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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ________________ to ________________
Commission File Number 1-7316
COMMONWEALTH ENERGY SYSTEM
(Exact name of registrant as specified in its Declaration of Trust)
Massachusetts 04-1662010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 225-4000
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock May 1, 1996
Common Shares of Beneficial
Interest, $4 par value 10,764,838 shares
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
(Unaudited)
March 31, December 31,
1996 1995
(Dollars in Thousands)
PROPERTY, PLANT AND EQUIPMENT, at original cost
Electric $1 109 185 $1 105 502
Gas 348 203 346 990
Other 63 331 63 132
1 520 719 1 515 624
Less - Accumulated depreciation and
amortization 511 235 497 627
1 009 484 1 017 997
Add - Construction work in progress
and nuclear fuel in process 14 120 10 276
1 023 604 1 028 273
LEASED PROPERTY, net 14 758 14 931
EQUITY IN CORPORATE JOINT VENTURES
Nuclear electric power companies (2.5%
to 4.5%) 10 045 9 814
Other investments 3 536 3 400
13 581 13 214
CURRENT ASSETS
Cash and cash equivalents 4 753 4 319
Accounts receivable 120 149 105 377
Unbilled revenues 22 536 31 642
Inventories, at average cost 13 183 25 538
Prepaid taxes and other 9 308 15 843
169 929 182 719
DEFERRED CHARGES 145 163 150 964
$1 367 035 $1 390 101
See accompanying notes.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
CAPITALIZATION AND LIABILITIES
(Unaudited)
March 31, December 31,
1996 1995
(Dollars in Thousands)
CAPITALIZATION
Common share investment -
Common shares, $4 par value -
Authorized - 18,000,000 shares
Outstanding - 10,764,838 in 1996 and
10,764,134 in 1995 $ 43 059 $ 43 056
Amounts paid in excess of par value 111 778 111 749
Retained earnings 255 331 235 980
410 168 390 785
Redeemable preferred shares, less current
sinking fund requirements 13 780 13 840
Long-term debt, including premiums, less current
sinking fund requirements and maturing debt 376 137 377 181
800 085 781 806
CAPITAL LEASE OBLIGATIONS 13 088 13 291
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 21 875 55 600
Maturing long-term debt 33 230 33 230
55 105 88 830
Other Current Liabilities -
Current sinking fund requirements 8 913 9 103
Accounts payable 123 328 134 908
Accrued taxes 36 462 31 587
Other 35 784 35 407
204 487 211 005
259 592 299 835
DEFERRED CREDITS
Accumulated deferred income taxes 171 513 170 182
Unamortized investment tax credits
and other 122 757 124 987
294 270 295 169
COMMITMENTS AND CONTINGENCIES
$1 367 035 $1 390 101
See accompanying notes.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
(Dollars in Thousands)
OPERATING REVENUES
Electric $167 768 $151 903
Gas 123 723 107 978
Steam and other 7 213 5 733
298 704 265 614
OPERATING EXPENSES
Fuel and purchased power 99 019 87 216
Cost of gas sold 61 613 51 136
Other operation and maintenance 61 253 61 891
Depreciation 14 667 13 751
Taxes -
Local property and other 8 534 8 363
Federal and state income 17 397 12 857
262 483 235 214
OPERATING INCOME 36 221 30 400
OTHER INCOME 2 401 1 513
INCOME BEFORE INTEREST CHARGES 38 622 31 913
INTEREST CHARGES
Long-term debt 9 372 9 799
Other interest charges 1 448 1 433
Allowance for borrowed funds
used during construction (105) (252)
10 715 10 980
NET INCOME 27 907 20 933
Dividends on preferred shares 267 282
EARNINGS APPLICABLE TO COMMON SHARES $ 27 640 $ 20 651
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10 764 838 10 566 316
EARNINGS PER COMMON SHARE $2.57 $1.95
DIVIDENDS DECLARED PER COMMON SHARE $ .77 $ .75
See accompanying notes.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
(Dollars in Thousands)
OPERATING ACTIVITIES
Net income $ 27 907 $ 20 933
Effects of noncash items -
Depreciation and amortization 17 583 17 249
Deferred income taxes and investment
tax credits, net (270) 284
Earnings from corporate joint ventures (457) (299)
Dividends from corporate joint ventures 90 389
Change in working capital, exclusive of cash,
cash equivalents and interim financing 6 706 20 271
All other operating items 2 021 4 357
Net cash provided by operating activities 53 580 63 184
INVESTING ACTIVITIES
Additions to property, plant and equipment
(exclusive of AFUDC) -
Electric (8 172) (8 955)
Gas (1 381) (2 343)
Other (135) (56)
Allowance for borrowed funds used during
construction (105) (252)
Net cash used for investing activities (9 793) (11 606)
FINANCING ACTIVITIES
Sale of common shares 32 2 418
Payment of dividends (8 556) (8 224)
Payment of short-term borrowings (33 725) (44 850)
Sinking funds payments (1 104) (1 294)
Net cash used for financing activities (43 353) (51 950)
Net increase (decrease) in cash and
cash equivalents 434 (372)
Cash at beginning of period 4 319 7 722
Cash at end of period $ 4 753 $ 7 350
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of capitalized amounts) $ 9 505 $ 8 736
Income taxes $ 9 986 $ 3 538
See accompanying notes.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) General Information
Commonwealth Energy System, the parent company, is referred to in this
report as the "System" and, together with its subsidiaries, is collec-
tively referred to as "the system." The System is an exempt public
utility holding company under the provisions of the Public Utility Holding
Company Act of 1935 with investments in four operating public utility
companies located in central, eastern and southeastern Massachusetts. In
addition, the System has interests in other utility and several non-
regulated companies.
The system has 2,077 regular employees including 1,227 (59%)
represented by various collective bargaining units. Negotiations with one
collective bargaining unit that represents approximately 18% of regular
employees are ongoing. The agreement that covered these employees expired
on March 31, 1996. A workforce of management personnel and experienced
contractors are performing all essential tasks. Management is unable to
predict the ultimate outcome of these negotiations. New agreements were
reached with two other bargaining units (representing approximately 23% of
regular employees) that were scheduled to expire on October 1, 1996 and
November 1, 1997. These new agreements will remain in effect until 2002
and 2001, respectively.
(2) Accounting Policies
(a) Principles of Accounting
The system's significant accounting policies are described in Note 1
of Notes to Consolidated Financial Statements included in its 1995 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
For interim reporting purposes, the system follows these same basic
accounting policies but considers each interim period as an integral part
of an annual period and makes allocations of certain expenses to interim
periods based upon estimates of such expenses for the year.
Generally, expenses which relate to more than one interim period are
allocated to other periods to more appropriately match revenues and
expenses. Principal items of expense which are allocated other than on
the basis of passage of time are depreciation and property taxes of the
gas subsidiary, Commonwealth Gas Company (Commonwealth Gas). These
expenses are recorded for interim reporting purposes based upon projected
gas revenue. Income tax expense is recorded using the statutory rates in
effect applied to book income subject to tax for each interim period.
The unaudited financial statements for the periods ended March 31,
1996 and 1995, reflect, in the opinion of the System, all adjustments
necessary to summarize fairly the results for such periods. In addition,
certain prior period amounts are reclassified from time to time to conform
with the presentation used in the current period's financial statements.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
The results for interim periods are not necessarily indicative of
results for the entire year because of seasonal variations in the
consumption of energy and Commonwealth Gas' seasonal rate structure.
(b) Regulatory Assets and Liabilities
Regulated subsidiaries of the System have established various
regulatory assets in cases where the Massachusetts Department of Public
Utilities (DPU) and/or the Federal Energy Regulatory Commission (FERC)
have permitted or are expected to permit recovery of specific costs over
time. Similarly, the regulatory liabilities established by the system are
required to be refunded to customers over time.
Based on the current regulatory framework, the system accounts for the
economic effects of regulation in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation." On January 1, 1996, the
system adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 imposes
stricter criteria for regulatory assets by requiring that such assets be
probable of future recovery at each balance sheet date. As of March 31,
1996, SFAS No. 121 did not have an impact on its financial position or
results of operations. However, this result may change as modifications
are made in the current regulatory framework pursuant to electric utility
restructuring orders issued by the DPU.
The principal regulatory assets included in deferred charges were as
follows:
March 31, December 31,
1996 1995
(Dollars in Thousands)
Postretirement benefit costs including
pensions $ 25 028 $ 24 608
Power contract buy-out 23 185 23 838
Fuel charge stabilization 17 901 22 063
Deferred income taxes 14 147 14 106
FERC Order 636 transition costs 11 326 11 711
Unrecovered plant and decommissioning costs 9 596 10 135
Seabrook related costs 8 701 9 511
Other 14 403 14 700
$124 287 $130 672
The regulatory liabilities, reflected in the accompanying balance
sheets and related to deferred income taxes, were $13.9 million and
$14 million at March 31, 1996 and December 31, 1995, respectively.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
(3) Commitments and Contingencies
Construction Program
The system is engaged in a continuous construction program presently
estimated at $293 million for the five-year period 1996 through 2000. Of
that amount, $69.3 million is estimated for 1996. The program is subject
to periodic review and revision.
(4) Common Shares
On March 28, 1996, the System's Board of Trustees had put forth in the
System's 1996 proxy statement a proposal seeking shareholder approval to
effect a two-for-one split of its outstanding common shares. On May 2,
1996, shareholders overwhelmingly supported the split. The split
accompanies a change in the par value from four dollars to two dollars per
share and an increase in the number of authorized common shares from 18
million to 50 million and will result in the issuance of an additional
10.8 million shares. The record date for the split is May 15, 1996. The
impact of the stock split has not been reflected in the accompanying
financial statements.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
Capital resources of the System and its subsidiaries are derived
principally from retained earnings and equity funds provided through the
System's Dividend Reinvestment and Common Share Purchase Plan (DRP).
However, effective February 1, 1996, the System's DRP common share
requirement was fulfilled through open market purchases rather than the
direct issue of common shares. This change was prompted by the System's
improving financial condition and reduced need for equity capital.
Supplemental interim funds are borrowed on a short-term basis and, when
necessary, replaced with new equity and/or debt issues through permanent
financing secured on an individual company basis. The system purchases
100% of all subsidiary common stock issues and provides, to the extent
possible, a portion of the subsidiaries' short-term financing needs.
These capital resources provide the funds required for the subsidiary
companies' construction programs, current operations, debt service and
other capital requirements.
For the first three months of 1996, cash flows from operating
activities amounted to approximately $53.6 million and reflect net income
of $27.9 million and noncash items including depreciation of $14.7
million, $2.9 million in amortization and deferred income taxes (net of
investment tax credits). The change in working capital since December 31,
1995, exclusive of cash, cash equivalents and interim financing, amounted
to $6.7 million and had a positive impact on cash flows from operating
activities, reflecting lower inventory levels ($12.4 million), unbilled
revenues ($9.1 million) and prepaid taxes ($5.5 million), coupled with a
higher level of accrued taxes ($4.9 million). These factors were offset,
in part, by a higher level of accounts receivable ($14.8 million) and a
decline in accounts payable ($11.6 million).
Construction expenditures for the first three months of 1996 were
approximately $9.8 million, including an allowance for funds used during
construction (AFUDC) and nuclear fuel. Construction expenditures,
preferred and common dividend requirements of the System ($8.6 million)
and the payment of short-term borrowings ($33.7 million), were funded
almost entirely with internally-generated funds.
Results of Operations
The following is a discussion of certain significant factors which
have affected operating revenues, expenses and net income during the
periods included in the accompanying condensed statements of income. This
discussion should be read in conjunction with the Notes to Condensed
Financial Statements appearing elsewhere in this report.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
A summary of the period to period changes in the principal items
included in the condensed statements of income for the three months ended
March 31, 1996 and 1995 and unit sales for these periods are shown below:
Three Months
Ended March 31,
1996 and 1995
Increase (Decrease)
(Dollars in Thousands)
Operating Revenues -
Electric $15 865 10.4%
Gas 15 745 14.6
Steam and other 1 480 25.8
33 090 12.5
Operating Expenses -
Fuel and purchased power 11 803 13.5
Cost of gas sold 10 477 20.5
Other operation and maintenance (638) (1.0)
Depreciation 916 6.7
Taxes -
Local property and other 171 2.0
Federal and state income 4 540 35.3
27 269 11.6
Operating Income 5 821 19.1
Other Income 888 58.7
Income Before Interest Charges 6 709 21.0
Interest Charges (265) (2.4)
Net Income 6 974 33.3
Dividends on preferred shares (15) (5.3)
Earnings Applicable to Common Shares $ 6 989 33.8
Unit Sales -
Electric - Megawatthours (MWH)
Retail 23 205 2.0
Wholesale 355 991 90.7
379 196 24.6
Gas - Billions of British Thermal Units (BBTU)
Firm 2 083 12.9
Interruptible and other (1 170) (61.1)
913 5.1
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
The following is a summary of electric and gas unit sales for the
three-month periods indicated:
Three Months Ended
March 31,
1996 1995
Electric Sales - MWH
Residential 486 024 457 491
Commercial 583 724 586 697
Industrial 94 051 96 309
Other 6 461 6 558
Total retail sales 1 170 260 1 147 055
Wholesale to other systems 748 448 392 457
Total 1 918 708 1 539 512
Gas Sales - BBTU
Residential 10 424 9 404
Commercial 5 130 4 432
Industrial 1 674 1 474
Other 966 801
Total firm sales 18 194 16 111
Off-system sales 249 1 413
Quasi-firm sales 124 350
Interruptible sales 373 153
Total 18 940 18 027
Electric Revenues, Fuel and Purchased Power Costs
For the first quarter of 1996, electric operating revenues increased
approximately $15.9 million or 10.4% due to higher fuel costs and increased
unit sales as a result of colder weather compared to the extremely mild
weather conditions during the first quarter of 1995. The increase in
revenues also reflects slightly higher conservation and load management
(C&LM) costs.
Fuel and purchased power costs increased during the first quarter of
1996 by approximately $11.8 million or 13.5% due mainly to higher unit
sales and greater fuel oil costs at Canal (a major supplier of electricity
to the system) that reflect the absence of scheduled maintenance on Unit 1
incurred in 1995.
For the three-month period ending March 31, 1996, retail electric
unit sales increased 2% reflecting higher sales to residential customers
(6.2% increase) due to the colder weather during the current quarter.
Retail unit sales to commercial and industrial customers changed marginally
from the first quarter of 1995 since these customer sectors draw less
energy for heating. Wholesale unit sales increased nearly 91% during the
current quarter due to an annual inspection and unscheduled turbine
maintenance for Canal Unit 1 in 1995. However, wholesale sales have
little, if any, impact on net income.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
Gas Revenues and Cost of Gas Sold
For the first three months of 1996, gas operating revenues increased
approximately $15.7 million (14.6%) due primarily to a higher level of cost
of gas sold ($10.5 million) that reflected a 12.9% increase in firm unit
sales. These increases were offset slightly by a decline in off-system
sales and quasi-firm sales and a lower level of C&LM costs ($804,000).
The increase in unit sales to firm customers reflects significant
weather-related improvements in all customer segments including residential
(10.8%), commercial (15.7%) and industrial (13.6%). For the current
quarter, heating degree days totaled 3,324 compared to 2,914 for the same
period in 1995, an increase of more than 14% and approximately 3% more than
normal.
Other Operating Expenses
For the first three months of 1996, other operation and maintenance
decreased 1% or $638,000 reflecting lower maintenance costs of $813,000,
primarily associated with the Canal units, and a decline in the provision
for bad debts ($337,000). These decreases were partially offset by higher
labor, insurance and benefit costs ($848,000).
Depreciation expense increased 6.7% or $916,000 due to a higher
level of depreciable plant. The slight increase in local property and
other taxes is due to higher rates and assessments within the system's
service territory. Federal and state income taxes increased $4.5 million
(35.3%) due primarily to a greater level of taxable income.
Other Income and Interest Charges
For the first quarter of 1995, other income increased by $888,000
due to the reversal of a reserve that had been established by Canal for
costs associated with postretirement benefits that are now being recovered
in wholesale rates.
Total interest charges for the current quarter decreased 2.4% due to
scheduled sinking fund payments and maturing long-term debt.
Electric Industry Restructuring
On August 16, 1995, the DPU issued an order calling for the
restructuring of the electric utility industry in Massachusetts in order to
allow customers more flexibility in choosing their electric service
provider and to develop an efficient industry structure and regulatory
framework that minimizes long-term costs to consumers while maintaining the
safety and reliability of electric services with a minimum impact on the
environment. Each of the state's electric utilities, together with other
interested parties, participated in this proceeding that initially
established a set of principles that would govern the restructuring of the
electric industry in Massachusetts.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
In February 1996, certain utilities submitted required proposals
detailing how they would plan to move into a competitive market structure.
Since that time, the DPU held a generic proceeding that focused on many of
the policy issues raised in its original order. On April 12, 1996,
Commonwealth Electric Company and Cambridge Electric Light Company (the
Companies), in response to the generic proceeding, filed comments with the
DPU on several issues that should be addressed in creating a restructured
electric utility industry which, together with comments from other
interested parties, provided valuable input to the DPU in its development
of proposed rules that were summarized in its order issued on May 1, 1996.
The proposed rules, which are subject to public comment and hearings prior
to adoption of final rules in October 1996, are based on the following
policies:
(1) An Independent System Operator which: (a) operates the regional
transmission system reliably; (b) is independent and unaffiliated
with electric companies; and (c) applies comparable transmission
rates, terms and conditions to all generators;
(2) A Power Exchange to manage a competitive bidding pool for short-term
power sales;
(3) Functional separation of electric companies into generation, trans-
mission and distribution corporate entities;
(4) Preservation of discounts for low-income customers, shut-off protec-
tions and provision of service to all customers;
(5) Registration requirements for generation suppliers, including market-
ers and aggregators;
(6) A reasonable opportunity for recovery of stranded costs, including a
proposal to protect municipalities from loss of utility property
taxes associated with diminished generation plant value;
(7) Options for phased incentives for electric companies to divest their
generation assets to stimulate a robust competitive market;
(8) Promotion of environmental goals;
(9) Support for energy efficiency and renewable energy resources;
(10) Encouragement, but not a requirement, for towns with Municipal
Electric Companies to participate in the restructured industry;
(11) A price cap system of economic incentive regulation for the remaining
distribution and transmission monopolies;
(12) Unbundling of rates on bills by January 1, 1997 into separate compo-
nents of transmission, distribution and a market proxy for energy
costs. Implementation of competitive generation market by January 1,
1998.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
In its May 1, 1996 order, the DPU acknowledged that it does not have
jurisdiction in such areas as environmental regulation and the establish-
ment of an Independent System Operator or a Power Exchange. Federal and
state environmental agencies and the Federal Energy Regulatory Commission
have the requisite authority in these areas. However, the DPU determined
that it was important for it to express its initial views regarding these
components of a restructured electric industry.
In accordance with the DPU's schedule, the Companies will file
revenue-neutral unbundled rates in October 1996 for effect in January
1997. Also, during 1997, the Companies will file their comprehensive
restructuring proposal. One element of the Companies' proposal (announced
on February 15, 1996) would require the Companies to voluntarily put their
power capacity entitlements (1,140 MW) to a market test in an effort to
develop a competitive market whereby customers would have the flexibility
of choosing their electric supplier. The proposal calls for the
auctioning in a competitive market of entitlements in all twenty-one
contracts, including contracts held by the Companies involving the
System's generating subsidiary Canal Electric. The proposal provides for
total recovery of the difference between the current market value of the
Companies' power contracts and their original unavoidable costs. This
difference, considered to be a stranded cost, would be recovered through a
non-bypassable access charge paid over an appropriate time period by all
customers in the Companies' service areas. The auction approach has
received initial positive reviews from the Commonwealth of Massachusetts
Division of Energy Resources and the Office of the Attorney General.
Management is unable to predict the ultimate outcome of the overall
proceedings or the Companies' specific proposal.
Environmental Matters
Commonwealth Gas is participating in the assessment of a number of
former manufactured gas plant (MGP) sites and alleged MGP waste disposal
locations to determine if and to what extent such sites have been
contaminated and whether Commonwealth Gas may be responsible for remedial
actions. Commonwealth Gas and certain other subsidiaries are also
involved in other known or potentially contaminated sites where the
associated costs may not be recoverable in rates. There were no
significant new developments that occurred during the first quarter of
1996. For further information on these matters, refer to the System's
1995 Annual Report on Form 10-K.
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The System is subject to legal claims and matters arising from its
course of business including Cambridge Electric as an intervenor in a
pending appeal at the Massachusetts Supreme Judicial Court (SJC) filed
by the Massachusetts Institute of Technology involving a DPU decision
approving a customer transition charge for the recovery of stranded
investment costs. The SJC has not yet established a schedule for
submitting briefs. This issue is discussed more fully in the System's
1995 Annual Report on Form 10-K. At this time, management is unable
to predict the outcome of this proceeding.
Item 2. Changes in the Rights of the Company's Security Holders
None
Item 3. Defaults by the Company on its Senior Securities
None
Item 4. Results of Votes of Security Holders
(a) The Annual Meeting of Shareholders was held on May 2, 1996.
(b) The three nominees, Peter H. Cressy, William J. O'Brien and
William G. Poist listed in the System's Notice of 1996 Annual Meeting,
Proxy Statement and 1995 Financial Information dated March 29, 1996
were elected to the Board of Trustees of Commonwealth Energy System.
(c) As set forth in the System's Notice of 1996 Annual Meeting, Proxy
Statement and 1995 Financial Information dated March 29, 1996 as Item
2, a proposal to amend Sections 5 and 22 of the System's Declaration
of Trust, which sections set forth the specific powers of the Board of
Trustees, the present authorized number of Common Shares of beneficial
interest and the par value of such Common Shares. The proposed
amendments would change the par value of each Common Share from Four
Dollars ($4.00) to Two Dollars ($2.00), increase the number of
authorized Common Shares from 18,000,000 to 50,000,000 Common Shares,
and allow for share splits or reverse share splits and changes in the
par value of Common Shares under certain terms without specific
Shareholder approval. There were 8,157,200 (75.8%) Common Shares
voted for this proposal, 741,439 (6.9%) Common Shares voted against,
66,188 (.6%) Common Shares abstained and 1,800,011 (16.7%) Common
Shares were not voted. The affirmative vote of the holders of a
majority of the outstanding Common Shares was required for approval of
this proposal.
(d) As set forth in the System's Notice of 1996 Annual Meeting, Proxy
Statement and 1995 Financial Information dated March 29, 1996 as Item
3, a shareholder proposal, which was also presented at the 1991, 1992,
1993, 1994 and 1995 Annual Meeting, requesting the Board of Trustees
to repeal the classified board and institute annual election of
trustees was voted upon and failed to pass at the 1996 Annual
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COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
Shareholders' Meeting. There were 1,918,941 (17.8%) Common Shares
voted for this proposal, 5,627,348 (52.3%) Common Shares voted
against, 310,765 (2.9%) Common Shares abstained and 2,907,784 (27%)
Common Shares were not voted. The affirmative vote of the holders of
a majority of the outstanding Common Shares was required for approval
of this proposal.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Filed herewith as Exhibit 1 is the Financial Data Schedule for
the three months ended March 31, 1996.
Filed herewith as Exhibit 2 is the restated Financial Data
Schedule for the three months ended March 31, 1995.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
March 31, 1996.
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COMMONWEALTH ENERGY SYSTEM
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMONWEALTH ENERGY SYSTEM
(Registrant)
Principal Financial and
Accounting Officer
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: May 14, 1996
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<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, statement of income and statement of cash flows contained in
Form 10-Q of Commonwealth Energy System for the three months ended March 31,
1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000071304
<NAME> COMMONWEALTH ENERGY SYSTEM
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,023,604
<OTHER-PROPERTY-AND-INVEST> 13,581
<TOTAL-CURRENT-ASSETS> 169,929
<TOTAL-DEFERRED-CHARGES> 145,163
<OTHER-ASSETS> 14,758
<TOTAL-ASSETS> 1,367,035
<COMMON> 43,059
<CAPITAL-SURPLUS-PAID-IN> 111,778
<RETAINED-EARNINGS> 255,331
<TOTAL-COMMON-STOCKHOLDERS-EQ> 410,168
13,780
0
<LONG-TERM-DEBT-NET> 376,137
<SHORT-TERM-NOTES> 21,875
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 41,323
820
<CAPITAL-LEASE-OBLIGATIONS> 13,088
<LEASES-CURRENT> 1,670
<OTHER-ITEMS-CAPITAL-AND-LIAB> 488,174
<TOT-CAPITALIZATION-AND-LIAB> 1,367,035
<GROSS-OPERATING-REVENUE> 298,704
<INCOME-TAX-EXPENSE> 17,397
<OTHER-OPERATING-EXPENSES> 245,086
<TOTAL-OPERATING-EXPENSES> 262,483
<OPERATING-INCOME-LOSS> 36,221
<OTHER-INCOME-NET> 2,401
<INCOME-BEFORE-INTEREST-EXPEN> 38,622
<TOTAL-INTEREST-EXPENSE> 10,715
<NET-INCOME> 27,907
267
<EARNINGS-AVAILABLE-FOR-COMM> 27,640
<COMMON-STOCK-DIVIDENDS> 8,289
<TOTAL-INTEREST-ON-BONDS> 9,372
<CASH-FLOW-OPERATIONS> 53,580
<EPS-PRIMARY> 2.57
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains restated summary financial information extracted from
the balance sheet, statement of income and statement of cash flows contained
in Form 10-Q of Commonwealth Energy System for the three months ended March
31, 1995 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<CIK> 0000071304
<NAME> COMMONWEALTH ENERGY SYSTEM
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 991,755
<OTHER-PROPERTY-AND-INVEST> 13,558
<TOTAL-CURRENT-ASSETS> 178,686
<TOTAL-DEFERRED-CHARGES> 159,262
<OTHER-ASSETS> 15,694
<TOTAL-ASSETS> 1,358,955
<COMMON> 42,344
<CAPITAL-SURPLUS-PAID-IN> 105,345
<RETAINED-EARNINGS> 230,435
<TOTAL-COMMON-STOCKHOLDERS-EQ> 378,124
14,600
0
<LONG-TERM-DEBT-NET> 417,073
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 30,973
820
<CAPITAL-LEASE-OBLIGATIONS> 14,008
<LEASES-CURRENT> 1,686
<OTHER-ITEMS-CAPITAL-AND-LIAB> 501,671
<TOT-CAPITALIZATION-AND-LIAB> 1,358,955
<GROSS-OPERATING-REVENUE> 265,614
<INCOME-TAX-EXPENSE> 12,857
<OTHER-OPERATING-EXPENSES> 222,357
<TOTAL-OPERATING-EXPENSES> 235,214
<OPERATING-INCOME-LOSS> 30,400
<OTHER-INCOME-NET> 1,513
<INCOME-BEFORE-INTEREST-EXPEN> 31,913
<TOTAL-INTEREST-EXPENSE> 10,980
<NET-INCOME> 20,933
282
<EARNINGS-AVAILABLE-FOR-COMM> 20,651
<COMMON-STOCK-DIVIDENDS> 7,942
<TOTAL-INTEREST-ON-BONDS> 9,799
<CASH-FLOW-OPERATIONS> 63,184
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 0
</TABLE>
