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{{#Wiki_filter:0   FPL Energy                                                           FPL Energy Seabrook Station Seabrook Station                                                    P.O. Box 300 Seabrook, NH 03874 (603) 773-7000 December 23, 2002 Docket 50-443 NYN-02127 U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555-0001 Seabrook Station Guarantees of Payments of Deferred Premiums Pursuant to 10CFR 140.21(e), FPL Energy Seabrook, LLC, (FPLE Seabrook), on behalf of the licensees named in Facility Operating License NPF-86, provides herewith, the Annual Reports for 2001. The Annual Reports provided below demonstrate the collective ability of the licensees to meet their obligation for payment of deferred premiums.
{{#Wiki_filter:0 FPL Energy Seabrook Station FPL Energy Seabrook Station P.O. Box 300 Seabrook, NH 03874 (603) 773-7000 December 23, 2002 Docket 50-443 NYN-02127 U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555-0001 Seabrook Station Guarantees of Payments of Deferred Premiums Pursuant to 10CFR 140.21(e), FPL Energy Seabrook, LLC, (FPLE Seabrook), on behalf of the licensees named in Facility Operating License NPF-86, provides herewith, the Annual Reports for 2001. The Annual Reports provided below demonstrate the collective ability of the licensees to meet their obligation for payment of deferred premiums.
Annual Reports for 2001 (containing certified financial statements) are enclosed for the following:
Annual Reports for 2001 (containing certified financial statements) are enclosed for the following:
          "*    FPL Group* (for subsidiary FPL Energy Seabrook)
FPL Group* (for subsidiary FPL Energy Seabrook)
          "*    Massachusetts Municipal Wholesale Electric Company Taunton Municipal Lighting Plant 0     Hudson Light and Power Department Previously submitted May 17,2002 as part of NYN-02045, "Application for Order and Conforming Amendments for License Transfer."
Massachusetts Municipal Wholesale Electric Company Taunton Municipal Lighting Plant 0
Hudson Light and Power Department Previously submitted May 17,2002 as part of NYN-02045, "Application for Order and Conforming Amendments for License Transfer."


U.S. Nuclear Regulatory Commission NYN-02127 / Page 2 In addition, the Agreement of Joint Ownership, Construction and Operation of New Hampshire Nuclear Units, dated May 1, 1973 as amended, and specifically the provisions of Paragraph 10.1, 1
U.S. Nuclear Regulatory Commission NYN-02127 / Page 2 In addition, the Agreement of Joint Ownership, Construction and Operation of New Hampshire Nuclear Units, dated May 1, 1973 as amended, and specifically the provisions of Paragraph 10.1, as amended by the Eighteenth Amendment, dated March 14, 1986, is incorporated by reference1.
as amended by the Eighteenth Amendment, dated March 14, 1986, is incorporated by reference .
The enclosed annual reports are submitted pursuant to 10 CFR 50.71 (b).
The enclosed annual reports are submitted pursuant to 10 CFR 50.71 (b).
Should you have any questions regarding this matter, please contact Mr. Brad A. Jacobson, Financial and Accounting Services Manager, at (603) 773-7684.
Should you have any questions regarding this matter, please contact Mr. Brad A. Jacobson, Financial and Accounting Services Manager, at (603) 773-7684.
Very truly yours, FPL ENERGY SEABROOK, LLC 0i'**     latory Programs Manager cc:     (without enclosures)
Very truly yours, FPL ENERGY SEABROOK, LLC 0i'**
latory Programs Manager cc:
(without enclosures)
H. J. Miller, NRC Region I Administrator R. D. Starkey, NRC Project Manager, Project Directorate 1-2 G. T. Dentel, NRC Senior Resident Inspector cc: (with enclosures):
H. J. Miller, NRC Region I Administrator R. D. Starkey, NRC Project Manager, Project Directorate 1-2 G. T. Dentel, NRC Senior Resident Inspector cc: (with enclosures):
U. S. Nuclear Regulatory Commission Attention: Director of Nuclear Reactor Regulation Washington, DC 20555-0001
U. S. Nuclear Regulatory Commission Attention: Director of Nuclear Reactor Regulation Washington, DC 20555-0001  
'As of November 1, 2002, certain owners of Seabrook Nuclear Power Station and NAESCO have completed the sale oftheir majority interest in Seabrook Station to FPL Energy Seabrook, LLC.
'As of November 1, 2002, certain owners of Seabrook Nuclear Power Station and NAESCO have completed the sale of their majority interest in Seabrook Station to FPL Energy Seabrook, LLC.


ENCLOSURE TO NYN-02127 I
ENCLOSURE TO NYN-02127
ANDERSEN MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION DECEMBER 31, 2001, 2000 AND 1999 WITH INDEPENDENT AUDITORS' REPORT THEREON


MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION DECEMBER 31, 2001, 2000 AND 1999 TABLE OF CONTENTS Pa e Independent Auditors' Report                                      1 Financial Statements Statements of Financial Position                            2 Statements of Operations                                    3 Statements of Cash Flows                                    4 Notes to Financial Statements                              5 Supplementary Schedules Independent Auditors' Report on Supplementary Information  20 Schedule I - Project Statements of Financial Position      21 Schedule 1 - Project Statements of Operations              22 Schedule Ill - Project Statements of Cash Flows            23
I ANDERSEN MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION DECEMBER 31, 2001, 2000 AND 1999 WITH INDEPENDENT AUDITORS' REPORT THEREON


41 i ANDERSEN Independent Auditors' Report To the Board of Directors of Massachusetts Municipal Wholesale Electric Company:
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION DECEMBER 31, 2001, 2000 AND 1999 TABLE OF CONTENTS Pa e Independent Auditors' Report 1
Financial Statements Statements of Financial Position 2
Statements of Operations 3
Statements of Cash Flows 4
Notes to Financial Statements 5
Supplementary Schedules Independent Auditors' Report on Supplementary Information 20 Schedule I - Project Statements of Financial Position 21 Schedule 1 - Project Statements of Operations 22 Schedule Ill - Project Statements of Cash Flows 23
 
41 i
ANDERSEN Independent Auditors' Report To the Board of Directors of Massachusetts Municipal Wholesale Electric Company:
We have audited the accompanying statement of financial position of Massachusetts Municipal Wholesale Electric Company (a Massachusetts public corporation) as of December 31, 2001, and the related statement of operations and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements as of December 31, 2000 and 1999 and for the years then ended were audited by other auditors whose report dated March 2, 2001, expressed an unqualified opinion on those statements.
We have audited the accompanying statement of financial position of Massachusetts Municipal Wholesale Electric Company (a Massachusetts public corporation) as of December 31, 2001, and the related statement of operations and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements as of December 31, 2000 and 1999 and for the years then ended were audited by other auditors whose report dated March 2, 2001, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted in the United States.
We conducted our audit in accordance with auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Massachusetts Municipal Wholesale Electric Company as of December 31, 2001, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Massachusetts Municipal Wholesale Electric Company as of December 31, 2001, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.
Hartford, Connecticut March 8, 2002 MASSACHUSETITS MUNICIPAL WHOLESAL E ELECTRIC COMPAN STATMENTS OF FINANCIAL POSITION DECEMBER 31- 2001- 2000 AND 1999 (In Thousands)
Hartford, Connecticut March 8, 2002 MASSACHUSETITS MUNICIPAL WHOLESAL E ELECTRIC COMPAN STATMENTS OF FINANCIAL POSITION DECEMBER 31-2001-2000 AND 1999 (In Thousands)
ASSETS 2D01                       1222 Electric plant In service (Note 5)                                     $ 1,241,219      $ 1,239,539  $ 1,236,752 Accumulated depreciation                                     (589,328)      (544,741)    (500,389) 651,891      694,798      736,363 Construction work in progress                                     6,114        2,609        3,448 Nuclear fuel - net of amortization                               11,279        12,108        9,736 Total electric plant                                           669,284      709,515      749,547 Special funds (Notes 2, 4 and 6)                                 215,946      250,628      241,042 Current assets Cash and temporary investments (Note 6)                             552          915        1,081 Accounts receivable                                               8,594        9,805        6,580 Unbilled revenues (Note 3)                                         6,721      12,204        3,300 Inventories                                                     19,270        13,679      18,505 Prepaid expenses                                                   6,554        6,434        6,470 Total current assets                                             41,691        43,037      35,936 Total special funds and current assets                         257,637      293,665      276,978 Deferred charges Amounts recoverable under terms of the power sales agreements (Note 2)                               261,344      219,395      238,565 Unamortized debt discount and expenses                           16,685        20,089      22,448 Nuclear decommissioning trusts                                  26,022        22,504      18,902 Other                                                              7,526        8,072        6,308 311,577      270,060      286,223
ASSETS 2D01 Electric plant In service (Note 5)
                                                          $ 1,238,498     $ 1,273,240  $ 1,312,748 YIABiLIELS Long-term debt (Note 4)                                   $ 1,037,845      $ 1,079,712 $ 1,130,975 Current liabilities Current maturities of long-term debt (Note 4)                    44,730        50,580      47,870 Short-term debt (Note 4)                                        20,560        28,075      36,847 Accounts payable                                                  9,695        9,285        9,860 Accrued expenses                                                37,610        35,851      21,501 Member and participant advances and reserves                    61,543        47,331      46,915 174,138      171,122      162,993 Deferred credits                                                  26,515        22,406        18,780 Commitments and contingencies (Note 10)
Accumulated depreciation Construction work in progress Nuclear fuel - net of amortization Total electric plant Special funds (Notes 2, 4 and 6)
                                                          $ 1,238,498    $ 1,273,240  $ 1,312,748 The accompanying notes are an integral part of these financial statements.
Current assets Cash and temporary investments (Note 6)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31. 2001- 2000 AND 1999 (In Thousands) 201D                       1999 Revenues (Note 3)                                       $ 258,711        $ 276,340  $ 232,094 Interest income                                             14,932          17,327      15,409 Total revenues and interest income                   $ 273,643        $ 293,667  $ 247,503 Operating and service expenses:
Accounts receivable Unbilled revenues (Note 3)
Fuel used in electric generation                     $    31,205      $  31,841  $  28,290 Purchased power                                           74,923          69,241      37,420 Other operating                                           35,165          40,841      39,367 Maintenance                                               11,184          16,862      15,207 Depreciation                                               45,368          45,205      45,032 Taxes other than income                                     4,611          5,180      5,645 202,456        209,170    170,961 Interest expense:
Inventories Prepaid expenses Total current assets Total special funds and current assets Deferred charges Amounts recoverable under terms of the power sales agreements (Note 2)
Interest charges                                           56,981          67,881      68,796 Interest charged to projects during construction (Note 2)                                         (60)        (122)        (19) 56,921          67,759      68,777 Total operating costs and interest expense                 259,377        276,929    239,738 Other (credits) charges (Note 8)                                   (5)          (43)    18,874 Loss on refinancing - net (Note 4)                           56,813 Total costs and expenses                                   316,185        276,886    258,612 (Increase) decrease in amounts recoverable under terms of the power sales agreements (Note 2)             (42,542)         16,781    (11,109)
Unamortized debt discount and expenses Nuclear decommissioning trusts Other YIABiLIELS Long-term debt (Note 4)
                                                        $ 273,643         $ 293,667   $ 247,503 The accompanying notes are an integral part of these financial statements.
Current liabilities Current maturities of long-term debt (Note 4)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (In Thousands) 2001            2000          1999 Cash flows from operating activities:
Short-term debt (Note 4)
Total revenues and interest income                         $      273,643    $  293,667    $  247,503 Total costs and expenses, net                                   (316,185)      (276,886)    (258,612)
Accounts payable Accrued expenses Member and participant advances and reserves Deferred credits Commitments and contingencies (Note 10)
Adjustments to arrive at net cash provided by operating activities:
$ 1,241,219 (589,328) 651,891 6,114 11,279 669,284 215,946 552 8,594 6,721 19,270 6,554 41,691 257,637 261,344 16,685 26,022 7,526 311,577
Depreciation and decommissioning                                 48,312        47,713        47,502 Amortization of debt discount and nuclear fuel                   25,374          7,354          7,829 Change in current assets and liabilities:
$ 1,238,498  
Accounts receivable                                           1,211        (3,225)            98 Unbilled revenues                                             5,483        (8,904)          476 Inventories                                                 (5,591)        4,826        (4,758)
$ 1,037,845 44,730 20,560 9,695 37,610 61,543 174,138 26,515
Prepaid expenses                                               (120)            36        2,018 Accounts payable                                                 410          (575)        2,346 2,247        12,501          3,413 Accrued expenses and other Member and participant advances and reserves                                               14,212            416        (5,623)
$ 1,238,498
Net cash provided by operating activities                           48,996        76,923        42,192 Cash flows from investing activities:
$ 1,239,539 (544,741) 694,798 2,609 12,108 709,515 250,628 915 9,805 12,204 13,679 6,434 43,037 293,665 219,395 20,089 22,504 8,072 270,060
Construction expenditures and purchases of nuclear fuel                                                     (10,168)      (10,168)        (6,037)
$ 1,273,240
Interest charged to projects during construction                         (60)        (122)            (19)
$ 1,079,712 50,580 28,075 9,285 35,851 47,331 171,122 22,406
Net (increase) decrease in special finds                           34,682        (9,586)        (1,495)
$ 1,273,240 1222
Change in net unrealized gain (loss) on special funds                   593        2,389        (3,785)
$ 1,236,752 (500,389) 736,363 3,448 9,736 749,547 241,042 1,081 6,580 3,300 18,505 6,470 35,936 276,978 238,565 22,448 18,902 6,308 286,223
Decommissioning trust payments, net                                 (4,140)      (3,740)        (3,429)
$ 1,312,748
Other                                                                 1,551        1,397          1,087 Net cash provided by (used for) investing activities               22,458        (19,830)    (13,678)
$ 1,130,975 47,870 36,847 9,860 21,501 46,915 162,993 18,780
Cash flows from financing activities:
$ 1,312,748 The accompanying notes are an integral part of these financial statements.
Payments for principal of long-term debt and commercial paper                                             (59,165)      (57,155)      (48,230)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31. 2001-2000 AND 1999 (In Thousands) 201D Revenues (Note 3)
Proceeds from bonds and commercial paper                       1,130,530                        19,140 Payments for bond and commercial paper issue costs                 (18,565)            (72)        (143)
Interest income Total revenues and interest income Operating and service expenses:
Bond issue premium                                                 49,203 Change in notes payable                                                 (50)          (32)            82 Payment for defeasance of bonds                               (1,173,770)
Fuel used in electric generation Purchased power Other operating Maintenance Depreciation Taxes other than income Interest expense:
Net cash used for financing activities                             (71,817)      (57,259)      (29,151)
Interest charges Interest charged to projects during construction (Note 2)
Net decrease in cash and temporary investments                         (363)        (166)          (637)
Total operating costs and interest expense Other (credits) charges (Note 8)
Cash and temporary investments at beginning of year                     915        1,081          1,718 Cash and temporary investments at end of year               $            552  $      915  $      1,081 Cash paid during the year for interest (Net of amount capitalized as shown above)                 $        47,886   $    65,004   $    65,885 The accompanying notes are an integral part of these financial statements.
Loss on refinancing - net (Note 4)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (1)     Nature of Operations The Massachusetts Municipal Wholesale Electric Company (MMWEC) is a public corporation and a political subdivision of the Commonwealth of Massachusetts (Commonwealth) formed to be a joint action agency and to develop a bulk power supply for its member Massachusetts municipal electric systems and other utilities. MMWEC is authorized to construct, own, or purchase ownership interests in, and to issue revenue bonds to finance electric facilities secured by revenues received by MMWEC in each of its Projects. A Project is MMWEC's ownership interest in electric generation facilities (Note 5). Project revenues are derived in part from Power Sales Agreements (PSAs) with its members and other utilities who are Participants in a Project. The power supply program consists of power purchase arrangements, power brokering services, planning and financial services, and the Projects relating to generating facilities either built and operated by MMWEC or other regional utilities.
Total costs and expenses (Increase) decrease in amounts recoverable under terms of the power sales agreements (Note 2)
$ 258,711 14,932
$ 273,643 31,205 74,923 35,165 11,184 45,368 4,611 202,456 56,981 (60) 56,921 259,377 (5) 56,813 316,185 (42,542)  
$ 273,643
$ 276,340 17,327
$ 293,667 31,841 69,241 40,841 16,862 45,205 5,180 209,170 67,881 (122) 67,759 276,929 (43) 276,886 16,781
$ 293,667 The accompanying notes are an integral part of these financial statements. 1999 232,094 15,409
$ 247,503 28,290 37,420 39,367 15,207 45,032 5,645 170,961 68,796 (19) 68,777 239,738 18,874 258,612 (11,109) 247,503
 
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (In Thousands)
Cash flows from operating activities:
Total revenues and interest income Total costs and expenses, net Adjustments to arrive at net cash provided by operating activities:
Depreciation and decommissioning Amortization of debt discount and nuclear fuel Change in current assets and liabilities:
Accounts receivable Unbilled revenues Inventories Prepaid expenses Accounts payable Accrued expenses and other Member and participant advances and reserves Net cash provided by operating activities Cash flows from investing activities:
Construction expenditures and purchases of nuclear fuel Interest charged to projects during construction Net (increase) decrease in special finds Change in net unrealized gain (loss) on special funds Decommissioning trust payments, net Other Net cash provided by (used for) investing activities Cash flows from financing activities:
Payments for principal of long-term debt and commercial paper Proceeds from bonds and commercial paper Payments for bond and commercial paper issue costs Bond issue premium Change in notes payable Payment for defeasance of bonds Net cash used for financing activities Net decrease in cash and temporary investments Cash and temporary investments at beginning of year Cash and temporary investments at end of year Cash paid during the year for interest (Net of amount capitalized as shown above) 2001 273,643 (316,185) 48,312 25,374 1,211 5,483 (5,591)
(120) 410 2,247 14,212 48,996 (10,168)
(60) 34,682 593 (4,140) 1,551 22,458 (59,165) 1,130,530 (18,565) 49,203 (50)
(1,173,770)
(71,817)
(363) 915 552 47,886 2000 293,667 (276,886) 47,713 7,354 (3,225)
(8,904) 4,826 36 (575) 12,501 416 76,923 (10,168)
(122)
(9,586) 2,389 (3,740) 1,397 (19,830)
(57,155)
(72)
(32)
(57,259)
(166) 1,081 915 65,004 1999 247,503 (258,612) 47,502 7,829 98 476 (4,758) 2,018 2,346 3,413 (5,623) 42,192 (6,037)
(19)
(1,495)
(3,785)
(3,429) 1,087 (13,678)
(48,230) 19,140 (143) 82 (29,151)
(637) 1,718 1,081 65,885 The accompanying notes are an integral part of these financial statements.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (1)
Nature of Operations The Massachusetts Municipal Wholesale Electric Company (MMWEC) is a public corporation and a political subdivision of the Commonwealth of Massachusetts (Commonwealth) formed to be a joint action agency and to develop a bulk power supply for its member Massachusetts municipal electric systems and other utilities. MMWEC is authorized to construct, own, or purchase ownership interests in, and to issue revenue bonds to finance electric facilities secured by revenues received by MMWEC in each of its Projects. A Project is MMWEC's ownership interest in electric generation facilities (Note 5). Project revenues are derived in part from Power Sales Agreements (PSAs) with its members and other utilities who are Participants in a Project. The power supply program consists of power purchase arrangements, power brokering services, planning and financial services, and the Projects relating to generating facilities either built and operated by MMWEC or other regional utilities.
A Massachusetts city or town having a municipal electric system, authorized by majority vote of the city or town, may become a member of MMWEC by applying for admission and agreeing to comply with the terms and conditions of membership as the MMWEC By-Laws may require. As of December 31, 2001, twenty-two Massachusetts municipal electric systems were members. Termination of membership does not relieve a system of its PSA obligations.
A Massachusetts city or town having a municipal electric system, authorized by majority vote of the city or town, may become a member of MMWEC by applying for admission and agreeing to comply with the terms and conditions of membership as the MMWEC By-Laws may require. As of December 31, 2001, twenty-two Massachusetts municipal electric systems were members. Termination of membership does not relieve a system of its PSA obligations.
(2)     Significant Accounting Policies MMWEC presents its financial statements in accordance with accounting principles generally accepted in the United States (GAAP) as promulgated by the Financial Accounting Standards Board (FASB). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.
(2)
Significant Accounting Policies MMWEC presents its financial statements in accordance with accounting principles generally accepted in the United States (GAAP) as promulgated by the Financial Accounting Standards Board (FASB). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.
Interest Charged to Projects During Construction MMWEC capitalizes interest as an element of the cost of electric plant and nuclear fuel in process. A corresponding amount is reflected as a reduction of interest expense. The amount of interest capitalized is based on the cost of debt, including amortization of debt discount and expenses, related to each Project, net of investment gains and losses and interest income derived from unexpended Project funds.
Interest Charged to Projects During Construction MMWEC capitalizes interest as an element of the cost of electric plant and nuclear fuel in process. A corresponding amount is reflected as a reduction of interest expense. The amount of interest capitalized is based on the cost of debt, including amortization of debt discount and expenses, related to each Project, net of investment gains and losses and interest income derived from unexpended Project funds.
Nuclear Fuel Nuclear fuel, net of amortization, includes MMWEC's ownership interest of spent fuel, fuel in use, in stock and in process for Millstone Unit 3 and Seabrook Station. The cost of nuclear fuel is amortized to fuel used in electric generation based on the relationship of energy produced in the current period to total expected energy production for fuel in the reactor. A provision for fuel disposal costs is included in fuel used in electric generation based upon disposal contracts with The Department of MASSACHUSEWTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)     Significant Accounting Policies (continued)
Nuclear Fuel Nuclear fuel, net of amortization, includes MMWEC's ownership interest of spent fuel, fuel in use, in stock and in process for Millstone Unit 3 and Seabrook Station. The cost of nuclear fuel is amortized to fuel used in electric generation based on the relationship of energy produced in the current period to total expected energy production for fuel in the reactor. A provision for fuel disposal costs is included in fuel used in electric generation based upon disposal contracts with The Department of MASSACHUSEWTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)
Significant Accounting Policies (continued)
Nuclear Fuel (continued)
Nuclear Fuel (continued)
Energy (DOE). In addition, fuel used in electric generation includes the annual assessment, under the Energy Policy Act of 1992, for the cost of decontamination and decommissioning of uranium enrichment plants operated by the DOE. Billings from the DOE will occur over the next six years. At December 31, 2001, MMWEC's share of Millstone Unit 3 and Seabrook Station unbilled assessments was $244,000 and
Energy (DOE). In addition, fuel used in electric generation includes the annual assessment, under the Energy Policy Act of 1992, for the cost of decontamination and decommissioning of uranium enrichment plants operated by the DOE. Billings from the DOE will occur over the next six years. At December 31, 2001, MMWEC's share of Millstone Unit 3 and Seabrook Station unbilled assessments was $244,000 and  
$372,000, respectively. These amounts are included in other deferred charges and deferred credits on the Statements of Financial Position.
$372,000, respectively. These amounts are included in other deferred charges and deferred credits on the Statements of Financial Position.
Special Funds In accordance with the General Bond Resolution (GBR) covering MMWEC's long-term debt, numerous special funds are required. The special funds, other than certain working capital funds, are invested in accordance with the GBR which was amended and restated during 2001. Changes to the GBR are discussed in Note 4. None of these changes affect the names of the funds specified below, except each such fund is now specific to a Project. The composition of special funds is as follows:
Special Funds In accordance with the General Bond Resolution (GBR) covering MMWEC's long-term debt, numerous special funds are required. The special funds, other than certain working capital funds, are invested in accordance with the GBR which was amended and restated during 2001. Changes to the GBR are discussed in Note 4. None of these changes affect the names of the funds specified below, except each such fund is now specific to a Project. The composition of special funds is as follows:
Fund                                                     2001             2000             1999 (In Thousands)
Fund 2001 2000 1999 (In Thousands)
Bond Fund Interest, Principal and Retirement Account to pay principal and interest on bonds             $ 17,818         $ 46,896         $ 45,427 Bond Fund Reserve Account set at the maximum annual interest obligation to make up any deficiencies in the Bond Fund Interest, Principal and Retirement Account                             59,100           79,396           77,904 Reserve and Contingency Fund to make up deficiencies in the Bond Funds and pay for repairs and extraordinary costs                             27,435           26,899           24,113 Revenue Fund to receive revenues and disburse them to other funds                                         90,177           79,084           73,625 Working Capital Funds to maintain funds to cover operating expenses                                           21,416           18,353           19.973 Total Special Funds Cash and Temporary Investments Certain cash and temporary investment amounts used for power purchases and working capital requirements of MMVWEC are not subject to the provisions of the GBR. In addition to the investment securities delineated in the GBR, MMWEC invests in repurchase agreements with banks where MMWEC has established accounts. Temporary investments have maturities of less than ninety days.
Bond Fund Interest, Principal and Retirement Account to pay principal and interest on bonds  
$ 17,818  
$ 46,896  
$ 45,427 Bond Fund Reserve Account set at the maximum annual interest obligation to make up any deficiencies in the Bond Fund Interest, Principal and Retirement Account 59,100 79,396 77,904 Reserve and Contingency Fund to make up deficiencies in the Bond Funds and pay for repairs and extraordinary costs 27,435 26,899 24,113 Revenue Fund to receive revenues and disburse them to other funds 90,177 79,084 73,625 Working Capital Funds to maintain funds to cover operating expenses 21,416 18,353 19.973 Total Special Funds Cash and Temporary Investments Certain cash and temporary investment amounts used for power purchases and working capital requirements of MMVWEC are not subject to the provisions of the GBR.
In addition to the investment securities delineated in the GBR, MMWEC invests in repurchase agreements with banks where MMWEC has established accounts. Temporary investments have maturities of less than ninety days.
Inventories Fuel oil and spare parts inventory are recorded and accounted for by the average cost method.
Inventories Fuel oil and spare parts inventory are recorded and accounted for by the average cost method.
At December 31, 2001, 2000 and 1999, total fuel oil inventory was valued at $9.7, $4.8 and $5.7 million, and spare parts inventory amounted to $9.6, $8.9 and $12.8 million, respectively.
At December 31, 2001, 2000 and 1999, total fuel oil inventory was valued at $9.7, $4.8 and $5.7 million, and spare parts inventory amounted to $9.6, $8.9 and $12.8 million, respectively.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)     Sianificant Accounting Policies (continued)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)
Amounts Recoverable Under Terms of the Power Sales Agreements Billings to Project Participants are designed to recover costs in accordance with the PSAs, which generally provide for billing debt service, operating funds and reserve requirements. Expenses are reflected in the Statements of Operations in accordance with GAAP. The timing difference between amounts billed and expensed is charged or credited to amounts recoverable under terms of the PSAs.
Sianificant Accounting Policies (continued)
Amounts Recoverable Under Terms of the Power Sales Agreements Billings to Project Participants are designed to recover costs in accordance with the PSAs, which generally provide for billing debt service, operating funds and reserve requirements. Expenses are reflected in the Statements of Operations in accordance with GAAP.
The timing difference between amounts billed and expensed is charged or credited to amounts recoverable under terms of the PSAs.
Amounts will be recovered through future billings or an expense will be recognized to offset credit balances. The principal differences include depreciation, fuel amortization, costs associated with canceled Projects (or assets abandoned within a Project), cost of refinancing, billing for certain interest, reserves, net unrealized gains or losses on securities available for sale and other costs. Individual Projects have a cumulative deferral of costs which total $271.5, $227.8 and $245.1 million and have cumulative billings in excess of costs which total $10.2, $8.4 and $6.5 million at December 31, 2001, 2000 and 1999, respectively.
Amounts will be recovered through future billings or an expense will be recognized to offset credit balances. The principal differences include depreciation, fuel amortization, costs associated with canceled Projects (or assets abandoned within a Project), cost of refinancing, billing for certain interest, reserves, net unrealized gains or losses on securities available for sale and other costs. Individual Projects have a cumulative deferral of costs which total $271.5, $227.8 and $245.1 million and have cumulative billings in excess of costs which total $10.2, $8.4 and $6.5 million at December 31, 2001, 2000 and 1999, respectively.
In accordance with the PSAs, these amounts have been offset in the Statements of Financial Position.
In accordance with the PSAs, these amounts have been offset in the Statements of Financial Position.
Line 90: Line 143:
MMWEC's share of the estimated reserve requirement for the prompt dismantling and removal of the Millstone Unit 3 and Seabrook Station, at the expiration of their original operating licenses in 2025 and 2026, is $18.5 and $67.8 million, respectively, in year end 2001 dollars. The new accounting standard described below could change this accounting policy.
MMWEC's share of the estimated reserve requirement for the prompt dismantling and removal of the Millstone Unit 3 and Seabrook Station, at the expiration of their original operating licenses in 2025 and 2026, is $18.5 and $67.8 million, respectively, in year end 2001 dollars. The new accounting standard described below could change this accounting policy.
New Accounting Standard The FASB has issued Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS No. 143 will be implemented on January 1, 2003. MMWEC is currently evaluating its asset obligations related to its various Projects in accordance with SFAS No. 143.
New Accounting Standard The FASB has issued Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS No. 143 will be implemented on January 1, 2003. MMWEC is currently evaluating its asset obligations related to its various Projects in accordance with SFAS No. 143.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)     Significant Accounting Policies (continued)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)
Significant Accounting Policies (continued)
Reclassifications Certain reclassifications of prior years' data have been made to conform with the current year presentation.
Reclassifications Certain reclassifications of prior years' data have been made to conform with the current year presentation.
(3)     Revenues and Unbilled Revenues Revenues include electric sales for resale provided through MMWEC's power supply program. Revenues   consist of billings under the PSAs, Power Purchase Agreements (PPAs), and related power brokering arrangements. MMWEC also provides its members with power supply planning and related services which are billed pursuant to the MMWEC Service Agreement and its members as service revenues. Amounts that are not yet billed are included in unbilled revenues on the Statements of Financial Position. Revenues are comprised of the following:
(3)
Revenues                                                 2001_           2000             1999 (In Thousands)
Revenues and Unbilled Revenues Revenues include electric sales for resale provided through MMWEC's power supply program. Revenues consist of billings under the PSAs, Power Purchase Agreements (PPAs), and related power brokering arrangements.
Electric sales for resale                                       $256,103         $261,438       $230,570 Service                                                             1,482           1,187             1,524 Millstone Unit 3 Settlement                                           56           12,595 Other                                                               1,070           1,120                 7 Total Revenues                                                               $    4                 4 In October 2001, MMWEC received a payment of approximately $1.1 million in settlement of an arbitration against Central Maine Power Company (CMP) and FPL Energy, Inc. under the W.F.
MMWEC also provides its members with power supply planning and related services which are billed pursuant to the MMWEC Service Agreement and its members as service revenues. Amounts that are not yet billed are included in unbilled revenues on the Statements of Financial Position. Revenues are comprised of the following:
Revenues 2001_
2000 1999 (In Thousands)
Electric sales for resale  
$256,103  
$261,438  
$230,570 Service 1,482 1,187 1,524 Millstone Unit 3 Settlement 56 12,595 Other 1,070 1,120 7
Total Revenues 4
4 In October 2001, MMWEC received a payment of approximately $1.1 million in settlement of an arbitration against Central Maine Power Company (CMP) and FPL Energy, Inc. under the W.F.
Wyman Unit No. 4 Joint Ownership Agreement. MMWEC and the other W.F. Wyman Unit No. 4 joint owners filed a claim related to the 1999 sale of CMP's majority ownership in W.F. Wyman Unit No. 4 to FPL Energy Wyman IV LLC, which required CMP to make payments to the joint owners as a result of the sale. This payment was recorded in other revenues and as a decrease to amounts recoverable under terms of the PSAs and will be refunded to Project Participants in 2002.
Wyman Unit No. 4 Joint Ownership Agreement. MMWEC and the other W.F. Wyman Unit No. 4 joint owners filed a claim related to the 1999 sale of CMP's majority ownership in W.F. Wyman Unit No. 4 to FPL Energy Wyman IV LLC, which required CMP to make payments to the joint owners as a result of the sale. This payment was recorded in other revenues and as a decrease to amounts recoverable under terms of the PSAs and will be refunded to Project Participants in 2002.
In August 2000, MMWEC executed a settlement agreement and release of its claims in all litigation proceedings against the parent company and the lead owners of Millstone Unit 3 associated with the unit's shutdown in 1996. Pursuant to this settlement, MMWEC received approximately $12.6 million and other consideration. MMWEC also agreed to waive its right of first refusal under the Millstone Unit 3 Sharing Agreement. The $12.6 million settlement was refunded to the Project Participants and was a reduction to electric sales for resale in 2000.
In August 2000, MMWEC executed a settlement agreement and release of its claims in all litigation proceedings against the parent company and the lead owners of Millstone Unit 3 associated with the unit's shutdown in 1996. Pursuant to this settlement, MMWEC received approximately $12.6 million and other consideration. MMWEC also agreed to waive its right of first refusal under the Millstone Unit 3 Sharing Agreement. The $12.6 million settlement was refunded to the Project Participants and was a reduction to electric sales for resale in 2000.
In August 2000, MMWEC received approximately $1.1 million in satisfaction of a judgment concerning water rates charged to the Stony Brook Energy Center which was recorded in other revenues. In 2001, this amount was refunded to the Stony Brook Intermediate and Stony Brook Peaking Project Participants and was a reduction to electric sales for resale in 2001.
In August 2000, MMWEC received approximately $1.1 million in satisfaction of a judgment concerning water rates charged to the Stony Brook Energy Center which was recorded in other revenues. In 2001, this amount was refunded to the Stony Brook Intermediate and Stony Brook Peaking Project Participants and was a reduction to electric sales for resale in 2001.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)     Debt General Bond Resolution MMWEC has eight Projects which were originally financed through the issuance of a multiple   series of Power Supply System Revenue Bonds (Bonds) under the GBR, originally adopted by MMWEC in 1976. Security for those Bonds included a pledge of the revenues derived by MMWEC from all its Project PSAs, without regard to Project or series of Bonds.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)
Debt General Bond Resolution MMWEC has eight Projects which were originally financed through the issuance of a multiple series of Power Supply System Revenue Bonds (Bonds) under the GBR, originally adopted by MMWEC in 1976. Security for those Bonds included a pledge of the revenues derived by MMWEC from all its Project PSAs, without regard to Project or series of Bonds.
Amended and Restated General Bond Resolution In November 2001, through a refinancing of all of its outstanding Bonds, MMWEC amended and restated its GBR to eliminate this "cross-pledge" of revenues. In refinancing all of its debt, MMWEC issued separate issues of Bonds for each of the eight Projects, which are payable solely from, and secured solely by, the revenues derived from the Project to which such issue relates, plus available funds pledged under the Amended and Restated GBR, with respect to the Bonds of such issues. The revenues derived from each Project are used solely to provide for the payment of the Bonds of any Bond issue relating to such Project, and to pay MMWEC's cost of owning and operating such Project, and are not used to provide for the payment of the Bonds of any Bond issue relating to any other Project. Pursuant to the PSAs, each Project Participant is obligated to pay its share of the actual costs relating to the generating units, and these obligations are not contingent upon the operational status of the units.
Amended and Restated General Bond Resolution In November 2001, through a refinancing of all of its outstanding Bonds, MMWEC amended and restated its GBR to eliminate this "cross-pledge" of revenues. In refinancing all of its debt, MMWEC issued separate issues of Bonds for each of the eight Projects, which are payable solely from, and secured solely by, the revenues derived from the Project to which such issue relates, plus available funds pledged under the Amended and Restated GBR, with respect to the Bonds of such issues. The revenues derived from each Project are used solely to provide for the payment of the Bonds of any Bond issue relating to such Project, and to pay MMWEC's cost of owning and operating such Project, and are not used to provide for the payment of the Bonds of any Bond issue relating to any other Project. Pursuant to the PSAs, each Project Participant is obligated to pay its share of the actual costs relating to the generating units, and these obligations are not contingent upon the operational status of the units.
As part of the plan to refund and restructure its debt and amend the existing GBR, MMWEC developed a plan to enable it to refund all the existing long-term debt, which was accomplished with two transactions. MMWEC expects to realize gross debt service savings from this debt-restructuring program of approximately $136.1 million over the life of the bonds, with annual savings between $58,000 and $13.5 million. The January 2001 and November 2001 portions, as described below, of this restructuring program produced economic gains (the present value of debt service savings adjusted for additional cash paid) of approximately $7.8 million and $38.8 million, respectively.
As part of the plan to refund and restructure its debt and amend the existing GBR, MMWEC developed a plan to enable it to refund all the existing long-term debt, which was accomplished with two transactions. MMWEC expects to realize gross debt service savings from this debt-restructuring program of approximately $136.1 million over the life of the bonds, with annual savings between $58,000 and $13.5 million. The January 2001 and November 2001 portions, as described below, of this restructuring program produced economic gains (the present value of debt service savings adjusted for additional cash paid) of approximately $7.8 million and $38.8 million, respectively.
In January 2001, MMWEC issued $94.2 million of 2001 Series A and $1.6 million of 2001 Series B refunding Bonds which were utilized to purchase for cancellation $95.4 million of portions of the 1992 Series A, 1992 Series C, 1992 Series E, 1993 Series A, 1994 Series A and 1994 Series B Bonds. The net cost of the refinancing equalled $6 million, plus $.7 million of net expenses.
In January 2001, MMWEC issued $94.2 million of 2001 Series A and $1.6 million of 2001 Series B refunding Bonds which were utilized to purchase for cancellation $95.4 million of portions of the 1992 Series A, 1992 Series C, 1992 Series E, 1993 Series A, 1994 Series A and 1994 Series B Bonds. The net cost of the refinancing equalled $6 million, plus $.7 million of net expenses.
In November 2001, MMWEC issued $726.3 million of Series A Bonds at a premium of
In November 2001, MMWEC issued $726.3 million of Series A Bonds at a premium of  
$49.2 million, $137.7 million of Series B Bonds and $170.8 million of Series One refunding Bonds, the total proceeds of which were utilized to purchase for cancellation $1,078.3 million of previously issued Bonds consisting of the 1987 Series A, 1992 Series A, 1992 Series B, 1992 Series C, 1992 Series D, 1992 Series E, 1993 Series A, 1994 Series A, 1994 Series B, 1994 Series C and 2001 Series A Bonds. The net cost of the refinancing equaled $50.8 million, plus $1.0 million of net expenses. The prior bonds refinanced by these transactions have been derecognized from the financial statements.
$49.2 million, $137.7 million of Series B Bonds and $170.8 million of Series One refunding Bonds, the total proceeds of which were utilized to purchase for cancellation $1,078.3 million of previously issued Bonds consisting of the 1987 Series A, 1992 Series A, 1992 Series B, 1992 Series C, 1992 Series D, 1992 Series E, 1993 Series A, 1994 Series A, 1994 Series B, 1994 Series C and 2001 Series A Bonds. The net cost of the refinancing equaled $50.8 million, plus $1.0 million of net expenses. The prior bonds refinanced by these transactions have been derecognized from the financial statements.
Power Supply System Revenue Bonds MMWEC's issuance of debt, other than obligations with a maturity of less than one year, requires authorization of the Massachusetts Department of Telecommunications and Energy (DTE).
Power Supply System Revenue Bonds MMWEC's issuance of debt, other than obligations with a maturity of less than one year, requires authorization of the Massachusetts Department of Telecommunications and Energy (DTE).
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)   Deb. (continued)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)
Deb. (continued)
Power Supply System Revenue Bonds (continued)
Power Supply System Revenue Bonds (continued)
Bonds payable consists of serial, term (2000 and 1999) and variable-rate bonds and are comprised of the following issues:
Bonds payable consists of serial, term (2000 and 1999) comprised of the following issues:
Net Interest              December 31.
and variable-rate bonds and are Issue 1987 Series A 1992 Series A 1992 Series B 1992 Series C 1992 Series D 1992 Series E 1993 Series A 1994 Series A 1994 Series B 1994 Series C Stony Brook Peaking Project, Series A Stony Brook Intermediate Project, Series A W.F. Wyman Unit No. 4 Project, Series A Nuclear Mix No. 1, Series A Nuclear Project No. 3, Series A Nuclear Project No. 4, Series A Nuclear Project No. 5, Series A Project No. 6, Series A Nuclear Project No. 3, Series B Nuclear Project No. 4, Series B Nuclear Project No. 5, Series B Project No. 6, Series B Nuclear Mix No. 1,.Series One Nuclear Project No. 3, Series One Nuclear Project No. 4, Series One Nuclear Project No. 5, Series One Project No. 6, Series One Bonds payable Unamortized premium Less: Current maturities Total long-term debt Net Interest Cost 8.9%
Issue                         Cost      2001            2000          1999 (In Thousands) 1987 Series A                                   8.9%    $          -  $      6,310  $      7,110 7.0%              -        87,170        89,805 1992 Series A 1992 Series B                                   7.0%              -      168,070        174,470 6.9%              -        52,775        54,295 1992 Series C 1992 Series D                                   6.3%              -        72,655        75,395 1992 Series E                                   6.0%              -        66,365        75,735 5.3%              -      313,215        329,100 1993 Series A 5.3%              -      112,270        113,130 1994 Series A 5.1%              -      153,240        161,445 1994 Series B Variable            -        97,600        97,600 1994 Series C                                               11 A2*
7.0%
Stony Brook Peaking Project, Series A           3.1%
7.0%
Stony Brook Intermediate Project, Series A     3.5%        66,270 W.F. Wyman Unit No. 4 Project, Series A         3.5%          3,255 Nuclear Mix No. 1, Series A                     4.0%        90,015 Nuclear Project No. 3, Series A                 4.2%        47,930 Nuclear Project No. 4, Series A                 4.3%        112,695 Nuclear Project No. 5, Series A                 4.2%        42,170 Project No. 6, Series A                         4.2%        347,535 Nuclear Project No. 3, Series B                 4.9%        65,290 Nuclear Project No. 4, Series B                 4.5%        48,450 Nuclear Project No. 5, Series B                 3.8%          7,765 Project No. 6, Series B                         3.5%        16,145 Nuclear Mix No. 1,.Series One                 Variable      11,350 Nuclear Project No. 3, Series One             Variable      62,975 Nuclear Project No. 4, Series One             Variable      35,325 Nuclear Project No. 5, Series One             Variable        9,025 Project No. 6, Series One                     Variable       52,100 1,034,730    1,129,670      1,178,085 Bonds payable 47,845           622            760 Unamortized premium (44.730)       (50.580)      (47.870)
6.9%
Less: Current maturities Total long-term debt                                11.037.845    $1.079.712   $1,130275 MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)     Debt (continued)
6.3%
6.0%
5.3%
5.3%
5.1%
Variable 3.1%
3.5%
3.5%
4.0%
4.2%
4.3%
4.2%
4.2%
4.9%
4.5%
3.8%
3.5%
Variable Variable Variable Variable Variable December 31.
2001 2000 (In Thousands) 6,310 87,170 168,070 52,775 72,655 66,365 313,215 112,270 153,240 97,600 11 A2*
66,270 3,255 90,015 47,930 112,695 42,170 347,535 65,290 48,450 7,765 16,145 11,350 62,975 35,325 9,025 52,100 1,034,730 47,845 (44.730) 11.037.845 1,129,670 622 (50.580)  
$1.079.712 1999 7,110 89,805 174,470 54,295 75,395 75,735 329,100 113,130 161,445 97,600 1,178,085 760 (47.870)
$1,130275
 
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)
Debt (continued)
Power Supply System Revenue Bonds (continued)
Power Supply System Revenue Bonds (continued)
The Series A Bonds issued in November 2001 and maturing on and prior to July 1, 2011, and the Series B Bonds issued in November 2001, are not subject to redemption prior to maturity at the option of MMWEC. The Series A Bonds maturing on and after July 1, 2012 are subject to redemption prior to maturity at the option of MMvWEC at 101% of the principal amount from January 1, 2012 to December 31, 2012 and at 100% from January 1, 2013 and thereafter.
The Series A Bonds issued in November 2001 and maturing on and prior to July 1, 2011, and the Series B Bonds issued in November 2001, are not subject to redemption prior to maturity at the option of MMWEC. The Series A Bonds maturing on and after July 1, 2012 are subject to redemption prior to maturity at the option of MMvWEC at 101% of the principal amount from January 1, 2012 to December 31, 2012 and at 100% from January 1, 2013 and thereafter.
The Series One Bonds of each issue are subject to redemption at the option of MMWEC, in whole or in part, at a redemption price of 100% of the principal amount.
The Series One Bonds of each issue are subject to redemption at the option of MMWEC, in whole or in part, at a redemption price of 100% of the principal amount.
Long-term debt maturities are as follows (In Thousands):
Long-term debt maturities are as follows (In Thousands):
Series A       Series B     Series One       Total 2002         $ 14,835       $ 29,895       $      -    $    44,730 2003             42,175         22,560               -        64,735 2004             46,305         22,665               -        68,970 2005             50,125         21,175               -        71,300 2006             51,465           18,895             -        70,360 Thereafter         521,400           22,460       170,775         714,635
Series A Series B Series One Total 2002  
                                      $726.305                                     SIM.77 The interest rates on the 1994 Series C variable-rate bonds were adjusted from time-to-time, and the rate from January 1, 2001 through November 7, 2001 was 2.7%. The interest rates on the 2001 Series A were 2.7% from January 16, 2001 through November 7, 2001, and the interest rates on the 2001 Series B were 4.8% from January 16, 2001 through August 14, 2001. The interest rates on the Series One variable rate bonds may be converted at the option of MM4WEC to a daily, weekly, flexible, term or fixed mode. The interest rate on the Series One variable rate bonds during 2001 was 1.5%.
$ 14,835  
Debt Service Forward Delivery Agreement In 1994, MMWEC entered into a seven year Debt Service Forward Delivery Agreement (Forward   Agreement)   for purposes other than trading. The Forward Agreement expires on June 30, 2002.
$ 29,895 44,730 2003 42,175 22,560 64,735 2004 46,305 22,665 68,970 2005 50,125 21,175 71,300 2006 51,465 18,895 70,360 Thereafter 521,400 22,460 170,775 714,635  
$726.305 SIM.77 The interest rates on the 1994 Series C variable-rate bonds were adjusted from time-to-time, and the rate from January 1, 2001 through November 7, 2001 was 2.7%. The interest rates on the 2001 Series A were 2.7% from January 16, 2001 through November 7, 2001, and the interest rates on the 2001 Series B were 4.8% from January 16, 2001 through August 14, 2001. The interest rates on the Series One variable rate bonds may be converted at the option of MM4WEC to a daily, weekly, flexible, term or fixed mode. The interest rate on the Series One variable rate bonds during 2001 was 1.5%.
Debt Service Forward Delivery Agreement In 1994, MMWEC entered into a seven year Debt Service Forward Delivery Agreement (Forward Agreement) for purposes other than trading. The Forward Agreement expires on June 30, 2002.
MMWEC makes monthly deposits to the various accounts within the Bond Fund for each Project for the semiannual payment of its debt service on its outstanding bonds for each Project. In exchange for the right to direct the investment of such monies, the counterparty pays a fixed amount to MMWEC on a periodic basis, providing MMUWEC a fixed yield that could be earned on a security with a five to seven year maturity purchased at the time the Forward Agreement contract was executed, while complying with the maturity limitations for investments in the Bond Fund for each Project under the terms of the GBR. The counterparty has the right to sell to MMWEC government obligations that mature prior to the relevant debt service payment dates during the term of the Forward Agreement.
MMWEC makes monthly deposits to the various accounts within the Bond Fund for each Project for the semiannual payment of its debt service on its outstanding bonds for each Project. In exchange for the right to direct the investment of such monies, the counterparty pays a fixed amount to MMWEC on a periodic basis, providing MMUWEC a fixed yield that could be earned on a security with a five to seven year maturity purchased at the time the Forward Agreement contract was executed, while complying with the maturity limitations for investments in the Bond Fund for each Project under the terms of the GBR. The counterparty has the right to sell to MMWEC government obligations that mature prior to the relevant debt service payment dates during the term of the Forward Agreement.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)     Debt (continued)
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)
Debt (continued)
Debt Service Forward Delivery Agreement (continued)
Debt Service Forward Delivery Agreement (continued)
MMWEC reserves the right to terminate the Forward Agreement in whole or in part in connection with any purchase, redemption or refinancing of fixed-rate bonds, counterparty default or counterparty credit rating deterioration to below investment grade. The Forward Agreement provides for the calculation and payment of liquidated damages to the counterparty reflecting market interest rates at the time of the termination compared to the rate levels in the Forward Agreement.
MMWEC reserves the right to terminate the Forward Agreement in whole or in part in connection with any purchase, redemption or refinancing of fixed-rate bonds, counterparty default or counterparty credit rating deterioration to below investment grade. The Forward Agreement provides for the calculation and payment of liquidated damages to the counterparty reflecting market interest rates at the time of the termination compared to the rate levels in the Forward Agreement.
The cash requirement under the Forward Agreement requires MMWEC to make available to the counterparty an average balance of $30.3 million over the seven year term of the Forward Agreement in exchange for investments in government securities, to be held by MNIWEC's Bond Fund Trustee, that mature prior to MMWEC's debt payment dates.
The cash requirement under the Forward Agreement requires MMWEC to make available to the counterparty an average balance of $30.3 million over the seven year term of the Forward Agreement in exchange for investments in government securities, to be held by MNIWEC's Bond Fund Trustee, that mature prior to MMWEC's debt payment dates.
The Forward Agreement is not recognized in the Statements of Financial Position to the extent that settlement of cash in exchange for financial instruments has not occurred. To the extent cash has been exchanged for government securities, the government securities are recorded on the Statements of Financial Position as special funds. The Forward Agreement is not a derivative as defined in SFAS No.
The Forward Agreement is not recognized in the Statements of Financial Position to the extent that settlement of cash in exchange for financial instruments has not occurred. To the extent cash has been exchanged for government securities, the government securities are recorded on the Statements of Financial Position as special funds. The Forward Agreement is not a derivative as defined in SFAS No.
133, Accountingfor Derivative Instruments andHedgingActivities, as amended.
133, Accounting for Derivative Instruments and Hedging Activities, as amended.
Interest Rate Protection Agreement Through November 7, 2001, MMWEC had in place an Interest Rate Protection Agreement (Cap Agreement)   to provide a hedge against interest rate risk on the 1994 Series C bonds. MMWEC purchased a $41 million Cap Agreement to limit the interest rate exposure on a portion of the 1994 Series C variable-rate debt to the extent that the variable debt costs exceed the fixed-rate received on the Forward Agreement described above. Pursuant to the Cap Agreement, MMWEC purchased the right to receive annually an amount by which an index-based interest rate, which approximates the interest rate on the 1994 Series C bonds, exceeds the protection rate in the Cap Agreement. The cost of the Cap Agreement was paid up front, and unamortized premiums were included in other deferred charges on the Statements of Financial Position in 2000 and 1999. The Cap Agreement was purchased for purposes other than trading. The fair value was not material as of December 31, 2000, and the Cap Agreement was terminated in November 2001 in connection with MMWEC's debt refinancing.
Interest Rate Protection Agreement Through November 7, 2001, MMWEC had in place an Interest Rate Protection Agreement (Cap Agreement) to provide a hedge against interest rate risk on the 1994 Series C bonds. MMWEC purchased a $41 million Cap Agreement to limit the interest rate exposure on a portion of the 1994 Series C variable-rate debt to the extent that the variable debt costs exceed the fixed-rate received on the Forward Agreement described above. Pursuant to the Cap Agreement, MMWEC purchased the right to receive annually an amount by which an index-based interest rate, which approximates the interest rate on the 1994 Series C bonds, exceeds the protection rate in the Cap Agreement. The cost of the Cap Agreement was paid up front, and unamortized premiums were included in other deferred charges on the Statements of Financial Position in 2000 and 1999. The Cap Agreement was purchased for purposes other than trading. The fair value was not material as of December 31, 2000, and the Cap Agreement was terminated in November 2001 in connection with MMWEC's debt refinancing.
Net Revenue Available for Debt Service In accordance with the provisions of MMWEC's Amended and Restated GBR, MMWEC covenants that it shall fix, revise and collect rates, tolls, rents and other fees and charges sufficient to produce revenues to pay all operating and maintenance expenses and principal of, premium and the interest on the bonds and to pay all other obligations against its revenue for each Project. Revenues, for each Project which include applicable interest earnings from investments, are required to equal 1.10 times the annual debt service for each contract year ending June 30, after deduction of certain operating and maintenance expenses and exclusive of-depreciation. As such, these amounts do not agree with those in the accompanying Statements of Operations. For the contract years ended June 30, 2001, 2000, 1999 and prior years, MMWEC met the original GBR debt service coverage requirements for the applicable MMWEC Projects.
Net Revenue Available for Debt Service In accordance with the provisions of MMWEC's Amended and Restated GBR, MMWEC covenants that it shall fix, revise and collect rates, tolls, rents and other fees and charges sufficient to produce revenues to pay all operating and maintenance expenses and principal of, premium and the interest on the bonds and to pay all other obligations against its revenue for each Project. Revenues, for each Project which include applicable interest earnings from investments, are required to equal 1.10 times the annual debt service for each contract year ending June 30, after deduction of certain operating and maintenance expenses and exclusive of-depreciation. As such, these amounts do not agree with those in the accompanying Statements of Operations. For the contract years ended June 30, 2001, 2000, 1999 and prior years, MMWEC met the original GBR debt service coverage requirements for the applicable MMWEC Projects.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999  
-(4)     Debt (continued)
-(4)
Debt (continued)
Net Revenue Available for Debt Service (continued)
Net Revenue Available for Debt Service (continued)
Contract Year Ended June 30, 2001             2000             1999 Debt Service Coverage:                                             (In Thousands)
Contract Year Ended June 30, 2001 2000 1999 Debt Service Coverage:
Revenues                                         $191,732         $180,789         $185,786 Other Billings                                         577               577             574 Reserve and Contingency Fund Billings               11,121           11,227           11,076 Total                                             203,430           192,593         197,436 Less: Operating & Maintenance Expenses             (81,102)         (69,099)         (75,604)
(In Thousands)
Available Revenues Net of Expenses                                 $123.494       $12182 Debt Service Requirement                         111               $112267         11.75 Coverage (110% Required)                                   %            110%             110%
Revenues  
Short-Term Debt MMWEC maintains a $5 million revolving line of credit to temporarily finance certain power purchases made by MMWEC for resale under power purchase contracts. Borrowings outstanding under the line of credit were $0, $50,000 and $82,000 as of December 31, 2001, 2000 and 1999, respectively. During 2001, 2000 and 1999, the maximum outstanding balance under the line of credit was
$191,732  
$3.9, $.9 and $2.4 million, respectively. Interest charged on borrowings under the line of credit is at minus one percent of the bank's prime rate (3.75% at December 31, 2001). In addition, a commitment fee of one quarter of 1% per annum is charged on the unused portion of the line based on the average daily principal amount of the borrowing outstanding. This line of credit expires June 30, 2002, at which time MMWEC intends to renew the line for an additional year.
$180,789  
$185,786 Other Billings 577 577 574 Reserve and Contingency Fund Billings 11,121 11,227 11,076 Total 203,430 192,593 197,436 Less: Operating & Maintenance Expenses (81,102)
(69,099)
(75,604)
Available Revenues Net of Expenses  
$123.494  
$12182 Debt Service Requirement 111  
$112267 11.75 Coverage (110% Required) 110%
110%
Short-Term Debt MMWEC maintains a $5 million revolving line of credit to temporarily finance certain power purchases made by MMWEC for resale under power purchase contracts. Borrowings outstanding under the line of credit were $0, $50,000 and $82,000 as of December 31, 2001, 2000 and 1999, respectively. During 2001, 2000 and 1999, the maximum outstanding balance under the line of credit was  
$3.9, $.9 and $2.4 million, respectively. Interest charged on borrowings under the line of credit is at minus one percent of the bank's prime rate (3.75% at December 31, 2001). In addition, a commitment fee of one quarter of 1% per annum is charged on the unused portion of the line based on the average daily principal amount of the borrowing outstanding. This line of credit expires June 30, 2002, at which time MMWEC intends to renew the line for an additional year.
In 1999, MMWEC issued $40.3 million of Series B Power Purchase commercial paper program notes. The Series B Power Purchase notes encompassed $19.1 million of new commercial paper notes and refunding of the outstanding $21.2 million of Series A commercial paper notes issued in 1998.
In 1999, MMWEC issued $40.3 million of Series B Power Purchase commercial paper program notes. The Series B Power Purchase notes encompassed $19.1 million of new commercial paper notes and refunding of the outstanding $21.2 million of Series A commercial paper notes issued in 1998.
The commercial paper notes are not subject to redemption prior to maturity but are subject to acceleration upon the occurrence of an event of default under the Series B Power Purchase Resolution (Resolution). The Series B Power Purchase notes are a special obligation of MMWEC payable solely from the revenues and other monies as specified in the Resolution. As of December 31, 2001, MMWEC had a bank letter of credit in the amount of $22.4 million that provides security for the payment of principal and interest on the Series B Power Purchase notes. The December 31, 2001, 2000 and 1999 outstanding balances of commercial paper notes were $20.6, $28.0 and $36.8 million, respectively. At December 31, 2001, the interest rate on the Series B Power Purchase notes was 2.6%.
The commercial paper notes are not subject to redemption prior to maturity but are subject to acceleration upon the occurrence of an event of default under the Series B Power Purchase Resolution (Resolution). The Series B Power Purchase notes are a special obligation of MMWEC payable solely from the revenues and other monies as specified in the Resolution. As of December 31, 2001, MMWEC had a bank letter of credit in the amount of $22.4 million that provides security for the payment of principal and interest on the Series B Power Purchase notes. The December 31, 2001, 2000 and 1999 outstanding balances of commercial paper notes were $20.6, $28.0 and $36.8 million, respectively. At December 31, 2001, the interest rate on the Series B Power Purchase notes was 2.6%.
MASSACHUSETrS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (5)    Electric Generation Facilities and Financing SMMWEC's power supply capacity includes ownership interests in the Stony Brook Peaking and Intermediate units which it operates. MMWEC is a nonoperating joint owner in the W.F. Wyman Unit No. 4, Millstone Unit 3 and Seabrook Station. Electric plant in service also includes MMWEC's service operations which totaled $2.4, $2.4 and $2.6 million in 2001, 2000 and 1999, respectively. The following is a summary of Projects included in electric plant in service and construction work in progress, as well as "hMMWEC'sshare of capability in megawatts (MW).
MASSACHUSETrS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 Electric Generation Facilities and Financing SMMWEC's power supply capacity includes ownership interests in the Stony Brook Peaking and Intermediate units which it operates. MMWEC is a nonoperating joint owner in the W.F. Wyman Unit No. 4, Millstone Unit 3 and Seabrook Station. Electric plant in service also includes MMWEC's service operations which totaled $2.4, $2.4 and $2.6 million in 2001, 2000 and 1999, respectively. The following is a summary of Projects included in electric plant in service and construction work in progress, as well as "hMMWEC's share of capability in megawatts (MW).
Facility and MMWEC                 Amounts as of December 31.
Projects Peaking Project Intermediate Project Wyman Project Nuclear Project No. 3 Nuclear Mix No. 1 Nuclear Mix No. 1 Nuclear Project No. 4 Nuclear Project No. 5 Project No. 6 Facility and MMWEC Share of Capability in MW Stony Brook Stony Brook W.F. Wyman No. 4 Millstone Unit 3 Millstone Unit 3 Seabrook Station Seabrook Station Seabrook Station Seabrook Station 170.0 319.5 22.7 36.8 18.4 1.9 49.8 12.6 69.0 Amounts as of December 31.
Projects              Share of Capability in MW       2001              2000            1999 (In Thousands)
2001 2000 1999 (In Thousands)
Peaking Project            Stony Brook             170.0    $ 56,636          $ 56,399      $ 56,380 Intermediate Project      Stony Brook             319.5      155,488          151,691        151,337 Wyman Project              W.F. Wyman No. 4         22.7        7,341            7,341          7,341 Nuclear Project No. 3     Millstone Unit 3         36.8     130,653          130,400        130,048 Nuclear Mix No. 1          Millstone Unit 3          18.4       51,818            51,694          51,517 Nuclear Mix No. 1          Seabrook Station          1.9       8,644            8,633          8,616 Nuclear Project No. 4      Seabrook Station          49.8      260,374           260,092        259,630 Nuclear Project No. 5      Seabrook Station          12.6      71,226           71,155          71,038 Seabrook Station          69.0      502,719
$ 56,636 155,488 7,341 130,653 51,818 8,644 260,374 71,226 502,719  
                                                            $1.24.99           502,328       501,688 Project No. 6 In April 2001, Dominion Resources, Inc. purchased a 93.5% ownership interest in Millstone Unit 3 from all of the joint owners of Millstone Unit 3, except MMWEC and one other joint owner.
$1.24.99 56,399 151,691 7,341 130,400 51,694 8,633 260,092 71,155 502,328
$ 56,380 151,337 7,341 130,048 51,517 8,616 259,630 71,038 501,688 In April 2001, Dominion Resources, Inc. purchased a 93.5% ownership interest in Millstone Unit 3 from all of the joint owners of Millstone Unit 3, except MMWEC and one other joint owner.
MMWEC has an 11.6% ownership interest in the Seabrook Station nuclear generating unit.
MMWEC has an 11.6% ownership interest in the Seabrook Station nuclear generating unit.
It is anticipated that certain other joint owners of Seabrook will sell their ownership interests in Seabrook through a bid process expected to be completed in late 2002. At this time MMWEC has no plans to sell any of its ownership interests in Seabrook.
It is anticipated that certain other joint owners of Seabrook will sell their ownership interests in Seabrook through a bid process expected to be completed in late 2002.
(6)     Investments and Deposits All bank deposits are maintained at one financial institution. Such deposits amounted to $3.1 million at December 31, 2001, and are included in both cash and temporary investments and special funds.
At this time MMWEC has no plans to sell any of its ownership interests in Seabrook.
The Federal Deposit Insurance Corporation currently insures up to $100,000 per depositor. At December 31, 2001, 2000 and 1999, investments are classified as available for sale and reported at market value with unrealized gains of $2.0, $1.4 and $.7 million, respectively, and unrealized losses of $148,000, $88,000 and
(6)
Investments and Deposits All bank deposits are maintained at one financial institution. Such deposits amounted to $3.1 million at December 31, 2001, and are included in both cash and temporary investments and special funds.
The Federal Deposit Insurance Corporation currently insures up to $100,000 per depositor. At December 31, 2001, 2000 and 1999, investments are classified as available for sale and reported at market value with unrealized gains of $2.0, $1.4 and $.7 million, respectively, and unrealized losses of $148,000, $88,000 and  
$1.8 million, respectively. The net losses and gains are excluded from earnings and are reported as a component of amounts recoverable under the terms of the PSAs on the Statements of Financial Position.
$1.8 million, respectively. The net losses and gains are excluded from earnings and are reported as a component of amounts recoverable under the terms of the PSAs on the Statements of Financial Position.
At December 31, 2001, all securities underlying repurchase agreements, and all other investments, were held MASSACHUSETTS MUNICIPAL WHOLESALE ELEC'TRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (6)     Investments and Deposits (continued) in MMWEC's name by custodians consisting of the Bond Fund Trustee or MMWEC's depository bank.
At December 31, 2001, all securities underlying repurchase agreements, and all other investments, were held (5)
 
MASSACHUSETTS MUNICIPAL WHOLESALE ELEC'TRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (6)
Investments and Deposits (continued) in MMWEC's name by custodians consisting of the Bond Fund Trustee or MMWEC's depository bank.
Investments, representing the special funds and cash and temporary investments, as well as certain additional amounts disbursed but available for investment, and accrued interest, are presented below:
Investments, representing the special funds and cash and temporary investments, as well as certain additional amounts disbursed but available for investment, and accrued interest, are presented below:
2001                          2000                    1999 Amortized Market            Amortized      Market  Amortized    Market Type of Investment           Cost Basis      Value        Cost Basis      Value  Cost Basis    Value (In Thousands)
Type of Investment Repurchase Agreements Other Investments:
Repurchase Agreements                                       L      -    $L      - $ 3,899      $ 3,899 Other Investments:
U.S. Treasury bills U.S. Treasury notes U.S. Agency bonds Municipal bonds U.S. Agency discount notes Total Other Investments Invested Cash Total Cash and Investments 2001 Amortized Market Cost Basis Value 17,904 33,842 124,846 33,872 210,464 4,172 2000 Amortized Market Cost Basis Value (In Thousands)
U.S. Treasury bills           17,904        17,902        23,950        24,300    22,457      22,985 U.S. Treasury notes           33,842        34,950        63,533        63,924    77,146      75,913 U.S. Agency bonds           124,846       125,601        85,753        86,241    29,142      28,651 Municipal bonds                                  -          1,355        1,368      8,199      8,228 U.S. Agency 33,872                                      76,250  102,519      102,565 discount notes                            33,873         76,224 210,464      212,326       250,815         252,083  239,463      238,342 Total Other Investments Invested Cash                  4,172       4,172            (540)         (540)     (118)       (118)
L
Total Cash and Investments                                          S250.275       $2L.2     $243 .244 During 2001, 2000 and 1999, the proceeds from the sale of available for sale securities were K $220.8, $89.0 and $33.1 million, respectively, resulting in gross realized gains of $1 million, $20,000 and
$L 17,902 23,950 34,950 63,533 125,601 85,753 1,355 33,873 76,224 212,326 250,815 4,172 (540) 24,300 63,924 86,241 1,368 76,250 252,083 (540) 1999 Amortized Market Cost Basis Value
  $70,000, respectively, and gross realized losses of $5,000, $168,000 and $66,000, respectively. The basis on which cost was determined in computing realized gain or loss was specific identification. Including repurchase agreements, the average contractual maturity of the investments in debt securities at December 31, 2001, 2000 and 1999 were 792, 497 and 530 days, respectively.
$ 3,899
Due to seasonal cash flows during 2001, 2000 and 1999, MMWEC, from time-to-time, K- invested in repurchase agreements with its depository bank that were collateralized by securities in MMWEC's name held by the depository bank.
$ 3,899 22,457 77,146 29,142 8,199 102,519 239,463 (118) 22,985 75,913 28,651 8,228 102,565 238,342 (118)
(7)     Fair Values of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:
S250.275  
K-                 Investments and Decommissioning Trusts - The fair values estimated are based on quoted K- market prices for those or similar investments.
$2L.2  
Long-Term Debt - The fair value is estimated based on quoted market prices for the same or K similar issues.
$243.244 During 2001, 2000 and 1999, the proceeds from the sale of available for sale securities were K  
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2001. 2000 and 1999 (7)     Fair Values of Financial Instruments (continued)
$220.8, $89.0 and $33.1 million, respectively, resulting in gross realized gains of $1 million, $20,000 and  
$70,000, respectively, and gross realized losses of $5,000, $168,000 and $66,000, respectively. The basis on which cost was determined in computing realized gain or loss was specific identification. Including repurchase agreements, the average contractual maturity of the investments in debt securities at December 31, 2001, 2000 and 1999 were 792, 497 and 530 days, respectively.
Due to seasonal cash flows during 2001, 2000 and 1999, MMWEC, from time-to-time, K-invested in repurchase agreements with its depository bank that were collateralized by securities in MMWEC's name held by the depository bank.
(7)
Fair Values of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:
K-Investments and Decommissioning Trusts - The fair values estimated are based on quoted K-market prices for those or similar investments.
Long-Term Debt - The fair value is estimated based on quoted market prices for the same or K
similar issues.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2001. 2000 and 1999 (7)
Fair Values of Financial Instruments (continued)
Interest Rate Protection Agreement - The fair value is based on average quoted market prices of agreements with similar duration and strike prices.
Interest Rate Protection Agreement - The fair value is based on average quoted market prices of agreements with similar duration and strike prices.
Debt Service Forward Delivery Agreement - The fair value reflects the estimated amounts that MMWEC would receive to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts.
Debt Service Forward Delivery Agreement - The fair value reflects the estimated amounts that MMWEC would receive to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts.
The estimated fair values of MMWEC's financial instruments are as follows:
The estimated fair values of MMWEC's financial instruments are as follows:
2001                       2000                    1999 Carrying Estimated          Carrying  Estimated  Carrying Estimated Value     Fair Value         Value   Fair  Value  Value    Fair Value (In Thousands)
2001 Carrying Estimated Value Fair Value 2000 Carrying Estimated Value Fair Value (In Thousands) 1999 Carrying Estimated Value Fair Value Financial Assets:
Financial Assets:
Investments Decommissioning Trusts Interest Rate Protection "Agreement Financial Liabilities:
Investments                     212,326 $ 212,326      $ 252,083    $ 252,083  $ 242,241 $ 242,241 Decommissioning Trusts           26,022      27,442          21,882      24,190    18,142      20,925 Interest Rate Protection "Agreement                                                     41          12        152        150 Financial Liabilities:
Long-Term Debt, excluding current maturities Unrecognized Financial Instruments:
Long-Term Debt, excluding current maturities         1,037,845 1,018,783         1,079,712   1,102,240 1,130,975 1,135,393 Unrecognized    Financial Instruments:
Debt Service Forward Delivery Agreement 212,326 $ 212,326 26,022 27,442
Debt Service Forward Delivery Agreement                -        643                          899                   891 The carrying amounts for cash, accounts receivable, notes payable and accounts payable approximate their fair value due to the short-term nature of these instruments.
$ 252,083 21,882 41 1,037,845 1,018,783 643
1 (8)     Other Charges and Credits to Income In 1999, MMWEC negotiated the payment of $18.9 million for the buy-out and termination of uneconomical PPAs, pursuant to which MMWEC had agreed to purchase electric capacity and output for resale to certain cities and towns of the Commonwealth having municipal electric departments. The buyout of these PPAs was financed through the issuance of $19.1 million in commercial paper notes.
$ 252,083 24,190
_ (9)     Benefit Plans MMNWEC has two non-contributory defined benefit pension plans covering substantially all full-time active employees. One plan covers union employees (union plan) and the other plan covers non union employees (non-union plan).       The amount shown below as the benefit obligation for MMWEC is a MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (9)     Benefit Plans (continued) standardized disclosure measure of the present value of pension benefits, adjusted for the effect of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the plans.
$ 242,241 18,142 12 152
The benefit obligation was determined by an actuarial valuation performed as of January 1 of each of the years presented below. Significant actuarial assumptions used in the valuation include a weighted-average discount rate of 7.0% and projected salary increases of 4.0% in 2001, 2000 and 1999, respectively. The benefit obligation, plan assets, funded status, and components of net periodic benefit cost for both plans is as follows:
$ 242,241 20,925 150 1,079,712 1,102,240 1,130,975 1,135,393 899 891 The carrying amounts for cash, accounts receivable, notes payable and accounts payable approximate their fair value due to the short-term nature of these instruments.
1 (8)
Other Charges and Credits to Income In 1999, MMWEC negotiated the payment of $18.9 million for the buy-out and termination of uneconomical PPAs, pursuant to which MMWEC had agreed to purchase electric capacity and output for resale to certain cities and towns of the Commonwealth having municipal electric departments. The buyout of these PPAs was financed through the issuance of $19.1 million in commercial paper notes.
(9)
Benefit Plans MMNWEC has two non-contributory defined benefit pension plans covering substantially all full-time active employees. One plan covers union employees (union plan) and the other plan covers non union employees (non-union plan).
The amount shown below as the benefit obligation for MMWEC is a MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (9)
Benefit Plans (continued) standardized disclosure measure of the present value of pension benefits, adjusted for the effect of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the plans.
The benefit obligation was determined by an actuarial valuation performed as of January 1 of each of the years presented below.
Significant actuarial assumptions used in the valuation include a weighted-average discount rate of 7.0% and projected salary increases of 4.0% in 2001, 2000 and 1999, respectively. The benefit obligation, plan assets, funded status, and components of net periodic benefit cost for both plans is as follows:
Amounts as of December 31.
Amounts as of December 31.
2001         2000           1999 Changes in benefit obligation Benefit obligation at beginning of year                         $ 8,004       $ 7,333       $   7,359 Service cost                                                           458           386           365 Interest cost                                                           650           511           470 Actuarial losst(gain)                                                 1,313           170         (430)
2001 2000 1999 Changes in benefit obligation Benefit obligation at beginning of year  
Benefits paid                                                         (118)         (396)         (431)
$ 8,004  
Benefit obligation at end of year                                               $ 8.004 S1030        S 7.333 Change in plan assets Fair value of plan assets at beginning of year                   $ 8,119       $ 7,821       $ 7,735 Actual return on plan assets                                           (292)         144             6 Employer contribution                                                   562           588           542 Benefits paid, including expenses                                     (162)       (434)           (462)
$ 7,333  
Fair value of plan assets at end of year                         $18.227                       $ 7.821 7Z811 Funded Status                                                   $ (2,080)     $    115     $    488 Unrecognized net actuarial loss                                       2,949       1,278           573 Unrecognized prior service cost                                         661           161           185 "Unrecognizedtransition obligation                                       73           88           104 Prepaid pension cost                                                 1                       L1J5 Components of net periodic benefit cost Service cost                                                     $      458     $    386     $    365 Interest cost                                                           650           511           470 Expected return on plan assets                                         (689)         (673)         (662)
$ 7,359 Service cost 458 386 365 Interest cost 650 511 470 Actuarial losst(gain) 1,313 170 (430)
S Amortization of transition obligation                                   15           15             15 Amortization of prior service cost                                       70           24             24 Recognized net actuarial loss                                           97           33 Net periodic benefit cost                                         ;    0.;229               L;6212 MASSACHUSETTS MUNICIPAL WHOLESALE
Benefits paid (118)
                                            . ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (9)     Benefit Plans (continued)
(396)
Annual contributions to the pension plans recorded as pension expense were $562,000,
(431)
  $588,000 and $541,000, for the years ended December 31, 2001, 2000 and 1999, respectively. These amounts were billed through the PSAs, PPAs and Service Agreement with MMWEC members and are included in other operating expense in the Statements of Operations. The union plan uses the aggregate actuarial cost method and the non-union plan uses the frozen initial liability actuarial cost method in determining pension expense. In addition to the actuarial assumptions outlined above, the assumed long
Benefit obligation at end of year S1030
_ term rate of return used in determining pension expense was 8.5% in 2001, 2000 and 1999, respectively.
$ 8.004 S 7.333 Change in plan assets Fair value of plan assets at beginning of year  
Pension costs applicable to prior years' service are amortized over thirty years.
$ 8,119  
                  "MMWEC contributes to an employee savings plan administered by an insurance company.
$ 7,821  
All full-time employees meeting the service requirements are eligible to participate in this defined contribution plan. Under the provisions of the plan, MMWEC's contributions vest immediately. MMWEC contributed $108,000, $104,000 and $99,000, while the employees contributed $180,000, $177,000 and
$ 7,735 Actual return on plan assets (292) 144 6
  $177,000 during the years ended December 31, 2001, 2000 and 1999, respectively.
Employer contribution 562 588 542 Benefits paid, including expenses (162)
(10)   Commitments and Contingencies Power Purchases MMWEC entered into agreements for participation in the transmission interconnection between New England utilities and the Hydro-Quebec electric system near Sherbrooke, Quebec (Phase I),
(434)
(462)
Fair value of plan assets at end of year  
$18.227 7Z811
$ 7.821 Funded Status  
$ (2,080) 115 488 Unrecognized net actuarial loss 2,949 1,278 573 Unrecognized prior service cost 661 161 185 "Unrecognized transition obligation 73 88 104 Prepaid pension cost 1
L1J5 Components of net periodic benefit cost Service cost 458 386 365 Interest cost 650 511 470 Expected return on plan assets (689)
(673)
(662)
S Amortization of transition obligation 15 15 15 Amortization of prior service cost 70 24 24 Recognized net actuarial loss 97 33 Net periodic benefit cost 0.;229 L;6212 MASSACHUSETTS MUNICIPAL WHOLESALE  
. ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (9)
Benefit Plans (continued)
Annual contributions to the pension plans recorded as pension expense were $562,000,  
$588,000 and $541,000, for the years ended December 31, 2001, 2000 and 1999, respectively. These amounts were billed through the PSAs, PPAs and Service Agreement with MMWEC members and are included in other operating expense in the Statements of Operations. The union plan uses the aggregate actuarial cost method and the non-union plan uses the frozen initial liability actuarial cost method in determining pension expense. In addition to the actuarial assumptions outlined above, the assumed long term rate of return used in determining pension expense was 8.5% in 2001, 2000 and 1999, respectively.
Pension costs applicable to prior years' service are amortized over thirty years.  
"MMWEC contributes to an employee savings plan administered by an insurance company.
All full-time employees meeting the service requirements are eligible to participate in this defined contribution plan. Under the provisions of the plan, MMWEC's contributions vest immediately. MMWEC contributed $108,000, $104,000 and $99,000, while the employees contributed $180,000, $177,000 and  
$177,000 during the years ended December 31, 2001, 2000 and 1999, respectively.
(10)
Commitments and Contingencies Power Purchases MMWEC entered into agreements for participation in the transmission interconnection between New England utilities and the Hydro-Quebec electric system near Sherbrooke, Quebec (Phase I),
which began commercial operation in October 1986. The New England portion of the interconnection was constructed at a total cost of about $140 million, of which 3.65% or $5 million is MMWEC's share to support Phase I. MMWEC. also entered into similar agreements for participation in the interconnection between New England utilities and the Hydro-Quebec electric system for the expansion of the Hydro Quebec interconnection (Phase I), which went into commercial operation in November 1990. MMWEC's Phase H equity investment approximates 0.6% or $3.3 million. MMWEC has corresponding agreements with certain of its members and another utility to recover MMWEC's share of the costs associated with the Phase II interconnection.
which began commercial operation in October 1986. The New England portion of the interconnection was constructed at a total cost of about $140 million, of which 3.65% or $5 million is MMWEC's share to support Phase I. MMWEC. also entered into similar agreements for participation in the interconnection between New England utilities and the Hydro-Quebec electric system for the expansion of the Hydro Quebec interconnection (Phase I), which went into commercial operation in November 1990. MMWEC's Phase H equity investment approximates 0.6% or $3.3 million. MMWEC has corresponding agreements with certain of its members and another utility to recover MMWEC's share of the costs associated with the Phase II interconnection.
Power Sales Agreements MM.WEC sells the Project Capability of each of its Projects to Project Participants under PSAs.
Power Sales Agreements MM.WEC sells the Project Capability of each of its Projects to Project Participants under PSAs.
In 1988, the Vermont Supreme Court ruled that the Project No. 6 PSAs between MMWEC and the Vermont   Project Participants were void since inception. Consequently, pursuant to the PSAs, MMWEC increased the remaining Project No. 6 Participants pro rata shares of Project Capability to cover the shortfall (step-up), which action was challenged by certain Massachusetts Participants. The Supreme Judicial Court of the Commonwealth in MMWEC et. al. v. Town of Danvers et. al. held that "the Project 6 PSAs executed by the defendants are valid and that the step-up provisions therein have been properly invoked".
In 1988, the Vermont Supreme Court ruled that the Project No. 6 PSAs between MMWEC and the Vermont Project Participants were void since inception.
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (10)     Commitments and Contingencies (continued)
Consequently, pursuant to the PSAs, MMWEC increased the remaining Project No. 6 Participants pro rata shares of Project Capability to cover the shortfall (step-up), which action was challenged by certain Massachusetts Participants. The Supreme Judicial Court of the Commonwealth in MMWEC et. al. v. Town of Danvers et. al. held that "the Project 6 PSAs executed by the defendants are valid and that the step-up provisions therein have been properly invoked".
MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (10)
Commitments and Contingencies (continued)
Legal Actions SMMWEC is involved in various legal actions. Based on bond counsels' opinions regarding the validity of the PSAs and legal counsel's representations regarding the litigation, discussions with such counsel, and other considerations, management believes that the ultimate resolution of litigation in which S
Legal Actions SMMWEC is involved in various legal actions. Based on bond counsels' opinions regarding the validity of the PSAs and legal counsel's representations regarding the litigation, discussions with such counsel, and other considerations, management believes that the ultimate resolution of litigation in which S
MMWEC       currently participates will not have a material, adverse effect on the financial position of WAWEC.
MMWEC currently participates will not have a material, adverse effect on the financial position of WAWEC.
In November 1997, the Commonwealth enacted legislation to restructure the electric utility
In November 1997, the Commonwealth enacted legislation to restructure the electric utility industry. MMWEC and the municipal light departments are not specifically subject to the legislation.
.. industry. MMWEC and the municipal light departments are not specifically subject to the legislation.
However, it is management's belief that industry restructuring and customer choice, provided by the legislation, will have an effect on MMWEC and the Participant's operations, which effect cannot be determined at this time.
However, it is management's belief that industry restructuring and customer choice, provided by the legislation, will have an effect on MMWEC and the Participant's operations, which effect cannot be determined at this time.
Nuclear Insurance The Price-Anderson Act (the Act), a federal statute, in effect until August 1, 2002, mandates an industry-wide program of liability insurance for nuclear facilities. The Act now provides approximately
Nuclear Insurance The Price-Anderson Act (the Act), a federal statute, in effect until August 1, 2002, mandates an industry-wide program of liability insurance for nuclear facilities. The Act now provides approximately  
  $9.5 billion for public liability claims from a single incident at a nuclear facility. The $200 million primary layer of insurance for the liability has been purchased in the commercial market. Secondary coverage is to be provided through an approximately $88.1 million per incident assessment of each of the currently licensed nuclear units in the United States. The maximum assessment is $10 million per incident per unit in any year. Under the Act, MMWEC's interest in Millstone Unit 3 and Seabrook Station could result in a maximum assessment of $4.2 and $10.2 million, limited to payments of $.5 and $1.2 million per incident per year, respectively. The United States House of Representatives has passed a bill which would extend the Act beyond August 1, 2002 and increase the amounts that would be assessed against nuclear facilities licenses in the event of a nuclear incident. The bill has gone to the United States Senate for its consideration.
$9.5 billion for public liability claims from a single incident at a nuclear facility. The $200 million primary layer of insurance for the liability has been purchased in the commercial market. Secondary coverage is to be provided through an approximately $88.1 million per incident assessment of each of the currently licensed nuclear units in the United States. The maximum assessment is $10 million per incident per unit in any year. Under the Act, MMWEC's interest in Millstone Unit 3 and Seabrook Station could result in a maximum assessment of $4.2 and $10.2 million, limited to payments of $.5 and $1.2 million per incident per year, respectively. The United States House of Representatives has passed a bill which would extend the Act beyond August 1, 2002 and increase the amounts that would be assessed against nuclear facilities licenses in the event of a nuclear incident. The bill has gone to the United States Senate for its consideration.
Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL) to cover the cost of repair, replacement, decontamination or premature decommissioning of utility property resulting from insured occurrences at Millstone Unit 3 and Seabrook Station. The NELL insurance is subject to retroactive assessments if losses exceed the accumulated funds available to the insurer. MMWEC is potentially subject to a $1.0 and $2.3 million assessment for its participation in Millstone Unit 3 and Seabrook Station, respectively, for excess property damage, decontamination and premature decommissioning.
Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL) to cover the cost of repair, replacement, decontamination or premature decommissioning of utility property resulting from insured occurrences at Millstone Unit 3 and Seabrook Station. The NELL insurance is subject to retroactive assessments if losses exceed the accumulated funds available to the insurer. MMWEC is potentially subject to a $1.0 and $2.3 million assessment for its participation in Millstone Unit 3 and Seabrook
: Station, respectively, for excess property
: damage, decontamination and premature decommissioning.
Environmental and Other Issues MMWEC is not currently covered under gradual pollution liability insurance related to SMMWEC's Stony Brook power plant. Nothing has come to management's attention concerning any material pollution liability claims made during 2001 or outstanding as of December 31, 2001.
Environmental and Other Issues MMWEC is not currently covered under gradual pollution liability insurance related to SMMWEC's Stony Brook power plant. Nothing has come to management's attention concerning any material pollution liability claims made during 2001 or outstanding as of December 31, 2001.
MMWEC has established a trust fund to enhance its Directors' and Officers' liability coverage. The purpose of the trust fund is to make available funds for the purchase of Directors' and Officers' liability insurance and/or indemnification of the Directors or Officers.
MMWEC has established a trust fund to enhance its Directors' and Officers' liability coverage. The purpose of the trust fund is to make available funds for the purchase of Directors' and Officers' liability insurance and/or indemnification of the Directors or Officers.
ANDERSEN Independent Auditors' Report on Supplementary Information To the Board of Directors of Massachusetts Municipal Wholesale Electric Company:
ANDERSEN Independent Auditors' Report on Supplementary Information To the Board of Directors of Massachusetts Municipal Wholesale Electric Company:
We have audited and reported separately herein on the financial statements of Massachusetts Municipal Wholesale Electric Company as of and for the year ended December 31, 2001. Our audit was made for the purpose of forming an opinion on the basic financial statements of Massachusetts Municipal Wholesale Electric Company taken as a whole. The Project statements of financial position, operations and cash flows, on page 21 through 23 are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
We have audited and reported separately herein on the financial statements of Massachusetts Municipal Wholesale Electric Company as of and for the year ended December 31, 2001. Our audit was made for the purpose of forming an opinion on the basic financial statements of Massachusetts Municipal Wholesale Electric Company taken as a whole. The Project statements of financial position, operations and cash flows, on page 21 through 23 are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Hartford, Connecticut March 8, 2002 (C(C((CC(CCC(C(                                                                                                 C(             (       ( (((C                         C(¢           Cr           (C((                 C MASSACHUSETTS MUNICIPAL WHOLFSqALE FLECfTlrR COMPANY PROJECT STATEMENTS OF   IQNANCIAL POSITION DEFCFMBRF~ 31 71101 (In Thousands)
Hartford, Connecticut March 8, 2002 (C(C((CC(CCC(C(
ASSETS                                        NUCLEAR       NUCLEAR     NUCLEAR         NUCLEAR       PROJECT                                             HYDRO QUEBEC SERVICE         MIX I         PROJ. 3     PROJ. 4       PROJ. 5       NO.6         PEAKING     INTERMEDIATE   WYMAN       PHASE II     TOTAL Electric plant In service                                          $    2,434   $    60,399   $  130,588  S 259,505      $  71,006 $      501,516 $      56,636    $  151,794  $  7,341              S 1,241,219 Accumulated depreciation                                (2,253)       (27,570)    (61,548)     (102,412)     (28,108)       (200,205)     (42,72)       (119,453)    (5,007)                (589,328) 181          32,829                    157,N93       42,898         30,1           -I86-4 13,P-          T2,41                              651,891 Construction work in progress                                                63          65          869           220           1,203                       3,694                                6,114 Nuclear fuel-net of amortization                              -          798        1,348          3,436           873         4,824                                                           11,279 Total electric plant                                                                            161,398       43,99         307,33     ~13,8                                                 669,284 Special funds Bond funds Interest, principal and retirement account                            1,845        2,118          3,032           933         6,707           902         2,184        97                    17,818 Reserve account                                                      4,521        8,120          9,253       2,810         30,487           671         3,129        109                    59,100 Reserve and contingency fund                                            3,675        4,734          5,872       1,509           8,853           869         1,620        303                    27,435 Revenue fund                                                            8,278      12,776        14,892       3,887         25,681         5,920         15,880      2,863                    90,177 Working capital funds                                  21,436                                                                                                                          (20)        21,416 33,049         9,139       7     ,728   -    ,36 Current assets Cash and temporary Investmen                              549                                            1                           2 552 Accounts receivable                                    6,071              250          308            396           115             750           212           369        29          94        8,594 Unbilled revenues                                      6,721                                                                                                                                      6,721 Inventories                                                                65                      1,735           439         2,402         2,813         11,577        239                    19,270 Advances to (from) projects                            2,865            (190)        (316)          (342)         (106)           (762)       (329)         (783)      (37)
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Prepaid expens                                            129            731        1,329          1,646           418         2,280             7             14                              6,554
(
    ""  Total current assets                                      16,335              856        1,321          3,436           866         4,672         2,703         11,177        231          94        41,691 Total special funds and current assets                    37,177          19T,17                      36,48       TU             7T6,4         11,065         33,990              ---  w" Deferred charges Amounts recoverable (payable) under terms of the power sales agreements                      20,234          59,024      87,446        16,349       10,257         71,760       (7,423)         6,434    (1,882)      (855)      261,344 Unamortzed debt discount and expenses                    170          1,598        2,730          3,180           957         6,880           202           924        44                    16,685 Nuclear decommissioning trusts                                          3,706        6,953          5,824       1,474           8,065                                                           26,022 Other                                                        77            122          187          768           196         1,064           438         3,834                  840          7,526
( (((C C(¢ Cr (C((
                                                              -                    M,450        97,316        26,12     12,84           8776-W,73                   11,192                    (15)      311,577 W        $    117,31,    $  196,83    s" 224,054     $-W 66,80   $      71""     $    18,14                             T-=W UJABLTHIF Long-term debt (Note 4)                                         -  $    101,375   $ 174.548   $  197,034   S   59,568   S     424,758   $    14,014   $    63,571 $  2,977   $          $ 1,037,845 Current liabilities Current maturities of long-term debt                                                       4,805        5,130          7,275        2,255          15,235        3,090          6,625        315                    44,730 Short-term debt (Note 4)                               20,560                                                                                                                                      20,560 Accounts payable                                        2,807             437         726          1,938          490          2,684            134          433        44          2        9,695 Accrued expenses                                        8,224            3,001        5,160         7,026       1,839         10,926           130        1,142        162                    37,610 Member and participant advances and reserves                                      26,842            3,922        4,191          4,796       1,226           9,684           778         9,446        601          57        61,543 l 3,775                    21,0W         n             38,529         4,132         17,646 1,T2-1                  174,138,49 Deferred credits                                                                                        5,93   -""T3wP               8,22o                                                           26,515 Commiunents and contingencies (Note 10)
ASSETS Electric plant In service Accumulated depreciation Construction work in progress Nuclear fuel-net of amortization Total electric plant Special funds Bond funds Interest, principal and retirement account Reserve account Reserve and contingency fund Revenue fund Working capital funds Current assets Cash and temporary Investmen Accounts receivable Unbilled revenues Inventories Advances to (from) projects Prepaid expens Total current assets Total special funds and current assets Deferred charges Amounts recoverable (payable) under terms of the power sales agreements Unamortzed debt discount and expenses Nuclear decommissioning trusts Other MASSACHUSETTS MUNICIPAL WHOLFSqALE FLECfTlrR COMPANY PROJECT STATEMENTS OF IQNANCIAL POSITION DEFCFMBRF~ 31 71101 (In Thousands)
                                                              $ 58,433     $    117,315   $ 196,838   $  224,004   S   66,880   $    471,507   $    18,146   $    81,217  $                      $ 1,238,498 4,099    $    59 The accompanying notes are an integral part of this supplemental schedule.
NUCLEAR NUCLEAR NUCLEAR NUCLEAR PROJECT HYDRO QUEBEC SERVICE MIX I PROJ. 3 PROJ. 4 PROJ. 5 NO.6 PEAKING INTERMEDIATE WYMAN PHASE II TOTAL 2,434 60,399 (2,253)
(27,570) 181 32,829 63 798 1,845 4,521 3,675 8,278 21,436 549 6,071 250 6,721 65 2,865 (190) 129 731 16,335 856 37,177 19T,17 20,234 59,024 170 1,598 3,706 77 122 M,450 W
117,31, 130,588 (61,548) 65 1,348 2,118 8,120 4,734 12,776 308 (316) 1,329 1,321 87,446 2,730 6,953 187 97,316 196,83 S 259,505 71,006 501,516 56,636 (102,412)
(28,108)
(200,205)
(42,72) 157,N93 42,898 30,1 13,P-
-I86-4 869 220 1,203 3,436 873 4,824 161,398 43,99 307,33  
~13,8 3,032 933 6,707 902 9,253 2,810 30,487 671 5,872 1,509 8,853 869 14,892 3,887 25,681 5,920 33,049 9,139 7  
,728  
,36 1
2 396 115 750 212 1,735 439 2,402 2,813 (342)
(106)
(762)
(329) 1,646 418 2,280 7
3,436 866 4,672 2,703 36,48 TU 7T6,4 11,065 16,349 10,257 71,760 (7,423) 3,180 957 6,880 202 5,824 1,474 8,065 768 196 1,064 438 26,12 12,84 8776-W,73 s" 224,054  
$-W 66,80 71""
18,14 151,794 (119,453)
T2,41 3,694 2,184 3,129 1,620 15,880 369 11,577 (783) 14 11,177 33,990 6,434 924 3,834 11,192 7,341 (5,007) 97 109 303 2,863 29 239 (37) 231 (1,882) 44 (20) 94 94 w"
(855) 840 (15)
T-=W UJABLTHIF Long-term debt (Note 4) 101,375  
$ 174.548 197,034 S
59,568 S
424,758 14,014 63,571 2,977 S 1,241,219 (589,328) 651,891 6,114 11,279 669,284 17,818 59,100 27,435 90,177 21,416 552 8,594 6,721 19,270 6,554 41,691 261,344 16,685 26,022 7,526 311,577 1,037,845 Current liabilities Current maturities of long-term debt Short-term debt (Note 4)
Accounts payable Accrued expenses Member and participant advances and reserves Deferred credits Commiunents and contingencies (Note 10) 20,560 2,807 8,224 4,805 437 3,001 26,842 3,922 3,775 5,130 726 5,160 4,191 7,275 1,938 7,026 2,255 15,235 490 2,684 1,839 10,926 3,090 134 130 4,796 1,226 9,684 778 21,0W n
38,529 4,132 5,93  
-""T3wP 8,22o
$ 58,433 117,315  
$ 196,838 224,004 S
66,880 471,507 18,146 The accompanying notes are an integral part of this supplemental schedule.
6,625 433 1,142 9,446 17,646 315 44 162 601 1,T2-1 2
57 81,217 4,099 59 44,730 20,560 9,695 37,610 61,543 l
174,138,49 26,515 1,238,498 C


( (       (     (     C (             (" C (             (       (         (         C     ((((((C                                     (C       (C      ((C                  (c:-(        C MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRC COMPANY PROJECT STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31.2001 (In Thousands)
(
NUCLEAR       NUCLEAR       NUCLEAR       NUCLEAR       PROJECT                                          HYDRO QUEBEC SERVICE .       MIX 1         PROJ. 3       PROJ. 4       PROJ. 5       NO. 6      PEAKING  INTERMEDIATE  WYMAN        PHASE II    TOTAL Revenues                                   $    83,202   $    13,783    $  24,205    $    26,568  $    7,583  $    51,372    $ 10,260    $ 38,146  $  3,111        $  481    $  258,711 Interest income                                    1,023        1,204         1,689         2,376          715          5,248        690        1,768        161          58        14,932 Total revenues and interest income      $    84,225    $    14,987   $  25,894   $    28,944  $    8,298  $    56,620    $ 10,950    $ 39,914  $  3,272        $ 539    $  273,643 Operating and service expenses:
(
Fuel used in electric generation                        $      630    $    1,120   $    1,700  $      431  $      2,332  $  2,358    $ 21,641  $    993        $51      $    31,205 Purchased power                              74,409                                                                                                                      514        74,923 Other operating                                1,498        2,750          4,971        6,659       1,742          9,410      1,943        5,630
(
* 562                      35,165 Maintenance                                        18        1,203         2,290        1,450          367        2,009      2,062        1,785                                  11,184 Depreciation                                      14        1,987          4,180        9,494        2,593        18,225     2,295        6,348        232                      45,368 Taxes other than income                            2           301            543          803          203          1,1111      391        1,078        179                      4,611 75,941          6,871        13,104        20,106        5,336        33,087      9,049      36,482      1,966          514        202,456 Interest expense:
(
Interest charges                                  932        4,992          8,027        10,468        3,333        24,513        960       3,606         150                      56,981 Interest charged to projects during construction                              -            (1)                         (20)         (6)           (33)                        -_        _(60) 932         4,991         8,027       10,448       3,327       24,480         960       3,606        150            -        56,921 Total operating costs and interest expense                              76,873         11,862       21,131         30,554       8,663       57,567     10,009       40,088     2,116           514       259,377 Other (credits) charges                                                                           (2)                        (3)                                                            (5)
C (
Loss on refinancing - net                               -        5,073         8,486       11,234       3,500       24,867         338       3,217          98                      56,813 Total costs and expenses                        76,873         16,935       29,617         41,786       12,163       82,431     10,347       43,305      2,214          514        316,185 (Increase) decrease in amounts recoverable under terms of the power sales agreements                              7,352         (1,948)       (3,723)     (12,842)     (3,865)     (25,811)       603       (3,391)    1,058            25        (42,542)
(" C (
                                              $    84,225   $    14,987   $ 25,894     $    28,944   $    8,298   $    56,620 $ 10,950       $ 39,914   $  3,272       $ 539     $  273,643
(
(
(
C ((((((C (C
(C MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRC COMPANY PROJECT STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31.2001 (In Thousands)
NUCLEAR NUCLEAR NUCLEAR NUCLEAR SERVICE.
MIX 1 PROJ. 3 PROJ. 4 PROJ. 5 Revenues Interest income Total revenues and interest income Operating and service expenses:
Fuel used in electric generation Purchased power Other operating Maintenance Depreciation Taxes other than income Interest expense:
Interest charges Interest charged to projects during construction Total operating costs and interest expense 83,202 1,023 84,225 74,409 1,498 18 14 2
75,941 13,783 24,205 1,204 1,689 14,987 25,894 630 2,750 1,203 1,987 301 6,871 932 4,992 1,120 4,971 2,290 4,180 543 13,104 8,027 26,568 2,376 28,944 1,700 6,659 1,450 9,494 803 20,106 10,468 7,583 715 8,298 431 1,742 367 2,593 203 5,336 3,333 PROJECT HYDRO QUEBEC NO. 6 PEAKING INTERMEDIATE WYMAN PHASE II 51,372
$ 10,260 5,248 690 56,620
$ 10,950 2,332 9,410 2,009 18,225 1,1111 33,087 24,513 2,358 1,943 2,062 2,295 391 9,049 38,146 1,768 39,914 21,641 5,630 1,785 6,348 1,078 36,482 3,111 161 3,272 993 562 232 179 1,966 960 3,606 (1)
(20)
(6)
(33) 932 4,991 8,027 10,448 3,327 24,480 960 76,873 11,862 21,131 30,554 8,663 57,567 10,009
$ 481 58
$ 539
$51 514 514 150 TOTAL 258,711 14,932 273,643 31,205 74,923 35,165 11,184 45,368 4,611 202,456 56,981
_(60) 3,606 150 56,921 40,088 2,116 514 259,377 Other (credits) charges Loss on refinancing - net Total costs and expenses (Increase) decrease in amounts recoverable under terms of the power sales agreements 5,073 8,486 11,234 3,500 24,867 338 76,873 16,935 29,617 41,786 12,163 82,431 10,347 7,352 (1,948)
(3,723)
(12,842)
(3,865)
(25,811) 603 84,225 14,987  
$ 25,894 28,944 8,298 56,620  
$ 10,950 3,217 98 43,305 2,214 514 (3,391) 1,058 25
$ 39,914 3,272  
$ 539
* Allocation between maintenance and other operating is not available.
* Allocation between maintenance and other operating is not available.
The accompanying notes are an integral part of this supplemental schedule.
The accompanying notes are an integral part of this supplemental schedule.
(2)
(3)
(5) 56,813 316,185 (42,542) 273,643
((C (c:-(
C


(, (     C c' (                   C C C c                         (         (     C (             C       (       C       C C ý( (                           r       r     r .r       r         r r         (' (, ( (
(, (
MASACHUEMIMUNICPAIPL                    ALT PROJECT STrATEMENT!                         I.OW YEAR FNDlPI) DECEMBER 31. 21101 (in Thousands)
C c' (
NUCLEAR       NUCLEAR         NUCLEAR       NUCLEAR             PROJECT                                               HYDRO QUEBEC SERVICE           MIX I         PROJ. 3         PROJ. 4       PROJ. 5           NO.6         PEAKING     INTERMEDIATE   WYMAN         EHABE1I       TOTAL Cash flows from operating activities:
C C C c
Total revenues and Interest income                    $  84,225     $    14,987   $    25,894     $    28,944 $         8,298 $         56,620 $ 10,950         $  39,914   $  3,272     $    539     $      273,643 Total costs and expenses, net                            (76.873)         (16,935)       (29,617)       (41,786)       (12,163)           (82,431)     (10,347)       (43,305)   (2,214)       (514)           (316,185)
(
Adjustments to arrive at net cash proied by operating activities:
(
Depreciation and decomissioning                            14         2,255         4,650         10,351           2,810             19,410         2,28           6,308       232                           48,312 Amortization of debt discount and nuclear fuel            113           2,001           4,156         5,760           2,016             10,681           61           590         (4)                         25,374 Change in current aets and liabilities:
C (
Accounts receivable                                2,276             (231)         (248)           (379)         (111)             (727)         179           280       164           8               1,211 U lled mvenues                                    5,483                                                                 -                                                        -          -                5,483 Inventories                                                              (2)                           (50)           (12)               (68)       (931)       (4,518)       (10)           -              (5,591)
C (
Prepald expenses                                      365             209           448           (441)         (111)             (605)             7             7         1                             (120)
C C C ý( (
Accounts payable                                    (803)             403           680             160             55               456           880           (921)     (498)           (2)                 410 Accrued expenses aM other                        (5,541)             597           864           1,442           421             3,174         (395)         1,632         81         (28)               2,247 Member and participant advances and reserves                                        87               559         2,446           1,098           157             2,M           (202)         6,819       374           (3)             14,212 Net cash provided by (used for) opermt activities            10,131           3,843           9,273         5,099           1,360             8,602         2,484         6,806     1,398                           48,996 Cash flows om Investing activities:
r r
Construction expetnitures and purchases of raucer fue                                      (67)           (217)         (285)       (2,013)           (509)           (2,789)         (237)       (4,051)                                     (10,168)
r.r r
Interest charged to pt during construction                                                            (1)             -            (20)           (6)               (33)                                                                     (60)
r r
Net (Increase) decrease in special funds                    (3,063)           2,324           (182)         8,781         3,155             11,811         3,807         8,885     (836)                         .34,682 Change In net unrelized pin (loss) on special flnds              5o             127           129             227             13               (             34.           80         22                               593 Decomunlssloning aust payments, net                                            (476)         (871)       (1,059)           (268)           (1,466)                                                                   (4,140)
('
Other                                                          101             226           435             203             52               281             -          253                                       1,551 Net cash provided by (used for) investing activities                                        (2,979)           1,983           (774)         6,119         2,437             7,715         3,604         5,167     (814)                           22,458 Cash flows from financing activities:
(, ( (
Payments for principal of long4erm debt and commercial paper                                      (7,465)           (6,070)       (8,795)         (6,735)       (2,255)           (14,760)       (3,925)       (8,780)     (380)                         (59,165)
Cash flows from operating activities:
Proceeds from bonds                                                        102,140       227,770         215,270         63,160           436,230         16,435       66,270     3,X55                       1,130,530 Payments for bond issue costs                                                (1,679)       (3,571)         (3,569)       (1,054)           (7,425)         (225)         (994)       (48)                         (18,565)
Total revenues and Interest income Total costs and expenses, net Adjustments to arrive at net cash proied by operating activities:
Bond Issue pmnium                                                  -          4,953         3,547           7,996         2,932             24,888           722         4,126         39                           49,203 Change In notes payable                                          (50)                                             *                                                              -                                          (50)
Depreciation and decomissioning Amortization of debt discount and nuclear fuel Change in current aets and liabilities:
Payment for deftasance of bonds                                          (05,170)       (7.450)         (2243M         (66,580)         (455a2%0)     (19,095)       (72,595)   (3,450)                     (1,173,770)
Accounts receivable U
Net cash used for financing activities                      (7,515)           (5,826)       (8,499)       (11,218)         (3,797)           (16,317)       (6,088)     (11,973)       (584)                         (71,817)
lled mvenues Inventories Prepald expenses Accounts payable Accrued expenses aM other Member and participant advances and reserves Net cash provided by (used for) opermt activities Cash flows om Investing activities:
Net decrease Incash and temporay investnts                      (363)                                                                                                                         -                            (363)
Construction expetnitures and purchases of raucer fue Interest charged to pt during construction Net (Increase) decrease in special funds Change In net unrelized pin (loss) on special flnds Decomunlssloning aust payments, net Other Net cash provided by (used for) investing activities Cash flows from financing activities:
Cash and temporary Investments at beginnng of year                                            912                                               1                                 2                                                                     915 Cash and temporary lnvesunents at end of year                                        $        549   S               $                          1 $             -$                2 $              $            $        -  $        -    $          552 Cash paid during the year for interest (Net of amount capitalized as shown above)            $        724   $      4,146   $      6,839   $      8,817   $      2,798     $      20,744   $      795   $    2,893 $    130   $        -    $        47,886 The accompanying notes are an integral part of this sup f1ementaI schedule.
Payments for principal of long4erm debt and commercial paper Proceeds from bonds Payments for bond issue costs Bond Issue pmnium Change In notes payable Payment for deftasance of bonds Net cash used for financing activities Net decrease In cash and temporay investnts Cash and temporary Investments at beginnng of year Cash and temporary lnvesunents at end of year Cash paid during the year for interest (Net of amount capitalized as shown above)
The accompanying notes are an integral part of this sup MASACHUEMI L
ALT MUNICPAIP PROJECT STrATEMENT!
I.OW YEAR FNDlPI) DECEMBER 31. 21101 (in Thousands)
NUCLEAR NUCLEAR NUCLEAR NUCLEAR PROJECT HYDRO QUEBEC SERVICE MIX I PROJ. 3 PROJ. 4 PROJ. 5 NO.6 PEAKING INTERMEDIATE WYMAN EHABE1I TOTAL 84,225 14,987 25,894 28,944 $
8,298 $
56,620 10,950 39,914 3,272 539 273,643 (76.873)
(16,935)
(29,617)
(41,786)
(12,163)
(82,431)
(10,347)
(43,305)
(2,214)
(514)
(316,185) 14 2,255 4,650 10,351 2,810 19,410 2,28 6,308 232 48,312 113 2,001 4,156 5,760 2,016 10,681 61 590 (4) 25,374 2,276 (231)
(248)
(379)
(111)
(727) 179 280 164 8
1,211 5,483 5,483 (2)
(50)
(12)
(68)
(931)
(4,518)
(10)
(5,591) 365 209 448 (441)
(111)
(605) 7 7
1 (120)
(803) 403 680 160 55 456 880 (921)
(498)
(2) 410 (5,541) 597 864 1,442 421 3,174 (395) 1,632 81 (28) 2,247 87 559 2,446 1,098 157 2,M (202) 6,819 374 (3) 14,212 10,131 3,843 9,273 5,099 1,360 8,602 2,484 6,806 1,398 48,996 (67)
(217)
(285)
(2,013)
(509)
(2,789)
(237)
(4,051)
(10,168)
(1)
(20)
(6)
(33)
(60)
(3,063) 2,324 (182) 8,781 3,155 11,811 3,807 8,885 (836)  
.34,682 5o 127 129 227 13
(
: 34.
80 22 593 (476)
(871)
(1,059)
(268)
(1,466)
(4,140) 101 226 435 203 52 281 253 1,551 (2,979) 1,983 (774) 6,119 2,437 7,715 3,604 5,167 (814) 22,458 (7,465)
(6,070)
(8,795)
(6,735)
(2,255)
(14,760)
(3,925)
(8,780)
(380)
(59,165) 102,140 227,770 215,270 63,160 436,230 16,435 66,270 3,X55 1,130,530 (1,679)
(3,571)
(3,569)
(1,054)
(7,425)
(225)
(994)
(48)
(18,565) 4,953 3,547 7,996 2,932 24,888 722 4,126 39 49,203 (50)
(50)
(05,170)
(7.450)
(2243M (66,580)
(455a2%0)
(19,095)
(72,595)
(3,450)
(1,173,770)
(7,515)
(5,826)
(8,499)
(11,218)
(3,797)
(16,317)
(6,088)
(11,973)
(584)
(71,817)
(363)
(363) 912 1
2 915 549 S
1 $
2 552 724 4,146 6,839 8,817 2,798 20,744 795 2,893 130 47,886 f1ementaI schedule.


Financial Statements and Report of Independent Certified Public Accountants Taunton Municipal Lighting Plant December 31, 2001 and 2000
Financial Statements and Report of Independent Certified Public Accountants Taunton Municipal Lighting Plant December 31, 2001 and 2000


CONTENTS Pae REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS   3 FINANCIAL STATEMENTS BALANCE SHEETS                                 4 STATEMENTS OF EARNINGS                         5 STATEMENTS OF RETAINED EARNINGS                 6 STATEMENTS OF CASH FLOWS                       7 NOTES TO FINANCIAL STATEMENTS                   9
CONTENTS Pae REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS BALANCE SHEETS 4
STATEMENTS OF EARNINGS 5
STATEMENTS OF RETAINED EARNINGS 6
STATEMENTS OF CASH FLOWS 7
NOTES TO FINANCIAL STATEMENTS 9


Grant Thornton S
Grant Thornton S Accountants and Management Consultants Report of Independent Certified Public Accountants Municipal Light Commission of the City of Taunton Taunton, Massachusetts We have audited the accompanying balance sheets of the Taunton Municipal Lighting Plant (a department of the City of Taunton) as of December 31, 2001 and 2000, and the related statements of earnings, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Plant's management. Our responsibility is to express an opinion on these financial statements based on our audits.
. Accountants and Management Consultants Report of Independent Certified Public Accountants Municipal Light Commission of the City of Taunton Taunton, Massachusetts We have audited the accompanying balance sheets of the Taunton Municipal Lighting Plant (a department of the City of Taunton) as of December 31, 2001 and 2000, and the related statements of earnings, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Plant's management. Our responsibility is to express an opinion on these financial statements based on our audits.
Except as discussed in the following paragraph, we conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
Except as discussed in the following paragraph, we conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
As discussed in Note G to the financial statements, the Plant records pension expense based on a formula determined by the City of Taunton, whereas generally accepted accounting principles require the use of actuarial methods in determining annual pension expense and certain disclosures required by the Governmental Accounting Standards Board relating to pensions have been omitted. The effect on the financial statements of not using actuarial methods has not been determined.
As discussed in Note G to the financial statements, the Plant records pension expense based on a formula determined by the City of Taunton, whereas generally accepted accounting principles require the use of actuarial methods in determining annual pension expense and certain disclosures required by the Governmental Accounting Standards Board relating to pensions have been omitted. The effect on the financial statements of not using actuarial methods has not been determined.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to determine the effects of not using actuarial methods in determining pension expense and the omission of certain pension plan disclosures required by the Governmental Accounting Standards Board on the 2001 and 2000 financial statements, the financial statemcnts referred to above present fairly, in all material respects, the financial position of the Taunton Municipal Lighting Plant as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to determine the effects of not using actuarial methods in determining pension expense and the omission of certain pension plan disclosures required by the Governmental Accounting Standards Board on the 2001 and 2000 financial statements, the financial statemcnts referred to above present fairly, in all material respects, the financial position of the Taunton Municipal Lighting Plant as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Boston, MassachusettsL                                                                               r July 10, 2002 98 N.Washington St Boston, MA 02114-1913
Boston, MassachusettsL r
July 10, 2002 98 N. Washington St Boston, MA 02114-1913
_ T 617.723.7900 F 617.723.3640 W www.grantthomton.com Grant Thornton LLP US Member of Grant Thornton International
_ T 617.723.7900 F 617.723.3640 W www.grantthomton.com Grant Thornton LLP US Member of Grant Thornton International


Taunton Municipal Lighting Plant BALANCE SHEETS December 3 1, ASSETS 2001           20D0 UTILTY PLANT - AT COST Plant in service                                                                                 $129,804,846     $128,014,759 Less accumulated depreciation                                                                       875486               4 .5 Net utility plant in service                                                         42,256,786         45,588,502 Investment in Seabrook                                                                               2,260,028         2,409,993 Construction work in progress                                                                         5,867.215         1.648.11 Total utility plant                                                                   50,384,029       49,646,611 DEPRECIATION FUND (including certificates of deposit of $4,000,000 and $2,000,000 in 2001 and 2000, respectively)                                                                           5,694,715         10,851,084 SICK LEAVE TRUST FUND                                                                                   5,130,468         5,206,908 OTHER ASSETS Investment in Hydro Quebec Project                                                                     265,396           265,396 Investment in Energy New England LLC                                                                   431,279           215,078 Due from Plant Retirement Trust                                                                         689,138           675,716 CURRENT ASSETS Cash                                                                                                 4,270,322           893,323 Cash - rate stabilization fund                                                                                             442,064 Customer deposits                                                                                       872,850           689,778 Accounts receivable - unbilled rate stabilization                                                     1,592,572         1,378,130 Accounts receivable, less allowance for doubtful accounts of S1,784,524 and $2,065,364 respectively                                                                       4,468,255         4,906,871 Accounts receivable Internet                                                                               81,794           54,375 Materials and supplies inventory                                                                     5,791,430         1,748,718 Prepaid expenses                                                                                       1,498.856 Total current assets                                                                   18.576.079       11,941762 RETAINED EARNINGS AND LIABILITIES RETAINED EARNINGS Appropriated retained earnings Loans repayment                                                                               S 24,387,000     $ 23,037,000 Construction repayment                                                                                 32.43             32.434 24,419,434         23,069,434 Unappropriated retained earnings                                                                     35803.65         34528633 Total retained earnings                                                               60,223,093       57,598,067 LONG-TERM DEBT                                                                                           7,278,386         8,746,740 COMMTIMENTS AND CONTINGENCIES CURRENT LIABILITIES Accounts payable                                                                                     2,868,981         3,221,015 Customer deposits                                                                                       554,626         448,434 Current maturities of long-term debt                                                                 1,465,000         1,350,000 Accrued liabilities Sick leave                                                                                         4,990,781         4,716,963 954,418             4,242 Pension fund Vacation                                                                                               806,099           794,424 Interest                                                                                             347.474           392,474 Payment in lieu of taxes                                                                           1,250,000         1,180,000 Power- rate stabilization                                                                               25,000           25,000 Payroll                                                                                               254,092           206,008 Other                                                                                                 153154             11 Total current liabilities                                                               1 The accompanying notes are an integral part of these statements.
Taunton Municipal Lighting Plant BALANCE SHEETS December 3 1, ASSETS 2001 20D0 UTILTY PLANT - AT COST Plant in service  
$129,804,846  
$128,014,759 Less accumulated depreciation 875486 4  
.5 Net utility plant in service 42,256,786 45,588,502 Investment in Seabrook 2,260,028 2,409,993 Construction work in progress 5,867.215 1.648.11 Total utility plant 50,384,029 49,646,611 DEPRECIATION FUND (including certificates of deposit of $4,000,000 and $2,000,000 in 2001 and 2000, respectively) 5,694,715 10,851,084 SICK LEAVE TRUST FUND 5,130,468 5,206,908 OTHER ASSETS Investment in Hydro Quebec Project 265,396 265,396 Investment in Energy New England LLC 431,279 215,078 Due from Plant Retirement Trust 689,138 675,716 CURRENT ASSETS Cash 4,270,322 893,323 Cash - rate stabilization fund 442,064 Customer deposits 872,850 689,778 Accounts receivable - unbilled rate stabilization 1,592,572 1,378,130 Accounts receivable, less allowance for doubtful accounts of S 1,784,524 and $2,065,364 respectively 4,468,255 4,906,871 Accounts receivable Internet 81,794 54,375 Materials and supplies inventory 5,791,430 1,748,718 Prepaid expenses 1,498.856 Total current assets 18.576.079 11,941762 RETAINED EARNINGS AND LIABILITIES RETAINED EARNINGS Appropriated retained earnings Loans repayment S 24,387,000  
$ 23,037,000 Construction repayment 32.43 32.434 24,419,434 23,069,434 Unappropriated retained earnings 35803.65 34528633 Total retained earnings 60,223,093 57,598,067 LONG-TERM DEBT 7,278,386 8,746,740 COMMTIMENTS AND CONTINGENCIES CURRENT LIABILITIES Accounts payable 2,868,981 3,221,015 Customer deposits 554,626 448,434 Current maturities of long-term debt 1,465,000 1,350,000 Accrued liabilities Sick leave 4,990,781 4,716,963 Pension fund 954,418 4,242 Vacation 806,099 794,424 Interest 347.474 392,474 Payment in lieu of taxes 1,250,000 1,180,000 Power-rate stabilization 25,000 25,000 Payroll 254,092 206,008 Other 153154 11 Total current liabilities 1
The accompanying notes are an integral part of these statements.
4
4


Taunton Municipal Lighting Plant STATEMENTS OF EARNINGS Years ended December 31, 2001          2000 Operating revenues Sales of electricity Commercial and industrial                                         $31,996,256     $29,219,911 Residential                                                        20,905,656     18,552,227 Sales for resale                                                    4,939,926     6,717,972 2,905,850     2,580,644 Municipal 60,747,689     57,070,754 450,563       576,508 Other operating revenues Total operating revenues                                      61,198,252     57,647,262 Operating expenses Power production                                                      38,639,378     36,676,119 Transmission and distribution                                          6,264,538     4,861,608 Customer accounting                                                    1,612,300     2,054,976 Administrative and general                                            4,582,238     3,600,795 Depreciation and amortization                                          5,121,803     5,094,281 229,175       240,343 Nuclear expense Total operating expenses                                    56,449,432     52,528,122 Earnings from operations                                      4,748,820       5,119,140 Other expense (income)
Taunton Municipal Lighting Plant STATEMENTS OF EARNINGS Years ended December 31, Operating revenues Sales of electricity Commercial and industrial Residential Sales for resale Municipal Other operating revenues Total operating revenues Operating expenses Power production Transmission and distribution Customer accounting Administrative and general Depreciation and amortization Nuclear expense Total operating expenses Earnings from operations Other expense (income)
Internet (income) expense - net                                            (27,056)     253,007 Interest expense                                                          748,650       836,391 Interest income                                                          (267,824)      (240,341)
Internet (income) expense - net Interest expense Interest income Other (income) expense Total other expense Earnings before provision for payment in lieu of taxes 2001
(759,976)      (209,985)
$31,996,256 20,905,656 4,939,926 2,905,850 60,747,689 450,563 61,198,252 38,639,378 6,264,538 1,612,300 4,582,238 5,121,803 229,175 56,449,432 4,748,820 (27,056) 748,650 (267,824)
Other (income) expense Total other expense                                            (306,206)       639,072 5,055,026     4,480,068 Earnings before provision for payment in lieu of taxes Provision for payment in lieu of taxes                                                 2,360,000 NET EARNINGS                                                $ 2.625:026 The accompanying notes are an integral part of these statements.
(759,976)
(306,206) 5,055,026 Provision for payment in lieu of taxes NET EARNINGS 2000
$29,219,911 18,552,227 6,717,972 2,580,644 57,070,754 576,508 57,647,262 36,676,119 4,861,608 2,054,976 3,600,795 5,094,281 240,343 52,528,122 5,119,140 253,007 836,391 (240,341)
(209,985) 639,072 4,480,068 2,360,000
$ 2.625:026 The accompanying notes are an integral part of these statements.
5
5


Taunton Municipal Lighting Plant STATEMENTS OF RETAINED EARNINGS Years ended December 31, 2001 and 2000 Apipropriated Retai ned Earnings        Unappropriated Loan              Construction    Retained Repayment            Repayment      Earnings Balance at December 31, 1999                 $21,787,000                 $32,434 $33,658,565 Transfer for bond repayment                      1,250,000                          (1,250,000) 2,120,068 Net earnings Balance at December 31, 2000                    23,037,000                32,434  34,528,633 Transfer for bond repayment                      1,350,000                          (1,350,000)
Taunton Municipal Lighting Plant STATEMENTS OF RETAINED EARNINGS Years ended December 31, 2001 and 2000 Balance at December 31, 1999 Transfer for bond repayment Net earnings Balance at December 31, 2000 Transfer for bond repayment Net earnings Balance at December 31, 2001 Ap Retai Loan Repayment
Net earnings                                                                          2,625,026 Balance at December 31, 2001                  $24.387,000                $32,434 The accompanying notes are an integral part of these statements.
$21,787,000 1,250,000 23,037,000 1,350,000
$24.387,000 ipropriated ned Earnings Construction Repayment
$32,434 32,434
$32,434 Unappropriated Retained Earnings
$33,658,565 (1,250,000) 2,120,068 34,528,633 (1,350,000) 2,625,026 The accompanying notes are an integral part of these statements.
6
6


Taunton Municipal Lighting Plant STATEMENTS OF CASH FLOWS Years ended December 31, 2001            2000 Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities:
Taunton Municipal Lighting Plant STATEMENTS OF CASH FLOWS Years ended December 31, Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities:
Net earnings                                                             $ 2,625,026    $ 2,120,068 Adjustments to reconcile net earnings to net cash and cash equivalents provided by operating activities:
Net earnings Adjustments to reconcile net earnings to net cash and cash equivalents provided by operating activities:
Depreciation and amortization                                         5,121,803      5,094,281 Amortization of bond premium                                               (3,354)        (3,354)
Depreciation and amortization Amortization of bond premium Equity in losses of Seabrook investment Equity in (income) losses of Energy New England LLC investment Equity in losses of Hydro Quebec Change in assets and liabilities:
Equity in losses of Seabrook investment                                 149,965          137,259 (216,201)      (112,953)
(Increase) decrease in accounts receivable (Increase) in accounts receivable Internet (Increase) in due from Plant Retirement Trust (Increase) decrease in inventory Decrease in prepaid expenses Decrease in other assets Decrease in accounts payable Decrease in deferred revenue - rate stabilization Increase in customer deposits Increase in accrued liabilities
Equity in (income) losses of Energy New England LLC investment Equity in losses of Hydro Quebec                                                           22,116 Change in assets and liabilities:
$ 2,625,026 5,121,803 (3,354) 149,965 (216,201) 224,174 (27,419)
(Increase) decrease in accounts receivable                             224,174      (1,823,441)
(13,422)
(Increase) in accounts receivable Internet                             (27,419)        (16,690)
(4,042,712)  
(Increase) in due from Plant Retirement Trust                           (13,422)       (28,579)
"329,647 (352,034) 106,192 1,342719
(Increase) decrease in inventory                                  (4,042,712)         404,438 Decrease in prepaid expenses                                          "329,647         139,689 Decrease in other assets                                                                  8,276 Decrease in accounts payable                                          (352,034)      (164,252)
$ 2,120,068 5,094,281 (3,354) 137,259 (112,953) 22,116 (1,823,441)
Decrease in deferred revenue - rate stabilization                                    (442,064)
(16,690)
Increase in customer deposits                                          106,192          66,025 1,342719          538,140 Increase in accrued liabilities Net cash provided by operating activities                         5,244,384 Cash flows from investing activities:
(28,579) 404,438 139,689 8,276 (164,252)
Net additions to utility plant                                             (6,009,186)    (4,536,332)
(442,064) 66,025 538,140 Net cash provided by operating activities Cash flows from investing activities:
Purchases of certificates of deposit- depreciation fund                                   (2,000,000)
Net additions to utility plant Purchases of certificates of deposit-depreciation fund Maturity of certificates of deposit - depreciation fund Increase (decrease) in Sick Leave Trust Fund Net cash used in investing activities Cash flows from financing activities:
Maturity of certificates of deposit - depreciation fund                     2,000,000 Increase (decrease) in Sick Leave Trust Fund                                   76,440      (511,.24)
Payment of long-term debt Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 5,244,384 (6,009,186) 2,000,000 76,440 (3,932,746)
Net cash used in investing activities                           (3,932,746)    (7.047.456)
(1.350,000)
Cash flows from financing activities:
(38,362) 10,876,249 (4,536,332)
Payment of long-term debt                                                 (1.350,000)     (1.250.000)
(2,000,000)
(38,362)   (2,358,497)
(511,.24)
Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year                              10,876,249      13,234,74
(7.047.456)
                                                                                            $i*~4 Cash and cash equivalents at end of year 7
(1.250.000)
(2,358,497) 13,234,74  
$i*~4 7
2001 2000


Taunton Municipal Lighting Plant STATEMENTS OF CASH FLOWS - CONTINUED Years ended December 31, 2001        2000 Cash and cash equivalents at end of year is reflected on the balance sheets as follows:
Taunton Municipal Lighting Plant STATEMENTS OF CASH FLOWS - CONTINUED Years ended December 31, Cash and cash equivalents at end of year is reflected on the balance sheets as follows:
                                                                        $ 5,694,715 $ 8,851,084 Depreciation fund (exclusive of long-term investments)                                 893,323 4,270,322 Cash - operating                                                                       442,064 Cash - rate stabilization fund                                                         689,7-78 Cash - customer deposit                                                   872,850
Depreciation fund (exclusive of long-term investments)
                                                                        $1083788 Supplemental Disclosure of Cash Flow Information:
Cash - operating Cash - rate stabilization fund Cash - customer deposit Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest                                 $   793,650 $  878,054 The accompanying notes are an integral part of these statements.
Cash paid during the year for interest
8
$ 5,694,715 4,270,322 872,850
$1083788 793,650 The accompanying notes are an integral part of these statements.
8 2001 2000
$ 8,851,084 893,323 442,064 689,7-78 878,054


Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000 NOTE A -  
Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000 NOTE A -  
Line 298: Line 629:
OF SIGNIFICANT ACCOUNTING POLICIES A summary of Taunton Municipal Lighting Plant's (the "Plant") significant accounting policies consistently applied in the preparation of the accompanying financial statements follows.
OF SIGNIFICANT ACCOUNTING POLICIES A summary of Taunton Municipal Lighting Plant's (the "Plant") significant accounting policies consistently applied in the preparation of the accompanying financial statements follows.
: 1. Nature of Business The Plant is a regulated municipal electric utility located in Taunton, Massachusetts. The Plant operates as an enterprise fund of the City of Taunton, Massachusetts, and produces, purchases and distributes electricity to approximately 33,000 customers in the City of Taunton and the surrounding areas. The Plant also operates an internet access business unit and provides services to approximately 3,500 customers. Revenue and expense for this business unit is presented in other expense (income) in the statement of earnings. The business unit leases certain assets from the Plant. For the years ended December 31, 2001 and 2000, other operating revenue for the Plant and internet expense includes approximately $77,000 and $153,000, respectively, relating to this lease.
: 1. Nature of Business The Plant is a regulated municipal electric utility located in Taunton, Massachusetts. The Plant operates as an enterprise fund of the City of Taunton, Massachusetts, and produces, purchases and distributes electricity to approximately 33,000 customers in the City of Taunton and the surrounding areas. The Plant also operates an internet access business unit and provides services to approximately 3,500 customers. Revenue and expense for this business unit is presented in other expense (income) in the statement of earnings. The business unit leases certain assets from the Plant. For the years ended December 31, 2001 and 2000, other operating revenue for the Plant and internet expense includes approximately $77,000 and $153,000, respectively, relating to this lease.
The Department operates within the electric utility industry which is currently undergoing significant restructuring and deregulation. In 1996, the Massachusetts Department of Telecommunications and Energy ("DTE") issued an electric industry restructuring plan, and the Massachusetts legislature created a special committee on electric industry restructuring. The financial impact the resultant changes in the industry will have on the Department is not yet known.
The Department operates within the electric utility industry which is currently undergoing significant restructuring and deregulation.
In 1996, the Massachusetts Department of Telecommunications and Energy ("DTE") issued an electric industry restructuring plan, and the Massachusetts legislature created a special committee on electric industry restructuring. The financial impact the resultant changes in the industry will have on the Department is not yet known.
: 2. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
: 2. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Estimates relating to the allowance for doubtful accounts and contingencies (see note F) represent the significant estimates included in the financial statements. Management bases their estimates of these items on historical experience, specific identification and future expectations.
Estimates relating to the allowance for doubtful accounts and contingencies (see note F) represent the significant estimates included in the financial statements. Management bases their estimates of these items on historical experience, specific identification and future expectations.
Line 319: Line 651:
==SUMMARY==
==SUMMARY==
OF SIGNIFICANT ACCOUNTING POLICIES - Continued In March 1997, the Governmental Accounting Standards Board issued Statement No. 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools"
OF SIGNIFICANT ACCOUNTING POLICIES - Continued In March 1997, the Governmental Accounting Standards Board issued Statement No. 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools"
("GASB 31"). Under GASB 31, investments are required to be reported at fair value in the balance sheet, and investment income, including changes in fair value of investments, is required to be recognized as revenue in the operating statement. The provisions of GASB 31 were adopted retroactively.
("GASB 31"). Under GASB 31, investments are required to be reported at fair value in the balance sheet, and investment income, including changes in fair value of investments, is required to be recognized as revenue in the operating statement.
The provisions of GASB 31 were adopted retroactively.
Realized gains and losses, and declines in value are included in the statement of earnings.
Realized gains and losses, and declines in value are included in the statement of earnings.
Net investment income for the Trust was approximately $239,000 and $224,000 in 2001 and 2000, respectively. The net (income) expense for sick leave was approximately $439,000 and
Net investment income for the Trust was approximately $239,000 and $224,000 in 2001 and 2000, respectively. The net (income) expense for sick leave was approximately $439,000 and
Line 335: Line 668:
: 12. Reclassifications Certain reclassifications have been made to the 2000 financial statements in order to conform with current year's presentation.
: 12. Reclassifications Certain reclassifications have been made to the 2000 financial statements in order to conform with current year's presentation.
NOTE B - CASH AND CERTIFICATES OF DEPOSIT The Plant's cash is deposited with the City of Taunton Treasurer who commingles it with other City funds. The City invests the cash and credits the Plant each year with interest earned on the cash deposits.
NOTE B - CASH AND CERTIFICATES OF DEPOSIT The Plant's cash is deposited with the City of Taunton Treasurer who commingles it with other City funds. The City invests the cash and credits the Plant each year with interest earned on the cash deposits.
Cash, certificates of deposit deposited and short term investments with the City of Taunton consists of the following at December 31, 2001            2000 Interest bearing pooled funds including restricted customer
Cash, certificates of deposit deposited and short term investments with the City of Taunton consists of the following at December 31, Interest bearing pooled funds including restricted customer deposits of $872,850 and $689,778, respectively Certificates of deposit with rates of 2.55% maturing February 2002 Certificates of deposit with rates of 6.52% maturing April 2001 Certificates of deposit with rates of 3.00% maturing January 2002 2001
                                                                              $ 6,837,887    $10,876,249 deposits of $872,850 and $689,778, respectively Certificates of deposit with rates of 2.55% maturing February 2002                                                               2,000,000 Certificates of deposit with rates of 6.52% maturing April 2001                                                                                 2,000,000 Certificates of deposit with rates of 3.00% maturing January 2002
$ 6,837,887 2000
                                                                              $10837.87       $12.876.249 Cash, certificates of deposit and short term investments at December 31, is reflected as follows:
$10,876,249 2,000,000 2,000,000
2001            2000
$10837.87
                                                                              $ 1,888,108      $ 4,942,077 Depreciation Fund - capital additions and replacements 327,318          327,318 Depreciation Fund - Major overhaul 2,750,605      4,853,005 Depreciation Fund - Unit 9 principal and interest 728,684          728,684 Depreciation Fund - other 4,270,322        1,335,387 Cash - including operating and rate stabilization fund Customer deposit - principal and interest fund                               872,850         689,778
$12.876.249 Cash, certificates of deposit and short term investments at December 31, is reflected as follows:
                                                                              $10.83.88 Certain cash amounts have been designated as restricted for the purpose of a rate stabilization fund.
Depreciation Fund - capital additions and replacements Depreciation Fund - Major overhaul Depreciation Fund - Unit 9 principal and interest Depreciation Fund - other Cash - including operating and rate stabilization fund Customer deposit - principal and interest fund 2001
$ 1,888,108 327,318 2,750,605 728,684 4,270,322 872,850  
$10.83.88 2000
$ 4,942,077 327,318 4,853,005 728,684 1,335,387 689,778 Certain cash amounts have been designated as restricted for the purpose of a rate stabilization fund.
This fund is designated to offset potential future customer rate increases.
This fund is designated to offset potential future customer rate increases.
12
12
Line 349: Line 685:
The Plant records this investment under the equity method. Included in other (income) expense is approximately $216,000 and $113,000 of income for the years ended December 31, 2001 and 2000, respectively, f~fesenting the Plant's share of Energy New England's net (income) losses.
The Plant records this investment under the equity method. Included in other (income) expense is approximately $216,000 and $113,000 of income for the years ended December 31, 2001 and 2000, respectively, f~fesenting the Plant's share of Energy New England's net (income) losses.
NOTE D - LONG-TERM DEBT Long-term debt is comprised of the follow4ng bonds:
NOTE D - LONG-TERM DEBT Long-term debt is comprised of the follow4ng bonds:
2001           2000 Electric Loan Act of 1969 Interest rate - 8%, interest payable February 1 and August 1, due serially to February 1, 2006                               $8,730,000     $10,080,000 Unamortized premium                                                               13,386           16740 8,743,386       10,096,740 Less current maturities                                                     1,465,000       1,350, Total long-term debt                                                         $2             $-&746J40 13
2001 2000 Electric Loan Act of 1969 Interest rate - 8%, interest payable February 1 and August 1, due serially to February 1, 2006  
$8,730,000  
$10,080,000 Unamortized premium 13,386 16740 8,743,386 10,096,740 Less current maturities 1,465,000 1,350, Total long-term debt  
$2  
$-&746J40 13


Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE D - LONG-TERM DEBT - Continued Aggregate maturities of long-term debt at December 31, 2001, are as follows:
Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE D - LONG-TERM DEBT - Continued Aggregate maturities of long-term debt at December 31, 2001, are as follows:
2002                                                                     $1,465,000 2003                                                                       1,585,000 2004                                                                       1,750,000 2005                                                                       1,890,000 2006                                                                       2,040,000 NOTE E - CONTRIBUTION IN LIEU OF TAXES The Plant contributed $2,430,000 and $2,360,000 in 2001 and 2000 to the City of Taunton in lieu of taxes. All contributions to the City are voted by the Municipal Light Commission.
2002  
$1,465,000 2003 1,585,000 2004 1,750,000 2005 1,890,000 2006 2,040,000 NOTE E - CONTRIBUTION IN LIEU OF TAXES The Plant contributed $2,430,000 and $2,360,000 in 2001 and 2000 to the City of Taunton in lieu of taxes. All contributions to the City are voted by the Municipal Light Commission.
NOTE F - COMMITMENTS AND CONTINGENCIES Hydro-Ouebec Agreement In 1988, the Plant entered into an agreement with the Massachusetts Municipal Wholesale Electric Company and other New England Utilities to support the operation of a transmission line to permit the interchange of electricity between such utilities and Hydro-Quebec Electric Corporation (HydroQuebec). In connection with the agreement, the Plant advanced approximately $800,000 toward development of the project of which approximately $450,000 was returned after the project had obtained financing. In 1991, the Hydro Quebec project was completed. Upon completion of this project, each participant received stock in the New England Hydro Transmission Electric Company and The New England Hydro Transmission Corporation proportional to their advances. The investment is being accounted for on the cost basis. The stock received is not readily marketable, but gives the holder rights to purchase power at a percentage of the fossil fuel rate.
NOTE F - COMMITMENTS AND CONTINGENCIES Hydro-Ouebec Agreement In 1988, the Plant entered into an agreement with the Massachusetts Municipal Wholesale Electric Company and other New England Utilities to support the operation of a transmission line to permit the interchange of electricity between such utilities and Hydro-Quebec Electric Corporation (HydroQuebec). In connection with the agreement, the Plant advanced approximately $800,000 toward development of the project of which approximately $450,000 was returned after the project had obtained financing. In 1991, the Hydro Quebec project was completed. Upon completion of this project, each participant received stock in the New England Hydro Transmission Electric Company and The New England Hydro Transmission Corporation proportional to their advances. The investment is being accounted for on the cost basis. The stock received is not readily marketable, but gives the holder rights to purchase power at a percentage of the fossil fuel rate.
During the years ended December 31, 2001 and 2000, the Plant received dividends from the above noted companies of approximately $37,000 and $51,000, respectively.
During the years ended December 31, 2001 and 2000, the Plant received dividends from the above noted companies of approximately $37,000 and $51,000, respectively.
Line 358: Line 699:


Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE F - COMMITMENTS AND CONTINGENCIES - Continued Power Contracts The Plant has commitments under long-term contracts for the purchase of electricity from various suppliers. These wholesale contracts are generally for fixed periods and require payment of demand and energy charges. The total costs under these contracts are included in purchased power in the statements of operations and are normally recoverable in revenues under cost recovery mechanisms mandated by the Commonwealth of Massachusetts. The status of these contracts is as follows:
Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE F - COMMITMENTS AND CONTINGENCIES - Continued Power Contracts The Plant has commitments under long-term contracts for the purchase of electricity from various suppliers. These wholesale contracts are generally for fixed periods and require payment of demand and energy charges. The total costs under these contracts are included in purchased power in the statements of operations and are normally recoverable in revenues under cost recovery mechanisms mandated by the Commonwealth of Massachusetts. The status of these contracts is as follows:
2001 KW           Contract           Estimated Annual Unit Fuel Type                           Entitlements         End Date           Minimum Paoments Fuel - Unspecified (fixed price contract)     10,000             2005                 $ 5,743,000 Fuel - Methane                                 3,800             2016                   2,727,000 Fuel - Methane                                 6,650             2019                   3,762,000 Fuel - Methane                                 6,700             2019                   2,768,000 Fuel - Methane                                 1,630             2016                     800,000 Fuel - Unspecified (fixed price contract)   27,500             2007                   11,147,000 Litigation and Other Matters
2001 KW Contract Estimated Annual Unit Fuel Type Entitlements End Date Minimum Paoments Fuel - Unspecified (fixed price contract) 10,000 2005  
$ 5,743,000 Fuel - Methane 3,800 2016 2,727,000 Fuel - Methane 6,650 2019 3,762,000 Fuel - Methane 6,700 2019 2,768,000 Fuel - Methane 1,630 2016 800,000 Fuel - Unspecified (fixed price contract) 27,500 2007 11,147,000 Litigation and Other Matters
: 1. The Plant has a contract with Vermont Yankee and certain of its Sponsors for 0.4602 percent of the output of the Vermont Yankee Plant. On January 6, 2000, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power Company, and AmerGen Vermont, LLC, initiated a number of related proceedings before the Federal Energy Regulatory Commission ("FERC") all arising from the proposed sale of the Vermont Yankee Plant to AmerGen.
: 1. The Plant has a contract with Vermont Yankee and certain of its Sponsors for 0.4602 percent of the output of the Vermont Yankee Plant. On January 6, 2000, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power Company, and AmerGen Vermont, LLC, initiated a number of related proceedings before the Federal Energy Regulatory Commission ("FERC") all arising from the proposed sale of the Vermont Yankee Plant to AmerGen.
On June 22, 2000, the Department and the 21 Municipals filed a complaint with FERC, in which they asserted that they were entitled to refunds for transaction costs incurred in the sale of the Plant and for certain decommissioning contributions.
On June 22, 2000, the Department and the 21 Municipals filed a complaint with FERC, in which they asserted that they were entitled to refunds for transaction costs incurred in the sale of the Plant and for certain decommissioning contributions.
The proposed sale to AmerGen was eventually terminated by Vermont Yankee, and the parties to those FERC proceedings entered into a settlement that resolved all issues, including the purchases' agreement to withdraw their complaint. The settlement agreement was approved by the Commission on September 13, 2001.               The Plant received a refund of certain decommissioning charges and transaction costs as a result of Settlement Agreement, as well as a reduction in future Vermont Yankee charges. The total refund amount was immaterial and was used to reduce power costs.
The proposed sale to AmerGen was eventually terminated by Vermont Yankee, and the parties to those FERC proceedings entered into a settlement that resolved all issues, including the purchases' agreement to withdraw their complaint. The settlement agreement was approved by the Commission on September 13, 2001.
The Plant received a refund of certain decommissioning charges and transaction costs as a result of Settlement Agreement, as well as a reduction in future Vermont Yankee charges. The total refund amount was immaterial and was used to reduce power costs.
15
15


Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE F - COMMITMENTS AND CONTINGENCIES - Continued In the fall of 2001, Vermont Yankee informed the Plant and the other purchasers that it had entered into a new contract for the sale of the Vermont Yankee plant, this time to Energy Nuclear Vermont Yankee. Prior to new filings being made at the FERC for approval of this new proposed transaction, the Plant and the other purchasers entered into negotiations that produced an agreement pursuant to which the Plant and the other purchasers agreed not to contest the plant sale in exchange for early termination of their Vermont Yankee contracts as of February 28, 2002. Absent that agreement, the contracts would have remained in effect through November 30, 2002. Notices of cancellation of the Vermont Yankee contracts for the Plant and the other purchasers were submitted to FERC on December 7, 2001, and accepted by FERC order dated February 26, 2002. The Plant expects this early termination to reduce its power costs for 2002.
Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE F - COMMITMENTS AND CONTINGENCIES - Continued In the fall of 2001, Vermont Yankee informed the Plant and the other purchasers that it had entered into a new contract for the sale of the Vermont Yankee plant, this time to Energy Nuclear Vermont Yankee.
Prior to new filings being made at the FERC for approval of this new proposed transaction, the Plant and the other purchasers entered into negotiations that produced an agreement pursuant to which the Plant and the other purchasers agreed not to contest the plant sale in exchange for early termination of their Vermont Yankee contracts as of February 28, 2002. Absent that agreement, the contracts would have remained in effect through November 30, 2002. Notices of cancellation of the Vermont Yankee contracts for the Plant and the other purchasers were submitted to FERC on December 7, 2001, and accepted by FERC order dated February 26, 2002. The Plant expects this early termination to reduce its power costs for 2002.
: 2. The Plant is involved in various legal matters incident to its business, none of which is believed by management to be significant to the financial condition or the results of operations of the Plant.
: 2. The Plant is involved in various legal matters incident to its business, none of which is believed by management to be significant to the financial condition or the results of operations of the Plant.
: 3. The Plant is also involved in proceedings relating to environmental matters. Although it is difficult to estimate the liability, if any, of the Plant related to these environmental matters, the Plant believes that these matters will not have a material adverse effect upon its financial condition or the results of operations.
: 3. The Plant is also involved in proceedings relating to environmental matters. Although it is difficult to estimate the liability, if any, of the Plant related to these environmental matters, the Plant believes that these matters will not have a material adverse effect upon its financial condition or the results of operations.
: 4. The Plant has a program for insurance coverage provided by the Massachusetts Municipal Utility Self-Insurance Trust Fund ("Trust"). The insurance coverage provided by the Trust is in excess of a
: 4. The Plant has a program for insurance coverage provided by the Massachusetts Municipal Utility Self-Insurance Trust Fund ("Trust"). The insurance coverage provided by the Trust is in excess of a  
        $50,000 self retention up to a maximum of $500,000 per occurrence. Additionally, coverage for certain environmental claims is provided by the Trust through a separate policy for which the plant is responsible for a $50,000 self-retention and the Trust covers the next $50,000.
$50,000 self retention up to a maximum of $500,000 per occurrence. Additionally, coverage for certain environmental claims is provided by the Trust through a separate policy for which the plant is responsible for a $50,000 self-retention and the Trust covers the next $50,000.
NOTE G - PENSION PLANS The Plant contributes to the City of Taunton Retirement System (the "System"), a public employee retirement system that acts as the investment and administrative agent for the City. All full-time employees participate in the System.
NOTE G - PENSION PLANS The Plant contributes to the City of Taunton Retirement System (the "System"), a public employee retirement system that acts as the investment and administrative agent for the City. All full-time employees participate in the System.
Instituted in 1937, the System is a member of the Massachusetts Contributory System and is governed by Massachusetts General Laws Chapter 32. Membership in the System is mandatory upon the commencement of employment for all permanent, full-time employees.
Instituted in 1937, the System is a member of the Massachusetts Contributory System and is governed by Massachusetts General Laws Chapter 32.
Membership in the System is mandatory upon the commencement of employment for all permanent, full-time employees.
16
16


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Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE G - PENSION PLANS - Continued The following represents the components of the Plant's recorded pension expense:
Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE G - PENSION PLANS - Continued The following represents the components of the Plant's recorded pension expense:
December 31, 2001               2000 Contributions to the System                                               $1,890,456       $1,822,402 Contributions from the Trust Fund                                          (1,340.718)       (1,294,120)
December 31, 2001 2000 Contributions to the System Contributions from the Trust Fund
                                                                              $ 549.738        $1 52,2 Recorded pension expense Prior to 1993, the System's funding policy for the participating entities was not actuarially determined.
$1,890,456 (1,340.718)  
$ 549.738 Recorded pension expense
$1,822,402 (1,294,120)  
$1 52,2 Prior to 1993, the System's funding policy for the participating entities was not actuarially determined.
The participating entities were required to contribute each fiscal year an amount approximating the pension benefits (less certain interest credits) expected to be paid during the year ("pay-as-you-go" method). Effective for fiscal year ends 1993 and beyond, the System has removed the "pay-as-you-go" method and will amortize the unfunded pension benefit obligation over thirty-two years. This change has been approved by Public Employees Retirement Association.
The participating entities were required to contribute each fiscal year an amount approximating the pension benefits (less certain interest credits) expected to be paid during the year ("pay-as-you-go" method). Effective for fiscal year ends 1993 and beyond, the System has removed the "pay-as-you-go" method and will amortize the unfunded pension benefit obligation over thirty-two years. This change has been approved by Public Employees Retirement Association.
Accounting standards require certain related disclosures be made including the components of pension costs and the funded status of the System. The effect of omitting such disclosure on the accompanying financial statements has not been determined.
Accounting standards require certain related disclosures be made including the components of pension costs and the funded status of the System. The effect of omitting such disclosure on the accompanying financial statements has not been determined.
NOTE H - POST EMPLOYMENT BENEFITS In addition to the pension benefits described in note G, the Plant provides post employment health care benefits to retirees that meet certain requirements. Retirees of the Plant under age 65 are eligible for the same health benefits as active employees, while retirees over the age of 65 are eligible for MEDEX. The costs of the benefits provided to retirees are borne 75% by the Plant, and 25% by the retirees.
NOTE H - POST EMPLOYMENT BENEFITS In addition to the pension benefits described in note G, the Plant provides post employment health care benefits to retirees that meet certain requirements. Retirees of the Plant under age 65 are eligible for the same health benefits as active employees, while retirees over the age of 65 are eligible for MEDEX. The costs of the benefits provided to retirees are borne 75% by the Plant, and 25% by the retirees.
The Plant is charged their prorata portion of the "pay-as-you-go" cost of benefits based on an allocation by the City done annually. For 2001 and 2000, the costs allocated to the Plant were approximately
The Plant is charged their prorata portion of the "pay-as-you-go" cost of benefits based on an allocation by the City done annually. For 2001 and 2000, the costs allocated to the Plant were approximately  
$599,000 and $510,000, respectively.
$599,000 and $510,000, respectively.
18
18


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HUDSON LIGHT AND POWER DEPARTMENT Financial Statements December 31, 2001 and 2000
HUDSON LIGHT AND POWER DEPARTMENT Financial Statements December 31, 2001 and 2000


HUDSON LIGHT AND POWER DEPARTMENT TABLE OF CONTENTS DECEMBER 31, 2001 AND 2000 Page Independent Auditors' Report                                       1 Management's Discussion and Analysis                             2-4 Financial Statements:
HUDSON LIGHT AND POWER DEPARTMENT TABLE OF CONTENTS DECEMBER 31, 2001 AND 2000 Page Independent Auditors' Report 1
Management's Discussion and Analysis 2-4 Financial Statements:
Operating Fund:
Operating Fund:
Statements of Net Assets                                     5-6 Statements of Revenues, Expenses and Changes in Net Assets   7 Statements of Cash Flows                                   8-10 Rate Stabilization Fund and Retirement Trust Fund:
Statements of Net Assets 5-6 Statements of Revenues, Expenses and Changes in Net Assets 7
Statements of Net Assets                                     11 Statements of Revenues, Expenses and Changes in Net Assets   12 Statements of Cash Flows                                     13 Notes to Financial Statements                                 14-29 Supplemental Information:
Statements of Cash Flows 8-10 Rate Stabilization Fund and Retirement Trust Fund:
Independent Auditors' Report on Supplemental Information     30 Schedules of Operating Revenues                             31 Schedules of Operations and Maintenance Expenses           32,33
Statements of Net Assets 11 Statements of Revenues, Expenses and Changes in Net Assets 12 Statements of Cash Flows 13 Notes to Financial Statements 14-29 Supplemental Information:
Independent Auditors' Report on Supplemental Information 30 Schedules of Operating Revenues 31 Schedules of Operations and Maintenance Expenses 32,33


Goulet, Salvidio & Associates, P.C.
Goulet, Salvidio & Associates, P.C.
Certified Public Accountants James F. Goulet, CPA, MST                                                               Michael A. Salvidio, CPA Catherine A. Kuzmeskus, CPA                                                                 James R. Dube, CPA INDEPENDENT AUDITORS' REPORT The Board of Commissioners Hudson Light and Power Department We have audited the accompanying financial statements of Hudson Light and Power Department of Hudson, Massachusetts, as of and for the years ended December 31, 2001 and 2000 as listed in the table of contents. These financial statements are the responsibility of the Department's management. Our responsibility is to express an opinion on these financial statements based on our audits.
Certified Public Accountants James F. Goulet, CPA, MST Michael A. Salvidio, CPA Catherine A. Kuzmeskus, CPA James R. Dube, CPA INDEPENDENT AUDITORS' REPORT The Board of Commissioners Hudson Light and Power Department We have audited the accompanying financial statements of Hudson Light and Power Department of Hudson, Massachusetts, as of and for the years ended December 31, 2001 and 2000 as listed in the table of contents. These financial statements are the responsibility of the Department's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
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Goulet, Salvidio & Associates, P.C.
Goulet, Salvidio & Associates, P.C.
Worcester, Massachusetts April 3, 2002 Nine Irving Street - Worcester, MA 01609 - Tel: 508-757-5957
Worcester, Massachusetts April 3, 2002 Nine Irving Street - Worcester, MA 01609 - Tel: 508-757-5957
* Fax: 508-753-0948 - E-mail: admin@gsamycpa.com The m Never Underestimate The Value
* Fax: 508-753-0948 - E-mail: admin@gsamycpa.com The m Never Underestimate The Value


MANAGEMENT'S DISCUSSION AND ANALYSIS Within this section of the Hudson Light and Power Department's annual financial report, management provides narrative discussion and analysis of the financial activities of the Hudson Light and Power Department for the year ended December 31, 2001. The Department's performance is discussed and analyzed within the context of the accompanying financial statements and disclosures following this section.
MANAGEMENT'S DISCUSSION AND ANALYSIS Within this section of the Hudson Light and Power Department's annual financial report, management provides narrative discussion and analysis of the financial activities of the Hudson Light and Power Department for the year ended December 31, 2001. The Department's performance is discussed and analyzed within the context of the accompanying financial statements and disclosures following this section.
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The Statements of Revenues, Expenses and Changes in Net Assets summarizes our operating results and reveals how much, if any, of a profit was earned for the year. As discussed in more detail below, our net profit for December 31, 2001 was $889,222.
The Statements of Revenues, Expenses and Changes in Net Assets summarizes our operating results and reveals how much, if any, of a profit was earned for the year. As discussed in more detail below, our net profit for December 31, 2001 was $889,222.
The Statements of Cash Flows provides information about the cash receipts and cash payments during the accounting period. It also provides information about the investing and financing activities for the same period. A review of our Statements of Cash Flows indicates that the cash receipts from operating activities, (that is, electricity sales and related services) adequately covers our operating expenses.
The Statements of Cash Flows provides information about the cash receipts and cash payments during the accounting period. It also provides information about the investing and financing activities for the same period. A review of our Statements of Cash Flows indicates that the cash receipts from operating activities, (that is, electricity sales and related services) adequately covers our operating expenses.
Summary of Net Assets - Operating Fund 2001              2000 Current Assets                                                 $ 11,114,866       $ 12,475,540 Noncurrent Assets                                                  10,782,146       10,447,924 Total Assets                                                    21.897.012 Current Liabilities                                                2,053,920         2,697,915 Noncurrent Liabilities                                                512,014           500,155 Total Liabilities                                                  2,565,934 Net Assets:
Summary of Net Assets - Operating Fund Current Assets Noncurrent Assets Total Assets Current Liabilities Noncurrent Liabilities Total Liabilities Net Assets:
Restricted for Debt Service                                        1,925,000         1,925,000 Invested in Capital Assets, Net of Related Debt                    5,288,396        5,461,549 Unrestricted                                                      12,117,682        12,338,845 Total Net Assets                                                  19,331,078        19,725,394 Total Liabilities and Net Assets                                $ L2187.012 2
Restricted for Debt Service Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets Total Liabilities and Net Assets 2001
$ 11,114,866 10,782,146 21.897.012 2,053,920 512,014 2,565,934 1,925,000 5,288,396 12,117,682 19,331,078
$ L2187.012 2000
$ 12,475,540 10,447,924 2,697,915 500,155 1,925,000 5,461,549 12,338,845 19,725,394 2


Summary of Changes in Net Assets - Operating Fund 2001                2000 Operating Revenues                                         $ 32,433,584      $ 29,444,534 Operating Expenses                                           31,949,194        28,231,134 Operating Income (Loss)                                           484,390        1,213,400 Nonoperating Revenues (Expenses)                                 404,832            440,378 Increase in Net Assets before Transfers                           889,222        1,653,778 Transfers Out - Payment in Lieu of Taxes                       (225,000)         (225,000)
Summary of Changes in Net Assets - Operating Fund Operating Revenues Operating Expenses Operating Income (Loss)
Transfers Out - Rate Stabilization Trust Fund                (1,411,653)         (247,212)
Nonoperating Revenues (Expenses)
Cash Received for Claims and Judgments                            353,115        1,131,345 Beginning Net Assets                                          19,725,394        17,412,483 Ending Net Assets                                            w19331.          $19.725.394 Financial Highlights:
Increase in Net Assets before Transfers Transfers Out - Payment in Lieu of Taxes Transfers Out - Rate Stabilization Trust Fund Cash Received for Claims and Judgments Beginning Net Assets Ending Net Assets 2001
$ 32,433,584 31,949,194 484,390 404,832 889,222 (225,000)
(1,411,653) 353,115 19,725,394 w19331.
2000
$ 29,444,534 28,231,134 1,213,400 440,378 1,653,778 (225,000)
(247,212) 1,131,345 17,412,483  
$19.725.394 Financial Highlights:
Operating revenues increased by $2.9 million in 2001, or 10%. This increase in revenue can be attributed primarily to two issues: the increase in power consumption and the increase in the power adjustment charges.
Operating revenues increased by $2.9 million in 2001, or 10%. This increase in revenue can be attributed primarily to two issues: the increase in power consumption and the increase in the power adjustment charges.
Operating expenses increased by $3.7 million in 2001, or 13%. This increase in expense can be attributed to the increased energy costs and the additional power consumption requirements needed to meet increased sales.
Operating expenses increased by $3.7 million in 2001, or 13%. This increase in expense can be attributed to the increased energy costs and the additional power consumption requirements needed to meet increased sales.
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4
4


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 OPERATING FUND ASSETS 2001             2000 CURRENT ASSETS:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 OPERATING FUND ASSETS 2001 CURRENT ASSETS:
Funds on Deposit with Town Treasurer Operating Fund                                         $      5,596,25 0   $  5,289,840 Petty Cash                                                                  00           500 Customer Accounts Receivable                                      3,461,6(18       3,306,247 Other Receivables                                                  226,3: 34         26,560 Deferred Debit - Fuel Charge                                                0       1,535,547 Materials and Supplies                                              944,5] 16       1,058,832 Purchased Power Prepayments                                        255,7999          621,187 Purchased Power Working Capital                                    629,7999          636,827 TOTAL CURRENT ASSETS                                          11,114,8( 56     12,475,540 NONCURRENT ASSETS:
Funds on Deposit with Town Treasurer Operating Fund Petty Cash Customer Accounts Receivable Other Receivables Deferred Debit - Fuel Charge Materials and Supplies Purchased Power Prepayments Purchased Power Working Capital 5,596,25 3,461,6(
Funds on Deposit with Town Treasurer Depreciation Fund                                                 292,539         471,269 Depreciation Investment Fund                                    4,602,207       3,919,583 Customer Deposits                                                315,891          321,548 Customer Deposits - Interest                                      194,696          177,181 Investment                                                          88,417            96,794 Utility Plant Assets, Net                                        5,288,396        5,461,549 TOTAL NONCURRENT ASSETS                                      10,782,146      10,447,924 TOTAL ASSETS                                                $  21,897,012      $ 22,923,464 See Accompanying Notes to Financial Statements 5
226,3:
944,5]
255,79 629,79 11,114,8(
TOTAL CURRENT ASSETS 0
5,289,840 00 500 18 3,306,247 34 26,560 0
1,535,547 16 1,058,832 99 621,187 99 636,827 56 12,475,540 NONCURRENT ASSETS:
Funds on Deposit with Town Treasurer Depreciation Fund Depreciation Investment Fund Customer Deposits Customer Deposits - Interest Investment Utility Plant Assets, Net TOTAL NONCURRENT ASSETS TOTAL ASSETS 292,539 4,602,207 315,891 194,696 88,417 5,288,396 10,782,146 21,897,012 471,269 3,919,583 321,548 177,181 96,794 5,461,549 10,447,924 22,923,464 See Accompanying Notes to Financial Statements 5
2000


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 OPERATING FUND LIABILITIES 2001          2000 CURRENT LIABILLTIES:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 OPERATING FUND LIABILITIES CURRENT LIABILLTIES:
Accounts Payable                                             $      1,351,631 $    2,241,454 Tax Collections Payable                                                   784        18,090 Miscellaneous Current and Accrued Liabilities                         524,900        438,371 Deferred Credit - Fuel Charge                                         176,605              0 TOTAL CURRENT LIABILITIES                                         2,053,920      2,697,915 NONCURRENT LIABILITIES:
Accounts Payable Tax Collections Payable Miscellaneous Current and Accrued Liabilities Deferred Credit - Fuel Charge TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES:
Customer Deposits                                                     315,981        321,638 Customer Deposits - Interest                                           193,933        176,417 Customer Advances for Construction                                       2,100          2,100 TOTAL NONCURRENT LIABILITIES                                        512,014       500,155 TOTAL LIABILITIES                                                  2,565,934     3,198,070 NET ASSETS Restricted for Debt Service                                         1,925,000      1,925,000 Invested in Capital Assets, Net of Related Debt                     5,288,396     5,461,549 Unrestricted                                                      12,117,682    12,338,845 TOTAL NET ASSETS                                                19,331,078    19,725,394 TOTAL LIABILITIES AND NET ASSETS                              $    21,897,012  $ 22,923,464 See Accompanying Notes to Financial Statements 6
Customer Deposits Customer Deposits - Interest Customer Advances for Construction TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES 2001 1,351,631 784 524,900 176,605 2,053,920 315,981 193,933 2,100 512,014 2,565,934 2000 2,241,454 18,090 438,371 0
2,697,915 321,638 176,417 2,100 500,155 3,198,070 NET ASSETS Restricted for Debt Service Invested in Capital Assets, Net of Related Debt Unrestricted TOTAL NET ASSETS TOTAL LIABILITIES AND NET ASSETS 1,925,000 5,288,396 12,117,682 19,331,078 21,897,012 1,925,000 5,461,549 12,338,845 19,725,394 22,923,464 See Accompanying Notes to Financial Statements 6


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND 2001           2000 OPERATING REVENUES                                            $    32,433,584   $ 29,444,534 OPERATING EXPENSES:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND 2001 32,433,584 OPERATING REVENUES OPERATING EXPENSES:
Operations and Maintenance                                         31,321,473      27,608,108 Depreciation Expense                                                   627,721        623,026 TOTAL OPERATING EXPENSES                                         31,949,194      28,231,134 OPERATING INCOME                                                       484,390      1,213,400 NONOPERATING REVENUES (EXPENSES):
2000 29,444,534 Operations and Maintenance Depreciation Expense TOTAL OPERATING EXPENSES OPERATING INCOME NONOPERATING REVENUES (EXPENSES):
Interest and Dividend Income                                           404,928        440,165 Realized Gains (Losses) on Maturities of Investments                         0            283 Interest Expense                                                           (96)          (70)
Interest and Dividend Income Realized Gains (Losses) on Maturities of Investments Interest Expense TOTAL NONOPERATING REVENUES (EXPENSES)
TOTAL NONOPERATING REVENUES (EXPENSES)                               404,832        440,378 Income Before Contributions and Transfers                             889,222      1,653,778 NET ASSETS - JANUARY 1                                             19,725,394      17,412,483 Transfers Out - Payment in Lieu of Taxes                             (225,000)       (225,000)
Income Before Contributions and Transfers NET ASSETS - JANUARY 1 Transfers Out - Payment in Lieu of Taxes Transfers Out - Rate Stabilization Trust Fund Cash Received for Claims and Judgments NET ASSETS - DECEMBER 31 31,321,473 627,721 31,949,194 484,390 27,608,108 623,026 28,231,134 1,213,400 404,928 0
Transfers Out - Rate Stabilization Trust Fund                      (1,411,653)       (247,212)
(96) 404,832 440,165 283 (70) 440,378 889,222 19,725,394 (225,000)
Cash Received for Claims and Judgments                                353,115      1,131,345 NET ASSETS - DECEMBER 31                                      $    19,331,078    $ 19,725,394 See Accompanying Notes to Financial Statements 7
(1,411,653) 353,115 19,331,078 1,653,778 17,412,483 (225,000)
(247,212) 1,131,345 19,725,394 See Accompanying Notes to Financial Statements 7


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND 2001              2000 CASH FLOWS FROM OPERATING ACTIVITIES:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers                                 $    33,802,400    $  26,117,547 Cash Paid to Suppliers and Employees                             (30,863,848)       (26,352,408)
Cash Received from Customers Cash Paid to Suppliers and Employees Cash Paid for Benefits Payment in Lieu of taxes Cash Received for Claims and Judgments Net Cash Provided (Used) by Operating Activities 2001 33,802,400 (30,863,848)
Cash Paid for Benefits                                                (768,844)          (678,994)
(768,844)
Payment in Lieu of taxes                                              (225,000)         (225,000)
(225,000) 353,115 2,297,823 2000 26,117,547 (26,352,408)
Cash Received for Claims and Judgments                                353,115          1,131,345 Net Cash Provided (Used) by Operating Activities                2,297,823              (7,510)
(678,994)
(225,000) 1,131,345 (7,510)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Interest Expense                                                             (96)              (70)
Interest Expense CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Purchases of Utility Plant Assets Purchases of Nuclear Fuel Net Cash Used in Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Utility Plant Assets                                     (451,676)          (160,075)
Rate Stabilization Reserve Interest and Dividend Income Due from Rate Stabilization Fund Net Proceeds from Maturities (Purchases) of Investments Net Cash Provided (Used) by Investing Activities INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - JANUARY 1 CASH AND CASH EQUIVALENTS - DECEMBER 31 (451,676)
Purchases of Nuclear Fuel                                               (25,541)          (35,017)
(25,541)
Net Cash Used in Capital and Related Financing Activities                                           (477,217)          (195,092)
(477,217)
CASH FLOWS FROM INVESTING ACTIVITIES:
(1,411,653) 404,928 0
Rate Stabilization Reserve                                         (1,411,653)          (247,212)
732,743 (273,982) 1,546,528 6,366,220 7,912,748 (160,075)
Interest and Dividend Income                                           404,928            440,165 Due from Rate Stabilization Fund                                               0          949,983 Net Proceeds from Maturities (Purchases) of Investments               732,743          (112,721)
(35,017)
Net Cash Provided (Used) by Investing Activities                 (273,982)        1,030,215 INCREASE IN CASH AND CASH EQUIVALENTS                               1,546,528            827,543 CASH AND CASH EQUIVALENTS - JANUARY 1                               6,366,220          5,538,677 CASH AND CASH EQUIVALENTS - DECEMBER 31                       $    7,912,748     $  6,366,220 See Accompanying Notes to Financial Statements 8
(195,092)
(247,212) 440,165 949,983 (112,721) 1,030,215 827,543 5,538,677 6,366,220 See Accompanying Notes to Financial Statements 8
(96)
(70)


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 2001            2000 Operating Income                                               $      484,390    $  1,213,400 Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities:
Depreciation                                                       627,721        623,026 Amortization of Nuclear Fuel                                         22,649        20,982 Appropriation in Lieu of Taxes                                     (225,000)      (225,000)
Depreciation Amortization of Nuclear Fuel Appropriation in Lieu of Taxes Cash Received for Claims and Judgments Changes in Assets and Liabilities:
Cash Received for Claims and Judgments                             353,115      1,131,345 Changes in Assets and Liabilities:
(Increase) Decrease in:
(Increase) Decrease in:
Customer Accounts Receivable                                   (155,421)     (1,277,413)
Customer Accounts Receivable Other Accounts Receivable Deferred Debit - Fuel Charge Materials and Supplies Purchased Power Prepayments Purchased Power Working Capital Increase (Decrease) in:
Other Accounts Receivable                                      (199,774)       404,373 Deferred Debit - Fuel Charge                                  1,535,547      (1,535,547)
Accounts Payable Customer Deposits Customer Deposits - Interest Tax Collections Payable Deferred Credit - Fuel Charge Miscellaneous Current and Accrued Liabilities Accumulated Provision for Insurance Net Cash Provided (Used) by Operating Activities 2001 484,390 627,721 22,649 (225,000) 353,115 (155,421)
Materials and Supplies                                          114,316        (204,079)
(199,774) 1,535,547 114,316 365,388 7,028 (889,823)
Purchased Power Prepayments                                    365,388        (446,219)
(5,657) 17,516 (17,306) 176,605 86,529 0
Purchased Power Working Capital                                    7,028      (296,751)
2,297,823 2000 1,213,400 623,026 20,982 (225,000) 1,131,345 (1,277,413) 404,373 (1,535,547)
Increase (Decrease) in:
(204,079)
Accounts Payable                                              (889,823)      1,463,657 Customer Deposits                                                (5,657)        (4,185)
(446,219)
Customer Deposits - Interest                                      17,516        24,041 Tax Collections Payable                                          (17,306)          4,685 Deferred Credit - Fuel Charge                                  176,605        (332,862)
(296,751) 1,463,657 (4,185) 24,041 4,685 (332,862) 34,431 (605,394)
Miscellaneous Current and Accrued Liabilities                    86,529        34,431 Accumulated Provision for Insurance                                    0      (605,394)
(7,510)
Net Cash Provided (Used) by Operating Activities    $      2,297,823  $      (7,510)
See Accompanying Notes to Financial Statements 9
See Accompanying Notes to Financial Statements 9


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
The following amounts are considered to be cash or cash equivalents for the purpose of the statements of cash flows:
The following amounts are considered to be cash or cash equivalents for the purpose of the statements of cash flows:
2001                    2000 Operating Fund                                             $      5,596,250        $      5,289,840 Petty Cash                                                               500                      500 Depreciation Fund                                                   292,539                  471,269 Depreciation Investment Fund (Note 8)                             1,512,872                 105,882 Customer Deposits                                                    315,891                 321,548 Customer Deposits - Interest                                        194,696                 177,181
Operating Fund Petty Cash Depreciation Fund Depreciation Investment Fund (Note 8)
                                                              $      7,912,748         $      6,366,220 Cash paid for interest expense in 2001 and 2000 was $96 and $70, respectively.
Customer Deposits Customer Deposits - Interest 2001 5,596,250 500 292,539 1,512,872 315,891 194,696 7,912,748 2000 5,289,840 500 471,269 105,882 321,548 177,181 6,366,220 Cash paid for interest expense in 2001 and 2000 was $96 and $70, respectively.
See Accompanying Notes to Financial Statements 10
See Accompanying Notes to Financial Statements 10


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND ASSETS 2001                  2000 NONCURRENT ASSETS:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND ASSETS NONCURRENT ASSETS:
Funds on Deposit with Town Treasurer Cash and Cash Equivalents                                                     $        2,474,284         $    748,918 Investments                                                                            5,278,082             6,062,409 TOTAL ASSETS                                                                      $      7,752,366          $  6,811,327 NET ASSETS NET ASSETS - Restricted                                                           $      7,752,366           $  6,811,327 RETIREMENT TRUST FUND ASSETS 2001                  2000 NONCURRENT ASSETS:
Funds on Deposit with Town Treasurer Cash and Cash Equivalents Investments TOTAL ASSETS 2001 2,474,284 5,278,082 7,752,366 2000 748,918 6,062,409 6,811,327 NET ASSETS NET ASSETS - Restricted 7,752,366 6,811,327 RETIREMENT TRUST FUND ASSETS NONCURRENT ASSETS:
Funds on Deposit with Town Treasurer Cash and Cash Equivalents                                                     $        2,378,373         $    350,574 Investments                                                                            4,555,521             6,225,348 TOTAL ASSETS                                                                      $      6,933,894          $ 6,575,922 NET ASSETS NET ASSETS - Restricted                                                           $      6,933,894           $ 6,575,922 See Accompanying Notes to Financial Statements 11
Funds on Deposit with Town Treasurer Cash and Cash Equivalents Investments TOTAL ASSETS 2001 2,378,373 4,555,521 6,933,894 2000 350,574 6,225,348 6,575,922 NET ASSETS NET ASSETS - Restricted 6,933,894 6,575,922 See Accompanying Notes to Financial Statements 11


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND 2001            2000 NONOPERATING REVENUES (EXPENSES):
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND NONOPERATING REVENUES (EXPENSES):
Interest Earned on Invested Funds                             $        439,363  $    467,924 Accrued Interest Paid at Purchase                                       (2,258)        (4,892)
Interest Earned on Invested Funds Accrued Interest Paid at Purchase Gain (Loss) from Security Redemption Annual Contribution from Operations Annual Purchased Power Stabilization Transfer 2001 439,363 (2,258)
Gain (Loss) from Security Redemption                                       (41)            10 Annual Contribution from Operations                                   692,322      1,563,202 Annual Purchased Power Stabilization Transfer                     (1,600,000)     (2,550,000)
(41) 692,322 (1,600,000) 2000 467,924 (4,892) 10 1,563,202 (2,550,000)
NET LOSS                                                             (470,614)       (523,756)
NET LOSS NET ASSETS - JANUARY 1 Transfers In - Operating Fund (470,614) 6,811,327 1,411,653 7,752,366 NET ASSETS - DECEMBER 31 (523,756) 7,087,871 247,212 6,811,327 RETIREMENT TRUST FUND NONOPERATING REVENUES (EXPENSES):
NET ASSETS - JANUARY 1                                              6,811,327       7,087,871 Transfers In - Operating Fund                                        1,411,653         247,212 NET ASSETS - DECEMBER 31                                     $    7,752,366    $  6,811,327 RETIREMENT TRUST FUND 2001            2000 NONOPERATING REVENUES (EXPENSES):
Interest Earned on Invested Funds Accrued Interest Paid at Purchase Gain (Loss) from Security Redemption Annual Contribution from Operations Annual Pension Expense 481,174 (7,431) 437 384,007 (500,215) 396,227 (9,455) 1,418 349,753 (507,728)
Interest Earned on Invested Funds                             $        481,174  $    396,227 Accrued Interest Paid at Purchase                                       (7,431)        (9,455)
NET INCOME NET ASSETS - JANUARY 1 NET ASSETS - DECEMBER 31 6,575,922 6,933,894 6,345,707 6,575,922 See Accompanying Notes to Financial Statements 12 2001 2000 357,972 230,215
Gain (Loss) from Security Redemption                                       437          1,418 Annual Contribution from Operations                                   384,007         349,753 Annual Pension Expense                                                (500,215)       (507,728)
NET INCOME                                                             357,972        230,215 NET ASSETS - JANUARY 1                                             6,575,922       6,345,707 NET ASSETS - DECEMBER 31                                      $    6,933,894    $  6,575,922 See Accompanying Notes to Financial Statements 12


HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND 2001             2000 CASH FLOWS FROM INVESTING ACTIVITIES:
HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND 2001 CASH FLOWS FROM INVESTING ACTIVITIES:
Interest Income                                                                       $          437, 105    $    463,032 Net Proceeds from Maturities (Purchases) of Investments                                           784, 327      1,333,514 Gain (Loss) on Security Redemption                                                                       (41)            10 Appropriation from Net Assets - Operating Fund                                                 1,411, 653         247,212 Annual Contribution from Operations                                                              692, 322       1,563,202 Annual Purchased Power Stabilization Transfer                                                (1,600, 000)     (3,499,983)
Interest Income Net Proceeds from Maturities (Purchases) of Investments Gain (Loss) on Security Redemption Appropriation from Net Assets - Operating Fund Annual Contribution from Operations Annual Purchased Power Stabilization Transfer INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - JANUARY 1 CASH AND CASH EQUIVALENTS - DECEMBER 31
INCREASE IN CASH AND CASH EQUIVALENTS                                                          1,725,366         106,987 CASH AND CASH EQUIVALENTS - JANUARY 1                                                            748,918         641,931 CASH AND CASH EQUIVALENTS - DECEMBER 31                                                $      2,474,284     $    748,918 RETIREMENT TRUST FUND 2001              2000 CASH FLOWS FROM INVESTING ACTIVITIES:
: 437, 784, 1,411,
Interest Income                                                                                   473,743    $    386,772 Net Proceeds from Maturities (Purchases) of Investments                                         1,669,826        (128,846)
: 692, (1,600, 105 463,032 327 1,333,514 (41) 10 653 247,212 322 1,563,202 000)
Gain (Loss) on Security Redemption                                                                     438          1,418 Annual Contribution from Operations                                                               384,007          349,753 Annual Pension Expense                                                                           (500,215)        (507,728)
(3,499,983) 1,725,366 748,918 2,474,284 106,987 641,931 748,918 RETIREMENT TRUST FUND CASH FLOWS FROM INVESTING ACTIVITIES:
INCREASE IN CASH AND CASH EQUIVALENTS                                                         2,027,799          101,369 CASH AND CASH EQUIVALENTS - JANUARY 1                                                             350,574          249,205 CASH AND CASH EQUIVALENTS - DECEMBER 31                                               $      2,378,373     $    350,574 See Accompanying Notes to Financial Statements 13
Interest Income Net Proceeds from Maturities (Purchases) of Investments Gain (Loss) on Security Redemption Annual Contribution from Operations Annual Pension Expense INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - JANUARY 1 CASH AND CASH EQUIVALENTS - DECEMBER 31 473,743 1,669,826 438 384,007 (500,215) 386,772 (128,846) 1,418 349,753 (507,728) 2,027,799 350,574 2,378,373 101,369 249,205 350,574 See Accompanying Notes to Financial Statements 13 2000 2001 2000


HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 1 -  
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 1 -  
Line 524: Line 892:
Regulation and Basis of Accounting The Town of Hudson complies with Generally Accepted Accounting Principles (GAAP). The Town's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Proprietary funds and similar component units apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case GASB prevails.
Regulation and Basis of Accounting The Town of Hudson complies with Generally Accepted Accounting Principles (GAAP). The Town's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Proprietary funds and similar component units apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case GASB prevails.
The Department uses the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.
The Department uses the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.
The Department has adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic FinancialStatements - and Management's Discussion and Analysis -for State and Local Governments, in 2001. The Department has restated the 2000 financial statements to reflect the effects of the adoption. Specifically, the Department has classified its retained earnings into unrestricted and restricted balances and has restated its 2000 statement of cash flows to conform to the direct method of operating cash flow presentation.
The Department has adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments, in 2001. The Department has restated the 2000 financial statements to reflect the effects of the adoption. Specifically, the Department has classified its retained earnings into unrestricted and restricted balances and has restated its 2000 statement of cash flows to conform to the direct method of operating cash flow presentation.
Under Massachusetts law, electric rates of the Department are set by the Municipal Light Board and may be changed not more often than once every three months. Rate schedules are filed with the Massachusetts Department of Telecommunications and Energy (DTE). While the DTE exercises general supervisory authority over the Department, the Department's rates are not subject to DTE approval.
Under Massachusetts law, electric rates of the Department are set by the Municipal Light Board and may be changed not more often than once every three months. Rate schedules are filed with the Massachusetts Department of Telecommunications and Energy (DTE). While the DTE exercises general supervisory authority over the Department, the Department's rates are not subject to DTE approval.
14
14
Line 552: Line 920:
Employees are permitted to carry vacation time from one year to the next. Upon termination of employment with the Light Department, the employee will be paid for unused vacation time based on the employee's base rate of pay at the time of termination. Union employees have to use their vacation by April of the following year.
Employees are permitted to carry vacation time from one year to the next. Upon termination of employment with the Light Department, the employee will be paid for unused vacation time based on the employee's base rate of pay at the time of termination. Union employees have to use their vacation by April of the following year.
Allowance for Doubtful Accounts Accounts are charged to bad debt expense as they are deemed uncollectible based upon a periodic review of the accounts. At December 31, 2001 and 2000, no allowance for uncollectible accounts was considered necessary.
Allowance for Doubtful Accounts Accounts are charged to bad debt expense as they are deemed uncollectible based upon a periodic review of the accounts. At December 31, 2001 and 2000, no allowance for uncollectible accounts was considered necessary.
NOTE 2- UNBILLED REVENUE:
NOTE 2-UNBILLED REVENUE:
No recognition is given to the amount of sales to customers which are unbilled at the end of the accounting period.
No recognition is given to the amount of sales to customers which are unbilled at the end of the accounting period.
16
16
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NOTE 8 - CASH EQUIVALENTS:
NOTE 8 - CASH EQUIVALENTS:
The Department's cash, cash equivalents and investments are held by the Hudson Town Treasurer. The Department's investments are classified as held to maturity and are recorded at unamortized cost plus accrued interest paid at purchase. The Depreciation Investment Fund is allocated between investments and cash equivalents as follows:
The Department's cash, cash equivalents and investments are held by the Hudson Town Treasurer. The Department's investments are classified as held to maturity and are recorded at unamortized cost plus accrued interest paid at purchase. The Depreciation Investment Fund is allocated between investments and cash equivalents as follows:
2001                 2000 Investments                                            $  3,089,335         $    3,813,701 Cash Equivalents                                          1,512,872               105,882 Total                                                  S 4.602.207           $    3.919.583 The gross unrealized holding gains on the U.S. Treasury Notes were $14,642 and $8,108 at December 31, 2001 and 2000, respectively.
Investments Cash Equivalents 2001 3,089,335 1,512,872 S 4.602.207 Total 2000 3,813,701 105,882 3.919.583 The gross unrealized holding gains on the U.S. Treasury Notes were $14,642 and $8,108 at December 31, 2001 and 2000, respectively.
NOTE 9 - INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT:
NOTE 9 - INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT:
2001                  2000 Cost of Capital Assets Acquired                       $ 21,475,449          $ 21,314,492 Less: Accumulated Depreciation                           16,187,053            15,852,943 Invested in Capital Assets, Net of Related Debt       $ 5.288,396           $ 5.461.549 18
Cost of Capital Assets Acquired Less: Accumulated Depreciation Invested in Capital Assets, Net of Related Debt 2001
$ 21,475,449 16,187,053
$ 5.288,396 2000
$ 21,314,492 15,852,943
$ 5.461.549 18


HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 10- UTILITY PLANT ASSETS:
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 10- UTILITY PLANT ASSETS:
Balance                                    Balance January 1,                                  December 31, 2001         Increases                     2001 Capital Assets Not Being Depreciated:
Balance January 1, 2001 Increases Capital Assets Not Being Depreciated:
Land                                       $        60,557              0 S        0  $        60,557 Intangible Plant                                      3,880              0          0            3,880 Total                                              64,437              0          0          64,437 Capital Assets Being Depreciated:
Land Intangible Plant Total Capital Assets Being Depreciated:
7,012,363         8,907      (1,368)      7,019,902 Production Plant 349,015        25,541            0          374,556 Nuclear Fuel 1,596,346        3,780      (2,123)       1,598,003 Transmission Plant 10,070,367      267,857    (226,031)       10,112,193 Distribution Plant 2,221,964      171,132    (86,738)        2,306,358 General Plant 21,250,055        477,217   (316,260)       21,411,012 Total Less Accumulated Depreciation For:
Production Plant Nuclear Fuel Transmission Plant Distribution Plant General Plant Total Less Accumulated Depreciation For:
Production Plant                                (5,568,858)     (161,791)       1,368      (5,729,281)
Production Plant Nuclear Fuel Transmission Plant Distribution Plant General Plant Total Accumulated Depreciation Capital Assets Being Depreciated, Net Utility Plant Assets, Net 60,557 3,880 64,437 7,012,363 349,015 1,596,346 10,070,367 2,221,964 21,250,055 (5,568,858)
(295,081)     (22,649)           0         (317,730)
(295,081)
Nuclear Fuel (1,483,678)     (12,809)      2,123       (1,494,364)
(1,483,678)
Transmission Plant (7,083,855)     (306,824)   226,031       (7,164,648)
(7,083,855)
Distribution Plant (1,421,471)     (146,297)     86,738        (1,481,030)
(1,421,471)
General Plant (15,852,943)     (650,370)   316,260      (16,187,053)
(15,852,943) 5,397,112 S
Total Accumulated Depreciation 5,397,112      (173,153)          0        5,223,959 Capital Assets Being Depreciated, Net S    5,461,549  $  (173,153) S        0  $    5,288,396 Utility Plant Assets, Net 19
5,461,549 0
0 0
8,907 25,541 3,780 267,857 171,132 477,217 (161,791)
(22,649)
(12,809)
(306,824)
(146,297)
(650,370)
(173,153)
(173,153)
S 0
60,557 0
3,880 0
(1,368) 0 (2,123)
(226,031)
(86,738)
(316,260) 1,368 0
2,123 226,031 86,738 316,260 0
S 0
64,437 7,019,902 374,556 1,598,003 10,112,193 2,306,358 21,411,012 (5,729,281)
(317,730)
(1,494,364)
(7,164,648)
(1,481,030)
(16,187,053) 5,223,959 5,288,396 19 Balance December 31, 2001


HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 11 - CLAIMS AND JUDGMENTS:
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 11 - CLAIMS AND JUDGMENTS:
During 2001 and 2000, the Department received and paid certain amounts relating to activities that occurred in prior years as follows:
During 2001 and 2000, the Department received and paid certain amounts relating to activities that occurred in prior years as follows:
2001             2000 Pilgrim Decommissioning       -Decommissioning Refund             $ 278,557       $  287,780 Mass Municipal Ins. Trust     -Oil Spill                               74,558                 0 Millstone 3 Litigation       98 Transmission Settlement                 0         277,148 Insurance Reserve             -Write off unfunded reserve                   0         605,394 Deferred Fuel Charge Adj.                                                   0             2,794 NEPOOL                       98 Overcharge Settlement                   0           (41,771)
2001 2000 Pilgrim Decommissioning  
                                                                    $ 353,115       $ 1,131,345 NOTE 12 - MMWEC PARTICIPATION:
-Decommissioning Refund  
$ 278,557 287,780 Mass Municipal Ins. Trust -Oil Spill 74,558 0
Millstone 3 Litigation 98 Transmission Settlement 0
277,148 Insurance Reserve  
-Write off unfunded reserve 0
605,394 Deferred Fuel Charge Adj.
0 2,794 NEPOOL 98 Overcharge Settlement 0
(41,771)  
$ 353,115  
$ 1,131,345 NOTE 12 - MMWEC PARTICIPATION:
Town of Hudson acting through its Light Department is a Participant in certain Projects of the Massachusetts Municipal Wholesale Electric Company (MMWEC).
Town of Hudson acting through its Light Department is a Participant in certain Projects of the Massachusetts Municipal Wholesale Electric Company (MMWEC).
MVWEC is a public corporation and a political subdivision of the Commonwealth of Massachusetts created as a means to develop a bulk power supply for its Members and other utilities. MMWEC is authorized to construct, own or purchase ownership interests in and to issue revenue bonds to finance electric facilities (Projects). MMWEC has acquired ownership interests in electric facilities operated by other utilities and also owns and operates its own electric facilities. MMWEC sells all of the capability (Project Capability) of each of its Projects to its Members and other utilities (Project Participants) under Power Sales Agreements (PSAs).
MVWEC is a public corporation and a political subdivision of the Commonwealth of Massachusetts created as a means to develop a bulk power supply for its Members and other utilities. MMWEC is authorized to construct, own or purchase ownership interests in and to issue revenue bonds to finance electric facilities (Projects). MMWEC has acquired ownership interests in electric facilities operated by other utilities and also owns and operates its own electric facilities. MMWEC sells all of the capability (Project Capability) of each of its Projects to its Members and other utilities (Project Participants) under Power Sales Agreements (PSAs).
Line 621: Line 1,026:


HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 14 - RATE STABILIZATION TRUST FUND (continued):
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 14 - RATE STABILIZATION TRUST FUND (continued):
Cost Plus Accrued         Accrued       Unamortized           Fair Interest        Interest            Cost            Value 2001 Cash Equivalents           $    2,474,284   $          0   $      2,474,284   $ 2,474,284 U.S. Treasury Notes            3,475,000             0         3,475,000     3,499,143 Certificates of Deposit        1,803,082             0         1,803,082     1,813,180
Cost Plus Accrued Interest Accrued Interest Unamortized Cost Fair Value Cash Equivalents U.S. Treasury Notes Certificates of Deposit 2001 2,474,284 0
                            $    7,752,366   $          0   $      7,752,366   $ 7,786,607 2000 Cash Equivalents           $      748,918  $          0  $        748,918  $    748,918 U.S. Treasury Notes             4,927,304           252           4,927,052     4,905,507 Certificates of Deposit        1,135,105             0         1,135,105     1,133,001 Total          $    6,811,327   $       252   $      6,811,075   $ 6,787,426 At December 31, 2001 the gross unrealized holding gains on the U.S. Treasury Notes were
2,474,284 $ 2,474,284 3,475,000 0
3,475,000 3,499,143 1,803,082 0
1,803,082 1,813,180 7,752,366 0
7,752,366  
$ 7,786,607 2000 Cash Equivalents U.S. Treasury Notes Certificates of Deposit Total 748,918 $
4,927,304 0
252 748,918 748,918 4,927,052 4,905,507 1,135,105 0
1,135,105 6,811,327 $
252 6,811,075  
$ 6,787,426 At December 31, 2001 the gross unrealized holding gains on the U.S. Treasury Notes were  
$24,143, and the gross unrealized holding gains on Certificates of Deposit were $10,098.
$24,143, and the gross unrealized holding gains on Certificates of Deposit were $10,098.
At December 31, 2000 the gross unrealized holding losses on the U.S. Treasury Notes were
At December 31, 2000 the gross unrealized holding losses on the U.S. Treasury Notes were  
$21,545. The gross unrealized holding gains on Certificates of Deposit were $50 and the gross unrealized holding losses were $2,154.
$21,545. The gross unrealized holding gains on Certificates of Deposit were $50 and the gross unrealized holding losses were $2,154.
23
23 1,133,001


HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 15 - RETIREMENT TRUST FUND:
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 15 - RETIREMENT TRUST FUND:
The Department's cash equivalents and investments are held by the Hudson Town Treasurer. The Department's investments are classified as held to maturity and are recorded at unamortized cost plus accrued interest paid at purchase.
The Department's cash equivalents and investments are held by the Hudson Town Treasurer. The Department's investments are classified as held to maturity and are recorded at unamortized cost plus accrued interest paid at purchase.
Cost Plus Accrued         Accrued         Unamortized           Fair Interest      Interest           Cost           Value 2001 Cash Equivalents             $    2,378,373 $          0   $      2,378,373   $ 2,378,373 U.S. Treasury Notes                3,361,171       6,917           3,354,254     3,391,231 Certificates of Deposit            1,194,350             0         1,194,350     1,193,316
Cost Plus Accrued Interest Accrued Unamortized Interest Cost Fair Value Cash Equivalents U.S. Treasury Notes Certificates of Deposit 2001 2,378,373 0
                              $    6,933,894 $      6,917   $      6,926,977   $ 6,962,920 2000 Cash Equivalents             $      350,574 $          0    $        350,574  $    350,574 U.S. Treasury Notes               4,122,597           0           4,122,597     4,091,983 Certificates of Deposit            2,102,751          651          2,102,100      2,103,344 Total             $    6,575,922 $        651   $      6,575,271   $ 6,545,901 At December 31, 2001 the gross unrealized holding gains on the U.S. Treasury Notes were
2,378,373  
$ 2,378,373 3,361,171 6,917 3,354,254 3,391,231 1,194,350 0
1,194,350 1,193,316 6,933,894 6,917 6,926,977  
$ 6,962,920 2000 Cash Equivalents U.S. Treasury Notes Certificates of Deposit 350,574 4,122,597 2,102,751 0
0 350,574 4,122,597 651 2,102,100 350,574 4,091,983 2,103,344 Total 6,575,922 651 6,575,271  
$ 6,545,901 At December 31, 2001 the gross unrealized holding gains on the U.S. Treasury Notes were  
$36,977. The gross unrealized holding gains on Certificate of Deposits were $3,698 and the gross unrealized holding losses were $4,732.
$36,977. The gross unrealized holding gains on Certificate of Deposits were $3,698 and the gross unrealized holding losses were $4,732.
At December 31, 2000 the gross unrealized holding gains on the U.S. Treasury Notes were
At December 31, 2000 the gross unrealized holding gains on the U.S. Treasury Notes were  
$12,375, the gross unrealized holding losses were $42,989 and the gross unrealized holding gains on Certificate of Deposits were $1,244.
$12,375, the gross unrealized holding losses were $42,989 and the gross unrealized holding gains on Certificate of Deposits were $1,244.
24
24
Line 656: Line 1,075:
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 16 - COMMITMENTS AND CONTINGENCIES (continued):
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 16 - COMMITMENTS AND CONTINGENCIES (continued):
MMWEC is involved in various legal actions. In the opinion of management, the outcome of such litigation or claims will not have a material adverse effect on the fmancial position of the Department.
MMWEC is involved in various legal actions. In the opinion of management, the outcome of such litigation or claims will not have a material adverse effect on the fmancial position of the Department.
As of December 31, 2001, total capital expenditures amounted to $1,491,205,000, of which
As of December 31, 2001, total capital expenditures amounted to $1,491,205,000, of which  
$162,671,000 represents the amount associated with the Department's Project Capability.
$162,671,000 represents the amount associated with the Department's Project Capability.
MMWEC's debt outstanding for the Projects and PPA included Power Supply System Revenue Bonds and commercial paper notes totals $1,055,290,000, of which $112,133,000 is associated with the Department's share of Project Capability and PPAs. As of December 31, 2001, MMWEC's total future debt service requirement on outstanding bonds issued for Projects and commercial paper notes for the PPA is $1,474,170,000, of which $161,798,000 is anticipated to be billed to the Department.
MMWEC's debt outstanding for the Projects and PPA included Power Supply System Revenue Bonds and commercial paper notes totals $1,055,290,000, of which $112,133,000 is associated with the Department's share of Project Capability and PPAs. As of December 31, 2001, MMWEC's total future debt service requirement on outstanding bonds issued for Projects and commercial paper notes for the PPA is $1,474,170,000, of which $161,798,000 is anticipated to be billed to the Department.
Hudson Light and Power Department has entered into PSAs and PPAs with MMWEC. Under these agreements, the Department is required to make certain payments to MMWEC. The aggregate amount of Hudson Light and Power Department's required payments under the PSAs and PPAs, exclusive of the Reserve and Contingency Fund billings, to MMWEC at December 31, 2001 and estimated for future years is shown below.
Hudson Light and Power Department has entered into PSAs and PPAs with MMWEC. Under these agreements, the Department is required to make certain payments to MMWEC. The aggregate amount of Hudson Light and Power Department's required payments under the PSAs and PPAs, exclusive of the Reserve and Contingency Fund billings, to MMWEC at December 31, 2001 and estimated for future years is shown below.
ANNUAL COSTS For years ended December 31,               2002           $        13,408,000 2003                   11,317,000 2004                   11,343,000 2005                   11,341,000 2006                   11,343,000 Later Fiscal Years                                         103,046,000 TOTAL               $      161.798.000 In addition, the Department is required to pay its share of the Operation and Maintenance (O&M) costs of the Projects in which they participate. The Department's total O&M costs including debt service under the PSAs were $17,240,000 and $17,430,000 for the years ended December 31, 2001 and 2000, respectively.
ANNUAL COSTS For years ended December 31, 2002 13,408,000 2003 11,317,000 2004 11,343,000 2005 11,341,000 2006 11,343,000 Later Fiscal Years 103,046,000 TOTAL 161.798.000 In addition, the Department is required to pay its share of the Operation and Maintenance (O&M) costs of the Projects in which they participate. The Department's total O&M costs including debt service under the PSAs were $17,240,000 and $17,430,000 for the years ended December 31, 2001 and 2000, respectively.
27
27


(C               C     C               C                 C             C               C HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (000)
(
TOTAL TOTAL PROJECT                             DEBT ISSUED                     DEBT SERVICE PERCENTAGE    EXPENDITURES          PARTICIPANTS    & OUTSTANDING       PARTICIPANTS    ON BONDS        PARTICIPANTS SHARE          TO DATE                SHARE            12/31/01           SHARE       OUTSTANDING         SHARE Stony Brook Peaking Project                   s        56,791      s                $        16,435  $              S        18,234  s Stony Brook Intermediate Project                       155,558                                  66,270                            78,788 Nuclear Mix No. I -SBK                 3.3984            15,033                  511            12,073              410          16,132              548 Nuclear Mix No. I -MLS                 3.3984         111,185                3,779              89,292            3,034          119,311            4,055 Nuclear Project No. 3-MLS               1.5997          137,571                2,201            176,195            2,819          250,166            4,002 Nuclear Project No. 4-SBK               4.2300         313,823               13,275           196,470            8,311          279,105          11,806 Nuclear Project No. 5-SBK              1.8613          85,745                1,596            58,960            1,097          83,596            1,556 Wyman Project                          9.2536            7,518                  696              3,255              301            3,728              345 Project No. 6-SBK                      23.1278          607,981              140,613            415,780            96,161          603,108          139,486 TOTAL                                    $      1,491,205      $      162,671    $    1,034,730   $      112,133 s    1,452,168  $      161,798 Commercial Paper Program                      $          $              -$
C C
                                                                                        $        20,560   $              s        22,002  $
C C
OPERATION &                              OPERATION &
C C
PERCENTAGE    MAINTENANCE           PARTICIPANTS     MAINTENANCE        PARTICIPANTS SHARE          12/31/00              SHARE            12/31/01           SHARE Stony Brook Peaking Project                    s          9,361      $                $        11,762   s Stony Brook Intermediate Project                        44,854                                  46,235 Nuclear Mix No. 1-SBK                  3.3984            1,889                  64              1,881               64 Nuclear Mix No. I-MLS                  3.3984          17,739                  603              15,620             531 Nuclear Project No. 3-MLS              1.5997          30,182                  483            29,084               465 Nuclear Project No. 4-SBK              4.2300          32,425                1,372            32,372             1,369 Nuclear Project No. 5-SBK              1.8613            9,451                  176              9,390             175 Wyman Project                          9.2536            3,324                308              2,434             225 Project No. 6-SBK                      23.1278          62,367              14,424            62,310           14,411 TOTAL                                    $        211,592      $      17,430    $      211,088    $      17,240 Commercial Paper Program                      s                 -    $                $                - $
C HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (000)
28
PERCENTAGE SHARE TOTAL PROJECT EXPENDITURES TO DATE PARTICIPANTS SHARE DEBT ISSUED  
& OUTSTANDING 12/31/01 PARTICIPANTS SHARE TOTAL DEBT SERVICE ON BONDS OUTSTANDING PARTICIPANTS SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. I -SBK Nuclear Mix No. I -MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 PERCENTAGE SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. 1-SBK Nuclear Mix No. I-MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 s
56,791 s
155,558 15,033 511 111,185 3,779 137,571 2,201 313,823 13,275 85,745 1,596 7,518 696 607,981 140,613 1,491,205 162,671 OPERATION &
MAINTENANCE PARTICIPANTS 12/31/00 SHARE s
9,361 44,854 1,889 64 17,739 603 30,182 483 32,425 1,372 9,451 176 3,324 308 62,367 14,424 211,592 17,430 s
16,435 66,270 12,073 410 89,292 3,034 176,195 2,819 196,470 8,311 58,960 1,097 3,255 301 415,780 96,161 1,034,730 112,133 20,560 OPERATION &
MAINTENANCE PARTICIPANTS 12/31/01 SHARE 11,762 s
46,235 1,881 64 15,620 531 29,084 465 32,372 1,369 9,390 175 2,434 225 62,310 14,411 211,088 17,240 S
18,234 s
78,788 16,132 548 119,311 4,055 250,166 4,002 279,105 11,806 83,596 1,556 3,728 345 603,108 139,486 s
1,452,168 161,798 s
22,002 28


SC                               (C                               C                                  C HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000                                                                 Ii (000) 2002                                 2003                              2004 PERCENTAGE    ANNUAL COST       PARTICIPANTS     ANNUAL COST       PARTICIPANTS   ANNUAL COST       PARTICIPANTS SHARE                            SHARE                              SHARE                            SHARE Stony Brook Peaking Project                   $        6,120    $                $          5,138  $                        4,792  $
SC (C
Stony Brook Intermediate Project                     15,208                                12,874                            12,875 Nuclear Mix No. I-SBK                   3.3984          1,612                55              1,361              46            1,357              46 Nuclear Mix No. I-MLS                   3.3984        11,919                405            10,066              342          10,039              341 Nuclear Project No. 3-MLS               1.5997        18,809                301            16,867              270          16,929              271 Nuclear Project No. 4-SBK               4.2300        22,612                956            19,255              814          19,847              840 Nuclear Project No. 5-SBK               1.8613          7,015              131              5,991              112            6,094              113 Wyman Project                           9.2536            670                62                559              52              563              52 Project No. 6-SBK                     23.1278        49,715            11,498            41,860            9,681          41,855            9,680 TOTAL                                     $    133,680    $      13,408    $      113,971    $      11,317  $      114,351    $      11,343 Commercial Paper Program                       $        8,928    $                $          8,799  $              $        3,649  $
HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (000)
2005                                  2006                          AFTER 2006 PERCENTAGE     ANNUAL COST      PARTICIPANTS      ANNUAL COST      PARTICIPANTS                      PARTICIPANTS SHARE                            SHARE                              SHARE                            SHARE Stony Brook Peaking Project                   $        2,184    $                                                        $          - $
Ii PERCENTAGE SHARE 2002 ANNUAL COST PARTICIPANTS SHARE 2003 ANNUAL COST PARTICIPANTS SHARE 2004 ANNUAL COST PARTICIPANTS SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. I-SBK Nuclear Mix No. I-MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 PERCENTAGE SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. I-SBK Nuclear Mix No. I-MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 6,120 15,208 1,612 55 11,919 405 18,809 301 22,612 956 7,015 131 670 62 49,715 11,498 133,680 13,408 8,928 2005 ANNUAL COST PARTICIPANTS SHARE 2,184 12,873 1,357 46 10,036 341 16,947 271 19,903 842 6,099 114 523 48 41,848 9,679 111,770 11,341 626 5,138 12,874 1,361 46 10,066 342 16,867 270 19,255 814 5,991 112 559 52 41,860 9,681 113,971 11,317 8,799 2006 ANNUAL COST PARTICIPANTS SHARE 12,428 1,361 46 10,064 342 16,955 271 19,926 843 6,109 114 528 49 41,847 9,678 109,218 11,343 4,792 12,875 1,357 46 10,039 341 16,929 271 19,847 840 6,094 113 563 52 41,855 9,680 114,351 11,343 3,649 AFTER 2006 PARTICIPANTS SHARE 12,530 9,084 309 67,187 2,284 163,659 2,618 177,562 7,511 52,288 972 885 82 385,983 89,270 869,178 103,046 29 C
Stony Brook Intermediate Project                     12,873                                12,428                            12,530 Nuclear Mix No. I-SBK                   3.3984          1,357                46              1,361              46            9,084              309 Nuclear Mix No. I-MLS                   3.3984        10,036                341            10,064              342          67,187            2,284 Nuclear Project No. 3-MLS               1.5997        16,947                271            16,955              271          163,659            2,618 Nuclear Project No. 4-SBK               4.2300        19,903                842            19,926              843          177,562            7,511 Nuclear Project No. 5-SBK               1.8613          6,099              114              6,109              114          52,288              972 Wyman Project                           9.2536            523                48                528              49              885                82 Project No. 6-SBK                     23.1278       41,848             9,679             41,847             9,678         385,983            89,270 TOTAL                                    $    111,770    $      11,341   $      109,218    $      11,343 $      869,178   $      103,046 Commercial Paper Program                      $          626    $                $                - $              $                $
C
29


Goulet, Salvidio & Associates, PC.
Goulet, Salvidio & Associates, PC.
Certified Public Accountants James F. Goulet, CPA, MST                                                               Michael A. Salvidio, CPA Catherine A. Kuzmeskus, CPA                                                                 James R. Dube, CPA INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL INFORMATION The Municipal Light Board Hudson Light and Power Department Our audits were made for the purpose of forming an opinion on the financial statements of Hudson Light and Power Department for the years ended December 31, 2001 and 2000, which are presented in the preceding section of this report. The supplemental information presented on pages 31-33 is for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Certified Public Accountants James F. Goulet, CPA, MST Catherine A. Kuzmeskus, CPA Michael A. Salvidio, CPA James R. Dube, CPA INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL INFORMATION The Municipal Light Board Hudson Light and Power Department Our audits were made for the purpose of forming an opinion on the financial statements of Hudson Light and Power Department for the years ended December 31, 2001 and 2000, which are presented in the preceding section of this report. The supplemental information presented on pages 31-33 is for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Goulet, Salvidio & Associates, P.C.
Goulet, Salvidio & Associates, P.C.
Worcester, Massachusetts April 3, 2002 Nine Irving Street - Worcester, MA 01609
Worcester, Massachusetts April 3, 2002 Nine Irving Street - Worcester, MA 01609
* Tel: 508-757-5957
* Tel: 508-757-5957
* Fax: 508-753-0948 - E-mail: admin@gsamycpa.com The6   'Never Underestimate The Vaiue
* Fax: 508-753-0948 - E-mail: admin@gsamycpa.com The6  
' Never Underestimate The Vaiue


; I- ;
I-HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATING REVENUES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 Sales to Residential Customers Sales to Commercial Customers Sales to Power Customers Private Property Lighting Sales Municipal Sales Hudson Street Lights Hudson Municipal Buildings Hudson Municipal Power All Electric Municipal Buildings Stow and Berlin Street Lights Stow, Maynard and Other Municipal Services Total Revenue from Sales of Electricity 2001 7,171,091 1,849,972 12,947,863 88,763 113,012 74,863 384,240 400,122 8,108 102,418 23,140,452 2000 6,886,770 1,861,175 11,591,450 87,888 101,000 70,569 374,720 422,926 7,495 102,430 21,506,423 Power Adjustment Charges Residential Sales Commercial Sales Power Sales Private Property Lighting Municipal Power Adjustment Charges Street Lighting Stow, et al Municipal Power Hudson Municipal Commercial Hudson Municipal Power Stow, et al Municipal Commercial Stow, et al Municipal All Electric Fuel Charge Adjustment Total Power Adjustment Charges Other Income Other Electric Revenues TOTAL OPERATING REVENUES 1,655 168,100 23,550 33,142 4,946 127,997 (390,710) 9,248,550 44,582 32,433,584 10,240 107,315 15,717 23,147 3,044 79,528 1,868,409 7,901,429 36,682 29,444,534 See Independent Auditors' Report on Supplemental Information 31 1,953,390 602,488 6,702,800 21,192 1,085,128 412,169 4,281,225 15,507
HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATING REVENUES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 2001              2000 Sales to Residential Customers                                 $    7,171,091        6,886,770 Sales to Commercial Customers                                         1,849,972        1,861,175 Sales to Power Customers                                           12,947,863        11,591,450 Private Property Lighting Sales                                         88,763            87,888 Municipal Sales Hudson Street Lights                                                 113,012          101,000 Hudson Municipal Buildings                                           74,863            70,569 Hudson Municipal Power                                               384,240          374,720 All Electric Municipal Buildings                                     400,122          422,926 Stow and Berlin Street Lights                                         8,108            7,495 Stow, Maynard and Other Municipal Services                           102,418          102,430 Total Revenue from Sales of Electricity                           23,140,452         21,506,423 Power Adjustment Charges Residential Sales                                                 1,953,390        1,085,128 Commercial Sales                                                     602,488          412,169 Power Sales                                                       6,702,800        4,281,225 Private Property Lighting                                             21,192            15,507 Municipal Power Adjustment Charges Street Lighting Stow, et al                                           1,655            10,240 Municipal Power Hudson                                               168,100          107,315 Municipal Commercial Hudson                                           23,550            15,717 Municipal Power Stow, et al                                           33,142            23,147 Municipal Commercial Stow, et al                                       4,946             3,044 Municipal All Electric                                              127,997           79,528 Fuel Charge Adjustment                                              (390,710)       1,868,409 Total Power Adjustment Charges                                      9,248,550          7,901,429 Other Income Other Electric Revenues                                              44,582            36,682 TOTAL OPERATING REVENUES                                        $  32,433,584      $ 29,444,534 See Independent Auditors' Report on Supplemental Information 31


HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATIONS AND MAINTENANCE EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 2001              2000 PRODUCTION EXPENSES:
HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATIONS AND MAINTENANCE EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 PRODUCTION EXPENSES:
Nuclear Power Generation:
Nuclear Power Generation:
Operation Supervision                                     $        18,997    $    17,581 Fuel                                                               29,512          27,263 Coolants and Water                                                   1,746            1,729 Steam Expenses                                                     14,414          16,668 Electric Expenses                                                       81              644 Miscellaneous Nuclear Power Expenses                               38,033          39,345 Maintenance Supervision                                             8,797            9,701 Maintenance of Structures                                           2,269            2,524 Maintenance of Reactor Plant Equipment                               6,602          14,160 Maintenance of Generation and Electric Plant                       10,794          16,332 Total Nuclear Power Generation Expenses                         131,245          145,947 Other Power Generation:
Operation Supervision Fuel Coolants and Water Steam Expenses Electric Expenses Miscellaneous Nuclear Power Expenses Maintenance Supervision Maintenance of Structures Maintenance of Reactor Plant Equipment Maintenance of Generation and Electric Plant Total Nuclear Power Generation Expenses Other Power Generation:
Operation Supervision                                               33,977          31,437 Fuel-Oil                                                           75,394          107,769 Fuel-Natural Gas                                                   67,934          92,806 Generation Expenses                                                 73,398          82,175 Generation Expenses-Lube                                             4,164            5,775 Miscellaneous Other Power Generation Expenses                     152,915          130,647 Maintenance Supervision                                             33,529          32,245 Maintenance of Structures                                           73,387          80,708 Maintenance of Generation and Electric Plant                       111,318          99,563 Total Other Power Generation Expenses                           626,016          663,125 TOTAL PRODUCTION EXPENSES                                           757,261          809,072 PURCHASED POWER EXPENSES:
Operation Supervision Fuel-Oil Fuel-Natural Gas Generation Expenses Generation Expenses-Lube Miscellaneous Other Power Generation Expenses Maintenance Supervision Maintenance of Structures Maintenance of Generation and Electric Plant Total Other Power Generation Expenses TOTAL PRODUCTION EXPENSES PURCHASED POWER EXPENSES:
Purchased Power-Entitlement                                     22,474,256       18,266,139 Purchased Power-Nepex System                                      3,939,007        4,540,129 Control and Load Dispersion                                            7,723            8,953 TOTAL PURCHASED POWER EXPENSES                                    26,420,986        22,815,221 (continued)
Purchased Power-Entitlement Purchased Power-Nepex System Control and Load Dispersion TOTAL PURCHASED POWER EXPENSES 2001 18,997 29,512 1,746 14,414 81 38,033 8,797 2,269 6,602 10,794 131,245 33,977 75,394 67,934 73,398 4,164 152,915 33,529 73,387 111,318 626,016 757,261 22,474,256 3,939,007 7,723 26,420,986 2000 17,581 27,263 1,729 16,668 644 39,345 9,701 2,524 14,160 16,332 145,947 31,437 107,769 92,806 82,175 5,775 130,647 32,245 80,708 99,563 663,125 809,072 18,266,139 4,540,129 8,953 22,815,221 (continued)
See Independent Auditors' Report on Supplemental Information 32
See Independent Auditors' Report on Supplemental Information 32


- f.
f.
HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATIONS AND MAINTENANCE EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 2001                2000 TRANSMISSION EXPENSES                                         $    1,463,054      $    1,399,386 DISTRIBUTION EXPENSES:
HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATIONS AND MAINTENANCE EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 TRANSMISSION EXPENSES DISTRIBUTION EXPENSES:
Operation Supervision and Engineering                               34,778              34,951 Station Expenses                                                   155,092              127,815 Overhead Line Expenses                                               11,247              10,293 Underground Line Expenses                                               858              2,871 Street Lighting and Signal Expenses                                   9,681              8,193 Meter Expenses                                                       83,907              92,766 Customer Installation Expenses                                         4,487              5,529 Miscellaneous Distribution Expenses                                   4,700              4,776 Maintenance Supervision and Engineering                               35,831              34,782 Maintenance of Station Equipment                                       5,282                136 Maintenance of Overhead Lines                                       361,619              328,516 Maintenance of Underground Lines                                     13,599              19,698 Maintenance of Line Transformer                                       16,433              5,166 Maintenance of Street Lighting                                       11,953              10,536 Maintenance of Meters                                                   403                959 TOTAL DISTRIBUTION EXPENSES                                           749,870              686,987 GENERAL EXPENSES:
Operation Supervision and Engineering Station Expenses Overhead Line Expenses Underground Line Expenses Street Lighting and Signal Expenses Meter Expenses Customer Installation Expenses Miscellaneous Distribution Expenses Maintenance Supervision and Engineering Maintenance of Station Equipment Maintenance of Overhead Lines Maintenance of Underground Lines Maintenance of Line Transformer Maintenance of Street Lighting Maintenance of Meters TOTAL DISTRIBUTION EXPENSES GENERAL EXPENSES:
Supervision                                                           15,544              15,059 Meter Reader Expenses                                                 62,451              53,075 Customer Records and Collection Expenses                           275,842              257,900 Miscellaneous Sales Expenses                                         11,374              5,548 Administrative and General Salaries                                 465,060              422,242 Office Supplies and Expenses                                         15,387              14,747 Outside Services Employed                                             88,367            210,414 Property Insurance                                                   28,844              25,221 Injuries and Damages                                                 59,558              55,162 Employee Pension and Benefits                                       768,844              678,994 General Advertising Expense                                             474              3,583 Miscellaneous General Expenses                                       34,361              39,817 Maintenance of General Plant                                         54,052              61,667 Transportation Expenses                                               32,296              36,375 TOTAL GENERAL EXPENSES                                             1,912,454            1,879,804 REAL ESTATE AND OTHER TAXES                                             17,848              17,638 TOUAL OFEKARI'UNS ANO MAINTIENANCE                             $ 31,321,413         $ 2"l,6US, 1US See Independent Auditors' Report on Supplemental Information 33}}
Supervision Meter Reader Expenses Customer Records and Collection Expenses Miscellaneous Sales Expenses Administrative and General Salaries Office Supplies and Expenses Outside Services Employed Property Insurance Injuries and Damages Employee Pension and Benefits General Advertising Expense Miscellaneous General Expenses Maintenance of General Plant Transportation Expenses TOTAL GENERAL EXPENSES REAL ESTATE AND OTHER TAXES TOUAL OFEKARI'UNS ANO MAINTIENANCE 2001 1,463,054 34,778 155,092 11,247 858 9,681 83,907 4,487 4,700 35,831 5,282 361,619 13,599 16,433 11,953 403 749,870 15,544 62,451 275,842 11,374 465,060 15,387 88,367 28,844 59,558 768,844 474 34,361 54,052 32,296 1,912,454 17,848
$ 31,321,413 2000 1,399,386 34,951 127,815 10,293 2,871 8,193 92,766 5,529 4,776 34,782 136 328,516 19,698 5,166 10,536 959 686,987 15,059 53,075 257,900 5,548 422,242 14,747 210,414 25,221 55,162 678,994 3,583 39,817 61,667 36,375 1,879,804 17,638
$ 2"l,6US, 1US See Independent Auditors' Report on Supplemental Information 33}}

Latest revision as of 13:28, 16 January 2025

Guarantees of Payments of Deferred Premiums
ML030030542
Person / Time
Site: Seabrook NextEra Energy icon.png
Issue date: 12/23/2002
From: Peschel J
North Atlantic Energy Service Corp
To:
Document Control Desk, Office of Nuclear Reactor Regulation
References
NYN-02127
Download: ML030030542 (81)
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0 FPL Energy Seabrook Station FPL Energy Seabrook Station P.O. Box 300 Seabrook, NH 03874 (603) 773-7000 December 23, 2002 Docket 50-443 NYN-02127 U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555-0001 Seabrook Station Guarantees of Payments of Deferred Premiums Pursuant to 10CFR 140.21(e), FPL Energy Seabrook, LLC, (FPLE Seabrook), on behalf of the licensees named in Facility Operating License NPF-86, provides herewith, the Annual Reports for 2001. The Annual Reports provided below demonstrate the collective ability of the licensees to meet their obligation for payment of deferred premiums.

Annual Reports for 2001 (containing certified financial statements) are enclosed for the following:

FPL Group* (for subsidiary FPL Energy Seabrook)

Massachusetts Municipal Wholesale Electric Company Taunton Municipal Lighting Plant 0

Hudson Light and Power Department Previously submitted May 17,2002 as part of NYN-02045, "Application for Order and Conforming Amendments for License Transfer."

U.S. Nuclear Regulatory Commission NYN-02127 / Page 2 In addition, the Agreement of Joint Ownership, Construction and Operation of New Hampshire Nuclear Units, dated May 1, 1973 as amended, and specifically the provisions of Paragraph 10.1, as amended by the Eighteenth Amendment, dated March 14, 1986, is incorporated by reference1.

The enclosed annual reports are submitted pursuant to 10 CFR 50.71 (b).

Should you have any questions regarding this matter, please contact Mr. Brad A. Jacobson, Financial and Accounting Services Manager, at (603) 773-7684.

Very truly yours, FPL ENERGY SEABROOK, LLC 0i'**

latory Programs Manager cc:

(without enclosures)

H. J. Miller, NRC Region I Administrator R. D. Starkey, NRC Project Manager, Project Directorate 1-2 G. T. Dentel, NRC Senior Resident Inspector cc: (with enclosures):

U. S. Nuclear Regulatory Commission Attention: Director of Nuclear Reactor Regulation Washington, DC 20555-0001

'As of November 1, 2002, certain owners of Seabrook Nuclear Power Station and NAESCO have completed the sale of their majority interest in Seabrook Station to FPL Energy Seabrook, LLC.

ENCLOSURE TO NYN-02127

I ANDERSEN MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION DECEMBER 31, 2001, 2000 AND 1999 WITH INDEPENDENT AUDITORS' REPORT THEREON

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION DECEMBER 31, 2001, 2000 AND 1999 TABLE OF CONTENTS Pa e Independent Auditors' Report 1

Financial Statements Statements of Financial Position 2

Statements of Operations 3

Statements of Cash Flows 4

Notes to Financial Statements 5

Supplementary Schedules Independent Auditors' Report on Supplementary Information 20 Schedule I - Project Statements of Financial Position 21 Schedule 1 - Project Statements of Operations 22 Schedule Ill - Project Statements of Cash Flows 23

41 i

ANDERSEN Independent Auditors' Report To the Board of Directors of Massachusetts Municipal Wholesale Electric Company:

We have audited the accompanying statement of financial position of Massachusetts Municipal Wholesale Electric Company (a Massachusetts public corporation) as of December 31, 2001, and the related statement of operations and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements as of December 31, 2000 and 1999 and for the years then ended were audited by other auditors whose report dated March 2, 2001, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted in the United States.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Massachusetts Municipal Wholesale Electric Company as of December 31, 2001, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

Hartford, Connecticut March 8, 2002 MASSACHUSETITS MUNICIPAL WHOLESAL E ELECTRIC COMPAN STATMENTS OF FINANCIAL POSITION DECEMBER 31-2001-2000 AND 1999 (In Thousands)

ASSETS 2D01 Electric plant In service (Note 5)

Accumulated depreciation Construction work in progress Nuclear fuel - net of amortization Total electric plant Special funds (Notes 2, 4 and 6)

Current assets Cash and temporary investments (Note 6)

Accounts receivable Unbilled revenues (Note 3)

Inventories Prepaid expenses Total current assets Total special funds and current assets Deferred charges Amounts recoverable under terms of the power sales agreements (Note 2)

Unamortized debt discount and expenses Nuclear decommissioning trusts Other YIABiLIELS Long-term debt (Note 4)

Current liabilities Current maturities of long-term debt (Note 4)

Short-term debt (Note 4)

Accounts payable Accrued expenses Member and participant advances and reserves Deferred credits Commitments and contingencies (Note 10)

$ 1,241,219 (589,328) 651,891 6,114 11,279 669,284 215,946 552 8,594 6,721 19,270 6,554 41,691 257,637 261,344 16,685 26,022 7,526 311,577

$ 1,238,498

$ 1,037,845 44,730 20,560 9,695 37,610 61,543 174,138 26,515

$ 1,238,498

$ 1,239,539 (544,741) 694,798 2,609 12,108 709,515 250,628 915 9,805 12,204 13,679 6,434 43,037 293,665 219,395 20,089 22,504 8,072 270,060

$ 1,273,240

$ 1,079,712 50,580 28,075 9,285 35,851 47,331 171,122 22,406

$ 1,273,240 1222

$ 1,236,752 (500,389) 736,363 3,448 9,736 749,547 241,042 1,081 6,580 3,300 18,505 6,470 35,936 276,978 238,565 22,448 18,902 6,308 286,223

$ 1,312,748

$ 1,130,975 47,870 36,847 9,860 21,501 46,915 162,993 18,780

$ 1,312,748 The accompanying notes are an integral part of these financial statements.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31. 2001-2000 AND 1999 (In Thousands) 201D Revenues (Note 3)

Interest income Total revenues and interest income Operating and service expenses:

Fuel used in electric generation Purchased power Other operating Maintenance Depreciation Taxes other than income Interest expense:

Interest charges Interest charged to projects during construction (Note 2)

Total operating costs and interest expense Other (credits) charges (Note 8)

Loss on refinancing - net (Note 4)

Total costs and expenses (Increase) decrease in amounts recoverable under terms of the power sales agreements (Note 2)

$ 258,711 14,932

$ 273,643 31,205 74,923 35,165 11,184 45,368 4,611 202,456 56,981 (60) 56,921 259,377 (5) 56,813 316,185 (42,542)

$ 273,643

$ 276,340 17,327

$ 293,667 31,841 69,241 40,841 16,862 45,205 5,180 209,170 67,881 (122) 67,759 276,929 (43) 276,886 16,781

$ 293,667 The accompanying notes are an integral part of these financial statements. 1999 232,094 15,409

$ 247,503 28,290 37,420 39,367 15,207 45,032 5,645 170,961 68,796 (19) 68,777 239,738 18,874 258,612 (11,109) 247,503

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (In Thousands)

Cash flows from operating activities:

Total revenues and interest income Total costs and expenses, net Adjustments to arrive at net cash provided by operating activities:

Depreciation and decommissioning Amortization of debt discount and nuclear fuel Change in current assets and liabilities:

Accounts receivable Unbilled revenues Inventories Prepaid expenses Accounts payable Accrued expenses and other Member and participant advances and reserves Net cash provided by operating activities Cash flows from investing activities:

Construction expenditures and purchases of nuclear fuel Interest charged to projects during construction Net (increase) decrease in special finds Change in net unrealized gain (loss) on special funds Decommissioning trust payments, net Other Net cash provided by (used for) investing activities Cash flows from financing activities:

Payments for principal of long-term debt and commercial paper Proceeds from bonds and commercial paper Payments for bond and commercial paper issue costs Bond issue premium Change in notes payable Payment for defeasance of bonds Net cash used for financing activities Net decrease in cash and temporary investments Cash and temporary investments at beginning of year Cash and temporary investments at end of year Cash paid during the year for interest (Net of amount capitalized as shown above) 2001 273,643 (316,185) 48,312 25,374 1,211 5,483 (5,591)

(120) 410 2,247 14,212 48,996 (10,168)

(60) 34,682 593 (4,140) 1,551 22,458 (59,165) 1,130,530 (18,565) 49,203 (50)

(1,173,770)

(71,817)

(363) 915 552 47,886 2000 293,667 (276,886) 47,713 7,354 (3,225)

(8,904) 4,826 36 (575) 12,501 416 76,923 (10,168)

(122)

(9,586) 2,389 (3,740) 1,397 (19,830)

(57,155)

(72)

(32)

(57,259)

(166) 1,081 915 65,004 1999 247,503 (258,612) 47,502 7,829 98 476 (4,758) 2,018 2,346 3,413 (5,623) 42,192 (6,037)

(19)

(1,495)

(3,785)

(3,429) 1,087 (13,678)

(48,230) 19,140 (143) 82 (29,151)

(637) 1,718 1,081 65,885 The accompanying notes are an integral part of these financial statements.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (1)

Nature of Operations The Massachusetts Municipal Wholesale Electric Company (MMWEC) is a public corporation and a political subdivision of the Commonwealth of Massachusetts (Commonwealth) formed to be a joint action agency and to develop a bulk power supply for its member Massachusetts municipal electric systems and other utilities. MMWEC is authorized to construct, own, or purchase ownership interests in, and to issue revenue bonds to finance electric facilities secured by revenues received by MMWEC in each of its Projects. A Project is MMWEC's ownership interest in electric generation facilities (Note 5). Project revenues are derived in part from Power Sales Agreements (PSAs) with its members and other utilities who are Participants in a Project. The power supply program consists of power purchase arrangements, power brokering services, planning and financial services, and the Projects relating to generating facilities either built and operated by MMWEC or other regional utilities.

A Massachusetts city or town having a municipal electric system, authorized by majority vote of the city or town, may become a member of MMWEC by applying for admission and agreeing to comply with the terms and conditions of membership as the MMWEC By-Laws may require. As of December 31, 2001, twenty-two Massachusetts municipal electric systems were members. Termination of membership does not relieve a system of its PSA obligations.

(2)

Significant Accounting Policies MMWEC presents its financial statements in accordance with accounting principles generally accepted in the United States (GAAP) as promulgated by the Financial Accounting Standards Board (FASB). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.

Interest Charged to Projects During Construction MMWEC capitalizes interest as an element of the cost of electric plant and nuclear fuel in process. A corresponding amount is reflected as a reduction of interest expense. The amount of interest capitalized is based on the cost of debt, including amortization of debt discount and expenses, related to each Project, net of investment gains and losses and interest income derived from unexpended Project funds.

Nuclear Fuel Nuclear fuel, net of amortization, includes MMWEC's ownership interest of spent fuel, fuel in use, in stock and in process for Millstone Unit 3 and Seabrook Station. The cost of nuclear fuel is amortized to fuel used in electric generation based on the relationship of energy produced in the current period to total expected energy production for fuel in the reactor. A provision for fuel disposal costs is included in fuel used in electric generation based upon disposal contracts with The Department of MASSACHUSEWTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)

Significant Accounting Policies (continued)

Nuclear Fuel (continued)

Energy (DOE). In addition, fuel used in electric generation includes the annual assessment, under the Energy Policy Act of 1992, for the cost of decontamination and decommissioning of uranium enrichment plants operated by the DOE. Billings from the DOE will occur over the next six years. At December 31, 2001, MMWEC's share of Millstone Unit 3 and Seabrook Station unbilled assessments was $244,000 and

$372,000, respectively. These amounts are included in other deferred charges and deferred credits on the Statements of Financial Position.

Special Funds In accordance with the General Bond Resolution (GBR) covering MMWEC's long-term debt, numerous special funds are required. The special funds, other than certain working capital funds, are invested in accordance with the GBR which was amended and restated during 2001. Changes to the GBR are discussed in Note 4. None of these changes affect the names of the funds specified below, except each such fund is now specific to a Project. The composition of special funds is as follows:

Fund 2001 2000 1999 (In Thousands)

Bond Fund Interest, Principal and Retirement Account to pay principal and interest on bonds

$ 17,818

$ 46,896

$ 45,427 Bond Fund Reserve Account set at the maximum annual interest obligation to make up any deficiencies in the Bond Fund Interest, Principal and Retirement Account 59,100 79,396 77,904 Reserve and Contingency Fund to make up deficiencies in the Bond Funds and pay for repairs and extraordinary costs 27,435 26,899 24,113 Revenue Fund to receive revenues and disburse them to other funds 90,177 79,084 73,625 Working Capital Funds to maintain funds to cover operating expenses 21,416 18,353 19.973 Total Special Funds Cash and Temporary Investments Certain cash and temporary investment amounts used for power purchases and working capital requirements of MMVWEC are not subject to the provisions of the GBR.

In addition to the investment securities delineated in the GBR, MMWEC invests in repurchase agreements with banks where MMWEC has established accounts. Temporary investments have maturities of less than ninety days.

Inventories Fuel oil and spare parts inventory are recorded and accounted for by the average cost method.

At December 31, 2001, 2000 and 1999, total fuel oil inventory was valued at $9.7, $4.8 and $5.7 million, and spare parts inventory amounted to $9.6, $8.9 and $12.8 million, respectively.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)

Sianificant Accounting Policies (continued)

Amounts Recoverable Under Terms of the Power Sales Agreements Billings to Project Participants are designed to recover costs in accordance with the PSAs, which generally provide for billing debt service, operating funds and reserve requirements. Expenses are reflected in the Statements of Operations in accordance with GAAP.

The timing difference between amounts billed and expensed is charged or credited to amounts recoverable under terms of the PSAs.

Amounts will be recovered through future billings or an expense will be recognized to offset credit balances. The principal differences include depreciation, fuel amortization, costs associated with canceled Projects (or assets abandoned within a Project), cost of refinancing, billing for certain interest, reserves, net unrealized gains or losses on securities available for sale and other costs. Individual Projects have a cumulative deferral of costs which total $271.5, $227.8 and $245.1 million and have cumulative billings in excess of costs which total $10.2, $8.4 and $6.5 million at December 31, 2001, 2000 and 1999, respectively.

In accordance with the PSAs, these amounts have been offset in the Statements of Financial Position.

The December 31, 2001, 2000 and 1999 balances of $261.3, $219.4 and $238.6 million, respectively, reflect the Statements of Operations net decrease (increase) of ($42.5), $16.8 and ($11.1) million for the years then ended and the change in net unrealized gain (loss) on securities available for sale of $.6, $2.4 and ($3.9) million for 2001, 2000 and 1999, respectively.

Depreciation Electric plant in service is depreciated using the straight-line method. The aggregate annual provisions for depreciation for 2001, 2000 and 1999 averaged 4% of the original cost of depreciable property.

Nuclear Decommissioning Trusts As required by the Nuclear Regulatory Commission and respective state statutes and regulations, MMWEC has funded trust funds maintained by external trustees to provide for the decommissioning activities of Millstone Unit 3 and Seabrook Station. The December 31, 2001 Millstone Unit 3 and Seabrook Station balances of $10.4 and $15.6 million, respectively, are stated at cost and are included as part of the deferred charges and deferred credits on the Statements of Financial Position.

MMWEC's share of the estimated reserve requirement for the prompt dismantling and removal of the Millstone Unit 3 and Seabrook Station, at the expiration of their original operating licenses in 2025 and 2026, is $18.5 and $67.8 million, respectively, in year end 2001 dollars. The new accounting standard described below could change this accounting policy.

New Accounting Standard The FASB has issued Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. SFAS No. 143 will be implemented on January 1, 2003. MMWEC is currently evaluating its asset obligations related to its various Projects in accordance with SFAS No. 143.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (2)

Significant Accounting Policies (continued)

Reclassifications Certain reclassifications of prior years' data have been made to conform with the current year presentation.

(3)

Revenues and Unbilled Revenues Revenues include electric sales for resale provided through MMWEC's power supply program. Revenues consist of billings under the PSAs, Power Purchase Agreements (PPAs), and related power brokering arrangements.

MMWEC also provides its members with power supply planning and related services which are billed pursuant to the MMWEC Service Agreement and its members as service revenues. Amounts that are not yet billed are included in unbilled revenues on the Statements of Financial Position. Revenues are comprised of the following:

Revenues 2001_

2000 1999 (In Thousands)

Electric sales for resale

$256,103

$261,438

$230,570 Service 1,482 1,187 1,524 Millstone Unit 3 Settlement 56 12,595 Other 1,070 1,120 7

Total Revenues 4

4 In October 2001, MMWEC received a payment of approximately $1.1 million in settlement of an arbitration against Central Maine Power Company (CMP) and FPL Energy, Inc. under the W.F.

Wyman Unit No. 4 Joint Ownership Agreement. MMWEC and the other W.F. Wyman Unit No. 4 joint owners filed a claim related to the 1999 sale of CMP's majority ownership in W.F. Wyman Unit No. 4 to FPL Energy Wyman IV LLC, which required CMP to make payments to the joint owners as a result of the sale. This payment was recorded in other revenues and as a decrease to amounts recoverable under terms of the PSAs and will be refunded to Project Participants in 2002.

In August 2000, MMWEC executed a settlement agreement and release of its claims in all litigation proceedings against the parent company and the lead owners of Millstone Unit 3 associated with the unit's shutdown in 1996. Pursuant to this settlement, MMWEC received approximately $12.6 million and other consideration. MMWEC also agreed to waive its right of first refusal under the Millstone Unit 3 Sharing Agreement. The $12.6 million settlement was refunded to the Project Participants and was a reduction to electric sales for resale in 2000.

In August 2000, MMWEC received approximately $1.1 million in satisfaction of a judgment concerning water rates charged to the Stony Brook Energy Center which was recorded in other revenues. In 2001, this amount was refunded to the Stony Brook Intermediate and Stony Brook Peaking Project Participants and was a reduction to electric sales for resale in 2001.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)

Debt General Bond Resolution MMWEC has eight Projects which were originally financed through the issuance of a multiple series of Power Supply System Revenue Bonds (Bonds) under the GBR, originally adopted by MMWEC in 1976. Security for those Bonds included a pledge of the revenues derived by MMWEC from all its Project PSAs, without regard to Project or series of Bonds.

Amended and Restated General Bond Resolution In November 2001, through a refinancing of all of its outstanding Bonds, MMWEC amended and restated its GBR to eliminate this "cross-pledge" of revenues. In refinancing all of its debt, MMWEC issued separate issues of Bonds for each of the eight Projects, which are payable solely from, and secured solely by, the revenues derived from the Project to which such issue relates, plus available funds pledged under the Amended and Restated GBR, with respect to the Bonds of such issues. The revenues derived from each Project are used solely to provide for the payment of the Bonds of any Bond issue relating to such Project, and to pay MMWEC's cost of owning and operating such Project, and are not used to provide for the payment of the Bonds of any Bond issue relating to any other Project. Pursuant to the PSAs, each Project Participant is obligated to pay its share of the actual costs relating to the generating units, and these obligations are not contingent upon the operational status of the units.

As part of the plan to refund and restructure its debt and amend the existing GBR, MMWEC developed a plan to enable it to refund all the existing long-term debt, which was accomplished with two transactions. MMWEC expects to realize gross debt service savings from this debt-restructuring program of approximately $136.1 million over the life of the bonds, with annual savings between $58,000 and $13.5 million. The January 2001 and November 2001 portions, as described below, of this restructuring program produced economic gains (the present value of debt service savings adjusted for additional cash paid) of approximately $7.8 million and $38.8 million, respectively.

In January 2001, MMWEC issued $94.2 million of 2001 Series A and $1.6 million of 2001 Series B refunding Bonds which were utilized to purchase for cancellation $95.4 million of portions of the 1992 Series A, 1992 Series C, 1992 Series E, 1993 Series A, 1994 Series A and 1994 Series B Bonds. The net cost of the refinancing equalled $6 million, plus $.7 million of net expenses.

In November 2001, MMWEC issued $726.3 million of Series A Bonds at a premium of

$49.2 million, $137.7 million of Series B Bonds and $170.8 million of Series One refunding Bonds, the total proceeds of which were utilized to purchase for cancellation $1,078.3 million of previously issued Bonds consisting of the 1987 Series A, 1992 Series A, 1992 Series B, 1992 Series C, 1992 Series D, 1992 Series E, 1993 Series A, 1994 Series A, 1994 Series B, 1994 Series C and 2001 Series A Bonds. The net cost of the refinancing equaled $50.8 million, plus $1.0 million of net expenses. The prior bonds refinanced by these transactions have been derecognized from the financial statements.

Power Supply System Revenue Bonds MMWEC's issuance of debt, other than obligations with a maturity of less than one year, requires authorization of the Massachusetts Department of Telecommunications and Energy (DTE).

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)

Deb. (continued)

Power Supply System Revenue Bonds (continued)

Bonds payable consists of serial, term (2000 and 1999) comprised of the following issues:

and variable-rate bonds and are Issue 1987 Series A 1992 Series A 1992 Series B 1992 Series C 1992 Series D 1992 Series E 1993 Series A 1994 Series A 1994 Series B 1994 Series C Stony Brook Peaking Project, Series A Stony Brook Intermediate Project, Series A W.F. Wyman Unit No. 4 Project, Series A Nuclear Mix No. 1, Series A Nuclear Project No. 3, Series A Nuclear Project No. 4, Series A Nuclear Project No. 5, Series A Project No. 6, Series A Nuclear Project No. 3, Series B Nuclear Project No. 4, Series B Nuclear Project No. 5, Series B Project No. 6, Series B Nuclear Mix No. 1,.Series One Nuclear Project No. 3, Series One Nuclear Project No. 4, Series One Nuclear Project No. 5, Series One Project No. 6, Series One Bonds payable Unamortized premium Less: Current maturities Total long-term debt Net Interest Cost 8.9%

7.0%

7.0%

6.9%

6.3%

6.0%

5.3%

5.3%

5.1%

Variable 3.1%

3.5%

3.5%

4.0%

4.2%

4.3%

4.2%

4.2%

4.9%

4.5%

3.8%

3.5%

Variable Variable Variable Variable Variable December 31.

2001 2000 (In Thousands) 6,310 87,170 168,070 52,775 72,655 66,365 313,215 112,270 153,240 97,600 11 A2*

66,270 3,255 90,015 47,930 112,695 42,170 347,535 65,290 48,450 7,765 16,145 11,350 62,975 35,325 9,025 52,100 1,034,730 47,845 (44.730) 11.037.845 1,129,670 622 (50.580)

$1.079.712 1999 7,110 89,805 174,470 54,295 75,395 75,735 329,100 113,130 161,445 97,600 1,178,085 760 (47.870)

$1,130275

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)

Debt (continued)

Power Supply System Revenue Bonds (continued)

The Series A Bonds issued in November 2001 and maturing on and prior to July 1, 2011, and the Series B Bonds issued in November 2001, are not subject to redemption prior to maturity at the option of MMWEC. The Series A Bonds maturing on and after July 1, 2012 are subject to redemption prior to maturity at the option of MMvWEC at 101% of the principal amount from January 1, 2012 to December 31, 2012 and at 100% from January 1, 2013 and thereafter.

The Series One Bonds of each issue are subject to redemption at the option of MMWEC, in whole or in part, at a redemption price of 100% of the principal amount.

Long-term debt maturities are as follows (In Thousands):

Series A Series B Series One Total 2002

$ 14,835

$ 29,895 44,730 2003 42,175 22,560 64,735 2004 46,305 22,665 68,970 2005 50,125 21,175 71,300 2006 51,465 18,895 70,360 Thereafter 521,400 22,460 170,775 714,635

$726.305 SIM.77 The interest rates on the 1994 Series C variable-rate bonds were adjusted from time-to-time, and the rate from January 1, 2001 through November 7, 2001 was 2.7%. The interest rates on the 2001 Series A were 2.7% from January 16, 2001 through November 7, 2001, and the interest rates on the 2001 Series B were 4.8% from January 16, 2001 through August 14, 2001. The interest rates on the Series One variable rate bonds may be converted at the option of MM4WEC to a daily, weekly, flexible, term or fixed mode. The interest rate on the Series One variable rate bonds during 2001 was 1.5%.

Debt Service Forward Delivery Agreement In 1994, MMWEC entered into a seven year Debt Service Forward Delivery Agreement (Forward Agreement) for purposes other than trading. The Forward Agreement expires on June 30, 2002.

MMWEC makes monthly deposits to the various accounts within the Bond Fund for each Project for the semiannual payment of its debt service on its outstanding bonds for each Project. In exchange for the right to direct the investment of such monies, the counterparty pays a fixed amount to MMWEC on a periodic basis, providing MMUWEC a fixed yield that could be earned on a security with a five to seven year maturity purchased at the time the Forward Agreement contract was executed, while complying with the maturity limitations for investments in the Bond Fund for each Project under the terms of the GBR. The counterparty has the right to sell to MMWEC government obligations that mature prior to the relevant debt service payment dates during the term of the Forward Agreement.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (4)

Debt (continued)

Debt Service Forward Delivery Agreement (continued)

MMWEC reserves the right to terminate the Forward Agreement in whole or in part in connection with any purchase, redemption or refinancing of fixed-rate bonds, counterparty default or counterparty credit rating deterioration to below investment grade. The Forward Agreement provides for the calculation and payment of liquidated damages to the counterparty reflecting market interest rates at the time of the termination compared to the rate levels in the Forward Agreement.

The cash requirement under the Forward Agreement requires MMWEC to make available to the counterparty an average balance of $30.3 million over the seven year term of the Forward Agreement in exchange for investments in government securities, to be held by MNIWEC's Bond Fund Trustee, that mature prior to MMWEC's debt payment dates.

The Forward Agreement is not recognized in the Statements of Financial Position to the extent that settlement of cash in exchange for financial instruments has not occurred. To the extent cash has been exchanged for government securities, the government securities are recorded on the Statements of Financial Position as special funds. The Forward Agreement is not a derivative as defined in SFAS No.

133, Accounting for Derivative Instruments and Hedging Activities, as amended.

Interest Rate Protection Agreement Through November 7, 2001, MMWEC had in place an Interest Rate Protection Agreement (Cap Agreement) to provide a hedge against interest rate risk on the 1994 Series C bonds. MMWEC purchased a $41 million Cap Agreement to limit the interest rate exposure on a portion of the 1994 Series C variable-rate debt to the extent that the variable debt costs exceed the fixed-rate received on the Forward Agreement described above. Pursuant to the Cap Agreement, MMWEC purchased the right to receive annually an amount by which an index-based interest rate, which approximates the interest rate on the 1994 Series C bonds, exceeds the protection rate in the Cap Agreement. The cost of the Cap Agreement was paid up front, and unamortized premiums were included in other deferred charges on the Statements of Financial Position in 2000 and 1999. The Cap Agreement was purchased for purposes other than trading. The fair value was not material as of December 31, 2000, and the Cap Agreement was terminated in November 2001 in connection with MMWEC's debt refinancing.

Net Revenue Available for Debt Service In accordance with the provisions of MMWEC's Amended and Restated GBR, MMWEC covenants that it shall fix, revise and collect rates, tolls, rents and other fees and charges sufficient to produce revenues to pay all operating and maintenance expenses and principal of, premium and the interest on the bonds and to pay all other obligations against its revenue for each Project. Revenues, for each Project which include applicable interest earnings from investments, are required to equal 1.10 times the annual debt service for each contract year ending June 30, after deduction of certain operating and maintenance expenses and exclusive of-depreciation. As such, these amounts do not agree with those in the accompanying Statements of Operations. For the contract years ended June 30, 2001, 2000, 1999 and prior years, MMWEC met the original GBR debt service coverage requirements for the applicable MMWEC Projects.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999

-(4)

Debt (continued)

Net Revenue Available for Debt Service (continued)

Contract Year Ended June 30, 2001 2000 1999 Debt Service Coverage:

(In Thousands)

Revenues

$191,732

$180,789

$185,786 Other Billings 577 577 574 Reserve and Contingency Fund Billings 11,121 11,227 11,076 Total 203,430 192,593 197,436 Less: Operating & Maintenance Expenses (81,102)

(69,099)

(75,604)

Available Revenues Net of Expenses

$123.494

$12182 Debt Service Requirement 111

$112267 11.75 Coverage (110% Required) 110%

110%

Short-Term Debt MMWEC maintains a $5 million revolving line of credit to temporarily finance certain power purchases made by MMWEC for resale under power purchase contracts. Borrowings outstanding under the line of credit were $0, $50,000 and $82,000 as of December 31, 2001, 2000 and 1999, respectively. During 2001, 2000 and 1999, the maximum outstanding balance under the line of credit was

$3.9, $.9 and $2.4 million, respectively. Interest charged on borrowings under the line of credit is at minus one percent of the bank's prime rate (3.75% at December 31, 2001). In addition, a commitment fee of one quarter of 1% per annum is charged on the unused portion of the line based on the average daily principal amount of the borrowing outstanding. This line of credit expires June 30, 2002, at which time MMWEC intends to renew the line for an additional year.

In 1999, MMWEC issued $40.3 million of Series B Power Purchase commercial paper program notes. The Series B Power Purchase notes encompassed $19.1 million of new commercial paper notes and refunding of the outstanding $21.2 million of Series A commercial paper notes issued in 1998.

The commercial paper notes are not subject to redemption prior to maturity but are subject to acceleration upon the occurrence of an event of default under the Series B Power Purchase Resolution (Resolution). The Series B Power Purchase notes are a special obligation of MMWEC payable solely from the revenues and other monies as specified in the Resolution. As of December 31, 2001, MMWEC had a bank letter of credit in the amount of $22.4 million that provides security for the payment of principal and interest on the Series B Power Purchase notes. The December 31, 2001, 2000 and 1999 outstanding balances of commercial paper notes were $20.6, $28.0 and $36.8 million, respectively. At December 31, 2001, the interest rate on the Series B Power Purchase notes was 2.6%.

MASSACHUSETrS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 Electric Generation Facilities and Financing SMMWEC's power supply capacity includes ownership interests in the Stony Brook Peaking and Intermediate units which it operates. MMWEC is a nonoperating joint owner in the W.F. Wyman Unit No. 4, Millstone Unit 3 and Seabrook Station. Electric plant in service also includes MMWEC's service operations which totaled $2.4, $2.4 and $2.6 million in 2001, 2000 and 1999, respectively. The following is a summary of Projects included in electric plant in service and construction work in progress, as well as "hMMWEC's share of capability in megawatts (MW).

Projects Peaking Project Intermediate Project Wyman Project Nuclear Project No. 3 Nuclear Mix No. 1 Nuclear Mix No. 1 Nuclear Project No. 4 Nuclear Project No. 5 Project No. 6 Facility and MMWEC Share of Capability in MW Stony Brook Stony Brook W.F. Wyman No. 4 Millstone Unit 3 Millstone Unit 3 Seabrook Station Seabrook Station Seabrook Station Seabrook Station 170.0 319.5 22.7 36.8 18.4 1.9 49.8 12.6 69.0 Amounts as of December 31.

2001 2000 1999 (In Thousands)

$ 56,636 155,488 7,341 130,653 51,818 8,644 260,374 71,226 502,719

$1.24.99 56,399 151,691 7,341 130,400 51,694 8,633 260,092 71,155 502,328

$ 56,380 151,337 7,341 130,048 51,517 8,616 259,630 71,038 501,688 In April 2001, Dominion Resources, Inc. purchased a 93.5% ownership interest in Millstone Unit 3 from all of the joint owners of Millstone Unit 3, except MMWEC and one other joint owner.

MMWEC has an 11.6% ownership interest in the Seabrook Station nuclear generating unit.

It is anticipated that certain other joint owners of Seabrook will sell their ownership interests in Seabrook through a bid process expected to be completed in late 2002.

At this time MMWEC has no plans to sell any of its ownership interests in Seabrook.

(6)

Investments and Deposits All bank deposits are maintained at one financial institution. Such deposits amounted to $3.1 million at December 31, 2001, and are included in both cash and temporary investments and special funds.

The Federal Deposit Insurance Corporation currently insures up to $100,000 per depositor. At December 31, 2001, 2000 and 1999, investments are classified as available for sale and reported at market value with unrealized gains of $2.0, $1.4 and $.7 million, respectively, and unrealized losses of $148,000, $88,000 and

$1.8 million, respectively. The net losses and gains are excluded from earnings and are reported as a component of amounts recoverable under the terms of the PSAs on the Statements of Financial Position.

At December 31, 2001, all securities underlying repurchase agreements, and all other investments, were held (5)

MASSACHUSETTS MUNICIPAL WHOLESALE ELEC'TRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (6)

Investments and Deposits (continued) in MMWEC's name by custodians consisting of the Bond Fund Trustee or MMWEC's depository bank.

Investments, representing the special funds and cash and temporary investments, as well as certain additional amounts disbursed but available for investment, and accrued interest, are presented below:

Type of Investment Repurchase Agreements Other Investments:

U.S. Treasury bills U.S. Treasury notes U.S. Agency bonds Municipal bonds U.S. Agency discount notes Total Other Investments Invested Cash Total Cash and Investments 2001 Amortized Market Cost Basis Value 17,904 33,842 124,846 33,872 210,464 4,172 2000 Amortized Market Cost Basis Value (In Thousands)

L

$L 17,902 23,950 34,950 63,533 125,601 85,753 1,355 33,873 76,224 212,326 250,815 4,172 (540) 24,300 63,924 86,241 1,368 76,250 252,083 (540) 1999 Amortized Market Cost Basis Value

$ 3,899

$ 3,899 22,457 77,146 29,142 8,199 102,519 239,463 (118) 22,985 75,913 28,651 8,228 102,565 238,342 (118)

S250.275

$2L.2

$243.244 During 2001, 2000 and 1999, the proceeds from the sale of available for sale securities were K

$220.8, $89.0 and $33.1 million, respectively, resulting in gross realized gains of $1 million, $20,000 and

$70,000, respectively, and gross realized losses of $5,000, $168,000 and $66,000, respectively. The basis on which cost was determined in computing realized gain or loss was specific identification. Including repurchase agreements, the average contractual maturity of the investments in debt securities at December 31, 2001, 2000 and 1999 were 792, 497 and 530 days, respectively.

Due to seasonal cash flows during 2001, 2000 and 1999, MMWEC, from time-to-time, K-invested in repurchase agreements with its depository bank that were collateralized by securities in MMWEC's name held by the depository bank.

(7)

Fair Values of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

K-Investments and Decommissioning Trusts - The fair values estimated are based on quoted K-market prices for those or similar investments.

Long-Term Debt - The fair value is estimated based on quoted market prices for the same or K

similar issues.

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2001. 2000 and 1999 (7)

Fair Values of Financial Instruments (continued)

Interest Rate Protection Agreement - The fair value is based on average quoted market prices of agreements with similar duration and strike prices.

Debt Service Forward Delivery Agreement - The fair value reflects the estimated amounts that MMWEC would receive to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts.

The estimated fair values of MMWEC's financial instruments are as follows:

2001 Carrying Estimated Value Fair Value 2000 Carrying Estimated Value Fair Value (In Thousands) 1999 Carrying Estimated Value Fair Value Financial Assets:

Investments Decommissioning Trusts Interest Rate Protection "Agreement Financial Liabilities:

Long-Term Debt, excluding current maturities Unrecognized Financial Instruments:

Debt Service Forward Delivery Agreement 212,326 $ 212,326 26,022 27,442

$ 252,083 21,882 41 1,037,845 1,018,783 643

$ 252,083 24,190

$ 242,241 18,142 12 152

$ 242,241 20,925 150 1,079,712 1,102,240 1,130,975 1,135,393 899 891 The carrying amounts for cash, accounts receivable, notes payable and accounts payable approximate their fair value due to the short-term nature of these instruments.

1 (8)

Other Charges and Credits to Income In 1999, MMWEC negotiated the payment of $18.9 million for the buy-out and termination of uneconomical PPAs, pursuant to which MMWEC had agreed to purchase electric capacity and output for resale to certain cities and towns of the Commonwealth having municipal electric departments. The buyout of these PPAs was financed through the issuance of $19.1 million in commercial paper notes.

(9)

Benefit Plans MMNWEC has two non-contributory defined benefit pension plans covering substantially all full-time active employees. One plan covers union employees (union plan) and the other plan covers non union employees (non-union plan).

The amount shown below as the benefit obligation for MMWEC is a MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (9)

Benefit Plans (continued) standardized disclosure measure of the present value of pension benefits, adjusted for the effect of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the plans.

The benefit obligation was determined by an actuarial valuation performed as of January 1 of each of the years presented below.

Significant actuarial assumptions used in the valuation include a weighted-average discount rate of 7.0% and projected salary increases of 4.0% in 2001, 2000 and 1999, respectively. The benefit obligation, plan assets, funded status, and components of net periodic benefit cost for both plans is as follows:

Amounts as of December 31.

2001 2000 1999 Changes in benefit obligation Benefit obligation at beginning of year

$ 8,004

$ 7,333

$ 7,359 Service cost 458 386 365 Interest cost 650 511 470 Actuarial losst(gain) 1,313 170 (430)

Benefits paid (118)

(396)

(431)

Benefit obligation at end of year S1030

$ 8.004 S 7.333 Change in plan assets Fair value of plan assets at beginning of year

$ 8,119

$ 7,821

$ 7,735 Actual return on plan assets (292) 144 6

Employer contribution 562 588 542 Benefits paid, including expenses (162)

(434)

(462)

Fair value of plan assets at end of year

$18.227 7Z811

$ 7.821 Funded Status

$ (2,080) 115 488 Unrecognized net actuarial loss 2,949 1,278 573 Unrecognized prior service cost 661 161 185 "Unrecognized transition obligation 73 88 104 Prepaid pension cost 1

L1J5 Components of net periodic benefit cost Service cost 458 386 365 Interest cost 650 511 470 Expected return on plan assets (689)

(673)

(662)

S Amortization of transition obligation 15 15 15 Amortization of prior service cost 70 24 24 Recognized net actuarial loss 97 33 Net periodic benefit cost 0.;229 L;6212 MASSACHUSETTS MUNICIPAL WHOLESALE

. ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (9)

Benefit Plans (continued)

Annual contributions to the pension plans recorded as pension expense were $562,000,

$588,000 and $541,000, for the years ended December 31, 2001, 2000 and 1999, respectively. These amounts were billed through the PSAs, PPAs and Service Agreement with MMWEC members and are included in other operating expense in the Statements of Operations. The union plan uses the aggregate actuarial cost method and the non-union plan uses the frozen initial liability actuarial cost method in determining pension expense. In addition to the actuarial assumptions outlined above, the assumed long term rate of return used in determining pension expense was 8.5% in 2001, 2000 and 1999, respectively.

Pension costs applicable to prior years' service are amortized over thirty years.

"MMWEC contributes to an employee savings plan administered by an insurance company.

All full-time employees meeting the service requirements are eligible to participate in this defined contribution plan. Under the provisions of the plan, MMWEC's contributions vest immediately. MMWEC contributed $108,000, $104,000 and $99,000, while the employees contributed $180,000, $177,000 and

$177,000 during the years ended December 31, 2001, 2000 and 1999, respectively.

(10)

Commitments and Contingencies Power Purchases MMWEC entered into agreements for participation in the transmission interconnection between New England utilities and the Hydro-Quebec electric system near Sherbrooke, Quebec (Phase I),

which began commercial operation in October 1986. The New England portion of the interconnection was constructed at a total cost of about $140 million, of which 3.65% or $5 million is MMWEC's share to support Phase I. MMWEC. also entered into similar agreements for participation in the interconnection between New England utilities and the Hydro-Quebec electric system for the expansion of the Hydro Quebec interconnection (Phase I), which went into commercial operation in November 1990. MMWEC's Phase H equity investment approximates 0.6% or $3.3 million. MMWEC has corresponding agreements with certain of its members and another utility to recover MMWEC's share of the costs associated with the Phase II interconnection.

Power Sales Agreements MM.WEC sells the Project Capability of each of its Projects to Project Participants under PSAs.

In 1988, the Vermont Supreme Court ruled that the Project No. 6 PSAs between MMWEC and the Vermont Project Participants were void since inception.

Consequently, pursuant to the PSAs, MMWEC increased the remaining Project No. 6 Participants pro rata shares of Project Capability to cover the shortfall (step-up), which action was challenged by certain Massachusetts Participants. The Supreme Judicial Court of the Commonwealth in MMWEC et. al. v. Town of Danvers et. al. held that "the Project 6 PSAs executed by the defendants are valid and that the step-up provisions therein have been properly invoked".

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 and 1999 (10)

Commitments and Contingencies (continued)

Legal Actions SMMWEC is involved in various legal actions. Based on bond counsels' opinions regarding the validity of the PSAs and legal counsel's representations regarding the litigation, discussions with such counsel, and other considerations, management believes that the ultimate resolution of litigation in which S

MMWEC currently participates will not have a material, adverse effect on the financial position of WAWEC.

In November 1997, the Commonwealth enacted legislation to restructure the electric utility industry. MMWEC and the municipal light departments are not specifically subject to the legislation.

However, it is management's belief that industry restructuring and customer choice, provided by the legislation, will have an effect on MMWEC and the Participant's operations, which effect cannot be determined at this time.

Nuclear Insurance The Price-Anderson Act (the Act), a federal statute, in effect until August 1, 2002, mandates an industry-wide program of liability insurance for nuclear facilities. The Act now provides approximately

$9.5 billion for public liability claims from a single incident at a nuclear facility. The $200 million primary layer of insurance for the liability has been purchased in the commercial market. Secondary coverage is to be provided through an approximately $88.1 million per incident assessment of each of the currently licensed nuclear units in the United States. The maximum assessment is $10 million per incident per unit in any year. Under the Act, MMWEC's interest in Millstone Unit 3 and Seabrook Station could result in a maximum assessment of $4.2 and $10.2 million, limited to payments of $.5 and $1.2 million per incident per year, respectively. The United States House of Representatives has passed a bill which would extend the Act beyond August 1, 2002 and increase the amounts that would be assessed against nuclear facilities licenses in the event of a nuclear incident. The bill has gone to the United States Senate for its consideration.

Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL) to cover the cost of repair, replacement, decontamination or premature decommissioning of utility property resulting from insured occurrences at Millstone Unit 3 and Seabrook Station. The NELL insurance is subject to retroactive assessments if losses exceed the accumulated funds available to the insurer. MMWEC is potentially subject to a $1.0 and $2.3 million assessment for its participation in Millstone Unit 3 and Seabrook

Station, respectively, for excess property
damage, decontamination and premature decommissioning.

Environmental and Other Issues MMWEC is not currently covered under gradual pollution liability insurance related to SMMWEC's Stony Brook power plant. Nothing has come to management's attention concerning any material pollution liability claims made during 2001 or outstanding as of December 31, 2001.

MMWEC has established a trust fund to enhance its Directors' and Officers' liability coverage. The purpose of the trust fund is to make available funds for the purchase of Directors' and Officers' liability insurance and/or indemnification of the Directors or Officers.

ANDERSEN Independent Auditors' Report on Supplementary Information To the Board of Directors of Massachusetts Municipal Wholesale Electric Company:

We have audited and reported separately herein on the financial statements of Massachusetts Municipal Wholesale Electric Company as of and for the year ended December 31, 2001. Our audit was made for the purpose of forming an opinion on the basic financial statements of Massachusetts Municipal Wholesale Electric Company taken as a whole. The Project statements of financial position, operations and cash flows, on page 21 through 23 are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Hartford, Connecticut March 8, 2002 (C(C((CC(CCC(C(

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ASSETS Electric plant In service Accumulated depreciation Construction work in progress Nuclear fuel-net of amortization Total electric plant Special funds Bond funds Interest, principal and retirement account Reserve account Reserve and contingency fund Revenue fund Working capital funds Current assets Cash and temporary Investmen Accounts receivable Unbilled revenues Inventories Advances to (from) projects Prepaid expens Total current assets Total special funds and current assets Deferred charges Amounts recoverable (payable) under terms of the power sales agreements Unamortzed debt discount and expenses Nuclear decommissioning trusts Other MASSACHUSETTS MUNICIPAL WHOLFSqALE FLECfTlrR COMPANY PROJECT STATEMENTS OF IQNANCIAL POSITION DEFCFMBRF~ 31 71101 (In Thousands)

NUCLEAR NUCLEAR NUCLEAR NUCLEAR PROJECT HYDRO QUEBEC SERVICE MIX I PROJ. 3 PROJ. 4 PROJ. 5 NO.6 PEAKING INTERMEDIATE WYMAN PHASE II TOTAL 2,434 60,399 (2,253)

(27,570) 181 32,829 63 798 1,845 4,521 3,675 8,278 21,436 549 6,071 250 6,721 65 2,865 (190) 129 731 16,335 856 37,177 19T,17 20,234 59,024 170 1,598 3,706 77 122 M,450 W

117,31, 130,588 (61,548) 65 1,348 2,118 8,120 4,734 12,776 308 (316) 1,329 1,321 87,446 2,730 6,953 187 97,316 196,83 S 259,505 71,006 501,516 56,636 (102,412)

(28,108)

(200,205)

(42,72) 157,N93 42,898 30,1 13,P-

-I86-4 869 220 1,203 3,436 873 4,824 161,398 43,99 307,33

~13,8 3,032 933 6,707 902 9,253 2,810 30,487 671 5,872 1,509 8,853 869 14,892 3,887 25,681 5,920 33,049 9,139 7

,728

,36 1

2 396 115 750 212 1,735 439 2,402 2,813 (342)

(106)

(762)

(329) 1,646 418 2,280 7

3,436 866 4,672 2,703 36,48 TU 7T6,4 11,065 16,349 10,257 71,760 (7,423) 3,180 957 6,880 202 5,824 1,474 8,065 768 196 1,064 438 26,12 12,84 8776-W,73 s" 224,054

$-W 66,80 71""

18,14 151,794 (119,453)

T2,41 3,694 2,184 3,129 1,620 15,880 369 11,577 (783) 14 11,177 33,990 6,434 924 3,834 11,192 7,341 (5,007) 97 109 303 2,863 29 239 (37) 231 (1,882) 44 (20) 94 94 w"

(855) 840 (15)

T-=W UJABLTHIF Long-term debt (Note 4) 101,375

$ 174.548 197,034 S

59,568 S

424,758 14,014 63,571 2,977 S 1,241,219 (589,328) 651,891 6,114 11,279 669,284 17,818 59,100 27,435 90,177 21,416 552 8,594 6,721 19,270 6,554 41,691 261,344 16,685 26,022 7,526 311,577 1,037,845 Current liabilities Current maturities of long-term debt Short-term debt (Note 4)

Accounts payable Accrued expenses Member and participant advances and reserves Deferred credits Commiunents and contingencies (Note 10) 20,560 2,807 8,224 4,805 437 3,001 26,842 3,922 3,775 5,130 726 5,160 4,191 7,275 1,938 7,026 2,255 15,235 490 2,684 1,839 10,926 3,090 134 130 4,796 1,226 9,684 778 21,0W n

38,529 4,132 5,93

-""T3wP 8,22o

$ 58,433 117,315

$ 196,838 224,004 S

66,880 471,507 18,146 The accompanying notes are an integral part of this supplemental schedule.

6,625 433 1,142 9,446 17,646 315 44 162 601 1,T2-1 2

57 81,217 4,099 59 44,730 20,560 9,695 37,610 61,543 l

174,138,49 26,515 1,238,498 C

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(C MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRC COMPANY PROJECT STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31.2001 (In Thousands)

NUCLEAR NUCLEAR NUCLEAR NUCLEAR SERVICE.

MIX 1 PROJ. 3 PROJ. 4 PROJ. 5 Revenues Interest income Total revenues and interest income Operating and service expenses:

Fuel used in electric generation Purchased power Other operating Maintenance Depreciation Taxes other than income Interest expense:

Interest charges Interest charged to projects during construction Total operating costs and interest expense 83,202 1,023 84,225 74,409 1,498 18 14 2

75,941 13,783 24,205 1,204 1,689 14,987 25,894 630 2,750 1,203 1,987 301 6,871 932 4,992 1,120 4,971 2,290 4,180 543 13,104 8,027 26,568 2,376 28,944 1,700 6,659 1,450 9,494 803 20,106 10,468 7,583 715 8,298 431 1,742 367 2,593 203 5,336 3,333 PROJECT HYDRO QUEBEC NO. 6 PEAKING INTERMEDIATE WYMAN PHASE II 51,372

$ 10,260 5,248 690 56,620

$ 10,950 2,332 9,410 2,009 18,225 1,1111 33,087 24,513 2,358 1,943 2,062 2,295 391 9,049 38,146 1,768 39,914 21,641 5,630 1,785 6,348 1,078 36,482 3,111 161 3,272 993 562 232 179 1,966 960 3,606 (1)

(20)

(6)

(33) 932 4,991 8,027 10,448 3,327 24,480 960 76,873 11,862 21,131 30,554 8,663 57,567 10,009

$ 481 58

$ 539

$51 514 514 150 TOTAL 258,711 14,932 273,643 31,205 74,923 35,165 11,184 45,368 4,611 202,456 56,981

_(60) 3,606 150 56,921 40,088 2,116 514 259,377 Other (credits) charges Loss on refinancing - net Total costs and expenses (Increase) decrease in amounts recoverable under terms of the power sales agreements 5,073 8,486 11,234 3,500 24,867 338 76,873 16,935 29,617 41,786 12,163 82,431 10,347 7,352 (1,948)

(3,723)

(12,842)

(3,865)

(25,811) 603 84,225 14,987

$ 25,894 28,944 8,298 56,620

$ 10,950 3,217 98 43,305 2,214 514 (3,391) 1,058 25

$ 39,914 3,272

$ 539

  • Allocation between maintenance and other operating is not available.

The accompanying notes are an integral part of this supplemental schedule.

(2)

(3)

(5) 56,813 316,185 (42,542) 273,643

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Cash flows from operating activities:

Total revenues and Interest income Total costs and expenses, net Adjustments to arrive at net cash proied by operating activities:

Depreciation and decomissioning Amortization of debt discount and nuclear fuel Change in current aets and liabilities:

Accounts receivable U

lled mvenues Inventories Prepald expenses Accounts payable Accrued expenses aM other Member and participant advances and reserves Net cash provided by (used for) opermt activities Cash flows om Investing activities:

Construction expetnitures and purchases of raucer fue Interest charged to pt during construction Net (Increase) decrease in special funds Change In net unrelized pin (loss) on special flnds Decomunlssloning aust payments, net Other Net cash provided by (used for) investing activities Cash flows from financing activities:

Payments for principal of long4erm debt and commercial paper Proceeds from bonds Payments for bond issue costs Bond Issue pmnium Change In notes payable Payment for deftasance of bonds Net cash used for financing activities Net decrease In cash and temporay investnts Cash and temporary Investments at beginnng of year Cash and temporary lnvesunents at end of year Cash paid during the year for interest (Net of amount capitalized as shown above)

The accompanying notes are an integral part of this sup MASACHUEMI L

ALT MUNICPAIP PROJECT STrATEMENT!

I.OW YEAR FNDlPI) DECEMBER 31. 21101 (in Thousands)

NUCLEAR NUCLEAR NUCLEAR NUCLEAR PROJECT HYDRO QUEBEC SERVICE MIX I PROJ. 3 PROJ. 4 PROJ. 5 NO.6 PEAKING INTERMEDIATE WYMAN EHABE1I TOTAL 84,225 14,987 25,894 28,944 $

8,298 $

56,620 10,950 39,914 3,272 539 273,643 (76.873)

(16,935)

(29,617)

(41,786)

(12,163)

(82,431)

(10,347)

(43,305)

(2,214)

(514)

(316,185) 14 2,255 4,650 10,351 2,810 19,410 2,28 6,308 232 48,312 113 2,001 4,156 5,760 2,016 10,681 61 590 (4) 25,374 2,276 (231)

(248)

(379)

(111)

(727) 179 280 164 8

1,211 5,483 5,483 (2)

(50)

(12)

(68)

(931)

(4,518)

(10)

(5,591) 365 209 448 (441)

(111)

(605) 7 7

1 (120)

(803) 403 680 160 55 456 880 (921)

(498)

(2) 410 (5,541) 597 864 1,442 421 3,174 (395) 1,632 81 (28) 2,247 87 559 2,446 1,098 157 2,M (202) 6,819 374 (3) 14,212 10,131 3,843 9,273 5,099 1,360 8,602 2,484 6,806 1,398 48,996 (67)

(217)

(285)

(2,013)

(509)

(2,789)

(237)

(4,051)

(10,168)

(1)

(20)

(6)

(33)

(60)

(3,063) 2,324 (182) 8,781 3,155 11,811 3,807 8,885 (836)

.34,682 5o 127 129 227 13

(

34.

80 22 593 (476)

(871)

(1,059)

(268)

(1,466)

(4,140) 101 226 435 203 52 281 253 1,551 (2,979) 1,983 (774) 6,119 2,437 7,715 3,604 5,167 (814) 22,458 (7,465)

(6,070)

(8,795)

(6,735)

(2,255)

(14,760)

(3,925)

(8,780)

(380)

(59,165) 102,140 227,770 215,270 63,160 436,230 16,435 66,270 3,X55 1,130,530 (1,679)

(3,571)

(3,569)

(1,054)

(7,425)

(225)

(994)

(48)

(18,565) 4,953 3,547 7,996 2,932 24,888 722 4,126 39 49,203 (50)

(50)

(05,170)

(7.450)

(2243M (66,580)

(455a2%0)

(19,095)

(72,595)

(3,450)

(1,173,770)

(7,515)

(5,826)

(8,499)

(11,218)

(3,797)

(16,317)

(6,088)

(11,973)

(584)

(71,817)

(363)

(363) 912 1

2 915 549 S

1 $

2 552 724 4,146 6,839 8,817 2,798 20,744 795 2,893 130 47,886 f1ementaI schedule.

Financial Statements and Report of Independent Certified Public Accountants Taunton Municipal Lighting Plant December 31, 2001 and 2000

CONTENTS Pae REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3

FINANCIAL STATEMENTS BALANCE SHEETS 4

STATEMENTS OF EARNINGS 5

STATEMENTS OF RETAINED EARNINGS 6

STATEMENTS OF CASH FLOWS 7

NOTES TO FINANCIAL STATEMENTS 9

Grant Thornton S Accountants and Management Consultants Report of Independent Certified Public Accountants Municipal Light Commission of the City of Taunton Taunton, Massachusetts We have audited the accompanying balance sheets of the Taunton Municipal Lighting Plant (a department of the City of Taunton) as of December 31, 2001 and 2000, and the related statements of earnings, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Plant's management. Our responsibility is to express an opinion on these financial statements based on our audits.

Except as discussed in the following paragraph, we conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

As discussed in Note G to the financial statements, the Plant records pension expense based on a formula determined by the City of Taunton, whereas generally accepted accounting principles require the use of actuarial methods in determining annual pension expense and certain disclosures required by the Governmental Accounting Standards Board relating to pensions have been omitted. The effect on the financial statements of not using actuarial methods has not been determined.

In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to determine the effects of not using actuarial methods in determining pension expense and the omission of certain pension plan disclosures required by the Governmental Accounting Standards Board on the 2001 and 2000 financial statements, the financial statemcnts referred to above present fairly, in all material respects, the financial position of the Taunton Municipal Lighting Plant as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Boston, MassachusettsL r

July 10, 2002 98 N. Washington St Boston, MA 02114-1913

_ T 617.723.7900 F 617.723.3640 W www.grantthomton.com Grant Thornton LLP US Member of Grant Thornton International

Taunton Municipal Lighting Plant BALANCE SHEETS December 3 1, ASSETS 2001 20D0 UTILTY PLANT - AT COST Plant in service

$129,804,846

$128,014,759 Less accumulated depreciation 875486 4

.5 Net utility plant in service 42,256,786 45,588,502 Investment in Seabrook 2,260,028 2,409,993 Construction work in progress 5,867.215 1.648.11 Total utility plant 50,384,029 49,646,611 DEPRECIATION FUND (including certificates of deposit of $4,000,000 and $2,000,000 in 2001 and 2000, respectively) 5,694,715 10,851,084 SICK LEAVE TRUST FUND 5,130,468 5,206,908 OTHER ASSETS Investment in Hydro Quebec Project 265,396 265,396 Investment in Energy New England LLC 431,279 215,078 Due from Plant Retirement Trust 689,138 675,716 CURRENT ASSETS Cash 4,270,322 893,323 Cash - rate stabilization fund 442,064 Customer deposits 872,850 689,778 Accounts receivable - unbilled rate stabilization 1,592,572 1,378,130 Accounts receivable, less allowance for doubtful accounts of S 1,784,524 and $2,065,364 respectively 4,468,255 4,906,871 Accounts receivable Internet 81,794 54,375 Materials and supplies inventory 5,791,430 1,748,718 Prepaid expenses 1,498.856 Total current assets 18.576.079 11,941762 RETAINED EARNINGS AND LIABILITIES RETAINED EARNINGS Appropriated retained earnings Loans repayment S 24,387,000

$ 23,037,000 Construction repayment 32.43 32.434 24,419,434 23,069,434 Unappropriated retained earnings 35803.65 34528633 Total retained earnings 60,223,093 57,598,067 LONG-TERM DEBT 7,278,386 8,746,740 COMMTIMENTS AND CONTINGENCIES CURRENT LIABILITIES Accounts payable 2,868,981 3,221,015 Customer deposits 554,626 448,434 Current maturities of long-term debt 1,465,000 1,350,000 Accrued liabilities Sick leave 4,990,781 4,716,963 Pension fund 954,418 4,242 Vacation 806,099 794,424 Interest 347.474 392,474 Payment in lieu of taxes 1,250,000 1,180,000 Power-rate stabilization 25,000 25,000 Payroll 254,092 206,008 Other 153154 11 Total current liabilities 1

The accompanying notes are an integral part of these statements.

4

Taunton Municipal Lighting Plant STATEMENTS OF EARNINGS Years ended December 31, Operating revenues Sales of electricity Commercial and industrial Residential Sales for resale Municipal Other operating revenues Total operating revenues Operating expenses Power production Transmission and distribution Customer accounting Administrative and general Depreciation and amortization Nuclear expense Total operating expenses Earnings from operations Other expense (income)

Internet (income) expense - net Interest expense Interest income Other (income) expense Total other expense Earnings before provision for payment in lieu of taxes 2001

$31,996,256 20,905,656 4,939,926 2,905,850 60,747,689 450,563 61,198,252 38,639,378 6,264,538 1,612,300 4,582,238 5,121,803 229,175 56,449,432 4,748,820 (27,056) 748,650 (267,824)

(759,976)

(306,206) 5,055,026 Provision for payment in lieu of taxes NET EARNINGS 2000

$29,219,911 18,552,227 6,717,972 2,580,644 57,070,754 576,508 57,647,262 36,676,119 4,861,608 2,054,976 3,600,795 5,094,281 240,343 52,528,122 5,119,140 253,007 836,391 (240,341)

(209,985) 639,072 4,480,068 2,360,000

$ 2.625:026 The accompanying notes are an integral part of these statements.

5

Taunton Municipal Lighting Plant STATEMENTS OF RETAINED EARNINGS Years ended December 31, 2001 and 2000 Balance at December 31, 1999 Transfer for bond repayment Net earnings Balance at December 31, 2000 Transfer for bond repayment Net earnings Balance at December 31, 2001 Ap Retai Loan Repayment

$21,787,000 1,250,000 23,037,000 1,350,000

$24.387,000 ipropriated ned Earnings Construction Repayment

$32,434 32,434

$32,434 Unappropriated Retained Earnings

$33,658,565 (1,250,000) 2,120,068 34,528,633 (1,350,000) 2,625,026 The accompanying notes are an integral part of these statements.

6

Taunton Municipal Lighting Plant STATEMENTS OF CASH FLOWS Years ended December 31, Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities:

Net earnings Adjustments to reconcile net earnings to net cash and cash equivalents provided by operating activities:

Depreciation and amortization Amortization of bond premium Equity in losses of Seabrook investment Equity in (income) losses of Energy New England LLC investment Equity in losses of Hydro Quebec Change in assets and liabilities:

(Increase) decrease in accounts receivable (Increase) in accounts receivable Internet (Increase) in due from Plant Retirement Trust (Increase) decrease in inventory Decrease in prepaid expenses Decrease in other assets Decrease in accounts payable Decrease in deferred revenue - rate stabilization Increase in customer deposits Increase in accrued liabilities

$ 2,625,026 5,121,803 (3,354) 149,965 (216,201) 224,174 (27,419)

(13,422)

(4,042,712)

"329,647 (352,034) 106,192 1,342719

$ 2,120,068 5,094,281 (3,354) 137,259 (112,953) 22,116 (1,823,441)

(16,690)

(28,579) 404,438 139,689 8,276 (164,252)

(442,064) 66,025 538,140 Net cash provided by operating activities Cash flows from investing activities:

Net additions to utility plant Purchases of certificates of deposit-depreciation fund Maturity of certificates of deposit - depreciation fund Increase (decrease) in Sick Leave Trust Fund Net cash used in investing activities Cash flows from financing activities:

Payment of long-term debt Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 5,244,384 (6,009,186) 2,000,000 76,440 (3,932,746)

(1.350,000)

(38,362) 10,876,249 (4,536,332)

(2,000,000)

(511,.24)

(7.047.456)

(1.250.000)

(2,358,497) 13,234,74

$i*~4 7

2001 2000

Taunton Municipal Lighting Plant STATEMENTS OF CASH FLOWS - CONTINUED Years ended December 31, Cash and cash equivalents at end of year is reflected on the balance sheets as follows:

Depreciation fund (exclusive of long-term investments)

Cash - operating Cash - rate stabilization fund Cash - customer deposit Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for interest

$ 5,694,715 4,270,322 872,850

$1083788 793,650 The accompanying notes are an integral part of these statements.

8 2001 2000

$ 8,851,084 893,323 442,064 689,7-78 878,054

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000 NOTE A -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES A summary of Taunton Municipal Lighting Plant's (the "Plant") significant accounting policies consistently applied in the preparation of the accompanying financial statements follows.

1. Nature of Business The Plant is a regulated municipal electric utility located in Taunton, Massachusetts. The Plant operates as an enterprise fund of the City of Taunton, Massachusetts, and produces, purchases and distributes electricity to approximately 33,000 customers in the City of Taunton and the surrounding areas. The Plant also operates an internet access business unit and provides services to approximately 3,500 customers. Revenue and expense for this business unit is presented in other expense (income) in the statement of earnings. The business unit leases certain assets from the Plant. For the years ended December 31, 2001 and 2000, other operating revenue for the Plant and internet expense includes approximately $77,000 and $153,000, respectively, relating to this lease.

The Department operates within the electric utility industry which is currently undergoing significant restructuring and deregulation.

In 1996, the Massachusetts Department of Telecommunications and Energy ("DTE") issued an electric industry restructuring plan, and the Massachusetts legislature created a special committee on electric industry restructuring. The financial impact the resultant changes in the industry will have on the Department is not yet known.

2. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Estimates relating to the allowance for doubtful accounts and contingencies (see note F) represent the significant estimates included in the financial statements. Management bases their estimates of these items on historical experience, specific identification and future expectations.

9

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE A -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES - Continued

3. Rates The Plant is under the charge and control of the Municipal Light Plant Commissioners in accordance with Chapter 164, Section 55 of the General Laws of the Commonwealth of Massachusetts. Electric power is both produced and purchased and is distributed to customers within their service area. The rates charged by the Plant to its customers are filed with the Department of Telecommunications and Energy ("DTE") (formerly the Massachusetts Department of Public Utilities) and are subject to Chapter 164, Section 58 of the General Laws, which provide that prices shall be fixed to yield not more than 8% per annum on the cost of the plant after repayment of operating expenses, interest on outstanding debt, the requirements of any serial debt and depreciation.
4. Depreciation Pursuant to the DTE regulations, depreciation is calculated as a percentage of depreciable property at January 1. Depreciation is computed using a rate of 4% of the cost of depreciable property.

Depreciation Fund cash is used in accordance with state laws for replacements, enlargements and additions to the utility plant in service.

5. Pension Plan Substantially all employees of the Plant are covered by a contributory pension plan administered by the City of Taunton in conformity with State Retirement Board requirements (see note G).
6. Inventory Materials and supplies inventory is carried at cost, principally on the average cost method.
7. Sick Leave Trust Fund The Plant established a Sick Leave Trust Fund ("Trust") in 1982 for the financing of future sick leave payments. It is the Plant's intention that the Trust be funded to the extent of the Plant's sick leave liability and that future sick leave expense will be paid by the Trust once full funding is achieved. Full funding was achieved in 1999. The assets of the Trust are shown in the financial statements to provide a more meaningful presentation, as the assets of the Trust are for the sole benefit of the Plant.

10

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE A -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES - Continued In March 1997, the Governmental Accounting Standards Board issued Statement No. 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools"

("GASB 31"). Under GASB 31, investments are required to be reported at fair value in the balance sheet, and investment income, including changes in fair value of investments, is required to be recognized as revenue in the operating statement.

The provisions of GASB 31 were adopted retroactively.

Realized gains and losses, and declines in value are included in the statement of earnings.

Net investment income for the Trust was approximately $239,000 and $224,000 in 2001 and 2000, respectively. The net (income) expense for sick leave was approximately $439,000 and

($167,000) for the years ended December 31, 2001 and 2000, respectively.

8. Deferred Fuel Costs/Rate Stabilization The Plant's rates include a Purchased Power Cost Adjustment (PPCA) which allows an adjustment of rates charged to customers in order to recover all changes in power costs from stipulated base costs. The PPCA provides for a quarterly reconciliation of total power costs billed with the actual cost of power incurred.
9. Investment in Seabrook The Plant's Inr$tm nt in Seabrook represents a 0.10034% joint ownership share. The Plant records annually depreciation computed at 4% of the initial investment in Seabrook. The Plant's percentage share of new plant additions are capitalized and their share of operating and maintenance expenses, and decommissioning expenses (see note C) are charged against earnings.
10. Cash Equivalents For purposes of the Statement of Cash Flows, the Plant considers certificates of deposit with maturities of three months or less to be cash equivalents.
11. Internet The Plant experienced its first full year as an internet provider in 1999. This new venture generated revenues of approximately $1,100,000 and $947,000 for the years ended December 31, 2001 and 2000, respectively. Expenses were approximately $1,072,000 and $1,200,000 for the same periods.

11

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE A -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES - Continued

12. Reclassifications Certain reclassifications have been made to the 2000 financial statements in order to conform with current year's presentation.

NOTE B - CASH AND CERTIFICATES OF DEPOSIT The Plant's cash is deposited with the City of Taunton Treasurer who commingles it with other City funds. The City invests the cash and credits the Plant each year with interest earned on the cash deposits.

Cash, certificates of deposit deposited and short term investments with the City of Taunton consists of the following at December 31, Interest bearing pooled funds including restricted customer deposits of $872,850 and $689,778, respectively Certificates of deposit with rates of 2.55% maturing February 2002 Certificates of deposit with rates of 6.52% maturing April 2001 Certificates of deposit with rates of 3.00% maturing January 2002 2001

$ 6,837,887 2000

$10,876,249 2,000,000 2,000,000

$10837.87

$12.876.249 Cash, certificates of deposit and short term investments at December 31, is reflected as follows:

Depreciation Fund - capital additions and replacements Depreciation Fund - Major overhaul Depreciation Fund - Unit 9 principal and interest Depreciation Fund - other Cash - including operating and rate stabilization fund Customer deposit - principal and interest fund 2001

$ 1,888,108 327,318 2,750,605 728,684 4,270,322 872,850

$10.83.88 2000

$ 4,942,077 327,318 4,853,005 728,684 1,335,387 689,778 Certain cash amounts have been designated as restricted for the purpose of a rate stabilization fund.

This fund is designated to offset potential future customer rate increases.

12

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE C - INVESTMENTS The Plant is a 0.10034% joint owner of the Seabrook New Hampshire Unit 1.

The joint owners of Seabrook have established a Decommissioning Fund that is currently held by a Trustee. The Plant's share of the estimated decommissioning liability is approximately $556,000 as of January 1, 1998 (the most current valuation date). The Plant is currently contributing, based on a present value formula, $1,808 per month over 25 years.

Energy New England In 1998, the Plant, in conjunction with the Reading Municipal Light Department, the Braintree Electric Light Department and the Connecticut Municipal Electric Energy Cooperative, formed a new cooperative, Energy New England LLC, as allowed under Chapter 164 of the General Laws of the Commonwealth of Massachusetts. Each founding system invested $500,000 in order to initially fund the new corporation. Energy New England is an energy and energy services cooperative established to assist publicly owned entities to ensure their continued viability in the newly deregulated wholesale electric utility markets and to strengthen their competitive position in the retail energy market for the benefit of the municipal entities' customers. Energy New England functions as an autonomous, entrepreneurial business unit that is free from many of the constraints imposed on traditional municipal utility operations. Each founding member has one seat on the Board of Directors along with three outside Directors. Energy New England commenced the management of the founders power supply operations in the newly restructured NEPOOL wholesale markets as of May 1, 1999.

The Plant records this investment under the equity method. Included in other (income) expense is approximately $216,000 and $113,000 of income for the years ended December 31, 2001 and 2000, respectively, f~fesenting the Plant's share of Energy New England's net (income) losses.

NOTE D - LONG-TERM DEBT Long-term debt is comprised of the follow4ng bonds:

2001 2000 Electric Loan Act of 1969 Interest rate - 8%, interest payable February 1 and August 1, due serially to February 1, 2006

$8,730,000

$10,080,000 Unamortized premium 13,386 16740 8,743,386 10,096,740 Less current maturities 1,465,000 1,350, Total long-term debt

$2

$-&746J40 13

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE D - LONG-TERM DEBT - Continued Aggregate maturities of long-term debt at December 31, 2001, are as follows:

2002

$1,465,000 2003 1,585,000 2004 1,750,000 2005 1,890,000 2006 2,040,000 NOTE E - CONTRIBUTION IN LIEU OF TAXES The Plant contributed $2,430,000 and $2,360,000 in 2001 and 2000 to the City of Taunton in lieu of taxes. All contributions to the City are voted by the Municipal Light Commission.

NOTE F - COMMITMENTS AND CONTINGENCIES Hydro-Ouebec Agreement In 1988, the Plant entered into an agreement with the Massachusetts Municipal Wholesale Electric Company and other New England Utilities to support the operation of a transmission line to permit the interchange of electricity between such utilities and Hydro-Quebec Electric Corporation (HydroQuebec). In connection with the agreement, the Plant advanced approximately $800,000 toward development of the project of which approximately $450,000 was returned after the project had obtained financing. In 1991, the Hydro Quebec project was completed. Upon completion of this project, each participant received stock in the New England Hydro Transmission Electric Company and The New England Hydro Transmission Corporation proportional to their advances. The investment is being accounted for on the cost basis. The stock received is not readily marketable, but gives the holder rights to purchase power at a percentage of the fossil fuel rate.

During the years ended December 31, 2001 and 2000, the Plant received dividends from the above noted companies of approximately $37,000 and $51,000, respectively.

14

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE F - COMMITMENTS AND CONTINGENCIES - Continued Power Contracts The Plant has commitments under long-term contracts for the purchase of electricity from various suppliers. These wholesale contracts are generally for fixed periods and require payment of demand and energy charges. The total costs under these contracts are included in purchased power in the statements of operations and are normally recoverable in revenues under cost recovery mechanisms mandated by the Commonwealth of Massachusetts. The status of these contracts is as follows:

2001 KW Contract Estimated Annual Unit Fuel Type Entitlements End Date Minimum Paoments Fuel - Unspecified (fixed price contract) 10,000 2005

$ 5,743,000 Fuel - Methane 3,800 2016 2,727,000 Fuel - Methane 6,650 2019 3,762,000 Fuel - Methane 6,700 2019 2,768,000 Fuel - Methane 1,630 2016 800,000 Fuel - Unspecified (fixed price contract) 27,500 2007 11,147,000 Litigation and Other Matters

1. The Plant has a contract with Vermont Yankee and certain of its Sponsors for 0.4602 percent of the output of the Vermont Yankee Plant. On January 6, 2000, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power Company, and AmerGen Vermont, LLC, initiated a number of related proceedings before the Federal Energy Regulatory Commission ("FERC") all arising from the proposed sale of the Vermont Yankee Plant to AmerGen.

On June 22, 2000, the Department and the 21 Municipals filed a complaint with FERC, in which they asserted that they were entitled to refunds for transaction costs incurred in the sale of the Plant and for certain decommissioning contributions.

The proposed sale to AmerGen was eventually terminated by Vermont Yankee, and the parties to those FERC proceedings entered into a settlement that resolved all issues, including the purchases' agreement to withdraw their complaint. The settlement agreement was approved by the Commission on September 13, 2001.

The Plant received a refund of certain decommissioning charges and transaction costs as a result of Settlement Agreement, as well as a reduction in future Vermont Yankee charges. The total refund amount was immaterial and was used to reduce power costs.

15

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE F - COMMITMENTS AND CONTINGENCIES - Continued In the fall of 2001, Vermont Yankee informed the Plant and the other purchasers that it had entered into a new contract for the sale of the Vermont Yankee plant, this time to Energy Nuclear Vermont Yankee.

Prior to new filings being made at the FERC for approval of this new proposed transaction, the Plant and the other purchasers entered into negotiations that produced an agreement pursuant to which the Plant and the other purchasers agreed not to contest the plant sale in exchange for early termination of their Vermont Yankee contracts as of February 28, 2002. Absent that agreement, the contracts would have remained in effect through November 30, 2002. Notices of cancellation of the Vermont Yankee contracts for the Plant and the other purchasers were submitted to FERC on December 7, 2001, and accepted by FERC order dated February 26, 2002. The Plant expects this early termination to reduce its power costs for 2002.

2. The Plant is involved in various legal matters incident to its business, none of which is believed by management to be significant to the financial condition or the results of operations of the Plant.
3. The Plant is also involved in proceedings relating to environmental matters. Although it is difficult to estimate the liability, if any, of the Plant related to these environmental matters, the Plant believes that these matters will not have a material adverse effect upon its financial condition or the results of operations.
4. The Plant has a program for insurance coverage provided by the Massachusetts Municipal Utility Self-Insurance Trust Fund ("Trust"). The insurance coverage provided by the Trust is in excess of a

$50,000 self retention up to a maximum of $500,000 per occurrence. Additionally, coverage for certain environmental claims is provided by the Trust through a separate policy for which the plant is responsible for a $50,000 self-retention and the Trust covers the next $50,000.

NOTE G - PENSION PLANS The Plant contributes to the City of Taunton Retirement System (the "System"), a public employee retirement system that acts as the investment and administrative agent for the City. All full-time employees participate in the System.

Instituted in 1937, the System is a member of the Massachusetts Contributory System and is governed by Massachusetts General Laws Chapter 32.

Membership in the System is mandatory upon the commencement of employment for all permanent, full-time employees.

16

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE G - PENSION PLANS - Continued The System provides for retirement allowance benefits up to a maximum of 80% of a member's highest three-year average annual rate of regular compensation. Benefit payments are based upon a member's age, length of creditable service, level of compensation and group classification.

Members of the System become vested after 10 years of creditable service. A retirement allowance may be received upon reaching age 65 or upon attaining twenty years of service. The System also provides for early retirement at age 55 if the participant (1) has a record of 10 years of creditable service, (2) was on the City's payroll on January 1, 1978, (3) voluntarily left City employment on or after that date, and (4) left accumulated annuity deductions in the fund. Active members contribute either 5%, 7%, 8%, or 9%

of their regular compensation depending on the date upon which their membership began. The System also provides death and disability benefits.

The System does not make a separate measurement of assets and the pension benefit obligation for the Plant. The pension benefit obligation is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the System on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the System. As of January 1, 2000 (the most current valuation date), the Plant's unfunded actuarial accrued liability is approximately $12,393,611.

The Plant has established a separate Employees Retirement Trust Fund ("Trust Fund") for the financing of future pension payments. The market value of the net assets at December 31, 2001 and 2000 was approximately $13,593,000 and $13,710,000, respectively. These funds are invested in money market funds, fixed income securities including government and corporate bonds and other equity securities.

The Plant has made no contributions to the Trust Fund in 2001 and 2000.

The Plant receives from the Trust Fund, over the next twenty-eight years, an amount equal to one hundred percent of the annual amortization of the unfunded pension liability.

17

Taunton Municipal Lighting Plant NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2001 and 2000 NOTE G - PENSION PLANS - Continued The following represents the components of the Plant's recorded pension expense:

December 31, 2001 2000 Contributions to the System Contributions from the Trust Fund

$1,890,456 (1,340.718)

$ 549.738 Recorded pension expense

$1,822,402 (1,294,120)

$1 52,2 Prior to 1993, the System's funding policy for the participating entities was not actuarially determined.

The participating entities were required to contribute each fiscal year an amount approximating the pension benefits (less certain interest credits) expected to be paid during the year ("pay-as-you-go" method). Effective for fiscal year ends 1993 and beyond, the System has removed the "pay-as-you-go" method and will amortize the unfunded pension benefit obligation over thirty-two years. This change has been approved by Public Employees Retirement Association.

Accounting standards require certain related disclosures be made including the components of pension costs and the funded status of the System. The effect of omitting such disclosure on the accompanying financial statements has not been determined.

NOTE H - POST EMPLOYMENT BENEFITS In addition to the pension benefits described in note G, the Plant provides post employment health care benefits to retirees that meet certain requirements. Retirees of the Plant under age 65 are eligible for the same health benefits as active employees, while retirees over the age of 65 are eligible for MEDEX. The costs of the benefits provided to retirees are borne 75% by the Plant, and 25% by the retirees.

The Plant is charged their prorata portion of the "pay-as-you-go" cost of benefits based on an allocation by the City done annually. For 2001 and 2000, the costs allocated to the Plant were approximately

$599,000 and $510,000, respectively.

18

t 4#.

HUDSON LIGHT AND POWER DEPARTMENT Financial Statements December 31, 2001 and 2000

HUDSON LIGHT AND POWER DEPARTMENT TABLE OF CONTENTS DECEMBER 31, 2001 AND 2000 Page Independent Auditors' Report 1

Management's Discussion and Analysis 2-4 Financial Statements:

Operating Fund:

Statements of Net Assets 5-6 Statements of Revenues, Expenses and Changes in Net Assets 7

Statements of Cash Flows 8-10 Rate Stabilization Fund and Retirement Trust Fund:

Statements of Net Assets 11 Statements of Revenues, Expenses and Changes in Net Assets 12 Statements of Cash Flows 13 Notes to Financial Statements 14-29 Supplemental Information:

Independent Auditors' Report on Supplemental Information 30 Schedules of Operating Revenues 31 Schedules of Operations and Maintenance Expenses 32,33

Goulet, Salvidio & Associates, P.C.

Certified Public Accountants James F. Goulet, CPA, MST Michael A. Salvidio, CPA Catherine A. Kuzmeskus, CPA James R. Dube, CPA INDEPENDENT AUDITORS' REPORT The Board of Commissioners Hudson Light and Power Department We have audited the accompanying financial statements of Hudson Light and Power Department of Hudson, Massachusetts, as of and for the years ended December 31, 2001 and 2000 as listed in the table of contents. These financial statements are the responsibility of the Department's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Hudson Light and Power Department as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, the Department adopted the provisions of Governmental Accounting Standards Board Statement of Accounting Standards No. 34 in 2001.

The Management's Discussion and Analysis on pages two through four is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurements and presentation of the supplementary information. However, we did not audit the information and express no opinion on it.

Goulet, Salvidio & Associates, P.C.

Worcester, Massachusetts April 3, 2002 Nine Irving Street - Worcester, MA 01609 - Tel: 508-757-5957

  • Fax: 508-753-0948 - E-mail: admin@gsamycpa.com The m Never Underestimate The Value

MANAGEMENT'S DISCUSSION AND ANALYSIS Within this section of the Hudson Light and Power Department's annual financial report, management provides narrative discussion and analysis of the financial activities of the Hudson Light and Power Department for the year ended December 31, 2001. The Department's performance is discussed and analyzed within the context of the accompanying financial statements and disclosures following this section.

Overview of the Financial Statements:

The basic financial statements include (1) the statements of net assets (2) the statements of revenues, expenses and changes in net assets (3) the cash flow statements and (4) notes to the financial statements.

The Statements of Net Assets are designed to indicate our financial position as of a specific point in time. At December 31, 2001, it shows our net worth has decreased compared to the year ended December 31, 2000. This decrease is due to the Department's appropriation of net assets to the rate stabilization fund.

The Statements of Revenues, Expenses and Changes in Net Assets summarizes our operating results and reveals how much, if any, of a profit was earned for the year. As discussed in more detail below, our net profit for December 31, 2001 was $889,222.

The Statements of Cash Flows provides information about the cash receipts and cash payments during the accounting period. It also provides information about the investing and financing activities for the same period. A review of our Statements of Cash Flows indicates that the cash receipts from operating activities, (that is, electricity sales and related services) adequately covers our operating expenses.

Summary of Net Assets - Operating Fund Current Assets Noncurrent Assets Total Assets Current Liabilities Noncurrent Liabilities Total Liabilities Net Assets:

Restricted for Debt Service Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets Total Liabilities and Net Assets 2001

$ 11,114,866 10,782,146 21.897.012 2,053,920 512,014 2,565,934 1,925,000 5,288,396 12,117,682 19,331,078

$ L2187.012 2000

$ 12,475,540 10,447,924 2,697,915 500,155 1,925,000 5,461,549 12,338,845 19,725,394 2

Summary of Changes in Net Assets - Operating Fund Operating Revenues Operating Expenses Operating Income (Loss)

Nonoperating Revenues (Expenses)

Increase in Net Assets before Transfers Transfers Out - Payment in Lieu of Taxes Transfers Out - Rate Stabilization Trust Fund Cash Received for Claims and Judgments Beginning Net Assets Ending Net Assets 2001

$ 32,433,584 31,949,194 484,390 404,832 889,222 (225,000)

(1,411,653) 353,115 19,725,394 w19331.

2000

$ 29,444,534 28,231,134 1,213,400 440,378 1,653,778 (225,000)

(247,212) 1,131,345 17,412,483

$19.725.394 Financial Highlights:

Operating revenues increased by $2.9 million in 2001, or 10%. This increase in revenue can be attributed primarily to two issues: the increase in power consumption and the increase in the power adjustment charges.

Operating expenses increased by $3.7 million in 2001, or 13%. This increase in expense can be attributed to the increased energy costs and the additional power consumption requirements needed to meet increased sales.

Utility Plant and Debt Administration:

Utility Plant Net utility plant decreased by $173,153 from 2000. This decrease is the difference between the current year additions of $477,217 and the annual depreciation (3%) write off of $650,370. During 2001, the Department purchased a bucket truck for approximately $135,000, which accounted for 30% of current year additions and line transformers placed in service accounted for approximately 48%.

In December 2001, the Department approved a substation redesign to improve reliability by taking advantage of a second transmission line being built by National Grid.

Debt Administration The Hudson Light and Power Department remains a vertically integrated utility, as do all Municipal Light Departments in Massachusetts. This means that we are allowed under the Massachusetts Utility Restructuring Laws to retain our ownership and control over our electrical generation assets. Investor owned utilities, such as Massachusetts Electric Company, have been required to sell their generation assets as a result of the same restructuring laws.

3

Debt Administration - Continued The generation assets, which we have a vested interest in through a Purchase Sales Agreement along with the other municipal electrical systems in New England, are financed through municipal bonds. The collective debt service owed under these bonds stand at approximately $1.5 billion, of which Hudson Light and Power Department's share is just over $162 million.

In an effort to ensure stable costs for electricity in future years the Hudson Light and Power Department, worked with the Massachusetts Municipal Wholesale Electric Company, on a bond refinancing in 2001. This refinancing is expected to save the Hudson Light and Power Department approximately $15 million in interest over the life of the bonds.

Though we will not gain any immediate benefit from the refinancing, it is part of a longer-term, strategic effort to maintain the competitive rates and reliable electric service into the future. The bulk of the savings from the refinancing program will be used to stabilize our power costs beginning in 2010. During this timeframe competition in the power markets is expected to intensify, and reduced debt service will place us in a better position to control costs.

Significant Balances and Transactions:

Retirement Trust Fund The Retirement Trust Fund's purpose is to directly reimburse the Town of Hudson for retirement costs attributable to the Hudson Light and Power Department's retirees for whom the Town of Hudson is assessed annually by the Middlesex County Retirement System, and to satisfy the Department's anticipated future pension liabilities for it's current employees.

Rate Stabilization Trust Fund The Rate Stabilization Trust Fund's purpose is to fund future power supply costs for which the department is presently obligated to make, so as to eliminate or reduce future power supply costs, in order to remain competitive within the electric industry and for other supply-related issues which the Trustees designate by vote.

Depreciation Fund Hudson Light and Power Department maintains a depreciation fund, which is managed by the Town of Hudson Treasurer. This fund is used to pay for large capital investments such as new trucks and other long term assets. Items such as these would be purchased from the operating funds, which would then be replenished by funds transferred from the depreciation fund. The depreciation fund is required by state statute.

We set aside 3% of our cost of plant annually to be used for capital improvements and additions.

Purchased Power Working Capital The purchased power working capital is an amount held by Massachusetts Municipal Wholesale Electric Company (MMWEC), our power supply agent. MMWEC requires that they hold a set amount of capital from which it may pay our power obligations when they are due. They replenish the fund as needed from our monthly invoice payments.

4

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 OPERATING FUND ASSETS 2001 CURRENT ASSETS:

Funds on Deposit with Town Treasurer Operating Fund Petty Cash Customer Accounts Receivable Other Receivables Deferred Debit - Fuel Charge Materials and Supplies Purchased Power Prepayments Purchased Power Working Capital 5,596,25 3,461,6(

226,3:

944,5]

255,79 629,79 11,114,8(

TOTAL CURRENT ASSETS 0

5,289,840 00 500 18 3,306,247 34 26,560 0

1,535,547 16 1,058,832 99 621,187 99 636,827 56 12,475,540 NONCURRENT ASSETS:

Funds on Deposit with Town Treasurer Depreciation Fund Depreciation Investment Fund Customer Deposits Customer Deposits - Interest Investment Utility Plant Assets, Net TOTAL NONCURRENT ASSETS TOTAL ASSETS 292,539 4,602,207 315,891 194,696 88,417 5,288,396 10,782,146 21,897,012 471,269 3,919,583 321,548 177,181 96,794 5,461,549 10,447,924 22,923,464 See Accompanying Notes to Financial Statements 5

2000

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 OPERATING FUND LIABILITIES CURRENT LIABILLTIES:

Accounts Payable Tax Collections Payable Miscellaneous Current and Accrued Liabilities Deferred Credit - Fuel Charge TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES:

Customer Deposits Customer Deposits - Interest Customer Advances for Construction TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES 2001 1,351,631 784 524,900 176,605 2,053,920 315,981 193,933 2,100 512,014 2,565,934 2000 2,241,454 18,090 438,371 0

2,697,915 321,638 176,417 2,100 500,155 3,198,070 NET ASSETS Restricted for Debt Service Invested in Capital Assets, Net of Related Debt Unrestricted TOTAL NET ASSETS TOTAL LIABILITIES AND NET ASSETS 1,925,000 5,288,396 12,117,682 19,331,078 21,897,012 1,925,000 5,461,549 12,338,845 19,725,394 22,923,464 See Accompanying Notes to Financial Statements 6

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND 2001 32,433,584 OPERATING REVENUES OPERATING EXPENSES:

2000 29,444,534 Operations and Maintenance Depreciation Expense TOTAL OPERATING EXPENSES OPERATING INCOME NONOPERATING REVENUES (EXPENSES):

Interest and Dividend Income Realized Gains (Losses) on Maturities of Investments Interest Expense TOTAL NONOPERATING REVENUES (EXPENSES)

Income Before Contributions and Transfers NET ASSETS - JANUARY 1 Transfers Out - Payment in Lieu of Taxes Transfers Out - Rate Stabilization Trust Fund Cash Received for Claims and Judgments NET ASSETS - DECEMBER 31 31,321,473 627,721 31,949,194 484,390 27,608,108 623,026 28,231,134 1,213,400 404,928 0

(96) 404,832 440,165 283 (70) 440,378 889,222 19,725,394 (225,000)

(1,411,653) 353,115 19,331,078 1,653,778 17,412,483 (225,000)

(247,212) 1,131,345 19,725,394 See Accompanying Notes to Financial Statements 7

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND CASH FLOWS FROM OPERATING ACTIVITIES:

Cash Received from Customers Cash Paid to Suppliers and Employees Cash Paid for Benefits Payment in Lieu of taxes Cash Received for Claims and Judgments Net Cash Provided (Used) by Operating Activities 2001 33,802,400 (30,863,848)

(768,844)

(225,000) 353,115 2,297,823 2000 26,117,547 (26,352,408)

(678,994)

(225,000) 1,131,345 (7,510)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Interest Expense CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Purchases of Utility Plant Assets Purchases of Nuclear Fuel Net Cash Used in Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES:

Rate Stabilization Reserve Interest and Dividend Income Due from Rate Stabilization Fund Net Proceeds from Maturities (Purchases) of Investments Net Cash Provided (Used) by Investing Activities INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - JANUARY 1 CASH AND CASH EQUIVALENTS - DECEMBER 31 (451,676)

(25,541)

(477,217)

(1,411,653) 404,928 0

732,743 (273,982) 1,546,528 6,366,220 7,912,748 (160,075)

(35,017)

(195,092)

(247,212) 440,165 949,983 (112,721) 1,030,215 827,543 5,538,677 6,366,220 See Accompanying Notes to Financial Statements 8

(96)

(70)

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities:

Depreciation Amortization of Nuclear Fuel Appropriation in Lieu of Taxes Cash Received for Claims and Judgments Changes in Assets and Liabilities:

(Increase) Decrease in:

Customer Accounts Receivable Other Accounts Receivable Deferred Debit - Fuel Charge Materials and Supplies Purchased Power Prepayments Purchased Power Working Capital Increase (Decrease) in:

Accounts Payable Customer Deposits Customer Deposits - Interest Tax Collections Payable Deferred Credit - Fuel Charge Miscellaneous Current and Accrued Liabilities Accumulated Provision for Insurance Net Cash Provided (Used) by Operating Activities 2001 484,390 627,721 22,649 (225,000) 353,115 (155,421)

(199,774) 1,535,547 114,316 365,388 7,028 (889,823)

(5,657) 17,516 (17,306) 176,605 86,529 0

2,297,823 2000 1,213,400 623,026 20,982 (225,000) 1,131,345 (1,277,413) 404,373 (1,535,547)

(204,079)

(446,219)

(296,751) 1,463,657 (4,185) 24,041 4,685 (332,862) 34,431 (605,394)

(7,510)

See Accompanying Notes to Financial Statements 9

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OPERATING FUND SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

The following amounts are considered to be cash or cash equivalents for the purpose of the statements of cash flows:

Operating Fund Petty Cash Depreciation Fund Depreciation Investment Fund (Note 8)

Customer Deposits Customer Deposits - Interest 2001 5,596,250 500 292,539 1,512,872 315,891 194,696 7,912,748 2000 5,289,840 500 471,269 105,882 321,548 177,181 6,366,220 Cash paid for interest expense in 2001 and 2000 was $96 and $70, respectively.

See Accompanying Notes to Financial Statements 10

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF NET ASSETS DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND ASSETS NONCURRENT ASSETS:

Funds on Deposit with Town Treasurer Cash and Cash Equivalents Investments TOTAL ASSETS 2001 2,474,284 5,278,082 7,752,366 2000 748,918 6,062,409 6,811,327 NET ASSETS NET ASSETS - Restricted 7,752,366 6,811,327 RETIREMENT TRUST FUND ASSETS NONCURRENT ASSETS:

Funds on Deposit with Town Treasurer Cash and Cash Equivalents Investments TOTAL ASSETS 2001 2,378,373 4,555,521 6,933,894 2000 350,574 6,225,348 6,575,922 NET ASSETS NET ASSETS - Restricted 6,933,894 6,575,922 See Accompanying Notes to Financial Statements 11

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND NONOPERATING REVENUES (EXPENSES):

Interest Earned on Invested Funds Accrued Interest Paid at Purchase Gain (Loss) from Security Redemption Annual Contribution from Operations Annual Purchased Power Stabilization Transfer 2001 439,363 (2,258)

(41) 692,322 (1,600,000) 2000 467,924 (4,892) 10 1,563,202 (2,550,000)

NET LOSS NET ASSETS - JANUARY 1 Transfers In - Operating Fund (470,614) 6,811,327 1,411,653 7,752,366 NET ASSETS - DECEMBER 31 (523,756) 7,087,871 247,212 6,811,327 RETIREMENT TRUST FUND NONOPERATING REVENUES (EXPENSES):

Interest Earned on Invested Funds Accrued Interest Paid at Purchase Gain (Loss) from Security Redemption Annual Contribution from Operations Annual Pension Expense 481,174 (7,431) 437 384,007 (500,215) 396,227 (9,455) 1,418 349,753 (507,728)

NET INCOME NET ASSETS - JANUARY 1 NET ASSETS - DECEMBER 31 6,575,922 6,933,894 6,345,707 6,575,922 See Accompanying Notes to Financial Statements 12 2001 2000 357,972 230,215

HUDSON LIGHT AND POWER DEPARTMENT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 RATE STABILIZATION TRUST FUND 2001 CASH FLOWS FROM INVESTING ACTIVITIES:

Interest Income Net Proceeds from Maturities (Purchases) of Investments Gain (Loss) on Security Redemption Appropriation from Net Assets - Operating Fund Annual Contribution from Operations Annual Purchased Power Stabilization Transfer INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - JANUARY 1 CASH AND CASH EQUIVALENTS - DECEMBER 31

437, 784, 1,411,
692, (1,600, 105 463,032 327 1,333,514 (41) 10 653 247,212 322 1,563,202 000)

(3,499,983) 1,725,366 748,918 2,474,284 106,987 641,931 748,918 RETIREMENT TRUST FUND CASH FLOWS FROM INVESTING ACTIVITIES:

Interest Income Net Proceeds from Maturities (Purchases) of Investments Gain (Loss) on Security Redemption Annual Contribution from Operations Annual Pension Expense INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - JANUARY 1 CASH AND CASH EQUIVALENTS - DECEMBER 31 473,743 1,669,826 438 384,007 (500,215) 386,772 (128,846) 1,418 349,753 (507,728) 2,027,799 350,574 2,378,373 101,369 249,205 350,574 See Accompanying Notes to Financial Statements 13 2000 2001 2000

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 1 -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES:

The significant accounting policies of Hudson Light and Power Department are as follows:

Reporting Entity The Hudson Light and Power Department is a component unit of the Town of Hudson, Massachusetts. The Department purchases power from various sources and sells it to the ultimate customers at rates submitted to the Massachusetts Department of Telecommunications and Energy (DTE). The municipal light board appoints a manager of municipal lighting who shall, under the direction and control of the municipal light board, have full charge of the operation and management of the Department.

Regulation and Basis of Accounting The Town of Hudson complies with Generally Accepted Accounting Principles (GAAP). The Town's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Proprietary funds and similar component units apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case GASB prevails.

The Department uses the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.

The Department has adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments, in 2001. The Department has restated the 2000 financial statements to reflect the effects of the adoption. Specifically, the Department has classified its retained earnings into unrestricted and restricted balances and has restated its 2000 statement of cash flows to conform to the direct method of operating cash flow presentation.

Under Massachusetts law, electric rates of the Department are set by the Municipal Light Board and may be changed not more often than once every three months. Rate schedules are filed with the Massachusetts Department of Telecommunications and Energy (DTE). While the DTE exercises general supervisory authority over the Department, the Department's rates are not subject to DTE approval.

14

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 1 -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Depreciation The general laws of Massachusetts allow utility plant to be depreciated at an annual rate of 3%.

In order to change this rate, approval must be obtained from the Department of Telecommunications and Energy. Changes in annual depreciation rates may be made for financial factors relating to cash flow rather than for engineering factors relating to estimates of useful lives. The Department used a depreciation rate of 3% for 2001 and 2000.

The Department charges maintenance to expense when incurred. Replacements and betterments are charged to utility plant.

Revenues Revenues from sales of electricity are recorded on the basis of bills rendered from monthly readings taken on a cycle basis. The revenues are based on rates established by the Department which are applied to the customers' consumption of electricity.

The Department has a fuel cost adjustment clause pursuant to which increased fuel costs (fuel costs in excess of amounts recovered through base rates) are billable to customers. The Department records estimated unbilled fuel adjustment charge revenue at the end of accounting periods.

Materials and Supplies Materials and supplies are valued using the average cost method.

Taxes The Department is exempt from federal and state income taxes. Although also exempt from property taxes, the Department pays amounts in lieu of taxes to the Town of Hudson. Taxes are paid to the State of New Hampshire resulting from ownership in the Seabrook, New Hampshire Nuclear Power Plant.

Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

15

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 1 -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Cash and Cash Equivalents For purposes of the statements of cash flows, the Department considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Advertising The Department expenses advertising costs as incurred. At December 31, 2001 and 2000 advertising expense was $474 and $3,583, respectively.

Reclassification Certain amounts in the 2000 financial statements have been reclassified to conform with the 2001 presentation with no effect on previously reported net income.

Compensated Absences In accordance with Town and Light Department policies, employees are allowed to accumulate sick days up to a maximum of 960 hours0.0111 days <br />0.267 hours <br />0.00159 weeks <br />3.6528e-4 months <br />. Upon termination of employment with the Light Department, the employee will not be paid for accumulated sick days. Upon retirement, employees are paid up to 50% of their accumulated sick time at their regular rate of pay. The percentage is based on employees age and number of years of service with the Light Department.

Employees are permitted to carry vacation time from one year to the next. Upon termination of employment with the Light Department, the employee will be paid for unused vacation time based on the employee's base rate of pay at the time of termination. Union employees have to use their vacation by April of the following year.

Allowance for Doubtful Accounts Accounts are charged to bad debt expense as they are deemed uncollectible based upon a periodic review of the accounts. At December 31, 2001 and 2000, no allowance for uncollectible accounts was considered necessary.

NOTE 2-UNBILLED REVENUE:

No recognition is given to the amount of sales to customers which are unbilled at the end of the accounting period.

16

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 3 - CONCENTRATION OF CREDIT RISK:

The Hudson Light and Power Department's deposits with the Town Treasurer are commingled and invested with deposits from other Town funds. Accordingly, it is not practical to disclose the related bank balance and credit risk of such cash deposits for the Light Department. Funds on deposit with financial institutions are subject to the insurance coverage limits imposed by the Federal Deposit Insurance Corporation (FDIC). The amount of insurance coverage for the Light Department deposits is not determinable because the limits of insurance are computed on a Town-wide basis.

NOTE 4 - INVESTMENT:

The Department owns shares of Hydro Quebec Phase II stock. The securities are stated at cost.

Fair market value approximates stated value.

NOTE 5 - DEPRECIATION FUND:

Pursuant to provisions of the Commonwealth General Laws, cash in an amount equivalent to the annual depreciation expense is transferred from unrestricted funds to the depreciation fund.

Interest earned on the balance of the fund must also remain in the fund. Such cash may be used for the cost of plant, nuclear decommissioning costs, the costs of contractual commitments, and deferred costs related to such commitments which the municipal light board determines are above market value.

NOTE 6 - PURCHASED POWER WORKING CAPITAL:

The purchased power working capital is an amount held by Massachusetts Municipal Wholesale Electric Company (MMWEC), our power supply agent. The implementation of the Working Capital Program began August 1, 1985. MMWEC Participants approved certain working capital amendments to the various power purchase agreements. MMWEC requires that they hold a set amount of capital from which it may pay our power obligations when they are due. They replenish the fund as needed from our monthly invoice payments. The income earned allocated to the Light Department will be applied as a credit to MMWEC Power Sales Billing. The balance in the fund as of December 31, 2001 and 2000 is $629,799 and $636,827, respectively.

17

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 7 - MAJOR CUSTOMER:

The Department's revenues include approximately $11,744,600 and $8,485,423 billed to one major customer during 2001 and 2000, respectively. Amounts due from this customer included in accounts receivable were $1,082,342 and $802,544 at December 31, 2001 and 2000, respectively.

NOTE 8 - CASH EQUIVALENTS:

The Department's cash, cash equivalents and investments are held by the Hudson Town Treasurer. The Department's investments are classified as held to maturity and are recorded at unamortized cost plus accrued interest paid at purchase. The Depreciation Investment Fund is allocated between investments and cash equivalents as follows:

Investments Cash Equivalents 2001 3,089,335 1,512,872 S 4.602.207 Total 2000 3,813,701 105,882 3.919.583 The gross unrealized holding gains on the U.S. Treasury Notes were $14,642 and $8,108 at December 31, 2001 and 2000, respectively.

NOTE 9 - INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT:

Cost of Capital Assets Acquired Less: Accumulated Depreciation Invested in Capital Assets, Net of Related Debt 2001

$ 21,475,449 16,187,053

$ 5.288,396 2000

$ 21,314,492 15,852,943

$ 5.461.549 18

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 10- UTILITY PLANT ASSETS:

Balance January 1, 2001 Increases Capital Assets Not Being Depreciated:

Land Intangible Plant Total Capital Assets Being Depreciated:

Production Plant Nuclear Fuel Transmission Plant Distribution Plant General Plant Total Less Accumulated Depreciation For:

Production Plant Nuclear Fuel Transmission Plant Distribution Plant General Plant Total Accumulated Depreciation Capital Assets Being Depreciated, Net Utility Plant Assets, Net 60,557 3,880 64,437 7,012,363 349,015 1,596,346 10,070,367 2,221,964 21,250,055 (5,568,858)

(295,081)

(1,483,678)

(7,083,855)

(1,421,471)

(15,852,943) 5,397,112 S

5,461,549 0

0 0

8,907 25,541 3,780 267,857 171,132 477,217 (161,791)

(22,649)

(12,809)

(306,824)

(146,297)

(650,370)

(173,153)

(173,153)

S 0

60,557 0

3,880 0

(1,368) 0 (2,123)

(226,031)

(86,738)

(316,260) 1,368 0

2,123 226,031 86,738 316,260 0

S 0

64,437 7,019,902 374,556 1,598,003 10,112,193 2,306,358 21,411,012 (5,729,281)

(317,730)

(1,494,364)

(7,164,648)

(1,481,030)

(16,187,053) 5,223,959 5,288,396 19 Balance December 31, 2001

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 11 - CLAIMS AND JUDGMENTS:

During 2001 and 2000, the Department received and paid certain amounts relating to activities that occurred in prior years as follows:

2001 2000 Pilgrim Decommissioning

-Decommissioning Refund

$ 278,557 287,780 Mass Municipal Ins. Trust -Oil Spill 74,558 0

Millstone 3 Litigation 98 Transmission Settlement 0

277,148 Insurance Reserve

-Write off unfunded reserve 0

605,394 Deferred Fuel Charge Adj.

0 2,794 NEPOOL 98 Overcharge Settlement 0

(41,771)

$ 353,115

$ 1,131,345 NOTE 12 - MMWEC PARTICIPATION:

Town of Hudson acting through its Light Department is a Participant in certain Projects of the Massachusetts Municipal Wholesale Electric Company (MMWEC).

MVWEC is a public corporation and a political subdivision of the Commonwealth of Massachusetts created as a means to develop a bulk power supply for its Members and other utilities. MMWEC is authorized to construct, own or purchase ownership interests in and to issue revenue bonds to finance electric facilities (Projects). MMWEC has acquired ownership interests in electric facilities operated by other utilities and also owns and operates its own electric facilities. MMWEC sells all of the capability (Project Capability) of each of its Projects to its Members and other utilities (Project Participants) under Power Sales Agreements (PSAs).

Among other things, the PSAs require each Project Participant to pay its pro rata share of MMWEC's costs related to the Project, which costs include debt service on the revenue bonds issued by MMWEC to finance the Project, plus 10% of MMWEC's debt service to be paid into a Reserve and Contingency Fund. In addition, should any Project Participant fail to make any payment when due, other Project Participants may be required to increase (step-up) their payments and correspondingly their Participants' share of Project Capability to an additional amount not to exceed 25% of their original Participants' share of the Project Capability. Project Participants have covenanted to fix, revise, and collect rates at least sufficient to meet their obligations under the PSAs.

20

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 12 - MMWEC PARTICIPATION (continued):

The payments required to be made to MMWEC under the PSAs and the PPAs are payable solely from Municipal Light Department revenues. Under the PSAs, each Participant is unconditionally obligated to make payments due to MMWEC whether or not the Project(s) is completed or operating and notwithstanding the suspension or interruption of the output of the Project(s).

NOTE 13 - PENSION PLAN:

The Department is a member of the Middlesex Retirement System, which, in turn is a member of the Massachusetts Contributory Retirement System, which is governed by M.G.L. c.32 of the Massachusetts General Laws. Membership in the plan is mandatory immediately upon the commencement of employment for all permanent, full-time employees. The plan is a contributory defined benefit plan for all county employees and employees of participating towns and districts except those employees who are covered by the teachers retirement board.

Massachusetts Contributory Retirement System benefits are uniform from system to system. The System provides for retirement allowance benefits up to a maximum of 80% of a member's highest three year average annual rate of regular compensation. Benefit payments are based upon a member's age, length of creditable service, level of compensation, and group classification.

A $30,000 salary cap, upon which members' benefits were calculated, was removed by the Middlesex Retirement System effective January 1, 1991. Members become vested after ten years of creditable service. A superannuation retirement allowance may be received upon the completion of twenty years of service or upon reaching the age of 55 with ten years of service.

Normal retirement for most employees occurs at age 65 (for certain hazardous duty and public safety positions normal retirement is at age 55).

A retirement allowance consists of two parts: an annuity and a pension. A member's accumulated total contributions and a portion of the interest they generate constitute the annuity. The differential between the total retirement benefit and the annuity is the pension. The average retirement benefit is approximately 80-85% pension and 15-20% annuity.

Active members contribute either 5, 7, 8, or 9% of their gross regular compensation. The percentage rate is keyed to the date upon which an employee's membership commences.

Members hired after 1978 contribute an additional 2% of annual pay above $30,000. These contributions are deposited in the Annuity Savings Fund and earn interest at a rate determined by the Public Employees' Retirement Administration's Commission (PERAC's) actuary. When a member's retirement becomes effective, his/her deductions and related interest are transferred to the Annuity Reserve Fund.

21

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 13 - PENSION PLAN (continued):

Members who become permanently and totally disabled for further duty may be eligible to receive a disability retirement allowance. The amount of benefits to be received in such cases is dependent upon several factors, including: whether or not the disability is work related, the member's age, years of creditable service, level of compensation, veterans' status, and group classification. Employees who resign from service and who are not eligible to receive a retirement allowance or are under the age of 55 are entitled to request a refund of their accumulated total contributions. In addition, depending upon the number of years of creditable service, such employees are entitled to receive either zero (0%) percent, fifty (50%) percent, or one hundred (100%) percent of the regular interest which has accrued upon those contributions.

Survivor benefits are extended to eligible beneficiaries of members whose death occurs prior to or following retirement.

The Town of Hudson is assessed annually for its share of the current year pension payments which includes the retired employees of the Town of Hudson Light and Power Department. The Department then reimburses the Town for the Department's share of this assessment. The Department paid to the Town $500,215 in 2001, $507,728 in 2000 and $504,347 in 1999.

The Plan's separately issued financial statements can be obtained by contacting Middlesex County Regional Retirement System at 40 Thorndike Street, Cambridge, MA 02141.

The Department is making provisions for their share of the Town of Hudson's unfunded actuarial liability by setting up the Town of Hudson Light and Power Department Employees' Retirement Trust to which they make contributions as deemed necessary by an actuary hired every two years to analyze the trust's estimated actuarial liability and assets. In addition to its annual town assessment, the Department has set aside amounts totaling $6,933,894 and $6,575,922 as of December 31, 2001 and 2000, for the Department's anticipated future liabilities for its current employees. (See Footnote 15).

NOTE 14 - RATE STABILIZATION TRUST FUND:

The Hudson Light and Power Board of Commissioners voted (January 11, 1997) to establish a Rate Stabilization Trust Fund for the purpose of providing the necessary funds to meet future power supply costs. Under the terms of the trust any assets remaining after the final payment of Power Sales Agreement obligations will revert back to the Department.

The Department's cash equivalents and investments are held by the Hudson Town Treasurer. The Department's investments are classified as held to maturity and are recorded at unamortized cost plus accrued interest paid at purchase.

22

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 14 - RATE STABILIZATION TRUST FUND (continued):

Cost Plus Accrued Interest Accrued Interest Unamortized Cost Fair Value Cash Equivalents U.S. Treasury Notes Certificates of Deposit 2001 2,474,284 0

2,474,284 $ 2,474,284 3,475,000 0

3,475,000 3,499,143 1,803,082 0

1,803,082 1,813,180 7,752,366 0

7,752,366

$ 7,786,607 2000 Cash Equivalents U.S. Treasury Notes Certificates of Deposit Total 748,918 $

4,927,304 0

252 748,918 748,918 4,927,052 4,905,507 1,135,105 0

1,135,105 6,811,327 $

252 6,811,075

$ 6,787,426 At December 31, 2001 the gross unrealized holding gains on the U.S. Treasury Notes were

$24,143, and the gross unrealized holding gains on Certificates of Deposit were $10,098.

At December 31, 2000 the gross unrealized holding losses on the U.S. Treasury Notes were

$21,545. The gross unrealized holding gains on Certificates of Deposit were $50 and the gross unrealized holding losses were $2,154.

23 1,133,001

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 15 - RETIREMENT TRUST FUND:

The Department's cash equivalents and investments are held by the Hudson Town Treasurer. The Department's investments are classified as held to maturity and are recorded at unamortized cost plus accrued interest paid at purchase.

Cost Plus Accrued Interest Accrued Unamortized Interest Cost Fair Value Cash Equivalents U.S. Treasury Notes Certificates of Deposit 2001 2,378,373 0

2,378,373

$ 2,378,373 3,361,171 6,917 3,354,254 3,391,231 1,194,350 0

1,194,350 1,193,316 6,933,894 6,917 6,926,977

$ 6,962,920 2000 Cash Equivalents U.S. Treasury Notes Certificates of Deposit 350,574 4,122,597 2,102,751 0

0 350,574 4,122,597 651 2,102,100 350,574 4,091,983 2,103,344 Total 6,575,922 651 6,575,271

$ 6,545,901 At December 31, 2001 the gross unrealized holding gains on the U.S. Treasury Notes were

$36,977. The gross unrealized holding gains on Certificate of Deposits were $3,698 and the gross unrealized holding losses were $4,732.

At December 31, 2000 the gross unrealized holding gains on the U.S. Treasury Notes were

$12,375, the gross unrealized holding losses were $42,989 and the gross unrealized holding gains on Certificate of Deposits were $1,244.

24

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 16 - COMMITMENTS AND CONTINGENCIES:

Stow Municipal Electric Department Hudson Light and Power Department has supplied the town of Stow with electric service since 1898 over a distribution system owned and operated by the Hudson Light and Power Department. In June 1994, Stow notified the Hudson Light and Power Department that it had voted to establish its own municipal lighting plant. The proceeding at the Department of Telecommunications and Energy (DTE) was commenced because the parties were unable to reach agreement on the price to be paid by Stow for Hudson Light and Power Department's assets, including the amount of damages to be paid for Hudson Light and Power Department's stranded power supply costs that would be incurred as a result of Stow's departure.

In its initial February 16, 1996 decision, the DTE denied Hudson Light and Power Department's request for damages associated with its stranded power supply costs. The DTE also calculated the price to be paid for Hudson Light & Power Department's distribution assets based upon a 50/50 weighting of Hudson Light & Power Department's method, reproduction cost new less depreciation and Stow's method, original cost less depreciation.

On appeal to the Supreme Judicial Court, the Court affirmed the DTE's ruling with respect to the valuation of the distribution assets, but reversed the ruling on stranded costs, and remanded the case to the DTE. Specifically, the Court ordered the DTE to consider whether it would be in the public interest to require Stow to take a slice of the Hudson Light and Power Department damages for the power supply costs that would become stranded due to Stow's departure from the system.

On remand, the DTE determined that a Slice of System would be in the public interest, and accordingly, ordered Stow take 12.9% of Hudson Light & Power Department's long term power supply if it departs from the Hudson Light & Power Department system. Stow requested reconsideration of the DTE's ruling, as well as a stay of the order pending any appeals.

MMWEC Contingencies and Litigation Through its participation in MMWEC, the Hudson Light and Power Department is contingently liable on the various Projects in which they participate as detailed below.

25

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 16 - COMMITMENTS AND CONTINGENCIES (continued):

MMWEC has eight Projects. MMWEC originally financed all eight Projects through the issuance of multiple series of revenue bonds under the General Bond Resolution adopted by MMWEC in 1976 (GBR). Security for these bonds included a pledge of the revenues derived by MMWEC from all its Project PSAs, without regard to Project or series of bonds. In late 2001, through a refinancing of all of its outstanding bonds, MMWEC amended and restated its GBR to eliminate this "cross-pledge" of revenues. In refinancing its debt, MMWEC issued a separate issue of bonds for each of the eight Projects, which are payable solely from, and secured solely by, the revenues derived from the Project to which such issue relates plus available funds pledged under the Amended and Restated GBR with respect to the bonds of such issue. The revenue derived from each Project is used solely to provide for the payment of the bonds of any bond issue relating to such Project and to pay MMWEC's cost of owning and operating such Project and are not used to provide for the payment of the bonds of any bond issue relating to any other Project.

MMWEC operates the Stony Brook Intermediate Project and the Stony Brook Peaking Project fossil-fueled power plants. MMWEC has a 22.7 MW interest in the W.F. Wyman Unit No. 4 plant, owned and operated by subsidiaries of Florida Power & Light and a 4.8% ownership interest in the Millstone Unit 3 nuclear unit operated by Dominion Nuclear Connecticut, Inc.

(DNCI) a subsidiary of Dominion Resources, Inc.

MMWEC's 11.6% ownership interest in the Seabrook Station nuclear generating unit represents a substantial portion of its plant investment and financing program. It is anticipated that certain other joint owners of Seabrook, but not MMWEC, intend to sell their ownership interests in Seabrook through a bid process commencing in 2002.

Pursuant to the PSAs the MMWEC Seabrook and Millstone Project Participants are liable for their proportionate share of the uninsured costs of a nuclear incident as outlined in the Price Anderson Act. The Project Participants are also liable for the decommissioning expenses, which are being funded through monthly Project billings.

In November 1997, the Commonwealth of Massachusetts enacted legislation effective March 1, 1998 to restructure the electric utility industry. MMWEC and the municipal light departments are not specifically subject to this legislation. However, it is management's belief that industry restructuring and customer choice promulgated by the legislation will have an effect on MMWEC and the Participant's operations.

26

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 16 - COMMITMENTS AND CONTINGENCIES (continued):

MMWEC is involved in various legal actions. In the opinion of management, the outcome of such litigation or claims will not have a material adverse effect on the fmancial position of the Department.

As of December 31, 2001, total capital expenditures amounted to $1,491,205,000, of which

$162,671,000 represents the amount associated with the Department's Project Capability.

MMWEC's debt outstanding for the Projects and PPA included Power Supply System Revenue Bonds and commercial paper notes totals $1,055,290,000, of which $112,133,000 is associated with the Department's share of Project Capability and PPAs. As of December 31, 2001, MMWEC's total future debt service requirement on outstanding bonds issued for Projects and commercial paper notes for the PPA is $1,474,170,000, of which $161,798,000 is anticipated to be billed to the Department.

Hudson Light and Power Department has entered into PSAs and PPAs with MMWEC. Under these agreements, the Department is required to make certain payments to MMWEC. The aggregate amount of Hudson Light and Power Department's required payments under the PSAs and PPAs, exclusive of the Reserve and Contingency Fund billings, to MMWEC at December 31, 2001 and estimated for future years is shown below.

ANNUAL COSTS For years ended December 31, 2002 13,408,000 2003 11,317,000 2004 11,343,000 2005 11,341,000 2006 11,343,000 Later Fiscal Years 103,046,000 TOTAL 161.798.000 In addition, the Department is required to pay its share of the Operation and Maintenance (O&M) costs of the Projects in which they participate. The Department's total O&M costs including debt service under the PSAs were $17,240,000 and $17,430,000 for the years ended December 31, 2001 and 2000, respectively.

27

(

C C

C C

C C

C HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (000)

PERCENTAGE SHARE TOTAL PROJECT EXPENDITURES TO DATE PARTICIPANTS SHARE DEBT ISSUED

& OUTSTANDING 12/31/01 PARTICIPANTS SHARE TOTAL DEBT SERVICE ON BONDS OUTSTANDING PARTICIPANTS SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. I -SBK Nuclear Mix No. I -MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 PERCENTAGE SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. 1-SBK Nuclear Mix No. I-MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 s

56,791 s

155,558 15,033 511 111,185 3,779 137,571 2,201 313,823 13,275 85,745 1,596 7,518 696 607,981 140,613 1,491,205 162,671 OPERATION &

MAINTENANCE PARTICIPANTS 12/31/00 SHARE s

9,361 44,854 1,889 64 17,739 603 30,182 483 32,425 1,372 9,451 176 3,324 308 62,367 14,424 211,592 17,430 s

16,435 66,270 12,073 410 89,292 3,034 176,195 2,819 196,470 8,311 58,960 1,097 3,255 301 415,780 96,161 1,034,730 112,133 20,560 OPERATION &

MAINTENANCE PARTICIPANTS 12/31/01 SHARE 11,762 s

46,235 1,881 64 15,620 531 29,084 465 32,372 1,369 9,390 175 2,434 225 62,310 14,411 211,088 17,240 S

18,234 s

78,788 16,132 548 119,311 4,055 250,166 4,002 279,105 11,806 83,596 1,556 3,728 345 603,108 139,486 s

1,452,168 161,798 s

22,002 28

SC (C

HUDSON LIGHT AND POWER DEPARTMENT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (000)

Ii PERCENTAGE SHARE 2002 ANNUAL COST PARTICIPANTS SHARE 2003 ANNUAL COST PARTICIPANTS SHARE 2004 ANNUAL COST PARTICIPANTS SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. I-SBK Nuclear Mix No. I-MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 PERCENTAGE SHARE Stony Brook Peaking Project Stony Brook Intermediate Project Nuclear Mix No. I-SBK Nuclear Mix No. I-MLS Nuclear Project No. 3-MLS Nuclear Project No. 4-SBK Nuclear Project No. 5-SBK Wyman Project Project No. 6-SBK TOTAL Commercial Paper Program 3.3984 3.3984 1.5997 4.2300 1.8613 9.2536 23.1278 6,120 15,208 1,612 55 11,919 405 18,809 301 22,612 956 7,015 131 670 62 49,715 11,498 133,680 13,408 8,928 2005 ANNUAL COST PARTICIPANTS SHARE 2,184 12,873 1,357 46 10,036 341 16,947 271 19,903 842 6,099 114 523 48 41,848 9,679 111,770 11,341 626 5,138 12,874 1,361 46 10,066 342 16,867 270 19,255 814 5,991 112 559 52 41,860 9,681 113,971 11,317 8,799 2006 ANNUAL COST PARTICIPANTS SHARE 12,428 1,361 46 10,064 342 16,955 271 19,926 843 6,109 114 528 49 41,847 9,678 109,218 11,343 4,792 12,875 1,357 46 10,039 341 16,929 271 19,847 840 6,094 113 563 52 41,855 9,680 114,351 11,343 3,649 AFTER 2006 PARTICIPANTS SHARE 12,530 9,084 309 67,187 2,284 163,659 2,618 177,562 7,511 52,288 972 885 82 385,983 89,270 869,178 103,046 29 C

C

Goulet, Salvidio & Associates, PC.

Certified Public Accountants James F. Goulet, CPA, MST Catherine A. Kuzmeskus, CPA Michael A. Salvidio, CPA James R. Dube, CPA INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL INFORMATION The Municipal Light Board Hudson Light and Power Department Our audits were made for the purpose of forming an opinion on the financial statements of Hudson Light and Power Department for the years ended December 31, 2001 and 2000, which are presented in the preceding section of this report. The supplemental information presented on pages 31-33 is for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Goulet, Salvidio & Associates, P.C.

Worcester, Massachusetts April 3, 2002 Nine Irving Street - Worcester, MA 01609

  • Tel: 508-757-5957
  • Fax: 508-753-0948 - E-mail: admin@gsamycpa.com The6

' Never Underestimate The Vaiue

I-HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATING REVENUES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 Sales to Residential Customers Sales to Commercial Customers Sales to Power Customers Private Property Lighting Sales Municipal Sales Hudson Street Lights Hudson Municipal Buildings Hudson Municipal Power All Electric Municipal Buildings Stow and Berlin Street Lights Stow, Maynard and Other Municipal Services Total Revenue from Sales of Electricity 2001 7,171,091 1,849,972 12,947,863 88,763 113,012 74,863 384,240 400,122 8,108 102,418 23,140,452 2000 6,886,770 1,861,175 11,591,450 87,888 101,000 70,569 374,720 422,926 7,495 102,430 21,506,423 Power Adjustment Charges Residential Sales Commercial Sales Power Sales Private Property Lighting Municipal Power Adjustment Charges Street Lighting Stow, et al Municipal Power Hudson Municipal Commercial Hudson Municipal Power Stow, et al Municipal Commercial Stow, et al Municipal All Electric Fuel Charge Adjustment Total Power Adjustment Charges Other Income Other Electric Revenues TOTAL OPERATING REVENUES 1,655 168,100 23,550 33,142 4,946 127,997 (390,710) 9,248,550 44,582 32,433,584 10,240 107,315 15,717 23,147 3,044 79,528 1,868,409 7,901,429 36,682 29,444,534 See Independent Auditors' Report on Supplemental Information 31 1,953,390 602,488 6,702,800 21,192 1,085,128 412,169 4,281,225 15,507

HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATIONS AND MAINTENANCE EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 PRODUCTION EXPENSES:

Nuclear Power Generation:

Operation Supervision Fuel Coolants and Water Steam Expenses Electric Expenses Miscellaneous Nuclear Power Expenses Maintenance Supervision Maintenance of Structures Maintenance of Reactor Plant Equipment Maintenance of Generation and Electric Plant Total Nuclear Power Generation Expenses Other Power Generation:

Operation Supervision Fuel-Oil Fuel-Natural Gas Generation Expenses Generation Expenses-Lube Miscellaneous Other Power Generation Expenses Maintenance Supervision Maintenance of Structures Maintenance of Generation and Electric Plant Total Other Power Generation Expenses TOTAL PRODUCTION EXPENSES PURCHASED POWER EXPENSES:

Purchased Power-Entitlement Purchased Power-Nepex System Control and Load Dispersion TOTAL PURCHASED POWER EXPENSES 2001 18,997 29,512 1,746 14,414 81 38,033 8,797 2,269 6,602 10,794 131,245 33,977 75,394 67,934 73,398 4,164 152,915 33,529 73,387 111,318 626,016 757,261 22,474,256 3,939,007 7,723 26,420,986 2000 17,581 27,263 1,729 16,668 644 39,345 9,701 2,524 14,160 16,332 145,947 31,437 107,769 92,806 82,175 5,775 130,647 32,245 80,708 99,563 663,125 809,072 18,266,139 4,540,129 8,953 22,815,221 (continued)

See Independent Auditors' Report on Supplemental Information 32

f.

HUDSON LIGHT AND POWER DEPARTMENT SCHEDULES OF OPERATIONS AND MAINTENANCE EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 TRANSMISSION EXPENSES DISTRIBUTION EXPENSES:

Operation Supervision and Engineering Station Expenses Overhead Line Expenses Underground Line Expenses Street Lighting and Signal Expenses Meter Expenses Customer Installation Expenses Miscellaneous Distribution Expenses Maintenance Supervision and Engineering Maintenance of Station Equipment Maintenance of Overhead Lines Maintenance of Underground Lines Maintenance of Line Transformer Maintenance of Street Lighting Maintenance of Meters TOTAL DISTRIBUTION EXPENSES GENERAL EXPENSES:

Supervision Meter Reader Expenses Customer Records and Collection Expenses Miscellaneous Sales Expenses Administrative and General Salaries Office Supplies and Expenses Outside Services Employed Property Insurance Injuries and Damages Employee Pension and Benefits General Advertising Expense Miscellaneous General Expenses Maintenance of General Plant Transportation Expenses TOTAL GENERAL EXPENSES REAL ESTATE AND OTHER TAXES TOUAL OFEKARI'UNS ANO MAINTIENANCE 2001 1,463,054 34,778 155,092 11,247 858 9,681 83,907 4,487 4,700 35,831 5,282 361,619 13,599 16,433 11,953 403 749,870 15,544 62,451 275,842 11,374 465,060 15,387 88,367 28,844 59,558 768,844 474 34,361 54,052 32,296 1,912,454 17,848

$ 31,321,413 2000 1,399,386 34,951 127,815 10,293 2,871 8,193 92,766 5,529 4,776 34,782 136 328,516 19,698 5,166 10,536 959 686,987 15,059 53,075 257,900 5,548 422,242 14,747 210,414 25,221 55,162 678,994 3,583 39,817 61,667 36,375 1,879,804 17,638

$ 2"l,6US, 1US See Independent Auditors' Report on Supplemental Information 33

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