-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wbn+PCBv+ghBAMWWDY4GwHv5ZcEXcdUBdFsDLLvgXPXT1pX0wCxeXVfsowb7RkCz 9j2Uq41SUHJXwjOjtqFmAg== 0000071304-96-000022.txt : 19961115 0000071304-96-000022.hdr.sgml : 19961115 ACCESSION NUMBER: 0000071304-96-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE ELECTRIC LIGHT CO CENTRAL INDEX KEY: 0000016573 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041144610 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-07909 FILM NUMBER: 96661985 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-Q 1 CAMBRIDGE ELECTRIC LIGHT COMPANY FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549-1004 Form 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 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) (Former name, address and fiscal year, if changed since last report.) 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 November 1, 1996 Common Stock, $25 par value 346,600 shares The Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this Form with the reduced disclosure format. PART I - FINANCIAL INFORMATION Item 1. Financial Statements CAMBRIDGE ELECTRIC LIGHT COMPANY CONDENSED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 ASSETS (Dollars in thousands) September 30, December 31, 1996 1995 (Unaudited) PROPERTY, PLANT AND EQUIPMENT, at original cost $158 966 $156 925 Less - Accumulated depreciation 61 195 58 839 97 771 98 086 Add - Construction work in progress 1 284 1 225 99 055 99 311 INVESTMENTS Equity in nuclear electric power companies 9 515 9 224 Other 5 5 9 520 9 229 CURRENT ASSETS Cash 729 239 Accounts receivable - Affiliates 671 2 140 Customers 11 367 10 534 Unbilled revenues 2 980 1 769 Prepaid property taxes 2 581 1 690 Inventories and other 1 860 2 179 20 188 18 551 DEFERRED CHARGES Yankee Atomic purchased power contract 3 755 4 504 Other 7 958 5 447 11 713 9 951 $140 476 $137 042 See accompanying notes. CAMBRIDGE ELECTRIC LIGHT COMPANY CONDENSED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 CAPITALIZATION AND LIABILITIES (Dollars in thousands) September 30, December 31, 1996 1995 (Unaudited) CAPITALIZATION Common Equity - Common stock, $25 par value - Authorized and outstanding - 346,600 shares, wholly-owned by Commonwealth Energy System (Parent) $ 8 665 $ 8 665 Amounts paid in excess of par value 27 953 27 953 Retained earnings 10 957 7 561 47 575 44 179 Long-term debt, including premiums, less maturing debt and current sinking fund requirements 17 503 21 865 65 078 66 044 CURRENT LIABILITIES Interim Financing - Notes payable to banks 18 450 2 675 Advances from affiliates 5 610 2 425 Maturing long-term debt 4 260 20 000 28 320 25 100 Other Current Liabilities - Current sinking fund requirements 100 160 Accounts payable - Affiliates 3 776 3 787 Other 9 865 8 870 Accrued taxes - Local property and other 3 455 1 690 Income 16 731 Accrued interest 280 973 Other 1 606 1 272 19 098 17 483 47 418 42 583 DEFERRED CREDITS Accumulated deferred income taxes 14 188 13 882 Unamortized investment tax credits 1 872 1 941 Yankee Atomic purchased power contract 3 755 4 504 Other 8 165 8 088 27 980 28 415 COMMITMENTS AND CONTINGENCIES $140 476 $137 042 See accompanying notes. CAMBRIDGE ELECTRIC LIGHT COMPANY CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 ELECTRIC OPERATING REVENUES $33 513 $34 453 $91 601 $95 566 OPERATING EXPENSES Electricity purchased for resale, transmission and fuel 21 750 22 049 59 261 62 343 Other operation and maintenance 5 214 5 984 17 175 18 323 Depreciation 1 086 1 038 3 258 3 114 Taxes - Income 1 370 1 270 2 641 2 042 Local property 785 793 2 286 2 310 Payroll and other 178 195 643 657 30 383 31 329 85 264 88 789 OPERATING INCOME 3 130 3 124 6 337 6 777 OTHER INCOME 136 176 1 415 461 INCOME BEFORE INTEREST CHARGES 3 266 3 300 7 752 7 238 INTEREST CHARGES Long-term debt 431 943 1 809 2 834 Other interest charges 412 119 950 432 Allowance for borrowed funds used during construction (12) (33) (49) (84) 831 1 029 2 710 3 182 NET INCOME 2 435 2 271 5 042 4 056 RETAINED EARNINGS - Beginning of period 8 522 7 547 7 561 7 166 Dividends on common stock - (1 039) (1 646) (2 443) End of period $10 957 $ 8 779 $10 957 $ 8 779 See accompanying notes. CAMBRIDGE ELECTRIC LIGHT COMPANY CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Dollars in thousands) (Unaudited) 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5 042 $ 4 056 Effects of noncash items - Depreciation and amortization 3 258 3 244 Deferred income taxes and investment tax credits, net 92 232 Earnings from corporate joint ventures (908) (830) Dividends from corporate joint ventures 617 575 Change in working capital, exclusive of cash and interim financing 468 (387) All other operating items (2 392) (183) Net cash provided by operating activities 6 177 6 707 CASH FLOWS FOR INVESTING ACTIVITIES Additions to property, plant and equipment (exclusive of AFUDC) (2 850) (4 360) Allowance for borrowed funds used during construction (49) (84) Net cash used for investing activities (2 899) (4 444) CASH FLOWS FROM FINANCING ACTIVITIES Payment of dividends (1 646) (2 443) Proceeds from (payment of) short-term borrowings 15 775 (1 675) Advances from affiliates 3 185 1 975 Long-term debt issue refunded (20 000) - Sinking funds payments (102) (162) Net cash used for financing activities (2 788) (2 305) Net increase (decrease) in cash 490 (42) Cash at beginning of period 239 376 Cash at end of period $ 729 $ 334 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest (net of capitalized amounts) $ 3 216 $ 2 707 Income taxes $ 3 049 $ 2 057 See accompanying notes. CAMBRIDGE ELECTRIC LIGHT COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (1) General Information 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 System is an exempt public utility 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 and several non-regulated companies. The Company has 151 regular employees including 112 (74%) represented by a collective bargaining unit. The existing collective bargaining agreement remains in effect until September 1, 1998. (2) Significant Accounting Policies (a) Principles of Accounting The Company's significant accounting policies are described in Note 2 of Notes to Financial Statements included in its 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows these same basic accounting policies but considers each interim period as an integral part of an annual period and makes allocations of certain expenses to interim periods based upon estimates of such expenses for the year. The unaudited financial statements for the periods ended September 30, 1996 and 1995 reflect, in the opinion of the Company, all adjustments (consisting of only normal recurring accruals) necessary to summarize fairly the results for such periods. In addition, certain prior period amounts are reclassified from time to time to conform with the presenta- tion used in the current period's financial statements. Income tax expense is recorded using the statutory rates in effect applied to book income subject to tax recorded in the interim period. The results for interim periods are not necessarily indicative of results for the entire year because of seasonal variations in the consump- tion of energy. (b) Regulatory Assets and Liabilities 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). Based on the current regulatory framework, the Company accounts for the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." The Company has established various regulatory assets in cases where the DPU and/or the FERC have permitted or are expected to permit recovery of specific costs over time. CAMBRIDGE ELECTRIC LIGHT COMPANY Similarly, regulatory liabilities established by the Company are required to be refunded to customers over time. On January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. As of September 30, 1996, SFAS No. 121 did not have an impact on the Company's financial position or results of operations. However, this result may change as modifications are made in the current regulatory framework pursuant to electric utility restructuring orders issued by the DPU including a final order that is expected to be issued by the end of 1996. For additional discussion of electric industry restructuring activities, see "Electric Industry Restructuring" in Management's Discussion and Analysis of Results of Operations in Item 2 of this report. The principal regulatory assets included in deferred charges were as follows: September 30, December 31, 1996 1995 (Dollars in thousands) Yankee Atomic unrecovered plant and decommissioning costs $ 3 755 $ 4 504 Postretirement benefit costs including pensions 2 992 2 807 Other 460 498 $ 7 207 $ 7 809 The regulatory liabilities, reflected in the accompanying balance sheets and related to deferred income taxes, were $3.1 million at September 30, 1996 and $3.2 million at December 31, 1995. (2) Commitments and Contingencies (a) Construction Program The Company is engaged in a continuous construction program presently estimated at $27.2 million for the five-year period 1996 through 2000. Of that amount, $6.3 million is estimated for 1996. As of September 30, 1996 the Company's actual construction expenditures amounted to $2.9 million, including an allowance for funds used during construction. 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 securities. 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 regulations. CAMBRIDGE ELECTRIC LIGHT COMPANY (b) Connecticut Yankee Atomic Power Company Outage On July 22, 1996, Connecticut Yankee Atomic Power Company (Connecticut Yankee), which operates the Connecticut Yankee nuclear power plant (the plant), took the unit out of service in connection with certain safety- related issues and refueling. While the plant has been out of service, Connecticut Yankee's owners have evaluated the economics of continuing to operate the plant over the remaining ten years of its current license life, compared to the costs of closing the plant and incurring replacement power for the same period. As a result of this evaluation, on October 9, 1996, Connecticut Yankee announced that a permanent shutdown of the plant seems likely. Connecticut Yankee's Board of Directors is expected to vote sometime during the fourth quarter of 1996 on whether to permanently shut down the plant. The Company has an equity ownership interest in Connecticut Yankee of 4.5% which, at September 30, 1996, amounted to approximately $4.8 million. The Company, through its ownership interest, has a corresponding capacity entitlement and power purchase obligation. The preliminary estimate of the sum of future payments for the closing, decommissioning and recovery of the remaining investment in the plant, assuming permanent shutdown, is approximately $797 million. The Company's share of these remaining estimated costs is approximately $36 million. Based upon regulatory precedent, Connecticut Yankee believes that it would continue to collect from its power purchasers (including the Company) its decommissioning costs, unrecovered plant investment and other costs associated with the permanent closure of the plant over the remain- ing period of the plant's operating license that expires in 2007. The Company does not believe the ultimate outcome of the early closing of this plant would have a material adverse effect on its operations and believes that recovery of these FERC-approved costs would continue to be allowed in its rates at the retail level. CAMBRIDGE ELECTRIC LIGHT COMPANY Item 2. 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 condensed statements of income. This discussion should be read in conjunction with the Notes to Condensed Financial Statements appearing elsewhere in this report. A summary of the period to period changes in the principal items included in the condensed statements of income for the three and nine months ended September 30, 1996 and 1995 and unit sales for these periods is shown below: Three Months Ended Nine Months Ended September 30, September 30, 1996 and 1995 1996 and 1995 Increase (Decrease) (Dollars in thousands) Electric Operating Revenues $ (940) (2.7)% $(3 965) (4.1)% Operating Expenses - Electricity purchased for resale, transmission and fuel (299) (1.4) (3 082) (4.9) Other operation and maintenance (770) (12.9) (1 148) (6.3) Depreciation 48 4.6 144 4.6 Taxes - Federal and state income 100 7.9 599 29.3 Local property and other (25) (2.5) (38) (1.3) (946) (3.0) (3 525) (4.0) Operating Income 6 0.2 (440) (6.5) Other Income (40) (22.7) 954 206.9 Income Before Interest Charges (34) (1.0) 514 7.1 Interest Charges (198) (19.2) (472) (14.8) Net Income $ 164 7.2 $ 986 24.3 Unit Sales (Megawatthours or MWH) Retail (21 539) (6.0) (65 829) (6.5) Wholesale 28 585 82.1 72 498 76.1 Total unit sales 7 046 1.8 6 669 0.6 The following is a summary of unit sales (in MWH) for the periods indicated: Three Months Nine Months Period Ended Total Retail Wholesale Total Retail Wholesale September 30, 1996 400 095 336 692 63 403 1 122 455 954 713 167 742 September 30, 1995 393 049 358 231 34 818 1 115 786 1 020 542 95 244 CAMBRIDGE ELECTRIC LIGHT COMPANY Operating Revenues, Electricity Purchased For Resale, Transmission and Fuel For the three and nine months ended September 30, 1996 operating revenues declined approximately $940,000 (2.7%) and $4 million (4.1%), respectively, due primarily to lower costs for electricity purchased for resale, transmis- sion and fuel and decreased levels of retail unit sales. The Company's total unit sales for the current three and nine-month periods increased slightly from last year reflecting higher wholesale sales to the New England Power Pool that were nearly offset by lower retail unit sales that reflected a significant decline in sales to the Massachusetts Institute of Technology, a large commercial customer that has constructed its own cogeneration facility and has elected to receive standby service only (refer to Part II, Item 1 for additional information pertaining to this issue). Electricity purchased for resale, transmission and fuel costs decreased nearly $3.1 million (4.9%) during the first nine months of 1996 due primarily to lower costs for nuclear power and affiliate Canal Electric Company's (Canal) Unit 2 which was out of service approximately five months for sched- uled maintenance and returned to service in mid-August 1996. Unit 2 also completed a fueling conversion to burn natural gas in addition to oil. These reductions were offset, in part, by an increase in power purchased from Canal Unit 1 which was out of service in 1995 from the start of the year until late July due to a combination of scheduled maintenance and unscheduled extensive repairs to the turbine. For the current quarter, electricity purchased for resale, transmission and fuel costs decreased $299,000 (1.4%) due mainly to lower transmission costs. Other Operation and Maintenance For the current quarter and nine-month period, operation and maintenance decreased $770,000 (12.9%) and $1.1 million (6.3%), respectively, due mainly to lower costs relating to marketing and customer operations ($47,000 and $139,000) and, in the current nine-month period, conservation and load management ($118,000) and buildings and grounds maintenance ($25,000). These lower costs were offset slightly in the current quarter and nine-month period by higher insurance and benefit costs of $64,000 and $388,000, respectively. The current nine-month period also reflects the absence of legal fees ($293,000) associated with the cancellation of a power contract in 1995. Depreciation and Taxes For the current quarter and nine-month period, depreciation expense increased 4.6% due to a higher level of depreciable plant. The increases in federal and state income taxes for the current quarter and nine-month period of 7.9% and 29.3%, respectively, were due to higher levels of pretax income. There were no material changes to local property and payroll-related taxes. Other Income and Interest Charges The significant increase in other income for the current nine-month period was due to the recognition of a gain relating to the sale of a parcel of land ($664,000), a higher rate of return relative to steam production for an affiliate steam company ($282,000), an increase in non-operating rental income ($53,000) and the timing of dividend payments (offset by lower equity earn- ings) associated with the Company's investment in nuclear generating companies ($35,000). CAMBRIDGE ELECTRIC LIGHT COMPANY Interest charges for the current three and nine-month periods declined by nearly 19.2% and 14.8%, respectively, due primarily to the repayment of a $20 million long-term debt issue during the second quarter and to a lesser extent, normal sinking fund payments. This overall decline was partially offset by higher short-term interest costs due to a significantly higher average level of short-term bank borrowings that reflect the use of short-term funds to repay a maturing long-term debt issue. The weighted average short-term interest rate dropped to 5.5% compared to 6.0% for both current periods in 1995 and had only a minimal impact on interest costs. Electric Industry Restructuring On August 16, 1995, the DPU issued an order calling for the restructuring of the electric utility industry in Massachusetts. The DPU's intent is to reduce electric costs to consumers by providing customers with the opportunity to choose their electric power provider while retail electric companies such as the Company and affiliate Commonwealth Electric Company (the Companies) continue to provide transmission and distribution services. On May 1, 1996, the DPU issued an order containing proposed rules for implementing electric industry restructuring. The proposed rules, which were the subject of public comment and hearings during June and July 1996, provide for: (1) the establishment of an independent system operator to operate the regional transmission system; (2) a power exchange to manage a competitive bidding pool for short- term power sales; (3) functional separation of electric companies into generation, trans- mission and distribution corporate entities; (4) preservation of discounts for low-income customers, shut-off protections and provision of service to all customers; (5) registration requirements for generation suppliers; (6) options for phased incentives for electric companies to divest their generation assets; (7) promotion of environmental goals; (8) support for energy efficiency and renewable energy resources; (9) a price cap system of incentive regulation for the remaining distribution and transmission functions; (10) unbundling of rates on bills into separate components of transmis- sion, distribution and energy, and implementation of a competitive generation market by January 1, 1998; and (11) a reasonable opportunity for recovery of stranded cost. On August 9, 1996, the DPU issued an order delaying the issuance of final rules until the end of 1996. The DPU also stated that it will issue a revised schedule for electric companies to make company-specific unbundled rate filings. Although the DPU has not yet issued its revised rate filing schedule, the Companies anticipate filing their revenue-neutral, unbundled rates in early 1997 after the issuance of the DPU's final rules. Also, during 1997, the Companies will file their comprehensive restructuring plan. One element of the Companies' plan (announced on February 15, 1996) calls for the auctioning, in a competitive market, of their capacity entitlement (1,140 MW) in all of CAMBRIDGE ELECTRIC LIGHT COMPANY their twenty-one power contracts in an effort to develop a competitive market whereby customers would have the flexibility of choosing their electric supplier. The entitlements include contracts for power from Canal Units 1 and 2 and Seabrook Unit 1, which are owned or jointly owned by the System's generating subsidiary Canal Electric Company. The Companies' plan provides for total recovery of the difference between the current market value of the Companies' power contracts and their unavoidable costs. Under the Companies' plan, this difference, a component of what is often referred to as stranded cost, would be recovered through a non-bypassable access charge paid over an appropriate time period by all customers in the Companies' service areas. The DPU's May 1 order reaffirmed that one of its transition principles is to seek near-term rate relief for electric customers. Also, the DPU's proposed rules would limit the period for recovery of net, non-mitigable stranded cost to a ten-year period (January 1, 1998 through December 31, 2007.) Recovery of stranded cost depends upon the timing, nature, and degree of competition that may result from future changes in regulatory policies governing the Companies' activities and prices, as well as future power costs and market prices of power. The Companies' single largest component of stranded cost relates to their purchased power contracts with non-utility generators. Based on their analyses of the DPU's effort, the Companies would be unable to recover a substantial portion of their stranded cost within the ten-year period without rate increases. However, while the Companies are unable to predict the ultimate outcome of restructuring, it is important to note that a recent proposed settlement agreement presented by another utility to the DPU includes a provision that lengthens the timeframe for recovery of certain stranded costs to their original lives thus making it possible for that company to fully recover all stranded costs without a significant rate increase. That settlement agreement is currently under review by the DPU. Generally accepted accounting principles require that losses be accrued in full when costs to complete a contract are expected to exceed related revenues expected to be realized. To the extent that the Companies determine that they will be unable to recover costs associated with their purchased power contracts, the Companies would be required to take an immediate charge against earnings when such a loss is probable and estimable. Statement of Financial Accounting Standards No. 121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121) which became effective for 1996, requires impairment losses on long-lived assets to be recognized when the book value of an asset exceeds its expected future cash flows. This standard also imposes stricter criteria for the retention of regulatory-created assets by requiring that such assets be probable of future recovery at each balance sheet date. To the extent such recovery is not probable at the balance sheet date, the Companies would be required to take a charge against earnings in that period. The Companies currently account for the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting Standards No. 71 - "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71) based on the cost-of-service regulatory framework in which they operate. The DPU has proposed that the distribution and transmission functions of their businesses be regulated under a form of price capped incentive regulation. In the event that recovery of specific costs through rates becomes unlikely or uncertain for all or a portion of the Companies' utility opera- tions, whether resulting from the expanding effects of competition or specific regulatory actions which move the Companies away from cost-of-service rate- CAMBRIDGE ELECTRIC LIGHT COMPANY making, SFAS No. 71 would no longer apply. While the Companies are unable to predict the final rules which may be adopted by the DPU in its restructuring proposal, the Companies could be required to discontinue the application of SFAS No. 71. Discontinuance of SFAS No. 71 would cause the write-off of the applicable portions of their regulatory assets which would have an adverse impact on the Companies' financial position and results of operations. The Companies will challenge any order that would have a significant adverse impact on them, including attempts to limit their recovery of stranded cost. CAMBRIDGE ELECTRIC LIGHT COMPANY PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is subject to legal claims and matters arising from its course of business including involvement in a court action filed by the Massachusetts Institute of Technology (MIT) relating to a September 1995 decision of the DPU approving the Company's customer transition charge (CTC) for the recovery of stranded cost. In this action, MIT has filed an appeal of the DPU decision to the Massachu- setts Supreme Judicial Court (SJC). The Company is an intervenor in this proceeding. In accordance with the briefing schedule, MIT filed its initial brief on October 21, 1996. The Company is scheduled to file its brief on November 20, 1996, with MIT to file its reply brief on December 5, 1996. While no schedule is set for a decision from the SJC, the Company anticipates a decision sometime in the second quarter of 1997. This issue is discussed more fully in the Company's 1995 Annual Report on Form 10-K. At this time, management is unable to predict the outcome of this proceeding. In a previous legal proceeding, on August 27, 1996, the United States District Court for the District of Massachusetts (District Court) granted the motions for summary judgement of the Company and the DPU and dismissed the May 1996 complaint filed by MIT. In its complaint, MIT had alleged that the CTC approved by the DPU and implemented by the Company violated the Public Utility Regulatory Policies Act of 1978 (PURPA). In dismissing MIT's complaint, the District Court found that MIT's complaint involved an allegation relating to the DPU's application of PURPA, which is not within the Court's jurisdiction. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule. Filed herewith as Exhibit 1 is the Financial Data Schedule for the nine months ended September 30, 1996. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended September 30, 1996. CAMBRIDGE ELECTRIC LIGHT COMPANY SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMBRIDGE ELECTRIC LIGHT COMPANY (Registrant) Principal Financial and Accounting Officer: Date: November 13, 1996 JAMES D. RAPPOLI James D. Rappoli, Financial Vice President and Treasurer EX-27 2 FINANCIAL DATA SCHEDULE - SEPTEMBER 30, 1996
UT This schedule contains summary financial information extracted from the balance sheet, statement of income and statement of cash flows contained in Form 10-Q of Cambridge Electric Light Company for the nine months ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000016573 CAMBRIDGE ELECTRIC LIGHT COMPANY 1,000 DEC-31-1996 SEP-30-1996 9-MOS PER-BOOK 99,055 9,520 20,188 11,713 0 140,476 8,665 27,953 10,957 47,575 0 0 17,503 24,060 0 0 4,360 0 0 0 46,978 140,476 91,601 2,641 82,623 85,264 6,337 1,415 7,752 2,710 5,042 0 5,042 1,646 1,809 6,177 0 0
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