-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bNe9AcvhFkQXWHs4/N2tu2RFiIwWaUOGoROslbtrK65OSIT7OjLiXHdwmkgJv5Yf Hao3h5+Hn2vaYR8O8ufQIQ== 0000018808-95-000005.txt : 19950602 0000018808-95-000005.hdr.sgml : 19950602 ACCESSION NUMBER: 0000018808-95-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL VERMONT PUBLIC SERVICE CORP CENTRAL INDEX KEY: 0000018808 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 030111290 STATE OF INCORPORATION: VT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08222 FILM NUMBER: 95523514 BUSINESS ADDRESS: STREET 1: 77 GROVE ST CITY: RUTLAND STATE: VT ZIP: 05701 BUSINESS PHONE: 8027732711 10-K 1 FORM 10-K FYE 12/31/94 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________ FORM 10-K (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, 1994 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 1-8222 Central Vermont Public Service Corporation (Exact name of registrant as specified in its charter) Vermont 03-0111290 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 77 Grove Street, Rutland, Vermont 05701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (802) 773-2711 ______________________________________________________________________________ Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which Title of each class registered Common Stock $6 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements or any amendment to this Form 10-K. [X] Cover page State the aggregate market value of the voting stock held by non- affiliates of the registrant: $158,100,498 based upon the closing price as of January 31, 1995 of Common Stock, $6 Par Value, on the New York Stock Exchange as reported in the Eastern Edition of the Wall Street Journal. Indicate the number of shares outstanding of each of the registrant's classes of Common Stock: As of January 31, 1995, there were outstanding 11,711,148 shares of Common Stock, $6 Par Value. DOCUMENTS INCORPORATED BY REFERENCE No documents are incorporated by reference in this report. Cover page continued Form 10-K - 1994 TABLE OF CONTENTS Page Part I Item 1. Business................................................ 2 Item 2. Properties.............................................. 16 Item 3. Legal Proceedings....................................... 17 Item 4. Submission of Matters to a Vote of Security Holders..... 17 Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.................................... 18 Item 6. Selected Financial Data................................. 19 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 20 Item 8. Financial Statements and Supplementary Data............. 29 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................... 53 Part III Item 10. Directors and Executive Officers of the Registrant...... 53 Item 11. Executive Compensation.................................. 56 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................. 62 Item 13. Certain Relationships and Related Transactions.......... 63 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................................ 64 Signatures........................................................ 83 PART I Item 1. Business. Overview. Central Vermont Public Service Corporation (the "Company"), incorporated under the laws of Vermont on August 20, 1929, is engaged in the purchase, production, transmission, distribution and sale of electricity. The Company has various wholly and partially owned subsidiaries. These subsidiaries are described below. The Company is the largest electric utility in Vermont and serves 135,704 customers in 175 of the 245 towns in Vermont. This represents about 50% of the Vermont population. In addition, the Company supplies electricity at wholesale to one municipal, one rural cooperative, and one private utility. The Company's sales are derived from a diversified customer mix. The Company's sales to residential, commercial and industrial customers accounted for 56% of total MWH sales for the year 1994. Sales to the five largest retail customers receiving electric service from the Company during the same period constituted about 4.7% of the Company's total electric revenues for the year. The Company's requirements resale sales accounted for approximately 4%, entitlement sales accounted for 23% and other resale sales which include contract sales, opportunity sales and sales to NEPOOL accounted for approximately 17% of total MWH sales for the year 1994. Connecticut Valley Electric Company Inc. ("Connecticut Valley"), a wholly owned subsidiary of the Company, incorporated under the laws of New Hampshire on December 9, 1948, distributes and sells electricity in parts of New Hampshire bordering the Connecticut River. It serves 10,261 customers in 13 communities in New Hampshire. About 2% of the New Hampshire population resides in its service area. Connecticut Valley's sales are also derived from a diversified customer mix. Connecticut Valley's sales to residential, commercial and industrial customers accounted for 99.5% of total MWH sales for the year 1994. Sales to its five largest retail customers during the same period equaled about 17.9% of Connecticut Valley's total electric revenues for the year. The Company also owns 56.8% of the common stock and 46.6% of the preferred stock of Vermont Electric Power Company, Inc. ("VELCO"). VELCO owns the high voltage transmission system in Vermont. VELCO created a wholly owned subsidiary, Vermont Electric Transmission Company, Inc. ("VETCO"), to finance, construct and operate the Vermont portion of the 450 KV DC transmission line connecting Quebec with Vermont and New England. In addition, the Company owns 31.3% of the common stock of Vermont Yankee Nuclear Power Corporation ("Vermont Yankee"), a nuclear generating company. The Company also owns 2% of the outstanding common stock of Maine Yankee Atomic Power Company, 2% of the outstanding common stock of Connecticut Yankee Atomic Power Company and 3.5% of the outstanding common stock of Yankee Atomic Electric Company. The Company has two wholly owned subsidiaries that were created for the purpose of financing and constructing two hydroelectric facilities in Vermont: Central Vermont Public Service Corporation - Bradford Hydroelectric, Inc. ("Bradford"), which became operational December 20, 1982, and Central Vermont Public Service Corporation - East Barnet Hydroelectric, Inc. ("East Barnet"), which became operational September 1, 1984. These hydro electric facilities have been leased and operated by the Company since their respective in- service dates. The Company also has the following wholly owned non-utility subsidiaries: C.V. Realty Inc., a real estate company, Catamount Energy Corporation whose primary purpose is to invest in non-regulated, energy-supply projects, CV Energy Resources, Inc. whose primary purpose is to invest in non- regulated energy-related projects and SmartEnergy Services, Inc. whose purpose is to cost effectively provide reliable energy efficient products and services, including the rental of electric water heaters. Catamount Energy Corporation currently has four wholly owned subsidiaries: (See "DIVERSIFICATION"); Catamount Rumford Corp., Equinox Vermont Corporation, Appomattox Vermont Corp. and Catamount Williams Lake L.P. For additional information of the Company's diversification activities, see Item 8 herein. REGULATION AND COMPETITION State Commissions. The Company is subject to the regulatory authority of the Vermont Public Service Board ("PSB") with respect to rates, and the Company and VELCO are subject to PSB jurisdiction respecting securities issues, construction of major generation and transmission facilities and various other matters. The Company is subject to the regulatory authority of the New Hampshire Public Utilities Commission as to matters pertaining to construction and transfers of utility property in New Hampshire. Additionally, the Public Utilities Commission of Maine and the Connecticut Department of Public Utility Control exercise limited jurisdiction over the Company based on its ownership as a tenant-in-common of Wyman #4 and Millstone #3, respectively. Connecticut Valley is subject to the regulatory authority of the New Hampshire Public Utilities Commission ("NHPUC") with respect to rates, securities issues and various other matters. Federal Power Act. Certain phases of the businesses of the Company and VELCO, including certain rates, are subject to the jurisdiction of the Federal Energy Regulatory Commission ("FERC"): the Company as a licensee of hydroelectric developments under Part I, and the Company and VELCO as interstate public utilities under Parts II and III, of the Federal Power Act, as amended and supplemented by the National Energy Act. The Company has licenses expiring at various times under Part I of the Federal Power Act for twelve of its hydroelectric plants. The Company has obtained an exemption from licensing for the Bradford and East Barnet projects. Public Utility Holding Company Act of 1935. Although the Company, by reason of its ownership of utility subsidiaries, is a holding company, as defined in the Public Utility Holding Company Act of 1935, it is presently exempt, pursuant to Rule 2, promulgated by the Commission under said Act, from all the provisions of said Act except Section 9(a)(2) thereof relating to the acquisition of securities of public utility affiliates. Environmental Matters. In recent years, public concern for the physical environment has resulted in increased governmental regulation of environmental matters. The Company is subject to these regulations in the licensing and operation of the generation, transmission, and distribution facilities in which it has interest, as well as the licensing and operations of the facilities in which it is a co-licensee. These environmental regulations are administered by local, state and Federal regulatory authorities and concern the impact of the Company's generation, transmission, distribution, transportation and waste handling facilities on air, water, land and aesthetic qualities. The Company cannot presently forecast the costs or other effects which environmental regulation may ultimately have upon its existing and proposed facilities and operations, because the extent of the applicability is not known at this time. The Company believes that any such costs related to its utility operations would be recoverable through the rate-making process. For additional information see Item 7 herein and refer to Item 8 herein for disclosures relating to environmental contingencies, hazardous substance releases and the control measures related thereto. Nuclear Matters. The nuclear generating facilities of Vermont Yankee and the other nuclear facilities in which the Company has an interest are subject to extensive regulations by the Nuclear Regulatory Commission ("NRC"). The NRC is empowered to regulate the siting, construction and operation of nuclear reactors with respect to public health, safety, environmental and antitrust matters. Under its continuing jurisdiction, the NRC may, after appropriate proceedings, require modification of units for which operating licenses have already been issued, or impose new conditions on such licenses, and may require that the operation of a unit cease or that the level of operation of a unit be temporarily or permanently reduced. Refer to Item 8 herein for disclosures relating to the shut down of the Yankee Atomic Nuclear Power plant. Competition. Competition now takes several forms. At the wholesale level, where the utility-to-utility market has been highly competitive for years, independent companies now compete to be the low-cost providers of power to local and regional utilities. A growing competitive threat is rooted in the belief that lower priced electricity could be made available to residents and business by voters establishing a municipally owned utility. At the retail level, customers have long had energy options such as propane, natural gas or oil for heating, cooling and water heating, and self-generation for larger customers. Changes anticipated as a result of the National Energy Policy Act of 1992 and evolving state regulatory policy may even bring about direct utility-to- utility competition for these retail customers. However, pursuant to Vermont statutes (30 V.S.A. Section 249), the PSB has established as the service area for the Company the area it now serves. Under 30 V.S.A. Section 251(b) no other company is legally entitled to serve any retail customers in the Company's established service area. An amendment to 30 V.S.A. Section 212(a) enacted May 28, 1987 authorizes the Vermont Department of Public Service ("Department") to purchase and distribute power at retail to all customers of electricity in Vermont, subject to certain preconditions specified in new sections 212(b) and 212(c). Section 212(b) provides that a review board consisting of the Governor and certain other designated legislative officers review and approve any retail proposal by the Department if they are satisfied that the benefits outweigh any potential risk to the State. However, the Department may proceed to file the retail proposal with the PSB either upon approval by the review board or the failure of the board to act within sixty (60) days of the submission. Section 212(c) provides that the Department shall not enter into any retail sales arrangement before the PSB determines and approves certain findings. Those findings are (1) the need for the sale, (2) the rates are just and reasonable, (3) the sale will result in economic benefit, (4) the sale will not adversely affect system stability and reliability and (5) the sale will be in the best interest of ratepayers. Section 212(d) provides that upon PSB approval of the Department retail sales proposal, Vermont utilities shall make arrangements for distributing such electricity on terms and conditions that are negotiated. Failing such negotiation, the PSB is directed to determine such terms as will compensate the utility for all costs reasonably and necessarily incurred to provide such arrangements. See Rate Developments below for additional details involving retail sales by the Department. In addition, Chapter 79 of Title 30 authorizes municipalities to acquire the electric distribution facilities located within their boundaries. The exercise of such authority is conditioned upon an affirmative three-fifths vote of the legal voters in an election and upon the payment of just compensation including severance damages. Just compensation is determined either by negotiation between the municipality and the utility or, in the event the parties fail to reach an agreement, by the Public Service Board after a hearing. If either party is dissatisfied, the statute allows them to appeal the Board's determination to the Vermont Supreme Court. Once the price is determined, whether by agreement of the parties or by the PSB, a second affirmative three-fifths vote of the legal voters is required. Competition in the energy services market exists between electricity and fossil fuels. In the residential and small commercial sectors this competition is primarily for electric space and water heating from propane and oil dealers. Competitive issues are price, service, convenience, cleanliness and safety. In the large commercial and industrial sectors, cogeneration and self- generation are the major competitive threats to electric sales. Competitive risks in these market segments are primarily related to seasonal, one-shift operations that can tolerate periodic power outages, and for industrial customers with steady heat loads where the generator's waste heat can be used in their manufacturing process. Competitive advantages for electricity in those segments are the cost of back up power sources, space requirements, noise problems, and maintenance requirements. There has been only one instance where Chapter 79 of Title 30 has been invoked; the Town of Springfield acted to acquire the Company's distribution facilities in that community pursuant to a vote in 1977. This action was subsequently discontinued by agreement between Springfield and the Company in 1985. In addition, in late 1994 the Select Board of the Town of Bennington considered whether to publicly warn a vote to acquire the Company's facilities located in Bennington pursuant to Chapter 79 of Title 30. By vote of the Selectors taken on January 9, 1995, the Town decided not to pursue the vote and to discontinue further study of the creation of a municipal utility at this time. No other municipality served by the Company, so far as is known to the Company, has taken any formal steps in an attempt to establish a municipal electric distribution system. For a discussion relating to the Company's wholesale electric business see "Wholesale Rates" below. RATE DEVELOPMENTS Vermont Retail Rates. In response to a March 1993 PSB inquiry into the appropriateness of a general review of the Company's retail rates, in April 1993 the DPS and the Company entered into a Stipulation that was approved by the PSB in September 1993. In the Stipulation the Company agreed to a decrease in its allowed rate of return on common equity from 12.5% to 12.0% for 1993, to accelerate the recovery of $1.5 million of Conservation and Load Management ("C&LM") costs deferred in 1993, to not seek recovery of further C&LM costs deferred in 1993 equal to amounts in excess of the 12.0% rate of return on common equity for 1993, and to not file a general rate increase that would become effective before August 1, 1994. The PSB in its September 1993 order also announced the opening of an investigation on November 16, 1993, the earliest date the Company could file for a rate increase under the Stipulation, into the Company's cost of service and resulting rates. In response to that investigation, on January 18, 1994 the Company filed a revenue requirement supporting a $16.1 million or 8.0% increase in retail rates for the year beginning November 1, 1993. The Company noted in its filing that current rate levels are justified and that the Company does not want any rate increase to be effective for that period. The Company also noted in its filing that rate relief would be needed in late 1994. Thus on February 15, 1994, the Company filed for a rate increase of $17.9 million or 8.9% to become effective November 1, 1994. The PSB consolidated its investigation and the Company's rate increase request. The PSB also broadened its investigation to specifically include the Company's management of its power contracts. During the hearings, the PSB approved a settlement of power costs between the DPS and the Company. The PSB's approval of such settlement specifically excluded the as yet unknown effects of the PSB's investigation of the Company's management of its power contracts. By PSB order dated October 31, 1994 and revised PSB order dated December 14, 1994, the PSB ordered (1) no changes in rates pursuant to its investigation and (2) a $10.192 million or 5.07% rate increase effective November 1, 1994 pursuant to the Company's rate increase request. The 10.75% rate of return on common equity allowed by the PSB was reduced by a .75% penalty based on the PSB's conclusions that there had been "mismanagement of power supply options" and because of "the Company's failed efforts to acquire all cost-effective energy efficiency resources." The Company anticipates filing for future rate increases when cost containment efforts are insufficient to offset the increasing cost of providing service, primarily purchased power. New Hampshire Retail Rates. Connecticut Valley's retail rate tariffs, approved by the NHPUC, contain a fuel adjustment clause (FAC) and a purchased power cost adjustment clause (PPCA). Under these clauses, Connecticut Valley recovers its estimated annual costs for purchased energy and capacity, respectively, which are reconciled when actual data is available. On the basis of estimates of costs for 1995 and reconciliations from 1994, the combined PPCA and FAC will result in a decrease in revenues of approximately $489,000 or 2.7% for 1995. Connecticut Valley's retail rate tariffs, approved by the NHPUC, also provide for Conservation and Load Management Percentage Adjustments (C&LMPA) for residential and commercial/industrial customers in order to collect deferred and forecast C&LM costs. The forecast costs are updated effective January 1 of each year and are reconciled when actual data are available. In addition, Connecticut Valley's earnings are made whole through recovery of lost revenues related to fixed costs which Connecticut Valley loses as a result of C&LM activities. However, the Company is not made whole because the fixed costs of the wholesale transaction between the Company and Connecticut Valley are not recovered when C&LM activities occur in Connecticut Valley. The C&LMPA further provides for the future recovery of shareholder incentives related to past C&LM activities. In October 1994 Connecticut Valley filed its annual update of the 1995 C&LMPA rates. When the schedule for hearings pointed to an effective date of April 1, 1995, Connecticut Valley petitioned to let revised C&LMPA rates become effective January 1, 1995. Such C&LMPA rates would be lower than they would be at the April 1 effective date. In addition, the January 1 effective date would coincide with the effective date of the FAC and PPCA so that one rate change would be experienced by the customers. Connecticut Valley also felt that further changes to the C&LMPA rates might not be necessary effective April 1, 1995 depending on the outcome of the hearings. The NHPUC allowed a $48,000 or 0.3% increase in the C&LMPA rates effective January 1, 1995. Connecticut Valley also purchases power from several small power producers who own qualifying facilities as defined by the Public Utility Regulatory Policies Act of 1978. In 1994, under long-term contracts with these qualifying facilities, Connecticut Valley purchased 4.3 MW, of which 3.9 MW were purchased from a New Hampshire/Vermont solid waste plant owned by Wheelabrator Claremont Company, L.P., (Wheelabrator). Connecticut Valley has filed a complaint with the Federal Energy Regulatory Commission (FERC) stating its concern that Wheelabrator has not been a qualifying facility since the plant began operation. Potential outcomes of this complaint could result in a refund, with interest, of past purchased power costs as well as lower future costs. Any refunds and lower future costs are likely to be reflected in the FAC. Pursuant to a Company request, the NHPUC issued an accounting order allowing deferral of litigation costs related to this FERC complaint, with recovery to be determined when the outcome of the FERC complaint is known and petitioned for implementation. Wholesale Rates. The Company sells firm power to Connecticut Valley under a wholesale rate schedule based on forecast data for each calendar year which is reconciled to actual data annually. The Company filed with the FERC for a revenue increase of $466,000 or 4.7% for 1995 power costs. The rate schedule provides for an automatic update of annual rates, as well as the subsequent reconciliation to actual data. As ordered by the NHPUC in Connecticut Valley's 1994 C&LMPA docket, the Company entered into negotiations with the NHPUC Staff to redesign the RS-2 wholesale rate under which Connecticut Valley purchases power from the Company. The redesign features marginal cost based energy and capacity charges for all energy and capacity purchases above or below a base level. Such negotiations concluded at the end of 1994. A summary report was filed with the NHPUC on February 13, 1995. The NHPUC has yet to issue an order approving the summary report. Connecticut Valley's costs of wholesale power will be lower than they otherwise would be only if Connecticut Valley's growth rate exceeds that of the Company's Vermont retail operations. Another of the Company's requirements wholesale customers, New Hampshire Electric Cooperative, Inc., with an average monthly peak of 2.8 MW has given the Company notice of termination of service under FERC Electric Tariff, First Revised Volume No. 1, effective in March 1995. The Company has entered into negotiations to provide transmission service and will submit a bid to supply power under another contract. POWER RESOURCES Overview. The Company's and Connecticut Valley's energy production, which includes generated and purchased power, required to serve their retail and firm wholesale customers was 2,410,703 MWH for the year ended December 31, 1994. The maximum one-hour integrated demand during that period was 414.6 MW, which occurred on January 17, 1994. The Company's and Connecticut Valley's total production in 1994, including production related to all resale customers, was 3,926,382 MWH. The following tabulation shows the sources of such energy and capacity available to the Company and Connecticut Valley for the year ended December 31, 1994 and at the time of the Company's own peak. For additional information related to purchased power costs, refer to Item 7 herein.
Year Ended December 31, 1994 _________________________________________________ Effective Generated and Capability Purchased at 12 Month Generated Time of the Average and Purchased Company's Peak __________ _________________ ______________ MW MWH % MW % WHOLLY-OWNED PLANTS: Hydro....................... 42.3 193,002 4.9 17.7 4.3 Diesel and Gas Turbine..... 28.4 403 - - - JOINTLY OWNED PLANTS: Millstone #3................ 19.8 163,069 4.2 18.8 4.5 Wyman #4.................... 11.0 7,180 0.2 9.4 2.3 McNeil...................... 10.5 18,166 0.5 10.0 2.4 EQUITY OWNERSHIP IN PLANTS: (Purchased) Vermont Yankee.............. 156.5 1,315,598 33.5 105.3 25.4 Maine Yankee................ 15.7 118,929 3.0 15.0 3.6 Connecticut Yankee.......... 11.5 76,035 1.9 11.1 2.7 MAJOR LONG-TERM PURCHASES: Hydro-Quebec................ 179.2 704,742 17.9 68.9 16.6 Merrimack #2................ 47.0 280,107 7.1 23.8 5.8 OTHER PURCHASES: System and other purchases.. 28.3 333,654 8.5 18.0 4.3 Small Power Producers....... 34.4 190,613 4.9 16.6 4.0 Unit Purchases.............. 90.0 244,148 6.2 77.3 18.6 Entitlement Purchases....... 0.2 14,711 0.4 - - Pumped Storage Hydro........ 4.2 2,932 0.1 - - NEPEX......................... - 263,093 6.7 22.7 5.5 ----- --------- ----- ----- ----- TOTAL.................... 679.0 3,926,382 100.0 414.6 100.0 ===== ========= ===== ===== =====
Wholly Owned Plants. The Company owns and operates 18 hydroelectric generating facilities in Vermont which have an aggregate nameplate capability of 37.5 MW. It also leases and operates hydroelectric facilities at Bradford and East Barnet, Vermont. These two plants have a nameplate capability of 1.5 MW and 2.2 MW, respectively. In addition, the Company owns and operates diesel and gas turbine generating facilities on a peaking or standby basis having a combined nameplate capability of 28.9 MW. Jointly Owned Plants. The Company has a joint-ownership interest in the following generating and transmission plants:
Net Fuel MW Generation Load Net Plant Name Location Type Ownership Entitlement MWH Factor Investment Millstone #3 Waterford, Nuclear 1.73% 20 163,069 93% $59,392,685 Connecticut Wyman #4 Yarmouth, Oil 1.78% 11 7,179 7% $ 1,743,332 Maine Joseph C. McNeil Burlington, Various 20.00% 10.6 18,166 20% $ 9,888,996 Vermont Highgate Trans- Highgate Springs, 46.08% N/A N/A N/A $ 9,377,519 mission Facility Vermont
The Company has a 1.73% joint-ownership interest in Millstone #3, an 1149 MW nuclear generating facility located in Waterford, Connecticut, which commenced commercial operation in April 1986. Under the Millstone Sharing Agreement, the Company is entitled to receive its share of the output and capacity of the facility and is responsible for its share of the operating expenses, including decommissioning. Based on a 1992 study, total estimated decommissioning obligation at December 31, 1994 was approximately $449 million and the funded obligation was about $76 million. The Company's share for the total obligation and funded obligation was approximately $7.8 million and $1.1 million, respectively. The Company also has a 1.78% joint-ownership interest in Wyman #4, a 619 MW oil-fired generating facility located in Yarmouth, Maine and a 20% joint-ownership interest in McNeil, a 53 MW wood, gas and oil-fired generating facility located in Burlington, Vermont. The Company receives its share of the output and capacity from these generating plants and is responsible for its share of the operating expenses of each. Finally the Company has a 46.08% joint-ownership interest in the Highgate Convertor, a 200 MW facility located in Highgate Springs, Vermont. This facility is directly connected to the Hydro-Quebec System to the north of the Convertor and to the VELCO System for delivery of power to Vermont Utilities. This facility can deliver power either direction, but normally delivers power from Hydro-Quebec to Vermont. Equity Ownership in Plants. In 1966 the Company purchased 35% of the Vermont Yankee common stock and was entitled to receive a like percentage of the output of the unit. In late 1969 and early 1970, the Company sold at cost a combined total of 3.7% of its original equity investment and currently resells at cost 4.5% of its entitlement. The Company's current equity ownership and net entitlement percentages are 31.3 and 30.5, respectively. The Atomic Energy Commission, now the NRC, granted a full-term (40-year), full power operating license for the Vermont Yankee plant, which was to expire in December 2007. On December 17, 1990 the NRC issued an amendment of the operating license extending its term to March 2012. Vermont Yankee's net capability is 514 MW of which 156.7 MW (See Note 1) is the Company's net entitlement. Vermont Yankee's plant performance for the past five years is shown below: Availability Capacity Factor Factor (See Note 2) (See Note 3) 1990......................... 84.4 80.3 1991......................... 93.6 91.2 1992......................... 87.5 82.7 1993......................... 78.3 74.9 1994......................... 98.2 95.8 As described in the overview section above, the Company is a stockholder, together with other New England electric utilities, in the following three nuclear generating companies: Maine Yankee Atomic Power Company, Connecticut Yankee Atomic Power Company and Yankee Atomic Electric Company. Net Company's Company Capability Entitlement Maine Yankee (See Note 4)..... 847 MW 2.0% - 16.9 MW Connecticut Yankee............ 582 MW 2.0% - 11.6 MW Yankee Atomic................. (See Note 5) (See Note 5) The Company is obligated to pay its entitlement percentage of the operating expenses of Vermont Yankee and the other Yankee companies, including depreciation and a return on invested capital, whether or not the plant is operating. The Company is obligated to contribute its entitlement percentage of the capital requirements of Vermont Yankee and Maine Yankee and has a similar, but more limited obligation to Connecticut Yankee. The Company's entitlement percentages are identical to the ownership percentages except that Vermont Yankee's entitlement percentage is 35%. For additional information regarding Equity Ownership in Plants, refer to Item 8 herein. _______________ Notes: (1) Currently, the Company resells at cost, through VELCO, 23.2 MW of its original entitlement to other Vermont utilities. (2) "Availability Factor" means the hours that the plant is capable of producing electricity divided by the total hours in the period. (3) "Capacity Factor" means the total net electrical generation divided by the product of the maximum design electrical rating capacity of 514 multiplied by the total hours in the period. (4) Currently, the Company resells at cost 1.8 MW of its entitlement to certain municipal utilities in Massachusetts. (5) Yankee Atomic permanently ceased power operations of the Yankee Nuclear Power Station. See Decommissioning Expense discussion below. Decommissioning Expense. Each of the Yankee companies and Millstone #3 has developed its own estimate of the cost of decommissioning its nuclear generating unit. These estimates vary depending upon the method of decommissioning, economic assumptions, site and unit specific variables, and other factors. Each of the Yankee Companies includes charges for decommissioning costs in the cost of capacity, as approved by the FERC. Decommissioning costs for Millstone #3 are included in depreciation expenses. The Company's entitlement percentage of decommissioning costs for Vermont Yankee, Connecticut Yankee, Maine Yankee, Yankee Atomic and Millstone #3 is as follows (dollars in millions): CVPS's Total Share of Date of Estimated CVPS's Funded Study Obligation Obligation Obligation Nuclear generating companies: Vermont Yankee 1993 $312.7 $109.4 $40.3 Maine Yankee 1993 $316.6 $6.3 $2.2 Connecticut Yankee 1992 $294.2 $5.9 $3.0 Yankee Atomic 1994 $370 $13.0 $3.6 Millstone #3 1992 $449 $7.8 $1.1 On February 26, 1992, the Board of Directors of Yankee Atomic decided to permanently discontinue operation of their plant, and, to decommission the facility. The Company relied on Yankee Atomic for less than 1.5% of its system capacity. Presently, purchased power costs billed to the Company by Yankee Atomic, which include a provision for ultimate decommissioning of the unit, are being collected from the Company's customers via existing retail rate tariffs. On March 18, 1993, the FERC approved a settlement agreement regarding the decommissioning plan, recovery of plant investment and all issues with respect to prudency of the decision to discontinue operation which included $247 million of decommissioning costs in 1992 dollars. Based on a new study developed by Yankee Atomic, decommissioning costs are approximately $370 million in 1994 dollars. The increase results primarily from delays in finding a permanent repository for its spent nuclear fuel. The new study is subject to FERC approval. Yankee Atomic is currently collecting from sponsors decommissioning costs based on $247 million in 1992 dollars and anticipates to begin collecting from sponsors based on $370 million in November 1995. The Company's share of the increase in decommissioning costs is approximately $4.3 million. The Company's total current share of its cost with respect to Yankee Atomic's decision to discontinue operation is approximately $12.4 million. This amount is reflected in the accompanying balance sheet both as a regulatory asset and deferred power contract obligation (current and non- current). The Company believes that its proportionate share of Yankee Atomic costs will be recovered through the regulatory process and, therefore, the ultimate resolution of the premature retirement of the plant will not have a material adverse effect on the Company's earnings or financial condition. Although the estimated costs of decommissioning are subject to change due to changing technologies and regulations, the Company expects that the nuclear generating companies' liability for decommissioning, including any future changes in the liability, will be recovered in their rates over their operating or license lives. See Item 8 herein. In 1982 the State of Maine enacted legislation that requires the development of a decommissioning trust fund for the Maine Yankee nuclear plant. This statute also provides that, if the trust has insufficient funds to decommission the plant, the licensee, Maine Yankee, is responsible for the deficiency and, if the licensee is unable to provide the entire amount, the owners of the licensee are jointly and severally responsible for the remainder. The definition of owner under the statute includes the Company. It is expected that any payments required by the Company under these provisions would be recovered through rates. Nuclear Fuel. Vermont Yankee has approximately $133 million of "requirements based" purchase contracts for nuclear fuel needs to meet substantially all of its power production requirements through 2002. Under these contracts, any disruption of operating activity would allow Vermont Yankee to cancel or postpone deliveries until actually needed. Vermont Yankee has contracted for uranium enrichment services through 2002. Vermont Yankee also has an enrichment contract with the DOE which expires in 2001. However, Vermont Yankee has exercised its right to partially terminate the DOE contract for the period 1990 to 1997. Vermont Yankee has a contract with the United States Department of Energy ("DOE") for the permanent disposal of spent nuclear fuel. Under the terms of this contract, in exchange for the one-time fee discussed below and a quarterly fee of $.001 per KWH of electricity generated and sold, the DOE agrees to provide disposal services when a facility for spent nuclear fuel and other high-level radioactive waste is available, which is required by contract to be prior to January 31, 1998. The DOE contract obligates Vermont Yankee to pay a one-time fee of $39.3 million for disposal costs for all spent fuel discharged through April 7, 1983. Although such amount has been collected in rates from the Sponsors, Vermont Yankee has elected to defer payment of the fee to the DOE as permitted by the DOE contract. The fee must be paid no later than the first delivery of spent nuclear fuel to the DOE. Interest accrues on the unpaid obligation based on the thirteen-week Treasury Bill rate and is compounded quarterly. Through 1994 Vermont Yankee accumulated approximately $54 million in an irrevocable trust to be used exclusively for defeasing this obligation at some future date provided the DOE complies with the terms of the aforementioned contract. On December 31, 1991, the DOE issued a final rule modifying the Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste. The amended final rule conforms with a March 17, 1989 ruling of the U.S. Court of Appeals for the District of Columbia that the $.001 per KWH fee in the Standard Contract should be based on net electricity generated and sold. The impact of the amendment on Vermont Yankee was to reduce the basis for the fee by 6% on an ongoing basis and to establish a receivable from the DOE for previous overbillings and accrued interest. Vermont Yankee has recognized in its rates the full impact of the amended final rule to the Standard Contract. The DOE is refunding the overpayments, including interest, to utilities over a four-year period ending in 1995 via credits against quarterly payments. Interest is based on the 90-day Treasury Bill Auction Bond Equivalent and will continue to accrue on amounts remaining to be credited. At December 31, 1994, 1993 and 1992 approximately $.0, $.9 and $1.6 million in principal and interest respectively, is reflected in other accounts receivable in the Vermont Yankee's Balance Sheet. The average energy and capacity costs to the Company of energy generated at the Vermont Yankee plant was 4.60, 3.69, 4.71, 5.34 and 3.77 cents per KWH for the years 1990 through 1994, respectively. The Company has been advised by the companies operating other nuclear generating stations in which the Company has an interest that they have contracted for certain segments of the nuclear fuel production cycle through various dates. Contracts for the remainder of the fuel cycle will be required but their availability, prices and terms cannot be predicted. Nuclear Liability and Insurance. The Price-Anderson Act currently limits public liability from a single incident at a nuclear power plant to $8.9 billion. Beyond that a licensee maintains an indemnity agreement with the Nuclear Regulatory Commission, but subject to Congressional approval. The first $200 million of liability coverage is the maximum provided by private insurance. The Secondary Financial Protection Program is a retrospective insurance plan providing additional coverage up to $8.7 billion per incident by assessing $79.3 million against each of the 110 reactor units that are currently subject to the Program in the United States, limited to a maximum assessment of $10 million per incident per nuclear unit in any one year. The maximum assessment is to be adjusted at least every five years to reflect inflationary changes. The Company's interests in the nuclear power units are such that it could become liable for an aggregate of approximately $4.4 million of such maximum assessment per incident per year. Major long-term purchases. Canadian Purchases - Under various contracts, the Company purchases from Hydro-Quebec capacity and associated energy. Under the terms of these contracts, the Company is required to pay certain fixed capacity costs whether or not energy purchases above a minimum level described in the contracts are made. Such minimum energy purchases must be made whether or not other less expensive energy sources might be available. The Company will receive varying amounts of capacity and energy from two Hydro-Quebec contracts during the period 1995-2016. The contract between a group of Vermont utilities (Vermont Joint Owners) and Hydro-Quebec provides power over the entire period while a contract between the state of Vermont and Hydro-Quebec terminates on September 22, 1995. Additional contracts were negotiated between the Company and Hydro-Quebec which in effect reduce the amount of power the Company is required to purchase, as well as one signed in 1994 which reduces the cost to the Company. The maximum net amount of capacity that the Company will purchase during the term of the agreements is 142.7 MW. The total commitment in the next five years to purchase power under these contracts is approximately $321 million, less approximately $112 million of power sellbacks, yielding a net cost of approximately $209 million. Early in the Vermont Joint Owners contract, two sellback contracts were negotiated which reduced the net purchase of Hydro-Quebec power as well as delayed the purchase of about 24 MW of capacity and associated energy. In 1994, the Company negotiated a third sellback arrangement whereby the Company receives an effective discount on up to 70 MW of capacity in the 1996 contract year (declining to 30 MW in the 1999 contract year) in exchange for the right of Hydro-Quebec to reduce capacity deliveries by up to 50 MW beginning as early as 2004 until 2015, and the ability to reduce the amounts of energy delivered from a 75% to a 50% load factor up to five years beginning in 2000. Details of these purchases and sell-back contracts are described in the table that follows (dollars in thousands):
State of VT Contract Schedule A Schedule C-1 Schedule C-2 Schedule B Schedule C-4 Capacity in MW 69 25 31 21 92 24 Contract period 1985-1995 1991-1995 1991-2012 1992-2012 1995-2015 1996-2016 Minimum energy capacity factor 50.0% 50.0% 75.0% 75.0% 75.0% 75.0% Minimum annual energy in MWH 220,752 79,844 201,863 138,141 606,069 155,801 Actual 1994 energy charges $6,750 $3,266 $4,848 $3,422 N/A N/A Est.1st full yr. future energy charges $5,662 $2,635 $4,893 $3,349 $15,204 $4,140 Est. avg. % change from 1st yr. future (100.0)% (100.0)% 3.5% 3.5% 3.5% 3.5% (1995-1996) (1995-1996) (1995-2012) (1995-2012) (1995-2015) (1996-2016) Actual 1994 annual capacity charge $4,511 $2,448 $7,041 $5,065 N/A N/A Est.1st full yr.future capacity charge $3,237 $1,744 $7,271 $5,041 $23,246 $6,189 Est. avg. % change from 1st yr. future (100.0)% (100.0)% - - - - (1995-1996) (1995-1996) (1995-2012) (1995-2012) (1995-2015) (1996-2016) Actual 1994 avg. cost in cents/KWH 2.8 5.2 5.9 6.0 N/A N/A Est. 1st full yr. future avg. cost in cents/KWH 2.7 5.5 6.0 6.1 6.3 6.6 Est. avg. % change from 1st yr future N/A N/A 1.4% 1.4% 1.4% 1.4% (1995-1996) (1995-1996) (1995-2012) (1995-2012) (1995-2015) (1996-2016) 1994 Sell-back in MW 25 30 20 Actual 1994 sell-back revenues $5,714 $9,354 $6,664 Expected sell-back #1 revenues 25 MW 25 MW 25 MW 100% of costs 100% of costs 100% of costs Est. 1st year future annual $4,379 $1,650 $1,090 (1995) (1995) (1995) Est. out-yrs. average annual N/A $11,420 Est. average annual % change (100.0)% 1.4% (1996) (1996-2012) Expected sell-back #2 revenues up to 30 MW 20 MW Approx. 78% of costs on average Estimated 1995 annual $7,740 $6,250 Estimated 1996 annual $1,470 $5,020 Expected sell-back #3 revenues up to 70 MW Approx. 90% of capacity costs Est. 1st contract year future $15,960 Est. 2nd contract year future $11,400 Est. 3rd contract year future $9,120 Est. 4th contract year future $6,840
Merrimack #2 - Merrimack #2 is a 320 MW capacity coal-fired steam unit located in Bow, New Hampshire, and is owned and operated by Public Service Company of New Hampshire ("PSNH"). In 1968 VELCO contracted with PSNH to purchase a block of 100 MW of the plant's output for 30 years and to pay a proportionate share of the plant's actual capacity and operating costs. Under an agreement dated February 10, 1968, between the Company and VELCO, the Company buys from VELCO at VELCO's cost 47.0 MW of that block for a 30-year period commencing May 1, 1968. Northeast Utilities (NU) has acquired all of PSNH's assets including the Merrimack #2 plant, pursuant to a merger agreement in 1991. The Merrimack #2 unit is subject to air emission limits for sulfur dioxide ("SO2") and Nitrogen Oxides ("NOx") starting in 1995, mandated by the Clean Air Act Amendments of 1990 ("CAAA"). The CAAA establishes SO2 allowances to reduce SO2 emissions. PSNH expects to have sufficient SO2 allowances to meet CAAA SO2 requirements. If any gains are realized from the sale of excess allowances, the Company will receive its proportionate share from VELCO. Likewise, the Company will pay its share of any allowances purchased. The CAAA NOx limits for Merrimack #2 are specified in Administrative Rules established by the state of New Hampshire. The NOx limits specified in the Rules that occur during the VELCO Contract term are effective May 31, 1995. PSNH expects to comply with the Merrimack #2 NOx limits by installing Selective Catalytic Reduction ("SCR") equipment by May 31, 1995. The estimated SCR capital cost is $19 million and the estimated increase in operating costs from the SCR are $1.6 million annually. The SCR is expected to have a negligible effect on unit fuel efficiency. The Company will share on a pro-rata basis the SCR based on its share of the VELCO contract. The total cost to the Company of energy generated by the Merrimack #2 unit was 3.21 cents per KWH in 1994. The 1994 annual capacity factor was 68%. Other Purchases. Cogeneration/Small Power Qualifying Facilities - A number of small producers using hydroelectric, biomass, and refuse-burning generation are currently producing energy that the Company is purchasing. For the year ended December 31, 1994, the Company received 190,613 MWH from these sources for which it paid $18,893,051. The Company expects to purchase approximately 42 MW in each year 1995 through 1999. The total commitment in the next five years to purchase power from these qualifying facilities is approximately $105.9 million. The Company continues to work with customers exploring the opportunities for either cogeneration by customers or the purchase by the Company of the output of small power qualifying facilities. Cogeneration is the production of electricity and usable thermal energy from the same fuel. New York Power Authority - Prior to July 1, 1985, under agreements between the State and NYPA, the Department purchased St. Lawrence and Niagara Project power. The Company in turn contracted with the Department to purchase the St. Lawrence and Niagara Project power at cost, and credited the lower cost thereof to certain of the Company's retail customers. From July 1, 1985 through July 31, 1993, the St. Lawrence and/or Niagara Project power was purchased by the DPS and sold directly to residential customers in the Company's service territory. The St. Lawrence Project power was reduced to one MW in July 1994 and will continue to be available to the Department at this level through 2002. New England Power Pool - The Company, through VELCO, is a participant in the New England Power Pool ("NEPOOL"), which is open to all investor-owned, municipal and cooperative utilities in New England under an agreement in effect since 1971. The NEPOOL Agreement provides for joint planning and operation of generating and transmission facilities and also incorporates generating capacity reserve obligations and provisions regarding the use of major transmission lines and payment for such use. Because of its participation in NEPOOL, the Company's operating revenues and costs are affected to some extent by the operations of other participants in that agreement. The primary purposes of NEPOOL are to provide energy reliability for the region, centralized economic dispatch and coordination of generation planning and construction by the individual participants. The Company's peak demand for 1994 occurred on January 17, 1994 and equaled 414.6 MW. At the time of this peak, the Company had a reserve margin of 31.9%. NEPOOL's peak for the year occurred on July 21, 1994 and totaled 20,519 MW. NEPOOL had a 21% reserve margin at the time of its 1994 peak. Power Resources - Future. The Company purchases about 90% of the power it needs, including the power it receives as part owner of the various Yankee nuclear plants. In 1994, about 30% of the Company's purchased power came from renewable sources, primarily water and wood. The Company's core business has no plans at this time to build any new generating facilities to supply power, instead it intends to satisfy customers' energy needs through a combination of power purchases and energy-efficiency services. Therefore, the Company uses a process called "integrated resource planning," or IRP, to help determine the resources necessary to meet future power needs. IRP is an evolving, on-going process. An interdisciplinary team representing various functional planning area works together continuously to coordinate and integrate planning. The primary objective of IRP is to provide reliable, least-cost energy resources consistent with the Company's policy to protect the environment. The choice of least-cost resources explicitly seeks a balance between traditional supply resources and energy efficiency investments with the Company's customers. Flexibility and diversity are investment guidelines designed to provide least- cost resources over a broad range of possible futures. The resource plan calls for investments in energy efficiency through the 1990's with additional investments in energy-efficiency programs or power purchases beginning after the year 2000. The energy efficiency and power purchase commitments made in the late 1980's served the Company and its shareholders well during the recent recessionary downturn compared to the alternative practice of building power plants. The resources from developers of cogeneration projects were deferred due to decreased need. Certain power purchases from Hydro-Quebec were deferred until 1996. Energy efficiency investments associated with new customers and new end-uses naturally declined during the period of reduced load growth and new deferrable efficiency investments were postponed. Based upon current load forecasts, the Company expects to be able to satisfy its load requirements into the first decade of the next century through its ownership in various generating facilities and purchases from various other New England, New York, Canadian utilities, Independent Power Producers, and Conservation and Load Management. Current load and capacity forecasts for NEPOOL indicate adequate reserves and availability of power for the region as a whole and the Northeast well past the year 2000. TRANSMISSION Vermont Electric Power Company, Inc. Since 1958 VELCO has been engaged in the operation of a high-voltage transmission system which interconnects the electric utilities in the State including the areas served by the Company. VELCO is also engaged in the business of purchasing bulk power for resale, at cost, to the Company and the other electric utilities (cooperative, municipal and investor-owned) in Vermont (the "Vermont utilities") and transmitting such power for the Vermont utilities. Refer to Item 8 herein for a discussion of the 1985 Four Party Agreement between the Company, VELCO and two other major distribution companies in Vermont. VELCO provides transmission services for the State of Vermont, acting by and through the Department, and for all of the electric distribution utilities in the State of Vermont. VELCO is reimbursed for its costs (as defined in the agreements relating thereto) for the transmission of power for such entities. The Company, as the largest electric distribution utility in Vermont, is the major user of VELCO's transmission system. The Company owns 34,083 shares (56.8%) of the Class B common stock of VELCO, the balance being owned by other Vermont utilities. Each share of Class B common stock has one vote. The Company also owns 46,624 shares (46.6%) of the Class C preferred stock of VELCO, the balance being owned by other Vermont utilities. Shares of Class C preferred stock have no voting rights except the limited right to vote VELCO's shares of common stock in Vermont Electric Transmission Company, Inc. if certain dividend requirements are not met. NEPOOL Arrangements. VELCO participates for itself and as agent for the Company and twenty-one other Vermont utilities in NEPOOL (see "Business-New England Power Pool" for additional details). Capitalization. VELCO has authorized 92,000 shares of Class B common stock, $100 par value, of which 60,000 shares were outstanding on December 31, 1994 and 125,000 shares of Class C preferred stock, of which 100,000 shares were outstanding at December 31, 1994. On that date there were authorized and outstanding three issues of First Mortgage Bonds, aggregating $37,999,000, issued under an Indenture of Mortgage dated as of September 1, 1957, as amended, between VELCO and Bankers Trust Company, as Trustee (the "VELCO Indenture"). The issuance of bonds under the VELCO Indenture is unlimited in amount but is subject to certain restrictions. New transmission and associated facilities will be required by VELCO in 1995 to transmit power to Vermont utilities. The costs of such facilities are presently estimated at $2,910,000 including allowance for funds used during construction calculated at a rate of approximately 4.7%. For a description of VELCO's properties, see "VELCO" under Item 2. Management. In 1957 VELCO entered into an agreement (the "Three-Party Agreement") whereby the Company and Green Mountain agreed that, if VELCO transmits firm power owned by it (which it does not now do), they would have the right to purchase all such firm power not sold to others with their consent and the obligation to pay (in agreed proportions) amounts sufficient, together with VELCO's revenues from other sources, to pay all VELCO's operating expenses, debt service and taxes. In connection with the transfer to VELCO of entitlements of the output of the Vermont Yankee plant, the Company and Green Mountain entered into a Three-Party Transmission Agreement, dated November 21, 1969, as amended, whereby they have agreed to pay transmission charges thereon in an aggregate amount sufficient, with VELCO's other revenues, to pay all of VELCO's expenses including capital costs. VELCO's Bonds are secured by a first mortgage on the major part of VELCO's transmission properties and by the assignment to the Trustee of the Three-Party Agreement, the Three-Party Transmission Agreement and certain other contracts as specified in the VELCO Indenture. See Item 8 herein for information relating to the 1985 Four-Party Agreement. Vermont Electric Transmission Company, Inc. In connection with the importing of Canadian power, VELCO has created a wholly owned subsidiary, Vermont Electric Transmission Company, Inc. ("VETCO"), to construct, finance and operate the Vermont portion of the transmission line which connects the Hydro-Quebec lines at the Canadian border to the lines of New England Electric Transmission Corporation, a subsidiary of New England Electric System, at the New Hampshire border on the Connecticut River. VETCO has entered into a Capital Funds Agreement with VELCO pursuant to which VETCO may request up to $12,500,000 (of which $10,000,000 was contributed as of December 31, 1994) of capital contributions from VELCO and has entered into Transmission Line Support Agreements with 20 New England utilities, including VELCO as representative for 15 Vermont utilities, pursuant to which those utilities have agreed to pay the transmission line costs, whether or not the line is operational. VELCO, as such representative, has entered into a similar agreement with New England Electric Transmission Corporation with respect to the New Hampshire portion of the DC transmission line and the DC/AC converter station. VELCO has entered into a Vermont Participation Agreement and a Capital Funds Support Agreement with 15 Vermont distribution utilities, including the Company, pursuant to which those utilities assume their pro rata share (based upon 1980 sales) of the benefits and obligations of VELCO under the Support Agreements and the VETCO Capital Funds Agreement. VETCO has authorized 10 shares of common stock, $100 par value, all of which were outstanding on December 31, 1994 and owned by VELCO, with each share having one vote. During 1986 VETCO paid off its construction financing by issuing $37,000,000 of secured notes, maturing in 2006, and receiving a $9,999,000 equity contribution from VELCO. The notes are secured by a First Mortgage on the major part of VETCO's transmission properties and by the assignment of its rights under the Support Agreements. Phase I and Phase II. The Company participated with other electric utilities in the construction of the Phase I Hydro-Quebec transmission facilities in northeastern Vermont, which were completed at a total cost of approximately $140 million. Under a support agreement relating to the Company's participation in the facilities, the Company is obligated to pay its 4.42% share of Phase I Hydro-Quebec capital costs over a twenty-year recovery period through and including 2006. Phase II transmission line began operation in November 1990. This service increased the maximum capacity of the Hydro- Quebec 450 KV DC line from 690 MW to 2000 MW and extended Phase I line from Comerford, New Hampshire to Sandy Pond, Massachusetts. The Company uses this transmission path to deliver a portion of the Company's long-term Hydro-Quebec firm power contract. The project cost approximately $487 million. Under a similar support agreement, the Company is obligated to pay its 5.132% share of Phase II Hydro-Quebec capital costs over a 25-year recovery period through and including 2015. Under the support agreement, the Company is eligible for savings associated with certain energy transactions by NEPOOL, which will offset the Company's support cost obligations. CONSERVATION AND LOAD MANAGEMENT The primary purpose of Conservation and Load programs is to offset the need for long-term power supply and delivery resources that are more expensive to purchase or develop than customer-efficiency programs. Expenditures in 1993 and 1994 were $9.9 million and $6.2 million, respectively, and are expected to be approximately $6.0 million in 1995. The amount of expenditures will be adjusted annually, based on the cost-effectiveness of programs compared to other options. The October 31, 1994 PSB Rate Order allowed the recovery of $13.9 million of C&LM expenditures and lost revenues, deferred since the prior PSB rate order which became effective September 1, 1991, over a five-year period beginning November 1, 1994 through October 31, 1999. The Company had requested the recovery of $14.6 million of such deferred C&LM expenditures and lost revenues. Accordingly, during 1994, the Company wrote-off approximately $.7 million of costs disallowed by the PSB in its October 31, 1994 Rate Order. For additional information regarding the PSB Rate Order, see Item 7 herein. In addition, the Company is involved in several cases in Vermont related to C&LM activities including the role of fuel-switching as a C&LM resource and the level of externalities to be recognized in Integrated Resource Planning and C&LM cost-effectiveness testing. On October 31, 1994, the Company also filed its Integrated Resource Plan, which describes the Company's long-term resource acquisition plans including C&LM. Currently, the Company is involved in cooperative efforts with the DPS to settle many issues related to C&LM. Currently the New Hampshire Public Utilities Commission (NHPUC) staff and the Company have reached agreement on most of the issues concerning the 1995 C&LM expenditures and related lost revenues for the Company's wholly owned New Hampshire subsidiary, Connecticut Valley Electric Company Inc. These expenditures and lost revenues are recovered along with shareholder incentives for 1994 program activity through a C&LM percentage adjustment clause of January 1 through December 31, 1995. The NHPUC has approved these rates in an interim Order dated December 13, 1994. The Company provides information to customers to help them use electricity more efficiently, first by ensuring that the customers are on the correct rate and have incorporated efficiency and conservation measures; secondly, by continually evaluating new energy management systems and other technologies to identify and develop programs to address new market opportunities and the competitive strengths of electricity. DIVERSIFICATION Catamount Energy Corporation (Catamount) was formed for the purpose of investing in non-regulated energy-related projects. Currently, Catamount, through its wholly owned subsidiaries, has interests in four operating independent power projects located in Rumford, Maine; East Ryegate, Vermont; Hopewell, Virginia; and Williams Lake, British Columbia, Canada. Effective January 1, 1993, the Company formed a new non-utility subsidiary, SmartEnergy Services, Inc. The purpose of this subsidiary is to cost effectively provide reliable, energy efficient products and services, including the rental of electric water heaters. For additional information regarding the Company's diversification activities, see Item 8 herein. The Company is continually assessing additional diversification opportunities. Any new investments will be financed primarily through a combination of debt and equity. EMPLOYEE INFORMATION A Local Union No. 300 affiliated with the International Brotherhood of Electrical Workers represents operating and maintenance employees of the Company and its wholly owned subsidiaries. At December 31, 1994 the Company and its wholly owned subsidiaries employed 696 persons, of which 241 are represented by the union. On December 31, 1992, the Company and its employees represented by the union agreed to a three-year contract, which provides for an annual wage increase of 3.95% for a three year period ending December 31, 1995. In the first quarter of 1994, the Company offered and recorded an obligation related to a Voluntary Retirement Program (VRP). The VRP was accepted by 42 employees. The estimated benefit obligation for the VRP as of December 31, 1994 is about $4.5 million. This amount consists of pension benefits and postretirement medical benefits of $2.2 million and $2.3 million, respectively. Additionally, 32 employees accepted a Voluntary Severance Program (VSP) offered by the Company. Eligible employees had until April 22, 1994 to apply. The Company also announced a layoff of 20 employees on May 9, 1994. VSP and layoff obligations of $.8 million and $.2 million, respectively, were recorded in the second quarter of 1994. At December 31, 1994, the benefit obligation for the VSP was about $96,000. The VRP, VSP and layoff combined with attrition since mid-1993, yields a total work force reduction of approximately 14%. In the October 31, 1994 PSB Rate Order, the Company was allowed rate recovery of this restructuring cost over a five-year period. The unamortized balance of these costs was approximately $4.8 million at December 31, 1994. SEASONAL NATURE OF BUSINESS The Company experiences its heaviest loads in the colder months of the year. Winter recreational activities, longer hours of darkness and heating loads from cold weather usually cause the Company's peak of electric MWH sales to occur in January or late December. For additional information regarding the seasonal nature of business see Item 8 herein. Item 2. Properties. The Company. The Company's properties are operated as a single system which is interconnected by transmission lines of VELCO, New England Power Company and PSNH. The Company owns and operates 21 small generating stations with a total current nameplate capability of 66,370 KW, has a 1.78% joint- ownership interest in an oil generating plant in Maine, has a 20% joint- ownership interest in a wood, gas and oil-fired generating plant in Vermont, has a 1.73% joint-ownership interest in a nuclear generating plant in Connecticut, has a 46.08% joint-ownership interest in a transmission interconnection with Hydro-Quebec in Vermont and leases and operates two hydro generating stations from wholly owned subsidiaries, Bradford and East Barnet, 1,500 KW and 2,200 KW, respectively. The electric transmission and distribution systems of the Company include about 614 miles of overhead transmission lines, about 7,199 miles of overhead distribution lines and about 213 miles of underground distribution lines which are located in Vermont except for about 23 miles of transmission lines which are located in New Hampshire and about two miles of transmission lines which are located in New York. Connecticut Valley. Connecticut Valley's electric properties consist of two principal systems in New Hampshire which are not interconnected with each other but each of which is connected directly with facilities of the Company. The electric systems of Connecticut Valley include about two miles of transmission lines and about 427 miles of overhead distribution lines and about nine miles of underground distribution lines. All the principal plants and important units of the Company and its subsidiaries are held in fee. Transmission and distribution facilities which are not located in or over public highways are, with minor exceptions, located either on land owned in fee or pursuant to easements substantially all of which are perpetual. Transmission and distribution lines located in or over public highways are so located pursuant to authority conferred on public utilities by statute, subject to regulation of state or municipal authorities. VELCO. VELCO's properties consist of about 483 miles of high voltage overhead transmission lines and associated substations. The lines connect on the west at the Vermont-New York state line with the lines of Niagara Mohawk Power Corporation near Whitehall, New York, and Bennington, Vermont and with the submarine cable of NYPA near Plattsburg, New York; on the south and east with lines of New England Power Company and PSNH; on the south with the facilities of Vermont Yankee; and on the north with lines of Hydro-Quebec through a converter station and tie line jointly owned by the Company and several other Vermont utilities. VETCO. VETCO has approximately 52 miles of high voltage DC transmission line connecting at the Quebec-Vermont border in the Town of Norton, Vermont with the transmission line of Hydro-Quebec and connecting at the Vermont-New Hampshire border near New England Power Company's Moore hydro-electric generating station with the transmission line of New England Electric Transmission Corporation, a subsidiary of New England Electric System. Item 3. Legal Proceedings. On March 20, 1992, Sunnyside Cogeneration Associates filed suit in the United States District Court for the District of Vermont against the Company, CV Energy Resources, Inc. (CVER) and a subsidiary of CVER alleging damages in excess of five million dollars resulting from the parties inability to come to agreement on the terms of CVER's proposed investment in the plaintiff's waste coal cogeneration facility under construction in Sunnyside, Utah. The Company has filed an answer denying the allegations and does not expect the resolution of the case to have a material affect on the business or financial condition of the Company. On December 30, 1994 the Company and its Board of Directors were named as defendants in a complaint filed in the United States District Court for the District of Vermont by three shareholders. The complaint alleges among other things, (i) that F. Ray Keyser, Jr., Chairman of the Company's Board of Directors, violated Section 8 of the Clayton Act, 15 U.S.C. Subchapter 19, which precludes certain interlocking directorships, (ii) that Mr. Keyser violated his fiduciary duties to the Company's stockholders by acquiring and operating a series of businesses in competition with the Company without offering those business opportunities to the Company, (iii) that the remaining individual defendants violated their fiduciary duties to the Company's stockholders by failing to analyze, or to cause management to analyze, diversification into propane and fossil fuels, and by failing to make the Company an effective competitor of alternative fuel companies, and (iv) that the Company violated the applicable provision of the Vermont General Corporation Law by failing to provide a list of the Company's stockholders. The complaint seeks an unspecified amount of damages (including treble damages against Mr.Keyser), attorney's fees and costs, a list of the Company's stockholders, and a court order to enjoin the defendants from alleged continuing violations of the law. Each of the individual defendants and the Company itself deny the allegations against them and intend to vigorously defend the complaint. There are no other material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or to which any of their property is subject. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to security holders during the fourth quarter of 1994. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. (a) The Company's common stock is traded on the New York Stock Exchange ("NYSE") under the trading symbol CV. The table below shows the high and low sales price of the Company's common stock, as reported on the NYSE composite tape by The Wall Street Journal, for each quarterly period during the last two years as follows: Market Price High Low 1994 First quarter.............. $ 22 $ 18 3/8 Second quarter............. 19 1/8 14 1/4 Third quarter.............. 15 1/2 12 1/8 Fourth quarter............. 14 1/2 12 3/8 1993 First quarter.............. $ 25 5/8 $ 24 1/8 Second quarter............. 25 1/8 22 Third quarter.............. 24 3/4 23 1/4 Fourth quarter............. 23 3/4 20 1/8 (b) As of December 31, 1994, there were 16,961 holders of the Company's common stock, $6 par value. (c) Common stock dividends have been declared quarterly. Cash dividends of $.355 per share were paid for all quarters of 1994 and 1993. So long as any Senior Preferred Stock or Second Preferred Stock is outstanding, except as otherwise authorized by vote of two-thirds of each such class, if the Common Stock Equity (as defined) is, or by the declaration of any dividend will be, less than 20% of Total Capitalization (as defined), dividends on Common Stock (including all distributions thereon and acquisitions thereof), other than dividends payable in Common Stock, during the year ending on the date of such dividend declaration, shall be limited to 50% of the Net Income Available for Dividends on Common Stock (as defined) for that year; and if the Common Stock Equity is, or by the declaration of any dividend will be, from 20% to 25% of Total Capitalization, such dividends on Common Stock during the year ending on the date of such dividend declaration shall be limited to 75% of the Net Income Available for Dividends on Common Stock for that year. The defined terms identified above are used herein in the sense as defined in subdivision 8A of the Company's Articles of Association; such definitions are based upon the unconsolidated financial statements of the Company. As of December 31, 1994, the Common Stock Equity of the Company was 54.4% of total capitalization. For additional information regarding dividend payment level and dividend restrictions see Item 8 herein.
Item 6. Selected Financial Data. (Dollars in thousands, except per share amounts) 1994 1993 1992 1991 1990 For the year Operating revenues $277,158 $279,389 $275,375 $233,469 $231,565 Net income $ 14,800* $ 21,292 $ 21,422 $ 18,576 $ 17,531 Earnings available for common stock $ 12,662* $ 18,634 $ 18,764 $ 17,514 $ 16,533 Consolidated return on average common stock equity 7.2%* 11.0% 11.8% 11.8% 12.0% Earnings per share of common stock $1.08* $1.64 $1.71 $1.65 $1.62 Cash dividends paid per share of common stock $1.42 $1.42 $1.39 $1.39 $1.37 Book value per share of common stock $14.56 $15.03 $14.21 $14.03 $13.68 Net cash provided by operating activities $ 49,410 $ 36,833 $ 48,904 $ 42,033 $ 23,591 Dividends paid $ 18,845 $ 18,112 $ 18,174 $ 15,677 $ 14,978 Construction and plant expenditures $ 22,621 $ 20,519 $ 20,503 $ 18,950 $ 21,202 Conservation and Load Management expenditures $ 6,159 $ 9,874 $ 3,539 $ 1,946 $ 1,534 At end of year Long-term debt $120,157 $122,419 $107,879 $130,163 $129,790 Total capitalization (excluding current portion of debt) $318,995 $331,309 $302,023 $316,897 $286,424 Total assets $490,399 $480,150 $451,052 $430,748 $406,426 * Net income includes non-recurring charge-offs of $4,336,000 (net of tax benefit of $1,785,000). For a detail of these charge-offs see Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Earnings Overview. The Company's earnings per share of common stock declined by 34% in 1994 to $1.08 from $1.64 per share in 1993. The return on common equity was 7.2% for 1994 and 11.0% for 1993. Earnings per share of common stock and return on common equity for 1992 were $1.71 and 11.8%, respectively. In 1992, earnings and earnings per share of common stock were reduced by approximately $3.0 million and $.27, respectively, for an anticipated environmental cleanup. Weak sales, increased cost of operations and fourth quarter charges, discussed below and described in results of operations, are primarily responsible for reduced earnings for 1994. During the fourth quarter of 1994, the Company incurred three non- recurring charges. The first resulted from cost disallowances associated with the Vermont Public Service Board (PSB) Rate Order described below, which reduced after tax earnings and earnings per share of common stock by approximately $1.8 million and $.16, respectively. The second resulted from the Company's decision to discontinue its proposed new headquarters office building which reduced after tax earnings and earnings per share of common stock by $1.7 million and $.14, respectively. The third resulted from writing down SmartEnergy Service Inc.'s investment in Green Technologies, Inc.'s common stock to reflect management's estimate of the decline in value of the investment. As a result, after-tax earnings and earnings per share of common stock were reduced by $.8 million and $.07, respectively. Absent the non-recurring charges, net income and earnings per share of common stock would have been as follows (dollars in thousands): Year Ended December 31 1994 1993 1992 Net income as reported $14,800 $21,292 $21,422 Non-recurring charges, net of taxes 4,336 - 2,965 ------- ------- ------- Net income before non-recurring charges $19,136 $21,292 $24,387 ======= ======= ======= Earnings per share of common stock before non-recurring charges $1.45 $1.64 $1.98 As a result of these non-recurring charges, the Company earned an 8.4% return on its Vermont utility business and a 1.1% return on non-utility investments. The combined non-utility investments return of 1.1% resulted from a 4.9% return from Catamount Energy Corporation and a 34.2% loss from SmartEnergy Services, Inc. primarily caused by the write down of its investment in Green Technologies, Inc. See Item 8 herein for additional details on the Company's non-utility investments. A PSB Rate Order dated October 31, 1994, subsequently amended, allowed the Company a base retail rate increase of 5.07% or approximately $10.2 million effective with service rendered November 1, 1994. The Company had filed for an 8.9% or $17.9 million increase in its base retail rates in February 1994. The Rate Order also lowered the allowed rate of return on the Company's common stock equity from 12% to 10%. The allowed return on common stock equity is after deducting a .75% penalty based on the PSB's conclusions that there had been "mismanagement of power supply options" and because of "the Company's failed efforts to acquire all cost-effective energy efficiency resources." The Company disagrees with the PSB's conclusion. Recognizing the need for financial flexibility in the face of the increasingly competitive marketplace, the Company's board of directors announced, on November 8, 1994, a new corporate strategy which includes a dividend targeted at approximately 60% of earnings; a program to purchase up to 2 million shares of its outstanding common stock in open market transactions; a new strategic plan to provide earnings growth and cost stability; and a further reduction in corporate spending to ensure that only projects and activities critical to reliable, cost-effective operations are funded. These actions are part of a plan to both control costs and rates, and to help position the Company for growth and success into the next century in a more competitive, price sensitive environment. These moves will allow the Company to retain more capital in the business, provide increased financial flexibility and assure the Company's ability to take advantage of opportunities for growth. Results of Operations. Operating revenues and MWH sales A summary of MWH sales and operating revenues for 1994 and 1993 (and the related percentage changes from 1993) is set forth below:
Percentage Percentage MWH Sales Increase Revenues (000's) Increase 1994 1993 (Decrease) 1994 1993 (Decrease) Residential 954,329 958,102 (.4) $ 99,991 $ 99,101 .9 Commercial 860,474 842,694 2.1 89,209 86,553 3.1 Industrial 391,928 400,117 (2.0) 30,002 30,741 (2.4) Other retail 7,564 7,480 1.1 1,744 1,706 2.2 --------- --------- -------- -------- Total retail sales 2,214,295 2,208,393 .3 220,946 218,101 1.3 Less: DPS sales - 25,714 (100.0) - 1,558 (100.0) --------- --------- -------- -------- Total Company retail sales 2,214,295 2,182,679 1.4 220,946 216,543 2.0 --------- --------- -------- -------- Resale sales: Firm 17,469 62,564 (72.1) 634 2,747 (76.9) Entitlement 834,304 908,819 (8.2) 37,220 42,417 (12.3) Other 642,802 286,249 124.6 14,201 6,445 120.3 --------- --------- -------- -------- Total resale sales 1,494,575 1,257,632 18.8 52,055 51,609 .9 --------- --------- -------- -------- Other revenues - - - 4,157 5,162 (19.5) --------- --------- -------- -------- Deferred revenues - - - - 6,075 (100.0) --------- --------- -------- -------- Total 3,708,870 3,440,311 7.8 $277,158 $279,389 (.8) ========= ========= ======== ========
Year-to-year fluctuations in total retail MWH sales are primarily affected by customer growth, Conservation and Load Management (C&LM) programs as well as relative prices of alternate energy sources, weather patterns and conservation induced by price changes and income elasticity responses of customers. Total retail MWH sales for 1994 were relatively flat compared to 1993, reflecting weak sales due to the state's slow economic growth and the effectiveness of C&LM programs. Although the Company was granted a 5.07% retail rate increase effective with service rendered November 1, 1994, retail revenues increased only 1.3%. Total Company retail MWH sales increased 1.4% and related revenues increased 2.0%. The increase is principally attributable to the September 1, 1993 change in power supplied to retail customers by the Company rather than as previously provided by the DPS. The impact was to increase retail sales and revenues by 25,714 MWH and $1.6 million in 1994. The increase in retail revenues was offset by a decrease in other revenues reflecting elimination of the fee previously charged to the DPS for delivery of power and for providing billing and collection services. Due to current market conditions, some of the Company's firm resale customers chose not to extend their contracts beyond October 1993. As a result, firm resale MWH sales and revenues declined for 1994 and 1993. However, one of those customers opted to purchase power from the Company based on market rates. Entitlement MWH sales and revenues decreased 8.2% and 12.3%, respectively, due to reduced sell-back of the Hydro-Quebec Schedule C-1 and C- 2 power offset by increased sales made in conjunction with a swap arrangement with Commonwealth Electric as well as sales to UNITIL. Other resale sales for 1994 increased 356,553 MWH and related revenues increased $7.8 million. These sales, made on a short-term basis, include sales to NEPOOL and other utilities in New England. The Company continues to make every effort to maintain or increase resale sales despite the weak market for capacity and energy in the region. Deferred revenues of $6.1 million in 1993 relate to the recognition of revenues deferred from 1991 to 1993. The table below analyzes the components of increases or decreases in revenues (including DPS sales) compared to the prior year (dollars in thousands): 1994 1993 Revenue increase (decrease) from: Retail MWH sales $ 826 $(2,395) Retail rates 2,019 (84) Changes in firm resale sales (2,113) (888) Changes in entitlement sales (5,197) (983) Changes in other resale sales 8,006 14 Changes in other revenues (70) 306 Deferred revenues (6,075) 6,075 ------- ------- Net increase (decrease) over prior year $(2,604) $ 2,045 ======= ======= The minimal increase in retail MWH sales described above resulted in an $.8 million increase in retail revenues. The increase in retail rates of $2.0 million is due to the 5.07% retail rate increase that became effective with service rendered November 1, 1994. Retail MWH sales in 1993 were lower by 1.3%, compared to 1992 resulting in a $2.4 million decrease in retail revenues. The decrease in entitlement sales for 1993 compared to 1992 is due to the scheduled refueling and unplanned shutdowns of Vermont Yankee reducing sales to UNITIL and Commonwealth Electric under a swap arrangement. In addition, in 1992, the Company was able to sell a portion of its Vermont Yankee entitlement to Public Service Company of New Hampshire. Purchased power The Company purchases approximately 90% of its power needs under several contracts of varying duration. Over 30% of these purchases are from affiliated companies whereby the Company receives its entitlement share of the output. The Company's purchased power portfolio assures that a mix of sources and fuel types are available to meet the Company's long-term load growth while providing short and intermediate term opportunities to purchase or sell capacity and energy to reduce overall power costs. The percentages of the Company's energy sources from certain long-term commitments and Company- owned generating units were as follows: Year Ended December 31 1994 1993 1992 Nuclear generating companies 39% 34% 34% Canadian imports 20 28 25 PSNH-coal 7 8 7 Company-owned hydro 5 5 5 Jointly owned units 5 4 4 Small power producers 5 5 3 Other sources 19 16 22 --- --- --- 100% 100% 100% === === === The Company has equity ownership interests in four nuclear generating companies: Vermont Yankee (VY), Maine Yankee (MY), Yankee Atomic (YA) and Connecticut Yankee (CY). The VY nuclear plant, which provides approximately one-third of the Company's power supply, was unavailable from March 6 through April 21, 1992 and from August 27 through October 24, 1993 due to its scheduled refueling outages, and had unscheduled outages from April 7 to April 16, 1993 and December 6 to December 20, 1993. The MY plant was shut down for refueling and maintenance from February 14 through April 19, 1992 and from July 30 through October 13, 1993. See Note 2 to the Consolidated Financial Statements for details related to YA. The CY plant was shut down for refueling and for an extended outage from October 17, 1991 through March 18, 1992 and for a scheduled refueling outage from May 15 through July 21, 1993. There were no scheduled refueling outages and no major unscheduled outages during 1994. During scheduled refueling outages, the Company purchases more costly replacement energy from NEPOOL and other sources to satisfy energy needs. In accordance with current rate-making treatment, the Company defers and amortizes to expense over their respective fuel cycles the incremental replacement energy and maintenance costs associated with these refueling outages for the Yankee plants and the Millstone #3 jointly owned nuclear generating unit. During 1993, the Company deferred $2.4 million and $6.5 million of replacement energy and capacity costs, respectively, for VY, MY, CY and Millstone #3. In 1984, the Company and other Vermont utilities signed a long-term purchase power contract with the DPS for 150 MW of power provided by Hydro- Quebec. During 1987, the Company and eight other Vermont utilities signed a long-term purchased power contract with Hydro-Quebec for up to 450 MW of power until 2020. Approval of the 450 MW contract was received in 1990. See Note 13 to the Consolidated Financial Statements for further details related to the Hydro-Quebec power contracts. Under a 30-year contract, which expires in 1998, the Company purchases 46.98 MW of capacity from Merrimack #2, a coal-fired generating plant owned by Northeast Utilities (NU). Vermont Electric Power Company, Inc., representing Vermont utilities, and NU negotiated an agreement which assures the continuation of this contract through 1998 under its original terms, thereby resolving past uncertainty relating to the contractual price of capacity and the availability of the unit to the Company. The Company also owns 20 hydroelectric generating units which have a total nameplate capability of 41.2 MW and two gas-fired and one diesel-peaking units with a combined nameplate capability of 28.9 MW. In addition, the Company maintains joint-ownership interests in Joseph C. McNeil, a 53 MW wood, gas and oil-fired unit; Wyman #4, a 619 MW oil-fired unit; and Millstone #3, an 1149 MW nuclear unit. Millstone #3 was shut down from July 31 through November 7, 1993 for a refueling outage. The Company's percentage ownership in these units is 20%, 1.78% and 1.73%, respectively. The Company, under long-term contracts, purchases power from a number of small power producers who own qualifying facilities under the Public Utility Regulatory Policies Act of 1978. These qualifying facilities produce energy using hydroelectric, wood, biomass, and refuse-burning generation. During 1994, the Company purchased 34.4 MW of which approximately 30.1 MW is associated with the Vermont Power Exchange and 3.9 MW with a New Hampshire/Vermont solid waste plant. The Company engages in purchases and sales with other electric utilities and with NEPOOL to take advantage of immediate pricing and other market conditions. These purchases are included in Other sources in the table above. The net cost components of purchased power for the past three years were as follows (dollars in thousands):
1994 1993 1992 Units Amount Units Amount Units Amount Purchased and produced: Capacity (MW) 568 $ 83,677 496 $ 86,857 478 $ 84,346 Energy (MWH) 3,544,563 59,485 3,338,298 59,726 3,481,297 55,514 Production fuel (MWH) 381,819 1,932 313,020 1,737 324,478 2,201 -------- -------- -------- Total purchased power and production fuel costs 145,094 148,320 142,061 Entitlement and other resale sales (MWH) 1,477,106 51,421 1,195,068 48,862 1,386,868 51,259 -------- -------- -------- Net purchased power and production fuel costs $ 93,673 $ 99,458 $ 90,802 ======== ======== ========
Purchased capacity costs decreased $3.2 million for 1994 resulting from a $15.7 million decrease in price offset by an increase of 14.5% or $12.5 million in the amount of MW purchased. These variances are primarily due to the absence of refueling outages for Vermont Yankee. The increase in total purchased capacity costs for 1993 is due to an increase in MW purchased, primarily from small power producers. In total, energy costs for 1994 are about the same as 1993. Cost per MWH purchased decreased 6.2% or $3.9 million offset by an increase of 6.2% or $3.7 million in the amount of MWH purchased. Total energy costs increased $4.2 million for 1993 primarily due to a $6.5 million increase in price offset by a decrease of $2.3 million relating to a 4.1% decrease in the amount of MWH purchased. However, average cost per MWH purchased increased by 12.2%. The higher average cost is primarily due to increased MWH purchased from small power producers mandated by Federal and state legislation. Energy costs are directly related to the variable prices of oil, nuclear fuel and coal but more importantly, to the proportion of the Company's purchased energy that comes from each of these fuel sources. The swap arrangement with Commonwealth Electric of Canal #2 power has increased the Company's reliance on oil as a source of electricity. Also, some Canadian purchased power contracts are tied to fossil fuel price indices. This will increase the Company's exposure to the variability of oil price volatility. The Company is responsible for paying its entitlement percentage of decommissioning costs for VY, CY, MY and YA as well as its joint ownership percentage of decommissioning costs for Millstone #3. See Notes 2 and 13 to the Consolidated Financial Statements. Recently, the staff of the Securities and Exchange Commission has questioned certain current accounting practices of the electric utility industry, including the Company, regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements of electric utilities. In response to these questions, the Financial Accounting Standards Board has agreed to review the accounting for nuclear decommissioning costs. If current electric utility industry accounting practices for such decommissioning costs are changed it is possible that annual provisions for decommissioning costs could increase, the total estimated costs for decommissioning could be recorded as a liability, and income from external decommissioning trusts could be reported as investment income instead of a reduction to decommissioning expense. The Company does not believe that such changes, if required, would have an adverse effect on results of operations due to its ability to recover decommissioning costs through the regulatory process. See Liquidity and Capital Resources - Competition, for related information. The increase in production fuel costs of $.2 million for 1994 results from a 22.0% or 68,799 MWH increase in the amount of MWH generated mostly by one of the Company's jointly owned units, Millstone #3. Production fuel costs decreased 21.1% or $.5 million in 1993, due to lower generation by the Company's jointly owned units. In order to optimize its power mix for baseload, intermediate and peaking power, the Company engages in sales and purchases with other electric utilities, primarily in New England and with NEPOOL. These transactions typically take advantage of immediate pricing and other market conditions. The profits from these transactions are used to reduce revenue requirements for rate-making purposes. As stated earlier, the Company is making every effort to maintain or increase these sales despite the weak resale market for excess capacity and energy in the region. The Company's forecast indicates that net purchased power and production fuel costs will be approximately $103.5, $116.3, and $136.0 million for the period 1995 through 1997. Production and transmission The Phase II transmission line began operation in November 1990. This service increased the maximum capacity of the Hydro- Quebec 450 KV DC line from 690 MW to 2000 MW and extended the Phase I line from Comerford, New Hampshire to Sandy Pond, Massachusetts. The Company uses this transmission path to deliver a portion of the Company's long-term Hydro- Quebec firm power contract. The Phase II project cost is approximately $487 million. The Company pays 5.132% of support costs or about $2.7 million annually. Also, the Company is obligated to pay a 4.421% share of the Phase I Hydro-Quebec capital costs or about $.5 million annually. Under the support agreement, the Company is eligible for savings associated with certain energy transactions by NEPOOL, which offset the Company's support cost obligations. Variances for production and transmission expenses for 1994 and 1993 were minimal. Other operation expenses Other operation expenses increased 13.2% or $4.8 million primarily due to the charge-off of approximately $2.9 million in costs related to the proposed new corporate headquarters office building, an increase in pension and benefit costs and regulatory commission expenses. Other operation expenses decreased $2.2 million for 1993 primarily due to an environmental reserve of $4.9 million established in December 1992 related to estimated costs associated with the cleanup of coal tar deposits discovered at the Company's Cleveland Avenue site, offset in part by the recognition of a postretirement benefit obligation in accordance with Statement of Financial Accounting Standards (SFAS) No. 106 effective January 1, 1993. For detailed information on SFAS No. 106, see Note 10 to the Consolidated Financial Statements and for a complete disclosure on environmental matters, see Note 13 to the Consolidated Financial Statements. Depreciation The increases in depreciation expense for 1994 and 1993 are due to property additions and the installation of new computer systems in 1992 and 1993. Income taxes Federal and state income taxes fluctuate with the level of pretax earnings. These taxes decreased for 1994 as a result of lower pre-tax earnings. However, the decrease was offset by the write-off of $1.6 million of SFAS No. 109 deferred tax assets which were expected to be collected from customers through rates. Recovery of these taxes was disallowed by the PSB in its October 31, 1994 Rate Order described in Earnings Overview. During 1993, the Company recognized additional accumulated deferred income taxes of approximately $15 million and a net corresponding asset from customers of approximately $15 million reflecting future revenues that will be required when the temporary differences reverse and are settled in rates. Also, due to the Revenue Reconciliation Act which was passed on August 10, 1993, income tax expense increased by approximately $.3 million for the year 1993. Other income and deductions Equity in earnings of affiliates decreased 14.3% for 1994, as compared to 1993. The decrease is attributable to a lower rate of return allowed by the Federal Energy Regulatory Commission to some of the Company's nuclear generating affiliates. The increase in allowance for equity and borrowed funds used during construction for 1994 is due to an increase in capital expenditures and also due to higher rates used for capitalization of these funds. In 1993, AFDC was lower than in 1992 due to lower rates used for capitalization of these funds. Other income (expenses), net, decreased approximately $.9 million for 1994 compared to 1993. During the fourth quarter of 1994, the Company wrote- down its investment in Green Technologies, Inc. by approximately $1.3 million to reflect management's estimate of the decline in value of the investment. This write-down is partially offset by higher income from non-utility subsidiaries as well as higher interest on temporary cash investments due to a combination of higher investment levels and interest rates during 1994. Other income (expenses), net, decreased for 1993 due to lower prevailing interest rates and lower levels of investments resulting in decreased earnings from temporary cash investments offset by increased income from non-utility operations. Interest on long-term debt The increase in interest on long-term debt for 1994 results from the issuance of $43 million of First Mortgage Bonds in December 1993. Interest on long-term debt decreased $3.0 million for 1993 primarily due to refinancing First Mortgage Bonds at lower interest rates. Other interest expense Other interest expense increased approximately $.4 million for 1994 due to the 1993 FERC settlement related to certain wholesale customers. Other interest expense decreased $.9 million for 1993 mainly due to a FERC settlement related to certain wholesale customers. The decrease was offset in part by an increase in interest expense due to higher levels of short-term borrowings outstanding during 1993. Cash Dividends Declared Preferred In January 1994, the Company redeemed 280,000 shares of preferred stock 9% dividend series at a premium of $.25 per share. This redemption resulted in a decrease in preferred dividends declared for 1994 compared to 1993. Common The increase in common dividends declared for 1994 results from an advanced quarterly common dividend declaration in December 1994 payable February 15, 1995. As a result, the accompanying Consolidated Financial Statements reflect five quarterly dividend declarations in 1994. The December 1994 declaration reflects the 44% reduction in future dividends paid per share. The decrease in common dividends declared for 1993 as compared with 1992 is due to an advanced quarterly common dividend declaration in November 1992 payable February 12, 1993. Liquidity and Capital Resources Competition As described in Note 1 to the Consolidated Financial Statements, management believes that the Company meets the requirement of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation", but continues to evaluate significant changes in the regulatory and competitive environment to ensure and assess the Company's overall consistency with the criteria of SFAS No. 71. In the event the Company determines that it no longer meets the criteria for following SFAS No. 71, the accounting impact would be an extraordinary non-cash charge to operations of an amount that could be material. Although these conditions do not currently exist, the Company anticipates that in the future competition will place pressure on both unit sales and the price the Company can charge. As a result, increased competitive pressure in the electric utility industry may restrict the Company's ability to establish prices to recover embedded costs and may lead to a significant change in the manner in which rates are set by regulators from cost-based regulation to a different form of regulation that approximates market conditions. Singly or together these events may give rise to the discontinuance of SFAS No. 71 and, in addition, could diminish the Company's ability to recover its embedded costs of providing service. Construction The Company's liquidity is primarily affected by the level of cash generated from operations, power contracts, and the funding requirements of its ongoing construction and C&LM programs. Cash flows from operating activities after dividends paid provided approximately $30.6 million in 1994, $18.7 million in 1993 and $30.7 million in 1992. Consistent with the new Corporate Strategy announced by the Company's Board of Directors (Board) on November 8, 1994, construction expenditures over the next five years will be directed toward the funding of projects and activities critical to reliable, cost effective operations. In light of this, the Company is deferring some planned expenditures and also decided to discontinue its proposed new headquarters office building. Accordingly, during the fourth quarter of 1994, the Company wrote-off approximately $2.9 million of pre-tax costs related to the new headquarters office building. Excluding allowance for funds used during construction, construction expenditures plus expenditures for the Company's C&LM programs are estimated to average between $20-23 million for each of the next five years. The Company's goal is to finance approximately 100% of these annual expenditures with funds generated from operations. Financing and Capitalization Utility The level of short-term borrowings fluctuates based on seasonal corporate needs, the timing of long-term financings and market conditions. Short-term borrowings are supported by committed lines of credit and uncommitted loan facilities with several banks totaling $43.25 million. Short-term borrowings generally are reduced when long-term debt or equity securities are issued. In December 1993, the Company issued $43 million of long-term debt, of which $14.5 million replaced First Mortgage Bonds redeemed in October 1993 and $4.325 million replaced First Mortgage Bonds redeemed in January 1994. The balance was used to reduce short-term debt outstanding. In December 1994, the Company's wholly owned subsidiary, Connecticut Valley Electric Company Inc., issued a promissory note of $2.5 million under a five- year loan agreement. The proceeds were used to settle its 9 1/2% note of $2.5 million held by the parent company. In the past, the Company has been able to finance its construction and C&LM programs and it expects to meet future commitments. In 1988, the Company sold a $12 million interest in certain customers' accounts receivable and unbilled revenues. Under the sales of accounts receivable agreement the Company can sell an additional $8 million of accounts receivable if certain accounts receivable ratio tests are satisfied. The original sale of customer accounts receivable and unbilled revenue was for a two-year period with an option that the Company may request, on each anniversary date, an extension for an additional year. On November 8, 1994, the Board announced a new dividend policy that targeted future dividends at 60% of earnings. In light of the new policy, the current annual dividend of $1.42 was reduced 44% to $.80 effective with the first quarter dividend paid in February 1995. Accordingly, on December 5, 1994, the Board declared a quarterly common stock dividend of $.20 per share payable February 15, 1995 to shareholders of record on January 31, 1995. The dividend payment level will be reviewed regularly in light of capital needs, projected earnings' levels and other relevant factors. Also, the Board authorized the purchase of up to 2 million shares of its outstanding common stock in open market transactions. As of December 31, 1994, the Company had purchased 56,400 shares at an average price of $12.98 per share. These transactions are recorded as treasury stock, at cost, in the Company's Consolidated Balance Sheet. As of February 8, 1995, the Company had purchased 74,700 shares at an average price of $12.99 per share. In January 1994, the Company redeemed $7 million of the 9.00% Series Preferred Stock, $25 Par Value. Beginning in August 1994, Dividend Reinvestment and Common Stock Purchase Plan, and Employee Stock Ownership Plan requirements were satisfied by the purchase of shares of common stock on the open market. The Company's capital structure ratios (including amounts of long-term debt due within one year) for the past three years were as follows: December 31 1994 1993 1992 Common stock equity 53% 52% 51% Preferred stock 9 10 11 Long-term debt 38 38 38 --- --- --- 100% 100% 100% === === === On July 21, 1994 and on August 5, 1994, Duff & Phelps, Inc. (Duff & Phelps) and Standard & Poor's Corporation (Standard & Poor's), respectively, lowered their rating on the Company's First Mortgage Bonds and Preferred Stock. Duff & Phelps stated that the downgrade reflects its concerns about the continuing recession in New England, intensifying competition in the utility industry and excess power in the northeastern region, as well as the Company's loss of wholesale revenues. Standard & Poor's revised its ratings outlook on the Company to "stable" from "negative" and stated "the downgrade reflects the Company's weak financial profile, adjusted for off-balance sheet obligations, primarily associated with purchased power, combined with the Company's low average business position." Standard & Poor's also stated "restrictive Vermont regulation, the state of the Vermont economy, nuclear asset concentration and increasing investments into non-regulated businesses are other factors impacting the Company's business position." Current credit ratings for the Company's securities as reaffirmed, in mid-1994, by Duff & Phelps and Standard & Poor's are as follows: Duff & Standard Phelps & Poor's First Mortgage Bonds BBB+ BBB Preferred Stock BBB- BBB- The decline in the Company's credit ratings will likely make the terms and conditions of borrowing more stringent, and increase the cost of capital. Currently, the Company does not anticipate issuing preferred stock or long- term debt in the near future. Non-Utility Catamount Energy Corporation, a wholly owned subsidiary of the Company, maintains an Irrevocable Standby Letter of Credit with a bank to borrow up to an aggregate amount of $2.3 million to replace its share of cash in the Appomattox Cogeneration Limited Partnership's Project Debt Service Reserve Fund. This Letter of Credit is for a one-year term with annual extensions available and requires fees totaling 2.527% of credit available. SmartEnergy Services, Inc., also a wholly owned subsidiary of the Company, maintains a $1.0 million revolving line of credit with a bank to provide working capital and financing assistance for investment purposes. Financial obligations of the non-utility wholly owned subsidiaries are non-recourse to the Company. Conservation and Load Management Programs (C&LM) The primary purpose of these programs is to offset the need for long-term power supply and delivery resources that are more expensive to purchase or develop than customer- efficiency programs. Expenditures in 1993 and 1994 were $9.9 million and $6.2 million, respectively, and are expected to be approximately $6.0 million in 1995. C&LM expenditure levels are adjusted on an ongoing basis based on the cost-effectiveness of programs compared to other options. The October 31, 1994 PSB Rate Order allowed the recovery of $13.9 million of C&LM expenditures and lost revenues, deferred since the prior PSB rate order which became effective September 1, 1991, over a five-year period beginning November 1, 1994 through October 31, 1999. The Company had requested the recovery of $14.6 million of such deferred C&LM expenditures and lost revenues. Accordingly, during 1994, the Company wrote-off approximately $.7 million of costs disallowed by the PSB in its October 31, 1994 Rate Order. For additional information regarding the PSB Rate Order, see Earnings Overview. In addition, the Company is involved in several cases in Vermont related to C&LM activities including the role of fuel switching as a C&LM resource and the level of externalities to be recognized in Integrated Resource Planning and C&LM cost-effectiveness testing. On October 31, 1994, the Company also filed its Integrated Resource Plan, which describes the Company's long-term resource acquisition plans including C&LM. Currently, the Company is involved in cooperative efforts with the DPS to settle many issues related to C&LM. Diversification Catamount Energy Corporation (Catamount) was formed for the purpose of investing in non-regulated energy-related projects. Currently, Catamount, through its wholly owned subsidiaries, has interests in four operating independent power projects located in Rumford, Maine; East Ryegate, Vermont; Hopewell, Virginia; and Williams Lake, British Columbia, Canada. SmartEnergy Services, Inc. was formed for the purpose of effectively providing reliable, energy-efficient products and services, including the rental of electric water heaters. Rates The Company recognizes that adequate and timely rate relief is necessary if the Company is to maintain its financial strength, particularly since Vermont regulatory rules do not allow for changes in purchased power and fuel costs to be passed on to consumers through rate adjustment clauses. The Company's practice of reviewing costs periodically will continue and rate increases will be requested when warranted. For information regarding a PSB Rate Order issued on October 31, 1994 and subsequently amended, see Earnings Overview. The Company anticipates filing for future rate increases when cost containment efforts are insufficient to offset the increasing cost of providing service, primarily purchased power. Inflation The annual rate of inflation as measured by the Consumer Price Index was 2.7% for 1994 and 1993, and 2.9% for 1992. The Company's revenues, however, are based on rate regulation that generally recognizes only historical costs. Although the rate of inflation has eased in recent years, it continues to have an impact on most aspects of the business. Item 8. Financial Statements and Supplementary Data. Index to Financial Statements and Supplementary Data Page No. Report of Independent Public Accountants............................. 30 Financial Statements: Consolidated Statement of Income for each of the three years ended December 31, 1994............................... 31 Consolidated Statement of Cash Flows for each of the three years ended December 31, 1994........................... 32 Consolidated Balance Sheet at December 31, 1994 and 1993.......................................................... 33 Consolidated Statement of Capitalization at December 31, 1994 and 1993........................................ 35 Consolidated Statement of Changes in Common Stock Equity for each of the three years ended December 31, 1994................................................. 36 Notes to Consolidated Financial Statements......................... 37 Report of Independent Public Accountants To the Board of Directors of Central Vermont Public Service Corporation: We have audited the accompanying consolidated balance sheet and statement of capitalization of Central Vermont Public Service Corporation and its wholly owned subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in common stock equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements 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 Central Vermont Public Service Corporation and its wholly owned subsidiaries as of December 31, 1994 and 1993 and the results of their operations and cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Boston, Massachusetts February 6, 1995
CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands, except per share amounts) Year Ended December 31 1994 1993 1992 Operating Revenues $277,158 $279,389 $275,375 -------- -------- -------- Operating Expenses Operation Purchased power 143,162 146,583 139,860 Production and transmission 21,122 21,188 20,340 Other operation 40,691 35,933 38,131 Maintenance 12,245 11,719 11,890 Depreciation 16,478 15,402 14,408 Other taxes, principally property taxes 10,423 10,022 9,602 Taxes on income 11,934 12,496 12,102 -------- -------- -------- Total operating expenses 256,055 253,343 246,333 -------- -------- -------- Operating Income 21,103 26,046 29,042 Other Income and Deductions Equity in earnings of affiliates 3,098 3,613 3,815 Allowance for equity funds during construction 232 35 267 Other income (expenses), net (27) 827 1,383 Benefit (provision) for income taxes 525 (276) (311) -------- -------- -------- Total other income and deductions, net 3,828 4,199 5,154 -------- -------- -------- Total Operating and Other Income 24,931 30,245 34,196 -------- -------- -------- Interest Expense Interest on long-term debt 9,611 8,804 11,779 Other interest 657 226 1,148 Allowance for borrowed funds during construction (137) (77) (153) -------- -------- -------- Total interest expense, net 10,131 8,953 12,774 -------- -------- -------- Net Income 14,800 21,292 21,422 Preferred Stock Dividends Requirements 2,138 2,658 2,658 -------- -------- -------- Earnings Available For Common Stock $ 12,662 $ 18,634 $ 18,764 ======== ======== ======== Average Shares of Common Stock Outstanding 11,716,926 11,383,109 10,992,123 Earnings Per Share of Common Stock $1.08 $1.64 $1.71 Dividends Paid Per Share of Common Stock $1.42 $1.42 $1.39 The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) Year Ended December 31 1994 1993 1992 Cash Flows Provided (Used) By Operating Activities Net income $ 14,800 $ 21,292 $ 21,422 Adjustments to reconcile net income to net cash provided by operating activities Deferred revenues - (7,507) - Depreciation 16,478 15,402 14,408 Write-down investment 1,332 - - Write-off corporate headquarters costs 2,857 - - Deferred income taxes and investment tax credits 3,522 9,615 2,652 Allowance for equity funds during construction (232) (35) (267) Net deferral and amortization of nuclear replacement energy and maintenance costs 5,353 (3,797) (135) Amortization of property losses 686 1,262 119 Amortization of nuclear fuel 613 515 547 Amortization of restructuring costs 632 - - (Increase) decrease in accounts receivable (1,598) 1,127 (823) Increase (decrease) in accounts payable (1,298) (3,475) 1,433 Increase (decrease) in accrued income taxes 3,209 (2,991) 3,179 Decrease in other working capital items 1,916 2,028 1,162 Other, net 1,140 3,397 5,207 -------- -------- -------- Net cash provided by operating activities 49,410 36,833 48,904 -------- -------- -------- Investing Activities (Increase) decrease in temporary investments (4,724) 597 17,978 Construction and plant expenditures (22,621) (20,519) (20,503) Conservation and load management expenditures (6,159) (9,874) (3,539) Investments in affiliates 150 290 269 Non-utility investments 606 (7,425) (13,536) Other investments, net (423) (382) (391) -------- -------- -------- Net cash used in investing activities (33,171) (37,313) (19,722) -------- -------- -------- Financing Activities Issuance of long-term debt 2,500 43,000 - Sale of common stock 3,988 8,325 7,988 Short-term debt, net 10,155 (744) 2,100 Retirement of preferred stock (7,070) - - Retirement of long-term debt (5,382) (34,216) (18,844) Common and preferred dividends paid (18,845) (18,112) (18,174) Repurchase of common stock (735) - - Other - 336 (180) -------- -------- -------- Net cash used by financing activities (15,389) (1,411) (27,110) -------- -------- -------- Net Increase (Decrease) In Cash 850 (1,891) 2,072 Cash at Beginning of Year 823 2,714 642 -------- -------- -------- Cash at End of Year $ 1,673 $ 823 $ 2,714 ======== ======== ======== Supplemental Cash Flow Information Cash paid during the year for: Interest (net of amounts capitalized) $ 9,673 $ 9,991 $ 12,565 Income taxes (net of refunds) $ 4,687 $ 5,337 $ 6,571 Non-cash Investing and Financing Activities Regulatory assets (Notes 2 and 11) Long-term lease arrangements (Note 13) The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET (Dollars in thousands) December 31 1994 1993 Assets Utility Plant, at original cost $434,059 $421,929 Less accumulated depreciation 125,800 112,299 -------- -------- 308,259 309,630 Construction work in progress 15,099 8,388 Nuclear fuel, net 1,197 1,390 -------- -------- Net utility plant 324,555 319,408 -------- -------- Investments and Other Assets Investments in affiliates, at equity 26,765 26,963 Non-utility investments 28,184 30,123 Non-utility property, less accumulated depreciation 2,989 3,203 -------- -------- Total investments and other assets 57,938 60,289 -------- -------- Current Assets Cash 1,673 823 Temporary investments, at market value 5,886 1,162 Accounts receivable 20,523 18,614 Unbilled revenues 10,696 10,959 Materials and supplies, at average cost 4,182 4,641 Prepayments 3,544 3,098 Other current assets 4,806 4,821 -------- -------- Total current assets 51,310 44,118 -------- -------- Regulatory Assets and Other Deferred Charges 56,596 56,335 -------- -------- Total Assets $490,399 $480,150 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. December 31 Capitalization And Liabilities 1994 1993 Capitalization Common stock equity $170,784 $173,836 Preferred and preference stock 8,054 15,054 Preferred stock with sinking fund requirements 20,000 20,000 Long-term debt 120,157 122,419 -------- -------- Total capitalization 318,995 331,309 -------- -------- Long-term Lease Arrangements 20,467 21,553 -------- -------- Current Liabilities Short-term debt 11,511 1,356 Current portion of long-term debt 4,230 4,850 Accounts payable 5,970 7,002 Accounts payable - affiliates 8,435 7,488 Accrued interest 671 564 Accrued income taxes 3,997 788 Dividends declared 2,853 664 Other current liabilities 26,002 23,913 -------- -------- Total current liabilities 63,669 46,625 -------- -------- Deferred Credits Deferred income taxes 52,710 52,028 Deferred investment tax credits 8,394 8,785 Yankee Atomic purchased power contract 10,725 9,768 Environmental cleanup 5,050 4,900 Other deferred credits 10,389 5,182 -------- -------- Total deferred credits 87,268 80,663 -------- -------- Commitments and Contingencies Total Capitalization and Liabilities $490,399 $480,150 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CAPITALIZATION (Dollars in thousands) December 31 1994 1993 Common Stock Equity Common stock, $6 par value, authorized 19,000,000 shares; outstanding 11,785,848 shares in 1994 and 11,562,219 shares in 1993 $ 70,715 $ 69,373 Other paid-in capital 45,229 42,584 Treasury stock (56,400 shares at cost) (735) - Retained earnings 55,575 61,879 -------- -------- Total common stock equity 170,784 173,836 -------- -------- Cumulative Preferred and Preference Stock Preferred stock, $100 par value, authorized 500,000 shares Outstanding: Non-redeemable 4.15 % Series; 37,856 shares 3,786 3,786 4.65 % Series; 10,000 shares 1,000 1,000 4.75 % Series; 17,682 shares 1,768 1,768 5.375% Series; 15,000 shares 1,500 1,500 Redeemable 8.30 % Series; 200,000 shares 20,000 20,000 Preferred stock, $25 par value, authorized 1,000,000 shares Outstanding - none - 7,000 Preference stock, $1 par value, authorized 1,000,000 shares Outstanding - none - - -------- -------- Total cumulative preferred and preference stock 28,054 35,054 -------- -------- Long-Term Debt First Mortgage Bonds 5 1/8% Series M , due 1995 4,230 4,255 6 3/4% Series N , due 1996 - 4,325 9 1/2% Series Y , due 2003 - 1,000 9.20 % Series EE, due 1998 7,500 7,500 9.20 % Series FF, due 2000 7,500 7,500 9.26 % Series GG, due 2002 3,000 3,000 9.97 % Series HH, due 2003 25,000 25,000 8.91 % Series JJ, due 2031 15,000 15,000 5.30 % Series KK, due 1998 10,000 10,000 5.54 % Series LL, due 2000 5,000 5,000 6.01 % Series MM, due 2003 7,500 7,500 6.27 % Series NN, due 2008 3,000 3,000 6.90 % Series OO, due 2023 17,500 17,500 Vermont Industrial Development Authority Bonds Variable, due 2013 (4.25% at December 31, 1994) 5,800 5,800 New Hampshire Industrial Development Authority Bonds 6 7/8%, due 2009 5,500 5,500 Connecticut Development Authority Bonds Variable, due 2015 (3.5% at December 31, 1994) 5,000 5,000 Other, various 2,857 389 -------- -------- 124,387 127,269 Less current portion 4,230 4,850 -------- -------- Total long-term debt 120,157 122,419 -------- -------- Total Capitalization $318,995 $331,309 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK EQUITY (Dollars in thousands) Other Common Stock Paid-in Treasury Retained Shares Amount Capital Stock Earnings Total Balance, December 31, 1991 10,808,463 $64,851 $30,993 $ - $ 55,836 $151,680 Sale of common stock 388,113 2,329 5,659 7,988 Net income 21,422 21,422 Cash dividends on capital stock: Common stock - $1.39 per share (19,162) (19,162) Cumulative preferred stock: Non-redeemable (998) (998) Redeemable (1,660) (1,660) Common and preferred stock issuance expenses (180) (180) ---------- ------- ------- ----- -------- -------- Balance, December 31, 1992 11,196,576 67,180 36,472 - 55,438 159,090 Sale of common stock 365,643 2,193 6,132 8,325 Net income 21,292 21,292 Cash dividends on capital stock: Common stock - $1.42 per share (12,193) (12,193) Cumulative preferred stock: Non-redeemable (998) (998) Redeemable (1,660) (1,660) Common and preferred stock issuance expenses (20) (20) ---------- ------- -------- ----- -------- -------- Balance, December 31, 1993 11,562,219 69,373 42,584 - 61,879 173,836 Sale of common stock 223,629 1,342 2,646 3,988 Treasury stock at cost (56,400) (735) (735) Net income 14,800 14,800 Cash dividends on capital stock: Common stock - $1.42 per share (16,620) (16,620) Common stock - $.20 per share (2,346) (2,346) Cumulative preferred stock: Non-redeemable (408) (408) Redeemable (1,660) (1,660) Premium (70) (70) Common stock issuance expenses (1) (1) ---------- ------- ------- ----- -------- -------- Balance, December 31, 1994 11,729,448 $70,715 $45,229 $(735) $ 55,575 $170,784 ---------- ------- ------- ----- -------- -------- The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 Summary of significant accounting policies Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Regulation The Company is subject to regulation by the Vermont Public Service Board (PSB), the Federal Energy Regulatory Commission (FERC) and, to a lesser extent, the public utilities commissions in other New England states where the Company does business, with respect to rates charged for service, accounting and other matters pertaining to regulated operations. As such, the Company currently prepares its financial statements in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation, and records various regulatory assets and liabilities. In order for a company to report under SFAS No. 71, the Company's rates must be designed to recover its costs of providing service, and the Company must be able to collect those rates from customers. If rate recovery of these costs becomes unlikely or uncertain, whether due to competition or regulatory action, these accounting standards may no longer apply to the Company's regulated operations. Management believes that the Company currently meets the criteria for continued application of SFAS No. 71, but will continue to evaluate significant changes in the regulatory and competitive environment to assess the Company's overall consistency with the criteria of SFAS No. 71. In the event the Company determines that it no longer meets the criteria for applying SFAS No. 71, the accounting impact would be an extraordinary non-cash charge to operations of an amount that could be material. Revenues Estimated unbilled revenues are recorded at the end of accounting periods. Unbilled revenues of approximately $18.6 million, $18.3 million and $18.5 million for 1992, 1993 and 1994, respectively, are included in revenues on the Consolidated Statement of Income. Maintenance Maintenance and repairs, including replacements not qualifying as retirement units of property, are charged to maintenance expense. Replacements of retirement units are charged to utility plant. The original cost of units retired plus the cost of removal, less salvage, is charged to the accumulated provision for depreciation. Depreciation The Company uses the straight-line remaining life method of depreciation. Total depreciation expense was approximately 3.5% of the cost of depreciable utility plant for each of the years 1992 through 1994. Income Taxes The Company records income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires an asset and liability approach to determine income tax liabilities. The standard recognizes tax assets and liabilities for the cumulative effect of all temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities, see Note 11. The deferred method under Accounting Principle Board's Opinion 11, was applied in 1992. Deferred income taxes were provided to recognize the income tax effect of reporting certain transactions in different years for income tax and financial reporting purposes. Investment tax credits associated with utility plant are deferred and amortized ratably to income over the lives of the related properties. Investment tax credits associated with non-utility plant are recognized as income in the year realized. Allowance for Funds During Construction Allowance for funds used during construction (AFDC) is the cost, during the period of construction, of debt and equity funds used to finance construction projects. The Company capitalizes AFDC as a part of the cost of major utility plant projects to the extent that costs applicable to such construction work in progress have not been included in rate base in connection with rate-making proceedings. AFDC equity represents a current non-cash credit to earnings which is recovered over the life of the property. The AFDC rates used by the Company were 10.51%, 5.09% and 8.05% for the years 1992 through 1994, respectively. Regulatory Assets and Other Deferred Charges Certain costs are deferred and amortized in accordance with authorized or expected rate-making treatment. The major components of these costs are $19.2 million for Conservation and Load Management, $12.4 million for Yankee Atomic Electric Company dismantling costs, $10.6 million for SFAS No. 109, and $4.8 million of restructuring costs. During regular nuclear refueling outages, the increased costs attributable to replacement energy purchased from NEPOOL and maintenance costs are deferred and amortized ratably to expense until the next regularly scheduled refueling shutdown. The Company earns a return on the unamortized replacement energy and maintenance costs. See Note 2 to the Consolidated Financial Statements for discussion of the costs associated with the discontinued operation of the Yankee Atomic Nuclear Power Corporation nuclear power plant. Purchased Power The Company records the annual cost of power obtained under long-term contracts as operating expenses. Since these contracts, as more fully described in Note 13, do not convey to the Company the right to use property, plant, or equipment, they are considered executory in nature. This accounting treatment is in contrast to the Company's commitment with respect to the Hydro Quebec Phase I and II transmission facilities which are considered capital leases. As such, the Company has recorded a liability for its commitment under the Phase I and II arrangements and recognized an asset for the right to use these facilities. Note 2 Investments in affiliates The Company uses the equity method to account for its investments in the following companies (dollars in thousands): December 31 Ownership 1994 1993 Nuclear generating companies: Vermont Yankee Nuclear Power Corporation 31.3% $16,916 $16,811 Connecticut Yankee Atomic Power Company 2.0% 2,011 2,016 Maine Yankee Atomic Power Company 2.0% 1,338 1,349 Yankee Atomic Electric Company 3.5% 813 836 ------- ------- 21,078 21,012 Vermont Electric Power Company, Inc.: Common stock 56.8% 3,494 3,498 Preferred stock 2,193 2,453 ------- ------- $26,765 $26,963 ======= ======= Each sponsor of the nuclear generating companies is obligated to pay an amount equal to its entitlement percentage of fuel, operating expenses (including decommissioning expenses) and cost of capital and is entitled to a similar share of the power output of the plants. The Company's entitlement percentages are identical to the ownership percentages except that Vermont Yankee's entitlement percentage is 35%. The Company is obligated to contribute its entitlement percentage of the capital requirements of Vermont Yankee and Maine Yankee and has a similar, but limited, obligation to Connecticut Yankee. The Company is responsible for paying its entitlement percentage of decommissioning costs for Vermont Yankee, Connecticut Yankee, Maine Yankee and Yankee Atomic as follows (dollars in millions): CVPS's Total Share of Date of Estimated CVPS's Funded Study Obligation Obligation Obligation Nuclear generating companies: Vermont Yankee 1993 $312.7 $109.4 $40.3 Maine Yankee 1993 $316.6 $6.3 $2.2 Connecticut Yankee 1992 $294.2 $5.9 $3.0 Yankee Atomic 1994 $370 $13.0 $3.6 On February 26, 1992, the Board of Directors of Yankee Atomic decided to permanently discontinue operation of their plant, and to decommission the facility. The Company relied on Yankee Atomic for less than 1.5% of its system capacity. Presently, purchased power costs billed to the Company by Yankee Atomic, which include a provision for ultimate decommissioning of the unit, are being collected from the Company's customers via existing retail rate tariffs. On March 18, 1993, the FERC approved a settlement agreement regarding the decommissioning plan, recovery of plant investment and all issues with respect to prudency of the decision to discontinue operation which included $247 million of decommissioning costs in 1992 dollars. Based on a new study developed by Yankee Atomic, decommissioning costs are approximately $370 million in 1994 dollars. The increase results primarily from delays in finding a permanent repository for its spent nuclear fuel. The new study is subject to FERC approval. Yankee Atomic is currently collecting from sponsors decommissioning costs based on $247 million in 1992 dollars and anticipates to begin collecting from sponsors based on $370 million in November 1995. The Company's share of the increase in decommissioning costs is approximately $4.3 million. The Company's total current share of its cost with respect to Yankee Atomic's decision to discontinue operation is approximately $12.4 million. This amount is reflected in the accompanying balance sheet both as a regulatory asset and deferred power contract obligation (current and non- current). The Company believes that its proportionate share of Yankee Atomic costs will be recovered through the regulatory process and, therefore, the ultimate resolution of the premature retirement of the plant will not have a material adverse effect on the Company's earnings or financial condition. Although the estimated costs of decommissioning are subject to change due to changing technologies and regulations, the Company expects that the nuclear generating companies' liability for decommissioning, including any future changes in the liability, will be recovered in their rates over their operating or license lives. The Price-Anderson Act currently limits public liability from a single incident at a nuclear power plant to $8.9 billion. Beyond that a licensee maintains an indemnity agreement with the Nuclear Regulatory Commission, but subject to Congressional approval. The first $200 million of liability coverage is the maximum provided by private insurance. The Secondary Financial Protection Program is a retrospective insurance plan providing additional coverage up to $8.7 billion per incident by assessing $79.3 million against each of the 110 reactor units that are currently subject to the Program in the United States, limited to a maximum assessment of $10 million per incident per nuclear unit in any one year. The maximum assessment is to be adjusted at least every five years to reflect inflationary changes. The Company's interests in the nuclear power units are such that it could become liable for an aggregate of approximately $4.4 million of such maximum assessment per incident per year. Summarized financial information for Vermont Yankee Nuclear Power Corporation is as follows (dollars in thousands): Earnings 1994 1993 1992 Operating revenues $162,757 $180,145 $175,919 Operating income $14,355 $16,441 $16,304 Net income $6,588 $7,794 $7,921 Company's equity in net income $2,067 $2,434 $2,476 December 31 Investment 1994 1993 Current assets $ 41,416 $ 40,136 Non-current assets 470,726 429,634 -------- -------- Total assets 512,142 469,770 Less: Current liabilities 37,287 32,021 Non-current liabilities 420,382 383,585 -------- -------- Net assets $ 54,473 $ 54,164 -------- -------- Company's equity in net assets $ 16,916 $ 16,811 Included in Vermont Yankee's revenues shown above are sales to the Company of $52.9 million, $52.3 million and $53.6 million for 1992 through 1994, respectively. These amounts are reflected as purchased power net of deferrals and amortization in the accompanying Consolidated Statement of Income. Vermont Electric Power Company, Inc. (Velco) and its wholly owned subsidiary Vermont Electric Transmission Company, Inc. (Vetco) own and operate transmission systems in Vermont over which bulk power is delivered to all electric utilities in the state. Velco has entered into transmission agreements with the state of Vermont and the electric utilities and under these agreements bills all costs, including interest on debt and a fixed return on equity, to the state and others using the system. These contracts enable Velco to finance its facilities primarily through the sale of first mortgage bonds. Included in Velco's revenues shown below are transmission services to the Company (reflected as production and transmission in the accompanying Consolidated Statement of Income) amounting to $8.3 million, $8.9 million and $8.4 million for 1992 through 1994, respectively. Velco operates pursuant to the terms of the 1985 Four-Party Agreement (as amended) with the Company and two other major distribution companies in Vermont. Although the Company owns 56.8% of Velco's outstanding common stock, the Four-Party Agreement effectively restricts the Company's control of Velco. Therefore, Velco's financial statements have not been consolidated. The Four- Party Agreement continues in full force and effect until May 1995 and will be extended for an additional two-year term in May 1995, and every two years thereafter, unless at least ninety (90) days prior to any two-year anniversary any party shall notify the other parties in writing that it desires to terminate the agreement as of such anniversary. No such notification has been filed by the parties. The Company also owns 46.6% of Velco's outstanding preferred stock, $100 par value. Summarized financial information for Velco is as follows (dollars in thousands): Earnings 1994 1993 1992 Transmission revenues $16,761 $17,891 $16,722 Operating income $3,350 $4,423 $4,379 Net income $1,296 $1,375 $1,494 Company's equity in net income $638 $698 $749 December 31 Investment 1994 1993 Current assets $16,549 $15,181 Non-current assets 53,175 55,018 ------- ------- Total assets 69,724 70,199 Less: Current liabilities 15,941 13,180 Non-current liabilities 42,909 45,626 ------- ------- Net assets $10,874 $11,393 ======= ======= Company's equity in net assets $ 5,687 $ 5,951 Note 3 Non-utility investments The Company's wholly owned subsidiary, Catamount Energy Corporation (Catamount) invests through its wholly owned subsidiaries in non-regulated, energy-related projects. Certain financial information for Catamount's investments is set forth in the table that follows (dollars in thousands):
Investment Generating December 31 Projects Location Capacity Fuel Ownership 1994 1993 Rumford Cogeneration Co. (Rumford) Maine 85MW Coal/Wood 15.1% $9,804 $6,280 Ryegate Associates (Equinox) Vermont 20MW Wood 33.1% $6,587 $7,034 Appomattox Cogeneration (Appomattox) Virginia 57MW Wood/Coal 50.0% $9,819 $10,668 Black liquor NW Energy Williams Lake L.P. British Columbia, 60MW Wood 8.1% $1,550 $1,975 (Williams Lake) Canada
The Rumford project was placed in service on August 1, 1990. The Ryegate and Williams Lake projects began commercial operation on November 1, 1992 and April 2, 1993, respectively. On October 26, 1992, Appomattox purchased a 50% partnership interest in Appomattox Cogeneration which owns a power sales agreement associated with a cogeneration facility currently in operation. In January 1994, Catamount purchased an additional 4.185% limited partnership interest in Rumford Cogeneration Co. This additional investment increased Rumford's ownership in the project to 15.1%. SmartEnergy Services, Inc. (SmartEnergy) also is a wholly owned subsidiary of the Company, whose purpose is to cost effectively provide reliable, energy efficient products and services, including the rental of electric water heaters. Prior to January 1, 1993, the rental electric water heater program was part of the Company's core electric business and reported as non-operating income. On October 1, 1993, SmartEnergy purchased for $1.2 million, 304,125 shares (5%) of Green Technologies, Inc. (Green Technologies) common stock and on September 19, 1994, purchased for $540,000, an additional 120,000 shares (1.8%). This investment increased SmartEnergy's ownership in Green Technologies to 6.8%. Green Technologies of Boulder, Colorado, currently manufactures Green Plug electricity savers for several types of household appliances. SmartEnergy uses the cost method of accounting for its investment in Green Technologies. During the fourth quarter of 1994, SmartEnergy wrote- down its investment in Green Technologies by approximately $1.3 million to reflect management's estimate of the permanent decline in value of the investment. SmartEnergy's investment in Green Technologies was approximately $.42 million and $1.2 million at December 31, 1994 and 1993, respectively. Note 4 Redeemable preferred stock Commencing in 1998, the 8.30% Dividend Series Preferred Stock is redeemable at par through a mandatory sinking fund in the amount of $1.0 million per annum, and at its option, the Company may redeem at par an additional non-cumulative $1.0 million per annum. Note 5 Common Stock On November 8, 1994, the Company's board of directors (Board) announced a new dividend policy that targeted future dividends at 60% of earnings. In light of the new policy, the current annual dividend of $1.42 was reduced 44% to $.80 effective with the first quarter dividend paid in February 1995. Accordingly, on December 5, 1994, the Board declared a quarterly common stock dividend of $.20 per share payable February 15, 1995 to shareholders of record on January 31, 1995. The dividend payment level will be reviewed regularly in light of capital needs, projected earnings levels and other relevant factors. Also, the Board authorized the purchase of up to 2 million shares of its outstanding common stock in open market transactions. As of December 31, 1994, the Company had purchased 56,400 shares at an average price of $12.98 per share. These transactions are recorded as treasury stock, at cost, in the Company's Consolidated Balance Sheet. As of February 8, 1995, the Company had purchased 74,700 shares at an average price of $12.99 per share. Note 6 Long-term debt and sinking fund requirements Based on issues outstanding at December 31, 1994, the aggregate amount of long-term debt maturities and sinking fund requirements (exclusive of the amount that may be satisfied by property additions) are approximately $4.2 million, $1.0 million, $3.0 million, $20.5 million and $5.5 million for the years 1995 through 1999, respectively. Substantially all property and plant is subject to liens under the First Mortgage Bonds. Note 7 Financial instruments The estimated fair values of the Company's financial instruments at December 31, 1994 are as follows (dollars in thousands): Carrying Fair Amount Value Cash and temporary cash investments $ 7,559 $ 7,559 Short-term debt $ 11,511 $ 11,511 Investments $ 424 $ 424 Sale of accounts receivable and unbilled revenues $ 12,000 $ 12,000 Redeemable preferred stock $ 20,000 $ 18,790 Long-term debt $124,387 $119,374 The carrying amount for cash, temporary cash investments and short-term debt approximates fair value because of the short maturity of those instruments. The carrying amount and the fair value of the Company's investment in Green Technologies, Inc. reflects management's estimate of the realizable value of the investment. The carrying amount for the sale of accounts receivable and unbilled revenues approximates fair value because of the short maturity of those instruments. The fair value of the Company's redeemable preferred stock and long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturation. Anticipated regulatory treatment of any excess or decline in the fair value relative to the carrying value of the Company's financial instruments, if they were settled at amounts approximating those above, would result in an increase or decrease in the Company's rates over a prescribed amortization period. Accordingly, any settlement would not result in a material impact on the Company's financial position or results of operations. The Company has no financial instruments that fall under the guidance of SFAS No. 119, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments. In May 1993, the FASB issued SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, effective for fiscal years beginning after December 15, 1993. SFAS No. 115 addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. The Company has the following investments that are covered by the principles of SFAS No. 115: temporary cash investments classified as trading activities and reported at market value, and its available for sale investment in Green Technologies, Inc. For additional information, see Note 3 herein. The adoption of SFAS No. 115 had no material impact on the Company's financial position or results of operations. Note 8 Accounts receivable In 1988 the Company entered into an agreement to sell up to $20 million of certain accounts receivable and unbilled revenues. At December 31, 1994 and 1993, a total of $12 million of accounts receivable and unbilled revenues were sold under an accounts receivable facility. Accounts receivable and unbilled revenues that have been sold were transferred with limited recourse. A pool of assets, varying between 3% to 5% of the accounts receivable and unbilled revenues sold, are set aside for this potential recourse liability. Accounts receivable and unbilled revenues are reflected net of sales of $4.2 million and $7.8 million, respectively, at December 31, 1994 and $4.7 million and $7.3 million, respectively, at December 31, 1993. Accounts receivable are also reflected net of an allowance for uncollectible accounts of $1.0 million and $.9 million at December 31, 1994 and 1993, respectively. Note 9 Short-term debt Utility The Company uses committed lines of credit and uncommitted loan facilities to finance its construction and C&LM programs, on a short-term basis, and for other corporate purposes. As of December 31, 1994, the Company had $18.25 million of committed lines of credit and $25 million of uncommitted loan facilities which are normally renewed upon expiration and require annual fees ranging from zero to .25% of an individual line. Borrowings under these short-term debt arrangements are at interest rates ranging from less than prime to the prime rate. The Company had $11.5 million and $1.4 million of outstanding short-term debt at December 31, 1994 and 1993, respectively, at average interest rates of 5.22% for 1994 and 3.61% for 1993. Non-Utility Catamount maintains an Irrevocable Standby Letter of Credit with a bank to borrow up to an aggregate amount of $2.3 million to replace its share of cash in the Appomattox Cogeneration Limited Partnership's Project Debt Service Reserve Fund. This Letter of Credit is for a one-year term with annual extensions available and requires fees totaling 2.527% of credit available. At December 31, 1994 and 1993, there were no borrowings outstanding under this Letter of Credit. Catamount believes it will not have to perform under this agreement because the likelihood of default by the primary party is remote. SmartEnergy maintains a $1.0 million revolving line of credit with a bank to provide working capital and financing assistance for investment purposes. SmartEnergy had $846,000 and $696,000 of outstanding short-term debt at December 31, 1994 and 1993, respectively, at average interest rates of 7.29% for 1994 and 6.08% for 1993. Financial obligations of the non-utility wholly owned subsidiaries are non-recourse to the Company. Note 10 Pension and postretirement benefits The Company has a non-contributory trusteed pension plan covering all employees (union and non-union). Under the terms of the pension plan, employees are generally eligible for monthly benefit payments upon reaching the age of 65 with a minimum of five years of service. The Company's funding policy is to contribute, at least, the statutory minimum to a trust. The Company is not required by its union contract to contribute to multi-employer plans. The projected unit credit actuarial cost method was used to compute net pension costs and the accumulated and projected benefit obligations. The change in the accumulated benefit obligation and projected benefit obligation for 1993 and 1994 results primarily from changes in plan assumptions. The following table sets forth the funded status of the pension plan and amounts recognized in the Company's Balance Sheet and Statement of Income (dollars in thousands): December 31 1994 1993 1992 Funded status of the plan Vested benefit obligation $35,869 $35,837 $27,899 Non-vested benefit obligation 312 493 439 ------- ------- ------- Accumulated benefit obligation $36,181 $36,330 $28,338 ------- ------- ------- Projected benefit obligation $46,669 $49,743 $39,001 Market value of plan assets (primarily equity and fixed income securities) 44,115 46,074 39,768 ------- ------- ------- Projected benefit obligation more (less) than market value of plan assets 2,554 3,669 (767) Unrecognized net transition assets 1,608 1,768 1,929 Unrecognized prior service costs (3,178) (3,568) (3,084) Unrecognized net gain 5,963 1,498 5,314 ------- ------- ------- Net pension liability 6,947 3,367 3,392 Less regulatory asset for restructuring costs 1,974 - - ------- ------- ------- Effective accrued pension costs $ 4,973 $ 3,367 $ 3,392 ------- ------- ------- Net pension costs include the following components Service cost $ 2,065 $ 1,491 $ 1,307 Interest cost 3,694 3,377 3,065 Actual return on plan assets 515 (6,800) (4,137) Net amortization and deferral (4,095) 3,391 890 ------- ------- ------- Pension costs 2,179 1,459 1,125 Amortization of regulatory asset 261 - - ------- ------- ------- Effective pension costs 2,440 1,459 1,125 Less amount allocated to other accounts 318 276 223 ------- ------- ------- Net pension costs expensed $ 2,122 $ 1,183 $ 902 ------- ------- ------- Assumptions used in calculating pension cost were as follows: December 31 1994 1993 1992 Weighted average discount rates 8.50% 7.25% 8.50% Expected long-term return on assets 9.50% 9.75% 10.25% Rate of increase in future compensation levels 5.00% 4.75% 5.50% The Company sponsors a defined benefit postretirement medical plan that covers all employees who retire with ten years or more of service after age 45. Effective January 1, 1993, the Company adopted, on a prospective basis, SFAS No. 106, Employer's Accounting for Postretirement Benefits Other Than Pensions (OPEB) which requires accrual of the expected costs of such benefits during the employees' years of service. In 1994, the Company adopted a policy to fund its OPEB obligation through a Voluntary Employees' Benefit Association and 401(h) Subaccount in its Pension Plan. The following table sets forth the plan's funded status and amounts recognized in the Company's Balance Sheet and the amount of expense charged to the Company's Statement of Income in accordance with SFAS No. 106 (dollars in thousands): December 31 1994 1993 Accumulated postretirement benefit obligation Retirees $(8,265) $(5,098) Fully eligible active plan participants (521) (1,207) Other active plan participants (806) (1,293) Plan assets at fair value 744 - ------- ------- Accumulated postretirement benefit obligation in excess of plan assets (8,848) (7,598) Unrecognized transition obligation 5,485 6,253 Unrecognized net loss 337 351 ------- ------- Accrued postretirement benefit cost (3,026) (994) Regulatory asset for restructuring costs 2,008 - ------- ------- Effective accrued postretirement benefit costs $(1,018) $ (994) ======= ======= Net postretirement benefit cost includes the following components Service cost $ 194 $ 168 Interest cost 682 588 Actual return on plan assets 1 - Deferral of asset gain during the year (1) - Amortization of transition obligation over a twenty-year period 305 329 ------- ------- Postretirement benefit cost 1,181 1,085 Amortization of regulatory asset 265 - ------- ------- Effective postretirement benefit cost 1,446 1,085 Less amount allocated to other accounts 172 205 ------- ------- Net postretirement benefit cost expensed $ 1,274 $ 880 ======= ======= Assumptions used in the per capita costs of the accumulated postretire- ment benefit obligation were as follows: December 31 1994 1993 Per capita percent increase in health care costs: Pre-65 9.50% 9.50% Post-65 8.00% 6.00% Weighted average discount rates 8.50% 7.25% Rate of increase in future compensation levels 5.00% 4.75% Health care trend rates are assumed to decrease to 6.0% for pre-65 and 5.5% for post-65 for the year 2001 and thereafter. This decrease results from changes to the retiree medical plan limiting the cost for employees retiring after 1995 to the 1995 per participant cost. Increasing the assumed health care cost trend rates by one percentage point in each year would have resulted in an increase of approximately $709,000 in the accumulated postretirement benefit obligation as of January 1, 1995, and an increase of about $57,000 in the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost for 1994. Prior to 1993, the Company expensed OPEB's costs as benefits were paid. Such costs totaled $546,000 for 1992. Effective January 1, 1994, the Company adopted, on a prospective basis, SFAS No. 112, Employers' Accounting for Postemployment Benefits which requires accrual of the expected cost of postemployment benefits provided to former or inactive employees, their beneficiaries, and covered dependents after employment but before retirement. The Company provides postemployment benefits consisting of long-term disability benefits, and prior to January 1, 1994 expensed these costs as benefits were paid. Such costs total $91,000 and $156,000 for 1992 and 1993, respectively. The accumulated postemployment benefit obligation at January 1, 1995 of approximately $1.3 million is reflected in the accompanying balance sheet as a deferred postemployment benefit obligation (current and non-current) and is offset by a corresponding regulatory asset of approximately $1.0 million. The PSB in its October 31, 1994 Rate Order allowed the Company to recover the regulatory asset over a 7-1/2 year period beginning November 1, 1994 through April 30, 2002. The postemployment benefit cost charged to expense in 1994 was approximately $324,000 (pre-tax). In the first quarter of 1994, the Company offered and recorded an obligation related to a Voluntary Retirement Program (VRP). The VRP was accepted by 42 employees. The estimated benefit obligation for the VRP as of December 31, 1994 is about $4.5 million. This amount consists of pension benefits and postretirement medical benefits of $2.2 million and $2.3 million, respectively. Additionally, 32 employees accepted a Voluntary Severance Program (VSP) offered by the Company. Eligible employees had until April 22, 1994 to apply. The Company also announced a layoff of 20 employees on May 9, 1994. VSP and layoff obligations of $.8 million and $.2 million, respectively, were recorded in the second quarter of 1994. At December 31, 1994, the benefit obligation for the VSP was about $96,000. The VRP, VSP and layoff combined with attrition since mid-1993, yields a total work force reduction of approximately 14%. In the October 31, 1994 PSB Rate Order, the Company was allowed rate recovery of this restructuring cost over a five-year period. The unamortized balance of these costs was approximately $4.8 million at December 31, 1994. Note 11 Income taxes The components of Federal and state income tax expense are as follows (dollars in thousands): Year Ended December 31 1994 1993 1992 Federal: Current $ 6,177 $ 2,751 $ 7,774 Deferred 3,417 7,893 2,042 Investment tax credits, net (391) (391) (391) ------- ------- ------- 9,203 10,253 9,425 ------- ------- ------- State: Current 1,710 406 1,987 Deferred 496 2,113 1,001 ------- ------- ------- 2,206 2,519 2,988 ------- ------- ------- Total Federal and state income taxes $11,409 $12,772 $12,413 ======= ======= ======= Federal and state income taxes charged (credited) to: Operating expenses $11,934 $12,496 $12,102 Other income (525) 276 311 ------- ------- ------- $11,409 $12,772 $12,413 ======= ======= ======= The principal components of deferred income tax expense for 1992 were additional depreciation for tax purposes of $3.9 million offset by $.9 million of contributions in aid of construction. The principal items comprising the difference between the total income tax expense and the amount calculated by applying the statutory Federal income tax rate to income before tax are as follows (dollars in thousands): Year Ended December 31 1994 1993 1992 Income before income tax $26,209 $34,064 $33,835 Federal statutory rate 35% 35% 34% Federal statutory tax expense $ 9,173 $11,922 $11,504 Increases (reductions) in taxes resulting from: Disallowed regulatory tax asset 1,641 - - Dividend received deduction (854) (995) (353) Deferred taxes on plant previously "flowed-through" 523 523 523 State income taxes net of Federal tax benefit 1,434 1,637 1,707 Investment credit amortization (391) (391) (391) Seabrook project 76 139 70 Book-to-return adjustments and other (193) (63) (647) ------- ------- ------- Total income tax expense provided $11,409 $12,772 $12,413 ======= ======= ======= The tax effects of temporary differences and tax carry forward that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (dollars in thousands): Year Ended December 31 1994 1993 Deferred tax assets Alternative minimum tax credit carry forward $ 900 $ 1,400 Non-deductible accruals and othe 4,682 4,186 Deferred compensation and pension 4,651 4,058 Environmental costs accrual 2,335 2,142 ------- ------- Total deferred tax assets 12,568 11,786 ------- ------- Deferred tax liabilities Property, plant and equipment 41,609 38,304 Net regulatory asset 12,217 13,806 Conservation and load management expenditures 7,664 5,123 Nuclear refueling costs 473 2,633 Other 3,315 3,948 ------- ------- Total deferred tax liabilities 65,278 63,814 ------- ------- Net deferred tax liability $52,710 $52,028 ======= ======= As a result of adopting SFAS No. 109 in 1993, the Company recognized additional net accumulated deferred income tax liabilities of approximately $15 million and a net corresponding regulatory asset from customers of approximately $15 million for future revenues that will be received when the temporary differences reverse and are settled in rates. As a result of the October 31, 1994 PSB Rate Order, during the fourth quarter of 1994, the Company recognized an additional $1.6 million of tax expense related primarily to a previous revenue agent review which were expected to be collected from customers through rates. A valuation allowance has not been recorded, as the Company expects all deferred income tax assets will be utilized in the future. The Company has an alternative minimum tax credit carry forward of $.9 million which is available to reduce future regular income taxes over an indefinite period. Note 12 Retail Rate Increase A PSB Rate Order dated October 31, 1994, allowed the Company a base retail rate increase of 4.27% or approximately $8.6 million effective with service rendered November 1, 1994. On December 14, 1994, the Company received an amended PSB Rate Order which allowed the Company a base retail rate increase of 5.07% or approximately $10.2 million. The Company had filed for an 8.9% or $17.9 million increase in its base retail rates in February 1994. The PSB Rate Order also lowered the allowed rate of return on the Company's common stock equity from 12% to 10%. The allowed return on equity is after deducting a .75% penalty based on the PSB's conclusions that there had been "mismanagement of power supply options" and because of "the Company's failed efforts to acquire all cost-effective energy efficiency resources." The Company disagrees with the PSB's conclusion. As discussed in Note 11, the Company recorded an additional income tax provision of $1.6 million which it had previously expected to recover in rates but was disallowed in the Rate Order. Note 13 Commitments and contingencies The Company's power supply is acquired from a variety of sources including its own generating units, jointly owned units, long-term contracts and short-term purchases from a variety of sources. Through its investments in four nuclear generating companies, the Company is entitled to receive power from those nuclear units. See Note 2 for a discussion of the Company's obligations related to its investment in nuclear generating companies. Under long-term contracts with various electric utilities in the region, the Company is purchasing certain percentages of the electrical output of production plants constructed and financed by those utilities. Such contracts obligate the Company to pay certain minimum annual amounts representing the Company's proportionate share of fixed costs, including debt service requirements (amounts necessary to retire the principal of and to pay the interest on the portion of the related long-term debt ascribed to the Company) whether or not the production plants are operating. The cost of power obtained under such long-term contracts, including payments required to be made when a production plant is not operating, is reflected as "Purchased power" in the Consolidated Statement of Income. The Company purchases power from a coal-fired generating plant owned by Northeast Utilities (NU) under a thirty-year contract which expires April 30, 1998. Under this contract the Company is obligated to make capacity payments which amounted to approximately $3.7 million, $3.8 million and $4.3 million for 1992 through 1994, respectively. These capacity payments will vary over the contract period due to factors such as changes in NU's net investment and allowed rate of return. The Company purchases power from several small power producers who own qualifying facilities under the Public Utility Regulatory Policies Act of 1978. These qualifying facilities produce energy using hydroelectric, wood, biomass, and refuse-burning generation. Under these long-term contracts, in 1994, the Company purchased 34.4 MW of which approximately 30.1 MW is associated with the Vermont Power Exchange and 3.9 MW with a New Hampshire/Vermont solid waste plant owned by Wheelabrator Claremont Company, L.P. The Company expects to purchase approximately 42 MW in each year 1995 through 1999. The total commitment in the next five years to purchase power from these qualifying facilities is approximately $105.9 million. The Company will receive varying amounts of capacity and energy from two Hydro-Quebec contracts during the period 1995-2016. The contract between a group of Vermont utilities (Vermont Joint Owners) and Hydro-Quebec provides power over the entire period while a contract between the state of Vermont and Hydro-Quebec terminates on September 22, 1995. Additional contracts were negotiated between the Company and Hydro-Quebec which in effect reduce the amount of power the Company is required to purchase, as well as one signed in 1994 which reduces the cost to the Company. The maximum net amount of capacity that the Company will purchase during the term of the agreements is 142.7 MW. The total commitment in the next five years to purchase power under these contracts is approximately $321 million, less approximately $112 million of power sellbacks, yielding a net cost of approximately $209 million. Early in the Vermont Joint Owners contract, two sellback contracts were negotiated which reduced the net purchase of Hydro-Quebec power as well as delayed the purchase of about 24 MW of capacity and associated energy. In 1994, the Company negotiated a third sellback arrangement whereby the Company receives an effective discount on up to 70 MW of capacity in the 1996 contract year (declining to 30 MW in the 1999 contract year) in exchange for the right of Hydro-Quebec to reduce capacity deliveries by up to 50 MW beginning as early as 2004 until 2015, and the ability to reduce the amounts of energy delivered in up to five years beginning in 2000. Joint-ownership The Company's ownership interests in jointly owned generating and transmission facilities are set forth in the table that follows and recorded in the Company's Consolidated Balance Sheet (dollars in thousands): MW December 31 Ownership Entitlement 1994 1993 Generating plants: Wyman #4 1.78% 11 $ 3,338 $ 3,322 Joseph C. McNeil 20.00% 11 14,871 14,821 Millstone #3 1.73% 20 75,101 75,071 Highgate transmission facility 46.08% 12,775 12,586 -------- -------- 106,085 105,800 Accumulated depreciation 25,683 22,535 -------- -------- $ 80,402 $ 83,265 ======== ======== Wyman #4, an oil-fired generating plant, commenced commercial operation in December 1978. The Joseph C. McNeil wood, gas and oil-fired generating plant commenced commercial operation in June 1984 and the Millstone #3, a nuclear generating unit, commenced commercial operation in April 1986. The Highgate transmission interconnection with Canada was placed in service in September 1985. The Company's share of operating expenses for these facilities is included in the corresponding operating accounts on the Consolidated Statement of Income. Each participant in these facilities must provide for its own financing. The Company is responsible for paying its ownership percentage of decommissioning costs for Millstone #3. Based on a 1992 study, total estimated obligation at December 31, 1994 was approximately $449 million and the funded obligation was about $76 million. The Company's share for the total obligation and funded obligation was approximately $7.8 million and $1.1 million, respectively. Environmental The Company is engaged in various operations and activities which subject it to inspection and supervision by both state and Federal regulatory authorities including the United States Environmental Protection Agency (EPA) (hereinafter "environmental laws"). It is Company policy to comply with these environmental laws to the extent currently applicable and effective against it. The Company has implemented various procedures and internal controls to assess and assure compliance. If non-compliance is discovered, corrective action is taken. Based on these efforts and the oversight of those regulatory agencies having jurisdiction, the Company believes it conforms, in all material respects, with these environmental laws. Company operations occasionally result in unavoidable and inadvertent spills or releases of regulated substances or materials, such as the rupture of a pole mounted transformer, broken hydraulic line, or other similar occurrences. When the Company learns of such spills and releases from ongoing operations, they are cleaned up to meet Federal and state requirements. Except as discussed in the following paragraphs, the Company is not aware of any instances where it has caused, permitted or suffered a release or spill on or about its properties or otherwise which will likely result in any material environmental liabilities to the Company. The Company is an amalgamation of more than 100 predecessor companies engaged in various operations and activities prior to their being incorporated in the Company. At least two of these companies were involved in the production of gas from coal to sell and distribute to retail customers at three different locations. These activities were discontinued by the Company in the late 1940's or early 1950's. In addition, these predecessor companies and the Company itself may have historically engaged in other waste disposal activities, while legal and consistent with commercially accepted practices at the time, may not meet modern standards and thus represent potential liability. The Company continues to discover, investigate, evaluate, monitor and, where appropriate, remediate contaminated sites related to these historic activities. The Company's policy is to accrue a liability for those sites where costs for remediation, monitoring and other future activities are probable and can be reasonably estimated. Based on these investigations and policies, coal tar deposits were discovered at the Company's Cleveland Avenue property located in the city of Rutland, a site where one of its predecessors operated a coal-gasification facility. Due to the presence of these deposits and uncertainties as to potential contamination migration off-site, the Company conducted studies to determine the magnitude and extent of the coal tar releases. The Company engaged a consultant to assist in evaluating clean-up methodologies and provide cost estimates. Those studies indicated the cost to remediate the site would be approximately $5 million. This was charged to expense in the fourth quarter of 1992. This was followed by an assessment of potential health, safety and ecological risks. Other site issues are still under evaluation. A final risk assessment report was completed and submitted to the state for review. Following state review, various remediation alternatives will be investigated. The Company was formally contacted by the EPA in January 1995 asking for written consent to conduct a site evaluation. The Company does not believe EPA's evaluation changes its potential liability so long as reasonable further progress is made in remediating the site. The Company has yet to determine whether insurance proceeds are available to offset the cost of any remediation required at this site. The Company is currently investigating its potential liability regarding three former municipal landfills: the Bennington Landfill, the Parker Landfill, and the Trafton-Hoisington Landfill. The Bennington Landfill is a superfund site located in Bennington, Vermont. The Company was contacted in the winter of 1994 by counsel for a group of potentially responsible parties (PRP Group) who were performing an engineering evaluation and cost analysis (EE/CA) for the site under a settlement agreement with the EPA. The PRP Group threatened contribution litigation against the Company and others to recover an equitable share of the approximate $3 million the PRP Group had expended thus far on the EE/CA. Investigation by the Company thus far suggests that it is unlikely that it contributed a meaningful amount of hazardous substances, if any, to the site and thus would not be liable for a significant share of liability for the EE/CA expenses or site clean up. No litigation by the PRP Group has yet been initiated against the Company. In July 1994, the EPA notified the Company that it had reviewed evidence which, in its opinion, indicated that the Company may have contributed to the environmental contamination at the site but that a full determination of its potential liability for the site had not been made. EPA, at that time, designated the Company a potentially interested party (PIP). Also in July 1994, the EPA notified the PRP Group, the Company and other PIPs that it was proposing a response action at the site with an estimated total present worth cost of approximately $9.5 million. During November 1994, the Company was notified that EPA had information indicating that the Company was a PRP. The EPA letter also requested that the Company participate with other PRPs in the response action described above and further made a demand against the Company and other PRPs for reimbursement of approximately $.85 million in costs EPA had incurred in responding to conditions at the site. The PRP Group is attempting to form a larger group of PRPs to undertake the remedial response, pay EPA response expenses and obtain reimbursement for the $3 million it spent on the EE/CA. Representatives of the Company have been in contact with EPA and the PRP Group and have evaluated the merits of participation with the larger group. The Company is entering into an agreement to become a part of the larger PRP Group and will also continue to work with EPA seeking a "de minimis" settlement. While further investigation is necessary and is continuing, the results thus far suggest that the Company will defend any contribution action from the other PRPs and the EPA but will continue to explore settlement options which appear to be in the overall best interest of the Company. The Company has yet to determine whether insurance proceeds are available to offset potential costs for the remediation or other expenses which might be required by the Company at this site. The Parker Landfill is a superfund site located in Lyndonville, Vermont. In 1989, the Company received an information request from the EPA seeking to determine if the Company sent any hazardous substances to the site. An investigation conducted at the time concluded general trash was occasionally sent to the site but the Company had not sent hazardous substances to the site. In May of 1994, the Company received a second request seeking additional information regarding disposal practices. A renewed investigation by the Company again concluded no significant amounts of hazardous substances were sent to the site. Last summer, EPA also announced its proposed preferred remedy for this site with an estimated total present net worth cost of $28.2 million. Final selection of a remedy is anticipated later this year. Thus far, the Company is considered a PIP, not a PRP, for the site. The Company has complied with the information request and will monitor EPA activities at the site. The Trafton-Hoisington Landfill was a municipal and industrial landfill in the Town of Windsor, Vermont. The site is presently a state lead site although placement on the National Priorities List remains a possibility. The state of Vermont has reached an agreement with a small group of PRPs to conduct a site investigation. The Company was contacted by these PRPs seeking contribution toward the cost of the site investigation. The Company conducted an investigation and concluded no significant amounts of hazardous substances were sent to the site. The Company has advised the PRPs it will not voluntarily contribute under these circumstances. At this time, the Company does not believe these sites represent the potential for a material adverse effect on its financial condition or results of operations but will continue to monitor activities at the sites. The Company is not subject to any pending or threatened litigation with respect to any other sites where remediation expenses could be material, nor has the EPA or other state or Federal agency sought contribution from the Company for the study or remediation of any such sites. Dividend restrictions The indentures relating to long-term debt and the Articles of Association contain certain restrictions on the payment of cash dividends on capital stock. Under the most restrictive of such provisions, approximately $45 million of retained earnings was not subject to dividend restriction at December 31, 1994. Leases and support agreements The Company participated with other electric utilities in the construction of the Phase I Hydro-Quebec transmission facilities in northeastern Vermont, which were completed at a total cost of approximately $140 million. Under a support agreement relating to the Company's participation in the facilities, the Company is obligated to pay its 4.42% share of Phase I Hydro-Quebec capital costs over a 20-year recovery period through and including 2006. The Company also participated in the construction of Phase II Hydro-Quebec transmission facilities constructed throughout New England, which were placed in service in November 1990 with a total cost of approximately $487 million. Under a similar support agreement, the Company is obligated to pay its 5.132% share of Phase II Hydro-Quebec capital costs over a 25-year recovery period through and including 2015. All costs under these support agreements are recorded as purchased transmission expense in accordance with the Company's rate-making policies. Future minimum payments will be approximately $3.2 million for each year from 1995 through 2015 and will decline thereafter. The Company's percentage shares of the net capital cost of these facilities, totaling approximately, $21.6 million, are classified in the accompanying Consolidated Balance Sheet as "Utility Plant" and "Long-term Lease Arrangements" (current and non-current). Minimum rental commitments of the Company under non-cancelable leases as of December 31, 1994, are not material. Total rental expense entering into the determination of net income, consisting principally of vehicle and equipment rentals, was approximately $3.0 million, $3.1 million and $3.3 million for the years 1992 through 1994, respectively. Legal proceeding On December 30, 1994, the Company and its board of directors were named as defendants in a complaint filed in the United States District Court for the District of Vermont by three shareholders. The complaint alleges, among other things, (i) that F. Ray Keyser, Jr., Chairman of the Company's board of directors, violated Section 8 of the Clayton Act, 15 U.S.C. Subchapter 19, which precludes certain interlocking directorships, (ii) that Mr. Keyser violated his fiduciary duties to the Company's stockholders by acquiring and operating a series of businesses in competition with the Company without offering those business opportunities to the Company, (iii) that the remaining individual defendants violated their fiduciary duties to the Company's stockholders by failing to analyze, or to cause management to analyze, diversification into propane and fossil fuels, and by failing to make the Company an effective competitor of alternative fuel companies, and (iv) that the Company violated the applicable provision of the Vermont General Corporation Law by failing to provide a list of the Company's stockholders. The complaint seeks an unspecified amount of damages (including treble damages against Mr. Keyser), attorney's fees and costs, a list of the Company's stockholders, and a court order to enjoin the defendants from alleged continuing violations of the law. Each of the individual defendants and the Company itself deny the allegations against them and intend to vigorously defend the complaint. Note 14 Non-recurring charge In addition to the write-offs described in Notes 3 and 11 herein, during the fourth quarter of 1994, the Company also wrote-off approximately $2.9 million of costs associated with its proposed new headquarters office building which reduced after tax earnings by approximately $1.7 million. Note 15 Unaudited quarterly financial information The following quarterly financial information is unaudited and includes all adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for a fair statement of results of operations for such periods. Variations between quarters reflect the seasonal nature of the Company's business (dollars in thousands, except per share amounts): Quarter Ended 12 Months March June September December Ended 1994 Operating revenues $83,885 $57,684 $59,027 $76,562 $277,158 Operating income (loss) $14,367 $ (447) $ 368 $ 6,815 $ 21,103 Net income (loss) $12,608 $(2,003) $ (791) $ 4,986 $ 14,800 Earnings (loss) per share of common stock $1.04 $(.22) $(.11) $.38 $1.08 1993 Operating revenues $85,319 $56,975 $60,994 $76,101 $279,389 Operating income $16,847 $ 260 $ 679 $ 8,260 $ 26,046 Net income (loss) $14,828 $ (920) $ (354) $ 7,738 $ 21,292 Earnings (loss) per share of common stock $1.26 $(.14) $(.09) $.61 $1.64 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The Company's Articles of Incorporation and By-Laws provide for the division of the Board of Directors into three classes having staggered terms of office. In accordance with the Company's By-Laws, the Board of Directors has fixed at ten (10) the number of Directors for the ensuing year. The Directors whose terms will expire at the 1995 Annual Meeting of Stockholders, consisting of the three nominees listed below, will stand for re-election to a three-year term expiring in 1998. Proxies will be voted (unless otherwise instructed) in favor of the election of the three nominees as indicated in the table below. While it is not anticipated that any of the persons listed will be unable to serve as a director, if that should occur the proxies will be voted for such other person or persons as the present Board of Directors shall determine. The following table sets forth certain information regarding the three nominees for Director, as well as all Directors presently serving on the Board whose terms will expire after the 1995 Annual Meeting. Each of the individuals listed in the table has been employed by the firm or has had the occupation set forth under his or her name for the past five years. In general, the business experience of each of these persons during this time was typical of a person engaged in the principal occupation listed for each. Served as Director Principal Occupation and Name and Age Since Business Experience Nominees whose terms will expire in 1998: Luther F. Hackett - 61 1979 President, Hackett, Valine & MacDonald, Inc., Burlington, Vermont (Insurance Agents) F. Ray Keyser, Jr. - 67 1980 Chairman of the Board of Central Vermont Public Service Corporation, Of Counsel, Keyser, Crowley, Meub, Layden, Kulig & Sullivan, P.C. Rutland, Vermont (Lawyers) Gordon P. Mills - 58 1980 Chairman, EHV-Weidmann Industries, Inc., St. Johnsbury, Vermont (Manufacturer of Electric Transformer Insulation) Directors whose terms will expire in 1997: Frederic H. Bertrand - 58 1984 Chairman of the Board and Chief Executive Officer, National Life Insurance Co. Montpelier, Vermont Mary Alice McKenzie - 37 1992 President and Chief Executive Officer, John McKenzie Packing Co., Inc. Burlington, Vermont (Manufacturer of Meat Products) Robert D. Stout - 68 1985 Retired President and Chief Executive Officer, Putnam Memorial Health Corporation, Bennington, Vermont Served as Director Principal Occupation and Name and Age Since Business Experience Directors whose terms will expire in 1996: Robert P. Bliss, Jr. - 71 1973 President, Bob Bliss, Ltd. St. Albans, Vermont (Insurance Industry Consultants) Elizabeth Coleman - 57 1990 President, Bennington College, Bennington, Vermont Preston Leete Smith - 64 1977 Chief Executive Officer, S-K-I Ltd., West Lebanon, New Hampshire (Ski Business) Thomas C. Webb - 60 1986 President and Chief Executive Officer, Central Vermont Public Service Corporation, Rutland, Vermont Executive Officers of the Registrant: Name and Age Office Officer Since Thomas C. Webb, 60 President and Chief Executive Officer 1985 Robert H. Young, 47 Executive Vice President and Chief Operating Officer 1987 Robert de R. Stein, 45 Senior Vice President-Energy Resources and External Markets 1988 Frederick S. Potter, 49 Vice President-Finance & Administration and Principal Financial Officer 1994 Jacquel-Anne Chouinard, 55 Vice President-Human Resources 1986 Thomas J. Hurcomb, 57 Vice President-Marketing and Public Affairs 1975 Robert G. Kirn, 43 Vice President-Engineering and Operations 1991 William J. Deehan, 42 Assistant Vice President-Rates and Economic Analysis 1991 Jonathan W. Booraem, 56 Treasurer 1984 Joseph M. Kraus, 40 Secretary and General Counsel 1987 James M. Pennington, 39 Controller and Principal Accounting Officer 1993 Mr. Webb joined the Company in 1985 as Executive Vice President - Finance and Administration and in 1986 was also designated Chief Executive Officer. He was elected Director, President and Chief Executive Officer on July 1, 1986. Mr. Young joined the Company in 1987 as Vice President - Finance and Administration. Mr. Young was named Senior Vice President - Finance and Administration in 1988, and in 1993 was elected Executive Vice President and Chief Operating Officer. Mr. Stein joined the Company in 1988 as Assistant Vice President - Energy Planning. Mr. Stein was elected Vice President - Energy Supply Planning and Engineering effective January 1, 1990, and Senior Vice President - Engineering and Energy Resources in 1993 and assumed his present position in 1994. Mr. Potter joined the Company in 1994 and has served as Vice President - Finance and Administration and Principal Financial Officer since that time. From 1991-1994 he was Vice President at DQE, Inc. and President of its wholly owned subsidiary, Duquesne Enterprises, Inc. During 1989-1990 he was a senior investment banker with Bear, Stearns & Co. Inc. Ms. Chouinard joined the Company in 1985 as Director - Human Resources. She was elected Assistant Vice President - Human Resources in 1986 and assumed her present position in 1988. Mr. Hurcomb joined the Company in 1967 in the Marketing and Customer Service area. He was elected Vice President - External Affairs in 1975, and Vice President - Marketing and Public Affairs in 1993. Mr. Kirn joined the Company in 1991 as Vice President - Division Operations and assumed his present position in 1994. From 1979 to 1991, he was employed by New York State Electric & Gas Corporation. He served as Operations Manager of the Lancaster Division Electric from 1988 until 1991. Mr. Deehan joined the Company in 1985. Prior to being elected to his present position, he served as Director of Rate Administration and Forecasting. Mr. Booraem has been with the Company since 1969. Prior to being elected Treasurer in 1984, he was Director of Finance & Planning. Mr. Kraus joined the Company in 1981 as Assistant Corporate Counsel. He was named Associate Corporate Counsel in 1983 and Senior Corporate Counsel in 1987. He was also elected Corporate Secretary and Senior Corporate Counsel in 1987 and Corporate Secretary and General Counsel effective January 1, 1994. Mr. Pennington joined the Company in 1989 as Director of Taxes. He was named Director of Taxes and Plant Accounting in 1990. Mr. Pennington was designated Acting Controller effective July 19, 1992, and was elected Controller and named Principal Accounting Officer in 1993. The term of each officer is for one year or until a successor is elected. Item 11. Executive Compensation. The following table sets forth all cash compensation paid or to be paid by the Company and its subsidiaries, as well as the number of stock option awards earned during the last three fiscal years by the Company's Chief Executive Officer and the four other most highly compensated executive officers whose salary and bonus for services rendered to the Company and its subsidiaries in all capacities for 1994 exceeded $100,000. I. Summary Compensation Table Long Term Compensation Annual Compensation Awards - ------------------------------------------------------ ------------ (a) (b) (c) (d) (g) (i) Securities Underlying Option/ All Other Name and Principal Salary Bonus SARs Compensation Position Year ($) 1/ ($)2/ (#) ($) 3/ - ---------------------- ---- ------- ------ ------------ --------- A. Thomas C. Webb 1994 260,759 0 8,000/0 7,946 President and Chief 1993 248,755 67,183 8,000/0 12,453 Executive Officer 1992 244,694 73,000 6,000/0 17,850 B. Robert H. Young 1994 153,756 0 6,000/0 4,927 Executive Vice President 1993 141,769 35,995 6,000/0 4,533 and Chief Operating 1992 130,667 34,073 4,500/0 4,363 Officer C. Robert de R. Stein 1994 119,606 0 4,500/0 4,873 Senior Vice President- 1993 114,677 16,804 4,500/0 3,988 Energy Resources and 1992 105,473 18,728 3,000/0 3,472 External Markets D. Thomas J. Hurcomb 1994 104,115 0 3,000/0 4,534 Vice President 1993 98,382 15,606 3,000/0 4,996 Marketing and 1992 98,649 17,766 3,000/0 4,355 Public Affairs E. Robert G. Kirn 1994 98,201 0 3,000/0 4,264 Vice President - 1993 93,736 15,750 3,000/0 3,574 Engineering and 1992 93,465 19,869 3,000/0 1,751 Operations 1/ - 1993 and 1994 include compensation deferred at the election of all executive officers named, and directors' retainers and fees earned from VELCO by Mr. Webb. - 1992 calendar year includes 53 pay periods. - Includes compensation for services performed by Mr. Webb for Vermont Yankee and by Mr. Stein for VELCO for which the Company was reimbursed. 2/ - Includes incentive bonuses awarded by Catamount Energy Corporation, a wholly owned subsidiary, in 1992 and 1993 as follows: For A: 1993 - $10,000, 1992 - $5,000, for B: 1993 - $10,000, 1992 - $5,000. - Includes relocation bonus for E: 1992 - $5,000. 3/ - The total amounts shown in this column for the last fiscal year are comprised as follows: (i) Company matching contributions to the Employee Savings and Investment Plan includes for A: $5,914; for B: $4,613; for C: $4,647; for D: $3,968; for E: $3,928. (ii) Taxable term cost on executive split-dollar insurance. (An insurance plan that gives both employer and employee an interest in the policy death benefit on the employee's life.) For A: $2,032; for B: $314; for C: $226; for D: $566; for E: $336. Stock Options. The following table sets forth stock options granted to the Company's Chief Executive Officer and the four other most highly compensated executive officers during 1994 under the Company's 1988 Stock Option Plan for Key Employees. Under SEC regulations, companies are required to project an estimate of appreciation of the underlying shares of stock during the option term. The Company has chosen the Black-Scholes model formula approved by the SEC. However, the ultimate value will depend on the market value of the Company's stock at a future date, which may or may not correspond to the projections below. II. Options/SAR Grants Table Option/SAR Grants in Last Fiscal Year Grant Date Individual Grants Value - ------------------ ---------- ---------- -------- ------- ---------- % of Number of Total Securities Options/ Underlying SARs Options/ Granted to Exercise Grant SARs Employees Or Base Expira- Date Granted In Fiscal Price tion Present Name (#) 1/ Year ($/Sh) Date Value 2/ - ------------------ ---------- ---------- -------- ------- ---------- Thomas C. Webb 8,000/0 21.1% $18.4375 5/3/04 $13,920 Robert H. Young 6,000/0 15.8 18.4375 5/3/04 10,440 Robert de R. Stein 4,500/0 11.8 18.4375 5/3/04 7,830 Thomas J. Hurcomb 3,000/0 7.9 18.4375 5/3/04 5,220 Robert G. Kirn 3,000/0 7.9 18.4375 5/3/04 5,220 1/ A total of 38,000 shares were awarded to all plan participants in 1994. Stock Options are exercisable in whole or in part from the date of the grant for a period of ten years and one day. 2/ Per Black-Scholes model as certified by independent consultant. The assumptions used for the Model are as follows: Volatility- .201 based on quarterly prices for the period of 3/31/88 to 12/31/94; Risk free rate of return-7.2%; Dividend Yield-7.7% over period of 3/31/88 to 12/31/94; and Term of Exercise-10 years. The following table sets forth stock options exercised by the Company's Chief Executive Officer and the four other most highly compensated executive officers during 1994, and the number and value of all unexercised options at year-end. The value of "in-the-money" options refers to options having an exercise price which is less than the market price of the Company's common stock on December 31, 1994. III. Option/SAR Exercises and Year-end Value Table Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Value (a) (b) (c) (d) (e) Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options/SARs Options/SARs At FY-End (#) FY-End ($) Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized($)1/ Unexercisable Unexercisable - ------------------ --------------- ------------- ------------- ------------- Thomas C. Webb - - 22,000/0 $0/0 Robert H. Young 4,125 $7,391 16,500/0 0/0 Robert de R. Stein - - 19,500/0 0/0 Thomas J. Hurcomb - - 18,000/0 0/0 Robert G. Kirn - - 11,250/0 0/0 1/ The dollar values in columns (c) and (e) are calculated by determining the difference between the fair market value of the securities underlying the options and the exercise or base price of the options at exercise or fiscal year end, respectively. Deferred Compensation Plan. Employees of the Company who are officers are eligible to defer receipt of a portion of their compensation pursuant to the Company's Deferred Compensation Plan (the "Plan") for Officers. Also, certain of the Directors of the Company have elected to defer receipt of all or a portion of their fees under a similar plan for Directors. Under the Plan approved effective January 1, 1990 Directors and Officers of the Company may elect to defer over a 5-year period receipt of a specified amount of compensation or fees otherwise currently payable to them until retirement at age 65 (age 70 for Directors), or until their death, disability, or resignation. Officers may receive a reduced benefit beginning at age 60 with 10 years of service. Amounts deferred are not currently taxable for state and federal income taxes. The benefit is equal to the compensation deferred plus interest credited by the Company. The plan is a defined contribution program under which the Company recovers any costs, including the cost of capital, through the proceeds of the supporting life insurance policies. In addition, if death of a Director occurs before age 70, an additional survivor benefit equal to the annual amount deferred will be paid to the beneficiary each year for fifteen years. This benefit is also financed by life insurance proceeds. Pension Plan. The Pension Plan of Central Vermont Public Service Corporation and Its Subsidiaries (the "Plan") is a defined benefit plan which covers employees, among others, who are officers. The Company pays the full cost of the Plan. The table below shows the annual amounts payable under the present provisions of the Plan as amended through December 31, 1994, based on Final Average Earnings for various years of service, assuming the employee would retire at age 65 in 1995.
Assumed 5-Year Final Years of Service Average Earnings 15 20 25 30 35 ---------------- --------- --------- --------- --------- --------- $ 80,000 $18,959 $25,278 $31,598 $37,918 $39,918 100,000 24,209 32,278 40,348 48,418 50,918 120,000 29,459 39,278 49,098 58,918 61,918 140,000 34,709 46,278 57,848 69,418 72,918 150,000 37,334(1) 49,778(1) 62,223(1) 74,668(1) 78,418(1) 190,000 37,334(1) 49,778(1) 62,223(1) 74,668(1) 78,418(1) 230,000 37,334(1) 49,778(1) 62,223(1) 74,668(1) 78,418(1) 250,000 37,334(1) 49,778(1) 62,223(1) 74,668(1) 78,418(1) 280,000 37,334(1) 49,778(1) 62,223(1) 74,668(1) 78,418(1) 300,000 37,334(1) 49,778(1) 62,223(1) 74,668(1) 78,418(1)
________ (1) Internal Revenue Code Section 401(a)(17) limits earnings used to calculate qualified plan benefits to $150,000 for 1994. Final Average Earnings is the highest five-year average of consecutive years' Base Salary (item (c) from the Summary Compensation Table with the exclusion of Mr. Webb s retainer and fees from VELCO) over an employee's career with the Company. The amounts above are payable for the life of the retiree only, and would be reduced on an actuarial basis if survivor options were chosen. In addition, no Social Security offset applies to amounts above. The credited years of service at December 31, 1994 under the Plan for those individuals named in the Summary Compensation Table were as follows: Mr. Webb, 10 years; Mr. Young, 7 years, 6 months; Mr. Stein, 6 years, 7 months; Mr. Hurcomb, 27 years and Mr. Kirn, 3 years, 8 months. Officers' Insurance and Supplemental Retirement Plan The Officers' Insurance and Supplemental Retirement Plan (the "Plan") is designed to supplement the retirement benefits available to the Company's officers. The Plan is a part of the Company's overall strategy for attracting and maintaining top managerial talent in the utility industry. Under this Plan, the individuals named in the Summary Compensation Table are covered, while employed, by life insurance at the following multiple of salary: Mr. Webb, 4 times; Messrs. Young, Stein, Hurcomb and Kirn, 3 times. Under the Plan, each officer is entitled to receive, upon his or her retirement at age 65, fifteen annual payments in amounts equal to a specified percentage of his or her final year's Base Salary (item (c) from the Summary Compensation Table with the exclusion of Mr. Webb s retainer and fees from VELCO). A reduced benefit is available at age 60 for officers who attain age 55 with ten years of service. A paid-up life insurance of $100,000 is also provided to vested retirees under this Plan. The applicable percentages for the individuals named in Summary Compensation Table are as follows: Mr. Webb, 44.5%; Messrs. Young, Stein, Hurcomb and Kirn, 33%. Shown below is the estimated Company provided benefit payable under the Plan for those individuals named in the Summary Compensation Table, assuming they were to retire at age 65: Assumed Final Annual Base Pay 33% 44.5% --------------- ------ ------- $ $ $ --------------- ------ ------- 80,000 26,400 35,600 100,000 33,000 44,500 120,000 39,600 53,400 140,000 46,200 62,300 160,000 52,800 71,200 180,000 59,400 80,100 220,000 72,600 97,900 260,000 85,800 115,700 The Plan is financed through the Company's acquisition of corporate-owned life insurance. Predecessor Deferred Compensation Plan. Between 1986 and 1990, the Company allowed officers to defer receipt of compensation in return for fifteen annual payments of a defined benefit amount upon retirement. The Company will pay the difference, if any, between the defined benefit cost and the accumulated value of deferred compensation. Shown below is the estimated Company-provided benefit, payable at age 65, for those individuals named in the Summary Compensation Table who elected to participate. Since these benefits do not apply to all of the named individuals, they have not been reflected in the foregoing pension table. Annual Company- Provided Benefit Name Payable at Age 65 ----------- ----------------- Mr. Webb $29,800 Mr. Hurcomb 13,900 Employee Savings and Investment Plan. Effective January 1, 1985 the Company adopted an Employee Savings and Investment Plan (the Plan ) (also known as a 401(k) Plan) which provides a means for eligible employees to accumulate savings and investment income without payment of current income taxes. Presently any employee of the Company who has completed at least one year of service, as defined in the Plan, is eligible to participate ( Participant ). An eligible employee who elects to participate in the Plan may authorize the Company to contribute to the Plan for his or her account between 1% and 15% of their pre-tax base compensation for each pay period. For 1994, the Plan limits the maximum annual deferral to $9,240 per Participant. This maximum is adjusted annually for inflation by the Internal Revenue Service. The Company matches 100% of the first 4% of the compensation the Participant contributes to the Plan. A Participant may direct the investment of his or her Plan account among five funds specified in the Plan and is at all times fully vested in his or her Plan account. Generally, distribution of employee contributions is deferred until the Participant's death, disability, retirement or other termination of employment, except in cases of financial hardship. Matching employer contributions, however, may be withdrawn by the Participant at any time and for any reason, provided either the amount withdrawn has been in the Plan for at least two years or the Participant has been a member of the Plan for at least 5 years. Such in-service withdrawals are generally subject to ordinary income tax and an additional 10% tax plus a mandatory 20% rollover tax withholding effective January 1, 1993. Distribution of Plan benefits may be in the form of cash, an annuity, or in certain circumstances, Common Stock of the Company. Amounts voluntarily deferred by the five highest paid executive officers are included in compensation listed in Item (c) of the Summary Compensation Table. Matching Company contributions credited to the Plan accounts of the individuals referred to during 1994 are set forth in Column 4, Item (i) in the Summary Compensation Table. Contracts with Management. The Company has entered into severance compensation agreements with Messrs. Webb, Young, Stein, Hurcomb, Kirn and six other officers of the Company. The agreements have a term of five years provision for renewal. They provide that in the event of termination of employment, or a significant change in employment status as defined in the agreement, within three years following a change in control of the Company, Messrs. Webb, Young, Stein, Hurcomb, Kirn and three other executive officers will receive 2.999 times and three other officers will receive two times their average annual compensation for the preceding five or fewer years of service and certain legal fees and expenses incurred as a result of termination of employment. The provisions of the agreement do not apply if the officer retires, dies, or is disabled, voluntarily resigns, or is dismissed for cause. In exchange for agreeing to provide consulting services as requested by the Company for one year and refraining from working in competition with, or for a competitor of the Company for three years, the agreement permits continued participation in and retention of benefits under the Deferred Compensation Plan, Officers' Insurance and Supplemental Retirement Plans, and health and disability plans. The extent of these provisions depends on an individual's participation and circumstances, and is specified in each agreement. Those seven officers with less than 10 years of service would receive a payment actuarially equivalent to benefits received under the Company's pension plan at age 65 with ten years of service, less any benefit paid under the pension plan. The agreements also provide for the payment to officers of an amount sufficient to offset any federal excise tax on the termination payments under Section 4999 of the Internal Revenue Code. Non-qualified stock options not immediately exercisable will become exercisable in the event of a change of control of the Company as defined in the Plan. A change of control occurs under the agreement when (1) any person, corporation, partnership or group acquires 20% or more of the combined voting power of the Company's outstanding securities; (2) if those members constituting a majority of the Directors at any given date no longer constitute a majority of the Directors at the end of a period of two consecutive years thereafter (unless the nomination of each new director was approved by a vote of at least two-thirds of the directors in office who were directors at the beginning of the period); or (3) if a third party acquires ownership or voting power of 10% or more of the outstanding voting securities of the Company, and subsequently is a "public utility holding company" within the meaning of the Public Utility Holding Company Act of 1935, or the Company loses its exemption from or is required to register under that Act. During 1989, the Board also approved a severance plan in the event of a change of control for key managers of the Company not covered by the above plan. In the event of a change in control as described above and a subsequent discharge from employment within eighteen months for reason other than cause, thirty-two managers will receive a severance payment equal to one year's base salary, outplacement services, and coverage under the Company's medical plan for one year at Company expense. The Board of Directors believes that such agreements protect the stockholders by ensuring officers and key managers can and will act in stockholders' best interests without regard to personal situations or concerns. The Board also believes that such agreements will better ensure retention and recruitment of high caliber officers and key managers. Item 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth the number of shares of Common Stock of the Company beneficially owned by each director and nominee director, each of the executive officers named in the Summary Compensation Table and by all the directors, nominee directors and officers as a group as of January 31, 1995. Shares of Common Stock Name Beneficially Owned (1)(2)(3)(4) -------------------- ---------------------- Frederic H. Bertrand 10,444 (5) Robert P. Bliss, Jr. 10,573 (6) Elizabeth Coleman 9,959 Luther F. Hackett 8,533 (7) Thomas J. Hurcomb 20,773 F. Ray Keyser, Jr. 14,226 (8) Robert G. Kirn 11,456 Mary Alice McKenzie 6,192 (9) Gordon P. Mills 44,606 (10) Preston Leete Smith 8,299 Robert de R. Stein 19,849 Robert D. Stout 11,531 Thomas C. Webb 35,290 Robert H. Young 17,410 All directors and officers as a group (20) 266,525 No Director, nominee for Director or Executive Officer owns any shares of the various classes of the Company's outstanding non-voting preferred stock. (1) No Director, nominee for Director or executive officer owns beneficially in excess of 1% of CVPS' outstanding Common Stock, except as otherwise indicated in the footnotes to the table, each of the named individual possesses sole voting and investment power over the shares listed. (2) Includes shares that the named individuals have a right to acquire pursuant to options granted under the 1988 and 1993 Stock Option Plans for Non-Employee Directors as follows: Messrs. Bertrand and Keyser, 9,000 shares; Messrs. Bliss, Mills and Stout, 7,500 shares; Ms. McKenzie and Mr. Smith, 6,000 shares; Ms. Coleman and Mr. Hackett, 4,500 shares. (3) Includes shares that the named individuals have a right to acquire pursuant to options granted under the 1988 Stock Option Plan for Key Employees as follows: Mr. Hurcomb, 18,000 shares; Mr. Kirn, 11,250 shares; Mr. Stein, 19,500 shares; Mr. Webb, 22,000 shares; Mr. Young, 16,500 shares; and all Executive Officers as a group, 114,250 shares. (4) Includes shares that the named individuals hold under the Company's Employee Savings and Investment and Employee Stock Ownership Plans as follows: Mr. Hurcomb, 2,759 shares; Mr. Webb, 8,790 shares; and Mr. Young, 310 shares. (5) Includes 1,444 shares held jointly with his wife over which Mr. Bertrand has voting and investment power. (6) Includes 150 shares held jointly with his wife over which Mr. Bliss has voting and investment power. (7) Includes 1,500 shares owned by corporations over which Mr. Hackett has voting and investment power. (8) Includes 1,476 shares held jointly with his wife and 3,750 shares held in a Keogh Trust over which Mr. Keyser has voting and investment power. (9) Includes 150 shares held jointly with her husband over which Ms. McKenzie has voting and investment power. (10) Includes 15,000 shares held in a pension trust over which Mr. Mills has voting and investment power. The Company knows of no person, entity or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) which owns beneficially more than 5% of any class of the Company's outstanding equity securities. Reports of Beneficial Ownership Section 16(a) of the Securities Exchange Act of 1934 requires the Company's Directors and Officers to file reports of ownership and changes in ownership of Company securities with the Securities and Exchange Commission and to furnish the Company with copies of all such reports. In making this statement, the Company has relied on copies of reports that have been filed with the Commission. Section 16(a) of the Securities Exchange Act of 1934 also requires directors, officers and persons who beneficially own more than ten percent (10%) of the Company's stock to file initial reports of ownership and subsequent reports of changes in ownership with the SEC and the NYSE. Based solely on a review of the copies of such reports prepared and filed with the Commission during 1994 by the Company's Executive Officers and Directors, and on written representations that no other reports were required the Company believes its Directors and Executive Officers have complied with all Section 16(a) filing requirements. The Company does not have a ten percent holder. Item 13. Certain Relationships and Related Transactions. None Filed Herewith at Page PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)1. The following financial statements for Central Vermont Public Service Corporation and its wholly owned subsidiaries are filed as part of this report: (See Item 8) 1.1 Consolidated Statement of Income, for each of the three years ended December 31, 1994 Consolidated Statement of Cash Flows, for each of the three years ended December 31, 1994 Consolidated Balance Sheet at December 31, 1994 and 1993 Consolidated Statement of Capitalization at December 31, 1994 and 1993 Consolidated Statement of Changes in Common Stock Equity for each of the three years ended December 31, 1994 Notes to Consolidated Financial Statements (a)2. Financial Statement Schedules: 2.1 Central Vermont Public Service Corporation and its wholly owned subsidiaries: Schedule II - Reserves for each of the three years ended December 31, 1994 Schedules not included have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Separate financial statements of the Registrant (which is primarily an operating company) have been omitted since they are consolidated only with those of totally held subsidiaries. Separate financial statements of subsidiary companies not consolidated have been omitted since, if considered in the aggregate, they would not constitute a significant subsidiary. Separate financial statements of 50% or less owned persons for which the investment is accounted for by the equity method by the Registrant have been omitted since, if considered in the aggregate, they would not constitute a significant investment. (a)3. Exhibits (* denotes filed herewith) Each document described below is incorporated by reference to the appropriate exhibit numbers and the Commission file numbers indicated in parantheses, unless the reference to the document is marked as follows: * - Filed herewith. Exhibit 3 Articles of Incorporation and By-Laws * 3-1 By-Laws, as amended May 3, 1994. 3-2 Articles of Association, as amended August 11, 1992. (Exhibit No. 3-2, 1992 10-K, File No. 1-8222) Exhibit 4 Instruments defining the rights of security holders, including Indentures Incorporated herein by reference: 4-1 Mortgage dated October 1, 1929, between the Company and Old Colony Trust Company, Trustee, securing the Company's First Mortgage Bonds. (Exhibit B-3, File No. 2-2364) 4-2 Supplemental Indenture dated as of August 1, 1936, supplemental to 4-1. (Exhibit B-4, File No. 2-2364) 4-3 Copy of Supplemental Indenture dated as of November 15, 1943, supplemental to 4-1. (Exhibit B-3, File No. 2-5250) 4-4 Copy of Supplemental Indenture dated as of December 1, 1943, supplemental to 4-1. (Exhibit No. B-4, File No. 2-5250) 4-5 Copy of directors' resolutions adopted December 14, 1943, establishing the Series C Bonds and dealing with other related matters, supplemental to 4-1. (Exhibit B-5, File No. 2-5250) 4-6 Copy of Supplemental Indenture dated as of April 1, 1944 supplemental to 4-1. (Exhibit No. B-6, File No. 2-5466) 4-7 Copy of Supplemental Indenture dated as of February 1, 1945, supplemental to 4-1. (Exhibit 7.6, File No. 2-5615) (22-385) 4-8 Directors' resolutions adopted April 9, 1945, establishing the Series D Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 7.8, File No. 2-5615 (22-385) 4-9 Copy of Supplemental Indenture dated as of September 2, 1947, supplemental to 4-1. (Exhibit 7.9, File No. 2-7489) 4-10 Copy of Supplemental Indenture dated as of July 15, 1948, and directors' resolutions establishing the Series E Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 7.10, File No. 2-8388) 4-11 Copy of Supplemental Indenture dated as of May 1, 1950, and directors' resolutions establishing the Series F Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 7.11, File No. 2-8388) 4-12 Copy of Supplemental Indenture dated August 1, 1951, and and directors'resolutions, establishing the Series G Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 7.12, File No. 2-9073) 4-13 Copy of Supplemental Indenture dated May 1, 1952, and directors' resolutions, establishing the Series H Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 4.3.13, File No. 2-9613) 4-14 Copy of Supplemental Indenture dated as of July 10, 1953, supplemental to 4-1. (July, 1953 Form 8-K, File No. 1-8222) 4-15 Copy of Supplemental Indenture dated as of June 1, 1954, and directors' resolutions establishing the Series K Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 4.2.16, File No. 2-10959) 4-16 Copy of Supplemental Indenture dated as of February 1, 1957 and directors' resolutions establishing the Series L Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 4.2.16, File No. 2-13321) 4-17 Copy of Supplemental Indenture dated as of March 15, 1960, supplemental to 4-1. (March, 1960 Form 8-K, File No. 1-8222) 4-18 Copy of Supplemental Indenture dated as of March 1, 1962, supplemental to 4-1. (March, 1962 Form 8-K, File No. 1-8222) 4-19 Copy of Supplemental Indenture dated as of March 2, 1964, supplemental to 4-1. (March, 1964 Form 8-K, File No, 1-8222) 4-20 Copy of Supplemental Indenture dated as of March 1, 1965, and directors' resolutions establishing the Series M Bonds and dealing with other matters, supplemental to 4-1. (April, 1965 Form 8-K, File No. 1-8222) 4-21 Copy of Supplemental Indenture dated as of December 1, 1966, and directors' resolutions establishing the Series N Bonds and dealing with other matters, supplemental to 4-1. (January, 1967 Form 8-K, File No. 1-8222) 4-22 Copy of Supplemental Indenture dated as of December 1, 1967, and directors' resolutions establishing the Series O Bonds and dealing with other matters, supplemental to 4-1. (December, 1967 Form 8-K, File No. 1-8222) 4-23 Copy of Supplemental Indenture dated as of July 1, 1969, and directors' resolutions establishing the Series P Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B.23, July, 1969 Form 8-K, File No. 1-8222) 4-24 Copy of Supplemental Indenture dated as of December 1, 1969, and directors' resolutions establishing the Series Q Bonds January, and dealing with other matters, supplemental to 4-1. (Exhibit B.24, January, 1970 Form 8-K, File No. 1-8222) 4-25 Copy of Supplemental Indenture dated as of May 15, 1971, and directors' resolutions establishing the Series R Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B.25, May, 1971, Form 8-K, File No. 1-8222) 4-26 Copy of Supplemental Indenture dated as of April 15, 1973, and directors' resolutions establishing the Series S Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B.26, May, 1973, Form 8-K, File No. 1-8222) 4-27 Copy of Supplemental Indenture dated as of April 1, 1975, and directors' resolutions establishing the Series T Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B.27, April, 1975, Form 8-K, File No. 1-8222) 4-28 Copy of Supplemental Indenture dated as of April 1, 1977, modifying 4-1. (Exhibit 2.42, File No. 2-58621) 4-29 Copy of Supplemental Indenture dated as of July 29, 1977, and directors' resolutions establishing the Series U, V, W, and X Bonds and dealing with other matters, supplemental to 4-1. (Exhibit 2.43, File No. 2-58621) 4-30 Copy of Thirtieth Supplemental Indenture dated as of September 15, 1978, and directors' resolutions establishing the Series Y Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B-30, 1980 Form 10-K, File No. 1-8222) 4-31 Copy of Thirty-first Supplemental Indenture dated as of September 1, 1979, and directors' resolutions establishing the Series Z Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B-31, 1980 Form 10-K, File No. 1-8222) 4-32 Copy of Thirty-second Supplemental Indenture dated as of June 1, 1981, and directors' resolutions establishing the Series AA Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B-32, 1981 Form 10-K, File No. 1-8222) 4-45 Copy of Thirty-third Supplemental Indenture dated as of August 15, 1983, and directors' resolutions establishing the Series BB Bonds and dealing with other matters, supplemental to 4-1. (Exhibit B-45, 1983 Form 10-K, File No. 1-8222) 4-46 Copy of Bond Purchase Agreement between Merrill, Lynch, Pierce, Fenner & Smith, Inc., Underwriters and The Industrial Development Authority of the State of New Hampshire, issuer and Central Vermont Public Service Corporation. (Exhibit B-46, 1984 Form 10-K, File No. 1-8222) 4-47 Copy of Thirty-Fourth Supplemental Indenture dated as of January 15, 1985, and directors' resolutions establishing the Series CC Bonds and Series DD Bonds and matters connected therewith, supplemental to 4-1. (Exhibit B-47, 1985 Form 10-K, File No. 1-8222) 4-48 Copy of Bond Purchase Agreement among Connecticut Development Authority and Central Vermont Public Service Corporation with E. F. Hutton & Company Inc. dated December 11, 1985. (Exhibit B-48, 1985 Form 10-K, File No. 1-8222) 4-49 Stock-Purchase Agreement between Vermont Electric Power Company, Inc. and the Company dated August 11, 1986 relative to purchase of Class C Preferred Stock. (Exhibit B-49, 1986 Form 10-K, File No. 1-8222) 4-50 Copy of Thirty-Fifth Supplemental Indenture dated as of December 15, 1989 and directors' resolutions establishing the Series EE, Series FF and Series GG Bonds and matters connected therewith, supplemental to 4-1. (Exhibit 4-50, 1989 Form 10-K, File No. 1-8222) 4-51 Copy of Thirty-Sixth Supplemental Indenture dated as of December 10, 1990 and directors' resolutions establishing the Series HH Bonds and matters connected therewith, supplemental to 4-1. (Exhibit 4-51, 1990 Form 10-K, File No. 1-8222) 4-52 Copy of Thirty-Seventh Supplemental Indenture dated December 10, 1991 and directors' resolutions establishing the Series JJ Bonds and matters connected therewith, supplemental to 4-1. (Exhibit 4-52, 1991 Form 10-K, File No. 1-8222) 4-53 Copy of Thirty-Eight Supplemental Indenture dated December 10, 1993 establishing Series KK, LL, MM, NN, OO supplemental to B-1 (Exhibit 4-53, 1993 Form 10-K, File No. 1-8222) Exhibit 10 Material Contracts (*Denotes filed herewith) Incorporated herein by reference: 10.l Copy of firm power Contract dated August 29, 1958, and supplements thereto dated September 19, 1958, October 7, 1958, and October 1, 1960, between the Company and the State of Vermont (the "State"). (Exhibit C-1, File No. 2-17184) 10.1.1 Agreement setting out Supplemental NEPOOL Understandings dated as of April 2, 1973. (Exhibit C-22, File No. 5-50198) 10.2 Copy of Transmission Contract dated June 13, 1957, between Velco and the State, relating to transmission of power. (Exhibit 10.2, 1993 Form 10-K, File No. 1-8222) 10.2.1 Copy of letter agreement dated August 4, 1961, between Velco and the State. (Exhibit C-3, File No. 2-26485) 10.2.2 Amendment dated September 23, 1969. (Exhibit C-4, File No. 2-38161) 10.2.3 Amendment dated March 12, 1980. (Exhibit C-92, 1982 Form 10-K, File No. 1-8222) 10.2.4 Amendment dated September 24, 1980. (Exhibit C-93, 1982 Form 10-K, File No. 1-8222) 10.3 Copy of subtransmission contract dated August 29, 1958, between Velco and the Company (there are seven similar contracts between Velco and other utilities). (Exhibit 10.3, 1993 Form 10-K, Form No. 1-8222) 10.3.1 Copies of Amendments dated September 7, 196l, November 2, 1967, March 22, 1968, and October 29, 1968. (Exhibit C-6, File No. 2-32917) 10.3.2 Amendment dated December 1, 1972. (Exhibit 10.3.2, 1993 Form 10-K, File No. 1-8222) 10.4 Copy of Three-Party Agreement dated September 25, 1957, between the Company, Green Mountain and Velco. (Exhibit C-7, File No. 2-17184) 10.4.1 Superseding Three Party Power Agreement dated January 1, 1990. (Exhibit 10-201, 1990 Form 10-K, File No. 1-8222) 10.4.2 Agreement Amending Superseding Three Party Power Agreement dated May 1, 1991. (Exhibit 10.4.2, 1991 Form 10-K, File No. 1-8222) 10.5 Copy of firm power Contract dated December 29, 1961, between the Company and the State, relating to purchase of Niagara Project power. (Exhibit C-8, File No. 2-26485) 10.5.1 Amendment effective as of January 1, 1980. (Exhibit 10.5.1, 1993 Form 10-K, File No. 1-8222) 10.6 Copy of agreement dated July 16, 1966, and letter supplement dated July 16, 1966, between Velco and Public Service Company of New Hampshire relating to purchase of single unit power from Merrimack II. (Exhibit C-9, File No. 2-26485) 10.6.1 Copy of Letter Agreement dated July 10, 1968, modifying Exhibit A. Exhibit C-10, File No. 2-32917) 10.7 Copy of Capital Funds Agreement between the Company and Vermont Yankee dated as of February 1, 1968. (Exhibit C-11, File No. 70-4611) 10.7.1 Copy of Amendment dated March 12, 1968. (Exhibit C-12, File No. 70-4611) * 10.7.2 Copy of Amendment dated September 1, 1993 10.8 Copy of Power Contract between the Company and Vermont Yankee dated as of February 1, 1968. (Exhibit C-13, File No. 70-4591) 10.8.1 Amendment dated April 15, 1983. (10.8.1, 1993 Form 10-K, File No. 1-8222) 10.8.2 Copy of Additional Power Contract dated February 1, 1984. (Exhibit C-123, 1984 Form 10-K, File No. 1-8222) 10.8.3 Amendment No. 3 to Vermont Yankee Power Contract, dated April 24, 1985. (Exhibit 10-144, 1986 Form 10-K, File No. 1-8222) 10.8.4 Amendment No. 4 to Vermont Yankee Power Contract, dated June 1, 1985. (Exhibit 10-145, 1986 Form 10-K, File No. 1-8222) 10.8.5 Amendment No. 5 dated May 6, 1988. (Exhibit 10-179, 1988 Form 10-K, File No. 1-8222) 10.8.6 Amendment No. 6 dated May 6, 1988. (Exhibit 10-180, 1988 Form 10-K, File No. 1-8222) 10.8.7 Amendment No. 7 dated June 15, 1989. (Exhibit 10-195, 1989 Form 10-K, File No. 1-8222) 10.9 Copy of Capital Funds Agreement between the Company and Maine Yankee dated as of May 20, 1968. (Exhibit C-14, File No. 70-4658) 10.9.1 Amendment No. 1 dated August 1, 1985. (Exhibit C-125, 1984 Form 10-K, File No. 1-8222) 10.10 Copy of Power Contract between the Company and Maine Yankee dated as of May 20, 1968. (Exhibit C-15, File No. 70-4658) 10.10.1 Amendment No. 1 dated March 1, 1984. (Exhibit C-112, 1984 Form 10-K, File No. 1-8222) 10.10.2 Amendment No. 2 effective January 1, 1984. (Exhibit C-113, 1984 Form 10-K, File No. 1-8222) 10.10.3 Amendment No. 3 dated October 1, 1984. (Exhibit C-114, 1984 Form 10-K, File No. 1-8222) 10.10.4 Additional Power Contract dated February 1, 1984. (Exhibit C-126, 1985 Form 10-K, File No. 1-8222) 10.11 Copy of Agreement dated January 17, 1968, between Velco and Public Service Company of New Hampshire relating to purchase of additional unit power from Merrimack II. (Exhibit C-16, File No. 2-32917) 10.12 Copy of Agreement dated February 10, 1968 between the Company and Velco relating to purchase by Company of Merrimack II unit power. (There are 25 similar agreements between Velco and other utilities.) (Exhibit C-17, File No. 2-32917) 10.13 Copy of Three-Party Power Agreement dated as of November 21, 1969, among the Company, Velco, and Green Mountain relating to purchase and sale of power from Vermont Yankee Nuclear Power Corporation. (Exhibit C-18, File No. 2-38161) 10.13.1 Amendment dated June 1, 1981. (Exhibit 10.13.1, 1993 Form 10-K, File No. 1-8222) 10.14 Copy of Three-Party Transmission Agreement dated as of November 21, 1969, among the Company, Velco, and Green Mountain providing for transmission of power from Vermont Yankee Nuclear Power Corporation. (Exhibit C-19, File No. 2-38161) 10.14.1 Amendment dated June 1, 1981. (Exhibit 10.14.1, 1993 Form 10-K, File No. 1-8222) 10.15 Copy of Stockholders Agreement dated September 25, 1957, between the Company, Velco, Green Mountain and Citizens Utilities Company. (Exhibit No. C-20, File No. 70-3558) 10.16 New England Power Pool Agreement dated as of September 1, 1971, as amended to November 1, 1975. (Exhibit C-21, File No. 2-55385) 10.16.1 Amendment dated December 31, 1976. (Exhibit 10.16.1 1993 Form 10-K, File No. 1-8222) 10.16.2 Amendment dated January 23, 1977. (Exhibit 10.16.2, 1993 Form 10-K, File No. 1-8222) 10.16.3 Amendment dated July 1, 1977. (Exhibit 10.16.3, 1993 Form 10-K, File No. 1-8222) 10.16.4 Amendment dated August 1, 1977. (Exhibit 10.16.4, 1993 Form 10-K, File No. 1-8222) 10.16.5 Amendment dated August 15, 1978. (Exhibit 10.16.5, 1993 Form 10-K, File No. 1-8222) 10.16.6 Amendment dated January 31, 1979. (Exhibit 10.16.6, 1993 Form 10-K, File No. 1-8222) 10.16.7 Amendment dated Feburary 1, 1980. (Exhibit 10.16.7, 1993 Form 10-K, File No. 1-8222) 10.16.8 Amendment dated December 31, 1976. (Exhibit 10.16.8, 1993 Form 10-K, File No. 1-8222) 10.16.9 Amendment dated January 31, 1977. (Exhibit 10.16.9, 1993 Form 10-K, File No. 1-8222) 10.16.10 Amendment dated July 1, 1977. (Exhibit 10.16.10, 1993 Form 10-K, File No. 1-8222) 10.16.11 Amendment dated August 1, 1977. (Exhibit 10.16.11, 1993 Form 10-K, File No. 1-8222) 10.16.12 Amendment dated August 15, 1978. (Exhibit 10.16.12, 1993 Form 10-K, File No. 1-8222) 10.16.13 Amendment dated January 31, 1980. (Exhibit 10.16.13, 1993 Form 10-K, File No. 1-8222) 10.16.14 Amendment dated February 1, 1980. (Exhibit 10.16.14, 1993 Form 10-K, File No. 1-8222) 10.16.15 Amendment dated September 1, 1981. (Exhibit 10.16.15, 1993 Form 10-K, File No. 1-8222) 10.16.16 Amendment dated December 1, 1981. (Exhibit 10.16.16, 1993 Form 10-K, File No. 1-8222) 10.16.17 Amendment dated June 15, 1983. (Exhibit 10.16.17, 1993 Form 10-K, File No. 1-8222) 10.16.18 Amendment dated September 1, 1985. (Exhibit 10-160, 1986 Form 10-K, File No. 1-8222) 10.16.19 Amendment dated April 30, 1987. (Exhibit 10-172, 1987 Form 10-K, File No. 1-8222) 10.16.20 Amendment dated March 1, 1988. (Exhibit 10-178, 1988 Form 10-K, File No. 1-8222) 10.16.21 Amendment dated March 15, 1989. (Exhibit 10-194, 1989 Form 10-K, File No. 1-8222) 10.16.22 Amendment dated October 1, 1990. (Exhibit 10-203, 1990 Form 10-K, File No. 1-8222) 10.16.23 Amendment dated September 15, 1992. (Exhibit 10.16.23, 1992 Form 10-K, File No. 1-8222) 10.16.24 Amendment dated May 1, 1993. (Exhibit 10.16.24, 1993 Form 10-K, File No. 1-8222) 10.16.25 Amendment dated June 1, 1993. (Exhibit 10.16.25, 1993 Form 10-K, File No. 1-8222) * 10.16.26 Amendment dated June 1, 1994. 10.17 Agreement dated October 13, 1972, for Joint Ownership, Construction and Operation of Pilgrim Unit No. 2 among Boston Edison Company and other utilities, including the Company. (Exhibit C-23, File No. 2-45990) 10.17.1 Amendments dated September 20, 1973, and September 15, 1974. (Exhibit C-24, File No. 2-51999) 10.17.2 Amendment dated December 1, 1974. (Exhibit C-25, File No. 2-54449) 10.17.3 Amendent dated February 15, 1975. (Exhibit C-26, File No. 2-53819) 10.17.4 Amendment dated April 30, 1975. (Exhibit C-27, File No. 2-53819) 10.17.5 Amendment dated as of June 30, 1975. (Exhibit C-28, File No. 2-54449) 10.17.6 Instrument of Transfer dated as of October 1, 1974, assigning partial interest from the Company to Green Mountain Power Corporation. (Exhibit C-29, File No. 2-52177) 10.17.7 Instrument of Transfer dated as of January 17, 1975, assigning a partial interest from the Company to the Burlington Electric Department. (Exhibit C-30, File No. 2-55458) 10.17.8 Addendum dated as of October 1, 1974 by which Green Mountain Power Corporation became a party thereto. (Exhibit C-31, File No. 2-52177) 10.17.9 Addendum dated as of January 17, 1975 by which the Burlington Electric Department became a party thereto. (Exhibit C-32, File No. 2-55450) 10.17.10 Amendment 23 dated as of 1975. (Exhibit C-50, 1975 Form 10-K, File No. 1-8222) 10.18 Agreement for Sharing Costs Associated with Pilgrim Unit No.2 Transmission dated October 13, 1972, among Boston Edison Company and other utilities including the Company. (Exhibit C-33, File No. 2-45990) 10.18.1 Addendum dated as of October 1, 1974, by which Green Mountain Power Corporation became a party thereto. (Exhibit C-34, File No. 2-52177) 10.18.2 Addendum dated as of January 17, 1975, by which Burlington Electric Department became a party thereto. (Exhibit C-35, File No. 2-55458) 10.19 Agreement dated as of May 1, 1973, for Joint Ownership, Construction and Operation of New Hampshire Nuclear Units among Public Service Company of New Hampshire and other utilities, including Velco. (Exhibit C-36, File No. 2-48966) 10.19.1 Amendments dated May 24, 1974, June 21, 1974, September 25, 1974, October 25, l974, and January 31, 1975. (Exhibit C-37, File No. 2-53674) 10.19.2 Instrument of Transfer dated September 27, 1974, assigning partial interest from Velco to the Company. (Exhibit C-38, File No. 2-52177) 10.19.3 Amendments dated May 24, 1974, June 21, 1974, and September 25, 1974. (Exhibit C-81, File No. 2-51999) 10.19.4 Amendments dated October 25, 1974 and January 31, 1975. (Exhibit C-82, File No. 2-54646) 10.19.5 Sixth Amendment dated as of April 18, 1979. (Exhibit C-83, File No. 2-64294) 10.19.6 Seventh Amendment dated as of April 18, 1979. (Exhibit C-84, File No. 2-64294) 10.19.7 Eighth Amendment dated as of April 25, 1979. (Exhibit C-85, File No. 2-64815) 10.19.8 Ninth Amendment dated as of June 8, 1979. (Exhibit C-86, File No. 2-64815) 10.19.9 Tenth Amendment dated as of October 10, 1979. (Exhibit C-87, File No. 2-66334 ) 10.19.10 Eleventh Amendment dated as of December 15, 1979. (Exhibit C-88, File No.2-66492) 10.19.11 Twelfth Amendment dated as of June 16, 1980. (Exhibit C-89, File No. 2-68168) 10.19.12 Thirteenth Amendment dated as of December 31, 1980. (Exhibit C-90, File No. 2-70579) 10.19.13 Fourteenth Amendment dated as of June 1, 1982.(Exhibit C-104, 1982 Form 10-K, File No. 1-8222) 10.19.14 Fifteenth Amendment dated April 27, 1984. (Exhibit 10-134, 1986 Form 10-K, File No. 1-8222) 10.19.15 Sixteenth Amendment dated June 15, 1984. (Exhibit 10-135, 1986 Form 10-K, File No. 1-8222) 10.19.16 Seventeenth Amendment dated March 8, 1985. (Exhibit 10-136, 1986 Form 10-K, File No. 1-8222) 10.19.17 Eighteenth Amendment dated March 14, 1986. (Exhibit 10-137, 1986 Form 10-K, File No. 1-8222) 10.19.18 Nineteenth Amendment dated May 1, 1986. (Exhibit 10-138, 1986 Form 10-K, File No. 1-8222) 10.19.19 Twentieth Amendment dated September 19, 1986. (Exhibit 10-139, 1986 Form 10-K, File No. 1-8222) 10.19.20 Amendment No. 22 dated January 13, 1989. (Exhibit 10-193, 1989 Form 10-K, File No. 1-8222) 10.20 Transmission Support Agreement dated as of May 1, 1973, among Public Service Company of New Hampshire and other utilities, including Velco, with respect to New Hampshire Nuclear Units. (Exhibit C-39, File No. 248966) 10.21 Sharing Agreement - 1979 Connecticut Nuclear Unit dated September 1, 1973, to which the Company is a party. (Exhibit C-40, File No. 2-50142) 10.21.1 Amendment dated as of August 1, 1974. (Exhibit C-41, File No. 2-51999) 10.21.2 Instrument of Transfer dated as of February 28, 1974, transferring partial interest from the Company to Green Mountain. (Exhibit C-42, File No. 2-52177) 10.21.3 Instrument of Transfer dated January 17, 1975, transferring a partial interest from the Company to Burlington Electric Department. (Exhibit C-43, File No. 2-55458) 10.21.4 Amendment dated May 11, 1984. (Exhibit C-110, 1984 Form 10-K, File No. 1-8222) 10.22 Preliminary Agreement dated as of July 5, 1974, with respect to 1981 Montague Nuclear Generating Units. (Exhibit C-44, File No. 2-51733) 10.22.1 Amendment dated June 30, 1975. (Exhibit C-45, File No. 2-54449) 10.23 Agreement for Joint Ownership, Construction and Operation of William F. Wyman Unit No. 4 dated November 1, 1974, among Central Maine Power Company and other utilities including the Company. (Exhibit C-46, File No. 2-52900) 10.23.1 Amendment dated as of June 30, 1975. (Exhibit C-47, File No. 2-55458) 10.23.2 Instrument of Transfer dated July 30, 1975, assigning a partial interest from Velco to the Company. (Exhibit C-48, File No. 2-55458) 10.24 Transmission Agreement dated November 1, 1974, among Central Maine Power Company and other utilities including the Company with respect to William F. Wyman Unit No. 4. (Exhibit C-49, File No. 2-54449) 10.25 Copy of Power Contract between the Company and Yankee Atomic dated as of June 30, 1959. (Exhibit C-61, 1981 Form 10-K, File No. 1-8222) 10.25.1 Revision dated April 1, 1975. (Exhibit C-61, 1981 Form 10-K, File No. 1-8222) 10.25.2 Amendment dated May 6, 1988. (Exhibit 10-181, 1988 Form 10-K, File No. 1-8222) 10.25.3 Amendment dated June 26, 1989. (Exhibit 10-196, 1989 Form 10-K, File No. 1-8222) 10.25.4 Amendment dated July 1, 1989. (Exhibit 10-197, 1989 Form 10-K, File No. 1-8222) 10.25.5 Amendment dated February 1, 1992 (Exhibit 10.25.5, 1992 Form 10-K, File No. 1-8222) 10.26 Copy of Transmission Contract between the Company and Yankee Atomic dated as of June 30, 1959. (Exhibit C-63, 1981 Form 10-K, File No. 1-8222) 10.27 Copy of Power Contract between the Company and Connecticut Yankee dated as of June 1, 1964. (Exhibit C-64, 1981 Form 10-K, File No. 1-8222) 10.27.1 Supplementary Power Contract dated March 1, 1978. (Exhibit C-94, 1982 Form 10-K, File No. 1-8222) 10.27.2 Amendment dated August 22, 1980. (Exhibit C-95, 1982 Form 10-K, File No. 1-8222) 10.27.3 Amendment dated October 15, 1982. (Exhibit C-96, 1982 Form 10-K, File No. 1-8222) 10.27.4 Second Supplementary Power Contract dated April 30, 1984. (Exhibit C-115, 1984 Form 10-K, File No. 1-8222) 10.27.5 Additional Power Contract dated April 30, 1984. (Exhibit C-116, 1984 Form 10-K, File No. 1-8222) 10.28 Copy of Transmission Contract between the Company and Connecticut Yankee dated as of July 1, 1964. (Exhibit C-65, 1981 Form 10-K, File No. 1-8222) 10.29 Copy of Capital Funds Agreement between the Company and Connecticut Yankee dated as of July 1, 1964. (Exhibit C-66, 1981 Form 10-K, File No. 1-8222) 10.29.1 Copy of Capital Funds Agreement between the Company and Connecticut Yankee dated as of September 1, 1964. (Exhibit C-67, 1981 Form 10-K, File No. 1-8222) 10.30 Copy of Five-Year Capital Contribution Agreement between the Company and Connecticut Yankee dated as of November 1, 1980. (Exhibit C-68, 1981 Form 10-K, File No. 1-8222) 10.31 Form of Guarantee Agreement dated as of November 7, 1981, among certain banks, Connecticut Yankee and the Company, relating to revolving credit notes of Connecticut Yankee. (Exhibit C-69, 1981 Form 10-K, File No. 1-8222) 10.32 Form of Guarantee Agreement dated as of November 13, 1981, between The Connecticut Bank and Trust Company, as Trustee, and the Company, relating to debentures of Connecticut Yankee. (Exhibit C-70, 1981 Form 10-K, File No. 1-8222) 10.33 Form of Guarantee Agreement dated as of November 5, 1981, between Bankers Trust Company, as Trustee of the Vernon Energy Trust, and the Company, relating to Vermont Yankee Nuclear Fuel Sale Agreement. (Exhibit C-71, 1981 Form 10-K, File No. 1-8222) 10.34 Preliminary Vermont Support Agreement re Quebec Interconnection between Velco and among seventeen Vermont Utilities dated May 1, 1981. (Exhibit C-97, 1982 Form 10-K, File No. 1-8222) 10.34.1 Amendment dated June 1, 1982. (Exhibit C-98, 1982 Form 10-K, File No. 1-8222) 10.35 Vermont Participation Agreement for Quebec Interconnection between Velco and among seventeen Vermont Utilities dated July 15, 1982. (Exhibit C-99, 1982 Form 10-K, File No. 1-8222) 10.35.1 Amendment No. 1 dated January 1, 1986. (Exhibit C-132, 1986 Form 10-K, File No. 1-8222) 10.36 Vermont Electric Transmission Company Capital Funds Support Agreement between Velco and among sixteen Vermont Utilities dated July 15, 1982. (Exhibit C-100, 1982 Form 10-K, File No. 1-8222) 10.37 Vermont Transmission Line Support Agreement, Vermont Electric Transmission Company and twenty New England Utilities dated December 1, 1981, as amended by Amendment No. 1 dated June 1, 1982, and by Amendment No. 2 dated November 1, 1982. (Exhibit C-101, 1982 Form 10-K, File No. 1-8222) 10.37.1 Amendment No. 3 dated January 1, 1986. (Exhibit 10-149, 1986 Form 10-K, File No. 1-8222) 10.38 Phase 1 Terminal Facility Support Agreement between New England Electric Transmission Corporation and twenty New England Utilities dated December 1, 1981, as amended by Amendment No. 1 dated as of June 1, 1982 and by Amendment No. 2 dated as of November 1, 1982. (Exhibit C-102, 1982 Form 10-K, File No. 1-8222) 10.39 Power Purchase Agreement between Velco and CVPS dated June 1, 1981. (Exhibit C-103, 1982 Form 10-K, File No. 1-8222) 10.40 Agreement for Joint Ownership, Construction and Operation of the Joseph C. McNeil Generating Station by and between City of Burlington Electric Department, Central Vermont Realty, Inc. and Vermont Public Power Supply Authority dated May 14, 1982. (Exhibit C-107, 1983 Form 10-K, File No. 1-8222) 10.40.1 Amendment No. 1 dated October 5, 1982. (Exhibit C-108, 1983 Form 10-K, File No. 1-8222) 10.40.2 Amendment No. 2 dated December 30, 1983. (Exhibit C-109, 1983 Form 10-K, File No. 1-8222) 10.40.3 Amendment No. 3 dated January 10, 1984. (Exhibit 10-143, 1986 Form 10-K, File No. 1-8222) 10.41 Transmission Service Contract between Central Vermont Public Service Corporation and The Vermont Electric Generation & Transmission Cooperative, Inc. dated May 14, 1984. (Exhibit C-111, 1984 Form 10-K, File No. 1-8222) 10.42 Copy of Highgate Transmission Interconnection Preliminary Support Agreement dated April 9, 1984. (Exhibit C-117, 1984 Form 10-K, File No. 1-8222) 10.43 Copy of Allocation Contract for Hydro-Quebec Firm Power dated July 25, 1984. (Exhibit C-118, 1984 Form 10-K, File No. 1-8222) 10.43.1 Tertiary Energy for Testing of the Highgate HVDC Station Agreement, dated September 20, 1985. (Exhibit C-129, 1985 Form 10-K, File No. 1-8222) 10.44 Copy of Highgate Operating and Management Agreement dated August 1, 1984. (Exhibit C-119, 1986 Form 10-K, File No. 1-8222) 10.44.1 Amendment No. 1 dated April 1, 1985. (Exhibit 10-152, 1986 Form 10-K, File No. 1-8222) 10.44.2 Amendment No. 2 dated November 13, 1986. (Exhibit 10-167, 1987 Form 10-K, File No. 1-8222) 10.44.3 Amendment No. 3 dated January 1, 1987. (Exhibit 10-168, 1987 Form 10-K, File No. 1-8222) 10.45 Copy of Highgate Construction Agreement dated August 1, 1984. (Exhibit C-120, 1984 Form 10-K, File No. 1-8222) 10.45.1 Amendment No. 1 dated April 1, 1985. (Exhibit 10-151, 1986 Form 10-K, File No. 1-8222) 10.46 Copy of Agreement for Joint Ownership, Construction and Operation of the Highgate Transmission Interconnection. (Exhibit C-121, 1984 Form 10-K, File No. 1-8222) 10.46.1 Amendment No. 1 dated April 1, 1985. (Exhibit 10-153, 1986 Form 10-K, File No. 1-8222) 10.46.2 Amendment No. 2 dated April 18, 1985. (Exhibit 10-154, 1986 Form 10-K, File No. 1-8222) 10.46.3 Amendment No. 3 dated February 12, 1986. (Exhibit 10-155, 1986 Form 10-K, File No. 1-8222) 10.46.4 Amendment No. 4 dated November 13, 1986. (Exhibit 10-169, 1987 Form 10-K, File No. 1-8222) 10.46.5 Amendment No. 5 and Restatement of Agreement dated January 1, 1987. (Exhibit 10-170, 1987 Form 10-K, File No. 1-8222) 10.47 Copy of the Highgate Transmission Agreement dated August 1, 1984. (Exhibit C-122, 1984 Form 10-K, File No. 1-8222) 10.48 Copy of Preliminary Vermont Support Agreement Re: Quebec Interconnection - Phase II dated September 1, 1984. (Exhibit C-124, 1984 Form 10-K, File No. 1-8222) 10.48.1 First Amendment dated March 1, 1985. (Exhibit C-127, 1985 Form 10-K, File No. 1-8222) 10.49 Vermont Transmission and Interconnection Agreement between New England Power Company and Central Vermont Public Service Corporation and Green Mountain Power Corporation with the consent of Vermont Electric Power Company, Inc., dated May 1, 1985. (Exhibit C-128, 1985 Form 10-K, File No. 1-8222) 10.50 Service Contract Agreement between the Company and the State of Vermont for distribution and sale of energy from St. Lawrence power projects ("NYPA Power") dated as of June 25, 1985. (Exhibit C-130, 1985 Form 10-K, File No. 1-8222) 10.50.1 Lease and Operating Agreement between the Company and the State of Vermont dated as of June 25, 1985. (Exhibit C-131, 1985 Form 10-K, File No. 1-8222) 10.51 System Sales & Exchange Agreement Between Niagara Mohawk Power Corporation and Central Vermont Public Service Corporation dated October 1, 1986. (Exhibit C-133, 1986 Form 10-K, File No. 1-8222) 10.54 Transmission Agreement between Vermont Electric Power Company, Inc. and Central Vermont Public Service Corporation dated January 1, 1986. (Exhibit 10-146, 1986 Form 10-K, File No. 1-8222) 10.55 1985 Four-Party Agreement between Vermont Electric Power Company, Central Vermont Public Service Corporation, Green Mountain Power Corporation and Citizens Utilities dated July 1, 1985. (Exhibit 10-147, 1986 Form 10-K, File No. 1-8222) 10.55.1 Amendment dated February 1, 1987. (Exhibit 10-171, 1987 Form 10-K, File No. 1-8222) 10.56 1985 Option Agreement between Vermont Electric Power Company, Central Vermont Public Service Corporation, Green Mountain Power Corporation and Citizens Utilities dated December 27, 1985. (Exhibit 10-148, 1986 Form 10-K, File No. 1-8222) 10.56.1 Amendment No. 1 dated September 28, 1988. (Exhibit 10-182, 1988 Form 10-K, File No. 1-8222) 10.56.2 Amendment No. 2 dated October 1, 1991. (Exhibit 10.56.2, 1991 Form 10-K, File No. 1-8222) * 10.56.3 Amendment No. 3 dated December 31, 1994 10.57 Highgate Transmission Agreement dated August 1, 1984 by and between the owners of the project and the Vermont electric distribution companies. (Exhibit 10-156, 1986 Form 10-K, File No. 1-8222) 10.57.1 Amendment No. 1 dated September 22, 1985. (Exhibit 10-157, 1986 Form 10-K, File No. 1-8222) 10.58 Vermont Support Agency Agreement re: Quebec Interconnection - Phase II between Vermont Electric Power Company, Inc. and participating Vermont electric utilities dated June 1, 1985. (Exhibit 10-158, 1986 Form 10K, File No. 1-8222) 10.58.1 Amendment No. 1 dated June 20, 1986. (Exhibit 10-159, 1986 Form 10-K, File No. 1-8222) 10.59 Indemnity Agreement B-39 dated May 9, 1969 with amendments 1-16 dated April 17, 1970 thru April 16, 1985 between licensees of Millstone Unit No. 3 and the Nuclear Regulatory Commission. (Exhibit 10-161, 1986 Form 10-K, File No. 1-8222) 10.59.1 Amendment No. 17 dated November 25, 1985. (Exhibit 10-162, 1986 Form 10-K, File No. 1-8222) 10.62 Contract for the Sale of 50MW of firm power between Hydro-Quebec and Vermont Joint Owners of Highgate Facilities dated February 23, 1987. (Exhibit 10-173, 1987 Form 10-K, File No. 1-8222) 10.63 Interconnection Agreement between Hydro-Quebec and Vermont Joint Owners of Highgate facilities dated February 23, 1987. (Exhibit 10-174, 1987 Form 10-K, File No. 1-8222) 10.63.1 Amendment dated September 1, 1993 (Exhibit 10.63.1, 1993 Form 10-K, File No. 1-8222) 10.64 Firm Power and Energy Contract by and between Hydro-Quebec and Vermont Joint Owners of Highgate for 500MW dated December 4, 1987. (Exhibit 10-175, 1987 Form 10-K, File No. 1-8222) 10.64.1 Amendment No. 1 dated August 31, 1988. (Exhibit 10-191, 1988 Form 10-K, File No. 1-8222) 10.64.2 Amendment No. 2 dated September 19, 1990. (Exhibit 10-202, 1990 Form 10-K, File No. 1-8222) 10.64.3 Firm Power & Energy Contract dated January 21, 1993 by and between Hydro-Quebec and Central Vermont Public Service Corporation for the sale back of 25 MW of power. (Exhibit 10.64.3, 1992 Form 10-K, File No. 1-8222) 10.64.4 Firm Power & Energy Contract dated January 21, 1993 by and between Hydro-Quebec and Central Vermont Public Service Corporation for the sale back of 50 MW of power. (Exhibit 10.64.4, 1992 Form 10-K, File No. 1-8222) 10.66 Hydro-Quebec Participation Agreement dated April 1, 1988 for 600 MW between Hydro-Quebec and Vermont Joint Owners of Highgate. (Exhibit 10-177, 1988 Form 10-K, File No. 1-8222) 10.67 Sale of firm power and energy (54MW) between Hydro-Quebec and Vermont Utilities dated December 29, 1988. (Exhibit 10-183, 1988 Form 10-K, File No. 1-8222) 10.75 Receivables Purchase Agreement between Central Vermont Public Service Corporation, Central Vermont Public Service Corporation as Service Agent and The First National Bank of Boston dated November 29, 1988. (Exhibit 10-192, 1988 Form 10-K) 10.75.1 Agreement Amendment No. 1 dated December 21, 1988 (Exhibit 10.75.1, 1993 Form 10-K, File No. 1-8222) 10.75.2 Letter Agreement dated December 4, 1989 (Exhibit 10.75.2, 1993 Form 10-K, File No. 1-8222) 10.75.3 Agreement Amendment No. 2 dated November 29, 1990 (Exhibit 10.75.3, 1993 Form 10-K, File No. 1-8222) 10.75.4 Agreement Amendment No. 3 dated November 29, 1991 (Exhibit 10.75.4, 1993 Form 10-K, File No. 1-8222) 10.75.5 Agreement Amendment No. 4 dated November 29, 1992 (Exhibit 10.75.5, 1993 Form 10-K, File No. 1-8222) EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS A 10.68 Stock Option Plan for Non-Employee Directors dated July 18, 1988. (Exhibit 10-184, 1988 Form 10-K, File No. 1-8222) A 10.69 Stock Option Plan for Key Employees dated July 18, 1988. (Exhibit 10-185, 1988 Form 10-K, File No. 1-8222) A 10.70 Officers Supplemental Insurance Plan authorized July 9, 1984. (Exhibit 10-186, 1988 Form 10-K, File No. 1-8222) A 10.71 Officers Supplemental Deferred Compensation Plan dated November 4, 1985. (Exhibit 10-187, 1988 Form 10-K, File No. 1-8222) A 10.72 Directors' Supplemental Deferred Compensation Plan dated November 4, 1985. (Exhibit 10-188, 1988 Form 10-K, File No. 1-8222) A 10.73 Management Incentive Compensation Plan as adopted September 9, 1985. (Exhibit 10-189, 1988 Form 10-K, File No. 1-8222) A 10.73.1 Revised Management Incentive Plan as adopted February 5, 1990. (Exhibit 10-200, 1989 Form 10-K, File No. 1-8222) A 10.74 Officers' Change of Control Agreements as approved October 3, 1988. (Exhibit 10-190, 1988 Form 10-K, File No. 1-8222) A 10.78 Stock Option Plan for Non-Employee Directors dated April 30, 1993 (Exhibit 10.78, 1993 Form 10-K, File No. 1-8222) A 10.79 Officers Insurance Plan dated November 15, 1993 (Exhibit 10.79, 1993 Form 10-K, File No. 1-8222) A 10.80 Directors'Supplemental Deferred Compensation Plan dated (Exhibit 10.80, 1993 Form 10-K, File No. 1-8222) A 10.81 Officers' Supplemental Deferred Compensation Plan dated (Exhibit 10.81, 1993 Form 10-K, File No. 1-8222) A - Compensation related plan, contract, or arrangement. 16. Change in certifying accountant (July 1, 1985 Form 8-K, File No. 1-8222) 18. Letter re change in accounting principles (1980 3rd Quarter Form 10-Q, File No. 1-8222) 21. Subsidiaries of the Registrant * 21.1 List of Subsidiaries of Registrant 23. Consents of Experts and Counsel * 23.1 Consent of Independent Public Accountants 27. Financial Data Schedule (b) Reports on Form 8-K: The Company filed the following reports on Form 8-K during the quarter ended December 31, 1994: 1. Item 5. Other Events, dated October 31, 1994 re: Retail Rate Order. 2. Item 5. Other Events, dated November 9, 1994 re: Third quarter 1994 report to shareholders and a press release reporting a new corporate strategy. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Exhibit Number 13, Letter to Shareholders. Exhibit Number 20, Press Release. 3. Item 5. Other Events, dated December 30, 1994 re: Legal proceeding. Report of Independent Public Accountants To the Board of Directors of Central Vermont Public Service Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Central Vermont Public Service Corporation's annual report to shareholders, included in this Form 10-K, and have issued our report thereon dated February 6, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state, in all material respects, the consolidated financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Boston, Massachusetts February 6, 1995
Schedule II CENTRAL VERMONT PUBLIC SERVICE CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES Reserves Year ended December 31, 1994 Additions -------------------- Balance at Charged to Charged Balance at beginning costs and to other end of of year expenses accounts Deductions year ---------- ---------- -------- ---------- ---------- Reserves deducted from assets to which they apply: $ 71,210(1) 335,718(2) Reserve for uncollectivle -------- accounts receivable $ 936,080 $547,490 $406,928 $ 922,766(3) $ 967,732 ========== ======== ======== ========== ========== Accumulated depreciation of miscellaneous properties: Rental water heater program $3,428,944 $265,309 - $ 243,969(4) $3,450,284 Other 68,153 145,134(5) - - 213,287 ---------- -------- ---------- ---------- $3,497,097 $410,443 $ 243,969 $3,663,571 Reserve shown separately: Injuries and damages reserve $ 225,580 - - - $ 225,580 ========== ========== (1) Amount due from collection agency. (2) Collections of accounts previously written off. (3) Uncollectible accounts written off. (4) Retirements of rental water heaters. (5) Includes reclassification of $67,201 of the Company's wholly owned subsidiary, SmartEnergy Services, Inc.'s depreciation expense from its water heater program to other non-utility property.
Schedule II CENTRAL VERMONT PUBLIC SERVICE CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES Reserves Year ended December 31, 1993 Additions -------------------- Balance at Charged to Charged Balance at beginning costs and to other end of of year expenses accounts Deductions year ---------- ---------- -------- ---------- ---------- Reserves deducted from assets to which they apply: $ 64,809(1) 324,081(2) Reserve for uncollectible -------- accounts receivable $1,079,806 $960,000 $388,890 $1,492,616(3) $ 936,080 ========== ======== ======== ========== ========== Accumulated depreciation of miscellaneous properties: Rental water heater program $3,334,201 $352,547 - $ 257,804(4) $3,428,944 Other 41,052 27,101 - - 68,153 ---------- -------- ---------- ---------- $3,375,253 $379,648 $ 257,804 $3,497,097 ========== ======== ========== ========== Reserve shown separately: Injuries and damages reserve $ 242,901 - - $ 17,321(5) $ 225,580 ========== ========== ========== (1) Amount due from collection agency. (2) Collections of accounts previously written off. (3) Uncollectible accounts written off. (4) Retirements of rental water heaters. (5) Payments for construction accidents.
Schedule II CENTRAL VERMONT PUBLIC SERVICE CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES Reserves Year ended December 31, 1992 Additions -------------------- Balance at Charged to Charged Balance at beginning costs and to other end of of year expenses accounts Deductions year ---------- ---------- -------- ---------- ---------- Reserves deducted from assets to which they apply: Reserve for uncollectible accounts receivable $ 992,433 $1,018,700 $355,472(1) $1,286,799(2) $1,079,806 ========== ========== ======== ========== ========== Accumulated depreciation of miscellaneous properties: Rental water heater program $3,283,660 $ 350,642 - $ 300,101(3) $3,334,201 Other 135,354 27,958 - 280 683(4) 41,052 ---------- ---------- ---------- ---------- $3,577,437 $ 378,600 $ 580,784 $3,375,253 ========== ========== ========== ========== Reserve shown separately: Injuries and damages reserve $ 268,077 - - $ 25,176 (5) $ 242,901 ========== ========== ========== (1) Collection of accounts previously written off. (2) Uncollectible accounts written off. (3) Retirements of rental water heaters. (4) Retirement of non-utility property. (5) Payments for construction accidents.
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. CENTRAL VERMONT PUBLIC SERVICE CORPORATION By /s/ Thomas C. Webb -------------------------------------- Thomas C. Webb, President and Chief Executive Officer By /s/ Robert H. Young -------------------------------------- Robert H. Young, Executive Vice President - Chief Operating Officer By /s/ Frederick S. Potter -------------------------------------- Frederick S. Potter, Vice President - Finance and Administration and Principal Financial Officer By /s/ James M. Pennington -------------------------------------- James M. Pennington, Controller and Principal Accounting Officer March 13, 1995 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. March 13, 1995 /s/ Frederic H. Bertrand ----------------------------------------- Frederic H. Bertrand Director March 13, 1995 /s/ Robert P. Bliss, Jr. ----------------------------------------- Robert P. Bliss, Jr. Director March 13, 1995 /s/ Elizabeth Coleman ----------------------------------------- Elizabeth Coleman Director March 13, 1995 /s/ ----------------------------------------- Luther F. Hackett Director March 13, 1995 /s/ F. Ray Keyser, Jr. ----------------------------------------- F. Ray Keyser, Jr. Director March 13, 1995 /s/ Mary Alice McKenzie ----------------------------------------- Mary Alice McKenzie Director March 13, 1995 /s/ Gordon P. Mills ----------------------------------------- Gordon P. Mills Director March 13, 1995 /s/ Preston Leete Smith ----------------------------------------- Preston Leete Smith Director March 13, 1995 /s/ Robert D. Stout ----------------------------------------- Robert D. Stout Director March 13, 1995 /s/ Thomas C. Webb ----------------------------------------- Thomas C. Webb Director EX-3 2 CV'S BYLAWS FOR FORM 10-K Exhibit 3-1 BY-LAWS OF CENTRAL VERMONT PUBLIC SERVICE Corporation ARTICLE I. Articles of Agreement: Offices Section 1. These By-Laws shall be subject to the Articles of Association, and all references in these By-Laws to the Articles of Association shall be construed to mean the Articles of Association of the Corporation as from time to time amended. Section 2. The Corporation shall maintain its principal office in Rutland, Vermont, and may maintain offices at such other places as the Board of Directors may, from time to time, appoint. ARTICLE II. Seal The corporate seal shall be circular in form and shall have inscribed thereon the name of the Corporation and the words and figures: "Seal Vermont 1929". ARTICLE III. Capital Stock and Transfers Section 1. The amount and classes of capital stock that may be issued by the Corporation, and the designations, preferences, rights, privileges, voting powers, restrictions, and qualifications of each class thereof, shall be as set forth in the Articles of Association, as the same shall at any time be duly recorded in the office of the Secretary of State of Vermont in original or amended form. Section 2. Each holder of fully paid stock shall be entitled to a certificate or certificates of stock as provided by law and in a form approved by the Board of Directors. (As amended May 2, 1972) Section 3. Shares of stock may be transferred by the owner by a proper endorsement upon the back of the certificate or by a separate instrument of assignment, and the assignee, upon producing, and surrendering the former certificate so transferred or the certificate accompanied by such instrument, shall be entitled to a new certificate if no liens upon the stock against the former owner have attached. The delivery of a properly executed stock certificate to a bona fide purchaser or pledgee for value to sell, assign and transfer the same, signed by the owner of the certificate, shall be a sufficient delivery to transfer the title against all persons except the Company; but no such transfer shall affect the right of the Company to treat the stockholder of record as the stockholder in fact until the old certificate is surrendered and a new certificate is issued to the person entitled thereto. Except as hereinafter provided, or as may be required by law or by the order of a court in appropriate proceedings, shares of stock shall be transferred on the books of the Company only upon the proper assignment and surrender of the certificates issued therefor. If an outstanding certificate of stock shall be lost, destroyed or stolen, the holder thereof may have a replacement certificate issued upon such terms as the Directors may prescribe. (As amended May 2, 1972) Section 4. If default shall be made in the prompt payment when due of any sum payable to the Company upon any subscription for stock of the Company, and if such default shall continue for a period of twenty days, then all right under the subscription in and to the stock subscribed for shall, upon the expiration of such period, cease and determine and become and be forfeited to the Company; provided that if at the expiration of such twenty day period such right shall belong to the estate of a decedent, it may be forfeited only by resolution of the Board of Directors declaring forfeiture. (As amended May 2, 1972) ARTICLE IV. Meetings of Stockholders Section 1. All meetings of the stockholders shall be held in Vermont, either at the principal office of the Company or at such other place as shall be designated in the call therefor. The annual meeting shall be held on the first Tuesday of May in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day, at the time designated in the call, for the election of Directors, and the transaction of such other business as may come before it. (As amended April 2, 1946) Section 2. Special meetings of the stockholders may be called by the Board of Directors, the President or the Secretary upon written request of stockholders holding not less than one- tenth of all the shares entitled to vote at the meeting. In case an annual meeting shall be omitted through inadvertence or otherwise, the business of such meeting may be transacted at a special meeting duly called for the purpose. (As amended May 2, 1972) Section 3. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the President or the Secretary, to each registered holder entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the registered holder at the address as it appears on the stock transfer books of the Company, with postage on it prepaid. (As amended May 2, 1972) Section 4. Unless otherwise provided in the Articles of Association, a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by law, by these By-Laws or by the Articles of Association. A majority vote of whatever stock shall be represented, even if less than a quorum, shall be sufficient (a) to adjourn from time to time until a quorum is present or (b) to adjourn sine die. (As amended May 2, 1972) Section 5. At all stockholders' meetings, holders of record of stock then having voting power shall be entitled to one vote for each share of stock held by them, respectively, upon any question or at any election, and such vote may, in all cases, be given by proxy, duly authorized in writing. But no proxy dated more than six months before the meeting, which shall be named therein, shall be accepted; and no proxy shall be valid after the final adjournment of such meeting. (As amended MAy 1, 1973) Article V. Directors Section 1. The property and business of the Corporation shall be managed by a Board of Directors, each of whom must be a stockholder. The Directors shall be elected by ballot by majority vote of the stockholders present in person or represented by proxy at the election and entitled to vote on the question, except as otherwise provided in the Articles of Association or in these By- Laws. (As amended October 16, 1944; May 7, 1963 and February 17, 1987) No person shall be eligible for election or re-election as a Director after his/her seventieth birthday, provided that any Director whose term of office extends beyond his/her seventieth birthday shall be entitled to serve the remainder of the full term of the class of Directors to which he/she was elected. (As amended June 13, 1983 and November 2, 1987) No person shall be a Director or executive officer of the Corporation who is also a Director or executive officer of Central Maine Power Company, of Public Service Company of New Hampshire, of Bates Manufacturing Company, of Keyes Fibre Company, or of any Corporation which may succeed to all or substantially all of the property and business of any of the said companies. A majority of the Directors shall at all times be persons who are not employees of the Corporation. The provisions of this paragraph shall not apply to the election of Directors by the holders of preferred stock when, in accordance with the Articles of Association, they shall be entitled to elect the smallest number of Directors necessary to constitute a majority of the full Board of Directors. (As amended April 6, 1953) Section 2. Subject to the provisions of Section 5 below, the Board of Directors shall consist of not less than 9 nor more than 21 persons, the exact number to be fixed from time to time by resolution of the Board of Directors. Such exact number may be increased or decreased by the affirmative vote of the holders of at least 80 percent of the combined voting power of the then- outstanding shares of common stock and of any other class of stock then being expressly entitled to vote with the common stock on the question. The Directors shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible. Upon their initial election, the members of the first class shall hold office for a term expiring at the next annual meeting of stockholders after their election, the members of the second class shall hold office for a term expiring at the second annual meeting of stockholders after their election, and the members of the third class shall hold office for a term expiring at the third annual meeting of stockholders after their election. (As amended February 17, 1987) Section 3. Subject to the provisions of Section 5 below, any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the Directors then in office, though less than a quorum of the Board of Directors. Any Director elected in accordance with this provision shall hold office for the remainder of the full term of the class of Directors in which the vacancy occurred and until such Director's successor shall have been elected and qualified. No decrease in the number of authorized Directors constituting the entire Board of Directors shall shorten the term of any incumbent Director. (As amended February 17, 1987) Section 4. Except as otherwise provided in paragraph (e) of subdivision 6 of the Articles of Association, a Director may be removed from office only for cause and only by the affirmative vote of the holders of at least 80 percent of the combined voting power of the then-outstanding shares of common stock and of any other class of stock then being expressly entitled to vote with the common stock on the question. (As amended February 17, 1987) Section 5. Nothing contained in Sections 2 through 4 of this Article V shall be deemed to alter, amend or repeal the provisions of paragraph (b) of subdivision 6, paragraph (b) of subdivision 10F, or paragraph (a) of subdivision 20F, of the Articles of Association each of which confers, under the circumstances described therein, on the holders of the classes of stock referred to therein, the right to vote in the election of Directors. During any period in which such rights may be exercised, the provision or provisions conferring such rights shall prevail over any provision of these By-Laws inconsistent therewith. (As amended February 17, 1987) Section 6. Notwithstanding any other provision of these By- Laws, of the Articles of Association or of law, the affirmative vote of the holders of at least 80 percent of the combined voting power of the then-outstanding shares of common stock and of any other class of stock then being expressly entitled to vote with the common stock in the election of Directors shall be required to alter, amend or repeal Sections 2, 3, 4, 5 or 6 of this Article V. (As amended February 17, 1987) Section 7. The Board of Directors may hold its meetings and may have one or more offices, and may keep the books of the Corporation (except such records and books as by laws of Vermont are required to be kept within the State) within or outside of Vermont, at such places as it may from time to time determine. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation, and do all such lawful acts and things as are not by law, by the Articles of Association or by these By- Laws required to be exercised or done by the incorporators or stockholders. Section 8. There is established a Directors' Advisory Council comprised of former Directors who are elected thereto by the Board of Directors. Members of the Council shall consult with and advise the Company at such times and places as requested by the President or the Board of Directors. Members shall be elected annually by the Board of Directors following the Annual Meeting to serve for the ensuing year, or, upon resignation of a Director, the Board of Directors may elect a Director to serve until the next Annual Meeting. Members of the Council shall receive as compensation the same amount as the annual retainer of a Director. (As amended June 13, 1983 and November 2, 1987) ARTICLE VI. Meetings of the Board Section 1. Regular meetings of the Board of Directors shall be held at such place and time as may be designated from time to time by the Board; and such meetings, and a regular meeting immediately following and at the same place as each annual meeting of the stockholders, may be held without notice. Special meetings of the Board of Directors may be called by the President, or by any two Directors, upon two days' notice to each Director, either personally or by mail or by telegram; and they may be held at any time without call or formal notice, provided all the Directors are present or waive notice thereof in writing. (As amended May 1, 1962) Section 2. A majority of the number of Directors fixed in accordance with the By-Laws shall constitute a quorum for the transaction of business, unless a greater number is required by the Articles of Association. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by the Articles of Association. (As amended May 2, 1972) Section 3. Directors who are not also officers or regular employees of the Company may receive compensation for their services as such or as a member of any committee of the Board of Directors, as well as fixed sums and expenses for attendance at Directors' or committee meetings, in such amounts as may be provided from time to time by the Board of Directors, provided that nothing herein contained shall be construed to preclude any Director from serving the Company in any other capacity and receiving compensation therefor. (As amended May 5, 1981) Section 4. Directors and members of the Executive Committee and any other committee designated by the Board of Directors may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting in such a manner shall constitute presence in person at such meeting. (As amended May 3, 1977) ARTICLE VII. Officers Section 1. In each year there shall be elected by the Board of Directors, and if practicable, at its first meeting after the annual election of Directors, a President, one or more Vice Presidents, a Secretary, a Treasurer, and a Controller; and the Board may provide for and elect a Chairperson, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers and prescribe such duties for them as in its judgment may, from time to time, be required to conduct the business of the Company. One of said Vice Presidents may be designated Executive Vice President. Any two or more offices may be held by the same person, except the offices of President and Secretary. All officers shall hold their respective offices for the term of one year, and until their successors, willing to serve, shall have been elected and, in the case of the Secretary, qualified, unless sooner removed; but they, and any of them, may be removed from their respective offices at the pleasure of the Board. Vacancies arising in any office from any cause shall be filled by the Board of Directors; and the persons chosen to fill vacancies shall serve for the balance of the unexpired term and until their successors shall have been elected. (As amended May 1, 1962; May 7, 1963; May 5, 1964; May 2, 1972 and November 2, 1987) Section 2. A Chairperson elected pursuant to Section 1 of this Article VII shall advise with and make his/her counsel available to the other officers of the Company and shall have such other powers and duties as may at any time be prescribed by these By-Laws and by the Board of Directors. He/She shall, when present, preside at all meetings of the stockholders and of the Board of Directors and of the Executive Committee. (As amended May 5, 1964) The President shall be the Chief Executive Officer of the Company and, subject to the direction of the Board of Directors and of the Chairperson (if one is elected), shall supervise the administration of the business and affairs of the Company and shall have such other powers and duties as may at any time be prescribed by these By-Laws and by the Board of Directors. In the absence of the Chairperson (or if no such Chairperson is elected), the President shall, when present, preside at meetings of the stockholders and of the Board of Directors and of the Executive Committee. (As amended May 5, 1964 and November 2, 1987) The Chairperson and the President shall be members of the Executive Committee (if such Executive Committee is designated by the Board of Directors) and each of them, in his/her discretion, may attend any meeting of any committee of the Board, whether or not he/she is a member of such committee. (As amended May 5, 1964) Section 3. The President shall, subject to the control of the Board of Directors, have charge of the business and affairs of the Company, including the power to appoint and to remove and to discharge any and all agents and employees of the Company not elected or appointed directly by the Board of Directors, and such other powers and duties as may at any time be prescribed by these By-Laws and by the Board of Directors. (As amended May 5, 1964) Section 4. The Vice President or Vice Presidents, if there shall be more than one, shall have such powers and duties as may from time to time be prescribed by the Board of Directors or by the President, but any powers and duties prescribed by the President shall not be inconsistent with any theretofore prescribed by the Board of Directors. In case the President, from absence or any other cause, shall be unable at any time to attend to the duties of the office of President requiring attention, or in case of his/her death, resignation or removal from office, the powers and duties of the President shall, except as the Board of Directors may otherwise provide, temporarily devolve upon the Executive Vice President if one shall have been designated and is able to serve, or in case of the latter's inability, upon the Vice President designated by the Board of Directors and able to serve and shall be exercised by such Vice President as acting President during such inability of the President, or until the vacancy in the office of President shall be filled. In case of the absence, disability, death, resignation or removal from office of both the President and such Vice President, the Board of Directors shall elect one of its members to exercise the powers and duties of the President during such absence or disability, or until the vacancy in one of said offices shall be filled. (As amended May 1, 1951 and May 1, 1962) Section 5. The Secretary shall reside in the State of Vermont and shall have the duties prescribed by law and such other duties as the By-Laws or the Board of Directors may prescribe. (As amended May 2, 1972) Section 6. The Treasurer shall have charge of, and be responsible for the custody and, jointly with the Controller, the receipt and disbursement of the funds of the Corporation, and shall deposit its funds in the name of the Company, in such banks, trust companies, or safe deposit vaults as the Board of Directors may direct. The Treasurer shall have the custody of such books and papers as in the practical business operations of the Company shall naturally belong in the office or custody of the Treasurer, or as shall be placed in his/her custody by the Board of Directors, by the Executive Committee, or by the President. The Treasurer shall also have charge of the safekeeping of all stocks, bonds, mortgages, and other securities belonging to the Company, but such stocks, bonds, mortgages, and other securities shall be deposited for safekeeping in a safe deposit vault to be approved by the Board of Directors or the Executive Committee, in a box or boxes, access to which shall be had as may be provided by resolution of the Board of Directors or by the Executive Committee. The Treasurer shall have such other powers and duties as are commonly incident to the office of Treasurer, or as may be prescribed. The Treasurer may be required to give bond to the Company for the faithful discharge of duties in such form and to such amount and with such sureties as shall be determined by the Board of Directors. (As amended November 2, 1987) Section 7. The Controller shall have charge of, and be responsible for the collection, and jointly with the Treasurer, the receipt and disbursement of the funds of the Corporation. The Controller shall maintain adequate records of all assets, liabilities, and transactions of the Company; shall see that adequate audits thereof are currently and regularly made and, in conjunction with other officers and department heads, shall initiate and enforce methods and procedures whereby the business of the Company shall be conducted with maximum safety, efficiency and economy. The Controller shall have the custody of such books, receipted vouchers, and other books and papers as in the practical business operations of the Company shall naturally belong in the office or the custody of the Controller, or as shall be placed in his/her custody by the Board of Directors, by the Executive Committee, or by the President. The Controller shall have such other powers and duties as are commonly incidental to the office of Controller, or as may be prescribed. The Controller may be required to give bond to the Company for the faithful discharge of duties in such form and to such amount and with such sureties as shall be determined by the Board of Directors. (As amended November 2, 1987) Section 8. Assistant Secretaries or Treasurers, when elected, shall assist the Secretary or Treasurer, as the case may be, in the performance of the respective duties assigned to such principal officers; and the powers and duties of any such principal officer, shall, except as otherwise ordered by the Board of Directors, temporarily devolve upon his/her assistant in case of the absence, disability, death, resignation or removal from office of such principal officer. They shall perform such other duties as may be assigned to them from time to time. (As amended May 7, 1963) ARTICLE VIII. Executive Committee Section 1. The Board of Directors may, by resolution passed by a majority of the Board, designate from their number an Executive Committee of such number, not less than three, as the Board may fix from time to time. The Executive Committee may make its own rules of procedure and shall meet where and as provided by such rules, or by resolution of the Board of Directors. A majority of the members of the Committee shall constitute a quorum for the transaction of business. During the intervals between the meetings of the Board of Directors, the Executive Committee shall have all the powers of the Board in management of the business and affairs of the Company except as may otherwise be provided by law, including power to authorize the seal of the Company to be affixed to all papers which may require it, and, by majority vote of all its members, exercise any and all such powers in such manner as such Committee shall deem best for the interest of the Company, in all cases in which specific directions shall not have been given by the Board of Directors, and in which the vote of a quorum of the full Board of Directors is not required by law, the Articles of Association, or by these By-Laws. (As amended May 2, 1972) Section 2. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. The Board of Directors shall have power to rescind any vote or resolution of the Executive Committee, but no such recision shall have retroactive effect. ARTICLE IX. Inspection of Books All records, accounts, and papers of the Corporation shall be open to the inspection of every stockholder at reasonable times and for legitimate purposes; and, subject to such rights of inspection as may be afforded the stockholders by law, the Directors may make such reasonable regulations relative to such inspection, and take such action to prevent an inspection of corporate books or papers for illegitimate purposes as may be consistent with law. ARTICLE X. (As amended May 3, 1988) Vote Required to Approve Business Combination The vote of the stockholders of the Corporation required to approve any Business Combination shall be as set forth in this Article X. The term "Business Combination" shall have the meaning ascribed to it in Paragraph 10.1(B) of this Article X. Each other capitalized term shall have the meaning ascribed to it in Paragraph 10.3 of this Article X. 10.1 (A) In addition to any affirmative vote required by law or these By-Laws and except as otherwise expressly provided in Paragraph 10.2 of this Article X: (1) any merger or consolidation of the Corporation or any Subsidiary with (i) any Interested Stockholder or (ii) any other person (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate of an Interested Stockholder; or (2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of $5,000,000 or more; or (3) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or an Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $5,000,000 or more, other than the issuance of securities upon the conversion of convertible securities of the Corporation or any Subsidiary which were not acquired by such Interested Stockholder (or such Affiliate) from the Corporation or a Subsidiary; or (4) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or (5) any transaction involving the Corporation or any Subsidiary (whether or not with or into or otherwise involving an Interested Stockholder), and including, without limitation, any reclassification of securities (including any reverse stock split), or recapitalization or reorganization of the Corporation, or of its Subsidiaries or any self tender offer for or repurchase of securities of the Corporation by the Corporation or any Subsidiary or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder), which in any such case has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities or securities convertible into equity securities of the Corporation or any Subsidiary which is directly or indirectly beneficially owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; shall require the affirmative vote of the holders of at least 80 percent of the combined voting power of the then outstanding shares of the Voting Stock (for the purposes of this Article X, each share of the Voting Stock shall have the number of votes granted to it pursuant to the Company's Articles of Association), which vote shall include the affirmative vote of at least two-thirds (2/3) of the combined voting power of the outstanding shares of Voting Stock held by stockholders other than the Interested Stockholder. Such affirmative vote shall be required notwithstanding any provision of law, any other provision of these By-Laws or the Articles of Association, any agreement with any national securities exchange or otherwise which might permit a lesser vote or no vote and in addition to any affirmative vote required of the holders of any class or series of Voting Stock pursuant to law. (B) The term "Business Combination" as used in this Article X shall mean any transaction that is referred to in any one or more clauses (1) through (5) of Paragraph 10.1(A) of this Article X. 10.2 The provisions of Paragraph 10.1(A) of this Article X shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law, any other provision of these By-Laws, by the Articles of Association, or any agreement with any national securities exchange, if, in the case of a Business Combination that does not involve any cash or other consideration being received by the stockholders of the Corporation, solely in their respective capacities as stockholders of the Corporation, as specified in paragraph 10.2(A) is met, or, in the case of any other Business Combination, the condition specified in the following paragraph 10.2(A) or the conditions specified in the following paragraph 10.2(B) are met: (A) such Business Combination shall have been approved by a majority of the Disinterested Directors; or (B) each of the conditions specified in the following clauses (1) through (4) shall have been met: (1) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of any consideration other than cash to be received per share by holders of Voting Stock in such Business Combination shall be at least equal to the highest of the following (it being intended that the requirements of this clause (B) (1) shall be required to be met with respect to all shares of Voting Stock outstanding whether or not the Interested Stockholder has acquired any shares of the Voting Stock): (i) if applicable, the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Voting Stock beneficially owned by the Interested Stockholder which were acquired beneficially by such Interested Stockholder within the two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Stockholder, whichever is higher; or (ii) the Fair Market Value per share of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; or (iii) an amount which bears the same or greater percentage relationship to the Fair Market Value of the Voting Stock on the Announcement Date as the highest per share price determined in clause (B)(l)(i) above bears to the Fair Market Value of the Voting Stock on the date of the commencement of the acquisition of the Voting Stock by such Interested Stockholder; and (2) the consideration to be received by holders of a particular class or series of outstanding Voting Stock shall be in cash or in the same form as was previously paid in order to acquire beneficially shares of such class or series of Voting Stock that are beneficially owned by the Interested Stockholder and, if the Interested Stockholder beneficially owns shares of any class or series of Voting Stock that were acquired with varying forms of consideration, the form of consideration to be received by each holder of such class or series of Voting Stock shall be, at the option of such holder, either cash or the form used by the Interested Stockholder to acquire beneficially the largest number of shares of such class or series of Voting Stock beneficially acquired by it prior to the Announcement Date; and (3) after such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (i) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock of the Corporation, except as part of the transaction in which it became an Interested Stockholder or upon conversion of convertible securities acquired by it prior to becoming an Interested Stockholder or as a result of a pro rata stock dividend or stock split; and (ii) such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits or other tax advantages provided by the Corporation or any Subsidiary, whether in anticipation of or in connection with such Business Combination or otherwise; and (iii) such Interested Stockholder shall not have caused any material change in the Corporation's business or capital structure, including, without limitation, the issuance of shares of capital stock of the Corporation to any third party; and (iv) there shall have been no reduction in the annual rate of dividends paid on Voting Stock (except as necessary to reflect any subdivision of the Voting Stock), except as approved by a majority of the Disinterested Directors and an increase in such annual rate of dividends (as necessary to prevent any such reduction) in the event of any reclassification (including any reverse stock split), recapitalization, reorganization, self tender offer or any similar transaction which has the effect of reducing the number of outstanding shares of the Voting Stock, unless the failure so to increase such annual rate was approved by a majority of the Disinterested Directors; and (4) a proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules and regulations), whether or not the Corporation is then subject to such requirements, shall be mailed by and at the expense of the Interested Stockholder at least thirty days prior to the earlier of the Consummation Date or the vote of stockholders relative thereto of such Business Combination to the stockholders of the Corporation (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions), and shall contain at the front thereof in a prominent place (i) any recommendations as to the advisability (or inadvisability) of the Business Combination which the Disinterested Directors, if any, may choose to state, and (ii) the opinion of a reputable national investment banking firm as to the fairness (or not) of such Business Combination from the point of view of the remaining stockholders of the Corporation (such investment banking firm to be engaged solely on behalf of the remaining stockholders, to be paid a reasonable fee for their services by the Corporation upon receipt of such opinion, to be unaffiliated with such Interested Stockholder, and, if there are at the time any Disinterested Directors, to be selected by a majority of the Disinterested Directors). 10.3 For the purposes of this Article X. (A) A "person" shall include, without limitation, any individual, firm, corporation, group (as such term is used in Regulation 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1987) or other entity. (B) "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary or any employee benefit plan of the Corporation or any Subsidiary) who or which: (1) is the beneficial owner, directly or indirectly of more than 10 percent of the combined voting power of the then outstanding shares of Voting Stock; or (2) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10 percent or more of the combined voting power of the then outstanding shares of Voting Stock; or (3) is an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock that were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (C) A person shall be a "beneficial owner" of any Voting Stock if: (1) such person or any of its Affiliates or Associates beneficially owns, directly or indirectly, Voting Stock; or (2) such person or any of its Affiliates or Associates has (a) the right to acquire (whether of not such right is exercisable immediately) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote or direct the vote pursuant to any agreement, arrangement or understanding of the Voting Stock; or (3) the Voting Stock is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (D) For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 10.3 (B) of this Article X, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by such Interested Stockholder through application of Paragraph 10.3 (C) of this Article X but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (E) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1987. (F) "Subsidiary" shall mean any corporation more than 50 percent of whose outstanding equity securities having ordinary voting power in the election of directors is owned, directly or indirectly, by the Corporation or by a Subsidiary or by the Corporation and one or more Subsidiaries; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 10.3 (B) of this Article X, the term "Subsidiary" shall mean only a corporation of which a majority of each class of Voting Stock is owned, directly or indirectly, by the Corporation. (G) "Disinterested Director" shall mean any member of the Board of Directors of the Corporation who is unaffiliated with, and not a nominee of, the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with, and not a nominee of, the Interested Stockholder and who is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board of Directors. (H) "Fair Market Value" shall mean: (1) in the case of stock, the highest closing sale price during the 30-day period commencing on the 40th day preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the New York Stock Exchange-Composite Tape, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing sale price or bid quotation with respect to a share of such stock during the 30-day period commencing on the 40th day preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations system or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; and (2) in the case of property other than cash or stock the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. (I) In the event of any Business Combination in which the Corporation survives, the phrase "any consideration other than cash to be received" as used in Paragraphs 10.2 (B)(1) and (2) of this Article X shall include the shares of Voting Stock retained by the holders of such shares. (J) "Announcement Date" shall mean the date of first public announcement of the proposed Business Combination. (K) "Determination Date" shall mean the date on which the Interested Stockholders became an Interested Stockholder. (L) "Consummation Date" shall mean the date of the consummation of the Business Combination. (M) The term "Voting Stock" shall mean all outstanding shares of capital stock of all classes and series of the Corporation at the time entitled to vote in the election of directors of the Corporation, in each case voting together as a single class. 10.4 A majority of the Disinterested Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article X including, without limitation: (A) whether a person is an Interested Stockholder; (B) the number of shares of Voting Stock beneficially owned by any person; (C) whether a person is an Affiliate or Associate of another person; (D) whether the requirements of Paragraph 2(B) of this Article X have been met with respect to any Business Combination; (E) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has an aggregate Fair Market Value of $5,000,000 or more; and (F) such other matters with respect to which a determination is required under this Article X. The good faith determination of a majority of the Disinterested Directors on such matters shall be conclusive and binding for all purposes of this Article X. 10.5 Nothing contained in this Article X shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. 10.6 Notwithstanding any other provisions of these By- Laws, the Articles of Association or of law, the affirmative vote of the holders of at least 80 percent of the combined voting power of all of the then outstanding shares of Voting Stock shall be required to alter, amend or repeal this Article X or any provision hereof; provided, however, that if there is an Interested Stockholder on the record date for the meeting at which such action is submitted to the stockholders for their consideration, such 80 percent vote must include the affirmative vote of at least two-thirds (2/3) of the combined voting power of all of the outstanding shares of Voting Stock held by stockholders other than the Interested Stockholder. ARTICLE XI (As amended May 3, 1988) INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES Section 1. Permissive Indemnification. To the extent legally permissible, the Company may indemnify any of its Directors, officers and employees who, as a result of such position, was or is a party or is threatened to be made a party to any contemplated, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal against expenses, actually and reasonably incurred by him or her in connection with such action, suit or proceeding. The term Expenses, as used in this Article, includes reasonable attorney's fees, damages, judgments, fines, amounts paid in settlement and costs including the costs of investigation and defense. Such indemnification against Expenses shall be payable only if (a) the Director, officer or employee acted in good faith, (b) the Director reasonably believed: (A) in the case of conduct in the Director's official capacity with the Company, that the Director's conduct was in its best interests; and (B) in all other cases, that the Director's conduct was at least not opposed to its best interests; and (c) with respect to any proceeding brought by a governmental entity, the Director had no reasonable cause to believe his or her conduct was unlawful, and the Director is not finally found to have engaged in a reckless or intentional unlawful act. Notwithstanding the foregoing and except as otherwise provided by law, the Company may not indemnify any Director, officer, or employee for any Expenses in any action by or in right of the Company in which such individual is adjudged liable to the Company. (As amended December 3, 1990 and May 3, 1994) Any indemnification under this section (unless ordered by a court) shall be made by the Company only upon a determination that indemnification of the Director, officer or employee is proper because he or she has acted in good faith in conformance with the applicable standard of conduct as set forth herein. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of Directors who are not parties to such action, suit or proceeding or (b) if such a quorum is not obtainable, by majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are parties to the action, suit or proceeding may participate), consisting solely of two or more Directors not at the time parties to the action, suit or proceeding; (c) by written opinion of special legal counsel: (A) selected by the Board of Directors or its committee in the manner prescribed in clause (a) or (b); or (B) if a quorum of the Board of Directors cannot be obtained under clause (a) and a committee cannot be designated under clause (b), selected by majority vote of the full Board of Directors (in which selection Directors who are parties to the action, suit or proceeding may participate); or (d) by the shareholders, but shares owned by or voted under the control of Directors who are at the time parties to the action, suit or proceeding may not be voted on the determination. (As amended May 3, 1994) Authorization of indemnification and evaluation as to reasonableness of Expenses shall be made in the same manner provided above as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of Expenses shall be made by those entitled under clause (c) above to select such counsel. (As amended May 3, 1994) The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea no nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith in conformance with the applicable standard of conduct as set forth above. (As amended May 3, 1994) Section 2. Mandatory Indemnification. To the extent that a Director, officer or employee of the Company has been wholly successful on the merits or otherwise in defense of any action, suit, proceeding, claim, issue, or matter referred to in Section 1 of this Article, he or she shall be indemnified to the extent legally permissible against Expenses reasonably incurred by him or her in connection therewith. (As amended May 3, 1994) Section 3. Right To Rely On Corporate Information. In discharging his or her duty, any Director, when acting in good faith in conformance with the applicable standard of conduct as set forth above, may rely upon information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: (a) one or more officers or employees of the Company whom the Director reasonably believes to be reliable and competent in the matters presented; (b) legal counsel, public accountants, or other persons as to matters the Director reasonably believes are within the person's professional or expert competence; or (c) a committee of the Board of Directors of which the Director is not a member if the Director reasonably believes the committee merits confidence. (As amended May 3, 1994) Section 4. Advance Payment of Expenses. Expenses incurred by a Director, officer or employee in connection with any of the matters with respect to which indemnification may be sought pursuant hereto may be paid from time to time by the Company in advance of the final disposition of any such matter if the following conditions are met: (a) the Director furnishes the Company written affirmation of his or her good faith belief that he or she has met the standard of conduct described in Section 1 of this Article; (b) the Director furnishes the Company a written undertaking, executed personally or on the Director's behalf, to repay the advance if it is ultimately determined that the Director did not meet the standard of conduct; and (c) a determination is made that the facts then known to those making the determination would not preclude indemnification under this subchapter. (As amended May 3, 1994) Determinations and authorizations of payments under this Section 4 shall be made in the manner specified in Section 1 of this Article. (As amended May 3, 1994) The Board of Directors may authorize counsel (which may be either Company counsel or outside counsel) to represent such individual in any action, suit or proceeding, whether or not the Company is a party to such action, suit or proceeding. (As amended May 3, 1994) Section 5. Procedure For Indemnification. Subject to compliance with any applicable procedures in Sections 1 or 4, as the case may be, any indemnification of a Director, officer or employee of the Company or advance of Expenses to such an individual under the terms of this Article shall be made promptly. If the Company unreasonably denies a written request for indemnity or the advance payment of Expenses, either in whole or in part, or if payment in full pursuant to such request is not made promptly, the right to indemnification or advances as granted by this Article shall be enforceable by such individual in any court of competent jurisdiction. Such individual's costs and expenses including reasonable attorney's fees incurred in connection with successfully establishing his or her right to indemnification in any such action shall also be indemnified by the Company. (As amended May 3, 1994) Section 6. Non-Exclusivity of Indemnification Rights. The right of indemnification hereby provided shall not be deemed exclusive of or otherwise affect any other rights to which any individual seeking indemnification may be entitled by law, or under any agreement, vote of stockholders or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer or employee and shall inure to the benefit of the heirs, executors and administrators of such a person. (As amended May 3, 1994) Section 7. Other Organizations. The indemnification provisions of this Article shall extend to any Director, officer or employee who serves at the Company's request as director, officer or trustee of another organization, including, without limitation, an employee benefit plan, in which the Company has or had an interest as a stockholder, creditor, sponsor or otherwise. The right to rely on corporate information conferred in Section 3 of this Article shall also extend to the records, books of accounts and reports of any such other organization of which the individual serves as director, officer or trustee. (As amended May 3, 1994) Section 8. Survival. The foregoing indemnification provisions shall be deemed to be a contract between the Company and each individual who serves in any capacity as a Director, officer or employee of the Company at any time while these provisions are in effect. Except as may otherwise be required as a result of changes in the law governing indemnification of officers, directors and employees of Vermont corporations, any repeal or modification of the foregoing provisions shall not affect any right or obligation then existing and such "contract rights" may not be modified retroactively without the consent of such Director, officer or employee. (As amended May 3, 1994) ARTICLE XII. (As amended May 3, 1988) Miscellaneous Section 1. The funds of the Company shall be deposited to its credit in such banks or trust companies as the Board of Directors may, from time to time, designate, and shall be drawn out only for the purposes of the Company and only upon checks or drafts signed in such manner as shall be authorized by the Board of Directors in accordance with the power vested in them by these By-Laws. Section 2. No debts shall be contracted, except for current expenses, unless authorized by the Board of Directors or the Executive Committee. Section 3. All dividends shall be payable at such time as may be fixed by the Board of Directors. Before payment of any dividend or making any distribution of profits, there shall be set aside, out of the surplus or net profits of the Corporation such sum or sums as the Board of Directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors think conducive to the interest of the Corporation. Section 4. The first fiscal year of the Corporation shall be the period commencing September 1, 1929 and ending December 31, 1930, and thereafter each calendar year, commencing with the year 1931, shall be the fiscal year of the Corporation. ARTICLE XIII AMENDMENT Except as set forth in subdivision 21 of the Company's Articles of Association and in Articles V and X of these By-Laws, these By-Laws may be altered, amended or repealed at any annual or special meeting of the stockholders called for the purpose, of which the notice shall specify the subject matter of the proposed alteration, amendment or repeal or the sections to be affected thereby, by vote of the stockholders, or if there shall be two or more classes or series of stock entitled to vote on the question, by vote of each such class or series. These By-Laws may also be altered, amended or repealed by vote of the majority of the number of Directors fixed in accordance with the By-Laws at a meeting called for that purpose of which the notice shall specify the subject matter of the proposed alteration, amendment or repeal or the sections to be affected thereby, except that the Directors shall not take any action which provides for indemnification of Directors or affects the powers of Directors or officers to contract with the Company, nor any action to amend this Article XIII, Sections 2, 3, 4, 5 or 6 of Article V, or Article X, and except that the Directors shall not take any action unless permitted by law. Except as set forth in subdivision 21 of the Company's Articles of Association and in Articles V and X of these By-Laws, any By-Law so altered, amended or repealed by the Directors may be further altered or amended or reinstated by the stockholder in the above manner. (As amended May 6, 1986 and May 3, 1988) EX-10 3 EXHIBIT 10-7-2 FOR FORM 10-K EXHIBIT 10.7.2 VERMONT YANKEE NUCLEAR POWER CORPORATION AMENDMENT NO. 2 TO CAPITAL FUNDS AGREEMENT AMENDMENT NO. 2, dated as of September 1, 1993, between VERMONT YANKEE NUCLEAR POWER CORPORATION ("Vermont Yankee"), a Vermont corporation, and CENTRAL VERMONT PUBLIC SERVICE CORPORATION (the "Sponsor"), a Vermont corporation, to the Capital Funds Agreement dated as of February 1, 1968, as heretofore amended (the "Capital Funds Agreement"), between Vermont Yankee and the Sponsor. Whereas, Vermont Yankee and its sponsoring utilities desire to extend the term of their Capital Funds Agreements in order to facilitate Vermont Yankee's financings and prevent the acceleration some of Vermont Yankee's outstanding First Mortgage Bonds. Now, therefore, in consideration of the premises and other good and valuable consideration, receipt of which is hereby acknowledged, Vermont Yankee and the Sponsor hereby agree Section 2 of the Capital Funds Agreement is hereby amended by striking the date "December 31, 2002" and inserting in lieu thereof the date "March 21, 2012". The parties hereto further agree that this Amendment No 2. shall become effective upon receipt by the Sponsor of notice that Vermont Yankee has entered into a similar amendment with each of its other sponsoring utilities. IN WITNESS WHEREOF, the parties have executed this amendment by their respective officers thereunto duly authorized as of the date first above written. VERMONT YANKEE NUCLEAR POWER CORPORATION BY /s/ J. G. Weigand CENTRAL VERMONT PUBLIC SERVICE CORPORATION By /s/ Thomas C. Webb JARAMCV.VY EX-10 4 EXHIBIT 10-16-26 FOR FORM 10-K Exhibit 10.16.2 THIRTY-FIRST AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT THIS AGREEMENT, dated as of the 1st day of June, 1994, is entered into by the signatory Participants for the amendment by them of the New England Power Pool Agreement dated as of September 1, 1971 (the "NEPOOL Agreement"), as previously amended by twenty-nine (29) amendments, the most recent of which was dated as of May 1, 1993, and as proposed to be amended by a pending thirtieth amendment dated as of June 1, 1993. WHEREAS, Participants have not been permitted by the terms of the NEPOOL Agreement to make sales of energy to other Participants or Non-Participants while retaining for their own Capability Responsibility accounting purposes the Capability related to the energy resource, and therefore there has been no opportunity for energy transactions directly between Participants, or between Participants and Non-Participants, without the Participant's loss of Capability for Capability Responsibility accounting purposes; and WHEREAS, the requirement that power transactions include both Capability for Capability Responsibility accounting purposes and energy has impeded implementation of economic coordination transactions among Participants and between Participants and Non-Participants; and WHEREAS, the Participants desire to implement a limited program that will permit transactions that transfer energy without affecting the seller's Capability for Capability Responsibility accounting purposes during a two-year trial period in order to determine the desirability of modifying the NEPOOL Agreement provisions to permit Participants to continue such transactions. NOW THEREFORE, the signatory Participants hereby agree as follows: SECTION 1 The NEPOOL Agreement is amended by adding the attachment hereto as a Supplement to the NEPOOL Agreement. SECTION II EFFECTIVENESS OF AGREEMENT Following its execution by the requisite number of Participants, this Agreement, and the amendment adding the attached Supplement to the NEPOOL Agreement, shall become effective on September 1, 1994, or if the Federal Energy Regulatory Commission shall not permit such effective date, then this Agreement and the attached Supplement shall become effective on the first day of such later month as the Federal Energy Regulatory Commission shall provide. SECTION III USAGE OF DEFINED TERMS Except as otherwise expressly provided, usage in this Agreement and the attached Supplement of terms which are defined in the NEPOOL Agreement shall be deemed to be in accordance with the definitions thereof in the NEPOOL Agreement. SECTION IV COUNTERPARTS This Agreement may be executed in any number of counterparts and each executed counterpart shall have the same force and effect as an original instrument and as if all the parties to all the counterparts had signed the same instrument. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereof, and may be attached to another counterpart of this Agreement identical in form hereto but having attached to it one or more signature pages. IN WITNESS WHEREOF, each of the signatory Participants have caused a counterpart signature page to be executed by its duly authorized representative, as of the 1st day of June, 1994. COUNTERPART SIGNATURE PAGE TO THIRTY-FIRST AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT DATED AS OF JUNE 1, 1994 The NEPOOL Agreement, being dated as of September 1, 1971, and being previously amended by twenty-nine (29) amendments the most recent of which was dated as of May 1, 1993, and as proposed to be amended by a pending thirtieth (30th) amendment dated as of June 1, 1993. CENTRAL VERMONT PUBLIC SERVICE CORP. By: ________________________________ Name: Thomas C. Webb Title: President & CEO Address: 77 Grove Street Rutland, VT 05701 COUNTERPART SIGNATURE PAGE TO THIRTY-FIRST AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT DATED AS OF JUNE 1, 1994 The NEPOOL Agreement, being dated as of September 1, 1971, and being previously amended by twenty-nine (29) amendments the most recent of which was dated as of May 1, 1993, and as proposed to be amended by a pending thirtieth (30th) amendment dated as of June 1, 1993. CENTRAL VERMONT PUBLIC SERVICE CORP. By:_______________________________ Name: Thomas C. Webb Title: President and CEO Address: 77 Grove Street Rutland, VT 05701 ATTACHMENT TO THIRTY-FIRST AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT SUPPLEMENT TRIAL PROGRAM TO PERMIT PARTICIPANT PURCHASES AND SALES OF ENERGY WHILE SELLER RETAINS CAPABILITY RESPONSIBILITY CREDIT Participants may implement transactions pursuant to the trial program described in this Supplement during the two-year period following the date on which this Supplement becomes effective: A. General Description of Trial Program 1. Generating unit and system contract Entitlements shall be considered to have separable resource attributes for the purposes of Capability Responsibility accounting and energy billing. For the purposes of this Supplement, such Entitlements may be considered to be Capability Responsibility resources for Capability Responsibility accounting purposes and "own load" resources for energy service billing purposes. a. A Participant shall have the option of making a "No Capability" sale by transferring the own load resource while the Participant retains the Entitlement's Capability Responsibility resource for its own Capability Responsibility accounting purposes. b. A Participant shall have the option of making a "No Capability" purchase by purchasing an own load resource without receiving a Capability Responsibility resource for the Participant's Capability Responsibility accounting purposes. The term "No Capability, as used in No Capability sale and No Capability purchase, denotes the impact of such transactions for Capability Responsibility accounting purposes only. In the case of system contracts, the terms "No Capability sale" and "No Capability purchase" shall mean transactions whereby, pursuant to the agreement of the seller and purchaser, the seller retains the Capability Responsibility resource and commits operable generation resources to cover the transaction over and above the seller's Load and operating reserve requirements. In the case of unit contracts, the seller relinquishes the opportunity to utilize the generation resource in the seller's own load energy service billing. In transactions between a Participant and a Non-Participant, such transactions shall preserve the value of the Capability Responsibility resource for the seller by providing that the seller shall retain the opportunity to interrupt the transaction prior to implementation of the applicable NEPEX capacity deficiency operating procedure actions (or the Non-Participant's equivalent of such capacity deficiency actions). 2. The No Capability sale and No Capability purchase transactions permitted under this trial program shall only be system transactions between Participants and system transactions between Participants and Non-Participants located outside of the NEPOOL control area. This limitation is intended to exclude No Capability sales and No Capability purchases that involve unit transactions and all No Capability sale and No Capability purchase transactions with Non-Participants that are located within the NEPOOL control area. 3. Upon the recommendation of the Operations Committee and approval by the Management Committee of procedural and administrative rules to regulate such transactions, the trial program described in this Supplement may be expanded to permit (a) generating unit No Capability sales and generating unit No Capability purchases, and/or (b) No Capability sales and No Capability purchase transactions between Participants and Non-Participants within the NEPOOL control area. 4. The net amount of a Participant's No Capability purchases and No Capability sales with other Participants shall be limited in any hour (the net amount is the difference between the Participant's total No Capability purchases and No Capability sales). For Participants as of December 3, 1993 (the date of the Executive Committee action accepting the report that recommended this trial program), the limit shall be the greater of: (1) 15 percent of the Participant's Adjusted Annual Peak as of November 1, 1993, or, (2) 10 percent of the Participant's Adjusted Annual Peak as of the start of the then-current Power Year. For any Entity that becomes a Participant following December 3, 1993, the limit shall be the greater of: (1) 15 percent of the Adjusted Annual Peak that such Entity would have experienced if it had been a Participant on November 1, 1993 (such Adjusted Annual Peak being determined by the Management Committee at the time that the Entity becomes a Participant), or (2) 10 percent of the Participant's Adjusted Annual Peak as of the start of the then-current Power Year. For Participants without an Adjusted Annual Peak, the limit shall be determined by the Management Committee. 5. The net flow of energy (an individual Participant's No Capability sales minus the Participant's No Capability purchases) from a Participant to Non-Participants shall be limited to a maximum of 500 MWH in any hour. There shall be no limit on the net flows to a Participant resulting from No Capability purchases by the Participant from Non-Participants. 6. The transactions permitted during this trial program shall be limited to the greater of (1) 30 days, or (2) the duration of the specified generating unit outage with which the transaction is associated. 7. Nothing in this Supplement shall be interpreted to relieve the parties to any transaction from the need to arrange transmission service, and transmission wheeling shall be required for No Capability sale transactions and No Capability purchase transactions in the same manner that transmission wheeling is required for transactions that involve both Capability and energy. When a transaction is made from a generating unit that is not located in the seller's system, transmission wheeling shall be required for both the Capability retained by the seller and the own load resource. B. Specific Elements of the Trial Program 1. Participant/Participant "No Capability" Transactions a. Whenever the seller retains the Capability Responsibility resource in accordance with the terms prescribed in this Supplement, that seller shall receive credit for the resource in Capability Responsibility accounting. However, in the case of a transaction from a specified generating unit the seller relinquishes the opportunity to use the resource in its own load energy service billing, and in the case of a system contract sale the seller shall incur an obligation in own load energy service billing equal to the scheduled amount of energy. b. Purchasing an own load resource means that the buyer receives the use of that resource in its own load energy service billing dispatch. Own load resources shall be treated in the buyer's own load energy service billing dispatch according to regular energy accounting procedures, including procedures applicable to treatment of outage service Entitlements and deficiency energy. c. An own load resource shall be treated in the buyer's own load energy service billing calculations as a dependable load carrying resource. Such a resource carries with it the operating reserve characteristics possessed by the generating unit or system contract involved in the sale. d. Any impact of the performance incentive program and the new unit adjustments on Capability Responsibility described in Section 9 of the NEPOOL Agreement, that relate to a generating unit or system contract involved in a transaction under this program, shall apply to the Participant that retains the credit for the Capability Responsibility resource. e. Whenever a Capability Responsibility resource is sold by one Participant to another, it must be accompanied by the associated own load resource. A Participant may resell to a third Participant, or to a Non-Participant, an own load resource associated with a Capability Responsibility resource it has purchased from another Participant. However, a Participant shall not be permitted to sell a Capability Responsibility resource and associated own load resource to another Participant and simultaneously buy back the own load resource associated with that Entitlement. Such a set of transactions would amount to transmitting a Capability Responsibility resource without it being accompanied by the associated own load resource and that result is not permitted under this program. 2. Participant/Non-Participant No Capability Transactions a. If it is determined that a Participant's purchase is being delivered out of the seller's operating reserve, NEPEX will have the option of implementing the transaction subject to the provisions of applicable NEPOOL rules and procedures relating to interpool transactions. All Participant contracts with Non-Participants outside the NEPOOL control area shall conform to the requirements of applicable NEPOOL rules and procedures relating to interpool transactions. Participant sales to Non-Participants that provide for interruption by NEPEX prior to the implementation of NEPEX actions during a capacity deficiency will be treated as No Capability sales. Participant purchases from Non-Participants that are interruptible by the seller prior to implementation on its system of actions equivalent to NEPEX capacity deficiency actions will be treated as No Capability purchases during hours when the contract energy is available to NEPEX. A Participant's purchase from a Non-Participant will be treated as a combined own load resource and Capability Responsibility resource if the purchase is interruptible only for the specific reasons permitted in the applicable NEPOOL rules and procedures relating to purchases from sources external to the pool which qualify as Capability for Capability Responsibility accounting purposes. b. A Participant making a No Capability sale to a Non-Participant shall retain the Capability Responsibility resource to meet the Participant's Capability Responsibility. The Participant making a No Capability system contract sale to a Non-Participant shall incur an obligation for own load energy service billing purposes equal to the amount of energy actually scheduled (MWH scheduled at the NEPOOL boundary plus applicable losses in each hour. The Capability Responsibility resources and own load resources available to such Participant shall not be impacted by the transaction. If the trial program is expanded to permit unit contract No Capability sales to Non-Participants pursuant to Section A.3. of this Supplement, the seller in such transactions shall relinquish the opportunity to utilize the generation resource in its own load energy service billing. A No Capability sale shall provide no operating reserve capability to the Non-Participant purchaser. A Participant purchasing from a Non-Participant may use a No Capability purchase resource in its own load energy service billing dispatch. In the purchasing Participant's own load accounting, a No Capability purchase is treated as a dependable load carrying resource during hours when it is actually available for NEPEX dispatch. A No Capability purchase by a Participant from a Non-Participant shall be deemed to have no operating reserve associated with it, and the purchasing Participant shall get no credit for the resource in its Capability Responsibility accounting. c. A Participant's No Capability sale and No Capability purchase transactions with Non-Participants shall have no effect on the performance incentive program or new unit adjustments described in Section 9 of the NEPOOL Agreement. C. Additional Responsibilities of the Operations Committee In addition to its other responsibilities, the Operations Committee shall be responsible for establishing criteria, rules and standards to implement and administer the trial program described in this Supplement. D. Extension of Program The trial program described in this Supplement may be extended beyond two years if such an extension is authorized by affirmative votes of the Operations Committee and the Management Committee. E. Conflict Between Supplement Provisions and Other NEPOOL Agreement Provisions In the event of conflict between any of the provisions of this Supplement and other provisions of the NEPOOL Agreement, the Supplement provisions shall govern during the duration of the trial program described herein and shall not affect any other NEPOOL Agreement provision except to the extent necessary to implement the trial program. Furthermore, the definitions of terms contained in this Supplement shall not be used to change the definitions of terms or the interpretation of terms in any other NEPOOL Agreement provision or in any other rate schedule, tariff or agreement filed by or entered into by any NEPOOL Participant prior to the effective date of this Supplement. EX-10 5 EXHIBIT 10-56-3 FOR FORM 10-K Exhibit 10.56.3 THIRD AMENDMENT TO 1985 OPTION AGREEMENT This Agreement, made and entered into as of December 31, 1994, by and between Vermont Electric Power Company, Inc., a Vermont corporation ("VELCO"), Central Vermont Public Service Corporation, a Vermont corporation, ("Central Vermont"), Green Mountain Power Corporation, a Vermont corporation ("Green Mountain"), and Citizens Utilities Company, a Delaware corporation ("Citizens"); Central Vermont, Green Mountain and Citizens being also referred to herein individually as "Company" and collectively as "Companies". WITNESSETH THAT: WHEREAS, each of the Companies is an original stockholder of VELCO, and each contributed certain assets to VELCO at the time of its incorporation; and WHEREAS, VELCO and the Companies were parties to a certain Agreement, dated March 29, 1957 (the "Four Party Agreement"), that included, among other things, purchase options relating to certain properties of VELCO that were subsequently more specifically described in an Agreement dated January 16, 1961, among said Companies and VELCO (the "1961 Agreement"), which options were extended to December 27, 1985; and WHEREAS, VELCO and the Companies are parties to a certain Agreement, dated December 27, 1985 ("the 1985 Option Agreement"), that extended the aforementioned purchase options to December 31, 1988; and WHEREAS, VELCO and the Companies were also parties to certain Amendments to the 1985 Option Agreement, dated September 28, 1988 (the "First Amendment Agreement"), and October 1, 1991 (the "Second Amendment Agreement") that further extended the aforementioned purchase options to December 31, 1991 and thence to December 31, 1994; and WHEREAS, the Companies desire to supersede the Second Amendment Agreement and to extend the aforesaid options until a date no later than December 31, 1996), on terms and conditions that are consistent with the terms and conditions of the Indenture of Mortgage, dated as of September 1, 1957, between VELCO and Bankers Trust Company, as Trustee, as now or hereinafter amended or supplemented. NOW, THEREFORE, the parties to this Agreement hereby agree that the 1985 Option Agreement is amended as follows: 1. In all places where the date "December 31, 1988" appears, it is changed to "December 31, 1996." 2. In all places where the date "October 1, 1988" appears, it is changed to "October 1, 1996." This agreement may be executed in counterpart copies which shall be combined and treated as one original. IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed on its behalf by a duly authorized officer as of the date first written above. CENTRAL VERMONT PUBLIC SERVICE CORPORATION Attest: /s/ Mary Eaton By: /s/ Robert de R. Stein Its CITIZENS UTILITIES COMPANY Attest: /s/ Craig A. Mark By: /s/ James Avery Its Vice President GREEN MOUNTAIN POWER COMPANY Attest: By: /s/ Armand Boucher Its Vice President VERMONT ELECTRIC POWER COMPANY, INC. Attest: /s/ Joyce A. Norris By: /s/ Thomas N. Weis Its Vice President EX-21 6 EXHIBIT 21-1 FOR FORM 10-K EXHIBIT 21.1 Subsidiaries of the Registrant State in Which Incorporated Connecticut Valley Electric Company Inc. (a) (F1) New Hampshire Vermont Electric Power Company, Inc. (b) (F2) Vermont C.V. Realty, Inc. (a) (F1) Vermont Central Vermont Public Service Corporation - Bradford Hydroelectric, Inc. (a) (F1) Vermont Central Vermont Public Service Corporation - East Barnet Hydroelectric, Inc. (a) (F1) Vermont CV Energy Resources, Inc. (a) (F1) Vermont Catamount Rumford, Inc. (a) (F1) Vermont Equinox Vermont Corporation (a) (F1) Vermont Appomattox Vermont Corporation (a) (F1) Vermont Catamount Energy Corporation (a) (F1) Vermont Catamount Williams Lake, Ltd. (a) (F1) Vermont SmartEnergy Services, Inc. (a) (F1) Vermont -------------------------------------------- (FN) (F1) (a) Included in consolidated financial statements (F2) (b) Separate financial statements do not need to be filed under Regulation S-X, Rule 1-02(v) defining a "significant subsidiary", and Rule 3-09, which sets forth the requirement for filing separate financial statements of subsidiaries not consolidated. EX-23 7 EXHIBIT 23-1 FOR FORM 10-K EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 6, 1995 included in this Form 10-K, into Central Vermont Public Service Corporation's previously filed Registration Statements on Form S-8, File No. 33-22741, Form S-8, File No. 33-22742, Form S-8, File No. 33-58101, Form S-8, File No. 33-62100 and Form S-3, File No. 33-37095. ARTHUR ANDERSEN LLP Boston, Massachusetts March 27, 1995 EX-27 8 EXHIBIT 27 FOR FORM 10-K
UT This Financial Data Schedule contains summary financial information extracted from the consolidated Financial Statements included herein and is qualified in its entirety by reference to such financial statements (dollars in thousands, except per share amounts). 1,000 YEAR DEC-31-1994 DEC-31-1994 PER-BOOK 324,555 57,938 51,310 56,596 0 490,399 69,980 45,229 55,575 170,784 20,000 8,054 120,157 11,511 0 0 4,230 0 20,467 1,095 134,101 490,399 277,158 11,934 244,121 256,055 21,103 3,828 24,931 10,131 14,800 2,138 12,662 18,966 8,359 49,410 1.08 0
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