Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-5139
CENTRAL MAINE POWER COMPANY
(Exact name of registrant as specified in its charter)
Maine 01-0042740
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Edison Drive, Augusta, Maine 04336
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:(207) 623-3521
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Preferred Stock, 7 7/8% Series New York Stock Exchange
Common Stock, $5 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
6% Preferred Stock, $100 Par Value (Voting, Noncallable)
(Title of class)
Dividend Series Preferred Stock, $100 Par Value (Callable)
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K __.
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value of
the voting stock held by non-affiliates of the Company was
$425,195,134 on March 21, 1994 (based, in the case of the common
stock of the Company, on the last reported sale price thereof on
the New York Stock Exchange on March 21, 1994).
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date. The number of shares of the Company's Common
Stock, $5 par value (being the only class of common stock of the
Company), outstanding on March 21, 1994, was 32,442,752 shares.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) Any annual
report to security holders; (2) Any proxy or information
statement; and (3) Any prospectus filed pursuant to Rule 424(b)
or (c) under the Securities Act of 1933.
Portions of the Company's Annual Report to Shareholders for
the year ended December 31, 1993 are incorporated by reference in
Part I and Part II hereof.
Portions of the definitive proxy statement for the Company's
1994 Annual Meeting of Shareholders are incorporated by reference
in Part III hereof.
CENTRAL MAINE POWER COMPANY
INFORMATION REQUIRED IN FORM 10-K
Item Number Page
Part I
Item 1. Business . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . 16
Item 3. Legal Proceedings . . . . . . . . . . . . . 24
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . 26
Item 4.1.Executive Officers of the Registrant . . . . 26
Part II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . 28
Item 6. Selected Financial Data . . . . . . . . . . 28
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 30
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . . 30
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . 30
Part III
Item 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . . . . . 31
Item 11. Executive Compensation . . . . . . . . . . 31
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . 31
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . 31
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . 31
Signatures . . . . . . . . . . . . . . . . . . . . . 34
PART I
Item 1. BUSINESS.
Introduction
General. Central Maine Power Company (the "Company") is an
investor-owned Maine public utility incorporated in 1905. The
Company is engaged in the business of generating, purchasing,
transmitting, distributing and selling electric energy for the
benefit of retail customers in southern and central Maine and
wholesale customers, principally other utilities. Its principal
executive offices are located at 83 Edison Drive, Augusta, Maine
04336, where its general telephone number is (207) 623-3521.
The Company has more customers and greater revenues than any
other electric utility in Maine, serving approximately 500,000
customers in its 11,000 square-mile service area in southern and
central Maine and having $894 million in consolidated electric
operating revenues in 1993 (reflecting consolidation of financial
statements with a majority-owned subsidiary, Maine Electric Power
Company, Inc. ("MEPCO")). The Company's service area contains
the bulk of Maine's industrial and commercial centers, including
Portland (the state's largest city), South Portland, Westbrook,
Lewiston, Auburn, Rumford, Bath, Biddeford, Saco, Sanford,
Kittery, Augusta (the state's capital), Waterville, Fairfield,
Skowhegan and Rockland, and approximately 936,000 people,
representing about 77 percent of the total population of the
state. The Company's industrial and commercial customers include
major producers of pulp and paper products, producers of
chemicals, plastics, electronic components, processed food, and
footwear, and shipbuilders. Large pulp-and-paper industry
customers account for approximately 66 percent of the Company's
industrial sales and approximately 27 percent of total service-
area sales.
Cost Reduction and Restructuring. Overall demand for energy
from the Company's system increased at a rate of 0.4 percent in
1993, after an increase of 0.8 percent in 1992. The low rate of
increase can be attributed to continued weakness in the Maine
economy, significant competition from alternative fuel sources,
the effects of the Company's demand-side management programs and
other factors.
The Company's earnings per share declined from $1.85 in 1992
to $1.65 in 1993. The rate of return on common equity for 1993
was 9.77 percent compared with 11.25 percent earned in 1992. The
reduced earnings level for 1993 is attributable to higher costs,
weak sales and cost disallowances associated with two proceedings
before the Maine Public Utilities Commission ("Maine PUC", "MPUC"
or "PUC") during 1993. For a discussion of those proceedings,
see "Base Rates" and "MPUC NUG Contracts Investigation" under
"Regulation and Rates", below.
The combination of weak sales due to economic and
competitive pressures and the disappointing and inadequate base-
rate-case decision in December 1993 offers the Company no
reasonable opportunity to achieve a level of 1994 earnings near
the 1993 level or the current allowed rate of return of 10.05
-1-
percent on common equity. Moreover, the unfavorable outlook for
the Company's near-term earnings capacity takes into account the
significant reductions in previously planned 1994 operations,
maintenance, and capital expenditures being implemented by the
Company as part of its broad cost-reduction program.
As a result of such factors, the Company's credit ratings
came under significant pressure during 1993 and early 1994 when
its senior secured debt was downgraded by all three agencies that
rate the Company's securities, one of which lowered the rating to
below investment grade. The Company's junior securities came
under even more pressure late in the year, being assigned, in
most cases, non-investment-grade ratings. The decline in the
Company's credit ratings will impair its access to the capital
markets, make the terms and conditions of borrowing more
stringent, and increase its cost of capital, and has already
substantially reduced, if not eliminated, the Company's access to
the commercial-paper markets. The credit-rating agencies cited
the stagnant economy, inadequate rate relief and pricing
flexibility, increased competition, and uncertainty of recovery
of non-utility purchased-power costs as reasons for the credit
downgrades. For a more detailed discussion of the downgrades,
see "Financing and Related Considerations" - "Rating Agency
Actions", below.
After review of the Company's overall financial position and
outlook, including the impacts associated with the MPUC's rate-
case order and the expected near-term revenue impacts of weak
sales, the Company's Board of Directors voted on December 15,
1993, to reduce the quarterly common-stock dividend from 39 cents
to 22.5 cents per share. The dividend reduction is part of a
broad-based cost-reduction and restructuring program designed to
stabilize the Company's rates and enhance its financial
condition. The program is composed of three major initiatives:
(1) reduce the Company's operating costs while maintaining
appropriate levels of service; (2) reduce the Company's largest
external expense, non-utility power costs; and (3) work with
regulators on innovative, competitive new pricing and service
options.
The first step in implementing the cost-reduction strategy
was to restructure the Company's organization along functional
lines and eliminate 225 full-time-equivalent jobs, or
approximately 10 percent of the Company's work-force, which was
accomplished in March 1994. In addition, the Company's operating
budget for 1994 was cut $22 million, or 12 percent, from
previously planned levels, and the 1994 capital budget for plant,
equipment, and conservation programs by $14 million, or 19
percent, from previously planned levels.
The second component of the plan, reducing the cost of non-
utility power, stresses continued efforts to renegotiate, buy out
or terminate high-cost purchased power contracts. It also
includes support for Maine legislative action on bills that could
have the effect of reducing such costs.
The final segment includes continuing efforts to achieve
changes in regulation that would redefine the basis for overall
price changes and provide flexibility in setting specific prices
and in the acquisition and use of resources. As detailed below
-2-
under "Regulation and Rates" - "Rate Stability Plan", the Company
has indicated interest in pursuing a modified price-cap approach
to the regulation of its electric rates and, consistent with the
terms of the PUC's December 1993 order in the base-rate case, has
been engaged in discussions with rate-case intervenors as to the
structure of such a plan. The Company expects to file a rate-
stability plan with the PUC sometime in the first half of 1994.
The Company is committed to its cost-reduction and
restructuring program. It believes that its ability to restore
earnings to competitive levels and improve its overall financial
health is closely tied to the success of the program.
The following topics are discussed under the general heading
of Business. Where applicable, the discussions make reference to
the various other Items of this Report. In addition, for further
discussion of information required to be furnished in response to
this Item, see pages 1 through 49 of Exhibit 13-1 hereto (the
Company's Annual Report to Shareholders for the year ended
December 31, 1993), which pages are hereby incorporated herein by
reference.
Topic Page
Non-utility Generation . . . . . . 3
Maine Yankee Atomic Power Company
Competition . . . . . . . . . . . . 4
Regulation and Rates . . . . . . . 5
Financing and Related
Considerations . . . . . . . . . 11
Environmental Matters . . . . . . . 13
Water Quality Control . . . . . . 14
Air Quality Control . . . . . . . 14
Hazardous Waste Regulations . . . 14
Electromagnetic Fields . . . . . 15
Capital Expenditures . . . . . . 15
Employee Information . . . . . . . 15
Non-utility Generation
The Company has been an industry leader in developing
supplies of energy from non-utility generators, including
cogeneration plants and small power producers. These sources
supplied 4.0 billion kilowatt-hours of electricity to the Company
in 1993, representing 40.2 percent of total generation, an
increase from 38.2 percent in 1992. The Company expects to
obtain approximately 44 percent of its energy from this source in
1994. The Company's contracts with non-utility generators,
however, which were entered into pursuant to 1978 federal
legislation and vigorous state implementation thereof, have
contributed the largest part of the Company's increased costs in
recent years. This has caused the Company to pursue re-
negotiations or buyouts of such contracts wherever practicable.
For further discussion of independent power production, see Item
2, Properties, "Non-utility Generation". For a discussion of a
regulatory proceeding involving the Company's management of its
contracts with non-utility generators, see "Regulation and Rates"
- "MPUC NUG Contracts Investigation", below.
-3-
Maine Yankee Atomic Power Company
The Company owns a 38 percent stock interest in Maine Yankee
Atomic Power Company ("Maine Yankee"), which owns and operates a
nuclear generating plant in Wiscasset, Maine (the "Maine Yankee
Plant"). The Maine Yankee Plant has been in commercial operation
since 1972 and has consistently produced power at a cost among
the lowest in the country for nuclear plants. In 1993 the Maine
Yankee Plant produced 5.7 billion kilowatt-hours of electric
power, the highest total ever for a year that included a
scheduled refueling and maintenance shutdown, at an average cost
of 3.4 cents per kilowatt-hour. The average capacity factor for
the Maine Yankee plant in 1993 was 76 percent. For further
discussion of Maine Yankee, see "Regulation and Rates", below,
and Item 2, Properties, "Existing Facilities".
Competition
In October 1992 the United States Congress enacted the
Energy Policy Act of 1992 (the "Policy Act"). The Policy Act was
designed to encourage competition among electric utility
companies, improve energy resource planning by utility companies,
and encourage the development of alternative fuels and sources of
energy. The Policy Act provides for, among other things, (1)
enhanced access to electric transmission to promote competition
for wholesale purchasers and sellers, (2) statutory reforms to
encourage utility participation in the formation of exempt
wholesale generators, (3) tax credits for electricity generation
from renewable energy sources, (4) tax incentives for the use of
alternative fuels, and (5) required fleet vehicle conversion to
alternative fuels. The Policy Act has been a significant factor
in creating new areas of competition for the Company.
The Company is facing competition in several areas of its
traditional business and anticipates that the new competition
will continue to place pressure on both sales and the price the
Company can charge for its product. Alternative fuels and pre-
Policy Act regulation that had restricted competition from
outside of the Company's service territory have expanded
customers' energy options. As a result, the Company has been
involved in a number of negotiations with certain of its
customers and will continue to pursue retention of its customer
base. This increasingly competitive environment has resulted in
the Company's entering into contracts with two of its wholesale
customers, as well as with certain of its industrial and
commercial customers, to provide their energy needs at prices and
margins lower than the current averages. For a discussion of the
potential loss of the largest wholesale customer of the Company
to an out-of-state supplier, see "Regulation and Rates" -
"Potential Loss of Wholesale Customer", below.
In addition to negotiating a number of special agreements
with large customers, the Company is also pursuing with the MPUC
alternative pricing mechanisms that would allow the Company the
flexibility to modify the price of its product in certain
instances, when the competitive alternatives could result in the
loss of a significant end use of electricity. In its preliminary
discussions, the MPUC has indicated there may be instances in
which the ability of the Company to adjust its price in response
-4-
to competitive pressures is advisable. In February 1994, the
MPUC approved a specific competitive-pricing plan under which the
Company will operate with respect to residential water-heating
customers. The Company believes it may be granted the authority
to develop additional market-responsive rates in certain
circumstances in the future. For a discussion of relevant PUC
orders, see "Regulation and Rates" - "Rate Design", below.
Regulation and Rates
The Company is subject to the regulatory authority of the
PUC as to retail rates, accounting, service standards, territory
served, the issuance of securities maturing more than one year
after the date of issuance, certification of generation and
transmission projects and various other matters. The Company is
also subject as to some phases of its business, including
licensing of its hydroelectric stations, accounting, rates
relating to wholesale sales (which constitute less than one
percent of operating revenues) and to interstate transmission and
sales of energy and certain other matters, to the jurisdiction of
the Federal Energy Regulatory Commission ("FERC") under Parts I,
II and III of the Federal Power Act. Other activities of the
Company from time to time are subject to the jurisdiction of
various other state and federal regulatory agencies.
The Maine Yankee Plant and the other nuclear facilities in
which the Company has an interest are subject to extensive
regulation by the federal Nuclear Regulatory Commission ("NRC").
The NRC is empowered to authorize the siting, construction and
operation of nuclear reactors after consideration of public
health, safety, environmental and antitrust matters. Under its
continuing jurisdiction, the NRC may, after appropriate
proceedings, require modification of units for which construction
permits or operating licenses have already been issued, or impose
new conditions on such permits or licenses, and may require that
the operation of a unit cease or that the level of operation of a
unit be temporarily or permanently reduced.
The United States Environmental Protection Agency ("EPA")
administers programs which affect all of the Company's thermal
generating facilities as well as the nuclear facilities in which
it has an interest. The EPA has broad authority in administering
these programs, including the ability to require installation of
pollution-control and mitigation devices. The Company is also
subject to regulation by various state and local authorities with
regard to environmental matters and land use. For further
discussion of environmental considerations as they affect the
Company, see "Environmental Matters", below.
Under the Federal Power Act, the Company's hydroelectric
projects (including storage reservoirs) on navigable waters of
the United States are required to be licensed by the FERC. The
Company is a licensee, either by itself or in some cases with
other parties, for 27 FERC-licensed projects, some of which
include more than one generating unit. Thirteen licenses were
scheduled to expire in 1993, one in 1997, and thirteen after
2000. The Company filed all applications for relicensing the
projects whose licenses were scheduled to expire in 1993 and has
been authorized to continue to operate those projects pending
-5-
action on relicensing by the FERC. New licenses may contain
conditions that reduce operating flexibility and require
substantial additional investment by the Company.
The United States has the right upon or after expiration of
a license to take over and thereafter maintain and operate a
project upon payment to the licensee of the lesser of its "net
investment" or the fair value of the property taken, and any
severance damages, less certain amounts earned by the licensee in
excess of specified rates of return. If the United States does
not exercise its statutory right, the FERC is authorized to issue
a new license to the original licensee, or to a new licensee upon
payment to the original licensee of the amount the United States
would have been obligated to pay had it taken over the project.
The United States has not asserted such a right with respect to
any of the Company's licensed projects.
Base Rates. On March 1, 1993, the Company filed a request
with the MPUC for a $95-million increase in base rates. The
major components of the request were (1) compensating for
lower-than-forecasted sales, (2) increased operation and
maintenance expenses, (3) increased operating costs of the four
operating nuclear plants in which the Company owns interests, (4)
property additions and transmission, distribution and other
improvements, (5) energy-management program costs and, (6) the
expiration of the flow-through of certain tax benefits.
Ultimately, the Company reduced the amount of its base-rate
request from $95 million to $83 million. The decrease was the
result of lower estimates of 1994 operation and maintenance
expenses, further reductions in the Company's cost of capital, a
decrease in the level of anticipated expenditures for energy
management programs and the change in the federal income-tax rate
from 34 percent to 35 percent.
On December 14, 1993, the MPUC issued its order in the
proceeding. The MPUC's analysis indicated a need for additional
revenues of $51.5 million, yet found the Company to be entitled
to a net revenue increase of only $26.2 million. The Commission
found a total cost of capital of 8.52 percent and a cost of
equity of 10.05 percent, after deducting a one-half percent (.5%)
return-on-equity penalty established by the MPUC in a 1993
investigation of the Company's management of certain independent
power-producer contracts. See "MPUC NUG Contracts Investigation"
below, for further discussion of this investigation. To arrive
at its revenue-requirement conclusion, the MPUC deducted $25.3
million "to adjust for management inefficiency" after finding the
Company's performance in the areas of management efficiency and
cost-cutting to have been "inadequate", based largely on the
recommendations contained in a management audit of the Company
conducted by a consultant retained by the MPUC.
The Company strongly disagrees with the MPUC's
management-inefficiency finding and with the resulting deduction
of nearly one-half the revenue increase to which the Commission
itself found the Company to be otherwise entitled using
traditional ratemaking principles. The Company filed an appeal
of the base-rate order with the Maine Supreme Judicial Court.
The Company cannot, however, predict the result of that appeal.
-6-
Rate-Stability Plan. In connection with the base-rate
proceeding, on July 21, 1993, the Company filed an alternative
rate proposal designed to promote stability in the Company's
rates. The proposal consisted of a combination of pricing and
regulatory changes that would, among other things, limit future
rate increases to annual changes based on the rate of inflation
and mandated costs, and revise existing regulatory rules and
policies to allow the Company to adjust prices more rapidly in
response to customer needs and competitive factors.
In its December 14, 1993, base-rate order, the MPUC ordered
that a follow-up proceeding be held to implement by mid-1994 a
rate-stability plan along the lines discussed in the order. The
MPUC encouraged the Company and the parties wishing to
participate in the proceeding to work together to develop a plan
containing price-cap, profit-sharing, and pricing-flexibility
components. The MPUC also directed that the initial plan have a
duration of five years, subject to a brief annual proceeding to
implement any applicable rate changes, and a detailed review at
the end of the fourth year to evaluate the performance of the
plan and initiate necessary changes. Participants in the
rate-stability plan proceeding have prepared price-cap proposals
in response to the MPUC's order and regular discussions are being
held. The Company cannot predict the outcome of this process or
the MPUC's ultimate decision on a rate-stability plan.
Fuel Clause Adjustment. The Company's electric sales are
subject to a fuel adjustment clause that enables the Company to
recover from its customers both fuel costs and the increasing
amounts of the fuel component of purchased-power costs, including
non-utility generation. The Company also collects carrying costs
on unbilled fuel and pays interest on fuel-related over-
collections.
In accordance with a January 1993 ratemaking stipulation,
the MPUC approved, as part of the $40 million July 1993 revenue
increase, $17 million to reduce deferred fuel-clause balances.
Earlier, in July 1992, the MPUC issued an order authorizing an
increase, effective September 1, 1992, in the Company's fuel cost
adjustment of $13.2 million of the $38.7 million requested by the
Company, along with the Electric Revenue Adjustment Mechanism
("ERAM") and demand-side-management incentives discussed below
under "Incentive Regulation". The orders extended the smoothing
approach that had begun in 1988, resulting in unrecovered fuel
and purchased-power costs being deferred for future recovery.
Rate Design. Effective in December 1991, the Company
implemented a rate-design order from the PUC that was intended to
realign customer class revenues and specific rate components more
closely with marginal costs. These rate design changes, which
raised or lowered some customers' rates by as much as eight
percent, were intended to reallocate revenues from customer
classes, but not to produce any change in aggregate revenues for
the Company. In February 1992, the Company filed a request with
the PUC to re-examine several rate-design changes in response to
concerns regarding the impact of such changes on some classes of
residential customers. After considering a number of proposals
by the Company and other parties, the PUC reduced the highest
winter time-of-use rates by a small percentage from the prior
-7-
winter's rates, effective in December 1992. The increases in on-
peak rates in December 1991 resulting in part from the rate-
design changes have caused a significant number of the Company's
residential electric heating customers and water heating
customers to convert to other fuel sources.
On February 18, 1994, the PUC issued its order in an
investigation of the Company's resource planning, rate structure,
and avoided cost that was initiated in December 1992. The
primary purpose of the investigation was to examine the Company's
"long-term costs and their relationships to usage and prices, and
to specify any implications for CMP's resource planning
activities and general rate structure policies." In its order
the PUC found, among other things, (1) "no reason to encourage
electric utilities to pursue broad promotion of load growth . . .
absent a clear and convincing demonstration that ratepayers as a
group would benefit from such efforts"; (2) "that CMP's proposed
strategy of encouraging marginal usage through broad adoption of
declining block rates is not cost-justified . . ." but the PUC
said it would "continue to encourage proposals for targeted,
short-term rates that are carefully designed to retain movable
load"; and (3) the PUC reaffirmed its "existing policy of
encouraging narrowly-focused economic incentive rates for
particular kinds of customers, when it can be shown that other
ratepayers will not be harmed". The PUC also indicated that it
would initiate a rulemaking proceeding to determine how "special
rates for customers with competitive alternatives should best
reflect the utility's obligation to serve, particularly with
respect to backup and maintenance rates . . .." The Company
cannot predict what changes it will ultimately be permitted to
implement in the areas of resource planning, rate structure, and
avoided cost.
MPUC NUG Contracts Investigation. On October 28, 1993, in
connection with an investigation of the Company's management of
independent power-producer contracts, the MPUC issued an order
finding that the Company had been unreasonable and imprudent in
its management of two independent power-producer contracts and
indicated that it would reduce the Company's allowed rate of
return on equity by 0.5 percent in the then-pending base-rate
case (approximately $4 million, before income taxes, over a
12-month period) and also directed the Company to charge against
deferred fuel-cost balances approximately $4.1 million of
payments from power providers that had previously been credited
against purchased-power capacity costs, unless the Company could
demonstrate that the crediting was proper. The Company recorded
a reserve totalling $4.1 million during the third quarter of
1993, reflecting the impact of the order. Finally, the MPUC
announced that it would review in the future the Company's
administration and management of certain power-purchase contracts
for purchases of ten megawatts or more.
On December 20, 1993, the Chief Justice of the Maine Supreme
Judicial Court (the "Court"), acting on the Company's request,
issued an order staying the effectiveness of the 0.5-percent
return-on-equity penalty pending final resolution of the
Company's appeal of the October 28, 1993, MPUC order to the
Court. In addition, the Court ordered that if the Company should
not prevail on its appeal, it would be required to refund any
-8-
revenues collected as a result of the stay order, with interest.
Finally, the Court ordered an expedited hearing on the appeal,
scheduling oral argument before the Court for March 1994.
On February 3, 1994, the MPUC filed a motion to dismiss with
the Court, stating that by order dated February 3, 1994, the
Commission had reopened and reconsidered its October 28, 1993
decision. As a result of its reconsideration, the MPUC decided
to vacate the return-on-equity penalty conditioned on either the
Company's acquiescence in the MPUC's jurisdiction or a finding by
the Court that the MPUC had retained jurisdiction, and to
consider alternative remedies. The MPUC argued that because of
its February 3 order the Company's appeal of the return-on-equity
penalty should be dismissed as moot. The Chief Justice declined
to dismiss the appeal and added the jurisdictional question to
the issues to be determined by the Court.
The MPUC, in its February 3, 1994 order, indicated that an
alternative under consideration by the MPUC "appears to present
an opportunity to insulate ratepayers sufficiently from CMP's
imprudence...," yet also noted, "We do not decide at this time
that such a remedy . . . will be adopted." The order indicated
an intent to seek additional information on the issue of annual
differences between the contract rates and avoided costs.
The case was argued on March 17 and a decision is expected
by early summer 1994. The Company cannot predict the outcome of
the appeal on either the issue of jurisdiction or the merits of
the return-on-equity penalty, or the outcome if remanded to the
PUC, including any subsequent appeal of any alternative remedy.
Incentive Regulation. In May 1991 the MPUC ordered a
three-year trial of the ERAM, which was a fundamental change in
the way the Company's revenues were treated and set new
incentives for effective utility-sponsored energy management. In
July 1992 the MPUC issued an order authorizing the Company to
begin collecting $7.8 million, which was only a portion of the
$26.2 million of ERAM revenues accrued in its first year, and an
energy-management incentive of $1.5 million, beginning in
September 1992. Approximately $18.4 million of ERAM revenues
accrued in the 12 months beginning in March 1991 were therefore
carried over to the 1993 ERAM filing.
In January 1993, the MPUC approved a stipulation that
resolved several outstanding issues, including those in the
Company's ERAM proceeding. The stipulation permitted recovery of
accrued ERAM balances in accordance with the terms of a Financial
Accounting Standards Board Emerging Issues Task Force consensus.
The stipulation also authorized recovery of the costs associated
with buy-outs by the Company of certain purchased-power contracts
and requested the MPUC to grant an increase in the Company's
fuel-cost adjustment. The stipulation also approved an
accounting order permitting the Company to accelerate the
flow-back of $5.9 million of certain deferred taxes associated
with prior losses on reacquired debt. For 1992, the stipulation
placed a limit of 11.25 percent on the Company's allowed rate of
return on equity. Earnings in excess of the limit, up to
approximately $10 million (the revenue requirement of the tax
benefits), were applied on a monthly basis to reduce 1993 ERAM
-9-
accruals. In addition, approximately $317,000 of income, net of
income taxes, in excess of the $10 million, was used to fund a
portion of 1993 operation-and-maintenance expenses.
The January 1993 stipulation also reduced the amount of ERAM
accruals from January 1993 through November 1993 by $591,000 per
month. The ERAM program continued until December 1, 1993, which
was the effective date of the new base rates resulting from the
Company's 1993 base-rate proceeding. As contemplated by the
terms of the stipulation, the MPUC subsequently approved a
revenue increase of $40 million, effective July 1, 1993, which
included, among other things, $21.2 million toward recovery of
deferred ERAM revenues.
As of December 31, 1993, the Company had collected
approximately $19.2 million of the ERAM revenues; the unbilled
ERAM balance at that time was approximately $50.5 million.
Potential Loss of Wholesale Customer. On July 28, 1993, the
Town of Madison Electric Works (Madison), a wholesale customer of
the Company, announced that it had selected a competitive bid
from Northeast Utilities (NU) and was entering negotiations for
NU to become its wholesale electric supplier for a period of up
to ten years. The Company's bid was rejected by Madison for
being submitted after the ten-day bidding period. NU, a
Connecticut-based holding company with substantial excess
generating capacity, had submitted a bid to provide up to 45
megawatts of capacity at a rate that would initially be well
below the Company's existing rates. Substantially all of the 45
megawatts would supply a large paper-making facility in Madison's
service territory that has been served directly by the Company
under a special service agreement with Madison during the last 12
years. The Company understands that Madison intends to start
taking power from NU in late 1994 for that portion required to
serve the paper-making facility and in late 1996 for its
remaining requirements. Losing Madison as a wholesale customer
would reduce the Company's non-fuel revenues by approximately $11
million annually when fully in effect, based on current rates and
1993 sales, minus any amounts paid to the Company for
transmission of the NU power from the New Hampshire border.
The Company intervened in opposition to Madison's petition
to the MPUC for approval of its contract with NU, but cannot
predict what action the MPUC will take on the petition.
The Company has also filed with the FERC for approval of a
contract to provide transmission service for Madison over the
Company's system. The filing seeks recovery of the full cost of
providing transmission service as well as compensation for any
"stranded investment" of the Company in facilities that would no
longer be needed to serve the Madison area.
FERC Power Contracts Settlement Agreement. In August 1991,
the FERC issued an order requiring the Company to revise its
rates to a level reflecting the filed cost of service associated
with each of 14 contracts for non-territorial sales, rather than
the negotiated market-based levels. In 1991 the Company
established a $4.5 million reserve to reflect refunds associated
with some of the contracts. In 1992 the Company reversed
-10-
approximately $1.9 million of that reserve as a result of a
settlement agreement that required the Company to refund
approximately $2.6 million related to that issue.
After rejection by the FERC of the Company's continuing
claims of disparate treatment based on its having been ordered to
make refunds while several similarly situated utilities were not,
on September 29, 1993, the FERC rescinded the Company's
obligation to make refunds. In making its decision, the FERC
invoked its "equitable discretion" and agreed that, based on its
having granted a general amnesty from refunds to other utilities,
circumstances had changed so dramatically since its approval of
the Company's 1992 refund settlement that it would be "unfair to
continue to single out Central Maine for refunds." The FERC
order allowed the utilities that had shared the $2.6 million in
refunds to repay the Company, with interest, over a 24-month
period. The utility that received the major share of the amount
refunded by the Company requested reconsideration of the FERC
rescission order. The Company recorded approximately $3.0
million of income during the third quarter of 1993, reflecting
the refund including interest. On March 22, 1994, the parties
submitted to the FERC a settlement agreement which, if approved,
would require the Company to deliver a combination of cash and
power sales having an aggregate value of up to $1.2 million.
Financing and Related Considerations
During 1993, the Company met its capital requirements
(including the refunding of several outstanding securities
issues) from a variety of sources, including the issuance of
additional General and Refunding Mortgage Bonds, utilization of
its unsecured Medium-Term Note Program and its Dividend
Reinvestment and Common Stock Purchase Plan, short-term unsecured
debt borrowings, including commercial paper, and internally
generated funds.
Financings. During 1993, the Company continued its program
of refinancing its outstanding debt to take advantage of lower
interest rates. The Company issued $75 million of Series Q 7.05%
Due 2008 General and Refunding Mortgage Bonds in March, $50
million of Series R Bonds, 7 7/8% Due 2023 in May, $60 million of
Series S Bonds, 6.03% Due 1998 in August, and $75 million of
Series T Bonds, 6.25% Due 1998 in November.
None of those series has a sinking fund, and the Series S
and Series T Bonds are not callable at the option of the Company.
The Series Q and Series R Bonds are not callable at the option of
the Company prior to March 1, 1998, and June 1, 2003,
respectively, except under limited circumstances.
The Company redeemed its $100-million Series I Bonds, 9 1/4%
Due 2016 in the second quarter of 1993, $50 million of its Series
M Bonds, 9.18% Due 1995 in the third quarter of 1993, and $27.5
million of its Series N Bonds, 8.50% Due 2001 in the fourth
quarter of 1993. Premiums paid on redemptions totalled $9.6
million.
These financing and refinancing transactions reduced the
annual cost of the Company's mortgage debt to 7.1 percent at
-11-
December 31, 1993, from 8.5 percent at December 31, 1992.
During the year, the Company also raised approximately $25.5
million of additional capital through its Dividend Reinvestment
and Common Stock Purchase Plan, resulting in the issuance of 1.2
million new shares of common stock. Effective in January 1994,
however, the Company elected to authorize an agent to purchase
outstanding shares for this plan on the open market, rather than
issue new shares. As a result, the Company's current plans call
for no additional shares of common stock to be issued for the
next several years.
In 1993, the Company issued $48 million of notes under its
$150-million medium-term note program at an average interest rate
of 4.8 percent and an average life of 2.9 years. Notes in the
amount of $26.5 million matured during the year, increasing the
total outstanding medium-term notes at year-end 1993 to $146.0
million from $124.5 million at year-end 1992.
The proceeds from the debt and equity issuances were used
for general corporate purposes, which included financing
construction and energy-management projects, retiring or
refunding outstanding securities, repaying short-term debt, and
buying out purchased-power contracts.
Rating Agency Actions. Beginning in late August 1993, three
major securities-rating agencies lowered their ratings on the
Company's outstanding debt and preferred stock on a number of
occasions.
In October 1993, Duff & Phelps Credit Rating Co. lowered the
Company's fixed income ratings as follows: General and Refunding
Mortgage Bonds from "BBB+" to "BBB-"; unsecured notes from "BBB"
to "BB+"; and preferred stock from "BBB" to "BB-."
Standard & Poor's Corp. ("S&P") announced in late October
1993, the application of more stringent financial-risk standards
to the investor-owned utility industry to reflect S&P's view of
mounting business risk. S&P stated that it believed the
industry's "credit profile" was being "threatened chiefly by
intensifying competitive pressures but also by sluggish demand
expectations, slow earnings growth prospects, high common
dividend payout, environmental cost pressures, and nuclear
operating cost and decommissioning challenges." As a result, S&P
revised rating outlooks for about one-third of the industry and
placed the Company and several other utilities on "CreditWatch
with negative implications."
On January 5, 1994, S&P removed the Company's ratings from
"CreditWatch" and lowered them again as follows: senior secured
debt to "BB+" from "BBB-"; senior unsecured debt to "BB-" from
"BB+"; preferred stock to "B+" from "BB"; and commercial paper to
"B" from "A-3." In addition, S&P assigned its preliminary "BB+"
senior-secured-debt rating to the Company's $150-million General
and Refunding Mortgage Bonds previously registered with the
Securities and Exchange Commission as a "shelf" registration.
On January 13, 1994, Moody's Investors Service ("Moody's")
lowered its rating on the Company's preferred stock to "ba2" from
"baa3" and its short-term debt rating for the Company's
commercial paper to "Prime-3" from "Prime-2." At the same time,
-12-
Moody's confirmed its ratings on the Company's General and
Refunding Mortgage Bonds at "Baa2", unsecured medium-term notes
and pollution control revenue bonds at "Baa3", and the Company's
Securities and Exchange Commission "shelf" registration for
$150,000,000 of General and Refunding Mortgage Bonds to
"(P)Baa2."
The rating agencies explained that the downgrades primarily
reflected the MPUC's "unsupportive" base-rate decision, which in
their opinion will not allow the Company's financial parameters,
adjusted for off-balance-sheet obligations, to remain at
acceptable levels for a utility with a "below-average" business
position. In addition, the rating agencies expressed the belief
that the Company's business position also reflected a depressed
Maine economy, a large industrial-customer base, difficulty in
materially reducing its significant purchased-power obligations,
relatively high production costs, increasing rate pressures, and
a high dividend payout.
Deferred Costs. Over the past few years, the amount of the
Company's deferred charges and regulatory assets has increased
under the regulatory policies of the MPUC. The Securities and
Exchange Commission has periodically considered issues regarding
the proper accounting treatment of charges deferred by regulatory
policy. As a result, the Company has regularly requested the
MPUC to issue accounting and ratemaking orders to provide
appropriate authority to comply with changing accounting
requirements and to allow the Company to appropriately reflect
the amounts as deferred charges and regulatory assets. In recent
years, the Company received such orders with respect to issues in
the 1991 Early Retirement Incentive Program, ERAM,
purchased-power contract buy-outs, environmental-site cleanup
costs, taxes on losses on reacquired debt, and accounting for
postretirement benefits and income taxes pursuant to the newly
issued accounting standards. The Company will monitor situations
that result in deferred charges and regulatory assets and will
seek appropriate regulatory approvals.
For further discussion of financing considerations affecting
the Company, see the information incorporated by reference in
Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Item 8, Financial
Statements and Supplementary Data (Notes 4 and 7 of Notes to
Financial Statements), below.
Environmental Matters
In connection with the operation and construction of its
facilities, various federal, state and local authorities regulate
the Company regarding air and water quality, hazardous wastes,
land use, and other environmental considerations.
Such regulation sometimes requires review, certification or
issuance of permits by various regulatory authorities. In
addition, implementation of measures to achieve environmental
standards may hinder the ability of the Company to conduct
day-to-day operations, or prevent or substantially increase the
cost of construction of generating plants, and may require
substantial investment in new equipment at existing generating
plants. Although no substantial investment is presently
necessary, the Company is unable to predict whether such
-13-
investment may be required in the future.
Water Quality Control. The federal Clean Water Act provides
that every "point source" discharger of pollutants into navigable
waters must obtain a National Pollutant Discharge Elimination
System ("NPDES") permit specifying the allowable quantity and
characteristics of its effluent. Maine law contains similar
permit requirements and authorizes the state to impose more
stringent requirements. The Company holds all permits required
for its plants by the Clean Water Act, but such permits may be
reopened at any time to reflect more stringent requirements
promulgated by the EPA or the Maine Department of Environmental
Protection ("DEP"). Compliance with NPDES and state requirements
has necessitated substantial expenditures and may require further
substantial expenditures in the future.
Air Quality Control. Under the federal Clean Air Act, as
amended, the EPA has promulgated national ambient air quality
standards for certain air pollutants, including sulfur oxides,
particulate matter and nitrogen oxides. The EPA has approved a
Maine implementation plan prepared by the DEP for the achievement
and maintenance of these standards. The Company believes that it
is in compliance with the requirements of the Maine plan. The
Clean Air Act also imposes stringent emission standards on new
and modified sources of air pollutants. Maintaining compliance
with more stringent standards, if they should be adopted, could
require substantial expenditures by the Company. Although 1990
amendments to the Clean Air Act require, among other things, an
aggregate reduction of sulfur dioxide emissions by United States
electric utilities by the year 2000, the Company believes that
the amendments will not have a material adverse effect on the
Company's operations.
In addition, a state regulation restricts the sulfur content
of the fuel oil burned in Maine to 2.0 percent. However, all oil
burned at William F. Wyman Unit No. 4 in Yarmouth, Maine, is
required by license to have a sulfur content not exceeding 0.7
percent, and the other three units at Wyman Station are required
to have a sulfur content not exceeding 1.5 percent when Wyman
Unit No. 4 is in operation. The Company believes that it will
continue to be able to obtain a sufficient supply of oil with the
required sulfur contents, subject to unforeseen events and the
factors influencing the availability of oil discussed under Item
2, Properties, "Fuel Supply", below. The operation of the
Company's present fuel adjustment clause permits it to recover
any additional cost of such fuel from its customers upon review
by the MPUC.
Hazardous Waste Regulations. Under the federal Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the
generation, transportation, treatment, storage and disposal of
hazardous wastes are subject to EPA regulations. Maine has
adopted state regulations that parallel RCRA regulations, but in
some cases are more stringent. The notifications and
applications required by the present regulations have been made.
The procedures by which the Company handles, stores, treats, and
disposes of hazardous waste products have been revised, where
necessary, to comply with these regulations and with more
stringent requirements on hazardous waste handling imposed by
amendments to RCRA enacted in 1984.
-14-
For a discussion of a matter in which the Company has been
named a potentially responsible party by the EPA with respect to
the disposal of certain toxic substances, see Item 3, Legal
Proceedings, under the caption "PCB Disposal", below.
Electromagnetic Fields. Public concern has arisen in recent
years as to whether electromagnetic fields associated with
electric transmission and distribution facilities and appliances
and wiring in buildings ("EMF") contribute to certain public
health problems. This concern has resulted in some areas in
opposition to existing or proposed utility facilities, requests
for new legislative and regulatory standards, and litigation. On
the basis of the scientific studies to date, the Company believes
that no persuasive evidence exists that would prove a causal
relationship or justify substantial capital outlays to mitigate
the perceived risks. Although the Company has suffered no
material effect as a result of this concern, the Company supports
further research on this subject and since 1988 has been
compiling and disseminating through a regular periodic
publication information on all related studies and published
materials as a central clearing house for such information, as
well as providing such information to its customers. The Company
intends to continue to monitor all significant developments in
this field.
Capital Expenditures. The Company estimates that its
capital expenditures for environmental purposes for the five
years from 1989 through 1993 totaled approximately $22.9 million.
The Company cannot presently predict the amount of such
expenditures in the future, as such estimates are subject to
change in accordance with changes in applicable environmental
regulations.
Employee Information
A local union affiliated with the International Brotherhood
of Electrical Workers (AFL-CIO) represents operating and
maintenance employees in each of the Company's operating
divisions, and certain office and clerical employees. At
December 31, 1993, the Company had 2,103 full-time employees, of
whom approximately 46 percent are represented by the union. At
the end of 1990 the Company had 2,322 full-time employees. The
reduction in the number of full-time employees from 1991 through
1993 was due largely to the implementation of an early retirement
program and other efficiency measures in 1991 and 1992. In the
first quarter of 1994 the Company further reduced its staffing in
connection with its restructuring and cost-reduction program
described above under "Introduction" - "Cost Reduction and
Restructuring".
In 1989 the Company and its employees represented by the
union agreed to a three-year contract, which was to expire on May
1, 1992. In November 1991, however, the Company and the union
agreed to a three-year extension of the contract providing for
annual wage increases of 3 percent, 3 percent, and 3.5 percent,
respectively, for each of the three years ending on May 1, 1995,
respectively.
Item 2. PROPERTIES.
Existing Facilities
-15-
The electric properties of the Company form a single
integrated system which is connected at 345 kilovolts and 115
kilovolts with the lines of Public Service Company of New
Hampshire at the southerly end and at 115 kilovolts with Bangor
Hydro-Electric Company at the northerly end of the Company's
system. The Company's system is also connected with the system
of The New Brunswick Power Corporation and with Bangor
Hydro-Electric Company, in each case through the 345-kilovolt
interconnection constructed by MEPCO, a 78 percent-owned
subsidiary of the Company. At December 31, 1993, the Company had
approximately 2,273 circuit-miles of overhead transmission lines,
18,605 pole-miles of overhead distribution lines and 1,182 miles
of underground and submarine cable. The maximum one-hour firm
system net peak load experienced by the Company during the winter
of 1993-1994 was approximately 1,337 megawatts on January 27,
1994. At the time of the peak, the Company's net capability was
1,977 megawatts. The maximum such peak load experienced by the
Company during the preceding three winters was approximately
1,456 megawatts on January 8, 1991, at which time the Company's
net capability was 2,069 megawatts. The New England Power Pool
("NEPOOL"), of which the Company is a member, had sufficient
installed capacity and firm purchases to meet the NEPOOL four-
year peak load of 19,742 megawatts experienced on July 19, 1991,
and its 1993-1994 winter peak load of 19,534 megawatts on January
19, 1994. See "NEPOOL", below.
The Company operates 28 hydroelectric generating stations
with an estimated net capability of 368 megawatts and purchases
an additional 91 megawatts of hydroelectric generation in Maine.
It is currently re-evaluating some of its older hydroelectric
plants in conjunction with efforts to obtain new federal
operating licenses, with the objective of increasing their output
and extending their usefulness. The Company also operates one
oil-fired steam-electric generating station, William F. Wyman
Station in Yarmouth, Maine, after de-activating its Mason Station
in Wiscasset, Maine, in 1991. The Company's share of William F.
Wyman Station has an estimated net capability of 592 megawatts.
The oil-fired station is located on tidewater, permitting
waterborne delivery of fuel. The Company also has three internal
combustion generating facilities with an estimated aggregate net
capability of 41 megawatts.
The Company has ownership interests in five nuclear
generating plants in New England. The largest is a 38-percent
interest in Maine Yankee, which generates power at its plant in
Wiscasset, Maine. In addition, the Company owns a 9.5 percent
interest in Yankee Atomic Electric Company ("Yankee Atomic"),
which has permanently shut down its plant located in Rowe,
Massachusetts, a 6 percent interest in Connecticut Yankee Atomic
Power Company ("Connecticut Yankee"), with a plant in Haddam,
Connecticut, and a 4 percent interest in Vermont Yankee Nuclear
Power Corporation ("Vermont Yankee"), which owns a plant located
in Vernon, Vermont (collectively, with Maine Yankee, the "Yankee
Companies"). In addition, pursuant to a joint ownership
agreement, the Company has a 2.5 percent direct ownership
interest in the Millstone 3 nuclear unit ("Millstone 3") in
Waterford, Connecticut.
In February 1992, the Board of Directors of Yankee Atomic,
after concluding that it would be uneconomic to continue to
operate, decided to permanently discontinue power operation at
-16-
the Yankee Atomic plant and to decommission that facility. The
Company had relied on Yankee Atomic for less than one percent of
the Company's system capacity. Its 9.5-percent equity investment
in Yankee Atomic is approximately $2.3 million. Currently,
purchased-power costs billed to the Company, which include the
estimated cost of the ultimate decommissioning of the unit, are
collected by the Company from its customers through the Company's
base-rate structure.
On March 18, 1993, the FERC approved a settlement agreement
regarding the decommissioning plan, recovery of plant investment,
and all issues with respect to prudence of the decision to
discontinue operation. The Company has estimated its remaining
share of the cost of Yankee Atomic's continued compliance with
regulatory requirements, recovery of its plant investments,
decommissioning and closing the plant, to be approximately $32.8
million. This estimate, which is subject to ongoing review and
revision, has been recorded by the Company as a regulatory asset
and a liability on the Company's balance sheet. As part of the
MPUC's decision in the Company's recent base-rate case, the
Company's share of costs related to the deactivation of Yankee
Atomic is being recovered through rates based on the most recent
projections of costs.
The Company's share of the capacity of the four operating
nuclear generating plants amounted to the following:
Maine Yankee . . . . 330 MW Connecticut Yankee . . 35 MW
Vermont Yankee . . . 21 MW Millstone 3 . . . . . 29 MW
The Company is obligated to pay its proportionate share of
the operating expenses, including depreciation and a return on
invested capital, of each of the Yankee Companies referred to
above for periods expiring at various dates to 2012. Pursuant to
the joint ownership agreement for Millstone 3, the Company is
similarly obligated to pay its proportionate share of the
operating costs of Millstone 3. The Company is also required to
pay its share of the estimated decommissioning costs of each of
the Yankee Companies and Millstone 3. The estimated
decommissioning costs are paid as a cost of energy in the amounts
allowed in rates by the FERC.
MEPCO owns and operates a 345-kilovolt transmission
interconnection, completed in 1971, extending from the Company's
substation at Wiscasset to the Canadian border where it connects
with a line of The New Brunswick Power Corporation ("NB Power")
under a 25-year interconnection agreement. MEPCO transmits power
between NB Power and various New England utilities under separate
agreements. In 1990 MEPCO transferred to a newly formed
partnership, of which a subsidiary of the Company is a 50-percent
general partner, approximately $29 million of construction work
in progress and an equal amount of deferred credits related to
the construction of certain static var compensator facilities
used for stabilization purposes in connection with the NEPOOL
Hydro-Quebec purchase discussed in the succeeding paragraph.
NEPOOL, of which the Company is a member, contracted in
connection with its Hydro-Quebec projects to purchase power from
Hydro-Quebec. The contracts entitle the Company to 85.9
megawatts of capacity credit in the winter and 127.25 megawatts
of capacity credit during the summer. The Company also entered
-17-
into facilities-support agreements for its share of the related
transmission facilities, with its share of the support
responsibility and of associated benefits being approximately 7
percent of the totals. The Company is making facilities-support
payments on approximately $33.2 million, its share of the
construction cost for the transmission facilities incurred
through December 31, 1993.
Maine Yankee Decommissioning. Effective in 1988 Maine
Yankee began collecting $9.1 million annually for decommissioning
based on a FERC-approved funding level of $167 million. In
January 1994, Maine Yankee filed a notice of tariff change with
the FERC to increase its annual collection to $14.9 million and
to reduce its return on common equity to 10.65 percent, for a
total net increase in rates of approximately $3.4 million. The
increase in decommissioning collection is based on the estimated
cost of decommissioning the Maine Yankee Plant, assuming
dismantlement and removal, of $317 million (in 1993 dollars)
based on a 1993 external engineering study. The estimated cost
of decommissioning nuclear plants is subject to change due to the
evolving technology of decommissioning and the possibility of new
legal requirements. Maine Yankee's accumulated decommissioning
funds were $93.8 million as of December 31, 1993.
Maine Yankee Low-Level Waste Disposal. The federal Low-
Level Radioactive Waste Policy Amendments Act (the "Waste Act"),
enacted in 1986, required operating disposal facilities to accept
low-level nuclear waste from other states until December 31,
1992. The Waste Act also set limits on the volume of waste each
disposal facility must accept from each state, established
milestones for the nonsited states to establish facilities within
their states or regions (pursuant to regional compacts) and
authorized increasing surcharges on waste disposal until 1992.
After 1992 the states in which there are operating disposal sites
are permitted to refuse to accept waste generated outside their
states or compact regions. In 1987 the Maine Legislature created
the Maine Low-Level Radioactive Waste Authority (the "Maine
Authority") to provide for such a facility if Maine is unable to
secure continued access to out-of-state facilities after 1992,
and the Maine Authority engaged in a search for a qualified
disposal site in Maine. Maine Yankee volunteered its site at the
Plant for that purpose, but progress toward establishing a
definitive site in Maine, as in other states, was difficult
because of the complex technical nature of the search process and
the political sensitivities associated with it. As a result,
Maine did not satisfy its milestone obligation under the Waste
Act requiring submission of a site license application by the end
of 1991, and is therefore subject to surcharges on its waste and
has not had access to regulated disposal facilities since the end
of 1992. Thus, Maine Yankee now stores all waste generated at an
on-site storage facility.
At the same time, the State of Maine was pursuing
discussions with the State of Texas concerning participation in a
compact with that state and Vermont. In May 1993, the Texas
Legislature approved a compact with the states of Maine and
Vermont. The Maine Legislature in June 1993 ratified the compact
and submitted it to ratification by Maine voters in a referendum
held on November 2, 1993, in which the compact was ratified by a
margin of approximately 73% to 27%. It must now be presented to
the United States Congress for final ratification.
-18-
The compact provides for Texas to take Maine's low-level
waste over a 30-year period for disposal at a planned facility in
west Texas. In return Maine would be required to pay $25
million, assessed to Maine Yankee by the State of Maine, payable
in two equal installments, the first after ratification by
Congress and the second upon commencement of operation of the
Texas facility. In addition, Maine Yankee would be assessed a
total of $2.5 million for the benefit of the Texas county in
which the facility would be located and would also be responsible
for its pro-rata share of the Texas governing commission's
operating expenses. Pending the ratification votes, the Maine
Authority suspended its search for a suitable disposal site in
Maine.
In the event the required ratification by Congress is not
obtained, subject to continued NRC approval, Maine Yankee can
continue to utilize its capacity to store approximately ten to
twelve years' production of low-level waste in its facility at
the Maine Yankee Plant site, which it started in January 1993.
Subject to obtaining necessary regulatory approval, Maine Yankee
could also build a second facility on the Plant site. Maine
Yankee believes it is probable that it will have adequate storage
capacity for such low-level waste available on-site, if needed,
through the licensed operating life of the Maine Yankee Plant.
On January 26, 1993, the NRC published for public comment a
proposed rulemaking that, if adopted, would require a licensee
such as Maine Yankee, as a condition of its license, to document
that it had exhausted other reasonable waste management options
in order to be permitted to store low-level waste on-site beyond
January 1, 1996. Such options include taking all reasonable
steps to contract, either directly or through the state, for
disposal of the low-level waste. On February 9, 1994, the NRC,
after affirming its preference for disposal of waste over
storage, announced its decision to withdraw the proposed
rulemaking. Maine Yankee has informed the Company that it
expects the NRC to issue its formal notice of withdrawal in the
spring of 1994.
The Company cannot predict whether the final required
ratification of the Texas compact or other regulatory approvals
required for on-site storage will be obtained, but Maine Yankee
has stated that it intends to utilize its on-site storage
facility in the interim and continue to cooperate with the State
of Maine in pursuing all appropriate options.
Nuclear Insurance. The Price-Anderson Act is a federal
statute providing, among other things, a limit on the maximum
liability for damages resulting from a nuclear incident.
Coverage for the liability is provided for by existing private
insurance and retrospective assessments for costs in excess of
those covered by insurance, up to $75.5 million for each reactor
owned, with a maximum assessment of $10 million per reactor in
any year. Based on the Company's stock ownership in four nuclear
generating facilities and its 2.5 percent direct ownership
interest in the Millstone 3 nuclear plant, the Company's
retrospective premium could be as high as $6 million in any year,
for a cumulative total of $45.3 million, exclusive of the effect
of inflation indexing and a 5-percent surcharge in the event that
total public liability claims from a nuclear incident should
exceed the funds available to pay such claims.
-19-
In addition to the insurance required by the Price-Anderson
Act, the nuclear generating facilities mentioned above carry
additional nuclear property-damage insurance. This additional
insurance is provided from commercial sources and from the
nuclear electric utility industry's mutual insurance company
through a combination of current premiums and retrospective
premium adjustments. Based on current premiums and the Company's
indirect and direct ownership in nuclear generating facilities,
this adjustment could range up to approximately $6.3 million
annually.
For a discussion of issues relating to Maine Yankee's spent
nuclear fuel disposal, see "Fuel Supply" - "Nuclear", below.
Non-utility Generation
In the Public Utility Regulatory Policies Act of 1978
("PURPA") the United States Congress provided substantial
economic incentives to non-utility power producers by allowing
cogenerators and small power producers to sell their entire
electrical output to an electric utility at the utility's
avoided-cost rate and purchase their entire electric energy
requirement at the utility's established rate for that customer
class. The Maine Legislature enacted a companion measure in
1979.
The Company has entered into a number of long-term,
noncancellable contracts for the purchase of capacity and energy
from non-utility generators. The agreements generally have terms
of five to 30 years and require the Company to purchase the
energy at specified prices per kilowatt-hour. As of December 31,
1993, facilities having 596 megawatts of capacity covered by
these contracts were in service, and another 15 megawatts is
expected to be added by the end of 1994. The costs of purchases
under all of these contracts amounted to $360.7 million in 1993,
$341.5 million in 1992 and $332.4 million in 1991. Such costs
are recoverable through the Company's fuel clause, after review
and approval by the PUC.
In connection with the Company's 1992 fuel cost adjustment
proceeding, the MPUC announced it would review the prudence of
administration and management of these contracts, as well as the
terms and conditions of recent contracts. For a discussion of an
imprudence finding by the MPUC in connection with its review, see
Item 1, "Business", "Regulation and Rates" - "MPUC NUG Contracts
Investigation", above.
In an effort to control the price pressure related to
purchases from non-utility generators, the Company negotiated
long term contract buy-outs or restructuring with three
non-utility generators in 1992, four in 1993, eleven in early
1994, and continues to renegotiate other contracts. The Company
incurred buy-out costs of approximately $11.4 million in 1993 and
$19 million in 1992. The 1994 renegotiation of prices and
contract terms did not require cash payments. Total buy-outs,
restructuring, and terminations made to date are expected to save
the Company's customers more than $170 million in fuel costs
during the next five years.
Construction Program
-20-
The Company's plans for improvements and expansion of
generating, transmission and distribution facilities and power-
supply sources are under continuing review. Actual construction
expenditures depend on the availability of capital and other
resources, load forecasts, customer growth, and general business
conditions. Recent economic and regulatory considerations have
led the Company to hold its planned 1994 capital investment
outlays, including deferred demand-side management expenditures,
to a level below that of 1993. During the five-year period ended
December 31, 1993, the Company's construction and acquisition
expenditures amounted to $425.1 million (including investment in
jointly-owned projects and excluding MEPCO), including an
Allowance for Funds Used During Construction ("AFC") of $13.6
million. The program is currently estimated at approximately $60
million for 1994 and $256 million for 1995 through 1998,
including AFC estimated for the period 1994 through 1998 at $3
million, and including an estimated $35 million for conservation
and energy management programs for the 1994 through 1998 period.
The following table sets forth the Company's estimated
capital expenditures as discussed above:
1994 1995-98 1994-98
Type of Facilities (Dollars in Millions)
Generating Projects $11 $ 48 $ 59
Transmission 7 28 35
Distribution 23 100 123
General 12 52 64
Energy Management 7 28 35
Total $60 $256 $316
Demand-side Management
The Company's demand-side-management efforts have included
programs aimed at residential, commercial and industrial
customers. Among the residential efforts have been programs that
offer energy audits, low-cost insulation and weatherization
packages, water heater wraps, energy-efficient light bulbs, and
water heater cycling credits. Among the commercial and
industrial efforts have been programs that offer rebates for
efficient lighting systems and motors, energy management loans,
grants to customers who make efficiency improvements, and shared
savings arrangements with customers who undertake qualifying
conservation and load management programs.
Under the Company's "Power Partners" program, customers or
energy service companies may submit energy management project
bids in response to requests for proposals issued by the Company
for specific blocks of power. Power Partners was the first
program in the United States to allow energy management proposals
to compete on an equal basis with cogeneration and small power
production facilities in a bidding process for capacity and
energy.
The Company anticipates incurring expenses of approximately
$17.5 million in 1994 in connection with conservation and
-21-
load-management programs and expects the costs of all of these
programs to be recoverable through rates. Actual expenditures
depend on such factors as availability of capital and other
resources, load forecasts, customer growth, and general business
conditions. Because of budget constraints, the Company is
seeking to concentrate its efforts where the need and cost-
effectiveness are the greatest, while continuing to honor
contractual commitments.
NEPOOL
The Company is a member of NEPOOL, which is open to all
investor-owned, municipal and cooperative electric utilities in
New England under an agreement in effect since 1971 that provides
for coordinated planning and operation of approximately 99
percent of the electric power production, purchases and
transmission in New England. The NEPOOL Agreement imposes
obligations concerning generating capacity reserve and the use of
major transmission lines, and provides for central dispatch of
the region's facilities.
Fuel Supply
The Company's total kilowatt-hour production by energy source
for each of the last two years and as estimated for 1994 is shown
below:
Actual Estimated
Source 1992 1993 1994
Nuclear (principally from 26% 28% 27%
Maine Yankee)
Hydro 15 14 17
Oil 19 16 12
Non-utility 38 40 44
Other purchases 2 2 0
100% 100% 100%
The 1994 estimated kilowatt-hour output from oil and
purchased power may vary depending upon the relative costs of
Company-generated power and power purchased through NEPOOL and
independent producers.
Oil. The Company's William F. Wyman Station in Yarmouth,
Maine, and its internal combustion electric generating units are
oil-fired. A one-year contract for the supply of the Company's
fuel oil requirements at market prices expired on June 30, 1993.
Since then the Company has been purchasing its fuel oil
requirements on the open market.
The average cost per barrel of fuel oil purchased by the
Company during the five calendar years commencing with 1989 was
$17.07, $17.33, $12.87, $14.02 and $13.12, respectively. A
substantial portion of the fuel oil burned by the Company and the
other member utilities of NEPOOL is imported. The availability
and cost of oil to the Company, both under contract and in the
open market, could be adversely affected by policies and events
in oil-producing nations and other factors affecting world
supplies and domestic governmental action.
Nuclear. As described above, the Company has interests in a
number of nuclear generating units. The cycle of production and
-22-
utilization of nuclear fuel for such units consists of (1) the
mining and milling of uranium ore, (2) the conversion of the
resulting concentrate to uranium hexafluoride, (3) the enrichment
of the uranium hexafluoride, (4) the fabrication of fuel
assemblies, (5) the utilization of the nuclear fuel, and (6) the
disposal of spent fuel.
Maine Yankee has entered into a contract with the United
States Department of Energy ("DOE") for disposal of its spent
nuclear fuel, as required by the Nuclear Waste Policy Act of
1982, pursuant to which a fee of one dollar per megawatt-hour is
currently assessed against net generation of electricity and paid
to the DOE quarterly. Under this Act, the DOE has assumed the
responsibility for disposal of spent nuclear fuel produced in
private nuclear reactors. In addition, Maine Yankee is obligated
to make a payment with respect to generation prior to April 7,
1983 (the date current DOE assessments began). Maine Yankee has
elected under terms of this contract to make a single payment of
this obligation prior to the first delivery of spent fuel to DOE,
scheduled to begin no earlier than 1998. The payment will
consist of $50.4 million (all of which Maine Yankee has
previously collected from its customers, but for which a reserve
was not funded), which is the approximate one-time fee charge,
plus interest accrued at the 13-week Treasury Bill rate
compounded on a quarterly basis from April 7, 1983, through the
date of the actual payment. Current costs incurred by Maine
Yankee under this contract are recoverable under the terms of its
Power Contracts with its sponsoring utilities, including the
Company. Maine Yankee has accrued and billed $53.1 million of
interest cost for the period April 7, 1983, through December 31,
1993.
Maine Yankee has formed a trust to provide for payment of
its long-term spent fuel obligation, and is funding the trust
with deposits at least semiannually which began in 1985, with
currently projected semiannual deposits of approximately $0.6
million through December 1997. Deposits are expected to total
approximately $62.8 million, with the total liability, including
interest due at the time of disposal, estimated to be
approximately $115.9 million at January 31, 1998. Maine Yankee
estimates that trust fund deposits plus estimated earnings will
meet this total liability if funding continues without material
changes.
Under the terms of a license amendment approved by the NRC
in 1984, the present storage capacity of the spent fuel pool at
the Maine Yankee Plant will be reached in 1999 and after 1996 the
available capacity of the pool will not accommodate a full-core
removal. After consideration of available technologies, Maine
Yankee elected to provide additional capacity by replacing the
fuel racks in the spent fuel pool at the Maine Yankee Plant for
more compact storage and, on January 25, 1993, filed with the NRC
seeking authorization to implement the plan. On March 15, 1994,
the NRC granted the authorization. Maine Yankee believes that
the replacement of the fuel racks will provide adequate storage
capacity through the Maine Yankee Plant's licensed operating
life. Maine Yankee has stated that it cannot predict with
certainty whether or to what extent the storage capacity
limitation at the plant will affect the operation of the plant or
the future cost of disposal.
-23-
Federal legislation enacted in December 1987 directed the
DOE to proceed with the studies necessary to develop and operate
a permanent high-level waste (spent fuel) disposal site at Yucca
Mountain, Nevada. The legislation also provides for the possible
development of a Monitored Retrievable Storage ("MRS") facility
and abandons plans to identify and select a second permanent
disposal site. An MRS facility would provide temporary storage
for high-level waste prior to eventual permanent disposal. In
late 1989 the DOE announced that the permanent disposal site is
not expected to open before 2010, although originally scheduled
to open in 1998. Additional delays due to political and
technical problems are probable.
The Company has been advised by the companies operating
nuclear generating stations in which the Company has an interest
that each of those companies has contracted for certain segments
of the nuclear fuel production and utilization cycle through
various dates. Contracts for other segments of the fuel cycle
will be required in the future, but their availability, prices
and terms cannot now be predicted. Those companies have also
advised the Company that they are assessing options generally
similar to those described above with respect to Maine Yankee in
connection with disposal of spent nuclear fuel.
Item 3. LEGAL PROCEEDINGS.
Material proceedings before the Maine PUC involving the
Company are discussed above in Item 1, Business.
PCB Disposal
The Company is a party in legal and administrative
proceedings that arise in the normal course of business. In
connection with one such proceeding, the Company has been named
as a potentially responsible party and has been incurring costs
to determine the best method of cleaning up an Augusta, Maine,
site formerly owned by a salvage company and identified by the
EPA as containing soil contaminated by polychlorinated biphenyls
(PCBs) from equipment originally owned by the Company.
In 1990, the Company and the EPA signed a negotiated consent
agreement, which was entered as an order by the United States
District Court for the District of Maine in 1991. The agreement
provides for studies, development of work plans, additional EPA
review, and eventual cleanup of the site by the Company over a
period of years, using the method and level of cleanup selected
by the EPA.
The Company has been investigating other courses of action
that might result in lower costs and, in March 1992, acquired
title to the site to pursue the possibility of developing it in a
manner that would not require the same method and level of
cleanup currently provided in the agreement. The Company also
initiated a lawsuit against the original owners of the site and
Westinghouse Electric Corp. (Westinghouse), which arranged for
the equipment disposal, seeking contributions toward past and
future cleanup costs. On November 8, 1993, the United States
District Court for the District of Maine rendered its decision in
the suit, holding that Westinghouse was responsible for 41
percent of the necessary past and future cleanup costs and the
former owners 12.5 percent, other than a small amount (less than
-24-
5 percent) of such costs not attributable to PCBs, for which
Westinghouse was held not responsible and the former owners were
held responsible for 33 percent. The Court further concluded
that the Company had incurred approximately $3.3 million to that
point in costs subject to sharing among the parties.
At the same time, the Company has been actively pursuing
recovery of its costs through its insurance carriers and has
reached agreement with one for recovering a portion of those
costs. It has also filed lawsuits seeking such recovery from
other carriers.
In August 1991, the Company requested permission from the
MPUC to defer its cleanup-related costs, with accrued carrying
costs, on the basis that such costs are allowable costs of
service and should be recoverable in rates. In August 1992, the
MPUC issued an order authorizing the Company to defer direct
costs associated with the site incurred after August 9, 1991,
with accrued carrying costs. Such costs incurred prior to the
request were charged to a $3-million reserve established in 1985.
Initial tests on the site have been completed and more
complex technological studies are still in progress. Based on
results to date and on the most likely cleanup method, the
Company believes that its remaining costs of the cleanup will
total between $7 million and $11 million, depending on the level
of cleanup ultimately required and other variable factors. Such
estimate is net of the agreed insurance recovery and considers
any contributions from Westinghouse and the former owners, but
excludes contributions from the insurance carriers the Company
has sued, or any other third parties. As a result, in the fourth
quarter of 1993, the Company decreased the liability recorded on
its books from $14 million, the estimated liability prior to the
November 1993 court ruling, to $7 million and recorded an equal
reduction in a regulatory asset established to reflect the
anticipated ratemaking recovery of such costs when ultimately
paid. Approximately $1 million of costs incurred to date has
been charged against the liability.
The Company cannot predict the level and timing of the
cleanup costs, the extent to which they will be covered by
insurance, or the ratemaking treatment of such costs, but
believes it should recover substantially all of such costs
through insurance and rates. The Company also believes that the
ultimate resolution of the legal and environmental proceedings in
which it is currently involved will not have a material adverse
effect on its financial condition.
Power Purchase Contract Suit. As previously reported, the
Company and Caithness King of Maine Limited Partnership
("Caithness") engaged in a lawsuit in the United States District
Court for the District of Maine over the Company's termination of
a contract for the purchase of approximately 80 megawatts of
electric power from a cogeneration project proposed for
construction by Caithness at the Topsham, Maine. In the suit
Caithness denied the validity of the termination and sought
damages estimated by Caithness to be in excess of $100 million
for breach of contract or, in the alternative, reformation of the
contract, and other legal relief.
Also as previously reported, on January 14, 1994, the
-25-
Company and Caithness entered into a Termination and Settlement
Agreement under which the Company paid Caithness a total of $5
million, and the parties agreed to the termination of the power-
purchase contract and to dismiss the suit and counterclaims. The
contract would have required payments by the Company over the
life of the contract that were projected to be significantly
higher than the Company's estimated avoided costs and was
therefore inconsistent with the Company's program of pursuing
terminations or other restructurings of high-cost power-purchase
contracts.
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.
Not applicable.
Item 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following are the present executive officers of the
Company with all positions and offices held. There are no family
relationships between any of them, nor are there any arrangements
or understandings pursuant to which any were selected as
officers.
Name, Age, and Year
First Became Officer Office
Carlton D. Reed, Jr., 63, 1991 Chairman of the Board of
Directors
Matthew Hunter, 59, 1978 Chairman of the Company, and
Director
David T. Flanagan, 46, 1984 President and Chief
Executive Officer, and
Director
Arthur W. Adelberg, 42, 1985 Vice President, Law and
Power Supply
Richard A. Crabtree, 47, 1978 Vice President, Retail
Operations
David E. Marsh, 46, 1986 Vice President, Corporate
Services, and Chief
Financial Officer
Curtis A. Mildner, 40, 1994 Vice President, Marketing
Gerald C. Poulin, 52, 1984 Vice President, Production
and Support
Douglas Stevenson, 45, 1984 Treasurer
Robert S. Howe, 54, 1975 Comptroller
-26-
William M. Finn, 57, 1984 Secretary and Clerk
Each of the executive officers, except Mr. Mildner, has
for the past five years been an officer or employee of the
Company.
Curtis A. Mildner joined the Company as Vice President,
Marketing, on February 7, 1994. Prior to his employment by the
Company, he had been employed since 1987 by Hussey Seating
Company of Berwick, Maine, as Vice President, Marketing, and in
related capacities.
Mr. Hunter has announced that he plans to retire
effective May 1, 1994.
-27-
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the New York
Stock Exchange. As of March 21, 1994, there were 35,146 holders
of record of the Company's common stock.
Price Range of and Dividends on Common Stock
Market Price Dividends
High Low Declared
1993
First Quarter $24 1/2 $21 3/4 $ .39
Second Quarter 24 3/8 21 .39
Third Quarter 24 21 7/8 .39
Fourth Quarter 22 1/4 14 3/8 .225
1992
First Quarter $22 7/8 $19 7/8 $ .39
Second Quarter 22 7/8 20 .39
Third Quarter 23 3/4 22 1/8 .39
Fourth Quarter 23 7/8 22 1/8 .39
Under the most restrictive terms of the indenture securing
the Company's General and Refunding Mortgage Bonds and of the
Company's Articles of Incorporation, no dividend may be paid on
the common stock of the Company if such dividend would reduce
retained earnings below $29.6 million. At December 31, 1993,
$87.5 million of retained earnings was not so restricted. Future
dividend decisions will be subject to future earnings levels and
the financial condition of the Company and will reflect the
evaluation by the Company's Board of Directors of then existing
circumstances.
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated
financial data of the Company for the five years ended December
31, 1989 through 1993. This information should be read in
conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial
statements and related notes thereto included elsewhere herein.
The selected consolidated financial data for the years ended
December 31, 1989 through 1993 are derived from the audited
financial statements of the Company.
-28-
Selected Consolidated Financial Data
(Dollars in Thousands, Except Per Share Amounts)
1993 1992 1991 1990 1989
Electric operating
revenues $ 893,577 $ 877,695$ 866,539 $ 780,821 $ 727,196
Net income 61,302 63,583 59,134 48,795 48,574
Long-term
obligations 581,844 499,029 518,625 495,716 430,544
Redeemable preferred
stock 80,000 40,750 43,500 44,875 11,250
Total assets 2,004,862 1,690,005 1,574,501 1,456,072 1,324,218
Earnings per common
share $ 1.65 $1.85 $1.82 $1.68 $1.92
Dividends declared
per common share $1.395 $1.56 $1.56 $1.56 $1.53
-29-
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required to be furnished in response to this
Item is submitted as pages 1 to 15 of Exhibit 13-1 hereto (the
Company's Annual Report to Shareholders for the year ended
December 31, 1993), which pages are hereby incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
The information required to be furnished in response to this
Item is submitted as pages 15 through 48 of Exhibit 13-1 hereto
(the Company's Annual Report to Shareholders for the year ended
December 31, 1993), which pages are hereby incorporated herein by
reference. For ease of reference, the following is a listing of
financial information incorporated by reference to Exhibit 13-1
hereto, which shows the page number or numbers of said Exhibit on
which such information is presented.
Financial Information Page(s) of Exhibit 13-1
Report of independent public accountants 47
Management report on responsibility
for financial reporting 48
Consolidated statement of earnings for
the three years ended December 31,
1993, 1992 and 1991 15-17
Consolidated balance sheet as of
December 31, 1993 and 1992 18-20
Consolidated statement of cash flows for
the three years ended December 31, 1993,
1992 and 1991 17-18
Consolidated statement of capitalization
and interim financing as of
December 31, 1993 and 1992 20-21
Consolidated statement of changes
in common stock investment for the
three years ended December 31, 1993,
1992 and 1991 21-23
Notes to consolidated financial statements 23-46
Supplementary quarterly financial
data (unaudited) 45-46
Item 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required to be furnished in response to this
Item is submitted on page 49 of Exhibit 13-1 hereto (the
Company's Annual Report to Shareholders for the year ended
December 31, 1993), which page is hereby incorporated by
-30-
reference.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.
See the information under the heading "Election of Directors"
in the registrant's definitive proxy material for its annual
meeting of shareholders to be held on May 25, 1994, and Item 4.1,
Executive Officers of the Registrant, above, both of which are
hereby incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION.
See the information under the heading "Board Committees,
Meetings and Compensation" and the heading "Executive
Compensation" in the registrant's definitive proxy material for
its annual meeting of shareholders to be held on May 25, 1994,
which is hereby incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
See the information under the heading "Security Ownership" in
the registrant's definitive proxy material for its annual meeting
of shareholders to be held on May 25, 1994, which is hereby
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the information under the heading, "Board Committees,
Meetings and Compensation" in the registrant's definitive proxy
material for its annual meeting of shareholders to be held on May
28, 1994, which is hereby incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) Listing of Exhibits. The exhibits which are filed with
this Form 10-K or are incorporated herein by reference are set
forth in the Exhibit Index, which immediately precedes the
exhibits to this report.
(b) Reports on Form 8-K. The Company filed the following
reports on Form 8-K during the last quarter of 1993 and
thereafter to date:
Date of Report Items Reported
October 27, 1993 Item 5
Lowering of debt and preferred stock ratings. On October 27,
1993, Duff & Phelps Credit Rating Co. announced that it was
lowering the ratings of the Company's debt and preferred stock.
Date of Report Items Reported
-31-
October 28, 1993 Item 5
(a) Debt and preferred stock ratings. On October 29, 1993,
Moody's Investors Service ("Moody's") lowered the ratings on the
Company's long-term debt and preferred stock, citing concerns
about the Company's "ability to safeguard its competitive
position and to gain the regulatory support needed to avoid
further pressure on cash flow and debt-protection measurements".
(b) Base-rate case. The Company reported on positions taken by
certain parties in the Company's base-rate case before the PUC.
(c) PUC order on independent power producer contracts. On
October 28, 1993, the PUC issued its written order incorporating
the conclusions of its October 5, 1993, deliberations.
Date of Report Items Reported
November 30, 1993 Item 5
Public Utilities Commission order in base-rate case and
securities downgrading. On November 30, 1993, the MPUC issued
its basic revenue requirements order finding the Company entitled
to an annual revenue increase of $26.2 million in the Company's
$83 million base-rate case. On December 1, 1993, Standard &
Poor's Corp. ("S&P") further lowered its ratings of the Company's
securities.
Date of Report Items Reported
December 15, 1993 Item 5
Common stock dividend reduction. On December 15, 1993, the
Company's Board of Directors reduced the quarterly dividend on
the Company's common stock from 39 cents to 22.5 cents per share.
Date of Report Items Reported
December 16, 1993 Item 5
(a) On December 16, 1993, the Company announced that David T.
Flanagan had been elected President, Chief Executive Officer and
a director, effective January 1, 1994, succeeding Matthew Hunter,
who planned to retire May 1, 1994.
(b) The Company reported that effective December 27, 1993, the
Company's 450,000 shares of outstanding Flexible Money Market
Preferred Stock, Series A, would no longer be subject to the
restriction that it be conveyed only in Units of 1,000 shares.
(c) On December 20, 1993, the Chief Justice of the Maine Supreme
Judicial Court issued an order temporarily staying the .5%
return-on-equity penalty that had been imposed on the Company by
the MPUC on October 28, 1993, in its independent power producer
contracts investigation.
-32-
Date of Report Items Reported
January 5, 1994 Item 5
On January 5, 1994, S&P further lowered its ratings on the
Company's securities, including the senior secured debt rating to
"BB+" from BBB-".
Date of Report Items Reported
January 13, 1994 Items 4 and 5
Item 4. On January 19, 1994, the Company's Board of Directors
voted to engage Coopers & Lybrand as the Company's principal
accountants in 1994. The Item also contained information on a
disagreement in 1991 with the Company's predecessor accountants.
(This item amended by Form 8-K/A, Amendment No. 1, also dated
January 13, 1994.
Item 5. (a) On January 13, 1994, Moody's lowered its ratings on
the Company's preferred stock and commercial paper, while
confirming its rating on the Company's General and Refunding
Mortgage Bonds at "Baa2".
(b) On January 14, 1994, the Company and Caithness King of Maine
Limited Partnership entered into a Termination and Settlement
Agreement terminating power-contract litigation.
Date of Report (Form 8-K/A) Items Reported
January 13, 1994 Item 4
The Company amended its January 13, 1994, Form 8-K to provide
further information on its change of principal accountants and a
1991 disagreement with the Company's predecessor accountants.
Date of Report Items Reported
February 3, 1994 Item 5
On February 4, 1993, the Chief Justice of the Maine Supreme
Judicial Court denied the MPUC's motion to dismiss the Company's
approval of the MPUC's October 28, 1993, return-on-equity
penalty. The MPUC had contended that it had reconsidered its
order imposing the penalty and was considering alternative
remedies.
-33-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Augusta, and State of
Maine on the 30th day of March, 1994.
CENTRAL MAINE POWER COMPANY
By
David E. Marsh
Vice President, Corporate Services
and Chief Financial Officer
-34-
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
________________________ President and March 30, 1994
David T. Flanagan Chief Executive
(Principal Executive Officer; Director
Officer)
_________________________ Vice President, March 30, 1994
David E. Marsh Corporate Services,
(Principal Financial and Chief Financial
Officer) Officer
_________________________ Comptroller March 30, 1994
Robert S. Howe
(Principal Accounting
Officer)
_________________________ Chairman of the March 30, 1994
Carlton D. Reed, Jr. Board of Directors
_________________________ Chairman of the March 30, 1994
Matthew Hunter Company; Director
_________________________ Director March 30, 1994
Charles H. Abbott
_________________________ Director March 30, 1994
Charleen M. Chase
_________________________ Director March 30, 1994
E. James Dufour
_________________________ Director March 30, 1994
Robert H. Gardiner
_________________________ Director March 30, 1994
David M. Jagger
_________________________ Director March 30, 1994
Charles E. Monty
_________________________ Director March 30, 1994
Robert H. Reny
_________________________ Director March 30, 1994
Anne Szostak
_________________________ Director March 30, 1994
Kathryn M. Weare
-35-
The following report and consent and financial schedules of
Central Maine Power Company are filed herewith and included in
response to Item 14(d).
Page
Report of independent public
accountants F-2
Consent of independent public
accountants F-3
Schedule V - Consolidated Property,
Plant and Equipment F-4 to F-6
Schedule VI - Consolidated Reserves
for Depreciation of Property and
Amortization of Nuclear Fuel F-7 to F-9
Schedule VIII - Valuation and Qualifying
Accounts F-10 to F-12
Schedule IX - Consolidated Short-Term
Borrowings F-13
Any and all other schedules are omitted because the required
information is inapplicable or the information is presented in
the financial statements or related notes.
-36-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Central Maine Power Company:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Central Maine Power Company's annual report to shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 1994. Our audits were made for
the purpose of forming an opinion on those statements taken as a
whole. The schedules listed on the accompanying index of
schedules included in reports to Item 14(a) in Form 10-K are
presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state, in all material
respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
February 4, 1994
-37-
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by
references in this Form 10-K, into the Company's previously filed
Registration Statements File No. 33-44944, File No. 33-44754,
File No. 33-51611, File No. 33-39826 and File No. 33-36679.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts,
March 28, 1994
-38-
Central Maine Power Company
CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT (H)
For the Year Ended December 31, 1993
(Dollars in Thousands)
Balance at Other Changes Balance at
Beginning Additions Retirements Miscellaneous End Classification
Classification of Period at Cost or Sale Adjustments of Period
Electric Property (A) (B)&(I)
Intangible Property $ 4,767 $ 2,799 $ 0 $ 0 $ 7,566
Generating Plant-Steam 202,367 703 (290) 594 203,374
Generating Plant-Hydro 197,486 5,995 (95) (12)(C) 203,374
Generating Plant-Internal
Combustion 4,080 1 0 0 4,081
Generating Plant-Nuclear 97,750 381 0 0 98,131
Transmission 270,948 6,353 (1,195) (2,590)(D) 273,516
Distribution 600,297 29,194 (9,503) 196 620,184
Other Property and
Equipment 139,250 22,367 (5,698) (1,270)(E) 154,649
Electric Plant Acquisition
Adjustment 0 0 0 0
Total Electric Property
in Service 1,516,945 67,793 (16,781) (3,082) 1,564,875
Unfinished Construction 34,550 (14,558) 0 (303) 19,689
Total Electric Property 1,551,495 53,235 (16,781) (3,385) 1,584,564
Nuclear Fuel (F) 8,443 621 0 0 9,064
Miscellaneous Properties (G) 3,898 112 (144) 1,086 4,952
Total Property, Plant and
Equipment $1,563,836 $53,968 $(16,925) $(2,299) $1,598,580
Notes: (A) Includes Operating Property and Property Held for Future Use land retirements/sales
of $9.
(B) Transfers (to)/from various classifications contained on this page.
(C) Includes the writedown of Hydro land and water rights.
(D) Includes annual reductions of ($1,610) for Transmission Facilities under Capital
Leases.
(E) Includes annual reductions for 1) General Facilities under Capital Leases of
($995) and 2) a long term asset associated with the General Office Settlement of
($79).
(F) Includes Nuclear Fuel in Processing, in Stock, in Reactor, and Spent Fuel.
(G) Included in Deferred Charges and Other Assets on Balance Sheet.
Report for depreciation policies.
(H) Refer to Note 1 of Notes to Consolidated Financial Statements in the 1993 Annual
Report for depreciation policies.
(I) As a result of the Company's adoption of FAS 109, property classifications were
adjusted as follows: (Steam) $570; (Hydro) $5; (Transmission) $136;
(Distribution) $38; and (General) $52.
F-4
-39-
Central Maine Power Company
CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT (H)
For the Year Ended December 31, 1992
(Dollars in Th
Balance at Other Changes Balance at
Beginning Additions Retirements Miscellaneous End
Classification of Period at Cost or Sale Adjustments of Period
Electric Property (A) (B)
Intangible Property $ 4,388 $ 379 $ 0 $ 0 $ 4,767
Generating Plant-Steam 200,409 3,324 (1,380) 14 202,367
Generating Plant-Hydro 191,855 5,909 (314) 36 (C) 197,486
Generating Plant-Internal
Combustion 4,080 0 0 0 4,080
Generating Plant-Nuclear 97,555 195 0 0 97,750
Transmission 263,137 10,974 (1,807) (1,356)(D) 270,948
Distribution 575,994 32,986 (8,478) (205) 600,297
Other Property and
Equipment 133,649 10,616 (4,587) (428)(E) 139,250
Electric Plant Acquisition
Adjustment 226 0 (226) 0
Total Electric Property
in Service 1,471,293 64,383 (16,792) (1,939) 1,516,945
Unfinished Construction 26,383 8,180 0 (13) 34,550
Total Electric Property 1,497,676 72,563 (16,792) (1,952) 1,551,495
Nuclear Fuel (F) 7,975 468 0 0 8,443
Miscellaneous Properties (G) 3,806 7 (10) 95 3,898
Total Property, Plant and
Equipment $1,509,457 $73,038 $(16,802) $(1,857) $1,563,836
Notes: (A) Includes Operating Property and Property Held for Future Use land retirements/sales
of $43.
(B) Transfers (to)/from various classifications contained on this page.
(C) Includes the writedown of Hydro land and water rights.
(D) Includes annual reductions of ($1,579) for Transmission Facilities under Capital
Leases.
(E) Includes annual reductions for 1) General Facilities under Capital Leases of
($925) and 2) a long term asset associated with the General Office Settlement of
($79) and to record the investment of purchased vehicles formerly leased $659.
(F) Includes Nuclear Fuel in Processing, in Stock, in Reactor, and Spent Fuel.
(G) Included in Deferred Charges and Other Assets on Balance Sheet.
(H) Refer to Note 1 of Notes to Consolidated Financial Statements in the 1992 Annual
Report for depreciation policies.
F-5
-40-
Central Maine Power Company
CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT (A)
For the Year Ended December 31, 1991
(Dollars in Thousands)
Balance at Other Changes Balance at
Beginning Additions Retirements Miscellaneous End
Classification of Period at Cost or Sale Adjustments of Period
Electric Property (B) (C)
Intangible Property $ 2,327 $ 2,054 $ 0 $ 7 $ 4,388
Generating Plant-Steam 193,708 7,446 (466) (279) 200,409
Generating Plant-Hydro 191,627 1,673 (681) (764)(D) 191,855
Generating Plant-Internal
Combustion 4,079 0 0 1 4,080
Generating Plant-Nuclear 97,445 110 0 0 97,555
Transmission 257,529 7,413 (939) (866)(E) 263,137
Distribution 546,746 37,043 (7,836) 41 575,994
Other Property and
Equipment 123,570 16,686(F) (4,801) (1,806)(G) 133,649
Electric Plant Acquisition
Adjustment 226 0 0 0 2
Total Electric Property
in Service 1,417,257 72,425 (14,723) (3,666) 1,471,293
Unfinished Construction 19,410 6,903 0 70 26,383
Total Electric Property 1,436,667 79,328 (14,723) (3,596) 1,497,676
Nuclear Fuel (H) 7,877 99 0 0 7,976
Miscellaneous Properties (I) 2,682 186 (387) 1,324 3,805
Total Property, Plant
and Equipment $1,447,226 $79,613 $(15,110) $(2,272) $1,509,457
Notes: (A) Refer to Note 1 of Notes to Consolidated Financial Statements in the 1992 Annual
Report for depreciation policies.
(B) Includes Operating Property and Property Held for Future Use land retirements/sales
of $19.
(C) Transfers (to)/from various classifications contained on this page.
(D) Includes the transfer of Columbia and Lincoln Hydro stations to Deferred Charges and
Other Assets of ($739) and the writedown of Hydro land and water rights.
(E) Includes annual reductions of ($566) for Transmission Facilities under Capital
Leases.
(F) Includes an addition of Property under Capital Leases for mainframe computer
equipment of $4,167.
(G) Includes annual reductions for 1) General Facilities under Capital Leases of
($861) and 2) a long term asset associated with the General Office Settlement of
($79).
(H) Includes Nuclear Fuel in Processing, in Stock, in Reactor, and Spent Fuel.
(I) Included in Deferred Charge
F-6
-41-
Central Maine Power Company
CONSOLIDATED RESERVES FOR DEPRECIATION OF PROPERTY AND AMORTIZATION
For the Year Ended December 31, 1993
(Dollars in Thousands)
Additions to Reserves Deductions from Reserves
Balance Retirements, Ch
at Charged to Renewals and Balance
Beginning Profit and Charged to Other Accounts Replace- Other at Close
of Period Loss Description Amount ments Description Amount of Period
(A)
Electric $474,036 $42,008 $16,772 $
Salvage of Cost of
Retired Materials Removing
and Equipment $2,488 Retired Plant $2,483
Auto Adjust Reserve-
Depreciation/ Assets
Amortization Transferred to
Charged to Nonoperat-
Clearing Accounts 2,996 ing 84
Adjust Reserve-
Millstone Unit
No. III
Decommissioning
Trust Fund (A/C
128) 1,091
474,036 42,008 6,575 16,772 2,567 503,280
Nuclear
Fuel 6,544 698 7,242
Miscel- Adjust Reserve-
laneous Assets
Propert- Transferred from
ies Operating
(B) 410 45 Property 84 3 536
$480,990 $42,751 $6,659 $16,775 $2,567 $511,058
Notes: (A) Retirements are made at original cost.
(B) Included in Deferred Charges and Other Assets on Balance Sheet.
F-7
-42-
Central Maine Power Company
CONSOLIDATED RESERVES FOR DEPRECIATION OF PROPERTY AND AMORTIZATION OF NUCLEAR FUEL
For the Year Ended December 31, 1992
(Dollars in Thousands)
Additions to Reserves Deductions from Reserves
Balance Retirements, Charg
at Charged to Charged to Other Accounts Renewals and Other Balance
Beginning Profit and Replace- at Close
of Period Loss Description Amount ments Description Amount of Period
(A)
Electric $447,276 $40,321 $16,749 $
Salvage of Cost of
Retired Materials Removing
and Equipment $2,151 Retired Plant $2,820
Auto Adjust Reserve-
Depreciation/ Assets
Amortization Transferred to
Charged to Nonoperat-
Clearing Accounts 3,183 ing 2
Adjust Reserve-
Loss on Disposal
of Property 12
Assets
Transferred to
Donations 5
Investment of
purchased
vehicles
formerly leased 659
447,276 40,321 6,010 16,749 2,822 474,036
Nuclear
Fuel 5,798 746 6,544
Miscel- Adjust Reserve-
laneous Assets
Proper- Transferred from
ties Operating
(B) 371 37 Property 2 410
$453,445 $41,104 $6,012 $16,749 $2,822 $480,990
Notes: (A) Retirements are made at original cost.
(B) Included in Deferred Charges and Other Assets on Balance Sheet.
F-8
-43-
Central Maine Power Company
CONSOLIDATED RESERVES FOR DEPRECIATION OF PROPERTY AND AMORTIZATION OF NUCLEAR FUEL
For the Year Ended December 31, 1991
(Dollars in Thousands)
Additions to Reserves Deductions from Reserves
Balance Retirements,
at Charged to Charged to Other Accounts Renewals and Other Balance
Beginning Profit and Replace- at Close
of Period Loss Description Amount ments Description Amount of Period
(A)
Electric $421,840 $39,000 $14,704 $
Salvage of Cost of
Retired Materials Removing
and Equipment $2,314 Retired Plant $4,015
Auto Adjust Reserve-
Depreciation/ Assets
Amortization Transferred to
Charged to Nonoperating
Clearing Accounts 3,123 (A/C 122) 369
Adjust Reserve- Deferred
Debits (A/C
186) 107(B)
Assets Donations
Transferred to (A/C
Deferred Debits 426.1)
(A/C 186) 195(B) 1
421,840 39,000 5,632 14,704 4,492 447,276
Nuclear
Fuel 5,480 318 5,798
Miscel- Adjust Reserve-
laneous Assets
Proper- Transferred from Sale of
ties Operating Nonoperating
(C) 174 15 Property 369 Property 187 371
$427,494 $39,333 $6,001 $14,704 $4,679 $453,445
Notes: (A) Retirements are made at original cost.
(B) To be recovered effective January 1, 1991 in accordance with the Maine Public Utilities Commission rate order in
Docket No. 89-68.
(C) Included in Deferred Charges and Other Assets on Balance Sheet.
F-9
-44-
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1993
(Dollars in Thousands)
Additions
Charged to
Balance at Charged to other Balance at
beginning costs and accounts- Deductions- end of
Description of period expenses describe describe period
Reserves deducted from assets to which they apply:
Reserve for uncollectible accounts $ 2,250 $5,548 $ $ 5,094(A) $ 2,704
Reserves not applied against assets:
Reserve for casualty and insurance $ 1,077 $1,123 $ 272(B) $ 1,397(C) $ 1,075
Reserve for workers' compensation 6,400 6,400
Reserve for hazardous material clean-up 2,981 5,019(D) 1,172(E) 6,828
Reserve for Millstone III sales tax 423 423(F)
Reserve for obsolete inventory 250 250(G)
Reserve for revenue adjustment of tax
flowback 9,990 9,990(H)
Total $21,121 $1,123 $5,291 $13,232 $14,303
Notes: (A) Amounts charged off as uncollectible after deducting customers' deposits and recoveries of accounts previously
charged off.
(B) Amounts charged to capital accounts.
(C) Principally payments for various injuries and damages and expenses in connection therewith.
(D) Amounts charged to regulatory asset account.
(E) Amounts paid, charged against the reserve.
(F) Amounts reversed, charged to nuclear operating expenses.
(G) Amounts charged off as Distribution Expense.
(H) Refer to Note 3 of Notes to Consolidated Financial Statements in the 1993 Annual Report.
F-10
-45-
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1992
(Dollars in Thousands)
Additions
Charged to Balance
Balance at Charged to other at end
beginning costs and accounts- Deductions- of
Description of period expenses describe describe period
Reserves deducted from assets to which they apply:
Reserve for uncollectible accounts $ 2,336 $ 5,576 $ $5,662(A) $ 2,250
Reserves not applied against assets:
Reserve for casualty and insurance $ 1,075 $ 1,524 $393(B) $1,915(C) $ 1,077
Reserve for workers' compensation 6,400 6,400
Reserve for hazardous material clean-up 4,500 1,519(D) 2,981
Reserve for Millstone III sales tax 487 46 110(E) 423
Reserve for rate refund 4,500 4,500(F)
Reserve for obsolete inventory 250 250
Reserve for revenue adjustment of tax
flowback 9,990 9,990
Total $16,962 $11,810 $393 $8,044 $21,121
Notes: (A) Amounts charged off as uncollectible after deducting customers' deposits and recoveries of accounts previously
charged off.
(B) Amounts charged to capital accounts.
(C) Principally payments for various injuries and damages and expenses in connection therewith.
(D) Amounts paid, charged against the reserve net of estimated insurance recoveries.
(E) Amounts paid to Northeast Utilities related to Millstone Unit 3 Sales and Use Tax settlement
agreement dated June 12, 1992.
(F) Amount of refund paid per Federal Energy Regulatory Commission stipulation of $2,076 and
reversal of prior year reserve accrual of $2,424.
F-11
-46-
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1991
(Dollars in Thousands)
Additions
Charged Charged to Balance
Balance at to costs other at end
beginning and accounts- Deductions- of
Description of period expenses describe describe period
Reserves deducted from assets to which they apply:
Reserve for uncollectible accounts $ 1,259 $5,690 $ $4,613(C) $ 2,336
Reserves not applied against assets:
Reserve for casualty and insurance $ 1,075 $1,520 $ 392(D) $1,912(E) $ 1,075
Reserve for workers' compensation 4,750 1,650(G) 6,400
Reserve for hazardous material clean-up 3,000 (912)(B) 4,500(A) 2,088(B) 4,500
Reserve for Millstone III sales tax 359 128 487
Reserve for wheeling 1,600 111 1,711(F)
Reserve for rate refund 4,500 4,500
Total $10,784 $5,347 $6,542 $5,711 $16,962
Notes: (A) Amounts deferred, net of anticipated insurance recovery, in anticipation of future rate treatment.
(B) Amounts previously charged to Account 186, Deferred Charges and Other Assets were charged against the reserve
and the remaining balance ($912) was credited to expense.
(C) Amounts charged off as uncollectible after deducting customers' deposits and recoveries of accounts previously
charged off.
(D) Amounts charged to capital accounts.
(E) Principally payments for various injuries and damages and expenses in connection therewith.
(F) Payment of contract settlement.
(G) Charged to Account 186, Deferred Charges and Other Assets.
F-12
-47-
CENTRAL MAINE POWER COMPANY
CONSOLIDATED SHORT-TERM BORROWINGS
For the Years Ended December 31,
(Dollars in Thousands)
Weighted Maximum amount Average amount Weighted average
Balance at end average outstanding outstanding interest rate
Category of aggregate short- of interest during the during the during the
term borrowings (A) period rate (B) period (C) period period
1993
Commercial paper $15,500 3.74% $105,940 $39,623(D) 3.54%(E)
Notes payable to banks 10,000 3.70 29,000 18,492(D) 3.86 (E)
1992
Commercial paper 61,000 3.76 65,400 46,932(D) 3.99 (E)
Notes payable to banks 27,500 4.11 43,500 28,589(D) 4.63 (E)
Medium-term notes - - 7,500 3,340(D) 6.98 (E)
1991
Commercial paper 38,500 5.77 38,500 24,614(D) 6.30 (E)
Notes payable to banks 45,000 5.61 45,000 12,734(D) 6.03 (E)
Medium-term notes (G) 7,500 7.79 27,500 18,035 8.01 (F)
Notes: (A) Refer to Note 7 of Notes to Consolidated Financial Statements for general terms of short-
term borrowing.
(B) At end of period.
(C) Maximum amount outstanding at any month end for each category.
(D) Average daily balance of net proceeds during the period.
(E) Based on the daily amount of net proceeds outstanding during the period.
(F) Embedded cost rate.
(G) Medium-term notes interest rates and average balances are calculated on a 360-day year.
F-13
-48-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1993
CENTRAL MAINE POWER COMPANY
File No. 1-5139
(Exact name of Registrant as specified in charter)
EXHIBITS
F-13
-49-
EXHIBIT INDEX
The following designated exhibits, as indicated below, are either filed herewith or have
heretofore been filed with the Securities and Exchange Commission under the Securities Act of 1933, the
Securities Exchange Act of 1934 or the Public Utility Holding Company Act of 1935 and are incorporated
herein by reference to such filings. Reference is made to Item 8 of this Form 10-K for a listing of
certain financial information and statements incorporated by reference herein.
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
EXHIBIT 2: PLAN OF ACQUISITION,
REORGANIZATION, ARRANGEMENT,
LIQUIDATION OR SUCCESSION
Not Applicable.
EXHIBIT 3: ARTICLES OF INCORPORATION AND
BY-LAWS
Incorporated herein by
reference:
3-1 Articles of Incorporation, as Annual Report on 3.1
amended. Form
10-K for year ended
December 31, 1992
3-2 Bylaws, as amended. Annual Report on 3.2
Form
10-K for the year
ended December 31,
1990
EXHIBIT 4: INSTRUMENTS DEFINING THE RIGHTS
OF SECURITY HOLDERS
F-13
-50-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
Incorporated herein by
reference:
4-1 General and Refunding Mortgage 2-58251 2.18
between the Company and The
First National Bank of Boston,
as Trustee, dated as of
April 15, 1976, relating to the
Series A Bonds.
4-2 First Supplemental Indenture 2-60786 2.19
dated as of March 15, 1977 to
the General and Refunding
Mortgage.
4-3 Supplemental Indenture to the Annual Report on A
General and Refunding Mortgage Form
Indenture dated as of October 1, 10-K for the year
1978 relating to the Series B ended December 31,
Bonds. 1978
4-4 Supplemental Indenture to the Quarterly Report on A
General and Refunding Mortgage for the quarter
Indenture dated as of October 1, ended Septem-
1979, relating to the Series C ber 30, 1979
Bonds.
4.10 Supplemental Indenture to the 33-9232 4.16
General and Refunding Mortgage
Indenture dated as of December
1, 1986, relating to the Series
I Bonds.
F-13
-51-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
4.14 Indenture, dated as of Augst 1, 33-29626 4.1
1989, between the Company and
The Ban of New York, Trustee,
relating to the Medium-Term
Notes.
4.15 First Supplemental Indenture, Current Report on 4.15
dated as of August 7, 1989, Form
relating to the Medium-Term 8-K dated
Notes, Series A, and August 16, 1989
supplementing the Indenture
relating to the Medium-Term
Notes.
4.15.1 Second Supplemental Indenture, Current Report on 4.1
dated as of January 10, 1992, Form
relating to the Medium-Term 8-K dated
Notes, Series B, and January 28, 1992
supplementing the Indenture
relating to the Medium-Term
Notes.
4.17 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form
Indenture, dated as of 8-K dated September
September 15, 1991, relating to 17, 1991
the Series N Bonds.
4.18 Supplemental Indenture to the Current Report on 1.2
General and Refunding Mortgage Form
Indenture, dated as of 8-K dated
December 1, 1991, relating to December 10, 1991
the Series O Bonds.
F-13
-52-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
4.19 Supplemental Indenture to the Annual Report on 4.19
General and Refunding Mortgage Form
Indenture, dated as of 10-K for year ended
December 15, 1992, relating to December 31, 1992
the Series P Bonds.
4.20 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form
Indenture, dated as of February 8-K dated March 1,
15, 1993, relating to the Series 1993
Q Bonds.
4.21 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form
Indenture, dated as of May 20, 8-K dated May 20,
1993, relating to the Series R 1993
Bonds.
4.22 Supplemental Indenture to the Current Report on 4.1
General and Refunding Mortgage Form
Indenture, dated as of August 8-K dated November
15, 1993, relating to the Series 30, 1993
S Bonds.
4.23 Supplemental Indenture to the Current Report on 4.2
General and Refunding Mortgage Form
Indenture, dated as of November 8-K dated November
1, 1993, relating to the Series 30, 1993
T Bonds.
EXHIBIT 9: VOTING TRUST AGREEMENT
Not applicable.
EXHIBIT 10: MATERIAL CONTRACTS
F-13
-53-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
Incorporated herein by
reference:
10-1 Agreement dated April 1, 1968 2-30554 4.27
between the Company and
Northeast Utilities Service
Company relating to services in
connection with the New England
Power Pool and NEPEX.
10-2 Form of New England Power Pool 2-55385 4.8
Agreement dated as of
September 1, 1971 as amended to
November 1, 1975.
10-3 Agreement setting forth 2-50198 5.10
Supplemental NEPOOL
Understandings dated as of
April 2, 1973.
10-4 Sponsor Agreement dated as of 2-32333 4.27
August 1, 1968 among the Company
and the other sponsors of
Vermont Yankee Nuclear Power
Corporation.
10-5 Power Contract dated as of 2-32333 4.28
February 1, 1968 between the
Company and Vermont Yankee
Nuclear Power Corporation.
10-6 Amendment to Exhibit 10.5 dated 2-46612 13-21
as of June 1, 1972.
F-13
-54-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-7 Capital Funds Agreement dated as 2-32333 4.29
of February 1, 1968 between the
Company and Vermont Yankee
Nuclear Power Corporation.
10-8 Amendment to Exhibit 10.7 dated 70-4611 B-3
as of March 12, 1968.
10-9 Stockholder Agreement dated as 2-32333 4.30
of May 20, 1968 among the
Company and the other
stockholders of Maine Yankee
Atomic Power Company.
10-10 Power Contract dated as of May 2-32333 4.31
20, 1968 between the Company and
Maine Yankee Atomic Power
Company.
10-10.1 Amendment No. 1 to Exhibit 10-10 Annual Report on 10-1.1
dated as of March 1, 1984. Form
10-K for the year
ended December 31,
1985 of Maine
Yankee Atomic Power
company (File No.
1-6554)
F-13
-55-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-10.2 Amendment No. 2 to Exhibit 10-10 Annual Report on 10-1.2
dated as of January 1, 1984. Form
10-K for the year
ended December 31,
1985 of Maine
Yankee Atomic Power
Company (File No.
1-6554)
10-10.3 Amendment No. 3 to Exhibit 10-10 Annual Report on 10-1.3
dated as of October 1, 1984. Form
10-K for the year
ended December 31,
1985 of Maine
Yankee Atomic Power
Company (File No.
1-6554)
10-10.4 Additional Power Contract Annual Report on 10-1.4
between the Company and Maine Form
Yankee Atomic Power Company 10-K for the year
dated February 1, 1984. ended December 31,
1985 of Maine
Yankee Atomic Power
Company (File No.
1-6554)
10-11 Capital Funds Agreement dated as 2-32333 4.32
of May 20, 1968 between the
Company and Maine Yankee Atomic
Power Company.
F-13
-56-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-11.1 Amendment No. 1 to Exhibit 10-11 Annual Report on 10-2.1
dated as of August 1, 1985. Form
10-K for the year
ended December 31,
1985 of Maine
Yankee Atomic Power
Company (File No.
1-6554)
10-25 Agreement dated as f May 1, 1973 2-48966 13-57
for Joint Ownership,
Construction and Operation of
New Hampshire Nuclear Units
among Public Service Company of
New Hampshire and certain other
utilities, including the
Company.
10-42 Twentieth Amendment to Exhibit Annual Report on 10-42
10-25 dated as of September 19, Form
1986. 10-K for the year
ended December 31,
1986
10-46 Participation Agreement, dated 2-35073 4.23.1
June 20, 1969 among Maine
Electric Power Company, Inc.,
the Company and certain other
utilities.
F-13
-57-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-47 Power Purchase and Transmission 2-35073 4.23.2
Agreement dated August 1, 1969,
among Maine Electric Power
Company, Inc., the Company and
certain other utilities,
relating to purchase and
transmission of power from The
New Brunswick Electric Power
Commission.
10-48 Agreement amending Exhibit 10-47 2-37987 4.41
dated June 24, 1970.
10-49 Agreement supplementing Exhibit 2-51545 5.7.4
10-47 dated December 1, 1971.
10-50 Assignment Agreement dated March 2-51545 5.7.5
20, 1972, between Maine Electric
Power Company, Inc., and the New
Brunswick Electric Power
Commission.
10-51 Capital Funds Agreement dated as 2-24123 4.19.1
of September 1, 1964 among
Connecticut Yankee Atomic Power
Company, the Company and certain
other utilities.
10-52 Power Contract dated as of 2-24123 4.19.2
July 1, 1964 among Connecticut
Yankee Atomic Power Company, the
Company and certain other
utilities.
F-13
-58-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-53 Stockholder Agreement dated as 2-24123 4.19.3
of July 1, 1964 among the
stockholders of Connecticut
Yankee Atomic Power Company,
including the Company.
10-54 Connecticut Yankee Transmission 2-24123 4.19.4
Agreement dated as of October 1,
1964 among the stockholders of
Connecticut Yankee Atomic Power
Company, including the Company.
10-55 Agreements with Yankee Atomic
Electric Company each dated
June 30, 1959, as follows:
10-55.1 Stock Agreement. 2-15553 4.17.1
10-55.2 Power Contract. 2-15553 4.17.2
10.55.3 Research Agreement. 2-15553 4.17.3
10-56 Transmission Agreement with 2-15553 4.18
Cambridge Electric Light Company
and other sponsoring
stockholders of Yankee Atomic
Electric Company.
10-57 Agreement for Joint Ownership, 2-52900 5.16
Construction and Operation of
Wyman Unit No. 4 dated
November 1, 1974 among the
Company and certain utilities.
F-13
-59-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-58 Amendment to Exhibit 10-57 dated 2-55458 5.48
as of June 30, 1975.
10-59 Amendment to Exhibit 10-57 dated 2-58251 5.19
as of August 16, 1976.
10-60 Amendment to Exhibit 10-57 dated 2-68184 5.31
as of December 31, 1978.
10-61 Transmission Agreement dated 2-54449 13-57
November 1, 1974 among the
Company and certain other
utilities, relating to Wyman
Unit No. 4.
10-62 Sharing Agreement--1979 2-50142 2.43
Connecticut Nuclear Unit dated
September 1, 1973 among the
Company and certain other
utilities, relating to Millstone
Unit No. 3.
10-63 Amendment to Exhibit 10-62 dated 2-51999 5.16
as of August 1, 1974, relating
to Millstone Unit
No. 3.
10-64 Agreement dated as of 2-58251 5.24
February 25, 1977 among the
Company, the Connecticut Light
and Power Company, the Hartford
Electric Light Company and
Western Massachusetts Electric
Company, relating to Millstone
Unit No. 3.
F-13
-60-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-70 Project Agreement dated Annual Report on 10-69
December 5, 1984 among the Form
Company, the Cities of Lewiston 10-K for the year
and Auburn, Maine and certain ended December 31,
other parties, relating to 1984
development of hydro-electric
plant.
10-73 Trust Indenture dated as of 2-60786 5.27
June 1, 1977 between the Town of
Yarmouth and Casco Bank & Trust
Company, as trustee, relating to
the Town of Yarmouth's 6 3/4%
Pollution Control Revenue Bonds
(Central Maine Power Company,
1977 Series A).
10-74 Installment Sale Agreement dated 2-60786 5.28
as of June 1, 1977 between the
Town of Yarmouth and the
Company.
10-75 Agreements Relating to
$11,000,000 Floating/Fixed Rate
Pollution Control Revenue
Refunding Bonds:
10-75.1 Bond Purchase Agreement dated as Quarterly Report on 28.3
of May 1, 1984. Form 10-Q for the
quarter ended
June 30, 1984
F-13
-61-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-75.2 Loan Agreement dated as of Quarterly Report on 28.4
May 1, 1984. Form 10-Q for the
quarter ended
June 30, 1984
10-76 Agreements Relating to
$8,500,000 Floating/Fixed Rate
Pollution Control Revenue Bonds:
10-76.1 Bond Purchase Agreement dated Annual Report on 10-77.1
December 28, 1984. Form
10-K for year ended
December 31, 1984
10-76.2 Loan Agreement dated as of Annual Report on 10-77.2
December 1, 1984. Form
10-K for year ended
December 31, 1984
10-77.1 Indenture of Trust dated as of Annual Report on 10-1.4
March 14, 1988 between Maine Form
Yankee Atomic Power Company and 10-K for year ended
Maine National Bank relating to December 31, 1987,
decommissioning trust funds. of Maine Yankee
Atomic Power
Company (1-6554)
10-77.1(a) Amended and Restated Indenture Annual Report on 10-6.1
of Trust dated as of January 1, Form
1993 between Maine Yankee Atomic 10-K for year ended
Power Company and The Bank of December 31, 1992,
New York relating to of Maine Yankee
decommissioning trust funds. Atomic Power
Company (1-6554)
F-13
-62-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-77.2 Indenture of Trust dated as of Annual Report on 10-7
October 16, 1985 between the Form
Company and Norstar Bank of 10-K for year ended
Maine relating to the spent fuel December 31, 1985,
disposal funds. of Maine Yankee
Atomic Power
Company (1-6554)
10-78 Form of Agreement of Purchase Annual Report on 0.79
and Sale dated February 19, 1986 Form
between the Company and Eastern 10-K for the year
Utilities Associates, relating ended December 31,
to the sale of the Company's 1985
Seabrook Project interest.
10-79 Addendum to Agreement of Quarterly Report on 2.1
Purchase and Sale dated June 23, Form 10-Q for the
1986, among the Company, Eastern quarter ending
Utilities Associates and EUA June 30, 1986
Power Corporation, amending
Exhibit 10-78.
10-80 Agreement, dated as of Quarterly Report on 2.1
October 29, 1986, between the Form 10-Q for the
Company and EUA Power quarter ended
Corporation, relating to the September 30, 1986
sale of the Company's interest
in the Seabrook Project.
F-13
-63-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-81 Credit Agreement, dated as of Quarterly Report on 2.2
October 15, 1986, among the Form 10-Q for the
Company, various banks and quarter ended
Continental Illinois National September 30, 1986
Bank and Trust Company of
Chicago, as agent, establishing
the terms of a $40 million
unsecured credit facility.
10-86 Labor Agreement dated as of Annual Report on 10.86
May 1, 1989 between the Company Form
(Northern, Western and Southern 10-K for the year
Division) and Local 1837 of the ended December 31,
International Brotherhood of 1989
Electrical Workers.
10-86.1 Agreement dated as of Annual Report on 10.86.1
November 25, 1991 extending Form
Labor Contract. 10-K for year ended
December 31, 1991
10-89 1987 Executive Incentive Plan, Annual Report on 10.89
as amended January 20, 1993.* Form
10-K for year ended
December 31, 1992
10-90 Deferred Compensation Plan for Annual Report on 10.90
Non-Employee Directors, as Form
amended and restated effective 10-K for year ended
February 1, 1992.* December 31, 1992
10-91 Retirement Plan for Outside Annual Report on 10.91
Directors, as amended and Form
restated effective April 24, 10-K for year ended
1991.* December 31, 1992
F-13
-64-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
10-92 Employment Agreement between the Filed herewith
Company and Matthew Hunter dated
as of October 20, 1993.*
10-93 Central Maine Power Company Filed herewith
Long-Term Incentive Plan.*
10-94 Central Maine Power Company Filed herewith
Supplemental Executive
Retirement Plan, as amended and
restated effective January 1,
1993.*
*Management contract or compensatory plan or arrangement required to be filed
in response to Item 14(c) of
Form 10-K.
EXHIBIT 11: STATEMENT RE COMPUTATION OF PER
SHARE EARNINGS
Not Applicable.
EXHIBIT 12: STATEMENTS RE COMPUTATION OF
RATIOS
Not Applicable.
EXHIBIT 13: ANNUAL REPORT TO SECURITY
HOLDERS, FORM 10-Q OR QUARTERLY
REPORT TO SECURITY HOLDERS
F-13
-65-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
13-1 Management's Discussion and Filed herewith
Analysis of Financial Condition
and REsults of Operations and
Financial Statements from Annual
Report of Central Maine Power
Company to Shareholders for the
year ended December 31, 1993
(pages 1-49).
EXHIBIT 16: LETTER RE CHANGE IN CERTIFYING Current Report on 16.1
ACCOUNTANT Form 8-K/A dated
January 13, 1994
EXHIBIT 18: LETTER RE CHANGE IN ACCOUNTING
PRINCIPLES
Not Applicable.
EXHIBIT 21: SUBSIDIARIES OF THE REGISTRANT
List of subsidiaries of Annual Report on 22.1
registrant. Form
10-K for year ended
December 31, 1992
EXHIBIT 22: PUBLISHED REPORT CONCERNING
MATTERS SUBMITTED TO VOTE OF
SECURITY HOLDERS
Not Applicable.
EXHIBIT 23: CONSENTS OF EXPERTS AND COUNSEL
F-13
-66-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
23-1 Consent of Arthur Andersen & Co. Filed herewith at
to the incorporation by page F-3
reference of their reports
included or incorporated by
reference herein in the
Company's Registration
Statements (File Number 33-
36679, 33-39826, 33-44754, 33-
44944 and 33-51611).
EXHIBIT 24: POWER OF ATTORNEY
Not Applicable.
EXHIBIT 27: FINANCIAL DATA SCHEDULE
Not Applicable.
EXHIBIT 28: INFORMATION FROM REPORTS
FURNISHED TO STATE INSURANCE
REGULATORY AUTHORITIES
Not Applicable.
EXHIBIT 99: ADDITIONAL EXHIBITS
To be filed under cover of a
Form 10-K/A amendment of this
Form 10-K within 180 days after
December 31, 1993, pursuant to
Rule 15d-21 under the Securities
Exchange Act of 1934:
F-13
-67-
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
99-1 and -2 Information, financial
statements and exhibits required
by Form 11-K with respect to
certain employee savings plans
maintained by the Company.
F-13
-68-