FILE NO. 70-9541
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4 TO
FORM U-1
APPLICATION/DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
WITH RESPECT TO THE PAYMENT OF DIVIDENDS, SHARE REPURCHASES AND SHARE
ISSUANCES IN CONNECTION WITH RESTRUCTURING BY NORTHEAST UTILITIES AND CERTAIN
SUBSIDIARIES
Northeast Utilities
Western Massachusetts Electric Company
174 Brush Hill Avenue
West Springfield, MA 01090
The Connecticut Light and Power Company
NU Enterprises, Inc.
Northeast Generation Company
Northeast Generation Services Company
Select Energy, Inc.
Select Energy Portland
Pipeline, Inc.
107 Selden Street
Berlin, CT 06037
Public Service Company of New Hampshire
North Atlantic Energy Corporation
1000 Elm Street
Manchester, NH 03015
HEC Inc.
Select Energy Contracting, Inc.
24 Prime Parkway
Natick, MA 01760
Reeds Ferry Supply Co., Inc.
605 Front Street
Manchester, NH 03102
HEC Energy Consulting Canada
Inc.
242 Simcoe Street
Niagara on the Lake
Ontario, Canada LOS1J0
(Names of companies filing this statement and addresses of principal
executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Cheryl W. Grise
Senior Vice President, Secretary and General Counsel
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices
and communications to:
Jeffrey C. Miller, Esq.
Assistant General Counsel
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
David R. McHale
Vice President and Treasurer
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
The application/declaration, as amended, in this file is amended and
restated as follows:
ITEM 1
DESCRIPTION OF PROPOSED TRANSACTIONS
Introduction
1. Northeast Utilities ("NU"), a public utility holding company registered
under the Public Utility Holding Company Act of 1935, as amended ("the Act"),
The Connecticut Light and Power Company ("CL&P"), Public Service Company of
New Hampshire ("PSNH"), Western Massachusetts Electric Company ("WMECO"), and
North Atlantic Energy Corporation ("NAEC"), each an electric utility
subsidiary of NU, NU Enterprises, Inc. ("NUEI"), a sub-holding company over
certain of NU's non-utility subsidiaries, Northeast Generation Company
("NGC"), Northeast Generation Services Company ("NGS"), Select Energy, Inc.
("SE"), HEC Inc. ("HEC"), and Select Energy Portland Pipeline, Inc.
("SEPPI"), each a direct subsidiary of NUEI and an indirect non-utility
subsidiary of NU, and Reeds Ferry Supply Co., Inc. ("Reeds"), Select Energy
Contracting, Inc. ("SECI")and HEC Energy Consulting Canada Inc. ("HEC
Energy"), each a direct subsidiary of HEC and an indirect non-utility
subsidiary of NU, (collectively, the "Applicants"), hereby submit this
application/declaration (the "Application") pursuant to Sections 6(a), 7,
9(a), 10 and 12(c) of the Act and Rules 26(c)(3), 42, 43, 44 and 46(a)
thereunder with respect to (a) the payment of dividends to, and/or the
repurchase of stock from, NU out of capital or unearned surplus by each of
CL&P, PSNH, WMECO NAEC, from certain restructuring proceeds, (b) the payment
of dividends to, and/or the repurchase of stock from, NU out of capital or
unearned surplus by NUEI, the payment of dividends to, and/or the repurchase
of stock from, NUEI out of capital or unearned surplus by each of NGC, NGS,
SE, HEC and SEPPI, and the payment of dividends to, and/or the repurchase of
stock from, HEC out of capital or unearned surplus by Reeds, SECI and HEC
Energy, (c) the payment of dividends and/or the repurchase of stock out of
capital or unearned surplus by CL&P from certain restructuring proceeds in
accordance with the provisions of CL&P's dividend covenant under its First
Mortgage Indenture and Deed of Trust dated May 1, 1921 to the Bankers Trust
Company as trustee (the "Mortgage Indenture"), in the case of (a), (b) and
(c) above, all through December 31, 2004 (the "Authorization Period"), (d)
the issuance of additional shares by NU to the extent necessary to fulfill
its obligations under one or more forward stock purchase contracts through
December 31, 2000 and (e) the waiver of the Commission's 30% common equity-
to-total capitalization test as to CL&P, WMECO and PSNH through the end of
the Authorization Period, so long as the senior debt securities of each
company remain investment grade, and as to NU through December 31, 2001. As
described in greater detail herein, the authorizations sought relate to the
capital restructuring of the NU system in connection with electric utility
deregulation in Connecticut, Massachusetts and New Hampshire and the related
required asset divestitures and the issuance of rate reduction bonds related
to stranded cost securitization transactions in such states. The
transactions described herein will permit NU and its subsidiaries to use the
proceeds of those divestitures and bond issuances, among other things, to
reduce and adjust their capital structures by retiring outstanding debt,
preferred stock and common equity, and to buy down existing power purchase
agreements with independent power producers. As a result, the Utilities
will be able to lower the rates charged to their utility customers, and gain
greater financing flexibility. In addition, the value of the investment in
NU held by its shareholders will be enhanced. The senior debt ratings of
CL&P, WMECO and PSNH issued by Standard & Poor's are each currently "BBB-"
while the senior debt ratings of CL&P and WMECO issued by Moody's Investor
Service, Inc. are each "Baa3" and that of PSNH is "Ba3." These ratings will
be unaffected or improved by the issuance of the rate reduction bonds, as the
agencies do not consider such securities to be obligations of the Utilities.
Background
2. Connecticut, Massachusetts and New Hampshire, the states in which CL&P,
WMECO, PSNH and NAEC (collectively, the "Utilities") operate, have enacted or
shortly will enact legislation deregulating the electric utility industry in
such states to provide retail consumers with a choice of electricity
providers. Eventually, consumers in all of those states will be allowed to
choose their energy providers, and energy prices will no longer be set by a
state regulatory commission. The transmission and distribution of
electricity will continue to be provided by the local utilities at regulated
rates.
As vertically integrated utilities with both generation assets and
transmission and distribution assets, CL&P, PSNH, WMECO and NAEC are or will
be (in the case of PSNH and NAEC) required to restructure their companies to
comply with state statutory provisions. This restructuring includes, among
other things, the divestiture of their generating assets. This divestiture,
combined with authorization for the issuance of rate reduction bonds as part
of the restructuring process, will leave the Utilities in a unique financial
position in that they will experience a significant decrease in the amount of
tangible assets that they own and receive a substantial influx of cash almost
simultaneously.
Connecticut Restructuring Law and CL&P
3. On April 29, 1998, the Connecticut Governor signed into law a
comprehensive restructuring bill entitled An Act Concerning Electric
Restructuring (the "Connecticut Act"). The Connecticut Act mandates retail
access for up to thirty-five percent of customers located in distressed
cities on and after January 1, 2000, with full retail competition to be
completed by July 1, 2000. Further, during the time period from July 1, 1998
through December 31,1999, rates could not exceed their levels on December 31,
1996. Starting January 1, 2000, the Act requires CL&P to implement standard
offer rates that are ten percent lower than the rates in effect on
December 1, 1996.
The Connecticut Act authorizes the Connecticut Department of Public
Utility Control ("DPUC") to permit electric public utilities to recover the
full amount of their stranded costs through a competitive transition
assessment, conditioned upon the divestiture of all non-nuclear generating
assets at auction by January 1, 2000 and divestiture of all nuclear
generating assets at auction by January 1, 2004. Additionally, all electric
public utilities are required to undertake steps to mitigate stranded costs.
The DPUC is responsible for determining the rate of recovery for each
utility.
The Connecticut Act allows for the issuance of rate reduction bonds to
finance portions of a utility's stranded costs, as determined to be
appropriate by the DPUC, through securitization transactions. The savings
generated through the use of rate reduction bonds ultimately results in a
reduction of electric rates. The Connecticut Act limits the use of
securitization to non-nuclear generation-related regulatory assets and costs
associated with the renegotiation of purchased-power contracts. CL&P may not
securitize any of its nuclear stranded costs.
Pursuant to the Connecticut Act, CL&P has filed stranded cost estimates
and unbundled rates with the DPUC. On July 7, 1999, the DPUC issued a Final
Decision on CL&P's stranded costs, ruling that CL&P can recover up to $3.5
billion in stranded costs.
New Hampshire Restructuring Law and PSNH and NAEC
4. Effective May 21, 1996, the New Hampshire legislature enacted Chapter
374-F of the New Hampshire Revised Statutes (the "New Hampshire Act")
mandating full retail electric choice by January 1, 1998, but allowing a six-
month extension to July 1, 1998. On February 28, 1997, the final version of
the New Hampshire Public Utilities Commission (the "PUC") plan was released
pursuant to which electric utilities are required to divest generation
facilities by January 1, 2000. Concurrent with the release of the PUC plan,
the PUC issued utility-specific orders regarding interim stranded cost
charges that resulted in litigation between PSNH and the PUC. That
litigation was stayed as a result of a Memorandum of Understanding between
New Hampshire and PSNH which was entered into on June 14, 1999. A final
settlement agreement was filed on August 2, 1999 with state regulators.
The settlement agreement provides that PSNH must reduce its rates by
approximately eighteen percent from current levels on the effective date of
the agreement, which is estimated to occur sometime in early 2000. PSNH is
seeking to recover almost $1.9 billion of its total estimated stranded costs,
which would require that PSNH write off approximately $225 million, after
taxes, in existing stranded costs. In addition, the settlement agreement
authorizes the issuance of approximately $725 million in rate reduction
bonds. The final settlement agreement must be approved by the PUC and by the
New Hampshire Legislature.
Massachusetts Restructuring Law and WMECO
5. On November 25, 1997, the Massachusetts Governor signed into law a
comprehensive restructuring bill entitled "An Act Relative to Restructuring
the Electric Utility Industry in the Commonwealth, Regulating the Provision
of Electricity and Other Services, and Promoting Enhanced Consumer
Protections Therein" (the "Massachusetts Act"). Pursuant to the
Massachusetts Act, retail electric competition began on March 1, 1998. WMECO
was ordered to institute a mandatory ten percent reduction in approved rates
commencing March 1, 1998. An additional five percent discount is required on
September 1, 1999. As a result of the rate reductions to date, WMECO's
annual revenues have declined from $426 million in 1997 to $393 million in
1998.
The Massachusetts Act authorizes the Massachusetts Department of
Telecommunications and Energy (the "DTE") to permit electric public utilities
to recover stranded costs through a non-bypassable market transition charge,
and the DTE is responsible for determining each utility's specific recovery,
which recovery is conditioned upon aggressive mitigation by the recovering
utility. The DTE has not issued an order on WMECO's pending filing regarding
stranded cost recovery. In addition, the Massachusetts Act provides for
securitization bonds to be issued to finance a portion of a utility's
stranded costs, as determined by the DTE. WMECO is seeking approval to
securitize up to $300 million in stranded costs.
The Impact of Restructuring on the Utilities
6. Pursuant to the states' statutory restructuring requirements, the
electric generating assets of CL&P, PSNH and WMECO will be sold, and PSNH
will buy out its power purchase agreement with NAEC. However, the applicable
state deregulation laws mandate that any gains on the sale of the electric
generating assets reduce stranded cost recovery, and accordingly the
Utilities will recognize no earnings effect and no accretion to their
retained earnings account when those gains are realized.
WMECO has already closed on its sale of approximately 290 MW of fossil
and hydroelectric generating assets for a sale price approximately 3.8 times
greater than the assets' 1997 book value. The sales of these assets and
future asset sales will be used to reduce WMECO's stranded costs. WMECO has
auctioned another 270 MW of pumped storage and conventional hydroelectric
generating assets and has obtained final regulatory approval for the sale of
those assets and hopes to close on the transaction in the first quarter of
2000. CL&P has auctioned off its non-nuclear generating facilities, as
required by the Connecticut Act. In February 1999, the DPUC announced the
offering for sale of CL&P's fossil fuel and hydroelectric generating
facilities. CL&P has received final regulatory approval for the sale of
those assets and hopes to close on that transaction in the first quarter of
2000. PSNH and NAEC expect to sell their interests in non-nuclear and
nuclear generating assets, respectively, once a settlement agreement with the
State of New Hampshire has been approved, which is expected to occur in the
latter part of 2000. In addition, proceeds from the sale of the Utilities'
nuclear generating assets will result in additional restructuring proceeds.
In addition to the proceeds raised from these sales of generating
assets, at least three of the Utilities, CL&P, PSNH and WMECO, will receive
proceeds from the issuance of rate reduction bonds as part of the
restructuring process. Because of the accounting treatment required by the
regulatory process, the receipt of proceeds from the rate reduction bonds
will have no effect on the respective net incomes of the Utilities and no
accretion to their retained earnings account. Accordingly, while the
Utilities will experience a substantial influx of cash from these
transactions, none of that cash will be treated as "income" or "retained
earnings" on their financial statements. In addition ratings on securities
of the Utilities will not be adversely affected and may improve by the
issuance of the rate reduction bonds. Rated senior debt of the Utilities are
presently expected to remain investment grade through the Authorization
Period.
When the aforementioned process is completed, CL&P presently expects to
receive net proceeds of approximately $1.191 billion from the sales of non-
nuclear generating assets and net proceeds of $1.489 billion from the
issuance and sale of rate reduction bonds. Thus, CL&P is presently expecting
to receive approximately $2.680 billion of cash from these restructuring
transactions.
When the aforementioned process is completed, PSNH presently expects to
receive net proceeds of approximately $360 million from the sales of non-
nuclear generating assets and net proceeds of approximately $725 million from
the issuance and sale of rate reduction bonds. Thus, PSNH presently expects
to receive approximately $1.085 billion of cash from these restructuring
transactions.
When the aforementioned process is completed, WMECO presently expects to
receive net proceeds of approximately $233 million from the sales of non-
nuclear generating assets and net proceeds of approximately $303 million from
the issuance and sale of rate reduction bonds. Thus, WMECO is presently
expecting to receive approximately $536 million of cash from these
restructuring transactions.
NAEC presently expects to receive net proceeds from restructuring
activities (primarily from PSNH's buy-out of its power contract with NAEC and
to a lesser extent from the sale of NAEC's interest in the Seabrook Nuclear
Power Plant) of approximately $646 million. NAEC does not expect to receive
proceeds from the issuance of rate reduction bonds.
A table summarizing these transactions is included as Exhibit I to this
Application.
The Results of Restructuring
7. As described above, CL&P, PSNH, WMECO and NAEC, after completing their
restructuring transactions, will become much smaller companies, requiring
much less capitalization. Further, the proceeds from the securitization of
the Utilities' stranded costs are required to be used to reduce customer
costs by reducing capitalization and, hence, their capital revenue
requirements. In order to achieve these cost savings, CL&P, PSNH, WMECO and
NAEC must reduce their common equity capitalizations to reflect the fact that
they are smaller corporate entities. The above-described proceeds of
restructuring transactions are expected to provide the Utilities with the
funds to achieve this capitalization reduction.
CL&P, WMECO and PSNH have a financial objective, post-restructuring, of
obtaining and maintaining a strong investment grade rating. A major factor
in achieving this objective is to have a common equity to total
capitalization ratio of approximately 40-45%, with a target date for
achieving this objective of December 31, 2000 and assuming that
securitization debt will not be treated as indebtedness for rating agency
purposes in this computation. Using these assumptions, NU derived the amount
of equity which it wished to have removed from these companies and still meet
the rating objective.
The Utilities plan to apply the net proceeds of their restructuring
transactions during the Authorization Period, among other things, to retire
outstanding debt and preferred stock, to buy down existing power purchase
agreements with independent power producers (except NAEC, which has no such
agreements) and to reduce their capitalizations. CL&P presently expect to
use approximately $310 million to reduce its common equity capitalization;
WMECO presently expects to use approximately $145 million to reduce its
common equity capitalization; PSNH presently expects to use approximately
$297 million to reduce its common equity capitalization; and NAEC presently
expects to use approximately $164 million to reduce its common equity
capitalization. (Individually, "CL&P Returned Equity", "WMECO Returned
Equity", "PSNH Returned Equity" and "NAEC Returned Equity" respectively).
The buy-down of power purchase contracts and the retirement of debt and
preferred stock can be accomplished without Commission approval. In order to
effectively reduce their capitalizations, CL&P, PSNH, WMECO and NAEC seek
Commission authorization to use all or a portion of, respectively, the CL&P
Returned Equity, the PNSH Returned Equity, the WMECO Returned Equity and the
NAEC Returned Equity either (i) to pay dividends to NU, (ii) to buy back a
portion of their outstanding common stock owned by NU or (iii) to effect
common equity capital reductions through a combination of dividends and stock
repurchases. Since, as described earlier, the receipt of restructuring
proceeds does not result in net income giving rise to earned surplus to the
Utilities, the Act and the regulations thereunder require Commission approval
for the use of such proceeds for the payment of dividends or the repurchase
of stock, in the full amount required to decapitalize the Utilities. In
addition, Commission approval is required for the repurchase by the Utilities
of their stock from NU, an affiliate of the Utilities, and these approvals
are sought in this Application.
The Commission has previously approved the payment of dividends out of
capital or unearned surplus by a utility subsidiary of a registered holding
company when the payment would not impair the subsidiary's ability to meet
its obligations and the subsidiary's assets would be sufficient to meet any
anticipated expenses or liabilities. See, e.g., AEP Generating Co., H.C.A.
Rel. No. 26754 (August 12, 1997). As described above, CL&P, PSNH, WMECO and
NAEC would not face adverse financial consequences as a result of the payment
to NU. Rather, CL&P, PSNH, WMECO and NAEC are reacting to a unique
situation, restructuring and its related financial impacts, which has created
a large influx of cash not treatable as earned surplus. Each of CL&P, WMECO,
PSNH and NAEC currently has, and following the consummation of the
transactions described herein, will continue to have, through the
Authorization Period, adequate cash and access to working capital facilities
to meet and support its normal business operations. Payment of the dividends
(or repurchases of common stock, as the case may be) would not impair the
financial integrity of CL&P, PSNH, WMECO or NAEC because, after the payment
of such dividends, each utility would still have adequate cash to operate its
substantially smaller business operations through the Authorization Period.
The authorization being sought by the Utilities is similar to that sought by
Conectiv Inc. and its utilities in its application/declaration on Form U-1 in
File No. 70-9499 (May 19, 1999). Similarly, the Commission has recently
approved the use of proceeds from the sale of generating assets to repurchase
the selling entity's stock from its parent registered holding company in
order to keep its capital structure balanced, in the same manner as the
Utilities propose to do here. New England Elec. System, H.C.A. Rel. No.
26918 (Sept. 25, 1998). That approval would seem to be apt precedent for the
stock repurchases proposed here.
Payments of Dividends or a Stock Repurchase by Competitive Subsidiaries
8. NU's other direct or indirect competitive subsidiaries, NUEI, NGC, NGS,
SE, HEC, Reeds, SECI, HEC Energy, and SEPPI, (collectively, the "Competitive
Subsidiaries") request approval during the Authorization Period for: (i) the
payment of dividends to, and/or the repurchase of stock from, NU by NUEI;
(ii) the payment of dividends to, and/or the repurchase of stock from, NUEI
by NGC, NGS, SE, HEC and SEPPI; and (iii) the payment of dividends to, and/or
the repurchase of stock from, HEC by Reeds, SECI and HEC Energy; in each case
out of capital or unearned surplus and in amounts not to exceed the amounts
set forth in the table in paragraph 11 below. The Competitive Subsidiaries
anticipate that they may have unrestricted cash available from time to time
for distribution in excess of their current or retained earnings. This could
occur, for example, where a company experienced an operating loss or asset
impairment which created negative retained earnings and also sold assets
which resulted in an influx of cash. To best arrange and deploy the NU
system's equity capital, the Competitive Subsidiaries propose to use some of
this unrestricted cash for the payment of dividends to NU, HEC and NUEI or to
effect a stock repurchase from NU, HEC and NUEI, the proceeds of which NU
ultimately would use to reduce its capitalization and other corporate
purposes. Fundamentally, the question of how much capital NU should have
invested at any one time in its Competitive Subsidiaries will be dictated by
competitive and commercial needs not fully foreseeable at this time. NU
needs the flexibility to adjust its level of equity investment at any time in
these companies as such circumstances dictate.
The Commission has permitted competitive subsidiaries of registered
holding companies to pay dividends out of capital or unearned surplus when
that payment will not adversely affect the financial integrity of the holding
company system or jeopardize the working capital of the operating
subsidiaries, American Electric Power Co., H.C.A. Rel. No. 26760 (Sept. 18,
1997), or when not permitting such a payment would cause cash to be trapped
at the competitive subsidiaries when there is no need for it, The Southern
Co., H.C.A. Rel. No. 26543 (July 17, 1996), See also Northeast Utilities,
H.C.A. Rel. No. 26810 (December 30, 1997). In response to more recently
filed applications under the Act, the Commission has given blanket
authorization for the payment of dividends out of capital or unearned
surplus. See, GPU International, Inc., et al. H.C.A. Rel. No. 27023 (May 14,
1999). Here, the payment of dividends by the Competitive Subsidiaries
directly or indirectly to NU or the repurchase of stock by the Competitive
Subsidiaries is part of the NU system's overall plan to maintain its level of
investment in each subsidiary as will most benefit its shareholders and
ratepayers, and so having such flexibility will improve, rather than harm,
the financial integrity of the NU system and its operating companies.
Moreover, the cash to be used to pay the dividends or to repurchase stock may
not be needed by the Competitive Subsidiaries to achieve their corporate
goals, so there would be no need to leave that cash with the Competitive
Subsidiaries. Accordingly, the payment of dividends or the repurchase of
stock by the Competitive Subsidiaries out of capital or unearned surplus
should be approved.
Approval of the Issuance of Additional Shares by NU
to Settle One or More Forward Contracts
9. In order to fund the share portion of its proposed merger with Yankee
Energy System, Inc. (see SEC File No. 70-09535), NU entered into forward
stock purchase contracts (collectively, the "Forwards") with a third party to
repurchase, on NU's behalf, the necessary NU shares. Since NU does not yet
have sufficient proceeds from the various restructuring transactions
described above, Forwards provide NU with a viable method of obtaining its
own shares at anti-dilutive prices and with no balance sheet impact during
the carrying period. NU anticipates closing out the Forwards in the fourth
quarter of 2000 assuming the availability of adequate proceeds from the
restructuring activities described above.
In a typical Forward transaction, a broker acting for NU will acquire a
negotiated number of shares at market prices, hold them until a negotiated
deadline, and then deliver them at the acquisition price (determined by one
of a number of possible methods) to NU. NU will pay a carrying charge plus a
fee to compensate the broker, and will collateralize the broker should the
aggregate market price of the carried shares fall below a negotiated
percentage of the original aggregate cost. Ultimately, and critical to the
broker's own financial standing, the broker retains the right to sell out the
position and charge the difference to NU should the market fall off be
substantial. Under present accounting rules, the transaction will be
accounted for as an equity commitment and not as an obligation of
indebtedness. In order to settle a negative forward in shares, NU must have
the lawful right to issue such shares, which is the purpose of this portion
of the Application.
NU estimates that it will need the ability to issue up to 8.5 million
shares to compensate for the possibility of negative Forward settlements and
accordingly requests permission to issue such shares in one or more
transactions through the period ending December 31, 2000, which is the latest
date it could envision needing such authorization .
Approval of the Payment of Additional Amounts under the CL&P
Mortgage Indenture restriction, dated May 1, 1921.
10. In addition to the other transactions described herein, the Applicants
request that the Commission exercise its reserved power as provided in the
dividend covenant in CL&P's Mortgage Indenture relating to CL&P's first
mortgage bonds, so as to permit CL&P, during the Authorization Period, to
effect dividend payments, the repurchase of its shares or any combination
thereof, notwithstanding the fact that the CL&P Returned Equity does not
represent net earnings giving rise to earned surplus. The full text of the
dividend covenant, Section 6.13 of the Mortgage Indenture, is attached hereto
as Exhibit J. CL&P has an additional issue of first mortgage bonds, its
Series TT Bonds, with a comparable covenant, but such bonds will be retired
with the proceeds of CL&P's asset sales in the first quarter of 2000 and
prior to any such upstream payment to NU.
The dividend covenant provides, among other things, that cash dividends
may not be paid on the capital stock of CL&P, or distributions made, or
capital stock purchased by CL&P, in an aggregate amount which exceeds CL&P's
earned surplus after December 31, 1966, plus the earned surplus of CL&P
accumulated prior to January 1, 1967 in an amount not exceeding $13,500,000,
plus such additional amount as may be authorized or approved by the
Commission under the Act. CL&P hereby is requesting that the Commission
approve such an additional amount to enable the payment of dividends and/or
the repurchase of stock, as described above. The actual amount over such
limit for which authorization is being sought depends on the amount of CL&P's
earned surplus at the time of the dividend payment or stock repurchase.
However, the maximum aggregate amount of capital expected to be transferred
to NU through these means during the Authorization Period will not exceed
$310 million. The Commission has previously approved the payment of
additional amounts under similar dividend restrictions upon a finding that
such approval was in the public interest. See, e.g., AEP Generating Co.,
H.C.A. Rel. No. 24989 (Nov. 21, 1989); Southern Elec. Gen. Co., H.C.A. Rel.
No. 14417 (April 25, 1961). The requested dividend payments and/or
repurchase of CL&P stock from restructuring proceeds are in the public
interest as it will not impair CL&P's ability to meet its obligations and it
will result in the benefits to the NU system, the NU shareholders and the
Utilities' customers described above. Without such authorization in this
case, much of the extraordinary funds received by CL&P through generation
asset sales and securitization would remain trapped at CL&P and would not be
available to benefit the NU system as a whole. Thus, such payments will not
negatively affect the interests sought to be protected under the dividend
restriction and CL&P's request should be approved.
Waiver of Commission's 30% Common Equity Ratio Test
11. As shown on Exhibit K hereto, the addition of securitization debt to
the balance sheets of CL&P, WMECO and PSNH on a pro forma basis will cause
these companies (and NU on a consolidated basis) to fail the Commission's
benchmark of 30% common equity-to-capitalization test, with their respective
pro forma common equity ratios at 19.1%, 16.6%, 14.2% and 29.1%, As indicated
earlier, however, the ratings of the Utilities' respective senior debt
securities will be unaffected or will be improved by the issuance of the rate
reduction bonds, as such bonds are not considered obligations of the
Utilities by the ratings agencies. CL&P, WMECO and PSNH presently anticipate
that all such debt will have been amortized by no later than twelve years
after the respective date when such company has issued the maximum principal
amount of rate reduction bonds which it intends to issue ("Full
Securitization"). Thus the companies' common equity ratio will exceed 30% by
no later than the end of such period. Assuming a straight line amortization
over the twelve-year period from Full Securitization of $84 million annually
in the case of CL&P, $20 million annually in the case of WMECO and $50
million annually in the case of PSNH, each company's common equity ratio will
be over 30% by the end of the twelfth year. Assuming full amortization of
the rate reduction bonds by the end of the twelfth year, the common equity
ratio will reach 30% in the ninth year in the case of CL&P and in the tenth
year in the case of WMECO and PSNH. Accordingly, CL&P, WMECO and PSNH each
seek a waiver of the Commission's 30% common equity ratio test through the
end of the Authorization Period so long as the ratings on their senior debt
securities remain investment grade. Should any of the companies require a
waiver of such test subsequent to the end of the Authorization Period, an
extension of the requested waivers will be sought from the Commission. In all
likelihood, a sufficient amount of securitization debt will be amortized
prior to the end of such twelve year period to restore the companies' common
equity ratio to over 30% prior to that date, but at this point the terms of
such debt are not known so an earlier date cannot be reliably predicted. In
addition, NU seeks a waiver of the Commission's 30% consolidated common
equity ratio threshold through December 31, 2001.
Summary of Requested Action
12. The Applicants request that the Commission issue an order authorizing:
(a) the payment of dividends to, and/or the repurchase of stock from, NU out
of capital or unearned surplus by each of the Utilities during the
Authorization Period; (b) during the Authorization Period (i) the payment of
dividends to, and/or the repurchase of stock from, NU out of capital or
unearned surplus by NUEI, (ii) the payment of dividends to, and/or the
repurchase of stock from, NUEI out of capital or unearned surplus by each of
NGC, NGS, SE, HEC and SEPPI, and (iii) the payment of dividends to, and/or
the repurchase of stock from, HEC out of capital or unearned surplus by
Reeds, SECI and HEC Energy, (d) the payment of dividends and/or the
repurchase of stock out of capital or unearned surplus by CL&P to NU under
its Mortgage Indenture dividend covenant during the Authorization Period, (d)
the issuance of additional shares by NU to the extent necessary to fulfill
its obligations under the Forwards through December 31, 2000 and (e) the
waiver of the Commission's 30% common equity-to-total capitalization test as
to CL&P, WMECO and PSNH through the end of the Authorization Period so long
as the senior debt securities of each respective company remain investment
grade and as to NU through December 31, 2001. The following chart depicts
graphically the various approvals sought in this Application:
(a) Approvals Sought For Payment Of Dividends And/Or Repurchase Of Stock
Out Of Capital Or Unearned Surplus
Company
Maximum amount
CL&P
not in excess of $310 million*
WMECO
not in excess of $145 million.*
PSNH
not in excess of $297 million*
NAEC
not in excess of $164 million*
NUEI
not in excess of $132 million
NGC
not in excess of $10 million
NGS
not in excess of $10 million
SE
not in excess of $70 million
HEC (Consolidated)
SECI
HEC Energy
Reeds
not in excess of $19 million
SEPPI
not in excess of $8.5 million
* Sources limited to restructuring proceeds.
(b) Other Approvals
NU
(a) issuance of up to 8.5 million
additional shares to the
extent necessary to fulfill
Forward obligations
(b) waiver of the Commission's
30% common equity-to-
capitalization test through
December 31, 2001
WMECO
waiver of the Commission's 30%
common equity-to-capitalization
test through the end of the
Authorization Period so long as
the senior debt securities of
the company remain investment
grade.
PSNH
waiver of the Commission's 30%
common equity-to-capitalization
test through the end of the
Authorization Period so long as
the senior debt securities of
the company remain investment
grade.
CL&P
(a) payment of dividends and/or
repurchase of stock out of
capital or unearned surplus
from restructuring proceeds in
accordance with Mortgage
Indenture dividend covenant
(b) waiver of the Commission's
30% common equity-to-
capitalization test through the
end of the Authorization Period
so long as the senior debt
securities of the company
remain investment grade
Statement Pursuant to Rule 54
13. Except in accordance with the Act, none of the Applicants (a) have
acquired an ownership interest in an exempt wholesale generator ("EWG") or a
foreign utility company ("FUCO") as defined in Sections 32 and 33 of the Act,
or (b) now is or as a consequence of the transactions proposed herein will
become a party to, or has as a consequence of the transactions proposed
herein will have a right under, a service, sales or construction contract
with an EWG or a FUCO. None of the proceeds from the transactions proposed
herein will be used by the Applicants to acquire any securities of, or any
interest in, an EWG or a FUCO.1
_________________________
1. Please see the application/declaration filed with the Commission by
NU and NGS on August 26, 1999, as amended, in File No. 70-9543 concerning
the anticipated investments in EWGs by NU.
The Applicants are in compliance with Rule 53(a), (b) and (c), as
demonstrated by the following determinations:
(i) NU's aggregate investment in EWGs and FUCOs (i.e., amounts invested
in or committed to be invested in EWGs and FUCOs for which there is
no recourse to the NU) does not exceed 50% of NU and its
subsidiaries' consolidated retained earnings as reported for the
four most recent quarterly periods on NU's Form 10-K and 10-Qs.
At June 30, 1999 the ratio of such investment ($6 million) to such
consolidated retained earnings ($579 million) was 1 percent.
(ii) Ave Fenix (NU's only EWG or FUCO at this time) maintains books and
records, and prepares financial statements in accordance with Rule
53(a)(2). Furthermore, NU has undertaken to provide the
Commission with access to such books and records and financial
statements, as it may request.
(iii) No employees of the Applicants have rendered services to the
EWG/FUCO.
(iv) NU has submitted (a) a copy of each Form U-1 and Rule 24
certificate that has been filed with the Commission under Rule 53
and (b) a copy of Item 9 of Form U5S and Exhibits G and H thereof
to each state regulator having jurisdiction over all the rates of
NU's public utility subsidiaries.
(v) None of the Applicants have been the subject of a bankruptcy or
similar proceeding unless a plan of reorganization has been
confirmed in such proceeding. In addition, although NU's average
consolidated retained earnings ("CREs") for the four most recent
quarterly periods have decreased by 10% or more from the average
for the previous four quarterly periods (at June 30, 1998, NU's
CREs were $698 million; at June 30, 1999 NU's CREs were $579
million), NU's aggregate investment in EWGs/FUCOs at such date ($6
million) did not exceed two percent of NU's consolidated capital
invested in utility operations ($5,950 million).
(vi) In the previous fiscal year, NU did not report operating losses
attributable to its investment in EWGs/FUCOs, unless such losses
did not exceed 5 percent of NU's consolidated retained earnings.
ITEM 2
FEES, COMMISSIONS AND EXPENSES
14. The fees, commissions and expenses paid or incurred, or to be paid or
incurred, directly or indirectly, in connection with the proposed
transactions by the Applicants are not expected to exceed $150,000 and are
expected to be comprised primarily of fees for ordinary legal, accounting and
investment banking services. None of such fees, commissions or expenses will
be paid to any associate company or affiliate of the Applicants except for
payments to Northeast Utilities Service Company for financial and other
services.
ITEM 3
APPLICABLE STATUTORY PROVISIONS
15. Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and Rules 26(c)(3), 42,
43, 44 and 46(a) thereunder are or may be applicable to the proposed
transactions. To the extent any other sections of the Act or Rules
thereunder may be applicable to the proposed transaction, the Applicants
request appropriate orders thereunder.
ITEM 4
REGULATORY APPROVALS
16. No state or Federal regulatory approval, other than the approval of the
Commission pursuant to this Application, is required to consummate the
transactions described herein, except that NU will be required to register
any shares issuable under the terms of a Forward to compensate for a funding
deficiency if a Forward terminates under the provisions of the Securities Act
of 1933, as amended.
ITEM 5
PROCEDURE
17. The Applicants respectfully request the Commission's approval, pursuant
to this Application, of all transactions described herein, whether under the
sections of the Act and Rules thereunder enumerated in Item 3 or otherwise.
It is further requested that the Commission issue an order authorizing the
transactions proposed herein at the earliest practicable date, but in any
event no later than February 29, 2000. Additionally, the Applicants (i)
request that there not be any recommended decision by a hearing officer or by
any responsible officer of the Commission, (ii) consent to the Office of
Public Utility Regulation within the Division of Investment Management
assisting in the preparation of the Commission's decision, and (iii) waive
the 30-day waiting period between the issuance of the Commission's order and
on the date on which it is to become effective, since it is desired that the
Commission's order when issued, become effective immediately.
ITEM 6
EXHIBITS AND FINANCIAL STATEMENTS
(asterisked (*) items were previously filed) .
18. (a) Exhibits
*A. Pro Forma Capitalization Ratios Schedule
*F. Opinion of Counsel
*G. Financial Data Schedules
*H. Proposed Form of Notice
*H.1 Revised Proposed Form of Notice
*I. Chart Depicting Utilities' Proceeds from Restructuring Transactions
and Uses Thereof
*J. CL&P Mortgage Indenture Dividend Covenant
K. Projected Capital Structure with Rate Reduction Bonds.
* (b)Financial Statements
1. Northeast Utilities and Subsidiaries (consolidated)
1.1 Balance Sheet, per books and pro forma, as of June 30,
1999.
1.2 Statement of Income, per books and pro forma, for 12
months ended June 30, 1999 and capital structure, per
books and pro forma, as of June 30, 1999.
2. Northeast Utilities (parent company only).
2.1 Balance Sheet, per books and pro forma, as of June 30,
1999.
2.2 Statement of Income and Surplus, per books and pro forma,
for 12 months ended June 30, 1999 and capital structure,
per books and pro forma, as of June 30, 1999.
3. The Connecticut Light and Power Company
3.1 Balance Sheet, per books and pro forma, as of June 30,
1999.
3.2 Statement of Income and Surplus, per books and pro forma,
for 12 months ended June 30, 1999 and capital structure,
per books and pro forma, as of June 30, 1999.
4. Public Service Company of New Hampshire
4.1 Balance Sheet, per books and pro forma, as of June 30,
1999.
4.2 Statement of Income and Surplus, per books and pro forma,
for 12 months ended June 30, 1999 and capital structure,
per books and pro forma, as of June 30, 1999.
5. Western Massachusetts Electric Company
5.1 Balance Sheet, per books and pro forma, as of June 30,
1999.
5.2 Statement of Income and Surplus, per books and pro forma,
for 12 months ended June 30, 1999 and capital structure,
per books and pro forma, as of June 30, 1999.
6. North Atlantic Energy Corporation
6.1 Balance Sheet, per books and pro forma, as of June 30,
1999.
6.2 Statement of Income and Surplus, per books and pro forma,
for 12 months ended June 30, 1999 and capital structure,
per books and pro forma, as of June 30, 1999.
ITEM 7
INFORMATION AS TO ENVIRONMENTAL EFFECTS
19. (a) The financial transactions described herein do not involve a major
Federal action significantly affecting the quality of the human environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transaction.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, as amended, the undersigned companies have duly caused this statement
to be signed on their behalf by the undersigned thereunto duly authorized.
NORTHEAST UTILITIES
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By: /s/ Randy A. Shoop
Randy A. Shoop
Assistant Treasurer- Finance
THE CONNECTICUT LIGHT AND POWER COMPANY
By: /s/ Randy A. Shoop
Randy A. Shoop
Treasurer
NORTH ATLANTIC ENERGY CORPORATION
NU ENTERPRISES, INC.
NORTHEAST GENERATION COMPANY
NORTHEAST GENERATION SERVICES COMPANY
SELECT ENERGY, INC.
SELECT ENERGY PORTLAND PIPELINE, INC.
HEC ENERGY CONSULTING CANADA, INC.
REEDS FERRY SUPPLY CO, INC.
By: /s/ Frederic Lee Klein
Frederic Lee Klein
Assistant Secretary
HEC INC.
SELECT ENERGY CONTRACTING, INC.
By:/s/ Frederic Lee Klein
Frederic Lee Klein
Assistant Clerk
Date: February 17, 2000
EXHIBIT K
Total Common
Capitalization Equity %
Northeast Utilities 6,221,145 1,808,972
29.1%
The Connecticut Light and Power Company 3,247,510 619,043
19.1%
Western Massachusetts Electric Company 561,384 93,166
16.6%
Public Service Company of New Hampshire 1,176,826 166,788
14.2%
Total Capitalization includes:
total common stockholder's equity
preferred stock not subject to mandatory redemption
preferred stock subject to mandatory redemption
long-term debt
minority interest in consolidated subsidiaries
rate reduction bond obligations
notes payable to banks and affiliated companies
current portion of long-term debt and preferred stock
Projected Capital Structure with RRBs
Post
Restructuring
$ %
Northeast Utilities
(1) Rate Reduction Bonds 2,516,800 40.46%
(2) Other Debt and Preferred Stock 1,895,373 30.47%
(3) Common Equity 1,808,972 29.08%
Total Capitalization 6,221,145 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,489,082 45.85%
(2) Other Debt and Preferred Stock 1,139,385 35.08%
(3) Common Equity 619,043 19.06%
Total Capitalization 3,247,510 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 302,718 53.92%
(2) Other Debt and Preferred Stock 165,500 29.48%
(3) Common Equity 93,166 16.60%
Total Capitalization 561,384 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 725,000 61.61%
(2) Other Debt and Preferred Stock 285,038 24.22%
(3) Common Equity 166,788 14.17%
Total Capitalization 1,176,826 100.00%
ASSUMPTIONS
(1) Straight - Line Amortization Per Year
CL&P 84,000
WMECO 20,000
PSNH 50,000
(2) Total Debt and Preferred Stock includes:
preferred stock not subject to mandatory redemption
preferred stock subject to mandatory redemption
long-term debt
minority interest in consolidated subsidiaries
rate reduction bond obligations
notes payable to banks and affiliated companies
current portion of long-term debt and preferred stock
(3) 1% increase in capital reflects net impact of 2%
increase in net income and 50% dividend payout
Year 1
$ %
Northeast Utilities
(1) Rate Reduction Bonds 2,362,800 38.83%
(2) Other Debt and Preferred Stock 1,895,373 31.15%
(3) Common Equity 1,827,062 30.02%
Total Capitalization 6,085,235 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,405,082 44.33%
(2) Other Debt and Preferred Stock 1,139,385 35.95%
(3) Common Equity 625,233 19.73%
Total Capitalization 3,169,700 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 282,718 52.13%
(2) Other Debt and Preferred Stock 165,500 30.52%
(3) Common Equity 94,098 17.35%
Total Capitalization 542,316 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 675,000 59.81%
(2) Other Debt and Preferred Stock 285,038 25.26%
(3) Common Equity 168,456 14.93%
Total Capitalization 1,128,494 100.00%
Year 2
$ %
Northeast Utilities
(1) Rate Reduction Bonds 2,208,800 37.13%
(2) Other Debt and Preferred Stock 1,895,373 31.86%
(3) Common Equity 1,845,332 31.02%
Total Capitalization 5,949,505 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,321,082 42.73%
(2) Other Debt and Preferred Stock 1,139,385 36.85%
(3) Common Equity 631,486 20.42%
Total Capitalization 3,091,953 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 262,718 50.21%
(2) Other Debt and Preferred Stock 165,500 31.63%
(3) Common Equity 95,039 18.16%
Total Capitalization 523,257 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 625,000 57.86%
(2) Other Debt and Preferred Stock 285,038 26.39%
(3) Common Equity 170,140 15.75%
Total Capitalization 1,080,178 100.00%
Year 3
$ %
Northeast Utilities
(1) Rate Reduction Bonds 2,054,800 35.34%
(2) Other Debt and Preferred Stock 1,895,373 32.60%
(3) Common Equity 1,863,786 32.06%
Total Capitalization 5,813,959 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,237,082 41.04%
(2) Other Debt and Preferred Stock 1,139,385 37.80%
(3) Common Equity 637,801 21.16%
Total Capitalization 3,014,268 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 242,718 48.14%
(2) Other Debt and Preferred Stock 165,500 32.82%
(3) Common Equity 95,989 19.04%
Total Capitalization 504,207 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 575,000 55.72%
(2) Other Debt and Preferred Stock 285,038 27.62%
(3) Common Equity 171,842 16.65%
Total Capitalization 1,031,880 100.00%
Year 4
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,900,800 33.47%
(2) Other Debt and Preferred Stock 1,895,373 33.38%
(3) Common Equity 1,882,424 33.15%
Total Capitalization 5,678,597 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,153,082 39.27%
(2) Other Debt and Preferred Stock 1,139,385 38.80%
(3) Common Equity 644,179 21.94%
Total Capitalization 2,936,646 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 222,718 45.91%
(2) Other Debt and Preferred Stock 165,500 34.11%
(3) Common Equity 96,949 19.98%
Total Capitalization 485,167 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 525,000 53.38%
(2) Other Debt and Preferred Stock 285,038 28.98%
(3) Common Equity 173,560 17.65%
Total Capitalization 983,598 100.00%
Year 5
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,746,800 31.51%
(2) Other Debt and Preferred Stock 1,895,373 34.19%
(3) Common Equity 1,901,248 34.30%
Total Capitalization 5,543,421 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,069,082 37.39%
(2) Other Debt and Preferred Stock 1,139,385 39.85%
(3) Common Equity 650,620 22.76%
Total Capitalization 2,859,087 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 202,718 43.49%
(2) Other Debt and Preferred Stock 165,500 35.50%
(3) Common Equity 97,918 21.01%
Total Capitalization 466,136 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 475,000 50.78%
(2) Other Debt and Preferred Stock 285,038 30.47%
(3) Common Equity 175,296 18.74%
Total Capitalization 935,334 100.00%
Year 6
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,592,800 29.45%
(2) Other Debt and Preferred Stock 1,895,373 35.04%
(3) Common Equity 1,920,260 35.50%
Total Capitalization 5,408,433 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 985,082 35.41%
(2) Other Debt and Preferred Stock 1,139,385 40.96%
(3) Common Equity 657,127 23.62%
Total Capitalization 2,781,594 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 182,718 40.87%
(2) Other Debt and Preferred Stock 165,500 37.02%
(3) Common Equity 98,898 22.12%
Total Capitalization 447,116 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 425,000 47.91%
(2) Other Debt and Preferred Stock 285,038 32.13%
(3) Common Equity 177,049 19.96%
Total Capitalization 887,087 100.00%
Year 7
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,438,800 27.28%
(2) Other Debt and Preferred Stock 1,895,373 35.94%
(3) Common Equity 1,939,463 36.78%
Total Capitalization 5,273,636 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 901,082 33.32%
(2) Other Debt and Preferred Stock 1,139,385 42.13%
(3) Common Equity 663,698 24.54%
Total Capitalization 2,704,165 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 162,718 38.01%
(2) Other Debt and Preferred Stock 165,500 38.66%
(3) Common Equity 99,887 23.33%
Total Capitalization 428,105 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 375,000 44.70%
(2) Other Debt and Preferred Stock 285,038 33.98%
(3) Common Equity 178,819 21.32%
Total Capitalization 838,857 100.00%
Year 8
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,284,800 25.00%
(2) Other Debt and Preferred Stock 1,895,373 36.88%
(3) Common Equity 1,958,857 38.12%
Total Capitalization 5,139,030 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 817,082 31.11%
(2) Other Debt and Preferred Stock 1,139,385 43.38%
(3) Common Equity 670,335 25.52%
Total Capitalization 2,626,802 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 142,718 34.89%
(2) Other Debt and Preferred Stock 165,500 40.45%
(3) Common Equity 100,885 24.66%
Total Capitalization 409,103 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 325,000 41.11%
(2) Other Debt and Preferred Stock 285,038 36.05%
(3) Common Equity 180,608 22.84%
Total Capitalization 790,646 100.00%
Year 9
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,130,800 22.60%
(2) Other Debt and Preferred Stock 1,895,373 37.87%
(3) Common Equity 1,978,446 39.53%
Total Capitalization 5,004,619 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 733,082 28.75%
(2) Other Debt and Preferred Stock 1,139,385 44.69%
(3) Common Equity 677,038 26.56%
Total Capitalization 2,549,505 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 122,718 31.46%
(2) Other Debt and Preferred Stock 165,500 42.42%
(3) Common Equity 101,894 26.12%
Total Capitalization 390,112 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 275,000 37.04%
(2) Other Debt and Preferred Stock 285,038 38.39%
(3) Common Equity 182,414 24.57%
Total Capitalization 742,452 100.00%
Year 10
$ %
Northeast Utilities
(1) Rate Reduction Bonds 976,800 20.06%
(2) Other Debt and Preferred Stock 1,895,373 38.92%
(3) Common Equity 1,998,230 41.03%
Total Capitalization 4,870,403 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 649,082 26.25%
(2) Other Debt and Preferred Stock 1,139,385 46.09%
(3) Common Equity 683,809 27.66%
Total Capitalization 2,472,276 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 102,718 27.68%
(2) Other Debt and Preferred Stock 165,500 44.59%
(3) Common Equity 102,913 27.73%
Total Capitalization 371,131 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 225,000 32.41%
(2) Other Debt and Preferred Stock 285,038 41.06%
(3) Common Equity 184,238 26.54%
Total Capitalization 694,276 100.00%
Year 11
$ %
Northeast Utilities
(1) Rate Reduction Bonds 822,800 17.37%
(2) Other Debt and Preferred Stock 1,895,373 40.02%
(3) Common Equity 2,018,213 42.61%
Total Capitalization 4,736,386 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 565,082 23.59%
(2) Other Debt and Preferred Stock 1,139,385 47.57%
(3) Common Equity 690,647 28.84%
Total Capitalization 2,395,114 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 82,718 23.49%
(2) Other Debt and Preferred Stock 165,500 47.00%
(3) Common Equity 103,942 29.52%
Total Capitalization 352,160 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 175,000 27.08%
(2) Other Debt and Preferred Stock 285,038 44.12%
(3) Common Equity 186,080 28.80%
Total Capitalization 646,118 100.00%
Year 12
$ %
Northeast Utilities
(1) Rate Reduction Bonds 668,800 14.53%
(2) Other Debt and Preferred Stock 1,895,373 41.18%
(3) Common Equity 2,038,395 44.29%
Total Capitalization 4,602,568 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 481,082 20.75%
(2) Other Debt and Preferred Stock 1,139,385 49.15%
(3) Common Equity 697,553 30.09%
Total Capitalization 2,318,020 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 62,718 18.82%
(2) Other Debt and Preferred Stock 165,500 49.67%
(3) Common Equity 104,982 31.51%
Total Capitalization 333,200 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 125,000 20.90%
(2) Other Debt and Preferred Stock 285,038 47.67%
(3) Common Equity 187,941 31.43%
Total Capitalization 597,979 100.00%
Break Even Straight Line Amortization
Post
Restructuring
$ %
Northeast Utilities
(1) Rate Reduction Bonds 2,516,800 40.46%
(2) Other Debt and Preferred Stock 1,895,373 30.47%
(3) Common Equity 1,808,972 29.08%
Total Capitalization 6,221,145 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,489,082 45.85%
(2) Other Debt and Preferred Stock 1,139,385 35.08%
(3) Common Equity 619,043 19.06%
Total Capitalization 3,247,510 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 302,718 53.92%
(2) Other Debt and Preferred Stock 165,500 29.48%
(3) Common Equity 93,166 16.60%
Total Capitalization 561,384 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 725,000 61.61%
(2) Other Debt and Preferred Stock 285,038 24.22%
(3) Common Equity 166,788 14.17%
Total Capitalization 1,176,826 100.00%
ASSUMPTIONS
(1) Straight - Line Amortization
Principal Repayment in 12 years Per Year
CL&P 124,090
WMECO 25,227
PSNH 60,417
(2) Total Debt and Preferred Stock includes:
preferred stock not subject to mandatory redemption
preferred stock subject to mandatory redemption
long-term debt
minority interest in consolidated subsidiaries
rate reduction bond obligations
notes payable to banks and affiliated companies
current portion of long-term debt and preferred stock
(3) 1% increase in capital reflects net impact of 2%
increase in net income and 50% dividend payout
Year 1
$ %
Northeast Utilities
(1) Rate Reduction Bonds 2,307,067 38.26%
(2) Other Debt and Preferred Stock 1,895,373 31.43%
(3) Common Equity 1,827,062 30.30%
Total Capitalization 6,029,501 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,364,992 43.62%
(2) Other Debt and Preferred Stock 1,139,385 36.41%
(3) Common Equity 625,233 19.98%
Total Capitalization 3,129,610 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 277,491.50 51.67%
(2) Other Debt and Preferred Stock 165,500 30.81%
(3) Common Equity 94,098 17.52%
Total Capitalization 537,089 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 664,583 59.44%
(2) Other Debt and Preferred Stock 285,038 25.49%
(3) Common Equity 168,456 15.07%
Total Capitalization 1,118,077 100.00%
Year 2
$ %
Northeast Utilities
(1) Rate Reduction Bonds 2,097,333 35.93%
(2) Other Debt and Preferred Stock 1,895,373 32.47%
(3) Common Equity 1,845,332 31.61%
Total Capitalization 5,838,039 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,240,902 41.20%
(2) Other Debt and Preferred Stock 1,139,385 37.83%
(3) Common Equity 631,486 20.97%
Total Capitalization 3,011,772 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 252,265.00 49.19%
(2) Other Debt and Preferred Stock 165,500 32.27%
(3) Common Equity 95,039 18.53%
Total Capitalization 512,804 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 604,167 57.03%
(2) Other Debt and Preferred Stock 285,038 26.91%
(3) Common Equity 170,140 16.06%
Total Capitalization 1,059,345 100.00%
Year 3
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,887,600 33.43%
(2) Other Debt and Preferred Stock 1,895,373 33.57%
(3) Common Equity 1,863,786 33.01%
Total Capitalization 5,646,759 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 1,116,812 38.59%
(2) Other Debt and Preferred Stock 1,139,385 39.37%
(3) Common Equity 637,801 22.04%
Total Capitalization 2,893,997 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 227,038.50 46.47%
(2) Other Debt and Preferred Stock 165,500 33.88%
(3) Common Equity 95,989 19.65%
Total Capitalization 488,528 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 543,750 54.34%
(2) Other Debt and Preferred Stock 285,038 28.49%
(3) Common Equity 171,842 17.17%
Total Capitalization 1,000,630 100.00%
Year 4
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,677,867 30.75%
(2) Other Debt and Preferred Stock 1,895,373 34.74%
(3) Common Equity 1,882,424 34.50%
Total Capitalization 5,455,663 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 992,721 35.76%
(2) Other Debt and Preferred Stock 1,139,385 41.04%
(3) Common Equity 644,179 23.20%
Total Capitalization 2,776,285 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 201,812.00 43.47%
(2) Other Debt and Preferred Stock 165,500 35.65%
(3) Common Equity 96,949 20.88%
Total Capitalization 464,261 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 483,333 51.31%
(2) Other Debt and Preferred Stock 285,038 30.26%
(3) Common Equity 173,560 18.43%
Total Capitalization 941,932 100.00%
Year 5
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,468,133 27.89%
(2) Other Debt and Preferred Stock 1,895,373 36.00%
(3) Common Equity 1,901,248 36.11%
Total Capitalization 5,264,754 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 868,631 32.67%
(2) Other Debt and Preferred Stock 1,139,385 42.86%
(3) Common Equity 650,620 24.47%
Total Capitalization 2,658,637 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 176,585.50 40.13%
(2) Other Debt and Preferred Stock 165,500 37.61%
(3) Common Equity 97,918 22.25%
Total Capitalization 440,004 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 422,917 47.88%
(2) Other Debt and Preferred Stock 285,038 32.27%
(3) Common Equity 175,296 19.85%
Total Capitalization 883,251 100.00%
Year 6
%
Northeast Utilities
(1) Rate Reduction Bonds 1,258,400 24.80%
(2) Other Debt and Preferred Stock 1,895,373 37.35%
(3) Common Equity 1,920,260 37.84%
Total Capitalization 5,074,033 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 744,541 29.30%
(2) Other Debt and Preferred Stock 1,139,385 44.84%
(3) Common Equity 657,127 25.86%
Total Capitalization 2,541,053 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 151,359.00 36.41%
(2) Other Debt and Preferred Stock 165,500 39.81%
(3) Common Equity 98,898 23.79%
Total Capitalization 415,757 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 362,500 43.96%
(2) Other Debt and Preferred Stock 285,038 34.57%
(3) Common Equity 177,049 21.47%
Total Capitalization 824,587 100.00%
Year 7
$ %
Northeast Utilities
(1) Rate Reduction Bonds 1,048,667 21.47%
(2) Other Debt and Preferred Stock 1,895,373 38.81%
(3) Common Equity 1,939,463 39.71%
Total Capitalization 4,883,502 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 620,451 25.60%
(2) Other Debt and Preferred Stock 1,139,385 47.01%
(3) Common Equity 663,698 27.39%
Total Capitalization 2,423,534 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 126,132.50 32.22%
(2) Other Debt and Preferred Stock 165,500 42.27%
(3) Common Equity 99,887 25.51%
Total Capitalization 391,519 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 302,083 39.44%
(2) Other Debt and Preferred Stock 285,038 37.21%
(3) Common Equity 178,819 23.35%
Total Capitalization 765,941 100.00%
Year 8
$ %
Northeast Utilities
(1) Rate Reduction Bonds 838,933 17.88%
(2) Other Debt and Preferred Stock 1,895,373 40.39%
(3) Common Equity 1,958,857 41.74%
Total Capitalization 4,693,164 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 496,361 21.52%
(2) Other Debt and Preferred Stock 1,139,385 49.41%
(3) Common Equity 670,335 29.07%
Total Capitalization 2,306,081 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 100,906.00 27.47%
(2) Other Debt and Preferred Stock 165,500 45.06%
(3) Common Equity 100,885 27.47%
Total Capitalization 367,291 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 241,667 34.17%
(2) Other Debt and Preferred Stock 285,038 40.30%
(3) Common Equity 180,608 25.53%
Total Capitalization 707,312 100.00%
Year 9
$ %
Northeast Utilities
(1) Rate Reduction Bonds 629,200 13.97%
(2) Other Debt and Preferred Stock 1,895,373 42.09%
(3) Common Equity 1,978,446 43.94%
Total Capitalization 4,503,019 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 372,270 17.01%
(2) Other Debt and Preferred Stock 1,139,385 52.06%
(3) Common Equity 677,038 30.93%
Total Capitalization 2,188,694 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 75,679.50 22.06%
(2) Other Debt and Preferred Stock 165,500 48.24%
(3) Common Equity 101,894 29.70%
Total Capitalization 343,074 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 181,250 27.94%
(2) Other Debt and Preferred Stock 285,038 43.94%
(3) Common Equity 182,414 28.12%
Total Capitalization 648,702 100.00%
Year 10
$ %
Northeast Utilities
(1) Rate Reduction Bonds 419,467 9.73%
(2) Other Debt and Preferred Stock 1,895,373 43.94%
(3) Common Equity 1,998,230 46.33%
Total Capitalization 4,313,070 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 248,180 11.98%
(2) Other Debt and Preferred Stock 1,139,385 55.01%
(3) Common Equity 683,809 33.01%
Total Capitalization 2,071,374 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 50,453.00 15.82%
(2) Other Debt and Preferred Stock 165,500 51.90%
(3) Common Equity 102,913 32.27%
Total Capitalization 318,866 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 120,833 20.48%
(2) Other Debt and Preferred Stock 285,038 48.30%
(3) Common Equity 184,238 31.22%
Total Capitalization 590,109 100.00%
Year 11
$ %
Northeast Utilities
(1) Rate Reduction Bonds 209,733 5.09%
(2) Other Debt and Preferred Stock 1,895,373 45.97%
(3) Common Equity 2,018,213 48.95%
Total Capitalization 4,123,319 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds 124,090 6.35%
(2) Other Debt and Preferred Stock 1,139,385 58.31%
(3) Common Equity 690,647 35.34%
Total Capitalization 1,954,122 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds 25,226.50 8.56%
(2) Other Debt and Preferred Stock 165,500 56.16%
(3) Common Equity 103,942 35.27%
Total Capitalization 294,669 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds 60,417 11.37%
(2) Other Debt and Preferred Stock 285,038 53.63%
(3) Common Equity 186,080 35.01%
Total Capitalization 531,535 100.00%
Year 12
$ %
Northeast Utilities
(1) Rate Reduction Bonds - 0.00%
(2) Other Debt and Preferred Stock 1,895,373 48.18%
(3) Common Equity 2,038,395 51.82%
Total Capitalization 3,933,768 100.00%
The Connecticut Light and Power Company
(1) Rate Reduction Bonds - 0.00%
(2) Other Debt and Preferred Stock 1,139,385 62.03%
(3) Common Equity 697,553 37.97%
Total Capitalization 1,836,938 100.00%
Western Massachusetts Electric Company
(1) Rate Reduction Bonds - 0.00%
(2) Other Debt and Preferred Stock 165,500 61.19%
(3) Common Equity 104,982 38.81%
Total Capitalization 270,482 100.00%
Public Service Company of New Hampshire
(1) Rate Reduction Bonds - 0.00%
(2) Other Debt and Preferred Stock 285,038 60.26%
(3) Common Equity 187,941 39.74%
Total Capitalization 472,979 100.00%
