<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 March 31, 1999
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 March 31, 1999.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Income
Periods Ended March 31
(Unaudited)
<CAPTION>
Three Months Twelve Months
------------ -------------
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $126,128 $119,976 $481,806 $508,548
-------- -------- -------- --------
Operating expenses:
Fuel for generation and purchased electric
energy:
Contract termination charges from New
England Power Company, an affiliate 35,647 33,855 119,548 33,855
Other New England Power Company 3,071 27,518 48,328 259,658
Other 37,526 98 87,004 215
Other operation 17,899 19,700 93,991 76,249
Maintenance 2,819 2,896 11,920 12,628
Depreciation 5,623 5,961 22,421 22,814
Taxes, other than federal income taxes 10,420 10,259 39,076 39,357
Federal income taxes 2,534 4,884 13,827 15,154
-------- -------- -------- --------
Total operating expenses 115,539 105,171 436,115 459,930
-------- -------- -------- --------
Operating income 10,589 14,805 45,691 48,618
Other income:
Other income (expense), net (1,069) (989) 721 (683)
-------- -------- -------- --------
Operating and other income 9,520 13,816 46,412 47,935
-------- -------- -------- --------
Interest:
Interest on long-term debt 3,626 3,831 14,720 15,705
Other interest 877 618 3,874 2,700
Allowance for borrowed funds used during
construction - credit (15) (32) (68) (108)
-------- -------- -------- --------
Total interest 4,488 4,417 18,526 18,297
-------- -------- -------- --------
Net income $ 5,032 $ 9,399 $ 27,886 $ 29,638
======== ======== ======== ========
Statements of Retained Earnings
(In Thousands)
Retained earnings at beginning of period $ 86,465 $129,567 $109,897 $123,738
Net income 5,032 9,399 27,886 29,638
Dividends declared on cumulative
preferred stock (94) (190) (471) (1,609)
Dividends declared on common stock - (28,879) (44,733) (40,204)
Premium on redemption of preferred stock 15 - (1,161) (1,666)
-------- -------- -------- --------
Retained earnings at end of period $ 91,418 $109,897 $ 91,418 $109,897
======== ======== ======== ========
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>
March 31, December 31,
ASSETS 1999 1998
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $737,319 $732,077
Less accumulated provisions for depreciation 214,140 209,155
-------- --------
523,179 522,922
Construction work in progress 1,689 2,566
-------- --------
Net utility plant 524,868 525,488
-------- --------
Current assets:
Cash 2,230 2,957
Accounts receivable:
From electric energy services 48,869 53,727
Other (including $189,000 and $4,444,000 from affiliates) 1,217 5,575
Less reserves for doubtful accounts 4,435 4,240
-------- --------
45,651 55,062
Unbilled revenues 11,497 20,752
Fuel, materials, and supplies, at average cost 3,845 3,494
Prepaid and other current assets 643 739
-------- --------
Total current assets 63,866 83,004
-------- --------
Deferred charges and other assets 54,477 55,628
-------- --------
$643,211 $664,120
======== ========
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 81 81
Other paid-in capital 105,714 105,713
Retained earnings 91,418 86,465
Unrealized gain on securities, net 242 237
-------- --------
Total common equity 254,079 249,120
Cumulative preferred stock, par value $50 per share 7,238 7,238
Long-term debt 168,723 168,702
-------- --------
Total capitalization 430,040 425,060
-------- --------
Current liabilities:
Long-term debt due in one year 8,000 8,000
Short-term debt to affiliates 24,375 26,675
Accounts payable (including $10,500,000 and $1,929,000
to affiliates) 34,952 28,260
Accrued liabilities:
Taxes 13,341 10,031
Interest 3,073 4,553
Other accrued expenses 12,806 34,734
Customer deposits 6,142 6,116
Dividends payable 94 4,058
-------- --------
Total current liabilities 102,783 122,427
-------- --------
Deferred federal income taxes 80,754 81,045
Unamortized investment tax credits 6,412 6,533
Other reserves and deferred credits 23,222 29,055
-------- --------
$643,211 $664,120
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Cash Flows
Quarters Ended March 31
(Unaudited)
<CAPTION>
1999 1998
---- ----
(In Thousands)
<S> <C> <C>
Operating activities:
Net income $ 5,032 $ 9,399
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 5,623 5,961
Deferred federal income taxes and investment tax credit, net (497) 3,416
Allowance for funds used during construction (15) (32)
Decrease (increase) in accounts receivable, net
and unbilled revenue 18,666 2,465
Decrease (increase) in fuel, materials, and supplies (351) (345)
Decrease (increase) in prepaid and other current assets 96 781
Increase (decrease) in accounts payable 6,692 1,058
Increase (decrease) in other current liabilities (20,072) (4,996)
Other, net (4,475) (105)
-------- --------
Net cash provided by operating activities $ 10,699 $ 17,602
-------- --------
Investing activities:
Plant expenditures, excluding allowance for
funds used during construction $ (5,020) $ (5,175)
Other investing activities (48) (80)
-------- --------
Net cash provided by (used in) investing activities$ (5,068) $ (5,255)
-------- --------
Financing activities:
Dividends paid on common stock $ (3,964) $ (3,397)
Dividends paid on preferred stock (94) (190)
Long-term debt - retirements - (5,000)
Preferred stock - retirements - (26)
Changes in short-term debt (2,300) (3,925)
-------- --------
Net cash provided by (used in)
financing activities $ (6,358) $(12,538)
-------- --------
Net increase (decrease) in cash and cash equivalents $ (727) $ (191)
Cash and cash equivalents at beginning of period 2,957 3,122
-------- --------
Cash and cash equivalents at end of period $ 2,230 $ 2,931
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
THE NARRAGANSETT ELECTRIC COMPANY
Notes to Unaudited Financial Statements
Note A - Hazardous Waste
- ------------------------
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly known as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous substances.
A number of states, including Massachusetts, have enacted similar
laws.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. The Narragansett Electric Company (the
Company) currently has 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 New England
Electric System (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
<PAGE>
indicated costs in a similar range. The NEES companies have
recovered amounts from certain insurers, and, where appropriate,
the Company intends to seek recovery from other 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.
Note B - New Accounting Standards
- ---------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (FAS 133), which
establishes accounting and reporting standards for such
instruments. FAS 133 is effective for fiscal years beginning after
June 15, 1999. Currently, the Company has no such holdings.
Note C
- ------
In the opinion of the Company, these financial 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 1998 Annual Report.
<PAGE>
THE NARRAGANSETT ELECTRIC COMPANY
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 (the Company) 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 1998 Annual Report on
Form 10-K.
Merger Agreements
- -----------------
For a full discussion of New England Electric Systems' (NEES)
merger agreements with The National Grid Group plc (National Grid)
and Eastern Utilities Associates (EUA), see the Merger Agreements
sections of the Company's Form 10-K for 1998 and the Company's 1998
Annual Report.
Update of Merger Agreements with National Grid and EUA
On April 9, 1999, NEES and National Grid received clearance under
the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, as
amended. In addition, shareholders of National Grid approved the
proposed merger on April 22, 1999 with 99 percent of those voting
approving the merger. On May 3, 1999, NEES received the approval
of more than the required majority of outstanding shares for the
merger with 75 percent of outstanding shares voting in favor of the
merger. Of those shares voted, in excess of 94 percent voted in
favor of the merger. NEES and National Grid have also filed for
merger approval with the Securities and Exchange Commission (SEC),
Federal Energy Regulatory Commission (FERC), and Nuclear Regulatory
Commission (NRC). NEES and National Grid have also made filings in
the states in which NEES subsidiaries operate where support or
approval for the merger is required. On April 21, 1999, the New
Hampshire Public Utilities Commission (NHPUC) issued an order
finding that the NEES/National Grid merger filing did not satisfy
the requirements for exemption from the NHPUC's formal review
process. Hearings on the merger are scheduled for June 1999. On
April 29, 1999, the Committee on Foreign Investment in the United
States under the Exon-Florio Provisions of the Omnibus Trade and
Competitiveness Act of 1988 concluded there were no issues of
national security to warrant any investigation. The NEES/National
Grid merger is expected to be completed by early 2000.
<PAGE>
On April 29, 1999, NEES and EUA also received clearance under HSR
for the NEES acquisition of EUA. NEES and EUA have filed for
merger approval with the FERC and the Commonwealth of
Massachusetts. The acquisition of EUA also requires approval by
the SEC and NRC, and approval by certain states in which EUA
subsidiaries operate. On May 17, 1999, EUA shareholders approved
the acquisition of EUA by NEES. The acquisition of EUA is expected
to be completed by early 2000.
Industry Restructuring
- ----------------------
For a full discussion of industry restructuring activities in
Rhode Island, the NEES companies' divestiture of its nonnuclear
generating business, stranded cost recovery, accounting
implications of industry restructuring and divestiture, and the
impact of restructuring on the distribution business, see the
"Industry Restructuring", "Accounting Implications", and "Impact of
Restructuring on Distribution Business" sections of the Company's
Form 10-K for 1998 and the Company's 1998 Annual Report.
Year 2000 Readiness Disclosure
- ------------------------------
Over the course of this year, most companies will face a
potentially serious information systems (computer) problem because
many software applications and operational programs written in the
past may not properly recognize calendar dates associated with the
year 2000 (Y2K). This could cause computers to either shut down or
lead to incorrect calculations.
During 1996, the NEES companies began the process of identifying
the changes required to their computer software and hardware to
mitigate Y2K issues. The NEES companies established a Y2K Project
team to manage these issues, which has consisted of as many as 70
full-time equivalent staff at some points in time, primarily
external consultants being overseen by an internal Y2K management
team. To facilitate the Y2K Project, NEES entered into contracts
with Keane, Inc. and IBM to provide personnel support to the Y2K
Project. Through March 31, 1999, the NEES companies have spent
approximately $ 17 million with these vendors, which is included in
the cost figures disclosed below. The Y2K Project team reports
project progress to a Y2K Executive Oversight Committee each month.
The team also makes regular reports to NEES' Board of Directors and
its Audit Committee. The NEES companies have separated their Y2K
Project into four parts as shown below, along with the estimated
completion dates for each part.
<PAGE>
<TABLE>
<CAPTION>
Substantial Contingency Testing
Completion Documentation,
of Critical and Clean
Category Specific Example Systems Management
- -------- ---------------- ----------- -------------------
<S> <C> <C> <C>
Mainframe/Midrange Accounting/Customer Completed Throughout 1999
systems service integrated
systems
Desktop systems Personal computers/ June 30, 1999 Throughout 1999
Department software/
Networks
Operational/ Dispatching systems/ June 30, 1999 Throughout 1999
Embedded Transmission and
systems Distribution systems/
Telephone systems
External issues Electronic Data June 30, 1999 Throughout 1999
Interchange/Vendor
communications
</TABLE>
The NEES companies are using a three-phase approach in
coordinating their Y2K Project for system-related issues: (I)
Assessment and Inventory, (II) Pilot Testing, and (III) Renovation,
Conversion, or Replacement of Application and Operating Software
Packages and Testing. Phase I, which was an initial assessment of
all systems and devices for potential Y2K defects, was completed in
mid-1997. These assessments included, but were not limited to, the
review of program code for mainframe and midrange systems, analysis
of personal computer hardware and network equipment for desktop
systems, reaching consensus with key "data exchange" partners
regarding the approach and execution of plans to address Y2K-
related issues, and coordination with other New England Power Pool
(NEPOOL) member utilities related to operational systems, such as
transmission systems. Phase II, which consisted of renovation
pilots for a cross-section of systems in order to facilitate the
establishment of templates for Phase III work, was completed in
late 1997. Phase III, which is currently ongoing, requires the
renovation, conversion, or replacement of the remaining
applications and operating software packages.
Critical systems include major operational and informational
systems such as the NEES companies' financial-related and customer
information systems. These mission critical systems were first
addressed at an individual component level, and then, upon
satisfactory completion of that testing, reviewed at an integrated
<PAGE>
level, during which the Y2K Project team tested for Y2K problems
which could be caused by various system interfaces. Additionally,
contingency plans are being formulated for mission critical
systems, as described below.
The overall Y2K Project has also been designed such that Y2K-
related work performed by external consultants is reviewed by NEES
employees, and vice-versa. The Y2K Project team management
periodically benchmarks its progress against the recommended
progress schedule documented by the North American Electric
Reliability Council (NERC), and is currently ahead of the
recommended schedule.
The NEES companies have also implemented a formalized
communication process with third parties to give and receive
information related to their progress in remediating their own Y2K
issues, and to communicate the NEES companies' progress in
addressing the Y2K issue. These third parties include major
customers, suppliers, and significant businesses with which the
NEES companies have data links (such as banks). The NEES companies
have identified standard offer generation service providers,
telecommunications companies, and the Independent System Operator-
New England (ISO New England) as critical to business operations.
The NEES companies have been in contact with all of these parties
regarding the progress of their Y2K remediation efforts, and will
continue to monitor their ongoing remediation efforts through
continued communications. The NEES companies cannot predict the
outcome of other companies' remediation efforts. Therefore,
contingency plans are being developed, as described below.
The NEES companies believe total costs associated with making the
necessary modifications to all centralized and noncentralized
systems will be approximately $28 million. These costs include the
replacement of approximately one thousand desktop computers. In
addition, the NEES companies are spending $7 million related to the
replacement of the human resources and payroll system, in part due
to the Y2K issue. As of March 31, 1999, total Y2K-related costs of
approximately $30 million have been incurred, of which
approximately $4 million has been capitalized. The NEES companies
continually review their cost estimates based upon the overall Y2K
Project status, and update these estimates as warranted.
The NEES companies are in the process of developing Y2K
contingency plans to allow for critical information and operating
systems to function from January 1, 2000 forward. If required,
these plans are intended to address both internal risks as well as
potential external risks related to suppliers and customers. Part
of the contingency planning for accounting and desktop systems will
include taking extensive data back-ups prior to year-end closing.
For operational systems, the NEES companies have in place an
overall disaster recovery program, which already includes periodic
<PAGE>
disaster simulation training (for outages due to severe weather,
for instance). As part of Y2K contingency planning, the NEES
companies will review their disaster recovery plans, modifying them
for Y2K-specific issues, such as a potential loss of
telecommunication services. The NEES companies expect that these
contingency plans will be in place by the third quarter of 1999.
Interregional and regional contingency plans are being formulated
that address emergency scenarios due to the interconnection of
utility systems throughout the United States. At a regional level,
the NEES companies are participating and cooperating with NEPOOL
and ISO New England. Overall regional activities, including those
of NEPOOL and ISO New England, will be coordinated by the Northeast
Power Coordinating Council, whose activities will be incorporated
into the interregional coordinating effort by NERC. The target for
the completion of this planning process is mid-1999. The NEES
companies have noted that the Y2K coordination efforts by ISO New
England began in May 1998, resulting in a demanding and difficult
schedule to attain regional and interregional target dates.
The NEES companies believe that the contingency plans being
developed both internally and on a regional level should
substantially mitigate the risks of Y2K-related failures at NEES
company facilities or those caused by the inability of entities,
such as ISO New England, to maintain the short-term reliability of
various generator and/or transmission lines on a regional or
interregional basis. Such risks include temporary disruptions of
electric service, which the NEES companies believe is the worst
case Y2K scenario with a reasonable chance of occurring. In the
event that a short-term disruption in service occurs, NEES does not
expect that it would have a material impact on its financial
position or results of operation.
While the NEES companies believe that their overall Y2K program
will satisfactorily address all critical operational and
system-related issues, significant risks remain. These risks
include, but are not limited to, the Y2K readiness of third
parties, including other utilities, power suppliers, and ISO New
England, cost and timeline estimates of remaining Y2K mitigation
efforts, and the overall accuracy of assumptions made related to
future events in the development of the Y2K mitigation effort.
Earnings
- --------
Net income for the first quarter of 1999 decreased $4 million
compared to the corresponding period in 1998. The decrease is due
primarily to reduced reimbursements associated with the Company's
former 10 percent ownership of the Manchester Street generating
station as a result of the sale of this facility in September 1998.
Increased operation and maintenance expenses also contributed to
the decrease in first quarter earnings.
<PAGE>
Operating Revenue
- -----------------
Operating revenue increased $6 million in the first quarter of
1999 as compared with the corresponding period in 1998 due
primarily to an increase in standard offer and access charge
revenues as described in the "Operating Expenses" section. In
addition, revenues were favorably affected by a refund made in
January 1998 of past overrecoveries of postretirement benefits
other than pension costs (PBOPs), the recovery of increased demand-
side management spending, and the implementation of a fully
reconciling transmission cost rate mechanism in the first quarter
of 1999. In addition, kilowatthour deliveries increased 1.5
percent as a result of a continued strong economy and the effect of
weather.
Operating Expenses
- ------------------
Operating expenses for the first quarter of 1999 increased $10
million compared with the corresponding period in 1998 primarily
due to increased purchased electric energy of approximately $9
million and increased operation and maintenance costs of
approximately $4 million. These increases were partially offset by
reduced income taxes.
The increase in purchased electric energy is principally due
to the reduction in reimbursements received from NEP for costs
associated with the Company's former 10 percent ownership of the
Manchester Street generating station, as described in the "Earnings"
section. All of the output of this generating unit had been
previously supplied to New England Power Company (NEP). The
increase is also due to an increase in standard offer purchased
power costs due to a scheduled increase in standard offer rates, as
well as a net increase in contract termination charges (CTC) of
approximately $2 million. CTC expenses increased as a result of a
$21 million payment made by the Company to NEP in accordance with
an agreement reached with the Rhode Island Public Utilities
Commission related to access charge overcollection. This payment
reduces the Company's remaining fixed CTC obligation to NEP which
will be recovered by the end of the year 2000. Partially
offsetting this increase was a decrease in NEP's CTC rate from 2.8
cents per kWh, as originally established, to approximately 1.5
cents or less per kWh upon completion of the September 1 sale of
NEP's nonnuclear generating business.
<PAGE>
Operation and maintenance expenses increased in the first
quarter primarily due to increased transmission wheeling costs of
$2.4 million, a portion of which is included in the transmission
cost rate adjustment mechanism as described in the "Operating
Revenue" section. In addition, as described earlier, the Company
had made a refund of past overrecoveries of PBOP costs during the
first quarter of 1998. This refund not only reduced revenues in
the first quarter of 1998, but also reduced expenses.
Utility Plant Expenditures and Financing
- ----------------------------------------
Cash expenditures for utility plant totaled $5 million for the
first three months of 1999. The funds necessary for utility plant
expenditures during the period were primarily provided by net cash
from operating activities, after the payment of dividends.
At March 31, 1999, the Company had $24 million of short-term
debt outstanding representing borrowings from affiliates. The
Company's ability to issue short-term debt is limited by the need
to obtain regulatory approval from the SEC under the Public Utility
Holding Company Act of 1935. Approval has been granted for up to
$100 million. As of March 31, 1999, the Company had lines of
credit with banks totaling $41 million. There were no borrowings
under these lines of credit at March 31, 1999.
For the twelve-month period ending March 31, 1999, the ratio
of earnings to fixed charges was 3.27.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
- ------------------------------------------------------------
On March 17, 1999, the Annual 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:
The number of directors for the ensuing year was fixed at
seven.
The following were elected as directors:
Richard W. Frost
Cheryl A. LaFleur
Robert L. McCabe
Lawrence J. Reilly
Michael F. Ryan
Richard P. Sergel
Ronald L. Thomas
PricewaterhouseCoopers was appointed as auditor for 1999.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
The Company is filing the following revised exhibit for
incorporation by reference into its registration statement on
Form S-3, Commission File No. 33-61131.
12 Statement re computation of ratios
The Company is filing Financial Data Schedules.
The Company filed a report on Form 8-K dated February 1,
1999 containing Items 5 and 7.
<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 March 31, 1999 to be signed on its behalf
by the undersigned thereunto duly authorized.
THE NARRAGANSETT ELECTRIC COMPANY
s/John G. Cochrane
John G. Cochrane
Treasurer, Authorized Officer, and
Principal Financial Officer
Date: May 17, 1999
<PAGE>
Exhibit Index
-------------
Exhibit Description Page
- ------- ----------- ----
12 Statement re computation of Filed herewith
ratios
27 Financial Data Schedule Filed herewith
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
<CAPTION> (Unaudited)
12 Months
Ended
March 31, 1999 Years Ended December 31,
Actual -------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
-------------- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 27,886 $32,253 $27,932 $22,954 $23,910 $14,589
- ----------
Add income taxes and fixed charges
- ----------------------------------
Current federal income taxes 20,895 19,312 14,185 6,918 7,212 1,020
Deferred federal income taxes (6,126) (2,212) 79 4,675 3,512 3,930
Investment tax credits - net (488) (489) (495) (498) (503) (508)
Interest on long-term debt 14,720 14,925 16,179 17,205 16,627 14,334
Interest on short-term debt and other 3,874 3,615 2,475 2,883 3,663 2,897
------- ------- ------- ------- ------- -------
Net earnings available for fixed charges $60,761 $67,404 $60,355 $54,137 $54,421 $36,262
------- ------- ------- ------- ------- -------
Fixed charges:
Interest on long-term debt $14,720 $14,925 $16,179 $17,205 $16,627 $14,334
Interest on short-term debt and other 3,874 3,615 2,475 2,883 3,663 2,897
------- ------- ------- ------- ------- -------
Total fixed charges $18,594 $18,540 $18,654 $20,088 $20,290 $17,231
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 3.27 3.64 3.24 2.69 2.68 2.10
- ----------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS
AND CASH FLOWS OF THE NARRAGANSETT ELECTRIC COMPANY, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 524,868
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 63,866
<TOTAL-DEFERRED-CHARGES> 54,477 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 643,211
<COMMON> 56,624
<CAPITAL-SURPLUS-PAID-IN> 105,795
<RETAINED-EARNINGS> 91,418
<TOTAL-COMMON-STOCKHOLDERS-EQ> 254,079 <F3>
0
7,238
<LONG-TERM-DEBT-NET> 168,723
<SHORT-TERM-NOTES> 24,375
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 180,796
<TOT-CAPITALIZATION-AND-LIAB> 643,211
<GROSS-OPERATING-REVENUE> 126,128
<INCOME-TAX-EXPENSE> 2,534
<OTHER-OPERATING-EXPENSES> 113,005
<TOTAL-OPERATING-EXPENSES> 115,539
<OPERATING-INCOME-LOSS> 10,589
<OTHER-INCOME-NET> (1,069)
<INCOME-BEFORE-INTEREST-EXPEN> 9,520
<TOTAL-INTEREST-EXPENSE> 4,488
<NET-INCOME> 5,032
94
<EARNINGS-AVAILABLE-FOR-COMM> 4,938
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 3,626
<CASH-FLOW-OPERATIONS> 10,699
<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.
<F3> Total common stockholders equity includes the unrealized gain on securities.
</FN>