SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 18, 1996
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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 of other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
174 BRUSH HILL AVENUE, WEST SPRINGFIELD, MASSACHUSETTS 01090-0010
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(Address of principal executive officers) (Zip Code)
(413) 785-5871
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name of former address, if changed since last report)
Item 5. Other Events
Rate Settlement
On June 18, 1996, the Connecticut Department of Public Utility Control
("DPUC") issued a draft decision (the "Draft") with respect to a settlement
agreement (the "Settlement") that had been jointly submitted on April 15,
1996 to the DPUC for approval by The Connecticut Light and Power Company
("CL&P" or the "Company"), the Office of Consumer Counsel ("OCC") and the
independent Prosecutorial Division ("PRO") of the DPUC. For a complete
description of the Settlement, see Item 5 in Northeast Utilities' April 15,
1996 Form 8-K.
The Draft was supportive of the Settlement in many respects, including
the Settlement's proposed resolution of nuclear outage prudence
investigations related to costs incurred prior to March 31, 1996, resolution
of pending litigation that could potentially affect CL&P's rates, the
proposed freeze of CL&P's rates until 1998 and the proposal to accelerate
recovery of $200-240 million of CL&P's regulatory assets. Nevertheless, the
Draft did not accept one aspect of the Settlement that would have folded into
base rates approximately $100 million in revenues over the settlement period
that had been collected under CL&P's fossil fuel adjustment clause ("FAC").
Although base rates would have increased as a result of the fold-in, the
fold-in was, when combined with other elements of the Settlement, proposed to
be revenue-neutral for as long as the FAC continued to operate. However, the
Draft concluded that the fuel fold-in could lead to customer bill increases
and accordingly rejected this aspect of the Settlement.
The Draft invites CL&P, OCC and PRO to renegotiate the Settlement in a
manner that precludes possible bill increases by deleting the fuel fold-in,
noting that such a modification would have the effect of reducing the
proposed accelerated amortization of CL&P's deferred assets. The Draft
describes two different renegotiation scenarios, one of which preserves a
monthly bill reduction of approximately 2.5 percent through February 1997
that had been proposed in the original Settlement and a second that would
allow CL&P to retain the revenues that it had planned to write off in order
to produce that bill reduction.
Management's preliminary evaluation of the two renegotiation scenarios
suggested by the Draft indicates that either would reduce CL&P's cash flow
below levels that would have occurred under the Settlement as filed, by
approximately $10 - $35 million in 1996 and $60 - $75 million in 1997,
depending on which scenario were pursued. Either would also have the effect
of substantially reducing the acceleration of deferred asset amortizations
from those proposed in the Settlement. However, it appears that the earnings
impact of either scenario would be similar in both 1996 and 1997 to the
effects of the Settlement that had been proposed.
CL&P plans to meet with OCC and PRO to determine whether a modified
Settlement along the lines suggested by the Draft is achievable in a manner
likely to improve CL&P's financial position over a no-Settlement scenario
while still preserving customer benefits. The Draft invites submission to
the DPUC of a proposed revision to the Settlement no later than June 25,
1996. Management is currently unable to predict whether productive
discussions can take place within the time available, whether they will be
successful, or what will result.
If a revised Settlement Agreement is not reached and if the Draft
becomes final, CL&P's current rates will remain in effect until further
action. In that situation, there would not be a resolution of the many
issues that led the Company and the other parties to agree to the Settlement.
These issues include uncertainty about future CL&P rates, continued legal
proceedings over past operational issues and rate proceedings, and high
deferred asset balances.
For additional information about the Settlement, the legal proceedings
that would have been resolved by the Settlement, and the rates in effect
absent the Settlement, see Northeast Utilities' Form 10-Q for the quarter
ended March 31, 1996, its April 15, 1996 Form 8-K, and its Form 10-K for the
year ended December 31, 1995.
Watch List
On January 31, 1996, the Nuclear Regulatory Commission ("NRC") placed
Millstone units 1, 2 and 3 on its "watch list" of facilities requiring
additional regulatory attention. As of June 20, 1996, all three Millstone
units are out of service and are undergoing a range of inspections,
engineering analysis, document review and physical repairs as is described
more fully in Northeast Utilities' Form 8-K dated June 3, 1996 and its Form
10-Q for the quarter ended March 31, 1996.
The NRC is scheduled to conduct a public meeting on or about June 25,
1996, to discuss the plants that will be removed from, placed on, or remain
on its watch list. Management believes that the three Millstone units will
remain on the watch list.
Because of the heightened NRC regulatory attention surrounding the
Millstone units and because each unit is currently out of service, management
believes that very formal NRC procedures, including public hearings and
possibly official Commissioner action (beyond staff actions), will be taken
before each Millstone unit resumes operations.
SIGNATURE
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
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Registrant
Date June 20, 1996 By /s/John B. Keane
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John B. Keane
Vice President and Treasurer
