-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JDRLBXFw5DRkM8DzOvJxJE1NBx2lozm/Cr06HvJmlP+UY9xjoCOoa8MZtzdb3pZ8 LT6LxazhYJyD72qSA/z9Gg== 0000013372-01-500005.txt : 20010516 0000013372-01-500005.hdr.sgml : 20010516 ACCESSION NUMBER: 0000013372-01-500005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON EDISON CO CENTRAL INDEX KEY: 0000013372 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041278810 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02301 FILM NUMBER: 1635981 BUSINESS ADDRESS: STREET 1: 800 BOYLSTON ST STREET 2: ROOM P 344 CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6174242000 MAIL ADDRESS: STREET 1: 800 BOYLSTON ST STREET 2: ROOM P 344 CITY: BOSTON STATE: MA ZIP: 02199 10-Q 1 beco10q032001.txt NSTAR 10Q FOR PERIOD ENDING 03312001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission file number 1-2301 BOSTON EDISON COMPANY (Exact name of registrant as specified in its charter)
Massachusetts 04-1278810 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 800 Boylston Street, Boston, Massachusettes 02199 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-424-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at May 14, 2001 Common Stock, $1 par value 100 shares
The Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this Form with the reduced disclosure format. Part I - Financial Information Item 1. Financial Statements
Boston Edison Company Condensed Consolidated Statements of Income (Unaudited) (in thousands) Three Months Ended March 31, 2001 2000 Operating revenues $ 466,162 $ 376,443 Operating expenses: Purchased power 276,785 194,579 Operations and maintenance 51,549 56,360 Depreciation and amortization 42,264 41,534 Demand side management and renewable energy programs 13,767 13,681 Taxes - property and other 18,126 16,765 Income taxes 16,388 11,493 Total operating expenses 418,879 334,412 Operating income 47,283 42,031 Other income, net 832 815 Operating and other income 48,115 42,846 Interest charges: Long term debt 11,800 14,325 Transition property securitization 10,798 11,946 certificates Other 2,414 682 Allowance for borrowed funds used during construction (553) (597) Total interest charges 24,459 26,356 Net income $ 23,656 $ 16,490 ========= ========= Per share data is not relevant because Boston Edison Company's common stock is wholly owned by NSTAR. The accompanying notes are an integral part of the condensed consolidated financial statements.
Boston Edison Company Condensed Consolidated Statements of Retained Earnings (Unaudited) (in thousands) Three Months Ended March 31, 2001 2000 Balance at the beginning of the period $ 352,832 $ 1,462 Add: Net income 23,656 16,490 Subtotal 376,488 17,952 Deduct: Dividends declared: Dividends to Parent 32,323 15,000 Preferred stock 1,490 1,490 Subtotal 33,813 16,490 Provision for preferred stock redemption and issuance costs 60 60 Balance at the end of the period $ 342,615 $ 1,402 ======== ======== The accompanying notes are an integral part of the condensed consolidated financial statements.
Boston Edison Company Condensed Consolidated Balance Sheets (Unaudited) (in thousands) March 31, December 31, 2001 2000 Assets Utility plant in service, at original cost $2,553,700 $2,522,682 Less: accumulated depreciation 843,895 825,367 1,709,805 1,697,315 Construction work in progress 33,249 39,820 Net utility plant 1,743,054 1,737,135 Equity investments 15,587 15,512 Other investments 9,640 9,599 Current assets: Cash and cash equivalents 4,005 12,125 Restricted cash 3,625 3,625 Accounts receivable: Customers 228,775 200,479 Affiliates 39,528 54,392 Regulatory assets 154,780 193,641 Accrued unbilled revenues 51,727 66,879 Materials and supplies, at average cost 16,722 15,621 Prepaid pension expense 155,172 149,889 Other 6,172 5,919 Total current assets 660,506 702,570 Regulatory assets 801,966 780,974 Other deferred debits 47,893 46,250 Total assets $3,278,646 $3,292,040 ========== ========== The accompanying notes are an integral part of the condensed consolidated financial statements.
Boston Edison Company Condensed Consolidated Balance Sheets (Unaudited) (in thousands) March 31, December 31, 2001 2000 Capitalization and Liabilities Common equity: Common stock, par value $1 per share (100 shares issued and outstanding) $ - $ - Premium on common stock 479,226 482,004 Retained earnings 342,615 352,832 Total common equity 821,841 834,836 Accumulated other comprehensive loss, net (117) (117) Cumulative nonmandatory redeemable preferred stock 43,000 43,000 Long-term debt 577,434 577,618 Transition property securitization certificates 548,000 584,130 Total long-term debt 1,125,434 1,161,748 Total capitalization 1,990,158 2,039,467 Current liabilities: Transition property securitization certificates due within one year 57,000 36,443 Redeemable preferred stock and long- term debt due within one year 49,845 50,186 Notes payable 185,000 96,500 Accounts payable: Affiliates 53,613 116,610 Other 105,548 115,783 Deferred taxes 85,112 99,542 Accrued interest 8,232 24,269 Dividends payable 911 993 Other 140,657 112,416 Total current liabilities 685,918 652,742 Deferred credits: Accumulated deferred income taxes 493,882 491,098 Accumulated deferred investment tax credits 20,098 20,346 Power contracts 25,150 25,868 Other 63,440 62,519 Total deferred credits 602,570 599,831 Commitments and contingencies Total capitalization and liabilities $3,278,646 $3,292,040 ========= ========= The accompanying notes are an integral part of the condensed consolidated financial statements.
Boston Edison Company Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended March 31, 2001 2000 Operating activities: Net income $ 23,656 $ 16,490 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 40,269 41,534 Deferred income taxes and investment tax credits (14,806) 8,033 Allowance for borrowed funds used during construction (553) (597) Net changes in working capital (42,394) (65,731) Other, net (27,542) (38,597) Net cash used in operating activities (21,370) (38,868) Investing activities: Plant expenditures (excluding AFUDC) (25,372) (16,353) Other investments (75) 58 Net cash used in investing activities (25,447) (16,295) Financing activities: Long-term debt redemptions - (65,400) Transition property securitization certificates redemptions (15,573) (22,154) Net change in notes payable 88,500 56,000 Dividends paid (34,230) (25,000) Net cash provided by (used in) financing activities 38,697 (56,554) Net decrease in cash and cash equivalents (8,120) (111,717) Cash and cash equivalents at beginning of year 12,125 117,537 Cash and cash equivalents at end of period $ 4,005 $ 5,820 ========= ========= Supplemental disclosures of cash flow information: Cash paid (refunded) during the period for: Interest, net of amounts capitalized $ 28,264 $ 26,975 ========= ========= Income taxes $ 708 $ (10,536) ========= ========= The accompanying notes are an integral part of the condensed consolidated financial statements.
Notes to Unaudited Condensed Consolidated Financial Statements A) The Company Boston Edison Company ("Boston Edison" or "the Company") is a regulated public utility incorporated in 1886 under Massachusetts law and is a wholly owned subsidiary of NSTAR. NSTAR is Massachusetts' largest investor-owned combined electric and gas utility and is an exempt public utility holding company. NSTAR is an energy delivery company serving approximately 1.3 million customers in Massachusetts, including more than one million electric customers in 81 communities and 244,000 gas customers in 51 communities. NSTAR's retail utility subsidiaries are Boston Edison, Commonwealth Electric Company (ComElectric), Cambridge Electric Light Company (Cambridge Electric), and NSTAR Gas Company (NSTAR Gas) and its wholesale electric subsidiary is Canal Electric Company (Canal Electric). Effective November 1, 2000, NSTAR's three retail electric companies began to operate under the brand name "NSTAR Electric." Reference in this report to "NSTAR Electric" shall mean each of Boston Edison, ComElectric and Cambridge Electric. B) Basis of Presentation The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company's Form 10-K for the year ended December 31, 2000. The financial information presented as of March 31, 2001 and for the periods ended March 31, 2001 and 2000 have been prepared from Boston Edison's books and records without audit by independent accountants. Financial information as of December 31, 2000 was derived from the audited consolidated financial statements of Boston Edison, but does not include all disclosures required by generally accepted accounting principles (GAAP). In the opinion of management, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial information for the periods indicated have been included. Certain reclassifications have been made to the prior year data to conform with the current presentation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The results of operations for the three-month periods ended March 31, 2001 and 2000 are not indicative of the results that may be expected for an entire year. Kilowatt-hour sales and revenues are typically higher in the winter and summer than in the spring and fall as sales tend to vary with weather conditions. Economic conditions also impact sales. C) Goodwill and Costs to Achieve Amortization Recorded goodwill is associated with the merger of BEC Energy (BEC) and Commonwealth Energy System (COM/Energy), effective August 25, 1999. The merger was accounted for by NSTAR as an acquisition of COM/Energy by BEC under the purchase method of accounting. An integral part of the merger is the rate plan of the retail utility subsidiaries of BEC and COM/Energy that was approved by the Massachusetts Department of Telecommunications and Energy (MDTE) in July 1999. Significant elements of the rate plan include a four-year distribution rate freeze, recovery of the acquisition premium (goodwill) of approximately $490 million over 40 years resulting in annual amortization of approximately $12.2 million, and recovery of filed transaction and integration costs (costs to achieve) of $111 million over 10 years. NSTAR's retail utility subsidiaries will reconcile the ultimate costs to achieve with that estimate, and any difference is expected to be recovered over the remainder of the amortization period. As a result of the merger, cost savings have been realized due to reduced staffing levels and operating efficiencies. Future cost savings are expected to result from the avoidance of costs that would have otherwise been incurred by BEC and COM/Energy. D) Contingencies 1. Environmental Matters Boston Edison is involved in approximately 16 state-regulated properties where oil or other hazardous materials were previously spilled or released. Boston Edison is required to clean up these properties in accordance with specific state regulations. There are uncertainties associated with these costs due to the complexities of cleanup technology, regulatory requirements and the particular characteristics of the different sites. Boston Edison also continues to have potential liability as a potentially responsible party in the cleanup of five multi-party hazardous waste sites in Massachusetts and other states where it is alleged to have generated, transported or disposed of hazardous waste at the sites. Boston Edison generally expects to have only a small percentage of the total potential liability for these sites. Approximately $4.8 million and $5 million is included as a liability in the accompanying Condensed Consolidated Balance Sheets at March 31, 2001 and December 31, 2000, respectively, related to the non-recoverable portion of these cleanup liabilities. Management is unable to fully determine a range of reasonably possible cleanup costs in excess of the accrued amount. Based on its assessments of the specific site circumstances, management does not believe that it is probable that any such additional costs will have a material impact on the Company's consolidated financial position. However, it is reasonably possible that additional provisions for cleanup costs that may result from a change in estimates could have a material impact on the results of operations for a reporting period in the near term. Estimates related to environmental remediation costs are reviewed and adjusted periodically as further investigation and assignment of responsibility occurs. Boston Edison is unable to estimate its ultimate liability for future environmental remediation costs. However, in view of Boston Edison's current assessment of its environmental responsibilities, existing legal requirements and regulatory policies, management does not believe that these matters will have a material adverse effect on Boston Edison's financial position or results of operations for a reporting period. 2. Industry and Corporate Restructuring Legal Proceedings The MDTE order approving Boston Edison's electric restructuring settlement agreement was appealed by certain parties to the Massachusetts Supreme Judicial Court. One appeal remains pending. However, there has to date been no briefing, hearing or other action taken with respect to this proceeding. Management is currently unable to determine the outcome of this proceeding. However, if an unfavorable outcome were to occur, there could be a material adverse impact on business operations, the consolidated financial position, cash flows or results of operations for a reporting period. 3. Regulatory proceedings In the Boston Edison 1999 reconciliation filing with the MDTE, the Massachusetts Attorney General contested cost allocations related to Boston Edison's wholesale customers since 1998. Management is unable to determine the outcome of this proceeding. However, if an unfavorable outcome were to occur, there could be a material adverse impact on Boston Edison's consolidated financial position, results of operations and cash flows in the near term. In October 1997, the MDTE opened a proceeding to investigate Boston Edison's compliance with the 1993 order that permitted the formation of Boston Energy Technology Group and authorized Boston Edison to invest up to $45 million in non-utility activities. Hearings were completed during 1999 and no further developments have occurred as of this time. Management is currently unable to determine the timing and outcome of this proceeding. However, if an unfavorable outcome were to occur, there could be a material adverse impact on business operations, the consolidated financial position, cash flows and results of operations for a reporting period. 4. Other litigation In the normal course of its business Boston Edison is also involved in certain other legal matters. Management is unable to fully determine a range of reasonably possible legal costs in excess of amounts accrued. Based on the information currently available, it does not believe that it is probable that any such additional costs will have a material impact on its consolidated financial position. However, it is reasonably possible that additional legal costs that may result from a change in estimates could have a material impact on the results of a reporting period in the near term. E) Income Taxes The following table reconciles the statutory federal income tax rate to the annual estimated effective income tax rate for 2001 and the actual effective income tax rate for the year ended December 31, 2000:
2001 2000 Statutory tax rate 35.0% 35.0% State income tax, net of federal income tax benefit 4.4 4.4 Investment tax credit amortization (0.6) (0.4) Other 2.7 1.8 Effective tax rate 41.5% 40.8% ===== =====
Item 2. Management's Discussion and Analysis Boston Edison Company ("Boston Edison" or "the Company") is a regulated public utility incorporated in 1886 under Massachusetts' law and is a wholly owned subsidiary of NSTAR. NSTAR is Massachusetts' largest investor-owned combined electric and gas utility. NSTAR is an energy delivery company serving approximately 1.3 million customers in Massachusetts including more than one million electric customers in 81 communities and 244,000 gas customers in 51 communities. Boston Edison serves approximately 681,000 electric customers in the city of Boston and 39 surrounding communities. NSTAR's retail utility subsidiaries are Boston Edison, Commonwealth Electric Company (ComElectric), Cambridge Electric Light Company (Cambridge Electric) and NSTAR Gas Company (NSTAR Gas) and its wholesale electric subsidiary is Canal Electric Company (Canal Electric). Effective November 1, 2000, NSTAR's three retail electric companies began to operate under the brand name "NSTAR Electric." Reference in this report to "NSTAR Electric" shall mean each of Boston Edison, ComElectric and Cambridge Electric. The electric industry has continued to change in response to legislative, regulatory and marketplace demands for improved customer service at lower prices. These demands have resulted in an increasing trend in the industry to seek competitive advantages and other benefits through business combinations. NSTAR was created to operate in this new marketplace by combining the resources of its utility subsidiaries and concentrating its activities in the transmission and distribution of energy. Goodwill and Costs to Achieve Amortization Recorded goodwill is associated with the merger of BEC Energy (BEC) and Commonwealth Energy System (COM/Energy), effective August 25, 1999. The merger was accounted for by NSTAR as an acquisition of COM/Energy by BEC under the purchase method of accounting. An integral part of the merger is the rate plan of the retail utility subsidiaries of BEC and COM/Energy that was approved by the Massachusetts Department of Telecommunications and Energy (MDTE) in July 1999. Significant elements of the rate plan include a four-year distribution rate freeze, recovery of the acquisition premium (goodwill) of approximately $490 million over 40 years resulting in annual amortization of approximately $12.2 million, and recovery of filed transaction and integration costs (costs to achieve) of $111 million over 10 years. NSTAR's retail utility subsidiaries will reconcile the ultimate costs to achieve with that estimate, and any difference is expected to be recovered over the remainder of the amortization period. As a result of the merger, cost savings have been realized due to reduced staffing levels and operating efficiencies. Future cost savings are expected to result from the avoidance of costs that would have otherwise been incurred by BEC and COM/Energy. Retail Electric Rates The 1997 Massachusetts Electric Restructuring Act (Restructuring Act) requires electric distribution companies to obtain and resell power to retail customers that choose not to buy energy from a competitive energy supplier. This is through either standard offer service or default service. As a result of the Restructuring Act, standard offer customers of Boston Edison currently pay rates that are 15% lower, on an inflation-adjusted basis, than rates in effect prior to March 1, 1998, the retail access date. All distribution customers must pay a transition charge as a component of their rate. From March 1, 1998, Boston Edison's accumulated cost to provide default and standard offer service was in excess of the revenues it was allowed to bill. As a result, Boston Edison recorded a regulatory asset of approximately $193.6 million at December 31, 2000 that is reflected as a component of Current assets on the accompanying Condensed Consolidated Balance Sheets. As a result of new rates for standard offer and default service that became effective January 1, 2001, the regulatory asset has declined to $154.8 million as of March 31, 2001. Under applicable restructuring plans or settlements approved by the MDTE, Boston Edison must, on an annual basis, file proposed adjustments to its rates for the upcoming year along with a proposed reconciliation of prior year revenues and costs for its standard offer, default service, transmission and transition charges. Boston Edison made such a filing with the MDTE in late 1999. The MDTE subsequently approved proposed rate adjustments effective January 1, 2000, and conducted further hearings for the purpose of reconciling prior year's costs and revenues related to Boston Edison's transition and transmission charges and the charges for standard offer and default service. In each such proceeding, certain cost allocations and other related issues have been contested; however, the MDTE has not yet rendered a final decision. In November 2000, Boston Edison made a similar filing containing proposed rate adjustments for 2001, including a reconciliation of costs and revenues through 1999. The MDTE has approved rate adjustments effective January 1, 2001, but it has not yet ruled on the reconciliation component of the filings. Management is unable to determine the outcome of the MDTE proceedings. However, if an unfavorable outcome were to occur, there could be a material adverse impact on Boston Edison's consolidated financial position, results of operations and cash flows in the near term. In addition to the annual rate filings referenced above, Boston Edison also made separate filings with the MDTE concerning charges for standard offer and default service. In December 2000, the MDTE approved an increase of 1.321 cents per kWh in Boston Edison's standard offer service rates for 2001 based on a fuel adjustment formula contained in its standard offer tariffs that reflects the prices of natural gas and oil. The MDTE has ruled that these fuel adjustments are not required to meet the 15% rate reduction requirement under the Restructuring Act. The MDTE will re-examine these rates in July 2001. In December 2000, the MDTE approved market-based default service rates for the period January 1, 2001 through June 30, 2001. These and future prices for default service are based upon market solicitations for power supply for default service consistent with provisions of the Restructuring Act and MDTE orders. Long-Term Power Purchase Contracts NSTAR Electric has existing long-term power purchase contracts. These long-term contracts are expected to supply approximately 90%-95% of its standard offer service obligations. NSTAR Electric has entered into six-month and shorter-term agreements to meet the remaining standard offer service obligation and continues to evaluate further proposals. In November 2000, NSTAR Electric entered into power purchase agreements to meet its entire default service supply obligation for the period January through June of 2001. In addition, in May 2001, NSTAR Electric entered into purchased power agreements to meet the default service obligation for the remainder of 2001. NSTAR Electric expects to continue to make periodic market solicitations for default service power supply consistent with provisions of the Restructuring Act and MDTE orders. The cost of providing standard offer and default service, which includes purchased power costs, is recovered from customers on a fully reconciling basis. Results of Operations - Three Months Ended March 31, 2001 vs. Three Months Ended March 31, 2000 Net income was $23.7 million for the three months ended March 31, 2001 compared to $16.5 million for the same period in 2000, a 43.6% increase. The results of operations for the quarter are not indicative of the results which may be expected for the entire year due to the seasonality of kilowatt-hour (kWh) sales and revenues. Refer to Note B to the Condensed Consolidated Financial Statements. Operating revenues
Operating revenues increased 23.8% during the first quarter of 2001 as follows: (in thousands) Retail electric revenues $ 82,051 Wholesale revenues 5,349 Other revenues 2,319 Increase in operating revenues $ 89,719 =========
Retail revenues were $424.7 million in 2001 compared to $342.6 million in 2000, an increase of $82.1 million, or 24%. The change in retail revenues includes higher rates implemented in January 2001 for standard offer and default services ($76.6 million), a 0.6% increase in retail kilowatt-hour (kWh) electric sales, higher transmission revenues ($5.6 million), the absence in the current quarter of a $23.4 million refund to customers and the recognition of incentive revenue entitlements for successfully lowering transition charges ($5.5 million). These increases in revenue were partially offset by a $23.5 million decline in transition recovery. Boston Edison recognized revenue for earned mitigation incentives for the years 1998 through September 2000 per the transition charge true-up filed with the MDTE in November 2000. Boston Edison will continue to earn mitigation incentive revenue as it lowers its transition charge through 2009. The revenues related to standard offer and default services are fully reconciled to the costs incurred and have no impact on net income. Wholesale electric revenues were $23.5 million in 2001 compared to $18.2 million in 2000, an increase of $5.3 million, or 29.1%. This increase in wholesale revenues primarily reflects increased kWh sales of 8.7% and the recovery of higher purchased power costs. Other revenues were $17.9 million in 2001 compared to $15.6 million in 2000, an increase of $2.3 million, or 14.7%. This change reflects higher transmission revenues due to a transmission rate increase effective January 2001. Operating expenses Purchased power costs was $276.8 million in 2001 compared to $194.6 million in 2000, an increase of $82.2 million, or 42%. The increase reflects higher purchased power requirements due to an 8.7% increase in wholesale sales and higher purchased power costs that reflect the prices of natural gas and oil. Boston Edison adjusts its electric rates to collect the costs related to energy supply from customers on a fully reconciling basis. Due to the rate adjustment mechanisms, changes in the amount of energy supply expense have no impact on earnings. Operations and maintenance expense was $51.5 million in 2001 compared to $56.4 million in 2000, a decrease of $4.9 million, or 8.7%. This decrease reflects lower expenses primarily resulting from merger-related operating efficiencies, offset partially by the impact of storm-related expenses incurred in the current period. Depreciation and amortization expense was $42.3 million in 2001 compared to $41.5 million in 2000, an increase of $0.8 million, or 1.9%. The increase reflects a slightly higher level of depreciable plant in service. Demand side management (DSM) and renewable energy programs expense was $13.8 million in 2001 compared to $13.7 million in 2000, an increase of $0.1 million, or 1%. This increase is primarily due to increased spending levels for programs. In accordance with legislative and regulatory directives, these costs are collected from customers on a fully reconciling basis. Therefore, the increase has no impact on earnings. Property and other taxes were $18.1 million in 2001 compared to $16.8 million in 2000, an increase of $1.3 million, or 7.7%. The increase is due to the inclusion of Plymouth property taxes of $2.4 million that, in prior periods, was included in purchased power expenses (related to the previously-owned Pilgrim generating unit), pursuant to an agreement with the purchaser that provides Boston Edison with purchased power from the Pilgrim unit. This increase was partially offset by lower property taxes paid to the City of Boston of $1.4 million. Income taxes from operations were $16.4 million in 2001 compared to $11.5 million in 2000, an increase of $4.9 million, or 42.6%. This increase reflects higher pretax operating income in 2001. Interest charges Interest on long-term debt and transition property securitization certificates was $22.6 million in 2001 compared to $26.3 million in 2000, a decrease of $3.7 million, or 14.1%. Approximately $1.1 million of the decrease is related to securitization certificate interest reflecting the scheduled retirement of this debt. The decrease in interest on long-term debt is primarily the result of a reduction of approximately $2.7 million due to the following retirements: $65 million of 6.8% debentures, $34 million of 9.875% debentures and $100 million of 6.05% debentures during the third quarter of 2000. Other interest charges were $2.4 million in 2001 compared to $0.7 million in 2000, an increase of $1.7 million. The increase reflects interest associated with the reconciliation to the 1998 and 1999 transition charge true-up filings with the MDTE in November 2000. New Accounting Principles As of January 1, 2001, Boston Edison adopted the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), as amended by Statements of Financial Accounting Standards No. 137 and 138, and collectively referred to as SFAS 133. SFAS 133 established accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in contracts possibly including fixed-price fuel supply and power contracts) be recorded on the Consolidated Balance Sheets as either an asset or liability measured at its fair value. The impact of this adoption has been assessed by the management of the Company. As part of this assessment, the Company formed an implementation team in 2000 consisting of key individuals from various operational and financial areas of the organization. The primary role of this team was to inventory and determine the impact of potential contractual arrangements for SFAS 133 application. The implementation team has performed extensive reviews of critical operating areas of the Company and has documented its procedures in applying the requirements of SFAS 133 to Boston Edison's contractual arrangements in effect on January 1, 2001. Based on Boston Edison's assessment to date, the adoption of SFAS 133 has not had a material adverse effect on its results of operations, cash flows, or financial position. Safe harbor cautionary statement Management occasionally makes forward-looking statements such as forecasts and projections of expected future performance or statements of its plans and objectives. These forward-looking statements may be contained in filings with the Securities and Exchange Commission (SEC), press releases and oral statements. Actual results could potentially differ materially from these statements. Therefore, no assurances can be given that the outcomes stated in such forward-looking statements and estimates will be achieved. The preceding sections include certain forward-looking statements about operating results and environmental and legal issues. The impact of continued cost control procedures on operating results could differ from current expectations. The effects of changes in economic conditions, tax rates, interest rates, technology and the prices and availability of operating supplies could materially affect the projected operating results. The impacts of various environmental, legal issues, and regulatory matters could differ from current expectations. New regulations or changes to existing regulations could impose additional operating requirements or liabilities other than expected. The effects of changes in specific hazardous waste site conditions and cleanup technology could affect estimated cleanup liabilities. The impacts of changes in available information and circumstances regarding legal issues could affect estimated litigation costs. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes since year-end. Part II - Other Information Item 5. Other Information The following additional information is furnished in connection with the Registration Statements on Form S-3 of the Registrant (File Nos. 33-57840 and 333-55890), filed with the Securities and Exchange Commission on February 3, 1993 and February 20, 2001, respectively.
Ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred stock dividend requirements: Twelve months ended March 31, 2001: Ratio of earnings to fixed charges 3.03 Ratio of earnings to fixed charges and preferred stock dividend requirements 2.81
Item 6. Exhibits and Reports on Form 8-K a) Exhibits filed herewith Exhibit 4 - Instruments defining the rights of security holders, including indentures Management agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any agreements or instruments defining the rights of holders of any long-term debt whose authorization does not exceed 10% of total assets Exhibit 12 - Computation of ratio of earnings to fixed charges 12.1 - Computation of ratio of earnings to fixed charges for the twelve months ended March 31, 2001 12.2 - Computation of ratio of earnings to fixed charges and preferred stock dividend requirements for the twelve months ended March 31, 2001 Exhibit 15 - Letter re unaudited interim financial information 15.1 - Report of Independent Accountants Exhibit 99 - Additional exhibits 99.1 - Letter of Independent Accountants Form S-3 Registration Statements filed by Boston Edison Company on February 3, 1993 (File No. 33-57840) and February 20, 2001 (File No. 333-55890). b) No Form 8-K was filed during the first quarter of 2001.
Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.
BOSTON EDISON COMPANY (Registrant) Date: May 15, 2001 /s/ Robert J. Weafer,Jr. Robert J. Weafer, Jr. Vice President, Controller and Chief Accounting Officer
EX-12 2 exhibit12.txt RATIOS Exhibit 12.1
Boston Edison Company Computation of Ratio of Earnings to Fixed Charges Twelve Months Ended March 31, 2001 (in thousands) Net income from continuing operations $ 153,194 Income taxes 105,805 Fixed charges (including securitization certificates) 127,370 Total $ 386,369 ======== Interest expense $ 112,270 Interest component of rentals 15,100 Total $ 127,370 ======== Ratio of earnings to fixed charges 3.03 ====
Exhibit 12.2
Boston Edison Company Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements Twelve Months Ended March 31, 2001 (in thousands) Net income from continuing operations $ 153,194 Income taxes 105,805 Fixed charges (including securitization certificates) 127,370 Total $ 386,369 ======== Interest expense $ 112,270 Interest component of rentals 15,100 Subtotal $ 127,370 ======== Preferred stock dividend requirements 10,076 Total $ 137,446 ======== Ratio of earnings to fixed charges and 2.81 preferred stock dividends requirements ====
EX-15 3 becoexhibit15.txt REPORT OF INDPENDENT ACCOUNTANTS Exhibit 15.1 Report of Independent Accountants To the Shareholders and Trustees of Boston Edison Company: We have reviewed the accompanying condensed consolidated balance sheet of Boston Edison Company and its subsidiaries as of March 31, 2001, and the related condensed consolidated statements of income, retained earnings and cash flow for each of the three- month periods ended March 31, 2001 and 2000. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2000, and the related consolidated statements of income, comprehensive income, retained earnings, and cash flows for the year then ended (not presented herein), and in our report dated January 26, 2001 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2001, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. PricewaterhouseCoopers LLP Boston, Massachusetts May 14, 2001 EX-99 4 becoexhibit99.txt Exhibit 99.1 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Commissioners: We are aware that our report dated May 14, 2001 on our review of the condensed consolidated interim financial information of Boston Edison Company for the period ended March 31, 2001 and included in Boston Edison's quarterly report on Form 10-Q for the quarter then ended is incorporated by reference in Boston Edison's registration statement on Form S-3 (File Nos. 33-57840 and 333-55890). PricewaterhouseCoopers LLP Boston, Massachusetts May 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----