-----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, BIhv4Nd/Ch/9H0DtfHQSyMEoSuLMUi2YnrGSH/y8RDQhoj0lykcEXgMujjmn3NFe A2yd2QWluDGyD+xA2LJUUQ== 0000071304-97-000005.txt : 19970401 0000071304-97-000005.hdr.sgml : 19970401 ACCESSION NUMBER: 0000071304-97-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-07909 FILM NUMBER: 97570643 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. FORM 10-K 1996 UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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, 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) 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, 1997 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 40 of this report. CAMBRIDGE ELECTRIC LIGHT COMPANY FORM 10-K DECEMBER 31, 1996 TABLE OF CONTENTS PART I PAGE Item 1. Business.............................................. 3 General............................................ 3 Electric Power Supply.............................. 3 New England Power Pool............................. 5 Energy Mix......................................... 5 Regulation......................................... 6 (a) Wholesale Rate Proceedings.................. 6 (b) Cost Recovery............................... 7 Rate Schedule............................. 7 Purchased Power........................... 7 Customer Transition Charge............... 7 (c) Electric Industry Restructuring............. 8 Competition........................................ 10 Construction and Financing......................... 10 Employees.......................................... 11 Item 2. Properties............................................ 11 Item 3. Legal Proceedings..................................... 11 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters................................... 12 Item 7. Management's Discussion and Analysis of Results of Operations............................................ 13 Item 8. Financial Statements and Supplementary Data........... 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 17 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................... 39 Signatures..................................................... 52 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 44,400 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 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 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. In early 1995, the Massachusetts Institute of Technology, one of the Company's largest customers, completed and placed into service a natural gas cogeneration facility which will meet approximately 94% of its power needs. For further information on this facility refer to the "Customer Transition Charge" section discussion which follows. Of the Company's 1996 retail electric unit sales, 12.5% was sold to residential customers, 81.4% to commercial customers, 5.5% to industrial customers and 0.6% to municipal and other customers. Electric Power Supply The Company owns generating facilities with a total capacity of 112.5 MW, of which 49.5 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 (Common- wealth Electric), the other wholly-owned electric distribution subsidiary of the System, are arranged in accordance with their requirements. These arrangements include purchases from Canal Electric Company (Canal), another wholly-owned subsidiary of the System. Canal is a wholesale electric generating company located in Sandwich, Massachusetts and is an important source of purchased power for the Company. Under long-term contracts, system entitlements include one-quarter (141.5 MW) of the capacity and energy of Canal Unit 1 and one-half (290 MW) of the capacity and energy of Canal Unit 2. CAMBRIDGE ELECTRIC LIGHT COMPANY The Company's entitlements in these units are 28.2 MW and 57.8 MW, respectively. Pursuant to a Capacity Acquisition and Disposition Agreement (CADA), 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. The CADA has been accepted for filing as an amendment to Canal's FERC rate schedule and allows Canal to act on behalf of the Company and Commonwealth Electric in the procurement of additional capacity for one or both companies. The CADA is in effect for Seabrook 1 and Phases I and II of Hydro-Quebec. Exchange agree- ments are in place with these utilities whereby, in certain circumstances, 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 associated with these facilities. The Company and Commonwealth Electric, in turn, have billed or are billing these charges (net of revenues from sales) to their customers through rates subject to DPU approval. The Company also has equity ownership interests (2 1/2% to 4%) in two operating nuclear units located in New England with power entitlements totaling 42.4 MW. One of the operating nuclear units, located in Wiscasset, Maine and operated by Maine Yankee Atomic Power Company (Maine Yankee), experienced two outages due to design and regulatory issues during 1996. On July 20, 1996 the unit was taken off-line to address a design issue on the primary component cooling system. The unit remained off-line until September 2, 1996, to also address issues related to compliance with the Nuclear Regulatory Commission's (NRC) General Letter 96-01 that addresses surveillance testing of safety system components. The second outage at Maine Yankee began on December 5, 1996 to correct technical issues associated with a Confirmatory Action Letter issued by the NRC. Maine Yankee also used this outage as an opportunity to breach the reactor and identify specific fuel assemblies which were detected as leaking earlier in the operating cycle. They identified eight assemblies with a total of seventy-five fuel rods leaking, and found the most recent load of fuel unacceptable for continued operation of the plant. Additional cable separation issues were also identified and the NRC has expanded the requirements of the Confirmatory Action Letter that Maine Yankee must meet prior to restart. The restart date of the unit has not yet been determined. In July 1996, Connecticut Yankee Atomic Power Company (Connecticut Yankee), which operates the Connecticut Yankee nuclear power plant, took the unit out of service in connection with certain safety related issues and refueling. On December 4, 1996, following an economic evaluation of continuing operation of the plant over the remaining ten years of its license life compared to ceasing operation and incurring replacement power costs for the same period, Connecticut Yankee's Board of Directors voted to permanently shut down the plant. Additionally, in February 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 CAMBRIDGE ELECTRIC LIGHT COMPANY Note 3(e) of Notes to Financial Statements filed under Item 8 of this report. In addition, the Company has entitlements of 19.7 MW and 8.1 MW through Canal's equity ownership in Hydro-Quebec Phase II and joint-ownership in the Seabrook nuclear unit, respectively. The Company expects to provide for future peak load plus reserve require- ments through existing 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. 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. The Company and the System's other electric subsidiaries are also members of the Northeast Power Coordinating Council (NPCC), an advisory organization, which includes the major power systems in New England and New York plus the provinces of Ontario and New Brunswick in Canada. The NPCC establishes cri- teria and standards for reliability and serves as a vehicle for coordination in the planning and operation of these systems. The reserve requirements used by NEPOOL participants in planning future additions are determined by NEPOOL to meet the reliability criteria recom- mended by the NPCC. The system estimates that, during the next ten years, reserve requirements so determined will be approximately 20% of peak load. Energy Mix The Company's energy mix, including purchased power, was as follows: 1996 1995 1994 Oil 21% 23% 31% Nuclear 39 36 43 Natural gas 33 40 25 Hydro 7 1 1 Total 100% 100% 100% The increase in hydro during 1996 represents an increase in power from Hydro-Quebec, while the decrease in oil represents a five-month maintenance outage at Canal Unit 2. The lower oil component in 1995 reflects Canal Unit 1 being off-line for the first seven months of the year and an additional outage period of nearly one month during the fourth quarter. In addition to power purchases, the Company is actively pursuing sales of certain available CAMBRIDGE ELECTRIC LIGHT COMPANY capacity to utilities in and outside the New England region. Regulation (a) Wholesale Rate Proceedings The Company provides power supply and transmission services to its FERC- jurisdictional wholesale customers. The Company requires FERC approval to change its wholesale rates, including those to the Municipal Light Department of the Town of Belmont, Massachusetts (Belmont), a "partial requirements" customer since 1986. Since February 1993, Belmont has taken power supply service under a FERC approved Net Requirements Power Supply Agreement. In 1993, the Company and Belmont began negotiations for a new transmission service agreement. The negotiations were not successful. On June 29, 1994 the Company filed for FERC approval of a new transmission service agreement with Belmont. The FERC accepted the rates effective January 25, 1995, subject to refund. At the same time, an investigation was opened by the FERC to determine the reasonableness of both the existing transmission tariff rates to Belmont and the proposed transmission service agreement with Belmont. Both Belmont and FERC staff intervened in the investigation. The Company filed its case with the FERC on October 25, 1994 and evidentiary hearings were held in March 1995. An Initial Decision (ID) of the Presiding Administrative Law Judge was issued on September 14, 1995. In the ID the Administrative Law Judge found that the Company's existing transmission tariff rates were just and reasonable. The Administrative Law Judge identified a number of revisions to the filed transmission service agreement which effectively reduced the rates to Belmont. In October 1995, the parties filed briefs on exceptions to the Administrative Law Judge's ID. The Company awaits final FERC action on this investigation. On March 29, 1995, the FERC issued two notices of proposed rulemaking concerning open access transmission and stranded costs. The FERC's notices proposed to remove impediments to competition in the wholesale bulk power marketplace and to bring more efficient, lower-cost power to consumers. On March 29, 1996 the Company filed Transmission Tariffs that implemented the FERC's requirements for non-discriminatory open access transmission for both point-to-point and network service. The tariffs were accepted on May 17, 1996 to be effective on May 28, 1996, but the rates are subject to a Section 206 investigation issued by the FERC itself. A settlement with the FERC regarding this investigation was filed on February 6, 1997. On April 24, 1996 the FERC issued Order No. 888 a set of three interrelated rules resolving the above rulemakings. The FERC required all public utilities that own, control or operate transmission facilities in interstate commerce to have on file wholesale open access transmission tariffs that conform to the FERC pro-forma tariff contained in Order No. 888. On July 9, 1996, the Company and Commonwealth Electric filed tariffs that conform to the FERC's pro-forma tariffs. On November 13, 1996, the FERC accepted the non-rate terms and conditions of these tariffs effective July 9, 1996, subject to a revision of one section dealing with the scheduling of services. CAMBRIDGE ELECTRIC LIGHT COMPANY On December 31, 1996, the Company and Commonwealth Electric filed market- based power sales tariffs with the FERC which received FERC approval on February 27, 1997. The Company and Commonwealth Electric seek to make wholesale power sales at fully negotiated rates. In addition, the Company and Commonwealth Electric requested authorization to participate as brokers in the sale and purchase of electricity. (b) Cost Recovery Rate Schedule The Company files a fuel charge (FC) rate schedule, subject to DPU regulation, under which the Company is allowed current recovery from retail customers of costs of fuel used in electric generation and a substantial portion of purchased power, demand and transmission costs. This schedule requires the quarterly computation and DPU approval of a FC decimal based on forecasts of fuel, electricity purchased for resale 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 a given calendar quarter, an appropriate adjustment is reflected in the calculation of the Company's 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 Company collects a portion of the capacity-related purchased power costs associated with certain long-term power and transmission agreements through base rates as approved by the DPU. Revenues collected through base rates are generally designed to reimburse the Company for all costs of operation other than fuel, the energy portion of purchased power, transmission and C&LM costs while providing a fair return on capital invested in the business. However, as a result of a DPU-mandated recovery mechanism for the capacity-related costs described above, the Company has experienced a revenue excess or shortfall when unit sales and/or the costs recoverable in base rates vary from test-period levels. This issue, which has had a significant impact on the Company's net income, was addressed in a settlement agreement approved by the DPU in May 1995 that permits deferral of up to $2 million annually for these capacity-related purchased power costs. There have been no deferrals to date. Customer Transition Charge In September 1995, the DPU issued a ruling largely approving four rate tariffs, including a Customer Transition Charge (CTC), that were filed by the Company on March 15, 1995. The CTC will protect remaining customers from paying certain costs, often referred to as stranded investment costs, that were incurred in the event that the Company's largest customers discontinue full service, yet still remain connected for back-up and other services. These costs include long-term power contracts entered into to meet projected energy requirements, investments in substations, underground and overhead lines and current and future decommissioning costs associated with nuclear plants. This ruling is believed to be the first retail stranded cost charge CAMBRIDGE ELECTRIC LIGHT COMPANY approved nationally and follows the DPU restructuring order which endorsed, in principle, the recovery of stranded investment costs. Through the CTC, the Company will initially recover 75% of net stranded investment costs as calculated in its proposal. The Company's other rates in- clude a Supplemental Service Rate, a Standby Service Rate and a Maintenance Service Rate each of which were approved with only minor changes. The Company is encouraged by the DPU's position on recovery of stranded investment costs and expects to address recovery of the remaining 25% in its restructuring filing. The Massachusetts Institute of Technology (MIT) appealed the DPU's deci- sion to the Massachusetts Supreme Judicial Court (the SJC). The Company is an intervenor in this proceeding. While no schedule is set for a decision from the SJC, the Company anticipates a decision sometime in the second quarter of 1997. At this time, the Company is unable to predict the outcome of this proceeding. In addition, on February 29, 1996, the FERC denied a petition filed in January 1996 by MIT, which sought relief from paying the CTC, on the premise that stranded costs are to be resolved at the state level. The Company believes that the FERC's action will be an important factor that the SJC will consider in the appeal process. 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 District Court's jurisdiction. (c) Electric Industry Restructuring In August 1995, the DPU issued an order calling for the restructuring of the electric utility industry in Massachusetts. On May 1, 1996, the DPU issued a second order containing proposed rules for implementing electric industry restructuring that were the subject of public comment and hearings during June and July 1996. Subsequently, on December 30, 1996, the DPU issued another order announcing its "Model Rules and Legislative Proposal" as a guide in the creation of a competitive market for electric generation in Massachusetts that would provide customers with the opportunity to achieve lower electric bills beginning January 1, 1998. The order also required electric utilities to file by March 3, 1997, revenue-neutral, unbundled rates and model bills showing a breakdown of the bill into generation, transmission, distribution and access charge categories. In its "Model Rules," the DPU has proposed that the minimum structural reorganization needed to create a competitive market is the functional separation of generation, transmission and distribution within one integrated company, and the establishment of a separate marketing affiliate if a company retains generation assets. The Massachusetts Legislature, which will render the final passage of any restructuring law, is now considering the DPU's proposed legislation. In addition, on March 20, 1997, the Legislature's own Joint Committee on Electric Utility Restructuring (the Committee) issued a CAMBRIDGE ELECTRIC LIGHT COMPANY comprehensive policy report which outlines options for the Legislature's consideration as debate on this issue continues. In addition to the report, the Committee formulated its own recommendations and corresponding legislative package designed to address each of the major areas of the law which must develop if electric utility restructuring is to be successfully implemented in Massachusetts. Other elements of the DPU's Model Rules provide that electric customers will be able to buy their power on the open market; distribution services will remain a monopoly service offered exclusively by the existing local distribu- tion companies in clearly defined service territories; and customers will have three types of electric generation choices. First, customers may enter into unregulated agreements with a competitive supplier for the provision of gener- ation. Second, customers may continue to buy power directly from their elec- tric distribution company at a price regulated by the DPU. Third, customers who have received generation from a competitive supplier but who, for any reason, have stopped receiving such generation will be able to receive default generation service, provided by distribution companies at spot market price. Changes in the electric industry reflected in the DPU's proposal could reduce the opportunity that currently exists for electric companies to recover their investment in generating plant and other expenditures previously approved by the DPU and included in current rates. The potential losses, which may result from subjecting electric company generation to the pressures of a competitive market, are typically referred to as "stranded costs." The single largest component of stranded costs which are significant to the system relates to above market purchased power contracts that the Company and Commonwealth Electric have with non-utility generators. However, the DPU has concluded that it is in the public interest to provide electric companies a reasonable opportunity to collect net, non-mitigable stranded costs. The DPU has proposed that stranded costs associated with owned generation facilities, regulatory assets, and minimum purchased power obligations be collected over the expected economic life of the generating facility, the current amortiza- tion schedule of the regulatory asset, or the contractual term of the purchased power obligation, respectively. The DPU's proposal requires that any stranded cost recovery for an electric utility be subject to mitigation efforts to reduce embedded costs over time. The Model Rules specify that mitigation should include such measures as sales of capacity and energy from owned generation, renegotiation or buy-out of purchased power contracts, and sales and voluntary writedowns of assets. Further, the DPU will conduct stranded cost charge reconciliations at years two, five and ten following the date of retail access. During the last several months, three Massachusetts electric utilities have announced negotiated settlement agreements with the Massachusetts Attorney General's Office (Attorney General) that include divestiture of generating assets, provision for a ten percent reduction in customers' charges and recovery of stranded costs through a non-bypassable access charge. One settlement agreement has already been approved by the DPU. Implementation of any restructuring settlement may be affected by actions of the Massachusetts Legislature. The Company and Commonwealth Electric are engaged in preliminary settle- ment discussions with the Attorney General, and expect to reach a comprehen- sive settlement during the first half of 1997. In the unlikely event that CAMBRIDGE ELECTRIC LIGHT COMPANY the parties are unable to complete a settlement, the companies would file a full restructuring plan with the DPU. As described in Note 2(b) to the Notes to Financial Statements, the Company complies with the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." In the event the Company determined that it no longer met the criteria for following SFAS No. 71, the accounting impact would be an extraordinary, non-cash charge to operations in an amount that could be material. Criteria that could give rise to the discontinuance of SFAS No. 71 include: 1) increasing competition restricting the Company's ability to establish prices to recover specific costs, and 2) a significant change in the current manner in which rates are set by regulators. The Company periodically reviews these criteria to ensure that the continuing application of SFAS No. 71 is appropriate. Based on the current evaluation of the various factors and conditions that are expected to impact future cost recovery, the Company believes that its regulatory assets, including those related to generation, are probable of future recovery. Competition The Company continues to develop and implement strategies that deal with the increasingly competitive environment facing the electric business. The inherently high cost of providing energy services in the Northeast has placed the region at a competitive disadvantage as more customers begin to explore alternative energy supply options. Pursuant to its aforementioned Model Rules, the DPU is proposing to implement programs under which utility and non- utility generators can sell electricity to customers of other utilities without regard to previously closed franchise service areas. In 1994, the DPU began an inquiry into incentive ratemaking. Company actions in response to the new competitive challenges have been well received by regulators, business groups and customers. The Company has developed and will continue to develop innovative pricing mechanisms designed to retain existing customers, add new retail and wholesale customers and expand beyond current markets. On February 6, 1997, due to the dramatically changing nature of the electric and gas industries, the System announced the consolidation of management personnel of Commonwealth Electric, Commonwealth Gas, COM/Energy Services Company and the Company effective on that date. COM/Electric and COM/Gas will continue to operate under their existing company names. The consolidation process for these companies will involve the merging of similar functions and activities to eliminate duplication in order to create the most efficient and cost-effective operation possible and will ultimately result in the elimination of approximately 300 (15% of system) positions system-wide. In March 1994, the Company was successful in negotiating a seven-year service agreement with Harvard University, whose sales in 1996, 1995 and 1994 accounted for approximately 9.8%, 9.4% and 8.5%, respectively, of the Company's total unit sales for those years. Construction and Financing Information concerning the Company's construction and financing programs CAMBRIDGE ELECTRIC LIGHT COMPANY is contained in Note 3(a) of the Notes to Financial Statements filed under Item 8 of this report. Employees The Company has 151 regular employees, 112 employees (74%) are represented by the Utility Workers' Union of America, A.F.L.-C.I.O. The existing collective bargaining agreement expires September 1, 1998. Employee relations have generally been satisfactory. 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 112.5 MW together with an integrated system of distribution lines and substations. At December 31, 1996, the Company's electric transmission and distribution system consisted of 93 pole miles of overhead lines, 704 cable miles of underground line, 217 substations and 44,947 active customer meters. Item 3. Legal Proceedings The Company is an intervenor in an appeal at the Massachusetts Supreme Judicial Court (SJC) filed by MIT of a decision by the DPU approving a customer transition charge that allows the Company to recover certain stranded investment costs. For additional information refer to "Cost Recovery" section in Item 1 of this report. 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, 1996 One (c) Frequency and Amount of Dividends Declared in 1996 and 1995 1996 1995 Per Share Per Share Declaration Date Amount Declaration Date Amount January 24, 1996 $ 4.00 January 25, 1995 $ 2.90 April 29, 1996 0.75 April 28, 1995 1.15 November 04, 1996 5.20 July 24, 1995 3.00 $ 9.95 November 14, 1995 7.50 $14.55 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 on the Company's earnings and capital requirements as well as financial and other conditions existing at that time. 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, 1996 and 1995 and unit sales for these periods is shown below: Years Ended Years Ended December 31, December 31, 1996 and 1995 1995 and 1994 Increase (Decrease) (Dollars in Thousands) Electric Operating Revenues $(3 198) (2.6)% $(4 873) (3.8)% Operating Expenses: Fuel used in electric production 532 18.4 (125) (4.1) Electricity purchased for resale (742) (1.1) (3 223) (4.4) Transmission (684) (10.0) (345) (4.8) Other operation and maintenance (200) (0.8) (282) (1.2) Depreciation 127 3.1 97 2.4 Taxes - Federal and state income (42) (1.5) (537) (16.5) Local property and other 11 0.3 114 3.0 (998) (0.9) (4 301) (3.6) Operating Income (2 200) (26.2) (572) (6.4) Other Income 933 71.3 (29) (2.2) Income Before Interest Charges (1 267) (13.0) (601) (5.8) Interest Charges (949) (22.2) 203 5.0 Net Income $ (318) (5.8) $ (804) (12.9) Unit Sales (MWH) Retail (68 197) (5.1) 9 320 0.7 Sales for resale 69 101 48.1 (160 059) (52.7) Total unit sales 904 0.1 (150 739) (9.3) CAMBRIDGE ELECTRIC LIGHT COMPANY Unit Sales The following is a summary of unit sales and customers for the periods indicated: Years Ended December 31, 1996 1995 1994 % % Change Change Unit Sales (MWH): Residential 157 803 0.3 157 355 0.9 155 986 Commercial 1 028 896 (5.5) 1 089 187 1.3 1 074 726 Industrial 69 680 (10.7) 78 063 (7.6) 84 471 Municipal and other 8 043 0.4 8 014 (1.3) 8 116 Total retail 1 264 422 (5.1) 1 332 619 0.7 1 323 299 Wholesale 212 666 48.1 143 565 (52.7) 303 624 Total 1 477 088 0.1 1 476 184 (9.3) 1 626 923 Customers: Residential 37 503 (0.5) 37 686 (0.2) 37 758 Commercial 6 523 1.0 6 458 1.0 6 393 Industrial 52 (8.7) 57 (1.7) 58 Municipal and other 304 0.7 302 1.7 297 Total 44 382 (0.3) 44 503 - 44 506 During 1996, a decrease in retail unit sales was virtually offset by an increase in wholesale sales, resulting in a 0.1% increase in total sales. The lower retail unit sales reflects a decrease in industrial sales and a significant decline in sales to Massachusetts Institute of Technology, a large commercial customer that constructed its own cogeneration facility and has elected to receive standby service only. The increase in wholesale sales reflects an increase in sales to NEPOOL due to changes in the Company's capacity needs. For 1995, the Company's total unit sales decreased 9.3% and reflected a significant decrease in wholesale sales to NEPOOL. Retail unit sales increased slightly and reflected moderate increases in the commercial and residential sectors. Operating Revenues Operating revenues decreased approximately $3.2 million or 2.6% during 1996 due to a lower level of retail unit sales ($1.3 million), lower costs for electricity purchased for resale ($742,000), transmission charges ($684,000) and C&LM charges ($145,000), offset, in part by an increase in fuel costs. Operating revenues for 1995 declined $4.9 million (3.8%) due primarily to decreases in wholesale unit sales, electricity purchased for resale ($3.2 million), C&LM charges ($764,000), transmission charges ($345,000), and fuel costs ($125,000) offset, in part, by a small increase in retail unit sales. Also impacting the change was the implementation of a $1.5 million rate refund pursuant to a May 1995 settlement agreement, approximately $1.3 million of which was included in the decrease in electricity purchased for resale. As a result of a DPU-mandated recovery mechanism implemented in 1993 for capacity-related costs associated with certain long-term purchased power CAMBRIDGE ELECTRIC LIGHT COMPANY contracts, the Company has experienced a revenue excess or shortfall when unit sales and/or the costs recoverable in base rates vary from test-period levels. This issue, which has had a significant impact on net income, was addressed in a settlement agreement approved by the DPU in May 1995 (refer to the "Cost Recovery" section in Item 1 of this report for additional details). During 1996, 1995 and 1994, the Company overrecovered approximately $290,000, $900,000 and $3.2 million, respectively, resulting in an increase to net income of approximately $177,000, $545,000 and $2 million, respectively. The following is an analysis of revenue components for the years 1996, 1995 and 1994: Years Ended December 31, 1996 1995 1994 (Dollars in Thousands) % % Change Change Electric revenues: Costs recovered in Fuel or Conservation Charge $ 47 956 0.1 $ 47 907 (8.9) $ 52 610 Certain power costs recovered in base rates 30 639 (3.4) 31 727 0.8 31 481 Other revenue recoveries (*) 40 510 (5.1) 42 669 (1.0) 43 085 Total revenues $119 105 (2.6) $122 303 (3.9) $127 176 (*) Includes sales for resale and other base rate revenue. Electricity Purchased For Resale, Transmission and Fuel To satisfy demand requirements and provide required reserve capacity, the Company purchases power on a long and short-term basis through entitlements pursuant to power contracts with other New England and Canadian utilities, Qualifying Facilities and other non-utility generators through a competitive bidding process that is regulated by the DPU. The Company supplements these sources with its own generating capacity. Electricity purchased for resale, transmission and fuel costs decreased approximately $900,000 (1.1%) in 1996 due primarily to a decline in purchases from NEPOOL, lower costs for nuclear power and from affiliate Canal Electric Company's (Canal) Unit 2 which was out of service for approximately five months for scheduled maintenance and was returned to service in mid-August 1996. The scheduled outage of Unit 2 also included the completion of a fueling conversion enabling the Unit to burn natural gas and oil. These reductions were offset, in part, by an increase in power purchased from Canal Unit 1 which was out of service from January until August 1995 due to a combination of scheduled and unscheduled maintenance. During 1995, electricity purchased for resale, transmission and fuel costs decreased $3.7 million or 4.5% due primarily to a $3.2 million reduction in purchased power costs which reflects the decreased availability of Canal Unit 1 during 1995, as discussed above. In addition, a nuclear unit remained out of service for most of 1995 while undergoing extensive generator repairs. CAMBRIDGE ELECTRIC LIGHT COMPANY Other Operation and Maintenance Other operation expense increased only 0.6% during 1996 as increases in liability insurance ($793,000) and postretirement benefits costs ($304,000) were offset, in part, by lower pension expense ($106,000), the absence of legal fees ($293,000) associated with the cancellation of a power contract in 1995, lower fees for industry-related research and development ($186,000) and lower C&LM costs ($145,000). Maintenance costs decreased $340,000 due primarily to a lower level of repairs at the Company's Kendall generating unit. During 1995, other operation decreased $887,000 (4.1%) due primarily to a decline in liability insurance ($856,000) due to adjustments to insurance accruals that reflected better than anticipated experience, lower C&LM costs ($764,000) and a decline in the provision for bad debts reflecting improved collection experience ($234,000). This was offset, in part, by higher costs for labor ($669,000) and postretirement benefits ($366,000). Maintenance costs increased $605,000 due primarily to repairs to the Company's Kendall and Blackstone generating units. Depreciation and Taxes Depreciation expense increased 3.1% and 2.4% in 1996 and 1995, respectively, due to higher levels of depreciable property, plant and equipment. Federal and state income taxes decreased during 1995 by approximately 17% due to a lower level of pretax income. Other Income and Interest Charges The significant increase in other income during 1996 was due primarily to the recognition of a gain relating to the sale of a parcel of land ($664,000) and a higher rate of return relative to steam production for an affiliate steam company ($346,000). Interest charges decreased 22.2% during 1996 due primarily to the repayment of a $20 million (9.97%) long-term debt issue during the second quarter, the effect of which was partially offset by a higher level of short-term bank borrowings. The weighted average short-term interest rate was 5.6% during 1996 as compared to 6.1% during 1995. Interest charges during 1995 increased 5% due to a higher level of short- term borrowings and higher short-term interest rates (6.1% in 1995 versus 4.3% in 1994) offset, somewhat, by an increase in the debt component of allowance for funds used during construction (AFUDC) ($82,000). Forward-Looking Statements This report contains statements which, to the extent they are not recita- tions of historical fact, constitute "forward-looking statements" and are intended to be subject to the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995. A number of important factors affecting the Company's business and financial results could cause actual results to differ materially from those stated in the forward-looking state- ments. Those factors include developments in the legislative, regulatory and competitive environment, certain environmental matters, demands for capital expenditures and the availability of cash from various sources, and CAMBRIDGE ELECTRIC LIGHT COMPANY uncertainty as to regulatory approval of the full recovery of regulatory assets and other stranded costs. 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 installa- tion of expensive air and water pollution control equipment. These regula- tions have had an impact on the Company's operations in the past and will continue to have an impact on future operations, capital costs and construc- tion schedules of major facilities. Effective January 1, 1997, the Company will adopt the provisions of Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities." This Statement provides authoritative guidance for recognition, measurement, display and disclosure of environmental remediation liabilities in financial statements. Management does not believe that SOP 96-1 will have a material adverse effect on the Company's results of operations or financial position. Item 8. Financial Statements and Supplementary Data The Company's financial statements required by this item are filed herewith on pages 18 through 38 of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. CAMBRIDGE ELECTRIC LIGHT COMPANY Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of 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, 1996 and 1995, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 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 LLP Boston, Massachusetts February 19, 1997. CAMBRIDGE ELECTRIC LIGHT COMPANY INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PART II. FINANCIAL STATEMENTS Balance Sheets at December 31, 1996 and 1995 Statements of Income for the Years Ended December 31, 1996, 1995 and 1994 Statements of Retained Earnings for the Years Ended December 31, 1996, 1995 and 1994 Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 Notes to Financial Statements PART IV. SCHEDULES I Investments in, Equity in Earnings of, and Dividends Received From Related Parties for the Years Ended December 31, 1996, 1995 and 1994 II Valuation and Qualifying Accounts for the Years Ended December 31, 1996, 1995 and 1994 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. CAMBRIDGE ELECTRIC LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS 1996 1995 (Dollars in Thousands) PROPERTY, PLANT AND EQUIPMENT, at original cost $161 331 $156 925 Less - Accumulated depreciation 61 499 58 839 99 832 98 086 Add - Construction work in progress 546 1 225 100 378 99 311 INVESTMENTS Equity in nuclear electric power companies 9 403 9 224 Other 5 5 9 408 9 229 CURRENT ASSETS Cash 143 239 Accounts receivable - Affiliated companies 1 452 2 140 Customers, less reserves of $482,000 in 1996 and $490,000 in 1995 11 285 10 534 Unbilled revenues 2 751 2 992 Inventories, at average cost - Materials and supplies 468 511 Electric production fuel oil 1 101 796 Prepaid taxes - Income 968 - Property 1 704 1 690 Other 454 872 20 326 19 774 DEFERRED CHARGES Regulatory assets 42 781 7 809 Other 2 258 2 142 45 039 9 951 $175 151 $138 265 The accompanying notes are an integral part of these financial statements. CAMBRIDGE ELECTRIC LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1996 AND 1995 CAPITALIZATION AND LIABILITIES 1996 1995 (Dollars in Thousands) CAPITALIZATION Common Equity - Common stock, $25 par value - Authorized and outstanding - 346,600 shares in 1996 and 1995, wholly-owned by Commonwealth Energy System (Parent) $ 8 665 $ 8 665 Amounts paid in excess of par value 27 953 27 953 Retained earnings 9 233 7 561 45 851 44 179 Long-term debt, including premiums, less current sinking fund requirements and maturing debt 17 503 21 865 63 354 66 044 CURRENT LIABILITIES Interim Financing - Notes payable to banks 18 725 2 675 Advances from affiliates 5 065 2 425 Maturing long-term debt 4 260 20 000 28 050 25 100 Other Current Liabilities - Current sinking fund requirements 100 160 Accounts payable - Affiliated companies 4 429 3 787 Other 8 216 8 522 Accrued taxes - Local property and other 1 705 1 690 Income - 731 Accrued interest 475 973 Other 3 738 2 843 18 663 18 706 46 713 43 806 DEFERRED CREDITS Accumulated deferred income taxes 14 355 13 882 Yankee Atomic purchased power contract 3 466 4 504 Connecticut Yankee purchased power contract 35 879 - Unamortized investment tax credits and other 11 384 10 029 65 084 28 415 COMMITMENTS AND CONTINGENCIES $175 151 $138 265 The accompanying notes are an integral part of these financial statements. CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1996 1995 1994 (Dollars in Thousands) ELECTRIC OPERATING REVENUES $119 105 $122 303 $127 176 OPERATING EXPENSES Fuel used in electric production 3 427 2 895 3 020 Electricity purchased for resale 68 673 69 415 72 638 Transmission 6 177 6 861 7 206 Other operation 20 757 20 617 21 504 Maintenance 3 064 3 404 2 799 Depreciation 4 254 4 127 4 030 Taxes - Income 2 683 2 725 3 262 Local property 3 041 3 017 2 968 Payroll and other 822 835 770 112 898 113 896 118 197 OPERATING INCOME 6 207 8 407 8 979 OTHER INCOME 2 242 1 309 1 338 INCOME BEFORE INTEREST CHARGES 8 449 9 716 10 317 INTEREST CHARGES Long-term debt 2 238 3 776 3 788 Other interest charges 1 157 638 341 Allowance for borrowed funds used during construction (66) (136) (54) 3 329 4 278 4 075 NET INCOME $ 5 120 $ 5 438 $ 6 242 The accompanying notes are an integral part of these financial statements. CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1996 1995 1994 (Dollars in Thousands) Balance at beginning of year $ 7 561 $ 7 166 $ 7 056 Add (Deduct): Net income 5 120 5 438 6 242 Cash dividends on common stock (3 448) (5 043) (6 132) Balance at end of year $ 9 233 $ 7 561 $ 7 166 The accompanying notes are an integral part of these financial statements. CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1996 1995 1994 (Dollars in Thousands) OPERATING ACTIVITIES Net income $ 5 120 $ 5 438 $ 6 242 Effects of noncash items - Depreciation and amortization 4 254 4 258 4 323 Deferred income taxes (628) 1 067 917 Investment tax credits (93) (94) (95) Earnings from corporate joint ventures (1 006) (1 111) (1 189) Dividends from corporate joint ventures 827 1 051 1 084 Change in working capital, exclusive of cash and interim financing - Accounts receivable and unbilled revenues 178 (1 543) 2 261 Income taxes (1 698) 55 991 Accounts payable and other 829 331 631 Deferred postretirement benefits and pension costs (225) (503) (1 019) All other operating items 2 356 109 (1 967) Net cash provided by operating activities 9 914 9 058 12 179 INVESTING ACTIVITIES Additions to property, plant and equipment (exclusive of AFUDC) (5 024) (6 229) (6 499) Allowance for borrowed funds used during construction (66) (136) (54) Net cash used for investing activities (5 090) (6 365) (6 553) FINANCING ACTIVITIES Payment of dividends (3 448) (5 043) (6 132) Proceeds from short-term borrowings, net 16 050 500 175 Proceeds from (payment of) affiliate borrowings 2 640 1 875 (755) Long-term debt issue refunded (20 000) - - Retirement of long-term debt through sinking funds (162) (162) (162) Net cash used for financing activities (4 920) (2 830) (6 874) Change in cash (96) (137) (1 248) Cash at beginning of period 239 376 1 624 Cash at end of period $ 143 $ 239 $ 376 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid (net of capitalized amounts) $ 3 796 $ 3 934 $ 3 743 Income taxes paid $ 4 015 $ 2 061 $ 2 102 The accompanying notes are an integral part of these financial statements. CAMBRIDGE ELECTRIC LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (1) General Information Cambridge Electric Light Company (the Company) is a wholly-owned subsidiary of Commonwealth Energy System (the System). The System is the parent company 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 with investments in four operating public utility companies located in central, eastern and southeastern Massachusetts and several non-regulated companies. The Company's operations are involved in the production and sale of elec- tricity 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 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 space heating and other purposes. The Company has 151 regular employees, 112 (74%) of whom are represented by a single collective bargaining unit with a contract that expires in 1998. Employee relations have generally been satisfactory. (2) Significant Accounting Policies (a) Principles of Accounting The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior year amounts are reclassified from time to time to conform with the presentation used in the current year's financial statements. (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. Similarly, the regulatory liabilities established by the Company are required to be refunded to customers over time. Effective 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 CAMBRIDGE ELECTRIC LIGHT COMPANY at each balance sheet date. SFAS No. 121 did not have an impact on the Company's financial position upon adoption. This result may change as modifications are made to the current regulatory framework due to ongoing electric industry restructuring efforts in Massachusetts. If all or a separable portion of the Company's operations becomes no longer subject to the provisions of SFAS No. 71, a write-off of related regulatory assets and liabilities would be required, unless some form of transition cost recovery continues through rates established and collected for the Company's remaining regulated operations. In addition, the Company would be required to determine any impairment to the carrying costs of deregulated plant and inventory assets. However, on December 30, 1996, the DPU issued an order containing "Model Rules" for industry restructuring that management believes would essentially allow full recovery of stranded costs. For additional information relating to industry restructuring, see the "Electric Industry Restructuring" section under Management's Discussion and Analysis of Results of Operations. The principal regulatory assets included in deferred charges at December 31, 1996 and 1995 were as follows: 1996 1995 (Dollars in Thousands) Yankee Atomic unrecovered plant and decommissioning costs $ 3 466 $ 4 504 Connecticut Yankee unrecovered plant and decommissioning costs 35 879 - Postretirement benefits costs including pensions 2 988 2 807 Other 448 498 $42 781 $ 7 809 The regulatory liabilities, reflected in the accompanying Balance Sheets and related to deferred income taxes, were $3.2 million at December 31, 1996 and 1995. As of December 31, 1996, $40.7 million of the Company's regulatory assets and all of its regulatory liabilities are reflected in rates charged to customers over a weighted average period of approximately 11 years. (c) Transactions with Affiliates Transactions between the Company and other system companies include purchases and sales of electricity, including purchases from Canal Electric Company (Canal), an affiliate wholesale electric generating company. Other Canal transactions include costs relating to the abandonment of Seabrook 2 and the recovery of a portion of Seabrook 1 pre-commercial operation costs. In addition, payments for management, accounting, data processing and other services are made to an 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: CAMBRIDGE ELECTRIC LIGHT COMPANY Purchased Power Purchased Power and Transmission Period Ended Purchased Power and Transmission From Canal December 31, Canal Units Seabrook 1 as Agent (Dollars in Thousands) 1996 $11 302 $ 7 932 $ 2 786 1995 10 148 6 973 1 465 1994 11 650 8 622 9 780 The costs for the Canal and Seabrook 1 units are included in the long-term obligation table listed in Note 3(b). In addition, the Company purchased natural gas from an affiliate, Commonwealth Gas Company, totaling $621,000, $1,969,000 and $2,158,000 in 1996, 1995 and 1994, respectively. (d) 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 costs associated with purchased power and transmission, fuel used in electric production and conservation and load management (C&LM) costs through adjust- ment clauses. Amounts recoverable under the adjustment clauses are subject to review and adjustment by the DPU. The amount of such costs incurred by the Company but not yet reflected in customers' bills is recorded as unbilled revenues. (e) 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 2.69% in 1996, 2.72% in 1995 and 2.76% in 1994. (f) 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 less salvage. (g) 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 capitalized in the current period is reflected in the accompanying Statements of Income. CAMBRIDGE ELECTRIC LIGHT COMPANY While AFUDC does not provide funds currently, these amounts are recover- able in revenues over the service life of the constructed property. The amount of AFUDC recorded was at a weighted average rate of 6.25% in 1996, 7.75% in 1995 and 6.5% in 1994. (3) Commitments and Contingencies (a) Financing and Construction Programs The Company is engaged in a continuous construction program presently estimated at $27 million for the five-year period 1997 through 2001. Of that amount, $5.9 million is estimated for 1997. The program is subject to periodic review and revision because of factors such as changes in business conditions, rates of customer growth, effects of inflation, maintenance of reliable and safe service, equipment delivery schedules, licensing delays, availability and cost of capital and environmental factors. The Company expects to finance these expenditures on an interim basis with internally generated funds and short-term borrowings which are ultimately expected to be repaid with the proceeds from sales of long-term debt and equity securities. (b) Power Contracts The Company has long-term contracts for the purchase of electricity from various sources. Generally, these contracts are for fixed periods and require payment of a demand charge for the capacity entitlement and an energy charge to cover the cost of fuel. Pertinent information with respect to life-of-the- unit contracts for power from nuclear units in which the Company has an equity ownership (Yankee Nuclear Units) is as follows: Connecticut Maine Vermont Yankee* Yankee Yankee (Dollars in Thousands) Equity Ownership (%) 4.50 4.00 2.50 Plant Entitlement (%) 4.50 3.59 2.25 Plant Capability (MW) 560.0 870.0 496.0 Company Entitlement (MW) 25.2 31.2 11.2 Contract Expiration Date 2007 2008 2012 1994 Actual Cost ($) 8 902 6 250 3 660 1995 Actual Cost ($) 9 498 7 376 4 003 1996 Actual Cost ($) 9 259 6 511 4 208 Decommissioning cost estimate (100%) ($) 410 582 380 718 366 142 Company's decommissioning cost ($) 18 476 13 668 8 238 Market value of assets (100%) ($) 209 448 163 536 159 613 Company's market value of assets ($) 9 425 5 871 3 591 * Refer to section (e) for further information on Connecticut Yankee. The Company pays its share of decommissioning expense to each of the operators of these nuclear facilities as a cost of electricity purchased for resale. The Company also has long-term contracts to purchase capacity from other generating facilities. Information relative to these contracts is as follows: CAMBRIDGE ELECTRIC LIGHT COMPANY Range of Contract Expiration Entitlement 1996 1995 1994 Dates % MW Cost Cost Cost (Dollars in Thousands) Type of Unit Cogenerating 2011 17.2 24.5 $14 589 $14 680 $14 808 Oil 2002-2009 * 85.6 11 301 10 148 11 650 Nuclear 2026 0.7 8.1 7 881 6 919 8 622 Total 118.2 $33 771 $31 747 $35 080 (*) Includes contracts to purchase power from two oil-fired units with capacity entitlements of 4.99% and 9.97%. Costs pursuant to these contracts are included in electricity purchased for resale in the accompanying Statements of Income and are recoverable in revenue. The estimated aggregate obligations under the life-of-the-unit contracts for capacity from the operating Yankee Nuclear Units and other long-term purchased power obligations, including the Canal and Seabrook 1 units, in effect for the five years subsequent to 1996 are as follows: Long-Term Equity-Owned Purchased Nuclear Units Power Total (Dollars in Thousands) 1997 $11 474 $40 735 $52 209 1998 11 003 40 318 51 321 1999 12 768 42 215 54 983 2000 12 779 43 394 56 173 2001 11 908 45 261 57 169 In addition, the Company incurred costs for purchases from the New England Power Pool of $10,973,000, $14,185,000 and $6,241,000 in 1996, 1995 and 1994, respectively. (c) Price-Anderson Act Under the Price-Anderson Act (the Act), owners of nuclear power plants have the benefit of approximately $8.9 billion of public liability coverage that would compensate the public for valid bodily injury and property loss on a no fault basis in the event of an accident at a commercial nuclear power plant. Under the provisions of the Act, each nuclear reactor with an operating license can be assessed up to $79.3 million per nuclear incident with a maximum assessment of $10 million per incident within one calendar year. Nuclear plant owners have initiated insurance programs designed to help cover liability claims relating to property damage, decontamination, replacement power and business interruption costs for participating utilities arising from a nuclear incident. The Company has an equity ownership interest in four nuclear generating facilities. The operators of these units maintain nuclear insurance coverage (on behalf of the owners of the facilities) with Nuclear Electric Insurance CAMBRIDGE ELECTRIC LIGHT COMPANY Limited (NEIL II) and the combined American Nuclear Insurers/Mutual Atomic Energy Liability Underwriters (ANI). NEIL II provides $2.25 billion of property, boiler, machinery and decontamination insurance coverage, including accidental premature decommissioning insurance in the amount of the shortfall in the Decommissioning Trust Fund, in excess of the underlying $500 million policy. All companies insured with NEIL are subject to retroactive assessments if losses exceed the accumulated funds available. ANI provides $500 million of "all risk" property damage, boiler, machinery and decontamination insurance. An additional $200 million of primary financial protection coverage is provided for off-site bodily injury or property damage caused by a nuclear incident. ANI also provides secondary financial protection liability insurance which currently provides $8.7 billion of retrospective insurance premium benefits in accordance with the provisions of the Act. Additional coverage ($200 million) provided by ANI includes tort liability protection arising out of radiation injury claims by nuclear workers and injury or property damage caused by the transportation or shipment of nuclear materials or waste. Based on its various ownership interests in the four nuclear generating facilities, the Company's retrospective premium could be as high as $1.3 million yearly or a cumulative total of $12.3 million, exclusive of the effect of inflation indexing (at five-year intervals) and a 5% surcharge ($4 million) in the event that total public liability claims from a nuclear incident exceed the funds available to pay such claims. (d) Guarantee Agreement In connection with its investment in Maine Yankee Atomic Power Company, the Company has guaranteed its pro-rata portion of that company's nuclear fuel financing. At December 31, 1996, the Company's portion amounted to $800,000. (e) Yankee Nuclear Power Plants On July 22, 1996, Connecticut Yankee Atomic Power Company (Connecticut Yankee), which operates the Connecticut Yankee nuclear power plant (the Connecticut plant), took the unit out of service in connection with certain safety-related issues and refueling. During the outage, Connecticut Yankee's owners 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 December 4, 1996, Connecticut Yankee's Board of Directors voted to permanently shut down the plant. The Company has an equity ownership interest in Connecticut Yankee of 4.5% which, at December 31, 1996, amounted to approximately $4.7 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 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 remaining 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 will have a material adverse effect on its operations CAMBRIDGE ELECTRIC LIGHT COMPANY and believes that recovery of these FERC-approved costs will continue to be allowed in its rates at the retail level. This action follows the permanent shutdown of the Yankee Atomic plant in Rowe, Massachusetts in 1992. Due to changing conditions within the nuclear industry, it is possible that the remaining two operating nuclear plants in which the Company has an equity ownership interest could be shut down sometime in the future prior to the expiration of each unit's operating license. (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 on the Company's operations in the past and could have an impact on future operations, capital costs and construction schedules of major facilities. (4) 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 regulations. The following is a summary of the Company's provisions for income taxes for the years ended December 31, 1996, 1995 and 1994: 1996 1995 1994 (Dollars in Thousands) Federal Current $ 2 861 $ 1 397 $ 1 976 Deferred (582) 991 805 Investment tax credits (93) (94) (95) 2 186 2 294 2 686 State Current 543 355 464 Deferred (21) 174 157 522 529 621 2 708 2 823 3 307 Amortization of regulatory liability relating to deferred income taxes (25) (98) (45) $ 2 683 $ 2 725 $ 3 262 Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. CAMBRIDGE ELECTRIC LIGHT COMPANY Accumulated deferred income taxes consisted of the following in 1996 and 1995: 1996 1995 (Dollars in Thousands) Liabilities Property-related $16 661 $16 263 All other 1 947 2 345 18 608 18 608 Assets Investment tax credits 1 193 1 253 Pension plan 789 761 Regulatory liability 1 112 1 128 All other 1 563 935 4 657 4 077 Accumulated deferred income taxes, net $13 951 $14 531 The net year-end deferred income tax liability above is net of a current deferred tax asset of $404,000 in 1996 which is included in other deferred charges in the accompanying Balance Sheets and includes a current deferred tax liability of $649,000 in 1995, included in accrued income taxes in the accompanying Balance Sheets. The total income tax provision set forth previously represents 34% in 1996, 33% in 1995 and 34% in 1994 of income before such taxes. The following table reconciles the statutory federal income tax rate to these percentages: 1996 1995 1994 (Dollars in Thousands) Federal statutory rate 35% 35% 35% Federal income tax expense at statutory levels $2 731 $2 857 $3 326 Increase (Decrease) from statutory levels: State tax net of federal tax benefit 339 343 404 Tax versus book depreciation 83 2 39 Amortization of excess deferred reserves (25) (98) (14) Amortization of investment tax credits (93) (94) (95) Reversals of capitalized expenses (13) (14) (100) Dividend received deduction (246) (272) (291) Other (93) 1 (7) $2 683 $2 725 $ 3 262 Effective federal income tax rate 34% 33% 34% (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 one 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. CAMBRIDGE ELECTRIC LIGHT COMPANY Components of pension expense and related assumptions to develop pension expense were as follows: 1996 1995 1994 (Dollars in Thousands) Service cost $ 538 $ 484 $ 560 Interest cost 1 921 1 924 1 732 Return on plan assets - (gain)/loss (3 899) (5 388) 392 Net amortization and deferral 2 080 3 672 (1 901) Total pension expense 640 692 783 Transfers from affiliated companies, net 441 439 404 Less: Amounts capitalized and deferred 299 243 386 Net pension expense $ 782 $ 888 $ 801 Discount rate 7.25% 8.50% 7.25% Assumed rate of return 8.75 9.00 8.50 Rate of increase in future compensation 4.25 5.00 4.50 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 ratemaking, is deferring the difference between pension contribution, which is reflected in base rates, and pension expense. The funded status of the Company's pension plan (using a measurement date of December 31) is as follows: 1996 1995 (Dollars in Thousands) Accumulated benefit obligation: Vested $ (20 583) $ (19 638) Nonvested (2 131) (2 093) $ (22 714) $ (21 731) Projected benefit obligation $ (26 690) $ (26 053) Plan assets at fair market value 29 027 26 361 Projected benefit obligation greater than plan assets 2 337 308 Unamortized transition obligation 688 825 Unrecognized prior service cost 1 074 1 194 Unrecognized gain (5 971) (4 019) Accrued pension liability $ (1 872) $ (1 692) The following actuarial assumptions were used in determining the plan's year-end funded status: 1996 1995 Discount rate 7.50% 7.25% Rate of increase in future compensation 4.25 4.25 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. CAMBRIDGE ELECTRIC LIGHT COMPANY (b) Other Postretirement Benefits Certain employees are eligible for postretirement benefits if they meet specific requirements. These benefits could include health and life insurance coverage and reimbursement of Medicare Part B premiums. Under certain circumstances, eligible employees are required to make contributions for postretirement benefits. To fund its postretirement benefits, the Company makes contributions to various voluntary employees' beneficiary association (VEBA) trusts that were established pursuant to section 501(c)(9) of the Internal Revenue Code (the Code). The Company also makes contributions to a subaccount of its pension plan pursuant to section 401(h) of the Code to fund a portion of its postretirement benefit obligation. The Company contributed approximately $1.2 million, $1.3 million and $1.4 million to these trusts during 1996, 1995 and 1994, respectively. The net periodic postretirement benefit cost for the years ended December 31, 1996, 1995 and 1994 include the following components and related assumptions: 1996 1995 1994 (Dollars in Thousands) Service cost $ 205 $ 164 $ 198 Interest cost 809 817 784 Return on plan assets (460) (521) (14) Amortization of transition obligation over 20 years 498 498 497 Net amortization and deferral 181 337 (94) Total postretirement benefit cost 1 233 1 295 1 371 Transfers from affiliated companies, net 555 579 603 Less: Amounts capitalized and deferred 68 458 863 Net postretirement benefit cost $1 720 $1 416 $1 111 Discount rate 7.25% 8.50% 7.25% Assumed rate of return 8.75 9.00 8.50 Rate of increase in future compensation 4.25 5.00 4.50 The funded status of the Company's postretirement benefit plan using a CAMBRIDGE ELECTRIC LIGHT COMPANY measurement date of December 31, 1996 and 1995 is as follows: 1996 1995 (Dollars in Thousands) Accumulated postretirement benefit obligation: Retirees $ (6 052) $ (6 219) Fully eligible active plan participants (1 422) (1 720) Other active plan participants (3 365) (3 463) (10 839) (11 402) Plan assets at fair market value 4 076 2 973 Accumulated postretirement benefit obligation greater than plan assets (6 763) (8 429) Unamortized transition obligation 7 960 8 458 Unrecognized gain (1 197) (29) $ - $ - The following actuarial assumptions were used in determining the plan's estimated accumulated postretirement benefit obligation (APBO) and funded status for 1996 and 1995: 1996 1995 Discount rate 7.50% 7.25% Rate of increase in future compensation 4.25 4.25 Medicare Part B premiums 9.50 12.20 Medical care 7.00 8.00 Dental care 5.00 5.00 The above dental rate remains constant through the year 2007. Rates for Medicare Part B premiums and medical care decrease to 3.1% and 5%, respectively, by 2007 and remain at that level thereafter. A one percent change in the medical trend rate would have a $150,000 impact on the Company's annual expense and would change the APBO 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 benefits expense in future years. 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. At December 31, 1996 and 1995, the Company's deferral amounted to approximately $2.1 million and $2.2 million, respectively. (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 and up to five percent for those employees no longer eligible for postretirement health benefits. The Company's contribution was $310,000 in 1996, $317,000 in 1995 and $325,000 in 1994. CAMBRIDGE ELECTRIC LIGHT COMPANY (6) Interim Financing and Long-Term Debt (a) 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, 1996, system companies had $135 million of committed lines of credit that will expire at varying intervals in 1997. These lines are normally renewed upon expiration and require annual fees of up to .1875% of the individual line. At December 31, 1996, the system's uncommitted lines of credit totaled $20 million. Interest rates on the Company's outstanding borrowings generally are at an adjusted money market rate and averaged 5.6% and 6.1% in 1996 and 1995, respectively. Notes payable to banks totaled $18,725,000 and $2,675,000 at December 31, 1996 and 1995, respectively. (b) Advances from Affiliates Notes payable to the System totaled $4,665,000 and $2,425,000 at December 31, 1996 and 1995, respectively. These notes are written for a term of up to 11 months and 29 days. Interest is at the prime rate and is adjusted for changes in that rate during the term of the notes. The rate averaged 8.3% and 8.8% in 1996 and 1995, respectively. 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 those available from banks. Interest rates on the out- standing borrowings are based on the monthly average rate the Company would otherwise have to pay banks, less one-half the difference between that rate and the monthly average U.S. Treasury Bill weekly auction rate. The borrow- ings are for a period of less than one year and are payable upon demand. Rates on these borrowings averaged 5.3% and 5.8% in 1996 and 1995, respective- ly. Notes payable to the Pool totaled $400,000 at December 31, 1996. The Company had no notes payable to the Pool at December 31, 1995. (c) Long-Term Debt Maturities and Retirements Long-term debt outstanding, exclusive of current maturities, current sinking fund requirements and related premiums, is as follows: Original Balance December 31, Issue 1996 1995 (Dollars in Thousands) 7-Year Notes - 8.04%, due 1999 $10 000 $10 000 $10 000 15-Year Notes - 8.7%, due 2007 5 000 5 000 5 000 30-Year Notes - Series C, 6 1/4%, due 1997 6 000 - 4 260 Series D, 7 3/4%, due 2002 5 000 2 500 2 600 $17 500 $21 860 Under the terms of its Indenture of Trust, the Company is required to make CAMBRIDGE ELECTRIC LIGHT COMPANY periodic sinking fund payments for retirement of outstanding long-term debt. The payments and balances of maturing debt issues for the five years subsequent to December 31, 1996 are as follows: Sinking Fund Maturing Year Payments Debt Issues Total (Dollars in Thousands) 1997 $100 $ 4 260 $ 4 360 1998 100 - 100 1999 100 10 000 10 100 2000 100 - 100 2001 100 - 100 (d) Disclosures About Fair Value of Financial Instruments The fair value of certain financial instruments included in the accompany- ing Balance Sheets as of December 31, 1996 and 1995 is as follows: 1996 1995 (Dollars in Thousands) Carrying Fair Carrying Fair Value Value Value Value Long-Term Debt $21 863 $22 787 $42 025 $43 656 The carrying amount of cash, notes payable to banks and advances to/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 on 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. (7) Dividend Restriction At December 31, 1996 none of retained earnings was restricted against the payment of cash dividends by terms of term loans and note agreements securing long-term debt. As of the same date, retained earnings also included approximately $4,406,000 representing the Company's equity in undistributed earnings of the nuclear companies. (8) 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 that prohibit the Company from entering into future lease agreements or obliga- tions. CAMBRIDGE ELECTRIC LIGHT COMPANY Future minimum lease payments, by period and in the aggregate, of noncanc- elable operating leases consisted of the following at December 31, 1996: Operating Leases (Dollars in Thousands) 1997 $ 1 774 1998 1 729 1999 1 681 2000 1 507 2001 1 333 Beyond 2001 4 862 Total future minimum lease payments $12 886 Total rent expense for all operating leases, except those with terms of a month or less, amounted to $1,348,000 in 1996, $1,374,000 in 1995 and $1,484,000 in 1994. There were no contingent rentals and no sublease rentals for the years 1996, 1995 and 1994. 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 19). (a) 2. Index to Financial Statement Schedules Filed herewith at page(s) indicated - Schedule I - Investments in, Equity in Earnings of, and Dividends Received From Related Parties - Years Ended December 31, 1996, 1995 and 1994 (pages 48-50). Schedule II - Valuation and Qualifying Accounts - Years Ended December 31, 1996, 1995 and 1994 (page 51). (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. 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 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 Third Supplemental on Form 10-K (1984) (Exhibit 1, File No. 2- 7909). 4.1.3 Fourth Supplemental on Form 10-K (1984) (Exhibit 2, File No. 2- 7909). 4.1.4 Sixth Supplemental on Form 10-Q (June 1989) (Exhibit 1, File No. 2-7909). 4.1.5 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). 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: CAMBRIDGE ELECTRIC LIGHT COMPANY 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 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). 10.1.6.1 Supplement to 10.1.6 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). 10.1.6.2 Supplements to 10.1.6 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). CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.6.3 Amendment to 10.1.6 as amended and restated June 1, 1993, henceforth referred to as the Capacity Acquisition and Disposition Agreement, whereby CEC, as agent, in addition to acquiring power may also sell bulk electric power which the Company and/or CE owns or otherwise has the right to sell (Exhibit 1 to CE's Form 10-Q (September 1993), File No. 2-30057). 10.1.7 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). 10.1.7.1 Second, Third and Fourth Amendments to 10.1.7 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). 10.1.7.2 Fifth and Sixth Amendments to 10.1.7 as amended June 26, 1989 and July 1, 1989, respectively (Exhibit 1 to the CEL Form 10-Q (September 1989), File No. 2-7909). 10.1.8 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). 10.1.8.1 Additional Power Contract to 10.1.8 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). 10.1.8.2 Second Supplementary Power Contract to 10.1.8 providing for decommissioning financing dated April 30, 1984 (Exhibit 6 to the CEL Form 10-Q (June 1984), File No. 2-7909). 10.1.9 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). 10.1.9.1 First Amendment (Section 7) and Second Amendment (decommissioning financing) to 10.1.9 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). 10.1.9.2 Third and Fourth Amendments to 10.1.9 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). 10.1.9.3 Fifth and Sixth Amendments to 10.1.9 both as amended May 6, 1988 (Exhibit 1 to the CEL Form 10-Q (June 1988), File No. 2-7909). 10.1.9.4 Seventh Amendment to 10.1.9 as amended June 15, 1989 (Exhibit 2 to the CEL Form 10-Q (September 1989), File No. 2-7909). 10.1.9.5 Additional Power Contract between CEL and Vermont Yankee Nuclear Power Corporation providing for decommissioning financing and contract extension dated February 1, 1984 (Refiled as Exhibit 1 to the 1993 CEL Form 10-K, File No. 2-7909). CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.10 Power Contract between Maine Yankee Atomic Power Company and CEL dated May 20, 1968 (Exhibit 5 to the CES Form S-7, File No. 2- 38372). 10.1.10.1 First Amendment (decommissioning financing) and Second Amendment (supplementary payments) to 10.1.10 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). 10.1.10.2 Third Amendment to 10.1.10 as amended October 1, 1984 (Exhibit 1 to the CEL Form 10-Q (September 1984), File No. 2-7909). 10.1.11 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). 10.1.11.1 Supplement Amending 10.1.11, as amended June 24, 1970 (Exhibit 8 to the CES Form S-7, Amendment No. 1, File No. 2-38372). 10.1.12 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). 10.1.13 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). 10.1.14 Agreement, dated September 1, 1985, With Respect To Amendment of Agreement With Respect To Use Of Quebec Interconnection, dated December 1, 1981, among certain New England Power Pool (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). 10.1.14.1 Amendatory Agreement No. 3 to 10.1.14, as amended June 1, 1990 (Exhibit 1 to the CEC Form 10-Q (September 1990), File No. 2- 30057). 10.1.15 Preliminary Quebec Interconnection Support Agreement - Phase II among certain NEPOOL utilities, dated June 1,1984 (Exhibit 6 to the CE Form 10-Q (June 1984), File No. 2-7749). 10.1.15.1 First, Second and Third Amendments to 10.1.15 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). 10.1.15.2 Fourth and Eighth Amendments to 10.1.15 as amended July 1, 1987 and August 1, 1988, respectively (Exhibit 3 to the CEC Form 10-Q (September 1988), File No. 2-30057). CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.15.3 Fifth, Sixth and Seventh Amendments to 10.1.15 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). 10.1.15.4 Ninth and Tenth Amendments to 10.1.15 as amended November 1, 1988 and January 15, 1989, respectively (Exhibit 2 to the CEC Form 10-K for 1988, File No. 2-30057). 10.1.15.5 Eleventh Amendment to 10.1.15 as amended November 1, 1989 (Exhibit 4 to the CEC Form 10-K for 1989, File No. 2-30057). 10.1.15.6 Twelfth Amendment to 10.1.15 as amended April 1, 1990 (Exhibit 1 to the CEC Form 10-Q (June 1990), File No. 2-30057). 10.1.16 Agreement to Preliminary Quebec Interconnection Support Agreement - Phase II among PSNH, New England Power Company, Boston Edison Company 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). 10.1.17 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). 10.1.18 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). 10.1.18.1 Amendment No. 1 to 10.1.18 as amended May 1, 1986 (Exhibit 6 to the CEC Form 10-Q (March 1987), File No. 2-30057). 10.1.18.2 Amendment No. 2 to 10.1.18 as amended September 1, 1987 (Exhibit 3 to the CEC Form 10-Q (September 1987), File No. 2-30057). 10.1.19 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). 10.1.20 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). CAMBRIDGE ELECTRIC LIGHT COMPANY 10.1.21 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). 10.1.21.1 Amendments Nos. 1 and 2 to 10.1.21 as amended May 1, 1986 and February 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (March 1987), File No. 2-30057). 10.1.21.2 Amendments Nos. 3 and 4 to 10.1.21 as amended June 1, 1987 and September 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (September 1987), File No. 2-30057). 10.1.22 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). 10.1.22.1 Amendments Nos. 1 and 2 to 10.1.22 as amended May 1, 1986 and February 1, 1987, respectively (Exhibit 2 to the CEC Form 10-Q (March 1987), File No. 2-30057). 10.1.22.2 Amendments Nos. 3 and 4 to 10.1.22 as amended June 1, 1987 and September 1, 1987, respectively (Exhibit 4 to the CEC Form 10-Q (September 1987), File No. 2-30057). 10.1.23 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). 10.1.24 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). 10.1.25 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). 10.1.25.1 System Exchange Agreement by and among Altresco Pittsfield, L.P., the 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 CES Form 10-Q (September 1993), File No. 1-7316). CAMBRIDGE ELECTRIC LIGHT COMPANY 10.2.2 Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies as amended and restated January 1, 1993 (Exhibit 2 to the CES Form 10-Q (September 1993), File No. 1-7316). 10.2.2.1 First Amendment to the Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies, as amended and restated as of January 1, 1993, effective October 1, 1994. (Exhibit 1 to the CES Form S-8 (January 1995), File No. 1-7316). 10.2.3 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). 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). 10.2.3.10 Twenty-Eighth Amendment to 10.2.3 as amended September 15, 1992 (Exhibit 1 to the CES Form 10-Q (September 1994), File No. 1-7316). 10.2.3.11 Twenty-Ninth Amendment to 10.2.3 as amended May 1, 1993 (Exhibit 2 to the CES Form 10-Q (September 1994), File No. 1-7316). CAMBRIDGE ELECTRIC LIGHT COMPANY 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). Exhibit 27. Financial Data Schedule Filed herewith as Exhibit 1 is the Financial Data Schedule for the twelve months ended December 31, 1996. Filed herewith as Exhibit 2 is the restated Financial Data Schedule for the twelve months ended December 31, 1995. Filed herewith as Exhibit 3 is the restated Financial Data Schedule for the twelve months ended December 31, 1994. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended December 31, 1996. SCHEDULE I CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1996 (Dollars in Thousands)
1996 Balance Balance December 31, Equity December 31, Name of Issuer and 1995 in Dividends 1996 Description of Investment Shares Amount Earnings Received Amount Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 564 $ 529 $ 346 $4 747 Maine Yankee Atomic Power Company 20 000 2 891 266 328 2 829 Vermont Yankee Nuclear Power Corporation 9 801 1 305 172 153 1 324 Yankee Atomic Electric Company 3 068 464 39 - 503 Total $9 224 $1 006 $ 827 $9 403 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; however, no market exists for these securities. See Note 3(e) of the Notes to Financial Statements included in Item 8 of this report for a discussion of the permanent closing of the nuclear plants owned by Connecticut Yankee Atomic Power Company and Yankee Atomic Electric Company.
SCHEDULE I CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1995 (Dollars in Thousands)
1995 Balance Balance December 31, Equity December 31, Name of Issuer and 1994 in Dividends 1995 Description of Investment Shares Amount Earnings Received Amount Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 583 $ 674 $ 693 $4 564 Maine Yankee Atomic Power Company 20 000 2 744 285 138 2 891 Vermont Yankee Nuclear Power Corporation 9 801 1 318 170 183 1 305 Yankee Atomic Electric Company 3 068 519 (18) 37 464 Total $9 164 $1 111 $1 051 $9 224 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; however, no market exists for these securities. See Note 3(e) 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.
SCHEDULE I CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1994 (Dollars in Thousands)
1994 Balance Balance December 31, Equity December 31, Name of Issuer and 1993 in Dividends 1994 Description of Investment Shares Amount Earnings Received Amount Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 490 $ 743 $ 650 $4 583 Maine Yankee Atomic Power Company 20 000 2 776 245 277 2 744 Vermont Yankee Nuclear Power Corporation 9 801 1 317 158 157 1 318 Yankee Atomic Electric Company 3 068 476 43 - 519 Total $9 059 $1 189 $1 084 $9 164 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; however, no market exists for these securities. See Note 3(e) 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.
SCHEDULE II CAMBRIDGE ELECTRIC LIGHT COMPANY VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Dollars in Thousands) Additions Balance at Provision Deductions Balance Beginning Charged to Accounts End Description of Year Operations Recoveries Written Off of Year Year Ended December 31, 1996 Allowance for Doubtful Accounts $490 $279 $ 51 $338 $482 Year Ended December 31, 1995 Allowance for Doubtful Accounts $471 $327 $101 $409 $490 Year Ended December 31, 1994 Allowance for Doubtful Accounts $491 $561 $ 92 $673 $471 CAMBRIDGE ELECTRIC LIGHT COMPANY FORM 10-K DECEMBER 31, 1996 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 27, 1997 William G. Poist, Chairman of the Board and Chief Executive Officer R. D. WRIGHT March 27, 1997 Russell D. Wright, President and Chief Operating Officer Principal Financial and Accounting Officer: JAMES D. RAPPOLI March 27, 1997 James D. Rappoli, Financial Vice President and Treasurer A majority of the Board of Directors: WILLIAM G. POIST March 27, 1997 William G. Poist, Director R. D. WRIGHT March 27, 1997 Russell D. Wright, Director JAMES D. RAPPOLI March 27, 1997 James D. Rappoli, Director EX-27 2 FINANCIAL DATA SCHEDULE 1996
UT This schedule contains summary financial information extracted from the balance sheet, statement of income, statement of retained earnings and statement of cash flows contained in Form 10-K of Cambridge Electric Light Company for the fiscal year ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 0000016573 CAMBRIDGE ELECTRIC LIGHT COMPANY 1,000 DEC-31-1996 DEC-31-1996 YEAR PER-BOOK 100,378 9,408 20,326 45,039 0 175,151 8,665 27,953 9,233 45,851 0 0 21,763 23,790 0 0 100 0 0 0 83,647 175,151 119,105 2,683 110,215 112,898 6,207 2,242 8,449 3,329 5,120 0 5,120 3,448 2,238 9,914 0 0
EX-27 3 FINANCIAL DATA SCHEDULE 1995 (RESTATED)
UT This schedule contains restated summary financial information extracted from the balance sheet, statement of income, statement of retained earnings and statement of cash flows contained in Form 10-K of Cambridge Electric Light Company for the fiscal year ended December 31, 1995 and is qualified in its entirety by reference to such financial statements. 0000016573 CAMBRIDGE ELECTRIC LIGHT COMPANY 1,000 DEC-31-1995 DEC-31-1995 YEAR PER-BOOK 99,311 9,229 19,774 9,951 0 138,265 8,665 27,953 7,561 44,179 0 0 41,865 5,100 0 0 160 0 0 0 46,961 138,265 122,303 2,725 111,171 113,896 8,407 1,309 9,716 4,278 5,438 0 5,438 5,043 3,776 9,058 0 0
EX-27 4 FINANCIAL DATA SCHEDULE 1994 (RESTATED)
UT This schedule contains restated summary financial information extracted from the balance sheet, statement of income, statement of retained earnings and statement of cash flows contained in Form 10-K of Cambridge Electric Light Company for the fiscal year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 0000016573 CAMBRIDGE ELECTRIC LIGHT COMPANY 1,000 DEC-31-1994 DEC-31-1994 YEAR PER-BOOK 96,778 9,169 18,029 13,733 0 137,709 8,665 27,953 7,166 43,784 0 0 42,027 2,725 0 0 160 0 0 0 49,013 137,709 127,176 3,262 114,935 118,197 8,979 1,338 10,317 4,075 6,242 0 6,242 6,132 3,788 12,179 0 0
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