Modified
FORM U-13-60
ANNUAL REPORT
For the Period
Beginning January 1, 1998 and Ending December 31, 1998
To The
U.S. Securities and Exchange Commission
of
HEC Inc.
A Subsidiary Service Company
Date of Incorporation: June 19, 1990
State under which Incorporated:
The Commonwealth of Massachusetts
Location of Principal Executive Offices of Reporting Company
24 Prime Parkway
Natick, MA 01760
Report filed pursuant to Order dated July 27, 1990
in file number 70-7698
Name, title, and address of officer to whom correspondence concerning
this report should be addressed:
Linda A. Jensen, Treasurer
HEC Inc.
24 Prime Parkway
Natick, MA 01760
Name of Principal Holding Company Under Which Reporting
Company is Organized:
Northeast Utilities
INSTRUCTIONS FOR THE USE OF MODIFIED FORM U-13-60
1. Number of Copies - Each annual report shall be filed in duplicate.
The company should prepare and retain at least one extra copy for itself in case
correspondence with reference to the report becomes necessary.
2. Definitions - Definitions contained in Instruction 01-8 to the
Uniform System of Accounts for Mutual Service Companies and Subsidiary Service
Companies, Public Utility Holding Company Act of 1935, as amended February 2,
1979 shall be applicable to words or terms used specifically within this Form
U-13-60.
3. Organization Chart - The company shall submit with each annual
report a copy of its current organization chart.
LISTING OF SCHEDULES AND ANALYSIS OF ACCOUNTS
Schedule or Page
Description of Schedules and Accounts Acct. No. No.
Description of system of accounting 3
COMPARATIVE BALANCE SHEET Schedule I 4-5
Company property Schedule II 6
Accumulated provision for depreciation and
amortization of company property Schedule III 7
Accounts receivable and accounts
receivable from associate companies Schedule V 8
Miscellaneous deferred debits Schedule IX 9
Proprietary capital Schedule XI 10
Long-term Debt Schedule XII 11
Current and accrued liabilities Schedule XIII 12
Notes to financial statements Schedule XIV 13-14
COMPARATIVE INCOME STATEMENT Schedule XV 15
Analysis of billing - non-associate
companies Account 458 16
Departmental analysis of salaries Account 920 17
Outside services employed Account 923 18-19
Miscellaneous general expenses Account 930.2 20
Rents Account 931 21
Taxes other than income taxes Account 408 22
Notes to statement of income Schedule XVIII 23
(included above)
ORGANIZATION CHART 24
Annual Report of: HEC Inc.
for the Twelve Months Ended December 31, 1998
Description of the system of accounting employed by HEC Inc.:
HEC Inc. maintains its accounting books and records on a computer network using
a general ledger software package developed by BST Consultants. The chart of
accounts is a standard set developed for architectural and engineering firms.
Revenues and expenses are recorded on an accrual basis. A more detailed
description of HEC's accounting policies can be found in the Notes to the
Financial Statements.
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
SCHEDULE I - COMPARATIVE BALANCE SHEET
Give balance sheet of the Company as of December 31, 1998 and 1997
- ------------------------------------------------------------- ------------ ------------
ACCOUNT ASSETS AND OTHER DEBITS AS OF DECEMBER 31
- ------------------------------------------------------------- ------------ ------------
1998 1997
<S> <C> <C>
COMPANY PROPERTY
101 Company property (Schedule II) $ 4,291,941 $ 4,148,484
107 Construction work in progress (Schedule II) 0 0
------------ ------------
Total Property 4,291,941 4,148,484
------------ ------------
108 Less accumulated provision for depreciation and
amortization of company property (Schedule III) 3,012,857 2,569,422
------------ ------------
Net Company Property 1,279,084 1,579,062
------------ ------------
INVESTMENTS
123 Investments in associate companies (Schedule IV) 0 0
124 Other Investments (Schedule IV) 0 0
------------ ------------
Total Investments 0 0
------------ ------------
CURRENT AND ACCRUED ASSETS
131 Cash 423,493 509,552
134 Special deposits
135 Working funds 1,800 1,800
136 Temporary cash investments (Schedule IV)
141 Notes receivable
143 Accounts receivable (Schedule V) 2,867,670 3,189,831
144 Accumulated provision of uncollectible accounts
145 Notes receivable from associate companies
146 Accounts receivable for associate companies (Schedule V) 796,281 617,924
152 Fuel stock expenses undistributed
154 Materials and supplies 0 25,888
163 Stores expense undistributed
165 Prepayments 144,498 124,486
174 Miscellaneous current and accrued assets
------------ ------------
Total Current and Accrued Assets 4,233,742 4,469,481
------------ ------------
DEFERRED DEBITS
181 Unamortized debt expense
184 Clearing Accounts
186 Miscellaneous deferred debits (Schedule IX) 1,923,274 2,174,417
188 Research, development, or demonstration expenditures 0 0
190 Accumulated deferred income taxes 79,703 79,703
------------ ------------
Total Deferred Debits 2,002,977 2,254,120
------------ ------------
TOTAL ASSETS AND OTHER DEBITS $ 7,515,803 $ 8,302,663
============ ============
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
SCHEDULE I - COMPARATIVE BALANCE SHEET
Give balance sheet of the Company as of December 31, 1998 and 1997
- ------------------------------------------------------------- ------------ ------------
ACCOUNT LIABILITIES AND PROPRIETARY CAPITAL AS OF DECEMBER 31
- ------------------------------------------------------------- ------------ ------------
1998 1997
<S> <C> <C>
PROPRIETARY CAPITAL
201 Common stock issued (Schedule XI) $ 100 $ 100
211 Miscellaneous paid-in capital (Schedule XI) 3,998,565 3,999,180
215 Appropriated Retained Earnings (Schedule XI) 0 0
216 Unappropriated Retained Earnings (Schedule XI) (562,215) 112,557
------------ ------------
Total Proprietary Capital 3,436,450 4,111,837
------------ ------------
LONG-TERM DEBT
223 Advances from associate companies (Schedule XII) 0 0
224 Other long-term debt (Schedule XII) 525,000 250,000
225 Unamortized premium on long-term debt 0 0
226 Unamortized discount on long-term debt 0 0
------------ ------------
Total Long Term Debt 525,000 250,000
------------ ------------
CURRENT AND ACCRUED LIABILITIES
231 Notes Payable
232 Accounts Payable 1,520,936 1,996,286
233 Notes payable to associate co's (Schedule XIII) 1,000,000 600,000
234 Accounts payable to associate co's (Schedule XIII) 55,704 27,188
236 Taxes accrued 220,528 381,522
237 Interest Accrued
238 Dividends declared
241 Tax collections payable (Schedule XIII) 18,124 9,227
242 Misc. current and accrued liabilities (Schedule XIII) 570,132 538,669
------------ ------------
Total Current and Accrued Liabilities 3,385,424 3,552,892
------------ ------------
DEFERRED CREDITS
253 Other deferred credits
255 Accumulated deferred investment tax credits
------------ ------------
Total Deferred Credits 0 0
------------ ------------
283 Accumulated Deferred Income Taxes 168,929 387,934
------------ ------------
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $ 7,515,803 $ 8,302,663
============ ============
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Year Ended December 31, 1998
SCHEDULE II - COMPANY PROPERTY
BALANCE AT BALANCE AT
BEGINNING OTHER 1/ CLOSE
DESCRIPTION OF YEAR ADDITIONS SALES CHANGES OF YEAR
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMPANY PROPERTY
Account
- ------
301 ORGANIZATION 15,163 0 (580) 14,583
303 MISCELLANEOUS INTANGIBLE PLANT 0 0
304 LAND AND LAND RIGHTS 0 0
305 STRUCTURES AND IMPROVEMENTS 0 0
306 LEASEHOLD IMPROVEMENTS 14,398 0 (3,031) 11,367
307 EQUIPMENT 2/ 0 0
308 OFFICE FURNITURE & EQUIPMENT 1,247,942 126,583 0 1,374,525
309 AUTOMOBILES, OTHER VEHICLES 36,613 20,485 0 57,098
AND RELATED GARAGE EQUIPMENT
310 AIRCRAFT AND AIRPORT EQUIPMENT 0 0
311 OTHER COMPANY PROPERTY 3/ 2,834,368 2,834,368
---------------------------- ----------------------
SUBTOTAL 4,148,484 147,068 0 (3,611) 4,291,941
---------------------------- ----------------------
107 CONSTRUCTION WORK IN 0
PROGRESS 4/
---------------------------- ----------------------
TOTAL 4,148,484 147,068 0 (3,611) 4,291,941
============================ ======================
1/ PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
Not applicable
2/ SUB-ACCOUNTS ARE REQUIRED FOR EACH CLASS OF EQUIPMENT OWNED. THE COMPANY
SHALL PROVIDE A LISTING BY SUB-ACCOUNT OF EQUIPMENT ADDITIONS DURING THE
YEAR AND THE BALANCE AT THE CLOSE OF THE YEAR.
Not applicable
3/ DESCRIBE OTHER COMPANY PROPERTY:
ENCORE Inservice Property consists of energy efficient fixtures and
metering equipment installed in end-user facilities under a program
sponsored by a New England utility company. HEC Inc. is paid based on
the savings generated by the fixtures over a specified period of time.
The equipment remains the property of HEC Inc. until the end of the
contract and is amortized over the life of the contract.
4/ DESCRIBE CONSTRUCTION WORK IN PROGRESS
None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
SCHEDULE III
ACCUMULATED PROVISION FOR DEPRECIATION AND
AMORTIZATION OF COMPANY PROPERTY
BALANCE AT ADDITIONS OTHER 1/ BALANCE
BEGINNING CHARGED TO CHANGES AT CLOSE
DESCRIPTION OF YEAR ACCT 403/404 SALES ADD/(DEDUCT) OF YEAR
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMPANY PROPERTY
Account
- ------
301 ORGANIZATION 9,550 2,977 (425) 12,102
303 MISCELLANEOUS INTANGIBLE PLANT 0 0
304 LAND AND LAND RIGHTS 0 0
305 STRUCTURES AND IMPROVEMENTS 0 0
306 LEASEHOLD IMPROVEMENTS 7,369 1,500 8,869
307 EQUIPMENT 0 0
308 OFFICE FURNITURE & EQUIPMENT 841,779 149,690 0 991,469
309 AUTOMOBILES, OTHER VEHICLES 18,786 7,021 0 25,807
AND RELATED GARAGE EQUIPMENT
310 AIRCRAFT AND AIRPORT EQUIPMENT 0 0
311 OTHER COMPANY PROPERTY 2/ 1,691,938 282,672 1,974,610
------------------------------------------------------------
TOTAL 2,569,422 443,860 0 (425) 3,012,857
============================================================
1/ PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
Not applicable
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIAIRES
For the Twelve Months Ended December 31, 1998
SCHEDULE V - ACCOUNTS RECEIVABLE AND
ACCOUNTS RECEIVABLE FROM ASSOCIATE COMPANIES
INSTRUCTIONS: Complete the following schedule listing accounts receivable and
accounts receivable from each associate company. Where the
service company has provided accomodation or convenience
payments for associate companies, a separate listing of total
payments for each associate company by sub-account should be
provided.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
- -------------------------------------------------- ------------- ------------
<S> <C> <C>
Account
143 Accounts Receivable from clients $3,189,831 $2,867,670
---------- ----------
TOTAL $3,189,831 $2,867,670
========== ==========
146 Accounts Receivable from Associate Companies
Northeast Utilities Service Company $ 14,046 $ 0
The Connecticut Light & Power Company 113,412 723,496
Western Massachusetts Electric Company 490,466 72,785
Public Service Company of New Hampshire 0 0
---------- ----------
TOTAL $ 617,924 $ 796,281
========== ==========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
SCHEDULE IX - MISCELLANEOUS DEFERRED DEBITS
INSTRUCTIONS: Provide detail of items in this account. Items less than
$10,000 may be grouped, showing the number of items in each group.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
- ---------------------------------------------------- ------------ ----------
<S> <C> <C>
Account
- -------
186 Miscellaneous Deferred Debits
Accrued Receivable for energy systems &
design contracts, net $2,161,917 $1,913,274
West Virginia Legal Receivable 12,500 10,000
---------- ----------
TOTAL $2,174,417 $1,923,274
========== ==========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
SCHEDULE XI - PROPRIETARY CAPITAL
NUMBER OF PAR OR STATED OUTSTANDING CLOSE OF
SHARES VALUE NUMBER OF PERIOD
ACCT. CLASS OF STOCK AUTHORIZED PER SHARE SHARES TOTAL AMOUNT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
201 COMMON STOCK 100 1 100 100
- --------------------------------------------------------------------------------------------------
INSTRUCTIONS: Classify amounts in each account with brief explanations, disclosing
the general nature of transactions which give rise to the
reported amounts.
DESCRIPTION AMOUNT
- --------------------------------------------------------------------------------------------------
211 Miscellaneous paid-in-capital 4,000,000
211.84 Currency Translation Adjustment (1,435)
215 Appropriated Retained Earnings None
-------------
TOTAL 3,998,565
=============
INSTRUCTIONS: Give particulars concerning net income or (loss) during the year,
distinguishing between compensation for the use of capital owed or
net loss remaining for servicing nonassociates per the General
Instructions of the Uniforn Systems of Accounts. For dividends
paid during the year in cash or otherwise, provide rate percentage,
amount of dividend, date declared and date paid.
BALANCE AT NET INCOME BALANCE AT
BEGINNING OR DIVIDENDS CLOSE
DESCRIPTION OF YEAR (LOSS) PAID OF YEAR
- --------------------------------------------------------------------------------------------------
216 Unappropriated Retained Earnings 112,557 (674,772) 0 (562,215)
---------------------------------------------------------
TOTAL 112,557 (674,772) 0 (562,215)
=========================================================
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC. AND SUBSIDIARIES
For the Year Ended December 31, 1998
SCHEDULE XII
LONG-TERM DEBT
INSTRUCTIONS: Advances from associate companies should be reported separately for advances in
notes, and advances on open account. Names of associate companies from which
advances were received shall be shown under the class and series of obligation
column. for Account 224 - - Other long-term debt provide the name of creditor
company or organization, terms of obligation, date of maturity, interest rate,
and the amount authorized and outstanding.
- ---------------------- ---------------- ----------- --------- ---------- --------- ---------- ---------- ---------
BALANCE
TERMS OF OBLIG. DATE AT BALANCE
CLASS & SERIES OF INTEREST AMOUNT BEGINNING DEDUCTIONS AT CLOSE
NAME OF CREDITOR OF OBLIGATION MATURITY RATE AUTHORIZED OF YEAR ADDITIONS (1) OF YEAR
- ---------------------- ---------------- ----------- --------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACCOUNT 223 - $ $ $ $ $
ADVANCES FROM
ASSOCIATE
COMPANIES:
ACCOUNT 224 -
OTHER
LONG-TERM DEBT:
Arizona Public Service 1996 Secured Notes 12/31/2000 6.85% 250,000 250,000 0 0 250,000
Arizona Public Service 1997 Secured Notes 12/31/2000 6.85% 275,000 0 275,000 0 275,000
--------- --------- --------- ---------- ---------
$ 525,000 $ 250,000 $ 275,000 $ 0 $ 525,000
========= ========= ========= ========== =========
(1) GIVE AN EXPLANATION OF DEDUCTIONS:
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
SCHEDULE XIII - CURRENT ACCRUED LIABILITIES
INSTRUCTIONS: Provide balance of notes and accounts payable to each
associate company. Give descriptions and amount of
miscellaneous current and accrued liabilities. Items
less than $10,000 may be grouped, showing the number
of items in each group.
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
- --------------------------------------------- ------------- ----------
<S> <C> <C>
Account
- -------
233 NOTES PAYABLE TO ASSOCIATE COS. $ 600,000 $1,000,000
---------- ----------
TOTAL $ 600,000 $1,000,000
========== ==========
234 ACCOUNTS PAYABLE TO ASSOCIATE COS.
Northeast Utilities Service Company $ 27,188 $ 55,704
---------- ----------
TOTAL $ 27,188 $ 55,704
========== ==========
241 TAX COLLECTIONS PAYABLE $ 9,227 $ 18,124
---------- ----------
TOTAL $ 9,227 $ 18,124
========== ==========
242 MISCELLANEOUS CURRENT AND
ACCRUED VENDOR LIABILITIES
Accrued Audit Fee $ 43,119 $ 32,687
Accrued Commissions 0 0
Accrued Incentive Expense 172,726 119,069
Accrued Accounts Payable 0 26,288
Accrued Lighting Maintenance 32,832 37,596
Reserve for energy savings guarantee 104,000 104,000
Deferred Compensation 149,105 211,109
Accrued West Virginia Legal Credit 12,500 10,000
Subcontractors Advances 0 0
Miscellaneous (6 Items) 24,387 29,383
---------- ----------
TOTAL $ 538,669 $ 570,132
========== ==========
</TABLE>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
SCHEDULE XIV
NOTES TO FINANCIAL STATEMENTS
INSTRUCTIONS: The space below is provided for important notes regarding
the financial statements or any account thereof. Furnish
particulars as to any significant contingent assets or
liabilities existing at the end of the year. Notes relating
to financial statements shown elsewhere in this report may be
indicated here by reference.
(1) Summary of Significant Accounting Policies
(a) General
HEC Inc. (the "Company"), a wholly-owned subsidiary of Northeast
Utilities ("NU"), provides design and energy services for engineering
and installation of energy efficient equipment. The consolidated
statements of the Company include the accounts of Southwest HEC Energy
Services L.L.C., owned 99% by HEC and two wholly-owned subsidiaries,
HEC Energy Consulting Canada Inc. and HEC International Corporation.
Significant intercompany transactions have been eliminated in
consolidation.
(b) Revenue Recognition
Revenues include amounts earned under contracts for the design and
installation of energy systems and the realization of energy savings.
Certain revenues are recognized by the percentage-of-completion method as
work progresses for contracts in process. Other revenues are recognized
as savings are realized by customers. Losses on contracts are fully
recognized in the period they become estimable.
(c) Depreciation
Depreciation and amortization are provided using straight-line methods
over the estimated useful lives of the assets.
(2) Short-Term Debt
The Company is a participant in the Northeast Utilities system Money
Pool (Pool). As a limited participant, HEC is limited to borrowing funds
provided by NU parent. The Pool provides a more efficient use of the
cash resources of the system, and reduces outside short-term borrowings.
Northeast Utilities Service Company (a wholly-owned subsidiary of NU)
administers the Pool as agent for the member companies. Borrowing based
on loans from NU parent bear interest at NU parent's cost and must be
repaid based upon the terms of NU parent's original borrowing. At
December 31, 1998 and 1997, HEC had approximately $1,000,000 and $600,000
in borrowings at 4.8 and 5.5 percent respectively, from the Pool.
(3) Long-Term Debt
Southwest HEC entered into a variable debt agreement with Arizona Public
Service ("APS") on December 7, 1995. The note requires an initial loan of
$100,000 with additional advances to Southwest HEC of $50,000 quarterly,
beginning April 1, 1996, until a maximum balance of $250,000 was reached.
The interest rate is set annually based on the long-term interest rate APS
reports on its FERC Form 1. The 1998 interest for the notes was 6.85%.
During 1998, APS made additional advances amounting to $275,000 to help
fund the expansion of the federal government program. The interest rate
on the advances made in 1998 is the one year US Treasury Note rate, which
was 6.85%. The total principal is due on December 31, 2000, unless the
notes are converted to a 50% ownership in Southwest HEC.
(4) Defined Contribution Plan
The Company participates in NU's 401(k) plan which covers substantially
all employees. Eligible employees may contribute up to 16% of their
compensation to the plan, and the Company will contribute up to 3% of
each employee's compensation. Employees become vested in contributions
by specified percentages over a five year period.
(5) Leases
The Company has certain operating leases for offices and equipment
expiring at various dates through 2001. During 1998 and 1997, HEC charged
approximately $398,000 and $346,000, respectively, in operating lease
rental payments to operating expense. Future minimum rentals payable for
operating leases are as follows:
1999 304,480
2000 73,302
2001 18,185
Total $395,967
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998 and 1997
SCHEDULE XV - STATEMENT OF INCOME
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
ACCOUNT DESCRIPTION 1998 1997
- -------- --------------------------------------------- ------------ -----------
<S> <C> <C>
INCOME
457 Services rendered to Associate Companies $ 2,515,694 $ 2,969,691
458 Services rendered to Nonassociate Companies 20,192,403 34,822,403
421 Miscellaneous Income/(Loss) 152,095 149,192
----------- -----------
TOTAL INCOME 22,860,192 37,941,286
=========== ===========
EXPENSE
904 Reserve for Uncollectible Accounts 10,000 13,000
920 Salaries and Wages 4,350,734 3,815,597
921 Office Supplies and Expense 4,827,617 3,697,628
922 Administrative Expense transferred-credit 0 0
923 Outside Services Employed 12,632,911 28,196,373
924 Property Insurance 33,098 28,247
925 Injuries and Damages 126,270 117,832
926 Employee Pensions and Benefits 402,923 290,377
928 Regulatory Commission Expense
930.1 General Advertising Expense 2,940 6,177
930.2 Miscellaneous General Expense 88,502 79,335
931 Rents 397,899 345,845
935 Maintenance of Structures and Equipment 36,210 39,825
403 Depreciation and Amortization Expense 440,883 437,576
404 Amortization - Organization Costs 2,977 3,110
408 Taxes other than Income Taxes 355,851 327,317
409 Income Taxes 28,722 188,865
410 Provision for Deferred Income Taxes 0 10,973
411 Provision for Deferred Income Taxes-Credit (310,120) 0
411.5 Investment Tax Credit 0 0
426.1 Donations 0 0
426.5 Other Deductions 0 0
427 Interest on Long-term Debt 0 0
428 Amortize Debt Expenses 0 0
430 Interest on Debt to Associate Companies 74,971 17,105
431 Other Interest Expense 32,576 17,820
----------- -----------
TOTAL EXPENSE 23,534,964 37,633,002
----------- -----------
NET INCOME/(LOSS) $ (674,772) $ 308,284
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
ANALYSIS OF BILLING
NONASSOCIATE COMPANIES
ACCOUNT 458
EXCESS
OR TOTAL
DEFICIENCY AMOUNT
DESCRIPTION TOTAL COST 458-4 BILLED
- --------------- ---------------------- ------------ -----------
<S> <C>
ENERGY MANAGEMENT SERVICES $15,369,126
DEMAND SIDE MANAGEMENT SERVICES 184,941
CONSULTING SERVICES 4,638,336
-----------
TOTAL $20,192,403
===========
INSTRUCTIONS: Provide a brief description of the services
rendered to each nonassociate company.
Energy Management Services:
Engineering and installation of energy conservation measures.
Demand Side Management Services:
Engineering and consulting services in the design,
implementation, and evaluation of demand side management
programs.
Consulting Services:
Other engineering and design services.
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
DEPARTMENTAL ANALYSIS OF SALARIES
ACCOUNT 920
NAME OF DEPARTEMENT OR SALARY NUMBER OF
SERVICE FUNCTION EXPENSE PERSONNEL
- ---------------------------------------- ---------- -----------
<S> <C> <C>
ADMINISTRATION $ 841,730 11
ENGINEERING 2,489,407 49
MARKETING 1,019,597 12
---------- -----------
TOTAL $4,350,734 72
========== ===========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC.
AND SUBSIDIARIES
For Twelve Months Ended December 31, 1998
OUTSIDE SERVICES EMPLOYED
ACCOUNT 923
From Whom "A"-Associate Description
Purchased "NA"-Nonassociate Amount of Services
- ----------------------- ----------------- ---------- -------------------
<S> <C> <C> <C>
SUBCONTRACTOR SERVICES
Bel Aire Mechanical NA 204,539 Mechancial Contractor
CDE Air Conditioning NA 144,532 Electrical Contractor
B&G NA 638,791 Electrical/Lighting Contractor
Candela Systems NA 191,330 Electrical Contractor
Clance & Associates NA 152,224 EMS Contractor
CVM Electric NA 353,285 Electrical Contractor
Delphi Mechancial NA 133,149 Mechanical Contractor
CRK Contracting NA 644,377 Mechanical Contractor
HHS Mechanical NA 211,036 Mechanical Contractor
Honeywell Incorporated NA 221,405 EMS Contractor
Johnson Controls NA 1,578,030 EMS Contractor
Landis &Staefa, Inc NA 402,808 EMS Contractor
Longo Industries NA 633,628 Mechanical Construction
Morales Electric NA 483,152 Electrical Contractor
Mytech Corporation NA 623,140 EMS Contractor
Pel Mar Products NA 235,976 Lighting Installations
Rolands NA 856,359 Electrical Contractor
Temperature System NA 294,536 Supply and Install Motors
T.M Bier and Associates NA 211,162 Mechanical Contractor
Unenco Services NA 219,323 Lighting Installations
Volland Electric NA 135,532 Lighting Installations
Windsor Electric NA 233,790 Lighting Retrofit Installations
York International NA 180,950 Mechanical Contractor
Thirty five Vendors NA 337,489
-----------
TOTAL SUBCONTRACTORS $ 9,320,543
-----------
SUBCONTRACTOR SUPPLIERS
Connecticut Trane Co NA 190,576 Chiller Supplier
Graybar Electric NA 138,125 Electrical Supplier
Kelly & Hayes NA 1,040,187 Electrical/Lighting Supplier
Sensorswitch NA 466,746 Lighting Supplier
TOTAL SUBCONTRACTOR SUPPLIERS $ 1,835,634
CONSULTING SERVICES
EEM NA 1,134,580 Engineering/Construction Mgment
Thirty four Vendors NA 179,100
-----------
TOTAL CONSULTING SERVICES $ 1,313,680
-----------
LEGAL SERVICES
Three Vendors NA $ 5,090
-----------
AUDITING SERVICES
Arthur Andersen NA $ 36,669
-----------
MARKETING AGENTS & CONSULTANTS
Six Vendors NA $ 73,322
-----------
OTHER PROFESSIONAL SERVICES
Four Vendors NA $ 47,973
-----------
TOTAL $12,632,911
===========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
MISCELLANEOUS GENERAL EXPENSE
ACCOUNT 930.2
INSTRUCTIONS: Provide a listing of the amount included in Account 930,
"Miscellaneous General Expense," classifying such expenses
according to their nature. Payments and expenses permitted
by Section 321(b)(2) of the Federal Election Campaign Act,
as amended by Public Law 94-283 in 1976 (2 U.S.C Section
441(b)(2) shall be separately classified.
DESCRIPTION AMOUNT
- ----------------------------------------------------------- ------------
<S> <C>
Utilities $ 14,307
Miscellaneous 38,371
Recruiting 35,824
------------
TOTAL $ 88,502
============
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
RENTS
ACCOUNT 931
INSTRUCTIONS: Provide a listing of the amount included in Account 931
"Rents," classifying such expenses by major groupings of
property, as defined in the account definition of the
Uniform System of Accounts.
DESCRIPTION AMOUNT
- ----------------------------------------------------- --------------
<S> <C>
Office Space $ 355,303
Equipment Rental 42,596
--------------
TOTAL $ 397,899
==============
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT OF HEC INC
AND SUBSIDIARIES
For the Twelve Months Ended December 31, 1998
TAXES OTHER THAN INCOME TAXES
ACCOUNT 408
INSTRUCTIONS: Provide an analysis of Account 408, "Taxes Other than Income
Taxes. Separate the analysis into two groups: (1) other than
U.S. Government taxes, and (2) U.S. Government taxes. Specify
each of the various kinds of taxes and show the amounts
thereof. Provide a subtotal for each class of tax.
KIND OF TAX AMOUNT
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<S> <C>
1) Other than U.S. Government taxes
City & County Taxes $ 8,412
State Franchise Taxes 16,829
State Unemployment Taxes 27,841
----------
Subtotal $ 53,082
----------
2) U.S. Government taxes
Employer's FICA Tax $ 297,358
Federal Unemployment Taxes 5,411
----------
Subtotal $ 302,769
----------
TOTAL $ 355,851
==========
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ANNUAL REPORT OF HEC INC AND SUBSIDIARIES
For the Year Ended December 31, 1998
SCHEDULE XVIII
NOTES TO STATEMENTS OF INCOME
INSTRUCTIONS: The space below is provided for important notes regarding
the statement of income or any account thereof. Furnish
particulars as to any significant increases in services
rendered or expenses incurred during the year. Notes relating
to financial statements shown elsewhere in this report may be
indicated here by reference.
See Notes to Financial Statements on pages 13 through 14.
ANNUAL REPORT OF HEC INC. AND SUBSIDIARIES
ORGANIZATION CHART (AS OF DECEMBER 31, 1998)
President - Thomas W. Philbin, Ph.D.
- Vice President - Operations - James B. Redden, P.E.
- Vice President - Customer Service - H. Donald Burbank, P.E.
- Vice President - David S. Dayton
- Vice President - Finance, Treasurer, and Clerk - Linda A. Jensen
ANNUAL REPORT OF HEC INC. AND SUBSIDIARIES
SIGNATURE CLAUSE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935 and in accordance with release numbers
22719, and order numbers File No. 70-7698, the undersigned
company has duly caused this report to be signed on its behalf
by the undersigned officer thereunto duly authorized.
HEC INC. AND SUBSIDIARIES
-----------------------------
(Name of Reporting Company)
By: /s/ Linda Jensen
-----------------------------
(Signature of Signing Officer)
Linda Jensen, Vice President-
Finance, Treasurer and Clerk
-----------------------------
(Printed Name and Title of
Signing Officer)
Date: April 23, 1999
-----------------------------
<TABLE> <S> <C>
<ARTICLE>OPUR2
<CIK>0000875017
<NAME>HEC INC. AND SUBSIDIARIES
<MULTIPLIER>1
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<BOOK-VALUE> PER-BOOK PER-BOOK
<NET-SERVICE-COMPANY-PROPERTY> 1,279,084 1,579,062
<TOTAL-INVESTMENTS> 0 0
<TOTAL-CURRENT-ASSETS> 4,233,742 4,469,481
<TOTAL-DEFERRED-DEBITS> 2,002,977 2,254,120
<OTHER-ASSETS-AND-DEBITS> 0 0
<TOTAL-ASSETS-AND-DEBITS> 7,515,803 8,302,663
<TOTAL-PROPRIETARY-CAPITAL> 3,436,450 4,111,837
<TOTAL-LONG-TERM-DEBT> 525,000 250,000
<NOTES-PAYABLE> 0 0
<NOTES-PAYABLE-ASSOCIATE-COMP> 1,000,000 600,000
<OTHER-CURR-AND-ACCRUED-LIAB> 2,385,424 2,952,892
<TOTAL-DEFERRED-CREDITS> 0 0
<DEFERRED-INCOME-TAX> 168,929 387,934
<TOT-LIABIL-AND-PROPRIET-CAP> 7,515,803 8,302,663
<SERVICES-ASSOCIATE-COMPANIES> 2,515,694 2,969,691
<SERVICES-NON-ASSOCIATE-COMP> 20,192,403 34,822,403
<MISC-INCOME-OR-LOSS> 152,095 149,192
<TOTAL-INCOME> 22,860,192 37,941,286
<SALARIES-AND-WAGES> 4,350,734 3,815,597
<EMPLOYEE-PENSION-AND-BENEFIT> 402,923 290,377
<OTHER-EXPENSES> 18,781,307 33,527,028
<TOTAL-EXPENSES> 23,534,964 37,633,002
<NET-INCOME> (674,772) 308,284
<TOTAL-EXPENSES-DIRECT-COST> 23,534,964 37,633,002
<TOTAL-EXPENSES-INDIRECT-COST> 0 0
<TOT-EXP-DIRECT-AND-INDIRECT> 23,534,964 37,633,002
<PERSONNEL-END-OF-YEAR> 72 69
</TABLE>
