured gas sites
and certain other hazardous waste sites in Massachusetts. A more
detailed discussion of this settlement agreement and of potential
hazardous waste liabilities is contained in Note D-3 of the Notes
to the Financial Statements. Predicting the potential costs to
investigate and remediate hazardous waste sites continues to be
difficult. At December 31, 1996, NEES had total reserves of $48
million and a related regulatory asset of $18 million. NEES
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.
Electric and Magnetic Fields (EMF)
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. In
October 1996, the National Research Council of the National
Academy of Sciences released a report stating no conclusive and
consistent evidence demonstrates that exposures to residential
EMF produce adverse health effects. It is impossible to predict
<PAGE>
the ultimate impact on NEES subsidiaries and the electric utility
industry if further investigations were to demonstrate that the
present electricity delivery system is contributing to increased
risk of cancer or other health problems.
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what the impact on the NEES companies would be if this
cause of action is recognized in the states in which NEES
companies operate and in contexts other than condemnation cases.
Liquidity and Capital Resources
Capital requirements for 1996 and projections for 1997 are shown
below:
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars) 1996 1997
---- ----
<S> <C> <C>
Cash expenditures for utility plant $235 $230
Oil and gas exploration and development 20 15
---- ----
Total capital expenditures 255 245
Maturing debt and prepayment requirements 24 80
---- ----
Total capital requirements $279 $325
Cash from utility operations after
payment of dividends $242 $250
Cash from oil and gas operations 29 35
---- ----
Total cash from operations
after the payment of dividends $271 $285
---- ----
</TABLE>
The long-term financing activities of the NEES subsidiaries
for 1996 and the projected long-term financings for 1997 are
summarized as follows:
<TABLE>
<CAPTION> 1996 Actual 1997 Projected
(millions of dollars) Issues Retirements Issues Retirements
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
NEP $48 $ 58 $ - $ 3
Massachusetts Electric 20 - 50 30
Narragansett 2 2 40 33
Granite State - 1 5 -
Nantucket 28 - - 1
Hydro-Transmission companies - 12 - 11
Narragansett Energy
Resources Company - 1 - 2
NEEI - 33 - 20
------ ---------- ------ ----------
$98 $107 $95 $100
</TABLE>
<PAGE>
Interest rates on the long-term debt issued in 1996 shown
above range from 4.10 percent to 7.24 percent.
Net cash from operating activities provided all of the funds
necessary for oil and gas expenditures in 1996 and is projected
to provide all of the funds necessary in 1997. NEEI's 1996 oil
and gas exploration and development costs included $7 million of
capitalized interest costs.
At December 31, 1996, NEES and its consolidated subsidiaries
had lines of credit and standby bond purchase facilities with
banks totaling $706 million. These lines and facilities were
used at December 31, 1996 for liquidity support for $4 million of
short-term borrowings, $141 million of commercial paper
borrowings, and $372 million of NEP mortgage bonds in tax-exempt
commercial paper mode. Fees are paid on the lines and facilities
in lieu of compensating balances.
<PAGE>
New England Electric System and Subsidiaries
Selected Financial Data
Year Ended December 31 (dollar amounts expressed in millions, except per share
data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating revenue:
Electric sales (excluding
fuel cost recovery) $ 1,531 $ 1,521 $ 1,518 $ 1,488 $ 1,424
Fuel cost recovery 662 600 568 582 597
Other utility revenue 125 121 117 117 118
Oil and gas sales 33 30 40 47 43
------- ------- ------- ------- -------
Total operating revenue $ 2,351 $ 2,272 $ 2,243 $ 2,234 $ 2,182
Net income $ 209 $ 205 $ 199 $ 190 $ 185
Average common shares
(000's) 64,924 64,944 64,970 64,970 64,970
Per share data:
Net income $ 3.22 $ 3.15 $ 3.07 $ 2.93 $ 2.85
Dividends declared $ 2.360 $ 2.345 $ 2.285 $ 2.22 $ 2.14
Return on average
common equity 12.6% 12.8% 12.7% 12.6% 12.6%
Total assets $ 5,223 $ 5,191 $ 5,085 $ 4,796 $ 4,585
Capitalization:
Common share equity $ 1,685 $ 1,632 $ 1,581 $ 1,530 $ 1,487
Minority interests 46 49 55 56 61
Cumulative preferred stock 126 147 147 147 162
Long-term debt 1,615 1,675 1,520 1,512 1,533
------- ------- ------- ------- -------
Total capitalization $ 3,472 $ 3,503 $ 3,303 $ 3,245 $ 3,243
Deliveries to ultimate
customers (millions
of kWh) 21,674 21,311 21,155 20,832 20,554
Cost per kWh sold to ultimate
customers (cents) 9.51 9.54 9.29 9.50 9.43
System maximum
demand (MW) 4,091 4,381 4,385 4,081 3,964
Electric capability
(net MW)-year end 5,276 5,482 5,533 5,362 5,479
Number of employees 4,787 4,832 4,990 4,969 5,415
Number of ultimate customers
(in thousands) 1,333 1,314 1,300 1,288 1,277
------- ------- ------- ------- -------
</TABLE>
<PAGE>
New England Electric System and Subsidiaries
Statements of Consolidated Income
Year Ended December 31 (thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating revenue $2,350,698 $2,271,712 $2,243,029
Operating expenses:
Fuel for generation 334,994 237,498 220,956
Purchased electric energy 509,400 548,370 514,143
Other operation 501,090 500,721 494,741
Maintenance 127,785 136,058 161,473
Depreciation and amortization 246,379 264,666 301,123
Taxes, other than income taxes 143,733 132,631 125,840
Income taxes 139,199 128,340 128,257
---------- ---------- ----------
Total operating expenses 2,002,580 1,948,284 1,946,533
---------- ---------- ----------
Operating income 348,118 323,428 296,496
Other income:
Allowance for equity funds used
during construction 7,852 10,169
Equity in income of generating
companies 10,334 10,552 9,758
Other income (expense), net (8,166) (6,306) (3,856)
---------- ---------- ----------
Operating and other income 350,286 335,526 312,567
---------- ---------- ----------
Interest:
Interest on long-term debt 110,479 108,365 93,500
Other interest 19,527 19,826 11,298
Allowance for borrowed funds
used during construction (2,246) (14,016) (7,793)
---------- ---------- ----------
Total interest 127,760 114,175 97,005
---------- ---------- ----------
Income after interest 222,526 221,351 215,562
Preferred dividends and net gain
on reacquisition of preferred
stock of subsidiaries 6,463 8,690 8,697
Minority interests 7,127 7,904 7,439
----------- ----------- -----------
Net income $ 208,936 $ 204,757 $ 199,426
----------- ----------- -----------
Average common shares 64,924,468 64,944,187 64,969,652
Per share data:
Net income $ 3.22 $ 3.15 $ 3.07
Dividends declared $ 2.360 $ 2.345 $ 2.285
----------- ----------- -----------
</TABLE>
Statements of Consolidated Retained Earnings
Year Ended December 31 (thousands of dollars)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Retained earnings at beginning of year $ 831,529 $ 779,045 $ 728,075
Net income 208,936 204,757 199,426
Dividends declared on common shares (153,173) (152,273) (148,456)
--------- --------- ---------
Retained earnings at end of year $ 887,292 $ 831,529 $ 779,045
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
New England Electric System and Subsidiaries
Consolidated Balance Sheets
At December 31 (thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Assets
Utility plant, at original cost $5,692,956 $5,480,001
Less accumulated provisions for depreciation
and amortization 1,853,003 1,710,991
---------- ----------
3,839,953 3,769,010
Net investment in Seabrook 1 under
rate settlement (Note A) 15,210
Construction work in progress 56,652 71,682
---------- ----------
Net utility plant 3,896,605 3,855,902
---------- ----------
Oil and gas properties, at full cost (Note A) 1,286,661 1,266,290
Less accumulated provision for amortization 1,081,940 1,032,777
---------- ----------
Net oil and gas properties 204,721 233,513
---------- ----------
Investments:
Nuclear power companies, at equity (Note D) 47,902 47,056
Other subsidiaries, at equity 40,124 40,259
Other investments 96,399 87,992
---------- ----------
Total investments 184,425 175,307
---------- ----------
Current assets:
Cash 8,477 7,064
Accounts receivable, less reserves
of $18,702 and $18,308 262,103 284,033
Unbilled revenues 59,093 66,300
Fuel, materials, and supplies, at average cost 74,111 73,724
Prepaid and other current assets 85,096 77,673
---------- ----------
Total current assets 488,880 508,794
---------- ----------
Deferred charges and other assets (Note B) 448,620 417,360
---------- ----------
$5,223,251 $5,190,876
---------- ----------
Capitalization and liabilities
Capitalization (see accompanying statements):
Common share equity $1,685,417 $1,631,779
Minority interests in consolidated
subsidiaries 46,293 48,912
Cumulative preferred stock of subsidiaries 126,166 147,016
Long-term debt 1,614,578 1,675,170
---------- ----------
Total capitalization 3,472,454 3,502,877
---------- ----------
Current liabilities:
Long-term debt due within one year 79,705 23,960
Short-term debt 145,050 203,250
Accounts payable 148,592 157,486
Accrued taxes 14,911 15,894
Accrued interest 27,494 27,455
Dividends payable 37,276 38,683
Other current liabilities (Note F) 109,582 73,104
---------- ----------
Total current liabilities 562,610 539,832
---------- ----------
Deferred federal and state income taxes 750,929 780,451
Unamortized investment tax credits 91,936 93,408
Other reserves and deferred credits 345,322 274,308
Commitments and contingencies (Note D) ---------- ----------
$5,223,251 $5,190,876
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
New England Electric System and Subsidiaries
Consolidated Statements of Cash Flows
Year ended December 31 (thousands of dollars)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operating activities
Net income $208,936 $204,757 $199,426
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 250,508 270,292 305,908
Deferred income taxes and
investment tax credits, net (30,328) 24,056 41,741
Allowance for funds used during
construction (2,246) (21,868) (17,962)
Amortization of unbilled revenues (8,209) (38,458)
Minority interests 7,127 7,904 7,439
Decrease (increase) in accounts
receivable, net and unbilled revenues 30,770 1,194 (33,107)
Decrease (increase) in fuel,
materials, and supplies 126 20,707 (20,117)
Decrease (increase) in prepaid
and other current assets (7,209) (955) (7,714)
Increase (decrease) in accounts payable (9,568) (11,451) 40,595
Increase (decrease) in other current
liabilities 33,999 (4,784) (25,676)
Other, net 40,455 (11,790) (34,109)
-------- -------- --------
Net cash provided by operating
activities $522,570 $469,853 $417,966
-------- -------- --------
Investing activities
Plant expenditures, excluding
allowance for funds used
during construction $(234,409) $(329,385) $(438,016)
Oil and gas exploration and
development (20,371) (17,947) (28,233)
Other investing activities (10,309) (32,460) (18,830)
--------- --------- ---------
Net cash used in investing
activities $(265,089) $(379,792) $(485,079)
--------- --------- ---------
Financing activities
Dividends paid to minority interests $ (8,878) $ (12,159) $ (8,416)
Dividends paid on NEES common shares (153,759) (151,335) (148,063)
Short-term debt (59,862) (30,720) 162,195
Long-term debt-issues 97,850 425,000 97,000
Long-term debt-retirements (106,811) (311,920) (34,920)
Preferred stock-retirements (20,900) (512)
Premium on reacquisition of long-term debt (2,003)
Return of capital to minority
interests and related premium (1,633) (1,364)
Repurchase of common shares (2,075) (1,543)
--------- --------- ---------
Net cash provided by (used in)
financing activities $(256,068) $ (86,044) $ 67,284
--------- --------- ---------
Net increase in cash and cash equivalents $ 1,413 $ 4,017 $ 171
Cash and cash equivalents at beginning
of year 7,064 3,047 2,876
--------- --------- ---------
Cash and cash equivalents at end of year $ 8,477 $ 7,064 $ 3,047
--------- --------- ---------
Supplementary information
Interest paid less amounts capitalized $ 119,710 $ 105,459 $ 90,500
--------- --------- ---------
Federal and state income taxes paid $ 168,255 $ 68,312 $ 114,597
--------- --------- ---------
Dividends received from investments
at equity $ 12,987 $ 14,748 $ 15,350
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
New England Electric System and Subsidiaries
Consolidated Statements of Capitalization
At December 31 (thousands of dollars)
<TABLE>
<CAPTION>
Common share equity 1996 1995
---------- ----------
<S> <C> <C>
Common shares, par value $1 per share
Authorized - 150,000,000 shares
Issued - 64,969,652 shares $ 64,970 $ 64,970
Paid-in capital 736,773 736,823
Retained earnings 887,292 831,529
Treasury stock - 102,957 and 45,931 shares,
respectively (3,618) (1,543)
---------- ----------
Total common share equity $1,685,417 $1,631,779
</TABLE>
<TABLE>
<CAPTION>
Shares outstanding
Cumulative preferred stock of
subsidiaries 1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
$100 Par value-
4.44% to 4.76% 371,640 430,140 $ 37,164 $ 43,014
6.00% to 7.24% 375,020 525,020 37,502 52,502
$50 Par value
4.50% to 6.95% 730,000 730,000 36,500 36,500
$25 Par value
6.84% 600,000 600,000 15,000 15,000
--------- --------- -------- --------
Total cumulative preferred stock
of subsidiaries (annual dividend
requirement of $7,332 for 1996
and $8,690 for 1995) 2,076,660 2,285,160 $126,166 $147,016
--------- --------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Long-term debt (Note G) Maturity Rate 1996 1995
----------------- ----------------------- ----------
<S> <C> <C> <C> <C>
Mortgage bonds 1996 through 1999 5.060%-8.280%$ 173,500 $ 183,500
2000 through 2004 6.240%-8.520% 243,500 243,500
2005 through 2014 6.110%-8.450% 94,000 74,000
2015 through 2026 7.050%-9.125% 442,700 472,550
2018 through 2022 Variable 371,850 342,000
Notes
Granite State Electric Company 1996 through 2025 7.370%-9.440% 15,000 16,000
Nantucket Electric Company 1997 through 2016 4.100%-8.500% 31,500
New England Energy Incorporated 1998 through 2002 Variable 149,000 182,000
Hydro-Transmission Companies 2001 through 2015 8.820%-9.410% 148,010 159,530
Narragansett Energy Resources
Company 2010 7.250% 30,560 32,000
----------------- ----------------------- ----------
Unamortized discounts and
premiums, net (5,337) (5,950)
--------------------
Total long-term debt 1,694,283 1,699,130
--------------------
Long-term debt due in one year (79,705) (23,960)
--------------------
$1,614,578$1,675,170
--------------------
</TABLE>
<PAGE>
The accompanying notes are an integral part of these consolidated
financial statements.
New England Electric System and Subsidiaries
Notes to Consolidated Financial Statements
Note A - Significant Accounting Policies
1. Nature of operations
New England Electric System (NEES) is a public utility holding
company. NEES and its subsidiaries constitute the second largest
electric utility system in New England. Its core business
activities are the generation, transmission, distribution, and
sale of electric energy and the delivery of related services,
including energy efficiency improvements, to residential,
commercial, industrial, and municipal customers. Other business
activities include independent transmission projects and
rate-regulated domestic oil and gas operations.
The NEES system provides electric service to retail customers
through separate distribution subsidiaries, Massachusetts
Electric Company (Massachusetts Electric) and Nantucket Electric
Company (Nantucket), which operate in Massachusetts; The
Narragansett Electric Company (Narragansett), which operates in
Rhode Island; and Granite State Electric Company (Granite State),
which operates in New Hampshire. Each of the distribution
subsidiaries purchases electricity on behalf of its customers
under wholesale all-requirements contracts with NEES's wholesale
generating subsidiary, New England Power Company (NEP). (See
Note B for a discussion of industry restructuring and NEP's
proposed divestiture of its generating business.)
2. Basis of consolidation and financial statement presentation
The consolidated financial statements include the accounts of
NEES and all subsidiaries except New England Electric
Transmission Corporation, which is recorded under the equity
method. Presentation of this subsidiary on the equity basis is
not material to the consolidated financial statements.
Nantucket, which was acquired by NEES on March 26, 1996, is also
included in the consolidated financial statements. NEP has a
minority interest in four regional nuclear generating companies
(Yankees). Narragansett Energy Resources Company (NERC) has a 20
percent general partnership interest in the Ocean State Power
(OSP) generating facility. NEES Energy, Inc. (NEES Energy) has a
50 percent interest in AllEnergy Marketing Company, L.L.C., a new
energy marketing joint venture with a wholly-owned subsidiary of
Eastern Enterprises. NEP, NERC, and NEES Energy account for
these ownership interests under the equity method.
NEES owns 50.4 percent of the outstanding common stock of
both New England Hydro-Transmission Electric Company, Inc. and
New England Hydro-Transmission Corporation (Hydro-Transmission
companies). The consolidated financial statements include 100
percent of the assets, liabilities, and earnings of the
<PAGE>
Hydro-Transmission companies. Minority interests, which
represent the minority stockholders' proportionate share of the
equity and income of the Hydro-Transmission companies, have been
separately disclosed on the NEES consolidated balance sheets and
income statements.
NEP is also a 12 percent and 10 percent joint owner,
respectively, of the Millstone 3 and Seabrook 1 nuclear
generating units, each 1,150 megawatts. NEP's net investments in
Millstone 3 and Seabrook 1, included in "Net utility plant," are
approximately $379 million and $55 million, respectively. NEP's
share of the related expenses for these units is included in
"Operating expenses."
The accounts of NEES and its utility subsidiaries are
maintained in accordance with the Uniform System of Accounts
prescribed by regulatory bodies having jurisdiction. All
significant intercompany transactions between consolidated
subsidiaries have been eliminated.
In preparing the financial statements, management is required
to make estimates that affect the reported amounts of assets and
liabilities and disclosures of asset recovery and contingent
liabilities as of the date of the balance sheets, and revenues
and expenses for the period. These estimates may differ from
actual amounts if future circumstances cause a change in the
assumptions used to calculate these estimates.
3. Electric sales revenue
All of NEES's subsidiaries accrue revenues for electricity
delivered but not yet billed (unbilled revenues), with the
exception of Granite State. Included in income are $8 million
and $38 million, in 1995 and 1994, respectively, which represent
amortization of the initial effect of recording unbilled
revenues, in accordance with the retail rate agreements. Accrued
revenues are also recorded in accordance with rate adjustment
mechanisms.
4. Allowance for funds used during construction (AFDC)
The utility subsidiaries capitalize AFDC as part of construction
costs. AFDC represents the composite interest and equity costs
of capital funds used to finance that portion of construction
costs not yet eligible for inclusion in rate base. AFDC is
capitalized in "Utility plant" with offsetting noncash credits to
"Other income" and "Interest." This method is in accordance with
an established rate-making practice under which a utility is
permitted a return on, and the recovery of, prudently incurred
capital costs through their ultimate inclusion in rate base and
in the provision for depreciation. The composite AFDC rates were
5.6 percent, 7.3 percent, and 7.6 percent, in 1996, 1995, and
1994, respectively.
<PAGE>
5. Depreciation and amortization
The depreciation and amortization expense included in the
statements of consolidated income is composed of the following:
<TABLE>
<CAPTION>
Year ended December 31 (thousands of dollars) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Depreciation $171,193 $159,510 $136,746
Nuclear decommissioning costs (see Note D-4) 2,629 2,629 1,951
Amortization:
Oil and gas properties (see Note A-6) 49,163 68,708 79,232
Investment in Seabrook 1
under rate settlement 15,210 23,073 65,061
Oil Conservation Adjustment (OCA) - 4,467 11,854
Property losses 6,280 6,279 6,279
Millstone 3 additional amortization,
under rate settlement 1,904 - -
-------- -------- --------
Total depreciation and amortization
expense $246,379 $264,666 $301,123
-------- -------- --------
</TABLE>
Depreciation is provided annually on a straight-line basis.
The provision for depreciation as a percentage of weighted
average depreciable property was 3.2 percent in 1996, 3.3 percent
in 1995, and 3.1 percent in 1994. The OCA was designed to
recover expenditures for coal conversion facilities at NEP's
Salem Harbor Station. These costs were fully amortized at
December 31, 1995. In addition, Seabrook 1 costs under the rate
settlement were fully amortized at December 31, 1996. In
December 1996, New England Energy Incorporated (NEEI) recorded a
$13 million adjustment, which reduced its amortization of oil and
gas properties to correct amounts recorded in the years 1990
through 1996.
6. Oil and gas operations
NEEI participates in a rate-regulated domestic oil and gas
exploration, development, and production program through a
partnership with a nonaffiliated oil company. This program
consists of prospects acquired prior to December 31, 1983. No new
prospects will be acquired under this program. However, NEEI
continues to incur costs in connection with existing prospects.
In conjunction with divestiture of the NEES companies' generation
business, NEEI intends to sell its oil and gas properties.
Losses from this program are passed on to NEP, and ultimately
to retail customers, under an intercompany pricing policy
approved by the Securities and Exchange Commission (SEC). NEEI
has incurred operating losses since 1986 due to low oil and gas
prices, and expects to incur substantial additional losses in the
future. Such losses were $22 million, $44 million, and $40
million in 1996, 1995, and 1994, respectively. NEP's ability to
<PAGE>
pass these losses on to its customers was favorably resolved in
NEP's 1988 Federal Energy Regulatory Commission (FERC) rate
settlement. This settlement covered all costs incurred by, or
resulting from, commitments made by NEEI through March 1, 1988.
Other subsequent costs incurred by NEEI are subject to normal
regulatory review.
NEEI follows the full cost method of accounting for its oil
and gas operations, under which capitalized costs (including
interest paid to banks) relating to wells and leases, determined
to be either commercial or noncommercial, are amortized using the
unit of production method. The pricing policy has allowed NEEI
to capitalize all costs incurred in connection with fuel
exploration activities of its rate-regulated program, including
interest paid to banks, of which $7 million was capitalized in
1996, and $10 million in both 1995 and 1994. In the absence of
the pricing policy, the SEC's cost center "ceiling test" rule
requires non-rate-regulated companies to write down capitalized
costs to a level that approximates the present value of their
proved oil and gas reserves. Based on NEEI's 1996 average oil
and gas selling prices, application of the ceiling test would
have resulted in a write-down of approximately $93 million after
tax ($149 million before tax) at December 31, 1996.
7. Cash
NEES and its subsidiaries classify short-term investments with an
original maturity of 90 days or less as cash.
Note B - Industry Restructuring
The electric utility business is rapidly progressing toward the
unbundling of what is now a fully-regulated, bundled product into
separate generation, transmission, and distribution components
and creating competition in the generation component. Under the
current regulatory framework, electric utilities have incurred
costs related to commitments to supply electricity to customers
that may not be economical in a competitive environment. The
amounts by which such costs exceed market prices are commonly
referred to as "stranded costs." As described below, a variety
of new rules, laws, or proposals have been enacted, or are in
process, in the jurisdictions that the NEES subsidiaries operate,
to provide for competition in a deregulated generation
environment, and allow for stranded cost recovery. See also the
"Industry Restructuring" section of Financial Review for a more
in-depth discussion of current developments in this area.
Massachusetts and Rhode Island
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved an industry restructuring settlement
agreement among NEP, its Massachusetts distribution affiliates
Massachusetts Electric and Nantucket, the Massachusetts Attorney
General, and other parties. In August 1996, the state of Rhode
Island enacted industry restructuring legislation. The
<PAGE>
Massachusetts settlement and the Rhode Island statute have many
similarities. Both plans:
- - provide for complete retail choice by customers of their
power supplier. In Rhode Island, this would begin in July 1997
for certain customers. All customers in Rhode Island and
Massachusetts would have choice in 1998. In Massachusetts,
choice is contingent on open access being available to all
customers of Massachusetts investor-owned utilities;
- - provide for recovery of their allocated share of NEP's
stranded costs;
- - provide customers who do not choose an alternative supplier
with service called "standard offer" service;
- - implement performance-based rates over varying periods with
predetermined rate increases and with additional adjustments that
can occur as a result of performance standards or if earnings are
below or above an established floor and ceiling;
- - require an adjustment of stranded cost recovery to reflect
the market value of fossil and hydroelectric generating assets
with the Massachusetts settlement requiring actual divestiture of
such assets;
- - propose amendments to the NEP-retail companies' wholesale
all-requirements contracts which have been filed with and
accepted by the FERC, set down for hearing, and made effective,
subject to refund.
The stranded costs to be recovered in both Massachusetts and
Rhode Island include (i) the above-market portion of generating
plant commitments and regulatory assets to be recovered over 12
years in Massachusetts and 12.5 years in Rhode Island and (ii)
the above-market portion of purchased power contracts and the
operating cost of nuclear plants, that cannot be avoided by
shutting down the plants, including nuclear decommissioning
costs. These latter costs would be recovered as incurred over
the life of these obligations, a period expected to extend beyond
12 years. NEP estimates that at December 31, 1996 its
above-market commitments are approximately $4.5 billion on a
present-value basis before application of the proceeds from the
sale of its generating business.
Under the Massachusetts settlement, the NEES companies must
complete the divestiture of their generating business within six
months of the later of the commencement of retail choice in
Massachusetts or the receipt of all necessary regulatory
approvals. As part of the divestiture plan, NEP will endeavor to
sell, or otherwise transfer, its minority interest in four
nuclear power plants to nonaffiliates. To the extent NEP is
unable to divest its nuclear generating interest, the
Massachusetts settlement provides for a sharing between customers
and shareholders of the nuclear-related revenues and costs not
otherwise reflected in the stranded cost recovery, with 80
<PAGE>
percent allocated to customers and 20 percent to shareholders.
In addition, NEEI is planning to sell its oil and gas properties,
the cost of which is supported by NEP through fuel purchased
contracts.
New Hampshire and federal activity
On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its plan to implement a New Hampshire
law calling for retail access by 1998. Under the plan, utilities
such as Granite State whose rates are below the regional average
would be allowed full recovery of stranded costs as calculated by
the NHPUC. However, the NHPUC indicated that its methodology and
proposed timing of recovery would yield both initial access
charges and total recovery less than that requested by Granite
State although the NHPUC indicated that its decision would not
result in savings for Granite State's customers.
Prior to the issuance of the NHPUC order, Granite State
reached an interim settlement with several customers and other
stakeholders that would set initial access charges at 2.8 cents
per kWh for two years, and in other respects would mirror the
Massachusetts settlement described previously. Stranded costs to
be recovered after the two-year initial period would be subject
to future regulatory determination. Unlike the NHPUC order, the
interim settlement agreement would provide all customers with a
rate reduction of approximately 10 percent. This interim
settlement is still pending before the NHPUC.
In April 1996, the FERC issued Order No. 888 requiring
utilities that own transmission facilities to file open access
tariffs to make available transmission service to affiliates and
nonaffiliates at fair, nondiscriminatory rates. In mid-1996, NEP
filed a transmission tariff with the FERC pursuant to this
requirement. 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 also stated that it would permit stranded
cost recovery under wholesale all-requirements contracts, such as
the contracts between NEP and its retail affiliates.
Because of the Massachusetts settlement and the Rhode Island
statute, NEP does not expect it will rely exclusively on Order
No. 888 to recover stranded costs from its affiliates in
Massachusetts and Rhode Island. NEP cannot predict at this time
whether an Order No. 888 filing will be necessary to fully
recover stranded costs from Granite State or from seven
unaffiliated wholesale customers should any of those customers
choose to terminate service under their contract with NEP.
Granite State and these seven unaffiliated customers are
responsible for approximately 3 percent and 2 percent of NEP's
sales, respectively. On February 26, 1997, the FERC announced
Order No. 888-A, reaffirming the principles of Order No. 888,
including stranded cost recovery.
<PAGE>
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 thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The NEES companies have recorded
approximately $550 million in regulatory assets in compliance
with FAS 71 of which approximately $75 million relate to the
transmission and distribution business.
Both the Massachusetts settlement and the Rhode Island
statute provide for full recovery of the costs of generating
assets and oil and gas related assets (including regulatory
assets) not recoverable from the proceeds of the divestiture of
NEP's generating business. The cost of these assets would be
recovered as part of a transition access charge imposed on all
distribution customers. After the proposed divestiture,
substantially all of NEP's business, including the recovery of
its stranded costs, would remain under cost-based rate
regulation. NEES believes the Massachusetts settlement and the
Rhode Island statute will enable the NEES distribution companies
operating in those states to recover through rates their specific
costs of providing ongoing distribution services. In addition,
FERC Order No. 888 enables transmission companies to recover
their specific costs of providing transmission service. NEES
believes these factors will allow its principal subsidiaries to
continue to apply FAS 71 and that no impairment of plant assets
will exist under Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (FAS 121). Any loss from the
divestiture of generating assets and oil and gas assets will be
recorded as a regulatory asset to be recovered through the
ongoing transition access charge.
Although NEES believes that its subsidiaries will continue to
meet the criteria for continued application of FAS 71, NEES
understands that members of the SEC staff have raised questions
concerning the continued applicability of FAS 71 to certain other
electric utilities facing restructuring. In addition, despite
the progress made to date in Massachusetts and Rhode Island, it
is possible that the final restructuring plans ultimately ordered
by regulatory bodies would not reflect full recovery of stranded
costs, including a fair return on those costs as they are being
recovered. In the event that future circumstances should cause
the application of FAS 71 to be discontinued, a noncash write-off
of previously established regulatory assets and liabilities
related to the affected operations would be required. In
addition, write-downs of plant assets under FAS 121 could be
required, including a write-off of any loss from the divestiture
of the generating business.
<PAGE>
<TABLE>
<CAPTION>
The components of regulatory assets are as follows:
At December 31 (thousands of dollars) 1996 1995
-------- --------
<S> <C> <C>
Oil and gas properties:
in excess of SEC "ceiling test" (see Note A-6) $149,100 $178,200
-------- --------
Regulatory assets included in current assets &
liabilities:
Accrued NEEI losses (see Note A-6) 21,648 43,731
Rate adjustment mechanisms (see Note F) (48,894) (6,720)
-------- --------
(27,246) 37,011
-------- --------
Regulatory assets included in deferred charges:
Accrued Connecticut Yankee costs (see Note D-4) 114,425 -
Accrued Yankee Atomic costs (see Note D-4) 51,988 67,566
Unamortized losses on reacquired debt 52,167 54,583
Deferred SFAS No. 106 costs (see Note E-2) 29,839 38,669
Deferred SFAS No. 109 costs (see Note C) 72,075 74,083
Purchased power contract termination costs 19,578 23,494
Deferred gas pipeline charges (see Note D-2) 59,733 62,873
Environmental response costs (see Note D-3) 18,265 19,276
Deferred storm costs 6,530 8,259
Unamortized property losses 253 12,044
Other 6,226 24,109
-------- --------
431,079 384,956
-------- --------
$552,933 $600,167
-------- --------
</TABLE>
Additional deferred charges included in "Deferred charges and
other assets" on the consolidated balance sheets, that do not
represent regulatory assets, totaled $17,541,000 and $32,404,000
at December 31, 1996 and 1995, respectively.
Note C - Income Taxes
Total income taxes in the statements of consolidated income are as follows:
<TABLE>
<CAPTION>
Year ended December 31 (thousands of dollars) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Income taxes charged to operations $139,199 $128,340 $128,257
Income taxes charged to "Other income" (3,018) 762 779
-------- -------- --------
Total income taxes $136,181 $129,102 $129,036
-------- -------- --------
</TABLE>
Total income taxes, as shown above, consist of the following components:
<TABLE>
<CAPTION>
Year ended December 31 (thousands of dollars) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current income taxes $166,509 $105,046 $ 87,295
Deferred income taxes (28,652) 25,578 46,166
Investment tax credits, net (1,676) (1,522) (4,425)
Total income taxes $136,181 $129,102 $129,036
-------- -------- --------
</TABLE>
<PAGE>
Total income taxes, as shown on previous page, consist of federal and
state components as follows:
<TABLE>
<CAPTION>
Year ended December 31 (thousands of dollars) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal income taxes $111,573 $103,503 $104,136
State income taxes 24,608 25,599 24,900
-------- -------- --------
Total income taxes $136,181 $129,102 $129,036
-------- -------- --------
</TABLE>
Investment tax credits of subsidiaries are deferred and
amortized over the estimated lives of the property giving rise to
the credits. Although investment tax credits were generally
eliminated by the 1986 tax legislation, additional carry forward
amounts continue to be recognized.
With regulatory approval, the subsidiaries have adopted
comprehensive interperiod tax allocation (normalization) for
temporary book/tax differences.
Total income taxes differ from the amounts computed by
applying the federal statutory tax rates to income before taxes.
The reasons for the differences are as follows:
<TABLE>
<CAPTION>
Year ended December 31 (thousands of dollars) 1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Computed tax at statutory rate $123,053 $119,892 $118,006
Increases (reductions) in tax resulting from:
Reversal of deferred taxes recorded
at a higher rate (2,175) (3,306) (4,230)
Amortization of investment tax credits (4,347) (4,443) (5,272)
State income tax, net of federal income
tax benefit 15,995 16,639 16,185
All other differences 3,655 320 4,347
-------- --------- --------
Total income taxes $136,181 $ 129,102 $129,036
-------- --------- --------
</TABLE>
The following table identifies the major components of total deferred
income taxes:
<TABLE>
<CAPTION>
At December 31 (millions of dollars) 1996 1995
------- --------
<S> <C> <C>
Deferred tax asset:
Plant related $ 110 $ 104
Investment tax credits 37 38
All other 143 122
------- --------
290 264
------- --------
Deferred tax liability:
Plant related (811) (788)
Equity AFDC (53) (56)
All other (177) (200)
------- --------
(1,041) (1,044)
------- --------
Net deferred tax liability $ (751) $ (780)
------- -------
</TABLE>
<PAGE>
There were no valuation allowances for deferred tax assets
deemed necessary.
Federal income tax returns for NEES and its subsidiaries have
been examined and reported on by the Internal Revenue Service
(IRS) through 1991. The returns for 1992 and 1993 are currently
under examination by the IRS.
Note D - Commitments and Contingencies
1. Plant expenditures
The NEES subsidiaries' utility plant expenditures are estimated
to be $230 million in 1997. At December 31, 1996, substantial
commitments had been made relative to future planned
expenditures.
2. Natural gas pipeline capacity
In connection with serving NEP's gas-burning electric generation
facilities, NEP has entered into several contracts for natural
gas pipeline capacity and gas supply. These agreements require
minimum fixed payments that are currently estimated to be
approximately $57 million to $60 million per year from 1997 to
2001. Under these agreements, remaining fixed payments from 2002
through 2014 total approximately $525 million.
As part of a rate settlement, NEP was recovering 50 percent
of the fixed pipeline capacity payments through its current fuel
clause and deferring the recovery of the remaining 50 percent
until the Manchester Street repowering project was completed.
These deferrals ended in November 1995, at which time NEP had
deferred payments of approximately $63 million, which will be
amortized over 25 years in accordance with rate settlements (see
Note B).
In connection with managing its fuel supply, NEP uses a
portion of this pipeline capacity to sell natural gas. Proceeds
from the sale of natural gas and pipeline capacity of $50
million, $71 million, and $55 million in 1996, 1995, and 1994,
respectively, have been passed on to customers through NEP's fuel
clause. These proceeds have been reflected as an offset to the
related fuel expense in "Fuel for generation" in NEP's statements
of income. Natural gas sales decreased in 1996 as a result of
the Manchester Street Station entering commercial operation in
the second half of 1995.
3. 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.
<PAGE>
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. NEES 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.
NEES and/or its subsidiaries have been named as potentially
responsible parties (PRPs) by either the United States
Environmental Protection Agency (EPA) or the Massachusetts
Department of Environmental Protection for 23 sites at which
hazardous waste is alleged to have been disposed. Private
parties have also contacted or initiated legal proceedings
against NEES and certain subsidiaries regarding hazardous waste
cleanup. The most prevalent types of hazardous waste sites with
which NEES and its subsidiaries have been associated are
manufactured gas locations. (Until the early 1970s, NEES was a
combined electric and gas holding company system.) NEES is aware
of approximately 40 such manufactured gas locations (including
nine of the 23 locations for which NEES companies are PRPs)
mostly located in Massachusetts. NEES and its subsidiaries are
currently aware of other possible hazardous waste sites, and may
in the future become aware of additional sites, that they may be
held responsible for remediating.
In 1993, the MDPU approved a settlement agreement regarding
the rate recovery of remediation costs of former manufactured gas
sites and certain other hazardous waste sites located in
Massachusetts. Under that agreement, qualified costs related to
these sites are paid out of a special fund established on
Massachusetts Electric's books. Massachusetts Electric made an
initial $30 million contribution to the fund. Rate-recoverable
contributions of $3 million, adjusted since 1993 for inflation,
are added annually to the fund along with interest and any
recoveries from insurance carriers. At December 31, 1996, the
fund had a balance of $17 million. Under the 1996 Massachusetts
settlement, an additional $15 million will be transferred to the
fund in 1997 out of existing reserves for refunds.
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 NEES or its
subsidiaries. Where appropriate, the NEES companies intend to
seek recovery from their insurers and from other PRPs, but it is
uncertain whether, and to what extent, such efforts will be
successful. At December 31, 1996, NEES had total reserves for
environmental response costs of $48 million and a related
regulatory asset of $18 million. NEES 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.
<PAGE>
In October 1996, the American Institute of Certified Public
Accountants issued new accounting rules for Environmental
Remediation Liabilities which become effective in 1997. NEES
does not believe these new rules will have a material effect on
NEES's financial position or results of operations.
4. Nuclear plant decommissioning and nuclear fuel disposal
NEP is liable for its share of decommissioning costs for
Millstone 3, Seabrook 1, and all of the Yankees. Decommissioning
costs include not only estimated costs to decontaminate the units
as required by the Nuclear Regulatory Commission (NRC), but also
costs to dismantle the uncontaminated portion of the units. NEP
records decommissioning cost expense on its books consistent with
its rate recovery. NEP is recovering its share of projected
decommissioning costs for Millstone 3 and Seabrook 1 through
depreciation expense. In addition, NEP is paying its portion of
projected decommissioning costs for all of the Yankees through
purchased power expense. Such costs reflect estimates of total
decommissioning costs approved by the FERC.
Connecticut Yankee
NEP has a 15 percent equity ownership interest in Connecticut
Yankee. As a result of an economic analysis, the Connecticut
Yankee board of directors voted in December 1996 to permanently
shut down and decommission the plant.
In December 1996, Connecticut Yankee filed with the FERC to
recover all of its approximately $246 million undepreciated
investment in the plant and other costs over the period extending
through June 2007, when the plant's NRC operating license would
have expired. In a 1993 decision, the FERC allowed Yankee Atomic
to recover its undepreciated investment in its permanently shut
down nuclear plant, in part on the grounds that owners should not
be discouraged from closing uneconomic plants. Several parties
have intervened in opposition to Connecticut Yankee's filing.
NEP believes that the FERC will allow NEP to recover from its
customers all costs that the FERC allows Connecticut Yankee to
recover from NEP.
NEP has recorded the estimated future payment obligation to
Connecticut Yankee of $114 million as a liability and as an
offsetting regulatory asset, reflecting NEP's expected future
rate recovery of such costs. The NRC has identified numerous
apparent violations of its regulations, which may result in the
assessment of civil penalties.
Yankee Atomic
NEP has a 30 percent ownership interest in Yankee Atomic. In
1992, the Yankee Atomic board of directors decided to permanently
cease power operation of, and decommission, the facility.
Decommissioning is currently underway.
<PAGE>
NEP has recorded an estimate of its total future payment
obligations for post-operating costs to Yankee Atomic as a
liability and as an offsetting regulatory asset, reflecting its
expected future rate recovery of such costs. This liability and
related regulatory asset are approximately $52 million each at
December 31, 1996.
Decommissioning Trust Funds
Each nuclear unit in which NEP has an ownership interest has
established a decommissioning trust fund or escrow fund into
which payments are being made to meet the projected costs of
decommissioning. Listed below is information on each operating
nuclear plant in which NEP has an ownership interest.
<TABLE>
<CAPTION>
NEP's share of (millions of dollars)
-----------------------------------
NEP's EstimatedDecommissioning
Ownership Net Decommissioning Fund License
Unit Interest (%)Plant AssetsCost (in 1996$) Balances* Expiration
- ---- ----------- ------------ --------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Maine Yankee** 20 44 74 31 2008
Vermont Yankee 20 36 75 30 2012
Millstone 3*** 12 379 62 16 2025
Seabrook 1*** 10 55 45 7 2026
<FN>
*Certain additional amounts are anticipated to be available through tax deductions.
**A Maine statute provides that if both Maine Yankee and its decommissioning trust fund
have insufficient assets to pay for the plant decommissioning, the owners of Maine Yankee
are jointly and severally liable for the shortfall.
***Fund balances are included in "Other investments" on the balance sheets and approximate
market value.
</FN>
</TABLE>
There is no assurance that decommissioning costs actually
incurred by the Yankees, Millstone 3, or Seabrook 1 will not
substantially exceed these amounts. For example, decommissioning
cost estimates assume the availability of permanent repositories
for both low-level and high-level nuclear waste; those
repositories do not currently exist. If any of the units were
shut down prior to the end of their operating licenses, the funds
collected for decommissioning to that point would be
insufficient.
The Nuclear Waste Policy Act of 1982 establishes that the
federal government is responsible for the disposal of spent
nuclear fuel. The federal government requires NEP to pay a fee
based on its share of the net generation from the Millstone 3 and
Seabrook 1 nuclear units. NEP is recovering this fee through its
fuel clause. Similar costs are incurred by the Maine Yankee and
Vermont Yankee nuclear generating units. These costs are billed
to NEP and also recovered from customers through NEP's fuel
clause.
<PAGE>
5. Investments in nuclear units
The Millstone 3 and Maine Yankee nuclear generating units are
currently shut down and have been placed on the NRC "Watch List,"
signifying that their safety performance exhibits sufficient
weakness to warrant increased NRC attention. Neither may restart
without NRC approval. At present, the Vermont Yankee and
Seabrook 1 nuclear generating units appear to be operating
routinely without major problems.
On October 9, 1996, the NRC issued letters to operators of
nuclear power plants requiring them to document that the plants
are operated and maintained within their design and licensing
bases, and that any deviations are reconciled in a timely manner.
The Seabrook 1, Maine Yankee, and Vermont Yankee nuclear power
plants responded to the NRC letters in February 1997.
Uncertainties regarding the future of nuclear generating
stations, particularly older units, such as Maine Yankee and
Vermont Yankee, are increasing rapidly and could adversely affect
their service lives, availability, and costs. These
uncertainties stem from a combination of factors, including the
acceleration of competitive pressures in the power generation
industry and increased NRC scrutiny.
Millstone 3
In April 1996, the NRC ordered Millstone 3, which has experienced
numerous technical and nontechnical problems, to remain shut down
pending verification that the unit's operations are in accordance
with NRC regulations and the unit's operating license. Millstone
3 is operated by a subsidiary of Northeast Utilities (NU). NEP
is not an owner of the Millstone 1 and 2 nuclear generating
units, which are also shut down under NRC orders.
A number of significant prerequisites must be fulfilled prior
to restart of Millstone 3, including certification by NU that the
unit adequately conforms to its design and licensing bases, an
independent verification of corrective actions taken at the unit,
an NRC assessment concluding a culture change has occurred,
public hearings, and a vote of the NRC Commissioners. NU
announced in December 1996 that it expects Millstone 3 to be
ready for restart around the end of 1997, subject to review by
the NRC Commissioners. NEP cannot predict when Millstone 3 will
be allowed by the NRC to restart, but believes that the unit will
remain shut down for a very protracted period.
NEP incurred $10 million of actual costs in 1996 related to
corrective actions associated with the outage. NEP has also
accrued a liability of approximately $3 million for its share of
future corrective action costs. Additional costs may be
incurred. During the outage, NEP is also incurring approximately
$1.6 million per month in incremental replacement power costs,
which it has been recovering from customers through its fuel
clause.
<PAGE>
Several criminal investigations related to Millstone 3 are
ongoing. The NRC has identified numerous apparent violations of
its regulations which may result in the assessment of civil
penalties. NEP and other minority owners of Millstone 3 are
assessing their legal rights with respect to NU's operation of
Millstone 3.
Maine Yankee
Over the past few years, the Maine Yankee nuclear generating
plant has experienced numerous technical and nontechnical
problems. In 1995, the plant had been shut down for much of the
year due to the discovery of cracks in its steam generator tubes.
The plant is currently shut down due to a cable routing problem.
In addition, due to leaking nuclear fuel rods, 68 fuel assemblies
will be replaced. As a result, Maine Yankee management does not
expect the unit to restart until at least summer of 1997.
In late 1995, allegations were made to the NRC that
inadequate analyses of the plant's emergency core cooling system
had been performed. As a result of the allegations, the NRC
limited the plant's operation to 90 percent of full capacity. In
September 1996, the NRC asked the Department of Justice (DOJ) to
review, for potential criminal violations, an NRC investigatory
report on the allegations. The DOJ is not limited in its
investigation to the matters covered in that report.
During 1996, the NRC conducted an independent safety
assessment (ISA) and identified a number of weaknesses,
deficiencies, and apparent violations which could result in
fines. Yankee Atomic performed professional services for Maine
Yankee associated with the matters being investigated. In
response to the ISA results, Maine Yankee has indicated that it
will spend more than $50 million in 1997 on operational
improvements. Additionally, in February 1997, Entergy
Corporation, an operator of five nuclear units, commenced
providing management services.
Under a confirmatory action letter issued by the NRC on
December 18, 1996, and supplemented on January 30, 1997, Maine
Yankee must fulfill certain commitments before its plant will be
allowed by the NRC staff to return to service. Because of
regulatory and other uncertainties faced by Maine Yankee, NEP
cannot predict whether or when Maine Yankee will return to
service.
During the outage, NEP is incurring approximately $1.8 million
per month in incremental replacement power costs, which it has
been recovering from customers through its fuel clause.
6. Nuclear insurance
The Price-Anderson Act limits the amount of liability claims that
would have to be paid in the event of a single incident at a
nuclear plant to $8.9 billion (based upon 110 licensed reactors).
The maximum amount of commercially available insurance coverage to
pay such claims is $200 million. The remaining $8.7 billion would
<PAGE>
be provided by an assessment of up to $79.3 million per incident
levied on each of the participating nuclear units in the United
States, subject to a maximum assessment of $10 million per
incident per nuclear unit in any year. The maximum assessment,
which was most recently adjusted in 1993, is adjusted for
inflation at least every five years. NEP's current interest in
the Yankees (excluding Yankee Atomic and Connecticut Yankee),
Millstone 3, and Seabrook 1 would subject NEP to a $58.0 million
maximum assessment per incident. NEP's payment of any such
assessment would be limited to a maximum of $7.3 million per
incident per year. As a result of the permanent cessation of
power operation of the Yankee Atomic plant, Yankee Atomic has
received from the NRC a partial exemption from obligations under
the Price-Anderson Act. However, Yankee Atomic must continue to
maintain $100 million of commercially available nuclear insurance
coverage. Connecticut Yankee is planning to file with the NRC for
a similar exemption.
Each of the nuclear units in which NEP has an ownership
interest also carries nuclear property insurance to cover the
costs of property damage, decontamination or premature
decommissioning, and workers' claims resulting from a nuclear
incident. These policies may require additional premium
assessments if losses relating to nuclear incidents at units
covered by this insurance occurring in a prior six-year period
exceed the accumulated funds available. NEP's maximum potential
exposure for these assessments, either directly, or indirectly
through purchased power payments to the Yankees, is approximately
$11 million per year.
7. Long-term contracts for the purchase of electricity
NEP purchases a portion of its electricity requirements pursuant
to long-term contracts with owners of various generating units.
These contracts expire in various years from 1997 to 2029. In
conjunction with its divestiture plan, NEP will endeavor to sell
these long-term contracts.
Certain of these contracts require NEP to make minimum fixed
payments, even when the supplier is unable to deliver power, to
cover NEP's proportionate share of the capital and fixed operating
costs of these generating units. The fixed portion of payments
under these contracts totaled $186 million in 1996, $215 million
in 1995, and $190 million in 1994. These contracts, excluding
contracts with Yankee Atomic and Connecticut Yankee (see Note
D-4), have minimum fixed payment requirements of $155 million in
1997, $150 million in 1998 and 1999, $145 million in 2000 and
2001, and approximately $1.3 billion thereafter. Approximately 92
percent of the payments under these contracts are to the Yankees
and OSP, entities in which NEES subsidiaries hold ownership
interests.
NEP's other contracts, principally with nonutility generators,
require NEP to make payments only if power supply capacity and
energy are deliverable from such suppliers. NEP's payments under
these contracts amounted to $230 million in 1996, $245 million in
1995, and $210 million in 1994.
<PAGE>
Note E - Employee Benefits
1. Pension plans
The NEES companies' retirement plans are noncontributory
defined-benefit plans covering substantially all employees. The
plans provide pension benefits based on the employee's
compensation during the five years prior to retirement. The NEES
companies' funding policy is to contribute each year the net
periodic pension cost for that year. However, the contribution
for any year will not be less than the minimum contribution
required by federal law or greater than the maximum tax deductible
amount.
Net pension cost for 1996, 1995, and 1994 included the
following components:
<TABLE>
<CAPTION>
Year ended December 31 (thousands of dollars) 1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 14,918 $ 14,167 $13,715
Plus (less):
Interest cost on projected benefit obligation 51,461 54,821 49,067
Return on plan assets at expected long-term rate (52,085) (49,691) (47,281)
Amortization 2,887 5,589 5,781
Net pension cost $ 17,181 $ 24,886 $21,282
-------- -------- -------
Actual return on plan assets $ 91,571 $130,979 $ 4,384
-------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31 1997 1996 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
Assumptions used to determine
pension cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Average rate of increase in future
compensation levels 4.13% 4.13% 4.63% 4.35%
Expected long-term rate of return
on assets 8.50% 8.50% 8.75% 8.75%
</TABLE>
The increase in 1995 costs and the decrease in 1996 costs
reflect additional amounts recorded in the fourth quarter of 1995
related to certain supplemental benefit changes.
<PAGE>
The following table sets forth the retirement plans' funded
status:
<TABLE>
<CAPTION>
At December 31 (millions of dollars) 1996 1995
---------------------------- ------------------------------
Union Non-UnionSupple- Union Non-Union Supple-
EmployeeEmployee mental EmployeeEmployee mental
Plans Plans Plans Plans Plans Plans
-------- ---------------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Benefits earned
Actuarial present value
of accumulated benefit liability:
Vested $298 $342 $47 $293 $343 $60
Nonvested 9 10 1 8 10 -
------------------------ ---------------- --------
Total $307 $352 $48 $301 $353 $60
------------------------ ---------------- --------
Reconciliation of funded status
Actuarial present value of
projected benefit liability $355 $398 $54 $346 $402 $73
Unrecognized prior service costs (6) (3) - (7) (4) (16)
SFAS No. 87 transition liability
not yet recognized (amortized) - (1) (3) - (1) (4)
Net gain (loss) not yet
recognized (amortized) 25 15 (3) (1) (23) (7)
Additional minimum liability
recognized - - 3 - - 14
------------------------ ---------------- --------
374 409 51 338 374 60
------------------------ ---------------- --------
Pension fund assets at fair value 384 428 - 349 392 -
SFAS No. 87 transition asset
not yet recognized (amortized) (10) - - (11) - -
------------------------ ---------------- --------
374 428 - 338 392 -
------------------------ ---------------- --------
Accrued pension/(prepaid)
payments recorded on books $ - $(19) $51 $ - $(18) $60
------------------------ ---------------- --------
</TABLE>
<PAGE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates from 1997 and 1996,
respectively, and the 1983 Group Annuity Mortality table.
Plan assets are composed primarily of corporate equity, debt
securities, and cash equivalents.
In addition to its regular pension funds shown in the table
above, NEES and its subsidiaries have a separate trust fund,
commonly referred to as a Rabbi Trust, for certain supplemental
pensions and deferred compensation for key executives and
employees. The balance of this Rabbi Trust is invested in
short-term investments and NEES shares. At December 31, 1996 and
1995, the Rabbi Trust held 102,957 and 45,931 NEES shares,
respectively, accounted for as treasury stock. At the end of 1996
and 1995, the difference between costs and market value of
investments in the Rabbi Trust was not material. The short-term
investments held in the Rabbi Trust amount to $45 and $43 million
at December 31, 1996 and 1995, respectively.
2. Postretirement benefit plans other than pensions (PBOPs)
The NEES subsidiaries provide health care and life insurance
coverage to eligible retired employees. Eligibility is based on
certain age and length of service requirements and in some cases
retirees must contribute to the cost of their coverage.
<PAGE>
The total cost of PBOPs for 1996, 1995, and 1994 included the
following components:
<TABLE>
<CAPTION>
Year ended December 31 (thousands of dollars) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 6,794 $ 7,137 $ 8,575
Plus (less):
Interest cost on accumulated benefit
obligation 24,667 29,377 27,813
Return on plan assets at expected
long-term rate (12,958) (9,742) (7,821)
Amortization 13,099 16,204 18,273
-------- -------- --------
Net postretirement benefit cost $ 31,602 $ 42,976 $ 46,840
-------- -------- --------
Actual return on plan assets $ 24,881 $ 29,054 $ 185
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31 1997 1996 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assumptions used to determine
postretirement benefit cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Expected long-term rate of return on assets 8.25% 8.25% 8.50% 8.50%
Health care cost rate - 1994 - - - 11.00%
Health care cost rate - 1995 to 1999 8.00% 8.00% 8.50% 8.50%
Health care cost rate - 2000 to 2004 6.25% 6.25% 8.50% 8.50%
Health care cost rate 2005 and beyond 5.25% 5.25% 6.25% 6.25%
</TABLE>
The following table sets forth benefits earned and the plans' funded status:
<TABLE>
<CAPTION>
At December 31 (millions of dollars) 1996 1995
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 236 $ 230
Fully eligible active plan participants 24 23
Other active plan participants 109 121
-------- --------
Total benefits earned 369 374
Unrecognized prior service costs (1) (1)
Unrecognized transition obligation (294) (313)
Net gain not yet recognized 101 71
-------- --------
175 131
-------- --------
Plan assets at fair value 202 160
-------- --------
Prepaid postretirement benefit costs recorded on books $ 27 $ 29
</TABLE>
<PAGE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates in effect for 1997 and 1996,
respectively.
The assumptions used in the health care cost trends have a
significant effect on the amounts reported. Increasing the
assumed rates by 1 percent in each year would increase the
accumulated postretirement benefit obligation as of December 31,
1996 by approximately $44 million and the net periodic cost for
1996 by approximately $5 million.
The NEES subsidiaries fund the annual tax-deductible
contributions. Plan assets are invested in equity and debt
securities and cash equivalents.
Note F - Short-Term Borrowings and Other Current Liabilities
At December 31, 1996, NEES and its consolidated subsidiaries had
lines of credit and standby bond purchase facilities with banks
totaling $706 million. These lines and facilities were used at
December 31, 1996 for liquidity support for $4 million of
short-term borrowing, $141 million of commercial paper borrowings,
and $372 million of NEP mortgage bonds in tax-exempt commercial
paper mode (see Note G). Fees are paid on the lines and
facilities in lieu of compensating balances. The weighted average
rate on outstanding short-term borrowings was 5.51 percent at
December 31, 1996. The fair value of the NEES subsidiaries'
short-term debt equals carrying value.
The components of other current liabilities are as follows:
<TABLE>
<CAPTION>
At December 31 (thousands of dollars) 1996 1995
-------- -------
<S> <C> <C>
Accrued wages and benefits $ 37,872 $30,222
Rate adjustment mechanisms 50,614 19,772
Customer deposits 10,595 10,993
Other 10,501 12,117
-------- -------
$109,582 $73,104
-------- -------
</TABLE>
Note G - Long-Term Debt
Substantially all of the properties of NEP, Massachusetts
Electric, and Narragansett are subject to the lien of mortgage
indentures under which mortgage bonds have been issued.
The aggregate payments to retire maturing long-term debt are as
follows:
<PAGE>
<TABLE>
<CAPTION>
(thousands of dollars) 1997 1998 1999 2000 2001
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Maturing long-term debt $66,265 $ 76,470 $34,480 $ 92,485 $ 6,495
Mandatory prepayments:
Hydro-Transmission companies 11,520 11,520 11,520 11,520 10,790
NEEI - 14,000 30,000 30,000 30,000
NERC 1,920 1,920 2,280 2,280 2,280
------- -------- ------- -------- -------
Total $79,705 $103,910 $78,280 $136,285 $49,565
------- -------- ------- -------- -------
</TABLE>
The terms of $372 million of variable rate pollution control
revenue bonds collateralized by NEP mortgage bonds at December 31,
1996 require NEP to reacquire the bonds under certain limited
circumstances. NEP has approximately $740 million of mortgage
bonds outstanding, including those collateralizing pollution
control revenue bonds. The bond indenture restricts the sale of
the trust property in its entirety or substantially in its
entirety. The proposed sale of NEP's generating business would
likely require that NEP either amend the bond indenture or defease
the bonds in connection with the proposed sale. Any defeasance of
bonds would be by the deposit of cash representing principal and
interest to the maturity date or interest, principal, and general
redemption premium to an earlier redemption date. At December 31,
1996, interest rates on NEP's variable rate bonds ranged from 2.30
percent to 4.80 percent. Also, at December 31, 1996, interest
rates on NEEI's debt ranged from 5.30 percent to 6.17 percent.
At December 31, 1996, the NEES subsidiaries' long-term debt had
a carrying value of approximately $1,694,000,000 and a fair value
of approximately $1,730,000,000. The fair value of debt that
reprices frequently at market rates approximates carrying value.
The fair market value of the NEES subsidiaries' long-term debt was
estimated based on the quoted prices for similar issues or on the
current rates offered to the NEES companies for debt of the same
remaining maturity.
<PAGE>
Note H - Supplementary Quarterly Financial Information (unaudited)
<TABLE>
<CAPTION>
1996 Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(thousands of dollars, except per share amounts)
Operating revenue $586,220 $551,110 $616,857 $596,511
Operating income $ 94,955 $ 69,133 $ 97,384 $ 86,646
Net income $ 61,496 $ 35,001 $ 64,375 $ 48,064
Net income per average share $ .95 $ .54 $ .99 $ .74
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
1995 Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31*
-------- -------- --------- --------
<S> <C> <C> <C> <C>
(thousands of dollars, except per share amounts)
Operating revenue $ 558,316 $533,547 $599,126 $580,723
Operating income $ 73,385 $ 59,881 $102,321 $ 87,841
Net income $ 47,662 $ 33,531 $ 73,820 $ 49,744
Net income per average share $ .73 $ .52 $ 1.14 $ .76
--------- -------- -------- --------
<FN>
*See Note E
</FN>
</TABLE>
Report of Management
The management of New England Electric System is responsible for
the integrity of the consolidated financial statements included in
this Annual Report. The financial statements were prepared in
accordance with generally accepted accounting principles using
management's informed best estimates and judgments where
appropriate to fairly present the financial condition of the NEES
companies and their results of operations. The information
included elsewhere in this report is consistent with the financial
statements.
The NEES companies maintain an accounting system and system of
internal controls which are designed to provide reasonable
assurance as to the reliability of the financial records, the
protection of assets, and the prevention of any material
misstatement of the financial statements. The NEES companies'
accounting controls have been designed to provide reasonable
assurance that errors or irregularities, which could be material
to the financial statements, are prevented or detected by
employees within a timely period as they perform their assigned
functions. The NEES companies' internal auditing staff
independently assesses the effectiveness of internal controls and
recommends improvements where appropriate.
<PAGE>
Coopers & Lybrand L.L.P., the NEES companies' independent
accountants, are engaged to audit and express their opinion on the
financial statements. Their audit includes a review of internal
controls to the extent required by generally accepted auditing
standards.
The Audit Committee, composed solely of outside directors,
meets periodically with management, the internal auditor, and the
independent accountants to ensure that each is carrying out its
responsibilities and to discuss auditing, internal accounting
control, and financial reporting matters. Both the internal
auditor and the independent accountants have free access to the
Audit Committee, without management present, to discuss the
results of their audit work.
/s John W. Rowe /s Alfred D. Houston
John W. Rowe Alfred D. Houston
President and Executive Vice President
Chief Executive Officer and Chief Financial Officer
Report of Independent Accountants
To the Board of Directors and Shareholders of New England Electric
System:
We have audited the accompanying consolidated balance sheets
and consolidated statements of capitalization of New England
Electric System and subsidiaries (the Company) as of December 31,
1996 and 1995 and the related consolidated statements of income,
retained earnings and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of the Company as of December 31, 1996 and
1995, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Boston, Massachusetts /s Coopers & Lybrand L.L.P.
February 28, 1997
<PAGE>
Shareholder Information
For shareholder information or assistance, write or call
Shareholder Services at:
New England Electric System, Shareholder Services,
P.O. Box 770, Westborough, MA 01581
Toll-free number: 1-800-466-7215 Local number: (508) 389-4900
Fax: (508) 836-0276 E-mail: [email protected]
Dividend reinvestment
Shareholders of New England Electric System common shares who hold
their shares in registered form are eligible to participate in the
Dividend Reinvestment and Common Share Purchase Plan. The Plan
provides participants the opportunity to reinvest their dividends
and send in optional cash payments to purchase additional common
shares. These shares will be newly issued shares or shares
purchased in the open market. The Company will pay all brokerage
commissions and service charges associated with the Plan. For more
information on the Plan, please contact Shareholder Services at
our toll-free number listed above.
Direct deposit of dividends
Shareholders who hold New England Electric System common shares in
their own name may request to have their dividends directly
deposited into their checking or savings account. This service is
provided without fees. If you participate in Direct Deposit, you
will receive a credit advice for your records. To sign up for this
service, please call Shareholder Services on our toll-free number
to request an authorization form.
Change of address
Please contact Shareholder Services on our toll-free number to
notify us of your address change.
Form 10-K
Copies of the Annual Report on Form 10-K to the Securities and
Exchange Commission for 1996 are available upon request at no
charge by writing to the address at left.
Annual meeting
The annual meeting of New England Electric System will be held at
the Casino, located at Roger Williams Park in Providence, RI on
April 29, 1997 at 10:30 a.m.
Stock exchange listings
New England Electric System common shares are listed on the New
York Stock Exchange and the Boston Stock Exchange under the symbol
NES.
<PAGE>
Transfer agent
Certificates for transfer should be mailed to our transfer agent
at:
Bank of Boston, c/o Boston EquiServe
P.O. Box 8040
Boston, MA 02266-8040
<TABLE>
<CAPTION>
New England Electric System common shares
1996 1995
---- ----
Price Range ($) Price Range ($)
High Low Dividend High Low Dividend
Declared ($) Declared ($)
<S> <C> <C> <C> <C> <C> <C>
First Quarter 40.625 36.125 .590 34.250 30.625 .575
Second Quarter 38.875 32.875 .590 35.250 29.625 .590
Third Quarter 36.375 31.125 .590 37.250 32.875 .590
Fourth Quarter 35.625 31.000 .590 40.000 37.000 .590
</TABLE>
The total number of shareholders at December 31, 1996 was 52,564.
[MAP OF SERVICE AREAS]
NEES Subsidiaries
As of January 1, 1997
Massachusetts Electric Company
25 Research Drive, Westborough, Massachusetts 01582
The Narragansett Electric Company
280 Melrose Street, Providence, Rhode Island 02901
Granite State Electric Company
407 Miracle Mile, Suite 1, Lebanon, New Hampshire 03766
Nantucket Electric Company
25 Research Drive, Westborough, Massachusetts 01582
AllEnergy Marketing Company, L.L.C.*
95 Sawyer Road, Waltham, Massachusetts 02154
* Joint venture with Eastern Enterprises
Granite State Energy, Inc.
4 Park Street, Concord, New Hampshire 03301
NEES Energy, Inc.
25 Research Drive, Westborough, Massachusetts 01582
Narragansett Energy Resources Company
280 Melrose Street, Providence, Rhode Island 02901
<PAGE>
New England Power Company
25 Research Drive, Westborough, Massachusetts 01582
NEES Communications, Inc.
25 Research Drive, Westborough, Massachusetts 01582
New England Electric Resources, Inc.
25 Research Drive, Westborough, Massachusetts 01582
New England Energy Incorporated
25 Research Drive, Westborough, Massachusetts 01582
New England Electric Transmission Corporation
4 Park Street, Concord, New Hampshire 03301
New England Hydro-Transmission Corporation
407 Miracle Mile, Suite 1, Lebanon, New Hampshire 03766
New England Hydro-Transmission Electric Company, Inc.
25 Research Drive, Westborough, Massachusetts 01582
New England Power Service Company
25 Research Drive, Westborough, Massachusetts 01582
<PAGE>
Executive Team
[PHOTO OF EXECUTIVE TEAM]
Left to right: Alfred D. Houston, Cheryl A. LaFleur, Michael E.
Jesanis, Richard P. Sergel, John W. Rowe, and Jeffrey D. Tranen
<PAGE>
NEES Officers
As of January 1, 1997
John W. Rowe
President and Chief Executive Officer
Alfred D. Houston
Executive Vice President and Chief Financial Officer
Richard P. Sergel
Senior Vice President
Jeffrey D. Tranen
Senior Vice President
Cheryl A. LaFleur
Vice President, General Counsel, and Secretary
Michael E. Jesanis
Vice President and Treasurer
Distribution Company Presidents
(not pictured)
Robert L. McCabe
- - The Narragansett Electric Company
Lawrence J. Reilly
- - Massachusetts Electric Company
- - Nantucket Electric Company
- - Granite State Electric Company
[PHOTOS OF NEES DIRECTORS]
Left to right: Edward H. Ladd, James Q. Wilson, Joshua A. McClure,
John M. Kucharski, George M. Sage, John W. Rowe, Joan T. Bok,
Charles E. Soule, Paul L. Joskow, Anne Wexler, James R. Winoker,
and William M. Bulger
<PAGE>
NEES Directors
As of January 1, 1997
Joan T. Bok
Chairman of the Board, New England Electric System, Westborough,
Massachusetts
- - Corporate Responsibility Committee
- - Executive Committee
William M. Bulger
President, University of Massachusetts, Boston, Massachusetts
- - Audit Committee
Paul L. Joskow
Professor of Economics and Management and Head, Department of
Economics, Massachusetts Institute of Technology, Cambridge,
Massachusetts
- - Audit Committee
<PAGE>
John M. Kucharski
Chairman, President, and Chief Executive Officer, EG&G, Inc.,
Wellesley, Massachusetts
- - Compensation Committee
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc., Investment counselors,
Boston, Massachusetts
- - Executive Committee
- - Nominating Committee
Joshua A. McClure
Former President, American Custom Kitchens, Inc., Providence, Rhode
Island
- - Corporate Responsibility Committee
John W. Rowe
President and Chief Executive Officer, New England Electric
System, Westborough, Massachusetts
- - Corporate Responsibility Committee
- - Executive Committee
George M. Sage
President and Treasurer, Bonanza Bus Lines, Inc., Providence,
Rhode Island
- - Compensation Committee
- - Executive Committee
- - Nominating Committee
Charles E. Soule
President and Chief Executive Officer, Paul Revere Insurance
Group, Worcester, Massachusetts
- - Audit Committee
Anne Wexler
Chairman, The Wexler Group, Management consultants, Washington,
D.C.
- - Corporate Responsibility Committee
- - Executive Committee
- - Nominating Committee
James Q. Wilson
Professor of Strategy and Organization, University of California
at Los Angeles
- - Corporate Responsibility Committee
James R. Winoker
Chief Executive Officer, Belvoir Properties, Inc., Providence,
Rhode Island
- - Audit Committee
- - Compensation Committee
<PAGE>
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an Agreement and Declaration of Trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which, as amended, has been filed with the Secretary of
The Commonwealth of Massachusetts. Any agreement, obligation, or
liability made, entered into, or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer, or agent thereof assumes
or shall be held to any liability therefore.
This report is not to be considered as an offer to sell or buy or
solicitation of an offer to sell or buy any security.
<PAGE>
[NEES LOGO]
New England Electric System
25 Research Drive
Westborough, Massachusetts 01582
Telephone 508-389-2000
www.nees.com
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
-----------------
Each of the undersigned directors of New England Electric System
(the "Company"), individually as a director of the Company, hereby
constitutes and appoints John G. Cochrane, Patricia M. Needham, and Robert
K. Wulff, individually, as attorney-in-fact to execute on behalf of the
undersigned the Company's annual report on Form 10-K for the year ended
December 31, 1996, to be filed with the Securities and Exchange Commission,
and to execute any appropriate amendment or amendments thereto as may be
required by law.
Dated this 25th day of February, 1997.
s/Joan T. Bok s/John W. Rowe
_________________________ _________________________
Joan T. Bok John W. Rowe
s/William M. Bulger s/George M. Sage
_________________________ _________________________
s/William M. Bulger George M. Sage
s/Paul L. Joskow s/Charles E. Soule
_________________________ _________________________
Paul L. Joskow Charles E. Soule
s/Anne Wexler
_________________________ _________________________
John M. Kucharski Anne Wexler
s/Edward H. Ladd s/James Q. Wilson
_________________________ _________________________
Edward H. Ladd James Q. Wilson
s/Joshua A. McClure s/James R. Winoker
_________________________ _________________________
Joshua A. McClure James R. Winoker
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND RELATED
CONSOLIDATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH
FLOWS OF NEW ENGLAND ELECTRIC SYSTEM, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<CIK> 0000071297
<NAME> New England Electric System
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,896,605
<OTHER-PROPERTY-AND-INVEST> 389,146
<TOTAL-CURRENT-ASSETS> 488,880
<TOTAL-DEFERRED-CHARGES> 448,620 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,223,251
<COMMON> 64,970
<CAPITAL-SURPLUS-PAID-IN> 736,773
<RETAINED-EARNINGS> 887,292
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,685,417 <F3>
0
126,166 <F2>
<LONG-TERM-DEBT-NET> 1,614,578
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 145,050
<LONG-TERM-DEBT-CURRENT-PORT> 79,705
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,572,335
<TOT-CAPITALIZATION-AND-LIAB> 5,223,251
<GROSS-OPERATING-REVENUE> 2,350,698
<INCOME-TAX-EXPENSE> 139,199
<OTHER-OPERATING-EXPENSES> 1,863,381
<TOTAL-OPERATING-EXPENSES> 2,002,580
<OPERATING-INCOME-LOSS> 348,118
<OTHER-INCOME-NET> 2,168
<INCOME-BEFORE-INTEREST-EXPEN> 350,286
<TOTAL-INTEREST-EXPENSE> 127,760
<NET-INCOME> 208,936
6,463 <F2>
<EARNINGS-AVAILABLE-FOR-COMM> 208,936
<COMMON-STOCK-DIVIDENDS> 153,173
<TOTAL-INTEREST-ON-BONDS> 110,479
<CASH-FLOW-OPERATIONS> 522,570
<EPS-PRIMARY> $3.22
<EPS-DILUTED> $3.22
<FN>
<F1> Total deferred charges includes other assets.
<F2> Preferred stock reflects preferred stock of subsidiaries. Preferred
stock dividends reflect preferred stock dividends of subsidiaries and
net gain on reacquisition of preferred stock.
<F3> Total common stockholders equity is reflected net of treasury stock
at cost.
</FN>
<PAGE>
MUTUAL ASSISTANCE AGREEMENT
---------------------------
WHEREAS, the Massachusetts Electric Company, Nantucket
Electric Company, The Narragansett Electric Company, Granite
State Electric Company, New England Power Company, New England
Electric Transmission, New England Hydro-Transmission
Corporation and New England Hydro-Transmission Electric
Company, Inc. (individually, a Company and together, the
Companies) are each an operating electric utility and an
affiliated company within the New England Electric System,
Massachusetts,
WHEREAS, each of the Companies from time to time have
required and may continue to require limited incidental
assistance and services to ensure that their electric utility
operations and equipment are maintained and perform in
accordance with good utility practice,
WHEREAS, each of the Companies may find it from time to
time economic and efficient to obtain from one another such
needed services and assistance, and to provide the same to one
another at cost,
NOW, THEREFORE, the Companies enter into this Mutual
Assistance Agreement.
COVENANTS
1. Each Company will, to the extent possible, respond to
requests from any other Company for specific or general
incidental assistance and services. Such requests may be
modified or canceled by the requesting Company and may be
refused by the responding Company.
2. Requests for incidental assistance and services shall
generally be for the types of services set forth in Exhibit A,
attached hereto and incorporated by reference.
3. All incidental assistance and services rendered under
this Mutual Assistance Agreement will be at actual cost
thereof. Direct charges will be made for assistance and
services.
<PAGE>
4. Bills for incidental assistance and services will be
rendered as soon as practicable after the close of each month.
Bills shall be paid as promptly as practicable following
receipt.
5. This Mutual Assistance Agreement is subject to
modification or termination at any time to the extent that its
performance may conflict with any federal or state law or any
rule, regulation or order of a federal or state regulatory body
having jurisdiction thereover. This Agreement is furthermore
subject to approval of any federal or state regulatory body
whose approval is a legal prerequisite to its execution and
performance.
6. This Agreement shall be in effect for calendar year
1997.
7. Any number of counterparts of this Mutual Assistance
Agreement may be executed, and each shall have the same force
and effect as an original instrument, as if all parties to all
counterparts had signed the same instrument.
MASSACHUSETTS ELECTRIC COMPANY
By
Title
NANTUCKET ELECTRIC COMPANY
By
Title
THE NARRAGANSETT ELECTRIC
COMPANY
By
Title
<PAGE>
GRANITE STATE ELECTRIC COMPANY
By
Title
NEW ENGLAND POWER COMPANY
By
Title
NEW ENGLAND ELECTRIC
TRANSMISSION
By
Title
NEW ENGLAND HYDRO-TRANSMISSION
CORPORATION
By
Title
NEW ENGLAND HYDRO-TRANSMISSION
ELECTRIC COMPANY
By
Title
<PAGE>
Exhibit A
---------
Description of Assistance and Services Available
------------------------------------------------
Construction and Maintenance
Manpower and equipment for construction, extension,
improvement, maintenance or repair of electric properties.
Emergencies
Assistance in emergency maintenance and restoration of
utility service and in mobilization of personnel and equipment.
Engineering
Engineering services; technical advice, design,
installation, supervision, planning, research, testing,
operation of communications, and operation and maintenance of
specialized technical equipment.
Stores
Services re storing of materials, supplies and equipment.
Miscellaneous
Consulting and monitoring services; land and/or real
facilities rentals related to transmission or wholesale power
sales; reimbursement of convenience expenses.
<PAGE>
Exhibit B
---------
Determination of Cost of Service
--------------------------------
Cost of service will be determined in accordance with the
rules, regulations and orders of the Securities Exchange
Commission, and will include all costs of doing business
incurred by the providing Company.
Records will be maintained for each unit of the providing
Company in order to accumulate all costs of doing business and
to determine the cost of service. These costs will include
wages and salaries of employees and related expenses such as
insurance, taxes, pensions and other employee welfare expenses,
and general administrative costs.
Charges for services rendered and related expenses and
non-
personnel expenses (e.g., use of automotive equipment, etc.)
will be billed directly to the requesting Company.
Charges for services will be determined from the time
sheets of employees and will be computed on the basis of each
employee's hourly rate plus a percentage factor to cover
related expenses and general administrative expenses. Records
of such related expenses and general administrative expenses
will be maintained and subjected to periodic review.
Out-of-pocket expenses which are incurred for the
requesting Company will be billed at cost. Charges for non-personnel expenses, such as for use of automobiles, trucks and
heavy equipment, will normally be computed on the basis of
costs per hour or per mile.
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF PUBLIC UTILITIES
____________________________________
)
Electric Utility Industry ) D.P.U. Docket Nos. 96-100
Restructuring ) and 96-25
)
____________________________________)
RESTRUCTURING SETTLEMENT AGREEMENT
----------------------------------
This Restructuring Settlement Agreement ("Settlement") is jointly
sponsored by the Attorney General, American National Power, Conservation Law
Foundation, Division of Energy Resources, KCS Power Marketing, Inc., Low-
Income Intervenors(1), Massachusetts Community Action Directors Association,
Massachusetts Energy Directors Association, Massachusetts High Technology
Council, Northeast Energy and Commerce Association, Northeast Energy
Efficiency Council, Inc, The Energy Consortium, Union of Concerned
Scientists, U.S. Generating Company, New England Power Company ("NEP"), and
Massachusetts Electric
Company and Nantucket Electric Company (referred to collectively as "Mass.
Electric"). The Settlement is designed to provide a resolution of some
issues presented in the industry restructuring Docket Nos. D.P.U. 96-100
(the Department's generic proceeding on electric utility restructuring) and
D.P.U. 96- 25 (Mass. Electric's own restructuring proceeding). This
Settlement, once approved by the Department, would require a restructuring
of the New England Electric System ("NEES") in furtherance of the
competitive market structure objectives of the Department and would
implement the restructuring plan of the Attorney General as applied to Mass.
Electric and its affiliates in the New
__________
1 The Low-Income Intervenors are Irving Berstein and Pearl Noorigian who are
represented by the National Consumer Law Center.
<PAGE>
England Electric System. The Settlement includes a requirement for a filing
by NEP to separate its generation business from its transmission business,
a commitment voluntarily to divest NEP's generation business through a sale
or spinoff of 100 percent of that business, a request for approval of the
jurisdictional separation between transmission facilities subject to the
Federal Energy Regulatory Commission's ("FERC") jurisdiction and
distribution facilities subject to the Department's jurisdiction, and the
assurance of stranded cost recovery by NEP and Mass. Electric. This
Settlement also resolves all ratemaking issues for Mass. Electric and
assures that Mass. Electric's rates to retail customers comply fully with
the requirements of the Attorney General's principles. Finally, this
Settlement resolves certain other issues necessary to implement retail
choice for Mass. Electric's customers on the Retail Access Date which is
defined as the later of January 1, 1998 or the date when retail access is
made available to all customers of the investor-owned utilities in
Massachusetts.
The parties to this Settlement recognize and fully understand that
their mutual promises in this Settlement evidence the consideration they
have extended to each other in their efforts to settle the issues of D.P.U.
96-25 in accordance with the principles articulated in D.P.U. 96-100. The
willingness and ability of Mass. Electric and NEP to commit to and fulfill
any and all of their obligations under this Settlement, including in
particular the full divestiture of NEP's generating business, are predicated
and conditioned upon the commitments by the Attorney General and the
Department to the recovery in full of Mass. Electric's and NEP's stranded
costs, as set forth in this Settlement and in the wholesale rate settlement
included in Attachment 3. The Settlement is designed to implement the
Attorney General's principles for electric industry restructuring in
Massachusetts in a manner that is consistent with the proposals articulated
by the Department in its
<PAGE>
orders in D.P.U. 96-100. It is further designed to insure recovery of Mass.
Electric's access charge as part of its transition from a fully bundled,
completely regulated electric utility to an unbundled distribution company
in an emerging competitive industry.
The Settlement follows the outline of the Attorney General's
principles. The parties have agreed on the following:
I. Price Reductions for Customers.
------------------------------
The Attorney General's principles will produce reduced rates for all
customers on the Retail Access Date. The Settlement accomplishes that
objective by freezing Mass. Electric's base rates prior to the Retail Access
Date, implementing unbundled rates for Mass. Electric on January 1, 1997,
and providing retail delivery tariffs with a standard offer option on the
Retail Access Date. Mass. Electric's unbundled tariffs that will be
effective from January 1, 1997 through the Retail Access Date, together with
supporting documentation, are included in Attachment 1. Mass. Electric's
retail delivery tariffs with the standard offer option that will be
effective on and after the Retail Access Date are included in Attachment 2.
Mass. Electric's retail delivery tariffs contemplate the corporate
separation of NEP's generation and transmission, and recognize that NEP will
be paid the transmission rates established by FERC.
Under a separate wholesale rate settlement included in Attachment 3,
NEP's wholesale base rates to Mass. Electric will be frozen through the
Retail Access Date, or through December 31, 2000 if the Retail Access Date
has not yet occurred or Mass. Electric has not otherwise terminated its all-
requirements service under the wholesale tariff. Following the Retail
Access Date, NEP will cease providing Mass. Electric all-requirements
service under its wholesale tariff, FERC Electric Tariff, Original Volume
No. 1 (Tariff 1),
<PAGE>
and NEP will implement, and Mass. Electric will pay, the contract
termination charges set forth in that wholesale rate settlement.
The approval by FERC of the wholesale rate settlement included in
Attachment 3 is a condition to the effectiveness of this Settlement and to
the provision of retail access by Mass. Electric to its customers. Failure
by FERC to approve the wholesale rate settlement as filed shall render this
Settlement null and void and of no effect.
A. The Unbundled Rates Effective from January 1, 1997 Through the
Retail Access Date.
--------------------------------------------------------------
The unbundled rates included in Attachment 1 shall be phased in during
the first six months of 1997 beginning on January 1, 1997 in accordance with
the following terms:
1. Mass. Electric's unbundled rates in Attachment 1 are divided
into delivery service charges and energy service charges. The
delivery service charges include Mass. Electric's distribution
costs including the conservation cost factors approved by the
Department for calendar year 1997, an allowance for
transmission costs, and recovery of fixed costs associated with
NEP's purchased power expense currently recovered in NEP's W-95
rate. The energy service charges include Mass. Electric's fuel
clause plus an allowance equal to the variable energy cost
currently recovered in NEP's W-95 rate. Mass. Electric's fuel
clause will continue to operate as a fully reconciling charge
during the effective period of the unbundled rates.
2. Mass. Electric's unbundled rates will be used for billing
purposes to provide information to customers. Further
information, such as the estimate of variable energy and
capacity costs under the
<PAGE>
Boston Edison Company E-Plan proposal will be made available to
any customer upon request.
3. Mass. Electric will eliminate its purchased power adjustment
clause as of January 1, 1997 and will roll PPCA W-95(S) into
its base rates by adding the PPCA W-95(S) amount of $0.00307
per kilowatthour and the PPCA reconciliation adjustment of
$0.00051 per kilowatthour to base revenues. No further
reconciliations of purchased power expense and revenues will be
required after August 1, 1996, and any balance whether positive
or negative existing from the PPCA reconciliation will be
retained or borne by Mass. Electric and will not be refunded or
collected from customers.(1)
__________
1 The balance in the PPCA reconciliation account through July 1996 is
approximately $18 million. This includes: a) an overrecovery of $25 million
since the last PPCA factor adjustment; and b) a remaining balance of $7
million on the underrecovery now being collected through a PPCA
reconciliation adjustment. Mass. Electric will credit the $18 million
balance by applying $3 million to prefund a storm fund effective on August
1, 1996, and by applying $15 million to Mass. Electric's hazardous waste
fund in lieu of the repayment of service extension discounts for customers
who have received the discounts and who choose another supplier within the
Service Extension Discount notice period. No further reconciliations of
purchased power expense and revenues will be required after July 31, 1996.
For August through December, Mass. Electric will accept the risk of an
underrecovery and retain the benefit of any overrecovery. In addition, any
refunds made pursuant to footnote 2 of the wholesale rate settlement in
Attachment 3 shall be retained by Mass. Electric.
<PAGE>
4. The unbundled rates in Attachment 1 shall remain in effect for
all usage prior to the Retail Access Date, subject to Section
I.C. below. The fuel adjustment factor shall be applied to
billings after the Retail Access Date for usage occurring
before the Retail Access Date. The final balances in the fuel
factor remaining after the Retail Choice Date shall be returned
to or collected from customers in the first quarter after the
Retail Access Date.
5. Effective on January 1, 1997, Mass. Electric shall close, or
cease to offer, to new customers the following rates and
incentive clauses:
Scheduled Interruptible Service, Rate I-1
Economy Interruptible Service, Rate I-2
Cooperative Interruptible Service Provision, Rate
I-3
Cooperative Interruptible Service Provision, Rate
I-4
Cooperative Interruptible Service Provision, Rate
I-5
Flexible Time-of-Use Pricing, Rate G-5
Community Partnership Program Discount Provision
Jobs Through Conservation Program Discount Provision
General Service - G-5 Rate Incentive Provision
Service Extension Discount
B. Retail Delivery Rates and the Standard Offer Effective from the
Retail Access Date Through December 31, 2000.
---------------------------------------------------------------
The retail delivery rates included in Attachment 2 shall become
effective for usage on and after the Retail Access Date on the following
terms.
1. Mass. Electric's retail delivery rates included in Attachment
2 include four components. The first three of the components
will be included in a delivery service charge, and the fourth
will be billed separately to customers taking standard offer
service. The four components are as follows:
(a) Distribution charges that will remain in place
through December 31, 2000 and which may be
superseded by a filing that becomes effective after
suspension on January 1, 2001.
<PAGE>
Performance standards are also established for
reliability and customer satisfaction in the
distribution component of the rate with credits to
customers if the standards are not achieved;
(b) Transmission charges that recover on a fully
reconciling basis the transmission charges billed
to Mass. Electric by NEP together with the charges,
if any, billed to Mass. Electric by or for the
benefit of a Regional Transmission Group, an
Independent System Operator, any other transmission
provider, or any regional entity that may be
created or allowed to implement rates and tariffs
for transmission services or reliability related
operating services under FERC accepted tariffs;
(c) Access charges that are designed to recover on a
fully reconciling basis all contract termination
charges paid by Mass. Electric to NEP. As set
forth more fully below these access charges are
fixed at 2.8 cents per kilowatthour for the period
through December 31, 2000, subject to the residual
value credit under Attachment 3, and at declining
levels thereafter. The access charges are subject
to adjustment for various factors in NEP's
wholesale rate settlement included in Attachment 3.
(d) A standard offer for service during a transition
period that is fixed for the period through
December 31, 2004 subject only to a fuel index,
which is set forth in Attachment 8, on the
following schedule:
<PAGE>
Calendar Year Average Price per kilowatthour
------------- ------------------------------
1998 2.8 cents
1999 3.1 cents
2000 3.4 cents
2001 3.8 cents
2002 4.2 cents
2003 4.7 cents
2004 5.1 cents
Together the charges in paragraphs (a) through (d) comply with the Attorney
General's principles related to rates and prices. In addition, Attachment
4 contains revised terms and conditions for Mass. Electric that reflect
changes to Mass. Electric's terms and conditions associated with its change
to an unbundled distribution company, and which set forth the requirements
for customers taking retail access. The details of each charge included in
the rates and the changes to the terms and conditions are set forth in the
paragraphs below.
2. Distribution Charges. The distribution charges in the retail
delivery rates will become effective on the Retail Access Date
and will remain in effect through December 31, 2000 on the
following terms.
(a) Mass. Electric shall be authorized to implement the
depreciation rates shown in Attachment 5 as of the
effective date of the retail delivery rates.
(b) Mass. Electric shall be authorized to establish a storm
fund to pay for all of the incremental costs of any major
storm, defined as any storm with incremental costs of
over $1.0 million occurring after the date this
Settlement is approved by the Department. The storm fund
will be prefunded with $3.0 million on August 1, 1996
pursuant to footnote 2 above. The distribution component
of the retail delivery rates contains a $3.0 million
accrual for this charge and Mass. Electric shall begin to
accrue this amount to the fund on an annual basis
commencing on the date when the retail delivery
<PAGE>
rates become effective. The accrual shall continue at
$3.0 million per year until a modification is approved by
the Department following a filing by Mass. Electric.
Mass. Electric is authorized to charge all incremental
costs of major storms against the fund and to pay or
accrue interest on the fund balance whether positive or
negative in accordance with the protocols for the fund
set forth in Attachment 6.
(c) This Settlement is based on the existing separation of
distribution and transmission facilities on the
integrated NEP and Mass. Electric systems, and thus
assumes that all property owned by Mass. Electric, except
for those facilities that are paid for by NEP pursuant to
the Integrated Facilities Schedule III-B of Tariff 1, is
subject to the Department's ratemaking jurisdiction when
it is used to provide access to retail customers.(1) As
set forth below, the parties agree that this separation
is reasonable and appropriate, and should be approved by
FERC and the Department for ratemaking purposes as part
of this Settlement. However, approval of the
jurisdictional separation of facilities without change is
not a condition of this Settlement, and Mass. Electric
and NEP will modify the separation in a manner that is
necessary to accommodate
__________
1 An analysis that supports the jurisdictional separation and demonstrates
its compliance with the seven factor test established by FERC in Order 888
is included in Attachment 12.
<PAGE>
the policies of the Commission and the Department. In
the event that facilities or costs are transferred from
transmission to distribution or from distribution to
transmission, the parties agree that appropriate
adjustments to the transmission and distribution
components of the rates will be made to reflect the
transfer.
(d) The retail delivery rates are based on the assumption
that all remaining unfunded state and federal deferred
income tax balances(1) are recovered over six years after
the effective date of the retail delivery rates.
(e) Mass. Electric shall implement the performance standards
for reliability and customer satisfaction set forth in
Attachment 7, and Mass. Electric shall be required to
credit customers with an amount calculated in accordance
with the schedules in that attachment during the year
following any year that it failed to meet any performance
standard. In addition, Mass. Electric shall propose, by
July 1, 1997, a performance standard for the effective
management of line losses.
(f) By April 1 of each year, Mass. Electric shall file with
the Department to adjust rates to recover or refund
revenues necessary to assure that Mass. Electric's annual
return on equity associated with distribution operations
from the prior year averaged between six percent and
eleven percent
__________
1 At December 31, 1995, unfunded deferred federal and state income tax
balances were $4,490,000 and $8,761,000, respectively. See Attachment 6,
pp. 3-4.
<PAGE>
before any credits that may be required pursuant to
paragraph (e) or incentives earned on demand side
programs as authorized by the Department pursuant to
section III.C, below. Mass. Electric's return on equity
for the prior year shall be calculated using the earnings
available for common equity as reported to the Securities
and Exchange Commission in Mass. Electric's annual report
as adjusted in the preceding sentence divided by the
average of the thirteen monthly common equity balances on
Mass. Electric's books for the same period.(1) If Mass.
Electric's return on equity so calculated is below six
percent, it shall be authorized to increase its rates by
a uniform per kilowatthour surcharge calculated to
provide sufficient revenues to increase Mass. Electric's
return on equity to six percent. If Mass. Electric's
calculated return on equity is above eleven percent, it
shall be required to reduce its rates by a uniform per
kilowatthour surcharge to refund revenues necessary to
reduce the calculated return on equity between eleven and
12.5 percent by 50 percent and the earnings above 12.5
percent by 100 percent. If Mass. Electric's calculated
return on equity falls between six and eleven percent,
then no further adjustment shall be authorized or
required.
__________
1 Mass. Electric's earnings available for common equity and common equity
balances shall also be adjusted to eliminate the effects of any writedown
and to restore expenses associated with any such writedown that may result
from the implementation of industry restructuring or this Settlement.
<PAGE>
(g) Mass. Electric shall also adjust its retail delivery
rates for the effects of any changes in the federal or
state income, revenue, sales, or franchise tax rates or
laws, or any externally imposed accounting changes, if
they affect Mass. Electric's costs by more than $1.0
million per year or any other charges under the retail
delivery rates in Attachment 2.
(h) The retail delivery rates in Attachment 2 include fully
reconciling charges for Mass. Electric's access charges
and transmission payments. To maintain rate stability
and avoid rate dislocations, cost allocations among rate
classes were determined using the allocators for these
cost functions that have been developed and approved in
prior cases within continuity constraints, and then, once
rates have been designed, a uniform cents per
kilowatthour reconciling factor is subtracted from the
energy component of the rate designs and applied to all
customers as a uniform cents per kilowatthour charge.
For billing purposes the transmission and access charges
shall be rolled into the distribution rates and shall not
be shown separately on bills to customers.
(i) The discount for the R-2 Rate that is available for Mass.
Electric's low income customers is designed to reduce the
base rates of a customer taking standard offer service by
35 percent in accordance with the Attorney General's
principles. To assure that the same level of discount is
available regardless of the supplier and to allow the
operation of the reconciling access and transmission
<PAGE>
charges, the discount is applied exclusively to the
distribution component of the rate. The recovery of the
discount from Mass. Electric's other customers is based
on distribution rate base in accordance with the practice
in prior cases.
(j) Mass. Electric's energy conservation services charge and
conservation cost factors are included in the base rates
in Attachment 2, and separate Energy Conservation Service
and conservation cost factors will be discontinued on the
effective date of the retail delivery rates. Any
outstanding balances, whether positive or negative, will
be added to or subtracted from Mass. Electric's demand
side program budgets for the first two years after the
Retail Access Date.
3. Transmission Charges. The transmission charges in Mass.
Electric's retail delivery rates shall be recovered in a
uniform cents per kilowatthour factor under the transmission
cost adjustment provisions included in the tariffs in
Attachment 2. The transmission cost adjustment shall recover
the costs billed to Mass. Electric by NEP, by any other
transmission provider, and by other regional transmission or
operating entities, such as NEPOOL, a regional transmission
group (RTG), an independent system operator (ISO), or other
regional body, in the event that they are authorized to bill
Mass. Electric directly for their services. The transmission
cost adjustment shall be established annually based on a
forecast of transmission costs, and shall include a full
reconciliation and adjustment for any over- or under-
recoveries occurring under the prior year's adjustment. As set
<PAGE>
forth below, the Parties have agreed to support the
implementation of NEPOOL reforms, including the formation of an
RTG and ISO to the extent consistent with this Settlement.
These reforms are desirable, but are neither a condition to
retail access by Mass. Electric nor of the approval of this
Settlement.
4. Access Charges. The access charges in Mass. Electric's retail
delivery rates shall be recoverable in a uniform cents per
kilowatthour factor under the access cost adjustment provisions
included in the tariffs in Attachment 2. The access cost
adjustment factor will recover on a fully reconciling basis the
contract termination charges billed by NEP to Mass. Electric
under the wholesale rate settlement included in Attachment 3
and shall be subject to the dispute resolution procedures set
forth in Section 3.5 of that wholesale rate settlement. The
Parties agree that: a) the wholesale rate settlement in
Attachment 3 is reasonable; b) approval of this Settlement by
the Department represents express authorization of Mass.
Electric to pay those charges under G.L. c. 164, Sec. 94A until
Mass. Electric's obligation to NEP for payment of contract
termination charges has been fully extinguished; c) the
decision by Mass. Electric to execute the contract termination
agreement with NEP included in Attachment 3 and to pay the
contract termination charges is reasonable and prudent; and (d)
the contract termination charges shall be recoverable in Mass.
Electric's rates for retail delivery services for as long as
the contract termination charges remain in effect.
5. Standard Offer. Consistent with the Attorney General's
principles Mass. Electric shall arrange to provide standard
offer service through a transition period ending on December
31, 2004, by
<PAGE>
putting it out to bid. Standard offer service shall be
available to all of Mass. Electric's retail customers on the
Retail Access Date. After the Retail Access Date customers are
free to leave the standard offer at any time to purchase from
an alternative supplier in the market, but, once the market
option is selected, a customer may not return to service at
standard offer prices, provided, however, that standard offer
service shall be available to all residential or G-1 customers
who have previously taken service from an alternative supplier
for the first year after the Retail Access Date, if such
residential or G-1 customer elects to return to standard offer
service within 90 days of first taking service from the
alternative supplier. The terms and conditions for the bids by
potential suppliers for standard offer service are set forth in
Attachment 8.
Mass. Electric's standard offer prices are guaranteed,
subject to the fuel price index described in Attachment 8.
Under the tariffs included in Attachment 2, Mass. Electric's
charges for standard offer service are included as a separate
surcharge to the rates for retail delivery service that apply
to all retail access customers. Mass. Electric shall reconcile
the revenues billed to retail customers taking standard offer
service against payments to suppliers of standard offer service
and recover or refund any under or overcollections on the
following terms:
(a) Any revenues billed by Mass. Electric for standard offer
service in excess of payments to suppliers of that
service shall be accumulated in an account and credited
with interest calculated using the methodology for
calculating interest on customer deposits specified in
Mass. Electric's
<PAGE>
terms and conditions. The accumulated balance at the end
of each calendar year shall be credited to all of Mass.
Electric's retail delivery customers through a uniform
cents per kilowatthour factor in the following year.
(b) In the event that the revenues billed by Mass. Electric
do not recover Mass. Electric's payments to suppliers or
Mass. Electric defers expenses to meet the inflation cap
established in Section I.B.9, Mass. Electric shall be
authorized to accumulate the deficiencies in the account
together with interest calculated as above and recover
those amounts by implementing a uniform cents per
kilowatthour surcharge on the rates for standard offer
service, if and to the extent that the access charges
billed by Mass. Electric to its retail delivery customers
are for any reason below the unadjusted contract
termination charges listed under the NEP wholesale rate
settlement in Attachment 3. Under-
recoveries, if any, that remain after the standard offer
transition period ends on December 31, 2004 shall be
recovered from all retail delivery customers by a uniform
surcharge not exceeding $0.004 per kilowatthour
commencing on January 1, 2010.
6. Safety Net Service. In recognition that electricity is an
essential service, and that there is a risk that in a
competitive market some low-income customers may be unable to
obtain or retain service on reasonable terms on account of a
credit profile that would not create a barrier to service under
the current regulated monopoly supply, Mass. Electric shall
arrange to provide electric
<PAGE>
supply for low-income customers who are no longer eligible to
receive service under the standard offer and not adequately
supplied by the market because they are unable to obtain or
retain electric service from competitive power suppliers.
Service under this provision shall be made available under
rates, terms and conditions approved by the Department. Mass.
Electric shall fully recover the reasonable costs it incurs in
arranging this service.
7. Basic Service. In recognition that customers may face an
occasional hiatus between competitive suppliers, and in an
effort to prevent such customers from losing power because they
do not have a contractual relationship with a viable supplier,
Mass. Electric shall facilitate the continued delivery of
power, such as by providing supply through the short-term
wholesale power market, to such customers and allow them to
have a reasonable opportunity to make other supply
arrangements, and shall fully recover its reasonable costs of
providing such service. Such supply shall be provided on terms
and conditions approved by the Department.
8. Terms and Conditions. Mass. Electric's terms and conditions in
Attachment 4 have been modified to reflect the changes in Mass.
Electric's operations. In addition to modifications that are
necessary to reflect changes to Mass. Electric's business with
its customers, the terms and conditions included in Attachment
9 have been added to specify the terms and conditions for the
settlement process with suppliers. Those requirements are
designed to allocate load and resources as required under the
NEPOOL agreement and protocols. These terms and conditions are
recommended by Mass. Electric for approval by the Department as
part of this
<PAGE>
Settlement. However, approval is not a condition of the
Settlement.
9. Inflation Cap for Standard Offer Customers. Mass. Electric
shall assure that the economic value of the ten percent rate
reduction for customers is maintained by capping average
revenues per kilowatthour for retail delivery service plus the
standard offer, adjusted to exclude: (1) the fuel price index
in Attachment 8; (2) any adjustments caused by the return on
equity floor under Section I.B.1(f); and (3) changes in tax
laws or accounting under Section I.B.1(g), at 8.91 cents per
kilowatthour adjusted for the Consumer Price Index occurring
between October 1, 1996 and the effective date of any
adjustment to the standard offer price under Section I.B.1(d).
Mass. Electric shall defer expenses associated with payments to
vendors under the standard offer equal to the amount necessary
to meet the inflation cap and recover such deferral using the
mechanism in Section I.B.5(b).
C. Right to File for Rate Change in the Event that Retail Access Date
Postponed
------------------------------------------------------------------
Nothing in this Settlement shall prevent the Parties from seeking a
rate change to become effective after suspension on January 1, 2001 in the
event that the Retail Access Date has not occurred by that time.
II. Benefits of Competition Extended to All Customers.
-------------------------------------------------
The Attorney General's principles require utilities to extend the
benefits of competition to all customers. This Settlement achieves that
requirement by providing all customers with the opportunity to choose
alternative suppliers on the Retail Access Date and by guaranteeing
<PAGE>
significant rate reductions for customers who take standard offer service
prior to choosing an alternative supplier under the ratemaking portion of
this Settlement. Specifically, the parties agree that Mass. Electric shall
implement retail access on the following terms:
A. Prior Commitments with Customers.
--------------------------------
Prior commitments under Mass. Electric's rates or contracts will be
treated as follows:
1. Service Extension Agreements: Many of Mass. Electric's non-
residential customers have executed Service Extension
Agreements under Paragraph 3 of Mass. Electric's currently
effective terms and conditions. Mass. Electric shall waive the
five year notice provision insofar as it would limit the
customer's ability to purchase electricity from an alternative
supplier under the terms of Mass. Electric's retail delivery
tariffs included in Attachment 2 and shall require no repayment
by the customer as would otherwise be required under the terms
and conditions and their contracts. Nothing in this Settlement
shall require Mass. Electric to waive the advance written
notice required before the retail customer may install on-site
non-emergency generation for its own use or bypass Mass.
Electric's distribution system.
2. Service Extension Discounts. Many of Mass. Electric's
customers served under Rate G-3 have exercised their option to
sign a service extension discount agreement under which the
customer must provide five years prior notice before purchasing
electricity from an alternative supplier or installing non-emergency generation for its own use, but is allowed to buy
down its five year notice provision to three years by repaying
120 percent of all Service Extension Discounts received from
Mass. Electric over the prior
<PAGE>
two years. Under this Settlement, Mass. Electric will waive
the five year notice provision without requiring such repayment
insofar as it would limit the customer's ability to purchase
electricity from an alternative supplier under the terms of
Mass. Electric's retail delivery tariffs included in Attachment
2.(1) As with the Service Extension Agreements, nothing in
this Settlement shall require Mass. Electric to waive the
advance written notice required before the retail customer may
install on-
site non-emergency generation for its own use or bypass Mass.
Electric's distribution system. Mass. Electric shall eliminate
the Service Extension Discount as of the Retail Access Date.
Under Section 7.3 of its W-95 wholesale rate settlement
(in FERC Docket No. ER95-267-000), NEP agreed to reimburse
Mass. Electric for the discounts provided to customers under
Service Extension Discount agreements. NEP's tariff provision,
however, requires that payments for the buy down of the notice
period be paid to NEP (Tariff 1, Section III-D, p.2, Par. 4)
and requires Mass. Electric to obtain NEP's consent prior to
modifying the Service Extension Discount agreements. (Id,
Par.6). In the wholesale rate settlement included as
Attachment 3 to this
__________
1 To the extent necessary to allow customers to purchase from alternative
suppliers under the retail delivery tariffs, Mass. Electric will also waive
condition 3 in the availability provisions of its G-5 Rate Incentive
Provision that requires customers participating on that rate not to have
provided notice under the Service Extension Discount Agreement.
Mass. Electric also has a special contract with Raytheon that was
approved by the Department on January 30, 1996. Under Section V.A. of that
contract, the Parties agreed that the agreement was to remain in effect
through December 31, 1998, even if retail access were to occur earlier than
that date. Under this Settlement, Mass. Electric shall provide Raytheon
with the option to terminate as of the Retail Access Date even if that date
occurs prior to January 1, 1999.
<PAGE>
Settlement, NEP provides that consent and waives its right to
reimbursement, as well as ceases payment to Mass. Electric for
Service Extension Discounts.
3. Notice Provisions in Mass. Electric's Tariffs. Mass.
Electric's General Service (G) rate tariffs include a provision
requiring all customers to provide two years prior written
notice before purchasing from an alternative source or
installing additional on-
site generation capacity for the customer's own use. Mass.
Electric shall waive this notice requirement for purchases from
alternative suppliers under the terms of Mass. Electric's
retail delivery rates included in Attachment 2. Nothing in
this Settlement shall require Mass. Electric to waive the
advance written notice required before the retail customer may
install additional on-site, non-emergency generation for its
own use or bypass Mass. Electric's distribution system.
4. Conservation and Load Management Program Terms and Conditions.
Many of Mass. Electric's nonresidential customers have
participated in Mass. Electric's conservation and load
management programs that require repayment of Mass. Electric's
incentive payments if the customer purchases electricity from
an alternative supplier. Mass. Electric shall waive this
repayment obligation insofar as it would limit the customer's
ability to purchase electricity from an alternative supplier.
Nothing in this Settlement shall require Mass. Electric to
waive the requirement for repayment before the retail customer
may install on-site, non-
emergency generation for its own use or bypass Mass. Electric's
distribution system.
<PAGE>
B. Implementation of Retail Access.
-------------------------------
This Settlement requires Mass. Electric to provide retail
access and implement the retail delivery rates in Attachment 2 on the
Retail Access Date, which is the later of January 1, 1998 or the date
on which retail access is made available to all customers of the
investor-owned utilities in Massachusetts. Under this Settlement,
this condition will be achieved when legislation, final regulatory or
court action, or unchallenged settlements with all other investor-
owned utilities are in place. In the event that retail access is not
yet available to all customers of investor-owned utilities by January
1, 1998, Mass. Electric in its sole discretion shall have the option
to accelerate the Retail Access Date under this Settlement, implement
retail access for its customers, and make the tariffs in Attachment
2 effective by providing the Department and the Parties with 90 days
advance notice in writing. Upon such notice, no further action by
the Department will be required for the tariffs to become effective.
III. Protect the Environment and Promote Conservation.
------------------------------------------------
The third element of the Attorney General's plan requires the
restructuring plans of utilities to protect the environment and promote
conservation. This Settlement complies with these requirements by requiring
significant emissions reductions from NEP's units, and by continuing funding
for demand side programs including clean renewable resources. The Parties
have agreed to the following terms:
A. Siting Reform
-------------
The parties agree to work cooperatively with all interested persons
to update the existing Energy Facilities Siting Board statute, G.L. C. 164,
Secs.
<PAGE>
69G through 69R, to substitute for the existing need and least cost
requirements in the current statute a mechanism that maintains the existing
alternative technologies review (with its minimum environmental impacts
standard), maintains the existing alternative site review, and which gives
a preference for clean energy technologies, including demand-side management
and clean renewables, in the Commonwealth's energy supply. The parties will
make best efforts to reach agreement on proposed legislation reflecting
these changes on or before December 4, 1996, for filing with the Legislature
on that date. The Division of Energy Resources and the clients represented
by the National Consumer Law Center elect not to be signatories to this
paragraph.
B. Emissions Reductions.
--------------------
NEP or its successors in interest shall reduce the emissions of NOx
and SO2 from its Salem Harbor Units 1, 2, 3, and 4, and its Brayton Point
Units 1, 2, 3, and 4 by the amounts and on the schedule and terms set forth
in Attachment 10. Nothing in this Settlement shall affect NEP's obligations
to comply with environmental regulations lawfully imposed or restrict the
environmental regulators' authority to impose new environmental standards.
C. Conservation and Load Management and Renewables.
-----------------------------------------------
By July 1, 1997, Mass. Electric shall develop and file with the
Department annual budgets for demand side programs and clean renewables for
the period 1998 through 2001 designed at $66.7 million adjusted for any
outstanding balances from the ECS and conservation cost factors on the
Retail Access Date pursuant to Section I.B.2., above. At least 15 percent
of the amount budgeted for residential programs in any given year shall be
spent on low income residential programs, and the amount budgeted for low
income residential programs implemented through the existing weatherization
and fuel assistance program network shall be a minimum of $1.1 million in
1998, $1.3
<PAGE>
million in 1999, $1.4 million in 2000, and $1.5 million in 2001 provided
that the performance of the network contractors is of satisfactory quality.
For each of the following years, funds shall be allocated within the $66.7
million budget to commercialize and develop fuel cells and a diverse group
of clean renewables in a manner approved by the Department, with
collaborative input, based on the following rates per kilowatthour times the
kilowatthours distributed by Mass. Electric. In 1998 the rate shall be
$0.00025; in 1999, $0.00055; in 2000, $0.00085; and in 2001, $0.00125 times
the kilowatthours distributed by Mass. Electric. The budgets shall also
include expenditures for the energy conservation service (ECS) program,
interruptible rate credits, Mass. Electric's demand side programs, the
installation of sophisticated metering and control systems, overhead costs,
and the incentive or bonus earned from programs implemented prior to the
Retail Access Date and to be earned on the demand side programs implemented
after the Retail Access Date pursuant to this paragraph. During any given
year Mass. Electric shall reconcile actual spending and earned incentive to
the approved budget, with a separate reconciliation for renewables and
demand side management, and shall carry forward any balance, positive or
negative, into the following year through an adjustment to the approved
budget.
While the Department will decide the appropriate level for ongoing
conservation, load management and renewables funding after December 31,
2001, Mass. Electric, the Attorney General, the Conservation Law Foundation,
the Northeast Energy Efficiency Council, the Union of Concerned Scientists,
and the Division of Energy Resources jointly recommend that evaluation of
funding after this date be informed by review of the then current market
barriers and experience gained with the competitive energy markets and
customer choice established in this Agreement; and should further be based
upon environmental and economic goals to be achieved by such funding
established by the
<PAGE>
Department through appropriate proceedings. Ongoing commercialization
support for fuel cells and clean renewable technologies beyond December 31,
2001 should also be based on a goal of supplying at least four percent of
Massachusetts electricity kilowatthour sales from such new, clean
technologies by the end of 2007.
Generation technologies potentially eligible for commercialization
support, subject to Department review, shall include a diverse group of low
and zero emissions generation technologies with substantial long-term, cost-
effective regional production potential which utilize any of the following:
a) solar photovoltaic and solar thermal electric energy;
b) wind energy;
c) ocean thermal, wave and/or tidal energy;
d) fuel cells;
e) landfill gas; and
f) low emission advanced biomass power conversion technologies
like gasification using such biomass fuels as wood,
agricultural, or food wastes; energy crops, biogas, or organic
refuse-derived fuel.
While the Department will decide how funds shall be allocated based
on input from a collaborative process, the commercialization of clean
generating technologies should be accomplished in a least cost manner.
Optimal use should be made of competitive bidding in funding
commercialization activities. Commercialization activities shall also
attempt to promote as diverse a group of clean technologies as is practical
and ensure no single resource or technology dominates commercialization
efforts.
The Company will perform pilot projects in 1997 funded out of the
adjustment for cost of conservation and load management approved by the
Department for 1997 to assess the value of distributed clean generation,
<PAGE>
conservation and load management technologies in reducing or avoiding
distribution system costs. Operational procedures to invest in clean
distributed generation and geographically-targeted DSM that lower
distribution service costs should be implemented as soon as is practical.
Clean distributed generation of 30 kilowatts (kW) or less to include
fuel cells, renewables and small scale cogeneration shall remain eligible
for "net metering" as provided for in existing Department regulations
regarding the buy- back of generated power at the retail rate.
IV. Protect Low Income Customers.
----------------------------
The fourth principle in the Attorney General's plan focuses on the
continued protection of low income customers. Mass. Electric's plan
complies with this principle by continuing the discount for Rate R-2
customers, assuring that all customers receive immediate rate reductions
through standard offer service, providing safety net service for low-income
customers that have no other alternative supplier (see Section I.B.2.,
above), and funding the residential low income demand side programs in
Section III.C. In addition, Mass. Electric shall implement a program to
protect against redlining by market suppliers by paying market suppliers of
Rate R-2 customers directly for electricity delivered up to the prices for
Standard Offer Service set forth in Section I.B.1.(d) and then including the
costs of such service in Mass. Electric's distribution bill to Rate R-2
customers. In this way, Mass. Electric, rather than the market supplier,
shall assume the risk of nonpayment from Rate R-2 customers.
Electric service is essential and should be available to all
customers. The restructured electricity industry should provide adequate
safeguards to assure universal service. Programs and mechanisms that enable
residential customers with low incomes to manage and afford essential
electricity
<PAGE>
requirements will be maintained throughout the period of the settlement in
order to foster the goal of universal service.
V. Create a Fully Functioning Stable and Reliable Structure for the
Competitive Market.
----------------------------------------------------------------
The Attorney General's final principle focuses on the institutional
structure and protections necessary to prevent unfair and anti-competitive
conduct, and to maintain reliable and safe electricity supplies. These
industry structure issues focus on the region as a whole and the corporate
structure of Mass. Electric and its affiliates within the New England
Electric System.
A. Regional Reform.
---------------
The regional issues center on the formation of a regional transmission
group, an independent system operator and NEPOOL reform. Mass. Electric and
NEP have made proposals and participated actively in these issues. The
current version of NEP's NEPOOL Restructuring Proposal and proposal for a
regional transmission group is included as Attachment 11. NEP and Mass.
Electric shall continue to support at a minimum, the regional reforms set
forth in those documents, and shall consult with the parties to this
Settlement to develop mutually agreeable approaches to these issues that are
consistent with the terms of this Settlement. However, this Settlement is
not conditional upon the adoption, approval, or implementation of the
regional reforms listed in those attachments. Nothing in this Settlement
shall limit parties from advocating positions other than those in Attachment
11.
<PAGE>
B. The Jurisdictional Separation Between Transmission and
Distribution.
------------------------------------------------------
In Order 888, FERC set forth a seven factor test for determining
whether facilities used to provide access to retail customers are subject
to the ratemaking jurisdiction of FERC under the Federal Power Act or of the
Department under state law. Attachment 12 provides a specific evaluation
of FERC's seven factors as applied to the separation of facilities between
Mass. Electric and NEP. The parties agree that all of Mass. Electric's
facilities, except for those that are paid for by NEP pursuant to the
Integrated Facilities Schedule III-B of Tariff 1, meet FERC's seven factor
test for designation as distribution facilities subject to the Department's
jurisdiction, and the parties support an affirmative recommendation by the
Department to FERC that the current separation between the transmission
facilities owned by NEP and distribution facilities owned by Mass. Electric
be adopted by FERC for ratemaking purposes as part of the approval of this
Settlement. However, approval of the jurisdictional separation of
facilities without change is not a condition of this Settlement.
C. The Transfer of Transmission Properties and Facilities.
------------------------------------------------------
NEP shall develop and file a plan with the Department by July 1, 1997
to separate its generating business from its transmission business.
D. Divestiture of NEP's Generating Business.
----------------------------------------
1. Consistent with the restructuring plan advanced by the Division
of Energy Resources, NEP agrees, subject to the receipt of all
required governmental approvals, to sell, spin off, or
otherwise transfer ownership of its generating business to a
nonaffiliated entity or entities, other than properties,
assets, and
<PAGE>
entitlements classified to the transmission function. The
parties intend that the properties to be divested shall also
include (1) properties owned by New England Energy Inc.
(NEEI), (2) the generating units of Nantucket Electric, to the
extent they are not classified to the transmission function,
including any proceeds from the sale of emission credits, and
(3) The Narragansett Electric Company's ownership interest in
the Manchester Street Station. NEP shall develop and file by
July 1, 1997 a plan with the Department to implement
divestiture. This plan shall include in particularized detail
the generating business to be divested and all properties,
assets, and entitlements to be included in the divestiture and
shall be updated with an informational filing 90 days before
the date of divestiture. The Department shall review the plan
and shall issue a final order on the method of sale and the
reasonableness of the proceeds as part of its plan approval.
The divestiture shall be completed by six months after the
later of the Retail Access Date or the receipt of all
governmental approvals necessary for the transfer. If, for
any reason, the divestiture is not completed within three years
of the Retail Access Date, NEP shall file a report with the
Department explaining the delay.
2. As part of the divestiture, NEP will endeavor to sell, lease,
assign, or otherwise dispose of its minority shares of nuclear
units or entitlements on terms that will assign ongoing
operating costs and responsibility to a nonaffiliated third
party but may require NEP to retain the obligation for post-
shutdown, decommissioning, and site restoration for these units
or entitlements. NEP shall recover these post-shutdown,
<PAGE>
decommissioning, and site restoration costs from Mass. Electric
through the contract termination charge, and shall credit any
net positive value or recover any payments associated with such
transaction in the reconciliation account of the contract
termination charge. The Parties agree that this approach is
reasonable and NEP is authorized to include it in its
divestiture plan. This plan will be subject to the approval of
the Nuclear Regulatory Commission ("NRC") to the extent
required by NRC regulations. In the event that NEP is unable
to sell, lease, assign, or otherwise dispose of its nuclear
units or entitlements, NEP shall include 80 percent of the
going forward costs of operating the units and entitlements,
including variable costs and capital additions, and 80 percent
of the revenues from kilowatthour sales from the units and
entitlements, in the reconciliation account and recover or
return any differences through its contract termination charges
to Mass. Electric. Within six months prior to implementing the
Performance Based Rate set forth in the prior sentence, NEP
will consult with the parties on a performance standard for
nuclear safety indicators and will file such performance
standard with a maximum potential credit for nonperformance of
$1 million. NEP's sales, if any, from its nuclear units and
entitlements shall only be made in the wholesale market to
nonaffiliates, provided that NEP shall retain the right to use
its minority shares of the units or entitlements to fulfill its
minimum, zero bid obligations under the standard offer.
As part of the divestiture, NEP will endeavor to sell,
assign or otherwise dispose of its power contracts on terms
that will assign ongoing contract payments to a nonaffiliated
third
<PAGE>
party. In that event, changes to the above market payment to
power suppliers shall be reflected in the Reconciliation
Account. In the event that such contracts cannot be sold,
assigned, or otherwise disposed of, the power purchased from
those contracts shall be sold and the contract payments and
market value associated with the sale shall be reflected in the
Reconciliation Account. Such sales, if any, shall only be made
in the wholesale market to nonaffiliates, provided, however,
that NEP shall retain the right to use the contracts, including
that with Hydro Quebec, to fulfill its minimum, zero bid
obligations under the standard offer. Nothing in this
Settlement shall affect the rights of suppliers or NEP under
purchased power contracts.
3. In this proceeding, the Department and intervenors have
expressed the goals of attaining a market valuation of utility
stranded costs and creating a competitive market for supplying
electricity to consumers. The Department has expressed a
preference for voluntary divestiture of utility generation as
a means of achieving these goals. The Department has stated
that it "has the authority to approve the voluntary divestiture
of assets", but that it has "no explicit statutory authority
[to] order divestiture, nor is it likely to be implied."
(D.P.U. 95-30, August 16, 1995). NEP and Mass. Electric have
asserted that the Department lacks authority to order
divestiture, and would contest any effort by the Department to
do so. NEP and Mass. Electric have agreed, as part of this
Settlement, voluntarily to undertake such divestiture. In
exchange, and as consideration for this voluntary divestiture,
the parties to this Settlement, and the Department by its
approval of this Settlement, agree that NEP's
<PAGE>
contract termination charges as set forth in Attachment 3 to
Mass. Electric and Mass. Electric's access charges as set forth
in Section I.B.1(c) for the period contemplated by this
Settlement are just and reasonable. Accordingly, and to give
effect to the reliance placed by the parties on the foregoing,
the Department shall treat the findings that such contract
termination charges and access charges are just and reasonable
as a final determination made after public notice and a full
investigation of the merits, and, in any future proceeding
brought by any person or party, or by the Department on its own
motion, shall accord such finding the full benefit of policies
of repose including, without limitation, the application of the
doctrines of res judicata, collateral estoppel, the filed rate
doctrine, the prohibition against retroactive ratemaking, and
the finality of contracts, it being the express intention of
the parties to prevent, as a matter of law and policy, the
Department or any other authority from: (a) revisiting the
issue of the justness and reasonableness of the contract
termination charges and the access charges; (b) reducing, other
than as set forth in Attachment 3, the amount of the contract
termination charges or the access charges; or (c) otherwise
limiting the right of NEP, its successors or assigns, or Mass.
Electric to charge and recover the contract termination charges
or the access charges set forth in this Settlement for any
reason prior to their recovery in full as contemplated by this
Settlement.
4. As a part of this Settlement, NEP is requesting financing and
other authorizations from the Department, including approval of
the assignment of its right to receive all or a portion of
<PAGE>
contract termination charges from Mass. Electric to lender(s)
or other third parties. Mass. Electric is requesting
authorization from the Department to guarantee full payment to
lender(s) of all or a portion of access charges payable to NEP
and/or its assignee(s) and/or to fully indemnify NEP and/or its
assignee(s) in the event that payments to lender(s) are not
fully covered by access charges. In connection with these
financings, NEP and Mass. Electric may be required to make
irrevocable commitments to lenders in substantially the form of
Attachment 13. Approval of this Settlement by the Department
shall constitute authorization and approval by the Department
under the statutes listed in Attachment 13 including, but not
limited to, (1) NEP to complete the financing including the
assignments, (2) NEP and Mass. Electric to make these
irrevocable commitments, and (3) Mass. Electric to indemnify
NEP and/or its assignee. Approval of this Settlement shall
represent findings by the Department that (1) these irrevocable
commitments, indemnification, and assignments are just and
reasonable and in the public interest, and (2) the payments by
Mass. Electric and NEP related to these commitments and
indemnification are fully recoverable in retail delivery rates.
5. To facilitate the divestiture and valuation of NEP's units, the
parties agree that it is in the public interest for NEP or its
successors or assigns to be authorized to sell electricity at
market prices in the wholesale markets, and that NEP or its
successors or assigns shall be free to apply to become an
exempt wholesale generator pursuant to Section 32 of the Public
Utility Holding Company Act of 1935 and other Federal law,
rules and
regulations, and to designate each and every generating
facility and entitlement it owns as an eligible facility
pursuant to that statute. Approval of this Settlement by the
Department shall represent express findings by the Department
that it has sufficient regulatory authority, resources, and
access to books
<PAGE>
and records to exercise its duties, and that the full
participation of NEP in the market and the designation of each
of its facilities as eligible facilities will benefit
consumers, is consistent with state laws, will not provide any
unfair competitive advantage by virtue of its status as a
facility owned or formerly owned by NEP, and is in the public
interest.
Nothing in this Settlement shall prevent an affiliate of
Mass. Electric from re-entering the generation business
following the completion of divestiture, and nothing in this
Settlement shall prevent affiliates of Mass. Electric from
marketing electricity, other energy sources, or energy services
to customers within or outside Mass. Electric's service
territory.
E. Standards of Conduct.
--------------------
As of the date of approval of this Settlement, Mass. Electric shall
adopt the standards of conduct set forth in Attachment 14. These standards
are recommended by Mass. Electric for approval by the Department as part of
this Settlement. However, approval is not a condition of the Settlement.
F. Customer Service Standards
--------------------------
Minimum residential customer service safeguards and protections for
consumers in their dealings with competitive power suppliers, as provided
by statute or the rules of the Department, should be maintained.
<PAGE>
G. Unbundled Distribution Services
-------------------------------
Effective January 1, 2000, Mass. Electric shall file with the
Department a proposal to unbundle distribution services that can be provided
competitively, without impairing system reliability or other system
benefits.
VI. Successors and Assigns.
----------------------
The rights conferred and obligations imposed on any Signatory by this
Settlement shall be binding on or inure to the benefit of their successors
in interest or assignees as if such successor or assignee was itself a
Signatory hereto.
VII. Additional Provisions.
---------------------
A. This Settlement is the product of settlement negotiations. The
content of those negotiations shall be privileged and all offers of
settlement shall be without prejudice to the position of any party or
participant presenting such offer.
B. Except as expressly set forth above, this Settlement is
submitted on the conditions that it be approved in full by the Department
and that FERC approve in full the wholesale rate settlement included in
Attachment 3, and on the further conditions that if the Department does not
approve the Settlement in its entirety or FERC does not approve Attachment
3 in its entirety, the Settlement shall be deemed withdrawn and shall not
constitute a part of the record in any proceeding or used for any purpose.
C. Acceptance of this Settlement by the Department shall not be
deemed to restrain the Department' exercise of its authority to promulgate
<PAGE>
future orders, regulations or rules which resolve similar matters affecting
other parties in a different fashion, provided, however, that approval of
this Settlement by the Department shall represent an express grant by the
Department of a waiver for Mass. Electric and NEP of any rule, requirement
or regulation promulgated by the Department as part of its proceeding on
utility restructuring that is inconsistent with the terms of this Settlement
and the wholesale rate settlement included in Attachment 3. Nor shall this
Settlement be deemed to restrain the authority of the General Court to enact
any law which would resolve similar matters affecting other parties in a
different fashion.
D. The Department approval of this Settlement shall endure so long
as is necessary to fulfill this Settlement's objectives. In the event of
future regulatory or legislative actions which may render any part of this
Settlement ineffective, Mass. Electric and NEP shall nevertheless be held
harmless and made whole.
Respectfully submitted,
<PAGE>
Annual Report 1996
New England Power Company
A Subsidiary of
New England Electric System
[LOGO] New England Power
A NEES Company
<PAGE>
New England Power Company
25 Research Drive
Westborough, Massachusetts 01582
Directors
(As of January 1, 1997)
Joan T. Bok
Chairman of the Board of New England Electric System
Alfred D. Houston
Executive Vice President and Chief Financial Officer of New
England Electric System
Cheryl A. LaFleur
Vice President and General Counsel of the Company and Vice
President, General Counsel, and Secretary of New England Electric
System
John W. Rowe
Chairman of the Company and President and Chief Executive Officer
of New England Electric System
Jeffrey D. Tranen
President of the Company and Senior Vice President of New England
Electric System
Officers
(As of January 1, 1997)
John W. Rowe
Chairman of the Company and President and Chief Executive Officer
of New England Electric System
Jeffrey D. Tranen
President of the Company and Senior Vice President of New England
Electric System
Cheryl A. LaFleur
Vice President and General Counsel of the Company and Vice
President, General Counsel, and Secretary of New England Electric
System
Andrew H. Aitken
Vice President
Lawrence E. Bailey
Vice President
Jeffrey A. Donahue
Vice President
John L. Levitt
Vice President
John F. Malley
Vice President
<PAGE>
Arnold H. Turner
Vice President
Jeffrey W. VanSant
Vice President
Michael E. Jesanis
Treasurer of the Company and Vice President and Treasurer of New
England Electric System
Robert King Wulff
Clerk of the Company and of certain affiliates and Assistant
Clerk of certain affiliates
John G. Cochrane
Assistant Treasurer of the Company and of certain affiliates and
Vice President of an affiliate
Kirk L. Ramsauer
Assistant Clerk of the Company and Clerk of certain affiliates
Howard W. McDowell
Controller of the Company and of certain affiliates and Treasurer
of certain affiliates
Transfer Agent and Dividend Paying Agent of Preferred Stock
Bank of Boston, Boston, Massachusetts
Registrar of Preferred Stock
State Street Bank and Trust Company, Boston, Massachusetts
This report is not to be considered an offer to sell or buy or
solicitation of an offer to sell or buy any security.
<PAGE>
New England Power Company
New England Power Company, a wholly-owned subsidiary of New
England Electric System (NEES), is a Massachusetts corporation
and is qualified to do business in Massachusetts, New Hampshire,
Rhode Island, Connecticut, Maine, and Vermont. The Company is
subject, for certain purposes, to the jurisdiction of the
regulatory commissions of these six states, the Securities and
Exchange Commission and the Federal Energy Regulatory Commission.
The Company's business is currently that of generating,
purchasing, transmitting, and selling electric energy in
wholesale quantities to other electric utilities, principally its
affiliates Granite State Electric Company, Massachusetts Electric
Company, Nantucket Electric Company, and The Narragansett
Electric Company. On October 1, 1996, the NEES companies,
including the Company announced their intention to divest their
generating business. The Company's wholesale contracts with its
distribution affiliates have been amended to allow for early
termination of all-requirements service under those contracts.
The amendment, which is subject to regulatory approval, provides
that upon early termination, the distribution affiliates in
Massachusetts and Rhode Island will recover their share (95
percent) of the cost of the Company's above-market generation
commitments through a contract termination charge. This charge
will, in turn, be paid by the distribution affiliate's
facilities. Efforts are ongoing with New Hampshire and
unaffiliated customers to secure recovery of the balance of the
Company's above-market commitments. (See "Industry
Restructuring" section of Financial Review for further
discussion.)
<PAGE>
Report of Independent Accountants
New England Power Company, Westborough, Massachusetts:
We have audited the accompanying balance sheets of New England
Power Company (the Company), a wholly-owned subsidiary of New
England Electric System, as of December 31, 1996 and 1995 and the
related statements of income, retained earnings, and cash flows
for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Company as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 28, 1997
<PAGE>
New England Power Company
Financial Review
Industry Restructuring
On October 1, 1996, the New England Electric System (NEES)
companies, including the Company, announced their intention to
divest their generating business. The decision to divest the
generating business was due to a combination of factors,
discussed below, relating to the restructuring of the electric
utility industry.
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures
stemming from a number 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.
In the recent past, this competition was most prominent in the
bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Massachusetts, Rhode
Island, and New Hampshire, there have been 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"). When electricity customers are allowed to
choose their electricity supplier, utilities across the country
will face the risk that market prices may not be sufficient to
recover the costs of the commitments incurred to supply customers
under a regulated structure. The amounts by which costs exceed
market prices are commonly referred to as "stranded costs."
The Company provides electric service to its distribution
affiliates, Massachusetts Electric Company (Massachusetts
Electric), Nantucket Electric Company (Nantucket), The
Narragansett Electric Company (Narragansett), and Granite State
Electric Company (Granite State). Each of these affiliates
purchases electricity on behalf of its customers under wholesale
all-requirements contracts with the Company. The Company also
provides all-requirements service to seven unaffiliated electric
utilities. The Company estimates that at December 31, 1996, its
above-market commitments on behalf of its all-requirements
customers are as much as $4.5 billion on a present-value basis
(before the application of the proceeds from the sale of its
generating business).
As described below, comprehensive legislation was enacted in
Rhode Island and a settlement agreement was reached in
Massachusetts which, when all regulatory approvals are in place,
<PAGE>
would allow recovery of the Company's above-market commitments to
retail customers in those states, which make up 95 percent of the
Company's all-requirements sales. In return for that recovery,
the NEES companies have agreed to provide lower rates to
customers, as well as sell their generating business. Efforts are
ongoing with New Hampshire and unaffiliated customers to secure
recovery of the balance of the Company's above-market
commitments.
Massachusetts Settlement Agreement
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved a settlement among the Company, its
Massachusetts distribution affiliates Massachusetts Electric and
Nantucket, the Massachusetts Attorney General, the Massachusetts
Division of Energy Resources, and 12 other parties, which
provides for retail choice by Massachusetts customers and the
recovery of the Company's above-market commitments to serve those
customers.
The settlement 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).
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 compared with
September 1996 bundled electricity prices.
In accordance with the settlement, the Company's wholesale
contracts with Massachusetts Electric and Nantucket have been
amended to allow for early termination of all-requirements
service under those contracts. The amendment, which is subject
to regulatory approval, provides that upon early termination,
Massachusetts Electric's and Nantucket's share of the cost of the
Company's above-market generation commitments will be recovered
through a contract termination charge. This charge will, in
turn, be paid by the Company's affiliates' distribution
facilities. Those commitments consist of (i) the above-market
portion of generating plant commitments, (ii) regulatory assets,
(iii) the above-market portion of purchased power contracts, and
(iv) the operating cost of nuclear plants that cannot be avoided
by shutting down the plants, including nuclear decommissioning
costs.
The above-market portion of costs associated with generating
plants and regulatory assets would be recovered over 12 years,
and would earn a return on equity of 9.4 percent. As the
transition access charge declines, the Company would earn
mitigation incentives that would supplement its return on equity.
The incentives are structured such that the Company believes,
based on its expectations of the level of mitigation it can
achieve through divestiture and other means, that it could earn a
cumulative return on equity on unrecovered costs of approximately
11 percent. The above-market component of purchased power
contracts and nuclear decommissioning costs would be recovered as
<PAGE>
incurred over the life of those obligations, a period expected to
extend beyond 12 years. Initially, the transition access charge
would be set at 2.8 cents per kilowatt-hour (kWh) through
December 31, 2000, and is expected to decline thereafter. The
initial transition access charge assumes that the generating
plants have no market value. To measure their actual market
value, the NEES companies, including the Company, agreed to sell
their generating business. The net proceeds from the sale will
be used to reduce the transition access charge.
The settlement is subject to approval by the Federal Energy
Regulatory Commission (FERC). The FERC accepted the filing to
become effective February 1, 1997, subject to refund, and ordered
hearings.
The Utility Workers Union of America and the Massachusetts
Alliance of Utility Unions, who intervened in the MDPU proceeding
on the settlement, have indicated they intend to appeal the
MDPU's order approving the settlement to the Massachusetts
Supreme Judicial Court. If an appeal is brought, the NEES
companies will oppose it.
Several bills are pending before the Massachusetts legislature
on electric industry restructuring, including comprehensive
legislation introduced by Governor William F. Weld and by the
legislature's Joint Committee on Electric Restructuring. These
bills cover many of the topics addressed in the settlement and
could impact the implementation of the settlement.
Among the issues being considered by the legislature is
securitization, whereby a utility would assign to a trust all or
a portion of its rights to receive access charges in exchange for
a lump sum reimbursement of stranded costs.
Rhode Island Legislation
In August 1996, the state of Rhode Island enacted pioneering
legislation that allows customers in the state the opportunity to
choose their electricity supplier. Under the Rhode Island
statute, state accounts, certain new customers, and the largest
manufacturing customers will be able to choose their supplier
beginning on July 1, 1997. These customers represent
approximately 2 percent of NEES's retail customer kWh sales. The
balance of Rhode Island customers will be able to choose their
supplier in 1998.
The statute calls for the Company's contract with NEES's Rhode
Island distribution subsidiary, Narragansett, to be amended to
permit a gradual, early termination of all-requirements service
under this contract. The amendment provides that, in return,
Narragansett's 22 percent share of the cost of the Company's
above-market generation commitments would be recovered through a
transition access charge on Narragansett's distribution
facilities. The specifics of the transition access charge are
similar to, and were a model for, those contained in the
Massachusetts settlement. One difference is the statute's return
<PAGE>
on equity, which will be set at 11 percent as long as the NEES
companies complete the divestiture or other market valuation of
their generating business; otherwise, the return will be equal to
9.2 percent.
The Company and Narragansett filed with the FERC an amendment
to their all-requirements contract in order to implement the
statute. The FERC has set down the amendment, along with the
Massachusetts settlement, for hearing. Narragansett has
indicated it is willing to make certain changes to its plan in
Rhode Island to parallel provisions in the Massachusetts
settlement. Implementation of other aspects of the statute is
subject to approval of the Rhode Island Public Utilities
Commission (RIPUC).
New Hampshire Proceeding and Settlement Agreement
On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its plan to implement a New Hampshire
law calling for retail access by 1998. Under the plan, utilities
such as Granite State whose rates are below the regional average
would be allowed full recovery of stranded costs as calculated by
the NHPUC. However, the NHPUC indicated that its methodology and
proposed timing of recovery would yield both initial access
charges and total recovery less than that requested by Granite
State although the NHPUC indicated that its decision would not
result in savings for Granite State's customers.
The largest utility in New Hampshire is Public Service Company
of New Hampshire (PSNH). PSNH has appealed the NHPUC's decision
to the courts and has included in its appeal certain arguments
which could have an impact on Granite State. Granite State has
therefore petitioned to intervene in this appeal to protect its
interest on those issues.
Prior to the issuance of the NHPUC order, Granite State
reached an interim settlement with several customers and other
stakeholders that would set initial access charges at 2.8 cents
per kWh for two years, and in other respects would mirror the
Massachusetts settlement described previously. Stranded costs to
be recovered after the two-year initial period would be subject
to future regulatory determination. Unlike the NHPUC order, the
interim settlement agreement would provide all customers with a
rate reduction of approximately 10 percent. This interim
settlement is still pending before the NHPUC.
Federal Activity
In April 1996, the FERC issued Order No. 888 requiring
utilities that own transmission facilities to file open access
tariffs to make available transmission service to affiliates and
nonaffiliates at fair, nondiscriminatory 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
<PAGE>
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 all-requirements contracts, such as the contracts
between the Company and its retail affiliates. On February 26,
1997, the FERC announced Order No. 888-A, reaffirming the
principles of Order No. 888, including stranded cost recovery.
Because of the Massachusetts settlement and the Rhode Island
statute, the Company does not expect it will rely exclusively on
Order No. 888 to recover stranded costs from its affiliates in
Massachusetts and Rhode Island. The Company cannot predict at
this time whether an Order No. 888 filing will be necessary to
fully recover stranded costs from Granite State or from seven
unaffiliated wholesale customers should any of those customers
choose to terminate service under their contract with the
Company. Granite State and these seven unaffiliated customers
are responsible for approximately 3 percent and 2 percent of the
Company's sales, respectively.
In July 1996, the Company, on behalf of the NEES companies,
filed a transmission tariff with the FERC pursuant to Order No.
888. The FERC accepted the filing, but ordered the Company to
refile to conform more closely with the FERC's requirements under
Order No. 888. Implementation of the tariff in mid-1996 did not
have a significant impact on the Company's revenues.
A number of proposals for federal legislation related to
industry restructuring have been brought forward for
consideration by the current Congress. The scope and aim of
these vary widely; however, the NEES companies and others will
argue that state settlements should be respected. The Company
cannot predict what federal legislation, if any, may be enacted.
Divestiture of Generation Business
Under the Massachusetts settlement and, if approved by the
FERC, automatically under the Rhode Island statute, the Company
must complete the divestiture of its generating businesses within
six months of the later of the commencement of retail choice in
Massachusetts or the receipt of all necessary regulatory
approvals. The Company is in the process of soliciting proposals
for the acquisition of its nonnuclear generating business with
the objective of reaching definitive purchase and sale agreements
by mid-1997. Closing would follow the receipt of regulatory
approvals, which are expected to take at least six to 12 months
following the execution of purchase and sale agreements. At
December 1996, nonnuclear net generating plant was approximately
$1.1 billion.
As part of the divestiture plan, the Company will endeavor to
sell, or otherwise transfer, its minority interest in four
nuclear power plants to nonaffiliates. The Company may retain
responsibility for decommissioning and related expenses, if
necessary. To the extent that the Company is unable to divest
its nuclear generating interest, the Massachusetts settlement
<PAGE>
provides for a sharing between customers and shareholders of the
revenues associated with the nuclear interests and the costs not
otherwise reflected in the access charge, with 80 percent
allocated to customers and 20 percent to shareholders. This
sharing mechanism is not included in the Rhode Island statute
previously discussed. In addition, New England Energy
Incorporated (NEEI) is planning to sell its oil and gas
properties, the cost of which is supported by the Company through
fuel purchase contracts.
The Company has approximately $740 million of mortgage bonds
outstanding. The bond indenture restricts the sale of the trust
property in its entirety or substantially in its entirety. The
proposed sale of the Company's generating business would likely
require that the Company either amend the bond indenture or
defease or call the bonds in connection with the proposed sale.
Any defeasance of bonds would be by the deposit of cash
representing principal and interest to the maturity date or
interest, principal, and general redemption premium to an earlier
redemption date.
Risk Factors
While substantial progress has been made in resolving the
uncertainty regarding the impact on shareholders from industry
restructuring, significant risks remain. These include, but are
not limited to (i) the potential that ultimately the
Massachusetts settlement and the Rhode Island statute will not be
implemented in the manner anticipated by the Company, (ii) the
possibility of state or federal legislation that would increase
the risks to shareholders above those contained in the
Massachusetts settlement and Rhode Island statute, and (iii) the
potential for adverse stranded cost recovery decisions involving
Granite State and the Company's unaffiliated customers.
Even if these risks do not materialize, the implementation of
the Massachusetts settlement and the Rhode Island statute will
negatively impact financial results for the Company starting in
1998. The returns on equity permitted on the unrecovered
commitments in the generating business (generally 9.4 percent to
11 percent) are less than those historically earned by the
Company. Also, once the Company has divested its generating
business and completed its stranded cost recovery, it will become
solely a provider of transmission services with substantially
lower revenues and capital requirements than currently exists.
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 thereby defer
the income statement impact of certain costs expected to be
<PAGE>
recovered in future rates. The Company has recorded
approximately $340 million in net regulatory assets in compliance
with FAS 71. In addition, the Company's affiliate, NEEI, has a
regulatory asset of approximately $150 million, which is
recoverable in its entirety from the Company.
Both the Massachusetts settlement and the Rhode Island statute
provide for full recovery of the costs of generating assets and
oil and gas related assets (including regulatory assets) not
recoverable from the proceeds of the divestiture of the Company's
generating business. The costs of these assets would be
recovered as part of a contract termination charge imposed on all
distribution customers. After the proposed divestiture,
substantially all of the Company's business, including the
recovery of its stranded costs, would remain under cost-based
rate regulation. Specifically, FERC Order No. 888 enables
transmission companies, which the Company would essentially
become, to recover their specific costs of providing transmission
service. The Company believes these factors will allow it to
continue to apply FAS 71 and that no impairment of plant assets
will exist under Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (FAS 121). Any loss from the
divestiture of generating assets and oil and gas assets will be
recorded as a regulatory asset to be recovered through the
contract termination charge.
Although the Company believes that it will continue to meet
the criteria for continued application of FAS 71, the Company
understands that members of the SEC staff have raised questions
concerning the continued applicability of FAS 71 to certain other
electric utilities facing restructuring. In addition, despite
the progress made to date in Massachusetts and Rhode Island, it
is possible that the final restructuring plans ultimately ordered
by regulatory bodies would not reflect full recovery of stranded
costs, including a fair return on those costs as they are being
recovered. In the event that future circumstances should cause
the application of FAS 71 to be discontinued, a noncash write-off
of previously established regulatory assets and liabilities
related to the affected operations would be required. In
addition, write-downs of plant assets under FAS 121 could be
required, including a write-off of any loss from the divestiture
of the generating business.
Overview
Net income increased by $1 million in 1996. This increase
reflects a reduction in purchased electric energy, excluding fuel
and a reduction in operation and maintenance expense. Partially
offsetting these increases were decreases in allowance for funds
used during construction and increased property taxes, both
primarily due to the completion in the second half of 1995 of the
Manchester Street generating station, as well as increased
integrated facilities credits to the Company's affiliate,
Narragansett. The Company also experienced reduced peak demand
charge billings in 1996.
<PAGE>
Net income increased by $2 million in 1995 reflecting higher
sales, lower depreciation and amortization expense and lower
maintenance expense. Partially offsetting these increases were
increased purchased power costs excluding fuel, increased costs
related to postretirement benefits other than pensions (PBOPs),
increased reimbursements to affiliates for service extension
discounts (SEDs) to customers and generation and transmission
costs incurred for the benefit of the Company. In addition,
interest costs also increased in 1995.
Operating Revenue
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
1996 1995
---- ----
(In Millions)
Fuel recovery $ 70 $ 27
Accrued NEEI fuel revenues (22) 4
Narragansett integrated facilities credit (9) (10)
SED reimbursements (12)
Sales growth and peak demand charges (7) 15
Other (2) 6
---- ----
$ 30 $ 30
==== ====
Accrued NEEI fuel revenues and accrued NEEI fuel costs (see
"Operating Expenses" section) reflect losses incurred by NEEI, an
affiliate of the Company, on its rate-regulated oil and gas
operations. These revenues are accrued in the year of the loss
but are billed to the Company's customers through its fuel
adjustment clause in the following year. Changes in accrued NEEI
fuel revenues and fuel costs are principally due to fluctuations
in NEEI production (see Note D-6). In addition, in December
1996, NEEI recorded a $13 million adjustment which reduced its
1996 amortization of oil and gas properties to correct amounts
recorded in the years 1990 through 1996.
The entire output of Narragansett's generating capacity is
made available to the Company. Narragansett receives a credit on
its purchased power bill from the Company for its fuel costs and
other generation and transmission-related costs. The increased
credits in 1996 relate to costs associated with the dismantlement
of the previously retired South Street generating facility and
with Narragansett's portion of the repowered Manchester Street
generating station that entered commercial operation in the
second half of 1995. The Company's 1995 rate agreement provided
for the deferral and recovery over three years of $12 million of
these credits related to the dismantlement of Narragansett's
South Street station.
<PAGE>
Operating Expenses
The following table summarizes the changes in operating
expenses:
Increase (Decrease) in Operating Expenses
1996 1995
---- ----
(In Millions)
Fuel costs $ 74 $ 27
Accrued NEEI fuel costs (22) 4
Purchased energy excluding fuel (28) 22
Other operation and maintenance (22) (2)
Depreciation and amortization 1 (35)
Taxes 8 (1)
---- ----
$ 11 $ 15
==== ====
Total fuel costs represent fuel for generation and the portion
of purchased electric energy permitted to be recovered through
the Company's fuel adjustment clause. The increase in fuel costs
in 1996 is primarily due to fixed pipeline demand charges that,
prior to the completion of the Manchester Street Station, were
being partially deferred for amortization and recovery after the
unit went into service in the second half of 1995. The increase
in fuel costs also reflects increased generation as a result of
increased sales to affiliates as well as generation supplied to
other utilities. See "Operating Revenue" section for a
discussion of accrued NEEI fuel costs.
In 1996, purchased power costs, excluding fuel, decreased,
reflecting the expiration of certain purchased power contracts.
In addition, purchased power costs in the first half of 1995
included the Company's share of costs to repair steam generator
tubes at the Maine Yankee nuclear power plant in which the
Company has a 20 percent interest. The increase in 1995 also
reflected other overhaul and refueling shutdowns by partially
owned nuclear power suppliers and the commencement of
amortization over seven years of $29 million of deferred
purchased power contract termination costs, in accordance with a
1995 rate settlement.
The decrease in operation and maintenance in 1996 reflects
reduced thermal and hydro generating plant overhaul activity
partially offset by $13 million of costs to correct deficiencies
at the Millstone 3 nuclear unit, in which the Company has a 12
percent ownership interest. The Company also experienced a
reduction in transmission wheeling costs, pension costs, PBOPs
and other general and administrative costs. The decrease in
operation and maintenance expense in 1995 has also reflected
reduced overhaul activity partially offset by the commencement of
amortization over seven years of $19 million of deferred PBOP
costs in accordance with the 1995 rate settlement. The rate
<PAGE>
agreement also provided for the deferral and recovery over three
years of $15 million of costs related to the replacement of a
turbine rotor at one of the Company's generating stations.
Depreciation expense increased in 1996 due to new plant
expenditures, including the Manchester Street Station which
entered service in the last half of 1995. This increase was
partially offset by the completion in mid-1995 of the
amortization of a portion of Seabrook 1 costs and Salem Harbor
coal conversion costs. Depreciation in 1995 decreased due to
reduced amortization of Seabrook 1 in accordance with the 1995
rate settlement which deferred recognition of $15 million of such
amortization from 1995 to 1996 as well as the completion of the
amortizations mentioned above. Partially offsetting these
decreases were increased depreciation rates of approximately $8
million approved in the 1995 rate agreement and increased
depreciation of new plant expenditures, including the Manchester
Street Station.
The increase in taxes in 1996 reflects municipal property
taxes. The increase in municipal property taxes is primarily as
a result of increased taxes on the Manchester Street Station.
Allowance for Funds Used During Construction (AFDC)
The changes in AFDC in 1996 and 1995 are due to the Manchester
Street Station repowering project which began commercial
operation in the second half of 1995.
Investments in Nuclear Units
The Company owns minority interests in six nuclear generating
units, two of which, Yankee Atomic and Connecticut Yankee, have
been shut down permanently. Two others, Millstone 3 and Maine
Yankee, are currently shut down and have been placed on the
Nuclear Regulatory Commission's (NRC) "Watch List," signifying
that their safety performance exhibits sufficient weakness to
warrant increased NRC attention. Neither may restart without NRC
approval. At present, the Vermont Yankee and Seabrook 1 nuclear
generating units appear to be operating routinely without major
problems.
On October 9, 1996, the NRC issued letters to operators of
nuclear power plants requiring them to document that the plants
are operated and maintained within their design and licensing
bases, and that any deviations are reconciled in a timely manner.
The Seabrook 1, Maine Yankee, and Vermont Yankee nuclear power
plants responded to the NRC letters in February 1997.
Uncertainties regarding the future of nuclear generating
stations, particularly older units such as Maine Yankee and
Vermont Yankee, are increasing rapidly and could adversely affect
their service lives, availability, and costs. These uncertainties
stem from a combination of factors, including the acceleration of
competitive pressures in the power generation industry and
increased NRC scrutiny.
<PAGE>
Connecticut Yankee
The Company has a 15 percent equity ownership interest in
Connecticut Yankee. As a result of an economic analysis, the
Connecticut Yankee board of directors voted in December 1996 to
permanently shut down and decommission the plant.
In December 1996, Connecticut Yankee filed with the FERC to
recover all of its approximately $246 million undepreciated
investment in the plant and other costs over the period extending
through June 2007, when the plant's NRC operating license would
have expired. In a 1993 decision, the FERC allowed Yankee Atomic
to recover its undepreciated investment in its permanently shut
down nuclear plant, in part on the grounds that owners should not
be discouraged from closing uneconomic plants. Several parties
have intervened in opposition to Connecticut Yankee's filing. The
Company believes that the FERC will allow the Company to recover
from its customers all costs that the FERC allows Connecticut
Yankee to recover from the Company.
The Company has recorded the estimated future payment
obligation to Connecticut Yankee of $114 million, as a liability
and as an offsetting regulatory asset, reflecting the Company's
expected future rate recovery of such costs. The NRC has
identified numerous apparent violations of its regulations, which
may result in the assessment of civil penalties.
Millstone 3
The Company is a 12 percent joint owner of Millstone 3. In
April 1996, the NRC ordered Millstone 3, which has experienced
numerous technical and nontechnical problems, to remain shut down
pending verification that the unit's operations are in accordance
with NRC regulations and the unit's operating license. Millstone
3 is operated by a subsidiary of Northeast Utilities (NU). The
Company is not an owner of Millstone 1 and 2 nuclear generating
units, which are also shut down under NRC orders.
A number of significant prerequisites must be fulfilled prior
to restart of Millstone 3, including certification by NU that the
unit adequately conforms to its design and licensing bases, an
independent verification of corrective action taken at the unit,
an NRC assessment concluding a culture change has occurred,
public hearings, and a vote of the NRC Commissioners. NU
announced in December 1996 that it expects Millstone 3 to be
ready for restart around the end of 1997, subject to review by
the NRC Commissioners. The Company cannot predict when Millstone
3 will be allowed by the NRC to restart, but believes that the
unit will remain shut down for a very protracted period.
The Company incurred $10 million of actual costs in 1996
related to corrective actions associated with the outage. The
Company has also accrued a liability of approximately $3 million
for its share of future corrective action costs. Additional costs
may be incurred. During the outage, the Company is also
<PAGE>
incurring approximately $1.6 million per month in incremental
replacement power costs, which it has been recovering from
customers through its fuel clause.
Several criminal investigations related to Millstone 3 are
ongoing. The NRC has identified numerous apparent violations of
its regulations which may result in the assessment of civil
penalties. The Company and other minority owners of Millstone 3
are assessing their legal rights with respect to NU's operation
of Millstone 3.
Maine Yankee
The Company has a 20 percent equity ownership interest in
Maine Yankee. Over the past few years, the Maine Yankee nuclear
generating plant has experienced numerous technical and
nontechnical problems. In 1995, the plant had been shut down for
much of the year due to the discovery of cracks in its steam
generator tubes. The plant is currently shut down due to a cable
routing problem. In addition, due to leaking nuclear fuel rods,
68 fuel assemblies will be replaced. As a result, Maine Yankee
management does not expect the unit to restart until summer of
1997.
In late 1995, allegations were made to the NRC that inadequate
analyses of the plant's emergency core cooling system had been
performed. As a result of the allegations, the NRC limited the
plant's operation to 90 percent of full capacity. In September
1996, the NRC asked the Department of Justice (DOJ) to review,
for potential criminal violations, an NRC investigatory report on
the allegations. The DOJ is not limited in its investigation to
the matters covered in that report.
During 1996, the NRC conducted an independent safety
assessment (ISA) and identified a number of weaknesses,
deficiencies, and apparent violations which could result in
fines. Yankee Atomic performed professional services for Maine
Yankee associated with the matters being investigated. In
response to the ISA results, Maine Yankee has indicated that it
will spend more than $50 million in 1997 on operational
improvements. Additionally, in February 1997, Entergy
Corporation, an operator of five nuclear units, commenced
providing management services.
Under a confirmatory action letter issued by the NRC on
December 18, 1996, and supplemented on January 30, 1997, Maine
Yankee must fulfill certain commitments before its plant will be
allowed by the NRC staff to return to service. Because of
regulatory and other uncertainties faced by Maine Yankee, the
Company cannot predict whether or when Maine Yankee will return
to service.
During the outage, the Company is incurring approximately $1.8
million per month in incremental replacement power costs, which
it has been recovering from customers through its fuel clause.
<PAGE>
Brayton Point
In October 1996, the Environmental Protection Agency (EPA)
announced it was beginning a process to determine whether to
modify or revoke the Company's water discharge permit for its
Brayton Point 1,576 megawatt power plant. This action came two
years before the permit expiration date. The EPA stated it took
this step in response to a request from the Rhode Island
Department of Environmental Management (RIDEM) that action be
taken on the Brayton Point permit prior to its 1998 renewal,
based on concerns raised in a final RIDEM report issued in
October 1996. The report asserted a statistical correlation
between the decline in the fish population in Mount Hope Bay and
a change in operations at Brayton Point that occurred in the
mid-1980's.
In February 1997, the Company signed a memorandum of agreement
negotiated with the various federal and state environmental
agencies under which the Company will voluntarily operate under
more stringent conditions than under its existing permit. The
agreement is in lieu of any immediate action on the permit, but
will cover only the months of February and March 1997. During
this time, the parties will continue to work toward a longer-term
solution. The Company cannot predict at this time what permit
changes will be required or the impact on Brayton Point's
operations and economics. However, permit changes may
substantially impact the plant's capacity and ability to produce
energy as well as require significant capital expenditures of
tens of millions of dollars to construct equipment to address the
concerns raised by the environmental agencies.
Electric and Magnetic Fields (EMF)
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. In
October 1996, the National Research Council of the National
Academy of Sciences released a report stating no conclusive and
consistent evidence demonstrates that exposures to residential
EMF produce adverse health effects. It is impossible to predict
the ultimate impact on the Company and the electric utility
industry if further investigations were to demonstrate that the
present electricity delivery system is contributing to increased
risk of cancer or other health problems.
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what the impact on the Company would be if this cause
of action is recognized in the states in which the Company
operates and in contexts other than condemnation cases.
<PAGE>
Utility Plant Expenditures and Financing
Cash expenditures for utility plant totaled $66 million for
1996. The funds necessary for utility plant expenditures during
the period were provided by net cash from operating activities,
after the payment of dividends. Cash expenditures for utility
plant for 1997 are estimated to be $70 million. Internally
generated funds are expected to fully cover the Company's 1997
capital expenditures in 1997.
In 1996, the Company refinanced $48 million of variable rate
mortgage bonds. In addition, in 1996, the Company retired $10
million of mortgage bonds.
In August 1996, the Company repurchased $6 million of its 4.64
percent series of cumulative preferred stock. In May 1996, the
Company redeemed all ($15 million) of its 7.24 percent series of
cumulative preferred stock.
At December 31, 1996, the Company had $94 million of
short-term debt outstanding including $89 million of commercial
paper borrowings and $5 million of borrowings from affiliates.
At December 31, 1996, the Company had lines of credit and bond
purchase facilities with banks totaling $530 million which are
available to provide liquidity support for commercial paper
borrowings and for $372 million of the Company's outstanding
variable rate mortgage bonds in tax-exempt commercial paper mode
and for other corporate purposes. There were no borrowings under
these lines of credit at December 31, 1996.
<PAGE>
New England Power Company
Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating revenue, principally from
affiliates $1,600,309 $1,570,539 $1,540,757
---------- ---------- ----------
Operating expenses:
Fuel for generation 342,545 279,849 260,540
Purchased electric energy 508,910 547,926 513,583
Other operation 203,456 211,872 196,610
Maintenance 79,118 92,954 110,528
Depreciation and amortization 104,209 102,758 137,979
Taxes, other than income taxes 66,416 58,716 54,400
Income taxes 91,894 91,051 96,596
---------- ---------- ----------
Total operating expenses 1,396,548 1,385,126 1,370,236
---------- ---------- ----------
Operating income 203,761 185,413 170,521
Other income:
Allowance for equity funds used during
construction 7,746 9,142
Equity in income of nuclear power
companies 5,159 5,721 4,816
Other income (expense), net (1,851) (1,610) (293)
---------- ---------- ----------
Operating and other income 207,069 197,270 184,186
---------- ---------- ----------
Interest:
Interest on long-term debt 45,111 46,797 38,711
Other interest 10,066 10,525 1,956
Allowance for borrowed funds used
during construction - credit (591) (11,479) (5,854)
---------- ---------- ----------
Total interest 54,586 45,843 34,813
---------- ---------- ----------
Net income $ 152,483 $ 151,427 $ 149,373
========== ========== ==========
Statements of Retained Earnings
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
Retained earnings at beginning of year $ 385,309 $ 372,763 $ 346,153
Net income 152,483 151,427 149,373
Dividends declared on cumulative
preferred stock (2,574) (3,433) (3,440)
Dividends declared on common stock,
$20.80, $21.00, and $18.50 per share,
respectively (134,158) (135,448) (119,323)
Premium on redemption of preferred stock (450)
--------- --------- ---------
Retained earnings at end of year $ 400,610 $ 385,309 $ 372,763
========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
New England Power Company
Balance Sheets
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
Assets ---- ----
<S> <C> <C>
Utility plant, at original cost $2,991,797 $2,941,469
Less accumulated provisions for
depreciation and amortization 1,118,340 1,047,982
---------- ----------
1,873,457 1,893,487
Net investment in Seabrook 1 under rate
settlement (Note D-2) 15,210
Construction work in progress 36,836 41,566
---------- ----------
Net utility plant 1,910,293 1,950,263
---------- ----------
Investments:
Nuclear power companies, at equity (Note D-1) 47,902 47,055
Non-utility property and other investments 30,591 26,627
---------- ----------
Total investments 78,493 73,682
---------- ----------
Current assets:
Cash 3,046 2,607
Accounts receivable:
Affiliated companies 201,370 204,314
Accrued NEEI revenues (Note D-6) 21,648 43,731
Others 23,219 17,821
Fuel, materials, and supplies, at average cost 58,709 54,664
Prepaid and other current assets 25,050 27,986
---------- ----------
Total current assets 333,042 351,123
---------- ----------
Deferred charges and other assets (Note B) 325,887 273,275
---------- ----------
$2,647,715 $2,648,343
========== ==========
Capitalization and Liabilities
Capitalization:
Common stock, par value $20 per share,
authorized and outstanding 6,449,896 shares $ 128,998 $ 128,998
Premiums on capital stocks 86,779 86,829
Other paid-in capital 289,818 288,000
Retained earnings 400,610 385,309
---------- ----------
Total common equity 906,205 889,136
Cumulative preferred stock, par value $100
per share (Note G) 39,666 60,516
Long-term debt 733,006 735,440
---------- ----------
Total capitalization 1,678,877 1,685,092
---------- ----------
Current liabilities:
Long-term debt due in one year 3,000 10,000
Short-term debt (including $5,275 and
$1,025 to affiliates) 93,600 125,150
Accounts payable (including $25,301 and
$50,760 to affiliates) 127,226 163,791
Accrued liabilities:
Taxes 8,158 3,447
Interest 9,668 10,482
Other accrued expenses (Note F) 16,577 10,834
Dividends payable 27,412 32,249
---------- ----------
Total current liabilities 285,641 355,953
---------- ----------
Deferred federal and state income taxes 382,164 390,197
Unamortized investment tax credits 55,486 57,509
Other reserves and deferred credits 245,547 159,592
Commitments and contingencies (Note D)
---------- ----------
$2,647,715 $2,648,343
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
New England Power Company
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
Operating activities: ---- ---- ----
<S> <C> <C> <C>
Net income $ 152,483 $ 151,427 $ 149,373
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 108,338 108,384 142,764
Deferred income taxes and
investment tax credits, net (7,458) 25,683 23,051
Allowance for funds used during
construction (591) (19,225) (14,996)
Decrease (increase) in accounts
receivable 19,629 1,321 (6,932)
Decrease (increase) in fuel, materials,
and supplies (4,045) 18,697 (17,406)
Decrease (increase) in prepaid and
other current assets 2,936 5,743 (7,275)
Increase (decrease) in accounts payable (36,565) (15,970) 35,661
Increase (decrease) in other current
liabilities 9,640 (2,150) (30,823)
Other, net 28,582 (28,244) (26,845)
--------- --------- ---------
Net cash provided by operating
activities $ 272,949 $ 245,666 $ 246,572
--------- --------- ---------
Investing activities:
Plant expenditures, excluding allowance
for funds used during construction $ (65,981) $(162,766) $(229,015)
Other investing activities (3,878) (3,614) (3,053)
--------- --------- ---------
Net cash used in investing activities $ (69,859) $(166,380) $(232,068)
--------- --------- ---------
Financing activities:
Dividends paid on common stock $(138,995) $(103,198) $(133,835)
Dividends paid on preferred stock (2,574) (3,433) (3,440)
Changes in short-term debt (31,550) (20,425) 95,050
Long-term debt - issues 47,850 60,000 28,000
Long-term debt - retirements (57,850) (10,000)
Preferred stock - retirements (20,900) (512)
Gain on redemption of preferred stock 1,368
--------- --------- ---------
Net cash used in financing activities $(202,651) $ (77,056) $ (14,737)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents $ 439 $ 2,230 $ (233)
Cash and cash equivalents at beginning of
year 2,607 377 610
--------- --------- ---------
Cash and cash equivalents at end of year $ 3,046 $ 2,607 $ 377
========= ========= =========
Supplementary Information:
Interest paid less amounts capitalized $ 51,212 $ 41,557 $ 32,510
--------- --------- ---------
Federal and state income taxes paid $ 96,006 $ 57,948 $ 83,455
--------- --------- ---------
Dividends received from investments
at equity $ 4,313 $ 5,014 $ 4,809
--------- --------- ---------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
New England Power Company
Notes to Financial Statements
Note A - Significant Accounting Policies
1. Nature of operations:
The Company, a wholly-owned subsidiary of New England Electric
System (NEES), is a Massachusetts corporation and is qualified to
do business in Massachusetts, New Hampshire, Rhode Island,
Connecticut, Maine, and Vermont. The Company is subject, for
certain purposes, to the jurisdiction of the regulatory
commissions of these six states, the Securities and Exchange
Commission, and the Federal Energy Regulatory Commission (FERC).
The Company's business is currently that of generating,
purchasing, transmitting, and selling electric energy in
wholesale quantities to other electric utilities, principally its
affiliates Granite State Electric Company (Granite State),
Massachusetts Electric Company (Massachusetts Electric),
Nantucket Electric Company (Nantucket), and The Narragansett
Electric Company. (See Note B for a discussion of industry
restructuring and the Company's proposed divestiture of its
generating business.)
2. System of accounts:
The accounts of the Company are maintained in accordance with the
Uniform System of Accounts prescribed by regulatory bodies having
jurisdiction.
In preparing the financial statements, management is required to
make estimates that affect the reported amounts of assets and
liabilities and disclosures of asset recovery and contingent
liabilities as of the date of the balance sheets, and revenues
and expenses for the period. These estimates may differ from
actual amounts if future circumstances cause a change in the
assumptions used to calculate these estimates.
3. Allowance for funds used during construction (AFDC):
The Company capitalizes AFDC as part of construction costs. AFDC
represents the composite interest and equity costs of capital
funds used to finance that portion of construction costs not yet
eligible for inclusion in rate base. AFDC is capitalized in
"Utility plant" with offsetting noncash credits to "Other income"
and "Interest." This method is in accordance with an established
rate-making practice under which a utility is permitted a return
on, and the recovery of, prudently incurred capital costs through
their ultimate inclusion in rate base and in the provision for
depreciation. The composite AFDC rates were 5.8 percent, 7.5
percent, and 7.8 percent, in 1996, 1995, and 1994, respectively.
4. Depreciation and amortization:
The depreciation and amortization expense included in the
statements of income is composed of the following:
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Depreciation $ 78,187 $ 66,309 $ 52,834
Nuclear decommissioning
costs (Note D-3) 2,629 2,629 1,951
Amortization:
Investment in Seabrook 1 under
rate settlement (Note D-2) 15,210 23,074 65,061
Oil Conservation Adjustment (OCA) 4,467 11,854
Property losses 6,279 6,279 6,279
Millstone 3 additional amortization,
under rate settlement 1,904
-------- -------- --------
Total depreciation and
amortization expense $104,209 $102,758 $137,979
======== ======== ========
</TABLE>
Depreciation is provided annually on a straight-line basis. The
provision for depreciation as a percentage of weighted average
depreciable property was 2.9 percent in 1996, 2.7 percent in
1995, and 2.4 percent in 1994. The OCA was designed to recover
expenditures for coal conversion facilities at the Company's
Salem Harbor Station. These costs were fully amortized at
December 31, 1995. In addition, pre-1988 Seabrook 1 costs under
the rate settlement were fully amortized at December 31, 1996.
5. Cash:
The Company classifies short-term investments with a maturity of
90 days or less at time of purchase as cash.
Note B - Industry Restructuring
The electric utility business is rapidly progressing toward the
unbundling of what is now a fully-regulated, bundled product into
separate generation, transmission, and distribution components
and creating competition in the generation component. Under the
current regulatory framework, electric utilities have incurred
costs related to commitments to supply electricity to customers
that may not be economical in a competitive environment. The
amounts by which such costs exceed market prices are commonly
referred to as "stranded costs." As described below, a variety
of new rules, laws, or proposals have been enacted, or are in
process, in the jurisdictions that the NEES subsidiaries operate,
to provide for competition in a deregulated generation
environment, and allow for stranded cost recovery. See also the
"Industry Restructuring" section of Financial Review for a more
in-depth discussion of current developments in this area.
Massachusetts and Rhode Island
On February 26, 1997, the Massachusetts Department of Public
Utilities approved an industry restructuring settlement agreement
among the Company, its Massachusetts distribution affiliates,
Massachusetts Electric and Nantucket, the Massachusetts Attorney
General, and other parties. In August 1996, the state of Rhode
Island enacted industry restructuring legislation.
<PAGE>
The Massachusetts settlement and the Rhode Island statute have
many similarities. Both plans:
- - provide for complete retail choice by customers of their power
supplier. In Rhode Island, this would begin in July 1997 for
certain customers. All customers in Rhode Island and
Massachusetts would have choice in 1998. In Massachusetts,
choice is contingent on open access being available to all
customers of Massachusetts investor-owned utilities;
- - provide for recovery of their allocated share of the Company's
stranded costs;
- - provide customers who do not choose an alternative supplier
with service called "standard offer" service;
- - require an adjustment of stranded cost recovery to reflect the
market value of fossil and hydroelectric generating assets with
the Massachusetts settlement requiring actual divestiture of such
assets;
- - propose amendments to the New England Power Company-
distribution companies' wholesale all-requirements contracts
which have been filed with and accepted by the FERC, set down for
hearing, and made effective, subject to refund.
The stranded costs to be recovered in both Massachusetts and
Rhode Island include (i) the above-market portion of generating
plant commitments and regulatory assets to be recovered over 12
years in Massachusetts and 12.5 years in Rhode Island and (ii)
the above-market portion of purchased power contracts and the
operating cost of nuclear plants, that cannot be avoided by
shutting down the plants, including nuclear decommissioning
costs. These latter costs would be recovered as incurred over
the life of these obligations, a period expected to extend beyond
12 years. The Company estimates that at December 31, 1996, its
above-market commitments are approximately $4.5 billion on a
present-value basis before application of the proceeds from the
sale of its generating business.
Under the Massachusetts settlement, the Company must complete the
divestiture of its generating business within six months of the
later of the commencement of retail choice in Massachusetts or
the receipt of all necessary regulatory approvals. As part of
the divestiture plan, the Company will endeavor to sell, or
otherwise transfer, its minority interest in four nuclear power
plants to nonaffiliates. To the extent the Company is unable to
divest its nuclear generating interests, the Massachusetts
settlement provides for a sharing between customers and
shareholders of the nuclear-related revenues and costs not
otherwise reflected in the stranded costs recovery, with 80
percent allocated to customers and 20 percent to shareholders.
In addition, New England Energy Incorporated is planning to sell
its oil and gas properties, the cost of which is supported by the
Company through fuel purchased contracts.
<PAGE>
The Utility Workers Union of America and the Massachusetts
Alliance of Utility Unions, who intervened in the MDPU proceeding
on the settlement, have indicated they intend to appeal the
MDPU's order approving the settlement to the Massachusetts
Supreme Judicial Court. If an appeal is brought, the NEES
companies will oppose it.
New Hampshire and federal activity
On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its plan to implement a New Hampshire
law calling for retail access by 1998. Under the plan, utilities
such as Granite State whose rates are below the regional average
would be allowed full recovery of stranded costs as calculated by
the NHPUC. However, the NHPUC indicated that its methodology and
proposed timing of recovery would yield both initial access
charges and total recovery less than that requested by Granite
State. Further, the NHPUC indicated that its decision would not
result in savings for Granite State's customers.
The largest utility in New Hampshire is Public Service Company of
New Hampshire (PSNH). PSNH has appealed the NHPUC's decision to
the courts and has included in its appeal certain arguments which
could have an impact on Granite State. Granite State has
therefore petitioned to intervene in this appeal to protect its
interest on those issues.
Prior to the issuance of the NHPUC order, Granite State had
reached an interim settlement with several customers and other
stakeholders that would set initial access charges at 2.8 cents
per kilowatt-hour (kWh) for two years, and in other respects
would mirror the Massachusetts settlement described above.
Stranded costs to be recovered after the two-year initial period
would be subject to future regulatory determination. Unlike the
NHPUC order, the interim settlement agreement would provide all
customers with a rate reduction of approximately 10 percent.
This interim settlement is still pending before the NHPUC.
In April 1996, the FERC issued Order No. 888 requiring utilities
that own transmission facilities to file open access tariffs to
make available transmission service to affiliates and
nonaffiliates at fair, nondiscriminatory rates. In mid-1996, the
Company filed a transmission tariff with the FERC pursuant to
this requirement. 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 also stated that it would permit
stranded cost recovery under wholesale all-requirements
contracts, such as those between the Company and its retail
affiliates. On February 26, 1997, the FERC announced Order No.
888-A, reaffirming the principle of Order No. 888, including
stranded cost recovery.
Because of the Massachusetts settlement and the Rhode Island
statute, the Company does not expect it will rely exclusively on
Order No. 888 to recover stranded costs from its affiliates in
Massachusetts and Rhode Island. The Company cannot predict at
this time whether an Order No. 888 filing will be necessary to
fully recover stranded costs from Granite State or from seven
<PAGE>
unaffiliated wholesale customers should any of those customers
choose to terminate service under their contracts with the
Company. Granite State and these seven unaffiliated customers
are responsible for approximately 3 percent and 2 percent of the
Company's sales, respectively.
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 thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The Company has recorded
approximately $340 million in regulatory assets in compliance
with FAS 71. In addition, the Company's affiliate, NEEI, has a
net regulatory asset of approximately $150 million, which is
recoverable in its entirety from the Company.
Both the Massachusetts settlement and the Rhode Island statute
provide for full recovery of the costs of generating assets and
oil and gas related assets (including regulatory assets) not
recoverable from the proceeds of the divestiture of the Company's
generating business. The costs of these assets would be
recovered as part of a contract termination charge imposed on all
distribution customers. After the proposed divestiture,
substantially all of the Company's business, including the
recovery of its stranded costs, would remain under cost-based
rate regulation. Specifically, FERC Order No. 888 enables
transmission companies, which the Company would essentially
become, to recover their specific costs of providing transmission
service. The Company believes these factors will allow it to
continue to apply FAS 71 and that no impairment of plant assets
will exist under Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (FAS 121). Any loss from the
divestiture of generating assets and oil and gas assets will be
recorded as a regulatory asset to be recovered through the
contract termination charge.
Although the Company believes that it will continue to meet the
criteria for continued application of FAS 71, the Company
understands that members of the SEC staff have raised questions
concerning the continued applicability of FAS 71 to certain other
electric utilities facing restructuring. In addition, despite
the progress made to date in Massachusetts and Rhode Island, it
is possible that the final restructuring plans ultimately ordered
by regulatory bodies would not provide for full recovery of
stranded costs, including a fair return on those costs as they
are being recovered. In the event that future circumstances
should cause the application of FAS 71 to be discontinued, a
noncash write-off of previously established regulatory assets and
liabilities related to the affected operations would be required.
In addition, write-downs of plant assets under FAS 121 could be
<PAGE>
required, including a write-off of any loss from the divestiture
of the generating business.
The components of regulatory assets are as follows:
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
---- ----
<S> <C> <C>
Regulatory assets included in current
assets and liabilities:
Accrued NEEI losses (see Note D-6) $ 21,648 $43,731
Rate adjustment mechanisms (4,790)
-------- -------
16,858 43,731
Regulatory assets included in deferred charges:
Accrued Connecticut Yankee
costs (see Note D-3) 114,425
Accrued Yankee Atomic
costs (see Note D-3) 51,988 67,566
Unamortized losses on reacquired debt 31,353 32,571
Deferred SFAS No. 106 costs
(see Note E-2) 13,680 16,416
Deferred SFAS No. 109 costs
(see Note C) 27,461 30,059
Purchased power contract
termination costs 19,578 23,494
Deferred gas pipeline charges
(see Note D-9) 59,733 62,873
Unamortized property losses 253 12,044
Other 2,727 22,049
-------- --------
321,198 267,072
-------- --------
$338,056 $310,803
======== ========
</TABLE>
Amounts included in "Deferred charges and other assets" on the
balance sheets that do not represent regulatory assets totaled
$4,689,000 and $6,203,000 at December 31, 1996 and 1995,
respectively. As previously noted, the Company's affiliate,
NEEI, has a regulatory asset of approximately $150 million, which
is recoverable in its entirety from the Company (see Note D-6).
Note C - Income Taxes
The Company and other subsidiaries participate with NEES in
filing consolidated federal income tax returns. The Company's
income tax provision is calculated on a separate return basis.
Federal income tax returns have been examined and reported on by
the Internal Revenue Service (IRS) through 1991. The returns for
1992 and 1993 are currently under examination by the IRS.
<PAGE>
Total income taxes in the statements of income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income taxes charged to operations $91,894 $91,051 $96,596
Income taxes charged (credited) to
"Other income" 555 353 (994)
------- ------- -------
Total income taxes $92,449 $91,404 $95,602
======= ======= =======
Total income taxes, as shown above, consist of the following components:
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
Current income taxes $99,907 $65,721 $72,551
Deferred income taxes (5,435) 27,188 26,628
Investment tax credits, net (2,023) (1,505) (3,577)
------- ------- -------
Total income taxes $92,449 $91,404 $95,602
======= ======= =======
</TABLE>
Investment tax credits have been deferred and are being amortized
over the estimated lives of the property giving rise to the
credits.
Total income taxes, as shown above, consist of federal and state
components as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal income taxes $76,656 $74,590 $78,274
State income taxes 15,793 16,814 17,328
------- ------- -------
Total income taxes $92,449 $91,404 $95,602
======= ======= =======
</TABLE>
With regulatory approval from the FERC, the Company has adopted
comprehensive interperiod tax allocation (normalization) for
temporary book/tax differences.
Total income taxes differ from the amounts computed by applying
the federal statutory tax rates to income before taxes. The
reasons for the differences are as follows:
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed tax at statutory rate $85,726 $84,991 $85,741
Increases (reductions) in tax
resulting from:
Amortization of investment
tax credits (2,023) (2,227) (3,045)
State income taxes, net of federal
income tax benefit 10,265 10,929 11,263
All other differences (1,519) (2,289) 1,643
------- ------- -------
Total income taxes $92,449 $91,404 $95,602
======= ======= =======
</TABLE>
The following table identifies the major components of total
deferred income taxes:
<TABLE>
<CAPTION>
At December 31, (In Millions) 1996 1995
---- ----
<S> <C> <C>
Deferred tax asset:
Plant related $ 97 $ 92
Investment tax credits 23 24
All other 46 43
----- -----
166 159
----- -----
Deferred tax liability:
Plant related (415) (397)
Equity AFDC (45) (47)
All other (88) (105)
----- -----
(548) (549)
----- -----
Net deferred tax liability $(382) $(390)
==== =====
</TABLE>
There were no valuation allowances for deferred tax assets deemed
necessary.
<PAGE>
Note D - Commitments and Contingencies
1. Yankee nuclear power companies (Yankees):
The Company has minority interests in four Yankee Nuclear Power
Companies. These ownership interests are accounted for on the
equity method. The Company's share of the expenses of the
Yankees is accounted for in "Purchased electric energy" on the
statements of income.
A summary of combined results of operations, assets, and
liabilities of the four Yankees is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating revenue $ 697,054 $ 695,781 $ 631,940
=========== =========== ===========
Net income $ 27,567 $ 31,657 $ 30,345
=========== =========== ===========
Company's equity in
net income $ 5,159 $ 5,721 $ 4,816
=========== =========== ===========
Net plant 401,049 443,967 537,103
Other assets 2,031,336 1,418,681 1,458,186
Liabilities and debt (2,177,068) (1,612,843) (1,748,960)
----------- ----------- -----------
Net assets $ 255,317 $ 249,805 $ 246,329
=========== =========== ===========
Company's equity in
net assets $ 47,902 $ 47,055 $ 46,349
=========== =========== ===========
Company's purchased
electric energy $ 110,778 $ 115,647 $ 106,404
=========== =========== ===========
</TABLE>
At December 31, 1996, $14 million of undistributed earnings of
the Yankees were included in the Company's retained earnings.
2. Jointly-owned nuclear generating units:
The Company is also a 12 percent and 10 percent joint owner,
respectively, of the Millstone 3 and Seabrook 1 nuclear
generating units, each 1,150 megawatts. The Company's net
investment in Millstone 3, included in "Net utility plant" is
approximately $379 million. The Company's pre-1988 investment in
Seabrook 1 has been fully amortized in 1996 pursuant to a
settlement agreement. The Company's net investment in Seabrook 1
since January 1, 1988, which is approximately $55 million, is
included in "Net utility plant" on the Company's balance sheet
and is being depreciated over the term of Seabrook 1's operating
license. The Company's share of expenses for these units is
included in "Operating expenses."
<PAGE>
3. Nuclear plant decommissioning and nuclear fuel disposal:
The Company is liable for its share of decommissioning costs for
Millstone 3, Seabrook 1, and all of the Yankees. Decommissioning
costs include not only estimated costs to decontaminate the units
as required by the Nuclear Regulatory Commission (NRC), but also
costs to dismantle the uncontaminated portion of the units. The
Company records decommissioning costs expense on its books
consistent with its rate recovery. The Company is recovering its
share of projected decommissioning costs for Millstone 3 and
Seabrook 1 through depreciation expense. In addition, the
Company is paying its portion of projected decommissioning costs
for all of the Yankees through purchased power expense. Such
costs reflect estimates of total decommissioning costs approved
by the FERC.
Connecticut Yankee
The Company has a 15 percent equity ownership interest in
Connecticut Yankee. As a result of an economic analysis, the
Connecticut Yankee board of directors voted in December 1996 to
permanently shut down and decommission the plant.
In December 1996, Connecticut Yankee filed with the FERC to
recover all of its approximately $246 million undepreciated
investment in the plant and other costs over the period extending
through June 2007, when the plant's NRC operating license would
have expired. In a 1993 decision, the FERC allowed Yankee Atomic
to recover its undepreciated investment in its permanently shut
down nuclear plant, in part on the grounds that owners should not
be discouraged from closing uneconomic plants. Several parties
have intervened in opposition to Connecticut Yankee's filing.
The Company believes that the FERC will allow the Company to
recover from its customers all costs that the FERC allows
Connecticut Yankee to recover from the Company.
The Company has recorded the estimated future payment obligation
to Connecticut Yankee of $114 million as a liability and as an
offsetting regulatory asset, reflecting the Company's expected
future rate recovery of such costs. The NRC has identified
numerous apparent violations of its regulations, which may result
in the assessment of civil penalties.
<PAGE>
Yankee Atomic
The Company has a 30 percent ownership interest in Yankee Atomic.
In 1992, the Yankee Atomic board of directors decided to
permanently cease power operation of, and decommission, the
facility. Decommissioning is currently underway.
The Company has recorded an estimate of its total future payment
obligations for post-operating costs to Yankee Atomic as a
liability and as an offsetting regulatory asset, reflecting its
expected future rate recovery of such costs. This liability and
related regulatory asset are approximately $52 million each at
December 31, 1996.
Decommissioning Trust Funds
Each nuclear unit in which the Company has an ownership interest
has established a decommissioning trust fund or escrow fund into
which payments are being made to meet the projected costs of
decommissioning. Listed below is information on each operating
nuclear plant in which the Company has an ownership interest.
<TABLE>
<CAPTION>
The Company's
share of (millions of dollars)
-------------------------------
Estimated
The Company's Net DecommissioningDecommissioning License
Ownership Plant Cost (in 1996 $) Fund Balances* Expiration
Unit Interest(%) Assets
<S> <C> <C> <C> <C> <C>
Maine Yankee ** 20 44 74 31 2008
Vermont Yankee 20 36 75 30 2012
Millstone 3 *** 12 379 62 16 2025
Seabrook 1 *** 10 55 45 7 2026
<FN>
* Certain additional amounts are anticipated to be available
through tax deductions.
** A Maine statute provides that if both Maine Yankee and its
decommissioning trust fund have insufficient assets to pay for
the plant decommissioning, the owners of Maine Yankee are jointly
and severally liable for the shortfall.
*** Fund balances are included in "Other investments" on the balance
sheets and approximate market value.
</FN>
</TABLE>
There is no assurance that decommissioning costs actually
incurred by the Yankees, Millstone 3, or Seabrook 1 will not
substantially exceed these amounts. For example, decommissioning
cost estimates assume the availability of permanent repositories
for both low-level and high-level nuclear waste; those
repositories do not currently exist. If any of the units were
shut down prior to the end of their operating licenses,
<PAGE>
the funds collected for decommissioning to that point would
beinsufficient.
The Nuclear Waste Policy Act of 1982 establishes that the federal
government is responsible for the disposal of spent nuclear fuel.
The federal government requires the Company to pay a fee based on
its share of the net generation from Millstone 3 and Seabrook 1
nuclear units. The Company is recovering this fee through its
fuel clause. Similar costs are incurred by the Maine Yankee and
Vermont Yankee nuclear generating units. These costs are billed
to the Company and also recovered from customers through the
Company's fuel clause.
4. Investments in nuclear units
The Millstone 3 and Maine Yankee nuclear generating units are
currently shut down and have been placed on the NRC "Watch List,"
signifying that their safety performance exhibits sufficient
weakness to warrant increased NRC attention. Neither may restart
without NRC approval. At present, the Vermont Yankee and
Seabrook 1 nuclear generating units appear to be operating
routinely without major problems.
On October 9, 1996, the NRC issued letters to operators of
nuclear power plants requiring them to document that the plants
are operated and maintained within their design and licensing
bases, and that any deviations are reconciled in a timely manner.
The Seabrook 1, Maine Yankee, and Vermont Yankee nuclear power
plants responded to the NRC letters in February 1997.
Uncertainties regarding the future of nuclear generating
stations, particularly older units, such as Maine Yankee and
Vermont Yankee, are increasing rapidly and could adversely affect
their service lives, availability, and costs. These
uncertainties stem from a combination of factors, including the
acceleration of competitive pressures in the power generation
industry and increased NRC scrutiny.
Millstone 3
In April 1996, the NRC ordered Millstone 3, which has experienced
numerous technical and nontechnical problems, to remain shut down
pending verification that the unit's operations are in accordance
with NRC regulations and the unit's operating license. Millstone
3 is operated by a subsidiary of Northeast Utilities (NU). The
Company is not an owner of Millstone 1 and 2 nuclear generating
units, which are also shut down under NRC orders.
A number of significant prerequisites must be fulfilled prior to
restart of Millstone 3, including certification by NU that the
unit adequately conforms to its design and licensing bases, an
independent verification of corrective actions taken at the unit,
an NRC assessment concluding a culture change has occurred,
public hearings, and a vote of the NRC Commissioners. NU
announced in December 1996 that it expects Millstone 3 to be
ready for restart around the end of 1997, subject to review by
the NRC Commissioners. The Company cannot predict when Millstone
<PAGE>
3 will be allowed by the NRC to restart, but believes that the
unit will remain shut down for a very protracted period.
The Company incurred $10 million of actual costs in 1996 related
to corrective actions associated with the outage. The Company has
also accrued a liability of approximately $3 million for its
share of future corrective action costs. Additional costs may be
incurred. During the outage, the Company is also incurring
approximately $1.6 million per month in incremental replacement
power costs, which it has been recovering from customers through
its fuel clause.
Several criminal investigations related to Millstone 3 are
ongoing. The NRC has identified numerous apparent violations of
its regulations which may result in the assessment of civil
penalties. The Company and other minority owners of Millstone 3
are assessing their legal rights with respect to NU's operation
of Millstone 3.
Maine Yankee
Over the past few years, the Maine Yankee nuclear generating
plant has experienced numerous technical and nontechnical
problems. In 1995, the plant had been shut down for much of the
year due to the discovery of cracks in its steam generator tubes.
The plant is currently shut down due to a cable routing problem.
In addition, due to leaking nuclear fuel rods, 68 fuel assemblies
will be replaced. As a result, Maine Yankee management does not
expect the unit to restart until summer of 1997.
In late 1995, allegations were made to the NRC that inadequate
analyses of the plant's emergency core cooling system had been
performed. As a result of the allegations, the NRC limited the
plant's operation to 90 percent of full capacity. In September
1996, the NRC asked the Department of Justice (DOJ) to review,
for potential criminal violations, an NRC investigatory report on
the allegations. The DOJ is not limited in its investigation to
the matters covered in that report.
During 1996, the NRC conducted an independent safety assessment
(ISA) and identified a number of weaknesses, deficiencies, and
apparent violations which could result in fines. Yankee Atomic
performed professional services for Maine Yankee associated with
the matters being investigated. In response to the ISA results,
Maine Yankee has indicated that it will spend more than $50
million in 1997 on operational improvements. Additionally, in
February 1997, Entergy Corporation, an operator of five nuclear
units, commenced providing management services.
Under a confirmatory action letter issued by the NRC on December
18, 1996, and supplemented on January 30, 1997, Maine Yankee must
fulfill certain commitments before its plant will be allowed by
the NRC staff to return to service. Because of regulatory and
other uncertainties faced by Maine Yankee, the Company cannot
predict whether or when Maine Yankee will return to service.
<PAGE>
During the outage, the Company is incurring approximately $1.8
million per month in incremental replacement power costs, which
it has been recovering from customers through its fuel clause.
5. Nuclear insurance:
The Price-Anderson Act limits the amount of liability claims that
would have to be paid in the event of a single incident at a
nuclear plant to $8.9 billion (based upon 110 licensed reactors).
The maximum amount of commercially available insurance coverage
to pay such claims is $200 million. The remaining $8.7 billion
would be provided by an assessment of up to $79.3 million per
incident levied on each of the participating nuclear units in the
United States, subject to a maximum assessment of $10 million per
incident per nuclear unit in any year. The maximum assessment,
which was most recently adjusted in 1993, is adjusted for
inflation at least every five years. The Company's current
interest in the Yankees (excluding Yankee Atomic and Connecticut
Yankee), Millstone 3, and Seabrook 1 would subject the Company to
a $58.0 million maximum assessment per incident. The Company's
payment of any such assessment would be limited to a maximum of
$7.3 million per incident per year. As a result of the permanent
cessation of power operation of the Yankee Atomic plant, Yankee
Atomic has received from the NRC a partial exemption from
obligations under the Price-Anderson Act. However, Yankee Atomic
must continue to maintain $100 million of commercially available
nuclear insurance coverage. Connecticut Yankee is planning to
file with the NRC for a similar exemption.
Each of the nuclear units in which the Company has an ownership
interest also carries nuclear property insurance to cover the
costs of property damage, decontamination or premature
decommissioning, and workers' claims resulting from a nuclear
incident. These policies may require additional premium
assessments if losses relating to nuclear incidents at units
covered by this insurance occurring in a prior six-year period
exceed the accumulated funds available. The Company's maximum
potential exposure for these assessments, either directly, or
indirectly through purchased power payments to the Yankees, is
approximately $11 million per year.
6. Oil and gas operations:
NEEI, a subsidiary of NEES, is engaged in domestic oil and gas
exploration, development, and production. NEEI operates under an
intercompany pricing policy with the Company which has been
approved by the Securities and Exchange Commission (SEC). The
pricing policy requires the Company to purchase all fuel meeting
its specifications offered to it by NEEI. Under the pricing
policy, NEEI's oil and gas exploration program is composed of
prospects entered into through December 31, 1983 under a
rate-regulated program. NEEI has incurred operating losses since
1986, due to low oil and gas prices, and expects to incur
substantial additional losses in the future. These losses are
passed on to the Company in the year after they are incurred by
NEEI and, in turn, are being recovered from customers through the
Company's fuel clause. The Company's ability to pass these
<PAGE>
losses on to its customers was favorably resolved in the
Company's 1988 FERC rate settlement. This settlement covered all
costs incurred by or resulting from commitments made by NEEI
through March 1, 1988. Other subsequent costs incurred by NEEI
are subject to normal regulatory review. In 1996, 1995, and
1994, the Company recorded accrued fuel expenses and accrued
revenues of $22 million, $44 million, and $40 million,
respectively, representing losses incurred by NEEI in each year.
In the absence of the pricing policy, the SEC's cost center
"ceiling test" rule requires non-rate-regulated companies to
write down capitalized costs to a level which approximates the
present value of their proved oil and gas reserves. Based on
NEEI's 1996 average oil and gas selling prices, application of
the ceiling test would have resulted in a write-down of
approximately $93 million after tax ($149 million before tax) at
December 31, 1996.
7. Plant expenditures:
The Company's utility plant expenditures are estimated to be
approximately $70 million in 1997. At December 31, 1996,
substantial commitments had been made relative to future planned
expenditures.
8. Hydro-Quebec Interconnection:
The Company is a participant in both the Hydro-Quebec Phase I and
Phase II projects. The Company's participation percentage in
both projects is approximately 18 percent. The Hydro-Quebec
Phase I and Phase II projects were established to transmit power
from Hydro-Quebec to New England. Three affiliates of the
Company were created to construct and operate transmission
facilities related to these projects. The participants,
including the Company, have entered into support agreements that
end in 2020, to pay monthly their proportionate share of the
total cost of constructing, owning, and operating the
transmission facilities. The Company accounts for these support
agreements as capital leases and accordingly recorded
approximately $69 million in utility plant at December 31, 1996.
Under the support agreements, the Company has agreed, in
conjunction with any Hydro-Quebec Phase II project debt
financing, to guarantee its share of project debt. At December
31, 1996, the Company had guaranteed approximately $27 million of
project debt.
9. Natural gas pipeline capacity:
In connection with serving the Company's gas-burning electric
generation facilities, the Company has entered into several
contracts for natural gas pipeline capacity and gas supply.
These agreements require minimum fixed payments that are
currently estimated to be approximately $57 million to $60
million per year from 1997 to 2001. Under these agreements,
remaining fixed payments from 2002 through 2014 total
approximately $525 million.
<PAGE>
As part of a rate settlement, the Company was recovering 50
percent of the fixed pipeline capacity payments through its
current fuel clause and deferring the recovery of the remaining
50 percent until the Manchester Street repowering project was
completed. These deferrals ended in November 1995, at which time
the Company had deferred payments of approximately $63 million
which will be amortized over 25 years in accordance with rate
settlements (see Note B).
In connection with managing its fuel supply, the Company uses a
portion of this pipeline capacity to sell natural gas. Proceeds
from the sale of natural gas and pipeline capacity of $50
million, $71 million, and $55 million, in 1996, 1995, and 1994,
respectively, have been passed on to customers through the
Company's fuel clause. These proceeds have been reflected as an
offset to the related fuel expense in "Fuel for generation" in
the Company's statements of income. Natural gas sales decreased
in 1996 as a result of the Manchester Street Station entering
commercial operation in the second half of 1995.
10. 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. NEES 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 United States Environmental Protection Agency
or the Massachusetts Department of Environmental Protection for
six 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 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.
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 and from other PRPs, but it is uncertain whether, and to
what extent, such efforts will be successful. The Company
believes that hazardous waste liabilities for all sites of which
<PAGE>
it is aware are not material to its financial position.
In October 1996, the American Institute of Certified Public
Accountants issued new accounting rules for Environmental
Remediation Liabilities which become effective in 1997. The
Company does not believe these new rules will have a material
effect on the Company's financial position or results of
operations.
11. Long-term contracts for the purchase of electricity:
The Company purchases a portion of its electricity requirements
pursuant to long-term contracts with owners of various generating
units. These contracts expire in various years from 1997 to
2029. In conjunction with its divesture plan, the Company will
endeavor to sell these long-term contracts.
Certain of these contracts require the Company to make minimum
fixed payments, even when the supplier is unable to deliver
power, to cover the Company's proportionate share of the capital
and fixed operating costs of these generating units. The fixed
portion of payments under these contracts totaled $186 million in
1996, $215 million in 1995, and $190 million in 1994. These
contracts, excluding contracts with Yankee Atomic and Connecticut
Yankee (see Note D-3), have minimum fixed payment requirements of
$155 million in 1997, $150 million in 1998 and 1999, $145 million
in 2000 and 2001, and approximately $1.3 billion thereafter.
Approximately 92 percent of the payments under these contracts
are to the Yankees and Ocean State Power, entities in which the
Company or its affiliates hold ownership interests.
The Company's other contracts, principally with nonutility
generators, require the Company to make payments only if power
supply capacity and energy are deliverable from such suppliers.
The Company's payments under these contracts amounted to $230
million in 1996, $245 million in 1995, and $210 million in 1994.
Note E - Employee Benefits
1. Pension plans:
The Company participates with other subsidiaries of NEES in
noncontributory, defined-benefit plans covering substantially all
employees of the Company. The plans provide pension benefits
based on the employee's compensation during the five years prior
to retirement. The Company's funding policy is to contribute
each year the net periodic pension cost for that year. However,
the contribution for any year will not be less than the minimum
contribution required by federal law or greater than the maximum
tax deductible amount.
<PAGE>
Net pension cost for 1996, 1995, and 1994 included the following
components:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
- -------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during the
period $ 2,769 $2,231 $2,202
Plus (less):
Interest cost on projected benefit obligation 6,669 6,406 6,403
Return on plan assets at expected long-term
rate (7,204) (6,488) (6,554)
Amortization 270 131 557
------- ------- -------
Net pension cost $ 2,504 $ 2,280 $ 2,608
======= ======= =======
Actual return on plan assets $12,672 $17,108 $ 608
======= ======= =======
Year Ended December 31, 1997 1996 1995 1994
- ----------------------- ---- ---- ---- ----
Assumptions used to determine pension cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Average rate of increase in future
compensation levels 4.13% 4.13% 4.63% 4.35%
Expected long-term rate of
return on assets 8.50% 8.50% 8.75% 8.75%
</TABLE>
The funded status of the plans cannot be presented separately for
the Company as the Company participates in the plans with other
NEES subsidiaries. The following table sets forth the funded
status of the NEES companies' plans at December 31:
<PAGE>
<TABLE>
<CAPTION>
Retirement Plans, (In Millions) 1996 1995
---- ----
<S> <C> <C>
Union Non-Union Union Non-Union
Employee Employee Employee Employee
Plans Plans Plans Plans
-------- --------- ------- --------
Benefits earned
Actuarial present value of
accumulated benefit liability:
Vested $298 $342 $293 $343
Non-vested 9 10 8 10
---- ---- ---- ----
Total $307 $352 $301 $353
==== ==== ==== ====
Reconciliation of funded status
Actuarial present value of
projected benefit liability $355 $398 $346 $402
Unrecognized prior service costs (6) (3) (7) (4)
SFAS No. 87 transition liability
not yet recognized (amortized) - (1) - (1)
Net gain (loss) not yet recognized
(amortized) 25 15 (1) (23)
---- ---- ---- ----
374 409 338 374
---- ---- ---- ----
Pension fund assets at fair value 384 428 349 392
SFAS No. 87 transition asset
not yet recognized (amortized) (10) - (11) -
---- ---- ---- ----
374 428 338 392
---- ---- ---- ----
Accrued pension/(prepaid)
payments recorded on books $ - $(19) $ - $(18)
</TABLE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates from 1997 and 1996,
respectively, and the 1983 Group Annuity Mortality table.
Plan assets are composed primarily of corporate equity, debt
securities, and cash equivalents.
2. Postretirement Benefit Plans Other Than Pensions (PBOPs):
The Company provides health care and life insurance coverage to
eligible retired employees. Eligibility is based on certain age
and length of service requirements and in some cases retirees
must contribute to the cost of their coverage.
<PAGE>
The total cost of PBOPs for 1996, 1995, and 1994 included the
following components:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 1,407 $ 1,344 $ 1,628
Plus (less):
Interest cost on accumulated
benefit obligation 3,580 4,013 3,954
Return on plan assets at expected
long-term rate (1,832) (1,374) (1,111)
Amortization 1,867 2,079 2,591
------- ------- -------
Net postretirement benefit cost $ 5,022 $ 6,062 $ 7,062
======= ======= =======
Actual return on plan assets $ 3,572 $ 4,137 $ 54
1997 1996 1995 1994
---- ---- ---- ----
Assumptions used to determine
postretirement benefit cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Expected long-term rate of return
on assets 8.25% 8.25% 8.50% 8.50%
Health care cost rate - 1994 11.00%
Health care cost rate - 1995 to 1999 8.00% 8.00% 8.50% 8.50%
Health care cost rate - 2000 to 2004 6.25% 6.25% 8.50% 8.50%
Health care cost rate - 2005 and beyond 5.25% 5.25% 6.25% 6.25%
</TABLE>
The following table sets forth benefits earned and the plans'
funded status:
<TABLE>
<CAPTION>
At December 31, (In Millions) 1996 1995
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 32 $ 30
Fully eligible active plan participants 2 1
Other active plan participants 20 20
---- ----
Total benefits earned 54 51
Unrecognized transition obligation (41) (43)
Unrecognized net gain 13 12
---- ----
26 20
---- ----
Plan assets at fair value 29 23
---- ----
Prepaid postretirement benefit costs recorded on books $ 3 $ 3
==== ====
</TABLE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates in effect for 1997 and 1996,
respectively.
<PAGE>
The assumptions used in the health care cost trends have a
significant effect on the amounts reported. Increasing the
assumed rates by 1 percent in each year would increase the
accumulated postretirement benefit obligation as of December 31,
1996 by approximately $6 million and the net periodic cost for
1996 by approximately $1 million.
The Company funds the annual tax-deductible contributions. Plan
assets are invested in equity and debt securities and cash
equivalents.
Note F - Short-term Borrowings and Other Accrued Expenses
At December 31, 1996, the Company had $94 million of short-term
debt outstanding including $89 million in commercial paper
borrowings and $5 million of borrowings from affiliates. NEES
and certain subsidiaries, including the Company, with regulatory
approval, operate a money pool to more effectively utilize cash
resources and to reduce outside short-term borrowings.
Short-term borrowing needs are met first by available funds of
the money pool participants. Borrowing companies pay interest at
a rate designed to approximate the cost of outside short-term
borrowings. Companies which invest in the pool share the
interest earned on a basis proportionate to their average monthly
investment in the money pool. Funds may be withdrawn from or
repaid to the pool at any time without prior notice.
At December 31, 1996, the Company had lines of credit and standby
bond purchase facilities with banks totaling $530 million which
are available to provide liquidity support for commercial paper
borrowings and for $372 million of the Company's outstanding
variable rate mortgage bonds in tax-exempt commercial paper mode
(see Note H) and for other corporate purposes. There were no
borrowings under these lines of credit at December 31, 1996. Fees
are paid on the lines and facilities in lieu of compensating
balances.
The weighted average rate on outstanding short-term borrowings
was 5.9 percent at December 31, 1996. The fair value of the
Company's short-term debt equals carrying value.
The components of other accrued expenses are as follows:
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
---- ----
<S> <C> <C>
Accrued wages and benefits $ 7,190 $ 6,258
Capital lease obligations due within one year 4,328 4,323
Rate adjustment mechanisms 4,790
Other 269 253
------- -------
$16,577 $10,834
======= =======
</TABLE>
<PAGE>
Note G - Cumulative Preferred Stock
<TABLE>
<CAPTION>
A summary of cumulative preferred stock at December 31, 1996 and 1995 is as follows (in
thousands of dollars except for share data):
Shares
Authorized Dividends Call
and Outstanding Amount Declared Price
--------------- ------ ------------ -----
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$100 Par value
6.00% Series 75,020 75,020$ 7,502 $ 7,502 $ 451 $ 451 (a)
4.56% Series 100,000 100,000 10,000 10,000 456 456$104.08
4.60% Series 80,140 80,140 8,014 8,014 368 368 101.00
4.64% Series 41,500 100,000 4,150 10,000 328 464 102.56
6.08% Series 100,000 100,000 10,000 10,000 608 608 102.34
7.24% Series - 150,000 - 15,000 363 1,086 103.06
------- -------------- ------- ------ ------
Total 396,660 605,160$39,666 $60,516 $2,574 $3,433
<FN>
(a) Noncallable.
</FN>
</TABLE>
The annual dividend requirement for total cumulative preferred
stock was $2,075,000 for 1996 and $3,433,000 for 1995.
In August 1996, the Company repurchased $6 million of its 4.64
percent series of cumulative preferred stock. In May 1996, the
Company redeemed all ($15 million) of its 7.24 percent series of
cumulative preferred stock.
<PAGE>
Note H - Long-term Debt
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
At December 31, (In Thousands)
Series Rate % Maturity 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General and Refunding Mortgage Bonds:
W(93-3) 5.12 February 2, 1996 $ 5,000
W(93-8) 5.06 February 5, 1996 5,000
Y(94-3) 8.10 December 22, 1997 $ 3,000 3,000
W(93-2) 6.17 February 2, 1998 4,300 4,300
W(93-4) 6.14 February 2, 1998 1,300 1,300
W(93-5) 6.17 February 3, 1998 5,000 5,000
W(93-7) 6.10 February 4, 1998 10,000 10,000
W(93-9) 6.04 February 4, 1998 29,400 29,400
Y(94-4) 8.28 December 21, 1999 10,000 10,000
W(93-6) 6.58 February 10, 2000 5,000 5,000
Y(95-1) 7.94 February 14, 2000 5,000 5,000
Y(95-2) 7.93 February 14, 2000 10,000 10,000
Y(95-3) 7.40 March 21, 2000 10,000 10,000
Y(95-4) 6.69 June 5, 2000 25,000 25,000
W(93-1) 7.00 February 3, 2003 25,000 25,000
Y(94-2) 8.33 November 8, 2004 10,000 10,000
K 7.25 October 15, 2015 38,500 38,500
L 7.80 April 1, 2016 29,850
X variable March 1, 2018 79,250 79,250
R variable November 1, 2020 135,850 117,850
S variable November 1, 2020 50,600 20,750
T variable November 1, 2020 18,000
U 8.00 August 1, 2022 170,000 170,000
V variable October 1, 2022 106,150 106,150
Y(94-1) 8.53 September 20, 2024 5,000 5,000
Unamortized discounts (2,344) (2,910)
-------- --------
Total long-term debt 736,006 745,440
======== ========
Long-term debt due in one year (3,000) (10,000)
-------- --------
$733,006 $735,440
======== ========
</TABLE>
Substantially all of the properties and franchises of the Company
are subject to the lien of the mortgage indentures under which
the general and refunding mortgage bonds have been issued.
The Company will make cash payments of $3 million in 1997, $50
million in 1998, $10 million in 1999, and $55 million in 2000 to
retire maturing mortgage bonds. There are no cash payments
required in 2001.
The terms of $372 million of variable rate pollution control
revenue bonds collateralized by the Company's mortgage bonds at
December 31, 1996 require the Company to reacquire the bonds
under certain limited circumstances. The Company has
approximately $740 million of mortgage bonds outstanding. The
bond indenture restricts the sale of the trust property in its
entirety or substantially in its entirety. The proposed sale of
the Company's generating business would likely require that the
Company either amend the bond indenture or defease the bonds in
connection with the proposed sale. Any defeasance of bonds would
<PAGE>
be by the deposit of cash representing principal and interest to
the maturity date or interest, principal, and general redemption
premium to an earlier redemption date. At December 31, 1996,
interest rates on the Company's variable rate bonds ranged from
2.30 percent to 4.80 percent.
At December 31, 1996, the Company's long-term debt had a carrying
value of $736,000,000 and had a fair value of approximately
$753,000,000. The fair value of debt that reprices frequently at
market rates approximates carrying value. For all other debt,
the fair market value of the Company's long-term debt was
estimated based on the quoted prices for similar issues or on the
current rates offered to the Company for debt of the same
remaining maturity.
Note I - Restrictions on Retained Earnings Available for
Dividends on Common Stock
Pursuant to the provisions of the Articles of Organization and
the By-Laws relating to the Dividend Series Preferred Stock,
certain restrictions on payment of dividends on common stock
would come into effect if the "junior stock equity" was, or by
reason of payment of such dividends became, less than 25 percent
of "Total capitalization." However, the junior stock equity at
December 31, 1996 was 54 percent of total capitalization,
including long-term debt due in one year, and, accordingly, none
of the Company's retained earnings at December 31, 1996 were
restricted as to dividends on common stock under the foregoing
provisions.
Under restrictions contained in the indentures relating to
general and refunding mortgage bonds (Series K), none of the
Company's retained earnings at December 31, 1996 were restricted
as to dividends on common stock. However, a portion of the
Company's retained earnings (less than $25 million) may be
restricted due to regulatory requirements related to
hydroelectric licensed projects.
Note J - Supplementary Income Statement Information
Advertising expenses, expenditures for research and development,
and rents were not material and there were no royalties paid in
1996, 1995, or 1994. Taxes, other than income taxes, charged to
operating expenses are set forth by classes as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Municipal property taxes $58,942 $49,807 $46,506
Federal and state payroll and other taxes 7,474 8,909 7,894
------- ------- -------
$66,416 $58,716 $54,400
</TABLE>
<PAGE>
New England Power Service Company, an affiliated service company
operating pursuant to the provisions of Section 13 of the Public
Utility Holding Company Act of 1935, furnished services to the
Company at the cost of such services. These costs amounted to
$85,124,000, $106,411,000, and $103,961,000, including
capitalized construction costs of $19,412,000, $24,671,000, and
$22,396,000, for each of the years 1996, 1995, and 1994,
respectively.
<PAGE>
New England Power Company
Operating Statistics (Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sources of Energy (Thousands of kWh)
Net generation - thermal 14,445,96911,547,85610,971,31911,621,03812,087,775
Net generation - conventional
hydro 1,818,670 1,257,533 1,352,600 1,253,925 1,212,155
Generation - pumped storage 514,400 519,931 525,653 548,358 530,796
Net generation - nuclear 1,280,119 1,812,468 1,767,959 1,696,677 1,592,340
Nuclear entitlements 2,015,104 1,278,598 2,535,534 2,196,998 2,214,976
Purchased energy from
nonaffiliates (B) 6,957,693 8,857,842 8,674,191 7,800,975 7,287,856
Energy for pumping (710,155) (716,279) (723,352) (750,784) (738,364)
--------------------------------------------------
Total generated and
purchased 26,321,80024,557,94925,103,90424,367,18724,187,534
Losses, company use, etc. (507,536) (690,626) (635,695) (548,228) (632,850)
--------------------------------------------------
Total sources of energy 25,814,26423,867,32324,468,20923,818,95923,554,684
Sales of Energy (Thousands of kWh)
Resale:
Affiliated companies 22,531,78822,338,30122,182,76121,858,49121,497,993
Less - generation by
affiliated Company (A) (329,883) (64,035) (5,781) (4,506) (83,753)
--------------------------------------------------
Net sales to affiliated
companies 22,201,90522,274,26622,176,98021,853,98521,414,240
Other utilities (B) 2,802,974 947,537 1,731,225 1,528,686 1,705,591
Municipals 795,974 633,970 551,866 426,525 415,659
--------------------------------------------------
Total sales for resale 25,800,85323,855,77324,460,07123,809,19623,535,490
Ultimate customers 13,411 11,550 8,138 9,763 19,194
--------------------------------------------------
Total sales of energy 25,814,26423,867,32324,468,20923,818,95923,554,684
Operating Revenue (In Thousands)
Revenue from electric sales
Resale:
Affiliated companies $1,480,460$1,498,848$1,448,503$1,459,619$1,450,831
Less - G and T
credits (A) (59,956) (43,532) (32,346) (26,001) (38,697)
--------------------------------------------------
Net sales to affiliated
companies 1,420,504 1,455,316 1,416,157 1,433,618 1,412,134
Other utilities (B) 95,249 41,193 56,306 52,695 55,156
Municipals 43,699 37,036 32,055 27,574 26,980
--------------------------------------------------
Total revenue from
sales for resale 1,559,452 1,533,545 1,504,518 1,513,887 1,494,270
Ultimate customers 1,065 945 606 752 1,399
---------------------------------------- ---------
Total revenue from
electric sales 1,560,517 1,534,490 1,505,124 1,514,639 1,495,669
Other operating revenue 39,792 36,049 35,633 34,375 35,206
--------------------------------------------------
Total operating revenue $1,600,309$1,570,539$1,540,757$1,549,014$1,530,875
Annual Maximum Demand
(kW - one hour peak) 4,091,000 4,381,000 4,385,000 4,081,000 3,964,000
<FN>
(A) The generation and transmission facilities of affiliates are operated as an
integrated part of the Company's power supply and the affiliates receive generation
and transmission (G and T) credits against their power bills for costs of facilities
so integrated.
(B) Includes transactions with the New England Power Pool.
</FN>
</TABLE>
<PAGE>
New England Power Company
Selected Financial Information
<TABLE>
<CAPTION>
Year Ended December 31, (In Millions) 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenue:
Electric sales
(excluding fuel cost recovery) $ 918 $ 941 $ 942 $ 939 $ 907
Fuel cost recovery 642 594 563 576 589
Other 40 36 36 34 35
------ ------ ------ ------ ------
Total operating revenue $1,600 $1,571 $1,541 $1,549 $1,531
Net income $ 152 $ 151 $ 149 $ 141 $ 134
Total assets $2,648 $2,648 $2,613 $2,441 $2,387
Capitalization:
Common equity $ 906 $ 889 $ 877 $ 850 $ 825
Cumulative preferred stock 40 61 61 61 86
Long-term debt 733 735 695 667 666
------ ------ ------ ------ ------
Total capitalization $1,679 $1,685 $1,633 $1,578 $1,577
Preferred dividends declared $ 3 $ 3 $ 3 $ 5 $ 6
Common dividends declared $ 134 $ 135 $ 119 $ 111 $ 100
</TABLE>
Selected Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(In Thousands) Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1996
Operating revenue $400,460 $375,001 $431,420 $393,428
Operating income $ 55,277 $ 39,628 $ 63,782 $ 45,074
Net income $ 40,973 $ 26,768 $ 52,559 $ 32,183
1995
Operating revenue $391,118 $378,177 $421,935 $379,309
Operating income $ 40,089 $ 33,454 $ 69,669 $ 42,201
Net income $ 30,982 $ 27,689 $ 61,684 $ 31,072
</TABLE>
Per share data is not relevant because the Company's common stock
is wholly-owned by New England Electric System.
A copy of New England Power Company's Annual Report on Form 10-K
to the Securities and Exchange Commission for the year ended
December 31, 1996 will be available on or about April 1, 1997,
without charge, upon written request to New England Power
Company, Shareholder Services Department, 25 Research Drive,
Westborough, Massachusetts 01582.
<PAGE>
<TABLE> EXHIBIT (21)
Subsidiaries of New England Power Company
-----------------------------------------
<CAPTION>
State of Incorporation or
Name of Company Organization
--------------- -------------------------
<S> <C>
Connecticut Yankee Atomic Connecticut
Power Company
Maine Yankee Atomic Maine
Power Company
Vermont Yankee Nuclear Vermont
Power Corporation
Yankee Atomic Electric Company Massachusetts
</TABLE>
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
-----------------
Each of the undersigned directors of New England Power Company (the
"Company"), individually as a director of the Company, hereby constitutes
and appoints John G. Cochrane, Patricia M. Needham, and Robert K. Wulff,
individually, as attorney-in-fact to execute on behalf of the undersigned
the Company's annual report on Form 10-K for the year ended December 31,
1996, to be filed with the Securities and Exchange Commission, and to
execute any appropriate amendment or amendments thereto as may be required
by law.
Dated this 18th day of March, 1997.
s/Joan T. Bok s/Alfred D. Houston
_________________________ _________________________
Joan T. Bok Alfred D. Houston
s/Cheryl A. LaFleur s/John W. Rowe
_________________________ _________________________
Cheryl A. LaFleur John W. Rowe
s/Jeffrey D. Tranen
_________________________
Jeffrey D. Tranen
<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 NEW ENGLAND POWER COMPANY,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<CIK> 0000071337
<NAME> New England Power Company
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,910,293
<OTHER-PROPERTY-AND-INVEST> 78,493
<TOTAL-CURRENT-ASSETS> 333,042
<TOTAL-DEFERRED-CHARGES> 325,887 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,647,715
<COMMON> 128,998
<CAPITAL-SURPLUS-PAID-IN> 376,597
<RETAINED-EARNINGS> 400,610
<TOTAL-COMMON-STOCKHOLDERS-EQ> 906,205
0
39,666
<LONG-TERM-DEBT-NET> 733,006
<SHORT-TERM-NOTES> 5,275
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 88,325
<LONG-TERM-DEBT-CURRENT-PORT> 3,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 872,238
<TOT-CAPITALIZATION-AND-LIAB> 2,647,715
<GROSS-OPERATING-REVENUE> 1,600,309
<INCOME-TAX-EXPENSE> 91,894
<OTHER-OPERATING-EXPENSES> 1,304,654
<TOTAL-OPERATING-EXPENSES> 1,396,548
<OPERATING-INCOME-LOSS> 203,761
<OTHER-INCOME-NET> 3,308
<INCOME-BEFORE-INTEREST-EXPEN> 207,069
<TOTAL-INTEREST-EXPENSE> 54,586
<NET-INCOME> 152,483
2,574
<EARNINGS-AVAILABLE-FOR-COMM> 149,909
<COMMON-STOCK-DIVIDENDS> 134,158
<TOTAL-INTEREST-ON-BONDS> 45,111
<CASH-FLOW-OPERATIONS> 272,949
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes other assets.
<F2> Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
</FN>
<PAGE>
<TABLE>
MASSACHUSETTS ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
(Unaudited)
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(In Thousands)
Net Income $37,926 $29,101 $34,726 $23,779 $34,905
- ----------
Add income taxes and fixed charges
- ----------------------------------
Current federal income taxes 25,867 9,437 (6,762) 5,606 3,977
Deferred federal income taxes (6,052) 6,156 24,932 3,430 13,451
Investment tax credits - net (1,118) (1,132) (1,228) (1,228) (1,228)
Massachusetts franchise tax 4,479 3,935 4,681 3,348 3,858
Interest on long-term debt 27,089 25,901 20,967 23,403 21,910
Interest on short-term debt and other 6,473 6,784 6,366 3,638 3,657
------- ------- ------- ------- -------
Net earnings available for fixed charges $94,664 $80,182 $83,682 $61,976 $80,530
------- ------- ------- ------- -------
Fixed charges:
Interest on long-term debt $27,089 $25,901 $20,967 $23,403 $21,910
Interest on short-term debt and other 6,473 6,784 6,366 3,638 3,657
------- ------- ------- ------- -------
Total fixed charges $33,562 $32,685 $27,333 $27,041 $25,567
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.82 2.45 3.06 2.29 3.15
- ----------------------------------
</TABLE>
<PAGE>
Annual Report 1996
Massachusetts Electric Company
A Subsidiary of
New England Electric System
[LOGO] Massachusetts Electric
A NEES Company
<PAGE>
Massachusetts Electric Company
25 Research Drive,
Westborough, Massachusetts 01582
Directors
(As of January 1, 1997)
Urville J. Beaumont
Treasurer and Director of Beaumont and Campbell, P.A.
(Attorneys), Salem, New Hampshire
Joan T. Bok
Chairman of the Board of New England Electric System
Sally L. Collins
Director of Workplace Health Services, Greenfield, Massachusetts
Dr. Kalyan K. Ghosh
President of Worcester State College
Charles B. Housen
Chairman and President of Erving Industries, Erving,
Massachusetts
Patricia McGovern
Director of Goulston and Storrs, P.C., Boston, Massachusetts
John F. Reilly, Jr.
President and Chief Executive Officer of Fred C. Church, Inc.,
Lowell, Massachusetts
Lawrence J. Reilly
President of the Company and certain affiliates
John W. Rowe
President and Chief Executive Officer of New England Electric
System
Richard P. Sergel
Chairman of the Company and Senior Vice President of New England
Electric System
Roslyn M. Watson
President of Watson Ventures, Boston, Massachusetts
Officers
(As of January 1, 1997)
Richard P. Sergel
Chairman of the Company and Senior Vice President of New England
Electric System
Lawrence J. Reilly
President and Chief Executive Officer
John C. Amoroso
Vice President
<PAGE>
Eric P. Cody
Vice President
Charles H. Moser
Vice President
Lydia M. Pastuszek
Vice President
Anthony C. Pini
Vice President
Christopher E. Root
Vice President
Nancy H. Sala
Vice President
Dennis E. Snay
Vice President
Michael E. Jesanis
Treasurer of the Company and Vice President and Treasurer
of New England Electric System
Thomas G. Robinson
Assistant Clerk and General Counsel of the Company
Robert King Wulff
Clerk of the Company and of certain affiliates
Howard W. McDowell
Controller and Assistant Treasurer of the Company, Treasurer of
certain affiliates, and Controller of certain affiliates
Transfer Agent, Dividend Paying Agent, and Registrar of Preferred
Stock
State Street Bank and Trust Company, Boston, Massachusetts
This report is not to be considered an offer to sell or buy or
solicitation of an offer to sell or buy any security.
<PAGE>
Massachusetts Electric Company
Massachusetts Electric Company is a wholly-owned subsidiary of
New England Electric System operating in Massachusetts. The
Company's business is the distribution and sale of electricity at
retail. Electric service is provided to approximately 960,000
customers in 146 cities and towns having a population of
approximately 2,160,000 (1990 Census). The Company's service
area covers approximately 43 percent of Massachusetts. The
cities and towns served by the Company include the highly
diversified commercial and industrial cities of Worcester,
Lowell, and Quincy, the Interstate 495 high technology belt,
suburban communities, and many rural towns. The principal
industries served include computer manufacturing and related
businesses, electrical and industrial machinery, plastic goods,
fabricated metals and paper, and chemical products. In addition,
a broad range of professional, banking, medical, and educational
institutions is served. In February 1997, a settlement agreement
among the Company and two affiliates, the Massachusetts Attorney
General, the Massachusetts Division of Energy Resources, and 12
other parties was approved by the Massachusetts Department of
Public Utilities. This settlement provides for retail choice of
power supplier by Massachusetts customers beginning January 1,
1998 (see "Industry Restructuring" section of Financial Review).
The properties of the Company consist principally of
substations and distribution lines interconnected with
transmission and other facilities of New England Power Company
(NEP), a wholesale generating affiliate. The Company buys its
electric energy requirements from NEP under a contract which
obligates NEP to furnish such requirements at its standard resale
rate. In accordance with the settlement, NEP's wholesale
contract with the Company has been amended to allow for early
termination of all-requirements service. The amendment, which is
subject to regulatory approval, provides that upon early
termination, the Company's share of the cost of NEP's above-
market generation commitments will be recovered through a
contract termination charge. This charge will, in turn, be paid
by customers that use the Company's distribution facilities.
<PAGE>
Report of Independent Accountants
Massachusetts Electric Company, Westborough, Massachusetts:
We have audited the accompanying balance sheets of
Massachusetts Electric Company (the Company), a wholly-owned
subsidiary of New England Electric System, as of December 31,
1996 and 1995 and the related statements of income, retained
earnings, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Company as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 28, 1997
<PAGE>
Massachusetts Electric Company
Financial Review
Industry Restructuring
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures
stemming from a number 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.
In the recent past, this competition was most prominent in the
bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Massachusetts, there
have been 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"). When electricity
customers are allowed to choose their electricity supplier,
utilities across the country will face the risk that market
prices may not be sufficient to recover the costs of the
commitments incurred to supply customers under a regulated
structure. The amounts by which costs exceed market prices are
commonly referred to as "stranded costs."
The Company currently purchases electricity on behalf of its
customers under a wholesale all-requirements contract with the
Company's wholesale generating affiliate, New England Power
Company (NEP).
As described below, a settlement agreement was reached in
Massachusetts which, when all regulatory approvals are in place,
would allow recovery of NEP's above-market commitments to retail
customers in Massachusetts, which make up 73 percent of NEP's
all-requirements sales.
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved a settlement among the Company, NEP,
Nantucket Electric Company (Nantucket), a distribution affiliate,
the Massachusetts Attorney General, the Massachusetts Division of
Energy Resources, and 12 other parties, which provides for retail
choice by Massachusetts customers and the recovery of NEP's
above-market commitments to serve those customers.
The settlement 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).
Customers who do not choose an alternative supplier would receive
<PAGE>
"standard offer" service, which would be priced to guarantee
customers at least a 10 percent savings in 1998 compared with
September 1996 bundled electricity prices.
In accordance with the settlement, NEP's wholesale contract
with the Company has been amended to allow for early termination
of all-requirements service. The amendment, which is subject to
regulatory approval, provides that upon early termination, the
Company's share of the cost of NEP's above-market generation
commitments (estimated at approximately $3 billion on a present-
value basis) will be recovered through a contract termination
charge. This charge will, in turn, be paid by customers that use
the Company's distribution facilities. Those commitments consist
of (i) the above-market portion of generating plant commitments,
(ii) regulatory assets, (iii) the above-market portion of
purchased power contracts, and (iv) the operating costs of
nuclear plants that cannot be avoided by shutting down the
plants, including nuclear decommissioning costs.
The above-market portion of costs associated with generating
plants and regulatory assets would be recovered over 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. Initially, the transition access charge would be set
at 2.8 cents per kilowatt-hour (kWh) through December 31, 2000,
and is expected to decline thereafter. The initial transition
access charge assumes that the generating plants have no market
value. To measure their actual market value, the New England
Electric System (NEES) companies agreed to sell their generating
business. The net proceeds from the sale will be used to reduce
the transition access charge.
The settlement also establishes performance-based rates for
the Company. Under the settlement, the Company's nonfuel rates
(and NEP's wholesale rates to the Company) would be frozen at
current levels until the earlier of the commencement of retail
choice or January 1, 2001. Upon commencement of retail choice,
the Company's distribution rates would be set at a level
approximately $45 million above the level embedded in its current
bundled rates, with such rates then frozen through the year 2000.
This increase reflects changes to the distribution cost of
service that 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 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 a maximum of 12.5 percent. This
sharing results in an effective cap on shareholder's return on
equity of 11.75 percent. To the extent that earnings fall below
the floor, the Company would be authorized to surcharge customers
for the shortfall.
<PAGE>
The settlement would also eliminate the Company's purchased
power cost adjustment (PPCA) mechanism 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
settlement also stipulates that the Company's net $18 million
PPCA refund liability balance at July 31, 1996 will be used to
prefund a storm contingency fund with $3 million, while the
remainder will be used to offset regulatory assets for hazardous
waste costs.
The settlement is subject to approval by the Federal Energy
Regulatory Commission (FERC). The FERC accepted the filing to
become effective February 1, 1997, subject to refund, and ordered
hearings.
The Utility Workers Union of America and the Massachusetts
Alliance of Utility Unions, who intervened in the MDPU proceeding
on the settlement, have indicated they intend to appeal the
MDPU's order approving the settlement to the Massachusetts
Supreme Judicial Court. If an appeal is brought, the NEES
companies will oppose it.
Several bills are pending before the Massachusetts legislature
on electric industry restructuring, including comprehensive
legislation introduced by Governor William F. Weld and by the
legislature's Joint Committee on Electric Restructuring. These
bills cover many of the topics addressed in the settlement and
could impact the implementation of the settlement.
A number of proposals for federal legislation related to
industry restructuring have been brought forward for
consideration by the current Congress. The scope and aim of
these vary widely; however, the NEES companies and others will
argue that state settlements should be respected. The Company
cannot predict what federal legislation, if any, may be enacted.
Risk Factors
The major risk factors affecting the Company relate to the
possibility of adverse regulatory or judicial decisions or
legislation which limits the level of revenues the Company is
allowed to charge for its services. While substantial progress
has been made in resolving the uncertainty regarding recovery by
the Company of stranded costs billed to it by NEP, significant
risks remain. These risks are primarily attributable to the
potential that ultimately the settlement, referred to above, will
not be implemented in the manner anticipated by the Company
and/or the possibility of state or federal legislation which
would increase the risks to the Company above those contained in
the settlement.
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
<PAGE>
No. 71, Accounting for the Effects of Certain Types of Regulation
(FAS 71), requires regulated entities, in appropriate
circumstances, to establish regulatory assets, and thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The Company has recorded
approximately $16 million in net regulatory assets in compliance
with FAS 71. The Company believes that the continuing rate-
making policies and practices of the MDPU and the terms of the
Massachusetts settlement will enable the Company to recover both
its specific costs of providing ongoing distribution services and
stranded costs billed to it by NEP. The Company believes that
these factors will allow it to continue to apply FAS 71. In the
event that future circumstances should cause the application of
FAS 71 to be discontinued, a noncash write-off of previously
established regulatory assets and liabilities would be required.
Overview of Financial Results
Net income for 1996 increased $9 million compared with 1995,
reflecting a 1995 rate increase, growth in sales, and decreased
demand charges from NEP, partially offset by increased operation
and maintenance expense and reduced revenues due to rate
adjustment mechanisms.
Net income for 1995 decreased $6 million compared with 1994.
Although the Company experienced growth in sales and reduced
operation and maintenance costs, such increases in income were
more than offset by increased purchased power costs, increased
interest expense, and a decrease in revenue due to the operation
of the Company's PPCA mechanism.
Operating Revenue
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
1996 1995
---- ----
(In Millions)
Fuel recovery $ 13 $ 38
PPCA mechanism (6) (11)
Rate changes/service extension discount (SEDs) 23 26
Unbilled revenues recognized under rate agreement - (32)
Demand-side management (DSM) recovery (5) (8)
Sales and deliveries growth and other 8 11
--- ----
$33 $ 24
=== ====
In 1996, kWh deliveries to ultimate customers increased 1.6
percent while total kWh sales increased 1.0 percent compared with
a 0.9 percent increase in 1995. The difference is the result of
pilot programs in Massachusetts, whereby the Company delivered
power provided by other companies. Peak demand billing levels to
commercial and industrial customers decreased 0.8 percent in 1996
compared with a 2.0 percent increase in 1995. The increase in
<PAGE>
kWh deliveries in 1996 reflects the effects of an improving
economy partially offset by the effects of milder weather in the
last half of the year.
The Company's rates contain a fuel clause and a PPCA
provision. These 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 PPCA
mechanism is also designed to pass on to customers the effects of
NEP's seasonal rates. The provisions of the Massachusetts
settlement would have caused the PPCA mechanism for the Company
to end, effective July 31, 1996. However, since the
Massachusetts settlement had not been approved at the end of
1996, the Company accrued refund provisions of $9 million related
to assumed operation of the PPCA provision during the last five
months of 1996.
Rate changes reflect the November 1994 expiration of a $26
million temporary rate decrease, as well as a $31 million general
rate increase that went into effect on October 1, 1995.
Unbilled revenues recognized under the Company's rate
agreement reflect the Company's completion of the recognition of
$35 million of unbilled revenues over a 13-month period that
ended in December 1994 in accordance with an October 1993 rate
agreement.
The Company has received approval from the MDPU to recover DSM
program expenditures in rates on a current basis. These
expenditures were $48 million, $53 million, and $59 million in
1996, 1995, and 1994, respectively. Since 1990, the Company has
been allowed to earn incentives based on the results of its DSM
programs. The Company recorded before-tax incentives of $5.7
million, $5.1 million, and $7.1 million in 1996, 1995, and 1994,
respectively.
Operating Expenses
The following table summarizes the changes in operating
expenses:
Increase (Decrease) in Operating Expenses
1996 1995
---- ----
(In Millions)
Purchased electric energy:
Fuel costs $13 $38
SED reimbursements - (9)
Purchases and demand charges from NEP (6) 10
Other operation and maintenance:
DSM (5) (6)
Other 12 (9)
Depreciation 3 2
Taxes 6 (1)
--- ---
$23 $25
=== ===
<PAGE>
The increase in fuel costs from NEP in 1996 reflects increased
purchases as well as increased gas pipeline demand charges being
recovered by NEP through its fuel adjustment clause in connection
with NEP's Manchester Street Station entering service in the
second half of 1995. The increase in fuel costs in 1995 reflects
decreased nuclear generation due to overhauls and decreased hydro
production resulting from low water levels.
Other operation and maintenance expense increased in 1996
after a decline in 1995. The decline in 1995 had primarily been
in distribution system related costs, however, the Company
experienced an increase in these costs in 1996. The increase in
1996 also reflects increased customer service expenses, in part,
related to the start-up of a new customer service center. In
both 1995 and 1996, the Company also experienced increased
general and administrative expenses including increased
postretirement benefits expenses other than pensions (PBOPs)
commensurate with additional amounts being recovered from
customers. The Company is recovering deferred PBOP costs over
five years.
In the fourth quarter of 1996, the Company incurred
approximately $8 million of costs related to a severe winter
storm. The Massachusetts settlement provides for the recovery of
the costs associated with major storms; however, its application
to the 1996 storm is subject to clarification by the MDPU.
Because the Massachusetts settlement had not been approved as of
December 31, 1996, the Company deferred the 1996 storm costs
based upon long-standing regulatory practice allowing the
recovery over five years of costs of major storms.
The changes in taxes in 1996 and 1995 are primarily due to
changes in taxable income levels. The Company also experienced a
sizeable increase in municipal property taxes in 1995 and a
lesser increase in 1996.
Hazardous Waste
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. 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 manufactured gas locations in
Massachusetts, including eight of the 19 locations for which the
Company has been identified by either federal or state
environmental regulatory agencies as a potentially responsible
party. In 1993, the MDPU approved a settlement agreement that
provides for rate recovery of remediation costs of former
manufactured gas sites and certain other hazardous waste sites in
Massachusetts. A more detailed discussion of this settlement
agreement and of potential hazardous waste liabilities is
contained in Note D-2 of the Notes to the Financial Statements.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. At December 31,
1996, the Company had total reserves of $38 million and a related
<PAGE>
regulatory asset of $15 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.
Electric and Magnetic Fields (EMF)
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. In
October 1996, the National Research Council of the National
Academy of Sciences released a report stating no conclusive and
consistent evidence demonstrates that exposures to residential
EMF produce adverse health effects. It is impossible to predict
the ultimate impact on the Company and the electric utility
industry if further investigations were to demonstrate that the
present electricity delivery system is contributing to increased
risk of cancer or other health problems.
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what the impact on the Company would be if this cause
of action is recognized in Massachusetts and in contexts other
than condemnation cases.
Utility Plant Expenditures and Financing
Cash expenditures for utility plant totaled $94 million in
1996. The funds necessary for utility plant expenditures during
1996 were primarily provided by net cash from operating
activities, after the payment of dividends and long-term debt
issuances. Cash expenditures for utility plant for 1997 are
estimated to be approximately $95 million. Internally generated
funds are expected to fully meet capital expenditures in 1997.
In 1996, the Company issued $20 million of first mortgage
bonds, bearing an interest rate of 6.82 percent. In July 1996,
Nantucket, 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. The Company plans to issue a net
$20 million of long-term debt in 1997 to fund capital
expenditures.
At December 31, 1996, the Company had $44 million of
short-term debt outstanding including $39 million of commercial
paper borrowings and $5 million of borrowings from affiliates.
As of December 31, 1996, the Company had lines of credit with
banks totaling $90 million which are available to provide
liquidity support for commercial paper borrowings and other
corporate purposes. There were no borrowings under these lines
of credit at December 31, 1996.
<PAGE>
Massachusetts Electric Company
Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating revenue $1,538,537 $1,505,676 $1,482,070
---------- ---------- ----------
Operating expenses:
Purchased electric energy, principally
from New England Power Company,
an affiliate 1,120,709 1,113,673 1,074,402
Other operation 211,663 206,660 215,794
Maintenance 31,102 29,525 35,502
Depreciation 47,357 44,829 42,775
Taxes, other than income taxes 30,559 30,022 28,664
Income taxes 25,186 19,297 22,265
---------- ---------- ----------
Total operating expenses 1,466,576 1,444,006 1,419,402
---------- ---------- ----------
Operating income 71,961 61,670 62,668
Other income (expense), net (1,213) (541) (995)
---------- ---------- ----------
Operating and other income 70,748 61,129 61,673
---------- ---------- ----------
Interest:
Interest on long-term debt 27,089 25,901 20,967
Other interest 6,473 6,784 6,366
Allowance for borrowed funds used during
construction - credit (740) (657) (386)
---------- ---------- ----------
Total interest 32,822 32,028 26,947
---------- ---------- ----------
Net income $ 37,926 $ 29,101 $ 34,726
========== ========== ==========
Statements of Retained Earnings
Year Ended December 31, (In Thousands) 1996 1995 1994
-------- -------- --------
Retained earnings at beginning of year $150,308 $136,911 $135,276
Net income 37,926 29,101 34,726
Dividends declared on cumulative
preferred stock (3,114) (3,114) (3,114)
Dividends declared on common
stock, $8.00, $5.25, and $12.50
per share, respectively (19,184) (12,590) (29,977)
-------- -------- --------
Retained earnings at end of year $165,936 $150,308 $136,911
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Massachusetts Electric Company
Balance Sheets
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
Assets ---------- ----------
<S> <C> <C>
Utility plant, at original cost $1,509,896 $1,420,069
Less accumulated provisions for depreciation 430,585 399,711
---------- ----------
1,079,311 1,020,358
Construction work in progress 9,119 21,118
---------- ----------
Net utility plant 1,088,430 1,041,476
---------- ----------
Current assets:
Cash 2,356 1,840
Accounts receivable:
From sales of electric energy 165,866 160,795
Other (including $1,605 and $1,776
from affiliates) 2,600 3,527
Less reserves for doubtful accounts 13,146 12,544
---------- ----------
155,320 151,778
Unbilled revenues (Note A-3) 43,390 49,800
Materials and supplies, at average cost 8,820 10,602
Prepaid and other current assets 25,923 22,514
---------- ----------
Total current assets 235,809 236,534
---------- ----------
Deferred charges and other assets (Note B) 66,019 65,090
---------- ----------
$1,390,258 $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 155,310 155,310
Retained earnings 165,936 150,308
---------- ----------
Total common equity 427,061 411,433
Cumulative preferred stock (Note G) 50,000 50,000
Long-term debt 343,321 353,267
---------- ----------
Total capitalization 820,382 814,700
---------- ----------
Current liabilities:
Long-term debt due in one year 30,000
Short-term debt (including $5,275 and $1,000
to affiliates) 43,775 55,450
Accounts payable (including $157,603 and
$165,515 to affiliates) 178,263 181,943
Accrued liabilities:
Taxes 961 7,371
Interest 9,635 9,502
Other accrued expenses (Note F) 54,833 17,136
Customer deposits 4,308 4,633
Dividends payable 7,973 1,977
---------- ----------
Total current liabilities 329,748 278,012
---------- ----------
Deferred federal and state income taxes 177,778 184,575
Unamortized investment tax credits 16,566 17,684
Other reserves and deferred credits 45,784 48,129
Commitments and contingencies (Note D)
---------- ----------
$1,390,258 $1,343,100
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Massachusetts Electric Company
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
Operating activities: -------- -------- --------
<S> <C> <C> <C>
Net income $ 37,926 $ 29,101 $ 34,726
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 47,357 44,829 42,775
Deferred income taxes and
investment tax credits, net (7,850) 6,666 28,909
Allowance for borrowed funds
used during construction (740) (657) (386)
Amortization of unbilled revenues (32,300)
Decrease (increase) in accounts
receivable, net and unbilled revenues 2,868 4,281 (7,580)
Decrease (increase) in materials and
supplies 1,782 922 (923)
Decrease (increase) in prepaid and
other current assets (3,409) (931) (1,593)
Increase (decrease) in accounts payable (3,680) (159) 3,985
Increase (decrease) in other current
liabilities 31,095 (2,326) (10,379)
Other, net (2,430) (2,340) (12,982)
-------- -------- --------
Net cash provided by operating
activities $102,919 $ 79,386 $ 44,252
-------- -------- --------
Investing activities:
Plant expenditures, excluding allowance
for funds used during construction $(93,828) $(89,735) $(94,105)
Other investing activities (598) (1,972) (4,892)
-------- -------- --------
Net cash used in investing
activities $(94,426) $(91,707) $(98,997)
-------- -------- --------
Financing activities:
Capital contributions from parent $ 14,000
Dividends paid on common stock $(13,188) (24,580) $(21,584)
Dividends paid on preferred stock (3,114) (3,114) (3,114)
Long-term debt - issues 20,000 88,000 36,000
Long-term debt - retirements (35,000)
Changes in short-term debt (11,675) (26,370) 43,895
-------- -------- --------
Net cash provided by(used in)financing
activities $ (7,977) $ 12,936 $ 55,197
-------- -------- --------
Net increase in cash and cash equivalents $ 516 $ 615 $ 452
Cash and cash equivalents at beginning
of year 1,840 1,225 773
-------- -------- --------
Cash and cash equivalents at end of year $ 2,356 $ 1,840 $ 1,225
======== ======== ========
Supplementary information:
Interest paid less amounts capitalized $ 30,569 $ 29,130 $ 24,562
-------- -------- --------
Federal and state income taxes paid
(refunded) $ 39,174 $ (8,026) $ 1,645
-------- -------- --------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Massachusetts Electric Company
Notes to Financial Statements
Note A - Significant Accounting Policies
1. Nature of Operations:
The Company is a wholly-owned subsidiary of New England Electric
System (NEES) operating in Massachusetts. The Company's business
is the distribution and sale of electricity at retail. Electric
service is provided to approximately 960,000 customers in 146
cities and towns having a population of approximately 2,160,000
(1990 Census). The Company's service area covers approximately 43
percent of Massachusetts. The properties of the Company consist
principally of substations and distribution lines interconnected
with transmission and other facilities of New England Power
Company (NEP), the Company's wholesale generating affiliate. The
Company purchases all of its electric energy requirements from
NEP under a contract which obligates NEP to furnish such
requirements at its standard resale rate. This contract requires
either party to give seven years notice prior to terminating the
contract. (See Note B for a discussion of industry restructuring
and NEP's proposed divestiture of its generating business.)
2. System of Accounts:
The accounts of the Company are maintained in accordance with the
Uniform System of Accounts prescribed by regulatory bodies having
jurisdiction.
In preparing the financial statements, management is required to
make estimates that affect the reported amounts of assets and
liabilities and disclosures of asset recovery and contingent
liabilities as of the date of the balance sheets and revenues and
expenses for the period. These estimates may differ from actual
amounts if future circumstances cause a change in the assumptions
used to calculate these estimates.
3. Electric Sales Revenue:
The Company accrues revenues for electricity delivered but not
yet billed (unbilled revenues). Income in 1994 included $32
million, which represented the completion of the amortization
over 13 months of the initial effect of recording unbilled
revenues, in accordance with a rate agreement. Accrued revenues
are also recorded in accordance with rate adjustment mechanisms.
4. Allowance for Funds Used During Construction (AFDC):
The Company capitalizes AFDC as part of construction costs. AFDC
represents an allowance for the cost of funds used to finance
construction. AFDC is capitalized in "Utility plant" with
offsetting noncash credits to "Interest." This method is in
accordance with an established rate-making practice under which a
utility is permitted a return on, and the recovery of, prudently
incurred capital costs through their ultimate inclusion in rate
base and in the provision for depreciation. The composite AFDC
rates were 5.4 percent, 6.0 percent, and 4.8 percent, in 1996,
1995, and 1994, respectively.
<PAGE>
5. Depreciation:
Depreciation is provided annually on a straight-line basis. The
provision for depreciation as a percentage of weighted average
depreciable property was 3.3 percent in each of the years 1996,
1995, and 1994.
6. Cash:
The Company classifies short-term investments with a maturity of
90 days or less at time of purchase as cash.
Note B - Industry Restructuring
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures
stemming from a number 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.
In the recent past, this competition was most prominent in the
bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Massachusetts, there have
been 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"). When electricity
customers are allowed to choose their electricity supplier,
utilities across the country will face the risk that market
prices may not be sufficient to recover the costs of the
commitments incurred to supply customers under a regulated
structure. The amounts by which costs exceed market prices are
commonly referred to as "stranded costs."
The Company currently purchases electricity on behalf of its
customers under a wholesale all-requirements contract with NEP.
As described below, a settlement agreement was reached in
Massachusetts which, when all regulatory approvals are in place,
would allow recovery of NEP's above-market commitments to retail
customers in Massachusetts, which make up 73 percent of NEP's
all-requirements sales.
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved a settlement among the Company, NEP,
Nantucket Electric Company (Nantucket), a distribution affiliate,
the Massachusetts Attorney General, the Massachusetts Division of
<PAGE>
Energy Resources, and 12 other parties, which provides for retail
choice by Massachusetts customers and the recovery of NEP's
above-market commitments to serve those customers.
The settlement 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).
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 compared with
September 1996 bundled electricity prices.
In accordance with the settlement, NEP's wholesale contract with
the Company has been amended to allow for early termination of
all-requirements service. The amendment, which is subject to
regulatory approval, provides that upon early termination, the
Company's share of the cost of NEP's above-market generation
commitments (estimated at approximately $3 billion on a present-
value basis) will be recovered through a contract termination
charge. This charge will, in turn, be paid by customers that use
the Company's distribution facilities. Those commitments consist
of (i) the above-market portion of generating plant commitments,
(ii) regulatory assets, (iii) the above-market portion of
purchased power contracts, and (iv) the operating costs of
nuclear plants that cannot be avoided by shutting down the
plants, including nuclear decommissioning costs.
The above-market portion of costs associated with generating
plants and regulatory assets would be recovered over 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. Initially, the transition access charge would be set
at 2.8 cents per kilowatt-hour (kWh) through December 31, 2000,
and is expected to decline thereafter. The initial transition
access charge assumes that the generating plants have no market
value. To measure their actual market value, the NEES companies
agreed to sell their generating business. The net proceeds from
the sale will be used to reduce the transition access charge.
The settlement also establishes performance-based rates for the
Company. Under the settlement, the Company's nonfuel rates (and
NEP's wholesale rates to the Company) would be frozen at current
levels until the earlier of the commencement of retail choice or
January 1, 2001. Upon commencement of retail choice, the
Company's distribution rates would be set at a level
approximately $45 million above the level embedded in its current
bundled rates, with such rates then frozen through the year 2000.
This increase reflects changes to the distribution cost of
service that 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 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 a maximum of 12.5 percent. This
<PAGE>
sharing results in an effective cap on shareholder's return on
equity of 11.75 percent. To the extent that earnings fall below
the floor, the Company would be authorized to surcharge customers
for the shortfall.
The settlement would also eliminate the Company's purchased power
cost adjustment (PPCA) mechanism 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
settlement also stipulates that the Company's net $18 million
PPCA refund liability balance at July 31, 1996 will be used to
prefund a storm contingency fund with $3 million, while the
remainder will be used to offset regulatory assets for hazardous
waste costs.
The settlement is subject to approval by the Federal Energy
Regulatory Commission (FERC). The FERC accepted the filing to
become effective February 1, 1997, subject to refund, and ordered
hearings.
The Utility Workers Union of America and the Massachusetts
Alliance of Utility Unions, who intervened in the MDPU proceeding
on the settlement, have indicated they intend to appeal the
MDPU's order approving the settlement to the Massachusetts
Supreme Judicial Court. If an appeal is brought, the NEES
companies will oppose it.
Several bills are pending before the Massachusetts legislature on
electric industry restructuring, including comprehensive
legislation introduced by Governor William F. Weld and by the
legislature's Joint Committee on Electric Restructuring. These
bills cover many of the topics addressed in the settlement and
could impact the implementation of the settlement.
A number of proposals for federal legislation related to industry
restructuring have been brought forward for consideration by the
current Congress. The scope and aim of these vary widely;
however, the NEES companies and others will argue that state
settlements should be respected. The Company cannot predict what
federal legislation, if any, may be enacted.
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 thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The Company has recorded
approximately $16 million in net regulatory assets in compliance
with FAS 71. The Company believes that the continuing rate-
making policies and practices of the MDPU and the terms of the
Massachusetts settlement will enable the Company to recover both
<PAGE>
its specific costs of providing ongoing distribution services and
stranded costs billed to it by NEP. The Company believes that
these factors will allow it to continue to apply FAS 71. In the
event that future circumstances should cause the application of
FAS 71 to be discontinued, a noncash write-off of previously
established regulatory assets and liabilities would be required.
<PAGE>
The components of regulatory assets are as follows:
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
--------- --------
<S> <C> <C>
Regulatory assets (liabilities) included in current
assets and liabilities:
Rate adjustment mechanisms (see Note F) $(40,264) $ (792)
--------- --------
Regulatory assets included in deferred charges:
Unamortized losses on reacquired debt 7,482 8,034
Deferred SFAS No. 106 costs (see Note E-2) 13,568 17,185
Deferred SFAS No. 109 costs (see Note C) 8,244 8,308
Environmental response costs (see Note D-2) 14,546 15,526
Deferred storm costs 11,221 4,433
Other 862 1,312
-------- --------
55,923 54,798
-------- --------
$ 15,659 $54,006
======== ========
</TABLE>
Amounts included in "Deferred charges and other assets" on the
Company's balance sheets that do not represent regulatory assets
totaled $10,096,000 and $10,292,000 at December 31, 1996 and
1995, respectively.
Note C - Income Taxes
The Company and other subsidiaries participate with NEES in
filing consolidated federal income tax returns. The Company's
income tax provision is calculated on a separate return basis.
Federal income tax returns have been examined and reported on by
the Internal Revenue Service (IRS) through 1991. The returns for
1992 and 1993 are currently under examination by the IRS.
Total income taxes in the statements of income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Income taxes charged to operations $25,186 $19,297 $22,265
Income taxes charged (credited) to
"Other income" (2,010) (901) (642)
------- ------- -------
Total income taxes $23,176 $18,396 $21,623
======= ======= =======
Total income taxes, as shown above, consist of the following components:
Year Ended December 31, (In Thousands) 1996 1995 1994
-------- -------- --------
Current income taxes $ 31,026 $ 11,730 $ (7,286)
Deferred income taxes (6,732) 7,798 30,137
Investment tax credits, net (1,118) (1,132) (1,228)
-------- -------- ---------
Total income taxes $ 23,176 $ 18,396 $ 21,623
======== ======== =========
<PAGE>
Investment tax credits have been deferred and are being amortized over the
estimated lives of the property giving rise to the credits.
Total income taxes, as shown above, consist of federal and state components as
follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- --- ---
<S> <C> <C> <C>
Federal income taxes $18,697 $14,461 $16,942
State income taxes 4,479 3,935 4,681
------- ------- -------
Total income taxes $23,176 $18,396 $21,623
======= ======= =======
</TABLE>
Consistent with rate-making policies of the MDPU, the Company has
adopted comprehensive interperiod tax allocation (normalization)
for temporary book/tax differences.
Total income taxes differ from the amounts computed by applying
the federal statutory tax rates to income before taxes. The
reasons for the differences are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed tax at statutory rate $ 21,386 $ 16,624 $ 19,722
Increases (reductions) in tax resulting from:
Amortization of investment tax credits (1,118) (1,132) (1,228)
State income taxes, net of federal income
tax benefit 2,911 2,558 3,043
All other differences (3) 346 86
-------- -------- --------
Total income taxes $ 23,176 $ 18,396 $ 21,623
======== ======== ========
</TABLE>
The following table identifies the major components of total
deferred income taxes:
<TABLE>
<CAPTION>
At December 31, (In Millions) 1996 1995
---- ----
<S> <C> <C>
Deferred tax asset:
Plant related $ 9 $ 9
Investment tax credits 7 7
All other 57 42
------ ------
73 58
------ ------
Deferred tax liability:
Plant related (216) (209)
All other (35) (34)
------ ------
(251) (243)
------ ------
Net deferred tax liability $ (178) $ (185)
====== ======
</TABLE>
There were no valuation allowances for deferred tax assets deemed necessary.
<PAGE>
Note D - Commitments and Contingencies
1. Plant Expenditures:
The Company's utility plant expenditures are estimated to be
approximately $95 million in 1997. At December 31, 1996,
substantial commitments had been made relative to future planned
expenditures.
2. 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. NEES 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 United States 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
manufactured gas locations in Massachusetts (including eight of
the 19 locations for which the Company is a PRP). The Company is
currently aware of other possible hazardous waste sites, and may
in the future become aware of additional sites, that it may be
held responsible for remediating.
In 1993, the MDPU approved a settlement agreement regarding the
rate recovery of remediation costs of former manufactured gas
sites and certain other hazardous waste sites located in
Massachusetts. Under that agreement, qualified costs related to
these sites are paid out of a special fund established on the
Company's books. The Company made an initial $30 million
contribution to the fund. Rate-recoverable contributions of $3
million, adjusted since 1993 for inflation, are added annually to
the fund along with interest and any recoveries from insurance
carriers and other third parties. At December 31, 1996, the fund
had a balance of $17 million. Under the 1996 Massachusetts
settlement, an additional $15 million will be transferred to the
fund in 1997 out of existing reserves for refunds.
<PAGE>
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 and from other PRPs, but it is uncertain whether, and to
what extent, such efforts will be successful. At December 31,
1996, the Company had total reserves for environmental response
costs of $38 million and a related regulatory asset of $15
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.
In October 1996, the American Institute of Certified Public
Accountants issued new accounting rules for Environmental
Remediation Liabilities which become effective in 1997. The
Company does not believe these new rules will have a material
effect on its financial position or results of operations.
Note E - Employee Benefits
1. Pension Plans:
The Company participates with other subsidiaries of NEES in
noncontributory, defined-benefit plans covering substantially all
employees of the Company. The plans provide pension benefits
based on the employee's compensation during the five years prior
to retirement. The Company's funding policy is to contribute each
year the net periodic pension cost for that year. However, the
contribution for any year will not be less than the minimum
contribution required by federal law or greater than the maximum
tax deductible amount.
Net pension cost for 1996, 1995, and 1994 included the following
components:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 4,429 $ 3,992 $ 4,134
Plus (less):
Interest cost on projected
benefit obligation 16,935 17,576 16,435
Return on plan assets at expected
long-term rate (18,562) (18,122) (17,223)
Amortization 316 99 1,060
-------- -------- --------
Net pension cost $ 3,118 $ 3,545 $ 4,406
======== ======== ========
Actual return on plan assets $ 32,675 $ 47,717 $ 1,541
======== ======== ========
1997 1996 1995 1994
---- ---- ---- ------
Assumptions used to determine pension cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Average rate of increase in
future compensation levels 4.13% 4.13% 4.63% 4.35%
Expected long-term rate of
return on assets 8.50% 8.50% 8.75% 8.75%
</TABLE>
<PAGE>
The funded status of the plans cannot be presented separately for
the Company as the Company participates in the plans with other
NEES subsidiaries. The following table sets forth the funded
status of the NEES companies' plans:
<TABLE>
<CAPTION>
At December 31, (In Millions) 1996 1995
---- ----
<S> <C> <C>
Union Non-Union Union Non-Union
Employee Employee Employee Employee
Plans Plans Plans Plans
-------- -------- -------- ---------
Benefits earned
Actuarial present value of
accumulated benefit liability:
Vested $298 $342 $293 $343
Nonvested 9 10 8 10
---- ---- ---- ----
Total 307 352 301 353
==== ==== ==== ====
Reconciliation of funded status
Actuarial present value of
projected benefit liability 355 398 346 402
Unrecognized prior service costs (6) (3) (7) (4)
SFAS No. 87 transition liability
not yet recognized (amortized) - (1) - (1)
Net gain (loss) not yet recognized
(amortized) 25 15 (1) (23)
---- ---- ---- ----
374 409 338 374
---- ---- ---- ----
Pension fund assets at fair
value 384 428 349 392
SFAS No. 87 transition asset
not yet recognized (amortized) (10) - (11) -
---- ---- ---- ----
374 428 338 392
---- ---- ---- ----
Accrued pension/(prepaid)
payments recorded on books $ - $(19) $ - $(18)
</TABLE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates from 1997 and 1996,
respectively, and the 1983 Group Annuity Mortality table.
Plan assets are composed primarily of corporate equity, debt
securities, and cash equivalents.
2. Postretirement Benefit Plans Other Than Pensions (PBOPs):
The Company provides health care and life insurance coverage to
eligible retired employees. Eligibility is based on certain age
and length of service requirements and in some cases retirees
must contribute to the cost of their coverage.
<PAGE>
The total cost of PBOPs for 1996, 1995, and 1994 included the
following components:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 2,232 $ 2,368 $ 2,840
Plus (less):
Interest cost on accumulated benefit
obligation 9,661 11,699 11,050
Return on plan assets at expected
long-term rate (5,455) (4,165) (3,306)
Amortization 5,267 6,628 7,287
-------- -------- --------
Net postretirement benefit cost $ 11,705 $ 16,530 $ 17,871
======== ======== ========
Actual return on plan assets $ 10,857 $ 12,209 $ 265
======== ======== ========
1997 1996 1995 1994
---- ---- ---- ----
Assumptions used to determine postretirement
benefit cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Expected long-term rate of return
on assets 8.25% 8.25% 8.50% 8.50%
Health care cost rate - 1994 - - - 11.00%
Health care cost rate - 1995 to 1999 8.00% 8.00% 8.50% 8.50%
Health care cost rate - 2000 to 2004 6.25% 6.25% 8.50% 8.50%
Health care cost rate - 2005 and beyond 5.25% 5.25% 6.25% 6.25%
</TABLE>
The following table sets forth benefits earned and the plans'
funded status:
<TABLE>
<CAPTION>
At December 31, (In Millions) 1996 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 94 $ 93
Fully eligible active plan participants 11 12
Other active plan participants 39 44
------ ------
Total benefits earned 144 149
Unrecognized prior service costs - (1)
Unrecognized transition obligation (117) (124)
Unrecognized net gain 40 26
------ ------
67 50
Plan assets at fair value 82 65
------ ------
Prepaid postretirement benefit costs recorded on books $ 15 $ 15
====== ======
</TABLE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates in effect for 1997 and 1996,
respectively.
<PAGE>
The assumptions used in the health care cost trends have a
significant effect on the amounts reported. Increasing the
assumed rates by 1 percent in each year would increase the
accumulated postretirement benefit obligation as of December 31,
1996 by approximately $17 million and the net periodic cost for
1996 by approximately $2 million.
The Company funds the annual tax-deductible contributions. Plan
assets are invested in equity and debt securities and cash
equivalents.
Note F - Short-term Borrowings and Other Accrued Expenses
At December 31, 1996, the Company had $44 million of short-term
debt outstanding including $39 million in commercial paper
borrowings and $5 million of borrowings from affiliates. NEES
and certain subsidiaries, including the Company, with regulatory
approval, operate a money pool to more effectively utilize cash
resources and to reduce outside short-term borrowings. Short-term
borrowing needs are met first by available funds of the money
pool participants. Borrowing companies pay interest at a rate
designed to approximate the cost of outside short-term
borrowings. Companies which invest in the pool share the interest
earned on a basis proportionate to their average monthly
investment in the money pool. Funds may be withdrawn from or
repaid to the pool at any time without prior notice.
At December 31, 1996, the Company had lines of credit with banks
totaling $90 million which are available to provide liquidity
support for commercial paper borrowings and other corporate
purposes. There were no borrowings under these lines of credit at
December 31, 1996. Fees are paid in lieu of compensating balances
on most lines of credit.
The weighted average rate on outstanding short-term borrowings
was 6.1 percent at December 31, 1996. The fair value of the
Company's short-term debt equals carrying value.
The components of other accrued expenses are as follows:
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
------- -------
<S> <C> <C>
Rate adjustment mechanisms $39,863 $ 3,908
Accrued wages and benefits 12,591 11,066
Other 2,379 2,162
------- -------
$54,833 $17,136
======= =======
</TABLE>
<PAGE>
Note G - Cumulative Preferred Stock
<TABLE>
<CAPTION>
A summary of cumulative preferred stock at December 31, 1996 and 1995 is as follows
(dollar amount expressed in thousands except for share data):
Shares
Authorized Dividends Call
and Outstanding Amount Declared Price
--------------- ------------- --------------- -----
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$25 Par value -
6.84% Series 600,000 600,000$15,000 $15,000 $1,026 $1,026 (a)
$100 Par value -
4.44% Series 75,000 75,000 7,500 7,500 333 333$104.068
4.76% Series 75,000 75,000 7,500 7,500 357 357 103.730
6.99% Series 200,000 200,000 20,000 20,000 1,398 1,398 (b)
------- -------------- -------------- -------
Total 950,000 950,000$50,000 $50,000 $3,114 $3,114
======= ============== ============== =======
(a) Callable on or after October 1, 1998 at $25.80.
(b) Callable on or after August 1, 2003 at $103.50.
The annual dividend requirement for total cumulative preferred stock was $3,114,000 for
1996 and 1995.
There are no mandatory redemption provisions on the Company's cumulative preferred stock.
</TABLE>
<PAGE>
Note H - Long-term Debt
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
At December 31, (In Thousands)
Series Rate % Maturity 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Mortgage Bonds:
R(92-4) 7.230 June 3, 1997 $ 10,000 $ 10,000
R(92-5) 7.210 June 3, 1997 5,000 5,000
S(92-6) 6.120 August 15, 1997 12,000 12,000
S(92-7) 6.010 August 15, 1997 3,000 3,000
U(95-3) 7.800 February 13, 1998 5,000 5,000
U(95-4) 7.790 February 16, 1998 5,000 5,000
R(92-1) 7.240 December 30, 1998 10,000 10,000
S(92-3) 6.630 August 12, 1999 7,500 7,500
S(92-4) 6.600 August 12, 1999 7,500 7,500
U(95-5) 7.930 February 14, 2000 6,000 6,000
S(92-2) 6.980 July 17, 2000 5,000 5,000
S(92-9) 6.310 September 15, 2000 10,000 10,000
R(92-6) 7.710 July 1, 2002 10,000 10,000
S(92-11) 7.250 October 28, 2002 5,000 5,000
S(92-12) 7.340 November 25, 2002 10,000 10,000
T(93-2) 7.090 January 27, 2003 20,000 20,000
T(93-5) 6.400 June 24, 2003 10,000 10,000
U(93-1) 6.240 November 17, 2003 5,000 5,000
U(94-6) 8.520 November 30, 2004 10,000 10,000
U(95-1) 8.450 January 10, 2005 10,000 10,000
U(95-2) 8.220 January 24, 2005 10,000 10,000
U(95-7) 7.920 March 3, 2005 9,000 9,000
V(95-1) 6.720 June 23, 2005 10,000 10,000
V(96-1) 6.780 November 20, 2006 20,000
T(93-7) 6.660 June 23, 2008 5,000 5,000
T(93-8) 6.660 June 30, 2008 5,000 5,000
T(93-10) 6.110 September 8, 2008 10,000 10,000
T(93-11) 6.375 November 17, 2008 10,000 10,000
R(92-3) 8.550 February 7, 2022 5,000 5,000
S(92-5) 8.180 August 1, 2022 10,000 10,000
S(92-10) 8.400 October 26, 2022 5,000 5,000
T(93-1) 8.150 January 20, 2023 10,000 10,000
T(93-3) 7.980 January 27, 2023 10,000 10,000
T(93-4) 7.690 February 24, 2023 10,000 10,000
T(93-6) 7.500 June 23, 2023 3,000 3,000
T(93-9) 7.500 June 29, 2023 7,000 7,000
U(93-2) 7.200 November 15, 2023 10,000 10,000
U(93-3) 7.150 November 24, 2023 1,000 1,000
U(94-1) 7.050 February 2, 2024 10,000 10,000
U(94-2) 8.080 May 2, 2024 5,000 5,000
U(94-3) 8.030 June 14, 2024 5,000 5,000
U(94-4) 8.160 August 9, 2024 5,000 5,000
U(94-5) 8.850 November 7, 2024 1,000 1,000
U(95-6) 8.460 February 28, 2025 3,000 3,000
V(95-2) 7.630 June 27, 2025 10,000 10,000
V(95-3) 7.600 September 12, 2025 10,000 10,000
V(95-4) 7.630 September 12, 2025 10,000 10,000
Unamortized discounts (1,679) (1,733)
-------- --------
Total long-term debt 373,321 353,267
======== ========
Long-term debt due in one year 30,000
-------- --------
$343,321 $353,267
======== ========
</TABLE>
<PAGE>
Substantially all of the properties and franchises of the Company
are subject to the lien of mortgage indentures under which the
first mortgage bonds have been issued.
In July 1996, Nantucket 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.
The Company will make cash payments of $30,000,000 in 1997,
$20,000,000 in 1998, $15,000,000 in 1999, and $21,000,000 in 2000
to retire maturing mortgage bonds. There are no cash payments
required in 2001.
At December 31, 1996, the Company's long-term debt had a carrying
value of approximately $343,000,000 and had a fair value of
approximately $380,000,000. The fair market value of the
Company's long-term debt was estimated based on the quoted prices
for similar issues or on the current rates offered to the Company
for debt of the same remaining maturity.
Note I - Restrictions on Retained Earnings Available for
Dividends on Common Stock
As long as any preferred stock is outstanding, certain
restrictions on payment of dividends on common stock would come
into effect if the "junior stock equity" was, or by reason of
payment of such dividends became, less than 25 percent of "Total
capitalization." However, the junior stock equity at December 31,
1996 was 50 percent of total capitalization, and accordingly,
none of the Company's retained earnings at December 31, 1996 were
restricted as to dividends on common stock under the foregoing
provisions.
Under restrictions contained in the indentures relating to first
mortgage bonds, $20,113,000 of the Company's retained earnings at
December 31, 1996 were restricted as to dividends on common
stock.
<PAGE>
Note J - Supplementary Income Statement Information
Advertising expenses, expenditures for research and development,
and rents were not material and there were no royalties paid in
1996, 1995, or 1994. Taxes, other than income taxes, charged to
operating expenses are set forth by classes as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Municipal property taxes $23,304 $23,119 $21,186
Federal and state payroll and other taxes 7,255 6,903 7,478
------- ------- -------
$30,559 $30,022 $28,664
</TABLE>
New England Power Service Company, an affiliated service company
operating pursuant to the provisions of Section 13 of the Public
Utility Holding Company Act of 1935, furnished services to the
Company at the cost of such services. These costs amounted to
$67,756,000, $67,680,000, and $71,107,000, including capitalized
construction costs of $9,330,000, $7,660,000, and $8,977,000 for
each of the years 1996, 1995, and 1994, respectively.
<PAGE>
Massachusetts Electric Company
Operating Statistics (Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sources of Energy (Thousands of kWh)
Purchased energy:
From New England Power
Company, an affiliate 16,757,485 16,594,81216,455,77416,179,204 16,005,087
From others 3,570 2,887 3,364 12,676 13,916
---------- ------------------------------ ----------
Total purchased 16,761,055 16,597,69916,459,13816,191,880 16,019,003
Losses, company use, etc. (739,586)(730,608)(733,804) (740,390) (711,157)
---------- ------------------------------ ----------
Total sources of energy 16,021,469 15,867,09115,725,33415,451,490 15,307,846
========== ============================== ==========
Sales and Deliveries of
Energy (Thousands of kWh)
Residential 5,855,0545,768,6355,798,806 5,694,539 5,645,350
Commercial 6,141,6385,999,5555,936,170 5,743,924 5,645,867
Industrial 3,926,3313,998,5063,885,391 3,850,075 3,907,040
Other 86,186 89,759 95,382 99,991 105,842
Total sales to ---------- ------------------------------ ----------
ultimate customers 16,009,209 15,856,45515,715,74915,388,529 15,304,099
Sales for resale 12,260 10,636 9,585 62,961 3,747
---------- ------------------------------ ----------
Total sales of energy 16,021,469 15,867,09115,725,33415,451,490 15,307,846
---------- ------------------------------ ----------
Deliveries 97,141 - - - -
---------- ------------------------------ ----------
Total sales and deliveries
of energy 16,118,610 15,867,09115,725,33415,451,490 15,307,846
========== ============================== ==========
Maximum Demand
(kW - one hour peak) 2,855,0003,029,0003,016,000 2,819,000 2,791,000
Average Annual Use per
Residential Customer (kWh) 6,887 6,844 6,948 6,888 6,886
Number of Customers at
December 31
Residential 854,108 847,437 839,443 831,223 824,072
Commercial 99,085 97,211 95,430 93,414 92,281
Industrial 4,445 4,503 4,551 4,637 4,624
Other 824 854 880 906 952
---------- ------------------------------ ----------
Total ultimate customers 958,462 950,005 940,304 930,180 921,929
Other (for resale) 178 179 178 278 22
Deliveries 14 - - - -
---------- ------------------------------ ----------
Total customers 958,654 950,184 940,482 930,458 921,951
========== ============================== ==========
Operating Revenue (In Thousands)
Residential $ 612,134 $ 610,856$ 588,518$ 593,336 $ 549,884
Commercial 566,743 543,715 523,826 518,965 510,638
Industrial 312,539 312,057 301,502 316,140 319,905
Other 18,627 17,991 17,147 17,416 17,489
---------- ------------------------------ ----------
Total revenue from
ultimate customers 1,510,0431,484,6191,430,993 1,445,857 1,397,916
Amortization of unbilled revenues - - 32,300 2,700 -
Sales for resale 1,182 1,013 924 5,399 278
---------- ------------------------------ ----------
Total revenue from
electric sales 1,511,2251,485,6321,464,217 1,453,956 1,398,194
Other operating revenue 27,312 20,044 17,853 14,584 14,754
---------- ------------------------------ ----------
Total operating revenue $1,538,537 $1,505,676$1,482,070$1,468,540 $1,412,948
========== ============================== ==========
</TABLE>
<PAGE>
Massachusetts Electric Company
Selected Financial Information
<TABLE>
<CAPTION>
Year Ended December 31, (In Millions) 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenue:
Electric sales
(excluding fuel cost recovery) $1,084 $1,072 $1,088 $1,062 $1,012
Fuel cost recovery 427 414 376 392 386
Other 28 20 18 15 15
------ ------ ------ ------ ------
Total operating revenue $1,539 $1,506 $1,482 $1,469 $1,413
Net income $ 38 $ 29 $ 35 $ 24 $ 35
Total assets $1,390 $1,343 $1,296 $1,232 $1,015
Capitalization:
Common equity $ 427 $ 412 $ 384 $ 382 $ 331
Cumulative preferred stock 50 50 50 50 50
Long-term debt 343 353 266 265 266
------ ------ ------ ------ ------
Total capitalization $ 820 $ 815 $ 700 $ 697 $ 647
Preferred dividends declared $ 3 $ 3 $ 3 $ 4 $ 3
Common dividends declared $ 19 $ 13 $ 30 $ 19 $ 23
</TABLE>
Selected Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(In Thousands) Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1996
Operating revenue $390,819 $358,479 $398,542 $390,697
Operating income $ 20,687 $ 13,783 $ 13,538 $ 23,953
Net income $ 10,734 $ 5,456 $ 4,774 $ 16,962
1995
Operating revenue $373,092 $355,431 $392,575 $384,578
Operating income $ 13,349 $ 11,173 $ 11,799 $ 25,349
Net income $ 5,126 $ 2,567 $ 3,653 $ 17,755
</TABLE>
Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
A copy of Massachusetts Electric Company's Annual Report on Form 10-K to
the Securities and Exchange Commission for the year ended December 31, 1996
will be available on or about April 1, 1997, without charge, upon written
request to Massachusetts Electric Company, Shareholder Services Department,
25 Research Drive, Westborough, Massachusetts 01582.
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
-----------------
Each of the undersigned directors of Massachusetts Electric Company
(the "Company"), individually as a director of the Company, hereby
constitutes and appoints John G. Cochrane, Patricia M. Needham, and Robert
K. Wulff, individually, as attorney-in-fact to execute on behalf of the
undersigned the Company's annual report on Form 10-K for the year ended
December 31, 1996, to be filed with the Securities and Exchange Commission,
and to execute any appropriate amendment or amendments thereto as may be
required by law.
Dated this 19th day of March, 1997.
s/Urville J. Beaumont s/John F. Reilly, Jr.
_________________________ _________________________
Urville J. Beaumont John F. Reilly, Jr.
s/Joan T. Bok s/Lawrence J. Reilly
_________________________ _________________________
Joan T. Bok Lawrence J. Reilly
s/Sally L. Collins s/John W. Rowe
_________________________ _________________________
Sally L. Collins John W. Rowe
s/Kalyan K. Ghosh s/Richard P. Sergel
_________________________ _________________________
Dr. Kalyan K. Ghosh Richard P. Sergel
s/Roslyn M. Watson
_________________________ _________________________
Charles B. Housen Roslyn M. Watson
s/Patricia McGovern
_________________________
Patricia McGovern
<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.
<CIK> 0000063073
<NAME> Massachusetts Electric Company
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,088,430
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 235,809
<TOTAL-DEFERRED-CHARGES> 66,019 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,390,258
<COMMON> 59,953
<CAPITAL-SURPLUS-PAID-IN> 201,172
<RETAINED-EARNINGS> 165,936
<TOTAL-COMMON-STOCKHOLDERS-EQ> 427,061
0
50,000
<LONG-TERM-DEBT-NET> 343,321
<SHORT-TERM-NOTES> 5,275
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 38,500
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 496,101
<TOT-CAPITALIZATION-AND-LIAB> 1,390,258
<GROSS-OPERATING-REVENUE> 1,538,537
<INCOME-TAX-EXPENSE> 25,186
<OTHER-OPERATING-EXPENSES> 1,441,390
<TOTAL-OPERATING-EXPENSES> 1,466,576
<OPERATING-INCOME-LOSS> 71,961
<OTHER-INCOME-NET> (1,213)
<INCOME-BEFORE-INTEREST-EXPEN> 70,748
<TOTAL-INTEREST-EXPENSE> 32,822
<NET-INCOME> 37,926
3,114
<EARNINGS-AVAILABLE-FOR-COMM> 34,812
<COMMON-STOCK-DIVIDENDS> 19,184
<TOTAL-INTEREST-ON-BONDS> 27,089
<CASH-FLOW-OPERATIONS> 102,919
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes other assets.
<F2> Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
</FN>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
(Unaudited)
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(In Thousands)
Net Income $22,954 $23,910 $14,589 $14,274 $21,052
- ----------
Add income taxes and fixed charges
- ----------------------------------
Current federal income taxes 6,918 7,212 1,020 2,183 4,608
Deferred federal income taxes 4,675 3,512 3,930 2,199 4,560
Investment tax credits - net (498) (503) (508) (508) (507)
Interest on long-term debt 17,205 16,627 14,334 12,715 13,290
Interest on short-term debt and other 2,883 3,663 2,897 2,074 1,277
------- ------- ------- ------- -------
Net earnings available for fixed charges $54,137 $54,421 $36,262 $32,937 $44,280
------- ------- ------- ------- -------
Fixed charges:
Interest on long-term debt $17,205 $16,627 $14,334 $12,715 $13,290
Interest on short-term debt and other 2,883 3,663 2,897 2,074 1,277
------- ------- ------- ------- -------
Total fixed charges $20,088 $20,290 $17,231 $14,789 $14,567
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.69 2.68 2.10 2.23 3.04
- ----------------------------------
</TABLE>
<PAGE>
Annual Report 1996
The Narragansett Electric Company
A Subsidiary of
New England Electric System
{LOGO} Narragansett Electric
A NEES Company
<PAGE>
The Narragansett Electric Company
280 Melrose Street
Providence, Rhode Island 02901
Directors
(As of January 1, 1997)
Joan T. Bok
Chairman of the Board of New England Electric System
Stephen A. Cardi
Treasurer, Cardi Corporation (Construction), Warwick, Rhode
Island
Frances H. Gammell
Senior Vice President, Treasurer, and Secretary, Original
Bradford Soap Works, Inc., West Warwick, Rhode Island
Joseph J. Kirby
Chairman and Chief Executive Officer, Washington Trust Bancorp,
Inc., Westerly, Rhode Island
Robert L. McCabe
President and Chief Executive Officer of the Company
John W. Rowe
President and Chief Executive Officer of New England Electric
System
Richard P. Sergel
Chairman of the Company and Senior Vice President of New England
Electric System
William E. Trueheart
Visiting Scholar of Graduate School of Education, Harvard
University, Cambridge, Massachusetts
John A. Wilson, Jr.
Consultant to and former President of Wanskuck Company (Cable
reel manufacturer), Providence, Rhode Island and Consultant to
Hinkley, Allen, Tobin and Silverstein
Officers
(As of January 1, 1997)
Richard P. Sergel
Chairman of the Company and Senior Vice President of New England
Electric System
Robert L. McCabe
President and Chief Executive Officer
William Watkins, Jr.
Executive Vice President
Richard W. Frost
Vice President
<PAGE>
Alfred D. Houston
Vice President and Treasurer of the Company and Executive Vice
President and Chief Financial Officer of New England Electric
System
Shannon M. Larson
Vice President
Richard Nadeau
Vice President
Michael F. Ryan
Vice President
Thomas G. Robinson
Secretary of the Company and General Counsel of an affiliate
John G. Cochrane
Assistant Treasurer of the Company and of certain affiliates and
Vice President of an affiliate
Craig L. Eaton
Assistant Secretary
Howard W. McDowell
Controller of the Company and of certain affiliates and Treasurer
of certain affiliates
Transfer Agent, Dividend Paying Agent, and Registrar of Preferred
Stock
Fleet National Bank, Providence, Rhode Island
This report is not to be considered an offer to sell or buy or
solicitation of an offer to sell or buy any security.
<PAGE>
The Narragansett Electric Company
The Narragansett Electric Company is a wholly-owned subsidiary
of New England Electric System (NEES) operating in Rhode Island.
The Company's business is the distribution and sale of
electricity at retail. Electric service is provided to
approximately 330,000 customers in 27 cities and towns having a
population of approximately 725,000 (1990 Census). The Company's
service area, which includes urban, suburban, and rural areas,
covers approximately 80 percent of Rhode Island, and includes the
cities of Providence, East Providence, Cranston, and Warwick. The
diversified economy of the Company's service area produces
fabricated metal products, electrical and industrial machinery,
transportation equipment, textiles, jewelry, silverware, and
chemical products. In addition, a broad range of professional,
banking, medical, and educational institutions is served. Rhode
Island legislation passed in 1996 allows utility customers in
Rhode Island to choose their power supplier. This customer
choice is being phased in over 12 months beginning July 1997.
Distribution companies, including the Company, would be required
to deliver the power to their customers (see "Industry
Restructuring" section of Financial Review).
The properties of the Company include an integrated system of
transmission and distribution lines and substations. In addition,
the Company owns a 10 percent share of the 489 megawatt
Manchester Street generating station. The entire output of this
plant is made available to New England Power Company (NEP), the
Company's wholesale generating affiliate, as part of the
integrated NEES system. Under an all-requirements contract with
NEP, the Company purchases its electric energy requirements from
NEP. The contract provides for the integration of the Company's
generating and transmission facilities with NEP's facilities in
order to achieve maximum economy and reliability. The contract
also provides for the application of credits against the
Company's power bills from NEP for costs associated with the
Company's facilities so integrated. NEP and the Company agreed
to the divestiture of their fossil and hydroelectric generating
facilities as part of industry restructuring. The Company will
be compensated by NEP for any difference between the sale price
of the Company's share of the Manchester Street Station and its
net book value. In addition, the Company's all-requirements
contract with NEP has been amended to allow for early termination
of all-requirements service. The amendment provides that upon
early termination, the Company's share of the cost of NEP's
above-market generation commitments will be recovered through a
contract termination charge. This charge will, in turn, be paid
by customers that use the Company's distribution facilities.
<PAGE>
Report of Independent Accountants
The Narragansett Electric Company, Providence, Rhode Island:
We have audited the accompanying balance sheets of The
Narragansett Electric Company (the Company), a wholly-owned
subsidiary of New England Electric System, as of December 31,
1996 and 1995 and the related statements of income, retained
earnings, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Company as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 28, 1997
<PAGE>
The Narragansett Electric Company
Financial Review
Industry Restructuring
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures
stemming from a number 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.
In the recent past, this competition was most prominent in the
bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Rhode Island, there
have been 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"). When electricity
customers are allowed to choose their electricity supplier,
utilities across the country will face the risk that market
prices may not be sufficient to recover the costs of the
commitments incurred to supply customers under a regulated
structure. The amounts by which costs exceed market prices are
commonly referred to as "stranded costs."
The Company currently purchases electricity on behalf of its
customers under a wholesale all-requirements contract with the
Company's wholesale generating affiliate, New England Power
Company (NEP).
As described below, comprehensive legislation was enacted in
Rhode Island which, when all regulatory approvals are in place,
would allow recovery of NEP's above-market commitments to retail
customers in Rhode Island, which make up 22 percent of NEP's all-
requirements sales.
In August 1996, the state of Rhode Island enacted pioneering
legislation that allows customers in that state the opportunity
to choose their electricity supplier. Under the Rhode Island
statute, state accounts, certain new customers, and the largest
manufacturing customers will be able to choose their supplier
beginning on July 1, 1997. These customers represent
approximately 10 percent of the Company's kilowatt-hour (kWh)
sales. The balance of Rhode Island customers will be able to
choose their supplier in 1998, with an additional 10 percent of
customers load having choice on January 1 and the remainder on
<PAGE>
July 1. All Rhode Island customers would have choice of supplier
beginning at an earlier date if retail access becomes available
to 40 percent or more of the kWh sales in New England by that
date.
The statute calls for NEP's contract with the Company to be
amended to permit a gradual, early termination of
all-requirements service. The amendment provides that, in return,
the Company's 22 percent share of the cost of NEP's above-market
generation commitments (estimated at approximately $1 billion on
a present-value basis) would be recovered through a contract
termination charge. This charge will, in turn, be paid by
customers that use the Company's distribution facilities. 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 avoided by shutting down the plants, including
nuclear decommissioning.
Sunk costs associated with generating plants and regulatory
assets would be recovered over a period of 12.5 years. The
above-market component of purchased power contracts and the
nuclear decommissioning costs would be recovered as incurred over
the life of those obligations, a period expected to extend beyond
12 years. The transition access charge would be reduced to
reflect the net proceeds from the sale of the New England
Electric System (NEES) companies' generating assets. (See
"Divestiture of Generation Business" section below.) 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 statute also establishes performance-based rates for
distribution utilities, such as the Company. Under the statute,
the Company increased distribution rates by approximately $11
million in 1997, and is entitled to a similar increase in 1998.
In addition, in 1997, the Company's return on equity from
distribution operations will be subject to a floor of 6 percent
and a ceiling of 11 percent. Earnings over the ceiling will be
shared equally between customers and shareholders up to a maximum
return on equity from distribution operations of 12.5 percent.
This sharing results in an effective cap on shareholder's return
on equity of 11.75 percent. To the extent that earnings fall
below the floor, the Company will be authorized to surcharge
customers for the shortfall.
NEP and the Company filed with the Federal Energy Regulatory
Commission (FERC) an amendment to their all-requirements contract
in order to implement the statute. The FERC has set down the
amendment for hearing. The Company has indicated it is willing
to make certain changes to its plan in Rhode Island to parallel
provisions in a similar Massachusetts settlement. The
Massachusetts settlement was approved by the Massachusetts
Department of Public Utilities on February 26, 1997. The
settlement provides for retail choice for Massachusetts customers
<PAGE>
in 1998 and the recovery of NEP's above-market commitments to
serve those customers. Implementation of other aspects of the
statute is subject to approval of the Rhode Island Public
Utilities Commission (RIPUC).
A number of proposals for federal legislation related to
industry restructuring have been brought forward for
consideration by the current Congress. The scope and aim of these
vary widely; however, the NEES companies and others will argue
that state settlements should be respected. The Company cannot
predict what federal legislation, if any, may be enacted.
Divestiture of Generation Business
NEP and the Company agreed to the divestiture of their fossil
and hydroelectric generating facilities as part of industry
restructuring. Such divestiture must be accomplished within six
months of the later of the commencement of retail choice in
Massachusetts, currently scheduled for January 1, 1988, or the
receipt of all necessary regulatory approvals. The Company will
be compensated by NEP for any difference between the sale price
of the Company's share of the Manchester Street Station and its
net book value. Proposals are being solicited for the
acquisition of the nonnuclear generating business, with the
objective of reaching definitive purchase and sale agreements by
mid-1997. Closing would follow the receipt of regulatory
approvals, which are expected to take at least six to 12 months
following the execution of purchase and sale agreements. The
Rhode Island statute also requires the Company to transfer its
transmission assets to NEP at net book value.
Risk Factors
The major risk factors affecting the Company relate to the
possibility of adverse regulatory or judicial decisions or
legislation which limits the level of revenues the Company is
allowed to charge for its services. While substantial progress
has been made in resolving the uncertainty regarding recovery by
the Company of stranded costs billed to it by NEP, significant
risks remain. These risks are primarily attributable to the
potential that ultimately the statute, referred to above, will
not be implemented in the manner anticipated by the Company
and/or the possibility of other state or federal legislation
which would increase the risks to the Company above those
contained in the statute.
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 thereby defer
<PAGE>
the income statement impact of certain costs expected to be
recovered in future rates. The Company has recorded
approximately $44 million in net regulatory assets in compliance
with FAS 71. The Company believes that the continuing rate-
making policies and practices of the RIPUC and the terms of the
Rhode Island statute will enable the Company to recover both its
specific costs of providing ongoing distribution services and
stranded costs billed to it by NEP. The Company believes that
these factors will allow it to continue to apply FAS 71. In the
event that future circumstances should cause the application of
FAS 71 to be discontinued, a noncash write-off of previously
established regulatory assets and liabilities would be required.
Overview
Net income in 1996 decreased by $1 million. This decrease was
primarily due to (i) the completion of the amortization, in
accordance with a rate agreement, of the initial effect of
recording unbilled revenues as well as (ii) a decrease in
allowance for funds used during construction (AFDC) primarily due
to the completion in the second half of 1995 of the Manchester
Street Station. These decreases were partially offset by the
effects of a rate increase that went into effect in late 1995.
Net income for 1995 increased by $9 million compared with
1994. This increase reflects the 1995 commencement of the
recovery of the Company's investment in the Manchester Street
Station, and related transmission facilities that went into
service in 1994. The increase in earnings in 1995 also reflects
the recognition of unbilled revenues over a 21-month period that
ended December 31, 1995. These increases were partially offset
by increased depreciation expense and increased interest expense.
Operating Revenue
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
(In Millions) 1996 1995
---- ----
Sales growth $ 1 $ 2
Fuel recovery 3 11
Rate changes 11 1
Unbilled revenues recognized
under rate agreements (8) 2
Purchased power cost adjustment
(PPCA) mechanism (4) 1
Demand-side management (DSM) recovery - (1)
Other 1 1
--- ---
$ 4 $17
=== ===
KWh sales to ultimate customers increased less than 1 percent
in both 1996 and 1995.
<PAGE>
The Company's rates contain a fuel clause and a PPCA
provision. These mechanisms are designed to allow the Company to
pass on to its customers changes in purchased energy costs from
NEP.
Rate changes primarily represent a $12 million general rate
increase that went into effect in December 1995. Also, in 1994,
the RIPUC approved a rate agreement for the Company that provided
for the recognition, for accounting purposes, of $14 million of
unbilled revenues over a 21-month period which ended in December
1995.
The Company has received approval from the RIPUC to recover
DSM program expenditures in rates on a current basis. These
expenditures were $10 million, $9 million, and $10 million in
1996, 1995, and 1994, respectively. Since 1990, the Company has
been allowed to earn incentives based on the results of its DSM
programs. The Company recorded before-tax incentives of $0.2
million, $0.5 million, and $0.6 million in 1996, 1995, and 1994,
respectively.
Operating Expenses
The following table summarizes the changes in operating
expenses:
Increase (Decrease) in Operating Expenses
(In Millions) 1996 1995
---- ----
Fuel for generation and electric energy:
Fuel costs $ 3 $11
Integrated facilities credit from NEP 3 (18)
Purchases and demand charges and other (4) -
Other operation and maintenance
DSM 1 -
Other 1 (2)
Depreciation (4) 7
Taxes, other than income taxes 2 1
Income taxes 1 6
--- ---
$ 3 $ 5
=== ===
The entire output of the Company's 10 percent share of the
Manchester Street generating station is made available to NEP,
and the Company receives a credit on its purchased power bill
from NEP for its fuel and other generation and transmission
costs. The decrease in these credits in 1996 and a portion of
the increase in 1995 reflects fluctuations in the level of
reimbursable costs being incurred in the dismantlement of the
Company's previously retired South Street generating station. In
addition, these credits increased in both 1996 and 1995 in
connection with the completion of the Manchester Street Station
in 1995. Both of these factors are also reflected in the changes
in depreciation expense in 1996 and 1995.
<PAGE>
The reduction in other operation and maintenance expenses in
1995 reflects decreased distribution system related expenses,
partially offset by increased postretirement benefit expenses.
The increases in taxes other than income taxes in both 1996
and 1995 is due primarily to increased municipal property taxes.
The 1996 increase is primarily attributable to the Manchester
Street Station.
Allowance for Funds Used During Construction
AFDC decreased in both 1996 and 1995. The 1996 decrease is
due to the completion in 1995 of the Manchester Street Station,
and the 1995 decrease is due to the completion in 1994, of
transmission facilities related to the Manchester Street Station.
Hazardous Waste
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. The Company has been named as a
potentially responsible party by either federal or state
environmental regulatory agencies for three sites at which
hazardous waste is alleged to have been disposed. The Company is
aware of approximately five sites on which gas was manufactured
or manufactured gas was stored that were owned either by the
Company or by its predecessor companies. A more detailed
discussion of potential hazardous waste liabilities is contained
in Note D-2 of the Notes to the Financial Statements. Predicting
the potential costs to investigate and remediate hazardous waste
sites continues to be difficult. The Company believes that
hazardous waste liabilities for all sites of which it is aware
are not material to its financial position.
Electric and Magnetic Fields (EMF)
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. In
October 1996, the National Research Council of the National
Academy of Sciences released a report stating no conclusive and
consistent evidence demonstrates that exposures to residential
EMF produce adverse health effects. It is impossible to predict
the ultimate impact on the Company and the electric utility
industry if further investigations were to demonstrate that the
present electricity delivery system is contributing to increased
risk of cancer or other health problems.
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what the impact on the Company would be if this cause
of action is recognized in Rhode Island and in contexts other
than condemnation cases.
<PAGE>
Utility Plant Expenditures and Financing
Cash expenditures for utility plant totaled $53 million in
1996. The funds necessary for utility plant expenditures during
1996 were primarily provided by net cash from operating
activities, after the payment of dividends. Cash expenditures
for utility plant for 1997 are estimated to be approximately $45
million. Internally generated funds are estimated to provide
approximately 70 percent of capital expenditure requirements in
1997. Cash expenditures for utility plant are also expected to
be funded through the issuance of long-term debt.
In 1996, the Company issued $2 million of first mortgage bonds
bearing an interest rate of 7.24 percent to refinance higher rate
bonds. In November 1995, the Company retired $16 million of
first mortgage bonds prior to maturity and incurred premiums of
$1.9 million.
At December 31, 1996, the Company had $19 million of
short-term debt outstanding including $14 million of commercial
paper borrowings and $5 million of borrowings from affiliates.
As of December 31, 1996, the Company had lines of credit with
banks totaling $41 million. There were no borrowings under these
lines of credit at December 31, 1996.
<PAGE>
The Narragansett Electric Company
Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating revenue $503,585 $499,113 $481,669
-------- -------- --------
Operating expenses:
Fuel for generation and purchased electric
energy, (principally from New England
Power Company, an affiliate) 297,060 294,652 300,888
Other operation 71,625 71,814 72,872
Maintenance 13,009 11,174 12,281
Depreciation 27,899 31,533 24,813
Taxes, other than federal income taxes 38,530 36,627 35,818
Federal income taxes 11,951 10,888 4,883
-------- -------- --------
Total operating expenses 460,074 456,688 451,555
-------- -------- --------
Operating income 43,511 42,425 30,114
-------- -------- --------
Other income:
Allowance for equity funds used
during construction 106 1,028
Other income (expense), net (732) (192) (856)
-------- -------- --------
Operating and other income 42,779 42,339 30,286
-------- -------- --------
Interest:
Interest on long-term debt 17,205 16,627 14,334
Other interest 2,883 3,663 2,897
Allowance for borrowed funds used during
construction credit (263) (1,861) (1,534)
-------- -------- --------
Total interest 19,825 18,429 15,697
-------- -------- --------
Net income $22,954 $23,910 $14,589
======== ======== ========
Statements of Retained Earnings
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
Retained earnings at beginning of year $108,227 $91,556 $81,659
Net income 22,954 23,910 14,589
Dividends declared on cumulative
preferred stock (2,143) (2,143) (2,143)
Dividends declared on common stock,
$8.00, $4.50, and $2.25 per share,
respectively (9,060) (5,096) (2,549)
-------- -------- --------
Retained earnings at end of year $119,978 $108,227 $91,556
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
The Narragansett Electric Company
Balance Sheets
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
---- ----
Assets
<S> <C> <C>
Utility plant, at original cost $742,481 $699,906
Less accumulated provisions for depreciation 187,690 173,391
-------- --------
554,791 526,515
Construction work in progress 5,392 8,733
-------- --------
Net utility plant 560,183 535,248
-------- --------
Current assets:
Cash 1,727 1,999
Accounts receivable:
From sales of electric energy 54,426 59,760
Other (including $1,253 and $1,464 from
affiliates) 3,415 9,330
Less reserves for doubtful accounts 5,149 5,516
-------- --------
52,692 63,574
Unbilled revenues (Note A-3) 15,300 16,500
Fuel, materials, and supplies, at average cost 4,300 6,245
Prepaid and other current assets 15,919 15,887
-------- --------
Total current assets 89,938 104,205
-------- --------
Deferred charges and other assets (Note B) 56,881 60,168
-------- --------
$707,002 $699,621
======== ========
Capitalization and Liabilities
Capitalization:
Common stock, par value $50 per share,
authorized and outstanding 1,132,487 shares $56,624 $56,624
Premiums on preferred stocks 170 170
Other paid-in capital 80,000 80,000
Retained earnings 119,978 108,227
-------- --------
Total common equity 256,772 245,021
Cumulative preferred stock, par value
$50 per share 36,500 36,500
Long-term debt 178,517 210,892
-------- --------
Total capitalization 471,789 492,413
-------- --------
Current liabilities:
Long-term debt due in one year 32,500
Short-term debt (including $5,300 and $1,000
to affiliates) 19,025 22,675
Accounts payable (including $40,425 and
$38,510 to affiliates) 45,221 46,247
Accrued liabilities:
Taxes 3,877 6,380
Interest 5,677 5,847
Other accrued expenses (Note F) 11,949 19,558
Customer deposits 5,638 5,691
Dividends payable 2,801 1,102
-------- --------
Total current liabilities 126,688 107,500
-------- --------
Deferred federal income taxes 81,880 76,017
Unamortized investment tax credits 7,517 8,016
Other reserves and deferred credits 19,128 15,675
Commitments and contingencies (Note D)
-------- --------
$707,002 $699,621
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
The Narragansett Electric Company
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $22,954 $23,910 $14,589
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 27,899 31,533 24,813
Deferred federal income taxes and
investment tax credits, net 4,177 3,009 3,422
Allowance for funds used during
construction (263) (1,967) (2,562)
Amortization of unbilled revenues (8,209) (6,158)
Decrease (increase) in accounts receivable,
net and unbilled revenues 12,082 (2,215) (14,163)
Decrease (increase) in fuel, materials,
and supplies 1,945 (1,075) (598)
Decrease (increase) in prepaid and
other current assets (32) (1,894) (2,478)
Increase (decrease) in accounts payable (1,026) (9,892) 5,134
Increase (decrease) in other
current liabilities (10,335) 9,320 12,312
Other, net 8,236 5,931 5,877
--------- --------- ---------
Net cash provided by operating
activities $65,637 $48,451 $40,188
--------- --------- ---------
Investing activities:
Plant expenditures, excluding allowance for
funds used during construction $(52,574) $(72,897) $(92,503)
Other investing activities (181) (251) (911)
--------- --------- ---------
Net cash used in investing activities $(52,755) $(73,148) $(93,414)
--------- --------- ---------
Financing activities:
Capital contributions from parent $20,000 $15,000
Dividends paid on common stock $(7,361) (4,813) (2,831)
Dividends paid on preferred stock (2,143) (2,143) (2,143)
Changes in short-term debt (3,650) (7,125) 10,075
Long-term debt issues 2,000 38,000 33,000
Long-term debt retirements (2,000) (16,000)
Premium on reacquisition of long-term debt (1,936)
--------- --------- ---------
Net cash provided by (used in)
financing activities $(13,154) $25,983 $53,101
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents $(272) $1,286 $(125)
Cash and cash equivalents at
beginning of year 1,999 713 838
--------- --------- ---------
Cash and cash equivalents at end of year $1,727 $1,999 $713
========= ========= =========
Supplementary Information:
Interest paid less amounts capitalized $18,620 $17,050 $14,015
--------- --------- ---------
Federal income taxes paid $8,873 $1,084 $2,982
--------- --------- ---------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
The Narragansett Electric Company
Notes to Financial Statements
Note A - Significant Accounting Policies
1. Nature of Operations:
The Company is a wholly-owned subsidiary of New England Electric
System (NEES) operating in Rhode Island. The Company's business
is the distribution and sale of electricity at retail. Electric
service is provided to approximately 330,000 customers in 27
cities and towns having a population of approximately 725,000
(1990 Census). The Company's service area, which includes urban,
suburban, and rural areas, covers approximately 80 percent of
Rhode Island. The properties of the Company include an
integrated system of transmission and distribution lines and
substations. In addition, the Company owns a 10 percent share of
the 489 megawatt Manchester Street generating station. The
entire output of this plant is made available to New England
Power Company (NEP), the Company's wholesale generating
affiliate, as part of the integrated NEES system. Under a
contract with NEP, the Company purchases all of its electric
energy requirements from NEP. The contract provides for the
integration of the Company's generating and transmission
facilities with NEP's facilities in order to achieve maximum
economy and reliability. The contract also provides for the
application of credits against the Company's power bills from NEP
for costs associated with the Company's facilities so integrated.
This contract requires either party to give seven years notice
prior to terminating the contract. (See Note B for a discussion
of industry restructuring and NEP's and the Company's proposed
divestiture of their generating business.)
2. System of Accounts:
The accounts of the Company are maintained in accordance with the
Uniform System of Accounts prescribed by regulatory bodies having
jurisdiction.
In preparing the financial statements, management is required to
make estimates that affect the reported amounts of assets and
liabilities and disclosures of asset recovery and contingent
liabilities as of the date of the balance sheets and revenues and
expenses for the period. These estimates may differ from actual
amounts if future circumstances cause a change in the assumptions
used to calculate these estimates.
3. Electric Sales Revenue:
The Company accrues revenues for electricity delivered but not
yet billed (unbilled revenues). Included in income were $8
million in 1995 and $6 million in 1994, which represented the
amortization over 21 months of the initial effect of recording
unbilled revenues, in accordance with a rate agreement. Accrued
revenues are also recorded in accordance with rate adjustment
mechanisms.
<PAGE>
4. Allowance for Funds Used During Construction (AFDC):
The Company capitalizes AFDC as part of construction costs. AFDC
represents the composite interest and equity costs of capital
funds used to finance that portion of construction costs not yet
eligible for inclusion in rate base. AFDC is capitalized in
"Utility plant" with offsetting noncash credits to "Other income"
and "Interest." This method is in accordance with an established
rate-making practice under which a utility is permitted a return
on, and the recovery of, prudently incurred capital costs through
their ultimate inclusion in rate base and in the provision for
depreciation. The composite AFDC rates were 5.3 percent, 6.2
percent, and 6.8 percent in 1996, 1995, and 1994, respectively.
5. Depreciation:
Depreciation is provided annually on a straight-line basis. The
provision for depreciation as a percentage of weighted average
depreciable property was 4.0 percent, 5.0 percent, and 4.5
percent in 1996, 1995, and 1994, respectively. The change in the
depreciation rates in 1996 and 1995 is primarily due to the
recognition through depreciation expense of dismantlement costs
for a retired generating facility.
6. Cash:
The Company classifies short-term investments with a maturity of
90 days or less at time of purchase as cash.
Note B - Industry Restructuring
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures
stemming from a number 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.
In the recent past, this competition was most prominent in the
bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Rhode Island, there have
been 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"). When electricity
customers are allowed to choose their electricity supplier,
utilities across the country will face the risk that market
prices may not be sufficient to recover the costs of the
<PAGE>
commitments incurred to supply customers under a regulated
structure. The amounts by which costs exceed market prices are
commonly referred to as "stranded costs."
The Company currently purchases electricity on behalf of its
customers under a wholesale all-requirements contract with NEP.
As described below, comprehensive legislation was enacted in
Rhode Island which, when all regulatory approvals are in place,
would allow recovery of NEP's above-market commitments to retail
customers in Rhode Island, which make up 22 percent of NEP's all-
requirements sales.
In August 1996, the state of Rhode Island enacted pioneering
legislation that allows customers in that state the opportunity
to choose their electricity supplier. Under the Rhode Island
statute, state accounts, certain new customers, and the largest
manufacturing customers will be able to choose their supplier
beginning on July 1, 1997. These customers represent
approximately 10 percent of the Company's kilowatt-hour (kWh)
sales. The balance of Rhode Island customers will be able to
choose their supplier in 1998, with an additional 10 percent of
customers load having choice on January 1 and the remainder on
July 1. All Rhode Island customers would have choice of supplier
beginning January 1, 1998 if retail access is available to 40
percent or more of the kWh sales in New England by that date.
The statute calls for NEP's contract with the Company to be
amended to permit a gradual, early termination of
all-requirements service. The amendment provides that, in
return, the Company's 22 percent share of the cost of NEP's
above-market generation commitments (estimated at approximately
$1 billion on a present-value basis) would be recovered through a
contract termination charge. This charge will, in turn, be paid
by customers that use the Company's distribution facilities.
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 avoided by shutting down the plants,
including nuclear decommissioning.
Sunk costs associated with generating plants and regulatory
assets would be recovered over a period of 12.5 years. The
above-market component of purchased power contracts and the
nuclear decommissioning costs would be recovered as incurred over
the life of those obligations, a period expected to extend beyond
12 years. The transition access charge would be reduced to
reflect the net proceeds from the sale of the NEES companies'
generating assets. (See "Divestiture of Generation Business"
section below.) 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 statute also establishes performance-based rates for
distribution utilities, such as the Company. Under the statute,
the Company increased distribution rates by approximately $11
<PAGE>
million in 1997, and is entitled to a similar increase in 1998.
In addition, in 1997, the Company's return on equity from
distribution operations will be subject to a floor of 6 percent
and a ceiling of 11 percent. Earnings over the ceiling will be
shared equally between customers and shareholders up to a maximum
return on equity from distribution operations of 12.5 percent.
This sharing results in an effective cap on shareholder's return
on equity of 11.75 percent. To the extent that earnings fall
below the floor, the Company will be authorized to surcharge
customers for the shortfall.
NEP and the Company filed with the Federal Energy Regulatory
Commission (FERC) an amendment to their all-requirements contract
in order to implement the statute. The FERC has set down the
amendment for hearing. The Company has indicated it is willing
to make certain changes to its plan in Rhode Island to parallel
provisions in a similar Massachusetts settlement. The
Massachusetts settlement was approved by the Massachusetts
Department of Public Utilities on February 26, 1997. The
settlement provides for retail choice for Massachusetts customers
in 1998 and the recovery of NEP's above-market commitments to
serve those customers. Implementation of other aspects of the
statute is subject to approval of the Rhode Island Public
Utilities Commission (RIPUC).
A number of proposals for federal legislation related to industry
restructuring have been brought forward for consideration by the
current Congress. The scope and aim of these vary widely;
however, the NEES companies and others will argue that state
settlements should be respected. The Company cannot predict what
federal legislation, if any, may be enacted.
Divestiture of Generation Business
NEP and the Company agreed to the divestiture of their fossil and
hydroelectric generating facilities as part of industry
restructuring. Such divestiture must be accomplished within six
months of the later of the commencement of retail choice in
Massachusetts, currently scheduled for January 1, 1988, or the
receipt of all necessary regulatory approvals. The Company will
be compensated by NEP for any difference between the sale price
of the Company's share of the Manchester Street Station and its
net book value. Proposals are being solicited for the
acquisition of the nonnuclear generating business, with the
objective of reaching definitive purchase and sale agreements by
mid-1997. Closing would follow the receipt of regulatory
approvals, which are expected to take at least six to 12 months
following the execution of purchase and sale agreements. The
Rhode Island statute also requires the Company to transfer its
transmission assets to NEP at net book value.
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
<PAGE>
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 thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The Company has recorded
approximately $44 million in net regulatory assets in compliance
with FAS 71. The Company believes that the continuing rate-making
policies and practices of the RIPUC and the terms of the Rhode
Island statute will enable the Company to recover both its
specific costs of providing ongoing distribution services and
stranded costs billed to it by NEP. The Company believes that
these factors will allow it to continue to apply FAS 71. In the
event that future circumstances should cause the application of
FAS 71 to be discontinued, a noncash write-off of previously
established regulatory assets and liabilities would be required.
The components of regulatory assets are as follows:
<TABLE>
<CAPTION>
At December 31, (In Thousands) 1996 1995
---- ----
<S> <C> <C>
Regulatory assets (liabilities) included in current
assets and liabilities:
Rate adjustment mechanisms (see Note F) $(2,870) $(7,661)
-------- --------
Regulatory assets included in deferred charges:
Deferred SFAS No. 109 costs (see Note C) 30,439 29,251
Unamortized losses on reacquired debt 13,287 13,918
Deferred SFAS No. 106 costs (see Note E 2) 2,487 4,894
Deferred storm costs 3,676
Other 5,656 3,900
-------- --------
51,869 55,639
-------- --------
Regulatory liabilities reflected in other reserves and
deferred credits - storm fund (4,691) -
-------- --------
$44,308 $47,978
======== ========
Amounts included in "Deferred charges and other assets" on the Company's
balance sheets that do not represent regulatory assets totaled $5,012,000 and
$4,529,000 at December 31, 1996 and 1995, respectively.
</TABLE>
Note C - Federal Income Taxes
The Company and other subsidiaries participate with NEES in
filing consolidated federal income tax returns. The Company's
income tax provision is calculated on a separate return basis.
Federal income tax returns have been examined and reported on by
the Internal Revenue Service (IRS) through 1991. The returns for
1992 and 1993 are currently under examination by the IRS.
<PAGE>
Total federal income taxes consist of the following components:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income taxes charged to operations:
Current income taxes $ 7,499 $7,560 $1,511
Deferred income taxes 4,950 3,831 3,880
Investment tax credits, net (498) (503) (508)
------- ------- -------
Total income taxes charged to
operations 11,951 10,888 4,883
------- ------- -------
Income taxes charged (credited) to
"Other income":
Current income taxes (581) (348) (491)
Deferred income taxes (275) (319) 50
------- ------- -------
Total income taxes charged (credited) to
"Other income" (856) (667) (441)
------- ------- -------
Total federal income taxes $11,095 $10,221 $4,442
======= ======= =======
Investment tax credits have been deferred and are being amortized over the
estimated lives of the property giving rise to the credits.
</TABLE>
Consistent with rate-making policies of the RIPUC, the Company
has adopted comprehensive interperiod tax allocation
(normalization) for most temporary book/tax differences.
<PAGE>
Total federal income taxes differ from the amounts computed by
applying the federal statutory tax rates to income before taxes.
The reasons for the differences are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed tax at statutory rate $11,917 $11,946 $6,661
Increases (reductions) in
tax resulting from:
Book versus tax depreciation not normalized 778 529 653
Costs associated with utility
plant retirements deducted
for tax purposes (1,341) (1,768) (1,872)
Allowance for equity funds used
during construction - (37) (360)
Amortization of investment tax credits (498) (503) (508)
All other differences 239 54 (132)
------- ------- -------
Total federal income taxes $11,095 $10,221 $4,442
======= ======= =======
The following table identifies the major components of total deferred income
taxes:
At December 31, (In Millions) 1996 1995
---- ----
Deferred tax asset:
Plant related $2 $2
Investment tax credits 3 3
All other 13 13
----- -----
18 18
===== =====
Deferred tax liability:
Plant related (67) (62)
All other (33) (32)
----- -----
(100) (94)
----- -----
Net deferred tax liability $(82) $(76)
===== =====
There were no valuation allowances for deferred tax assets deemed necessary.
</TABLE>
Note D - Commitments and Contingencies
1. Plant Expenditures:
The Company's utility plant expenditures are estimated to be
approximately $45 million in 1997. At December 31, 1996,
substantial commitments had been made relative to future planned
expenditures.
2. Hazardous Waste:
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly know as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous
substances.
<PAGE>
The electric utility industry typically utilizes and/or generates
in its operations a range of potentially hazardous products and
by-products. NEES 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 United States Environmental Protection Agency
or the Massachusetts Department of Environmental Protection for
three sites (two of which are located in Massachusetts) at which
hazardous waste is alleged to have been disposed. 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.
Gas was manufactured from coal in Rhode Island in the past. The
Company is aware of five sites on which gas was manufactured or
manufactured gas was stored that were owned either by the Company
or by its predecessor companies. It is not known to what extent
the Company would be held liable for hazardous wastes, if any,
left at these manufactured gas locations.
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. A
preliminary review by a consultant hired by the NEES companies of
the potential cost of investigating and, if necessary,
remediating Rhode Island manufactured gas sites resulted in costs
per site ranging from less than $1 million to $11 million. An
informal survey of other utilities conducted on behalf of NEES
and its subsidiaries indicated costs in a similar range. Where
appropriate, the Company intends to seek recovery from its
insurers and from other PRPs, but it is uncertain whether, and to
what extent, such efforts will be successful. The Company
believes that hazardous waste liabilities for all sites of which
it is aware are not material to its financial position.
In October 1996, the American Institute of Certified Public
Accountants issued new accounting rules for Environmental
Remediation Liabilities which become effective in 1997. The
Company does not believe these new rules will have a material
effect on its financial position or results of operations.
Note E - Employee Benefits
1. Pension Plans:
The Company participates with other subsidiaries of NEES in
noncontributory, defined-benefit plans covering substantially all
employees of the Company. The plans provide pension benefits
based on the employee's compensation during the five years prior
<PAGE>
to retirement. The Company's funding policy is to contribute each
year the net periodic pension cost for that year. However, the
contribution for any year will not be less than the minimum
contribution required by federal law or greater than the maximum
tax deductible amount.
Net pension cost for 1996, 1995, and 1994 included the following
components:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost benefits earned
during the period $2,007 $1,963 $1,877
Plus (less):
Interest cost on projected
benefit obligation 8,954 9,327 8,629
Return on plan assets at expected
long-term rate (9,787) (9,567) (9,024)
Amortization 165 67 567
------- ------- -------
Net pension cost $1,339 $1,790 $2,049
------- ------- -------
Actual return on plan assets $17,228 $25,192 $809
======= ======= =======
1997 1996 1995 1994
---- ---- ---- ----
Assumptions used to determine
pension cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Average rate of increase in
future compensation levels 4.13% 4.13% 4.63% 4.35%
Expected long-term rate of
return on assets 8.50% 8.50% 8.75% 8.75%
</TABLE>
<PAGE>
The funded status of the plans cannot be presented separately for
the Company as the Company participates in the plans with other
NEES subsidiaries. The following table sets forth the funded
status of the NEES companies' plans at December 31:
<TABLE>
<CAPTION>
Retirement Plans, (In Millions) 1996 1995
---- ----
<S> <C> <C>
Union Non-Union Union Non-Union
Employee Employee Employee Employee
Plans Plans Plans Plans
-------- --------- -------- ---------
Benefits earned
Actuarial present value of
accumulated benefit liability:
Vested $298 $342 $293 $343
Nonvested 9 10 8 10
---- ---- ---- ----
Total $307 $352 $301 $353
==== ==== ==== ====
Reconciliation of funded status
Actuarial present value of
projected benefit liability $355 $398 $346 $402
Unrecognized prior service costs (6) (3) (7) (4)
SFAS No. 87 transition liability
not yet recognized (amortized) - (1) (1)
Net gain (loss) not yet recognized
(amortized) 25 15 (1) (23)
---- ---- ---- ----
374 409 338 374
---- ---- ---- ----
Pension fund assets at fair value 384 428 349 392
SFAS No. 87 transition asset not
yet recognized (amortized) (10) - (11)
---- ---- ---- ----
374 428 338 392
---- ---- ---- ----
Accrued pension/(prepaid)
payments recorded on books $ - $(19) $ - $(18)
</TABLE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates from 1997 and 1996,
respectively, and the 1983 Group Annuity Mortality table.
Plan assets are composed primarily of corporate equity, debt
securities, and cash equivalents.
2.Postretirement Benefit Plans Other Than Pensions (PBOPs)
The Company provides health care and life insurance coverage to
eligible retired employees. Eligibility is based on certain age
and length of service requirements and in some cases retirees
must contribute to the cost of their coverage.
<PAGE>
The total cost of PBOPs for 1996, 1995, and 1994 included the
following components:
<TABLE>
<CAPTION>
Year Ended December 31, (In Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during
the period $1,030 $1,072 $1,252
Plus (less):
Interest cost on accumulated
benefit obligation 5,034 6,006 5,630
Return on plan assets at expected
long-term rate (2,803) (2,080) (1,640)
Amortization 2,739 3,539 3,716
------- ------- -------
Net postretirement benefit cost $6,000 $8,537 $8,958
======= ======= =======
Actual return (loss) on plan assets $5,469 $6,161 $(23)
======= ======= =======
1997 1996 1995 1994
---- ---- ---- ----
Assumptions used to determine
postretirement benefit cost:
Discount rate 7.25% 7.25% 8.25% 7.25%
Expected long-term rate of return
on assets 8.25% 8.25% 8.50% 8.50%
Health care cost rate 1994 11.00%
Health care cost rate 1995 to 1999 8.00% 8.00% 8.50% 8.50%
Health care cost rate 2000 to 2004 6.25% 6.25% 8.50% 8.50%
Health care cost rate 2005 and beyond 5.25% 5.25% 6.25% 6.25%
The following table sets forth benefits earned and the plans' funded status:
At December 31, (In Millions) 1996 1995
---- ----
Accumulated postretirement benefit obligation:
Retirees $51 $50
Fully eligible active plan participants 5 6
Other active plan participants 19 20
---- ----
Total benefits earned 75 76
Unrecognized transition obligation (62) (66)
Net gain not yet recognized 22 16
---- ----
35 26
Plan assets at fair value 42 34
---- ----
Prepaid postretirement benefit costs recorded
on books $7 $8
==== ====
</TABLE>
The plans' funded status at December 31, 1996 and 1995 were
calculated using the assumed rates in effect for 1997 and 1996,
respectively.
The assumptions used in the health care cost trends have a
significant effect on the amounts reported. Increasing the
assumed rates by 1 percent in each year would increase the
accumulated postretirement benefit obligation as of December 31,
1996 by approximately $9 million and the net periodic cost for
1996 by approximately $1 million.
<PAGE>
The Company funds the annual tax-deductible contributions. Plan
assets are invested in equity and debt securities and cash
equivalents.
Note F - Short-term Borrowings and Other Accrued Expenses
At December 31, 1996, the Company had $19 million of short-term
debt outstanding including $14 million in commercial paper
borrowings and $5 million of borrowings from affiliates. NEES and
certain subsidiaries, including the Company, with regulatory
approval, operate a money pool to more effectively utilize cash
resources and to reduce outside short-term borrowings. Short-term
borrowing needs are met first by available funds of the money
pool participants. Borrowing companies pay interest at a rate
designed to approximate the cost of outside short-term
borrowings. Companies which invest in the pool share the interest
earned on a basis proportionate to their average monthly
investment in the money pool. Funds may be withdrawn from or
repaid to the pool at any time without prior notice.
At December 31, 1996, the Company had lines of credit with banks
totaling $41 million. There were no borrowings under these lines
of credit at December 31, 1996. Fees are paid in lieu of
compensating balances on most lines of credit.
The weighted average rate on outstanding short-term borrowings
was 6.0 percent at December 31, 1996. The fair value of the
Company's short-term debt equals carrying value.
<TABLE>
<CAPTION>
The components of other accrued expenses are as follows:
At December 31, (In Thousands) 1996 1995
---- ----
<S> <C> <C>
Rate adjustment mechanisms $4,632 $14,075
Accrued wages and benefits 7,259 5,483
Other 58 -
------- -------
$11,949 $19,558
======= =======
</TABLE>
<PAGE>
Note G - Cumulative Preferred Stock
<TABLE>
<CAPTION>
A summary of cumulative preferred stock at December 31, 1996 and 1995 is as
follows (in thousands of dollars except for share data):
Shares
Authorized Dividends Call
and Outstanding Amount Declared Price
--------------- ------ ------------- -----
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$50 Par value
4.50% Series 180,000 180,000 $9,000 $9,000 $405 $405 55.000
4.64% Series 150,000 150,000 7,500 7,500 348 348 52.125
6.95% Series 400,000 400,000 20,000 20,000 1,390 1,390 (a)
------- ------- ------- ------- ------ ------
Total 730,000 730,000 $36,500 $36,500 $2,143 $2,143
======= ======= ======= ======= ====== ======
<FN>
(a)Callable on or after August 1, 2003 at $51.74.
</FN>
The annual dividend requirement for total cumulative preferred stock was
$2,143,000 for 1996 and 1995.
</TABLE>
<PAGE>
Note H - Long-term Debt
<TABLE>
<CAPTION>
A summary of long-term debt is as follows:
At December 31, (In Thousands)
Series Rate % Maturity 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Mortgage Bonds:
U(92-1) 7.230 June 3, 1997 $10,000 $10,000
U(92-2) 7.210 June 3, 1997 5,000 5,000
U(92-3) 7.000 June 16, 1997 10,000 10,000
U(92-7) 5.700 September 16, 1997 7,500 7,500
V(95-1) 7.810 February 16, 1998 5,000 5,000
V(94-2) 6.960 May 3, 1999 2,000 2,000
V(94-3) 6.910 May 4, 1999 1,000 1,000
U(92-6) 6.630 August 12, 1999 5,000 5,000
U(92-5) 6.980 July 17, 2000 5,000 5,000
U(92-8) 6.340 September 18, 2000 10,000 10,000
U(92-4) 7.830 June 17, 2002 15,000 15,000
U(93-1) 7.080 January 13, 2003 7,500 7,500
U(93-2) 6.560 April 15, 2003 5,000 5,000
U(93-4) 6.350 July 1, 2003 5,000 5,000
V(94-4) 7.420 June 15, 2004 5,000 5,000
V(94-6) 8.330 November 8, 2004 10,000 10,000
U(93-3) 6.650 June 30, 2008 5,000 5,000
S 9.125 May 1, 2021 22,200 22,200
T 8.875 August 1, 2021 22,000 24,000
U(93-5) 7.050 September 1, 2023 5,000 5,000
U(94-1) 7.050 February 2, 2024 5,000 5,000
V(94-1) 8.080 May 2, 2024 5,000 5,000
V(94-5) 8.160 August 9, 2024 5,000 5,000
V(95-2) 7.750 June 2, 2025 10,000 10,000
V(95-3) 7.500 October 10, 2025 7,000 7,000
W(95-1) 7.300 November 13, 2025 16,000 16,000
W(96-1) 7.240 January 19,2026 2,000 -
Unamortized discounts and premiums (1,183) (1,308)
-------- --------
Total long-term debt $211,017 $210,892
======== ========
Long-term debt due in one year 32,500 -
-------- --------
$178,517 $210,892
======== ========
</TABLE>
Substantially all of the properties and franchises of the Company
are subject to the lien of mortgage indentures under which the
first mortgage bonds have been issued.
The Company will make cash payments of $32,500,000 in 1997,
$5,000,000 in 1998, $8,000,000 in 1999, and $15,000,000 in 2000
to retire maturing mortgage bonds. There are no cash payments
required in 2001.
At December 31, 1996, the Company's long-term debt had a carrying
value of approximately $211,000,000 and had a fair value of
approximately $203,000,000. The fair market value of the
Company's long-term debt was estimated based on the quoted prices
for similar issues or on the current rates offered to the Company
for debt of the same remaining maturity.
<PAGE>
Note I - Restrictions on Retained Earnings Available for
Dividends on Common Stock
As long as any preferred stock is outstanding, certain
restrictions on payment of dividends on common stock would come
into effect if the "junior stock equity" was, or by reason of
payment of such dividends became, less than 25 percent of "Total
capitalization." However, the junior stock equity at December 31,
1996 was 51 percent of total capitalization and, accordingly,
none of the Company's retained earnings at December 31, 1996 were
restricted as to dividends on common stock under the foregoing
provisions.
Note J - Regulatory Matters
A 1986 Rhode Island Supreme Court decision held that the RIPUC's
rate-making powers include the authority to order refunds of
amounts earned in excess of an allowed return. As a result, the
RIPUC monitors the Company's earnings on a regular basis.
Note K - Supplementary Income Statement Information
Advertising expenses, expenditures for research and development,
and rents were not material and there were no royalties paid in
1996, 1995, or 1994. Taxes, other than federal income taxes,
charged to operating expenses are set forth by class as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
(In Thousands) ---- ---- ----
<S> <C> <C> <C>
Municipal property taxes $16,546 $15,172 $13,944
State gross earnings tax 18,764 18,617 19,270
Federal and state payroll and
other taxes 3,220 2,838 2,604
------- ------- -------
$38,530 $36,627 $35,818
======= ======= =======
</TABLE>
New England Power Service Company, an affiliated service company
operating pursuant to the provisions of Section 13 of the Public
Utility Holding Company Act of 1935, furnished services to the
Company at the cost of such services. These costs amounted to
$27,336,438, $29,094,719, and $32,445,000, including capitalized
construction costs of $6,426,000, $6,268,000, and $7,756,000 for
each of the years 1996, 1995, and 1994, respectively.
<PAGE>
The Narragansett Electric Company
Operating Statistics (Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sources of Energy (Thousands of kWh)
Net generation for New England
Power Company, an affiliate 329,883 64,035 5,781 4,506 83,753
Purchased energy:
From New England Power
Company (net of
generation) 4,698,017 4,955,575 5,001,843 4,982,254 4,729,733
From others 2,422 2,080 2,909 2,343 2,249
--------------------------------------------------
Total generated and
purchased 5,030,322 5,021,690 5,010,533 4,989,103 4,815,735
Losses, company use, etc. (251,709) (260,960) (263,234) (270,373) (229,106)
--------------------------------------------------
Total sources of energy 4,778,613 4,760,730 4,747,299 4,718,730 4,586,629
==================================================
Sales of Energy (Thousands of kWh)
Residential 1,847,111 1,835,085 1,843,970 1,817,675 1,783,754
Commercial 2,035,294 2,031,541 1,983,508 1,931,377 1,877,738
Industrial 847,877 843,635 868,092 917,305 869,062
Other 47,745 49,881 51,138 51,821 55,476
--------------------------------------------------
Total sales to
ultimate customers 4,778,027 4,760,142 4,746,708 4,718,178 4,586,030
Sales for resale 586 588 591 552 599
--------------------------------------------------
Total sales of energy 4,778,613 4,760,730 4,747,299 4,718,730 4,586,629
==================================================
Annual Maximum Demand
(kW one hour peak) 929,000 1,031,000 1,005,000 939,000 919,000
Average Annual Use per
Residential Customer (kWh) 6,304 6,305 6,397 6,337 6,265
Number of Customers at
December 31
Residential 294,274 292,659 289,317 287,876 286,228
Commercial 33,101 32,412 32,195 31,948 31,534
Industrial 1,778 1,792 1,825 1,869 1,914
Other 868 873 875 878 941
--------------------------------------------------
Total ultimate customers 330,021 327,736 324,212 322,571 320,617
Other electric companies
(for resale) 2 2 2 1 3
--------------------------------------------------
Total customers 330,023 327,738 324,214 322,572 320,620
==================================================
Operating Revenue (In Thousands)
Residential $216,103 $205,649 $200,778 $202,522 $196,983
Commercial 202,219 198,429 189,059 190,185 183,702
Industrial 68,447 72,071 72,136 78,088 76,275
Other 7,809 7,236 6,883 6,778 6,587
--------------------------------------------------
Total revenue from
ultimate customers 494,578 483,385 468,856 477,573 463,547
Amortization of unbilled
revenues - 8,209 6,158 - -
Sales for resale 75 70 68 64 68
--------------------------------------------------
Total revenue from
electric sales 494,653 491,664 475,082 477,637 463,615
Other operating revenue 8,932 7,449 6,587 5,391 4,637
--------------------------------------------------
Total operating revenue $503,585 $499,113 $481,669 $483,028 $468,252
==================================================
</TABLE>
<PAGE>
The Narragansett Electric Company
Selected Financial Information
<TABLE>
<CAPTION>
Year Ended December 31, (In Millions) 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenue:
Electric sales
(excluding fuel cost recovery) $361 $361 $356 $351 $342
Fuel cost recovery 134 131 120 127 121
Other 9 7 6 5 5
------ ------ ------ ------ ------
Total operating revenue $504 $499 $482 $483 $468
Net income $23 $24 $15 $14 $21
Total assets $707 $700 $647 $556 $479
Capitalization:
Common equity $257 $245 $208 $183 $176
Cumulative preferred stock 36 36 37 37 27
Long-term debt 179 211 189 156 143
------ ------ ------ ------ ------
Total capitalization $472 $492 $434 $376 $346
Preferred dividends declared $2 $2 $2 $2 $2
Common dividends declared $9 $5 $3 $5 $5
</TABLE>
Selected Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(In Thousands) Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1996
Operating revenue $127,285 $116,470 $140,481 $119,349
Operating income $12,286 $8,245 $13,419 $9,561
Net income $6,290 $3,117 $8,169 $5,378
1995
Operating revenue $125,020 $116,426 $139,217 $118,450
Operating income $12,645 $7,301 $12,699 $9,780
Net income $7,766 $3,058 $7,939 $5,147
</TABLE>
Per share data is not relevant because the Company's common stock
is wholly-owned by New England Electric System.
A copy of The Narragansett Electric Company's Annual Report on
Form 10-K to the Securities and Exchange Commission for the year
ended December 31, 1996 will be available on or about April 1,
1997, without charge, upon written request to The Narragansett
Electric Company, Shareholder Services Department, 280 Melrose
Street, Providence, Rhode Island 02901.
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
-----------------
Each of the undersigned directors of The Narragansett Electric Company
(the "Company"), individually as a director of the Company, hereby
constitutes and appoints John G. Cochrane, Patricia M. Needham, and Robert
K. Wulff, individually, as attorney-in-fact to execute on behalf of the
undersigned the Company's annual report on Form 10-K for the year ended
December 31, 1996, to be filed with the Securities and Exchange Commission,
and to execute any appropriate amendment or amendments thereto as may be
required by law.
Dated this 25th day of March, 1997.
s/Joan T. Bok s/Joseph J. Kirby
_________________________ _________________________
Joan T. Bok Joseph J. Kirby
s/Stephen A. Cardi s/Robert L. McCabe
_________________________ _________________________
Stephen A. Cardi Robert L. McCabe
s/Richard W. Frost
_________________________ _________________________
Richard W. Frost John W. Rowe
s/Frances H. Gammell
_________________________ _________________________
Frances H. Gammell Richard P. Sergel
s/William E. Trueheart
_________________________
William E. Trueheart
<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 THE NARRAGANSETT ELECTRIC
COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<CIK> 0000069659
<NAME> The Narragansett Electric Company
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 560,183
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 89,938
<TOTAL-DEFERRED-CHARGES> 56,881 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 707,002
<COMMON> 56,624
<CAPITAL-SURPLUS-PAID-IN> 80,170
<RETAINED-EARNINGS> 119,978
<TOTAL-COMMON-STOCKHOLDERS-EQ> 256,772
0
36,500
<LONG-TERM-DEBT-NET> 178,517
<SHORT-TERM-NOTES> 5,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 13,725
<LONG-TERM-DEBT-CURRENT-PORT> 32,500
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 183,688
<TOT-CAPITALIZATION-AND-LIAB> 707,002
<GROSS-OPERATING-REVENUE> 503,585
<INCOME-TAX-EXPENSE> 11,951
<OTHER-OPERATING-EXPENSES> 448,123
<TOTAL-OPERATING-EXPENSES> 460,074
<OPERATING-INCOME-LOSS> 43,511
<OTHER-INCOME-NET> (732)
<INCOME-BEFORE-INTEREST-EXPEN> 42,779
<TOTAL-INTEREST-EXPENSE> 19,825
<NET-INCOME> 22,954
2,143
<EARNINGS-AVAILABLE-FOR-COMM> 20,811
<COMMON-STOCK-DIVIDENDS> 9,060
<TOTAL-INTEREST-ON-BONDS> 17,205
<CASH-FLOW-OPERATIONS> 65,637
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes other assets.
<F2> Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
</FN>
