-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GijL1A1Esvsh5n7PW0QbnDMqpVnSzJM3Jog6RIQHSF91QwSbo4O8Og5LzfZaFpH6 wOWSsqTuEXInQx+kCPHWKg== 0000071304-94-000008.txt : 19940404 0000071304-94-000008.hdr.sgml : 19940404 ACCESSION NUMBER: 0000071304-94-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE ELECTRIC LIGHT CO CENTRAL INDEX KEY: 0000016573 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 041144610 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 002-07909 FILM NUMBER: 94519457 BUSINESS ADDRESS: STREET 1: ONE MAIN ST CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6172254000 MAIL ADDRESS: STREET 1: P O BOX 9150 CITY: CAMBRIDGE STATE: MA ZIP: 02142-9150 10-K 1 CAMBRIDGE ELECTRIC LIGHT CO. 1993 FORM 10-K PAGE 1 Washington, D. C. 20549-1004 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________ to _______________ Commission file number 2-7909 CAMBRIDGE ELECTRIC LIGHT COMPANY (Exact name of registrant as specified in its charter) Massachusetts 04-1144610 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Main Street, Cambridge, Massachusetts 02142-9150 (Address of principal executive offices) (Zip Code) (617) 225-4000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Title of Class None 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. Outstanding at Class of Common Stock March 15, 1994 Common Stock, $25 par value 346,600 shares The Company meets the conditions set forth in General Instruction J(1)(a) and (b) of Form 10-K as a wholly-owned subsidiary and is therefore filing this Form with the reduced disclosure format. Documents Incorporated by Reference Part in Form 10-K None Not Applicable List of Exhibits begins on page 36 of this report. PAGE 2 CAMBRIDGE ELECTRIC LIGHT COMPANY FORM 10-K DECEMBER 31, 1993 TABLE OF CONTENTS PART I PAGE Item 1. Business.............................................. 3 General............................................ 3 Electric Power Supply.............................. 3 Power Contracts and Capacity Acquisition and Disposition Agreement........... 4 New England Power Pool............................. 4 Energy Mix......................................... 5 Rates and Regulation............................... 5 (a) Retail Rate Proceeding...................... 5 (b) Wholesale Rate Proceedings.................. 6 (c) Cost Recovery............................... 6 Environmental Matters.............................. 8 Construction and Financing......................... 8 Employees.......................................... 9 Item 2. Properties............................................ 9 Item 3. Legal Proceedings..................................... 9 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters................................... 10 Item 7. Management's Discussion and Analysis of Results of Operations............................................ 11 Item 8. Financial Statements and Supplementary Data........... 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 15 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................... 36 Signatures...................................................... 54 PAGE 3 CAMBRIDGE ELECTRIC LIGHT COMPANY PART I. Item 1. Business General Cambridge Electric Light Company (the Company) is engaged in the production, distribution and sale of electricity at retail to approximately 44,500 customers in the city of Cambridge, Massachusetts. The service territory encompasses a seven square mile area with a population of approximately 96,000. In addition, the Company sells power for resale to the New England Power Pool (NEPOOL) and to the Town of Belmont, Massachusetts (Belmont), and sells steam from its electric generating stations at wholesale to an affiliated company for distribution to customers for use in connection with space heating and other purposes. The Company, which was organized on January 28, 1886 pursuant to a special act of the legislature of the Commonwealth of Massachusetts, operates under the jurisdiction of the Massachusetts Department of Public Utilities (DPU), which regulates retail rates, accounting, issuance of securities and other matters. The Company also files its wholesale rates with the Federal Energy Regulatory Commission (FERC). The Company is a wholly-owned subsidiary of Commonwealth Energy System ("System"), which, together with its subsidiaries, is referred to as "the system." By virtue of its charter, which is unlimited in time, the Company distributes electricity without direct competition in kind from any privately or municipally-owned utility. Alternate sources of energy are available to customers within the service territory, but competition from these sources to date has not been a significant factor affecting the Company. However, the Massachusetts Institute of Technology (MIT) is constructing a 19 MW natural gas-fired cogeneration facility which is expected to be completed in January 1995. MIT expects that this cogeneration facility will meet approximately 94% of its power, heating and cooling requirements. Sales to MIT in 1993 accounted for approximately 9.4% of the Company's total unit sales. MIT and the Company are presently negotiating a buy and sell arrangement which will require the approval of the DPU. Of the Company's 1993 retail electric unit sales, 12% was sold to residential customers, 74% to commercial customers, 6% to industrial customers and 8% to municipal and other customers. Electric Power Supply The Company owns generating facilities with a total capacity of 114.5 MW, of which 51.5 MW is used for peaking purposes. The Company relies primarily on purchased power to meet its energy requirements. Power purchases for the Company and Commonwealth Electric Company (Commonwealth Electric), the other wholly-owned electric distribution subsidiary of the System, are arranged whereby power is made available to the subsidiaries in accordance with their requirements including purchases from PAGE 4 CAMBRIDGE ELECTRIC LIGHT COMPANY Canal Electric Company (Canal), an affiliated wholesale electric generating company located in Sandwich, Massachusetts, and a major source of purchased power for the Company. Under long-term contracts, system entitlements include one-quarter (143 MW) of the capacity and energy of Canal Unit 1 and one-half (292 MW) of the capacity and energy of Canal Unit 2. In response to solicitations made to NEPOOL member companies by Northeast Utilities (NU), Canal, on behalf of the Company and Commonwealth Electric, agreed to purchase entitlements through various contracts ranging up to five years in length. The terms of a five-year agreement stipulate the purchase of 50 MW, on average, from NU annually from November 1989 through October 1994. The Company and Commonwealth Electric are each appropriated a portion of the power received from NU based on need. In addition, the Company has ownership interests (2 1/2% to 4 1/2%) in three operating nuclear units located in New England with power entitlements totaling 67.6 MW. On February 26, 1992, Yankee Atomic Electric Company's Board of Directors decided to permanently cease power operation at a nuclear unit located in Rowe, Massachusetts and, in time, decommission the facility. The Company has a 2% interest in this facility. For further information, refer to Note 4(d) of the Notes to Financial Statements filed under Item 8 of this report. In addition, through Canal's equity ownership in Hydro-Quebec Phase II and joint-ownership in the Seabrook nuclear unit, the Company has entitlements of 19.7 MW and 8.1 MW, respectively. The Company expects to provide for future peak load plus reserve requirements through existing and planned system generation, including purchasing excess capacity from neighboring utilities. These and other bulk electric power purchases are necessary in order to fulfill the system's NEPOOL obligation and for Canal to acquire and deliver electric generating capacity to meet the Company's and Commonwealth Electric's requirements. Power Contracts and Capacity Acquisition and Disposition Agreement The Company has long-term contracts for the purchase of electricity from various sources. In addition, the Company's future generation needs will be met substantially through a Capacity Acquisition and Disposition Agreement with Canal. For further information, refer to Note 4(b) of the Notes to Financial Statements filed under Item 8 of this report. New England Power Pool The Company, together with other electric utility companies in the New England area, is a member of NEPOOL, which was formed in 1971 to provide for the joint planning and operation of electric systems throughout New England. NEPOOL operates a centralized dispatching facility to ensure reliability of service and to dispatch the most economically available generating units of member companies to fulfill the region's energy requirements. This concept is accomplished through the use of computers to monitor and forecast load requirements and provide for the economic dispatch of generation. The Company and the System's other electric subsidiaries are also members of the Northeast Power Coordinating Council (NPCC), an advisory PAGE 5 CAMBRIDGE ELECTRIC LIGHT COMPANY organization which includes the major power systems in New England and New York plus the provinces of Ontario and New Brunswick in Canada. NPCC establishes criteria and standards for reliability and serves as a vehicle for coordination in the planning and operation of these systems in enhancing reliability. The reserve requirements used by the NEPOOL participants in planning future additions are determined by NEPOOL to meet the reliability criteria recommended by NPCC. The system estimates that, during the next ten years, reserve requirements so determined will be in the range of 23% to 29% of peak load. Energy Mix The Company's energy mix, including purchased power, was as follows: 1993 1992 1991 Oil 43% 58% 55% Nuclear 44 38 40 Natural gas 12 4 5 Hydro 1 - - Total 100% 100% 100% Oil-fired generation, although reduced from prior year levels, still accounts for a large percentage of the Company's total generation sources. The Company's energy mix shifted during 1993 from oil to natural gas and other types of generation due to the availability of capacity from an independent power producing (IPP) facility (Altresco Pittsfield) and, to a lesser extent, an effort to reduce its reliance on oil. In addition to power purchases, the Company is actively pursuing sales of certain available capacity to utilities in and outside the New England region. Rates and Regulation (a) Retail Rate Proceeding The Company operates under the jurisdiction of the DPU, which regulates retail rates, accounting, issuance of securities and other matters. The DPU requires historical test-year information to support changes in rates. On May 28, 1993, the DPU issued an order increasing the Company's retail revenues by approximately $7.2 million or 6.4%. The rates, based on a June 30, 1992 test-year and effective June 1, 1993, provide an overall return of 9.95%, including an equity return of 11% and represented approximately 70% of the amount requested. More than 80% of the increase related to: 1) plant additions since the Company's last retail rate proceeding in 1989; 2) capacity costs associated with certain purchased power contracts; and 3) costs of postretirement benefits other than pensions. The costs associated with these postretirement benefits were determined in accordance with Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," issued in 1990 and adopted by the Company as of January 1, 1993. The DPU authorized recovery of these costs over a four-year period with carrying costs on the deferred portion. In PAGE 6 CAMBRIDGE ELECTRIC LIGHT COMPANY addition, the new base rates also reflect the roll-in of costs associated with power from the Seabrook nuclear power plant which are billed to the Company by Canal. Previously these costs were recovered through the Company's Fuel Charge decimal. (b) Wholesale Rate Proceedings The Company requires FERC approval to increase its wholesale rates to Belmont, a "partial requirements" customer of the Company since 1986. These rates include a fuel adjustment clause which reflects changes in costs of fuels and purchased power used to supply Belmont. On March 23, 1990, the Company filed a request with the FERC to increase its wholesale rates to Belmont by $2,252,000 annually. The request was largely due to increased purchased power costs and major additions to plant- in-service. The proposed rates were accepted by the FERC, subject to refund, on August 1, 1990. On September 19, 1990, the Company and Belmont filed an uncontested Offer of Settlement which the FERC approved on December 6, 1990 resolving all issues with the exception of Seabrook 1 costs which were subject to change based upon the results of the FERC's final review of Canal's investment in the unit. This settlement required the Company to adjust its Belmont rate to reflect the final allocation of power purchased by Canal on behalf of the Company and Commonwealth Electric. The Company made a refund to Belmont in August 1991 and filed the requisite compliance report with the FERC on September 16, 1991. A settlement agreement between Canal and Belmont addressing all Seabrook cost-of-service issues (except rate of return on common equity) was filed with the FERC on April 16, 1991 and subsequently approved by the FERC on November 13, 1991. In addition, this settlement changed the effective date of the Belmont Service Agreement from August 1, 1990 to June 30, 1990. The charges and refunds resulting from this settlement were applied to Belmont's bill in January 1992. On November 12, 1991 a settlement agreement between Canal and Belmont addressing the rate of return on common equity in the Seabrook Power Contract was filed with the FERC. The return on equity settlement, which was approved by the FERC on January 29, 1992, allowed a return on equity of 11.72% and required Canal to refund certain sums to the Company and Commonwealth Electric and to make a compliance report to the FERC. On March 12, 1992, Canal made its compliance filing with the FERC indicating that all refunds were made to the Company and Commonwealth Electric on February 27, 1992. As a result of the return on equity settlement, the Company was required to refund certain sums to Belmont. On April 2, 1992 the Company made its requisite compliance filing with the FERC indicating that refunds were made to Belmont in the March 1992 billings. (c) Cost Recovery Rate Schedule - The Company files a Fuel Charge rate schedule, which provides for the current recovery, from retail customers, of fuel used in electric production, purchased power and transmission costs. This schedule requires the quarterly computation and DPU approval of a Fuel Charge decimal PAGE 7 CAMBRIDGE ELECTRIC LIGHT COMPANY based on forecasts of fuel, purchased power and transmission costs and billed unit sales for each period. To the extent that collections under the rate schedule do not match actual costs for that period, an appropriate adjustment is reflected in the calculation of the decimal for the next calendar quarter. Purchased Power - The Company has long-term contracts for the purchase of electricity from various sources. Generally, these contracts are for fixed periods and require that the Company pay a demand charge for its capacity entitlement and an energy charge to cover the cost of fuel. The DPU ordered the Company, effective July 1, 1991, to collect a portion of capacity-related purchased power costs associated with certain long-term power and transmission agreements through base rates. Prior to that date the Company was recovering these costs through its Fuel Charge. The recovery mechanism for these costs uses a per kilowatthour (KWH) factor that is calculated using historical (test-period) capacity costs and unit sales. This factor is then applied to current monthly KWH sales. When current period capacity costs and/or unit sales vary from test-period levels, the Company experiences a revenue excess or shortfall which can have a significant impact on net income. All other capacity and energy-related purchased power costs are recovered through the Company's Fuel Charge. The Company and Commonwealth Electric made a filing in late 1992 with the DPU seeking an alternative method of recovery. This request was denied in a letter order issued on October 6, 1993. However, the Company and Commonwealth Electric were encouraged by the DPU's acknowledgement that the issues presented warrant further consideration. The DPU encouraged each company to continue to work with other interested parties, including the Attorney General of Massachusetts, to reach a consensus solution on the issue for consideration in each company's next base rate proceeding. Seabrook Costs - The full commission of the FERC, in a final order issued on August 4, 1992, approved full recovery of Canal's investment in the Seabrook nuclear power plant. The Company and Commonwealth Electric had been billing, subject to refund, Seabrook 1 charges to their retail customers since August 1, 1990 through Fuel Charge decimals approved by the DPU. As discussed in the aforementioned retail rate proceeding section, the Company is now recovering its Seabrook 1 costs in base rates. The Company and Commonwealth Electric collect, through their respective Fuel Charge, amounts being billed to them by Canal for costs associated with Seabrook 2 (over a ten-year period ending in 1997) pursuant to a Capacity Acquisition Agreement the terms of which were approved by both FERC and the DPU. Conservation and Load Management Programs - The Company and Commonwealth Electric have received approval from the DPU to recover conservation and load management program (C&LM) costs. The programs offer opportunities to all customers to save energy by investing in C&LM measures. The objective of the programs is to reduce capacity and energy requirements which in turn reduce the cost of providing service. The Company has Conservation Charge (CC) rate schedules which allow for current cost recovery from retail customers. On June 30, 1993, the DPU issued an order in Phase I of a C&LM filing by the Company and Commonwealth Electric which authorizes the recovery of "lost base revenues" from electric customers. The recovery of lost base revenues is allowed by the DPU to encourage effective implementation of C&LM programs. PAGE 8 CAMBRIDGE ELECTRIC LIGHT COMPANY The KWH savings that are realized as a result of the successful implementation of C&LM programs serve as the basis for determining lost base revenues. The amount to be recovered is $88,000 for the Company and is based on anticipated KWH savings for the eighteen-month period beginning January 1, 1993. The revenue will be recovered from customers over a twelve-month period which began July 1, 1993. On October 25, 1993, the DPU issued an order in Phase II of the C&LM proceeding. In that order, the DPU ruled that approximately $526,000 in C&LM Task Force related expenditures are not recoverable by the Company "at this time" because certain programs have yet to be implemented and thus ratepayers are receiving no current benefits. The Company removed these costs from the current CC decimal and is continuing with the development of the programs and plans to seek recovery of these costs in a subsequent filing with the DPU. Based on the language in the order and subsequent discussions with the parties involved in the proceeding, management believes that the ultimate recovery of a substantial portion of these costs is likely. Environmental Matters The Company is subject to laws and regulations administered by federal, state and local authorities relating to the quality of the environment. These laws and regulations affect, among other things, the siting and operation of generating facilities, and will continue to impact future operations, capital costs and construction schedules. Air emission regulations require the use of more costly lower-sulphur content fuels (0.5% maximum in the case of the Company's facilities, which are located in a populated urban area) in electric generating facilities. The amendments to the federal Clean Air Act enacted in 1990 will impose restrictions on air emissions, and have a particular impact on the cost of electric generating operations. Regulations enacted by the state of Massachusetts will require a reduction in sulphur dioxide emission rates effective December 31, 1994. A plan to meet this target date was developed and submitted to the state in compliance with applicable regulations. These regulations may also result in an increase in the cost of power purchased from others. The Company recovers its cost of fuel and purchased power through its Fuel Charge or base rates. In October 1992, the Company received a statutory demand letter alleging the Company is jointly and severally liable, along with numerous other (unrelated) entities, for the clean-up of a hazardous waste site located in Waltham, Massachusetts. The Company anticipates that its share of site clean- up costs will not be material. The Company is investigating these allegations and will respond in accordance with state law. Construction and Financing Information concerning the Company's construction and financing programs is contained in Note 4(a) of the Notes to Financial Statements filed under Item 8 of this report. PAGE 9 CAMBRIDGE ELECTRIC LIGHT COMPANY Employees The Company has 167 regular employees, 122 employees (73%) are represented by the Utility Workers' Union of America, A.F.L.-C.I.O. The existing collective bargaining agreement expires June 15, 1995. Employee relations have generally been satisfactory and management views the current work force level to be appropriate to service the Company's customers. Item 2. Properties The Company owns and operates two steam generating plants and two gas turbine units located in Cambridge with a total capability of 114.5 MW together with an integrated system of distribution lines and substations. At December 31, 1993, the Company's electric transmission and distribution system consisted of 93 pole miles of overhead lines, 672 cable miles of underground line, 217 substations and 44,920 active customer meters. Item 3. Legal Proceedings The Company is not a party to any pending material legal proceeding. PAGE 10 CAMBRIDGE ELECTRIC LIGHT COMPANY PART II. Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (a) Principal Market Not applicable. The Company is a wholly-owned subsidiary of Commonwealth Energy System. (b) Number of Stockholders at December 31, 1993 One (c) Frequency and Amount of Dividends Declared in 1993 and 1992 1993 1992 Per Share Per Share Declaration Date Amount Declaration Date Amount April 26, 1993 $ .95 October 21, 1992 $1.40 July 26, 1993 .90 October 18, 1993 4.50 $6.35 Reference is made to Note 7 of the Notes to Financial Statements filed under Item 8 of this report for the restriction against the payment of cash dividends. (d) Future dividends may vary depending upon the Company's earnings and capital requirements as well as financial and other conditions existing at that time. PAGE 11 CAMBRIDGE ELECTRIC LIGHT COMPANY Item 7. Management's Discussion and Analysis of Results of Operations The following is a discussion of certain significant factors which have affected operating revenues, expenses and net income during the periods included in the accompanying statements of income and is presented to facilitate an understanding of the results of operations. This discussion should be read in conjunction with the Notes to Financial Statements filed under Item 8 of this report. A summary of the period to period changes in the principal items included in the accompanying statements of income for the years ended December 31, 1993 and 1992 is shown below: Years Ended Years Ended December 31, December 31, 1993 and 1992 1992 and 1991 Increase (Decrease) (Dollars in Thousands) Electric Operating Revenues $ 13 125 11.6 % $(5 329) (4.5)% Operating Expenses: Fuel used in electric production (213) (8.2) (1 222) (32.1) Electricity purchased for resale 9 971 15.5 3 813 6.3 Transmission (203) (2.6) (513) (6.1) Other operation and maintenance (610) (2.6) 1 992 9.1 Depreciation 194 5.4 111 3.2 Conservation and load management (1 341) (31.6) (3 889) (47.8) Taxes - Federal and state income 2 143 310.1 (2 323) (142.3) Local property and other 482 15.7 427 16.2 10 423 9.6 (1 604) (1.5) Operating Income 2 702 64.6 (3 725) (47.1) Other Income 301 602.0 (675) (108.0) Income Before Interest Charges 3 003 72.7 (4 400) (51.6) Interest Charges (34) (0.8) (425) (9.5) Net Income $ 3 037 4745.3 $(3 975) (98.4) Unit Sales (MWH) Change 86 179 5.6 (20 461) (1.3) PAGE 12 CAMBRIDGE ELECTRIC LIGHT COMPANY Unit Sales The following is a summary of unit sales and customers for the periods indicated: Years Ended December 31, 1993 1992 1991 % % Unit Sales (MWH): Change Change Residential 155 638 6.2 146 500 (2.4) 150 157 Commercial 990 325 3.2 959 594 0.7 953 217 Industrial 82 706 (7.0) 88 943 (2.1) 90 874 Municipal and other 109 378 5.9 103 276 3.6 99 676 Total retail 1 338 047 3.1 1 298 313 0.3 1 293 924 Sales for resale 300 793 18.3 254 348 (8.9) 279 198 Total 1 638 840 5.6 1 552 661 (1.3) 1 573 122 Customers: Residential 37 752 0.8 37 448 (0.6) 37 684 Commercial 6 030 0.8 5 984 0.3 5 966 Industrial 59 (9.2) 65 (4.4) 68 Municipal and other 600 2.6 585 2.1 573 Total 44 441 0.8 44 082 (0.5) 44 291 During 1993 retail unit sales increased 3.1% reflecting moderate growth in customers, primarily residential, a greater demand for power from commercial and municipal customers reflecting an improving economy and, to a lesser extent, more extreme weather conditions resulting in additional use to meet heating or air conditioning requirements, offset somewhat by the impact of conservation programs. Retail unit sales were virtually unchanged for 1992 compared to 1991 reflecting the negative impact of the state's poor economic condition. Changes in the level of wholesale sales during the three years are attributable to the Town of Belmont, Massachusetts and sales to NEPOOL. Revenues, Fuel, Transmission and Purchase Power Operating revenues increased $13.1 million or 11.6% in 1993 due primarily to an increase in purchased power costs of $10 million or 15.5%, offset in part by a $1.3 million (31.6%) decrease in conservation and load management (C&LM) costs. Also contributing to the increase were new base rates, which became effective June 1, 1993. Despite a $3.8 million or 6.3% increase in purchased power costs, operating revenues decreased by approximately $5.3 million (4.5%) in 1992. This reduction was due to a $3.8 million reduction in C&LM costs, a $1.2 million decrease in fuel used in electric production and, to a lesser extent, decreases in transmission costs and total unit sales. The Company has received approval from the Massachusetts Department of Public Utilities (DPU) to recover in revenues current costs associated with C&LM programs through the operation a Conservation Charge (CC) decimal on a dollar-for-dollar basis. To the extent that these costs increase or decrease PAGE 13 CAMBRIDGE ELECTRIC LIGHT COMPANY from period to period based on customer participation, a corresponding change will occur in revenues. Revenues collected through base rates are intended to reimburse the Company for all costs of operation other than fuel, the energy portion of purchased power, transmission and C&LM costs and provide a fair return on capital invested in the business. The aforementioned costs not collected through the Company's base rates are collected through a Fuel Charge (FC) decimal, or for C&LM costs, through a CC decimal, as approved by the DPU. Prior to April 1992 C&LM costs were collected through the FC. Listed below is an analysis of revenue components and current recoverable costs for the years 1993, 1992 and 1991: Years Ended December 31, 1993 1992 1991 (Dollars in Thousands) % % Change Change Electric revenues: Costs recovered in Fuel or Conservation Charge $ 60 808 (0.6) $ 61 193 (3.0) $ 63 063 Power costs in base rates 26 294 48.6 17 696 0.1 17 636 Base rates and other 38 971 14.4 34 059 (9.4) 37 578 Total electric revenues $126 073 11.6 $112 948 (4.5) $118 277 Purchased power expense for 1993 and 1992 includes $526,000 and $2.5 million, respectively, for capacity-related costs associated with certain purchased power contracts that were not recovered in revenues due to the mechanism established by the DPU. The impact of this underrecovery reduced net income by $320,000 and $1.6 million in 1993 and 1992, respectively. (For more information refer to the "Purchased Power" section filed on page 7 under Item 1 of this report). For 1993 fuel, purchased power, transmission and C&LM costs accounted for approximately 69% of each dollar of electric revenue in 1993 averaging 5.3 cents per KWH in current year and 5.1 cents in both 1992 and 1991. Shown below is a summary of these costs together with base rate components of electric revenues. Percent of Electric Revenue Revenue components: 1993 1992 1991 Costs recovered in Fuel or Conservation Charge 48.2 54.1 53.3 Power costs in base rates 20.9 15.7 14.9 Base rates and other 30.9 30.2 31.8 100.0 100.0 100.0 Other Operation and Maintenance During 1993, other operation expense decreased slightly due in part to a decrease in the provision for bad debts ($544,000) reflecting better payment experience resulting from improving economic conditions. Maintenance costs for 1993 remained virtually unchanged compared to 1992. PAGE 14 CAMBRIDGE ELECTRIC LIGHT COMPANY Other operation and maintenance increased in 1992 due primarily to a significant increase in the cost of insurance and benefits ($977,000) and an increase in the provision for bad debts ($352,000). Depreciation and Taxes Depreciation expense increased in both years due to the higher level of depreciable property, plant and equipment. Federal and state income taxes increased in 1993 due to a greater level of pretax income and, to a lesser extent, a 1% increase in the federal tax rate to 35%. For 1992, federal and state income taxes decreased due to a significant decline in pretax income. Local property and other taxes increased in both periods. The increase in 1993 was due to higher tax rates, offset, in part by lower assessments. The 1992 increase resulted from an increase in both the tax rate and assessments in the City of Cambridge. Other Income The change in other income for 1993 was due primarily to a $60,000 reversal of a 1992 charge to other income deductions related to the Company's interest in Yankee Atomic Power Company (Yankee Atomic). This reversal was made as a result of a Federal Energy Regulatory Commission audit. In addition, the 1993 increase in other income resulted from a higher investment base related to non-utility operations ($84,000) and a decline in costs related to new business development costs that are treated as other income deductions. In 1992, other income decreased due, in part, to a 7.6% decline in equity earnings, the aforementioned charge to other income deductions related to Yankee Atomic and the absence of interest income from the Company's investment in Series B Debentures of Connecticut Yankee Atomic Power Company, which were redeemed in the fourth quarter of 1991. Interest Charges Interest charges decreased slightly in 1993 due to a lower level of short-term borrowings and a decrease in average short-term interest rates, offset, in part, by a greater level of long-term interest costs resulting from the issuance of Series G (8.04%, $10,000,000) and Series H (8.70%, $5,000,000) in March 1992. Interest rates on bank borrowings averaged 3.3% for 1993 compared to 4% in 1992. Interest charges decreased in 1992 due to a lower level of interest income on overpayment of Seabrook costs, a lower level of short-term borrowings and the repayment of a $10 million long-term note which matured in early 1992 offset, in part, by the aforementioned financing. New Accounting Standards Effective January 1, 1993, the Company adopted the provisions of a new accounting standard, Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." For further information, refer to Note 5(b) of the Notes to Financial Statements. PAGE 15 CAMBRIDGE ELECTRIC LIGHT COMPANY In 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS 112). The Company is required to adopt this statement effective January 1, 1994. SFAS 112 requires employers to recognize the obligation to provide benefits to former or inactive employees after employment but before retirement (postemployment). Those benefits include salary continuation, supplemental employment benefits, severance benefits, disability-related benefits and continuation of health care and life insurance coverage if each of the following conditions are met: 1) the obligation is attributable to employee services already rendered, 2) employees' rights to those benefits accumulate or vest, 3) payment of the benefits is probable and 4) the cost of the benefits can be reasonably estimated. The Company believes that the adoption of the provisions of SFAS 112 will not have a material impact on its financial position or results of operations. Item 8. Financial Statements and Supplementary Data The Company's financial statements required by this item are filed herewith on pages 16 through 35 of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PAGE 16 CAMBRIDGE ELECTRIC LIGHT COMPANY Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Cambridge Electric Light Company: We have audited the accompanying balance sheets of CAMBRIDGE ELECTRIC LIGHT COMPANY (a Massachusetts corporation and wholly-owned subsidiary of Commonwealth Energy System) as of December 31, 1993 and 1992, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cambridge Electric Light Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 5 to the financial statements, effective January 1, 1993, the Company changed its method of accounting for costs associated with postretirement benefits other than pensions. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements and schedules are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Arthur Andersen & Co. Boston, Massachusetts, February 17, 1994. PAGE 17 CAMBRIDGE ELECTRIC LIGHT COMPANY INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PART II. FINANCIAL STATEMENTS Balance Sheets at December 31, 1993 and 1992 Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 Statements of Retained Earnings for the Years Ended December 31, 1993, 1992 and 1991 Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 Notes to Financial Statements PART IV. SCHEDULES III Investments in, Equity in Earnings of, and Dividends Received From Related Parties for the Years Ended December 31, 1993, 1992 and 1991 V Property, Plant and Equipment for the Years Ended December 31, 1993, 1992 and 1991 VI Accumulated Depreciation of Property, Plant and Equipment for the Years Ended December 31, 1993, 1992 and 1991 VIII Valuation and Qualifying Accounts for the Years Ended December 31, 1993, 1992 and 1991 IX Short-Term Borrowings for the Years Ended December 31, 1993, 1992 and 1991 SCHEDULES OMITTED All other schedules are not submitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto. Financial statements of 50% or less owned companies accounted for by the equity method have been omitted because they do not, considered individually, constitute a significant subsidiary. PAGE 18 CAMBRIDGE ELECTRIC LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1993 AND 1992 ASSETS 1993 1992 (Dollars in Thousands) PROPERTY, PLANT AND EQUIPMENT, at original cost $145 324 $142 790 Less - Accumulated depreciation 52 382 49 996 92 942 92 794 Add - Construction work in progress 1 013 96 93 955 92 890 INVESTMENTS Equity in nuclear electric power companies 9 059 9 089 Other 5 5 9 064 9 094 CURRENT ASSETS Cash 1 624 2 Accounts receivable - Affiliated companies 1 036 1 253 Customers, less reserves of $491,000 in 1993 and $453,000 in 1992 10 178 8 764 Unbilled revenues 3 835 2 019 Inventories, at average cost - Materials and supplies 738 742 Electric production fuel oil 575 811 Prepaid taxes - Property 1 600 1 397 Income 423 1 016 Other 976 870 20 985 16 874 DEFERRED CHARGES (Notes 1 and 4) Yankee Atomic purchased power contract 6 900 8 341 Other 3 084 852 9 984 9 193 $133 988 $128 051 PAGE 19 CAMBRIDGE ELECTRIC LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1993 AND 1992 CAPITALIZATION AND LIABILITIES 1993 1992 (Dollars in Thousands) CAPITALIZATION Common Equity - Common stock, $25 par value - Authorized and outstanding - 346,600 shares in 1993 and 1992, wholly-owned by Commonwealth Energy System (Parent) $ 8 665 $ 8 665 Amounts paid in excess of par value 27 953 27 953 Retained earnings (Note 7) 7 056 6 156 43 674 42 774 Long-term debt, including premiums, less current sinking fund requirements and maturing debt (Note 3) 42 189 42 351 85 863 85 125 CURRENT LIABILITIES Interim Financing (Note 3) - Notes payable to banks 2 000 1 500 Advances from affiliates 1 305 - 3 305 1 500 Other Current Liabilities - Current sinking fund requirements 160 98 Accounts payable - Affiliated companies 4 972 4 817 Other 5 187 4 687 Accrued taxes - Local property and other 1 611 1 398 Income 97 - Accrued interest 1 003 987 Other 2 776 1 281 15 806 13 268 19 111 14 768 DEFERRED CREDITS Accumulated deferred income taxes 12 189 10 749 Unamortized investment tax credits 2 130 2 225 Yankee Atomic purchased power contract 6 900 8 341 Other 7 795 6 843 29 014 28 158 COMMITMENTS AND CONTINGENCIES (Note 4) $133 988 $128 051 The accompanying notes are an integral part of these financial statements. PAGE 20 CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 1993 1992 1991 (Dollars in Thousands) ELECTRIC OPERATING REVENUES $126 073 $112 948 $118 277 OPERATING EXPENSES Fuel used in production 2 376 2 589 3 811 Electricity purchased for resale 74 102 64 131 60 318 Transmission 7 719 7 922 8 435 Other operation 20 301 20 997 18 753 Maintenance 2 996 2 910 3 162 Depreciation 3 795 3 601 3 490 Conservation and load management 2 905 4 246 8 135 Taxes - Income (Note 2) 1 452 (691) 1 632 Local property 2 683 2 298 1 859 Payroll and other 860 763 775 119 189 108 766 110 370 OPERATING INCOME 6 884 4 182 7 907 OTHER INCOME (EXPENSE),net 251 (50) 625 INCOME BEFORE INTEREST CHARGES 7 135 4 132 8 532 INTEREST CHARGES Long-term debt 3 797 3 549 3 427 Other interest charges 246 540 1 137 Allowance for borrowed funds used during construction (9) (21) (71) 4 034 4 068 4 493 NET INCOME $ 3 101 $ 64 $ 4 039 The accompanying notes are an integral part of these financial statements. PAGE 21 CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 1993 1992 1991 (Dollars in Thousands) Balance at beginning of year $ 6 156 $ 6 577 $ 6 604 Add (Deduct) Net income 3 101 64 4 039 Cash dividends on common stock (2 201) (485) (4 066) Balance at end of year $ 7 056 $ 6 156 $ 6 577 The accompanying notes are an integral part of these financial statements. PAGE 22 CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 1993 1992 1991 (Dollars in Thousands) OPERATING ACTIVITIES Net income $ 3 101 $ 64 $ 4 039 Effects of non-cash items - Depreciation and amortization 3 842 3 716 4 309 Deferred income taxes 1 081 1 170 (487) Investment tax credits (95) (96) (96) Earnings from corporate joint ventures (1 069) (1 321) (1 430) Dividends from corporate joint ventures 1 099 1 335 1 278 Change in working capital, exclusive of cash and interim financing - Accounts receivable and unbilled revenues (3 013) 2 258 5 179 Prepaid (accrued) taxes 700 (1 906) 293 Accounts payable and other 2 362 839 (3 142) All other operating items (1 549) (348) 1 818 Net cash provided by operating activities 6 459 5 711 11 761 INVESTING ACTIVITIES Additions to property, plant and equipment (exclusive of AFUDC) (4 270) (3 686) (4 658) Allowance for borrowed funds used during construction (9) (21) (71) Connecticut Yankee debenture redemption - - 684 Net cash used for investing activities (4 279) (3 707) (4 045) FINANCING ACTIVITIES Sale of common stock to Parent - 5 250 - Payment of dividends (2 201) (485) (4 066) Proceeds from (payment of) short-term borrowings 500 (10 200) (2 550) Proceeds from (payment of) affiliate borrowings 1 305 (1 540) (805) Long-term debt issue - 15 000 - Retirement of long-term debt through sinking funds (162) (162) (162) Long-term debt issue refunded - (10 000) - Net cash provided used for financing activities (558) (2 137) (7 583) Change in cash 1 622 (133) 133 Cash at beginning of period 2 135 2 Cash at end of period $ 1 624 $ 2 $ 135 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid (net of capitalized amounts) $ 3 863 $ 3 481 $ 4 254 Income taxes paid (refunded) $ (44) $ 229 $ 728 The accompanying notes are an integral part of these financial statements. PAGE 23 CAMBRIDGE ELECTRIC LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (1) Significant Accounting Policies (a) General and Regulatory Cambridge Electric Light Company (the Company) is a wholly-owned subsidiary of Commonwealth Energy System. The parent company is referred to in this report as the "System" and, together with its subsidiaries, is collectively referred to as "the system." The Company is regulated as to rates, accounting and other matters by various authorities including the Federal Energy Regulatory Commission (FERC) and the Massachusetts Department of Public Utilities (DPU). The System is an exempt holding company under the provisions of the Public Utility Holding Company Act of 1935 and, in addition to its investment in the Company, has interests in other utility companies and several nonregulated companies. The Company has established various regulatory assets in cases where the DPU has permitted, or is expected to permit, recovery of specific costs over time. At December 31, 1993, principal regulatory assets, included in deferred charges, were $6.9 million for unrecovered plant and decommissioning costs for the Yankee Atomic nuclear plant and $1.1 million for postretirement benefits. The more significant regulatory liabilities, reflected in deferred credits, include $3.9 million related to income taxes and $6.9 million related to the Yankee Atomic nuclear plant. (b) Reclassifications Certain prior year amounts are reclassified from time to time to conform with the presentation used in the current year's financial statements. (c) Transactions with Affiliates Transactions between the Company and other system companies include purchases and sales of electricity, including purchases of electricity through Canal Electric Company (Canal). Other Canal transactions include costs relating to the abandonment of Seabrook 2 for the three years ending in 1993 and the recovery of a portion of Seabrook 1 pre-commercial operation financing costs in 1991. Transactions with other system companies include purchases of gas and sales of steam. In addition, payments for management, accounting, data processing and other services are made to affiliate COM/Energy Services Company. Transactions with other system companies are subject to review by the DPU. The Company's operating expenses include the following major intercompany transactions for the periods indicated: Purchased Power and Transmission Period Ended Purchased Power Purchased Power From Canal December 31, Canal Units Seabrook 1 As Agent (Dollars in Thousands) 1993 $12 637 $ 9 082 $10 896 1992 13 596 9 335 9 600 1991 12 209 12 681 9 915 PAGE 24 CAMBRIDGE ELECTRIC LIGHT COMPANY The Company also purchased gas from affiliate Commonwealth Gas Company totaling $1,485,000 in 1993, $2,253,000 in 1992 and $4,708,000 in 1991. (d) Equity Method of Accounting The Company uses the equity method of accounting for its investments in four nuclear electric power companies due, in part, to its ability to exercise significant influence over operating and financial policies of these entities. Under this method, it records as income the proportionate share of the net earnings of the nuclear power companies with a correspond- ing increase in the carrying value of the investment. The investment is reduced as cash dividends are received. (e) Operating Revenues Customers are billed for their use of electricity on a cycle basis throughout the month. To reflect revenues in the proper period, the estimated amount of unbilled sales revenue is recorded each month. The Company is generally permitted to bill customers currently for fuel used in electric production, transmission and purchased power costs and conservation and load management costs through adjustment clauses. The Company collects capacity-related costs associated with certain long-term power arrangements through base rates. Amounts recoverable under the adjustment clauses are subject to review and adjustment by the DPU. The amount of such fuel and energy costs incurred but not yet reflected in customers' bills, which totaled $1,850,000 in 1993 and $514,000 in 1992, is recorded as unbilled revenues. (f) Depreciation Depreciation is provided using the straight-line method at rates intended to amortize the original cost and the estimated cost of removal less salvage of properties over their estimated economic lives. The average composite depreciation rate was 2.66% in 1993, 2.59% in 1992 and 2.58% in 1991. (g) Maintenance Expenditures for repairs of property and replacement and renewal of items determined to be less than units of property are charged to maintenance expense. Additions, replacements and renewals of property considered to be units of property are charged to the appropriate plant accounts. Upon retirement, accumulated depreciation is charged with the original cost of property units and the cost of removal net of salvage. (h) Allowance for Funds Used During Construction Under applicable rate-making practices, the Company is permitted to include an allowance for funds used during construction (AFUDC) as an element of its depreciable property costs. This allowance is based on the amount of construction work in progress that is not included in the rate base on which the Company earns a return. An amount equal to the AFUDC PAGE 25 CAMBRIDGE ELECTRIC LIGHT COMPANY capitalized in the current period is reflected in the accompanying Statements of Income. While AFUDC does not provide funds currently, these amounts are recoverable in revenues over the service life of the constructed property. The amount of AFUDC recorded was at a weighted average rate of 3.5% in 1993, 4.5% in 1992 and 6.8% in 1991. (2) Income Taxes For financial reporting purposes, the Company provides federal and state income taxes on a separate return basis. However, for federal income tax purposes, the Company's taxable income and deductions are included in the consolidated income tax return of the System and it makes tax payments or receives refunds on the basis of its tax attributes in the tax return in accordance with applicable tax regulations. The following is a summary of the provisions for income taxes for the years ended December 31, 1993, 1992 and 1991. 1993 1992 1991 (Dollars in Thousands) Federal: Current $ 327 $(1 636) $1 808 Deferred 973 1 252 (485) Investment tax credits (96) (96) (96) 1 204 (480) 1 227 State: Current 140 (129) 407 Deferred 195 240 (2) 335 111 405 1 539 (369) 1 632 Amortization of regulatory liability relating to deferred income taxes (87) (322) - $1 452 $ (691) $1 632 Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS No. 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. PAGE 26 CAMBRIDGE ELECTRIC LIGHT COMPANY Accumulated deferred income taxes consisted of the following in 1993 and 1992: 1993 1992 (Dollars in Thousands) Liabilities Property-related $14 820 $13 580 Postretirement benefits plan 358 74 All other 1 076 905 16 254 14 559 Assets Investment tax credit 1 375 1 381 Pension plan 704 609 Regulatory liability 1 256 1 450 All other 959 745 4 294 4 185 Accumulated deferred income taxes, net $11 960 $10 374 The net year-end deferred income tax liability above is net of a current deferred tax asset of $229,000 in 1993 and $375,000 in 1992 which was included in prepaid income taxes in the accompanying Balance Sheets. The following table, detailing the significant timing differences for 1991 which resulted in deferred income taxes, is required to be disclosed pursuant to accounting standards for income taxes in effect prior to adoption of SFAS No. 109: 1991 (Dollars in Thousands) Accelerated depreciation $ 933 Seabrook power contract settlement (597) Capitalized interest during construction (25) Contributions in aid of construction (58) Pension costs and deferred compensation (84) Transmission costs (193) Conservation and load management (219) Other (244) Deferred income tax provision $ (487) PAGE 27 CAMBRIDGE ELECTRIC LIGHT COMPANY The total income tax provision set forth previously represents 32% in 1993, 110% in 1992 and 29% in 1991 of income before such taxes. The following table reconciles the statutory federal income tax rate to these percentages: 1993 1992 1991 (000's) Federal statutory rate 35% 34% $(213) 34% Increase (Decrease) from statutory rate: Dividend received deduction (6) 50 (315) (6) Tax versus book depreciation 1 (5) 35 1 State tax net of federal tax benefit 5 (14) 86 5 Amortization of investment tax credits (2) 15 (95) (1) Amortization of excess deferred reserves (2) 29 (180) (4) Other 1 1 (9) - Effective federal tax rate 32% 110% $(691) 29% As a result of the Revenue Reconciliation Act of 1993, the Company's federal income tax rate increased to 35% effective January 1, 1993. (3) Long-Term Debt and Interim Financing (a) Long-Term Debt Long-term debt outstanding exclusive of maturing debt issues, current sinking fund requirements and related premiums is as follows: Original Balance December 31, Issue 1993 1992 (Dollars in Thousands) 7-Year Notes - 9.97%, due 1996 $20 000 $20 000 $20 000 7-Year Notes - 8.04%, due 1999 10 000 10 000 10 000 15-Year Notes - 8.70%, due 2007 5 000 5 000 5 000 30-Year Notes - Series C, 6 1/4%, due 1997 6 000 4 380 4 440 Series D, 7 3/4%, due 2002 5 000 2 800 2 900 $42 180 $42 340 The balance of long-term debt at December 31, 1992 was exclusive of $62,000 principal amounts purchased by the Company and deposited with the Trustee in anticipation of future sinking fund requirements. The Company may continue to purchase its outstanding notes in advance of sinking fund requirements under favorable conditions. PAGE 28 CAMBRIDGE ELECTRIC LIGHT COMPANY Under terms of its Indenture of Trust, the Company is required to make periodic sinking fund payments for retirement of outstanding long-term debt. These payments and balances of maturing debt issues for the five years subsequent to December 31, 1993 are as follows: Sinking Fund Maturing Year Payments Debt Issues Total (Dollars in Thousands) 1994 $160 $ - $ 160 1995 160 - 160 1996 160 20 000 20 160 1997 100 4 260 4 360 1998 100 - 100 (b) Notes Payable to Banks The Company and other system companies maintain both committed and uncommitted lines of credit for the short-term financing of their construction programs and other corporate purposes. As of December 31, 1993, system companies had $115 million of committed lines of credit that will expire at varying intervals in 1994. These lines are normally renewed upon expiration and require annual fees of up to .1875% of the individual line. At December 31, 1993, the uncommitted lines of credit totaled $70 million. Interest rates on the outstanding borrowings generally are at an adjusted money market rate. The Company's notes payable to banks totaled $2,000,000 and $1,500,000 at December 31, 1993 and 1992, respectively. (c) Advances from Affiliates The Company is a member of the COM/Energy Money Pool (the Pool), an arrangement among the subsidiaries of the System, whereby short-term cash surpluses are used to help meet the short-term borrowing needs of the utility subsidiaries. In general, lenders to the Pool receive a higher rate of return than they otherwise would on such investments, while borrowers pay a lower interest rate than that available from banks. The Company had borrowings from the Pool totaling $1,305,000 at December 31, 1993. (d) Disclosures about Fair Value of Financial Instruments As required by Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the fair value of certain financial instruments included in the accompanying Balance Sheets as of December 31, 1993 and 1992 are as follows: 1993 1992 (Dollars in Thousands) Carrying Fair Carrying Fair Value Value Value Value Long-Term Debt $ 42 349 $ 45 782 $ 42 449 $ 45 394 PAGE 29 CAMBRIDGE ELECTRIC LIGHT COMPANY The carrying amount of cash and advances from affiliates approximates the fair value because of the short maturity of these financial instruments. The estimated fair value of long-term debt is based upon quoted market prices of the same or similar issues or on the current rates offered for debt with the same remaining maturity. The fair values shown above do not purport to represent the amounts at which those obligations would be settled. (4) Commitments and Contingencies (a) Financing and Construction Programs The Company is engaged in a continuous construction program presently estimated at $33.1 million for the five-year period 1994 through 1998. Of that amount, $10.3 million is estimated for 1994. The program is subject to periodic review and revision because of factors such as changes in business conditions, rates of customer growth, effects of inflation, maintenance of reliable and safe service, equipment delivery schedules, licensing delays, availability and cost of capital and environmental factors. The Company expects to finance these expenditures on an interim basis with internally generated funds and short-term borrowings which are ultimately expected to be repaid with the proceeds from sales of long-term debt and equity securities. (b) Power Contracts and Capacity Acquisition and Disposition Agreement The Company has entered into Power Contracts with Canal for a portion of the capacity from Canal Units 1 and 2. The cost to the Company in 1993 for purchases under these contracts was $12,637,000. In addition, Canal seeks to secure bulk electric power on a single system basis to provide cost savings for the customers of the Company and Commonwealth Electric under terms of a Capacity Acquisition and Disposition Agreement (CADA) which has been accepted for filing as an amendment to Canal's rate schedule by the FERC. The CADA allows Canal to act as agent for the Company and Commonwealth Electric in the procurement of additional capacity for one or both companies, or, to sell a portion of each company's entitlement in capacity and/or energy produced by Canal Unit 2. Such "Commitments" are in effect for Seabrook 1, Phases I and II of Hydro-Quebec and for power acquired from Northeast Utilities (NU). Exchange agreements are in place with several of these utilities whereby, in certain circum- stances, it is possible to exchange capacity so that the mix of power improves the pricing for dispatch for both the seller and the purchaser. Power contracts are in place whereby Canal bills or credits the Company and Commonwealth Electric for the costs or revenues received associated with these facilities. The Company and Commonwealth Electric, in turn, have billed or are billing these net charges (net of revenues from sales) to their customers through rates which are subject to DPU approval. Currently, Canal's principal activities under the CADA are its ownership interest in the Seabrook nuclear power plant and its Power Sales Agreements with NU. Canal contracted to purchase 50 MW, on average, from NU annually from November 1989 through 1994 to fulfill the system's NEPOOL capacity PAGE 30 CAMBRIDGE ELECTRIC LIGHT COMPANY obligation and to have sufficient energy supply to meet customer needs. In 1993, the costs to the Company for power purchases from Seabrook 1 and NU were $9,082,000 and $9,380,000, respectively. The Company has ownership interests in four nuclear generating facilities in New England and is obligated to pay its proportionate share of the capacity and energy costs associated with these units, which include depreciation, operations and maintenance, a return on invested capital and the estimated cost of decommissioning the nuclear plants at the end of their estimated service lives. Pertinent information with respect to life-of-the- unit contracts for power from the operating nuclear units is as follows: Connecticut Maine Vermont Yankee Yankee Yankee Location Haddam Neck, Wiscasset, Vernon, Connecticut Maine Vermont Year of initial operation 1968 1972 1972 Contract expiration date 1998 2008 2012 Equity ownership 4.50% 4.00% 2.50% Plant entitlement 4.50% 3.59% 2.25% Plant capability (MW) 560.0 870.0 496.0 Company entitlement (MW) 25.2 31.2 11.2 1991 Actual cost ($000) $ 9 692 $5 900 $3 383 1992 Actual cost ($000) 9 508 6 671 3 970 1993 Actual cost ($000) 10 016 7 050 4 076 1994 Estimated cost ($000) 10 005 6 755 3 755 The Company pays its share of decommissioning expense to each of the operators of the nuclear facilities as a cost of electricity purchased for resale. The Company has also contracted to purchase power and transmission capacity from various other generating and transmission facilities as follows: Estimated 1991 1992 1993 1994 MW Cost MW Cost MW Cost MW Cost (Dollars in Thousands) Purchased Power - Nuclear 6.5 $1 670 8.7 $1 986 11.7 $3 789 21.0 $4 880 Hydro 4.5 1 162 6.0 1 377 8.2 2 639 14.6 3 390 Waste-to-energy and other 30.9 5 075 35.3 4 608 9.3 2 952 18.9 4 394 Transmission - (Hydro-Quebec) - 1 586 - 1 222 - 1 232 - 1 292 Costs under these and other contracts are included in electricity purchased for resale and fuel in the accompanying Statements of Income and are recoverable in revenues through either the Fuel Charge or in base rates. PAGE 31 CAMBRIDGE ELECTRIC LIGHT COMPANY In addition, the Company incurred costs for purchases from NEPOOL for $11,039,000, $11,215,000 and $7,546,000 in 1993, 1992 and 1991, respec- tively. The system's 3.52% interest in the Seabrook nuclear power plant is owned by Canal, a wholesale electric generating subsidiary, to provide for a portion of the capacity and energy needs of the Company and Commonwealth Electric. Canal is recovering 100% of its Seabrook 1 investment through a power contract with the Company and Commonwealth Electric pursuant to FERC approval. The Company received DPU approval to recover Seabrook 1 costs through base rates effective with the June 1, 1993 rate order. (c) Guarantee Agreement In connection with its investment in Maine Yankee Atomic Power Company (Maine Yankee), the Company has guaranteed its pro-rata portion of that company's nuclear fuel financing. At December 31, 1993, the Company's portion amounted to $480,000. (d) Yankee Atomic On February 26, 1992, the Board of Directors of Yankee Atomic Electric Company agreed to permanently discontinue power operation of its plant and, in time, decommission the facility. The plant provided less than 1% of the Company's capacity. The Company's 2% investment in Yankee Atomic was approximately $475,000 at December 31, 1993. Presently, purchased power costs, which include a provision for ultimate decommissioning of the unit, are billed to the Company and collected from customers. The Company has estimated their unrecovered share of all costs associated with the shutdown of the facility, recovery of its plant investment and decommissioning and closing the plant to be approximately $6.9 million. This amount is reflected in the accompanying Balance Sheets as a liability and a corresponding regulatory asset at December 31, 1993. (e) Price-Anderson Act The Price-Anderson Act (the Act) is a federal statute that includes among its provisions a requirement that licensees of nuclear electric generating units maintain financial protection to cover public liability claims resulting from a nuclear incident or precautionary evacuation. In 1988, Congress enacted a 15 year extension of the Act and increased the available insurance and the maximum liability. The higher liability is provided by existing private insurance and retrospective assessments for costs in excess of that covered by insurance, up to $66.15 million for each nuclear reactor which is licensed to operate with a maximum assessment of $10 million per incident within one calendar year. Based on the Company's equity ownership interest in four nuclear generating facilities, its retrospective premium could be as high as $1.6 million yearly or a cumulative total of $10.3 million, exclusive of the effect of inflation indexing (at five-year intervals) and a 5% surcharge ($3.3 million) in the event that total public liability claims from a nuclear incident exceed the funds available to pay such claims. PAGE 32 CAMBRIDGE ELECTRIC LIGHT COMPANY (f) Environmental Matters The Company is subject to laws and regulations administered by federal, state and local authorities relating to the quality of the environment. These laws and regulations affect, among other things, the siting and operation of electric generating and transmission facilities and can require the installation of expensive air and water pollution control equipment. These regulations have had an impact upon the Company's operations in the past and will continue to have an impact upon future operations, capital costs and construction schedules of major facilities. (5) Employee Benefit Plans (a) Pension The Company has a noncontributory pension plan covering substantially all regular employees who have attained the age of 21 and have completed a year of service. Pension benefits are based on an employee's years of service and compensation. The Company makes monthly contributions to the plan consistent with the funding requirements of the Employee Retirement Income Security Act of 1974. Components of pension expense were as follows: 1993 1992 1991 (Dollars in Thousands) Service cost $ 459 $ 471 $ 443 Interest cost 1 646 1 544 1 417 Return on plan assets (3 175) (2 156) (4 121) Net amortization and deferral 1 781 849 3 051 Total pension expense 711 708 790 Transfers from affiliated companies, net 101 321 299 Less: Amounts capitalized and deferred 93 111 114 Net pension expense $ 719 $ 918 $ 975 The following economic assumptions were used to measure year-end obliga- tions and the estimated pension expense for the subsequent year: 1993 1992 1991 Discount rate 7.25% 8.50% 8.50% Assumed rate of return 8.50 8.50 8.50 Rate of increase in future compensation 4.50 5.50 5.50 Pension expense reflects the use of the projected unit credit method which is also the actuarial cost method used in determining future funding of the plan. The Company, in accordance with current rate-making, is deferring the difference between pension contribution, which is allowed currently in base rates, and pension expense, recognized pursuant to Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions." The funded status of the Company's pension plan (using a measurement date of December 31) is as follows: PAGE 33 CAMBRIDGE ELECTRIC LIGHT COMPANY 1993 1992 (Dollars in Thousands) Accumulated benefit obligation: Vested $(17 172) $(14 212) Nonvested (2 267) (591) $(19 439) $(14 803) Projected benefit obligation $(23 109) $(18 836) Plan assets at fair market value 23 236 21 002 Projected benefit obligation less than plan assets 127 2 166 Unamortized transition obligation 1 099 1 236 Unrecognized prior service cost 1 091 876 Unrecognized gain (3 600) (5 322) Accrued pension cost $ (1 283) $ (1 044) Plan assets consist primarily of fixed income and equity securities. Fluctuations in the fair market value of plan assets will affect pension expense in future years. The increase in the accumulated benefit obligation and the projected benefit obligation from December 31, 1992 to December 31, 1993 was primarily due to a reduction in the discount rate in light of current interest rates. (b) Other Postretirement Benefits Through December 31, 1992, the Company provided postretirement health care and life insurance benefits to eligible retired employees. Employees became eligible for these benefits if their age plus years of service at retirement equaled 75 or more provided, however, that such service was performed for a subsidiary of the System. As of January 1, 1993, the Company eliminated postretirement health care benefits for those nonbargain- ing employees who were less than 40 years of age or had less than 12 years of service at that date. Under certain circumstances, eligible employees are now required to make contributions for postretirement benefits. Certain bargaining employees are also participating under these new eligibility requirements. Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106). This new standard requires the accrual of the expected cost of such benefits during the employees' years of service and the recognition of an actuarially determined postretirement benefit obligation earned by existing retirees. The assumptions and calculations involved in determining the accrual and the accumulated postretirement benefit obligation (APBO) closely parallel pension accounting requirements. The cumulative effect of implementation of SFAS No. 106 as of January 1, 1993 was approximately $10 million which is being amortized over 20 years. Prior to 1993, the cost of postretirement benefits was recognized as the benefits were paid. The cost of retiree medical care and life insurance benefits under the traditional pay-as-you-go method totaled $428,000 in 1992 and $434,000 in 1991. In 1993, the Company began making contributions to various voluntary employee beneficiary association (VEBA) trusts that were established PAGE 34 CAMBRIDGE ELECTRIC LIGHT COMPANY pursuant to section 501(c)9 of the Internal Revenue Code (the Code). The Company also made contributions to a sub-account of its pension plan pursuant to section 401(h) of the Code to satisfy a portion of its postretirement benefit obligation. The Company contributed approximately $1,100,000 to these trusts during 1993. The net periodic postretirement benefit cost for the year ended December 31, 1993 included the following components: 1993 (Dollars in Thousands) Service cost $ 201 Interest cost 839 Return on plan assets (74) Amortization of transition obligation over 20 years 498 Net amortization and deferral (7) Total postretirement benefit cost 1 457 Less: Amounts capitalized and deferred 734 Net postretirement benefit cost $ 723 The funded status of the Company's postretirement benefit plan using a measurement date of December 31, 1993 is as follows: 1993 (Dollars in Thousands) Accumulated postretirement benefit obligation: Retirees $ (5 837) Active participants (4 522) (10 359) Plan assets at fair market value 980 Projected postretirement benefit obligation greater than plan assets (9 379) Unamortized transition obligation 9 453 Unrecognized gain (74) $ - In determining its estimated APBO and the funded status of the plan, the Company assumed a discount rate of 7.25%, an expected long-term rate of return on plan assets of 8.5%, and a medical care cost trend rate of 9%, which gradually decreases to 5% in the year 2007 and remains at that level thereafter. The estimate also reflects a trend rate of 14.9% for reimbursement of Medicare Part B premiums which decreases to 5% by 2007 and a dental care trend rate of 5% in all years. A one percent change in the medical trend rate would have a $160,000 impact on the Company's annual expense (interest component - $111,000; service cost - $49,000) and would change the accumulated benefit obligation by approximately $1.4 million. Plan assets consist primarily of fixed income and equity securities. Fluctuations in the fair market value of plan assets will affect postretire- ment benefit expense in future years. PAGE 35 CAMBRIDGE ELECTRIC LIGHT COMPANY The DPU's policy on postretirement benefits is to allow in rates the maximum tax deductible contributions made to trusts that have been estab- lished specifically to pay postretirement benefits. Effective with its June 1, 1993 rate order from the DPU, the Company was allowed to recover its SFAS No. 106 expense in base rates over a four-year phase-in period with carrying costs on the deferred balance. Further, based on recent DPU action and discussions with regulators, the Company believes that it is appropriate to record the difference between the amount included in rates and SFAS No. 106 costs as a regulatory asset. At December 31, 1993, this deferral amounted to approximately $1.1 million. (c) Savings Plan The Company has an Employees Savings Plan that provides for Company contributions equal to contributions by eligible employees of up to four percent of each employee's compensation rate. Effective January 1, 1993, the rate was increased to five percent for those employees no longer eligible for postretirement benefits other than pensions. The Company's contribution was $321,000 in 1993, $327,000 in 1992 and $316,000 in 1991. (6) Lease Obligations The Company leases equipment and office space under arrangements that are classified as operating leases. These lease agreements are for terms of one year or longer. Leases currently in effect contain no provisions which prohibit the Company from entering into future lease agreements or obligations. Future minimum lease payments, by period and in the aggregate, of non- cancelable operating leases consisted of the following at December 31, 1993: Operating Leases (Dollars in Thousands) 1994 $1 577 1995 1 539 1996 1 256 1997 926 1998 892 Beyond 1998 2 675 Total future minimum lease payments $8 865 Total rent expense for all operating leases, except those with terms of a month or less, amounted to $1,577,000 in 1993, $1,688,000 in 1992 and $1,756,000 in 1991. There were no contingent rentals and no sublease rentals for the years 1993, 1992 and 1991. (7) Dividend Restriction At December 31, 1993, approximately $5,722,000 of retained earnings was restricted against the payment of cash dividends by terms of the Indenture of Trust securing long-term debt. As of the same date, retained earnings also included approximately $4,062,000 representing the Company's equity in undistributed earnings of the nuclear companies. PAGE 36 CAMBRIDGE ELECTRIC LIGHT COMPANY PART V. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Index to Financial Statements Financial statements and notes thereto of the Company together with the Report of Independent Public Accountants, are filed under Item 8 of this report and listed on the Index to Financial Statements and Schedules (page 17). (a) 2. Index to Financial Statement Schedules Filed herewith at page(s) indicated - Schedule III - Investments in, Equity in Earnings of, and Dividends Received From Related Parties - Years Ended December 31, 1993, 1992 and 1991 (pages 45-47). Schedule V - Property, Plant and Equipment - Years Ended December 31, 1993, 1992 and 1991 (pages 48-50). Schedule VI - Accumulated Depreciation of Property, Plant and Equipment - Years Ended December 31, 1993, 1992 and 1991 (page 51). Schedule VIII - Valuation and Qualifying Accounts - Years Ended December 31, 1993, 1992 and 1991 (page 52). Schedule IX - Short-Term Borrowings - Years Ended December 31, 1993, 1992 and 1991 (page 53). (a) 3. Exhibits: Notes to Exhibits - a. Unless otherwise designated, the exhibits listed below are incorporated by reference to the appropriate exhibit numbers and the Securities and Exchange Commission file numbers indicated in parentheses. b. If applicable, as designated by an asterisk, certain documents previously filed by the Company have been disposed of by the Commission pursuant to its Records Control Schedule and are hereby being refiled by the Company. c. The following is a glossary of Commonwealth Energy System and subsidiary companies' acronyms that are used throughout the following Exhibit Index: CES.....................Commonwealth Energy System CE......................Commonwealth Electric Company CEL.....................Cambridge Electric Light Company CEC.....................Canal Electric Company CG......................Commonwealth Gas Company NBGEL...................New Bedford Gas and Edison Light Company PAGE 37 CAMBRIDGE ELECTRIC LIGHT COMPANY Exhibit Index Exhibit 3. Articles of incorporation and by-laws. 3.1 Articles of incorporation of CEL (Exhibit 1 to the CEL Form 10-K for 1990, File No.2-7909). 3.2 By-laws of CEL, as amended (Exhibit 2 to the CEL Form 10-K for 1990, File No.2-7909). Exhibit 4. Instruments defining the rights of security holders; including indentures Indenture of Trust or Supplemental Indenture of Trust. 4.1.1 Original Indenture on Form S-1 (April 1949) (Exhibit 7(a), File No. 2-7909). 4.1.2 First Supplemental on Form S-9 (January 1958) (Exhibit 2(b)2, File No. 2-13783). 4.1.3 Second Supplemental on Form 8-K (February 1962) (Exhibit A, File No. 2-7909). 4.1.4 Third Supplemental on Form 10-K (1984) (Exhibit 1, File No. 2- 7909). 4.1.5 Fourth Supplemental on Form 10-K (1984) (Exhibit 2, File No. 2- 7909). 4.1.6 Fifth Supplemental on Form 10-K (1983) (Exhibit 1, File No. 2- 7909). 4.1.7 Sixth Supplemental on Form 10-Q (June 1989) (Exhibit 1, File No. 2-7909). 4.1.8 Seventh Supplemental on Form 10-Q (June 1992) (Exhibit 1, File No. 2-7909). Exhibit 10. Material Contracts. 10.1 Power Contracts. 10.1.1 Power Contract between CEC and CEL dated December 1, 1965 (Exhibit 13(a)(1) to the CEC Form S-1, File No. 2-30057). 10.1.2 Contract between CEC and NBGEL and CEL, affiliated companies, for the sale for specified amounts of electricity from CEC Unit 2 dated January 12, 1976 (Exhibit 7 to the CES Form 10-K for 1985, File No. 1-7316). 10.1.3 Power Contract, as amended to February 28, 1990, superseding the Power Contract dated September 1, 1986 and amendment dated June 1, 1988, between CEC (seller) and CE and CEL (purchasers) for seller's entire share of the Net Unit Capability of Seabrook 1 and related energy produced and other provisions (Exhibit 1 to the CEC Form 10- Q (March 1990), File No. 2-30057). PAGE 38 CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.4 Termination Supplement between CEC, CE and CEL RE: Seabrook Unit 2 dated December 8, 1986 (Exhibit 3 to the CEC Form 10-K for 1986, File No. 2-30057). 10.1.5 Agreement for Joint-Ownership, Construction and Operation of the New Hampshire Nuclear Units (Seabrook) between CE, Public Service Company of New Hampshire (PSNH) and others dated May 1, 1973 and filed by CE as Exhibit 13(N) on Form S-1 dated October 1973, File No. 2-49013, and as amended below: 10.1.5.1 First through Fifth Amendments to 10.1.5 dated May 24, 1974, June 21, 1974, September 25, 1975, October 25, 1974 and January 31, 1975, respectively (Exhibit 13(m) to CE's Form S-1, (November 7, 1975), File No. 2-54995). 10.1.5.2 Sixth through Eleventh Amendments to 10.1.5 dated April 18, 1979, April 18, 1979, April 25, 1979, June 8, 1979, October 11, 1979 and December 15, 1979, respectively (Refiled as Exhibit 1 to the CEC Form 10-K for 1989, File No. 2-30057). 10.1.5.3 Twelfth through Fourteenth Amendments to 10.1.5 dated May 16, 1980, December 31, 1980 and June 1, 1982, respectively (Refiled as Exhibits 1, 2 and 3 to the CE 1992 Form 10-K), File No. 2-7749). 10.1.5.4 Fifteenth and Sixteenth Amendment to 10.1.5 dated April 27, 1984 and June 15, 1984, respectively (Exhibit 1 to the CEC Form 10-Q (June 1984), File No. 2-30057). 10.1.5.5 Seventeenth Amendment to 10.1.5 dated March 8, 1985 (Exhibit 1 to the CEC Form 10-Q (March 1985), File No. 2-30057). 10.1.5.6 Eighteenth Amendment to 10.1.5 dated March 14, 1986 (Exhibit 1 to the CEC Form 10-Q (March 1986), File No. 2-30057). 10.1.5.7 Nineteenth Amendment to 10.1.5 dated May 1, 1986 (Exhibit 1 to the CEC Form 10-Q (June 1986), File No. 2-30057). 10.1.5.8 Twentieth Amendment to 10.1.5 dated September 19, 1986 (Exhibit 1 to the CEC Form 10-K for 1986, File No. 2-30057). 10.1.5.9 Twenty-First Amendment to 10.1.5 dated November 12, 1987 (Exhibit 1 to the CEC Form 10-K for 1989, File No. 2-30057). 10.1.5.10 Twenty-Second Amendment and Settlement Agreement to 10.1.5 both dated January 13, 1989, (Exhibit 4 to the CEC Form 10-K for 1988, File No. 2-30057). 10.1.6 Resolutions proposed by Merrill Lynch Capital Markets and adopted by the Joint-Owners of the Seabrook Nuclear Project regarding Project financing, dated May 14, 1984 (Exhibit 1 to the CEC Form 10-Q (March 1984), File No. 2-30057). PAGE 39 CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.7 Interim Agreement to Preserve and Protect the Assets of and Investment in the New Hampshire Nuclear Units by and between CEC, PSNH and other participants, dated April 27, 1984 (Exhibit 2 to the CEC Form 10-Q (June 1984), File No. 2-30057). 10.1.8 Agreement for Seabrook Project Disbursing Agent by and among CEC, PSNH and other participants establishing Yankee Atomic Electric Company as the disbursing agent under the Joint-Ownership Agreement, dated May 23, 1984, (Exhibit 4 to the CEC Form 10-Q (June 1984), File No. 2-30057). 10.1.8.1 First Amendment dated March 8, 1985 to 10.1.8 (Exhibit 2 to the CEC Form 10-Q (March 1985), File No. 2-30057). 10.1.8.2 Second through Fifth Amendments dated May 20, 1985, June 18, 1985, January 2, 1986 and November 12, 1987, respectively, to 10.1.8 (Exhibit 4 to the CEC Form 10-K for 1987, File No. 2-30057). 10.1.9 Capacity Acquisition Agreement between CEC, CEL and CE dated September 25, 1980 (Exhibit 1 to the 1991 CEC Form 10-K, File No. 2-30057). 10.1.9.1 Supplement to 10.1.9 consisting of three Capacity Acquisition Commitments each dated May 7, 1987, concerning Phases I and II of the Hydro-Quebec Project and electricity acquired from Connecticut Light and Power Company (Exhibit 1 to the CEC Form 10-Q (September 1987), File No. 2-30057). 10.1.9.2 Supplements to 10.1.9 consisting of two Capacity Acquisition Commitments each dated October 31, 1988, concerning electricity acquired from Western Massachusetts Electric Company and/or Connecticut Light and Power Company for periods ranging from November 1, 1988 to October 31, 1994 (Exhibit 2 to the CEC Form 10- Q (September 1989), File No. 2-30057). 10.1.9.3 Amendment to 10.1.9 as amended and restated June 1, 1993, henceforth referred to as the Capacity Acquisition and Disposition Agreement, whereby Canal Electric Company, as agent, in addition to acquiring power may also sell bulk electric power which the Company and/or Commonwealth Electric Company owns or otherwise has the right to sell (Exhibit 1 to Canal Electric's Form 10-Q (September 1993), File No. 2-30057). 10.1.10 Power Contract between Yankee Atomic Electric Company and CEL, dated June 30, 1959, as amended April 1, 1975 (Exhibit 1 to the CEL Form 10-K, File No. 2-7909). 10.1.10.1 Second, Third and Fourth Amendments to 10.1.10 as amended October 1, 1980, April 1, 1985 and May 6, 1988, respectively (Exhibit 2 to the CEL Form 10-Q (June 1988), File No. 2-7909). 10.1.10.2 Fifth and Sixth Amendments to 10.1.10 as amended June 26, 1989 and July 1, 1989, respectively (Exhibit 1 to the CEL Form 10-Q (September 1989), File No. 2-7909). PAGE 40 CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.11 Power Contract between Connecticut Yankee Atomic Power Company and CEL dated July 1, 1964 (Exhibit 13-K1 to the CES Form S-1, (April 1967) File No. 2-25597). 10.1.11.1 Additional Power Contract to 10.1.11 providing for extension on the contract term dated April 30, 1984 (Exhibit 5 to the CEL Form 10-Q (June 1984), File No. 2-7909). 10.1.11.2 Second Supplementary Power Contract to 10.1.11 providing for decommissioning financing dated April 30, 1984 (Exhibit 6 to the CEL Form 10-Q (June 1984), File No. 2-7909). 10.1.12 Power Contract between CEL and Vermont Yankee Nuclear Power Corporation dated February 1, 1968 (Exhibit 3 to the CEL 1984 Form 10-K, File No. 2-7909). 10.1.12.1 First Amendment (Section 7) and Second Amendment (decommissioning financing) to 10.1.12 as amended June 1, 1972 and April 15, 1983, respectively (Exhibits 1 and 2, respectively, to the CEL Form 10-Q (June 1984), File No. 2-7909). 10.1.12.2 Third and Fourth Amendments to 10.1.12 as amended April 1, 1985 and June 1, 1985, respectively (Exhibit 1 and 2 to the CEL Form 10-Q (June 1986) File No. 2-7909). 10.1.12.3 Fifth and Sixth Amendments to 10.1.12 both as amended May 6, 1988 (Exhibit 1 to the CEL Form 10-Q (June 1988), File No. 2-7909). 10.1.12.4 Seventh Amendment to 10.1.12 as amended June 15, 1989 (Exhibit 2 to the CEL Form 10-Q (September 1989), File No. 2-7909). 10.1.12.5* Additional Power Contract between CEL and Vermont Yankee Nuclear Power Corporation providing for decommissioning financing and contract extension dated February 1, 1984 (Refiled herewith as Exhibit 1). 10.1.13 Power Contract between Maine Yankee Atomic Power Company and CEL dated May 20, 1968 (Exhibit 5 to the System's Form S-7, File No. 2- 38372). 10.1.13.1 First Amendment (decommissioning financing) and Second Amendment (supplementary payments) to 10.1.13 as amended March 1, 1984 and January 1, 1984, respectively (Exhibits 3 and 4 to the CEL Form 10- Q (June 1984), File No. 2-7909). 10.1.13.2 Third Amendment to 10.1.13 as amended October 1, 1984 (Exhibit 1 to the CEL Form 10-Q (September 1984), File No. 2-7909). 10.1.14 Participation Agreement between Maine Electric Power Company and CEL and/or NBGEL for the construction of a 345 KV transmission line between Wiscasset, Maine and Mactaquac, New Brunswick, Canada and for the purchase of base and peaking capacity from the New Brunswick Electric Power Commission, dated June 20, 1969 (Exhibit 13 to the CES Form 10-K for 1984, File No. 1-7316). PAGE 41 CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.14.1 Supplement Amending 10.1.14, as amended June 24, 1970 (Exhibit 8 to the CES Form S-7, Amendment No. 1, File No. 2-38372). 10.1.15 Service Agreement for Non-Firm Transmission Service between Boston Edison Company and CEL dated July 5, 1984 (Exhibit 4 to the CEL 1984 Form 10-K, File No. 2-7909). 10.1.16 Power Exchange Agreement by and between Boston Edison Company and CEL dated December 1, 1984 (Exhibit 5 to the CEL 1984 Form 10-K, File No. 2-7909). 10.1.17 Agreement, dated September 1, 1985, With Respect To Amendment of Agreement With Respect To Use Of Quebec Interconnection, dated December 1, 1981, among certain NEPOOL utilities to include Phase II facilities in the definition of "Project" (Exhibit 1 to the CEC Form 10-Q (September 1985), File No. 2-30057). 10.1.17.1 Amendatory Agreement No. 3 to 10.1.17, as amended June 1, 1990 (Exhibit 1 to the CEC Form 10-Q (September 1990), File No. 2- 30057). 10.1.18 Preliminary Quebec Interconnection Support Agreement - Phase II among certain New England electric utilities, dated June 1,1984 (Exhibit 6 to the CE Form 10-Q (June 1984), File No. 2-7749). 10.1.18.1 First, Second and Third Amendments to 10.1.18 as amended March 1, 1985, January 1, 1986 and March 1, 1987, respectively (Exhibit 1 to the CEC Form 10-Q (March 1987), File No. 2-30057). 10.1.18.2 Fourth and Eighth Amendments to 10.1.18 as amended July 1, 1987 and August 1, 1988, respectively (Exhibit 3 to the CEC Form 10-Q (September 1988), File No. 2-30057). 10.1.18.3 Fifth, Sixth and Seventh Amendments to 10.1.18 as amended October 15, 1987, December 15, 1987 and March 1, 1988, respectively (Exhibit 1 to the CEC Form 10-Q (June 1988), File No. 2-30057). 10.1.18.4 Ninth and Tenth Amendments to 10.1.18 as amended November 1, 1988 and January 15, 1989, respectively (Exhibit 2 to the CEC Form 10-K for 1988, File No. 2-30057). 10.1.18.5 Eleventh Amendment to 10.1.18 as amended November 1, 1989 (Exhibit 4 to the CEC Form 10-K for 1989, File No. 2-30057). 10.1.18.6 Twelfth Amendment to 10.1.18 as amended April 1, 1990 (Exhibit 1 to the CEC Form 10-Q (June 1990), File No. 2-30057). 10.1.19 Agreement to Preliminary Quebec Interconnection Support Agreement - Phase II among Public Service Company of New Hampshire (PSNH), New England Power Co., Boston Edison Co. and CEC whereby PSNH assigns a portion of its interests under the original Agreement to the other three parties, dated October 1, 1987 (Exhibit 2 to the CEC 1987 Form 10-K, File No. 2-30057). PAGE 42 CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.20 Phase II Equity Funding Agreement for New England Hydro- Transmission Electric Company, Inc. (New England Hydro (Massachusetts) between New England Hydro and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 2 to the CEC Form 10-Q (September 1985), File No. 2-30057). 10.1.21 Phase II Equity Funding Agreement for New England Hydro- Transmission Corporation (New Hampshire Hydro) between New Hampshire Hydro and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 3 to the CEC Form 10-Q (September 1985), File No. 2- 30057). 10.1.21.1 Amendment No. 1 to 10.1.21 as amended May 1, 1986 (Exhibit 6 to the CEC Form 10-Q (March 1987), File No. 2-30057). 10.1.21.2 Amendment No. 2 to 10.1.21 as amended September 1, 1987 (Exhibit 3 to the CEC Form 10-Q (September 1987), File No. 2-30057). 10.1.22 Phase II Massachusetts Transmission Facilities Support Agreement dated June 1, 1985, refiled as a single agreement incorporating Amendments 1 through 7 dated May 1, 1986 through January 1, 1989, respectively, between New England Hydro-Transmission Electric Company, Inc. (New England Hydro) and certain NEPOOL utilities (Exhibit 2 the CEC Form 10-Q (September 1990), File No. 2-30057). 10.1.23 Phase II New Hampshire Transmission Facilities Support Agreement dated June 1, 1985, refiled as a single agreement incorporating Amendments 1 through 8 dated May 1, 1986 through January 1, 1990, respectively, between New England Hydro-Transmission Corporation (New Hampshire Hydro) and certain NEPOOL utilities (Exhibit 3 to the CEC Form 10-Q (September 1990), File No. 2-30057). 10.1.24 Phase II New England Power AC Facilities Support Agreement between New England Power and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 6 to the CEC Form 10-Q (September 1985), File No. 2- 30057). 10.1.24.1 Amendments Nos. 1 and 2 to 10.1.24 as amended May 1, 1986 and February 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (March 1987), File No. 2-30057). 10.1.24.2 Amendments Nos. 3 and 4 to 10.1.24 as amended June 1, 1987 and September 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (September 1987), File No. 2-30057). 10.1.25 Phase II Boston Edison AC Facilities Support Agreement between Boston Edison Company and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 7 to the CEC Form 10-Q (September 1985), File No. 2- 30057). 10.1.25.1 Amendments Nos. 1 and 2 to 10.1.25 as amended May 1, 1986 and February 1, 1987, respectively (Exhibit 2 to the CEC Form 10-Q (March 1987), File No. 2-30057). PAGE 43 CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.25.2 Amendments Nos. 3 and 4 to 10.1.25 as amended June 1, 1987 and September 1, 1987, respectively (Exhibit 4 to the CEC Form 10-Q (September 1987), File No. 2-30057). 10.1.26 Agreement Authorizing Execution of Phase II Firm Energy Contract among certain NEPOOL utilities in regard to participation in the purchase of power from Hydro Quebec, dated September 1, 1985 (Exhibit 8 to the CEC Form 10-Q (September 1985), File No. 2- 30057). 10.1.27 System Power Sales Agreement by and between Connecticut Light and Power (CL&P), Western Massachusetts Electric Company (Northeast Utilities companies), as sellers, and CEL, as buyer, of power in excess of firm power customer requirements from the electric systems of the Northeast Utilities companies, dated June 1, 1984, as effective October 25, 1985 (Exhibit 1 to the CEL 1985 Form 10-K, File No. 2-7909). 10.1.28 Power Sale Agreement dated November 1, 1988 by and between CEC (buyer) and CL&P (seller), whereby buyer will purchase generating capacity totaling 250 MW from various seller's units ("Slice of System") for the term of November 1, 1989 to October 31, 1994 (Exhibit 3 to the CEC Form 10-K for 1988, File No. 2-30057). 10.1.29 Power Sale Agreement by and between Altresco Pittsfield, L. P. and the Company for entitlement to the electric capacity and related energy to be produced by a cogeneration facility located in Pittsfield, Massachusetts, dated February 20, 1992 (Exhibit 1 to the CEL Form 10-Q (September 1993), File No. 2-7909). 10.1.29.1 System Exchange Agreement by and among Altresco Pittsfield, L.P., the Company, Commonwealth Electric Company (CE) and New England Power Company, dated July 2, 1993 (Exhibit 3 to the CE Form 10-Q (September 1993), File No. 2-7749). 10.2 Other Agreements. 10.2.1 Pension Plan for Employees of Commonwealth Energy System and Subsidiary Companies as amended and restated January 1, 1993 (Exhibit 1 to the System's Form 10-Q (September 1993), File No. 1- 7316). 10.2.2 Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies as amended and restated January 1, 1993 (Exhibit 2 to the System's Form 10-Q (September 1993), File No. 1-7316). 10.2.3 New England Power Pool (NEPOOL) Agreement dated September 1, 1971 as amended through August 1, 1977 between NEGEA Service Corporation, as agent for CEL, CEC, NBGEL and various other electric utilities operating in New England, together with amendments dated August 15, 1978, January 31, 1979 and February 1, 1980 (Exhibit 5(c)13 to the CES Form S-16 (April 1980), File No. 2- 64731). PAGE 44 CAMBRIDGE ELECTRIC LIGHT COMPANY 10.2.3.1 Thirteenth Amendment to 10.2.3 dated September 1, 1981 (Exhibit 3 to the CES 1991 Form 10-K, File No. 1-7316). 10.2.3.2 Fourteenth through Twentieth Amendments to 10.2.3 as amended December 1, 1981, June 1, 1982, June 15, 1983, October 1, 1983, August 1, 1985, August 15, 1985 and September 1, 1985, respectively (Exhibit 4 to the CES Form 10-Q (September 1985), File No. 1-7316). 10.2.3.3 Twenty-first Amendment to 10.2.3 as amended to January 1, 1986 (Exhibit 1 to the CES Form 10-Q (March 1986), File No. 1-7316). 10.2.3.4 Twenty-second Amendment to 10.2.3 as amended to January 1, 1986 (Exhibit 1 to the CES Form 10-Q (September 1986), File No. 1-7316). 10.2.3.5 Twenty-third Amendment to 10.2.3 as amended April 30, 1987 (Exhibit 1 to the CES Form 10-Q (June 1987), File No. 1-7316). 10.2.3.6 Twenty-fourth Amendment to 10.2.3 as amended March 1, 1988 (Exhibit 1 to the CES 1987 Form 10-K, File No. 1-7316). 10.2.3.7 Twenty-fifth Amendment to 10.2.3 as amended May 1, 1988 (Exhibit 1 to the CES Form 10-Q (March 1988), File No. 1-7316). 10.2.3.8 Twenty-sixth Amendment to 10.2.3 as amended March 15, 1989 (Exhibit 1 to the CES Form 10-Q (March 1989), File No. 1-7316). 10.2.3.9 Twenty-seventh Amendment to 10.2.3 as amended October 1, 1990 (Exhibit 3 to the CES 1990 Form 10-K, File No. 1-7316). 10.2.4 Guarantee Agreement by CEL (as guarantor) and MYA Fuel Company (as initial lender) covering the unconditional guarantee of a portion of the payment obligations of Maine Yankee Atomic Power Company under a loan agreement and note initially between Maine Yankee and MYA Fuel Company (Exhibit 3 to the CEL 1985 Form 10-K, File No. 2- 7909). (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended December 31, 1993. PAGE 45 SCHEDULE III CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1993 (Dollars in Thousands)
1993 Balance Balance December 31, Equity December 31, Name of Issuer and 1992 in Dividends 1993 Description of Investment Shares Amount Earnings Received Amount Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 518 $ 563 $ 591 $4 490 Maine Yankee Atomic Power Company 20 000 2 759 328 311 2 776 Vermont Yankee Nuclear Power Corporation 9 801 1 336 178 197 1 317 Yankee Atomic Electric Company 3 068 476 - - 476 Total $9 089 $1 069 $1 099 $9 059 Other Investments Massachusetts Business Development Corporation 500 5 5 Total $ 5 $ 5 Under terms of the capital funds agreements and power contracts, no stock may be sold or transferred except to another stockholder and, as such, no market exists for these securities. See Note 4(d) of the Notes to Financial Statements included in Item 8 of this report for a discussion of the permanent closing of the nuclear plant owned by Yankee Atomic Electric Company.
PAGE 46 SCHEDULE III CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1992 (Dollars in Thousands)
1992 Balance Balance December 31, Equity December 31, Name of Issuer and 1991 in Dividends 1992 Description of Investment Shares Amount Earnings Received Amount Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 600 $ 721 $ 803 $4 518 Maine Yankee Atomic Power Company 20 000 2 758 336 335 2 759 Vermont Yankee Nuclear Power Corporation 9 801 1 325 208 197 1 336 Yankee Atomic Electric Company 3 068 420 56 - 476 Total $9 103 $1 321 $1 335 $9 089 Other Investments Massachusetts Business Development Corporation 500 5 5 Total $ 5 $ 5 Under terms of the capital funds agreements and power contracts, no stock may be sold or transferred except to another stockholder and, as such, no market exists for these securities. See Note 4(d) of the Notes to Financial Statements included in Item 8 of this report for a discussion of the permanent closing of the nuclear plant owned by Yankee Atomic Electric Company.
PAGE 47 SCHEDULE III CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1991 (Dollars in Thousands)
1991 Balance Balance December 31, Equity December 31, Name of Issuer and 1990 in Dividends 1991 Description of Investment Shares Amount Earnings Received Redemption Amount Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 455 $ 775 $ 630 $ - $4 600 Maine Yankee Atomic Power Company 20 000 2 735 362 339 - 2 758 Vermont Yankee Nuclear Power Corporation 10 001 1 345 232 232 20 1 325 Yankee Atomic Electric Company 3 068 416 61 57 - 420 Total $8 951 $1 430 $1 258 $ 20 $9 103 Other Investments Connecticut Yankee Atomic Power Company Series B Debentures - $ 684 $ 684 $ - Massachusetts Business Development Corporation 500 5 - 5 Total $ 689 $ 684 $ 5 In 1991, Vermont Yankee repurchased 2% of its common stock at $150 per share. The Company's original cost was $100 per share resulting in a gain of $10,000 for this transaction. As of December 31, 1991, the Company held 9,801 shares in Vermont Yankee. Under terms of the capital funds agreements and power contracts, no stock may be sold or transferred except to another stockholder and, as such, no market exists for these securities. See Note 4(d) of the Notes to Financial Statements included in Item 8 of this report for a discussion of the permanent closing of the nuclear plant owned by Yankee Atomic Electric Company.
PAGE 48 SCHEDULE V CAMBRIDGE ELECTRIC LIGHT COMPANY PROPERTY, PLANT AND EQUIPMENT (A) FOR THE YEAR ENDED DECEMBER 31, 1993
Balance Retirements Balance Beginning Additions Charged to End of Classification of Year at Cost Reserve Other Transfers Year (Dollars in Thousands) ELECTRIC Intangible plant $ 233 $ - $ - $ - $ - $ 233 Land and rights of way 732 3 - - - 735 Structures and leasehold improvements 12 909 130 2 - - 13 037 Production equipment 22 995 174 44 - - 23 125 Transmission equipment 17 796 - - - - 17 796 Distribution equipment 81 624 3 031 733 - - 83 922 General equipment, vehicles and other 933 40 7 - - 966 Total plant in service 137 222 3 378 786 - - 139 814 Construction work in progress 96 917 - - - 1 013 Total electric 137 318 4 295 786 - - 140 827 OTHER Miscellaneous Physical Property 5 568 (16) 42 - - 5 510 Total Property, Plant and Equipment $142 886 $ 4 279 $ 828 $ - $ - $146 337 (A) Refer to Note 1 of Notes to Financial Statements for depreciation method and rates.
PAGE 49 SCHEDULE V CAMBRIDGE ELECTRIC LIGHT COMPANY PROPERTY, PLANT AND EQUIPMENT (A) FOR THE YEAR ENDED DECEMBER 31, 1992
Balance Retirements Balance Beginning Additions Charged to End of Classification of Year at Cost Reserve Other Transfers Year (Dollars in Thousands) ELECTRIC Intangible plant $ 233 $ - $ - $ - $ - $ 233 Land and rights of way 732 (35) - (35) - 732 Structures and leasehold improvements 12 913 (3) 1 - - 12 909 Production equipment 22 402 734 165 - 24 22 995 Transmission equipment 17 796 - - - - 17 796 Distribution equipment 78 986 3 439 777 - (24) 81 624 General equipment, vehicles and other 910 28 5 - - 933 Total plant in service 133 972 4 163 948 (35) - 137 222 Construction work in progress 744 (648) - - - 96 Total electric 134 716 3 515 948 (35) - 137 318 OTHER Miscellaneous Physical Property 5 470 192 94 - - 5 568 Total Property, Plant and Equipment $140 186 $ 3 707 $1 042 $(35) $ - $142 886 (A) Refer to Note 1 of Notes to Financial Statements for depreciation method and rates.
PAGE 50 SCHEDULE V CAMBRIDGE ELECTRIC LIGHT COMPANY PROPERTY, PLANT AND EQUIPMENT (A) FOR THE YEAR ENDED DECEMBER 31, 1991
Balance Retirements Balance Beginning Additions Charged to End of Classification of Year at Cost Reserve Transfers Year (Dollars in Thousands) ELECTRIC Intangible plant $ 210 $ 23 $ - $ - $ 233 Land and rights of way 732 - - - 732 Structures and leasehold improvements 12 798 118 3 - 12 913 Production equipment 22 180 261 66 27 22 402 Transmission equipment 17 779 17 - - 17 796 Distribution equipment 75 267 4 903 1 157 (27) 78 986 General equipment, vehicles, and other 841 77 8 - 910 Total plant in service 129 807 5 399 1 234 - 133 972 Construction work in progress 1 492 (748) - - 744 Total electric 131 299 4 651 1 234 - 134 716 OTHER Miscellaneous Physical Property 5 410 78 18 - 5 470 Total Property, Plant and Equipment $136 709 $ 4 729 $1 252 $ - $140 186 (A) Refer to Note 1 of Notes to Financial Statements for depreciation method and rates.
PAGE 51 SCHEDULE VI CAMBRIDGE ELECTRIC LIGHT COMPANY ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (Dollars in Thousands)
Provision Clearing Balance at Accounts and Amortization of Balance Beginning of Charged to Other Leasehold Removal at End Classification Year Operations Income Improvements Retirements Cost Salvage of Year YEAR ENDED DECEMBER 31, 1993 Electric $45 586 $3 795 $ - $ 47 $ 786 $ 861 $116 $47 897 Other 4 410 - - - 42 - 117 4 485 Total Accumulated Depreciation $49 996 $3 795 $ - $ 47 $ 828 $ 861 $233 $52 382 YEAR ENDED DECEMBER 31, 1992 Electric $43 576 $3 601 $ - $ 47 $ 948 $ 794 $104 $45 586 Other 4 439 - 309 - 94 244 - 4 410 Total Accumulated Depreciation $48 015 $3 601 $309 $ 47 $1 042 $1 038 $104 $49 996 YEAR ENDED DECEMBER 31, 1991 Electric $41 761 $3 490 $ - $47 $1 234 $628 $140 $43 576 Other 4 177 - 299 - 18 19 - 4 439 Total Accumulated Depreciation $45 938 $3 490 $299 $47 $1 252 $647 $140 $48 015
PAGE 52 SCHEDULE VIII CAMBRIDGE ELECTRIC LIGHT COMPANY VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (Dollars in Thousands) Additions Balance Provision Deductions Balance Beginning Charged to Accounts at End Description of Year Operations Recoveries Written-off of Year Year Ended December 31, 1993 Allowance for Doubtful Accounts $453 $257 $280 $499 $491 Year Ended December 31, 1992 Allowance for Doubtful Accounts $309 $801 $ 1 $658 $453 Year Ended December 31, 1991 Allowance for Doubtful Accounts $287 $449 $104 $531 $309 PAGE 53 SCHEDULE IX CAMBRIDGE ELECTRIC LIGHT COMPANY SHORT-TERM BORROWINGS (a) FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (Dollars in Thousands) Maximum Weighted Month-End Average Weighted Category of Average Amount Amount Average Aggregate Balance Interest Outstanding Outstanding Interest Short-Term at End Rate at End During During the Rate During Borrowings of Period of Period the Period Period(b) the Period(c) December 31, 1993 Notes Payable to Banks $2 000 3.1% $ 5 375 $ 1 850 3.3% Notes Payable to System $ - - $ 1 050 $ 81 6.0% COM/Energy Money Pool $1 305 3.2 $ 2 855 $ 737 3.2% December 31, 1992 Notes Payable to Banks $1 500 3.5% $21 600 $ 6 396 4.0% Notes Payable to System $ - - $ 705 $ 546 6.3% COM/Energy Money Pool $ - - $ 1 205 $ 592 3.7% December 31, 1991 Notes Payable to Banks $11 700 5.8% $15 625 $12 067 6.3% Notes Payable to System $ 655 6.5% $ 655 $ 495 8.3% COM/Energy Money Pool $ 885 4.6% $ 1 285 $ 907 5.8% (a) Refer to Note 3 of Notes to Financial Statements filed under Item 8 of this report for the general terms of each category of short-term borrowings. (b) The average amount outstanding during the period is determined by averaging the level of month-end principal balances outstanding for the prior thirteen-month period ending December 31. (c) The weighted average interest rate during the period is determined by averaging the interest rates in effect on all loans transacted for the twelve-month period ended December 31. PAGE 54 CAMBRIDGE ELECTRIC LIGHT COMPANY FORM 10-K DECEMBER 31, 1993 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. CAMBRIDGE ELECTRIC LIGHT COMPANY (Registrant) By: WILLIAM G. POIST William G. Poist, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Principal Executive Officers: WILLIAM G. POIST March 30, 1994 William G. Poist, Chairman of the Board and Chief Executive Officer R. D. WRIGHT March 28, 1994 Russell D. Wright, President and Chief Operating Officer Principal Financial Officer: JAMES D. RAPPOLI March 30, 1994 James D. Rappoli, Financial Vice President and Treasurer Principal Accounting Officer: JOHN A. WHALEN March 28, 1994 John A. Whalen, Comptroller A majority of the Board of Directors: WILLIAM G. POIST March 30, 1994 William G. Poist, Director R. D. WRIGHT March 28, 1994 Russell D. Wright, Director JAMES D. RAPPOLI March 30, 1994 James D. Rappoli, Director EX-10 2 POWER CONTRACT PAGE 1 EXHIBIT 1 ADDITIONAL POWER CONTRACT, dated as of February 1, 1984, between VERMONT YANKEE NUCLEAR POWER CORPORATION ("Vermont Yankee"), a Vermont corporation, and CAMBRIDGE ELECTRIC LIGHT COMPANY (the "Purchaser"). It is agreed as follows: 1. Basic Understandings. Vermont Yankee was organized in 1966 to provide for the supply of power to its sponsoring utility companies (including the Purchaser), which utilities are hereinafter called the "sponsors". It constructed a nuclear electric gen- erating unit of the boiling water type, having a maximum net capability of approximately 540 megawatts electric, at a site adjacent to the Connecticut River at Vernon, Vermont (said unit being herein, together with the site and all related facilities owned or to be owned by Vermont Yankee, referred to as the "Unit"). On February 28, 1973 Vermont Yankee was issued a full-term, operating license for the Unit from the Atomic Energy Commission (now the Nuclear Regulatory Commission which, together with any successor agency or agencies, is hereafter called the "NRC"), which license expires on December 11, 2007, and the Unit commenced commercial operation on November 30, 1972. The Unit is operated to supply power to Vermont Yankee's sponsors, each of which by a Power Contract dated as of February 1, 1968, as amended (collec- tively the "Initial Power Contracts"), has undertaken to purchase a fixed percentage of the capacity and output of the Unit for a term extending through November 30, 2002. The names of the sponsors and their respective percentages ("entitlement percentages") of the capacity and output of the Unit are as follows: Entitlement Percentage Central Vermont Public Service Corporation . . . . 35.0% Green Mountain Power Corporation . . . . . . . . . 20.0% New England Power Company. . . . . . . . . . . . . 20.0% The Connecticut Light and Power Company. . . . . . 9.5% Central Maine Power Company. . . . . . . . . . . . 4.0% Public Service Company of New Hampshire. . . . . . 4.0% Western Massachusetts Electric Company . . . . . . 2.5% Montaup Electric Company . . . . . . . . . . . . . 2.5% Cambridge Electric Light Company . . . . . . . . . 2.5% The sponsors have resold portions of their entitlement percentages of capacity and output of the Unit under the Initial Power Contracts to other utilities (the "secondary purchasers") on terms and conditions substantially equivalent to those in the Initial Power Contracts: in 1969, the two Vermont sponsors resold an aggregate of 7.426% of the Unit's capacity and output to other utilities in Vermont; and in 1970 the non-Vermont sponsors resold an aggregate of 4.5451% of the Unit's capacity and output to other New England utilities outside of Vermont (collectively the "Resale Contracts"). In 1983 the Initial Power Contracts were amended to incorporate provisions for collec- tion of funds to defray the ultimate cost of decommissioning the Unit, which costs are being borne pro rata by said secondary purchasers under the Resale Contracts. PAGE 2 Vermont Yankee and its sponsors desire to provide for the orderly continuation of the sale and purchase of the capacity and output of the Unit during the useful life of the Unit to the extent it continues beyond the termination date of the Initial Power Contracts and to provide appropriate provisions for the collection of funds for and the payment of decommissioning and any other costs with respect thereto both during and after the useful life of the Unit. Vermont Yankee and its other sponsors are entering into Addi- tional Power Contracts which are identical to this contract except for neces- sary changes in the names of the parties. 2. Effective Date, Term and Waiver. This contract shall become effective upon receipt by the Purchaser of notice that Vermont Yankee has entered into additional power contracts, as contemplated by Section 1 above, with each of its other sponsors. The opera- tive term of this contract shall commence on December 1, 2002 notwithstanding the fact that the useful service life of the Unit may have been terminated prior to that date, and shall terminate upon the later to occur of (i) 30 days after the date on which the last of the financial obligations of Vermont Yankee which constitute elements of the purchase price calculated pursuant to Section 7 of this contract has been extinguished by Vermont Yankee or (ii) 30 days after the date on which Vermont Yankee is finally relieved of any obligations under the last of any licenses (operating and/or possessory) which it now holds from, or which may hereafter be issued to it by, the NRC with respect to the Unit under applicable provisions of the Atomic Energy Act of 1954, as amended from time to time (the "Act"). Vermont Yankee and the Purchaser acknowledge that, if the useful life of the Unit is terminated prior to December 1, 2002, then only the provisions of this contract applicable to decommissioning of the Unit will apply during the operative term of this contract. The Purchaser hereby irrevocably waives its right to extend the contract term of its Initial Power Contract pursuant to subsections (a) or (b) of Section 8 thereof. 3. Operation and Maintenance of the Unit. Vermont Yankee will operate and maintain the Unit in accordance with good utility practice under the circumstances and all applicable law, includ- ing the applicable provisions of the Act and of any licenses issued thereunder to Vermont Yankee. Within the limits imposed by good utility practice under the circumstances and applicable law, the Unit will be operated at its maximum capability and on a long hour use basis. Outages for inspection, maintenance refueling and repairs and replace- ments will be scheduled in accordance with good utility practice and insofar as practicable shall be mutually agreed upon by Vermont Yankee and the Purchaser. In the event of an outage, Vermont Yankee will use its best efforts to restore the Unit to service as promptly as practicable. 4. Decommissioning. After commercial operation of the Unit permanently ceases, Vermont Yankee will decommission the Unit in a manner authorized by Vermont Yankee's PAGE 3 board of directors and approved by the NRC in accordance with the Act and the rules and regulations thereunder then in effect and by any agency having jurisdiction over decommissioning of the Unit. It is understood that, pursuant to the Initial Power Contracts and the Resale Contracts, the sponsors and secondary purchasers are currently being billed for Total Decommissioning Costs which as of the date of this contract, are being accumulated in a separate fund which was established for the purpose of reimbursing Vermont Yankee for Decommissioning Expenses incurred in the process of decommissioning the Unit and that such billings are subject to change in accordance with the provisions of the Initial Power Contracts subject to the jurisdiction of FERC. It is contemplated that sufficient funds will be accumulated pursuant to those contracts and paragraph 7 hereof to reimburse Vermont Yankee for the full cost of decommissioning the Unit. 5. Purchaser's Entitlement. The Purchaser will, throughout the term of this contract, be entitled and obligated to take its entitlement percentage of the capacity and net electrical output of the Unit, at whatever level the Unit is operated or operable, whether more or less than 540 megawatts electric. 6. Deliveries and Metering. The Purchaser's entitlement percentage of the output of the Unit will be delivered to and accepted by it at the step-up substation at the site. All deliveries will be made in the form of 3-phase, 60 cycle, alternating current at a nominal voltage of 345,000 volts. The Purchaser will make its own arrangements for the transmission of its entitlement percentage of the output of the Unit. Vermont Yankee will supply and maintain all necessary metering equipment for determining the quantity and conditions of supply of deliveries under this contract, will make appropriate tests of such equipment in accordance with good utility practice and as reasonably requested by the Purchaser, and will maintain the accuracy of such equipment within reasonable limits. Vermont Yankee will furnish the Purchaser with such summaries of meter readings as the Purchaser may reasonably request. 7. Payment. With respect to each month commencing on or after December 1, 2002, the Purchaser will pay Vermont Yankee an amount equal to the Purchaser's entitle- ment percentage of the sum of (a) Vermont Yankee's total fuel costs for the month with respect to the Unit, plus (b) the Total Decommissioning Costs for the month with respect to the Unit, plus (c) Vermont Yankee's total operating expenses for the month with respect to the Unit, plus (d) an amount equal to one-twelfth of the composite percentage for such month of the net Unit invest- ment as most recently determined in accordance with this Section 7. "Composite percentage" shall be computed as of the last day of each month during the term hereof (the "computation date") and for any month the composite percentage shall be that computed as of the most recent computation date. "Composite percentage" as of a computation date shall be the sum of (i) the equity percentage as of such date multiplied by the percentage which PAGE 4 equity investment as of such date is of the total capital as of such date; plus (ii) the stated interest rate per annum of each principal amount of indebtedness bearing a particular rate of interest outstanding on such date for money borrowed from other than sponsors multiplied by the percentage which such principal amount is of total capital as of such date. "Equity percentage" as of any date after the commencement of the opera- tive term hereof shall be that percentage which was the "equity percentage" in effect on the last day of the term of the Initial Power Contracts or such other percentage as may from time to time thereafter be approved by the Federal Energy Regulatory Commission or any successor agency thereto ("FERC"). "Common stock equity investment" as of any date shall consist of equity investment as of such date less the aggregate par value of all issues of preferred stock outstanding on such date. "Equity investment" as of any date shall consist of not less than the sum of (i) all amounts theretofore paid to Vermont Yankee for all capital stock theretofore issued (taken at the total par value thereof plus the total of all amounts in excess of such par value paid thereon); plus all capital contributions, loans and advances theretofore made to Vermont Yankee by its sponsors, less the sum of any amounts distributed by Vermont Yankee to its sponsors or stockholders in the form of stock repurchases or redemptions, return of capital or repayments of loans and advances; plus (ii) any credit balance in the capital surplus account (not included under (i)) and in the earned surplus account on the books of Vermont Yankee as of such date. "Total capital" as of any date shall be the equity investment plus the total of all indebtedness then outstanding for money borrowed from other than Vermont Yankee's sponsors. "Uniform System" shall mean the Uniform System of Accounts prescribed by the FERC for Class A and Class B Public Utilities and Licensees as from time to time in effect. Vermont Yankee's "fuel costs" for any month shall include (i) amounts chargeable in accordance with the Uniform System in such month as amortization of costs of fuel assemblies and components and burn-up of nuclear materials for the Unit; plus (ii) all other amounts properly chargeable in accordance with the Uniform System to fuel costs for the Unit less any applicable credits thereto; plus(ii) to the extent not so chargeable all payments (or accruals therefor) with respect to lease or other financing obligations incurred in connection with such fuel assemblies and components, including nuclear materi- als, for the Unit (provided such fuel assemblies and components are not included in net Unit investment), and with the temporary or permanent storage or disposal thereof. Vermont Yankee's "operating expenses" shall include all amounts properly chargeable to operating expense accounts (other than such amounts which are included in Vermont Yankee's fuel costs) less any applicable credits thereto, in accordance with the Uniform System; it being understood that for purposes of this contract "operating expenses" shall include (i) depreciation accrual at a rate at least sufficient to fully amortize the non-salvageable plant investment over the estimated remaining useful life of the plant; and (ii) obligations incurred in connection with the leasing of plant facilities. PAGE 5 The "net Unit investment" shall consist, in each case with respect to the Unit, of (i) the aggregate amount properly chargeable at the time in accordance with the Uniform System to Vermont Yankee's electric plant accounts (including construction work in progress) less the amount of any accumulated provisions for depreciation thereof; plus (ii) the aggregate amount properly chargeable at the time in accordance with the Uniform System to accounts representing fuel assemblies and components (including nuclear materials) and other materials and supplies, less the balance, if any, at the time of the accumulated amortization thereof; plus (iii) such reasonable allowances for prepaid items and cash working capital as may from time to time be determined by Vermont Yankee. The net Unit investment shall be determined as of the commencement of each calendar year, or, if Vermont Yankee elects, at more frequent intervals. "Total Decommissioning Costs" for any month shall mean the sum of (x) an amount equal to all accruals in such month, as from time to time established by Vermont Yankee and approved by its board of directors, to provide for the ultimate payment of the Decommissioning Expenses of the Unit plus (y) Decom- missioning Tax Liability for such month. It is understood (i) that such funds may be held by Vermont Yankee or by an independent trust or other separate fund as determined by said board of directors, (ii) that, upon compliance with Section 17 hereof, the amount, custody and/or timing of such accruals may from time to time during the term hereof be modified by said board of directors in its discretion or to comply with applicable statutory or regulatory requirements or to reflect changes in the amount,custody or timing of antici- pated Decommissioning Expenses, and (iii) that the use of the term "to decom- mission" herein encompasses compliance with all requirements (other than those relating to spent nuclear fuel) of the NRC for permanent cessation of opera- tion of a nuclear facility and any other activities reasonably related thereto. "Decommissioning Expenses" shall include: (1)All costs and expenses of removing the Unit from service, including without limitation, dismantling, mothballing, removing radioactive material (excluding spent nuclear fuel) to temporary and/or perma- nent storage sites, decontaminating, restoring and supervising the site, and any costs and expenses incurred in connection with pro- ceedings before governmental regulatory authorities relating to any authorization to decommission the Unit or remove the Unit from service; (2)All costs of labor and services whether directly or indirectly incurred, including without limitation services of foremen, inspec- tors, supervisors, surveyors, engineers, security personnel, coun- sel and accountants, performed or rendered in connection with the decommissioning of the Unit and the removal of the Unit from ser- vice, and all costs of materials, supplies, machinery, construction equipment and apparatus acquired or used (including rental charges for machinery, equipment or apparatus hired) for or in connection with the decommissioning of the Unit and the removal of the Unit from service, and all administrative costs, including services of counsel and financial advisers, of any applicable independent trust or other separate fund; it being understood that any amount, exclu- sive of proceeds of insurance, realized by Vermont Yankee as sal- vage on any machinery, construction equipment and apparatus, the cost of which was charged to Decommissioning Expense shall be treated as a reduction of the amounts otherwise chargeable on account of the costs of decommissioning of the Unit; and PAGE 6 (3)All overhead costs applicable to the Unit during its decommission- ing period including, without limiting the generality of the fore- going, taxes (other than taxes on or in respect of income), charges licenses, excises and assessments, casualties, surety bond premiums and insurance premiums. "Decommissioning Tax Liability" for any month shall be an amount estab- lished by Vermont Yankee and approved by its board of directors to meet possible income tax obligations, which amount shall not exceed: the amount to be included in the clause (x) portion of Total Decommissioning Costs for such month multiplied by a fraction whose numerator is equal to the combined highest statutory Federal and state marginal income tax rate and whose denomi- nator is equal to one minus the combined highest statutory Federal and state marginal income tax rate. Without limiting the generality of the foregoing, amounts expended or to be paid with respect to decommissioning of the Unit or removal of the Unit from service shall constitute part of the Decommissioning Expenses if they are, or when paid will be, either (i) properly chargeable to any account related to decommissioning of a nuclear generating unit in accordance with the Uniform System or generally accepted accounting principles as then in effect, or (ii) properly chargeable to decommissioning of a nuclear generating unit in accordance with then applicable regulations of the NRC or the FERC or any other regulatory agency having jurisdiction. 8. Billing. Vermont Yankee will bill the Purchaser, as soon as practicable after the end of each month, for all amounts payable by the Purchaser with respect to the particular month pursuant to Section 7 hereof. Such bills will be rendered in such detail as the Purchaser may reasonably request and may be rendered on an estimated basis subject to corrective adjustments in subsequent billing periods. All bills shall be due and payable when rendered and any amount remaining unpaid 10 days following the date of issuance of bills should bear interest at an annual rate equal to 2% in excess of the current prime rate then in effect at The First National Bank of Boston, from the due date to the date payment is received by Vermont Yankee. 9. Decommissioning Fund. Vermont Yankee agrees to cause an appropriate decommissioning reserve to be maintained in accordance with applicable regulatory requirements. As of the date hereof, FERC has required an independent trust or other separate fund to be created which has the necessary powers to hold and invest all funds collected for the decommissioning of the Unit and to disburse the same to pay or to reimburse Vermont Yankee for such costs when actually incurred for decommissioning of the Unit or removal of the Unit from service. If during the term of such trust or fund federal or state legislation or regulations are promulgated which so permit or require or an alternative entity is created for funding decommissioning of the Unit, such trust has the authority, with the concurrence of Vermont Yankee, to transfer its trust estate to such newly authorized entity for the purpose of providing for the decommissioning of the Unit or removal of the Unit from service. Vermont Yankee agrees to credit to, or cause to be credited to, the PAGE 7 appropriate decommissioning reserve all funds collected hereunder for the express purpose of decommissioning the Unit or removing the Unit from service and further agrees that, after the tax consequences of decommissioning collec- tions have been resolved, any funds collected hereunder to meet Decommission- ing Tax Liability which are not used for that purpose, will be refunded to Purchaser. 10. Cancellation of Contract. If deliveries cannot be made to the Purchaser because either (i) the Unit is damaged to the extent of being completely or sub- stantially completely destroyed, or (ii) the Unit is taken by exercise of the right of eminent domain or a similar right or power, or (iii) (a) the Unit cannot be used because of contamination, or because a necessary license or other necessary public authorization cannot be obtained or is revoked or because the utilization of such a license or authorization is made subject to specified conditions which are not met, and (b) the situation cannot be rectified to an extent which will permit Vermont Yankee to make deliveries to the Purchaser from the Unit; then and in any such case, the Purchaser may cancel the provisions of this contract except that in all cases other than those described in clause (ii) above, the provisions relating to the payment of Total Decommissioning Costs and of costs of permanent storage or disposal of spent nuclear fuel shall, whether or not the Unit is operated or operable and notwithstanding any earlier termination of the service life of the Unit, remain in full force and effect until the expiration of the term hereof, it being recognized that such costs represent deferred payments in connection with power theretofore deliv- ered by Vermont Yankee hereunder. Such cancellation shall be effected by written notice given by the Purchaser to Vermont Yankee. In the event of such cancellation, all continuing obligations of the parties hereunder as to subse- quently incurred costs of Vermont Yankee other than the obligations relating to the payment and application of Total Decommissioning Costs and of costs of permanent storage or disposal of spent nuclear fuel to the extent excluded from such cancellation by the second preceding sentence, but including the Purchaser's obligations to continue payments pursuant to clause (a)(other than those related to the costs of permanent storage or disposal of spent nuclear fuel, and clauses (c) and (d) of the first paragraph of Section 7 hereof, shall cease forthwith. Notwithstanding the foregoing, the applicable provi- sions of this contract shall continue in effect after the cancellation hereof to the extent necessary to permit final billings and adjustments hereunder with respect to obligations incurred through the date of cancellation and the collection thereof. Any dispute as to the Purchaser's right to cancel this contract pursuant to the foregoing provisions shall be referred to arbitration in accordance with the provisions of Section 13. Notwithstanding anything in this contract elsewhere contained, the Purchaser may cancel this contract or be relieved of its obligations to make payments hereunder only as provided in the next preceding paragraph of this Section 10. Further, if for reasons beyond Vermont Yankee's reasonable control, deliveries are not made as contemplated by this contract, Vermont Yankee shall have no liability to the Purchaser on account of such non- delivery. PAGE 8 11. Insurance. Vermont Yankee presently has in effect, and hereafter will at all times maintain until the expiration of the term hereof, insurance to cover its "public liability" for personal injury and property damage resulting from a "nuclear incident" (as those terms are defined in the Act), with limits not less than Vermont Yankee may be required to maintain to qualify for governmen- tal indemnity under the Act and shall execute and maintain an indemnification agreement with the NRC as provided by the Act. Vermont Yankee will also at all times maintain such other types of liability insurance, including work- men's compensation insurance in such amounts, as is customary in the case of other similar electric utility companies, or as may be required by law. Vermont Yankee will at all times keep insured such portions of the Unit (other than the fuel assemblies and components, including nuclear materials) as are of a character usually insured by electric utility companies similarly situated and operating like properties, against the risk of a "nuclear inci- dent" and such other risks as electric utility companies, similarly situated and operating like properties, usually insure against; and such insurance shall to the extent available be carried in amounts sufficient to prevent Vermont Yankee from becoming a co-insurer. Vermont Yankee will at all times keep its fuel assemblies and components (including nuclear materials) insured against such risks and in such amounts as shall, in the opinion of Vermont Yankee, provide adequate protection. 12. Audit. Vermont Yankee's books and records (including metering records) shall be open to reasonable inspection and audit by the Purchaser. 13. Arbitration. In case any dispute shall arise as to the interpretation or performance of this contract which cannot be settled by mutual agreement, such dispute shall be submitted to arbitration. The parties shall if possible agree upon a single arbitrator. In case of failure to agree upon an arbitrator within 15 days after the delivery by either party to the other of a written notice requesting arbitration, either party may request the American Arbitration Association to appoint the arbitrator. The arbitrator, after opportunity for each of the parties to be heard, shall consider and decide the dispute and notify the parties in writing of his decision. Such decision shall be binding upon the parties, and the expenses of the arbitration shall be borne equally by them. 14. Regulation. This contract, and all rights, obligations and performance of the parties hereunder, are subject to all applicable state and federal law and to all duly promulgated orders and other duly authorized action of governmental authority having jurisdiction in the premises. 15. Assignment. This contract shall be binding upon and shall inure to the benefit of, and may be performed by, the successors and assigns of the parties, except PAGE 9 that no assignment, pledge or other transfer of this contract by either party shall operate to release the assignor, pledgor or transferor from any of its obligations under this contract unless consent to the release is given in writing by the other party, or, if the other party has theretofore assigned, pledged or otherwise transferred its interest in this contract, by the other party's assignee, pledgee or transferee, or unless such transfer is incident to a merger or consolidation with, or transfer of all or substantially all of the assets of the transferor to, another sponsor which shall, as a part of such succession, assume all the obligations of the transferor under this contract. 16. Right of Setoff. The Purchaser shall not be entitled to set off against the payments required to be made by it under this contract (i) any amounts owed to it by Vermont Yankee or (ii) the amount of any claim by it against Vermont Yankee. However, the foregoing shall not affect in any other way the Purchaser's right and remedies with respect to any such amounts owed to it by Vermont Yankee or any such claim by it against Vermont Yankee. 17. Amendments. Upon authorization by Vermont Yankee's board of directors of uniform amendments to all the Additional Power Contracts with sponsors, Vermont Yankee shall have the right to amend the provisions of Section 7 hereof by serving an appropriate statement of such amendment upon the Purchaser and filing the same with FERC (or such other regulatory agency as may have jurisdiction in the premises) in accordance with the provisions of applicable laws and any rules and regulations thereunder, and the amendment shall thereupon become effective on the date specified therein, subject to any suspension order issued by such agency. All other amendments to this contract shall be by mutual agreement evidenced by a written amendment signed by the parties thereto. 18. Interpretation. The interpretation and performance of this contract shall be in accor- dance with and controlled by the law of the State of Vermont. 19. Addresses. Except as the parties may otherwise agree, any notice, request, bill or other communication from one party to the other, relating to this contract, or the rights, obligations or performance of the parties hereunder, shall be in writing and shall be effective upon delivery to the other party. Any such communication shall be considered as duly delivered when delivered in person or mailed by registered or certified mail, postage prepaid, to the respective post office address of the other party shown following the signatures of such other party hereto, or such other address as may be designated by written notice given as provided in this Section 19. 20. Corporate Obligations. This contract is the corporate act and obligation of the parties hereto, and any claim hereunder against any stockholder, director or officer of either party, as such, is expressly waived. PAGE 10 21. All Prior Agreements Superseded. This contract represents the entire agreement between the parties relating to the subject matter hereof during the operative term hereof (i.e., post-December 1, 2002), and all previous agreements, discussions, communica- tions and correspondence with respect to the subject matter are hereby superseded and are of no further force and effect. IN WITNESS WHEREOF the parties have executed this contract by their respective officers thereunto duly authorized as of the date first above written. VERMONT YANKEE NUCLEAR POWER CORPORATION By William F. Conway President R.D. 5, Ferry Road, Box 169 Brattleboro, Vermont 05301 CAMBRIDGE ELECTRIC LIGHT COMPANY By E. G. Cheney Financial Vice President (Address) 675 Massachusetts Avenue Cambridge, Massachusetts 02139 -----END PRIVACY-ENHANCED MESSAGE-----