<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7471
(LOGO) THE NARRAGANSETT ELECTRIC COMPANY
(Exact name of registrant as specified in charter)
Rhode Island 05-0187805
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
280 Melrose Street, Providence, R.I. 02901
(Address of principal executive offices)
Registrant's telephone number, including area code
(401-784-7000)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Common stock, par value $50 per share, authorized and
outstanding: 1,132,487 shares at June 30, 1995.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
----------------------------
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Income (Loss)
Periods Ended June 30
(Unaudited)
<CAPTION>
Quarter Six Months
-------- ----------
1995 1994 1995 1994
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $116,426 $103,800 $241,446 $229,261
-------- -------- -------- --------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate71,713 65,370 144,515 143,577
Other operation 17,649 17,355 33,918 33,328
Maintenance 2,383 2,828 5,052 6,227
Depreciation 7,506 8,655 15,013 13,330
Taxes, other than federal income taxes 9,219 8,530 18,886 18,439
Federal income taxes 655 (1,652) 4,116 1,239
-------- -------- -------- --------
Total operating expenses 109,125 101,086 221,500 216,140
-------- -------- -------- --------
Operating income 7,301 2,714 19,946 13,121
Other income:
Allowance for equity funds used
during construction 219 340 428 618
Other income (expense) - net (145) (265) (466) (1,052)
-------- -------- -------- --------
Operating and other income 7,375 2,789 19,908 12,687
-------- -------- -------- --------
Interest:
Interest on long-term debt 4,088 3,489 8,070 6,814
Other interest 561 674 1,662 1,228
Allowance for borrowed funds used during
construction - credit (332) (361) (648) (656)
-------- -------- -------- --------
Total interest 4,317 3,802 9,084 7,386
-------- -------- -------- --------
Net income (loss) $ 3,058 $ (1,013) $ 10,824 $ 5,301
======== ======== ======== ========
Statements of Retained Earnings
Retained earnings at beginning of period$ 98,220 $ 86,871 $ 91,556 $ 81,659
Net income (loss) 3,058 (1,013) 10,824 5,301
Dividends declared on cumulative
preferred stock (536) (536) (1,072) (1,072)
Dividends declared on common stock (3,397) (567) (3,963) (1,133)
-------- -------- -------- --------
Retained earnings at end of period $ 97,345 $ 84,755 $ 97,345 $ 84,755
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Income
Twelve Months Ended June 30
(Unaudited)
<CAPTION>
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Operating revenue $493,854 $480,613
-------- --------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 301,616 306,474
Other operation 73,672 71,070
Maintenance 11,106 11,584
Depreciation 26,496 21,900
Taxes, other than federal income taxes 36,265 36,031
Federal income taxes 7,760 4,025
-------- --------
Total operating expenses 456,915 451,084
-------- --------
Operating income 36,939 29,529
Other income:
Allowance for equity funds used
during construction 838 1,005
Other income (expense) - net (270) (646)
-------- --------
Operating and other income 37,507 29,888
-------- --------
Interest:
Interest on long-term debt 15,590 13,336
Other interest 3,331 2,325
Allowance for borrowed funds used during
construction - credit (1,526) (1,054)
-------- --------
Total interest 17,395 14,607
-------- --------
Net income $ 20,112 $ 15,281
======== ========
Statements of Retained Earnings
Retained earnings at beginning of period $ 84,755 $ 74,326
Net income 20,112 15,281
Dividends declared on cumulative preferred stock (2,143) (2,226)
Dividends declared on common stock (5,379) (2,265)
Premium on redemption of preferred stock (361)
-------- --------
Retained earnings at end of period $ 97,345 $ 84,755
======== ========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Balance Sheets
(Unaudited)
<CAPTION>
June 30, December 31,
ASSETS 1995 1994
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $640,456 $617,498
Less accumulated provisions for depreciation 168,083 161,557
-------- --------
472,373 455,941
Construction work in progress 44,472 35,974
-------- --------
Net utility plant 516,845 491,915
-------- --------
Current assets:
Cash 1,106 713
Accounts receivable:
From sales of electric energy 55,407 51,278
Other (including $4,871,000 and $9,306,000 from affiliates) 13,063 17,953
Less reserves for doubtful accounts 5,440 4,472
-------- --------
63,030 64,759
Unbilled revenues 12,200 13,100
Fuel, materials and supplies, at average cost 6,448 5,170
Prepaid and other current assets 16,007 13,993
-------- --------
Total current assets 98,791 97,735
-------- --------
Deferred charges and other assets 57,204 57,727
-------- --------
$672,840 $647,377
======== ========
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 60,000 60,000
Retained earnings 97,345 91,556
-------- --------
Total common equity 214,139 208,350
Cumulative preferred stock 36,500 36,500
Long-term debt 203,827 188,862
-------- --------
Total capitalization 454,466 433,712
-------- --------
Current liabilities:
Short-term debt (including $17,750,000 to affiliates in 1995) 27,850 29,800
Accounts payable (including $44,518,000 and $47,900,000
to affiliates) 50,453 56,139
Accrued liabilities:
Taxes 711 143
Interest 6,018 5,615
Other accrued expenses 23,288 25,346
Customer deposits 5,396 5,261
Dividends payable 3,933 819
-------- --------
Total current liabilities 117,649 123,123
-------- --------
Deferred federal income taxes 73,509 70,253
Unamortized investment tax credits 8,267 8,518
Other reserves and deferred credits 18,949 11,771
-------- --------
$672,840 $647,377
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Cash Flows
Six Months Ended June 30
(Unaudited)
<CAPTION>
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $ 10,824 $ 5,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 15,013 13,330
Deferred federal income taxes and
investment tax credit, net 1,793 (2,599)
Amortization of unbilled revenues (4,104)
Allowance for funds used during construction (1,076) (1,274)
Decrease (increase) in accounts receivable, net and
unbilled revenues 2,629 5,824
Decrease (increase) in fuel, materials, and supplies (1,278) (2,609)
Decrease (increase) in prepaid and other current assets (2,014) 1,455
Increase (decrease) in accounts payable (5,686) 1,904
Increase (decrease) in other current liabilities 3,152 5,885
Other, net 8,880 1,929
-------- --------
Net cash provided by operating activities $ 28,133 $ 29,146
-------- --------
Investing Activities:
Plant expenditures, excluding allowance for
funds used during construction $(38,868) $(40,079)
-------- --------
Net cash used in investing activities $(38,868) $(40,079)
-------- --------
Financing Activities:
Dividends paid on common stock $ (850) $ (1,133)
Dividends paid on preferred stock (1,072) (1,072)
Long-term debt - issues 15,000 18,000
Changes in short-term debt (1,950) (4,275)
-------- --------
Net cash provided by financing activities $ 11,128 $ 11,520
-------- --------
Net increase in cash and cash equivalents $ 393 $ 587
Cash and cash equivalents at beginning of period 713 838
-------- --------
Cash and cash equivalents at end of period $ 1,106 $ 1,425
======== ========
Supplementary Information:
Interest paid less amounts capitalized $ 8,389 $ 6,603
-------- --------
Federal income taxes (refunded) paid $ (285) $ 700
-------- --------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Note A
------
A 1986 Rhode Island Supreme Court decision held that the Rhode
Island Public Utilities Commission's (RIPUC) 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 B - 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.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. New England Electric System (NEES)
subsidiaries currently have in place an environmental audit program
intended to enhance compliance with existing federal, state, and
local requirements regarding the handling of potentially hazardous
products and by-products.
The Company has been named as a potentially responsible party
(PRP) by either the U.S. Environmental Protection Agency or the
Massachusetts Department of Environmental Protection for two sites
(one of which is 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
<PAGE>
Note B - Hazardous Waste - Continued
------------------------
Rhode Island manufactured gas sites resulted in costs per site
ranging from less than $1 million to $8 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 would be successful. The Company believes that
hazardous waste liabilities for all sites of which it is aware will
not be material to its financial position.
Note C - New Accounting Standard
--------------------------------
In March 1995, the Financial Accounting Standards Board issued
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), effective for fiscal year 1996. This
standard clarifies when and how to recognize an impairment of long-
lived assets. In addition, FAS 121 requires that all regulatory
assets, which must have a high probability of recovery to be
initially established, must continue to meet that high probability
standard to avoid being written off. However, if written off, a
regulatory asset can be restored if it again has a high probability
of recovery. The impact of this standard will be driven by the
facts and circumstances that exist when the standard is adopted and
thereafter.
Note D
------
In the opinion of the Company, these statements reflect all
adjustments (which include normal recurring adjustments) necessary
for a fair statement of the results of its operations for the
periods presented and should be considered in conjunction with the
notes to the financial statements in the Company's 1994 Annual
Report.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
Condition and Results of Operations
-----------------------------------
This section contains management's assessment of The
Narragansett Electric Company's financial condition and the
principal factors having an impact on the results of operations.
This discussion should be read in conjunction with the Company's
financial statements and footnotes and the 1994 Annual Report on
Form 10-K.
Earnings
--------
Net income for the second quarter and first six months of 1995
increased $4 million and $6 million, respectively, from the
corresponding periods in 1994. These increases in income reflect
the recovery that commenced in 1995 of the Company's investment in
new transmission facilities which went into service in September
1994 and the recognition of unbilled revenues over a 21 month
period in accordance with a 1994 rate agreement. These increases
were partially offset by a decrease in kilowatthour (KWH) sales in
the first quarter of 1995 (see Operating Revenue section).
Rate Activity
-------------
On March 1, 1995, the Company filed a request with the Rhode
Island Public Utilities Commission (RIPUC) to increase its base
rates by $30.5 million. In this filing, the Company proposed a $3
<PAGE>
million discount for manufacturers which would have been
recoverable from other customers. In connection with the Rhode
Island Governor's veto of legislation that would have allowed
certain customers to buy power from alternative suppliers, the
Company has modified its proposal by providing a two year rate
discount to manufacturers amounting to $2 million per year, which
will not be recovered from customers (see Competitive Conditions
section). A decision on the Company's filing will be issued by
December 1, 1995.
In June 1995, the RIPUC opened a proceeding to reassess
whether fuel adjustment and purchased power cost adjustment (PPCA)
mechanisms should be continued after 1995 or whether such costs
should be included in base rates. These adjustment mechanisms
currently allow the Company to pass through the costs of fuel and
purchased power and do not require the Company to take risk
regarding recovery of such costs. The RIPUC has not yet scheduled
hearings in this proceeding.
In February 1995, the Federal Energy Regulatory Commission
(FERC) approved a rate agreement, effective in January 1995, for
the Company's affiliated power supplier, New England Power Company
(NEP). This rate agreement, among other things, increased the
credits the Company receives from NEP for the costs of owning and
operating its generation and transmission facilities by $14 million
<PAGE>
on an annual basis. The Company supplies all of the output of its
generating facilities to NEP. The increase in the credits reflects
the Company's 10 percent investment in the Manchester Street
generating station, which is expected to enter commercial operation
before the end of 1995, and the transmission facilities associated
with the station, which were placed in service in September 1994.
Operating Revenue
-----------------
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
Second Quarter Six Months
-------------- ------------
1995 vs 1994 1995 vs 1994
-------------- ------------
(In Millions)
Sales billed to ultimate customers $ 1 $(2)
Seasonal change in unbilled revenues 1 (1)
Unbilled revenues recognized
under rate agreement 2 4
Fuel recovery 7 8
Other 2 3
--- ---
$13 $12
=== ===
KWH sales billed to ultimate customers decreased by 1 percent
for the six months ending June 30, 1995. This reduction in KWH
sales reflects a 3 percent decrease in the first quarter of 1995,
<PAGE>
primarily in the residential sector, due to unusually mild winter
weather conditions when heating degree days were approximately 12
percent below normal. This decrease was partially offset by a 1
percent increase in KWH sales in the second quarter of 1995,
primarily in the commercial and industrial sectors.
The amount shown for unbilled revenues recognized under rate
agreement reflects the recognition of $14 million over a 21 month
period to end December 31, 1995 in accordance with the Company's
1994 rate agreement. The amount applicable to the second quarter
of 1994 was not recorded until the third quarter of 1994 when the
rate agreement was approved.
For a discussion of fuel recovery see the fuel costs
discussion in the Operating Expenses section.
<PAGE>
Operating Expenses
------------------
The following table summarizes the changes in operating
expenses discussed below:
Increase (Decrease) in Operating Expenses
Second Quarter Six Months
-------------- ------------
1995 vs 1994 1995 vs 1994
------------- ------------
(In Millions)
Purchased electric energy:
Fuel costs $ 7 $ 8
Integrated facilities
credits from NEP (1) (7)
Other operation and maintenance (1)
Depreciation (1) 2
Taxes 3 3
--- ---
$ 8 $ 5
=== ===
The increase in fuel costs from NEP in the second quarter and
six months reflects increased short-term purchases and alternate
energy purchases which flow through NEP's fuel clause. This was
the result of decreased generation from NEP's nuclear power
suppliers, decreased hydro production due to low water levels, and
overhauls of NEP's thermal generating facilities.
The Company owns a 10 percent share of the Manchester Street
Station and also owns the entire seven mile underground
transmission line associated with the facility as well as other
<PAGE>
transmission facilities in Rhode Island. The Company's share of
the electricity generated by this plant is made available to NEP
which owns the remaining 90 percent of the station. The Company
receives a credit on its purchased power bill from NEP reflecting
rate recovery of its investment in the station and the transmission
line, and for its fuel costs and other generation and transmission
costs. The increase in the integrated facilities credits from NEP
shown in the table above is primarily due to the recovery of the
Company's investment in this new transmission line which was placed
in service in September 1994, as well as increased credits for
dismantlement costs being incurred on the Company's previously
retired South Street generating station.
The fluctuations in depreciation expense are primarily due to
fluctuations in the level of dismantlement costs for the previously
retired South Street generating station.
The increase in taxes is primarily due to increased income.
Interest Expense
-----------------
The increase in interest expense is due to increased long-term
debt balances and higher interest rates in the first six months of
1995.
<PAGE>
Competitive Conditions
----------------------
The electric utility business is being subjected to rapidly
increasing competitive pressures, stemming from a combination of
trends, including surplus generating capacity, increasing electric
rates, improved technologies, increasing demand for customer
choice, and new regulations and legislation intended to foster
competition. See the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
The state of Rhode Island has been considering various proposals
for allowing electric customers greater choice over their
electricity supplier. The RIPUC convened a task force of
utilities, commercial and industrial customers, and other
interested parties to prepare a report on restructuring the
industry. In this proceeding, the Company has filed with the RIPUC
a set of interdependent principles for industry restructuring.
These principles, which were agreed to by groups representing
environmental protection advocates, governmental agencies, non-
utility generators, investor-owned utilities, and large and small
customer interests, include provisions for increased customer
choice while allowing utilities the opportunity to recover the cost
of their past commitments, as well as provisions for protecting
residential customers, encouraging renewable resources and energy
conservation, and honoring contracts with independent power
producers. The parties agreeing to the principles suggested to the
<PAGE>
RIPUC that they be permitted a six month period for discussions and
negotiations leading to the development of detailed, company-
specific plans. The RIPUC is expected to issue a decision this
summer.
In July 1995, the Governor of Rhode Island vetoed two bills that
would have allowed certain industrial customers to buy power from
alternative suppliers, rather than through the local electric
utility. The Rhode Island Legislature may still override the
vetoes and it has indicated that it will consider alternative
legislation in September 1995. Narragansett cannot predict whether
any such legislation will be enacted. Because the Company believed
that the proposed legislation would result in piecemeal
deregulation that would not be fair to customers or shareholders
and would circumvent the comprehensive proceedings mentioned above,
the Company urged the Governor to exercise his veto. The Company
committed that, if the measures were not enacted into law, the
Company would provide a two year rate discount to manufacturing
customers (see Rate Activity section). In addition, the Company
committed, if the measure were not enacted, to submit by July 1,
1996, a specific and detailed proposal to the RIPUC addressing the
issues associated with providing open access to the Company's
distribution system for its large commercial and industrial
customers. Among other things, that filing would address the
proper means for recovering past costs incurred to serve exiting
<PAGE>
customers through a compensatory access charge. If the charges are
approved by the RIPUC, the appropriate access tariffs would then be
filed with the FERC.
In March 1995, the FERC issued a notice of proposed rule-making
in which it stated that recovery in rates of legitimate and
verifiable stranded costs from departing customers is the
appropriate method for recovery of costs stranded as the result of
wholesale competition. Under the FERC policy proposal, costs
stranded as a result of retail competition would be subject to
state commission review if the state commission has the necessary
statutory authority, and subject to FERC review if the state
commission does not have such authority. A final decision is
expected in mid-1996.
Electric utility rates have historically 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 Standard No.
71, Accounting for the Effects of Certain Types of Regulation (FAS
71), requires regulated entities, in appropriate circumstances, to
establish regulatory assets and liabilities, and thereby defer the
income statement impact of certain costs that are expected to be
recovered in future rates. The Company believes that its
operations currently meet the criteria established in FAS 71.
However, the effects of regulatory and/or legislative initiatives
<PAGE>
could, in the near future, cause all or a portion of the Company's
operations to cease meeting the criteria of FAS 71. In that event,
the application of FAS 71 to such operations would be discontinued
and a non-cash write-off of previously established regulatory
assets and liabilities related to such operations would be
required. At June 30, 1995, the Company had pre-tax regulatory
assets (net of regulatory liabilities) of approximately $50
million. In addition, if the Company's revenues are insufficient
to recover its costs, a write-down of plant assets could be
required pursuant to Financial Accounting Standard No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of (FAS 121). This standard, effective
for fiscal year 1996, clarifies when and how to recognize an
impairment of long-lived assets. For further discussion of FAS 121
see Note C.
Utility Plant Expenditures and Financings
-----------------------------------------
Cash expenditures for utility plant totaled $39 million in the
first six months of 1995, including $8 million related to the
Company's 10 percent share of the Manchester Street Station
repowering project in Providence, Rhode Island. The repowering of
the Manchester Street generating station, scheduled to commence
commercial operation in late 1995, is estimated to cost
approximately $510 million, excluding transmission facilities. The
<PAGE>
funds necessary for utility plant expenditures were primarily
provided by net cash from operating activities, after the payment
of dividends, and from proceeds of long-term debt issues.
During the first six months of 1995 the Company issued $15
million of bonds at interest rates ranging from 7.75 to 7.81
percent. The Company plans to issue an additional $10 million of
long-term debt during 1995.
At June 30, 1995, the Company had $28 million of short-term
debt outstanding of which $10 million represents commercial paper
borrowings. The Company currently has lines of credit with banks
totaling $41 million. There were no outstanding borrowings under
these lines of credit at June 30, 1995.
For the twelve-month period ending June 30, 1995, the ratio of
earnings to fixed charges was 2.45.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
Information concerning the Company's request to increase rates
filed with the Rhode Island Public Utilities Commission, discussed
in Part I of this report in Management's Discussion and Analysis of
Financial Condition and Results of Operations, is incorporated
herein by reference and made a part hereof.
Item 4. Submission of Matters to a Vote of Security-Holders
------------------------------------------------------------
On June 9, 1995, a Special Meeting of Stockholders was held.
The following actions were taken by the unanimous vote of the
1,132,487 shares having general voting rights represented at the
meeting:
A new series of first mortgage bonds was authorized.
Regulatory filings and the execution of documents in connection
with the new series were authorized. The issuance of $50 million
of the new first mortgage bonds was authorized.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
The Company is filing the following revised exhibit for
incorporation by reference into its registration statements on Form
S-3, Commission File Nos. 33-49455, 33-50015, and 33-61131:
12 Statement re computation of ratios
The Company is filing Financial Data Schedules.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-Q for
the quarter ended June 30, 1995 to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NARRAGANSETT ELECTRIC COMPANY
s/ Howard W. McDowell
Howard W. McDowell
Controller, Authorized Officer, and
Principal Accounting Officer
Date: August 10, 1995
Exhibit Index
<PAGE>
Exhibit Index
-------------
Exhibit Description Page
------- ----------- ----
12 Statement re computation of Filed herewith
ratios
27 Financial Data Schedule Filed herewith
Exhibit 12
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
(Unaudited)
<CAPTION>
12 Months
Ended
June 30, 1995 Years Ended December 31,
Actual -------------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990
-------------- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Income $20,112 $14,589 $14,274 $21,052 $16,820 $17,599
----------
Add income taxes and fixed charges
----------------------------------
Current federal income taxes (481) 1,020 2,183 4,608 1,558 7,624
Deferred federal income taxes 8,317 3,930 2,199 4,560 5,528 351
Investment tax credits - net (506) (508) (508) (507) (500) (504)
Interest on long-term debt 15,590 14,334 12,715 13,290 12,581 11,016
Interest on short-term debt and other3,331 2,897 2,074 1,277 2,500 2,968
------- ------- ------- ------- ------- -------
Net earnings available for fixed charges$46,363$36,262 $32,937 $44,280 $38,487 $39,054
------- ------- ------- ------- ------- -------
Fixed charges:
Interest on long-term debt $15,590 $14,334 $12,715 $13,290 $12,581 $11,016
Interest on short-term debt and other3,331 2,897 2,074 1,277 2,500 2,968
------- ------- ------- ------- ------- -------
Total fixed charges $18,921 $17,231 $14,789 $14,567 $15,081 $13,984
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.45 2.10 2.23 3.04 2.55 2.79
----------------------------------
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS QTR-2 QTR-2
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994 JUN-30-1995 JUN-30-1994
<BOOK-VALUE> PER-BOOK PER-BOOK PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 516,845 0 0 0
<OTHER-PROPERTY-AND-INVEST> 0 0 0 0
<TOTAL-CURRENT-ASSETS> 98,791 0 0 0
<TOTAL-DEFERRED-CHARGES> 57,204 <F1> 0 0 0
<OTHER-ASSETS> 0 0 0 0
<TOTAL-ASSETS> 672,840 0 0 0
<CAPITAL-SURPLUS-PAID-IN> 60,170 0 0 0
<RETAINED-EARNINGS> 97,345 0 0 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 214,139 0 0 0
<COMMON> 56,624 0 0 0
0 0 0 0
36,500 0 0 0
<LONG-TERM-DEBT-NET> 203,827 0 0 0
<SHORT-TERM-NOTES> 27,850 <F2> 0 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0 0 0
0 0 0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0 0 0
<LEASES-CURRENT> 0 0 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 190,524 0 0 0
<TOT-CAPITALIZATION-AND-LIAB> 672,840 0 0 0
<GROSS-OPERATING-REVENUE> 241,446 229,261 116,426 103,800
<INCOME-TAX-EXPENSE> 4,116 1,239 655 (1,652)
<OTHER-OPERATING-EXPENSES> 217,384 214,901 108,470 102,738
<TOTAL-OPERATING-EXPENSES> 221,500 216,140 109,125 101,086
<OPERATING-INCOME-LOSS> 19,946 13,121 7,301 2,714
<OTHER-INCOME-NET> (38) (434) 74 75
<INCOME-BEFORE-INTEREST-EXPEN> 19,908 12,687 7,375 2,789
<TOTAL-INTEREST-EXPENSE> 9,084 7,386 4,317 3,802
<NET-INCOME> 10,824 5,301 3,058 (1,013)
1,072 1,072 536 536
<EARNINGS-AVAILABLE-FOR-COMM> 9,752 4,229 2,522 (1,549)
<COMMON-STOCK-DIVIDENDS> 3,963 1,133 3,397 567
<TOTAL-INTEREST-ON-BONDS> 8,070 6,814 4,088 3,489
<CASH-FLOW-OPERATIONS> 28,133 29,146 10,673 21,343
<PAGE>
<EPS-PRIMARY> 0 <F3> 0 <F3> 0 <F3> 0 <F3>
<EPS-DILUTED> 0 <F3> 0 <F3> 0 <F3> 0 <F3>
<FN>
<F1> Total deferred charges includes other assets.
<F2> Short-term notes includes commercial paper obligations and notes payable to associated companies.
<F3> Per share data is not relevant because the Company's common stock is wholly owned by New England Electric System.
</FN>
