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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: October 1, 1996
NEW ENGLAND ELECTRIC SYSTEM
(exact name of registrant as specified in charter)
Massachusetts 1-3446 04-1663060
(state or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
(508) 389-2000
(Registrant's telephone number, including area code)
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Item 5. Other Events
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As previously reported on September 12, 1996, New England
Electric System (NEES) subsidiaries Massachusetts Electric
Company (Massachusetts Electric) and New England Power Company
(NEP) announced that they had reached agreement with the Attorney
General of Massachusetts on a plan which, if approved by the
Massachusetts Department of Public Utilities (MDPU), would
implement retail choice in 1998 and provide Massachusetts
Electric and NEP recovery of stranded costs. Since that time,
the NEES companies have been seeking to reach consensus on that
plan with other industry stakeholders before filing the plan with
the MDPU.
On October 1, 1996, Massachusetts Electric and NEP, together
with the Attorney General, the Massachusetts Division of Energy
Resources and other parties announced the filing of a
restructuring plan with the MDPU. The filed plan is similar to
the previously announced plan except that the NEES companies have
agreed to voluntarily divest, either by sale or spin off, 100% of
their generating business to one or more nonaffiliated entities.
The plan would require the NEES companies to file an additional
plan by July 1, 1997 detailing how the divestiture would be
carried out. Actual divestiture would take place within six
months after the later of (i) commencement of retail choice in
Massachusetts for all customers of investor-owned electric
utilities or (ii) the receipt of all governmental approvals
necessary for the transfer. The aggregate amount of the
transition access charge on retail distribution rates to recover
NEP's past generation commitments would be reduced by the
proceeds or other valuation of the divested generation assets.
As part of the divestiture plan, NEP would endeavor to sell
or otherwise transfer its minority interest in five operating
nuclear power plants to nonaffiliates. NEP may, however, retain
responsibility for decommissioning and related expenses if
necessary.
The NEES companies have requested that the MDPU hold public
hearings on the plan and issue a decision by December 1, 1996.
Implementation of the plan is also subject to enactment of
enabling legislation by the Massachusetts legislature and the
approval of the Federal Energy Regulatory Commission. Additional
governmental approvals would be required for the transfer of the
generation business.
Historically, electric utility rates have been based on a
utility's costs. As a result, electric utilities are subject to
certain accounting standards that are not applicable to other
business enterprises in general. Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation
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(FAS71), requires regulated entities, in appropriate
circumstances, to establish regulatory assets and liabilities,
and thereby defer the income statement impact of certain costs
that are expected to be recovered in future rates. The NEES
companies believe that, if approved by regulators, the
restructuring plan would meet the criteria for continued
application of FAS71 to the NEES companies' remaining regulated
utility operations, including the recovery of stranded costs. As
a result, no writeoff of existing regulatory assets is expected
and any loss from the divestiture of the NEES companies
generating business would be recorded as a regulatory asset.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this Current Report on
Form 8-K to be signed on its behalf by the undersigned thereunto
duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/Alfred D. Houston
By
Alfred D. Houston
Executive Vice President and
Chief Financial Officer
Date: October 1, 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.
