FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-5324
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NORTHEAST UTILITIES
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2147929
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
174 BRUSH HILL AVENUE, WEST SPRINGFIELD, MASSACHUSETTS (01090-0010)
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(Address of principal executive offices) (Zip Code)
(413) 785-5871
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
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Common Shares, $5.00 par value 125,171,056 shares
NORTHEAST UTILITIES AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
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Part I.Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 2
Consolidated Statements of Income - Three
Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Report of Independent Public Accountants 9
Item 2. Management's Discussion and Analysis 10
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
PART I. FINANCIAL INFORMATION
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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(Thousands of Dollars)
<S> <C> <C>
ASSETS
- ------
Utility Plant, at original cost:
Electric................................................ $ 9,360,189 $ 9,334,912
Other................................................... 154,374 157,632
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9,514,563 9,492,544
Less: Accumulated provision for depreciation......... 3,383,124 3,293,660
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6,131,439 6,198,884
Construction work in progress........................... 194,959 179,724
Nuclear fuel, net....................................... 212,972 224,839
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Total net utility plant............................. 6,539,370 6,603,447
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Other Property and Investments:
Nuclear decommissioning trusts, at market............... 261,919 240,229
Investments in regional nuclear generating
companies, at equity................................... 81,478 82,464
Investments in transmission companies, at equity........ 25,996 26,106
Other, at cost.......................................... 48,836 40,896
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418,229 389,695
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Current Assets:
Cash.................................................... 24,718 34,579
Receivables, net........................................ 360,605 357,322
Accrued utility revenues................................ 131,038 142,788
Fuel, materials, and supplies, at average cost.......... 195,905 190,062
Prepayments and other................................... 53,125 54,886
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765,391 779,637
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Deferred Charges:
Regulatory assets:
Income taxes,net...................................... 1,135,945 1,124,119
Unamortized PSNH acquisition costs.................... 656,458 678,974
Deferred costs--nuclear plants........................ 218,700 233,145
Unrecovered contract obligation--Yankee Atomic
Electric Company..................................... 152,593 157,147
Recoverable energy costs, net......................... 293,583 268,982
Deferred demand-side-management costs................. 112,014 116,133
Other................................................. 165,484 145,864
Unamortized debt expense................................ 37,524 33,517
Other .................................................. 48,733 54,220
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2,821,034 2,812,101
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Total Assets.............................................. $ 10,544,024 $ 10,584,880
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</TABLE>
See accompanying notes to consolidated financial statements.
2
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
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Capitalization:
Common shareholders' equity:
Common shares, $5 par value--authorized
225,000,000 shares; 134,210,462 shares issued and
125,171,056 shares outstanding in 1995 and
134,210,226 shares issued and 124,962,981 shares
outstanding in 1994..................................... $ 671,052 $ 671,051
Capital surplus, paid in................................. 907,165 904,371
Deferred benefit plan--employee stock
ownership plan......................................... (209,238) (213,324)
Retained earnings........................................ 978,001 946,988
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Total common shareholders' equity................. 2,346,980 2,309,086
Preferred stock not subject to mandatory redemption........ 169,700 234,700
Preferred stock subject to mandatory redemption............ 306,250 375,250
Long-term debt............................................. 3,914,499 3,942,005
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Total capitalization.............................. 6,737,429 6,861,041
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Minority Interest in Consolidated Subsidiaries (Note 2)<F2>.. 100,060 36
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Obligations Under Capital Leases............................. 175,433 166,018
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Current Liabilities:
Notes payable to banks..................................... 123,000 180,000
Commercial paper........................................... - 10,000
Long-term debt and preferred stock--current
portion................................................... 175,825 174,948
Obligations under capital leases--current
portion................................................... 68,388 73,103
Accounts payable........................................... 218,840 280,942
Accrued taxes.............................................. 84,779 57,532
Accrued interest........................................... 85,010 70,639
Accrued pension benefits................................... 90,221 90,194
Other...................................................... 88,063 98,296
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934,126 1,035,654
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Deferred Credits:
Accumulated deferred income taxes.......................... 2,006,133 1,968,230
Accumulated deferred investment tax credits................ 185,328 188,005
Deferred contract obligation--Yankee Atomic
Electric Company......................................... 152,593 157,147
Other...................................................... 252,922 208,749
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2,596,976 2,522,131
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Commitments and Contingencies (Note 4)<F4>
Total Capitalization and Liabilities.............. $ 10,544,024 $ 10,584,880
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</TABLE>
See accompanying notes to consolidated financial statements.
3
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
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1995 1994
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(Thousands of Dollars,
except share information)
<S> <C> <C>
Operating Revenues.................................... $ 944,705 $ 966,174
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Operating Expenses:
Operation--
Fuel, purchased and net interchange power........ 237,644 225,574
Other............................................ 226,553 220,174
Maintenance......................................... 60,142 68,634
Depreciation........................................ 87,753 83,407
Amortization of regulatory assets, net.............. 29,901 50,731
Federal and state income taxes...................... 71,251 90,985
Taxes other than income taxes....................... 65,773 67,110
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Total operating expenses...................... 779,017 806,615
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Operating Income...................................... 165,688 159,559
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Other Income:
Deferred nuclear plants return--other funds......... 4,677 7,058
Equity in earnings of regional nuclear generating
and transmission companies....................... 2,337 3,364
Other, net.......................................... (4,643) 2,691
Income taxes--credit................................ 5,771 1,695
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Other income, net............................. 8,142 14,808
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Income before interest charges................ 173,830 174,367
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Interest Charges:
Interest on long-term debt.......................... 80,204 79,054
Other interest...................................... 1,599 660
Deferred nuclear plants return--borrowed funds...... (8,324) (11,832)
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Interest charges, net......................... 73,479 67,882
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Income before interest charges................. 100,351 106,485
Preferred Dividends of Subsidiaries................... 14,067 10,597
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Net Income............................................ $ 86,284 $ 95,888
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Earnings Per Common Share............................. $ 0.69 $ 0.77
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Common Shares Outstanding (average)................... 125,119,824 124,374,142
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</TABLE>
See accompanying notes to consolidated financial statements.
4
NORTHEAST UTILITIES and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
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(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Income before preferred dividends of subsidiaries......... $ 100,351 $ 106,485
Adjustments to reconcile to net cash
from operating activities:
Depreciation............................................ 87,753 83,407
Deferred income taxes and investment tax credits, net... 29,302 35,873
Deferred nuclear plants return, net of amortization..... 17,835 10,494
Recoverable energy costs, net of amortization........... (17,623) (3,477)
Amortization of PSNH acquitision costs.................. 14,136 14,308
Deferred demand-side management, net of amortization.... 4,119 2,452
Other sources of cash................................... 84,049 6,544
Other uses of cash...................................... (24,794) (18,481)
Changes in working capital:
Receivables and accrued utility revenues................ 8,467 (22,048)
Fuel, materials, and supplies........................... (5,843) (505)
Accounts payable........................................ (62,102) (10,247)
Accrued taxes........................................... 27,247 52,888
Other working capital (excludes cash)................... (1,052) 2,952
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Net cash flows from operating activities.................... 261,845 260,645
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Financing Activities:
Issuance of common shares................................. 3,866 3,549
Issuance of long-term debt................................ - 370,000
Issuance of Monthly Income
Preferred Securities (Note 2)<F2>........................ 100,000 -
Net decrease in short-term debt........................... (67,000) (27,500)
Reacquisitions and retirements of long-term debt.......... (30,208) (477,066)
Reacquisitions and retirements of preferred stock......... (133,175) (1,500)
Cash dividends on preferred stock......................... (14,067) (10,597)
Cash dividends on common shares........................... (55,016) (54,725)
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Net cash flows used for financing activities................ (195,600) (197,839)
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Investment Activities:
Investment in plant:
Electric and other utility plant........................ (49,685) (61,401)
Nuclear fuel............................................ (6,277) 11,137
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Net cash flows used for investments in plant.............. (55,962) (50,264)
Other investment activities, net.......................... (20,144) (10,264)
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Net cash flows used for investments......................... (76,106) (60,528)
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Net (Decrease) Increase In Cash For The Period.............. (9,861) 2,278
Cash and special deposits - beginning of period............. 34,579 32,008
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Cash and special deposits - end of period................... $ 24,718 $ 34,286
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</TABLE>
See accompanying notes to consolidated financial statements.
5
NORTHEAST UTILITIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<F1>1. General
The accompanying unaudited consolidated financial statements should be read in
conjunction with the Annual Report of Northeast Utilities (the company or NU) on
Form 10-K for the year ended December 31, 1994 (1994 Form 10-K). In the opinion
of the company, the accompanying financial statements contain all adjustments
necessary to present fairly the financial position as of March 31, 1995, the
results of operations for the three months ended March 31, 1995, and 1994, and
the statements of cash flows for the months ended March 31, 1995 and 1994. The
results of operations for the three months ended March 31, 1995 and 1994 are not
necessarily indicative of the results expected for a full year.
Certain reclassifications of prior period data have been made to conform with
the current period presentation.
<F2>2. Capitalization
On January 23, 1995, CL&P Capital, L.P. (CL&P LP) issued $100 million of
cumulative 9.3% Monthly Income Preferred Securities (MIPS), Series A. The
Connecticut Light and Power Company (CL&P), a wholly owned subsidiary of NU, is
the sole general partner of CL&P LP, and is the guarantor of the MIPS
securities. Subsequent to the MIPS issuance, CL&P LP loaned the proceeds of the
MIPS issuance, along with CL&P's $3.1 million capital contribution, back to CL&P
in the form of an unsecured debenture. CL&P consolidates CL&P LP for financial
reporting purposes. Upon consolidation, the unsecured debenture is eliminated,
and the MIPS securities are accounted for as a minority interest.
During the first quarter of 1995, the net proceeds from the issuance and sale of
MIPS, along with the proceeds of short-term debt were used for redemption,
reacquisition or payment at maturity of $67.5 million of CL&P's 1989 Series, 9
percent Preferred Stock and $50 million of variable-rate 1989 Dutch Auction Rate
Transferable Securities.
<F3>3. Derivative Financial Instruments
CL&P uses fuel-swap agreements with financial institutions to hedge against
well-defined fuel-price risk created by negotiated energy contracts. CL&P does
not use them for trading purposes. These fuel swaps minimize exposure
associated with rising fuel prices and effectively fix CL&P's cost of fuel for
these negotiated energy contracts. Under the swap agreements, CL&P exchanges
monthly payments based on the differential between a fixed and variable price
for the associated fuel. As of March 31, 1995, CL&P had outstanding agreements
with a total notional value of approximately $192 million, and a positive mark-
to-market position of approximately $1.9 million. These swap agreements have
been made with various financial institutions, each of which are rated "A" or
better by Standard & Poor's rating group.
CL&P is exposed to credit risk on its fuel swaps if the counterparties fail to
perform their obligations. However, management anticipates that the
counterparties will be able to fully satisfy their obligations under the
contracts.
For further information on Derivative Financial Instruments, see the Notes to
Consolidated Financial Statements in NU's 1994 Form 10-K.
<F4>4. Commitments and Contingencies
Construction Program: For information regarding the construction program, see
the Notes to Consolidated Financial Statements in NU's 1994 Form 10-K.
Nuclear Performance: Regarding the decisions for each of the five prudence
reviews related to outages that occurred over the period October 1990 through
February 1992 at the Millstone nuclear units, the Office of Consumer Counsel
(OCC) had appealed two of the decisions favorable to CL&P. The OCC has
prevailed in both appeals on a procedural issue and the cases have been remanded
to the DPUC for further proceedings.
Management's ongoing evaluation of the current Millstone 2 extended refueling
and maintenance outage that began on October 1, 1994 has concluded that, based
on currently available information, the unit is not expected to return to
service before June 1995. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this Form 10-Q for additional
information on the Millstone 2 outage.
For further information regarding the performance of the NU system's nuclear
units, see the Notes to Consolidated Financial Statements in NU's 1994 Form 10-
K.
PSNH Rate Agreement: For information regarding the PSNH Rate Agreement, see the
Notes to Consolidated Financial Statements in NU's 1994 Form 10-K.
Environmental Matters: On a periodic basis, the NU system reviews known waste
disposal sites, and related reserves, for which the system's subsidiaries expect
to bear legal liability. As a result of its review in the first quarter of
1995, the NU system increased the liability recorded for its estimated
environmental remediation costs, excluding any insurance recoveries or
recoveries from third parties, by $3.2 million. NU's environmental reserve is
now $14 million. If it becomes necessary to effect remedies that are not
currently probable, it is reasonably possible that the upper end of the range of
the NU system's environmental liability could be approximately $19 million.
For additional information regarding environmental matters, see the Notes to
Consolidated Financial Statements in NU's 1994 Form 10-K.
Nuclear Insurance Contingencies: For information regarding nuclear insurance
contingencies, see the Notes to Consolidated Financial Statements in NU's 1994
Form 10-K.
Purchased Power Arrangements: For information regarding purchased power
arrangements, see the Notes to Consolidated Financial Statements in NU's 1994
Form 10-K.
Hydro-Quebec: For information regarding Hydro-Quebec, see the Notes to
Consolidated Financial Statements in NU's 1994 Form 10-K.
Report of Independent Public Accountants
----------------------------------------
To Northeast Utilities:
We have reviewed the accompanying consolidated balance sheet of Northeast
Utilities (a Massachusetts trust) and subsidiaries as of March 31, 1995, and the
related consolidated statements of income for the three-month periods ended
March 31, 1995 and 1994, and the consolidated statements of cash flows for the
three-month periods ended March 31, 1995 and 1994. These financial statements
are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Hartford, Connecticut
April 21, 1995
NORTHEAST UTILITIES AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This section contains management's assessment of Northeast Utilities' (NU or the
company) financial condition and the principal factors having an impact on the
results of operations. This discussion should be read in conjunction with the
company's consolidated financial statements, footnotes, and management's
discussion and analysis in the 1994 Form 10-K.
FINANCIAL CONDITION
Overview
The company's earnings decreased to $0.69 per common share for the three months
ended March 31, 1995, from $0.77 for the same period in 1994. The decrease in
earnings from 1994 is primarily attributable to lower retail kilowatt-hour sales
as a result of extremely mild weather in the first three months of 1995. NU's
retail kilowatt-hour sales for 1995 were down by 5.3 percent from 1994, which
had colder than normal weather in the first three months. The impact of the mild
weather in 1995 was partially offset by the deferral of CL&P cogeneration
expenses and a reduction in nonfuel operation and maintenance costs.
Regulatory Matters
New Hampshire
The costs associated with purchases by PSNH from certain nonutility generators
(NUGs) over the level assumed in rates are deferred and recovered over ten-year
periods through the Fuel and Purchased Power Adjustment Clause (FPPAC). At
March 31, 1995, the unrecovered deferrals were approximately $181 million.
PSNH has been renegotiating power sales agreements with eight wood-fired NUGs.
Settlements with two of the NUGs were completed last fall and the units were
closed. Confidential settlement terms have been filed with the New Hampshire
Public Utilities Commission (NHPUC) for another three units and active
negotiations are continuing with the owner of a fourth unit. No agreement has
been reached with the owner of the remaining two units.
On April 4, 1995, the NHPUC opened a proceeding to consider whether PSNH's $27
million of capital -- including $22 million for Merrimack station -- and
approximately $4 million of annual operating and maintenance expenses necessary
for current compliance with the Clean Air Act Amendments of 1990 at PSNH's
fossil generating stations are recoverable from PSNH's customers under PSNH's
1989 Rate Agreement with the State of New Hampshire.
Nuclear Performance
The composite capacity factor of the five nuclear generating units that the NU
system operates -- including the Connecticut Yankee nuclear unit (CY) -- was
65.6 percent for the three months ended March 31, 1995, as compared with 66.9
percent for the same period in 1994. The lower 1995 capacity factor was
primarily the result of an extended refueling and maintenance outage for
Millstone 2.
On October 1, 1994, Millstone Unit 2 was shut down for a planned 63-day
refueling and maintenance outage. The outage has encountered several unexpected
difficulties which have lengthened the duration of the outage. The outage
extension was primarily caused by a significant scope increase in service water
system repairs as identified through a comprehensive inspection plan, and by a
need for management to exercise a deliberate approach to the conduct of work
during the early portion of the outage. The outage has been further extended for
one month (from May to June) based on a detailed analysis of the work remaining
to be performed, and the need to adequately train the plant's licensed operators
in the use of revised emergency operating procedures. The outage schedule is
currently under review, but the unit is not expected to return to service until
June 1995 following a Nuclear Regulatory Commission assessment of the unit's
readiness to restart. Total replacement-power costs attributable to the
extension of the outage for CL&P and WMECO are expected to be in the range of $8
million per month. In addition, operation and maintenance (O&M) costs to be
incurred during the outage are estimated to be $57 million, an increase of $24
million as a result of the extended outage. O&M costs associated with the
refueling outage are deferred and amortized through rates for CL&P and WMECO.
The recovery of the replacement- power and O&M costs is subject to prudence
reviews in both Connecticut and Massachusetts.
CL&P has a mechanism that has been in operation since 1979 designed to recover
or refund certain non-nuclear fuel costs if the nuclear units do not operate at
a predetermined capacity factor (the Generation Utilization Adjustment Clause or
GUAC). For the GUAC year ended July 31, 1995, CL&P expects to defer
approximately $86 million of GUAC fuel costs for projected nuclear performance
below 72 percent. A one percent change in the GUAC factor from 72 percent
results in additional revenues to be collected or refunded of approximately $6
million. As of March 31, 1995, CL&P has reserved approximately $18 million
against the deferred GUAC costs, based on the methodology applied by the
Department of Public Utility Control (DPUC) in previous GUAC decisions. Recovery
of the deferred costs will be subject to review by the DPUC.
Maine Yankee Atomic Power Company (Maine Yankee) is the owner of an 860 MW
nuclear electric generating unit (the Plant). The company, through CL&P, WMECO
and PSNH, owns 20% of the common stock of Maine Yankee and purchases
approximately the same percentage of the Plant's output at a rate based on Maine
Yankee's costs. Like other pressurized water reactors, the Plant has been
experiencing degradation of its steam generator tubes, primarily in the form of
circumferential cracking. Until early 1995, the cracking was believed to be
limited to a relatively small number of tubes.
During the current refueling and maintenance outage that began in February 1995,
Maine Yankee detected substantially increased degradation of the steam generator
tubes. Maine Yankee is continuing to assess the extent of the cracking and
evaluating its options. The extent of tube cracking is sufficiently great that
the Plant cannot return to operation without repairs that will result in
substantial additional expenditures by Maine Yankee, with the Company being
responsible for its pro rata share of non-capital costs under its power
contracts. In addition, CL&P, WMECO and PSNH will incur additional costs for
replacement power (estimated at approximately $1 million per month) until the
Plant returns to service.
Maine Yankee intends to sleeve all 17,000 tubes in the Plant's three steam
generators. Maine Yankee expects that the sleeving operation would begin in June
and that the Plant would return to service near the end of 1995. The cost to
Maine Yankee of the sleeving operation has not been determined, but could be
approximately $40 million. If the capital cost of the sleeving operation exceeds
the funds available to Maine Yankee itself (which is not currently expected),
Maine Yankee might request equity contributions from its common stockholders,
including CL&P, PSNH, and WMECO, under its capital funds agreement with them.
If requested, the stockholders are required to contribute their pro rata shares,
subject in some cases to regulatory approval.
Environmental Matters
The company is potentially liable for environmental cleanup costs at a number of
sites both inside and outside its service territories. To date, the future
estimated environmental remediation liability has not been material with respect
to the earnings or financial position of the company. In the first quarter of
1995, the company increased the liability recorded by approximately $3 million
to approximately $14 million. These costs could rise to as much as $19 million
if alternate remedies become necessary.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations remained relatively unchanged for the first three
months of 1995, as compared to 1994. Cash used for investments was
approximately $16 million higher in 1995, as compared with 1994, primarily due
to nuclear fuel purchases in December 1993 that were transferred to the nuclear
fuel trust in January 1994 and higher investments in the decommissioning trust
in 1995, partially offset by higher construction expenditures in 1995.
The NU system's construction program expenditures, including allowance for funds
used during construction, amounted to approximately $50 million for the first
three months of 1995, as compared to approximately $61 million during the same
period in 1994.
RESULTS OF OPERATIONS
Comparison of the First Quarter of 1995 with the First Quarter of
- -----------------------------------------------------------------
1994
- ----
Operating revenues decreased approximately $21 million in the first quarter of
1995, as compared with 1994. The components of the change in operating revenues
are as follows:
Changes in Operating Revenues Increase/(Decrease)
- ----------------------------- ------------------
(Millions of Dollars)
Regulatory decisions $ 23
Fuel, purchased power, and
FPPAC cost recoveries (9)
Sales volume (39)
Sales to other utilities (3)
Other revenues 7
----
Total revenue change $(21)
====
Revenues related to regulatory decisions increased primarily because of the
retail rate increase for CL&P in July 1994 and the June 1994 retail rate
increase for PSNH, partially offset by the June 1994 retail rate reduction for
WMECO. Fuel, purchased power, and FPPAC cost recoveries decreased primarily due
to lower revenues from lower sales to other outside utilities. Sales volume
decreased as a result of lower retail kilowatt-hour sales in 1995. Retail sales
decreased 5.3 percent for the first quarter of 1995 from 1994 sales level
primarily due to extremely mild weather in the first three months of 1995.
Fuel, purchased, and net interchange power expense increased approximately $12
million in the first quarter of 1995, as compared with 1994, primarily because
of a higher level of energy purchases from other utilities and a $5 million
increase in the reserve against deferred GUAC costs.
Other operation expense increased approximately $6 million and maintenance
expense decreased approximately $8 million. The increase in operation expense is
due primarily to higher capacity charges from Maine Yankee which is in an
extended refueling outage. The decrease in maintenance expense is due primarily
to lower storm costs and lower maintenance costs at the nuclear units.
Amortization of regulatory assets, net decreased approximately $21 million in
the first quarter of 1995, as compared with 1994, primarily because of the
deferral of CL&P cogeneration expenses of $6 million a month which began in July
1994.
Federal and state income taxes decreased approximately $24 million in the first
quarter of 1995, as compared with 1994, primarily because of lower book taxable
income and an adjustment to the tax accrual for a favorable tax ruling.
Deferred nuclear plants return decreased approximately $6 million in the first
quarter of 1995, as compared with 1994, primarily because the last 5 percent of
CL&P's Millstone 3 investment was phased into rates on January 1, 1995.
Other income decreased approximately $7 million in the first quarter of 1995, as
compared with 1994, primarily because of an increase to the environmental
reserve and the write down of CL&P's investment in Millstone 3 as a result of a
settlement agreement with the town of Wallingford, Connecticut.
Preferred dividends increased $3 million in the first quarter of 1995, as
compared with 1994, primarily due to a charge to earnings for premiums on
preferred stock redeemed in 1995.
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
1. On April 12, 1995, the Federal Energy Regulatory Commission (FERC) denied
requests for reconsideration of its January 11, 1995 order granting CL&P's
petition concerning the Southeastern Connecticut Regional Resources Recovery
Authority project in Preston, Connecticut. In the January order, FERC ruled
that states cannot require a utility to pay qualifying facilities greater than
avoided costs. One party has appealed this decision to the United States Court
of Appeals, and further appeals are expected.
For additional information on this proceeding, see "Item 3 - Legal Proceedings"
in the NU's 1994 Form 10-K.
Item 5. Other Information
1. On April 10, 1995, CL&P received a notice of opportunity from the
Connecticut Department of Public Utility Control (DPUC) to brief the issues
related to the outage at Millstone Unit 2, which ended on June 18, 1994,
involving the repair of damage to a reactor coolant pump. The notice requested
parties to submit briefs by May 3, 1995 on whether $13 million of replacement
power costs related to the outage should be recovered through rates and whether
hearings are necessary.
For additional information on this matter, see "Item 1. Business - Electric
Operations - Nuclear Generation - Millstone Units" in the NU's 1994 Form 10-K.
2. On April 10, 1995, in connection with PSNH's 1994 integrated least cost
resource plan filing, the New Hampshire Public Utilities Commission (NHPUC)
ordered PSNH to conduct future least cost planning by evaluating resource
options available to PSNH based on the economics of only the PSNH system, rather
than the combined NU system. This ruling could have an adverse effect on the
System's future resource planning. PSNH plans to seek rehearing of the NHPUC's
decision regarding combined system planning.
3. On March 31, 1995, WMECO submitted its comments entitled "Path To A
Competitive Future" in the Massachusetts Department of Public Utilities'
electric utility restructuring docket. WMECO's comments paralleled those
submitted by CL&P to the DPUC on March 22, 1995. A similar approach, tailored
to the specific needs of its service territory, also was introduced by PSNH in
the on-going roundtable set up by the NHPUC to deal with a more competitive
market for electric utility services.
For additional information on this matter, see "Item 1. Business - Subsequent
Events" in the NU's 1994 Form 10-K.
Item 6. Exhibits and Reports on Form 8-K
(a) Listing of Exhibits:
Exhibit
Number Description
------- -----------
15 Letter regarding unaudited financial information
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during this reporting period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTHEAST UTILITIES
-------------------
Registrant
Date April 28, 1995 By /s/ Bernard M. Fox
-------------------- ----------------------------------
Bernard M. Fox
President and Chief
Executive Officer
Date April 28, 1995 By /s/ John W. Noyes
-------------------- --------------------------------
John W. Noyes
Vice President and Controller
Exhibit 15
April 21, 1995
To Northeast Utilities:
We are aware that Northeast Utilities has incorporated by reference in its
Registration Statement No. 33-34622, No. 33-40156, and No. 44814 its Form 10-Q
for the quarter ended March 31, 1995 which includes our report dated April 21,
1995 covering the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified by our
firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
Arthur Andersen LLP
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