<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, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3446
(LOGO) NEW ENGLAND ELECTRIC SYSTEM
(Exact name of registrant as specified in charter)
MASSACHUSETTS 04-1663060
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
Registrant's telephone number, including area code
(508-366-9011)
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 Shares, par value $1 per share, authorized and
outstanding: 64,969,652 shares at June 30, 1994.
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1. Financial Statements
- ----------------------------
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statements of Consolidated Income
Periods Ended June 30
(Unaudited)
<CAPTION>
Quarter Six Months
------- ----------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $517,078 $518,136$1,093,984 $1,097,626
-------- ------------------ ----------
Operating expenses:
Fuel for generation 53,314 43,327 115,778 106,046
Purchased electric energy 119,026 133,626 240,025 260,193
Other operation 116,115 136,796 225,844 265,370
Maintenance 39,362 39,136 72,053 74,125
Depreciation and amortization 77,567 75,293 156,236 154,542
Taxes, other than income taxes 31,200 29,966 66,515 63,154
Income taxes 22,778 13,946 67,955 47,439
-------- ------------------ ----------
Total operating expenses 459,362 472,090 944,406 970,869
-------- ------------------ ----------
Operating income 57,716 46,046 149,578 126,757
Other income:
Allowance for equity funds used during
construction 2,627 900 4,681 1,657
Equity in income of generating companies 2,633 2,706 5,261 5,795
Other income (expense) - net (1,145) 386 (1,514) 1,225
-------- ------------------ ----------
Operating and other income 61,831 50,038 158,006 135,434
-------- ------------------ ----------
Interest:
Interest on long-term debt 22,875 25,074 45,233 51,151
Other interest 2,935 1,426 4,580 3,060
Allowance for borrowed funds used during
construction (1,630) (527) (2,815) (1,038)
-------- ------------------ ----------
Total interest 24,180 25,973 46,998 53,173
-------- ------------------ ----------
Income after interest 37,651 24,065 111,008 82,261
Preferred dividends of subsidiaries 2,173 2,643 4,353 5,286
Minority interests 1,894 2,276 3,798 4,243
-------- ------------------ ----------
Net income $ 33,584 $ 19,146$ 102,857 $ 72,732
======== ================== ==========
Average common shares 64,969,65264,969,65264,969,652 64,969,652
Net income per average common share $ .51 $ .30 $ 1.58 $ 1.12
Dividends declared per share $.575 $.560 $1.135 $1.100
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statements of Consolidated Income
Twelve Months Ended June 30
(Unaudited)
<CAPTION>
1994 1993
---- ----
(In Thousands)
<S> <C> <C>
Operating revenue $2,230,337 $2,205,332
---------- ----------
Operating expenses:
Fuel for generation 236,913 228,689
Purchased electric energy 507,139 520,612
Other operation 452,554 493,866
Maintenance 144,147 156,419
Depreciation and amortization 298,326 301,994
Taxes, other than income taxes 123,854 119,083
Income taxes 141,640 102,433
---------- ----------
Total operating expenses 1,904,573 1,923,096
---------- ----------
Operating income 325,764 282,236
Other income:
Allowance for equity funds used during construction6,818 3,048
Equity in income of generating companies 10,483 12,125
Other income (expense) - net (3,893) (1,240)
---------- ----------
Operating and other income 339,172 296,169
---------- ----------
Interest:
Interest on long-term debt 94,860 107,913
Other interest 11,329 7,666
Allowance for borrowed funds used during
construction (4,594) (2,151)
---------- ----------
Total interest 101,595 113,428
---------- ----------
Income after interest 237,577 182,741
Preferred dividends of subsidiaries 9,652 10,573
Minority interests 7,577 8,960
---------- ----------
Net income $ 220,348 $ 163,208
========== ==========
Average common shares 64,969,652 64,969,652
Net income per average common share $ 3.39 $ 2.51
Dividends declared per share $2.255 $2.180
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
June 30,December 31,
ASSETS 1994 1993
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $4,759,611$4,661,612
Less accumulated provisions for depreciation and amortization 1,567,7151,511,271
--------------------
3,191,896 3,150,341
Net investment in Seabrook 1 under rate settlement 71,683 103,344
Construction work in progress 339,377 228,816
--------------------
Net utility plant 3,602,956 3,482,501
--------------------
Oil and gas properties, at full cost 1,233,835 1,220,110
Less accumulated provision for amortization 928,995 884,837
--------------------
Net oil and gas properties 304,840 335,273
--------------------
Investments:
Nuclear power companies, at equity 46,727 46,342
Other subsidiaries, at equity 43,388 44,676
Other investments, at cost 33,623 28,836
--------------------
Total investments 123,738 119,854
--------------------
Current assets:
Cash 4,370 2,876
Accounts receivable, less reserves of $17,496,000 and
$14,551,000 256,842 275,020
Unbilled revenues 40,800 43,400
Fuel, materials and supplies, at average cost 88,194 74,314
Prepaid and other current assets 58,688 69,004
--------------------
Total current assets 448,894 464,614
--------------------
Accrued Yankee Atomic costs 91,520 103,501
Deferred charges and other assets 293,428 290,135
--------------------
$4,865,376$4,795,878
====================
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Outstanding - 64,969,652 shares $ 64,970$ 64,970
Paid-in capital 736,823 736,823
Retained earnings 757,192 728,075
--------------------
Total common share equity 1,558,985 1,529,868
Minority interests in consolidated subsidiaries 54,206 55,855
Cumulative preferred stock of subsidiaries 147,016 147,528
Long-term debt 1,512,381 1,511,589
--------------------
Total capitalization 3,272,588 3,244,840
--------------------
Current liabilities:
Long-term debt due within one year 37,920 12,920
Short-term debt 96,445 71,775
Accounts payable 151,615 128,342
Accrued taxes 22,663 10,332
Accrued interest 24,721 23,278
Dividends payable 38,063 36,950
Other current liabilities 129,007 153,812
--------------------
Total current liabilities 500,434 437,409
--------------------
Deferred federal and state income taxes 704,947 705,026
Unamortized investment tax credits 98,056 99,355
Accrued Yankee Atomic costs 91,520 103,501
Other reserves and deferred credits 197,831 205,747
--------------------
$4,865,376$4,795,878
====================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30
(Unaudited)
<CAPTION>
1994 1993
---- ----
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $ 102,857 $ 72,732
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 158,245 157,209
Deferred income taxes and investment tax credits - net(2,390) (35,064)
Allowance for funds used during construction (7,496) (2,695)
Amortization of unbilled revenues (16,100)
Minority interests 3,798 4,243
Early retirement program 23,922
Decrease (increase) in accounts receivable, net
and unbilled revenues 20,778 23,667
Decrease (increase) in fuel, materials, and supplies(13,880) (9,673)
Increase (decrease) in accounts payable 23,273 1,136
Increase (decrease) in other current liabilities 5,069 38,090
Other, net (5,590) (5,805)
--------- ---------
Net cash provided by operating activities $ 268,564 $ 267,762
--------- ---------
Investing Activities:
Plant expenditures, excluding allowance for
funds used during construction $(222,261) $(131,692)
Oil and gas exploration and development (13,725) (8,051)
Other investing activities (2,149) 1,081
--------- ---------
Net cash used in investing activities $(238,135) $(138,662)
--------- ---------
Financing Activities:
Dividends paid to minority interests $ (4,838) $ (4,263)
Dividends paid on NEES common shares (74,095) (72,058)
Short-term debt 24,670 (42,250)
Long-term debt - issues 38,000 204,500
Long-term debt - retirements (12,160) (166,260)
Preferred stock - redemption (512)
Premium on reacquisition of long-term debt (1,127)
--------- ---------
Net cash used in financing activities $ (28,935) $ (81,458)
--------- ---------
Net increase in cash and cash equivalents $ 1,494 $ 47,642
Cash and cash equivalents at beginning of period 2,876 2,768
--------- ---------
Cash and cash equivalents at end of period $ 4,370 $ 50,410
========= =========
Supplementary Information:
Interest paid less amounts capitalized $ 43,425 $ 48,069
--------- ---------
Federal and state income taxes paid $ 58,918 $ 76,658
--------- ---------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statements of Consolidated Retained Earnings
Periods Ended June 30
(Unaudited)
<CAPTION>
Quarter Six Months
------- ----------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Retained earnings at beginning of period$760,965 $702,635 $728,075 $684,132
Net income 33,584 19,146 102,857 72,732
Dividends declared on common shares (37,357) (36,383) (73,740) (71,466)
-------- -------- -------- --------
Retained earnings at end of period $757,192 $685,398 $757,192 $685,398
======== ======== ======== ========
Consolidated Electric Operating Statistics
Periods Ended June 30
Quarter Six Months
------- ----------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands of KWH)
Generated at nuclear power plants 317,305 504,415 794,030 1,007,770
Generated at system thermal plants 2,638,878 2,029,260 5,909,594 5,290,165
Generated at system hydro plants 586,043 469,848 887,807 759,281
Generated at pumped storage plant 152,731 139,897 272,701 274,812
Less energy for pumping 188,399 190,248 354,467 375,481
--------- --------- ---------- ----------
Total generated 3,506,558 2,953,172 7,509,665 6,956,547
Nuclear entitlements 750,338 601,815 1,309,729 1,297,240
Purchased electric energy 1,761,926 2,038,930 3,817,136 3,892,858
--------- --------- ---------- ----------
Total generated and purchased 6,018,822 5,593,917 12,636,530 12,146,645
Less losses, company use, etc. 475,574 312,741 820,226 560,325
--------- --------- ---------- ----------
Total sales 5,543,248 5,281,176 11,816,304 11,586,320
========= ========= ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statements of Consolidated Retained Earnings
Periods Ended June 30
(Unaudited)
<CAPTION>
Twelve Months
-------------
1994 1993
---- ----
(In Thousands)
<S> <C> <C>
Retained earnings at beginning of period $ 685,398 $ 663,823
Net income 220,348 163,208
Dividends declared on common shares (146,507) (141,633)
Premium on redemption of preferred stock of subsidiaries(2,047)
--------- ---------
Retained earnings at end of period $ 757,192 $ 685,398
========= =========
Consolidated Electric Operating Statistics
Periods Ended June 30
Twelve Months
-------------
1994 1993
---- ----
(In Thousands of KWH)
Generated at nuclear power plants 1,482,936 1,725,228
Generated at system thermal plants 12,244,974 11,414,468
Generated at system hydro plants 1,382,451 1,214,800
Generated at pumped storage plant 546,247 551,266
Less energy for pumping 729,770 754,318
---------- ----------
Total generated 14,926,838 14,151,444
Nuclear entitlements 2,209,487 2,687,411
Purchased electric energy 7,740,920 7,461,896
---------- ----------
Total generated and purchased 24,877,245 24,300,751
Less losses, company use, etc. 1,857,184 1,555,189
---------- ----------
Total sales 23,020,061 22,745,562
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
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.
Parties liable include past and present site owners and operators,
transporters that brought wastes to the site, and entities that
generated or arranged for disposal or treatment of wastes
ultimately disposed of at the site. 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. These products or by-products may not
have previously been considered hazardous, and may not currently be
considered hazardous, but may be identified as such by federal,
state, or local authorities in the future. The 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.
Federal and state environmental agencies, as well as private
parties, have contacted or initiated legal proceedings against NEES
and certain subsidiaries regarding liability for cleanup of sites
alleged to contain hazardous waste or substances. NEES and/or its
subsidiaries have been named as a potentially responsible party
(PRP) by either the U.S. Environmental Protection Agency (EPA) or
the Massachusetts Department of Environmental Protection (DEP) for
19 sites at which hazardous waste is alleged to have been disposed.
NEES and its subsidiaries are also aware of other sites which they
may be held responsible for remediating and it is likely that, in
the future, NEES and its subsidiaries will become involved in
additional proceedings demanding contribution for the cost of
remediating additional hazardous waste sites.
The most prevalent types of hazardous waste sites that NEES
and its subsidiaries have been connected with are former
manufactured gas locations. Until the early 1970's, NEES was a
combined electric and gas holding company system. NEES is
currently aware of approximately 40 locations (including five of
the 19 locations for which NEES companies are PRPs) at which gas
may have been manufactured and/or stored. Of the manufactured gas
locations, 17 have been listed for investigation by the DEP.
<PAGE>
Note A - Hazardous Waste - Continued
- ------------------------
In a lawsuit involving one of these sites, the United States Court
of Appeals for the First Circuit affirmed in 1993 an earlier
adverse decision against NEES, Massachusetts Electric Company
(Massachusetts Electric), and New England Power Service Company.
The decision held these companies liable for cleanup of the
properties involved in the case.
In 1993, the Massachusetts Department of Public Utilities
approved a rate agreement filed by Massachusetts Electric that
resolved all rate recovery issues related to Massachusetts
manufactured gas sites as well as certain other Massachusetts
hazardous waste sites. The agreement allows for environmental
remediation costs for such sites to be met from a special interest
bearing fund established on Massachusetts Electric's books. The
fund's initial balance of $30 million has come from previously
recorded reserves and is not recoverable from customers. Annual
contributions of $3 million, adjusted for inflation, are being
added to the fund by Massachusetts Electric and are recoverable in
rates. Under the agreement, any shortfalls in the fund will be
paid by Massachusetts Electric and be recovered through rates over
seven years, without interest.
NEES has been notified by the EPA that it is one of several
PRPs for cleanup of the Pine Street Canal Superfund site in
Burlington, Vermont, at which coal tar and other materials were
deposited. Between 1931 and 1951, NEES and its predecessor owned
all of the common stock of Green Mountain Power Corporation. Prior
to, during, and after that time, gas was manufactured at the Pine
Street Canal site. Among the waste by-products of that process
were coal and oil tars. The EPA had brought a lawsuit against NEES
and other parties to recover all of the EPA's past and future
response costs at this site. In 1990, the litigation ended with
the filing of a final consent decree with the court. Under the
terms of the settlement, to which 14 entities were party, the EPA
recovered its past response costs. NEES recorded its share of
these costs in 1989. NEES remains a PRP for ongoing and future
response costs. In November 1992, the EPA proposed a cleanup plan
estimated by the EPA to cost $50 million. In June 1993, the EPA
withdrew this cleanup plan in response to public concern about the
plan and the cost. It is not known at this time what the ultimate
cleanup plan will be, how much it will cost, or what portion NEES
will have to pay.
<PAGE>
Note A - Hazardous Waste - Continued
- ------------------------
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. Factors such as
the evolving nature of remediation technology and regulatory
requirements and the particular characteristics of each site,
including, for example the size of the site, the nature and amount
of waste disposed at the site, and the surrounding geography and
land use, make precise estimates difficult. There are also
significant uncertainties as to the portion, if any, of the
investigation and remediation costs of any particular hazardous
waste site that may ultimately be borne by NEES or its
subsidiaries. At June 30, 1994, NEES had total reserves for
environmental response costs of $50 million and a related
regulatory asset of $16 million.
NEES believes that hazardous waste liabilities for all sites
of which it is aware, and which are not covered by a rate
agreement, will not be material (10 percent of common equity) to
its financial position. Where appropriate, the NEES companies
intend to seek recovery from their insurers and from other PRPs,
but it is uncertain whether, and to what extent, such efforts will
be successful.
Note B
- ------
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 NEES' 1993 Annual Report.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Earnings
- --------
Earnings for the second quarter and first six months of 1994
were $.51 per share and $1.58 per share, respectively, compared to
$.30 and $1.12 per share, for the corresponding periods in 1993.
As outlined in the table below, the increase in second quarter
earnings compared to 1993 is due in part to a one-time charge
recorded in June 1993 related to potential environmental response
costs for wastes associated with a number of Massachusetts
manufactured gas locations. Earnings for the second quarter of
1994 include the effects of a rate agreement that was implemented
in the fourth quarter of 1993 by Massachusetts Electric Company
(Massachusetts Electric). The rate agreement provides for a
temporary rate reduction that will continue in effect through
October 1994, and for the recognition of revenues for electricity
delivered but not yet billed (unbilled revenue). The initial
balance of such unbilled revenues is being amortized over a
thirteen month period ending December 1994 (see Rate Activity
section). Items that decreased earnings for the second quarter of
1994 include increased depreciation and amortization costs,
increased computer system development costs, and general increases
in other areas, partially offset by decreased uninsured claims.
Kilowatthour (KWH) sales billed to ultimate customers in the second
<PAGE>
quarter of 1994 increased 0.5 percent over the same period last
year.
In addition to those items affecting the quarter, the increase
in earnings for the six month period ending June 30 also reflects
a one-time charge recorded in March 1993 due to an early retirement
offer and severance program associated with an organizational
review. KWH sales to ultimate customers for the first six months
of 1994 increased by 1.3 percent over the same period last year.
The increased sales reflect the colder weather conditions in the
first quarter of 1994 over the same period last year and an
improving economy, partially offset by a reduction of one billing
day due to meter reading schedules.
The following table summarizes the major factors affecting
earnings:
Period ending June 30
---------------------
3 months 6 months
-------- --------
1993 earnings $ .30 $1.12
1993 One-time charges:
Manufactured gas waste reserves .21 .21
Organizational review .27
1994 Effects of Massachusetts
Electric Rate Agreement:
General rate reduction (.07) (.14)
Unbilled revenue amortization .08 .15
1994 unbilled revenue - seasonal
change .03 (.02)
Other impacts on earnings (.04) (.01)
----- -----
1994 earnings $ .51 $1.58
----- -----
<PAGE>
Earnings for the twelve months ended June 30, 1994 were $3.39
per share, which includes a one-time increase to fourth quarter
1993 earnings of $.19 per share related to the reversal of certain
reserves and other effects of the Massachusetts Electric rate
agreement. The agreement resolved the issue of rate recovery of
environmental response costs for Massachusetts manufactured gas
locations, certain storm restoration costs, and other costs
previously charged to expense. Also included in earnings for the
twelve months ended June 30, 1994, is a seasonal increase in
unbilled revenues of approximately $.06 per share experienced by
Massachusetts Electric. This increase reflects a $.08 per share
seasonal increase in unbilled revenues in the fourth quarter of
1993 partially offset by the $.02 per share decrease in the first
six months of 1994 shown in the table above.
Rate Activity
- -------------
In 1993, the Massachusetts Department of Public Utilities
(MDPU) approved a rate agreement filed by Massachusetts Electric,
the Massachusetts Attorney General, and two groups of large
commercial and industrial customers.
Under the agreement, effective December 1, 1993, Massachusetts
Electric began implementing an 11 month general rate decrease of
$26 million (annual basis), from the level of rates then in effect.
This rate reduction will continue in effect until October 31, 1994,
<PAGE>
after which rates will increase to the previously approved levels.
The agreement also provides for rate discounts totaling up to
$4 million available for the period ending October 31, 1994 for
large commercial and industrial customers who sign agreements to
give a five year notice to Massachusetts Electric before they
purchase power from another supplier or generate any additional
power themselves. The notice provision may be reduced from five to
three years under certain conditions. These discounts will
increase in November 1994 to a total level of $11 million per year,
representing a five percent discount on base rates, if all eligible
customers sign agreements. Approximately 83 percent of eligible
customers have signed agreements. Massachusetts Electric also
agreed not to increase its base rates before October 1, 1995. The
decrease in revenues is being offset by the recognition, for
accounting purposes, of unbilled revenue. The agreement provided
that unbilled revenue at September 30, 1993 of approximately
$35 million be amortized over thirteen months commencing
December 1, 1993.
The agreement also resolved all rate recovery issues associated
with environmental remediation costs of Massachusetts manufactured
gas waste sites formerly owned by Massachusetts Electric and its
affiliates, as well as certain other Massachusetts Electric
environmental cleanup costs (see Hazardous Waste section).
<PAGE>
In July 1994, the Rhode Island Public Utilities Commission
approved a rate agreement between Narragansett Electric Company
(Narragansett) and the Rhode Island Division of Public Utilities
and Carriers that provides for a 5 percent base rate discount,
excluding fuel costs, retroactive to May 15, 1994, for
Narragansett's large commercial and industrial customers who sign
an agreement to give a five year notice to Narragansett before they
purchase power from another supplier or generate any additional
power themselves. The notice provision may be reduced from five to
three years under certain conditions. The amount of the proposed
discount, if all eligible customers sign agreements, is estimated
at $4 million per year. The agreement also provides for
Narragansett to begin recognizing unbilled revenues for accounting
purposes. Unbilled revenues at December 31, 1993, of approximately
$14 million will be amortized to income over the twenty-one month
period beginning April 1994 through December 1995. No unbilled
revenues are yet recorded in the financial statements through June
1994. Narragansett will begin recording the effects of this rate
agreement in the third quarter of this year.
In 1993, a new accounting standard for postretirement benefits
other than pensions (PBOPs) went into effect that requires
employers to establish a liability for the expected costs of PBOPs
during the working years of employees instead of recording such
costs when paid. Each of the New England Electric System (NEES)
<PAGE>
subsidiaries has received regulatory approval to recover the effect
of this standard on a current and/or deferred basis. The Federal
Energy Regulatory Commission (FERC) has allowed New England Power
Company (NEP) to defer increased costs resulting from this new
standard, pending its next rate filing so long as such filing
occurs before the end of 1995. Accordingly, the NEES subsidiaries
recovered approximately $5 million in rates in 1993 and are
recovering approximately $9 million in 1994. The total amount of
PBOP costs deferred for future recovery at June 30, 1994 was
approximately $33 million, including $3 million during the second
quarter of 1994.
Demand-Side Management Programs
- -------------------------------
The retail companies file their conservation and load
management programs, also referred to in the industry as demand-
side management (DSM) programs, regularly with their respective
regulatory agencies and have received approval to recover in rates
estimated DSM expenditures on a current basis. The rates provide
for reconciling estimated expenditures to actual DSM expenditures,
with interest. Expenditures subject to the reconciliation
mechanism were $20 million in the first six months of 1994 and
$62 million for the full year 1993. Since 1990, the retail
companies have been allowed to earn incentives based on the results
of their DSM programs. Before incentives are recorded, the retail
<PAGE>
companies must be able to demonstrate to their respective state
regulatory agencies the electricity savings produced by their DSM
programs. During 1993, the retail companies recorded a total of
$7.3 million of incentives, before tax, including $2 million in the
second quarter. No incentives were recorded during the first six
months of 1994. The retail companies have received regulatory
orders that will give them the opportunity to continue to earn
incentives on 1994 DSM program results.
Operating Revenue
- -----------------
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
Second Quarter Six Months
-------------- ------------
1994 vs 1993 1994 vs 1993
-------------- ------------
(In Millions)
Fuel recovery $ (2) $ (6)
Accrued NEEI fuel revenues (2) (2)
Rate changes (7) (12)
Oil & gas sales (1) (3)
DSM recovery (4) (4)
Unbilled revenues recognized 8 16
under rate agreement
Change in accrued unbilled 3 (2)
revenue
Sales growth and other 4 9
--- ----
$(1) $ (4)
=== ====
<PAGE>
KWH sales to ultimate customers in the second quarter and first
six months of 1994 increased by 0.5 and 1.3 percent, respectively,
over the same periods last year. The increase in sales growth and
other for the second quarter primarily reflects increased sales for
resale to other utilities. The increased sales for the first six
months of 1994 also reflect the colder weather conditions in the
first quarter of 1994 and an improving economy, partially offset by
a reduction of one billing day due to meter reading schedules. KWH
sales in 1994 are expected to increase in the range of 1 to 1.5
percent as compared to 1993.
The decrease in revenue due to rate changes for the second
quarter and first six months of 1994 primarily reflects
Massachusetts Electric's general rate decrease implemented in the
fourth quarter of 1993. This rate decrease will stay in effect
until October 31, 1994, when rates will increase to Massachusetts
Electric's previously authorized level. This decrease was offset
by the recognition in the second quarter and first six months of
1994 of $8 million and $16 million, respectively, of unbilled
revenue recorded pursuant to the 1993 Massachusetts Electric rate
agreement. Massachusetts Electric is now recognizing, on a
quarterly basis, seasonal fluctuations in unbilled revenues.
Accrued New England Energy Incorporated (NEEI) fuel revenues
reflect losses incurred by NEEI on its rate-regulated oil and gas
operations. These revenues are accrued by NEP in the year of the
<PAGE>
loss, and billed to its customers through its fuel clause in the
following year. The decrease in accrued NEEI fuel revenues
reflects decreased losses due to decreased oil and gas production,
partially offset by decreased oil prices. These decreases in
production and oil prices were also the major causes for the
decline in oil and gas sales.
The decrease in DSM recovery includes $2 million of incentives
recorded in the second quarter of 1993 (see Demand-Side Management
Programs section).
Operating Expenses
- ------------------
The following table summarizes the changes in operating
expenses during the period:
Increase (Decrease) in Total Operating Expenses
Second Quarter Six Months
-------------- ------------
1994 vs 1993 1994 vs 1993
-------------- ------------
(In Millions)
Total fuel costs $ (3) $ (7)
Purchased energy excluding fuel (2) (3)
Other operation and maintenance:
DSM (2) (2)
Other (18) (40)
Depreciation and amortization 2 2
Taxes 10 24
---- ----
$(13) $(26)
==== ====
<PAGE>
Total fuel costs represents fuel for generation and the portion
of purchased electric energy permitted to be recovered through
NEP's fuel adjustment clause. Purchased energy excluding fuel
represents the remainder of purchased electric energy costs. The
decrease in fuel costs reflects reduced alternate energy purchases.
The decrease in purchased energy excluding fuel reflects a
reduction in costs billed to NEP during the second quarter of 1994
resulting from a refueling outage by a nuclear power supplier in
1993.
The decrease in other operation and maintenance expense for the
second quarter reflects a $22 million charge in 1993 for
Massachusetts gas waste liabilities and decreased uninsured claims
in 1994. The decrease in other operation and maintenance expense
for the first six months of 1994 also reflects a $28 million one-
time charge associated with an early retirement offer and special
severance program recorded in the first quarter of 1993. Partially
offsetting these decreases were increased computer system
development costs, increased costs associated with PBOPs, and
general increases in other areas.
The increase in depreciation and amortization expense reflects
increased amortization of the net investment in the Seabrook 1
Nuclear Unit (Seabrook 1), increased charges for dismantlement of
a previously retired generating station, and new construction
expenditures. This increase is partially offset by decreased oil
and gas amortization due to decreased production.
<PAGE>
The increase in taxes for the second quarter and first six
months of 1994 is primarily due to increased income, the effects of
the increase in the federal corporate income tax rate from 34
percent to 35 percent which went into effect in the third quarter
of 1993 retroactive to January 1, 1993, and increased property
taxes.
Allowance For Funds Used During Construction (AFDC)
- --------------------------------------------------
AFDC increased for the second quarter and first six months of
1994 due to increased construction work in progress, principally
associated with the repowering of the Manchester Street Station
(see Liquidity and Capital Resources section).
Interest Expense
- ----------------
The decrease in interest expense on long-term debt for the
second quarter and first six months of 1994 is primarily due to
significant refinancings of corporate debt at lower interest rates
during 1993.
Oil and Gas Operations
- ----------------------
NEEI participates in a rate-regulated domestic oil and gas
exploration, development, and production program consisting of
prospects acquired prior to December 31, 1983. NEEI is not
<PAGE>
acquiring any new prospects. Due to precipitate declines in oil
and gas prices, NEEI has incurred operating losses since 1986, and
expects to incur substantial additional losses in the future.
These losses are being passed on to NEP under an intercompany
pricing policy approved by the Securities and Exchange Commission.
NEP is allowed to recover these losses from its customers under
NEP's 1988 FERC rate settlement, which covered all costs incurred
by or resulting from commitments made by NEEI through March 1,
1988. Other subsequent costs incurred by NEEI are subject to
normal regulatory review.
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.
Parties liable include past and present site owners and operators,
transporters that brought wastes to the site, and entities that
generated or arranged for disposal or treatment of wastes
ultimately disposed of at the site. 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. These products or by-products may not
<PAGE>
have previously been considered hazardous, and may not currently be
considered hazardous, but may be identified as such by federal,
state, or local authorities in the future. 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.
Federal and state environmental agencies, as well as private
parties, have contacted or initiated legal proceedings against NEES
and certain subsidiaries regarding liability for cleanup of sites
alleged to contain hazardous waste or substances. NEES and/or its
subsidiaries have been named as a potentially responsible party
(PRP) by either the U.S. Environmental Protection Agency (EPA) or
the Massachusetts Department of Environmental Protection (DEP) for
19 sites at which hazardous waste is alleged to have been disposed.
NEES and its subsidiaries are also aware of other sites which they
may be held responsible for remediating and it is likely that, in
the future, NEES and its subsidiaries will become involved in
additional proceedings demanding contribution for the cost of
remediating additional hazardous waste sites.
The most prevalent types of hazardous waste sites that NEES and
its subsidiaries have been connected with are former manufactured
gas locations. Until the early 1970's, NEES was a combined
electric and gas holding company system. NEES is currently aware
<PAGE>
of approximately 40 locations (including five of the 19 locations
for which NEES companies are PRPs) at which gas may have been
manufactured and/or stored. Of the manufactured gas locations, 17
have been listed for investigation by the DEP. In a lawsuit
involving one of these sites, the United States Court of Appeals
for the First Circuit affirmed in 1993 an earlier adverse decision
against NEES, Massachusetts Electric, and New England Power Service
Company (NEPSCo). The decision held these companies liable for
cleanup of the properties involved in the case.
In 1993, the MDPU approved a rate agreement filed by
Massachusetts Electric (see Rate Activity section) that resolved
all rate recovery issues related to Massachusetts manufactured gas
sites as well as certain other Massachusetts hazardous waste sites.
The agreement allows for environmental remediation costs for such
sites to be met from a special interest bearing fund established on
Massachusetts Electric's books. The fund's initial balance of
$30 million has come from previously recorded reserves and is not
recoverable from customers. Annual contributions of $3 million,
adjusted for inflation, are being added to the fund by
Massachusetts Electric and are recoverable in rates. Under the
agreement, any shortfalls in the fund will be paid by Massachusetts
Electric and be recovered through rates over seven years, without
interest.
<PAGE>
NEES has been notified by the EPA that it is one of several
PRPs for cleanup of the Pine Street Canal Superfund site in
Burlington, Vermont, at which coal tar and other materials were
deposited. Between 1931 and 1951, NEES and its predecessor owned
all of the common stock of Green Mountain Power Corporation. Prior
to, during, and after that time, gas was manufactured at the Pine
Street Canal site. Among the waste by-products of that process
were coal and oil tars. The EPA had brought a lawsuit against NEES
and other parties to recover all of the EPA's past and future
response costs at this site. In 1990, the litigation ended with
the filing of a final consent decree with the court. Under the
terms of the settlement, to which 14 entities were party, the EPA
recovered its past response costs. NEES recorded its share of
these costs in 1989. NEES remains a PRP for ongoing and future
response costs. In November 1992, the EPA proposed a cleanup plan
estimated by the EPA to cost $50 million. In June 1993, the EPA
withdrew this cleanup plan in response to public concern about the
plan and the cost. It is not known at this time what the ultimate
cleanup plan will be, how much it will cost, or what portion NEES
will have to pay.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. Factors such as
the evolving nature of remediation technology and regulatory
requirements and the particular characteristics of each site,
<PAGE>
including, for example the size of the site, the nature and amount
of waste disposed at the site, and the surrounding geography and
land use, make precise estimates difficult. There are also
significant uncertainties as to the portion, if any, of the
investigation and remediation costs of any particular hazardous
waste site that may ultimately be borne by NEES or its
subsidiaries. At June 30, 1994, NEES had total reserves for
environmental response costs of $50 million and a related
regulatory asset of $16 million.
NEES believes that hazardous waste liabilities for all sites
of which it is aware, and which are not covered by a rate
agreement, will not be material (10 percent of common equity) to
its financial position. Where appropriate, the NEES companies
intend to seek recovery from their insurers and from other PRPs,
but it is uncertain whether, and to what extent, such efforts will
be successful.
Electric and Magnetic Fields (EMF)
- ---------------------------------
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. Some of
<PAGE>
the studies have suggested associations between certain EMF and
various types of cancer, while other studies have not substantiated
such associations. In February 1993, the EPA called for
significant additional research on EMF. In July 1994, a study by
a University of Southern California professor suggested an
association between EMF and Alzheimer's disease. It is impossible
to predict the ultimate impact on NEES subsidiaries and the
electric utility industry if further investigations were to
demonstrate that the present electricity delivery system is
contributing to increased risk of cancer or other health problems.
Many utilities, including Massachusetts Electric, have been
contacted by customers regarding a potential relationship between
EMF and adverse health effects. To date, no court in the United
States has ruled that EMF from electrical facilities causes adverse
health effects and no utility has been found liable for personal
injuries alleged to have been caused by EMF. In any event,
Massachusetts Electric believes that it has adequate insurance
coverage.
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what impact there would be on the NEES companies if this
cause of action is recognized in the states in which NEES companies
operate and in contexts other than condemnation cases.
<PAGE>
A lawsuit concerning the proposed expansion of a transmission
line was filed on April 28, 1994 against NEES, Narragansett, and
NEPSCo, in the Superior Court of Rhode Island. The plaintiffs are
residents of property which borders existing Narragansett
transmission lines in East Greenwich, Rhode Island. Narragansett
has a proposal before the Rhode Island Energy Facilities Siting
Board (EFSB) to upgrade one of the lines and relocate the lines on
the existing right of way. The plaintiffs allege that fear of
health risks from exposure to high voltage power lines has devalued
their property and ask for unspecified damages. The plaintiffs
have also asked for an injunction to halt the proposed changes to
the transmission lines and an order to remove the existing power
lines. After preliminary review of the complaint, NEES,
Narragansett, and NEPSCo do not expect that the plaintiffs will
prevail. The EFSB has recently concluded hearings on
Narragansett's proposal to upgrade and relocate the transmission
lines and a decision is expected shortly.
Bills had been introduced in the Rhode Island legislature to
require that transmission lines be placed underground. In July
1993, two bills passed by the legislature restricting the
construction of overhead transmission lines were vetoed by the
governor. A similar bill was introduced in 1994 and was rejected
by the legislature. EMF-related legislation has also been
introduced in Massachusetts.
<PAGE>
Clean Air Requirements
- ----------------------
NEP produces approximately 50 percent of its electricity at
eight older thermal generating units located in Massachusetts. Six
of the units are fueled by coal and the other two are fueled by oil
and natural gas. The 1990 amendments to the federal Clean Air Act
require a significant reduction in the nation's sulfur dioxide
(SO2) and nitrogen oxide (NOx) emissions by the year 2000.
Under the amendments pertaining to SO2 emissions, NEP expects
to be included in Phase 1 of the acid rain provisions that will
become effective in 1995. NEP is also subject to the Massachusetts
SO2 acid rain law that will become effective in 1995, and Phase 2
of the federal acid rain requirements, that will become effective
in 2000.
In connection with requirements that relate to NOx emissions,
state environmental agencies in ozone non-attainment areas were
required to develop regulations (also known as Reasonably Available
Control Technology requirements, or RACT) that will become
effective in 1995 to address the first phase of ozone air quality
attainment. These regulations were adopted in Massachusetts in
September 1993. The RACT regulations require control technologies
(such as low NOx burners) to reduce NOx emissions, an ozone
precursor. Additional control measures may be necessary to ensure
attainment of the ozone standard. These measures would have to be
developed by the states in 1994 and fully implemented by NEP no
<PAGE>
later than 1999. The extent of these additional control measures
is unknown at this time, but could range from minor additions to
the RACT requirements to extensive emission reduction requirements,
such as costly add-on controls or fuel switching. Should the 1999
ozone attainment requirements be extensive, or additional Clean Air
Act or other environmental requirements be imposed, continued
operation of certain existing generating units beyond 1999 could be
uneconomical. NEP believes that premature retirement of
substantially all of its older thermal generating units would cause
substantial rate increases.
It is estimated that NEP will incur one-time operation and
maintenance costs totaling approximately $25 million and capital
costs totaling approximately $120 million by 1995, of which
approximately $10 million and $68 million, respectively, had been
spent through June 1994, to comply with SO2 and NOx requirements
that will become effective in 1995. In addition, NEP expects to
incur increased fuel costs ranging from approximately $10 million
to $20 million, depending on fuel market conditions, by 1995, as a
result of federal and state clean air requirements.
The generation of electricity from fossil fuels may emit trace
amounts of hazardous air pollutants as defined in the Clean Air Act
Amendments of 1990. The Act mandates a study of the potential
dangers of hazardous air pollutant emissions from electric utility
plants. Such research is currently under way and is expected to
<PAGE>
be complete in 1995. The study conclusions could result in new
emission standards and the need for additional costly controls on
NEP plants. At this time, NEES and its subsidiaries cannot
estimate the impact that findings of this research might have on
operations.
Competitive Conditions
- ----------------------
The electric utility business is being subjected to increasing
competitive pressures, stemming from a combination of trends,
including increasing electric rates, improved technologies, and new
regulations and legislation intended to foster competition.
Recently, this competition has been most prominent in the bulk
power market in which non-utility generating sources have
noticeably increased their market share. For example, in 1984,
less than 1 percent of NEP's capacity was supplied by non-utility
generation sources. By the end of 1993, non-utility power
purchases accounted for 380 MW, or 7 percent, of NEP's total
capacity. In addition to competition from non-utility generators,
the presence of excess generating capacity in New England has
resulted in the sale of bulk power by utilities at prices less than
the total costs of owning and operating such generating capacity.
However, in July 1994, a new all-time regional and system peak
occurred which will have the effect of reducing the near-term level
of this excess generating capacity in New England.
<PAGE>
Electric utilities are also facing increased competition in the
retail market. Currently, retail competition comes primarily from
alternative fuel suppliers (principally natural gas companies) for
heating and cooling, customer-owned generation to displace
purchases from electric utilities, and direct competition among
electric utilities to attract major new manufacturing facilities to
their service territories. In the future, the potential exists for
electric utilities and non-utility generators to sell electricity
to retail customers of other electric utilities without regard to
franchised service territories. For example, the California Public
Utilities Commission recently announced a proposal that would give
certain large retail customers, by the year 1996, and all other
retail customers, by the year 2002, the option of selecting their
electricity provider. Power purchased from another provider would
still be delivered over the local utility's transmission network
which, under the proposal, would be subject to broader access.
Other states, including several New England states, have considered
or are in the process of considering options to foster increased
competition.
The NEES companies are responding to current and anticipated
competitive pressures in a variety of ways, including cost control
and a corporate reorganization into separate retail and wholesale
business units. The wholesale business unit is positioning itself
for increased competition through such means as terminating
<PAGE>
certain purchased power contracts, shutdowns of uneconomic
generating stations, as well as rapid amortization of certain plant
assets. Specifically, NEP's rates currently include approximately
$100 million per year associated with the recovery of certain
Seabrook 1 costs under a 1988 rate settlement and coal conversion
expenditures at NEP's Salem Harbor station. The recovery of these
costs will be completed prior to the end of 1995. The retail
business unit's response to competition includes the development of
value-added services for customers and the offering of economic
development rates to encourage businesses to locate in our service
territory. Pursuant to its recent rate agreement, Massachusetts
Electric was able to change the standard terms under which it
offers service to commercial and industrial customers to extend
the notice period a customer must give before purchasing
electricity from others or generating any additional electricity
for the customer's own use from one year to two years. In
addition, Massachusetts Electric offered, and Narragansett has
recently received approval to begin offering, a discount from base
rates in return for a contract requiring a customer to provide five
years written notice before purchasing electricity from others or
generating any additional electricity for the customer's own use.
The discount is available to Massachusetts Electric customers with
average monthly peak demands over 500 kilowatts, and Narragansett
customers with average monthly peak demands over 200 kilowatts.
<PAGE>
The FERC ruled in 1992, in a proceeding not involving NEES
subsidiaries, that a utility may recover from a wholesale
requirements customer, any legitimate, prudent, and verifiable
costs that the utility had incurred based on a reasonable
expectation that it would continue to sell requirements service to
the customer. The FERC has referred to such costs as "stranded
costs". On appeal, the United States Court of Appeals for the
District of Columbia Circuit has questioned whether allowing
utilities to recover stranded costs is anti-competitive and the
Court remanded the case back to the FERC for further proceedings
and development of the competitive issues. In a separate
development, the FERC issued a notice of proposed rule-making on
the recovery of investment costs stranded as a result of increased
competition.
Electric utility rates are generally based on a utility's
costs. Therefore, electric utilities are subject to certain
accounting standards that are not applicable to other business
enterprises in general. These accounting rules require regulated
entities, in appropriate circumstances, to establish regulatory
assets and liabilities, which defer the income statement impact of
certain costs that are expected to be recovered in future rates.
The effects of competition could ultimately cause the operations of
the NEES companies, or a portion thereof, to cease meeting the
criteria for application of these accounting rules. While the
<PAGE>
NEES companies do not expect to cease meeting these criteria in the
near future, if this were to occur, accounting standards of
enterprises in general would apply and immediate recognition of any
previously deferred costs would be necessary in the year in which
these criteria were no longer applicable. In addition, if, because
of competition, utilities are unable to recover all of their costs
in rates, it may be necessary to write off those costs that are not
recoverable.
Liquidity and Capital Resources
- -------------------------------
Plant expenditures in the first six months of 1994 amounted to
$222 million for the utility subsidiaries, including $95 million
related to the Manchester Street Station Repowering project. The
necessary funds were primarily provided by net cash from operating
activities, after the payment of dividends, and the proceeds of
short-term and long-term debt issues.
The financing activities of NEES subsidiaries for the first six
months of 1994 are summarized as follows:
Issues Retirements
------ -----------
(In Millions)
Long-term debt
- --------------
Massachusetts Electric $20
Narragansett 18
Hydro-Transmission Companies $ 6
NEEI 6
--- ---
$38 $12
=== ===
<PAGE>
The interest rate on the new long-term debt issues shown above
ranged from 6.91 to 8.08 percent. In August 1994, Massachusetts
Electric and Narragansett each issued an additional $5 million of
new long-term debt at an interest rate of 8.16 percent. NEP and
the retail subsidiaries plan to issue $92 million of additional
long-term debt in 1994.
Net cash from operating activities provided all of the funds
necessary for oil and gas expenditures for the first six months of
1994. NEEI's capitalized oil and gas exploration and development
costs amounted to $14 million, including $5 million of capitalized
interest costs.
At June 30, 1994, NEES' consolidated subsidiaries had
$96 million of short-term debt outstanding in the form of
commercial paper borrowings. NEES and its consolidated
subsidiaries currently have lines of credit and standby bond
purchase facilities with banks totaling $636 million. These lines
of credit are available to provide liquidity support for commercial
paper borrowings and for $342 million of NEP's outstanding variable
rate mortgage bonds in commercial paper mode and for other
corporate purposes. There were no borrowings under these lines of
credit at June 30, 1994. Cash balances at June 30, 1994 were
approximately $4 million.
The NEES subsidiaries' major construction project is the
repowering of Manchester Street Station, a 140 MW electric
<PAGE>
generating station in Providence, Rhode Island. Repowering will
more than triple the power generation capacity of Manchester Street
Station and substantially increase the plant's thermal efficiency.
NEP owns a 90 percent interest and Narragansett owns a 10 percent
interest in the Manchester Street Station. The total cost for the
generating station, scheduled for completion in late 1995, is
estimated to be approximately $525 million, including AFDC. In
addition, related transmission work, which is the principal
responsibility of Narragansett, is estimated to cost approximately
$75 million and is scheduled for completion in late 1994. At
June 30, 1994, $263 million, including AFDC, had been spent on the
project, which includes the related transmission work. Substantial
commitments have been made relative to future planned expenditures
for this project.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Information concerning the approval by the Rhode Island Public
Utilities Commission of a rate agreement filed by The Narragansett
Electric Company (Narragansett), 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 April 26, 1994, the Annual Meeting of Shareholders was
held.
The shareholders, by a vote of 57,142,706 in favor, 845,468
against, and 723,832 abstaining, approved a Company proposal
setting the number of directors at thirteen.
Directors were elected and received the following votes:
Director Votes For Votes Withheld
-------- --------- --------------
Joan T. Bok 57,500,675 1,143,043
Paul L. Joskow 57,706,999 936,719
John M. Kucharski 57,668,749 974,969
Edward H. Ladd 57,684,660 959,058
Joshua A. McClure 57,591,641 1,052,077
Malcolm McLane 57,640,820 1,002,898
Felix A. Mirando, Jr. 57,603,719 1,039,999
John W. Rowe 57,495,923 1,147,795
George M. Sage 57,670,325 973,393
Charles E. Soule 57,583,773 1,059,945
Anne Wexler 57,595,379 1,048,339
James Q. Wilson 57,618,925 1,024,793
James R. Winoker 57,541,804 1,101,914
In addition to electing directors, the shareholders, by a vote
of 51,369,181 in favor, 5,595,969 against, and 1,746,856
abstaining, approved a Company proposal regarding a Director Share
Plan.
<PAGE>
The shareholders, by a vote of 8,426,415 in favor, 42,994,627
against, and 2,369,243 abstaining, rejected a shareholder proposal
regarding a shareholder-designated charitable contributions
program.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
None.
<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, 1994 to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/ Alfred D. Houston
Alfred D. Houston
Executive Vice President,
Authorized Officer, and
Principal Financial Officer
Date: August 9, 1994
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent thereof assumes or
shall be held to any liability therefor.
