-----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, BOZxVC1/2gdqu3gv14ezjoX9BDYc+pUCQHO+fWbC4Wc3ek4iE1WaC2pK8VJcfy72 i4AvgQbnvPnR7tmdYxMQTQ== 0000013372-99-000026.txt : 19991117 0000013372-99-000026.hdr.sgml : 19991117 ACCESSION NUMBER: 0000013372-99-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99754528 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 BOSTON EDISON COMPANY 1999 3RD QUARTER FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ x ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1999 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, Massachusetts 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 November 1, 1999 - ----- ------------------------------- Common Stock, $1 par value 100 shares 2 Part I - Financial Information Item 1. Financial Statements - ----------------------------- Boston Edison Company Consolidated Statements of Income (Unaudited) (in thousands)
Three Months Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 -------- -------- ---------- ---------- Operating revenues $454,871 $479,664 $1,205,210 $1,259,129 -------- -------- ---------- ---------- Operating expenses: Fuel and purchased power 182,472 154,785 480,170 424,914 Operations and maintenance 71,457 87,814 218,100 272,380 Depreciation and amortization 40,812 47,560 135,776 147,672 Demand side management and renewable energy programs 13,871 20,002 40,572 37,043 Taxes - property and other 15,329 18,064 55,277 70,939 Income taxes 40,271 50,600 80,648 90,456 -------- -------- ---------- ---------- Total operating expenses 364,212 378,825 1,010,543 1,043,404 -------- -------- ---------- ---------- Operating income 90,659 100,839 194,667 215,725 Other income (expense), net 17,362 766 19,236 (4,734) -------- -------- ---------- ---------- Operating and other income 108,021 101,605 213,903 210,991 -------- -------- ---------- ---------- Interest charges: Transition property securitization bonds 8,439 0 8,439 0 Long-term debt 17,033 19,457 55,934 63,486 Other 3,098 66 4,962 7,789 Allowance for borrowed funds used during construction (449) (410) (1,368) (975) -------- -------- ---------- ---------- Total interest charges 28,121 19,113 67,967 70,300 -------- -------- ---------- ---------- Net income $ 79,900 $ 82,492 $ 145,936 $ 140,691 ======== ======== ========== ==========
Consolidated Statements of Retained Earnings (Unaudited) (in thousands)
Three Months Nine Months Ended September 30, Ended September 30, 1999 1998 1999 1998 -------- -------- ---------- ---------- Balance at the beginning of the period $310,215 $262,116 $ 297,347 $ 328,802 Net income 79,900 82,492 145,936 140,691 Dividends declared: Dividends to common shareholders 0 0 0 (22,802) Dividends to BEC Energy (400,000) (23,000) (450,000) (116,000) Preferred stock (1,490) (1,486) (4,470) (7,275) Transfer of BETG to BEC Energy 0 0 0 (2,980) -------- -------- ---------- ---------- Subtotal (11,375) 320,122 (11,187) 320,436 -------- -------- ---------- ---------- Provision for preferred stock redemption and issuance costs 9 (7,459) (179) (7,773) -------- -------- ---------- ---------- Balance at the end of the period $(11,366) $312,663 $ (11,366) $ 312,663 ======== ======== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 3 Boston Edison Company Consolidated Balance Sheets (Unaudited) (in thousands)
September 30, December 31, 1999 1998 ------------- ------------ Assets - ------ Utility plant in service, at original cost $2,386,241 $2,720,681 Less: accumulated depreciation 840,680 926,020 ---------- ---------- 1,545,561 1,794,661 Construction work in progress 39,600 40,965 ---------- ---------- Net utility plant 1,585,161 1,835,626 Nuclear decommissioning trust 0 172,908 Equity investments 21,291 20,769 Other investments 10,504 10,029 Current assets: Cash and cash equivalents 59,640 82,700 Accounts receivable 356,973 206,003 Accrued unbilled revenues 16,801 14,322 Fuel, materials and supplies, at average cost 14,211 10,287 Prepaid expenses and other 125,414 102,404 ---------- ---------- Total current assets 573,039 415,716 ---------- ---------- Other regulatory assets: Generation-related regulatory asset, net 752,710 477,317 Power contracts 46,999 58,415 Income taxes, net 66,140 52,168 Merger costs 51,904 0 Redemption premiums 17,515 23,419 Other 32,842 1,825 ---------- ---------- Total regulatory assets 968,110 613,144 Other deferred debits 38,376 26,423 ---------- ---------- Total assets $3,196,481 $3,094,615 ========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 4 Boston Edison Company Consolidated Balance Sheets (Unaudited) (in thousands)
September 30, December 31, 1999 1998 ------------- ------------ Capitalization and Liabilities - ------------------------------ Common equity: Common stock, par value $1 per share (100 shares issued and outstanding) $ 0 $ 0 Premium on common stock 741,520 742,544 Retained earnings (11,366) 297,347 ---------- ---------- Total common equity 730,154 1,039,891 ---------- ---------- Cumulative preferred stock: Nonmandatory redeemable series 43,000 43,000 Mandatory redeemable series 49,220 49,040 ---------- ---------- Total preferred stock 92,220 92,040 ---------- ---------- Transition property securitization bonds 646,558 0 Long-term debt 613,518 955,563 ---------- ---------- Total capitalization 2,082,450 2,087,494 ---------- ---------- Current liabilities: Transition property securitization bonds due within one year 68,561 0 Long-term debt due within one year 166,067 667 Accounts payable 78,423 90,890 Accrued interest 16,772 19,991 Dividends payable 993 25,993 Other 191,265 176,823 ---------- ---------- Total current liabilities 522,081 314,364 ---------- ---------- Deferred credits: Accumulated deferred income taxes 449,200 348,557 Accumulated deferred investment tax credits 21,455 45,930 Nuclear decommissioning liability 0 176,578 Power contracts 46,999 58,415 Other 74,296 63,277 ---------- ---------- Total deferred credits 591,950 692,757 Commitments and contingencies __________ __________ Total capitalization and liabilities $3,196,481 $3,094,615 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 5 Boston Edison Company Consolidated Statements of Cash Flows (Unaudited) (in thousands)
Nine Months Ended September 30, 1999 1998 --------- --------- Operating activities: Net income $ 145,936 $ 140,691 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 145,094 178,051 Deferred income taxes and investment tax credits 45,593 (149,710) Allowance for borrowed funds used during construction (1,368) (975) Power contract buyout (65,781) 0 Net changes in: Accounts receivable and accrued unbilled revenues (153,449) (28,305) Fuel, materials and supplies 610 28,667 Transition contract and other accounts payable (7,055) 48,926 Other current assets and liabilities (11,786) 9,423 Other, net 55,205 3,801 --------- --------- Net cash provided by operating activities 152,999 230,569 --------- --------- Investing activities: Plant expenditures (excluding AFUDC) (85,323) (66,998) Costs of nuclear divestiture, net (127,061) 0 Proceeds from sale of fossil generating assets 0 533,633 Nuclear fuel expenditures (16,117) (11,141) Investments (7,712) (29,639) --------- --------- Net cash (used in) provided by investing activities (236,213) 425,855 --------- --------- Financing activities: Proceeds from transition property securitization 725,000 0 Long-term debt redemptions (185,376) (201,600) Preferred stock redemption 0 (71,519) Net change in notes payable 0 (101,878) Dividends paid (479,470) (146,833) --------- --------- Net cash provided by (used in) financing activities 60,154 (521,830) --------- --------- Net (decrease) increase in cash and cash equivalents (23,060) 134,594 Cash and cash equivalents at beginning of year 82,700 4,140 --------- --------- Cash and cash equivalents at end of period $ 59,640 $ 138,734 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net of amounts capitalized $ 68,949 $ 79,549 ========= ========= Income taxes $ 87 $ 182,200 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 6 Notes to Unaudited Consolidated Financial Statements - ---------------------------------------------------- A) Merger of BEC Energy and Commonwealth Energy System --------------------------------------------------- On August 25, 1999, BEC Energy (BEC) and Commonwealth Energy System (COM/Energy) completed a merger transaction to create a new holding company, NSTAR, an energy delivery company serving approximately 1.3 million customers in Massachusetts including more than one million electric customers in 81 communities and 240,000 gas customers in 51 communities. NSTAR is an exempt public utility holding company under the provisions of the Public Utility Holding Company Act of 1935. NSTAR's utility subsidiaries include Boston Edison Company, Commonwealth Electric Company, Cambridge Electric Light Company, Canal Electric Company and Commonwealth Gas Company. NSTAR's nonutility operations include telecommunications, district heating and cooling operations, liquefied natural gas services and five real estate trusts. B) Basis of Presentation --------------------- In May 1998, Boston Edison Company (Boston Edison) completed its reorganization plan to form a holding company, with Boston Edison becoming a wholly owned subsidiary of BEC Energy (BEC). Under the holding company structure the owners of Boston Edison's common stock became BEC common shareholders. Existing debt and preferred stock of Boston Edison remained obligations of Boston Edison. Effective June 25, 1998, Boston Energy Technology Group (BETG) ceased being a subsidiary of Boston Edison and became a wholly owned subsidiary of BEC. Therefore, the 1998 consolidated financial statements reflect the results of operations and cash flows of Boston Edison prior to the reorganization. The accompanying unaudited consolidated financial statements should be read in conjunction with the Boston Edison 1998 Annual Report on Form 10-K/A and quarterly report on Form 10-Q for the periods ended March 31, 1999 and June 30, 1999. The financial information presented as of and for the periods ended September 30 has been prepared from Boston Edison's books and records without audit by independent accountants. Financial information as of December 31 has been derived from the audited 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 and nine-month periods ended September 30, 1999 and 1998 are not indicative of the results which may be expected for an entire year. Kilowatt-hour sales and revenues are typically 7 higher in the winter and summer than in the spring and fall as sales tend to vary with weather conditions. C) Pilgrim Nuclear Power Station ----------------------------- Under Boston Edison's approved restructuring settlement agreement approximately 75% of the net assets of Pilgrim Nuclear Power Station (Pilgrim) are recoverable through a non-bypassable transition charge of the utility's distribution business. All Boston Edison distribution customers must pay a transition charge as a component of distribution electric rates. The purpose of the transition charge is to allow Boston Edison to collect costs from customers that would not be collected in the competitive energy supply market. The distribution and transmission businesses continue to be subject to rate- regulation. This Pilgrim regulatory asset is included in the generation- related regulatory asset-net on the consolidated balance sheet. On July 13, 1999, Boston Edison completed the sale of Pilgrim Nuclear Generating Station to Entergy Nuclear Generating Company, a subsidiary of Entergy Corporation, for $81 million. In addition to the amount received from Entergy, Boston Edison will also receive a total of approximately $243 million from the wholesale contract customers (including $105 million received from Commonwealth Electric Company, an affiliate of Boston Edison) to terminate their contracts and to release them from all future liabilities. As part of the sale, Boston Edison transferred its decommissioning trust fund to Entergy, and was released from all future liability related to the ultimate decommissioning of the plant. In order to provide Entergy with a fully funded decommissioning trust fund, Boston Edison contributed approximately $271 million to the fund at the time of the sale. As a result of a favorable IRS tax ruling, Boston Edison received $43 million from Entergy reflecting a reduction in the required decommissioning funding in the fourth quarter. The difference between the total proceeds received and the net book value of the Pilgrim assets sold plus the net amount to fully fund the decommissioning trust will be included in the balance of generation-related regulatory asset- net on the consolidated balance sheet as such amounts are being collected from customers under Boston Edison's settlement agreement. The final amounts to be collected from customers related to Pilgrim are subject to regulatory review. Three municipal light departments had previously filed for separate claims alleging that the sale of Pilgrim constituted a breach of their respective power sale agreements. Boston Edison has reached a settlement in principle with all fourteen municipal customers of Pilgrim. This settlement, effective upon Federal Energy Regulatory Commission (FERC) approval, will terminate the purchase power agreements between Boston Edison and the municipal light departments and dispose of all disputes, including previously filed arbitration claims, regarding the sale of Pilgrim to Entergy and the power sale agreements. D) Securitization -------------- On July 29, 1999, a wholly owned special purpose subsidiary (SPS) of Boston Edison closed the sale of $725 million of notes to a special purpose trust created by two Massachusetts state agencies. The trust then concurrently closed the sale of $725 million of electric rate reduction bonds to the public. The notes are secured by a portion of the transition charge assessed 8 on Boston Edison's retail customers as permitted under the Massachusetts Electric Industry Restructuring Act and authorized by the Massachusetts Department of Telecommunications and Energy (MDTE). These bonds are non- recourse to Boston Edison. E) Nature of Operations -------------------- NSTAR is focusing its utility operations on the transmission and distribution of energy. This is illustrated by the sale of Boston Edison's fossil generating assets to Sithe Energies in May 1998 and the sale of Pilgrim to Entergy Nuclear Generating Company in July 1999. Boston Edison currently delivers electricity at retail to an area of 590 square miles, including the city of Boston and 39 surrounding cities and towns. It also supplies electricity at wholesale for resale to other utilities and municipalities. Boston Edison is required to continue to develop and implement electric demand side management programs as well as to provide funding for renewable energy projects pursuant to Massachusetts law. F) Contingencies ------------- 1. Hazardous Waste Boston Edison is an owner or operator of approximately 20 properties where oil or hazardous materials were spilled or released. As such, Boston Edison is required to clean up these remaining properties in accordance with a timetable developed by the Massachusetts Department of Environmental Protection. 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 faces possible 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 is one of many potentially responsible parties and currently expects to have only a small percentage of the total potential liability for these sites. Through September 30, 1999, Boston Edison had approximately $6 million accrued on its consolidated balance sheet related to 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, 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 provisions for cleanup 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. 2. Generating Unit Performance Program The MDTE's generating unit performance program ceased March 1, 1998. Under this program the recovery of incremental purchased power costs resulting from Boston Edison's generating unit outages and outages at units in which it had entitlements was subject to review by the MDTE. Proceedings relative to generating unit performance remain pending before the MDTE. These proceedings will include the review of replacement power costs associated with the shutdown of the Connecticut Yankee nuclear electric generating unit. Boston Edison is a 9.5% equity investor in Connecticut Yankee Atomic Power Company and was a power purchaser from the generating unit. Management is unable to 9 fully determine a range of reasonably possible disallowance costs in excess of amounts accrued. Based on its assessment of 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 provisions for disallowance 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. 3. Industry and Corporate Restructuring Legal Proceedings The MDTE order approving the Boston Edison restructuring settlement agreement was appealed by certain parties to the Massachusetts Supreme Judicial Court. One settlement agreement appeal remains pending, however there has to date been no briefing, hearing or other action taken with respect to this proceeding. In addition, along with other Massachusetts investor-owned utilities, Boston Edison has been named as a defendant in a class action suit seeking to declare certain provisions of the Massachusetts electric industry restructuring legislation unconstitutional. Management is currently unable to determine the outcome of these outstanding proceedings however, if an unfavorable outcome were to occur, there could be a material adverse impact on business operations, the consolidated financial position or results of operations for a reporting period. 4. Regulatory Proceedings In October 1997, the MDTE opened a proceeding to investigate Boston Edison's compliance with the 1993 order which permitted the formation of BETG and authorized Boston Edison to invest up to $45 million in unregulated activities. Hearings were completed during the first quarter of 1999. A MDTE ruling is expected in 2000. 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 or results of operations for a reporting period. 5. Rate Plan The MDTE issued an order approving most major elements of a rate plan filed by the retail utility subsidiaries of NSTAR on July 27, 1999. The highlights of the rate plan include a four-year distribution rate freeze for each of the NSTAR retail utility subsidiaries, the collection from customers of the acquisition premium of approximately $478 million over 40 years and the recovery of transaction and integration costs initially estimated at approximately $111 million over 10 years. The Massachusetts Attorney General and a group of four intervenors filed separate appeals of the MDTE order with the Massachusetts Supreme Judicial Court (SJC) regarding the rate plan. While management anticipates that the MDTE's decision to approve the rate plan will be upheld by the SJC, it cannot determine the ultimate outcome of these appeals or their impact on the rate plan. 10 6. 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, management does not believe that it is probable that any such additional costs will have a material impact on Boston Edison's 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. G) Income Taxes ------------ The following table reconciles the statutory federal income tax rate to the annual estimated effective income tax rate for 1999 and the actual effective income tax rate for 1998.
1999 1998 ---- ---- Statutory tax rate 35.0% 35.0% State income tax, net of federal income tax benefit 4.3 5.1 Investment tax credit amortization (11.1) (6.8) Other 0.7 0.8 ---- ---- Effective tax rate 28.9% 34.1% ==== ====
The 1999 estimated effective tax rate decreased by 9.8% as a result of the recognition in net income of the remaining unamortized investment tax credits related to Pilgrim at the time of its sale. The 1998 effective tax rate declined by 4.5% as a result of the recognition in net income of the remaining unamortized investment tax credits related to Boston Edison's fossil generating assets at the time of their sale. This shareholder benefit, which was realized in the second quarter of 1998, is included in other expense, net on the 1998 consolidated statement of income. H) Related Party Transactions -------------------------- The September 30, 1999 consolidated balance sheet of Boston Edison includes a $14 million receivable from BETG's wholly owned subsidiary, BECoCom. The receivable is for construction and construction management services provided by Boston Edison. The September 30, 1999 balance sheet also includes an $18 million receivable from NSTAR. This represents Boston Edison's share of BEC's consolidated federal income tax benefit. Item 2. Management's Discussion and Analysis - --------------------------------------------- Merger of BEC Energy and Commonwealth Energy System - --------------------------------------------------- NSTAR, an exempt public utility holding company, was created through a merger transaction involving BEC Energy (BEC) and Commonwealth Energy System (COM/Energy) on August 25, 1999. The utility industry has continued to change in response to legislative and regulatory mandates that are aimed at lowering prices for energy by creating a more competitive marketplace. These pressures have resulted in an increasing trend in the industry to seek competitive advantages and other benefits through business combinations. NSTAR is 11 focusing its utility operations on the transmission and distribution of energy following the sale of BEC's fossil generating facilities to Sithe Energies in May 1998, BEC's nuclear generating facilities to Entergy Nuclear Generating Company in July 1999 and substantially all of COM/Energy's generating facilities to Southern Company in December 1998. The utility companies of NSTAR form an energy delivery company serving approximately 1.3 million customers in Massachusetts, including more than one million electric customers in 81 communities and 240,000 gas customers in 51 communities. The merger became effective after receipt of various regulatory approvals. The Federal Energy Regulatory Commission approved the merger on June 24, 1999. The Nuclear Regulatory Commission approved the transfer of control of affiliate Canal Electric Company's interest in the Seabrook nuclear plant from COM/Energy to NSTAR on August 11, 1999. The Securities and Exchange Commission issued its approval on August 24, 1999. An integral part of the merger is the rate plan that was filed by the retail utility subsidiaries of BEC and COM/Energy and approved by the MDTE on July 27, 1999. Significant elements of the rate plan include a four-year distribution rate freeze (after an adjustment to the distribution rates of affiliates Cambridge Electric Light Company and Commonwealth Electric Company to collect the appropriate level of distribution costs that is offset by a reduction in the transition charge that was previously approved by the MDTE), recovery of the acquisition premium (goodwill) over 40 years and recovery of transaction and integration costs (costs to achieve) over 10 years. The merger was accounted for by BEC as an acquisition of COM/Energy under the purchase method of accounting. The goodwill amounted to approximately $478 million while the original estimate of costs to achieve the merger was $111 million. The annual amortization of goodwill will be approximately $11.9 million while the cost to achieve amortization will initially be approximately $11.1 million annually. The cost to achieve amortization is based on the filed estimate of $111 million to be amortized over 10 years. NSTAR's retail utility subsidiaries will reconcile the actual costs with that estimate and any difference is expected to be recovered over the remainder of the amortization period. A group of four intervenors and the Massachusetts Attorney General filed two separate appeals of the MDTE's rate plan order with the Massachusetts Supreme Judicial Court (SJC) in August 1999. While management anticipates that the MDTE's decision to approve the rate plan will be upheld by the SJC, it is unable to determine the ultimate outcome of these appeals or their impact on the rate plan. Results of Operations - Three Months Ended September 30, 1999 vs. Three Months - ------------------------------------------------------------------------------ Ended September 30, 1998 - ------------------------ Net income was $79.9 million for the three months ended September 30, 1999 compared to $82.5 million for the same period in 1998, a 3.2% decrease as described below. 12 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 Consolidated Financial Statements. Operating revenues Operating revenues were $454.9 million in 1999 compared to $479.7 million in 1998, a decrease of $24.8 million or 5.2% as follows:
(in thousands) - ------------------------------------------------------ Retail electric revenues $ (7,325) Wholesale revenues (13,675) Short-term sales and other revenues (3,793) - ------------------------------------------------------ Decrease in operating revenues $(24,793) ======================================================
Retail revenues were $412.1 million in 1999 compared to $419.5 million in 1998, a decrease of approximately $7.4 million or 2%. The decrease in retail revenues reflects a 5% rate reduction in retail rates, from 10% to 15%, effective September 1, 1999, as mandated by the Massachusetts Electric Utility Industry Restructuring Act, partially offset by a 4.1% increase in retail kWh sales resulting from the higher than normal summer temperatures in 1999 and a continuing strong local economy. Wholesale revenues were $22.4 million in 1999 compared to $36.1 million in 1998, a decrease of $13.7 million or 38%. This reflects a $15.9 million decrease in sales to Pilgrim contract customers due to the Pilgrim divestiture. This is partially offset by a $2.2 million increase in sales to municipal wholesale customers. Total short-term sales and other revenues were $20.4 million in 1999 compared to $24.1 million in 1998, a decrease of $3.7 million or 15%. This decrease reflects a $10.0 million decrease in short-term sales which is consistent with the decrease in short-term kWh sales. Beginning December 1, 1998, under an agreement with Select Energy, a subsidiary of Northeast Utilities, Boston Edison is only purchasing enough power to meet its obligations to its retail and wholesale customers. Therefore, Boston Edison has no excess power supply to sell into the New England Power Pool. This decrease is partially offset by an increase of $4.0 million due to a billing settlement related to the nuclear divestiture. Operating expenses Fuel and purchased power expense was $182.5 million in 1999 compared to $154.8 million in 1998, an increase of $27.7 million or 18%. Fuel expense related to Pilgrim station decreased $6 million due to the 1999 refueling outage and the sale of the plant in July 1999. Boston Edison adjusts its electric rates to collect the costs related to fuel and purchased power from customers on a fully reconciling basis. Fuel and purchased power expense reflects a reduction of $13 million in 1999 and $47 million in 1998 related to these rate recovery mechanisms. Due to the rate adjustment mechanisms, changes in the amount of fuel and purchased power expense has no net impact on earnings. 13 Operations and maintenance expense was $71.5 million in 1999 compared to $87.8 million in 1998, a decrease of $16.3 million or 19%. This reflects a decrease of $22 million of nuclear production expenses as a result of the sale of Pilgrim station in the third quarter and a decrease of $5 million for the deferral of costs related to the Pilgrim refueling outage. This decrease was partially offset by increases of $2 million due to restoration efforts related to Hurricane Floyd and $10 million for bad debt expense. Depreciation and amortization expense was $40.8 million in 1999 compared to $47.6 million in 1998, a decrease of $6.8 million or 14%. This decrease reflects lower depreciation due to the nuclear divestiture. Demand side management (DSM) and renewable energy programs expense was $13.9 million in 1999 compared to $20.0 million in 1998, a decrease of $6.1 million or 31%. These costs are collected from customers on a fully reconciling basis. Therefore, the decrease has no impact on earnings. Property and other taxes were $15.3 million in 1999 compared to $18.1 million in 1998, a decrease of $2.8 million or 15%. The decrease reflects lower municipal property taxes resulting from the fossil and nuclear divestiture. Other expense, net Other income, net was $17.4 million in 1999 compared to $0.8 million in 1998, a net increase of $16.6 million. Prior to the consideration of tax benefits, other income was $1.3 million in both 1999 and in 1998. This reflects $2.7 million of interest income in 1999 compared to $0.7 million in 1998. Other miscellaneous expense was $1.4 million in 1999 compared to income of $0.6 million in 1998. Income tax benefits in 1999 were $16.1 million compared to income tax expense of $0.5 million in 1998. The 1999 income tax benefit includes $20.8 million related to the recognition of previously deferred investment tax credits associated with the Pilgrim nuclear generating station. Interest charges Interest on long-term debt and transmission property securitization bonds was $25.5 million in 1999 compared to $19.5 million in 1998, an increase of $6 million or 31%. This increase reflects $8 million related to securitization. This increase is partially offset by approximately $3 million in reductions related to the retirement of $19 million of 7.8% debentures, $66 million of 9.875% debentures and $91 million of 9.375% debentures during the third quarter of 1999. Results of Operations - Nine Months Ended September 30, 1999 vs. Nine Months - ---------------------------------------------------------------------------- Ended September 30, 1998 - ------------------------ Net income was $145.9 million for the nine months ended September 30, 1999 compared to $140.7 million for the same period in 1998, a 3.7% increase as described below. The results of operations for the nine months ended 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 Consolidated Financial Statements. 14 Operating revenues Operating revenues were $1,205.2 million in 1999 compared to $1,259.1 million in 1998, a decrease of $53.9 million or 4.3% as follows:
(in thousands) - ------------------------------------------------------ Retail electric revenues $(13,152) Wholesale revenues (14,828) Short-term sales and other revenues (25,939) - ------------------------------------------------------ Decrease in operating revenues $(53,919) ======================================================
Retail revenues were $1,064.3 million in 1999 compared to $1,077.5 million in 1998, a decrease of $13.2 million or 1%. This decrease is due to a decrease in retail revenues reflecting the impact of the 10% reduction in retail rates mandated by the Massachusetts Electric Utility Industry Restructuring Act that was implemented in March 1998 and an additional 5% rate reduction effective September 1, 1999. This decrease is partially offset by increases reflecting a 4.6% increase in kWh sales resulting from the higher than normal summer temperatures and the continuing strong local economy in 1999. Wholesale revenues were $91.5 million in 1999 compared to $106.3 million in 1998, a decrease of $14.8 million or 14%. This decrease in wholesale revenues reflects a $19.4 million decrease in sales to Pilgrim contract customers due to the scheduled 1999 refueling and maintenance outage and subsequent sale of Pilgrim station in July 1999. This is partially offset by a $4.6 million increase in sales to municipal wholesale contract customers. Total short-term sales and other revenues were $49.4 million in 1999 compared to $75.3 million in 1998, a decrease of $25.9 million or 34%. This reflects $16 million of revenue received in 1998 as a result of support of standard offer service by the fossil generating stations prior to divestiture. This decrease also reflects a $22 million decrease in short-term sales which is consistent with the decrease in short-term kWh sales. Beginning December 1, 1998, under an agreement with Select Energy, a subsidiary of Northeast Utilities, Boston Edison is only purchasing enough power to meet its obligations to its retail and wholesale customers. Therefore, Boston Edison has no excess power supply to sell into the New England Power Pool. These decreases are partially offset by a $6 million increase related to a FERC approved settlement for transmission contract customers and a $4 million increase for billing settlements to Pilgrim contract customers. Operating expenses Fuel and purchased power expense was $480.2 million in 1999 compared to $424.9 million in 1998, an increase of $55.3 million or 13%. Purchased power expense increased $84 million reflecting the increase in Boston Edison's purchased power requirements in the absence of its fossil generating units and the 1999 Pilgrim refueling outage and sale. Boston Edison adjusts its electric rates to collect the costs related to fuel and purchased power from customers on a fully reconciling basis. Fuel and purchased power expense reflects a reduction of $38 million in 1999 and $88 million in 1998 related to these rate recovery mechanisms. Due to the rate adjustment mechanisms, changes in the amount of fuel and purchased power expense have no net impact on earnings. The fuel expense related to Boston Edison's fossil generation units decreased 15 $66 million reflecting the divestiture of those units in May 1998. Fuel expense related to Pilgrim station decreased $10 million due to the 1999 refueling outage and the sale of the plant in July 1999. The increase is additionally offset by a decrease of $2 million related to Boston Edison's non-electric product costs. Operations and maintenance expense was $218.1 million in 1999 compared to $272.4 million in 1998, a decrease of $54.3 million or 20%. The decrease reflects a $21 million decrease in fossil-related power production expenses due to the fossil divestiture in May 1998. This also reflects a decrease of $38 million of nuclear power production expenses due to the deferral of costs related to the 1999 refueling outage at Pilgrim station and the sale of the plant in July 1999. These decreases are partially offset by increases of $10 million for bad debt expense and $2 million incurred due to restoration efforts related to Hurricane Floyd. This decrease also reflects $4 million of expense from BETG in the first half of 1998. Depreciation and amortization expense was $135.8 million in 1999 compared to $147.7 million in 1998, a decrease of $11.9 million or 8%. This decrease reflects decreases resulting from the nuclear divestiture and the amortization of the gain on the sale of the fossil plants which began in June 1998. These decreases are partially offset by an increase in depreciation on distribution utility plant required under the terms of the Boston Edison settlement agreement beginning March 1, 1998. Demand side management (DSM) and renewable energy programs expense was $40.6 million in 1999 compared to $37.0 million in 1998, an increase of $3.6 million or 10%. These costs are collected from customers on a fully reconciling basis. Therefore, the increase has no impact on earnings. Property and other taxes were $55.3 million in 1999 compared to $70.9 million in 1998, a decrease of $15.6 million or 22%. The decrease is due to a decrease in municipal property taxes resulting from the fossil and nuclear divestiture. Other expense, net Other income was $19.2 million in 1999 compared to other expense of $4.7 million in 1998, a net increase in income of $23.9 million. Prior to the consideration of tax benefits, other income was $4.3 million in 1999 compared to expense of $25.7 million in 1998. BETG's 1998 total equity losses from its RCN and EnergyVision joint ventures were $9.0 million. 1998 reflects $22.4 million of costs related to the fossil divestiture that is offset by the recognition of investment tax credits disclosed below. These negative amounts are offset by $2.2 million of interest income in 1999 compared to $6.3 million in 1998 due to the level of cash on hand as a result of the proceeds of the fossil divestiture. Other miscellaneous income was $2.1 million in 1999 compared to expense of $0.6 million in 1998. Income tax benefits in 1999 were $14.9 million compared to $21.0 million in 1998. The income tax benefits include $20.8 million in 1999 and $10.9 million in 1998 related to the recognition of previously deferred investment tax credits associated with the Pilgrim nuclear generating station sold in 1999 and the fossil generating stations sold in 1998. 16 Interest charges Interest on long-term debt and transmission property securitization bonds was $64.4 million in 1999 compared to $63.5 million in 1998, an increase of $0.9 million or 1%. This increase reflects $8 million related to securitization. This increase is partially offset by reductions of approximately $2 million due to the maturing of $100 million of 5.95% debentures in March 1998 and the cessation of amortization of the associated discounts and redemption premiums, and a reduction of approximately $3 million due to the redemption of a $100 million 6.662% bank loan in June 1998. Additionally, interest charges were lower by approximately $3 million due to the retirement of $19 million of 7.8% debentures, $66 million of 9.875% debentures and $91 million of 9.375% debentures during the third quarter of 1999. Preferred stock dividends Preferred stock dividends were $4.5 million in 1999 compared to $7.3 million in 1998, a decrease of $2.8 million or 38%. The decrease is due to the redemption of 400,000 shares of 7.75% series cumulative preferred stock and the remaining 320,000 shares of 7.27% series in July 1998. Electric Revenues - ----------------- Boston Edison's electric delivery business has provided its standard offer customers service at rates designed to give 10% savings from rates in effect prior to the retail access date (March 1, 1998) and an additional 5% average savings, after an adjustment for inflation, as of September 1, 1999. The cost of providing standard offer service, which includes fuel and purchased power costs, is recovered from customers on a fully reconciling basis. New retail customers in the Boston Edison service territory and previously existing customers that are no longer eligible for the standard offer service and who have not chosen to receive service from a competitive energy supplier are on default service. The price of default service is based on the average competitive market price for power. Refer also to the Electric Revenues section of Item 7 of the Boston Edison 1998 Annual Report on Form 10-K/A. Under the Boston Edison restructuring settlement agreement, the rates of Boston Edison's distribution business will remain unchanged, subject to a minimum and maximum return on average common equity (ROE), until December 31, 2000. Refer to the Electric Revenues section of Item 7 of the Boston Edison 1998 Annual Report on Form 10-K/A for detail regarding the minimum and maximum ROE. Under the Boston Edison settlement agreement, the cost of providing transmission service to distribution customers is recovered on a fully reconciling basis. Liquidity - --------- Boston Edison supplements internally generated funds as needed, primarily through the issuance of short-term commercial paper and bank borrowings. Boston Edison has authority from the Federal Energy Regulatory Commission to issue up to $350 million of short-term debt. Boston Edison has a $200 million revolving credit agreement with a group of banks as well as other arrangements with several banks to provide additional short-term credit on an uncommitted 17 and as available basis. No amount was outstanding under these revolving credit agreements as of September 30, 1999. On July 29, 1999, a wholly owned special purpose subsidiary (SPS) of Boston Edison closed the sale of $725 million of notes to a special purpose trust created by two Massachusetts state agencies. The trust then concurrently closed the sale of $725 million of electric rate reduction bonds to the public. The notes are secured by a portion of the transition charge assessed on Boston Edison's retail customers as permitted under the Massachusetts Electric Industry Restructuring Act and authorized by the MDTE. These bonds were issued in five separate classes with variable payment periods ranging from approximately one to ten years and bearing fixed interest rates ranging from 5.99% to 7.03%. The bonds are non-recourse to Boston Edison. Proceeds were utilized to finance a portion of the stranded costs that are being collected from customers under Boston Edison's restructuring settlement agreement. Boston Edison will collect a portion of the transition charge on behalf of the SPS and remit the proceeds to the SPS. Boston Edison used a portion of the proceeds received from the SPS to fund a portion of the nuclear decommissioning fund transferred to Entergy as part of the sale of the Pilgrim generating station. Boston Edison is using the remaining proceeds to reduce capitalization and for general corporate purposes. On July 30, 1999, Boston Edison announced a tender offer for any and all of its outstanding 9-7/8% debentures due June 1, 2020 and its 9-3/8% debentures due August 15, 2021. The aggregate principal amount of the securities is $215 million, of which approximately $157 million was redeemed. In addition, unrelated to the tender offer, $19 million of 7.80% series due 2023 was repurchased from the open market. Year 2000 Computer Issue - ------------------------ The year 2000 issue is the result of computer programs that were written using two digits rather than four to define an applicable year. If computer programs with date-sensitive functions are not year 2000 compliant, they may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system failures or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions and engage in other normal business activities. Boston Edison has a year 2000 program in place to address the risk of non-compliant internal business software, internal non-business software and embedded chip technology and external noncompliance of third parties. Boston Edison is addressing the year 2000 issue on a coordinated basis. Boston Edison inventoried and assessed all date-sensitive systems including mission critical systems, important business systems used for information and transaction processing systems, and non-critical internal productivity systems. The North American Electric Reliability Council (NERC) has defined mission critical systems as those whose mis-operation could result in loss of electric generation, transmission or load interruption. Important business systems are those necessary to maintain core business functions such as billing and accounting for electricity to customers. Boston Edison has inventoried mission critical systems that may be date- sensitive and that use embedded technology such as micro-controllers or microprocessors. Approximately 27% of these systems required modification or 18 replacement. These systems can be categorized as: (1) telecommunications, (2) distribution systems controls, and (3) other distribution equipment. Boston Edison has completed remediation and testing of mission critical systems and reported to NERC on June 30, 1999 that all mission critical systems are ready for year 2000. Boston Edison inventoried important business systems that are date-sensitive and determined that approximately one-third of these systems needed modification or replacement. Plans were developed and implemented to correct and test all affected systems, with priorities based on the importance of the supported activity. As systems were remediated they were tested for operational and year 2000 readiness in their own environment. After completion of implementation, the systems were then tested for their integration and compatibility with other interactive systems. All important business system replacements, remediation and testing were completed by July 1999. These systems are now considered year 2000 ready. In addition all non-critical internal productivity systems have been inventoried and assessed. Approximately one-third of these systems required modification or replacement. Under the year 2000 plan, each of these systems has a form of readiness acceptance commensurate with its business importance. More important and complex systems are tested as a means of acceptance. Less important and non-complex systems may refer to industry test results, vendor test results and/or vendor statements of readiness as a means of acceptance. All of these systems were declared ready by September 30, 1999. Costs incurred to remediate systems are expensed as incurred. In addition, a decision was made to use this opportunity to upgrade some of Boston Edison's less efficient centralized business systems. Systems' replacement costs will be capitalized and amortized over future periods. Boston Edison expects the modification and testing of its information and embedded systems to cost $32 million. Boston Edison has expended $29 million on this project through September 30, 1999. Boston Edison has funded and plans on continuing to fund all costs related to year 2000 with internally generated cash flows. In addition to its internal efforts, Boston Edison has initiated formal communications with its significant suppliers, service providers and other vendors to determine the extent to which it may be vulnerable to their failure to correct their own year 2000 issues. Boston Edison has received responses from over 500 third party vendors including mission critical vendors. All of these vendors have indicated that they will be year 2000 ready by the end of 1999. In addition, Boston Edison has contacted all of its significant power suppliers. Each has indicated that they either are or will be year 2000 ready by the end of 1999. In addition to the risk faced from its dependence on third party suppliers for year 2000 readiness, Boston Edison has a risk that power will not be available from the Independent System Operator-New England (ISO-NE) for the purchase and distribution to Boston Edison's customers. Should ISO-NE fail to resolve its year 2000 issues as planned, there would be an adverse impact on Boston Edison and its customers. To mitigate this risk, efforts are being coordinated with ISO-NE and the New England Power Pool (NEPOOL) to establish inter-utility testing guidelines coordinated with NERC plans to determine year 2000 readiness. Boston Edison is a participant in the NEPOOL/ISO New England Year 2000 Joint Oversight Committee which is overseeing ISO-NE's and NEPOOL's year 2000 readiness activities. Overall the Northeast Power Coordinating Council, whose activities will be incorporated into the interregional coordinating efforts by the NERC, will coordinate regional activities, including those of ISO- NE/NEPOOL. Regional year 2000 contingency plans were developed and submitted to NERC in June 1999. Drills will continue through the remainder of the year. 19 In addition, parts of the global infrastructure, including national banking systems, electrical power grids, gas pipelines, transportation facilities, communications and government activities, may not be fully functional after 1999 due to the year 2000 issue. Infrastructure failures could significantly reduce Boston Edison's ability to acquire energy and its ability to serve its customers as effectively as they are now being served. Boston Edison believes that its efforts to address the year 2000 issue will allow it to successfully avoid any material adverse effect on its operations or financial condition. However, it recognizes that failing to resolve year 2000 issues on a timely basis would, in a most reasonable worst case scenario, significantly limit its ability to acquire and distribute energy or process its daily business transactions for a period of time, especially if such failure is coupled with third party or infrastructure failures. Similarly, Boston Edison could be significantly affected by the failure of one or more significant suppliers, customers or components of the infrastructure to conduct their respective operations normally after 1999. Adverse effects on Boston Edison could include, among other things, business disruption, increased costs, loss of business and other similar risks. Boston Edison's year 2000 program includes contingency plans. If required, these plans are intended to address both internal risks as well as potential external risks related to vendors, customers and energy suppliers. Plans have been developed in conjunction with available national and regional guidance and are based on system emergency plans that were developed and successfully tested over the past several years. Included within its contingency plans are procedures for the procurement of short-term power supplies and emergency distribution system restoration procedures. The contract with ISO-NE requires ISO-NE dispatch at all times sufficient resources to meet total New England load requirements. ISO-NE has the responsibility and authority to dispatch all regional generation sources including maintaining sufficient operating reserves to respond to unanticipated system conditions. ISO-NE, in conjunction with NEPOOL has an extensive year 2000 readiness program underway to ensure that it will have sufficient generation and transmission resources to reliably serve load. In addition, ISO-NE indicated that it will maximize the operating reserves during the early year 2000 period. The foregoing discussion regarding year 2000 project timing, effectiveness, implementation and costs includes forward-looking statements that are based on management's current evaluation using available information. Factors that might cause material changes include, but are not limited to, the availability of key year 2000 personnel, the readiness of third parties and Boston Edison's ability to respond to unforeseen year 2000 complications. 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, 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. Refer also to the safe harbor cautionary statements included in the Boston Edison 1998 Annual Report on Form 10-K/A. The preceding sections include certain forward-looking statements about merger, environmental and legal issues and year 2000 compliance. 20 The cost savings and cost avoidances ultimately realized from the merger may differ from current estimates. The impacts of various environmental and legal issues 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 the estimated litigation costs. The timing and total costs related to the year 2000 plan could differ from current expectations. Factors that may cause such differences include the ability to locate and correct all relevant computer codes and the availability of personnel trained in this area. In addition, management cannot predict the nature or impact on operations of third party noncompliance. Item 3. Quantitative and Qualitative Disclosures about Market Risk - ------------------------------------------------------------------- There have been no material changes since year-end. 21 Part II - Other Information Item 5. Other Information - -------------------------- The following additional information is furnished in connection with the Registration Statement on Form S-3 of the Registrant (File No. 33-57840), filed with the Securities and Exchange Commission on February 3, 1993. Ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred stock dividend requirements: Twelve months ended September 30, 1999: -------------------------------------- Ratio of earnings to fixed charges 3.30 Ratio of earnings to fixed charges and preferred stock dividend requirements 3.05 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 September 30, 1999 12.2 - Computation of ratio of earnings to fixed charges and preferred stock dividend requirements for the twelve months ended September 30, 1999 Exhibit 15 - Letter Re Unaudited Interim Financial Information 15.1 - Report of Independent Accountants Exhibit 27 - Financial Data Schedule 27.1 - Schedule UT 22 Exhibit 99 - Additional Exhibits 99.1 - Letter of Independent Accountants Form S-3 Registration Statement filed by Boston Edison Company on February 3, 1993 (File No. 33-57840) b) SEC Form 8-K for Boston Edison Company was filed on August 13, 1999 relating to the issuance of notes totaling $725 million by its wholly owned special purpose subsidiary BEC Funding LLC. 23 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 thereunto duly authorized. BOSTON EDISON COMPANY --------------------- (Registrant) Date: November 15, 1999 /s/ R. J. Weafer, Jr. ------------------------------ Robert J. Weafer, Jr. Vice President, Controller and Chief Accounting Officer EX-12.1 2 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 24 Exhibit 12.1 Boston Edison Company Computation of Ratio of Earnings to Fixed Charges Twelve Months Ended September 30, 1999 (in thousands) Net income from continuing operations $162,582 Income taxes 65,521 Fixed charges 99,007 -------- Total $327,110 ======== Interest expense $ 89,174 Interest component of rentals 9,833 -------- Total $ 99,007 ======== Ratio of earnings to fixed charges 3.30 ====
EX-12.2 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS 25 Exhibit 12.2 Boston Edison Company Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements Twelve Months Ended September 30, 1999 (in thousands) Net income from continuing operations $162,582 Income taxes 65,521 Fixed charges 99,007 -------- Total $327,110 ======== Interest expense $ 89,174 Interest component of rentals 9,833 -------- Subtotal 99,007 -------- Preferred stock dividend requirements 8,361 -------- Total $107,368 ======== Ratio of earnings to fixed charges and preferred stock dividend requirements 3.05 ====
EX-15.1 4 REPORT OF INDEPENDENT ACCOUNTANTS 26 Exhibit 15.1 Report of Independent Accountants To the Directors of Boston Edison Company: We have reviewed the accompanying consolidated balance sheet of Boston Edison Company (Boston Edison) as of September 30, 1999 and the related statements of income for the three and nine-month periods ended September 30, 1999 and 1998 and cash flows for the nine-month periods ended September 30, 1999 and 1998. These financial statements are the responsibility of 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 financial statements in order for them to be in conformity with generally accepted accounting principles. Hartford, Connecticut PricewaterhouseCoopers LLP November 15, 1999 EX-99.1 5 SEC LETTER 27 Exhibit 99.1 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Boston Edison Company Registration on Form S-3 We are aware that our report dated November 15, 1999 on our review of the interim financial information of Boston Edison Company (Boston Edison) for the period ended September 30, 1999 and included in this Form 10-Q is incorporated by reference in Boston Edison's registration statement on Form S-3 (File No. 33-57840). Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statement prepared or certified by us within the meaning of Sections 7 and 11 of that Act. Hartford, Connecticut PricewaterhouseCoopers LLP November 15, 1999 EX-27 6 FINANCIAL DATA SCHEDULE
UT 1,000 9-MOS DEC-31-1999 SEP-30-1999 PER-BOOK 1,585,161 31,795 573,039 1,006,486 0 3,196,481 0 741,520 (11,366) 730,154 49,220 43,000 1,260,076 0 0 0 234,628 0 0 0 879,403 3,196,481 1,205,210 80,648 929,895 1,010,543 194,667 19,236 213,903 67,967 145,936 4,470 0 0 0 152,999 0 0
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