<PAGE>
File No.
70-8803
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NEW ENGLAND ELECTRIC SYSTEM
(Name of company filing this statement)
25 Research Drive
Westborough, Massachusetts 01582
(Address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Robert King Wulff
Treasurer Corporation Counsel
25 Research Drive 25 Research Drive
Westborough, Massachusetts 01582 Westborough, Massachusetts
01582
(Names and addresses of agents for service)
<PAGE>
Item 1, Part B, last paragraph, is hereby amended and restated in
its
entirety:
"The MDPU has approved two retail access pilot programs in
Massachusetts
(the "Massachusetts Pilots"). The first Massachusetts Pilot
allows retail
choice to be provided to residential, small commercial, and
industrial
customers in Lawrence, Lynn, Northhampton, and Worcester served
under Mass.
Electric's R-1, R-2, R-4, G-1, and G-2 rates for up to 10,000
customers
representing 100 million kilowatthours (KWHs) per year (50
million KWHs set
aside for residential customers); this Massachusetts Pilot is
proposed to
commence September 1, 1996. The second Massachusetts Pilot
permits retail
choice for members of the Massachusetts High Technology Council,
Inc. who are
currently served under Mass. Electric's G-3 rate beginning July
1, 1996."
Item 1, Part C, as most recently amended and restated by
Amendment No. 1 to
this filing, is further amended as follows:
The first sentence is hereby amended to read in its entirety
as follows:
"As a step toward implementation of Choice: New England,
NEES proposes
to form one or more marketing companies in Massachusetts, Rhode
Island, New
Hampshire, New York, New Jersey, Pennsylvania, Maryland, and
Delaware."
The second paragraph is hereby amended to read in its
entirety as
follows:
"The Marketing Companies also propose to provide a broad
range of
electrical-related services to customers. These
electrical-related services
include, but are not limited to, audits, power quality, fuel
supply, repair,
maintenance, construction, design, engineering and consulting."
A third paragraph is added as follows:
"Other than the Marketing Companies formed to participate in
the Pilot
Program in New Hampshire and the Massachusetts Pilot Programs for
which
specific authorization is requested at this time, no Marketing
Company may
make retail sales of electricity without first showing state
regulatory
authority for such activities and obtaining an appropriate
supplemental order
from the Commission. The Marketing Company formed to participate
in the New
Hampshire Pilot Program shall be named Granite State Energy, Inc.
The
Marketing Company formed to participate in the Massachusetts
Pilot Programs
shall be named NEES Energy, Inc. NEES requests that the
Commission reserve
jurisdiction over retail sales of electricity by Marketing
Companies in New
Hampshire (other than such Marketing Company's participation in
the Pilot
Program), in Massachusetts (other than such Marketing Company's
participation
in the Massachusetts Pilot Programs), Rhode Island, New York, New
Jersey,
Pennsylvania, Maryland, and Delaware."
Item 1, Part D, as most recently amended and restated by
Amendment No. 1 to
this filing, is hereby amended and restated in its entirety as
follows:
"D. Personnel of Marketing Companies
- --------------------------------------
Staffing is expected to begin with a small group of
employees for the
Marketing Companies, primarily sales staff. Technical and
support staff
needed for a particular project could be assigned for the
duration of that
project from NEPSCO, NEP, and the Retail Companies, and the
assigned employees
would continue to be employees of NEPSCO, NEP, and the Retail
Companies, not
to exceed in any one year 2% of the total employees of NEPSCO,
NEP, and the
Retail Companies. All costs associated with such staff
(including
compensation, overheads, and benefits) would be fully reimbursed
by the
<PAGE>
Marketing Company to which they were assigned in accordance with
Rules 90 and
91 of the Act. Reimbursements for these costs will be on a
thirty-day cycle
basis in accordance with service contracts to be entered into
with the
Marketing Company (see Exhibit J hereto)."
Item 1, Part F, as most recently amended and restated by
Amendment No. 1 to
this filing, is hereby amended and restated in its entirety as
follows:
"F. Financing
- --------------
NEES proposes to provide initial financing for each
Marketing Company by
the purchase of one thousand shares of the common stock, par
value $1.00 per
share, for a total purchase price of $1,000. NEES then proposes
to make
subsequent capital contributions and/or loans to the Marketing
Company from
time to time, provided that such NEES financing for all Marketing
Companies
shall not be in excess of $15 million, in the aggregate
outstanding at any one
time. Any such loans will be in the form of non-interest bearing
subordinated
notes payable in twenty years or less from the date of issue (see
Exhibit B
hereto). The Marketing Company may prepay any or all of the
outstanding notes
hereunder, in whole or in part, at any time and from time to time
without
premium or penalty. Subsequent capital contributions or open
account advances
without interest, loans, or extensions of credit, from NEES to
the Marketing
Companies in accordance with the terms of Rule 45 of the Act, are
exempt from
the requirement of authorization by the Commission. It is
proposed that the
above investments be authorized through December 31, 1999."
Item 1, Part G, is hereby amended to read in its entirety as
follows:
"NEES shall file certificates with the Commission pursuant
to the terms
and conditions of Rule 24 under the Act on a quarterly basis,
within 60 days
after the end of each quarter, in connection with the formation
of Marketing
Companies and the performance of services thereby. As part of
such Rule 24
filings, NEES shall provide the Commission with: (1) copies of
the by-laws
and articles of organization or incorporation of any Marketing
Company formed
during such period, (2) a report of the number of permanent
employees assigned
to any Marketing Company during such period, broken down by NEES
company,
together with a general description of the services provided and
the total
dollar value of such services, (3) a balance sheet, twelve months
ending
income statement, and statement of cash flow for each Marketing
Company, and
(4) a report by each Marketing Company, by customer class, of the
aggregate
number of KWHs sold or marketed at retail during such quarter."
Item 1 is amended by adding the following new Part:
"H. Compliance with Rule 53
- -----------------------------
Neither NEES nor any subsidiary currently has an ownership
interest in
an exempt wholesale generator ("EWG") as defined in Section 32 of
the Act or a
foreign utility company ("FUCO") as defined in Section 33 of the
Act.
Additionally, neither NEES nor any subsidiary is a party to, or
has any rights
under, a service, sales, or construction agreement with an EWG or
FUCO. NEES
and NEERI have filed an Application/Declaration (File No.
70-8783) requesting
authority to make EWG and FUCO acquisitions and financings. In
the event that
the total amount of authority requested in the above-referenced
Application/Declaration (File No. 70-8783) is granted and
invested in
connection with EWGs and FUCOs, NEES' 'aggregate investment'
(determined in
accordance with Rule 53(a)(1)(i)) in EWGs and FUCOs would not
exceed 50% of
NEES' 'consolidated retained earnings' (as defined in Rule
53(a)(1)(ii)) in
compliance with the provisions set forth in Rule 53 under the
Act. NEES and
its subsidiaries shall comply with the requirements of Rules 53
and 54 of the
Act in connection with EWG and FUCO acquisitions and financings."
<PAGE>
Item 6(a) is hereby amended by supplying the following exhibits:
F Opinion of Counsel
*J Draft Form of Service Contract
K-1 MDPU Letter approving Massachusetts Pilot Programs
K-2 Submission letter to MDPU for Massachusetts Pilot
Programs
K-3 Background information: Residential and Small
Commercial and
Industrial Customer Pilot
K-4 Background information: Massachusetts High Technology
Council
Pilot
*Final form to be supplied by post-effective amendment
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Public Utility Holding
Company Act
of 1935, the undersigned Company has duly caused this Amendment
No. 3 to its
Application/Declaration on Form U-1 (Commission's File No.
70-8803) to be
signed on its behalf, as indicated by the undersigned officer
thereunto duly
authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By
Michael E. Jesanis, Treasurer
Date: May 8, 1996
The name "New England Electric System" means the trustee or
trustees for the
time being (as trustee or trustees but not personally) under an
agreement and
declaration of trust dated January 2, 1926, as amended, which is
hereby
referred to, and a copy of which as amended has been filed with
the Secretary
of The Commonwealth of Massachusetts. Any agreement, obligation
or liability
made, entered into or incurred by or on behalf of New England
Electric System
binds only its trust estate, and no shareholder, director,
trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
F Opinion of Counsel Filed herewith
*J Draft Form of Service Contract Filed herewith
K-1 MDPU Letter approving Massachusetts Filed
herewith
Pilot Programs
K-2 Submission letter to MDPU for Filed herewith
Massachusetts Pilot Programs
K-3 Background information: Residential Filed
herewith
and Small Commercial and Industrial
Customer Pilot
K-4 Background information: Massachusetts Filed
herewith
High Technology Council Pilot
* Final Form to be supplied by post-effective amendment
<PAGE>
Exhibit F
25 Research Drive, Westborough, Massachusetts 01582
===================================================
May 8, 1996
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, DC 20549
RE: File No. 70-8803
Dear Commissioners:
New England Electric System (NEES) has filed a Statement on
Form U-1
with your Commission dated February 16, 1996, an Amendment No. 1
thereto dated
March 8, 1996, an Amendment No. 2 thereto dated April 26, 1996,
and an
Amendment No. 3 thereto dated the date hereof (the Statement)
requesting
authorization for NEES to, among other things, form one or more
marketing
companies (Marketing Companies) and for such Marketing Companies
to provide
electrical-related services to customers, all as set forth in the
Statement.
The Statement also requests authorization for NEES to
provide initial
financing for each such Marketing Company by the purchase of one
thousand
shares of common stock, par value $1.00 per share, for a total
purchase price
of $1000, and to finance, from time to time through December 31,
1999, the
activities of such Marketing Companies for the transactions
outlined in the
Statement, such financing not to exceed $15 million in the
aggregate
outstanding at any one time. The New Hampshire Public Utilities
Commission
has authorized a retail electric competition pilot program;
participation in
this pilot program by NEES will include the activities of a
Marketing Company
in New Hampshire as contemplated by the Statement. The
Massachusetts
Department of Public Utilities has authorized two retail access
pilot
programs; participation by NEES will include the activities of a
Marketing
Company in Massachusetts as contemplated by the Statement.
It is my opinion that NEES, a voluntary association duly
created in The
Commonwealth of Massachusetts under an Agreement and Declaration
of Trust
dated as of January 2, 1926, as amended, has all approvals
necessary for the
transactions contemplated in the Statement. Other than as set
forth in the
Statement, no approval of any state or federal commission is
necessary to take
these actions other than the Securities and Exchange Commission.
Based upon the foregoing and subject to appropriate action
by the
Securities and Exchange Commission under the Act, it is my
opinion that, in
the event the proposed transactions are consummated in accordance
with the
Statement:
(a) All state laws applicable to the proposed transactions
will have
been complied with;
(b) The Marketing Companies will be validly organized and
duly
existing;
<PAGE>
(c) When issued and sold as described in the Statement, any
securities
of Marketing Companies issued and sold in accordance
with the
Commission's authorization of the transactions
contemplated by the
Statement, will be validly issued, fully paid, and
non-assessable,
and the holders thereof will be entitled to the rights
and
privileges appertaining thereto set forth in the
corporate
documents defining such rights and privileges;
(d) When acquired as described in the Statement, NEES will
legally
acquire any securities issued and sold by Marketing
Companies in
accordance with the Commission's authorization of the
transactions
contemplated by the Statement;
(e) The consummation of the proposed transactions as
described in the
Statement will not violate the legal rights of any
holder of
securities issued by NEES or any associate company
thereof.
I hereby consent to the use of this opinion in connection
with the
statement on Form U-1, as amended, filed with the Securities and
Exchange
Commission with reference to the proposed transactions.
Very truly yours,
s/Kirk L. Ramsauer
Kirk L. Ramsauer
Associate General Counsel
<PAGE>
Exhibit J
DRAFT
[Existing NEES COMPANY]
(hereinafter called Company)
[ADDRESS]
SERVICE CONTRACT
DATE:
[NEW MARKETING AFFILIATE TO BE CREATED]
The intent of this agreement is for Company to furnish
certain services
to you at cost, fairly and equitably allocated. Services will be
rendered by
Company only upon receipt from time to time of specific or
general request
therefor. Said requests may always be modified or cancelled by
you at your
discretion. The parties hereto agree as follows:
1. The Company agrees to furnish you upon the terms and
conditions
herein set forth such services, if available, as you may from
time to time
request. Notwithstanding the foregoing the Company shall not
furnish under
this agreement any engineering, construction, or maintenance
services for a
nuclear generating plant.
2. The Company has and will maintain a staff trained and
experienced
in the engineering, construction, operation, maintenance and
management of
public utility properties. In addition to the services of its
own staff,
Company will, after consultation with you concerning services to
be rendered
pursuant to your request, arrange for services of non-affiliated
experts,
consultants, accountants and attorneys.
3. All of the services rendered under this agreement will
be at
actual cost thereof. Direct charges will be made for services
where a direct
allocation of cost is possible. The methods of determining such
costs and the
allocation thereof are set forth in Schedule I hereto. These
methods are
reviewed annually and more frequently, if appropriate. Such
methods may be
modified or changed by Company without the necessity of an
amendment of this
agreement provided that in each instance all services rendered
hereunder will
be at actual cost thereof, fairly and equitably allocated, and
all in
accordance with the requirements of the Public Utility Holding
Company Act of
1935 and the rules and regulations and orders thereunder. You
will be advised
from time to time of any material changes in such methods.
4. Bills will be rendered during the first week of each
month
covering amounts due for the month calculated on an estimated
basis using the
actual expenses incurred during the previous month. This
estimated amount
would be adjusted on the bill to be rendered during the first
week of the
following month. Any amount remaining unpaid after fifteen days
following
receipt of the bill shall bear interest thereon from the date of
the bill at
an annual rate of 2% above the lowest interest rate then being
charged by the
First National Bank of Boston on 90 day commercial loans.
Services will be
performed hereunder for a term commencing ______________, 1996,
and continuing
through ______________________, 199__, unless terminated at an
earlier date by
either party giving thirty days' written notice to the other of
such
termination at the end of any month.
5. This agreement will be subject to termination or
modification at
any time to the extent its performance may conflict with any
federal or state
law or any rule, regulation or order of a federal or state
regulatory body
<PAGE>
having jurisdiction. The agreement shall be subject to approval
of any
federal or state regulatory body whose approval is a legal
prerequisite to its
execution and delivery or performance.
[COMPANY]
By:_________________________________
[MARKETING COMPANY TO BE CREATED]
Accepted: __________, 19__
By:________________________________
<PAGE>
SCHEDULE I
Determination of Cost of Service and Allocation Thereof
Cost of service will be determined in accordance with the
Public Utility
Holding Company Act of 1935 and the rules and regulations and
orders
thereunder, and will include all costs of doing business incurred
by the
Company.
Records will be maintained for each Department and Division
of the
Company in order to accumulate all costs of doing business and to
determine
the cost of service. These costs will include wages and salaries
of employees
and related expenses such as insurance, taxes, pensions and other
employee
welfare expenses, and rent, light, heat, telephone, supplies, and
other
housekeeping costs. In addition, records will be maintained of
general
administrative expenses, which will include the costs of
operating the Company
as a corporate entity.
Charges for services rendered and related expenses and
non-personnel
expenses (e.g., use of automotive equipment, etc.) will be billed
directly to
the serviced companies, either individually or, when the services
performed
are for a group of companies, by means of an equitable allocation
formula.
Each formula will have an appropriate basis such as customers,
meters,
employees, plant investments, inventories or operating revenues.
Charges for services will be determined from the time sheets
of
employees and will be computed on the basis of each employee's
hourly rate
plus a percentage factor to cover related expenses and general
administrative
expenses. Records of such related expenses and general
administrative
expenses will be maintained and subjected to periodic review.
Out-of-pocket expenses which are incurred for the serviced
companies
will be billed at cost. Charges for non-personnel expenses, such
as for use
of automobiles, trucks and heavy equipment, will normally be
computed on the
basis of costs per hour or per mile.
<PAGE>
EXHIBIT K-1
The Commonwealth of Massachusetts
Department of Public Utilities
Leverett Saltonstall Building, Government Center
100 Cambridge Street, Boston 02202
April 3, 1996
Thomas G. Robinson, Esq.
Massachusetts Electric Company
25 Research Drive
Westborough, MA 01582
Re: Retail Access Pilot Programs
Dear Mr. Robinson:
On March 4, 1996, Massachusetts Electric Company ("MECo"
or "Company") submitted two retail access pilot programs to
the Department of Public Utilities ("Department") for review.
In the first pilot program, the Company proposes to implement
retail choice to residential and small commercial and
industrial customers in the communities of Lawrence, Lynn,
Northampton, and Worcester./1/ The second pilot program
extends retail choice to members of the Massachusetts High
Technology Council ("MHTC") who are currently served under the
Company's G-3 rate./2/ The Company proposes to commence the
residential and small commercial and industrial pilot
effective September 1, 1996, and the MHTC pilot effective
July 1, 1996./3/ The Company has provided unbundled rates
for each pilot program that tie directly to its February
16,1996 industry restructuring proposal. See D.P.U. 96-25,
Exhibit PTZ-13.
___________________
1 The residential and small commercial and industrial pilot
would be available to customers currently served under the
R-1, R-2, R-4, G-1, and G-2 rates for up to 10,000 customers
representing 100 million kilowatthours per year (50 million
set aside for residential customers) of electricity usage.
2 The second pilot program would provide retail choice for up
to 200 million kilowatthours of electricity usage.
3 The residential and small commercial and industrial pilot
would terminate on December 31, 1997, and the MHTC pilot
would continue until direct access is generally available to
customers.
<PAGE>
Massachusetts Electric Company Page 2
April 3, 1996
The Company stated that approval of the pilot programs is
appropriate for several reasons (MECo Cover Letter at 2).
First, the pilot programs will allow the Company to test the
metering and billing protocols that will be used to develop
broader programs. Second, the pilot programs will allow
suppliers to aggregate loads, transfer capability
responsibilities, and work through the NEPOOL settlement
process. Third, the pilot programs will provide a test of the
market. In addition, the Company stated that, because
participation is voluntary and participants may return to
MECo's filed rates at any time, customers will not be harmed
by the pilot programs. The Company also stated that, because
New England Power Company will bear the risk of any under-
recovery, non-participants will not be harmed by the pilot
programs (DPU-IR-3).
In the transition to a competitive market structure, the
pilot programs will provide valuable experience to the
Company, customers, and the other participants that will be
active in a competitive market. Accordingly, with the
understanding that the Company's customers that do not
participate in the programs are not harmed by their
implementation, the Department approves the pilot programs.
In addition, the Department understands that the Company will
file a pilot distribution tariff with the Federal Energy
Regulatory Commission, with the rates, terms and conditions
approved by the Department. Finally, in approving the pilot
programs, the Department makes no findings on the merits of
the Company's restructuring proposal (D.P.U. 96-25).
Sincerely,
s/ John B. Howe
John B. Howe, Chairman
s/ Mary Clark Webster
Mary Clark Webster, Commissioner
s/ Janet Gail Besser
Janet Gail Besser, Commissioner
cc: Mary L. Cottrell
George Dean, Assistant Attorney General
<PAGE>
EXHIBIT K-2
Massachusetts Electric Thomas G. Robinson
A NEES company General
Counsel
March 4, 1996
by Hand
Mary L. Cottrell, Secretary
Department of Public Utilities
100 Cambridge Street, 12th Fl.
Boston, MA 02202
Re: Massachusetts Electric Company: Retail Access
Pilot
Programs
Dear Secretary Cottrell:
Attached are two proposals to implement Pilot
Programs for
Massachusetts Electric Company's ("Mass. Electric's") customers
that are designed to test the metering and billing protocols set
forth in Choice: New England. In the first Pilot Program, Mass.
Electric proposes to implement retail choice for up to 10,000
residential and small commercial and industrial customers
representing 100 million kilowatthours per year of electricity
usage. The Pilot Program is summarized in Attachment 1. The
customers within this pilot are now served under R-1, R-2, R-4,
G-1, and G-2 rates. For the pilot, these rates will be unbundled
and customers will be allowed to choose their suppliers. The
unbundled rates tie directly to Mass. Electric's February 16,
1996 filing in the restructuring case. (See Docket D.P.U. 96-25,
Exhibit PTZ-13). If approved, the residential pilot would
commence on September 1, 1996, and the rates which implement the
Pilot Program for customers now served on the R-1, R-2, R-4, G-1,
and G-2 rates included in Attachment 3 have this effective date.
The second pilot extends retail choice to Mass.
Electric's
larger G-3 customers. Specifically, we have reached an agreement
with the Massachusetts High Technology Council, Inc. to implement
retail choice for up to 200 million kilowatthour sales by its
members who take service under Mass. Electric's G-3 rate. (See
25 Research Drive
Westborough, MA 01582-0099
Telephone: 508-389-2877
Fax: 508-389-2463
[email protected]
<PAGE>
Mary L. Cottrell
March 4, 1996
Page 2
Attachment 2). We currently expect that the 200 million
kilowatthours will be bid in two separate requests for proposal
and the New England Power Company ("NEP") will be restricted to
winning only one bid. In that way, we are assured that an
alternative supplier is selected for a significant portion of the
load made available under the Pilot Program. Again, the
unbundled G-3 rates and access charges tie to Mass. Electric's
February 16, 1996 filing in the industry restructuring docket.
(See Docket D.P.U. 96-25, Exhibit PTZ-13). The earliest
implementation date for this Pilot Program is July 1, 1996, and
the rate included in Attachment 3 designed to serve the current
G-3 customers has this effective date.
Unbundled tariffs to implement both Pilots are
included in
Attachment 3. To allow adequate time to prepare to implement the
Pilot Programs and to make transmission filings with the Federal
Energy Regulatory Commission, /1/ Mass. Electric is asking the
Department to approve these rates within one month or by April 4,
1996. Although the April, 1996 date is prior to the proposed
effective dates of the rates, an early approval of the Pilot
Programs will allow us some time to work through the details of
the pilot implementation and to gain FERC approval following the
Department's action.
_____________________
/1/ Following Department approval of the Pilot
Programs,
Mass. Electric will make the appropriate transmission filings
with FERC. These FERC filings will include amendments to the
system's wholesale transmission tariffs to make them available
for retail service to the extent necessary to implement the Pilot
Programs, a request for approval of Mass. Electric's unbundled
distribution tariffs to eliminate any jurisdictional
uncertainties associated with providing distribution service by
Mass. Electric, and an amendment to Mass. Electric's all-
requirements tariff with NEP to authorize the implementation of
the Pilot Programs and the necessary transmission arrangements
and to reimburse NEP for the access charge collected under Mass.
Electric's unbundled rates. NEP will also make any other filings
necessary to hold its other wholesale customers harmless from the
implementation of the Pilot Programs as required under its
memorandum of understanding with Mass. Electric and its other
retail affiliates. For the purposes of the Pilot Programs we
have established the transmission component of NEP's W-95 rate at
$2.18 per kilowatt-month in our unbundled rate filing. (See
Docket D.P.U. 96-25, Exhibit PTZ-4, p. 2.)
<PAGE>
Mary L. Cottrell
March 4, 1996
Page 3
The Department's approval of the Pilot Programs is
appropriate for several reasons. First, the implementation of
the Pilot is essential to test the metering and billing protocols
that will be used to develop broader programs for customer choice
in the ongoing restructuring proceedings. Metering and billing
methods present significant issues that must be resolved prior to
the implementation of broad based customer choice. Second, the
Pilot allows suppliers to aggregate loads, transfer capability
responsibilities, and work through the NEPOOL settlement process.
Under our current restructuring plan, suppliers would provide
these services by either joining NEPOOL or contracting with a
NEPOOL member. We expect a vibrant market to develop for these
services among NEPOOL members. The Pilot Programs will test the
ability and willingness of NEPOOL members to provide these
services. At the suggestion of the Division of Energy Resources,
NEP would agree to provide these services to a winning bidder in
the Pilot Programs in the event that the winning bidder is not a
NEPOOL member and is unable to contract with a NEPOOL member to
provide these services, and if the bidder reimburses NEP for all
costs associated with providing the services. Third, the Pilot
Programs will provide a concrete test of the market. The Pilot
Programs will generate data about prices, customer response, and
supplier creativity in the retail market for electricity.
Finally, the Pilot Programs will not harm customers. Customers
need not participate and if they do, may return to Mass.
Electric's filed rates at any time. Thus, Mass. Electric's
regulated service provides a complete backstop to the Pilot
Programs. As a result, the new option for customers will produce
either a decrease in rates or an increase in value; otherwise,
customers would simply continue with regulated service. For all
these reasons, we ask the Department to approve the rates in
Attachment 3 and authorize Mass. Electric to implement the Pilot
Programs.
Thank you for your attention to our filings.
Very truly yours,
s/ Thomas G. Robinson
Thomas G. Robinson
TGR/afs
Attachment
c: Ronald F. LeComte, Hearing Officer
George B. Dean, Esq.
Robert F. Sydney, Esq.
<PAGE>
[Attachment 1 to MDPU Submission Letter] EXHIBIT K-3
3/4/96
MASSACHUSETTS ELECTRIC COMPANY
RESIDENTIAL AND SMALL BUSINESS CUSTOMERS
CHOICE: NEW ENGLAND -- PILOT PROGRAM
Massachusetts Electric Company and its affiliates have developed
a plan for providing all customers choice in their power supplier
called Choice: New England. Choice: New England proposes that
all customers have the option of choosing their electricity
supplier beginning January 1, 1998. In the meantime, the pilot
will test the potential for customers to lower their electricity
bills in a competitive marketplace. It will also allow
Massachusetts Electric to work out the logistical and
administrative details of retail choice, such as metering and
billing, before implementing choice on a state-wide scale. The
pilot program for residential and small business customers will
be administered with the following terms:
1. Participation:
-------------
- Open to all residential R rate customers, and
commercial/industrial G1 or G2 customers receiving
electric service from Massachusetts Electric in
the
cities of Lawrence, Lynn, Northampton, and
Worcester.
- Total participation will initially be limited to
100
million kWh per year. 50 million kWh will be
specifically set aside for residential customers.
- MECO reserves the right to expand this program at
a later
date or conduct additional pilot programs.
- If customers totaling more than 50 million kWh
each for
residential and business customers ask to
participate, a
lottery will be held to select participants.
2. Pilot Program Administration
----------------------------
- Massachusetts Electric will hire an Administrator,
who
will be responsible for choosing the power supply
options, and marketing and administering the
program for
customers. The Administrator will sign a contract
including all the terms in this description, as
well as
provisions to protect customer information and
confidentiality.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 2
- Massachusetts Electric will pay the Administrator
a fixed
fee plus a bonus for delivering 100% of the 50
million
kWh participation for the business portion and an
incremental incentive for each residential
customer who
chooses to receive power through one of the supply
options available. The total amount paid to the
administrator will not exceed $75,000. This
amount will
be added to the generation price that customers
pay.
3. Community Outreach
------------------
- Massachusetts Electric will send an initial letter
to all
the approximately 140,000 eligible customers,
directing
them to mail a postage paid card back to the
Administrator if interested. In this way, only
customers who give permission for their names,
addresses,
phone numbers, and usage to be released will be
given to
the Administrator.
- These cards can also be filled out and collected
by
community agencies including neighborhood centers,
Community Development Corporations, local business
associations, public government offices, etc, and
be
forwarded to the Administrator. Special efforts
will be
made to work with agencies who represent seniors,
low
income customers, customers who do not speak or
read
English, electric heat customers, locally owned
businesses, etc.
- Massachusetts Electric will meet initially with
local
community groups and officials to introduce the
program
and the Administrator. All further outreach and
marketing activities will be conducted by the
Administrator.
- Massachusetts Electric will promptly refer any
inquiries
from interested customers it receives directly to
the
Administrator.
4. Start Date:
----------
- The latter of September 1, 1996, or receipt of all
necessary regulatory approvals.
- This program shall continue through December 31,
1997.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 3
- During the pilot, customers may opt to return to
service
under their previous bundled tariff. Once they
return to
bundled tariffs, they cannot rejoin the pilot.
5. Terms:
-----
Massachusetts Electric will provide participating
customers
access to alternative power suppliers on the terms
specified
in Choice: New England as modified below:
- During the term of the pilot, customers will pay MECO for
Transmission, Distribution, and Access at the prices
specified in Attachments 1-5.
- The prices for Transmission and Distribution specified in
Attachments 1- 5 are estimates of the unbundled prices
for those services. While MECO's prices remain bundled,
the prices specified in Attachments 1-5 shall increase or
decrease in proportion to overall increases or decreases
in the distribution portion of MECO's base rates approved
from time-to-time by the DPU.
6. Power Supply:
------------
- The Administrator will solicit bids from alternative
power suppliers on behalf of the customers participating
in the Pilot. The Administrator will also be responsible
for community outreach and marketing the options to
interested customers.
- All bids received shall be made public.
- All bids must specify a price or pricing schedule for all
requirements, firm power delivered to NEP's system for an
initial term of 12 months. After such initial term,
power supplies for Pilot participation may be solicited
for different durations, depending on the availability of
direct access on terms and conditions approved by the DPU
and FERC.
- The pilot will not be renewed if direct access will be
available to customers within a reasonable time period,
as determined by Massachusetts Electric.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 4
- NEP specifically reserves the right to bid or not bid in
any such solicitation.
- Massachusetts Electric will assist the Administrator in
the preparation of the initial power supply Request For
Proposal. Massachusetts Electric will encourage the
creation of several supply options for each customer
class.
- To facilitate the pilot program during the period direct
access is not generally available to customers, NEP may
enter into contracts with the winning bidder to buy and
resell power to participating customers if it is not
practicable to conduct such transactions under
appropriate wheeling tariffs.
- Among other things, the RFP will require that each
winning bidder be a member of NEPOOL or, if not, have an
agreement with a NEPOOL member to include the load served
in the NEPOOL member's own-load dispatch. This will
ensure that appropriate NEPOOL requirements are met and
that if NEP does not bid or is not the winning bidder, it
will be relieved of responsibility to meet the
requirements of participating customers.
7. Metering/Billing/Customer Service
---------------------------------
- MECO will continue to provide distribution services,
including DSM, to all customers participating in the
Pilot Program on the same terms and conditions generally
applicable to customers on their previous bundled tariff.
- Detailed billing procedures will be developed to
coordinate arrangements between MECO and the generation
supplier. Among other things, these arrangements must
address compensation for losses, cash working capital,
and bad debts.
- Customers will use existing meters for pilot
participation unless they or their supplier elect to
install, at their own expense, alternative meters
acceptable to Massachusetts Electric. No new metering
will be installed as part of the pilot.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 5
8. Regulatory Approval:
-------------------
- Pilot program is subject to regulatory approval by the
DPU and FERC.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 6
ATTACHMENT 1 - RATE: R1
Distribution Charges /1/
Customer Charge (inc. ECS) /2/ $6.63 per month
Energy Charge $0.02294 per kWh
DSM/Renewables /3/ $0.00271 per kWh
Transmission Charge /1/
Energy Charge $0.00408 per kWh
Access Charges
Energy Charge $0.03044 per kWh
1. To be superseded when unbundled rates are generally
available.
2. Subject to adjustment based on base rate changes.
3. As approved by MDPU from time to time.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 7
ATTACHMENT 2 - RATE: R2
Distribution Charges /1/
Customer Charge (inc. ECS) /2/ $4.40 per month
Energy Charge $0.01731 per kWh
DSM/Renewables /3/ $0.00271 per kWh
Transmission Charges /1/
Energy Charge $0.00308 per kWh
Access Charges
Energy Charge: $0.02298 per kWh
1. To be superseded when unbundled rates are generally
available.
2. Subject to adjustment based on base rate changes.
3. As approved by MDPU from time to time.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 8
ATTACHMENT 3 - RATE: R4
Distribution Charges /1/
Customer Charge (inc. ECS) /2/ $21.33 per month
Energy Charge $0.02429 per kWh
DSM/Renewables /3/ $0.00271 per kWh
Transmission Charges /1/
Energy Charge $0.00376 per kWh
Access Charges
Energy Charge $0.03000 per kWh
1. To be superseded when unbundled rates are generally
available.
2. Subject to adjustment based on base rate changes.
3. As approved by MDPU from time to time.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 9
ATTACHMENT 4 - RATE: G1
Distribution Charges /1/
Customer Charge (inc. ECS) /2/ $9.46 per month
Unmetered Charge $7.20 per month
Energy Charge $0.02573 per kWh
DSM/Renewables /3/ $0.00583 per kWh
Transmission Charges /1/
Energy Charge $0.00519 per kWh
Access Charges
Energy Charge $0.03000 per kWh
1. To be superseded when unbundled rates are generally
available.
2. Subject to adjustment based on base rate changes.
3. As approved by MDPU from time to time.
<PAGE>
Massachusetts Electric Company
Residential/Small Business Choice: New England Pilot
March 4, 1996
Page 10
ATTACHMENT 5 - RATE: G2
Distribution Charges /1/
Customer Charge (inc. ECS) /2/ $17.14 per month
Demand: $6.33 per kW-Mo.
DSM/Renewables /3/ $0.00281 per kWh
Transmission Charges /1/
Demand: $1.48 per kW-Mo.
Access Charges
Demand $2.25 per kW - Mo.
Energy $0.02288 per kWh
1. To be superseded when unbundled rates are generally
available.
2. Subject to adjustment based on base rate changes.
3. As approved by MDPU from time to time.
<PAGE>
[Attachment 2 to MDPU Submission Letter] EXHIBIT K-4
Massachusetts Electric
A NEES company
February 14, 1996
Mr. Howard P. Foley
President
Massachusetts High Technology Council, Inc.
Reservoir Place
1601 Trapelo Road
Waltham, Massachusetts 02154
Re: Choice: New England -- Pilot Program
Dear Mr. Foley:
As you are aware, Massachusetts Electric Company and its
affiliates have developed a plan for providing all customers true
choice in their power supplier called Choice: New England.
Although the schedule for implementation of the program is
January 1, 1998, we are prepared to seek approval from the
Department of Public Utilities (DPU) to implement pilot programs
for representative groups of residential, small commercial, and
high technology customers that could begin as soon as July 1,
1996. With respect to high technology customers, we are offering
the Massachusetts High Technology Council (MHTC) members a pilot
program on the following terms:
1. Participation:
-------------
- Open to MHTC members currently served by MECO on rate
G-3.
- MHTC members with more than one G-3 account can designate
accounts to participate in the Pilot. All participating
accounts shall be for all requirements service.
- Total participation will initially be limited to 200
million kWh per year.
- MECO reserves the right to expand this Pilot at a later
date or conduct additional pilot programs.
- Allocation of available kWh among MHTC members to be
determined by MHTC.
<PAGE>
Mr. Howard P. Foley
February 14, 1996
Page 2
2. Option to Improve Terms:
-----------------------
- MECO agrees that, between the effective date of this
Pilot and the time direct access is generally available
under terms and conditions approved by the DPU and the
Federal Energy Regulatory Commission (FERC), it will not
offer any customer, either individually or as part of a
group, direct access to alternative power suppliers on
terms more favorable than those contained herein without
first offering MHTC the opportunity to modify this Pilot
to conform to the terms of such other offer.
3. Start Date:
----------
- The latter of July 1, 1996, or receipt of all necessary
regulatory approvals.
- This Pilot shall terminate when direct access is
generally available to customers on terms and conditions
approved by the DPU and FERC.
- During the term of this Pilot, MHTC members may opt to
return to service under MECO's G-3 rate, provided such is
consistent with the terms of any power supply arrangement
entered into by or on behalf of MHTC members.
4. Terms:
-----
- Massachusetts Electric will provide participating
customers access to alternative power suppliers on the
terms specified in Choice: New England as modified
below:
- During the term of the Pilot, customers will pay MECO
for transmission, distribution, and access at the
prices specified in Attachment 1.
- The prices for transmission and distribution specified
in Attachment 1 are estimates of the unbundled prices
for those services. While MECO's prices remain
bundled, the prices specified in Attachment 1 shall
increase or decrease in proportion to overall increases
<PAGE>
Mr. Howard P. Foley
February 14, 1996
Page 3
or decreases in the distribution portion of MECO's G-3
base rate approved from time-to-time by the DPU.
- During the term of the Pilot, the access charges
specified in Attachment 1 shall be fixed through
December 31, 1998, thereafter they shall be adjusted
annually in accordance with the terms of Choice: New
England as proposed in MECO's February 16, 1996, filing
with the DPU.
5. Rights Upon Termination:
-----------------------
- At such time as direct access is generally available to
customers on terms approved by the DPU and FERC, the
Pilot shall terminate and the prices specified on
Attachment 1 for transmission, distribution and access
shall be superseded in their entirety by the generally
available prices for those services.
6. Power Supply:
------------
- MHTC will be required to solicit bids from alternative
power suppliers on behalf of its members participating in
the Pilot.
- All bids received shall be made public.
- All bids must specify a price for all requirements, firm
power delivered to NEP's system for an initial period of
18 months. After such initial period, power supplies for
Pilot participants may be solicited for different
durations.
- NEP specifically reserves the right to bid or not bid in
any such solicitation.
- MHTC shall select only one supplier in response to each
solicitation conducted under the terms of this Pilot
Program. If any supplier selected by MHTC is unable to
fulfill its obligations under a power supply agreement,
MHTC shall have the right to select a replacement
supplier.
<PAGE>
Mr. Howard P. Foley
February 14, 1996
Page 4
- NEP agrees to reimburse MHTC for reasonable costs
incurred in connection with the development and
initiation of the Pilot and preparation of the initial
power supply RFP by an independent consultant.
- To facilitate the Pilot program, NEP may enter into
contracts with the winning bidder to buy and resell power
to participating customers if it is not practicable to
conduct such transactions under appropriate wheeling
tariffs. To the extent possible, any contracts entered
into by NEP in connection with this Pilot will be
assigned to the MHTC and/or its participating members.
- The terms of any RFP issued shall be subject to NEP's
approval. Among other things, the RFP will require that
the winning bidder be a member of NEPOOL or, if not, have
an agreement with a NEPOOL member to include the load
served in the NEPOOL member's own-load dispatch. This
will ensure that appropriate NEPOOL requirements are met
and that if NEP does not bid or is not the winning
bidder, it will be relieved of responsibility to meet the
requirements of participating customers.
7. Metering/Billing/Customer Service:
---------------------------------
- MECO will continue to provide distribution services,
including DSM, to all customers participating in the
Pilot Program on the same terms and conditions generally
applicable to G-3 customers.
- Detailed billing procedures will be developed to
coordinate arrangements between MECO and the generation
supplier. Among other things, these arrangements must
address compensation for losses, cash working capital,
and bad debts.
8. Miscellaneous Provisions:
------------------------
- MECO agrees that MHTC members that have entered into
Service Extension Discount agreements with the Company
will be allowed to participate in the Pilot Program.
<PAGE>
Mr. Howard P. Foley
February 14, 1996
Page 5
- During the term of the Pilot Program, the restrictions
contained in the Service Extension Discount agreements
with respect to purchasing electricity from alternative
suppliers shall be suspended for participating MHTC
members. Upon a participant's election to end its
participation in the Pilot, all obligations under the
Service Extension Discount agreements shall be
reinstated. MHTC members that participate in the Pilot
for its full term shall be relieved of all obligations
under Service Extension Discount agreements with MECO.
9. Regulatory Approval:
-------------------
- Pilot program is subject to regulatory approval by the
DPU and FERC.
If the terms outlined above are acceptable to you, please so
indicate by countersigning a duplicate copy of this letter and
returning it to me.
Thank you for your cooperation. I am looking forward to
working with you on this exciting endeavor.
Very truly yours,
MASSACHUSETTS ELECTRIC COMPANY
s/John H. Dickson
John H. Dickson
President
Agreed and Accepted:
MASSACHUSETTS HIGH TECHNOLOGY COUNCIL, INC.
s/Howard P. Foley
Howard P. Foley
President
Massachusetts High Technology Council, Inc.
<PAGE>
ATTACHMENT 1
Distribution Charges
Customer Charge (inc. ECS) /1/ $78.75 per month
Demand /1/ $3.71 per kW-Mo.
DSM/Renewables /2/ $.00483 per kWh
Transmission Charges
Demand /1/ $1.75 per kW-Mo.
Access Charges
Demand $4.42 per kW-Mo.
Energy $.01934 per kWh
1. Subject to adjustment based on base rate changes.
2. As approved by DPU from time to time.
