ML19345A878
| ML19345A878 | |
| Person / Time | |
|---|---|
| Site: | Pilgrim |
| Issue date: | 11/21/1980 |
| From: | May T BOSTON EDISON CO. |
| To: | Saltzman J Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 8011250359 | |
| Download: ML19345A878 (57) | |
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BasTON EDISON COMPANY Execureve arrices 800 SovLSTcN STREET ScSTON, MASSACHUSETTS 02199 -
i TH oMAS.A. MAY f.
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7.1 November 21, 1980 J
Mr. Jerome Saltzmanl Chief ~
I Antitrust Indemnity Group Nuclear Regulatory Commission U. S. Nuclear Regulatory Agency Washington, D.-C.
20555 Re: Docket No. 50-293 6
Dear Mr. Saltzman:
Enclosed please find the data. necessary for compliance with the 1975 amendments to the Price Anderson Act (Public Law 94-197):
1.
Boston Edison Company Annual Report for 1979.
3 2.
Boston Edison Company Form 10-Q for the quarter ended September-30, 1980 - as filed with the Securities and Exchange l
1 Commission.
3.
Cash Flow Forecast for the year 1981.
4 4.
Narrative Statement of curtailment of capital expenditures.
Very truly yours, 4
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BOSTON EDISON COMPANY 1981 Internal Cash Flow Projection for 'ilgrim Unit #1 Nuclear Power Station (Dollars in Thousands) 12 Mos. Ended Projected Year 9/30/80 1981 Net Income After Taxes S 63,512 S 77,373 Less Dividends Paid 52,634 58,392 Retained Earnings S 10,878
$ 18,981 Adjustments:
Depreciation and Amortization 59,688 65,726 Deferred Income Taxes and Investment Tax Credits 37,186 46,786 Allowance for Funds Used During Construction (29,420)
(37,099)
Total Adjustments S 67,454 S 75,413 Internal Cash Flow S 78,332 S 94,394 Average Quarterly Cash Flow S__19,583 S 23,599 Percentage Ownership Pilgrim Unit #1 74.277.
in All Operating Nuclear Units Maximum Total Contingent Liability S 10,000
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STATE:'I.;TS OF CL'FT '.!L"_:'" OF CAPIT.I. T':FI C :T'r E d
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The Boston Edison Company would be able to curtail $10 million of capital expenditures within any three month period of the next twelve months if it becomes necessary to pay retrospective premiums.
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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C.
20549 F0RM 10-Q 1
i QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) 0F THE SECURITIES EXCHANGE ACT OF 1934 For Ouarter Ended Sectember 30, 1980 Commission file number 1-2301-2 BOSTON EDISON COMPANY I
(Exact name of registrant as specified in its charter)
Massachusetts 04-1278810 (State or other jurisdiction of (I.R.S. Employer incorporation or organization)
Identification No.)
800 Boylston Street, Boston, Massachusetts 02199 (Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 617-424-2000 None Former name, former address and forme.r fiscal year, if changed since last report.
Indicate by check mark whether the registrant (1) has f'. led all reports re-quired 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 reg-istrant 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 close of the period covered by this report.
j Class Outstanding at Seutember 30, 1980 Common Stock, $10 par value 13,848,067 shares
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i BOSTON EDISON COMPANY INDEX PAGE NO.
Part I.
FINANCIAL INFORMATION:
(Unaudited)
Balance Sheets - September 30,~ 1980 and 1979 2
Statements of Income - Nine Months and Quarters Ended September 30, 1980 and 1979 3
Statements of Sources of Construction Funds - Nine Months Ended September 30, 1980 and 1979 4
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Notes to Unaudited Financial Statements 5
Management's Discussion and Analysis of Statements of. Income 7
l Report of Independent Certified Public Accountants 10 Part II.
OTHER INFORMATION:
11 Signature 13 1
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PART I.
' Fin xcial Information 30STON EDISON C1'C3 ANT BA MNCI SMEI~'S
. (Unaudited )
September 30, 1980 1979=
Property, Plant and Equipment:
(In Thousands)
Utility Plant in Service
$1,615,454
$1,534,395 820 872 Nonutility Property Construction Work in Progress 258,956 205,208 1,875,230 1,740,975 Lass: Depreciation 433,833 392,578 1,441,397 1,348,397 Nuclear Fuel - Net 57,500 47,803 Total yroperty, Plant and Equipment 1,495,397 1,396,200 Investments in Nuclear Electric Companies, at equity 6,975 6,786 Current Aasets:
Cash 3,416 8,697 Accounts Receivable - Net 126,520 104,436 Other 37,250 40,064 Total Current Assets 167,186 153,247 Deferred Debits:
Deferred Fuel Expense 56,033 41,307 Other 16,116 22,269 Total Deferred Debits 72.149 63,576
$1,745,207 si,619,809 LIABILITIES A'!D CAP!!A; Commen Stock, par value $10 per share (Note 2)
$ 138,48 1
$ 135,345 Premium on Con =en Stock 156,196 152,775 Retained Earnings 131,279 120,278 425,956 408,395 Cumulative Preference Stock (Note 3) 82,873 84,682 Cumulative Preferred Stock 82,997 82,983 Total Capital 591,826 576,063 Long-Term Debt:
First Mortgage Sonds (Note 4) 603,000 528,000 Secured Notes 18,080 19,720 Total Long-Term Debt 621,080 547,720 Nuclear Fuel Financing Cbligation 50,000 50,000 Current Liabilities:
Long-Term Debt Due within One Year (Note 4 )
1,640 90,303 Notes Payable - Banks 129,200 44,180 Other 81,615 90,248 Total Current Liabilities 212,455 224,731 Deferred Credits:
Accumulated tsferred Income Taxes (Note 6) 213,694 171,448 Accumulated Deferred Investment Tax credit 49,634 46,518 Other 6,518 3,329 Total Liabilities and Deferred Credits L,153,gBL 1,043,7co
$1,745,207
$1.619,30y See acce=panying notes to financial statements.
- Restated to reflect refunds to wholesale electric utility customers.
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i BOSTON EDISON COMPANY STATEMENTS OF INCOME
'(Unaudited)
Quarter Ended Nine Months Ended 9-30-80 9-30-79*
9-30-80 9-30-79*
OPERATING REVENUES:
(In Thousands)
Electric
$130,247 $123,923
$352,557 $325,195 Steam 2,063 2,101 11,074 10,779 Fuel and purchased power ' adjust:nent 95,134 70,984 288,218 169,936 Other 4,211 3,407 11,451 9,742 Total 231,655 200,415 663,300 515,652 OPERATING EXPENSES:
i Operation - Fuel 102,884 72,396 301,902 191,231 i
- Purchased Power (4,274) 14,909 26,297 16,969
-- Other 29,587 28,069 87,121 79,158 128,197 115,374 415,320 is7,Jds Maintenance 11,081 8,936 30,854 24,487 Depreciation 12,225 11,843 36,675 35,528 Taxes - Other than income 21,270 19,474 64,787 60,767 Taxes - Income 17,286 16,295 31,027 33,870 Total 190,059 171,912 578,663 442,010 OPERATING INCOME 41,596 28,503 84,637 73,642 OTHER INCOME AND DEDUCTIONS:
Allowance for other funds used during construction (Note 3) 1,330 2,665 5,209 6,795 Other - Net 98 109 292 (21)
INCOME BEFORE INTEREST CHARGES 43,024 31,277 90,138 80,416 INTEREST CHARCES:
Long-term debt 12,848 12,809 38,631 39,094 Nuclear fuel financing obligation 1,273 1,385 5,160 3,739 other 4,757 2,174 14,934 5,764 Allowance for borrowed' funds used during construction - credit (Note 3)
(5,803)
(5,342)
-(17,439)
(12,080)
Total 13,075 11,026 41,286 36,517 NET INCOME 29,949 20,251 48,852 43,899 1
PREFERRED DIVIDENDS PROVIDED 1,379 1,379 4,134 4,134 PREFERENCE DIVIDENDS PROVIDED 2,401 2,460 7,216 7,354 BAIANCE AVAIIABLE FOR CCMiON STOCK 26,169 16,412
'37,502 32,411 EARNINGS PER SHARE OF COMMON STOCK
$1.90
$1.27
$2.73 S2.70 DIVIDEND DECLARED PER COMMON SHARE
$0.68-
$0.61
$2 04
$1.83 e
COMMON SHAEES OUTSTANDING-(weighted average) 13,804 12,897 13,724 11,993 See accompanying notes to financial statements.
- Restated to reflecc refunds to wholesale electric utility customers. _-.. - _ ~ _ __ -
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BOSTON EDIS'E COMPANY j
STATEMENTS ' 0F SOURCES OF ' CONSTRUCTION FUNDS I
(Unaudited) s Nine Months Ended September 30, 1980 September 30, 1979*
(In Thousands)
Funds from Operations -
$ 99,679
$-96.457 Funds,Provided from or (Applied to) Outside Sources Sale of Common Stock (Note. 2) 4,737 43,410 Sale of First Mortgage Bonds. 45,500 Redemption of $1.175 Series Preference Stock (1,866) Proceeds from Nuclear Fuel Financing 6,211 Obligation 4
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Sinking fund payments and other retirements First mortgage bonds (13,663)
(60,025)
Increase (Decrease) in notes payable 62,520 (8,000) 51,728 27,096 Other Funds Used:
Working Capital and other changes (7,794)
(12,930)
Dividends declared (39,447)
(33,818)
(47,261)
(46,748)
'Iotal Funds Provided
$104,166
$ 76,805 4
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' Construction Expenditures:
i Planc
$ 91,987
$ 59,038 Nuclear Fuel 12,179 17,767 Total construction expenditures S104,166 s 76,805 i
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See accompanying notes to financial statements.
- Rescated to reflect refunds to wholesalt electric utility customers.
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BOSTON EDISON COMPANY NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted in this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of the Company, the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading. See Notes to Financial State-ments included in the Company's Form 10-K.~or the year ended December 31, 1979 for additional information relevant to the financial statements contained herein, including information as to significant accounting policies followed by the Company (Note A) and the restatement for certain wholesale revenue adjustments (Note G).
In the opinion of the Company, the accompanying unaudiced financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 1980 and 1979, and the results of operations and sources of construction funds for the nine months then ended.
The results of operations for the nine month period ended September 30, 1980 are not necessarily indicative of the results to be expected for the full year.
During 1979 and 1978, the Company experienced major fluctuations in quarterly net income.
(See Note J of Notes to Financial Statements included in the Company's Form 10-K for the year ended December 31, 1979.)
(2) On July 15, 1980, August, 15, 1980 and September 2, 1980, the Company issued 29,938 shares, 39,566 shares and 29,160 shares, respectively, of its common stock in accordance with the Dividend Reinvestment and Common Stock Purchased Plan.
(See Part II, Item 5(a) Increase in Outstanding Securities in this Foca 10-Q.)
At September 30, 1980, 17,534,000 shares of Common Stock were authorized; 13,848,067 shares were issued and outstanding.
(3) Prior to April 1, 1981, the Company is required to offer to purchase, on May 1, 1981, 200,000 shares of the $1.175 series (less any shares purchased prior to the date of the offer) at prices not to exceed $10 plus dividends accrued.
(4) The aggregate net principal amounts of long-term debt due in the five years 1980 through 1984 are $1,640,000, $1,640,000, $16,640,000 $4,015,000 and
$23,390,000, respectively.
(5) Co=mencing in 1977, pursuant to Order 9561 issued by the Federal Energy Regulatory Commission (FERC), the Company changed its method for determining the rate used in computing Allowance For Funds Used During Construction (AFUDC) and its method of presentation of AFUDC in the statement of income. In accordance with the Order, the AFUDC races for the years 1978 and 1979 were 11% and 11.5%; the rate used in the first nine months of 1980 was 12.37..
a (6) Based upon its most recent retail rate order, the company adjusted its provision for deferred income taxes associated with the debt portion of AFUDC by approximately $5,200,000 effective January 1,1980. This amount is based on the method used to compute deferred income tax expense in the rate level allowed by the Massachusetts Department of Public Utilities in such race order. This change has increased third quarter eamings per share by $0.38, of which $0.26 is applicable to the first six months of 1980.
]
BOSTON EDISON COMPANY Management's Discussion and Analysis of Statements of Income For the Three and Nine Months Ended September 30, 1980 Versus the Comoarable 1979 Periods Based on an increased number of shares, earnings per common share for the three and nine months ended September 30, 1980 increased $0.63 and $0.03, respectively, over the comparable 1979 periods.
Results for the periods were affected by a change in the Company's method of accounting for deferred income taxes associated with the debe portion of AFUDC.
This change was in response to a regulatory order and increased earnings per common share by $0.38, (see note 6 of Notes to Unaudited Financial Statements included in Part 1 of this Form 10-Q).
Results for the periods were also affected by a change in the Company's fuel and purchased power adjustment clause. The Company has recently received an order from the Massachusetts Department of Public Utilities (MDPU) which allows the use of a forecasted fuel clause to recover its fuel and purchased power costs. In accordance with the order the Company has deferred in the third quarter of 1980 approximately $9,300,000 of fuel and purchased power costs. Although this change has increased earnings per common share by $0.34 for the three and nine months ended September 30, 1980, a substantial portion of this amount would have been recovered in the fourth quarter through the previous fuel clause and therefore the impact for the full year 1980 will not be material.
Results for the nine months ended September 30, 1980 were also affected by increased kilowatthour sales, rate increases and an increase in allowanca for funds used during construction. These increases were offset primarily by higher interest costs and the operation and maintenance expenses associated with the refueling outage of the Company's nuclear generating unit.
Excluding the effects of the Company's chan7e from bimonthly to monthly billing, retail and territory kilowatthour sales increased about 2.7 and 0.6 percent, respectively, during d2e three and nine months.
Base electric revenues for the three and nine =onths were higher by $6,324,000 and $27,362,000, respectively, for the reasons summarized in the following table.
Ihree Months Nine Months Ended Ended Seotember 30, 1980 Seotember 30, 1980 Estimated Retail Rate Increases S 6,113,000
$15,860,000 Increase From Conversion to Monthly Billing 1,904,000 4,979,000 Increase in Energy Sold at Retail 1,547,000 1,205,000 Total Retail Revenue Increase S 9,564,000
$22,044,000 Sales for Resale (3,240,000) 5,318,000 Total Increase in Base Electric Revenues S 6,326,000 S27,362,000 i
For the third quarter, fuel and purchased power adjustment revenues and fuel and purchased power expenses increased $24,150,000 and $11,305,000, respectively. For the nine months ended September 30, 1980, like revenues and expenses increased $118,282,000 and $119,999,000. The nine months' increases were primarily as a result of the refueling outage of the Company's nuclear generating unit and the resulting higher costs of fuel.
Fuel and purchased power expenses were reduced for both periods by approx-imately $9,300,000 as described in the third paragraph above.
Maintenance is accrued based on an annual forecast. The annual maintenance forecast for 1979 was adjusted subsequent to September 30, 1979. The 1980 annual forecast as of September 30, 1980 is $41,070,000 which is $4,986,000 higher than 1979 actual of $36,084,000.
Taxes other than income taxes, primarily property taxes, increased because of increases in tax rates and valuations.
The effective income tax rate for the three and nine months ended September 30, 1980 was 37" and 39%, respectively; for the comparable 1979 periods the rates were 45% and 437..
The lower 1980 rates are due to the third quarter change in accounting for deferred income taxes associated with the debt portion of AFUDC (see note 6 of Neces to Unaudited Financial Statements included in Part 1 of this Form 10-Q).
Other interest increased $2,583,000 and $9,170,000, respectively, for the three and nine months ending September 30, 1980 principally as a result of an increase in the average outstanding loan balance and an increase in the 1980 average borrowing race.
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BOSTON EDISON COMPANY Management's Discussion and Analysis of Statements of Income Third Ouarter of 1980 Versus Secend Ouarter of 1980 l
As mentioned in management's discussion of the three and nine months ended September 30, 1980, the third quarter was affected by a change in the Company's method of accounting for deferred income taxes and the use of a forecasted fuel and purchased power adjustment clause.
Excluding the effects of the change to month'.y billing. retail and territory kilowatthour sales increased by approximate 13 12.0% percent.
The third quarter summer =enths have historically resulted in the highest quarterly sales during the year.
Total operating revenues increased $31,661,000 during the third quarter, primarily due to increased kilowatthour sales.
Total operating expenses, excluding income taxes, increased S3,060,000 or
- 1. 87..
The effective inco=e tax rate per the second and third quarter of 1980 was 427 and 377., respectively. The lower third quarter race is due to the change in accounting for deferred ince=e taxes associated with the debe portion of AFL*DC.
Other interest expense decreased $1,399,000 principally due to lower borrowing races.
Primarily as a result of the above, net income increased $20,038,000.
1 COOPERS & LY B R A N D ccateco meue aceov~rints 4MCueEmrim4 CF COCptms & gvemAND reNitamationau To the Stockholders and Directors of Boston Edison Company:
We have made a review of the balance sheets, statements of income and sources of construction funds of Boston Edison Company as of September 30, 1980 and 1979, and for the nine month periods then ended, in accordance with standards established by the American Institute of Certified public Accountants.
A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the aforementioned financial statements for them to be in conformity with generally accepted accounting principles.
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Boston, Massachusetts
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October 22, 1980
t BOSTON EDISON COMPANY PART II.
OTHER INFORMATION Item 1.
Legal Proceedings By letter dated September 30, 1980, FERC acknowledged the Company's co=pliance with the settlement between the Company and the Towns of Concord, Norwood and Wellesley terminating the proceedings on its docket. In addition, a stipulation of dismissal has been filed with the U.S. District Court in Boston.
(See note 3 of Noces to Unaudited Financial Statements in Part I of the Company's Form 10-Q for the quarter ended June 30, 1980).
Item 5.
Increase in Amount Outstanding of Securities or Indebtedness (a) Increase in Outstanding Securities Number Co::xnon Common Stock:
of Shares Stock Premium Balance at June 30, 1980 13,749,403 $137,494,030 S155,509,664 Dividend Reinvestment Plaa Sales:
July 15, 1980 29,938 299,380 392,562 August 15, 1980 39,566 395,660 437,771 September 2, 1980 29,160 291,600 337,177 Balance 13,848,067 S138,480,670 $156,677,174 Less Capital Stock Expenses 481,089 Balance at September 30, 1980
$156,196,085 Item 8.
Other Materially Imoortant Events (1) In an order issued September 30, 1980, as supplemented on October 17,1980, the Massachusetts Department of Public Utilities granted the Company an annual retail rate increase of $37,500,000. The new rates are effective for power consumed on and after September 30, 1980. The Department increased the allowed return on equity from 13.627. to 14.27. and adopted a year-end rate base in lieu of the year average rate base to offset the effects of attrition and regulatory lag.
The Company has filed a motion for reconsideration of the rate order to reflect property tax increases received after October 17, 1980.
(2) The Company intends to file a Form S-16 Registration Statement on or about November 14, 1980 in connection with the sale of 2,000,000 shares of Common Stock, par value $10 per share.
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1 Item 9.
Exhibits and Reports on Form 8-K 4
t (a) Exhibits Description t
Articles of Organization, as amended April 15, 1980 to increase the authorized capital stock of the Company by 3,000,000 shares of Common Stock having a par value of $10 per share.
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l (b) Reports on Form 8-K None 4
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i SIGNATURE I
l 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.
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BOSTON EDISON COMPAh"I (Registrant)
Date: Noverbe.r 14, 1980 m'+ M-v'=
a Ralph M. Kelmon Treasurer (Chief Accounting Officer)
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1 Ehe780stonEWonCompany 1979 ANNUAL REPORT Strength-With Boston Boston enters the emergingdecade as one of the premier urban cen-ters in the nation. Throue.h pru-dent plannmg, it has established eminence tn character and is posi-tioned for growth and prospenty.
So too with Boston Edison. It is a beneficiaryof thearea'sdynamic economy, possesses strength in operations and. throue.h significant financial accomplishment, has i
Jt fashioned a sound foundation for C. the future, iQ.
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1979 1978
% Change Operating Revenues (000) 5698,002
$613,263 13.8 Balance for Common Stock [000)
S 43,567 5 34,139 27.6 Common Shares Outstanding-Weighted Average (000) 12,389 11,535 7.4 Common Stock Data:
Eamings Per Share
$3.52
$2.96 18.9 Dividends Declared Per Share
$2.51
$2.44 2.9 Payout Ratio 71 %
82%
Book Value per Share
$30.37
$30.91 (1.8)
Retum on Average Common Equity 11.31 %
9.65 %
17.2 Fixed Charge Coverage (SEC)
_ L53x 2.50x 1.2 i FinancialHighlights 17 StatementsofIncome 1.'4essage to Our Shareholders 18 BalanceSheets 2 ;W9 Highlights 19 Sources of Constmetion Funds The 5 vength of Boston 19 RetainedEamings 3 Ouah.y of Life 20 Notes to Financial Statements 3 Changic Business Climate 29 OperatingStatistics 5 Developmg th.: New Boston 30 SalesStatistics 5 Outlook for the Future 31 FinancialStatistics The Strength of Boston Edison 32 DirectorsandOfficers 6 Improved Operations ii ShareholderInformation 8 Energy Supply 11 Changing Market 12 Financial Accomplishment 16 Management's Discussion Cover:
Brownstone tow houses. Back Bav. Caca 1870 lohn F Kermeds Pressdennall.abra:y. Columbia tbmc. Cuca 1979 i.
1i Tb OurShareholders As we enter the decade of the The fossil units achieved signifi-to realize its full potential. Com-eighties, the Boston Edison corpo-cantly unproved generating effi-pany efforts to attain additional rate mission remains constant-ciencies. The planning and con-consumer benefits from nuclear to provide customers with reliable trol budget process was refined.
power through the construcuon and reasonably priced electric The number of employees was of Pilgrim Umt 2 are faced with energy m an environmentally mamtatned near record low levels.
delays in the regulatory process acceptable manner balancmg the These achievements represent as a result of Three Mile Island.
interests of our employees and efforts of a capable and dynamic To reduce oil dependence, the shareholders. While tius task is employee team. The Company's Company is also exploring coal, even more demanding today, we management structure has under-altemative energy sources, con-are confident Boston Edison is gone substantial changes over the servation and load management.
well positioned to address the past few years to enhance its tiext-We recently announced the fund-decade of the eigh ties successfully.
bility and compc.ence to respond ingof studiestoralowheadhydro-The Company has gained sig-to today's rapidly changing and electric facility on the Charles nificant strength through pro-complex energy supply situation River in Newton, an agreement grams aimed at the corporate ob-and the socialand regulatory in principle with Wheelabrator-iectives of bemg well managed, environment.
Frve Corporation for a joint proier productive, financially strong, One of the greatest challenges to build a refuse to energy facility techmcally proficient and socially facing the Company today is en-tn the Metropolitan Boston area, responsible. These objectives will ergy supply. We have contmually and also commissioned a study continue to govem activities in and aggressively pursued means at the Weymouth generating site the eighties.
of reducing dependence upon im-for new coal buming units.
Prospects for economic growth ported ml. We have emphasized As Boston Edison pursues its and development in the Boston the benefits of nuclear energy, corporate objectives in the eight-area are excellent. Rapidly grow-which has proven to be safe, re-ies, we believe we have a strong mg service and high technology liable, economical and environ-base of human and physical re-industries have brought expanded mentally acceptable. In 1979, New sources in place to aggressively opportumty and established a England's nuclear units generated address the challenges and to sound economic foundation for over 30 percent of area energy re-grasp the opportunities.
the region. Development tnterest quirements and savt ' consumers is high and expected to remain so.
over 5800 million m fuel charges.
Inlargepart thestrengthof Boston Pilgnm Unit I attained outstand-Edison reflects the strength of a ing operating success, supplying
,m; y
revitah:ed Boston-its economic close to 40 percent of the Com-vitality and its p ospects for pany's generation, at a capacity as M. stas:esky development.
tactor of 83 percent, and providing Preudent and chier operarms orncer In 1979, significant financial over $139 million in fuel savmgs accomplishment was evident.
to our customers.
Eamings per share and retum In 1979, nuclear energy experi-
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r on common equity reached their enced a most difficult challenge--
p highest levelsin seven years; an the accident at Three Mile Island.
mme c,awr' Execurwe orncer already healthy cash flow im-It was an accident that had both chairman and chiet proved, successfulfinancingswere positive and negative aspects. It completed and the improvement generated a thorough reassess-Februarv 22. imo of financial ratios continued. Re-ment of present practices and, affirming the Company's long as a result, nuclear energy will standingcommitment to its share-be even safer. Nuclear energy holders, the dividend was in-remains capable of alleviating creased in December and a dis-present and future energy supply count dividend reinvestment plan problems but positive action by was adopted.Today, Boston Edison govemment is necessary if we are has built a solid foundation for additional accomplishment.
Boston Edison is conunitted to unprove productivity and effi-ciency and made maior strides in these areas during the year. The record of our nuclear generating umt Pilgnm I was outstanding.
1979 Highlights i
Die Streiigtli opostor1 l
&>ston enters the 1980s as one of Changing Businss Climate the premier urban centers in the nat.on. Standing at the forefront me Boston area economy is of cities expenencing revitaliza-sound, having exhibited the enti-tion, it offers a quality of life calabihty to replace declining seMom found elsewhere. Through industnes with growing ones:
prudent planning, Boston has tmm trade and fishing to shoes and textiles and now to technol-established eminence in character and is positioned for growth and ogy and services. High technology, prospenty throagh the coming fueled by promtnent educational decade. Simply put, today the nd research establishments, paces the area s econonus ictivity and Boston area is a most attractive place to live, work, shop and visit; represents an industry ot almost an attractiveness that will be en.
hmitless gmwth potential. Educa-hanced throue.h the 1980s.
tion, medicine and govemment epi-tomize expanding service indus-Qually0[Lj[e tnes, as do intemational finance and the arts. They are each ele-What is special about Boston? It ments of the new Boston economy.
is the preservation of the charm of To stimulate expansion of exist-the past while developing the new; ing business and attract new com-resurrected brownstone town panies, maior efforts are reducing houses and the new K,ennedy the burdens of h> cal and e te Librarv. It is job oppor tunities, taxation.Govemor King 1 the expanding and vaned, aM 1,using Massachusetts legislature, m 1979, choices rangmg trom the. art ot
.,ad to stabilize or reduce local the city to the surrounding sub-property tax rates. personalin-urbs. It is an atmosphere of cul-come taxes have been reduced, ture; the pertorming arts-ballet, meal taxes were lowered, and the l
theater, opera and the symphony; capital gains tax will be reduced and the applied arts-museums, 60 percent by 1981.
galleries and libraries. It is sathng m the summer and skiing in the winter; strolling along the histonc Freedom Trail or shopptng at the 4
bustling Faneuil Hill Market-c..
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lace. Boston's strength is its in-erent ability to provide a wide
-N array of attractive choices, per-3 mitting people to live, work and Q~.q A*>fV 'Q relax as they desire, it is "a quahty
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5 The Massachusetts Bustness Development Councilis working to irrprove the state's economic climate and attract business to the Commonwealth. Regional Tratnmg Centers are being de-veloped m coniunction with existing colleges and vocational new, expanded and renovated institutions to provide citizens facilities, a cultural revival was with expanded tratning oppor-begun and is well underway.
tunities to meet the labor require-Since 1960. Boston's busmess mentsof area employers.Ninety-base has successfully shifted from three high technology firms have manufactunng to expanding formally committed themselves broad-based service activities.
to work with state govemment This has had a maior impact on the to promote jobs in retum for an area's economic transformation economically constructive tax as these actmties have generated system. Specifically, the goal is a pattem of contmuous growth.
to provide 150,000 new iobs by the end of 1982. The needs of existmg Outlookfor tire Future business and the requirements at The outlook for Boston's con-aw business are bemg addressed tinued development dunng the acdvely by state govemment.
1980s is encouragmg. Over the Overall, the business climate is next four years, public and pnvate healthy and improving.
investment is planned at a rate of Temtory sales by c!m m approximately $1 bilhon a year.
Developu.rg tire investor interest is strong and
!l al; u New Bostoir expected to increase as develop-
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l Spurred by over a dode of ment progresses.
lanned developtr alt, current Boston today is in a pos,itton to buildtng activir, indicates that control the quality or its tuture
,, p 3 3 p F Residential Boston has substantial potential development and may pick and j, y q g ll q, w l m lIndustnal for growth in almost every seg.
choose among development pro-l ment of its economy. Boston's p sals. Investment interest is keen 6
6 in u other because there are clear cut needs f r housing, office space, retail out-l transfom1ation from an older w
s 6
.s urban area into a city with restored lets and new hotels. Pcsitive pride and an optimistic outk>ok is the result of a combination of steps are underway to increase public improvement and private substantially conventton facih,-
investment. Carefully planned ties, enhancing the city's attrac-tiveness as a convention center.
publicinvestment sparked ar influx of private investment, to.
Protects are already proceeding t " dress each of these needs.
gether totaling over $12 billion tn the past 12 years.
The Boston area is strong and Dunng this renod, office space will be stronger. Caarul planning increased by an unprecedented ver the past few yeat ;has made 50 percent. New hotels were con, Boston the unique cit 3 it is today.
struc.ed and others expanded, Caretul planning willembellish providing additional rooms equal that image through the 1980s.
to almost a third of existing capa-city. Apartment and condominium construction paced substantial housing development.Maior new retail facilities were completed.
The area's medical and educa-tionalestablishments experienced significant expansion. Evidenced by considerable investment in
U TheStrength ofBoston Edison 1
Just as Boston is wellpositioned Additional steps were taken to enter the decade of the 80s so during the past year to strengthen too is Boston Edison. It is a bene-the executive team and reinforce ficiary of the area's strong econ-the organizational structure. The omy. It has strength in operations expanded Executive Office, re-and energy supply to meet chang-sponsible for monitoring the ing pattems or energy use and has operationsof theCompanyand ettected financialimprovements establishing corporate colicies.
that form a sound foundation for continued to improve the delega-the future.
tion of decision-making authonty throughout the various levels of hnproved Opemtwns management.
In 1979, Pilgrim Unit 1, Boston A Strategic Management Coim-Edison's 670 MW unit, achieved cil, cons 4ttng of key corporate its best performance since com-executives, was established to mencing commercialoperation formalte development of corpo-in 1972 and established all time rate intennediate and long range operating records. It supplied 38 plannmg and overall corporate percentof theCompany'sgenera-strategies. Among the matters tion at a capacity factor of 83 under study are future energy percent, saving the buming of ap-supply cnd planning issues. hu-Temtory s.iles Crowth 51 proximately 8 million barrels or man resource development and s
oiland representing fuel savmgs infonnation processing systems.
to customers of over $139 million.
Continueddevelopmentof the This capacity factor represented Company-wide planning and con-the fourth best performance of all trol budget process, which unifies boilingwater reactorsin the world.
goals, plans and budgets, has ef-On January 5,1980, the unit teeted tighter operational control.
was taken out of service f<r y-Also during 1979, the consoilda-fueling tits first since late 1977),
tionof twomaiorworklocations for scheduled maintenance, and at the Company's Prude ntial Cen-for the installation of new equip-ter headquarters was completed.
ment. It is scheduled to retum to and.:onstrucu. began on a n2w servicein Apnl1980.
ma' erials management comr lex In the area of generating effi-in Watertown which will pravide ciency as measured by heat rates, central warehousing and utvic-Boston Edison ranks as one of the ing facilities for the Company. To top utilities in the nation-a re-improve system reliability and flection ofimproved overhauland efficiency by providing increased maintenance programs for the operationand' plannmginforma-Company's fossil-fired units. An tion, work contmues on a new Outage ControlGroup was formed Supervisory Controland Data in 1979, resulting in all generating Acquisition System. It is ex-unit overhauls being completed pected to be operationalin 1981.
on schedule and within budget.
As an outgrowth of the recent The Heat Rate Group, composed Boston Edison rate decision ren-of a central staff supported by co-dered by the Department of Public ordinators at individual generattn,
Utilities, the management con-r stations, has established a rigorous sulting firm of Temple, Barker and approach to monitoring and im.
Sloane is conducting a manage-proving unit efficiency.
ment audit of the Company. The Company welcomes the audit and believes it willconfirm the effectiveness of efforts designed to achieve efficiency and produc-tivitygains and to provide oppor-l tunities for further achievement.
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8 solution to the nation's oil prob-lems. As part of long-term energy supply planning effor ts, however, it is investigating a number of options other than nuclear and Energy Supply coal: additional capacity pur-chases; conversion or existmg For the ten year penod 1980 to oil-fired units to synthenc liquid 1990, the Company's terntory peak load is expected to grow at M m coapoil sluny; altemauve technologies such as solar, wmd, about 2 $ercent annually. Exist-retuse, cogeneration and fuel cells; ing capa ility should be sufficient and load reductmn through direct to meet new load requirements load controland incennve rate untd the later art of the 80s, at which time pifgnm Unit 2, an structures. The Company is also directly involved in on going Toutopenungevenue s*
1150 MW nuclear generatmg unit, energy research being conducted is scheduled to be placed into by the Electric Power Research service.
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To reduce dependence upon Underscosg the unportance imported oil and to assure ade-of the Company s multiple etforts w
quate generatmg caSacity to meet to reduce its oilconsumpnon loads m the 1990s, t e Company has ininated feasibility studies for were the supply problems and 9
a new coal fired station at the site pnce mcreases expenenced, m 1979, by the country and Boston of the former Edgar generating n
station in Weymouth.
Edison due to the political unrest n '- w w v Amaiorcorporategoalof Boston in ilproducingcountnes.The Edison has been and is to decrea3e w rid price of oil skyrocketed. In its reliance on tmported oil.This February 1980, the Company's,
goalis also in ime with the Presi, e st was over $28 per banel. This dent's proposal for utilities to c mpares to an average cost per barrelin 1979 of $19.34 and in substantially cut their oil con.
sumptmn by 1990.
1970 of $2.22 per barrel. Oil prices Tlie Company believes that the are expected to exceed $30 per use of nuclear and coal for base barrel m early 1980.
Ioad power generation represents Because higher percent sulphur an available and viable near tenn oilis more plentiful, environ-mental standards would be met and customers could realize up to 595 millionin annualfuelsavings, the Company is aggressively seek-ing from regulatory agencies per-mission to bum higher percent sulphur oilin lieu of one per-cent oil.
1 9
lbston Edison has already dem-onstrated notable achievement in efforts to lessen the use of h-ported oil. Over the last decade,
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the Company's oil consumption has decitned from 17 million bar-
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rels in 1970 to 14 milhon barrels n 1979, dut prunanly to the im-
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reports have been released recently 5
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s ports the nuclear option was
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in areas of operation and regula-f ig.
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energy can be answered. Recom-e c?4 g (\\ Ng mendations for unprovements
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can be effected. Existma problems 1
y are solvable. What is necessary, gn however, is a conumtment trom 7,' p 7,h (
govenunent to effectively utih:e
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the nuclear option and to sub-sequently dimuush cnppitng s S:.-scc @i,
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The nuclearindustry in general construction permit as soon as As energy producers, the na-has been strengthened bylessons possible, for financial planning tion's utilities are obligated to t
leamed from the accident at purposes it has assumed that the assumeleadership in promoting Three MileIsland. Establishment construction permit willnot be energy efficiency. To that end, 3
of theInstituteof Nuclear Power granted until April 1981 and that Boston Edison has initiated pro-i l
Operations and a Nuclear Safety on that basis the unit will com-grams in time-of use rates. It has Analysis Center represent indus-mence commercialoperation asststed customers with energy tg commitments toimproved in 1987.
audits, conducted load research, reactor safety and operating excel.
and is engagedin a constructive lence. In addition toits active role Changhig Market marketmg program to encourage in the development and imple-The uncertain condition of world otf peakenergyuseandimprove 4
mentation of these key industry fuelsupply and pnces has altered the system load factor. In 1979, organizations, Boston Edison the nation's market for electric the Company's !oad factor im-established task forces to review energy. Homeowners and busi-proved to 59.7 percent from 57.7 i
and evaluate plant systems, safety, nesses are acutely aware of rising percent in 1978.
training and communication with energy costs and are exercising Construcuon Expenditures wh respect to Company nuclear ac-closer controlof energy consump-3u tivities. Recommendations con-tion. Federal, state and local ac-cemingchangesin equipment and tions have accelerated conserva-im procedures that resulted from the tion efforts, prime examples being Kemeny Report, Nuclear Regula-more energy efficient building m
i a
ins a u
i tory Commission regulations and construction and more effi ient l
in-house studies are being and appliance standards. These mea-will beimplemented toassure sures follow conservation eiforts
.L that nuclear power generation already taken voluntarily.
will continue to be both a safe As energy efficiency becomes y
y and reliable source of energy.
a key ooiective. the short term Boston Edison recognized the implication for future electnc Percent Intemalceneauon value ofindependent reviews of energy usage nationallyis clearly of Consuuction Expenditures its nuclear operations and in more controlled load growth.
m March 1978 tormed a Nuclear Early in 1979, the electric en-ReviewGroup,composedof three ergy growth rate in the United n
eminently qualified nuclear spe-States appeared headed for the
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.i cialists. On a quarterly basis, the 5 to 6 percent level, but data now w
u l
group spends a week reviewing all emergmg suggestgrowthatabout3 m
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aspects of the Company's nuclear percent. For 1980, national growth
-3 operations and reportsits findings expectations are forecast in the directly to senior management.
2 to 3 percent range.This now n
Many operatingimprovements means that rather than being on 1
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have resulted from their sugges-the low side, Boston Edison's tions and recommendations.
growth rate willbe approximately The construction of Pilgrim that of the nation as a whole.
Unit 2 has been delayed by effects Boston Edison had already ex-from the accident at Three Mile periencedandaddressed thechang-l Island.The date when the unit ing pattem of energy usage. Com-willcommencecommercialopera-pany territory sales growthin ticn largely depends upon the date 1979 was 2.3 percent, a rate that of theissuanceof aconstruction may approximate growth over the permit by the Nuclear Regulatory ne :t decade.While the Boston 1
Commission.The Commission area is experiencir.g strong eco-has paused in the issuance of con-nomic activity and development struction permits and operat-int: e t, ww projects willinclude inglicenses whileit evaluates considerable emphois on energy the studies and reports on the -
, censervation. Inc!uded un these accident at Three Mile Island.
3rojects are severalallelectric Although the Companyis con-I;uildings.
I ttnuingits efforts to obtain a
12 Identification of the economic The residential sector also ex-sectors which contribute to energy hibits favorable growth prospects.
growth is important to Boston over $340 mtilion ofinvestment Edison. The transition to a service m apartment and condomimum and high technology onented construction is expected through economy has had a stabilizing the next four years. Shipyard Quar-eifect upon Company sales growth ters represents a ten year proi-because such industries are more ect, starting in 1980, to convert recession proof than their manu-the former Charlestown Navy factunng counterparts. They also Yard to mixed residential use.
9%
constitute the Company's grow-Exeter Towers and Devonshire 1 D D " (D
{ 3-ing commercial sector, currently Towers typify development of
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H" accounting for close to one half luxury apartments while Brad-of territory sales. In the past this ford Towers will provide housmg sector has been the least affected for the elderly. Both the Copley by economic downtums and the place project and the Rit: Carlton first to rebound. It has been the Hoteladdition contain housing core of the region's development.
components. While interest is Among maior commercial especially high in Boston's Water-7"""4""#
developments underway and front, Back Bay and South End planned are Lafayette Place, Cop-sections where property values n ~y ley Place, the State Transportation and unit demand have soared, it m
m.
Building and One Post Otfice is evident in the subutbs as well.
m,,, n Square. These alone represent 51oreover, the creation of the m
over $500 million of investment Boston 51artneIndustnal Park and and lead the many proposals for the Crosstown Industrial Park hotels and office buildings, a num-sigmfy important new industrial ber of which will be under con-
- activity, o
struction m 1980. The proposed enlargement of the Hynes Audi-Fm.ancial Accomplishment tonum, currently Boston's largest In 1979, maior financial ains were f"#
convention center, will double achieved. Eamings per share in-n',
the size of that existmg facility.
creased approxunately 19 percent Expansion of area medical facil-to $3.52 trom $2.96 in 1978. Rev-
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ities continues with a $25 million enues advanced to $698 million, ambulatory care unit at 51assachu-an increase of 14 percent. The setts General Hospital, a $40 mil-retum on average common equity lion pediatric wing at Tufts New rose to 11.3 percent, a 17 percent England 51edical Center, a $23 tmprovement and the highest million National Nutrition Center, level since 1971 for this important y
being developed by the U.S. Depart-measure of financial performance.
,d,g ment of Agriculture in coniunc-The Company continues to tion with Tuf ts University, and exhibitoneof the bettercash i
the nearly completed new sub-positions in the industry. Cash
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urban quarters for the Lahey tlow per share in 1979 amounted
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Clinic.
to 59.72, covenng common divi-4 1. - ' -
Relative to education. area dends by over 3.5 times. Corres-vW
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,G M.i f
about $60 million of plant invest-million expended for construction
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ment over the coming four years, dunng the year was generated r h1 y
for additional dormitories, class-from intemal funds, compared d
rooms and otfice space.
with an industry average of ap-
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Substantialdevelopment poten-proximately 36 percent. Despite tialis protected for the high tech-record setting interest rates, the nology tndustry as severalhundred Company's coverage ratio exhi-companies in computers, elec-bited continued improvement, tronics, communications, instru-increastng to 2.53 tunes.
mentation and other fields con-s tinue to experience growth and
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expansion.
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i Significant progress was again tndicated that it was actively con.
The Company received 543.4 achieved in the area of capitali:a-sidenng a change in its conven-million from the issuance of two tmn. Financings undertaken from tional ratemaking methodology million additional snares of com-1977 through 1979 have elimin-in order to alleviate problems as-mon stock in August. In October, ated all intermediate-term debt.
sociated with regulatory lag and the Company privately placed The refunding of a 575 million persistent inflation.
$75 million at Series R,10.959 term note in October completed Overall, the decision represents First Mortgage Bonds and received, a process of convertmg close to a forward step in ratemakmg in in August, S45.5 million as sched-
$200 million in intermediate-tenn the Commonwealth, and the uled delivery of the Senes Q, debt to long term debt. At year Company is optimistic that its 9.759, First Mortgage Bond.5, end, common equity comprised financial needs will be addressed pnvately placed m December 1978.
34 percent of long-term capitali:a-responsibly in the future.
Ikith bond issues were placed at tion. Long-term debt represented The Company has notified the rates lower than those obtainable 52 percent and preferred and pret-Department of its intention to file in the public m.:rket at the times erence equity 14 percent. These on March 17,1980 tor a general of delivery.
percentages reflect the results of retail rate increase. The Depart-In September, a new Dividend a concerted effort to increase the ment may suspend the effective Reinvestment and Common percentage capitali:ation of com-date of the rates for a period of up Stock Purchase plan was msti-mon equity and to reduce the debt to six months and will hold public tuted for Common, Preferred and ratio from a high of 60 percent hearings and investigate the pro-Preference shareholders as well reahred in 1974. Future financings priety of the new rates.
as for eligible employees. Partici-are expected to mamtain the ratios In the Company's external pants in the plan, along with m line with industry averages.
financing activity,1979 was a busy those in a revised Employee Stock in December, the Company's and successful year. The Company Ownership Plan, receive newly Ikurd of Directors increased the negotiated a S500 mdlion revolv-issued shares of common equity quarterly dividend to S.68 per ing credit and tenn loan facility from the Comp:my. In 1979,92,000 share from S.61 per share, the first with an intemational consortium shares were issued by the Cem-increase since 1972. On an annual of maior banks.This credit agree-pany under the plans.
basis the dividend rate would be ment has replaced most of the
$2.72 per share. The increase re-Company's bank lines and is caritah: anon m flected the Company's improved designed to provide a standby canmon financial position, optimism about source at long-term borrowings u u n :s 29 n tqmty the future and an established com-during the Pilgrim Unit 2 coa-Preferred and mitment to retum to shareholders struction period. The agreement i n lln ll"lb6 ll h f rrererence a competitive yield on their in-extends over 12 years. encompass-Eqmty vestment.
ing both the construction of Pil-
- toneTenn in October, the Company grtm Unit 2 and a period after Det received a $20.1 million rate in-project completion for loan repay-crease on an annual basis in a ment.The Company intends to decision on a rate filing submitted issue First Mortgage Bonds and to the Department of Public Utili-other debt securities in the public ties in March 1979.This rate in-and private markets. Should crease represented the first maior market conditions preclude the decision rendered by the Depart-availability of such funds, the ment's new conunissioners and credit agreement could be drawn demonstrated a more responsive upon for long-tenn borrowmgs approach to ratemaking in the Commonwealth. The allowed retum on equity wasincreased to 13.62 percent, and the commis-ston suggested that it may allow an increased retum on equity as "an appropriate means of reward-ing increased einciency and pro-ductivity."The commission also a
8 Management's Discussion and Analysis 4
Management's Discussion and Analysis of Statements of Income i
Kilowarthour sales to our retail customers increased 2.39 in 1979 and 1.74 in 1978, respectively, whde i
territev kilowatthour sales mcreased 2.37 and 1.84 for the same periods. Terntory kdowatthour sales for both yeat; would have been up approximately 2.01 had not 28.00tuxx) kdowatthours been lost due to the February 1978 blizzard.
The following table provides a sunmury of the changes m operating revenues for the years 1979 and 1978.
Increase (Decreasel j
Operating Revenue Changes 1978*
l Electnc Revenues:
tin thousandst Retail Sales:
i Estimated Rate Increases
$24,346 increase m Energy Sold 2.517 i
Subtotal 26,863 l
Sales for Resale 2.574 Total Base Electnc Revenues 29,437 Other Electnc Revenues (39) 1 Fuel and Purchased Power Adiustment Revenues (1,294) f Total Electric Revenues 28,104 Steam Revenues-Including Fuel Adiustment (3.236) i Total
$24.868
- Restated, see Note G In 1979 total fuel and purchased power adjustment revenues and net tuel and purchased power expenses increased $52,357,000 and $62 M3,000, respectively. This compares with.: 1978 decrease m like revenues and expenses of $3,687,000 and $1,803.000. The 1979 increases were due prinurity to the averar.e cost per barrel of oil which was approximately $6.74 greater than the 1978 average of $12.61. In 1978 the average cost 1
per barrel decreased by $0.88.The Company's nuclear facthty, Pilgrun Unit I, operated at 83% and 759, of capacity, dunng 1979 and 1978, respectively, which saved the Company's customers ruel costs of approxi-i mately $139,000.000 in 1979 and $78,000.00l) in 1978, and was the maior cause of the 1978 decrease m fuel
]
revenues and expenses.
Other operating expenses were up $11.677,000 in 1979 and $5.894.0(X) in 1978 primarily due to increases 9
l in labor cors, rents, insurmce, and nuclear power expenses. Maintenance costs mcreased in 1979 due prm-i cipally to the effect of mtlatwn.
I Taxes other than income taxes decreased durmg 1979 as a result of property tax abatements.The 1978 I
mcrease resulted from higher property tax rates and valuations. The effecuve income tax rates for the years J
1979 and 1978 were 42.7% and 46.79, respeenvely. The lower 1979 rate is due, in part, to a decrease in the
[
federal mcome tax rate from 489 to 46%. lSee also note C of notes to financial statements).
J Interest on long-term debt increased because of additiomt sales of long term securities dunng the periods.
The nuclear fuel financing obligarmn commenced in August,1978, thus, the 1979 increase.
l Other interest decreased in 1979 principally as a result of a decrease in the average short-term loans out-standing of approxunately 551,400JXX); this was partially orfset by an mcrease m weighted average interest 4
rates which rose from 9.029 in 1978 to 13.079 in 1979. The 1978 increase was principally due to a 2.74 i '
increase in the average interest rates.
Allowances for Funds Used Dunng Construction increased 58.581AXX) in 1979 and $7,997,000 in 1978 due pnmanly to increased average construction work in progress and an increase in the accrual rate reflecting an increased cost of funds. lSee also note B of notes to financial statements).
3 f
~
Expense Revenue 3404 Fueland Purchased Power Adiustment Taxes !8.14
~
I 24 N9 Gmuncretal Pavmil and Benefits !I 5%
}
lsM Residental Other Expenses 934
((
j 1184 Other Utthries Deprecutum 6M4 764 Industnal Dmdends Dedared 674 394 hecliancous interest and other Charges-Net U4 Retamed m Bustness U%
l 4
il a
.,m n-,.--.n
.-,r--,-.
c----,,,n.-
,-.e,-.-,-
m-p--,,---
17 s--,a e-Years ended Decemher 31.
1978*
1977*
1976*
1975 Operating Revenu-s Electnc
$400,553 $371,116 $349.868 5290,186 Steam 15,439 16.282 17,101 15,925 Fuel and purchased power adiusmient 184,785 188,472 174,454 184.557 Other 12.486 12.525 11.796 10.454 Total Operating Revenue 613.263 588,395 553.219 501.122 Operating Expenses:
Operation:
Fuelinote A) 219,840 206,583 189.668 173,049 Purchased power (note Al (1.7101 13.350 16 855 28.873 218,130 219.933 206,523 201,922 Other 97,300 91.406 83.972 73.359 Total Operation Expense 315.430 311,339 290,495 275,281 Maintenance 32.812 33.659 31,875 25.090 Deprectation inote A) 45,936 44,814 42,815 38,324 Taxes other than income taxes 82.931 79,781 71,288 60,136 Provisions for income taxes (notes A and H):
Current 11,739 3,969 2.048 1,153 Deferred 24.486 18,827 13.032 24,916 Investment tax credit-Net { note Al 7,470 12.004 16.362 13121 Total Operatmg Expenses 520.804 504.393 467.915 424.588 Operating Income 92,459 84,002 85.304 76,;34 Other Income:
Allowance for othet funds used during construction (note B) 4.266 236 4,651 6.494 Other-Net (1611 9941 179 70 Operating and Other Income 96,564 83.744 90.134 83.098 Interest Charges:
Interest on long term debt 48,119 47,595 47,413 45,376 Nuclear fuel fuuncmg obligation (note D) 1,702 Other 10,110 7,381 7,484 9,660 Allowance for borrowed funds used duttng construction-credit (note B)
~
(12,798) 18.8311 (3.805) l3.314) 1 Total 47,133 46.145 51.092 49.722 Net income 49,431 37,599 39,042 33,376 Preterred dividends provided 5,512 5,512 5,512 5.512 j'
Balance Available for Common Suick
$ 34.139 $ 22.307 5 25.168 $ 23.361 Preterence dividends provided 9,780 9.780 8.362 4.503 i
i Conunon Shares Outstanding iwetghted average)
I1,535 10,852 9.535 9,535 Eamings per Share of Common Stock
$2.96
$2.06
$2.64
$2.45 The notes on pages 20 through 28 are an integral part of the financial statements.
Management's Discussion and Analysis of Statements of Income is on page 16.
- Restated, we note G.
}
t
-,.. ~,,,, - - - - -
18
-sa.
December 31,1978*
Assets Property, Plant and Equipment, at original cost (notes A, C, and L)
Utility plant m service:
Electric plant 51,459,340 Steam heatmg service plant 46.269 1,505.609 Less: Accumulated depreciation 367.926 S1,137.683 Nuclear fuelinote DI 84.127 Less: Accumulated amortization 45.663 38,464 Nonutility property 927 Less: Accumulated depreciation 28 899 Construction work m progress (note C) 169,960 1,347,006 investments in Nuclear Electric Companies, at equity 6,498 Current Assets:
Cash 15,327 Accounts receivable:
Customers 88,278 Other 4.110 Matenals and supplies, at average cost (note C) 27,077 Prepaid expenses and other current assets 967 135,759 Deferred Debits (notes A. C and G) 53,483 S1,542,746 Liabilities and Capital Common Stock par value S 10 per share (note F):
Shares authonzed 1/,534,500 Sha,es outstand : 13.626.439
$115,345 Premium on Cor,uon Stock (note FJ 129,812 Retained Earnings 111,497 Surplus Invested in Plant 405 Capital Stock Expense-net (426) $ 356.633 Cumulative Preferred Stock, par value 5100 per share, authorized, issued and outstandung (note F):
4.25% Senes-180.000 shares 18.000 4.78% Senes-250,0(X) shares 25.000 8.88% Series-400,000 shares 40,000 Capital Stock Expense-net (28) 82.972 Cumulative Preference Stock, par value $1 per share, author-iced 8,000,000 shares, issued and outstanding (note F):
Non-Redeemable Series-
$1.46 Series-2,675,000 shares 2.675 Premium on $1.46 Senes 35,658 Capital Stock Expense-net (146) 38,187 Redeemable Series:
$1.175 Series-5.000,000 shares 5,000 Premium on S1.175 Series 41,650 Capital Stock Expen,e-net (193) 46.457 Long-Term Debt (note C):
First mortgage bonds 541.680 Secured notes 19.720 561.400 Nuclear Fuel Financing Obligation (note D) 43,789 Current Liabilities:
Long-term debt due within one year 91,148 Notes payable to banks (note El 52,180 Accounts payable 43,738 Customerdeposits 4,493 Taxesaccrued (note H) 6,212 Interest accrued z.531 Dividends declared 8,412 Other current liabilities 2.220 218.034 Deferred Credits:
Accumulated deferred income taxes (notes A an.J H) 150,402 Accumulated deferred investment tax credit (notes A and H) 41,509 l'namorti:ed premium on debt, less expense (note C) 369 Other 2,994 195.274 51.542.746
- Restated, see note G.
The notes on pages 20 through 28 are an uaegral part of the financial statements.
~
-i s -, e, - a,
,, - o,c n,,,,,
. 19 Years ended December 31, 1978 1977 1976*
1975 Statements of Snurces of Construction Iunds fonds Generated intemally:
Net Income
$ 49,431 5 37,599 5 39,042 S 33,376 Add-Amounts charged (credited) not requinng funds currently:
Depreciation 46,015 44,904 42,8 4 38,452 Deferred income taxes (note H) 24,486 18,827 12,937 24,699 Amortir.ation oi nuclear fuel 11,618 4,136 5,118 4,515 Invet.ent tax credit-net 7,470 12,004 16,362 (312)
Allowace for funds used dunng construction (17,0641
-(9.0671 l8,456)
(l1,808)
Total from operations 121,956 108,403 107,867 88,922 Less-Preferred dividends declared 5,512 5,512 5,512 5,512 Less-Preference dividends declared 9,780 9,780 8.037 4,020 Less-Common dtvidends declared 28,144 26,924 23.264 23,264 Funds generated intemally -
78.520 66.187 71,054 36.126 Funds Obtained from Outside Sources:
Sale of Secunties:
Common Stock 51,560 Preference Stock 38,333 46,650 First Mortgage Bonds 49,500 60,000 Less-Sinking Fund & other retirements (150)
(358)
(175)
(200)
Decrease in term notes payable to banks (60,000)
Sale (redemption)of Secured Notes (1,640) 23,000 Increase (decrease) in notes payai)le to banks 156,500) 14,000 (12,500) (12,320)
Proceeds from Nuclear Fuel Financmg Obligation 43,789 Funds obtained fror,a $tside sources 34,999 65,202 25.658 57,130 Other Funds Pmvided iUsee,:
Deferred fuelcosts 11,030
{l1,743) 798 12,1981 Working Capitaland other changes (6.3941 (10,9581 7,203 (124) 4,636 (22,701) 8,001 12,322)
Total funds provided S118,155 $108,688 5104,713 5110.934 i
Construction Expenditures:
Plant I*2,102 109,727 86,507 94,131 Nuclear Fuel 6.053 (1,0391 18,206 16,803 Total construction expenditures SI18.155 5108,688 S104,713 S110.934 Statements of Retained Eamings Balance at beginmng of year:
As previously repcaed
$106 a85 5111,102 S107,890 $107,310 Cumulative adjusunent to reflect refunds to certain cusa viers (note G1 19 M 1 i983)
As restated 105,502 110,119 107,890 107,310 Netincome ~
49,431 37,599 39,042 33.376 154,933 147,718 146,932 140,686 Cash Dtvidends Declared:
Preferred 5,512 5,512 5,512 5,512 Preference 9,780 9,780 8,037 4,020 Common 28,144 26.924 23,264 23,264 43,436 42,216 36.813 32.796 Balance at end of year S111,497 $105.502 S110,119 $107,890 The notes on pages 20 through 28 are an integral part of the financial statements.
- Restated seeNoteG.
1 i
s The cost of nuclear fuelis
- 5. Pensions amortized to fuelexpense based on The Company's policyis to fund engmeenng estimates of usage.
pension costs accrued; pension The Company is subject to regu-melear fuelcost does not melude expense for the yearconsists of lation by various agencies. Because salvage value and reprocessing normalcost plus 10% amortization of the effect in regulated businesses c sts, since the Massachuscus of uuualpnor serme costs (see of dierate-makingprocess,diffu Departmentof PublicUtilities note I).
ences may arise in the application (MDPU)has not allowed estunates of generally accepted accounting f these items to be used in the pnnciples as between regulated determination of current fuel ad-and nonregulated businesses. Such justment charges.
Under the rate-making process, differences are related principally to the time at which variousitems
- 2. Capitalization of the amounts recorded as Allow-enterinto the determination of Costs During Construction ance for Funds Used DuringCon-net incomein accordance with the in accordance with regulatory struction(AFUDClare not realized principle of matching costs and accounting, the Company capital-in cash currently but will be re-i:es as part of construction costs covered over the servicelife of
- revenues, certain generaland administrative plant in the form ofincreased rev-
- 1. Depreciation and Amortization c sts, and also capitalizes and m-enue collected as a result of higher Physical property is depreciated cludes in income an allowance for depreciation expense.
on a straight-line basis at ap roxi-funds used during construction Commencmg m 1977, pursuant mately3.18% annually. At t e time (see note B).
to Order #561 issued by the Federal of retirement of property units, Energy Regulatory Commission their cost and the cost of removal
- 3. Deferred Debits are charged to and salvage is cred-The Company defers unbilled fuel (FERC), the Company changed its ited to accumulated depreciation.
and purchased power costs, and method fordeterminmg the rate Maintenance expenseis charged certain other costs deemed recov.
used in computing AFUDC. In for the cost of current repairs, re-erable in rates, accordance with the Order, the AFUDC rates for the years 1977, placement of items not accounted
- 4. IncomeTaxes 8 and M werM, M and for as units of property, and minor Deferred income tax expense re-bette ents of plant d proper-sults from timingdifferencesin the Ilhd thomeofformal tn ties as ey areincu recognition of certam expenses for mie-making proceedings, the tax and financial statement pur-AUJPU has not allowed the Order poses.The maior components of
- 561 method nordid it allow the deferredincome tax expense are additionaldeferred income taxes summan:ed in note H.
resulting from that method to be Investment tax credits are included in the cost of service. Had reflected in income over the esti-the Company used the methodin mated u:,efullives of the related effect prior to Order #561,1977 net property.
income would have beeniraased by approximately $.20 per common share; 1978 netincomewould not have been maurially changed;and 1979 netincome would have been decreased by approximately S.19 per common share.
First Mortgage Bonds Substantially all property, plant and equipment and materials and supplies owned by theCompany are subject tolien under the terms of theIndenture of Trust and First
)
Mortgage dated December 1,1940, and supplements thereto, l
4
\\
l Senes Rate Maturity 1979 1978 (in thousands)
O 12 %
Aug.15,1979(1) 5 $ 60,000 B
21 Apr. 1,1980 13,663 13,688 D
in July 1,1982 15,000 15,000 E
3 Aug. 1,1984 18,000 18,000 F
4%
June 1,1987 25,000 25,000 H
4%
lune 1,1992 15,000 15,000 I
4%
Nov. 1,1995 25,000 25,000 J
6%
June 1,1997 40,000 40,000 K
6%
Nov. 1,1998 50,000 50,000 L
9 Dec. 1,1999 50,000 50,000 M
9%
July 1,2000 60,000 60.000 N
8%
May 15,2001 75.000 75,000 Q
9%
Dec.15,2003(11 95,000 49,500 R
10.95 Oct. 31,2004(2) 75,000 P 9%
Apr.15, 2007 60.000 60.000 Total First Mortgage Bonds 616,663 556.188 Other Long-Term Debt:
Term Note Payable to Bank, maturing on October 31,1979 (21 75,000 Secured Notes, due November 15,1985, with mterest at 11%% {31 19,720 21.360 Total Long-term Debt 636,383 652,548 Less: Long-term Debt due within one year 15,3C3 91.148 Long term Debt-Net S621.080 5561,400 (1)On August 15,1979 the Com-fund payments of $1,875,000 in the pany received $45,500,000 from a years 1984 through1990, $3,000,000 group ofinstitutionalinvestors as in the years 1991 through 1996 part of the December 1978 sale of and $5,475,000 in the years 1997
$95,000,000 principal amount of through 2003.
First Mortgage Bonds, Series Q, (3)The notes are secured by five gas 9%%, due '2003.The proceeds from turbine facilities and have annual the August delivery wen applied prepayment requirements of to the payment of the Company's
$1,640,000 through November First Mortgage Bonds, Series 0, 15,1984.
12%%, due August 15,1979.
Theaggregate principalamounts (2)The Companyissued $75,000,000 oflong tenn debt duein the five aggregate principalamount of years 1980 through 1984 are First Mortgage Bonds, Series R,
$15,303,000, $1,640,000, $16,640,-
I 10.95%, due 2004 pursuant to 000,54,015,000, and $23,890,000, Bond Purchase Agreements dated respectively.
October 31,1979 with institutional The uaanortired premium on investors.The proceeds were used the Company's outstanding debt, to refund the outstandingTerm less expense ofissue,is being Note Payable to Bank, due Octo-amortned ratably to the maturities ber 31,1979. Under the agreement of the respectivedebt.
the bonds are redeemable at prices declining from $110.95 at the present time to 100.00% of par valuein the year 2004 and may not be refunded prior to October 31,
. 1989 withindebtedness havinga shorterlife to maturityora lower interest rate.The Company will be required to makeannualsinkmg i
e
..-.n
.7n
a verted willbe repayablein four equal annualinstallments begin-nmg ne year after the earlier of Under the tenns of an agreement conintencenient of conunercial with PmLease,Inc., the Company peration of Unit No. 2 or July 31, is able to finance from time to time 1987. Borrowtngs under the revolv-the acquisition costs of nuci.
ing credit facility bearinterest at fuel up to a maximum amou-if 104% of the prime rate with no com-
$50,000,000 at any one time out-pensating balme requirement.
standing. Principal is paid uarterly The Companyis obligated to pay on the basis of nuclear fuel umup.
comnunnent fees of % of 1% per Interest, at a rate equal to Pru-annum of the unused portion of Lease's ninety-day commercial the revolving credit facility and %
paper rate plus 1%%,is payable of 1% per annum of the unused por-g ti n f the termloan facility. At 1 rul. ase has a secured interest December 31,1979, bonowtngs in the assets financed by the agree.
under the revolvingcredit facility ment which is subordinate to the anmunted to $50,000,000.
lienof theindenturesecuringthe At December 31,1979, the Com-Company's First Mortgage Bonds.
pany also has lines of credit with At December 31,1979 the interest a number of banks totaling rate was 15%%'
S25,000,000, the terms of which provide for borrowings at the prime On July 31,1979, the Company rate with no compensating balance entered into a credit agreement requirentents.
providing for The weighted averageinterest with a bankinggroufving credit rate on outstanding short-tenn a 5500,000,000 revo and term loan facility designed to borrowings was I!.46'7c at Decem-ber31,1978 and 15.70% at De-replacemostof theCompany's cember 31,1979. The maximum short-tenn bank lines and to pro, am unts of short-term borrowings vide a standby source of long-term utstanding were $124,180,000 borrowings for the Company',
in 1978 and $69,180,000 in 1979.
constmetion program through the commencement of commercial Amage short-term borrowings operation of Pilgrim Unit No. 2 or utstandingand related average July 31,1987, whichever is earlier.
interest rates dunng the years 1978 and 1979 were $101,860,000 at Catstanding borrowings under the revolving credit facility (up to 9.02% and $50.453,000 at 13.07%,
$125,000,000) on that date can be respectively.The average amounts converted into a term loan at the utstanding and the average in-terest rates are based on daily option of the Company. Borrowings weighted averages, but without under the term loan facility (up to
$375,000,000) and any portion of c nsidering the effect of compen-sating balance requ rements m the revolving credit facility so con-ettect during such penods.
- 1. Common Stock:
On May 4,1977, the Company sold 2,000,000 shares of common stock for $51,560,000 of which $20,000,00 was credited to common stock at par value and $31,560,000 was cred-ited to premium on common stock.
The Company issued 2,000,000 shares of common stock, $10 par value on August 7,1979 and issued shares periodically pursuant to its Dividend Reinvestment and Com-mon Stock Purchase Plan and Employee Stock Ownership Plan.
i Number Common In 1976, the Company began of Shares Stock Premium billmg to wholesale customers e er e costs Balance at December 31,1978 11,534,500
$115,345,000
$129,811,669 overa twentWourmonth period New issue on August 7,1979 2,000,000 20,000,000 23,410,000 On May 3,1979, FERC ruled that Davidend Reinvestment Plan (a) 42,739 427,390 428,186 Employee Stock Ownership Plan (a) 49,200 492.000 506.760 the Company was not entitled to h Compan ma e Balance at December 31,1979 13.626,439
$136.264.390
$154.156.615 ds p d theg g
{
(a)The remaming authonzed shares reserved for future issuance are: Dividend appeal to the First Circuit Court of Remvestment Plan 457,261, Employee Stock Ownership Plan 250,800.
Appeals which was subsequently
- 2. Cumulative Preferred Stock:
denied. Accordingly, the years 1976 through 1978 have been re-Series Current Redemption Pnce stated to record the refunds. The 4.25% (1)
S103.625 per Share effectof therestatementwasto 4.78% (1)
$102.80 perShare reduce net income by $983,000 8.88% (1)
$107.00 per Share
($.10 per share) for the year 1976.
(1) Upon involuntary liquidation of the Company, holders will be entitled to In addition, with no effect on net receive $100 per share.
income, fueland purchased power
- 3. Cumulative Redeemable Preferenca Stock:
adjustment retenues and fuel expense were each reduced by S*"#5'
$767,000, $982,000 and $175,000,
$ 1.175 (issued March 19,1975) (2) (3)
Not Redeemable Pnor respectively, for the years 1976, to March 1,1980 1977 and 1978.
(2) Prior to April 1,1980, the Company is required to offer to purchase, on May 1,
- 3. Litigation 1980, 200,000 shares of the $1.175 Series lless any shares purchased prior to the The Companyis a defendant m date of the offerl at pnces not to exceed $10 per share plus dividends accrued.
antitrust suits brought by the
- 4. Cumulative Non Mandatory Redeemable Preference Stock:
Town of Norwood in 1974 and the Towns of Concord andWellesley Senes:
in 1976.The plaintiffs claim treble
$1.46 (issued May 12,1976)(3)
Redeemable at the option of damages totaling $69,000,000 the Company after May 1,1981 based on their dealings with the (3) Subject to the prior preferential rights of the Cumulative Preferred Stockhold-Company as wholesale purchasers f electnc power.
ers, upon involuntary liquidation of the Comhmy, holders of the $1.175 and S1.46 Hernck & Smith, special coun-Senes are entitled to receive $10 and $15 per s are, respectively.
sel to the Company, have stated that they cannot predict the out-which are designed toincrease come of theselawsuits, since they revenues approximately $1,000,000 cannot be certain what facts might
- 1. Capital Commitments annually, are being contested by be foundin a trialor how some At December 31,1979, contractual certain wholesale customers.
legalissues might be resolved, but Based on a settlement offer made that in the pretrialproceedings to obligations for plant and equipment were approximately $197,000,000.
to these customers, the Company date, nothing has come to their Of thisamount$79,000,000was has provided $284,000 for esti-attention indicating to them that for Unit No. 2 at Pilgrim Station of mated revenue refunds for the the plaintiffs' claims have merit.
which $32,000,000 is to be bome period April 30,1979 through by the other joint owners of Unit December 31,1979. In addition, No. 2. As of December 31,1979 the the Company has provided for Company's portion of construction estimated revenue refundsin con-l expenditeres for Unit No. 2 in-nection with wholesale rate in-cludedin construction work m creases for the period Tanuary 1, progress totaled $181,000,000, 1973 through April 29,1979.
including $41,000,000of AFUDC.
2 Rate Proceedings Infonnation regarding certain pending rate proceedings at De-cember31,1979 was as follows:
Effective April 30,1979 the Com-pany increased its rates to its whole-sale electric utility customers subject to finalapprovalby FERC and possible refund.The new rates
- 4. Lease Commitments Total Capital Lesses At December 31,1978 and 1979, (in thousands) the Company hadleases covering 1980 s10,100
$ 7,100 certain facilities and equipment.
1981 11,500 8,000 Someof theseleasesare" capital 1982 10,000 7,200 leases,"as defined by the Financial 1983 9,500 6,000 AccountingStandards Board.Under 1984 10,000 5,500 regulatory accounting, leases are 1985-1989 30,400 22.100 not capitalized.
1990-1994 23,700 14,700 Had alloperatingleases which 1995 1999 19,900 10,900 meet the enteria for capitalleases.
2000 and subsequent 17,100 15,300 been capitali:ed, the amounts of A portion of the aforementioned rentals may be capitalized as part of construction i
the asset and theliability that costs in the future.
would have beenincluded in the Information with respect to rentals from 1975 through 1979 is as followv balance sheets for the years ended Capitalized December 31,1978 and 1979 and Portion Related As Part of the effect on expenses would be Rent Expense
- to Capital Leases
- Constmction Costs inunaterial.
1979
$8,600
$6,000
$1,600 Estimated minimum rental 1978 7,500 -
5,300 1,900 commitments under noncancel-1977 8,700 6,400 1,700 lable leases and the amounts ap-1976 5,600 3,800 1,500 plicable to capitalleases for years.
1975 4.800 3.200 1.100 subsequent to 1979 are as follows:
. Excludes rentals capitalized as part of.onstruction costs.
Components of deferred income tax expense are as follows:
1979 1978 1977 1976 1975 (in thousands) l Excess tax depreciation 1
over book depreciation
$19,042 $19,387* 5 5,337 $ 4,863 5 9,399 I
Deferred fuel expense 9,012 (4,950) 5,270 (358) 5,580 l
Capitalized property taxes 115 60 1,887 i
Deferred interest expense (3,780) 1,108 158 105 1,652 J
Debtportionof allowance i
for funds used during construction (note B) 6,994 5.744 3,964 1,708 3,067 Contested property taxes 380 1,299 i
Otherindirect constmetion 1
costs 1,290 1,386 1,225 1,432 Massachusetts corporate franchise tax 4,770 1,152 2,382 1,512 2,139 j
Abandonment loss 1,471 Other (1.9531 1,985 330 1,865 - (1,721) l
'Ibtal
$35.490 $24.486 S18,827 $ 12,771 524.734 "In computm' g the 1978 income tax liability, the Company used a method of depreciation different than that subsequently used when filing its 1978 tax re-tums. As a result, $15,384,000 has been reclassified from the current to the de-ferred provision for 1978 income taxes in the accompanying financial statements.
i
t 8
i
'The effective income tax rates reflected in the financial statements and It is the Company's opinion that the reasons for their differences from the statutory Federalincome tax the quarterly financialdata has rate are explained below; been prepared by theapplicationof consisynt accounting practices 1979 1978 1977 1976 1975 and pohcies and reflect alladjust-Statttory rate 46 %
- 48%
48 %
48 %
48 %
ments necessary for a fair presen-Allowance for other funds tationof thequarterly tratiltsof used during constmction pgti ns.
(note B)
(4.11 (2.21
(.21 (3.11 (5.3)
Massachusetts corporate quarter eamings are primarily due franchise tax 3.2 3.2 3.3 3.1 3.2 Othe-(2.41 (2.3)
(3.71 (3.4) t2.5) to the effect of a summer rate surcharge.
Effective Rate 42.74 46.7 %
47.4%
44.6 %
43.4 %
Federal income tax retums through 1973 have been examined and closed.
The Company has a noncontributory funded pian (with voluntary con-The Companyhas recently ex-tributory features) covering substantially all employees. Pension accruals panded its fuel storage facilities at and the portion added to construction costs were as follows:
the Pilgrim site toinclude suffi-cient capability for spent fuel 1979 1978 1977 1976 1975 through approximately the year (in thousands) 1990.Since thereis no domestic Totalaccrued
$8,057
$7,808 57,406
$6,389
$5,974 facility in operation to reprocess Added to construc-spentnuclear fuelat the present tion costs 1,728 1,810 1,841 1.659 1,542 time, the Company's spent nuclear Untunded prior service costs as of December 31,1978 and 1979 were fuelassemblies might require in-4
$11,000,000 and $7,900,000, respectively.
definite storage.No provision has The plan's asset and benefit information at the most recent actuarial beenmade for this cost ofindefi-valuation date, January 1,1979, was as follows (in thousands):
nite storage; however, attemative Actuarial present value of accumulated benefits:
methods are currently being eval-uated for reasonableness.Once the Vested S 92,100 Companyis satisfied as to a rea-Nonvested 4.100 sonable method of approach, the S 96,200 appropriate regulatory authorities Net assets available for benefits
$117,600 will be petitioned forapproval.
The depreciation rate for Pilgrim Unit No. Idoes not include pro-vision for cost of decommissioning j
the unit at the end ofits useful Net Eamings life, however, such costs will be Income Per includedin the depreciation rate 4
Available Share once they can be reasonably de-termined by tb-Company and Operating Op ing Nec Co on Co on approved by the appropnate regu-Quarter Revenues Income Income Stock
- Stock, latoryauthorities.
The Company also participates First S159,995
$22,898
$11,808
$ 7,995
$0.69 as an investopn two oser nuclear Second 155,398 22.261 11,980 8,144 0.71 units.Both or these units have Third 200,510 28,514 20,337 16,498 1.28 Fourth" 132,099 24,911 14,734 10,930 0.81 begun to recoveras part of their wholesale rates a provision for 1978 "
- estimated permanent storage costs, First
$164,768
$18,117 5 7,149,
S 3,336
$0.29 while one of the unitsis condi-ti nallyincluding a decommission-i 1
2 in$ provision subiect to possible Fourth 147,541 23,195 12.859 9,055 0.79 retund by FERC mandate.
- Based on quarterly weighted average number of shares.
"As a result of a recent rate order, fourth quarter camings reflect an adjustment in property taxes and nuclear operating expense which decreased fourth quarter camings per common share by 50.18, of which $0.05 was applicable to each of the first three quarters.
- " Operating Revenues restated, see note G-2.
i
1 4
i F
Tb the Stockholders and Directors of Boston Edison Company The following supplementaryin f nnati nissuppliedinaccordance-
- 1. Joint-Owned Electric Plants We have examined the balance.
+
with the requirements of the State-The Company ow M59.026% of sheets of Boston Edison Company.
ment irsanciaMcwuming the Unit No. 2 nuclear facility to be at December 31 1979 and 1978 and.
Standards No.33 for the purpose of constructed at Pilgrim Station the related statements ofinccine
' (see note G 1). In addition, the retained earnings and sources of '
providing certain information about die e#ect f changing pncesJr Companyis a joint owner of Yar-construction funds for each of the should be viewed as an estimate of i
mouth Unit e4, which was con-
'structed by Central Maine Power -
five bears in the period ended De-tlle appmxunate e#e,ct of inflation, cem r31 1979.Our examinations radier dian as a precise measure.
Company and commenced opera-were made in accordance with 8en-Constant dolly amounts repre-tions in 1979, included in the ac-11 d
datd sent historical costs stated in terms companying balance sheetsis the
'fd acco a
y clu ed ch tes s fdollarsof equalpurchasingpower.
Company's proportionate share of the accountuig records and such. as measured by The Consumers (5.888%)of plant in service of ther auditing procedures as PriceIndex forallUrban Consumers '
$10,684,000 and $11,799,000 for we wnsidered necessaryin the (CPI-U). Current cost amounts re-1978 and 1979, respectively, and
- 2'"* 8'#"C#8-flect the changesin specific prices accumulated depreciation of in ur pini n, the financial -
of plant from the date the plant was
$32,000 and $401,000 for 1978 and statements referred to above pre-acquired to the present, and differ 1979, res crively.The Company's share of Nrect expenses of Yar-sent fairly the financial position of from constant dollar amounts to Boston Edison Company at Decem-the extent that specific prices have mouth Unit #4 were $1,000,000 in ber31,1979 and 1978 and the re-nereasedmoreorlessrapidlythan 1979 and were charged R operating sults ofits operations and sources the generalrate ofinflation.The
- expenses, of construction funds for each of arrem mstof plantisdetermined
' 2. Iong-Term Contracts for the the five yearsin the period ended primarily byindexing surviving.
j Purchase of Electricity December 31,1978 in conformity plant by the Handy-Whitman i
The Company has fivelong-term with generally accepted account-contracts for the purchase of elec-ing principles applied on a con-Index of Publ,ic Utility Construc-tion Costs. Smce the utility plant tric power.The totalannualcosts sistent basis-under these contracts areincluded ts not expected to be replaced pre-with purchased power expensein y
ciselyin kind, current cost does not necessarily represent the re-the Company's Statements of In.
Boston, Massachusetts placementcostof theCompany's 4
come.The contracts arelisted January 24,1980 productive capacity.
below:
Boston Edison's 1979 Proportionate Share Contract 4 Unit (s)
Interest Portion Generating Expiration Capacity Total Minimum of Minimum Debt Unit Date Purchased Expense (c)
Debt Service Debt Service Outstanding i
(in thousands)
CanalUni: #1 2001 25.0(a)
$ 4,084 5 670
. $ 394 5 4,650 4
Coleson CoveUnits (d) 1986 9.7 3,766 2,527 2,449 497(b) l Connecticut Yankee Atomic 1998 9.5 4,729 743 506 5,894 PotterUnit #2 1984 38.33(e) 1,288 1,000 527.
1,383(b)
Yankee Atomic 1991 9.5 1.829 301 181 950 Total 515,696 55,241
$4.058 513.374 (a) Represents 4.99% of the Company's installed net capability; the remaining four units aggregate 5.7%
(bl uese contracts do not extend for the life of the unit, however, the amount represents the estunated debt payments through the contract expiration dates (c) Exclud fuelcosts (d) Expres in United Statesdollars (el Composite 4 for 1979, declines annually
[
m
.c
....a.
f Fuelinventories and the cost offset by the gain from the decline tion on this plant islimited to the of fossil fuelused in generation, inpurchasingpowerofnetamounts recovery of historical costs, the han oot been restated from their owed.During the period of infla-Company does not have the op-histc.ical cost in nominal dollars.
tion, holders of monetaryassets portunity to rea;izea holdinggain Regulationlimits the recovery of suffer aloss of generalpurchasing on debt and is limited to recovery fuel through the operation of ad-power while holders of monetary onlyof theembeddedcostof justment clauses or adjustments liabilities experience a gain.The
. debt capital.
in basic rate schedules to actual gain from the decline in purchasing The erosion of stockholders'
~
costs. For this reason fuelinven-power of net amounts owed is pn-equitydue to changing prices may
~
tories are effectively monetary assets.
marily attributable to the sub-be summarized eitherin terms of stantialamount of debt which has generalinflation orin terms of Depreciationis determined been used to finance property, plant, changesin specific prices,as by app ing the Company's com-and equipment. Since the deprecia-follows:
posite reciation rate to the indexed lantamounts.
stated in average 1979 dollars Since only historicalcostsare in terms of In terms of deductible forincome tax purposes, General Specific Changes the income tax expense in the his.
Intlation in Pnces toricalcost financialstatements (in thousands) is not adjusted.
Increase in provision for:
Under rate-making prescribed Depreciation S 36,931
$ 43,273 Amoru.zauon 4,150 15,062 by the regulatory commissions to which theCompanyis subiect,only Increase in Specinc pnces, (370,1121 less general pnce levelincrease 317,540 the historical cost of plant is recov-Wnte-down in plant because only historical etable in revenues as depreciation.
cost depreciation is specifically recoverable Therefore, the excess of the cost in utility rates 140,854 176,172 of plant statedin tenns of constant Cain from decline in purchasing power of net dollars or current cost that exceed amounts owed (115,4281 (115,4281 the historic cost of plant is not pres-Total erosion of stockholders' equity because ently recoverable in rates as deprec1' ofintiation
$ 66.507 s 66.507 atton, and is reflected as a reduction to net recoverable cost.While the rate-making process gives no recog-nition to the current cost of re-placing property, plant, and equip-ment, based on past practices the Company believesit willbeallowed to eam on theincreased cost of its net investment when replacement of facilities actually occurs.
To properly reflect the economics of rate regulation in the Statement -
ofIncome from ContinuingOpera-tions, the reduction of net property, plant, and equipment should be 4
k 2
1 l
l i
SEement of Income from Continuing Operations Adrusted for Changmg Prices For the Year Ended December 31,1979 (In housands)
Constant Dollar Current Cost Conventional Average 1979 Average 1975 Historic Cost Dollars Dollars Revenues
$698.002 3698.002 5698.002 Expenses:
Operation and maintenance, exduding nuclear fuel amortization 412,060 412.060 412,060 Nuclear fuel amortization 13,786 17,936 28,848 Depreciation 47,407 84,338 90,680 Taxes other than income taxes 81,712 81,712 81,712 Income taxes 44,453 44,453 44,453 Interest charges 49,009 49,009 49,009 Other income l9,284)
(9,284)
(9 ? 8 41 Total Expenses
$639,143
$680,224
$697,478 Income from operations excluding reduction to net recoverable amount
$ 58.859
$ 17,778*
S 524 Increase in specific pnces (current cost) of plant held dunng the year" S370,112 Reduction to net recoverable an.ount 5(140,854)
(176,172)
Effect of increase in general pri<,e level (317,540)
$(123,600)
Net _
Cam from decline in purchasing power of net amounts owed 115,428 115,428 5 (25.426)
S (8,172)
~
' Including the reduction to net recoverable cost, the loss from continuing operations on a constant dollar basis would have been 5123,076.
" At December 31,1979, c'irrent cost of property, plant and equipment, net of accumulated depreciation, was 52,622,082, while histoncal cost or net cost recoverable through depreciation was $1,417,685.
Five Year Comparison of Selected Supplementar cinancial Data Adiusted for Effects of Changmg Pnces lIn Housands of Average 1979 Dollars)
Years Ended December 31, 1975 1976 1977 1978 1979 Operating revenues
$676.465 $706,046 5705,426 $682,938 $698,002 IIistorical cost information adjusted for generalin'lation income from continuing operations (excluding reduction to net recoverable cost)
$17,778 Income per common share (after dividend requirements on preferred stock)
$0.2C Net assets at year end at net recoverable cost
$503,34(
Current cost information income from ccentinuing operations (excluding reduccion to net recoverable cost)
$524 Less per common share (after dividend requirements on preferred stock)
S(l.19 Excess of increase in general pnce level over increase in specific prices after reduction to net recoverable cost
$(123,600 Net assets at year end at net recoverable cost
$503,346 Generalinformation Cam from decline in purchasing power of net amounts owed
$ 115,428 Cash dividends declared per common share
$3.29 53.11
$2.93
$2.72
$2.51 Market pnce per common share at year end
$31.00
$34.94
$30.87
$26.59
$12.0(
Average consumer pnce index 161.2 170.5 181.5 195.4 217.6
29 scucs on,sn 1978 1977 1976 1975 1974 Capability-MW:
New Boston Station 760 760 7(4) 760 760 Pilgnm Station 670 670 670 670 670 Mystic Station 1.026 1,020 1,047 1,056 633 Edgar Station 297 294 194 294 L Street Station 48 48 43 46 46 Yarmouth Umt #4 35 Cas Ibrbines 267 237 234 232 232 Total 2,806 3,032 3,048 3,058 2,635 Contract Purchases 317 261 216 315 394 Contract Sales (3291 (323)
(3131 (453)
(4971 Net Capability at Year-end 2,79a 2.970 2,951 2,920 2,532 Net Capability at Peak 2,716 2,980 2,926 2,905 2,606 Capability Responsibility to NEPOOL at Peak 2,462 2,895 2,765 2,631 2,585 Edison Territory Hourly Peak-MW 2WI 2,013 1,970 1,933 1,891 Edison Territory Load Factor 57.7 %
57.2 4 58.7 %
57.9%
59.7 %
Generating Station Economy-BTU per Net kWh Generated 10,149 10,190 10,290 10.250 10,363 Average Cost of Fuel-Cents per Million BTU:
Fossil 204.20 218.28 188.68 200.92 196.15 Nuclear 25.61 14.77 19.72 16.41 21.49 Composite 142.57 168.89 149.16 150.97 159.13 Capability inet kW):
Fossil 80 %
81%
81 %
80 %
77 %
Nuclear 20 %
19 %
19 4 20 %
23 4 Generation (net kWh):
Fossil 68 %
78 %
78 %
77 %
79 4 Nuclear 32%
22 4 224 23 %
21%
Plant Investment (000):
Additions tgross)
$126,625
$118,075
$ 9F,552 5105,534
$114,352 Retirements 64,869 11,475 12,888 26,760 16,210 Accumulated Depreciation 367,954 387,614 354,577 322,454 305,630 Amount of Depreciable Plant 1,467,975 1,441,653 1,386,772 1,312,886 1,124,990 Total Plent Investment 1,676,496 1,614,740 1,508,140 1,425,476 1,346,702 Per Average Customer (dollars) 3,053 2,9 M 2,777 2,627 2,489 Per Average Employee Idollars) 433,764 405,408 377,318 356,191 326,949 Per $1 Base Operatmg Revenue (dollars) 3.91 4.04 3.98 4.50 4.81 Electric Plant in Service per Edison Tkrritory Hourly Peak (dollars per kW) 719 709 693 673 587 Numberof Employees at Year-end 3,837 3,921 3,999 3,972 4/>t2 l
1
_4 D STD TD ^flh g(J
' y 6ju Ub b
Mrs.Nomun L Cahners Dusteet Frank L Farwell nomas I. Galligan, Jr.
Chairman af the Board.
Chairman and Chiei Executive Officer i
L2bertyMutualinsurance Companyt*
Francis M. Stas:esky L
Thomas j. Calligan, Ir.
President and Chief Operatmg Ofticer Chairman and Chset Executive Othcer.
loseph P.TVtrell Boston Edison Company
- Semor Vice President Kenneth I. Cuscott fames M. Lydon President. Ken Guscott Associates Semor Vice President (management consultants)tt Andrew F.Corry 3
Philip B.Hamdton Semor Vice President i'-
former Chairman of the Board.
Stephen I.Sweeney Denmson Marudastraum Ca:ny.mv Semor Vice President tmanufacturets oiomce machmes Eleanor T.Daly andpaperconvertersi +
Vice President t
Edward B. Harufy Assistant to the Chairman Atromey.at. Law.
Robert T. Parry 4
Partner. Ropes o) Grayr Vice President-Emplovee ReL tions Ioseph P.Healey Bernamm H. Weiner Chairman. BavBank Middlesex*
Vice President C
Richard D. Hill Power Suppiv Adrmnistratson Chaimaan of the Board Victor H. Kar.annan
,i and ChieiExecutive Orficer.
Vice Pressdent and GeneralCounsel First Nattonal Boston Corporatton
- 1. Edward Howard thank holding companyltt Vsce President-Nuclear Bemard I. O'Keefe David I. OConnor, fr.
Chastman and Chiei Vsce President t
Executive Officer. EGe'G. im.
Accoun ting. Procurement and Service Itechnologicalservices>*
C.Bmce Damsell
,g '
Herbert Roth, Jr.
Vice President
,(
Pressdent and Chief Executsve Officer.
Engmeenng and Distnbution LFE Corporation !mannfactuser of CraigD.Peifer i
eqmpment. tid system s for trafric Vice President-Commercial andindustnal orocewontrols t lohn R.Stevens Francts M. Stas:ess, Vice Pressdent-Corporate Relations President and Chie/ Operatmg Otticer.
Wilham D.Harnngton Boston Edison Company Vice President
~
Steam and Electnc Operations loseph P.Tvtrell Semor Vice President.
Ralph M. Kelman Boston Edison Company Deasurer 7
Diane Kinch Tritter Wember tw the ExecutneGarmuce Clerk of the Corporation
(
"wtnher<* the Aue omnuttee Timothy J.Hetfeman
- *mber ce the Execurwe Perwunel Gmnuttee Assistant Deasurer homas J.May Assistant Deasurer Marc S. Alpert
(
Asststant Deasurer Batbara M.Donahue Asssstant Clerk of the Corporation Richard I.Coughhn
-t Directorof Stores andSemce t
t
31 semese 1978 1977 1976*
1975 1974 Operating Revenues (000) 5613,263
$588,395
$553.119
$501,122 S459,532 Balance for Common (000) 534,139 S22,307 525.168 S23,361 S24,128 Eamings Per Share
$2.96
$2.06
$ 2.64
$2.45
$2.53 Dividends Per Share
$2.44 '
$2.44 S2.44 S2.44
$2.44 Payout Ratio 82%
1184 92%
100 %
96%
Book Value per Share
$30.91
$30.39
$31.85
$31.61 531.54 Cash Flow Per Share 59.25
$8.58
$9.89
$8.33
$6.32 Return on Average Common Equity 9.65%
6.82%
8.32%
7.76 %
8.03 %
Year-end Dividend Yield 10.22 %
9.48 %
8.91%
10.61 %
15.87 %
Fixed Charges Coverage (SEC) 2.50x 2.26x 2.25x 2.05x 1.74x Capitalization:
Long-Term Debt 52%
544 56%
58%
60%
Preferred and Preference Equity 15 %
15 %
16%
13%
94 Common Equity 33%
31%
28 %
29 %
31%
Funds Generated Intemally (000) 578,520
$66,187
$71,054
$56,126
$36,972 Construction Expenditures l000) 5118,155
$108,688
$104,713 5110,934
$103,683 Per Cent Intemal Generation 66 4 61%
6J4 51%
36%
Stockholders at Year-end 57,667 57.302 51,720 5.t,427 51,317 Shares Outstanding:
iWtd. Ave.)
11,534,500 10,851,704 9,534 500 9,534,500 9,534,500 (Year-end)
I1,534,500 11,534,500 9,534,500 9,534.500 9,534,500 Stock Price-High 26 %
28 %
27 %
24 %
29 %
-Low 22%
24 %
12 %
15 %
14
-Year-end 23 %
25 %
27 %
23 15 %
Year-end Market Value t000)
$275,386
$297,012 5261,007
$219,294 5146,593 Trading Volume (Shares) 2,087,000 1,982.000 1,570,000 1,563,000 2,245.000 Ma ket/ Book (Year-end)
.77
.85
.86
.73
.49 Price /Eamings (Year-end) 8.1 12.5 10.4 9.4 6.1
- Restared See Note G.
Quarterly Stock Data Following are the reported high and low sales pnces of Boston Edison Comparc's common secck on the New York Stock Exchange and Composite Tape transactions for the quarters ut t979 and 1978 and the dividends per share paid durtng those quarters:
1979 1978 High Low Dividends High Low Dividends First Quart 2r 24 %
23
.61 26 %
22 %
.61 Second Quarter 23 %
20 %
.61 24 %
22 %
.61 Third Quarter 23 %
21
.61 25 %
23 %
.61 Fourth Quarter 22%
19 %
.68 25 %
22 %
.61 Additional Financial Data Long Term Debt
-Page 20 Pensions
-Page 25 Capital Stock
-Page 22 Selected Quarterly Financial Data
-Page 25 Lease Commitments-Page 24 Long-Term Purchase Power Contracts-Page 26 incott'e Tax Data
-Page 24 Mention here is not intended to give increased emphasis to a particular note, but merely to avoid repetition ot detailed financial data. The notes in their entirety are an integral part of the financial statements.
BULK'rtATE
- U.S. POSTAGE PAID Ibton Edimn Outipany 16171424-2fn)
PK)STON. MA N XJ Siylston Street, anton. MA 021W PERMIT NO. k I
I