December 3, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20459-1004
Gentlemen:
Pursuant to the requirements of the Public Utility Holding Company Act of
1935 submitted herewith is the Annual Report on Form U5S/A (Amendment 2)
for the year ended December 31, 1997 for the Northeast Utilities system.
Very truly yours,
/s/ Suzanne Barber
Suzanne Barber
Commission File Number: 30-246
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549-1004
FORM U5S/A
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMENDMENT NO. 2)
Filed pursuant to the Public Holding Company Act of 1935 by
NORTHEAST UTILITIES
174 Brush Hill Avenue, West Springfield, Massachusetts 01090-0010
(Corporate Address)
Selden Street, Berlin, Connecticut 06037-1616
(Principal Headquarters)
NORTHEAST UTILITIES
FORM U5S/A ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
Item Page
10. Financial Statements and Exhibits
Exhibit D - Tax Allocation Agreement for Year
Ended December 31, 1997 pursuant to Rule 45(c) 2-10
Signature F-1
FIRST AMENDMENT TO THE AMENDED AND RESTATED
TAX ALLOCATION AGREEMENT DATED AS OF
JANUARY 1, 1990
This Amendment, dated as of October 26, 1998, to the Amended and
Restated Tax Allocation Agreement, dated as of January 1, 1990 (the
"Agreement"), is made by and among Northeast Utilities (the "Parent Company")
and The Connecticut Light and Power Company, Western Massachusetts Electric
Company, Holyoke Water Power Company, Northeast Utilities Service Company,
Northeast Nuclear Energy Company, Holyoke Power and Electric Company, The
Rocky River Realty Company, The Quinnehtuk Company, Research Park, Inc.,
Charter Oak Energy, Inc., HEC, Inc., Public Service Company of New Hampshire,
Properties Inc., North Atlantic Energy Corporation, North Atlantic Energy
Service Corporation, COE Development Corporation, COE Argentina II Corp., COE
Tejona Corporation, COE Ave Fenix Corporation, HEC International Corporation,
Mode I Communications Inc., Select Energy, Inc., WMECO Receivables
Corporation, CL&P Receivables Corporation and any other corporations that
become a member of the Parent Company's affiliated group, as defined in
Section 1504(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code") and execute a duplicate copy of the Agreement or consent to be
included in a consolidated federal income tax return that includes the Parent
Company (hereinafter collectively "subsidiaries" and singly "subsidiary") in
accordance with Rule 45(c). (1)
(1) References to Rule 45 are to Rule 45 of the Public Utility Holding Company
Act of 1935.
The Agreement is hereby amended as follows:
1. The first unnumbered paragraph of the Agreement is amended to
include as subsidiaries (as of the date on which each of the following
companies became a member of the Parent Company's affiliated group):
Properties Inc., COE Development Corporation, COE Argentina II
Corp., COE Tejona Corporation, COE Ave Fenix Corporation, HEC
International Corporation, Mode I Communications Inc., Select
Energy, Inc., WMECO Receivables Corporation, CL&P Receivables
Corporation and any other corporations that become a member of the
Parent Company's affiliated group and execute a duplicate copy of
this Agreement or consent to be included in a consolidated federal
income tax return that includes the Parent Company
2. Paragraph (1)(c) of the Agreement is deleted in its entirety and
replaced with the following:
Dividends and other transactions with respect to stock, bonds, or other
obligations of members shall be reflected as provided in Treas. Reg. Section
1.1502-13(f) and -13(g).
3. Paragraph (1)(f) of the Agreement is deleted in its entirety and
replaced with the following:
Basis shall be determined under Treas. Reg. Section 1.1502-31 or
Section 1.1502-32.
4. The second sentence of paragraph (2) of the Agreement is deleted in
its entirety and replaced with the following:
Subject to the limitation provided in paragraph (10), such
consolidated federal income tax allocated to a subsidiary, which
may be either positive or negative, shall be equal to the separate
taxable income of the subsidiary (after elimination of capital
gains and losses) multiplied times the highest effective corporate
federal income tax rate set forth in Section 11 of the Code.
5. The first sentence of paragraph (4) of the Agreement is deleted in
its entirety and replaced with the following:
General business credits arising in a particular year shall be
allocated among the subsidiaries giving rise to such credits by
multiplying the amount of consolidated general business credits for
such year utilized by a fraction, the numerator of which is the
amount of general business credit of the subsidiary for such year
and the denominator of which is the total amount of general
business credit of all such subsidiaries for such year.
6. The first sentence of paragraph (6) of the Agreement is deleted in
its entirety and replaced with the following:
Should the Parent Company's affiliated group generate a net
operating loss for a tax year, each company shall first receive an
allocation of consolidated federal income tax, which may be either
positive or negative, as provided in paragraph (2); provided,
however, a negative allocation of the consolidated federal income
tax shall be made only to the extent that separate taxable income
reduces consolidated federal income tax for such tax year.
7. Paragraph (6) is further amended to add the following after the
last sentence:
For purposes of the consolidated return, the utilization of net
operating losses carried back or carried over is determined on a first-
in first-out basis with all net operating losses generated by all
subsidiaries in the earliest year utilized first before net operating
losses generated in a subsequent year can be utilized. For purposes of
allocating the net operating losses pursuant to this Agreement, and in
accordance with the separate return limitation of Paragraph (10), the
net operating losses utilized shall be determined on a first-in first-
out basis with the net operating losses generated by subsidiaries
allocated positive taxes in Paragraphs (2) and (3) utilized first, for
all available vintages, before net operating losses generated by
subsidiaries allocated negative taxes in Paragraphs (2) and (3) are
utilized. If the vintages of net operating losses utilized pursuant to
this Agreement differ from those utilized according to the consolidated
return for a subsidiary, then the vintages of net operating losses
utilized pursuant to this Agreement shall be exchanged among the
affected subsidiaries. Net operating loss carryovers that are lost due
to reductions, limitations and expirations imposed by the Code or the
regulations thereunder shall be allocated in an appropriate and
reasonable manner. See Rule 45(c)(5).
8. Paragraph (7) of the Agreement is deleted in its entirety and
replaced with the following:
Allocation of Alternative Minimum Tax or Credit. Any portion of
the consolidated federal income tax that is attributable to
alternative minimum tax ("Consolidated AMT") shall be allocated in
a positive amount to each subsidiary with "tentative minimum tax,"
as defined in Section 55(b)(1) of the Code (determined following
the principles used to compute each subsidiary's separate return
tax), which for purposes of this Agreement can be positive or
negative, ("Separate Return Tentative Minimum Tax"), in excess of
the "regular tax," as defined in Section 55(c) of the Code
(determined following the principles used to compute each
subsidiary's separate return tax), allocated to such subsidiary in
accordance with this Agreement (except paragraph (10)), which for
purposes of this Agreement can be positive or negative ("Separate
Return Regular Tax"). Consolidated AMT shall be allocated to each
such subsidiary by multiplying Consolidated AMT by a fraction the
numerator of which is the amount by which the subsidiary's Separate
Return Tentative Minimum Tax exceeds such subsidiary's Separate
Return Regular Tax and the denominator of which is the sum of the
amounts by which the Separate Return Tentative Minimum Tax of the
subsidiaries to which an allocation of Consolidated AMT is made
exceeds the Separate Return Regular Tax allocated to such
subsidiaries. If the regular tax portion of the consolidated
federal income tax is reduced by reason of a "minimum tax credit,"
as defined in Section 53 of the Code, the benefit of such minimum
tax credit shall be allocated to the subsidiaries that (by having
an alternative minimum tax liability allocated to them in a prior
year) generated such minimum tax credit, with the earliest
liabilities being allocated such minimum credit first. See Rules
45(c)(3) and 45(c)(5). The allocation of any "alternative tax net
operating loss deduction," as defined by Section 56(d) of the Code,
shall follow the principles of paragraph (6).
9. Paragraph (8) of the Agreement is deleted in its entirety and
replaced with the following:
Other Federal Taxes, Benefits and Credits. Taxes, tax benefits
and credits against consolidated federal income tax that are not
specifically addressed herein and for which allocation under
paragraph (2) is not appropriate shall be allocated following the
principles set forth in paragraphs (3) through (7) in order to
allocate the material effects of such tax, tax benefit or credit to
the subsidiary to which it is applicable. See Rule 45(c)(3).
10. Paragraph (10) of the Agreement is amended to add the following
after the last sentence:
If the federal income tax otherwise allocated to a subsidiary under
this Agreement is greater than the federal income tax computed as
if such subsidiary had always filed a separate return, the Parent
Company shall be liable for such excess, subject to recovery in
later years from subsequent consolidated tax benefits.
11. Paragraph (11) of the Agreement is amended by denoting the current
text thereof as subparagraph (a) and captioning subparagraph (a) as
"Generally and New Hampshire Business Profits Tax for Tax Years Ending on or
Before December 31, 1997".
12. Paragraph (11) of the Agreement is amended to add the following
after the last sentence of the current provision:
(b) States with Unitary Reporting for Tax Years Beginning After
December 31, 1997. Notwithstanding the preceding sentence, for
purposes of allocating any current state income tax liability that
is determined on the basis of unitary reporting and that is
associated with a state income tax return involving more than one
subsidiary ("Unitary Tax Liability"), any such current Unitary Tax
Liability shall be allocated, first, to subsidiaries with a
positive income tax liability with respect to such state determined
following the principles used to compute the subsidiary's Separate
Return Tax ("Separate Unitary Return Tax") in an amount equal to
each such subsidiary's Separate Unitary Return Tax; then
(i) if the current Unitary Tax Liability is less than the
aggregate Separate Unitary Return Tax of the subsidiaries with
positive Separate Unitary Return Tax ("Unitary Tax Benefit"),
second, in a negative amount to the Parent Company in an
amount equal to the lesser of the Unitary Tax Benefit with
respect to such state or the Unitary Tax Detriment (as
hereinafter defined) from a prior year that has not been
recovered in a prior year, third, in a negative amount to each subsidiary
with a tax credit from such state that was unavailable in determining
such subsidiaries' Separate Unitary Return Tax ("Unavailable Credit")
(provided, however, that such tax credit was available in such state to
the unitary group for such state) in an amount equal to the
lesser of the Unitary Tax Benefit (less any amount allocated
by clause second of this paragraph (11)(b)) or the sum of the
Unavailable Credit of all subsidiaries with Unavailable Credit
multiplied by a fraction (A) the numerator of which is the
Unavailable Credit of the subsidiary and (B) the denominator
of which is the sum of the Unavailable Credits for all
subsidiaries with Unavailable Credit; fourth, in a negative
amount to each subsidiary having negative Separate Unitary
Return Tax in an amount equal to the lesser of the Unitary Tax
Benefit (less any amounts allocated by clauses second and
third of this paragraph (11)(b) or the sum of the Separate
Unitary Return Tax of all subsidiaries with negative Separate
Unitary Return Tax multiplied by a fraction (A) the numerator
of which is the Separate Unitary Return Tax of the subsidiary
and (B) the denominator of which is the sum of the Separate
Unitary Return Tax of the subsidiaries having negative
Separate Unitary Return Tax, and, fifth, in a negative amount
to each subsidiary having positive Separate Unitary Return Tax
in an amount equal to the Unitary Tax Benefit (less any
amounts allocated by clauses second, third and fourth of this
paragraph (11)(b) multiplied by a fraction (A) the numerator
of which is the Separate Unitary Return Tax of the subsidiary
and (B) the denominator of which is the sum of the Separate
Unitary Return Tax of the subsidiaries having positive
Separate Unitary Return Tax; or
(ii) if the current Unitary Tax Liability is in excess of the
aggregate Separate Unitary Return Tax of the subsidiaries with
positive Separate Unitary Return Tax ("Unitary Tax
Detriment"), second, to the Parent Company in the amount of
the Unitary Tax Detriment, subject to recovery in later years
from subsequent Unitary Tax Benefits. (See Rule 45(c)).
(c) Payments for Allocations of State Tax Liabilities. Payments of
positive and negative allocations of state income tax liabilities
and of net current state income tax liabilities of the Parent
Company and the subsidiaries shall follow the principles set forth
in paragraph (9).
13. Paragraph (12) of the Agreement is amended to add the following
after the last sentence:
The Parent Company or designated subsidiary may act as an agent for
each subsidiary doing business in a state with respect to the
payment of any liability shown on the state income tax returns of
such state.
14. The last sentence of paragraph (15) of the Agreement is deleted in
its entirety and replaced with the following:
If at any time any other company becomes a member of the Parent
Company's affiliated group, the parties hereto agree that such new
member may become a party to this Agreement by (i) executing a
duplicate copy of this Agreement or (ii) consenting to be included
in a consolidated federal income tax return that includes the
Parent Company.
The above procedures for apportioning the consolidated annual net
current federal and state income tax liability and expense of the Parent
Company and the subsidiaries have been duly authorized and agreed to by each
of the below listed members of the Parent Company's affiliated group as
evidenced by the signature of a duly authorized officer of each company:
ATTEST: NORTHEAST UTILITIES
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: THE CONNECTICUT LIGHT AND POWER COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: WESTERN MASSACHUSETTS ELECTRIC COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: HOLYOKE WATER POWER COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: NORTHEAST UTILITIES SERVICE COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: NORTHEAST NUCLEAR ENERGY COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: HOLYOKE POWER AND ELECTRIC COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: THE ROCKY RIVER REALTY COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: THE QUINNEHTUK COMPANY
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: RESEARCH PARK, INC.
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: CHARTER OAK ENERGY, INC.
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: HEC, INC.
/s/ Rose Maccio By: /s/ David R. McHale
Title: Assistant Treasurer
ATTEST: PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: PROPERTIES, INC.
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: NORTH ATLANTIC ENERGY CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: NORTH ATLANTIC ENERGY SERVICE CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: COE DEVELOPMENT CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: COE ARGENTINA II CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: COE TEJONA CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Assistant Treasurer - Finance
ATTEST: COE AVE FENIX CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: HEC INTERNATIONAL CORPORATION
/s/ Rose Maccio By: /s/ John H. Forsgren
Title: Executive Vice President and
Chief Financial Officer
ATTEST: MODE 1 COMMUNICATIONS, INC.
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: SELECT ENERGY, INC.
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: WMECO RECEIVABLES CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
ATTEST: CL&P RECEIVABLES CORPORATION
/s/ Rose Maccio By: /s/ David R. McHale
Title: Vice President and Treasurer
October 26, 1998
SIGNATURE
Northeast Utilities, a registered holding company, has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized,
pursuant to the requirements of the Public Utility Holdiong Company Act of
1935.
NORTHEAST UTILTIIES
By: /s/ John J. Roman
John J. Roman
Vice President and Controller
December 3, 1998
