<PAGE>
"THIS DOCUMENT IS A COPY OF THE FORM 10-KT FILED ON JUNE 30, 2000 PURSUANT TO
A RULE 201 TEMPORARY HARDSHIP EXEMPTION."
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1999
OR
(X) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from January 1, 2000 to March 31, 2000
<TABLE>
<CAPTION>
Registrant; State of
Incorporation or I.R.S. Employer
Commission Organization; Address; Identification
File Number and Telephone Number Number
------------ ---------------------- ---------------
<S> <C> <C>
1-6564 NEW ENGLAND POWER COMPANY 04-1663070
(A Massachusetts corporation)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
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.
(X) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregate market value
of the voting stock Number of shares of
held by nonaffiliates common stock outstanding
of the registrant at of the registrant at
June 15, 2000 June 15, 2000
---------------------- -------------------------
<S> <C> <C>
New England $1,285,104 3,619,896($20 par value)
Power Company
Documents Incorporated by Reference
</TABLE>
<TABLE>
<CAPTION>
Part of Form 10-K into which
Description document is incorporated
---------------------------------- ----------------------------
<S> <C>
Portions of New England Power Company Parts I and II
Annual Report to Stockholders for the
year ended December 31, 1999 as set
forth in Parts I and II
Portions of New England Power Company Parts I and II
Transition Report to Stockholders for the
transition period from January 1, 2000
to March 31, 2000 as set forth in Parts I
and II.
</TABLE>
<PAGE>
TABLE OF CONTENTS
PAGE
GLOSSARY OF TERMS.......................................... iii
FORWARD LOOKING INFORMATION................................ v
PART I
ITEM 1. BUSINESS............................................ 1
THE COMPANY................................................. 1
Merger with National Grid ............................. 1
Merger with EUA........................................ 1
Employees.............................................. 2
ELECTRIC UTILITY OPERATIONS................................. 2
Industry Restructuring................................. 2
Accounting Implications............................. 2
Overview of Financial Results....................... 2
Year 2000 Disclosure................................... 2
Transmission and Nuclear Generation Business........... 3
Description of Business............................. 3
Rates............................................... 4
Standard Offer Service.............................. 5
Operating Revenues.................................. 6
Electric Utility Properties............................ 7
Transmission Properties............................. 7
Interconnection with Quebec ........................ 8
Nuclear Generation Properties....................... 8
Nuclear Units..................................... 9
Purchased Power Transfer Agreement................ 17
Regulatory and Environmental Matters................... 18
Regulation.......................................... 18
Environmental Requirements.......................... 18
Construction and Financing............................. 19
EXECUTIVE OFFICERS.......................................... 22
ITEM 2. PROPERTIES.......................................... 23
ITEM 3. LEGAL PROCEEDINGS................................... 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS................................................ 25
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS........................ 25
ITEM 6. SELECTED FINANCIAL DATA............................. 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................... 26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................ 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......... 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................... 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT............................................. 26
ITEM 11. EXECUTIVE COMPENSATION............................ 29
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT......................................... 40
PART IV
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.... 40
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.................. 41
INDEX TO FINANCIAL STATEMENTS............................... 53
<PAGE>
GLOSSARY OF TERMS
Term Meaning
---- -------
AFDC allowance for funds used during
construction
Connecticut Yankee Connecticut Yankee Atomic Power Company
CTC contract termination charges
DOE U.S. Department of Energy
EUA Eastern Utilities Associates
Electricity Delivery Mass. Electric, Narragansett, Granite
Companies State, and Nantucket
FERC Federal Energy Regulatory Commission
Granite State Granite State Electric Company
Interconnection transmission interconnection between
participating New England utilities
and Hydro-Quebec
ISO Independent System Operator
kWh kilowatthour
Maine Yankee Maine Yankee Atomic Power Company
Mass. Electric Massachusetts Electric Company
Mass. Hydro New England Hydro-Transmission Electric
Company, Inc.
MDTE Massachusetts Department of
Telecommunications and Energy
MW megawatts
Nantucket Nantucket Electric Company
Narragansett The Narragansett Electric Company
National Grid The National Grid Group plc
National Grid USA Successor to NEES and a wholly-owned
subsidiary of The National Grid Group plc
N.E. Hydro Finance New England Hydro Finance Company, Inc.
NEEI New England Energy Incorporated
NEES New England Electric System (renamed National
Grid USA)
NEES Energy NEES Energy, Inc.
NEET New England Electric Transmission
Corporation
NEP New England Power Company
NEPOOL New England Power Pool
N.H. Hydro New England Hydro-Transmission
Corporation
NRC Nuclear Regulatory Commission
PG&E Gen PG&E Generating, formerly USGen New
England, Inc.
GLOSSARY OF TERMS
Term Meaning
---- -------
Seabrook 1 Seabrook Nuclear Generating Station
Unit 1
SEC Securities and Exchange Commission
Sellers NEP and Narragansett
Service Company New England Power Service Company
spent nuclear fuel high level radioactive waste
stranded costs the amounts by which prudently
incurred costs incurred to supply
customers electricity under a
regulated industry structure
exceed market prices under an
unregulated industry structure
Vermont Yankee Vermont Yankee Nuclear Power
Corporation
VPSB Vermont Public Service Board
Yankee Atomic Yankee Atomic Electric Company
Yankee Companies Yankee Atomic, Vermont Yankee,
Maine Yankee, and Connecticut
Yankee
1935 Act Public Utility Holding Company Act
of 1935, as amended
<PAGE>
FORWARD LOOKING INFORMATION
This report and other presentations made by New England Power Company (NEP
or the Company) contain forward looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Throughout
this report, forward looking statements can be identified by the words or
phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimated", "projected", "believe", "hopes", or similar
expressions. Although NEP believes that, in making any such statements, its
expectations are based on reasonable assumptions, any such statements may
be influenced by factors that could cause actual outcomes and results to be
materially different from those projected. Important factors that could
cause actual results to differ materially from those in the forward looking
statements include, but are not limited to:
(a) the impact of ongoing industry restructuring, as more fully set out
in the Industry Restructuring section of the NEP Transition Report for the
period January 1, 2000 to March 31, 2000;
(b) the impact of general economic changes in New England;
(c) federal and state regulatory developments and changes in law which
may have a substantial adverse impact on the value of NEP's assets;
(d) changes in accounting rules and interpretations which may have an
adverse impact on NEP's statements of financial position and reported
earnings;
(e) timing and adequacy of rate relief;
(f) adverse changes in electric load;
(g) climatic changes or unexpected changes in weather patterns; and
(h) operation and decommissioning costs associated with nuclear
generating facilities, as set out under Nuclear Units below, page 9.
PART I
ITEM 1. BUSINESS
THE COMPANY
Merger with National Grid
On March 22, 2000, the merger of New England Electric System (NEES) and The
National Grid Group plc (National Grid) was completed, with NEES (renamed
National Grid USA) becoming a wholly owned subsidiary of National Grid. New
England Power Company (NEP) will maintain its existing name and will remain a
wholly owned subsidiary of National Grid USA.
Merger with EUA
The merger between the National Grid USA and Eastern Utilities Associates
(EUA) parent companies was completed on April 19, 2000, with EUA merging into
National Grid USA. The impacts of this transaction will be reflected in
subsequent reporting periods. On May 1, 2000, EUA's operating companies merged
into those of National Grid USA, and Montaup Electric Company, a wholly-owned
subsidiary of EUA, was consolidated into the Company.
<TABLE>
<CAPTION>
New England Power Company, a wholly owned subsidiary of National Grid USA
(formerly New England Electric System), is a Massachusetts corporation qualified
to do business in Massachusetts, New Hampshire, Rhode Island, Connecticut, Maine,
and Vermont. NEP is subject, for certain purposes, to the jurisdiction of the
regulatory commissions of these six states, the Securities and Exchange
Commission, under the Public Utility Holding Company Act of 1935 (the 1935 Act),
the Federal Energy Regulatory Commission, and the Nuclear Regulatory Commission.
NEP's business is primarily the transmission of electric energy in wholesale
quantities to other electric utilities, principally its distribution affiliates
Granite State Electric Company, Massachusetts Electric Company, Nantucket
Electric Company, and The Narragansett Electric Company. NEP's transmission
business will also do business under the name of National Grid Transmission USA.
Holders of common stock and 6% Cumulative Preferred Stock have general voting
rights. National Grid USA owns 99.57% of the voting stock of NEP and the NEP 6%
preferred holders own 0.43%. NEP owns voting stock in the amounts indicated of
the following companies:
% Voting
Securities
State of Type of Owned by
Name of Company Organization Business NEP
--------------- ------------ -------- ---------
<S> <C> <C> <C>
Connecticut Yankee Atomic Conn. Ownership of 15%
Power Company Nuclear Unit (a)
Maine Yankee Atomic Maine Ownership of 20%
Power Company Nuclear Unit (a)
Vermont Yankee Nuclear Vermont Ownership of 20%
Power Corporation Nuclear Unit (a)
Yankee Atomic Electric Company Mass. Ownership of 30%
Nuclear Unit (a)
</TABLE>
(a) For information on NEP's ownership interest in nuclear
generating units, see Nuclear Units, page 9.
The facilities of NEP, together with National Grid USA's four
electricity delivery companies, Massachusetts Electric Company
(Mass. Electric), The Narragansett Electric Company (Narragansett),
Granite State Electric Company (Granite State), and Nantucket
Electric Company (Nantucket), (together, the Electric Delivery
Companies) constitute an electrical transmission and distribution
system that is directly interconnected with other utilities in New
England and New York State, and indirectly interconnected with
utilities in Canada. See ELECTRIC UTILITY OPERATIONS, page 2.
EMPLOYEES
At March 31, 2000, NEP had 81 employees, of which approximately
16 are members of labor organizations. Collective bargaining
agreements with the Brotherhood of Utility Workers of New England,
Inc., the International Brotherhood of Electrical Workers, and the
Utility Workers Union of America, AFL-CIO expire in May, 2004.
ELECTRIC UTILITY OPERATIONS
INDUSTRY RESTRUCTURING
For a full discussion of Industry Restructuring see the
Industry Restructuring section of the 1999 NEP Annual Report, and
the NEP Transition Report for the period January 1, 2000 to March
31, 2000, both incorporated herein by reference.
Accounting Implications
For a full discussion of Accounting Implications see the
Accounting Implications section of the 1999 NEP Annual Report, and
the NEP Transition Report for the period January 1, 2000 to March
31, 2000, incorporated herein by reference.
Overview of Financial Results
For a full discussion of Overview of Financial Results see the
Overview of Financial Results section of the 1999 NEP Annual
Report, and the NEP Transition Report for the period January 1,
2000 to March 31, 2000, incorporated herein by reference.
YEAR 2000 DISCLOSURE
For a full discussion of Year 2000 disclosure, see the Year
2000 Disclosure section of the 1999 NEP Annual Report, incorporated
herein by reference.
<PAGE>
TRANSMISSION AND NUCLEAR GENERATION BUSINESS
Description of Business
On September 1, 1998, NEP completed the sale of substantially
all of its nonnuclear generating business to PG&E Generating
(PG&E Gen) an indirect wholly-owned subsidiary of PG&E
Corporation. NEP's primary business is now the transmission of
electric energy to other electric utilities, principally its
distribution affiliates, the Electricity Delivery Companies. NEP
owns a system of transmission lines and substations. NEP
continues to own minority interests in two joint owned nuclear
generating units as well as minority equity interests in four
nuclear generating companies (see Nuclear Units, page 9).
<PAGE>
Rates
The rates of NEP are subject to regulation by the Federal
Energy Regulatory Commission ("FERC"). NEP's current unbundled
rates consist of contract termination charges, transmission
charges, standard offer charges where applicable, and market
revenues where applicable.
Prior to industry restructuring, NEP was obligated to sell to
its customers, and its customers were obligated to purchase from
NEP, the requirements of their respective retail service
territories, and they could only terminate those mutual
obligations upon seven years' notice.
Under the Settlement Agreements between NEP and the
Electricity Delivery Companies implemented in 1997 and 1998, the
contractual relationship was reformed to allow for the early
termination of the Electricity Delivery Companies' obligation to
purchase wholesale all-requirements service from NEP, in
consideration for the payment of contract termination charges
("CTCs"). The CTCs recover costs associated with NEP's former
generating investments and related contractual commitments that
were not recovered from the divestiture of those investments
("stranded costs"). The recovery of NEP's stranded costs is
divided into several categories. Unrecovered costs associated
with generating plants (nuclear and nonnuclear) and most
regulatory assets will be fully recovered through the CTCs by the
end of 2000 and earn a return on equity averaging 9.7%. Stranded
investment relating to the Montaup generation facilities and
other regulatory assets will be recovered through the CTCs by the
end of 2007 and earn a return on equity averaging 8.39%. NEP's
obligation related to the above-market cost of purchased power
contracts and nuclear decommissioning costs are recovered through
the CTCs as such costs are actually incurred. As the CTC's rate
declines, NEP, under certain of the Settlement Agreements, earns
incentives based on successful mitigation of its stranded costs.
These incentives supplement NEP's return on equity. Until such
time as NEP divests its operating nuclear interests, NEP will
share with customers, through the CTCs, 80% of the revenues and
operating costs related to the units, with shareholders retaining
the balance.
The Electricity Delivery Companies are recovering the CTCs
through a transition access charge. NEP has also reached similar
agreements with three unaffiliated wholesale customers. (See
Item 3 for a description of litigation with one unaffiliated
customer.)
<PAGE>
The transmission charge is a formula rate which recovers
NEP's actual costs plus a return on actual capital investment and
equals approximately 0.5 cents per kWh (including the
transmission element of NEPOOL tariff charges). The standard
offer revenues with respect to NEP's continuing obligation to
supply standard offer service to Narragansett described
below equaled 3.5 cents per kWh in 1999 and equal 3.8 cents in
2000. The rate will escalate in the years thereafter. Revenues
from any sales in the marketplace will vary. In 1999, 47% of
NEP's total transmission billings was derived directly from
affiliated companies, and 53% was from NEPOOL, including payments
from NEP's affiliates to NEPOOL and municipal and other
utilities.
Standard Offer Service
Prior to divesting its nonnuclear generation business, NEP
was the wholesale supplier of the electric energy requirements of
the Electricity Delivery Companies under contracts that required
seven years' notice of termination. NEP's contracts with the
Electricity Delivery Companies were amended to remove the
obligation to sell electrical energy and related products. PG&E
Gen, TransCanada Power Marketing, Ltd. and Constellation Power
Source, Inc. retain the backstop obligation to supply the
electric energy requirements of the Electricity Delivery
Companies for retail customers eligible to continue to buy
standard offer generation service from their electricity delivery
company at regulated prices. NEP remains obligated to provide
transition power supply service at fixed rates to new customer
load in Rhode Island. NEP meets this obligation by periodically
procuring the necessary power supply at market prices. Over time
NEP cannot predict whether the resulting revenues will be
sufficient to cover the costs of producing such power. In the
short term, it appears that due to current high market prices, it
is probable that NEP will incur losses this summer.
<PAGE>
OPERATING REVENUES
The following is the detail of kWh sales and deliveries,
electric sales and other operating revenue, and operating income
for the quarter ended March 31, 2000 and each of the three years
ended December 31, 1999.
<TABLE>
<CAPTION>
Sales and Deliveries of Electricity
(in thousands of kWh)
------------------------------------
Quarter Ended Year Ended December 31
March 31, 2000 1999 1998 1997
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
Total Sales
and Deliveries 901,723 2,970,433 18,214,193 26,405,204
======== ========== ========== ==========
Operating Revenues
(in thousands of dollars)
------------------------------------
Quarter Ended Year Ended December 31
March 31, 2000 1999 1998 1997
-------------- ---- ---- ----
Total Electric 32,048 90,639 631,943 1,616,598
Sales Revenue
Other Operating 102,515 505,702 586,397 61,305
Revenue
--------- --------- ---------- ---------
Total Operating
Revenue $134,564 $596,341 $1,218,340 $1,677,903
========= ========== ========== =========
Operating Income $ 16,319 $78,563 $ 157,362 $ 190,852
========= ========== ========== =========
</TABLE>
Operating revenue for 1999 decreased $622 million compared
with 1998 due to the divestiture and reduced CTC charges.
<PAGE>
ELECTRIC UTILITY PROPERTIES
Transmission Properties
NEP's integrated system consists of approximately 2,400
circuit miles of transmission lines, and approximately 108
substations.
The properties of National Grid USA subsidiaries also
include the ownership interests of NEET, Mass. Hydro, and
N.H. Hydro in the Hydro-Quebec Interconnection, and an integrated
system of transmission lines, substations, and distribution
facilities.
NEP is a participant in NEPOOL. The NEPOOL Agreement
provides for coordination of the operation of the generation and
transmission facilities of its members. The NEPOOL Agreement
further provides for New England-wide central dispatch of
generation by the Independent System Operator (ISO).
ISO-New England was activated on July 1, 1997 and has been
operating the control area since that time. It operates under
contract with NEPOOL and is governed by an independent Board of
Directors. NEPOOL's Open Access Transmission Tariff, which
covers service across pool transmission facilities is
administered by ISO-New England.
In May 1999, NEPOOL and ISO-New England commenced
implementation of the NEPOOL competitive market system. The
market system establishes markets for several tradable energy and
reserve products. Implementation of the markets also has
resulted in the imposition of certain costs including congestion
related costs. By Order issued June 28, 2000, FERC conditionally
approved a congestion management system and multi-settlement
system (CMS/MSS). The CMS/MSS includes a number of transitional
steps towards the establishment of a permanent congestion
management system which would include a Financial Congestion
Rights scheme, a transmission planning process, and locational
marginal pricing.
NEPOOL's governance structure consists of five sectors:
transmission owners, generators, suppliers, public power, and end
users. National Grid USA participates in the transmission owners
sector. The Transmission sector accounts for 20 percent of the
NEPOOL vote and the National Grid USA Companies account for one-
seventh of the Transmission sector vote. Under NEPOOL's revised
governance structure, all National Grid USA companies are
considered "related persons" and therefore receive only a single
vote.
<PAGE>
Interconnection with Quebec
New England Electric Transmission Corporation (NEET) owns
and operates a portion of an international transmission
interconnection between the electric systems of Hydro-Quebec and
New England. New England Hydro-Transmission Electric Company,
Inc. (Mass. Hydro) and New England Hydro-Transmission Corporation
(N.H. Hydro) own and operate facilities in connection with an
expanded second phase of this interconnection. New England Hydro
Finance Company, Inc. (N.E. Hydro Finance) provides the debt
financing to Mass. Hydro and N.H. Hydro for the capital costs of
the interconnection. National Grid USA owns 100% of the voting
stock of NEET and 53.97% (60.51% including Montaup's interest) of
the voting stock of Mass. Hydro and N.H. Hydro. Mass. Hydro and
N.H. Hydro each own 50% of the voting securities of N.E. Hydro
Finance.
NEET, Mass. Hydro, and N.H. Hydro own and operate, on behalf
of NEPOOL participants in the project, a 450 kV direct current
transmission line and related terminals to interconnect the New
England and Quebec transmission systems (the Interconnection).
The transfer capability of the Interconnection is currently rated
at 2,000 MW. Operating limits implemented by adjacent Power
Pools covering New York, New Jersey, Pennsylvania, and Maryland
often restrict the effective transfer capability to levels of
1,200 MW to 1,400 MW.
The Interconnection has two phases. NEP's participation in
both is approximately 18 percent. NEP and the other participants
have entered into support agreements that end in 2020. Under the
support agreements, NEP has agreed to guarantee its share of
debt financing for the second phase. At March 31, 2000, NEP had
guaranteed approximately $20 million of project debt. NEP's
rights and obligations under its support agreements were
transferred to PG&E Gen upon completion of the sale of NEP's
nonnuclear generating business, but NEP remains an obligor in the
event of PG&E Gen nonperformance (see the Industry Restructuring
section of the 1999 NEP Annual Report and the NEP Transition
Report for the period January 1, 2000 to March 31, 2000).
Nuclear Generation Properties
On September 1, 1998, NEP and its affiliate Narragansett,
completed the sale of substantially all of their nonnuclear
generating business to PG&E Gen. NEP also plans to seek offers
to buy its operating nuclear generating interests. For more
information regarding the sale of operating generating units, see
Nuclear Units, page __.
<PAGE>
Nuclear Units
General
NEP has interests in six nuclear units. Three of the units
have been permanently shut down. The remaining three are
currently operating.
NEP is a stockholder of Yankee Atomic Electric Company
("Yankee Atomic"), Vermont Yankee Nuclear Power Corporation
("Vermont Yankee"), Maine Yankee Atomic Power Company ("Maine
Yankee"), and Connecticut Yankee Atomic Power Company
("Connecticut Yankee"). Each of these companies (collectively
referred to as the "Yankee Companies") owns a single nuclear
generating unit. The stockholders of three of the Yankee
Companies (Vermont Yankee, Maine Yankee, and Connecticut Yankee)
have agreed, subject to regulatory approval, to provide capital
requirements in the same proportion as their ownership
percentages of the particular Yankee Company. NEP also has power
contracts with each Yankee Company that require NEP to pay
an amount equal to its share of total fixed and operating costs
(including decommissioning costs) of the plant plus a return on
equity. Yankee Atomic, Connecticut Yankee, and Maine Yankee have
permanently ceased operations. NEP purchases the output of the
Vermont Yankee plant in the same percentage as its stock
ownership, less small entitlements taken by municipal utilities.
In addition, NEP is a joint owner of the Millstone 3 nuclear
generating unit in Connecticut and the Seabrook Nuclear
Generating Station Unit 1 ("Seabrook 1") nuclear generating unit
in New Hampshire. Millstone 3 and Seabrook 1 are operated by
subsidiaries of Northeast Utilities ("NU"). NEP pays its
proportionate share of costs and receives its proportionate share
of output from Millstone 3 and Seabrook 1. Listed below is
certain information on each nuclear plant in which NEP has an
ownership interest.
Montaup held an ownership interest of 4% in Millstone 3 and
an equity investment of 4.5% in Yankee Atomic, 2.5% in Vermont
Yankee, 4% in Maine Yankee, and 4.5% in Connecticut Yankee. These
interests are included in the information set out below.
Under restructuring settlement agreements approved by
regulators in Massachusetts, New Hampshire and Rhode Island, NEP
has agreed to attempt to divest its interest in the three
operating nuclear generating units.
<PAGE>
Operating Nuclear Units
The Company has minority interests in three operating
nuclear generating units which the Company is engaged in efforts
to divest: Vermont Yankee, Millstone 3, and Seabrook 1.
Uncertainties regarding the future of nuclear generating
stations, particularly older units, such as Vermont Yankee, have
increased in recent years and could adversely affect their
service lives, availability, and costs. These uncertainties stem
from a combination of factors, including the acceleration of
competitive pressures in the power generation industry and
increased Nuclear Regulatory Commission (NRC) scrutiny. The
Company performs periodic economic viability reviews of operating
nuclear units in which it holds ownership interests. Until such
time as the Company divests its operating nuclear interests, the
Company will share with customers, through the CTC, 80 percent of
the revenues and operating costs related to the units, with
shareholders retaining the balance.
Vermont Yankee
The following tables summarize the interests of the Company,
and of Montaup (effective with the EUA merger), in the Vermont
Yankee Nuclear Power Corporation as of March 31, 2000:
<TABLE>
<CAPTION>
The Company's Interest
(millions of dollars)
----------------------------------------------
Equity Net Estimated Decommissioning
Ownership Equity Plant Decommissioning Fund License
Interest (%) Investment Assets Cost (in 1999$) Balance Expiration
------------ ---------- ------ --------------- ------- ----------
<S> <C> <C> <C> <C> <C>
20 $11 $33 $86 $43 2012
Montaup's Interest
(millions of dollars)
----------------------------------------------
Equity Net Estimated Decommissioning
Ownership Equity Plant Decommissioning Fund License
Interest (%) Investment Assets Cost (in 1999$) Balance Expiration
------------ ---------- ------ --------------- ------- ----------
2.5 $1 $4 $11 $5 2012
</TABLE>
<PAGE>
In November 1999, the Vermont Yankee Nuclear Power Corporation
entered into an agreement with AmerGen Energy Company (AmerGen),
a joint venture between PECO Energy and British Energy, to sell
the assets of Vermont Yankee. Under the terms of the agreement,
after a Vermont Yankee contribution toward the plant's
decommissioning trust fund, AmerGen will take over the fund and
assume responsibility for the actual cost of decommissioning the
plant. The agreement also requires the existing power purchasers
(including the Company) to continue to purchase the output of the
plant or to buy out of the purchased power obligation. In
November 1999, the Company signed an agreement to buy out of its
obligation, requiring future payments which will be recovered
through the Company's CTC. The Company has recorded an accrued
liability and an offsetting regulatory asset of $80 million for
its share of future liabilities related to Vermont Yankee,
including the purchased power contract termination payment
obligation, but excluding interest and a return allowance. The
proposed sale is contingent upon regulatory approvals by the NRC,
the Securities and Exchange Commission (SEC), under the Public
Utility Holding Company Act of 1935 (1935 Act), and the Vermont
Public Service Board (VPSB), among others. The Vermont Public
Service Department has identified several issues that must be
resolved to its satisfaction for it to support the VPSB's
approval of the sale.
Millstone 3
In August 1997, the Company sued Northeast Utilities (NU) in
Massachusetts Superior Court for damages, alleging that NU
engaged in tortious conduct that caused the shutdown of Millstone
3, which is operated by a subsidiary of NU. The Company's claim
for damages included the costs of replacement power during the
outage, costs necessary to return Millstone 3 to safe operation,
and other additional costs. Most of the Company's incremental
replacement power costs have been recovered from customers,
either through fuel adjustment clauses or through provisions in
the Settlement Agreements.
In August 1997, the Company also sent a demand for arbitration to
Connecticut Light & Power Company and Western Massachusetts
Electric Company, both subsidiaries of NU, seeking damages for
breach of obligations under an agreement with the Company and
others regarding the operation and ownership of Millstone 3. In
July 1998, Millstone 3 returned to full operation after being
shut down for more than two years.
<PAGE>
In November 1999, the Company executed an agreement which settled
the litigation and arbitration. Under the settlement agreement,
the NU companies paid the Company $23.7 million and paid Montaup
$7.8 million. The settlement also includes an agreement by NU to
include the Company's and Montaup's share of Millstone 3 in an
auction of NU's share of the unit. Upon the closing of the sale,
NU will pay the Company and Montaup a combined total of $25
million, regardless of the actual sale price, and reimburse the
Company and Montaup for any capital expenditures in excess of
pre-budgeted levels incurred after October 1999. The Company and
Montaup will also be reimbursed for fuel procurement expenditures
which increase net nuclear fuel account balances above current
balances. The settlement also requires NU to indemnify the
Company and Montaup and assume any residual liabilities resulting
from the sale, including any requirements that the sellers
continue to purchase output from the unit. In addition, the
settlement requires NU to pay the Company and Montaup an
additional combined total of $1 million per month for every month
beyond April 1, 2001 that the closing does not occur. The auction
process is being conducted by the CDPUC and is ongoing. Amounts
received pursuant to a sale will, after reimbursement of the
Company's transaction costs and net investment in Millstone 3, be
credited to customers.
Seabrook 1
As part of its restructuring settlement with the State of New
Hampshire, Public Service Company of New Hampshire (PSNH),
through its affiliate, North Atlantic Energy Corporation (NAEC),
has committed to seek New Hampshire Public Utilities Commission
(NHPUC) approval of a definitive plan to sell, via public
auction, its share of Seabrook 1, with such sale to occur no
later than December 31, 2003. NAEC is the majority owner of the
plant with a 35.98 percent interest and is also the plant
operator. As part of its settlement, PSNH has also agreed to make
all reasonable efforts to bundle its interests with those of
other owners (including the Company) seeking to sell their
interests. This would allow for an auction of a majority
interest. The NHPUC granted conditional approval of the
settlement on April 19, 2000. The New Hampshire legislature
approved the necessary legislation on May 31, 2000. Final
resolution by the NHPUC approving the settlement in compliance
with the legislation is expected this summer.
Nuclear Units Permanently Shut Down
Three regional nuclear generating companies in which the
Company has a minority interest own nuclear generating units that
have been permanently shut down. These three units, including
Montaup's portion effective with the EUA merger, are as follows:
<PAGE>
<TABLE>
<CAPTION>
Future
The Company's Estimated
Investment Billings to
as of 3/31/00 Date the Company
Unit % $(millions) Retired $(millions)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Yankee Atomic 30 4 Feb 1992 4
Connecticut Yankee 15 16 Dec 1996 60
Maine Yankee 20 15 Aug 1997 124
Future
Montaup's Estimated
Investment Billings
as of 3/31/00 Date to Montaup
Unit % $(millions) Retired $(millions)
-----------------------------------------------------------------
Yankee Atomic 4.5 1 Feb 1992 1
Connecticut Yankee 4.5 5 Dec 1996 19
Maine Yankee 4.0 3 Aug 1997 26
</TABLE>
In the case of each of these units, the Company has recorded
a liability and an offsetting regulatory asset reflecting the
estimated future billings from the companies. In a 1993 decision,
the FERC allowed Yankee Atomic to recover its undepreciated
investment in the plant, including a return on that investment,
as well as unfunded nuclear decommissioning costs and other
costs. Maine Yankee recovers its costs, including a return, in
accordance with settlement agreements approved by the FERC in May
1999. Connecticut Yankee filed a similar request with the FERC,
to which several parties intervened in opposition arguing that
Connecticut Yankee was entitled to recover only those costs
directly related to decommissioning, but should not recover any
remaining unamortized investment or return on equity. In August
1998, a FERC Administrative Law Judge (ALJ) issued an initial
decision which would allow for full recovery of Connecticut
Yankee's unrecovered investment, but precluded a return on that
investment. Connecticut Yankee, the Company, and other parties
filed with the FERC exceptions to the ALJ's decision. Should the
FERC uphold the ALJ's initial decision in its current form, the
Company's share (including Montaup's) of the loss of the return
component would total approximately $16 million to $20 million
before taxes for the entire recovery period. In April 2000, a
settlement was reached among Connecticut Yankee, the Connecticut
Department of Public Utility Control (CDPUC), the Office of
Consumer Counsel (OCC), and the Connecticut Municipal Electric
Cooperative. The settlement resolves all issues in the case,
<PAGE>
except the OCC has reserved its right to appeal recovery of any
costs other than decommissioning. Billings will be reduced
prospectively. There will be no refund of any amounts collected
up to the effective date of the settlement. Connecticut Yankee
had reserved for potential refunds and will be reversing that
reserve. Prospectively, Connecticut Yankee has agreed to reduce
annual collections for decommissioning through the use of its
pre-1983 spent fuel trust funds and to limit its return on equity
to 6 percent. In addition, Connecticut Yankee has pursued
litigation against the Department of Energy to assume financial
responsibility for storage of spent nuclear fuel and has agreed
to pass to ratepayers any recovery after litigation expenses. The
settlement is pending before the FERC.
A Maine statute provides that if both Maine Yankee and its
decommissioning trust fund have insufficient assets to pay for
the plant decommissioning, the owners of Maine Yankee are jointly
and severally liable for the shortfall.
Under the provisions of the Settlement Agreements, the
Company recovers all costs, including shutdown costs, that the
FERC allows these Yankee companies to bill to the Company.
Maine Yankee had hired Stone & Webster, Inc., an
engineering, construction, and consulting company, as the
principal contractor to decommission the unit. Stone & Webster
recently announced plans to file for Chapter 11 bankruptcy
protection due to financial difficulties. Stone & Webster also
announced that it has negotiated the sale of substantially all of
its assets. In May 2000, Maine Yankee terminated its long-term
contract with Stone & Webster and negotiated an arrangement with
Stone & Webster to continue work until June 2000. On June 2,
2000, Stone & Webster filed for Chapter 11 bankruptcy protection.
Maine Yankee is considering its options for decommissioning the
unit beyond June 30, 2000. At this time, the Company is unable to
determine the potential impact, if any, of this development.
Nuclear Decommissioning
The Company is liable for its share of decommissioning costs
for Millstone 3, Seabrook 1, and all of the Yankees.
Decommissioning costs include not only estimated costs to
decontaminate the units as required by the NRC, but also costs to
dismantle the uncontaminated portion of the units. The Company
records decommissioning costs on its books consistent with its
rate recovery. The Company is recovering its share of projected
decommissioning costs for Millstone 3 and Seabrook 1 and these
costs are recorded as depreciation expense. In addition, the
Company is paying its portion of projected decommissioning costs
for all of the Yankees through purchased power expense. Such
<PAGE>
costs reflect estimates of total decommissioning costs approved
by the FERC.
In New Hampshire, legislation was enacted in 1998 which
makes owners of Seabrook 1, in which the Company owns a 10
percent interest, proportional guarantors for decommissioning
costs in the event that an owner without a franchise service
territory fails to fund its share of decommissioning costs.
Currently, a single owner of an approximate 15 percent share of
Seabrook 1 has no franchise service territory. The impact of this
legislation to the Company is not considered material to its
financial position or results of operation.
The Nuclear Waste Policy Act of 1982 establishes that the
federal government (through the DOE) is responsible for the
disposal of spent nuclear fuel. The federal government requires
the Company to pay a fee based on its share of the net generation
from the Millstone 3 and Seabrook 1 nuclear generating units.
Prior to 1998, the Company recovered this fee through its fuel
clause. Under the Settlement Agreements, substantially all of
these costs are recovered through CTCs. Similar costs are billed
to the Company by Vermont Yankee and are also recovered from
customers through CTCs. In 1997, ruling on a lawsuit brought
against the DOE by numerous utilities and state regulatory
commissions, the U.S. Court of Appeals for the District of
Columbia held that the DOE was obligated to begin disposing of
utilities' spent nuclear fuel by January 1998. The DOE failed to
meet this deadline and is not expected to have a temporary or
permanent repository for spent nuclear fuel before 2010, at the
earliest. Many utilities, including Yankee Atomic, Connecticut
Yankee, and Maine Yankee, are plaintiffs in on-going litigation
related to the DOE's failure to accept spent nuclear fuel.
Decommissioning Trust Funds
Each nuclear unit in which the Company and Montaup have an
ownership interest has established a decommissioning trust fund
or escrow fund into which payments are being made to meet the
projected costs of decommissioning. The tables below list
information on the operating nuclear plants in which the Company
and Montaup are joint owners.
<PAGE>
<TABLE>
<CAPTION>
The Company's share of (millions of dollars)
--------------------------------------------
Decommissioning
The Company's Net Estimated Fund
OwnershipPlant AssetsDecommissioning Balances* License
Unit Interest (%)(at 3/31/00) Cost (in 1999 $) (at 3/31/00) Expiration
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Millstone 3 12 12** 76 23 2025
Seabrook 1 10 14** 56 13 2026
Montaup's share of (millions of dollars)
--------------------------------------------
Decommissioning
The Company's Net Estimated Fund
OwnershipPlant AssetsDecommissioning Balances* License
Unit Interest (%)(at 3/31/00) Cost (in 1999 $) (at 3/31/00) Expiration
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Millstone 3 4 4** 25 8 2025
<FN>
*Certain additional amounts are anticipated to be available through tax deductions.
**Represents post-December 1995 spending including nuclear fuel. For further information,
refer to Note C.
</FN>
</TABLE>
There is no assurance that decommissioning costs actually
incurred will not substantially exceed the estimated amounts. For
example, decommissioning cost estimates assume the availability
of permanent repositories for both low-level and high-level
nuclear waste; those repositories do not currently exist. The
temporary low-level repository located in Barnwell, South
Carolina will gradually become unavailable to units other than
Connecticut Yankee and Millstone 3. If any of the operating units
were shut down prior to the end of their operating licenses,
which the Company believes is likely, the funds collected for
decommissioning to that point would be insufficient. Under the
Settlement Agreements, the Company will recover decommissioning
costs through CTCs.
Nuclear Fuel Supply
The utilities responsible for the fuel supply for these
operating nuclear units are not experiencing any difficulties in
obtaining commitments for the supply of each element of the
nuclear fuel cycle.
<PAGE>
Purchased Power Transfer Agreement
As part of the sale of NEP's nonnuclear generating business
to PG&E Gen on September 1, 1998, NEP signed a purchased power
transfer agreement through which PG&E Gen purchased NEP's
entitlement to approximately 1,100 MW of power procured under
long-term contracts. For more information, see the Industry
Restructuring section of the 1999 NEP Annual Report, and the NEP
Transition Report for the period January 1, 2000 to March 31,
2000.
<PAGE>
REGULATORY AND ENVIRONMENTAL MATTERS
Regulation
Numerous activities of NEP are subject to regulation by
various federal agencies. Under the 1935 Act, many transactions
of NEP are subject to the jurisdiction of the SEC. With the
intensifying competitive pressures within the electric utility
industry, there has been increasing debate about modifying or
repealing the 1935 Act. Under the Federal Power Act, NEP is
subject to the jurisdiction of the FERC with respect to rates and
accounting. In addition, the NRC has broad jurisdiction over
nuclear units and federal environmental agencies have broad
jurisdiction over environmental matters.
For more information, see Industry Restructuring section of
the 1999 NEP Annual Report, and the NEP Transition Report for the
period January 1, 2000 to March 31, 2000; Rates, page 4; Nuclear
Units, page 9; and Environmental Requirements, page 18.
Environmental Requirements
Existing Operations
NEP is subject to federal, state, and local environmental
regulation of, among other things, wetlands and flood plains; air
and water quality; storage, transportation, and disposal of
hazardous wastes and substances; underground storage tanks; and
land-use. Upon completion of the sale of substantially all of
NEES' nonnuclear generating business to PG&E Gen, PG&E Gen
assumed responsibility for environmental conditions at the
Sellers' nonnuclear generating stations (see the Industry
Restructuring section of the 1999 NEP Annual Report, and the NEP
Transition Report for the period January 1, 2000 to March 31,
2000.)
Siting and Construction Activities for New Transmission
Facilities
All New England states require, in certain circumstances,
regulatory approval for site selection or construction of major
transmission facilities. Connecticut, Maine, Massachusetts, New
Hampshire, and Rhode Island also have programs of coastal zone
management that might restrict construction of electrical
facilities in, or potentially affecting, coastal areas. The
New England states have environmental laws which require project
proponents to prepare reports of the environmental impact of
certain proposed actions for review by various agencies.
<PAGE>
Environmental Protection Facilities Expenditures
Due to the divestiture of its nonnuclear generating
business, NEP estimates that capital expenditures for
environmental protection facilities in 2000 and 2001 will not be
material.
Hazardous Substances
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. For more information regarding sites
for which NEP has been named as potentially responsible parties,
other sites, a settlement agreement covering rate recovery of
certain remediation costs, and reserves, see Note D of the Notes
to the Financial Statements of both the NEP 1999 Annual Report,
and the NEP Transition Report for the period January 1, 2000 to
March 31, 2000.
Nuclear
The NRC, along with other federal and state agencies, has
extensive regulations pertaining to environmental aspects of
nuclear reactors. Safety aspects of nuclear reactors, including
design controls and inspection programs to mitigate any
possibility of nuclear accidents and to reduce any damages
therefrom, are also subject to NRC regulation. See Nuclear
Units, page 9.
CONSTRUCTION AND FINANCING
NEP's estimated construction expenditures (including nuclear
fuel) are shown below for the fiscal years ended March 2001
through 2003.
NEP conducts a continuing review of its construction and
financing programs. These programs and the estimates shown below
are subject to revision based upon changes in assumptions as to
load growth, rates of inflation, receipt of adequate and timely
rate relief, the availability and timing of regulatory approvals,
new environmental and legal or regulatory requirements, total
costs of major projects, technological changes, and the
availability and costs of external sources of capital.
<PAGE>
<TABLE>
<CAPTION>
Estimated Construction Expenditures
for the years ended March
-----------------------------------
2001 2002 2003 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
($ in Millions - excluding AFDC)
Nuclear Generation (1) 10 10 10 30
Transmission 45 45 40 130
---- ---- ---- ----
Total NEP 55 55 50 160
---- ---- ---- ----
<FN>
(1) Includes nuclear fuel.
</FN>
</TABLE>
Financing
All of NEP's construction expenditures during the fiscal
years ended March 2001 through March 2003 are expected to be
financed by internally generated funds.
NEP's general practice has been to finance construction
expenditures in excess of internally generated funds initially by
issuing unsecured short-term debt. This short-term debt is
subsequently reduced through sales of long-term debt securities
and through capital contributions from its parent.
The ability of NEP to issue short-term debt is limited by
the need to obtain regulatory approval from the SEC under the
1935 Act and from the New Hampshire Public Utilities Commission.
The following table summarizes the short-term debt amounts for
which regulatory approval has been granted at March 31, 2000, and
the amount of outstanding short-term debt and lines of credit and
standby bond facilities at such date.
<PAGE>
<TABLE>
<CAPTION>
($ millions)
Lines of Credit/
Regulatory Standby Bond
Limit Outstanding Facilities
---------- ----------- ----------------
<S> <C> <C> <C>
NEP 375 39(a) 460
(a) NEP plans to seek the necessary regulatory approvals in 2000 which would
allow the $39 million of variable rate debt to remain outstanding through
2015. This would result in classifying the debt as long-term rather than
short-term.
</TABLE>
NEP and certain affiliates, with regulatory approval,
operate a money pool to more effectively utilize cash resources
and to reduce outside short-term borrowings. Short-term
borrowing needs are met first by available funds of the money
pool participants. Borrowing companies pay interest at a rate
designed to approximate the cost of outside short-term
borrowings. Companies which invest in the pool share the
interest earned on a basis proportionate to their average monthly
investment in the money pool. Funds may be withdrawn from or
repaid to the pool at any time without prior notice. At March
31, 2000, NEP had no moneypool borrowings outstanding.
<PAGE>
EXECUTIVE OFFICERS
The Treasurer is elected by the stockholders to hold office
until the next annual meeting of stockholders and until the
successor is duly chosen and qualified. The other executive
officers are elected by the Board of Directors to hold office
subject to the pleasure of the directors and until the first
meeting of directors after the next annual meeting of
stockholders and until their successors are duly chosen and
qualified. Certain officers of NEP are, or at various times in
the past have been, officers and/or directors of the affiliated
companies with which NEP has entered into contracts and had other
business relations. The list below is as of June 1, 2000.
Peter G. Flynn - Age: 46 - Elected President in 1999 - Vice
President and Director of Rates for the Service Company from
1996 to 1999 - Assistant General Counsel for the Service
Company during 1996 - Senior Counsel for the Service Company
from 1992 to 1996.
Michael E. Jesanis - Age: 43 - Vice President since 1998 -
National Grid USA (formerly NEES) Senior Vice President and
Chief Financial Officer since 1998 - NEES Vice President
from 1997 to 1998 - NEES Treasurer from 1992 to 1998 -
Elected Vice President of Narragansett in 1998 -
Treasurer of Mass. Electric and NEP from 1992 to 1998.
Cheryl A. LaFleur - Age: 45 - Vice President since 1995.
National Grid USA (formerly NEES) Senior Vice President
since 1998 - NEES Vice President from 1995 to 1998 -
Secretary and General Counsel since 1995 - Vice President of
Mass. Electric from 1993 to 1995.
Marc F. Mahoney - Age: 46- Elected Vice President in 2000 -
Vice President, Field Operations for EUA from 1997 to 2000 -
Director, Transmission and Distribution for EUA from 1995 to
1997.
John F. Malley - Age: 51 - Vice President since 1992.
James S. Robinson - Age: 46 - Vice President since 1998 -
Director of Nuclear Investments from 1997 to 1998 - Manager,
Wholesale Business Administration from 1993 to 1997.
<PAGE>
Masheed H. Rosenqvist - Age: 45 - Vice President since 1998
- Manager, Transmission Tariffs and Contracts for NEP or
Service Company since 1997 - Consulting Engineer for the
Service Company from 1995 to 1997.
Terry L. Schwennesen - Age: 44 - Elected Vice President in
2000 - Associate General Counsel of Mass. Electric 1999 to
2000 - Director of Rates for Service Company from 1998 to
1999 - Manager of Rates during 1998 - Manager of Wholesale
Rates until 1998.
John G. Cochrane - Age: 42 - National Grid USA (formerly
NEES) Vice President since 1999 - National Grid USA
(formerly NEES) Treasurer since 1998 - Treasurer of Mass.
Electric, NEP, and the Service Company since 1998 - Vice
President of the Service Company and Treasurer of
Narragansett since 1993.
Kwong O. Nuey - Age: 51 - Elected Controller in 2000 - Vice
President and Director, Retail Information Services for
Mass. Electric from 1993 to 2000.
ITEM 2. PROPERTIES
See ITEM 1. Business - Transmission Properties, Page 7 and
Nuclear Generation Properties, page 8.
ITEM 3. LEGAL PROCEEDINGS
See Item 1. BUSINESS - Nuclear Units, page 9.
In August 1997, NEP sued Northeast Utilities (NU) in
Massachusetts Superior Court for damages resulting from the
tortious conduct of NU that caused the shutdown of Millstone 3.
NEP's claim for damages included the costs of replacement power
during the outage, costs necessary to return Millstone 3 to safe
operation, and other additional costs. Most of NEP's incremental
replacement power costs have been recovered from customers,
either through fuel adjustment clauses or through provisions in
the Settlement Agreements.
In August 1997, NEP also sent a demand for arbitration to
Connecticut Light & Power Company and Western Massachusetts
Electric Company, both subsidiaries of NU (subsidiaries), seeking
damages resulting from their breach of obligations under an
agreement with NEP and others regarding the operation and
ownership of Millstone 3.
<PAGE>
In November 1999, NEP, NU, and the subsidiaries executed an
agreement which settled the litigation and the arbitration
described above. Under the settlement, NU paid NEP approximately
$24 million. In addition, NU also agreed to include NEP's
Millstone 3 interest when NU sells its Millstone 3 interest at
auction. Amounts received pursuant to a sale will, after
reimbursement of NEP's transaction costs and net investment in
Millstone 3, be credited to customers.
From 1983 until 1998, NEP was the wholesale power supplier
for the Town of Norwood, Massachusetts (Norwood). In April 1998,
Norwood began taking power from another supplier. Pursuant to a
tariff amendment approved by the FERC in May 1998, NEP has been
assessing Norwood a CTC. Through December 1999, the charges
assessed Norwood amount to approximately $15 million, all of
which remain unpaid. NEP is pursuing a collection action in
Massachusetts Superior Court.
Separately, Norwood filed suit in Federal District Court
(District Court) in April 1997 alleging that NEP's divestiture
violated the terms of the 1983 power contract and contravened
antitrust laws. The District Court dismissed the lawsuit. On
appeal, the First Circuit Court of Appeals (First Circuit) also
consolidated appeals Norwood made from FERC's orders approving
the divestiture, the wholesale rate settlement between NEP and
its distribution affiliates, and the CTC tariff amendment. On
February 2, 2000, the First Circuit dismissed Norwood's appeal
from the FERC orders and dismissed its appeal from all but one of
Norwood's District Court claims, which relates to the creation of
generation market power. On February 28, 2000, and March 3,
2000, respectively, the First Circuit denied Norwood's petition
for further review of its District Court claims decision and its
decision on the FERC orders. On May 30, 2000, Norwood petitioned
the US Supreme Court for review of the First Circuit decisions.
Norwood has also appealed a 1999 FERC decision that rejected
Norwood's challenge to the calculation of the CTC based on the
term of the 1983 power contract. On June 12, 2000, Norwood moved
to amend its complaint to reassert a claim for rescission with
respect to NEP's divestiture. NEP has filed a motion to dismiss.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 25, 2000, a Special Meeting of Shareholders was
held.
By unanimous vote of the 3,749,896 shares present out of
3,765,568 total shares having general voting rights:
1. The Company's Articles of Organization and By-Laws were
amended to delete provisions relating to Dividend Series
Preferred Stock and Preferred Stock-Cumulative.
2. The Company's capital stock was decreased by 2,262,500
shares of Dividend Series Preferred Stock and 6,879,440
shares of Preferred Stock-Cumulative.
3. The Company's By-laws were amended to add provisions for a
Nuclear Committee which has delegated authority over most
matters regarding the Company's ownership in nuclear
generating units.
4. The Company's By-laws were amended to require that all
officers and directors of the Company be US citizens so long
as the Company is a licensee of an operating nuclear
generating unit.
5. The number of directors was increased from four to seven.
6. The following were elected as directors:
Cynthia A. Arcate
L. Joseph Callan
Philip R. Sharp
7. To approve the merger of Montaup Electric Company into the
Company.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
The information required by this item is not applicable as
the common stock of NEP is held solely by National Grid USA.
Information pertaining to payment of dividends and restrictions
on payment of dividends is incorporated herein by reference to
the NEP 1999 Annual Report and the NEP Transition Report for the
period January 1, 2000 to March 31, 2000.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein
by reference to Selected Financial Information, Note K of both
the NEP 1999 Annual Report and the NEP Transition Report for the
period January 1, 2000 to March 31, 2000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required by this item is incorporated herein
by reference to the Financial Review section of the NEP 1999
Annual Report and the NEP Transition Report for the period
January 1, 2000 to March 31, 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information required by this item is incorporated herein
by reference to the Risk Management section of the NEP 1999
Annual Report and the NEP Transition Report for the period
January 1, 2000 to March 31, 2000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein
by reference to the financial statements and Notes to Financial
Statements in the NEP 1999 Annual Report and the NEP Transition
Report for the period January 1, 2000 to March 31, 2000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the directors of NEP, their ages, and a brief
account of their business experience during the past five years
appear below. Information required by this item for Executive
Officers is provided under the caption EXECUTIVE OFFICERS in Part
I of this report.
Directors are elected to hold office until the next annual
meeting of stockholders or special meeting held in lieu thereof
and until their respective successors are chosen and qualified.
<PAGE>
The list below is as of June 1, 2000
L. Joseph Callan - Age: 52 - Elected Director in 2000 -
Consultant since 1998 - Several positions at the NRC,
including Regional Administrator and Executive Director of
Operations, from 1979 to 1998.
Peter G. Flynn* - Elected Director in 1999.
Michael E. Jesanis* - Elected Director in 2000 -
Directorships of National Grid USA Companies: EUA Bioten,
Inc., EUA Energy Investment Corporation, EUA Ocean State
Corporation, Granite State Electric Company, Massachusetts
Electric Company, Nantucket Electric Company, National Grid
USA, National Grid USA Service Company, Inc., NEES
Communications, Inc., New England Electric Transmission
Corporation, New England Energy Incorporated, New England
Hydro Finance Company, Inc., New England Hydro-Transmission
Corporation, New England Hydro-Transmission Electric
Company, Inc. and New England Power Company.
Cheryl A. LaFleur* - Director since 1995. Directorships of
National Grid USA companies: AllEnergy Fuels Corp., EUA
Bioten, Inc., EUA Cogenex Corporation, EUA Cogenex West
Corporation, EUA Energy Investment Corporation, EUA Ocean
State Corporation, Granite State Electric Company, Granite
State Energy, Inc., Massachusetts Electric Company,
Nantucket Electric Company, National Grid Transmission
Services Corporation, National Grid USA, National Grid USA
Service Company, Inc., NEES Communications, Inc., NEES
Energy, Inc., NEES Telecommunications Corp., New England
Electric Transmission Corporation, New England Energy
Incorporated, New England Hydro Finance Company, Inc., New
England Hydro-Transmission Corporation, New England Hydro-
Transmission Electric Company, Inc., New England Power
Company, NEWHC, Inc., New England Wholesale Electric
Company, Northeast Energy Management, Inc., and Wayfinder
Group, Inc.
Robert G. Powderly - Age: 53 - Elected Director in 2000 -
Executive Vice President of EUA until 2000 - Directorships
of National Grid USA Companies: EUA Bioten, Inc., EUA
Cogenex Corporation, EUA Energy Investment Corporation, EUA
Ocean State Corporation, National Grid USA, National Grid
USA Service Company, Inc.
Terry L. Schwewnnesen* - Elected Director in 2000.
<PAGE>
Richard P. Sergel* - Director since 1998. Director of
National Grid Group, plc. Directorships of National Grid
USA companies: EUA Bioten, Inc., EUA Cogenex Corporation,
EUA Energy Investment Corporation, EUA Ocean State
Corporation, Granite State Electric Company, Granite State
Energy, Inc., Massachusetts Electric Company, Nantucket
Electric Company, The Narragansett Electric Company,
National Grid Transmission Services Corporation, National
Grid USA, National Grid USA Service Company, Inc., NEES
Communications, Inc., NEES Energy, Inc., NEES
Telecommunications Corp., New England Energy Incorporated,
New England Electric Transmission Corporation, New England
Hydro Finance Company, Inc., New England Hydro-
Transmission Corporation, New England Hydro-Transmission
Electric Company, Inc., New England Power Company, NEWHC,
Inc., and Wayfinder Group, Inc.
Philip R. Sharp - Age: 57 - Elected Director in 2000 -
Lecturer, Harvard University John F. Kennedy School of
Government since 1995 - US Congressman from 1975 to 1995.
Other directorship: Cinergy Corporation.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS in Part I of this report for other
information regarding these directors.
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934
requires NEP's officers and directors, and persons who own more
than 10 percent of a registered class of NEP's equity securities,
to file reports on Forms 3, 4, and 5 of share ownership and
changes in share ownership with the SEC and the New York Stock
Exchange and to furnish NEP with copies of all Section 16(a)
forms they file.
Based solely on NEP's, review of the copies of such forms
received by it, or written representations from certain reporting
persons that such forms were not required for those persons, NEP
believes that, during the first calendar quarter of 2000, all
filing requirements applicable to its officers, directors, and 10
percent beneficial owners were complied with, with the exception
that due to Company error a Form 3 for each of Messrs. Callan and
Sharp was filed late.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table gives information with respect to all
compensation (whether paid directly by NEP or billed to it as
hourly charges) for services in all capacities for NEP for the
first calendar quarter of 2000 and years 1997 through 1999 to or
for the benefit of the Chief Executive Officer and the four other
most highly compensated executive officers.
<PAGE>
NEP
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation (b) Compensation
-------------------------- -------------------
Other Restricted Securities
Name and Annual & Deferred Under All Other
Principal Compensa- Share Lying LTIP Compensa-
Position Year Salary Bonus tion Awards Options Payouts tion
(a) ($)(c) ($)(c) ($)(d) ($) ($) ($)(f)
---------- ---- ------- ------ --------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter G. 2000(g) 40,997 107,889 2,050 0 36,473 118,615 90
Flynn 1999 154,707 74,812 3,616 30,220 46,464 359
President 1998 57,838 29,383 1,151 12,176 6,864 75
(Elected 1/99)
Alfred D. 2000(g) 11,110 35,204 653 0 0 59,146 99
Houston 1999 40,385 20,766 1,054 11,576 20,235 219
Chairman 1998 49,236 32,804 1,137 18,677 17,545 288
(Retired
3/31/00)
Cheryl A. 2000(g) 9,794 26,656 654 0 10,892 54,198 32
LaFleur 1999 36,268 17,321 1,278 7,871 19,015 82
Vice 1998 32,922 18,509 1,258 8,562 6,143 69
President 1997 85,555 93,340 3,311 1,832 0 149
Masheed H. 2000(g) 32,745 63,412 1,637 0 16,023 54,855 103
Rosenqvist 1999 124,740 45,569 2,538 17,671 0 412
Vice 1998 113,697 44,654 2,285 17,618 0 366
President
James S. 2000(g) 31,811 62,966 1,625 0 14,458 53,878 42
Robinson 1999 115,920 42,415 2,693 16,405 22,018 167
Vice 1998 108,205 39,143 2,510 17,734 13,641 149
President
</TABLE>
(a) Certain officers of NEP are also officers of affiliate companies.
(b) Includes deferred compensation in category and year earned.
<PAGE>
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the
variable match of the incentive thrift plan, including related
deferred compensation plan matches, special cash bonuses, and
unrestricted shares under the incentive share plan. In 1997,
the bonus amounts were all cash or contributions to the
incentive thrift plan, including related deferred compensation
plan matches. See descriptions under Plan Summaries.
(d) Includes amounts reimbursed by NEP for the payment of taxes on
certain noncash benefits and NEP contributions to the
incentive thrift plan that are not bonus contributions
including related deferred compensation plan match. See
description under Plan Summaries.
(e) The incentive share awards for the named executives who were
also NEES executives (1997 - 1999) and the other named
executives (in 1998 only) were in the form of restricted
shares (with a five-year restriction) or deferred share
equivalents, deferred for receipt for at least five years, at
the executive's option. As cash dividends were declared, the
number of deferred share equivalents increased as if the
dividends were reinvested in shares. The shares awarded for
the other named executives in 1997 were not restricted and the
value of the awards is included in the bonus column.
As of December 31, 1999, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Flynn 3,691 shares, $191,009 value; Mr. Houston
19,545 shares, $1,011,454 value; Ms. LaFleur 8,306 shares,
$429,836 value; Ms. Rosenqvist 376 shares, $19,458 value; and
Mr. Robinson 131 shares, $6,779 value. The value was
calculated by multiplying the closing market price on December
31, 1999 by the number of shares. These shares were cashed
out as a result of the merger with National Grid.
(f) Includes NEP contributions to life insurance. See description
under Plan Summaries. The life insurance contribution is
calculated based on the value of term life insurance for the
named individuals. The premium costs for most of these
policies have been or will be recovered by NEP.
(g) Information is for the first calendar quarter of 2000 only.
<PAGE>
Directors' Compensation
Members of the NEP Board who are employees of National Grid
USA companies receive no fees for service on the Board. Non-
employee directors receive an annual retainer of $20,000 plus a
meeting fee of $1,000 for each Board or committee meeting attended.
Retirement Plans
The following table shows estimated annual benefits payable to
executive officers under the qualified pension plan and the
supplemental retirement plan, assuming retirement at age 65 in
2000.
<TABLE>
PENSION TABLE
<CAPTION>
Five-Year
Average 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
Compensa- of of of of of of
tion Service Service Service Service Service Service
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 18,926 29,276 39,626 49,976 60,326 70,676
$150,000 29,276 42,414 57,439 72,464 87,489 102,514
$200,000 39,626 57,439 75,251 94,951 114,651 134,351
$250,000 49,976 72,464 94,951 116,814 141,064 165,314
$300,000 60,326 87,489 114,651 141,064 167,477 184,123
$350,000 70,676 102,514 134,351 165,314 196,277 215,865
$400,000 81,026 117,539 154,051 189,564 225,077 241,590
$450,000 91,376 132,564 173,751 213,814 253,877 279,315
$500,000 101,726 147,589 193,451 238,064 282,677 311,040
</TABLE>
For purposes of the retirement plans, Mr. Flynn, Mr. Houston,
Ms. LaFleur, Ms. Rosenqvist, and Mr. Robinson currently have 18,
21, 14, 18, and 12 credited years of service, respectively.
Benefits under the pension plans are computed using formulae
based on percentages of highest average compensation computed over
five consecutive years. The compensation covered by the pension
plan includes salary, bonus, and incentive share awards. Long-Term
Performance Share awards are not included. The benefits listed in
the pension table are not subject to deduction for Social Security
and are shown without any joint and survivor benefits. If the
participant elected at age 65 a 100 percent joint and survivor
benefit with a spouse of the same age, the benefit shown would be
reduced by approximately 16 percent.
<PAGE>
The pension plan table above does not include annuity payments
to be received in lieu of life insurance for Mr. Houston. The
payments are described below under Plan Summaries.
NEP contributes the full cost of post-retirement health
benefits for senior executives.
PAYMENTS UPON A CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT
National Grid USA is a party to agreements with each of Mr.
Houston, Ms. LaFleur, and Mr. Flynn (each, an Executive and each
agreement, a Severance Agreement), which Severance Agreements were
entered into in 1995 with Mr. Houston and on March 1, 1998 with the
other Executives and which remain in effect for the three year
period following (1) a Change in Control of NEES (as defined in the
Severance Agreements) or (2) a Major Transaction (as defined in the
Severance Agreements). In accordance with the terms of the
Severance Agreements, if the applicable Executive's employment is
terminated within three years following the event described in
clause (1) or (2), as applicable, National Grid USA will pay to the
Executive the severance payments and will provide to the Executive
the severance benefits described below, unless the Executive's
employment is terminated (x) by National Grid USA for Cause, (y) by
the Executive without Good Reason or (z) by reason of the
Executive's death, Disability or Retirement (each term, as defined
in the Severance Agreements).
The shareholder approval of the merger agreement with The
National Grid Group plc (May 1999) constituted a Major Transaction
and the merger with The National Grid Group plc on March 22, 2000
constituted a Change in Control. Accordingly, in the event an
Executive's employment is terminated within three years following
the Major Transaction or Change in Control, such Executive will be
entitled to receive, in lieu of any other payments due to the
Executive: (1) lump sum cash payment equal to three times (two
times, in certain cases) the sum of (a) the higher of (i) such
Executive's annual base compensation in effect at the time of
termination and (ii) such Executive's annual base compensation in
effect immediately prior to the Change in Control or Major
Transaction and (b) the higher of (i) the average of the annual
bonuses awarded to such Executive under the New England Electric
Companies' Senior Incentive Compensation Plan, New England Electric
Companies' Incentive Compensation Plan I, II and III and the
Incentive Share Plan (collectively, the Incentive Plans) for the
three performance years ended prior to the date of termination and
<PAGE>
(ii) the average of the annual bonuses awarded to such Executive
pursuant to the Incentive Plans for the three performance years
ended prior to the Change in Control or Major Transaction; (2) a
cash lump sum payment equal to the excess of (a) the actuarial
equivalent of the retirement pension which the Executive would have
accrued under the terms of each pension plan of National Grid USA
(determined as if the Executive (i) were fully vested thereunder
and had accumulated 36 additional months (24 additional months, in
certain cases) of service credit thereunder and (ii) had been
credited under each such pension plan of National Grid USA during
such 36 month period with compensation at the higher of (A) the
Executive's compensation during the 12 months prior to the date of
termination and (B) the Executive's compensation during the 12
months ending on the date of the Change in Control or Major
Transaction) over (b) the actuarial equivalent of the retirement
pension which the Executive had actually accrued pursuant to the
provisions of National Grid USA's pension plans as of the date of
his or her termination of employment; (3) the continuation of
employee welfare benefits for three years (two years, in certain
cases) following the date of termination, reduced to the extent the
Executive receives such benefits from a subsequent employer; (4) if
the Executive would have otherwise been entitled to post-retirement
health care or life insurance had he continued to be employed for
three additional years (two additional years, in certain cases),
such post-retirement health care and life insurance commencing on
the later of (a) the date that such coverage would have first
become available to the Executive and (b) the date that the
benefits described in clause (3) above terminate and (5) the
reimbursement of legal fees and expenses, if any, incurred by the
Executive in disputing any issue relating to the termination of his
employment. Notwithstanding the above, payments to be made and
benefits to be provided to the Executives will be reduced to the
extent necessary to avoid imposition of the excise tax (the Excise
Tax) pursuant to Section 4999 of the Code; in certain cases,
however, such payments and benefits will be reduced only if such
reduction would yield a greater result to the Executive than actual
payment by the Executive of the Excise Tax.
Mr. Houston's employment was terminated in accordance with the
merger agreement. Therefore, Mr. Houston is receiving the benefits
listed in the preceding paragraph. Also pursuant to the merger
agreement with National Grid, National Grid and National Grid USA
entered into a consulting contract with Mr. Houston. The
consulting contract is for a term of two years and provides for
payments to Mr. Houston of $200,000 per year.
<PAGE>
Upon a change in control a participant in the deferred
compensation plan has the option of receiving a full distribution
of the participant's cash and share accounts and the actuarial
value of future benefits from the insurance related benefits under
a prior plan, all less 10 percent.
NEES's bonus plans, including the incentive compensation plans,
the Incentive Thrift Plan, and the Goals Program, provided for
payments equal to the average of the bonuses for the three prior
years in the event of a Change of Control. These payments would be
made in lieu of the regular bonuses for the year in which the
Change in Control occurs. These payments were triggered upon the
merger with National Grid and are reflected in the Summary
Compensation Table in the bonus column for 2000. The Long-Term
Performance Share Award Plan provided for a cash payment equal to
the value of the performance shares in the participants' account
times the average target achievement percentage for the Incentive
Thrift Plan for the three prior years. This payment was triggered
upon the merger with National Grid and is reflected in the Summary
Compensation Table in the LTIP Payouts column for 2000. The
Retirees Health and Life Insurance Plan has provisions preventing
changes in benefits adverse to the participants for three years
following a Change in Control.
PLAN SUMMARIES
A brief description of the various plans through which
compensation and benefits have been provided to the named executive
officers is presented below to better enable shareholders to
understand the information presented in the tables shown earlier.
The amounts of compensation and benefits provided to the named
executive officers under the plans described below (and charged to
NEP) are presented in the Summary Compensation Table.
Goals Program
The Goals Program establishes goals annually. For 1999, these
included goals related to core operating income, costs for
customers for electricity delivery, safety, absenteeism,
transmission and distribution reliability, environmental and OSHA
compliance, and customer satisfaction. Some goals apply to all
employees, while others apply to particular functional groups.
Depending upon the number of goals met, and provided the minimum
earnings goal is met, employees may earn a cash bonus of 1 percent
to 4-1/2 percent of their compensation.
<PAGE>
Incentive Thrift Plan
The incentive thrift plan (a 401(k) program) provides for a
match of 40 percent of up to the first 5 percent of base
compensation contributed to the incentive thrift plan (shown under
Other Annual Compensation in the Summary Compensation Table) and,
based on an incentive formula tied to core operating income, may
fully match the first 5 percent of base compensation contributed
(the additional amount, if any, is shown under Bonus in the Summary
Compensation Table). Under Federal law, contributions to these
plans are limited. In 1999, the salary reduction amount was
limited to $10,000.
Deferred Compensation Plan
The Deferred Compensation Plan offered executives the
opportunity to defer base pay and bonuses. The plan offered the
option of investing at the prime rate or in NEES common shares.
Under Federal law, the Incentive Thrift Plan, described above, was
required to limit participant base compensation to $160,000 in
calculating the NEES match. Under the Deferred Compensation Plan,
NEES made a contribution to an executive's share account equivalent
to the resultant reduction in his or her match under the Incentive
Thrift Plan.
Life Insurance
National Grid USA has established for certain senior executives
life insurance plans funded by individual policies. The combined
death benefit under these insurance plans is three times the
participant's annual salary. These plans are structured so that,
over time, National Grid USA should recover the cost of the
insurance premiums.
Mr. Houston's plan differed and under the terms of the plan he
has elected to receive an annuity income equal to 22.5 percent of
1998 annual salary plus 40 percent of final annual salary. The
life insurance is reduced over 15 years to an amount equal to his
final annual salary.
<PAGE>
Incentive Compensation Plan
Under the bonus plan for certain senior employees, bonuses are
tied to achievement of core business operating income and strategic
objectives. Annual income targets and strategic objectives are
established for each year. Bonuses are also dependent upon the
achievement of individual goals. An individual's award of shares
under the incentive share plan has been a fixed percentage of her
or his cash bonus for that year. If no cash award was made, no
shares would be distributed.
Financial Counseling
NEP pays for personal financial counseling for certain
executives. As required by the IRS, a portion of the amount paid
is reported as taxable income for the executive. Financial
counseling is also offered to other employees through seminars
conducted at various locations each year.
Stock Option Plan
For description, please see the Option Grants During
Transition Period table.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The Long-Term Performance Share Award Plan provided awards
based on various measures of NEES performance over a three-year
period. Each award factor functioned independently. The
performance targets for each cycle were set by the Compensation
Committee of the NEES Board. Performance was rated on rolling
three-year periods, with a new cycle beginning each year. An
individual's potential award under the plan was a fixed percentage
(ranging from 15 percent to 50 percent) of base pay. At the end of
the three-year cycle, the participant received NEES shares based
upon the performance against the various factors.
The only measure of performance for the cycle commencing
January 1, 1999 was the successful completion of the merger with
National Grid.
<PAGE>
The following table shows the awards, for those executive
officers named in the Summary Compensation Table, under the Long-
Term Performance Share Award Plan for the performance cycle
commencing January 1, 1999. Due to the change of control
provisions in the plan, triggered by the merger with National Grid
on March 22, 2000, the listed participants received awards in the
amounts indicated in the table. The amount awarded was based upon
the average of incentive compensation target achievement for the
prior three years and not upon the measure specified above.
<TABLE>
<CAPTION>
NEP
---
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
Number of Actual Change
Common Shares Performance in Control
Name Allotted Period Award (a)
--------- ----------- ------------
<S> <C> <C> <C>
Peter G. Flynn 856 3 years 744
Alfred D. Houston 5187 3 years 4512
Cheryl A. LaFleur 2534 3 years 2204
Masheed H. Rosenqvist 388 3 years 338
James S. Robinson 361 3 years 314
</TABLE>
(a) The awards in this column were made as a result of the change
in control on March 22, 2000. The listed participants
received awards in the amounts indicated in the table. The
amount awarded was based upon the average of incentive
compensation target achievement for the prior three years and
not upon the measure specified above.
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS DURING TRANSITION PERIOD
--------------------------------------
Potential Realizable
Value At Assumed
Annual Rates Of Stock
Individual Grants Price Appreciation
For Option Term
----------------------------------------------------------------------------
Percent Of
Number Of Options
Securities Granted
Underlying To Exercise
Option Employees Of Base Expi-
Granted In Fiscal Price ration
Name (#) Year ($/Sh) Date 5%($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peter G. Flynn 36,473 40% 8.97 3/31/2010 205,749 521,408
Alfred D. Houston 0 0% 8.97 3/31/2010 0 0
Cheryl A. LaFleur 10,892 12% 8.97 3/31/2010 61,441 155,705
Masheed H. Rosenqvist 16,023 18% 8.97 3/31/2010 90,389 229,063
James S. Robinson 14,458 16% 8.97 3/31/2010 81,560 206,690
</TABLE>
On March 31, 2000, National Grid granted stock options to
certain executives, including officers named in the Summary
Compensation Table. The exercise price is $8.97 (the mid market
price on the day before the grant of the options) per share of
National Grid stock. The options are not vested for 3 years and
lapse after 10 years. The number of stock options granted was a
multiple of base pay ranging from 1 to 3 times base pay. None of
the options may be exercised if National Grid earnings per share
growth does not exceed inflation on a rolling three year basis
(EPS Exceeds Inflation) by 5.99%. Fifty percent of the options
may be exercised if EPS Exceeds Inflation by 6 to 8.99% and 100%
may be exercised if EPS Exceeds Inflation by 9% or more.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
National Grid USA owns 99.57 percent of the voting
securities of NEP.
The following table lists the holdings of National Grid
American Depositary Receipts (ADRs) as of June 1, 2000 by the
directors, the executive officers named in the Summary
Compensation Table, and all directors and executive officers of
the Company, as a group. All of the ADRs are held through the
Incentive Thrift Plan described above.
<TABLE>
<CAPTION>
Name ADRs Beneficially Owned
<S> <C>
L. Joseph Callan 0
Peter G. Flynn 2,715
Alfred D. Houston 47
Michael E. Jesanis 81
Cheryl A. LaFleur 76
Robert G. Powderly 21
James S. Robinson 245
Masheed H. Rosenqvist 40
Terry L. Schwennesen 37
Richard P. Sergel 74
Philip R. Sharp 0
All directors and
executive officers,
as a group (15 persons) 3,460
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to ITEM 11. EXECUTIVE COMPENSATION.
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
List of Exhibits
Unless otherwise indicated, the exhibits listed below are incorporated
by reference to the appropriate exhibit numbers and the Commission file
numbers indicated in parentheses.
(3) (a) Articles of Organization as amended through June 25, 1987
(Exhibit 3(a) to 1988 Form 10-K, File No. 0-1229). Articles of
Amendment dated January 27, 1998 (Exhibit B.18.a to National Grid
USA 1999 Form U-5-S, File No. 30-33); Articles of Amendment dated
February 25, 2000 (filed herewith).
(b) By-laws of the Company as amended April 19, 2000 (Filed
herewith).
(10) Material Contracts
(a) Boston Edison Company et al. and the Company: Amended REMVEC
Agreement dated August 12, 1977 (Exhibit 5-4(d), File No.
2-61881).
(i) Boston Edison Company et al. and the Company: REMVEC II
Agreement dated on or about July 1, 1997 (Exhibit 10(a)(I)
to NEES' 1997 Form 10- K, File No. 1-3446).
(ii) Boston Edison Company et al. and the Company: Security
Analysis Services Agreement dated on or about July 1, 1997
(Exhibit 10(a)(ii) to NEES' 1997 Form 10-K, File No. 1-
3446).
(b) The Connecticut Light and Power Company et al. and the Company:
Sharing Agreement for Joint Ownership, Construction and
Operation of Millstone Unit No. 3 dated as of September 1,
1973, and Amendment dated as of August 1, 1974 (Exhibit 10-5,
File No. 2-52820); Amendments dated as of December 15, 1975 and
April 1, 1986 (Exhibit 10(b) to NEES' 1990 Form 10-K File No.
1-3446). Transmission Support Agreement dated August 9, 1974;
Instrument of Transfer to the Company with respect to the 1979
Connecticut Nuclear Unit, and Assumption of Obligations, dated
December 17, 1975 (Exhibit 10-6(b), File No. 2-57831).
<PAGE>
(c) Connecticut Yankee Atomic Power Company et al. and the Company:
Stockholders Agreement dated July 1, 1964 (Exhibit 13-9-A, File
No. 2-2006); Power Purchase Contract dated July 1, 1964
(Exhibit 13-9-B, File No. 2-23006); Additional Power Contract
dated as of April 30, 1984 and 1996; Amendatory Agreement dated
as of December 4, 1996 (Exhibit 10(c) to 1996 Form 10-K, File
No. 1-3446); Supplementary Power Contract dated as of April 1,
1987 (Exhibit 10(c) to 1987 Form 10-K, File No. 0-1229);
Capital Funds Agreement dated September 1, 1964 (Exhibit
13-9-C, File No. 2-23006); Transmission Agreement dated October
1, 1964 (Exhibit 13-9-D, File No. 2-23006); Agreement revising
Transmission Agreement dated July 1, 1979 (Exhibit to NEES'
1979 Form 10-K, File No. 1-3446); Amendment revising
Transmission Agreement dated as of January 19, 1994 (Exhibit
10(c) to NEES' 1995 Form 10-K, File No. 1-3446); Five Year
Capital Contribution Agreement dated November 1, 1980 (Exhibit
10(e) to NEES' 1980 Form 10-K, File No. 1-3446).
(d) Maine Yankee Atomic Power Company et al. and the Company:
Capital Funds Agreement dated May 20, 1968 and Power Purchase
Contract dated May 20, 1968 (Exhibit 4-5, File No. 2-29145);
Amendments dated as of January 1, 1984, March 1, 1984 (Exhibit
10(d) to NEES' 1983 Form 10-K, File No. 1-3446); October 1,
1984, and August 1, 1985 (Exhibit 10(d) to NEES' 1985 Form
10-K, File No. 1-3446); Stockholders Agreement dated May 20,
1968 (Exhibit 10-20; File No. 2-34267); Additional Power
Contract dated as of February 1, 1984 (Exhibit 10(d) to NEES'
1985 Form 10-K, File No. 1-3446); 1997 Amendatory Agreement
dated as of August 6, 1997 (Exhibit 10(d) to NEES' 1997 Form
10-K, File No. 1-3446).
(e) Mass. Electric and the Company: Primary Service for Resale
dated February 15, 1974 (Exhibit 5-17(a), File No. 2-52969);
Amendment of Service Agreement dated June 22, 1983 (Exhibit
10(b) to Mass. Electric's 1986 Form 10-K, File No. 0-5464);
Amendment of Service Agreement effective November 1, 1993
(Exhibit 10(e) to 1993 Form 10-K, File No. 0-1229); Memorandum
of Understanding effective May 22, 1994 (Exhibit 10(e) to 1994
Form 10-K, File No. 0-1229); Amendment of Service Agreement
effective July 1, 1996 and, Amendment to Service Agreement
dated as of February 1, 1997 (Exhibit 10(e) to 1997 Form 10-K,
File No. 1-3446); Supplement to Amendment to Service Agreement
dated as of March 1, 1998; (Exhibit 10(e) to 1998 Form 10-K,
File No. 1-3446); Supplement to Service Agreement effective
December 31, 1999 (Exhibit 10(e)to 1999 Form 10-K, File No. 1-
6564).
<PAGE>
(f) The Narragansett Electric Company and the Company: Primary
Service for Resale dated February 15, 1974 (Exhibit 4-1(b),
File No. 2-51292); Amendment of Service Agreement dated
July 26, 1990 (Exhibit 4(f) to New England Power Company's 1990
Form 10-K, File No. 0-1229). Amendment of Service Agreement
dated July 24, 1991 (Exhibit 10(f) to 1991 Form 10-K, File No.
0-1229); Amendment of Service Agreement effective November 1,
1993 (Exhibit 10(f) to 1993 Form 10-K, File No. 0-1229);
Memorandum of Understanding effective May 22, 1994 (Exhibit
10(e) to 1994 Form 10-K, File No. 0-1229); Amendment of Service
Agreement effective January 1, 1995 (Exhibit 10(f) to 1995 Form
10-K, File No. 0-1229); Amendment of Service Agreement
effective October 30, 1995 and, Amendment to Service Agreement
dated as of February 1, 1997 (Exhibit 10(f) to 1997 Form 10-K,
File No. 1-3446); Supplement to Amendment to Service Agreement
dated as of December 31, 1998 (Exhibit 10(f) to 1998 Form 10-K,
File No. 1-3446); Supplement to Service Agreement effective
December 31, 1999 (Exhibit 10(f) to 1999 Form 10-K, File No.
1-6564).
(g) New England Electric Transmission Corporation et al. and the
Company: Phase I Terminal Facility Support Agreement dated as
of December 1, 1981 (Exhibit 10(g) to NEES' 1981 Form 10-K,
File No. 1-3446); Amendments dated as of June 1, 1982 and
November 1, 1982 (Exhibit 10(f) to NEES' 1982 Form 10-K, File
No. 1-3446); Agreement with respect to Use of the Quebec
Interconnection dated as of December 1, 1981 (Exhibit 10(g) to
NEES' 1981 Form 10-K, File No. 1-3446); Amendments dated as of
May 1, 1982 and November 1, 1982 (Exhibit 10(f) to NEES' 1982
Form 10-K, File No. 1-3446); Amendment dated as of January 1,
1986 (Exhibit 10(f) to NEES' 1986 Form 10-K, File No. 1-3446);
Agreement for Reinforcement and Improvement of the Company's
Transmission System dated as of April 1, 1983 (Exhibit 10(f) to
NEES' 1983 Form 10-K, File No. 1-3446); Lease dated as of
May 16, 1983 (Exhibit 10(f) to NEES' 1983 Form 10-K, File No.
1-3446); Upper Development-Lower Development Transmission Line
Support Agreement dated as of May 16, 1983 (Exhibit 10(f) to
NEES' 1983 Form 10-K, File No. 1-3446).
(h) Vermont Electric Transmission Company, Inc. et al. and the
Company: Phase I Vermont Transmission Line Support Agreement
dated as of December 1, 1981; Amendments dated as of June 1,
1982 and November 1, 1982 (Exhibit 10(g) to NEES' 1982 Form
10-K, File No. 1-3446); Amendment dated as of January 1, 1986
(Exhibit 10(h) to NEES' 1986 Form 10-K, File No. 1-3446).
<PAGE>
(i) New England Power Pool Agreement: (Exhibit 4(e), File No.
2-43025); Amendments dated July 1, 1972, March 1, 1973 (Exhibit
10-15, File No. 2-48543); Amendment dated March 15, 1974
(Exhibit 10-5, File No. 2-52775); Amendment dated June 1, 1975
(Exhibit 10-14, File No. 2-57831); Amendment dated September 1,
1975 (Exhibit 10-13, File No. 2-59182); Amendments dated
December 31, 1976, January 31, 1977, July 1, 1977, and August
1, 1977 (Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980 (Exhibit
10-3, File No. 2-68283); Amendment dated September 1, 1981
(Exhibit 10(h) to NEES' 1981 Form 10-K, File No. 1-3446);
Amendment dated December 1, 1981 (Exhibit 10(h) to NEES' 1982
Form 10-K, File No. 1-3446); Amendments dated June 1, 1982,
June 15, 1983, and October 1, 1983 (Exhibit 10(i) to NEES' 1983
Form 10-K, File 1-3446); Amendments dated August 1, 1985,
August 15, 1985, September 1, 1985, and January 1, 1986
(Exhibit 10(i) to NEES' 1985 Form 10-K, File No. 1-3446);
Amendment dated September 1, 1986 (Exhibit 10(i) to NEES' 1986
Form 10-K, File No. 1-3446); Amendment dated April 30, 1987
(Exhibit 10(i) to NEES' 1987 Form 10-K, File No. 1-3446);
Amendments dated March 1, 1988 and May 1, 1988 (Exhibit 10(i)
to NEES' 1988 Form 10-K, File No. 1-3446); Amendment dated
March 15, 1989 (Exhibit 10(i) to 1989 NEES Form 10-K, File No.
1-3446); Amendment dated October 1, 1990 (Exhibit 10(i) to 1990
NEES Form 10-K, File No. 1-3446); Amendment dated October 1,
1990 Exhibit 10(i) to 1990 NEES Form 10-K, File No. 1-3446);
Amendment dated as of September 15, 1992 (Exhibit 10(i) to 1992
NEES Form 10-K, File No. 1-3446); Amendments dated as of June
1, 1993, July 1, 1995, and September 1, 1995 (Exhibit 10(i) to
1995 NEES Form 10-K, File No. 1-3446); Amendment dated as of
December 1, 1996 (Exhibit 10(i) to 1996 NEES Form 10-K, File
No. 1-3446). Amendment dated as of September 1, 1997 and
Amendment dated as of November 15, 1997 (Exhibit 10(i) to 1997
NEES Form 10-K, File No. 1-3446); Second Restated New England
Power Pool Agreement as amended through the Fifty-first
Agreement amending the New England Power Pool Agreement issued
on December 30, 1999 (Exhibit 10(i) to 1999 Form 10-K, File No.
1-6564).
(j) New England Power Service Company and the Company: Specimen of
Service Contract (Exhibit 10(l) to 1994 Form 10-K, File No. 0-
1229).
(k) Massachusetts Electric Company, et al. and the Company: Form of
Mutual Assistance Agreement (Exhibit 10(n) to 1996 Form 10-K,
File No. 0-1229).
<PAGE>
(l) Massachusetts Electric Company, et al. and the Company:
Restructuring Settlement Agreement approved by the
Massachusetts Department of Public Utilities (Exhibit 10(o) to
1996 Form 10-K, File No. 0-1229).
(m) Public Service Company of New Hampshire et al. and the Company:
Agreement for Joint Ownership, Construction and Operation of
New Hampshire Nuclear Units dated as of May 1, 1973; Amendments
dated May 24, 1974, June 21, 1974, September 25, 1974 and
October 25, 1974 (Exhibit 10-18(b), File No. 2-52820);
Amendment dated January 31, 1975 (Exhibit 10-16(b), File No.
2-57831); Amendments dated April 18, 1979, April 25, 1979,
June 8, 1979, October 11, 1979, December 15, 1979, June 16,
1980, and December 31, 1980 (Exhibit 10(i) to NEES' 1980 Form
10-K, File No. 1-3446); Amendments dated June 1, 1982,
April 27, 1984, and June 15, 1984 (Exhibit 10(j) to NEES' 1984
Form 10-K, File No. 1-3446); Amendments dated March 8, 1985,
March 14, 1986, May 1, 1986, and September 19, 1986 (Exhibit
10(j) to NEES' 1986 Form 10-K, File No. 1-3446); Amendment
dated November 12, 1987 (Exhibit 10(j) to NEES' 1987 Form 10-K,
File No. 1-3446); Amendment dated January 13, 1989 (Exhibit
10(j) to NEES' 1990 Form 10-K, File No. 1-3446); Seventh
Amendment as of November 1, 1990 (Exhibit 10(m) to NEES' 1991
Form 10-K, File No. 1-3446). Transmission Support Agreement
dated as of May 1, 1973 (Exhibit 10-23, File No. 2-49184);
Instrument of Transfer to the Company with respect to the New
Hampshire Nuclear Units and Assumptions of Obligations dated
December 17, 1975 and Agreement Among Participants in New
Hampshire Nuclear Units, certain Massachusetts Municipal
Systems and Massachusetts Municipal Wholesale Electric Company
dated May 28, 1976 (Exhibit 16(c), File No. 2-57831); Seventh
Amendment To and Restated Agreement for Seabrook Project
Disbursing Agent dated as of November 1, 1990 (Exhibit 10(m) to
NEES' 1991 Form 10-K, File No. 1-3446); Amendments dated as of
June 29, 1992 (Exhibit 10(j) to NEES' 1992 Form 10-K, File No.
1- 3446). Settlement Agreement dated as of July 19, 1990
between Northeast Utilities Service Company and the Company
(Exhibit 10(m) to NEES' 1991 Form 10-K, File No. 1-3446).
Seabrook Project Managing Agent Operating Agreement dated as of
June 29, 1992, Amendment to Seabrook Project Managing Agent
Operating Agreement dated as of June 29, 1992 (Exhibit 10(j) to
NEES' 1992 Form 10-K, File No. 1- 3446).
<PAGE>
(n) Vermont Yankee Nuclear Power Corporation et al. and the
Company: Capital Funds Agreement dated February 1, 1968,
Amendment dated March 12, 1968 and Power Purchase Contract
dated February 1, 1968 (Exhibit 4-6, File No. 2-29145);
Amendments dated as of June 1, 1972, April 15, 1983 (Exhibit
10(k) to NEES' 1983 Form 10-K, File No. 0-1229) and April 24,
1985 (Exhibit 10(n) to NEES' 1985 Form 10-K, File No. 1-3446);
Amendment dated as of June 1, 1985 (Exhibit 10(n) to 1988 Form
10-K, File No. 0-1229); Amendments dated May 6, 1988 (Exhibit
10(n) to 1988 Form 10-K, File No.0-1229); Amendment dated as of
June 15, 1989 (Exhibit 10(k) to 1989 NEES Form 10-K, File No.
1-3446); Additional Power Contract dated as of February 1, 1984
(Exhibit 10(k) to NEES' 1983 Form 10-K, File No. 1-3446);
Guarantee Agreement dated as of November 5, 1981 (Exhibit 10(j)
to NEES' 1981 Form 10-K, File No. 1-3446); 1999 Amendatory
Agreement dated as of November 17, 1999 and 1999 Restated
Amendatory Agreement dated as of November 17, 1999 (Exhibit
10(n) to 1999 Form 10-K, File No. 1-6564).
(o) Yankee Atomic Electric Company et al. and the Company: Amended
and Restated Power Contract dated April 1, 1985 (Exhibit 10(l)
to NEES' 1985 Form 10-K, File No. 1-3446); Amendment dated
May 6, 1988 (Exhibit 10(l) to NEES' 1988 Form 10-K, File No.
1-3446); Amendments dated as of June 26, 1989 and July 1, 1989
(Exhibit 10(l) to 1989 NEES Form 10-K, File No. 1-3446);
Amendment dated as of February 1, 1992 (Exhibit 10(l) to 1992
NEES Form 10-K, File No. 1-3446).
*(p) New England Electric Companies' Deferred Compensation Plan as
amended through February 28, 1998 (Exhibit 10(l) to NEES' 1998
Form 10-K, File No. 1-3446); Amendments effective as of March
1, 1999 and September 1, 1999 (Exhibit 10(p) to 1999 Form 10-K,
File No. 1-6564).
*(q) New England Electric System Companies Retirement Supplement
Plan as amended through June 1, 1996 (Exhibit 10(n) to NEES'
1996 Form 10-K, File No. 1-3446); Amendment dated as of March
1, 1999 (Exhibit 10(q) to 1999 Form 10-K, File No. 1-6564).
*(r) New England Electric Companies' Executive Supplemental
Retirement Plan I as amended through December 11, 1998
(Exhibit 10(n) to NEES' 1998 Form 10-K, File No. 1-3446);
Amendment dated as of March 1, 1999 (Exhibit 10(r) to 1999 Form
10-K, File No. 1-6564).
<PAGE>
*(s) New England Electric Companies Executive Retirees Health and
Life Insurance Plan as Amended and Restated January 1, 1996
(Exhibit 10(o) to NEES' 1998 Form 10-K, File No. 1-3446).
*(t) New England Electric Companies' Incentive Compensation Plan I
as amended through January 1, 1998 (Exhibit 10(p) to NEES' 1998
Form 10-K, File No. 1-3446).
*(u) New England Electric Companies' Incentive Compensation Plan II
as amended through January 1, 1998 (Exhibit 10(q) to NEES' 1998
Form 10-K, File No. 1-3446).
*(v) New England Electric Companies' Incentive Compensation Plan III
as amended through January 1, 1998 (Exhibit 10(r) to NEES' 1998
Form 10-K, File No. 1-3446).
*(w) New England Electric Companies' Senior Incentive Compensation
Plan as amended through January 1, 1998 (Exhibit 10(s) to NEES'
1998 Form 10-K, File No. 1-3446).
*(x) Forms of Life Insurance Program (Exhibit 10(s) to NEES' 1986
Form 10-K, File No. 1-3446); and Form of Life Insurance
(Collateral Assignment) (Exhibit 10(t) to NEES' 1991 Form 10-K,
File No. 1-3446).
*(y) New England Electric Companies' Incentive Share Plan as amended
through February 24, 1997 (Exhibit 10(w) to NEES' 1996 Form 10-
K, File No. 1-3446); Amendment dated as of March 1, 1999
Exhibit 10(y) to 1999 Form 10-K, File No. 1-6564).
*(z) Forms of Severance Protection Agreement (Exhibit 10(z) to NEES'
1996 Form 10-K, File No. 1-3446). Forms of Severance
Protection Agreements (Exhibit 10(y) to NEES' 1998 Form 10-K,
File No. 1-3446).
*(aa) New England Electric Companies' Long-Term Performance
Share Award Plan amended through August 25, 1998 (Exhibit
10(w) to NEES' 1998 Form 10-K, File No. 1-3446); Amendment
dated as of March 1, 1999 (Exhibit 10(aa) to 1999 Form 10-
K, File No. 1-6564).
<PAGE>
(bb) New England Hydro-Transmission Electric Company, Inc. et
al. and the Company: Phase II Massachusetts Transmission
Facilities Support Agreement dated as of June 1, 1985
(Exhibit 10(t) to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(t) to NEES'
1986 Form 10-K, File No. 1-3446); Amendments dated as of
February 1, 1987, June 1, 1987, September 1, 1987, and
October 1, 1987 (Exhibit 10(u) to NEES' 1987 Form 10-K,
File No. 1-3446); Amendment dated as of August 1, 1988
(Exhibit 10(u) to NEES' 1988 Form 10-K, File No. 1-3446);
Amendment dated January 1, 1989 (Exhibit 10(u) to NEES'
1990 Form 10-K, File No. 1-3446).
(cc) New England Hydro-Transmission Corporation et al. and the
Company: Phase II New Hampshire Transmission Facilities
Support Agreement dated as of June 1, 1985 (Exhibit 10(u)
to NEES' 1986 Form 10-K, File No. 1-3446); Amendment dated
as of May 1, 1986 (Exhibit 10(u) to NEES' 1986 Form 10-K,
File No. 1-3446); Amendments dated as of February 1, 1987,
June 1, 1987, September 1, 1987, and October 1, 1987
(Exhibit 10(v) to NEES' 1987 Form 10-K, File No. 1-3446).
Amendment dated as of August 1, 1988 (Exhibit 10(v) to
NEES' 1988 Form 10-K, File No. 1-3446); Amendments dated
January 1, 1989 and January 1, 1990 (Exhibit 10 (v) to
NEES' 1990 Form 10-K, File No. 1-3446).
(dd) Vermont Electric Power Company et al. and the Company:
Phase II New England Power AC Facilities Support Agreement
dated as of June 1, 1985 (Exhibit 10(v) to NEES' 1986 Form
10-K, File No. 1-3446); Amendment dated as of May 1, 1986
(Exhibit 10(v) to NEES' 1986 Form 10-K, File No. 1-3446).
Amendments dated as of February 1, 1987, June 1, 1987, and
September 1, 1987 (Exhibit 10(w) to NEES' 1987 Form 10-K,
File No. 1-3446); Amendment dated as of August 1, 1988
(Exhibit 10(w) to NEES' 1988 Form 10-K, File No. 1-3446).
<PAGE>
(ee) USGen New England Contracts
(i) Asset Purchase Agreement among the Company, The
Narragansett Electric Company and, USGen New England,
Inc. dated as of August 5, 1997 (Exhibit 2 to NEES'
Form 10-Q for period ended September 30, 1997, File
No. 1-3446); Amendment No. 1 dated as of September
25, 1997, Amendment No. 2 dated as of October 29,
1997, Amendment No. 3 dated as of August 5, 1997,
Amendment No. 4 dated as of September 1, 1998
(Exhibit 10(ee)(i) to 1999 Form 10-K, File No. 1-
6564).
(ii) Wholesale Sales Agreement between the Company and
USGen New England, Inc. dated as of August 5, 1997
(Exhibit 10(gg)(ii) to 1997 Form 10-K, File No. 1-
6564); Amendment No. 1 dated as of September 25,
1997, Amendment No. 2 dated as of September 1, 1998
(Exhibit 10(ee)(ii) to 1999 Form 10-K, File No. 1-
6564).
(iii) PPA Transfer Agreement between the Company and USGen
New England, Inc. dated as of August 5, 1997 (Exhibit
10(gg)(iii) to 1997 Form 10-K, File No. 1-6564).
(iv) Form of PSA Performance Support Agreement between the
Company, USGen New England, Inc., and each of the
following; North Attleboro Electric Department,
Groton Electric Light Department, Middleton Municipal
Electric Department, Hingham Municipal Lighting
Plant, Town of Holden Municipal Light Department,
Unitil Power Corp. (Salem Harbor), Unitil Power Corp.
(Ocean State), Bangor Hydro- Electric Company,
Montaup Electric Company, Central Vermont Public
Service Corporation, Braintree Electric Light
Department, Littleton Electric Light Department,
Massachusetts Government Land Bank, Reading (MA)
Municipal Light Department, Shrewsbury Electric Light
Plant, Taunton Municipal Light Plant, and Vermont
Electric Company, dated as of August 5, 1997 (Exhibit
10(gg)(iv) to 1997 Form 10-K, File No. 1-6564).
<PAGE>
(v) Quebec Interconnection Transfer Agreement
between the Company, The Narragansett
Electric Company, and USGen New England,
Inc. dated as of September 1, 1998 (Exhibit
10(ee)(v) to 1999 Form 10-K, File No. 1-
6564).
* Compensation related plan, contract, or arrangement.
(13) The Transition Report to Stockholders for the transition
period from January 1, 2000 to March 31, 2000 (filed
herewith).
(21) Subsidiary list (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
<PAGE>
Reports on Form 8-K
NEP filed no reports on Form 8-K during the transition
period.
<PAGE>
NEW ENGLAND POWER COMPANY
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) 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. The signature of
the undersigned company shall be deemed to relate only to matters having
reference to such company.
NEW ENGLAND POWER COMPANY
s/Peter G. Flynn
Peter G. Flynn
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated. The signature of
each of the undersigned shall be deemed to relate only to matters having
reference to the above-named company.
(Signature and Title)
Principal Executive Officer
s/Peter G. Flynn
Peter G. Flynn
President
Principal Financial Officer
s/John G. Cochrane
John G. Cochrane
Treasurer
Principal Accounting Officer
s/Kwong O. Nuey
Kwong O. Nuey
Controller
Directors (a majority)
L. Joseph Callan
Peter G. Flynn
Michael E. Jesanis
Cheryl A. LaFleur s/John G. Cochrane
Robert G. Powderly All by:
Terry L. Schwennesen John G. Cochrane
Richard P. Sergel Attorney-in-fact
Philip R. Sharp
Date (as to all signatures on this page)
June 29, 2000
<PAGE>
<TABLE>
NEW ENGLAND POWER COMPANY
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
References (Page)
----------------------
Transition
Report to
Stockholders
for the
period
Form January 1,
2000
10-K To March 1,
2000
---- ------------
<S> <C> <C>
Report of Independent Accountants........................... 4
Statements of Income, Three Months Ended March 31, 2000 and 1999,
and Year Ended December 31, 1999, 1998 and 1997............... 15
Statements of Retained Earnings, Three Months Ended March 31,
2000 and 1999, and Year Ended December 31, 1999, 1998 and 1997... 15
Balance Sheets, March 31, 2000, December 31, 1999 and 1998........ 16
Statements of Cash Flows, Three Months Ended March 31, 2000
and 1999, and Year Ended December 31, 1999, 1998 and 1997........ 17
Notes to Financial Statements............................... 18-42
* Incorporated by Reference.
</TABLE>
<PAGE>
NEP
EXHIBIT INDEX
-------------
Exhibit No. Description Page
----------- ----------- ----
(3)(a) Articles of Organization as Incorporated
amended through June 27, 1998 by Reference
Articles of Amendment dated Filed
February 25, 2000 herewith
(3)(b) By-laws of the Company as Filed
amended April 19, 2000 herewith
(10)(a) Boston Edison Company et al. Incorporated
and the Company: Amended by Reference
REMVEC Agreement dated
August 12, 1977
(10)(a)(i) Boston Edison Company et al. Incorporated
and the Company: REMVEC II by Reference
Agreement dated on or about
July 1, 1997
(10)(a)(ii) Boston Edison Company et al. Incorporated
and the Company: Security by Reference
Analysis Services Agreement
dated on or about July 1, 1997
(10)(b) The Connecticut Light and Power Incorporated
Company et al. and the Company: by Reference
Sharing Agreement for Joint
Ownership, Construction and
Operation of Millstone Unit No. 3
dated as of September 1, 1973,
and Amendments thereto;
Transmission Support Agreement
dated August 9, 1974; Instrument
of Transfer to the Company with
respect to the 1979 Connecticut
Nuclear Unit, and Assumption of
Obligations, dated December 17,
1975
<PAGE>
(10)(c) Connecticut Yankee Atomic Power Incorporated
Company et al. and the Company: by Reference
Stockholders Agreement dated
July 1, 1964; Power Purchase
Contract dated July 1, 1964;
Additional Power Contract dated
as of April 30, 1984 and 1996;
Amendatory Agreement dated as
of December 4, 1996;
Supplementary Power Contract
dated as of April 1, 1987;
Capital Funds Agreement dated
September 1, 1964; Transmission
Agreement dated October 1, 1964;
Agreement revising Transmission
Agreement dated July 1, 1979;
Amendment revising Transmission
Agreement dated as of January 19,
1994; Five Year Capital Contribution
Agreement dated November 1, 1980
(10)(d) Maine Yankee Atomic Power Incorporated
Company et al. and the Company: by Reference
Capital Funds Agreement dated
May 20, 1968 and Power Purchase
Contract dated May 20, 1968;
and Amendments thereto;
Stockholders Agreement dated
May 20, 1968; Additional Power
Contract dated as of February 1,
1984; 1997 Amendatory Agreement
dated as of August 6, 1997
(10)(e) Mass. Electric and the Company: Incorporated
Primary Service for Resale dated by Reference
February 15, 1974; and Amendments
thereto; Memorandum of Understanding
effective May 22, 1994;
Amendment of Service Agreement
effective July 1, 1996;
Amendment to Service Agreement
dated as of February 1, 1997;
Supplement to Amendment to Service
Agreement dated as of March 1, 1998
<PAGE>
Supplement to Service Incorporated
Agreement dated as of by Reference
December 31, 1999
(10)(f) The Narragansett Electric Incorporated
Company and the Company: by Reference
Primary Service for Resale
dated February 15, 1974
and Amendments thereto;
Memorandum of Understanding
effective May 22, 1994 and
Amendment thereto;
Amendment of Service Agreement
effective October 30, 1995;
Amendment to Service Agreement
dated as of February 1, 1997;
Supplement to Amendment to
Service Agreement dated as of
December 31, 1998
Supplement to Service Incorporated
Agreement dated as of by Reference
December 31, 1999
(10)(g) New England Electric Incorporated
Transmission Corporation et al. by Reference
and the Company: Phase I
Terminal Facility Support
Agreement dated as of
December 1, 1981; Amendments
dated as of June 1, 1982 and
November 1, 1982; Agreement with
respect to Use of the Quebec
Interconnection dated as of
December 1, 1981; Amendments
dated as of May 1, 1982 and
November 1, 1982; Amendment
dated as of January 1, 1986;
Agreement for Reinforcement
and Improvement of the Company's
Transmission System dated as
of April 1, 1983; Lease dated
as of May 16, 1983; Upper
Development-Lower Development
Transmission Line Support
Agreement dated as of May 16,
1983
<PAGE>
(10)(h) Vermont Electric Transmission Incorporated
Company, Inc. et al. and the by Reference
Company: Phase I Vermont
Transmission Line Support
Agreement dated as of
December 1, 1981 and Amendments
thereto
(10)(i) New England Power Pool Incorporated
Agreement and Amendments by Reference
thereto
(10)(j) New England Power Service Incorporated
Company and the Company: by Reference
Specimen of Service Contract
(10)(k) Massachusetts Electric Incorporated
Company, et al. and the by Reference
Company: Form of Mutual
Assistance Agreement
(10)(l) Massachusetts Electric Incorporated
Company, et al. and the by Reference
Company: Restructuring
Settlement Agreement
approved by the Massachusetts
Department of Public Utilities
(10)(m) Public Service Company of New Incorporated
Hampshire et al. and the by Reference
Company: Agreement for Joint
Ownership, Construction and
Operation of New Hampshire
Nuclear Units dated as of
May 1, 1973 and Amendments
thereto; Seventh Amendment
as of November 1, 1990;
Transmission Support Agreement
dated as of May 1, 1973;
Instrument of Transfer to the
Company with respect to the New
Hampshire Nuclear Units and
Assumptions of Obligations
dated December 17, 1975 and
Agreement Among Participants
in New Hampshire Nuclear Units,
<PAGE>
certain Massachusetts Municipal
Systems and Massachusetts
Municipal Wholesale Electric
Company dated May 28, 1976;
Seventh Amendment To and
Restated Agreement for Seabrook
Project Disbursing Agent dated
as of November 1, 1990;
Amendments dated as of
June 29, 1992;
Settlement Agreement dated as
of July 19, 1990 between
Northeast Utilities Service
Company and the Company;
Seabrook Project Managing
Agent Operating Agreement
dated as of June 29, 1992;
and Amendment thereto
(10)(n) Vermont Yankee Nuclear Power Incorporated
Corporation et al. and the by Reference
Company: Capital Funds
Agreement dated February 1,
1968, Amendment dated March 12,
1968 and Power Purchase Contract
dated February 1, 1968 and
Amendments thereto; Additional
Power Contract dated as of
February 1, 1984; Guarantee
Agreement dated as of November 5,
1981
1999 Amendatory Agreements Incorporated
by Reference
(10)(o) Yankee Atomic Electric Company Incorporated
et al. and the Company: by Reference
Amended and Restated Power
Contract dated April 1, 1985
and Amendments thereto
(10)(p) New England Electric Companies' Incorporated
Deferred Compensation Plan as by Reference
amended through February 28,
1998 and amendments thereto
<PAGE>
(10)(q) New England Electric System Incorporated
Companies Retirement Supplement by Reference
Plan as amended through June 1,
1996 and an Amendment thereto
(10)(r) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan I as amended through
December 11, 1998 and an Amendment
thereto
(10)(s) New England Electric Companies' Incorporated
Executive Retirees Health and Life by Reference
Insurance Plan as Amended and
Restated January 1, 1996
(10)(t) New England Electric Companies' Incorporated
Incentive Compensation Plan I as by Reference
amended through January 1, 1998
(10)(u) New England Electric Companies' Incorporated
Incentive Compensation Plan II as by Reference
amended through January 1, 1998
(10)(v) New England Electric Companies' Incorporated
Incentive Compensation Plan III as by Reference
amended through January 1, 1998
(10)(w) New England Electric Companies' Incorporated
Senior Incentive Compensation by Reference
Plan as amended through
January 1, 1998
(10)(x) Forms of Life Insurance Program Incorporated
and Form of Life Insurance by Reference
(Collateral Assignment)
(10)(y) New England Electric Companies' Incorporated
Incentive Share Plan as amended by Reference
through February 24, 1997 and an
Amendment thereto
(10)(z) Forms of Severance Protection Incorporated
Agreements by Reference
<PAGE>
(10)(aa) New England Electric Companies' Incorporated
Long-Term Performance Share by Reference
Award Plan amended through
August 25, 1998 and Amendments
thereto
(10)(bb) New England Hydro-Transmission Incorporated
Electric Company, Inc. et al. by Reference
and the Company: Phase II
Massachusetts Transmission
Facilities Support Agreement
dated as of June 1, 1985
and Amendments thereto
(10)(cc) New England Hydro-Transmission Incorporated
Corporation et al. and the by Reference
Company: Phase II New Hampshire
Transmission Facilities Support
Agreement dated as of June 1,
1985 and Amendments thereto
(10)(dd) Vermont Electric Power Company Incorporated
et al. and the Company: Phase by Reference
II New England Power AC
Facilities Support Agreement
dated as of June 1, 1985 and
Amendments thereto
(10)(ee)(i) Asset Purchase Agreement between Incorporated
USGen New England and the Company by Reference
and The Narragansett Electric
Company dated as of August 5, 1997
(10)(ee)(ii) Wholesale Sales Agreement between Incorporated
the Company and USGen New England, by Reference
Inc. dated as of August 5, 1997
(10)(ee)(iii) PPA Transfer Agreement between Incorporated
the Company and USGen New England, by Reference
Inc. dated as of August 5, 1997
(10)(ee)(iv) Form of PSA Performance Support Incorporated
Agreement between the Company, by Reference
USGen New England, Inc., and
various Wholesale Customers
dated as of August 5, 1997
<PAGE>
(10)(ee)(v) Quebec Interconnection Transfer Incorporated
Agreement between the Company, by Reference
The Narragansett Electric Company,
and USGen New England, Inc.,
dated as of September 1, 1998
(13) 1999 Annual Report to Incorporated
Stockholders by Reference
(21) Subsidiary list Filed herewith
(24) Power of Attorney Filed herewith
(27) Financial Data Schedule Filed herewith
