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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 2-7749
COMMONWEALTH ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1659070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
(617) 225-4000
(Registrant's telephone number, including area code)
(Former name, address and fiscal year, if changed since last report.)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock August 1, 1998
Common Stock, $25 par value 2,043,972 shares
The Company meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COMMONWEALTH ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
ASSETS
(Dollars in thousands)
June 30, December 31,
1998 1997
(Unaudited)
PROPERTY, PLANT AND EQUIPMENT, at original cost $560,958 $550,449
Less - Accumulated depreciation 181,497 174,488
379,461 375,961
Add - Construction work in progress 1,899 4,010
381,360 379,971
INVESTMENTS
Equity in nuclear electric power company 584 519
Other 14 14
598 533
CURRENT ASSETS
Cash 1,202 1,496
Accounts receivable -
Affiliates 3,322 1,753
Customers 38,316 45,199
Unbilled revenues 4,146 9,162
Prepaid property taxes - 3,043
Inventories and other 5,559 4,349
52,545 65,002
DEFERRED CHARGES
Regulatory assets 90,645 70,112
Other 4,292 3,601
94,937 73,713
$529,440 $519,219
See accompanying notes.
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COMMONWEALTH ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
CAPITALIZATION AND LIABILITIES
(Dollars in thousands)
June 30, December 31,
1998 1997
(Unaudited)
CAPITALIZATION
Common Equity -
Common stock, $25 par value -
Authorized and outstanding -
2,043,972 shares wholly-owned by
Commonwealth Energy System (Parent) $ 51,099 $ 51,099
Amounts paid in excess of par value 97,112 97,112
Retained earnings 31,893 31,993
180,104 180,204
Long-term debt, less current sinking
fund requirements 146,145 147,192
326,249 327,396
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 38,675 14,900
Advances from affiliates 4,135 5,315
42,810 20,215
Other Current Liabilities -
Current sinking fund requirements 3,553 3,553
Accounts payable -
Affiliates 11,855 12,007
Other 23,907 32,826
Accrued taxes -
Local property and other 56 3,299
Income 13,792 19,114
Other 22,898 16,528
76,061 87,327
118,871 107,542
DEFERRED CREDITS
Accumulated deferred income taxes 51,206 50,283
Unamortized investment tax credits 6,480 6,696
Other 26,634 27,302
84,320 84,281
COMMITMENTS AND CONTINGENCIES
$529,440 $519,219
See accompanying notes.
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COMMONWEALTH ELECTRIC COMPANY
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Dollars in thousands - unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
ELECTRIC OPERATING REVENUES $ 93,957 $111,405 $200,058 $228,766
OPERATING EXPENSES
Electricity purchased for
resale, transmission and fuel 62,688 73,261 128,361 150,328
Other operation and maintenance 20,842 29,472 39,665 51,223
Depreciation 4,505 4,419 9,024 8,838
Taxes -
Income (161) (847) 4,051 2,103
Local property 1,533 1,529 3,063 3,152
Payroll and other 593 682 1,390 1,641
90,000 108,516 185,554 217,285
OPERATING INCOME 3,957 2,889 14,504 11,481
OTHER INCOME (EXPENSE) 145 (65) 165 (55)
INCOME BEFORE INTEREST CHARGES 4,102 2,824 14,669 11,426
INTEREST CHARGES
Long-term debt 3,321 3,407 6,642 6,796
Other interest charges 758 489 1,177 904
4,079 3,896 7,819 7,700
NET INCOME (LOSS) 23 (1,072) 6,850 3,726
RETAINED EARNINGS -
Beginning of period 38,820 32,132 31,993 27,334
Dividends on common stock (6,950) (3,373) (6,950) (3,373)
End of period $ 31,893 $ 27,687 $ 31,893 $ 27,687
See accompanying notes.
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COMMONWEALTH ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Dollars in thousands - unaudited)
1998 1997
OPERATING ACTIVITIES
Net income $ 6,850 $ 3,726
Effects of noncash items -
Depreciation and amortization 11,833 12,697
Deferred income taxes and investment
tax credits, net 354 (504)
Change in working capital, exclusive of cash
and interim financing 897 (1,354)
Transition costs deferral (23,924) -
Fuel charge stabilization deferral 1,465 (6,873)
All other operating items (2,619) (6,311)
Net cash (used for) provided by operating activities (5,144) 1,381
INVESTING ACTIVITIES
Additions to property, plant and equipment
(inclusive of AFUDC) (9,748) (8,809)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 23,775 9,325
Proceeds from (payments to) affiliates (1,180) 4,595
Payment of dividends (6,950) (3,373)
Sinking funds payments (1,047) (1,047)
Net cash provided by financing activities 14,598 9,500
Net increase (decrease) in cash (294) 2,072
Cash at beginning of period 1,496 358
Cash at end of period $ 1,202 $ 2,430
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of capitalized amounts) $ 7,422 $ 7,504
Income taxes $ 8,659 $ 3,913
See accompanying notes.
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COMMONWEALTH ELECTRIC COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) General Information
Commonwealth Electric Company (the Company) is a wholly-owned subsid-
iary of Commonwealth Energy System. The parent company is referred to in
this report as the "System" and together with its subsidiaries is collec-
tively referred to as "the system." The System is an exempt public
utility holding company under the provisions of the Public Utility Holding
Company Act of 1935 and, in addition to its investment in the Company, has
interests in other utility and several nonregulated companies.
The Company has 699 regular employees including 485 (69%) who are
represented by three collective bargaining units. One of these collective
bargaining units, representing approximately 12% of regular employees,
reached an agreement earlier this year on a new five-year contract that
remains in effect until April 30, 2003. Agreements with two other
bargaining units (representing approximately 57% of regular employees)
will remain in effect until September 30, 2002 and October 31, 2001,
respectively. Employee relations have generally been satisfactory.
(2) Significant Accounting Policies
(a) Principles of Accounting
The Company's significant accounting policies are described in Note 2
of Notes to Financial Statements included in its 1997 Annual Report on
Form 10-K filed with the Securities and Exchange Commission. For interim
reporting purposes, the Company follows these same basic accounting poli-
cies but considers each interim period as an integral part of an annual
period and makes allocations of certain expenses to interim periods based
upon estimates of such expenses for the year.
The unaudited financial statements for the periods ended June 30, 1998
and 1997 reflect, in the opinion of the Company, all adjustments (consist-
ing of only normal recurring accruals, except for a one-time charge
recorded in June 1997 as described in Management's Discussion and Analysis
of Results of Operations) necessary to summarize fairly the results for
such periods. In addition, certain prior period amounts are reclassified
from time to time to conform with the presentation used in the current
period's financial statements.
Income tax expense is recorded using the statutory rates in effect
applied to book income subject to tax recorded in the interim period.
The results for interim periods are not necessarily indicative of
results for the entire year because of seasonal variations in the con-
sumption of energy.
(b) Regulatory Assets and Liabilities
The Company is regulated as to rates, accounting and other matters by
various authorities including the Federal Energy Regulatory Commission
(FERC) and the Massachusetts Department of Telecommunications and Energy
(DTE).
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COMMONWEALTH ELECTRIC COMPANY
Based on the current regulatory framework, the Company accounts for
the economic effects of regulation in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation." The Company has established
various regulatory assets in cases where the DTE and/or the FERC have
permitted or are expected to permit recovery of specific costs over time.
Similarly, the regulatory liabilities established by the Company are
required to be refunded to customers over time. In the event the criteria
for applying SFAS No. 71 are no longer met, the accounting impact would be
an extra-ordinary, noncash charge to operations of an amount that could be
material. Criteria that give rise to the discontinuance of SFAS No. 71
include: 1) increasing competition that restricts the Company's ability to
establish prices to recover specific costs, and 2) a significant change in
the current manner in which rates are set by regulators from cost-based
regulation to another form of regulation. These criteria are reviewed on
a regular basis to ensure the continuing application of SFAS No. 71 is
appropriate. Based on the current evaluation of the various factors and
conditions that are expected to impact future cost recovery, the Company
believes that its regulatory assets, including those related to genera-
tion, are probable of future recovery.
As a result of electric industry restructuring, the Company discontin-
ued application of accounting principles applied to its investment in
electric generation facilities effective March 1, 1998. The Company will
not be required to write off any of its generation-related assets,
including regulatory assets. These assets will be retained on the
Company's Balance Sheets because the legislation and the DTE's plan for a
restructured electric industry specifically provide for their recovery
through a non-bypassable transition charge.
The principal regulatory assets included in deferred charges were as
follows:
June 30, December 31,
1998 1997
(Dollars in thousands)
Power contract buy-out $16,515 $17,609
Fuel charge stabilization 27,885 29,655
Postretirement benefits costs 12,270 12,271
Transition costs 24,225 -
Yankee Atomic unrecovered plant
and decommissioning costs 2,826 3,436
Pilgrim nuclear plant litigation costs 5,689 5,929
Conservation and load management costs 210 314
Other 1,025 898
$90,645 $70,112
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COMMONWEALTH ELECTRIC COMPANY
The regulatory liabilities, reflected in deferred credits in the
accompanying Balance Sheets were as follows:
June 30, December 31,
1998 1997
(Dollars in thousands)
Excess Seabrook-related deferred income taxes $ 337 $ 698
Other deferred income taxes 1,875 1,875
Excess replacement power refunds 127 246
$ 2,339 $ 2,819
In November 1997, the Commonwealth of Massachusetts enacted a compre-
hensive electric utility industry restructuring bill. On November 19,
1997, the Company, together with affiliates Cambridge Electric Light
Company (Cambridge Electric) and Canal Electric Company (Canal), filed a
restructuring plan with the DTE. The plan, approved by the DTE on
February 27, 1998, provides that the Company and Cambridge Electric,
beginning March 1, 1998, initiate a ten percent rate reduction for all
customer classes and allow customers to choose their energy supplier. As
part of the plan, the DTE authorized the recovery of certain strandable
costs and provides that certain future costs may be deferred to achieve or
maintain the rate reductions that the restructuring bill mandates. The
legislation gives the DTE the authority to determine the amount of
strandable costs that will be eligible for recovery. Costs that will
qualify as strandable costs and be eligible for recovery include, but are
not limited to, certain above market costs associated with generating
facilities, costs associated with long-term commitments to purchase power
at above market prices from independent power producers and regulatory
assets and associated liabilities related to the generation portion of the
electric business.
The cost of transitioning to competition will be mitigated, in part,
by the sale of the system's non-nuclear generating assets. The sale is
expected to be completed by year-end 1998 pending receipt of the necessary
regulatory approvals. The net proceeds from the sale of these assets will
be used to mitigate transition costs.
The Company's ability to recover its transition costs will depend on
several factors, including the aggregate amount of stranded costs the
Company will be allowed to recover and the market price of electricity.
Management believes that the Company will recover its transition costs. A
change in any of the above listed factors or in the current legislation
could affect the recovery of transition costs and may result in a loss to
the Company. For additional information relating to industry restructur-
ing, see the "Industry Restructuring" section under Management's Discus-
sion and Analysis and Results of Operations.
(3) Commitments and Contingencies
The Company is engaged in a continuous construction program presently
estimated at $106 million for the five-year period 1998 through 2002. Of
that amount, $23.8 million is estimated for 1998. As of June 30, 1998,
the Company's construction expenditures amounted to approximately $9.7
million, including an allowance for funds used during construction. The
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COMMONWEALTH ELECTRIC COMPANY
Company expects to finance these expenditures on an interim basis with
internally-generated funds and short-term borrowings.
The program is subject to periodic review and revision due to factors
such as changes in business conditions, rates of customer growth, effects
of inflation, maintenance of reliable and safe service, equipment delivery
schedules, licensing delays, availability and cost of capital and environ-
mental regulations.
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COMMONWEALTH ELECTRIC COMPANY
Item 2. Management's Discussion and Analysis of Results of Operations
The following is a discussion of certain significant factors which have
affected operating revenues, expenses and net income during the periods
included in the accompanying Condensed Statements of Income. This discussion
should be read in conjunction with the Notes to Condensed Financial Statements
appearing elsewhere in this report.
A summary of the period to period changes in the principal items included
in the Condensed Statements of Income for the three and six months ended
June 30, 1998 and 1997 and unit sales for these periods is shown below:
Three Months Ended Six Months Ended
June 30, June 30,
1998 and 1997 1998 and 1997
Increase (Decrease)
(Dollars in thousands)
Electric Operating Revenues $(17,448) (15.7)% $(28,708) (12.5)%
Operating Expenses -
Electricity purchased for resale,
transmission and fuel (10,573) (14.4) (21,967) (14.6)
Other operation and maintenance (8,630) (29.3) (11,558) (22.6)
Depreciation 86 1.9 186 2.1
Taxes -
Federal and state income 686 81.0 1,948 92.6
Local property and other (85) (3.8) (340) (7.1)
(18,516) (17.1) (31,731) (14.6)
Operating Income 1,068 37.0 3,023 26.3
Other Income 210 323.1 220 400.0
Income Before Interest Charges 1,278 45.3 3,243 28.4
Interest Charges 183 4.7 119 1.5
Net Income $ 1,095 102.1 $ 3,124 83.8
Unit Sales (Megawatthours or MWH)
Retail (51,717) (6.2) (47,184) (2.8)
Wholesale 75,035 30.6 176,827 32.2
Total 23,318 2.2 129,643 5.8
The following is a summary of unit sales (in MWH) for the periods
indicated:
Three Months Six Months
Period Ended Total Retail Wholesale Total Retail Wholesale
June 30, 1998 1,101,716 781,077 320,639 2,369,528 1,643,029 726,499
June 30, 1997 1,078,398 832,794 245,604 2,239,885 1,690,213 549,672
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COMMONWEALTH ELECTRIC COMPANY
Operating Revenues, Electricity Purchased for Resale, Transmission and Fuel
Operating revenues for the second quarter and six-month period of 1998
were $17.4 million and $28.7 million lower, respectively, than the correspond-
ing periods in 1997, due to decreases in electricity purchased for resale,
fuel and transmission charges ($10.6 million and $22 million, respectively)
and the decline in retail unit sales. The decline in these costs reflects a
cost deferral of $12.4 million for the quarter and $23.9 million in the six-
month period in conjunction with the Company's restructuring plan as approved
by the DTE. As a result of industry restructuring, the Company has unbundled
its rates, provided customers with a 10 percent rate reduction as of March 1,
1998 and has afforded customers the opportunity to purchase generation supply
in the competitive market consistent with the electric industry restructuring
legislation further discussed below. Delivery rates are composed of a
customer charge (to collect metering and billing costs), a distribution
charge, a transition charge (to collect stranded costs), a transmission
charge, an energy conservation charge (to collect costs for demand-side
management programs) and a renewable energy charge. Electricity supply
services provided by the Company include optional standard offer service and
default service. Amounts collected through these various charges will be
reconciled to actual expenditures on an on-going basis.
Total unit sales for the current quarter and six-month period increased
primarily as a result of greater wholesale sales to other utilities.
Other Operation and Maintenance
The decline in other operation and maintenance in the second quarter and
six-month period of 1998 from the same periods last year primarily reflects
the absence of a one-time charge ($8.4 million) related to the personnel
reduction program (PRP) initiated in the second quarter of 1997. Also
contributing to the decrease in the current quarter and six-month period were
labor savings realized from the aforementioned PRP ($1.5 million and $2.2
million, respectively), the absence of storm damage costs related to an April
1997 blizzard ($2 million), a reduction in the provision for bad debts
($568,000 and $1.1 million, respectively), and a reduction in insurance and
employee benefits costs ($663,000 and $911,000, respectively). The impact of
these factors was offset somewhat by higher costs relating to the outsourcing
of the information technology, telecommunications and network services
function ($1.2 million and $2.8 million, respectively) that include costs
associated with Year 2000 compliance.
Depreciation and Taxes
Depreciation expense increased due to a higher level of depreciable
property, plant and equipment. Federal and state income taxes increased due
to the change in pretax income. The decline in local property and other taxes
was primarily due to lower payroll taxes reflecting the impact of the PRP.
Other Income and Interest Charges
Other income increased in the current quarter and six-month period due to
interest accrued on the deferral of electric industry restructuring-related
costs ($272,000 and $301,000, respectively) effective March 1, 1998.
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COMMONWEALTH ELECTRIC COMPANY
Total interest charges increased in the current quarter and six-month
period reflecting a greater level of short-term borrowings and slightly higher
rates, offset somewhat by scheduled sinking fund payments on long-term debt.
Industry Restructuring
On November 25, 1997, the Governor of Massachusetts signed into law the
Electric Industry Restructuring Act (the Act). This legislation provided,
among other things, that customers of retail electric utility companies who
take standard offer service receive a 10 percent rate reduction and be allowed
to choose their energy supplier, effective March 1, 1998. The Act also
provides that utilities be allowed full recovery of transition costs subject
to review and an audit process. The rate reduction mandated by the legisla-
tion increases to 15 percent effective September 1, 1999 for customers who
continue to take standard offer service.
It is likely that a statewide referendum will appear on the ballot in
November of this year that is seeking to repeal the legislation. Management
is unable to predict what the ultimate outcome of this challenge will be.
The Company, together with Cambridge Electric and Canal, filed a compre-
hensive electric restructuring plan with the DTE in November 1997, that was
substantially approved by the DTE in February 1998. The divestiture of the
Company's non-nuclear generation assets and the entitlements associated with
its purchased power contracts is an integral part of the Company's restructur-
ing plan and is consistent with the Act. While the Company is encouraged with
the treatment afforded net non-mitigable transition costs (which, for the
Company, are primarily the result of above-market purchased power contracts
with non-utility generators) by the legislation and the DTE, the mandated rate
reduction has had a significant impact on cash flows of the Company. However,
the successful results of the generation auction, as discussed below, could
significantly reduce the impact that the rate reductions will have on future
cash flows.
In March 1997, the Company, together with Cambridge Electric and Canal,
had submitted a report to the DTE that detailed the proposed auction process
for selling their electric generation assets and the entitlements associated
with purchased power contracts. The auction process provided a market-based
approach to maximizing stranded cost mitigation and minimizing the transition
costs that retail customers will have to pay for stranded cost recovery. A
request for bids from interested parties was issued last August and an
Offering Memorandum followed in October. Potential bidders examined all
pertinent information related to the generating facilities and purchased power
contracts in order to prepare and submit their first round of bids in mid-
December. Final binding bids were submitted on May 8, 1998.
On May 27, 1998, the System announced that three of its subsidiary
companies (Cambridge Electric, Canal and the Company) had selected affiliates
of Southern Energy New England, L.L.C., an affiliate of The Southern Company
of Atlanta, Georgia, to buy substantially all of their non-nuclear electric
generating assets for approximately $462 million (subject to certain adjust-
ments at closing). These facilities represent 984 megawatts (mw) of electric
capacity and have an approximate book value of $79 million.
The plants being sold include: Canal Unit 1 (566 mw) and a one-half
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COMMONWEALTH ELECTRIC COMPANY
interest in Canal Unit 2 (282.5 mw) located in Sandwich, MA and owned by Canal
Electric; the Kendall Station facility (67 mw) and the adjacent Kendall Jets
(46 mw), located in Cambridge, MA and owned by Cambridge Electric; five diesel
generators (13.8 mw) in Oak Bluffs and West Tisbury on the island of Martha's
Vineyard that are owned by the Company, and a 1.4 percent joint-ownership
interest (8.9 mw) in Wyman Unit No. 4 located in Yarmouth, ME, also owned by
the Company.
The Company continues to evaluate bids related to the purchased power
contracts.
On July 31, 1998, a formal divestiture filing was submitted to the FERC
and the DTE that requests approval of the sale of the Company's generating
assets and further proposes (subject to completion of the sale) that the
current 10 percent rate reduction increase, effective January 1, 1999, to 12.1
percent. In addition, the Company proposes to increase the retail price of
standard offer service, starting January 1, 1999, from the present rate of 2.8
cents per kilowatthour (kwh) to 3.5 cents. At the same time that the price
for standard offer service is increased, the transition charge for the
Company's customers will decline from 4.08 cents per kwh to 3.13 cents. These
proposed changes are intended to further reduce the cost of electricity to
customers, to make the market increasingly more attractive for independent
power suppliers to sell electricity directly to consumers, and to reduce the
Company's cost deferrals associated with the pricing of standard offer
service. The required approvals of the sale and rate structure are expected
to be received by year-end 1998.
Year 2000
The Company has been involved in Year 2000 compliancy since 1996. A
complete inventory and review of software, information processing, delivery
systems and operational components for certain facilities has been completed,
and work continues on computer systems wherever necessary. While some
computer systems have already been updated, tested and placed in production,
the Company expects to complete the balance of the modifications by mid-1999.
Costs associated with Year 2000 compliancy are being expensed as incurred.
The total cost of this project is expected to be funded with internally
generated funds.
Management believes that, with appropriate modifications, the Company will
be fully compliant regarding all Year 2000 issues and will continue to provide
its products and services uninterrupted through the millennium change.
Failure to become fully compliant could have a significant impact on the
Company's operations.
New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts possibly
including fixed-price power contracts) be recorded on the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133
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COMMONWEALTH ELECTRIC COMPANY
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999
and may be implemented as of the beginning of any fiscal quarter after
issuance but cannot be applied retroactively. SFAS No. 133 must be applied to
derivative instruments and certain derivative instruments embedded in hybrid
contracts that were issued, acquired or substantively modified after December
31, 1997 and, at the Company's election, before January 1, 1998.
The Company has not yet quantified the impacts of adopting SFAS No. 133 on
its financial statements and has not determined the timing of its method of
adopting SFAS No. 133.
Forward-Looking Statements
This discussion contains statements which, to the extent it is not a
recitation of historical fact, constitute "forward-looking statements" and is
intended to be subject to the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995. A number of important factors
affecting the Company's business and financial results could cause actual
results to differ materially from those reflected in the forward-looking
statements or projected amounts. Those factors include developments in the
legislative, regulatory and competitive environment, certain environmental
matters, demands for capital and the availability of cash from various
sources.
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COMMONWEALTH ELECTRIC COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any pending material legal proceeding.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Filed herewith as Exhibit 1 is the Financial Data Schedule for
the six months ended June 30, 1998.
(b) Reports on Form 8-K
A report on Form 8-K was filed June 5, 1998 for an event first
reported May 27, 1998 regarding the sale of the Company's gener-
ating assets.
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COMMONWEALTH ELECTRIC COMPANY
SIGNATURE
Pursuant to the requirements 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.
COMMONWEALTH ELECTRIC COMPANY
(Registrant)
Principal Financial and
Accounting Officer:
Date: August 14, 1998 JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, statement of income and statement of cash flows contained in
Form 10-Q of Commonwealth Electric Company for the six months ended June 30,
1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000071222
<NAME> COMMONWEALTH ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 381,360
<OTHER-PROPERTY-AND-INVEST> 598
<TOTAL-CURRENT-ASSETS> 52,545
<TOTAL-DEFERRED-CHARGES> 94,937
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 529,440
<COMMON> 51,099
<CAPITAL-SURPLUS-PAID-IN> 97,112
<RETAINED-EARNINGS> 31,893
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0
0
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0
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0
<EARNINGS-AVAILABLE-FOR-COMM> 6,850
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</TABLE>
