-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ah7wa4FFijdzY658gw78aalfKbiBYo1or2JRTrZMeYm8OqSytcluHIuGj/5ZHhac slUnDUVsG8/dvepqGO6Rdw== 0000071304-96-000024.txt : 19961115 0000071304-96-000024.hdr.sgml : 19961115 ACCESSION NUMBER: 0000071304-96-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMONWEALTH ELECTRIC CO CENTRAL INDEX KEY: 0000071222 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041659070 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-07749 FILM NUMBER: 96661993 BUSINESS ADDRESS: STREET 1: ONE MAIN ST CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6172254000 MAIL ADDRESS: STREET 1: P O BOX 9150 CITY: CAMBRIDGE STATE: MA ZIP: 02142-9150 FORMER COMPANY: FORMER CONFORMED NAME: NEW BEDFORD GAS & EDISON LIGHT CO DATE OF NAME CHANGE: 19810331 FORMER COMPANY: FORMER CONFORMED NAME: NEW BEDFORD GAS LIGHT CO DATE OF NAME CHANGE: 19701106 10-Q 1 COMMONWEALTH ELECTRIC COMPANY - FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549-1004 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number 2-7749 COMMONWEALTH ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Massachusetts 04-1659070 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Main Street, Cambridge, Massachusetts 02142-9150 (Address of principal executive offices) (Zip Code) (617) 225-4000 (Registrant's telephone number, including area code) (Former name, address and fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class of Common Stock November 1, 1996 Common Stock, $25 par value 2,043,972 shares The Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this Form with the reduced disclosure format. PART I - FINANCIAL INFORMATION Item 1. Financial Statements COMMONWEALTH ELECTRIC COMPANY CONDENSED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 ASSETS (Dollars in thousands) September 30, December 31, 1996 1995 (Unaudited) PROPERTY, PLANT AND EQUIPMENT, at original cost $533 628 $520 714 Less - Accumulated depreciation 163 291 154 170 370 337 366 544 Add - Construction work in progress 1 575 1 912 371 912 368 456 INVESTMENTS Equity in nuclear electric power company 634 590 Other 14 14 648 604 CURRENT ASSETS Cash 2 822 1 430 Accounts receivable - Affiliates 2 653 2 570 Customers 40 030 41 951 Unbilled revenues 7 653 5 795 Prepaid property taxes 4 536 2 843 Inventories and other 5 101 5 262 62 795 59 851 DEFERRED CHARGES 73 197 77 916 $508 552 $506 827 See accompanying notes. COMMONWEALTH ELECTRIC COMPANY CONDENSED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 CAPITALIZATION AND LIABILITIES (Dollars in thousands) September 30, December 31, 1996 1995 (Unaudited) CAPITALIZATION Common Equity - Common stock, $25 par value - Authorized and outstanding - 2,043,972 shares wholly-owned by Commonwealth Energy System (Parent) $ 51 099 $ 51 099 Amounts paid in excess of par value 97 112 97 112 Retained earnings 28 571 20 708 176 782 168 919 Long-term debt, less current sinking fund requirements 153 231 154 275 330 013 323 194 CURRENT LIABILITIES Interim Financing - Notes payable to banks 9 450 17 300 Advances from affiliates 8 095 1 545 17 545 18 845 Other Current Liabilities - Current sinking fund requirements 3 553 3 553 Accounts payable - Affiliates 7 957 8 987 Other 30 371 32 699 Accrued taxes - Local property and other 5 322 3 068 Income 19 037 18 721 Other 10 571 11 742 76 811 78 770 94 356 97 615 DEFERRED CREDITS Accumulated deferred income taxes 46 134 44 211 Unamortized investment tax credits 7 235 7 559 Other 30 814 34 248 84 183 86 018 COMMITMENTS AND CONTINGENCIES $508 552 $506 827 See accompanying notes. COMMONWEALTH ELECTRIC COMPANY CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 ELECTRIC OPERATING REVENUES $123 350 $112 651 $346 204 $323 953 OPERATING EXPENSES Electricity purchased for resale, transmission and fuel 77 052 72 114 222 586 212 362 Other operation and maintenance 21 945 19 592 62 321 59 589 Depreciation 4 290 4 102 12 870 12 307 Taxes - Income 5 383 4 191 11 289 8 556 Local property 1 524 1 169 4 415 3 933 Payroll and other 558 599 2 243 2 239 110 752 101 767 315 724 298 986 OPERATING INCOME 12 598 10 884 30 480 24 967 OTHER INCOME (EXPENSE) 49 26 (212) 1 256 INCOME BEFORE INTEREST CHARGES 12 647 10 910 30 268 26 223 INTEREST CHARGES Long-term debt 3 493 3 521 10 477 10 562 Other interest charges 593 741 1 685 2 059 Allowance for borrowed funds used during construction (10) (59) (79) (295) 4 076 4 203 12 083 12 326 NET INCOME 8 571 6 707 18 185 13 897 RETAINED EARNINGS - Beginning of period 20 000 14 773 20 708 15 350 Dividends on common stock - (2 044) (10 322) (9 811) End of period $ 28 571 $ 19 436 $ 28 571 $ 19 436 See accompanying notes. COMMONWEALTH ELECTRIC COMPANY CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Dollars in thousands) (Unaudited) 1996 1995 OPERATING ACTIVITIES Net income $ 18 185 $ 13 897 Effects of noncash items - Depreciation and amortization 16 201 14 699 Deferred income taxes and investment tax credits, net (890) 3 305 Change in working capital, exclusive of cash and interim financing (3 511) 14 533 Buy-out of power contract - (25 500) Fuel charge stabilization deferral 4 835 (4 600) All other operating items (5 894) (753) Net cash provided by operating activities 28 926 15 581 INVESTING ACTIVITIES Additions to property, plant and equipment (exclusive of AFUDC) (14 789) (18 876) Allowance for borrowed funds used during construction (79) (295) Net cash used for investing activities (14 868) (19 171) FINANCING ACTIVITIES Payment of short-term borrowings (7 850) (1 050) Proceeds from affiliates 6 550 15 405 Payment of dividends (10 322) (9 811) Sinking funds payments (1 044) (1 044) Net cash (used for) provided by financing activities (12 666) 3 500 Net increase (decrease) in cash 1 392 (90) Cash at beginning of period 1 430 1 637 Cash at end of period $ 2 822 $ 1 547 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid (received) during the period for: Interest (net of capitalized amounts) $ 13 043 $ 13 207 Income taxes $ 10 289 $ (2 808) See accompanying notes. COMMONWEALTH ELECTRIC COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (1) General Information Commonwealth Electric Company (the Company) is a wholly-owned subsidiary of Commonwealth Energy System. The parent company is referred to in this report as the "System" and together with its subsidiaries is collectively referred to as "the system." The System is an exempt public utility holding company under the provisions of the Public Utility Holding Company Act of 1935 and, in addition to its investment in the Company, has interests in other utility and several non-regulated companies. The Company has 847 regular employees including 554 (65%) represented by three collective bargaining units. New agreements were reached earlier this year with two bargaining units (representing approximately 54% of regular employees) that were scheduled to expire on October 1, 1996 and November 1, 1997. These new agreements will remain in effect until 2002 and 2001, respectively. (2) Significant Accounting Policies (a) Principles of Accounting The Company's significant accounting policies are described in Note 2 of Notes to Financial Statements included in its 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows these same basic accounting poli- cies but considers each interim period as an integral part of an annual period and makes allocations of certain expenses to interim periods based upon estimates of such expenses for the year. The unaudited financial statements for the periods ended September 30, 1996 and 1995 reflect, in the opinion of the Company, all adjustments (consisting of only normal recurring accruals) necessary to summarize fairly the results for such periods. In addition, certain prior period amounts are reclassified from time to time to conform with the presenta- tion used in the current period's financial statements. Income tax expense is recorded using the statutory rates in effect applied to book income subject to tax recorded in the interim period. The results for interim periods are not necessarily indicative of results for the entire year because of seasonal variations in the con- sumption of energy. (b) Regulatory Assets and Liabilities The Company is regulated as to rates, accounting and other matters by various authorities including the Federal Energy Regulatory Commission (FERC) and the Massachusetts Department of Public Utilities (DPU). Based on the current regulatory framework, the Company accounts for the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." The Company has established COMMONWEALTH ELECTRIC COMPANY various regulatory assets in cases where the DPU and/or the FERC have permitted or are expected to permit recovery of specific costs over time. Similarly, regulatory liabilities established by the Company are required to be refunded to customers over time. On January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. As of September 30, 1996, SFAS No. 121 did not have an impact on the Company's financial position or results of operations. However, this result may change as modifications are made in the current regulatory framework pursuant to electric utility restructuring orders issued by the DPU including a final order that is expected to be issued by the end of 1996. For additional discussion of electric industry restructuring activities, see "Electric Industry Restructuring" in Management's Discussion and Analysis of Results of Operations in Item 2 of this report. The principal regulatory assets included in deferred charges were as follows: September 30, December 31, 1996 1995 (Dollars in thousands) Purchased power contract buy-out $ 21 718 $ 23 838 Fuel charge stabilization 18 562 22 063 Postretirement benefit costs including pensions 12 140 12 283 Yankee Atomic unrecovered plant and decommissioning costs 4 708 5 630 Pilgrim nuclear plant litigation costs 6 376 6 644 Conservation and load management costs 2 483 2 968 Other 669 804 $ 66 656 $ 74 230 The regulatory liabilities included in deferred credits were as follows: September 30, December 31, 1996 1995 (Dollars in thousands) Excess Seabrook-related deferred income taxes $ 3 316 $ 4 887 Other deferred income taxes 2 182 2 182 Excess replacement power refunds 1 167 1 719 $ 6 665 $ 8 788 (3) Commitments and Contingencies The Company is engaged in a continuous construction program presently estimated at $110 million for the five-year period 1996 through 2000. Of that amount, $24.1 million is estimated for 1996. As of September 30, 1996, the Company's construction expenditures amounted to approximately $14.9 million, including an allowance for funds used during construction. The Company expects to finance these expenditures on an interim basis with internally-generated funds and short-term borrowings. COMMONWEALTH ELECTRIC COMPANY The program is subject to periodic review and revision due to factors such as changes in business conditions, rates of customer growth, effects of inflation, maintenance of reliable and safe service, equipment delivery schedules, licensing delays, availability and cost of capital and environ- mental regulations. COMMONWEALTH ELECTRIC COMPANY Item 2. Management's Discussion and Analysis of Results of Operations The following is a discussion of certain significant factors which have affected operating revenues, expenses and net income during the periods included in the accompanying condensed statements of income. This discussion should be read in conjunction with the Notes to Condensed Financial Statements appearing elsewhere in this report. A summary of the period to period changes in the principal items included in the condensed statements of income for the three and nine months ended September 30, 1996 and 1995 and unit sales for these periods is shown below: Three Months Ended Nine Months Ended September 30, September 30, 1996 and 1995 1996 and 1995 Increase (Decrease) (Dollars in thousands) Electric Operating Revenues $ 10 699 9.5% $ 22 251 6.9% Operating Expenses - Electricity purchased for resale, transmission and fuel 4 938 6.8 10 224 4.8 Other operation and maintenance 2 353 12.0 2 732 4.6 Depreciation 188 4.6 563 4.6 Taxes - Federal and state income 1 192 28.4 2 733 31.9 Local property and other 314 17.8 486 7.9 8 985 8.8 16 738 5.6 Operating Income 1 714 15.7 5 513 22.1 Other Income 23 88.5 (1 468) (116.9) Income Before Interest Charges 1 737 15.9 4 045 15.4 Interest Charges (127) (3.0) (243) (2.0) Net Income $ 1 864 27.8 $ 4 288 30.9 Unit Sales (Megawatthours or MWH) Retail (8 368) (0.9) 90 239 3.6 Wholesale 26 850 12.1 25 305 3.9 Total 18 482 1.6 115 544 3.7 The following is a summary of unit sales (in MWH) for the periods indicated: Three Months Nine Months Period Ended Total Retail Wholesale Total Retail Wholesale September 30, 1996 1 160 955 911 850 249 105 3 265 641 2 599 590 666 051 September 30, 1995 1 142 473 920 218 222 255 3 150 097 2 509 351 640 746 COMMONWEALTH ELECTRIC COMPANY Operating Revenues, Electricity Purchased for Resale, Transmission and Fuel Operating revenues for the nine-month period ended September 30, 1996 increased by $22.3 million (6.9%) from the corresponding period in 1995 primarily due to a 3.7% improvement in total unit sales, particularly in the residential and commercial sectors, that was attributable to weather that was colder than normal in the first half of this year, a slight increase in cus- tomers, and a 4.8% increase in electricity purchased for resale, transmission and fuel costs. Also contributing to the revenue increase was a $4 million refund associated with a power contract settlement agreement approved by the Federal Energy Regulatory Commission related to billing issues in prior years. Operating revenues increased for the three-month period ended September 30, 1996 due to the increased cost of electricity purchased for resale, transmis- sion and fuel and the power contract refund discussed above, offset to some extent by the decrease in retail unit sales due to a cooler summer period. Revenues from wholesale sales increased in the current three and nine-month periods by 0.7% and 3.7% to $5.1 million and $13.9 million, respectively, reflecting the changing capacity needs of non-affiliated utilities and NEPOOL. Fluctuations in the level of wholesale sales have no impact on net income. Electricity purchased for resale, transmission and fuel expense in- creased in the current nine-month period due to the impact of higher unit sales and to a lesser extent, an increase in power purchased from affiliate Canal Electric Company's (Canal) Unit 1 which was out of service in 1995 from the start of the year until late July due to a combination of scheduled maintenance and unscheduled extensive repairs to the turbine. These increases were offset, in part, by Canal Unit 2 which was out of service approximately five months for scheduled maintenance and returned to service in mid-August 1996. Unit 2 also completed a fueling conversion to burn natural gas in addition to oil. These same expenses increased in the current three-month period due to the impact of higher fuel oil costs and, to a lesser extent, greater unit sales. Other Operation and Maintenance The increase in other operation and maintenance in the current three and nine-month periods reflects storm damage costs incurred for Hurricane Edouard ($1.9 million). Higher costs for postretirement benefits ($1.3 million) and labor ($1.1 million) also contributed to the change for the current nine-month period but were virtually unchanged in the current quarter. Somewhat offset- ting these higher costs in the current three and nine-month periods were lower provisions for bad debts ($204,000 and $603,000) and lower costs related to District Services, primarily marketing and customer operations ($131,000 and $323,000), respectively. The current nine-month period also reflects the absence of legal fees ($517,000) associated with the cancellation of the Eastern Energy Corporation (Eastern Energy) power contract in 1995. Depreciation and Taxes Depreciation expense increased 4.6% in the current three and nine-month periods due to a higher level of depreciable property, plant and equipment. The increases in federal and state income taxes were due to a higher level of pretax income. The increase in local property and other taxes for both periods was due to higher rates and assessments. COMMONWEALTH ELECTRIC COMPANY Other Income and Interest Charges Other income declined $1.5 million in the current nine-month period due to the reversal of a $1.4 million reserve in the first quarter of 1995 that related to certain costs associated with the Company's energy conservation program, the recovery of which was subsequently approved by the Massachusetts Department of Public Utilities (DPU). Total interest charges declined in the current three and nine-month periods due to a lower average level of borrowings and lower rates. Also contributing to the decline in expense in the current nine-month period was the absence of interest costs associated with the termination of the Eastern Energy power contract. These decreased charges were offset somewhat in both current periods by decreases in the allowance for borrowed funds used during construction. Electric Industry Restructuring On August 16, 1995, the DPU issued an order calling for the restructuring of the electric utility industry in Massachusetts. The DPU's intent is to reduce electric costs to consumers by providing customers with the opportunity to choose their electric power provider while retail electric companies such as the Company and affiliate Cambridge Electric Light Company (the Companies) continue to provide transmission and distribution services. On May 1, 1996, the DPU issued an order containing proposed rules for implementing electric industry restructuring. The proposed rules, which were the subject of public comment and hearings during June and July 1996, provide for: (1) the establishment of an independent system operator to operate the regional transmission system; (2) a power exchange to manage a competitive bidding pool for short-term power sales; (3) functional separation of electric companies into generation, transmission and distribution corporate entities; (4) preservation of discounts for low-income customers, shut-off protections and provision of service to all customers; (5) registration requirements for generation suppliers; (6) options for phased incentives for electric companies to divest their generation assets; (7) promotion of environmental goals; (8) support for energy efficiency and renewable energy resources; (9) a price cap system of incentive regulation for the remaining distribution and transmission functions; (10) unbundling of rates on bills into separate components of transmission, distribution and energy, and implementation of a competitive generation market by January 1, 1998; and (11) a reasonable opportunity for recovery of stranded cost. On August 9, 1996, the DPU issued an order delaying the issuance of final rules until the end of 1996. The DPU also stated that it will issue a revised schedule for electric companies to make company-specific unbundled rate filings. COMMONWEALTH ELECTRIC COMPANY Although the DPU has not yet issued its revised rate filing schedule, the Companies anticipate filing their revenue-neutral, unbundled rates in early 1997 after the issuance of the DPU's final rules. Also, during 1997, the Companies will file their comprehensive restructuring plan. One element of the Companies' plan (announced on February 15, 1996) calls for the auctioning, in a competitive market, of their capacity entitlement (1,140 MW) in all of their twenty-one power contracts in an effort to develop a competitive market whereby customers would have the flexibility of choosing their electric supplier. These entitlements include contracts for power from Canal Units 1 and 2 and Seabrook Unit 1, which are owned or jointly owned by the System's generating subsidiary Canal Electric Company. The Companies' plan provides for total recovery of the difference between the current market value of the Companies' power contracts and their unavoidable costs. Under the Companies' plan, this difference, a component of what is often referred to as stranded cost, would be recovered through a non-bypassable access charge paid over an appropriate time period by all customers in the Companies' service areas. The DPU's May 1 order reaffirmed that one of its transition principles is to seek near-term rate relief for electric customers. Also, the DPU's proposed rules would limit the period for recovery of net, non-mitigable stranded cost to a ten-year period (January 1, 1998 through December 31, 2007.) Recovery of stranded cost depends upon the timing, nature, and degree of competition that may result from future changes in regulatory policies governing the Companies' activities and prices, as well as future power costs and market prices of power. The Companies' single largest component of stranded cost relates to their purchased power contracts with non-utility generators. Based on their analyses of the DPU's proposed rules, the Compa- nies would be unable to recover a substantial portion of their stranded cost within the ten-year period without rate increases. However, while the Companies are unable to predict the ultimate outcome of restructuring, it is important to note that a recent proposed settlement agreement presented by another utility to the DPU includes a provision that lengthens the timeframe for recovery of certain stranded costs to their original lives thus making it possible for that company to fully recover all stranded costs without a significant rate increase. That settlement agreement is currently under review by the DPU. Generally accepted accounting principles require that losses be accrued in full when costs to complete a contract are expected to exceed related revenues expected to be realized. To the extent that the Companies determine that they will be unable to recover costs associated with their purchased power contracts, the Companies would be required to take an immediate charge against earnings when such a loss is probable and estimable. Statement of Financial Accounting Standards No. 121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121) which became effective for 1996, requires impairment losses on long-lived assets to be recognized when the book value of an asset exceeds its expected future cash flows. This standard also imposes stricter criteria for the retention of regulatory-created assets by requiring that such assets be probable of future recovery at each balance sheet date. To the extent such recovery is not probable at the balance sheet date, the Companies would be required to take a charge against earnings in that period. The Companies currently account for the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting Standards COMMONWEALTH ELECTRIC COMPANY No. 71 - "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71) based on the cost-of-service regulatory framework in which they operate. The DPU has proposed that the distribution and transmission functions of their businesses be regulated under a form of price capped incentive regulation. In the event that recovery of specific costs through rates becomes unlikely or uncertain for all or a portion of the Companies' utility opera- tions, whether resulting from the expanding effects of competition or specific regulatory actions which move the Companies away from cost-of-service rate- making, SFAS No. 71 would no longer apply. While the Companies are unable to predict the final rules which may be adopted by the DPU in its restructuring proposal, the Companies could be required to discontinue the application of SFAS No. 71. Discontinuance of SFAS No. 71 would cause the write-off of the applicable portions of their regulatory assets which would have an adverse impact on the Companies' financial position and results of operations. The Companies will challenge any order that would have a significant adverse impact on them, including attempts to limit their recovery of stranded cost. Retail Choice Pilot Program On September 3, 1996, the DPU approved the Company's retail choice pilot program. The program is comprised of two components: under Subscription A, eligible customers have the opportunity to buy their power from a supplier other than the Company (an alternative supplier); under Subscription B, eligible customers continue to buy their power from the Company, but at prices posted by the Company one day ahead. All participating customers will pay the Company a customer charge, transmission and distribution charges, and an access charge. The program is available to the Company's 18 commercial and industrial customers taking service under one of the Company's economic development rates. Subscription A has been filled by 5 customers having an aggregate load of approximately 15 megawatts. The remaining customers are eligible to participate in Subscription B. Subscription A customers have not yet selected an alternative supplier. The program is designed to allow a limited number of customers the opportunity to possibly reduce their electric bills while the Company learns more about real-time pricing and the administrative requirements associated with open-market competition. Through the program, the Company expects to develop internal procedures for billing and allocating the costs for providing an alternative supply to its retail customers, and to develop methods for educating customers regarding retail choice. The program is scheduled to continue until December 31, 1997. Those customers that find that their selection is not right for them will be able to return to Company service at their prior rate. Termination of Power Sale Agreement On June 5, 1996, the DPU approved a power sale termination agreement between the Company and Altresco Lynn, Inc. (Altresco) that related to a purchase power obligation of the Company under which the Company would have been required to purchase approximately 25 MW from Altresco beginning on January 1, 1997. Under the terms of the termination agreement, the Company COMMONWEALTH ELECTRIC COMPANY returned to Altresco $550,000 of the $750,000 power sale agreement security deposit held by the Company since April 1992. The remaining $200,000, plus accumulated interest, was credited to the Company's fuel charge stabilization account. Consistent with DPU precedent regarding provision of least-cost electric service, the termination of the power sale agreement, coupled with providing replacement power when necessary, will save the Company's customers approximately $34 million, in 1995 dollars, over the twenty-year life of the initial power sale agreement. COMMONWEALTH ELECTRIC COMPANY PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any pending material legal proceeding. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule Filed herewith as Exhibit 1 is the Financial Data Schedule for the nine months ended September 30, 1996. Filed herewith as Exhibit 2 is the restated Financial Data Schedule for the nine months ended September 30, 1995. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended September 30, 1996. COMMONWEALTH ELECTRIC COMPANY SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMMONWEALTH ELECTRIC COMPANY (Registrant) Principal Financial and Accounting Officer: Date: November 13, 1996 JAMES D. RAPPOLI James D. Rappoli, Financial Vice President and Treasurer EX-27 2 FINANCIAL DATA SCHEDULE - SEPTEMBER 30, 1996
UT This schedule contains summary financial information extracted from the balance sheet, statement of income and statement of cash flows contained in Form 10-Q of Commonwealth Electric Company for the nine months ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000071222 COMMONWEALTH ELECTRIC COMPANY 1,000 DEC-31-1996 SEP-30-1996 9-MOS PER-BOOK 371,912 648 62,795 73,197 0 508,552 51,099 97,112 28,571 176,782 0 0 153,231 17,545 0 0 3,553 0 0 0 157,441 508,552 346,204 11,289 304,435 315,724 30,480 (212) 30,268 12,083 18,185 0 18,185 10,322 10,477 28,926 0 0
EX-27 3 FINANCAIL DATA SCHEDULE - SEPTEMBER 30, 1995
UT This schedule contains restated summary financial information extracted from the balance sheet, statement of income and statement of cash flows contained in Form 10-Q of Commonwealth Electric Company for the nine months ended September 30, 1995 and is qualified in its entirety by reference to such financial statements. 0000071222 COMMONWEALTH ELECTRIC COMPANY 1,000 DEC-31-1995 SEP-30-1995 9-MOS PER-BOOK 366,098 639 58,146 87,524 0 512,407 51,099 97,112 19,436 167,647 0 0 156,773 20,955 0 0 1,053 0 0 0 165,979 512,407 323,953 8,556 290,430 298,986 24,967 1,256 26,223 12,326 13,897 0 13,897 9,811 10,562 15,581 0 0
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