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"THIS DOCUMENT IS A COPY OF THE FORM 10-K FILED ON JUNE 28, 2002 PURSUANT TO
A RULE 201 TEMPORARY HARDSHIP EXEMPTION."
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended March 31, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Registrant; State of
Incorporation or I.R.S. Employer
Commission Organization; Address; Identification
File Number and Telephone Number Number
- ------------ ---------------------- ---------------
1-6564 NEW ENGLAND POWER COMPANY 04-1663070
(A Massachusetts corporation)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
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.
(X) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
Aggregate market value
of the voting stock Number of shares of
held by nonaffiliates common stock outstanding
of the registrant at of the registrant at
June 17, 2002 June 17, 2002
---------------------- -------------------------
New England $1,105,675 3,619,896($20 par value)
Power Company
Documents Incorporated by Reference
Part of Form 10-K into which
Description document is incorporated
- ---------------------------------- ----------------------------
Portions of New England Power Company Parts I and II
Annual Report to Stockholders for the
year ended March 31, 2002 as set
forth in Parts I and II
-v-
TABLE OF CONTENTS
PAGE
GLOSSARY OF TERMS.......................................... iii
FORWARD LOOKING INFORMATION................................ v
PART I
ITEM 1. BUSINESS............................................ 6
THE COMPANY................................................. 6
Merger with National Grid ............................. 7
Acquisition of EUA..................................... 7
Merger with Niagara Mohawk................... 7
Employees.............................................. 7
Accounting Implications............................... 7
Overview of Financial Results......................... 7
TRANSMISSION AND NUCLEAR GENERATION BUSINESS................... 8
Description of Business............................. 8
Regulatory Environment...................................... 8
FERC Proceedings...................................... 9
Operating Revenues.................................. 11
Electric Utility Properties............................ 13
Transmission Properties............................. 13
Interconnection with Quebec ........................ 13
Nuclear Units..................................... 15
Purchased Power Transfer Agreement................ 22
Regulatory and Environmental Matters................... 23
Regulation.......................................... 23
Environmental Requirements.......................... 23
Construction and Financing............................. 24
EXECUTIVE OFFICERS.......................................... 26
ITEM 2. PROPERTIES.......................................... 27
ITEM 3. LEGAL PROCEEDINGS................................... 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS................................................ 29
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS........................ 29
ITEM 6. SELECTED FINANCIAL DATA............................. 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................... 29
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................ 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......... 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................... 29
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT............................................. 29
ITEM 11. EXECUTIVE COMPENSATION............................ 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS......... 41
PART IV
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.... 42
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.................. 43
INDEX TO FINANCIAL STATEMENTS............................... 54
GLOSSARY OF TERMS
Term Meaning
---- -------
ADS or ADR National Grid Group plc American
Depositary Shares traded on the New York
Stock Exchange
AFDC allowance for funds used during
construction
Connecticut Yankee Connecticut Yankee Atomic Power Company
CTC contract termination charges
DOE U.S. Department of Energy
EUA Eastern Utilities Associates
Electricity Delivery Mass. Electric, Narragansett, Granite
Companies State, and Nantucket
FERC Federal Energy Regulatory Commission
Granite State Granite State Electric Company
Interconnection transmission interconnection between
participating New England utilities
and Hydro-Quebec
ISO Independent System Operator
kWh kilowatthour
Maine Yankee Maine Yankee Atomic Power Company
Mass. Electric Massachusetts Electric Company
Mass. Hydro New England Hydro-Transmission Electric
Company, Inc.
MDTE Massachusetts Department of
Telecommunications and Energy
Montaup Montaup Electric Company
MW megawatts
Nantucket Nantucket Electric Company
Narragansett The Narragansett Electric Company
National Grid National Grid Group plc
National Grid USA Successor to NEES and a wholly-owned
subsidiary of National Grid Group plc
N.E. Hydro Finance New England Hydro Finance Company, Inc.
NEES New England Electric System (renamed National Grid USA)
NEET New England Electric Transmission
Corporation
NEP New England Power Company
NEPOOL New England Power Pool
N.H. Hydro New England Hydro-Transmission
Corporation
NHNDFC New Hampshire Nuclear Decommissioning
Finance Committee
NRC Nuclear Regulatory Commission
PG and E Gen PG and E Generating, formerly USGen New
England, Inc.
RTO Regional Transmission Organization
GLOSSARY OF TERMS
Term Meaning
---- -------
Seabrook 1 Seabrook Nuclear Generating Station
Unit 1
SEC Securities and Exchange Commission
Service Company National Grid USA Service Company, Inc.
spent nuclear fuel high level radioactive waste
stranded costs the amounts by which prudently
incurred costs to supply
customers electricity under a
regulated industry structure
exceed market prices under an
unregulated industry structure
Vermont Yankee Vermont Yankee Nuclear Power
Corporation
VPSB Vermont Public Service Board
Yankee Atomic Yankee Atomic Electric Company
Yankee Companies Yankee Atomic, Vermont Yankee,
Maine Yankee, and Connecticut
Yankee
1935 Act Public Utility Holding Company Act
of 1935, as amended
FORWARD LOOKING INFORMATION
This report and other presentations made by New England Power Company (NEP or the Company) contain forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Throughout this report,
forward looking statements can be identified by the words or phrases "will likely result", "are expected to", "will continue",
"is anticipated", "estimated", "projected", "believe", "hopes", or similar expressions. Although NEP believes that, in making
any such statements, its expectations are based on reasonable assumptions, any such statements may be influenced by factors
that could cause actual outcomes and results to be materially different from those projected. Important factors that could
cause actual results to differ materially from those in the forward looking statements include, but are not limited to:
(a) the impact of industry restructuring, as more fully set out under Regulatory Environment below;
(b) the impact of general economic changes in New England;
(c) federal and state regulatory developments and changes in law which may have a substantial adverse impact on the
value of NEP's assets;
(d) federal regulatory developments concerning regional transmission organizations, as more fully set out under
Regulatory Environment and Transmission Properties below;
(e) changes in accounting rules and interpretations which may have an
adverse impact on NEP's statements of financial position and reported earnings;
(f) timing and adequacy of rate relief;
(g) adverse changes in electric load;
(h) climatic changes or unexpected changes in weather patterns; and
(i) operation and decommissioning costs associated with nuclear generating facilities, as set out under Nuclear Units
below, page 15.
-11-
PART I
ITEM 1. BUSINESS
THE COMPANY
New England Power Company (NEP or the Company), a wholly owned subsidiary of National Grid USA (formerly New England Electric
System (NEES)), is a Massachusetts corporation qualified to do business in Massachusetts, New Hampshire, Rhode Island, Connecticut,
Maine, and Vermont. NEP is subject, for certain purposes, to the jurisdiction of the regulatory commissions of all these states
(except Connecticut), the Securities and Exchange Commission, under the Public Utility Holding Company Act of 1935 (the 1935 Act),
the Federal Energy Regulatory Commission, and the Nuclear Regulatory Commission. NEP's business is primarily the transmission of
electric energy in wholesale quantities to other electric utilities, principally its distribution affiliates, National Grid USA's
four electricity delivery companies, Massachusetts Electric Company (Mass. Electric), The Narragansett Electric Company
(Narragansett), Granite State Electric Company (Granite State), and Nantucket Electric Company (Nantucket), (together, the
Electricity Delivery Companies). NEP's transmission facilities are part of National Grid USA's transmission operations, which are
represented under the name National Grid Transmission USA. Holders of common stock and 6% Cumulative Preferred Stock have general
voting rights. National Grid USA owns 99.60% of the voting stock of NEP and the NEP 6% preferred holders own 0.40%. NEP owns voting
stock in the amounts indicated of the following companies:
% Voting
Securities
State of Type of Owned by
Name of Company Organization Business NEP
--------------- ------------ -------- ---------
Connecticut Yankee Atomic Conn. Ownership of 19.5%
Power Company Permanently
Shutdown
Nuclear Unit (a)
Maine Yankee Atomic Maine Ownership of 24.0%
Power Company Permanently
Shutdown
Nuclear Unit (a)
Vermont Yankee Nuclear Vermont Ownership of 23.9%
Power Corporation Operating
Nuclear Unit (a)
Yankee Atomic Electric Company Mass. Ownership of 34.5%
Permanently
Shutdown
Nuclear Unit (a)
New England Hydro Transmission NH Electric 3.2%
Corporation Transmission
New England Hydro-Transmission Mass Electric 3.2%
Electric Co., Inc. Transmission
(a) For information on NEP's ownership interest in nuclear generating units, see Nuclear Units, page 15.
The facilities of NEP, together with the Electricity Delivery Companies constitute an electrical transmission and distribution
system that is directly interconnected with other utilities in New England and New York State, and indirectly interconnected with
utilities in Canada. See TRANSMISSION AND NUCLEAR GENERATION BUSINESS, page 8.
Merger with National Grid
On March 22, 2000, the merger of NEES and National Grid Group plc (National Grid) was completed, with NEES (renamed National
Grid USA) becoming a wholly owned subsidiary of National Grid. NEP maintained its existing name and remained a wholly owned
subsidiary of National Grid USA.
Acquisition of EUA
The acquisition of Eastern Utilities Associates (EUA) by National Grid USA was completed on April 19, 2000. On May 1, 2000,
Montaup Electric Company (Montaup), formerly a subsidiary of EUA, was merged into the Company.
Merger with Niagara Mohawk
On January 31, 2002, National Grid acquired Niagara Mohawk Holdings, Inc., (NiMo) for a value of approximately $3.0 billion in
cash and National Grid's American Depositary Shares (ADSs). NiMo provides electric service to approximately 1,500,000 electric
customers in areas of eastern, central, northern, and western New York State and sells, distributes, and transports natural gas to
approximately 540,000 gas customers in areas of central, northern, and eastern New York State.
EMPLOYEES
At March 31, 2002, NEP had 72 employees, of which 13 are members of labor organizations. Collective bargaining agreements
with the Brotherhood of Utility Workers of New England, Inc., the International Brotherhood of Electrical Workers, and the Utility
Workers Union of America, AFL-CIO expire in May, 2004.
ACCOUNTING IMPLICATIONS
For a full discussion of Accounting Implications see the Regulatory Environment and Accounting Implications section of the
2002 NEP Annual Report, incorporated herein by reference.
OVERVIEW OF FINANCIAL RESULTS
For a full discussion of Overview of Financial Results see the Overview of Financial Results section of the 2002 NEP Annual
Report, incorporated herein by reference.
TRANSMISSION AND NUCLEAR GENERATION BUSINESS
Description of Business
On September 1, 1998, NEP completed the sale of substantially all of its nonnuclear generating business to PG and E Generating
(PG and E Gen) an indirect wholly-owned subsidiary of PG and E Corporation. NEP's primary business is now the transmission of electric energy
to other electric utilities, principally its distribution affiliates, the Electricity Delivery Companies. NEP owns a system of
transmission lines and substations. NEP continues to own a minority interest in a joint owned nuclear generating unit as well as
minority equity interests in four nuclear generating companies (see Nuclear Units, page 15).
Regulatory Environment
Prior to divesting substantially all of its nonnuclear generation business in 1998, the Company was the wholesale supplier
of the electric energy requirements to its retail distribution affiliates as well as unaffiliated customers. The Company's
all-requirements contracts with its affiliated distribution companies, as well as with some unaffiliated customers, were generally
terminated pursuant to settlement agreements and tariff provisions in 1998. However, the Company remained obligated to provide
transition power supply service to new customer load in Rhode Island at the standard offer price, but did not have a regulatory
agreement that necessarily allowed full recovery of the costs of such standard offer power. Consequently, the Company was at risk for
the difference between the actual cost of serving this load and the revenue received from this obligation. For the year ended March
31, 2002, the impact on the Company's financial position was immaterial. Effective December 1, 2001, a third party assumed the
responsibility for providing transitional standard offer power service in Rhode Island, and the Company's obligation terminated.
Under settlement agreements, the Company is permitted to recover costs associated with its former generating investments and
related contractual commitments that were not recovered through the sale of those investments (stranded costs). These costs are
recovered from the Company's wholesale customers with whom it has settlement agreements through contract termination charges (CTC)
that the affiliated wholesale customers recover through delivery charges to distribution customers. The recovery of the Company's
stranded costs (including Montaup Electric Company's (Montaup), a former Eastern Utilities Associates (EUA) subsidiary) is divided
into several categories. The Company's unrecovered costs associated with generating plants (nuclear and nonnuclear) and most
regulatory assets will be fully recovered through the CTC by the end of 2009 and earn a return on equity (ROE) averaging 9.7 percent.
The Company's obligation related to the above-market cost of purchased power contracts and nuclear decommissioning costs are
recovered through the CTC as such costs are actually incurred. As the CTC rate declines, the Company, under certain of the settlement
agreements, earns incentives based on successful mitigation of its stranded costs. These incentives supplement the Company's ROE.
Until such time as the Company divests its operating nuclear interests, the Company will share with customers, through the CTC, 80
percent of the revenues and operating costs related to the units, with shareholders retaining the balance.
In conjunction with the divestiture, the Company transferred to the buyer of its nonnuclear generating business (the buyer)
its entitlement to power procured under several long-term contracts in exchange for fixed monthly payments by the Company. Similar to
the Company, Montaup also transferred its purchased power obligations as part of the divestiture and in return agreed to make fixed
monthly payments. These fixed monthly payments by the Company, inclusive of Montaup's share, average approximately $11 million per
month through December 2009 toward the above-market cost of those contracts. The liability relating to purchased power obligations,
which is also reflected in regulatory assets, represents the net present value of these fixed monthly payments. At March 31, 2002,
the net present value is approximately $659 million. For certain contracts which have been formally assigned to the buyer, the
Company has made lump sum payments equivalent to the present value of the monthly fixed payment obligations of those contracts
(approximately $453 million), which were separate from the $659 million figure referred to above.
FERC Proceedings
In general, the regulatory structure and regulations which relate to the Company's business are in a period of major change
and uncertainty. Decisions being made by the Federal Energy Regulatory Commission (FERC) and the Independent System Operator-New
England (ISO New England) will affect how the Company does business and whether it can enter new endeavors. The Company is currently
unable to determine whether these proceedings will have a material impact on its financial position or results of operations.
The FERC has been reviewing the development of regional transmission organizations (RTOs). The FERC has indicated that it
wants RTOs to have large geographic scope. In July and August, 2001, the FERC ordered National Grid USA and other New England
parties and participants of the New York Independent System Operator (ISO), and the Pennsylvania-New Jersey-Maryland (PJM) ISO to
participate in a mediation process to develop a proposal for a larger RTO. The FERC has not yet ruled on the mediation report issued
in September 2001. Pending the ruling on the mediation report, the transmission owners have been working toward a hybrid RTO
structure in which an independent transmission company would manage the transmission grid for the RTO and an independent market
administrator would manage power markets for the RTO. However, it is not clear what sort of RTO structure will ultimately result from
these negotiations.
In fact, based on a January 29, 2002 filing by the New York
and New England ISOs to form their own RTO, even the geographic scope of the RTO in which the Company will participate is still an
open question.
In late 2001 and early 2002, the FERC convened an advanced rulemaking proceeding to enable transmission owners, such as the
Company, and generators to establish standardized procedures and agreements concerning the way generators would interconnect with the
transmission grid. On April 24, 2002, FERC issued proposed rules very favorable to generators and unfavorable, and, the Company
believes, at times unworkable, for transmission owners. The Company has submitted comments seeking significant changes in the proposed
rules. FERC is expected to issue final rules later this year.
In 2001, the FERC began an advanced rulemaking procedure to address Standard Market Design regarding the buying and selling
of power. In a December 2001 order, FERC requested that all industry segments try to agree on a single standards setting organization
that would establish national standard business practices for the wholesale electric industry. FERC has also solicited comments on a
wide range of issues, including: transmission pricing, pricing for electric energy and capacity, transmission planning, generation
dispatch, RTO governance, market monitoring, long term generation adequacy (including installed capacity or "ICAP"), and resolution
of "seams" - or conflicting practices or charges that inhibit inter-regional energy transactions. All of these either directly or
indirectly affect the Company's business. It is anticipated that FERC will launch a formal notice of proposed rulemaking proceeding
this summer.
NEPOOL and ISO NE have a separate standard market design initiative which is proceeding in parallel to the ferc initiative. It is
expected that either New England Power Pool (NEPOOL) or ISO-NE will file a proposal to conform the procedures by which energy is
bought and sold in New England to those of PJM with FERC this summer for implementation by December 2002 or early 2003.
To the extent the Company wishes to pursue opportunities to manage or to be a member of an independent transmission company or an
RTO, with the opportunity to propose financial incentives to deliver greater value for customers and shareholders, the FERC rulings
in the standard market design proceeding and other proceedings may have an impact on the ability to do so.
In June 2001, the FERC issued an order relating to NEPOOL's proposed congestion management and multi-settlement systems.
In the June Order, the FERC found that "energy uplift" costs (which had been about $9 million per month for NEPOOL in 2000) should be
allocated on the basis of reliance on the energy markets administered by the ISO New England. This would have the effect of relieving
parties that procure power under bilateral contracts (such as the Company) from paying energy uplift charges. However, the NEPOOL
Participants Committee and ISO New England submitted a filing in July 2001 that the Company believed did not comport with the FERC's
order. The Company protested the
filing, and received a favorable order from FERC on February 15, 2002. Nevertheless, the NEPOOL Participants Committee and ISO New
England submitted another filing on March 18, 2002 that the Company believes does not comport with the FERC's orders, and the Company
has again filed another protest.
On September 27, 2001, FERC initiated a notice of proposed rulemaking regarding affiliate standards of conduct in both the
electric and gas industries. In its proposed rules, FERC proposed a broad definition of "energy affiliate", which would include its
affiliate National Grid USA Service Company, Inc. (Service Company) as well as the Company's electric distribution company
affiliates. The proposed rules would impose significant restrictions on the ability of the Company to interact with such "energy
affiliates." If not modified, the proposed rules could require significant reorganization for the Company and possibly duplication
of support functions that the Company depends on the Service Company to provide.
As previously reported, there has been litigation regarding a FERC order to increase the ICAP deficiency charge to $8.75 per
kilowatt-month (kW-month) instead of the rate proposed by ISO New England of $0.17 per kW-month. In June 2001, after significant
litigation and a remand from the US Court of Appeals for the First Circuit, ISO New England made a Compliance Filing with the FERC
proposing a compromise ICAP regime, including an ICAP deficiency charge of $4.87 per kW-month. On September 28, 2001, the FERC issued
an order refusing to apply retroactively the $8.75 per kW-month deficiency charge for the period January to June 2000. On November
20, 2001, the FERC issued an order on rehearing of the August order requiring ISO New England to establish a prospective ICAP regime
(i.e., one under which utility ICAP purchase requirements are known in advance) in lieu of a retrospective requirement with a cure
period. It is unclear what system will replace the ICAP regime in the future. The issue of the appropriate ICAP deficiency charge
for the period since July 2000, is currently back before the US Court of Appeals for the First Circuit for resolution. FERC is also
now addressing complaints by power marketers about how ICAP should have been charged for the period January to July 2000. Both of
these proceedings will likely affect the Company's ICAP exposure.
OPERATING REVENUES
The following is the detail of kWh sales and deliveries, electric sales and other operating revenue, and operating income for
each of the years ended March 31, 2002 and 2001, the quarter ended March 31, 2000 and the year ended December 31, 1999.
Sales and Deliveries of Electricity
(in thousands of kWh)
------------------------------------
Year Ended
Year Ended Year Ended Quarter Ended December 31,
March 31, 2002 March 31, 2001 March 31, 2000 1999
-------------- -------------- ------------ ----
Total Sales
and Deliveries 2,535,502 4,518,054, 901,723 2,970,433
=========== ========= ======== ==========
Operating Revenues
(in thousands of dollars)
------------------------------------
Year Ended
Year Ended Year Ended Quarter Ended December 31,
March 31, 2002 March 31, 2001 March 31,2000 1999
------------ -------------- ---- ----
Total Electric 103,187 168,057 32,048 90,639
Sales Revenue
Other Operating 457,231 488,215 102,515 505,702
Revenue
-------- --------- --------- -------
Total Operating
Revenue $560,418 $656,272 $134,564 $596,341
======== ========= ======== ========
Operating Income $ 86,354 $ 87,715 $16,685 $78,563
======= ========= ========= =========
The decrease in total sales and deliveries and total electric sales revenue is primarily attributable to reduced kWh sales due to
the sale of Millstone 3 nuclear generating unit and the effect of a refueling outage at the Vermont Yankee nuclear power plant during
the quarter ended June 30, 2001.
ELECTRIC UTILITY PROPERTIES
Transmission Properties
NEP's integrated system consists of approximately 2,800 circuit miles of transmission lines, and approximately 119
substations.
The properties of National Grid USA subsidiaries also include the ownership interests of New England Electric Transmission
Corporation (NEET),New England Hydro-Transmission Electric Company, Inc. (Mass. Hydro), and New England Hydro-Transmission
Corporation (N.H.Hydro) in the Hydro-Quebec Interconnection, and an integrated system of transmission lines, substations, and
distribution facilities.
NEP is a participant in ISO New England's Power Pool (NEPOOL). The NEPOOL Agreement provides for coordination of the
operation of the generation and transmission facilities of its members. The NEPOOL Agreement further provides for New England-wide
central dispatch of generation by the Independent System Operator (ISO).
ISO-New England was activated on July 1, 1997 and has been operating the control area since that time. It operates under
contract with NEPOOL and is governed by an independent Board of Directors. NEPOOL's Open Access Transmission Tariff, which covers
service across pool transmission facilities is administered by ISO-New England.
NEPOOL's governance structure consists of five sectors: transmission owners, generators, suppliers, public power, and end
users. National Grid USA participates in the transmission owners sector. The Transmission sector accounts for 20 percent of the
NEPOOL vote and the National Grid USA Companies account for one-seventh of the Transmission sector vote. Under NEPOOL's revised governance structure, all National Grid USA companies are considered
"related persons" and therefore receive only a single vote.
For information on Regional Transmission Organizations, see Regulatory Environment, page 8.
Interconnection with Quebec
NEET owns and operates a portion of an international transmission interconnection between the electric systems of Hydro-Quebec
and New England. Mass. Hydro and N.H. Hydro own and operate facilities in connection with an expanded second phase of this
interconnection. New England Hydro Finance Company, Inc. (N.E. Hydro Finance) provides the debt financing to Mass. Hydro and N.H.
Hydro for the capital costs of the interconnection. National Grid USA owns 100% of the voting stock of NEET and 57.47% of the voting
stock of both Mass. Hydro and N.H. Hydro. Mass. Hydro and N.H. Hydro each own 50% of the voting securities of N.E. Hydro Finance.
NEET, Mass. Hydro, and N.H. Hydro own and operate, on behalf of NEPOOL participants in the project, a 450 kV direct current
transmission line and related terminals to interconnect the New England and Quebec transmission systems (the Interconnection). The
transfer capability of the Interconnection is currently rated at 2,000 megawatts (MW). Operating limits implemented by adjacent
Power Pools covering New York, New Jersey, Pennsylvania, and Maryland often restrict the effective transfer capability to levels of
1,200 MW to 1,400 MW.
The Interconnection has two phases. NEP's participation in both is approximately 22 percent. NEP and the other participants
have entered into support agreements that end in 2020. Under the support agreements, NEP has agreed to guarantee its share of debt
financing for the second phase. At March 31, 2002, NEP had guaranteed approximately $20 million of project debt, including $4
million originally guaranteed by Montaup, with terms through 2015. NEP's rights and obligations under its support agreements
(excluding the Montaup obligations) were transferred to the purchaser of its nonnuclear generation. NEP remains an obligor under the support agreements, (excluding the
Montaup obligations) until 2020. Costs associated with these support agreements are recoverable through the Company's transmission
rates.
Nuclear Units
General
NEP has interests in five nuclear units. Three of the units have been permanently shut down. The remaining two are currently
operating.
NEP is a stockholder of Yankee Atomic Electric Company (Yankee Atomic), Vermont Yankee Nuclear Power Corporation (Vermont
Yankee), Maine Yankee Atomic Power Company (Maine Yankee), and Connecticut Yankee Atomic Power Company (Connecticut Yankee). Each of
these companies (collectively referred to as the "Yankee Companies") owns a single nuclear generating unit. The stockholders of three
of the Yankee Companies (Vermont Yankee, Maine Yankee, and Connecticut Yankee) have agreed, subject to regulatory approval, to
provide capital requirements in the same proportion as their ownership percentages of the particular Yankee Company. NEP also has
power contracts with each Yankee Company that require NEP to pay an amount equal to its share of total fixed and operating costs
(including decommissioning costs) of the plant plus a return on equity. Yankee Atomic, Connecticut Yankee, and Maine Yankee have
permanently ceased operations. NEP purchases the output of the Vermont Yankee plant in the same percentage as its stock ownership,
less small entitlements taken by municipal utilities.
In addition, NEP is a joint owner of the Seabrook Nuclear Generating Station Unit 1 (Seabrook 1) in New Hampshire. Seabrook 1
is operated by subsidiaries of Northeast Utilities (NU). NEP pays its proportionate share of costs and receives its proportionate
share of output from Seabrook 1. Listed below is certain information on each nuclear plant in which NEP has an ownership interest.
Under restructuring settlement agreements approved by regulators in Massachusetts, New Hampshire and Rhode Island, NEP has
agreed to attempt to divest its interest in the two operating nuclear generating units.
Nuclear Units Permanently Shut Down
Three of the Yankee Nuclear Power Companies in which the Company has a minority interest own nuclear generating units that
have been permanently shut down. These three units are as follows:
Future
The Company's Estimated
Investment Billings to
as of 3/31/02 Date the Company
Unit % $(millions) Retired $(millions)
- ----------------------------------------------------------------------------------------------------------
Yankee Atomic 34.5 0.4 Feb 1992 0
Connecticut Yankee 19.5 13 Dec 1996 44
Maine Yankee 24.0 15 Aug 1997 123
Yankee Atomic has discontinued further billings to the Company subject to a final reconciliation of costs once decommissioning
at the plant has been completed. For Maine Yankee and Connecticut Yankee, the Company has recorded a liability and a regulatory asset
reflecting the estimated future billings from the companies.
Under the provisions of the Company's industry restructuring settlement agreements approved by state and federal regulators in 1998,
the Company recovers all costs, including shutdown costs, that the FERC allows these Yankee companies to bill to the Company.
A Maine statute provides that if both Maine Yankee and its decommissioning trust fund have insufficient assets to pay for the plant
decommissioning, the owners of Maine Yankee are jointly and severally liable for the shortfall.
Maine Yankee had previously hired Stone and Webster, Inc. (S and W), an engineering, construction, and consulting company, as the principal
contractor to decommission the unit. In May 2000, Maine Yankee terminated its long-term contract with S and W and negotiated an
arrangement with S and W to continue work through June 2000. In June 2000, S and W filed for Chapter 11 bankruptcy protection. Subsequently,
Maine Yankee decided to self-manage the unit's decommissioning process. In June 2000, Federal Insurance Company (Federal) filed a
complaint in S and W's bankruptcy proceedings, subsequently removed to US District Court in Maine, which alleged that Maine Yankee
improperly terminated its contract with S and W and that Federal should be excused from a $39 million performance bond and a $12 million
payment bond to Maine Yankee.
In December 2001, Maine Yankee and Federal reached a settlement. Pursuant to the settlement agreement, Federal paid Maine Yankee $44
million in January 2002. Maine Yankee deposited the payment in its decommissioning trust fund. With regard to Maine Yankee's August
2000 damage claim against S and W in the bankruptcy proceeding for $78.2 million (later decreased to $21 million to reflect, among
other things, the recovery of $44 million from Federal), on May 30, 2002, the bankruptcy judge held that Maine Yankee had proved
damages of $20.8 million and estimated its claim at that amount. However, the amount Maine Yankee actually recovers will depend on
the magnitude of assets in the bankrupt estate available to pay creditors' claims.
At Maine Yankee and Yankee Atomic, the contractor responsible for the movement of spent fuel from wet storage to dry storage has
incurred delays. Connecticut Yankee has experienced delays in its decommissioning process due to zoning and other issues, most of
which are now resolved.
Due to rate recovery mechanisms, the S and W claims and decommissioning delays are not expected to materially affect the Company's
earnings.
Operating Nuclear Units
The Company has minority interests in two operating nuclear generating units that the Company is engaged in efforts to divest:
Vermont Yankee and Seabrook 1. In addition, the Company sold its 16.2 percent interest in Millstone 3 to Dominion Resources, Inc.
(Dominion) on March 31, 2001. Until such time as the Company divests its operating nuclear interests, 80 percent of the revenues and
reasonable operating costs related to the units will be allocated to the customers through CTCs, with shareholders being allocated
the balance. Net proceeds attributed to the divestiture of the units will be allocated to customers through CTC.
Vermont Yankee
The following table summarizes the Company's interest in the Vermont Yankee Nuclear Power Corporation as of March 31, 2002:
The Company's Interest
(millions of dollars)
---------------------------------------------------
Net Decommissioning
Equity Plant Estimated Fund License
Ownership Equity Assets Decommissioning Balance Expiration
Interest (%) Investments Cost (in 2001 $)
------------- -----------------------------------------------------------------------------------
23.9 $12 $34 $107 $63 2012
In December 2001, Vermont Yankee reached a settlement with four equity owners, other than the Company, agreeing to repurchase the
Vermont Yankee shares held by these minority shareholders for $230 per share. The repurchase was consummated in January 2002 for
approximately $5.4 million. As a result of the repurchase, the Company's ownership interest in Vermont Yankee increased from 22.5
percent to 23.9 percent.
On August 15, 2001, Vermont Yankee announced that it had reached an Agreement (the Agreement) to sell the Vermont Yankee nuclear
power plant to Entergy Corporation (Entergy) for $180 million. The Company's portion of the sale price would be approximately
$43 million ($35 million for the plant and related assets and $8 million for nuclear fuel) based on its 23.9 percent ownership interest.
The plant's decommissioning trust fund would be transferred to Entergy, and Entergy would assume decommissioning liability for the plant.
As part of the transaction, Vermont Yankee owners, including the Company, would purchase power from the plant through 2012. Net proceeds
from the sale would be credited to the Company's customers through the CTC. The sale of the plant is contingent upon the receipt of
regulatory approvals by the Securities and Exchange Commission, under the 1935 Act, the FERC, the Nuclear Regulatory Commission
(NRC), the Vermont Public Service Board (VPSB), and other state regulatory commissions with jurisdiction over other equity owners of
Vermont Yankee. The FERC, the NRC and the VPSB have approved the sale. On June 21, 2002, Entergy filed a motion seeking reconsideration
by the VPSB of a condition in its order approving the sale. The condition rejected a provision int he Agreement entitling Entergy to keep
50 percent of any property remaining in the decommissioning trust fund upon completion of decommissiong. The Agreement with Entergy
terminates if the sale is not completed by July 31, 2002.
The Company previously resold 11.8 MW of its Vermont Yankee entitlement to a number of municipal and cooperative utilities (Secondary
Purchasers) located in Massachusetts under a "Vermont Yankee Secondary Purchaser Agreement" which had a 30-year term expiring on
November 30, 2002. On May 16, 2002, the FERC approved an early termination of the Secondary Purchasers contract effective February
28, 2002. Pursuant to the settlement, the Secondary Purchasers agreed not to oppose the plant sale in any regulatory proceeding.
The Citizens of Brattleboro, and eight other towns in Vermont, cast non binding votes at town meetings in March 2002 on whether Vermont
Yankee should be shut down. In the nine towns that voted on the issue, a narrow majority chose to keep the plant open.
Seabrook 1
The following table summarizes the Company's interest in the Seabrook 1 nuclear generating unit as of March 31, 2002.
The Company's share of (millions of dollars)
--------------------------------------------
The Company's Net Estimated Decommissioning
Ownership Plant Assets Decommissioning Fund License
Interest (%) Cost(in 2001$) Balance* Expiration
- -----------------------------------------------------------------------------------------------------------------------
10 $17** $55 $19 2026
*Certain additional amounts are anticipated to be available through tax deductions.
**Represents post-December 1995 spending including nuclear fuel.
On April 15, 2002, eight of the 11 joint owners of Seabrook, including the Company, announced that they had reached an agreement to
sell an 88.2 percent interest in Seabrook to FPL Energy Seabrook LLC (FPL Seabrook), a subsidiary of FPL Group, for $836.6 million.
The Company's portion of the gross sales proceeds would be approximately $93.5 million. Pursuant to the terms of the Company's
restructuring settlements, 98 percent of the Company's proceeds, net of expenses related to the sale, post-1995 capital additions and
inventories, will be returned to National Grid customers in Massachusetts, Rhode Island, and New Hampshire. FPL Seabrook will assume
responsibility for ultimate decommissioning of Seabrook and will receive the Seabrook decommissioning funds, including a top-off
payment by the Company and other sellers. Approvals for the transaction are needed from federal and state regulatory agencies,
including public utility commissions in the sellers' states, the NRC, the New Hampshire Nuclear Decommissioning Financing Committee
(NHNDFC), the FERC, and the Department of Justice or the Federal Trade Commission. The plant owners are targeting to complete the
sale by the end of 2002.
Millstone 3
In November 1999, the Company entered into an agreement with Northeast Utilities (NU) to settle claims made by the Company regarding
the operation of Millstone 3. Among other things, the settlement provided for NU to include the Company's 16.2 percent interest in
Millstone 3 in an auction of NU's share of the unit. Upon the closing of the sale, the Company was to receive a fixed amount,
regardless of the actual sale price.
In August 2000, Dominion agreed to purchase the Millstone units, including the Company's interest in Millstone 3, for $1.3 billion.
In March 2001, the sale was completed. In accordance with the prior settlement agreement, the Company was paid approximately $27.9
million, including $25 million for the plant, and the Company paid approximately $5.8 million to increase the decommissioning trust
fund.
Regulatory authorities from Rhode Island, New Hampshire and Massachusetts have expressed an intent to challenge the reasonableness of
the settlement agreement as the Company would have received approximately $140 million of sale proceeds without the agreement. The
dispute will be resolved by FERC. The Company believes it has a strong argument that it acted prudently since the amount received
under the settlement agreement was the highest sale price for a nuclear unit at the time the agreement was reached.
Nuclear Decommissioning
The Company is liable for its share of decommissioning costs for Seabrook 1 and all of the Yankees. Decommissioning costs include not
only estimated costs to decontaminate the units as required by the NRC, but also costs to dismantle the units. Such costs reflect
estimates of total decommissioning costs approved by the FERC.
The Company records decommissioning costs on its books consistent with its rate recovery. The Company is recovering its share of
projected decommissioning costs for Seabrook 1 through depreciation expense. In addition, the Company is paying its portion of
projected decommissioning costs for Connecticut Yankee and Maine Yankee. The Company has completed its projected decommissioning
obligation for Yankee Atomic, subject to a final reconciliation of decommissioning costs.
In New Hampshire, legislation was enacted in 1998 that makes owners of Seabrook 1, in which the Company owns a 10 percent interest,
proportional guarantors for decommissioning costs in the event that an owner without a franchise service territory fails to fund its
share of decommissioning costs. Currently, there is a single owner of an approximate 15 percent share of Seabrook 1 that is subject
to the legislation. The impact of this legislation to the Company is not considered material to its financial position or results of
operation.
On July 6, 2001, legislation was enacted to modify New Hampshire's current decommissioning law. This new legislation, initiated and
supported by Seabrook's joint owners, including the Company, was designed to protect customers from future decommissioning risks. The
legislation reduces the standard for non-radiological decommissioning at the site and will allow the buyer of the plant to retain any
decommissioning funds in excess of those contributed by customers of the present owners.
The NHNDFC has authority to implement the new decommissioning law. Under the new law, the NHNDFC is charged with assuring that the
buyer of Seabrook will have adequate funding to complete decommissioning in the event the plant is prematurely shutdown.
On November 5, 2001, the NHNDFC issued an order substantially approving a settlement establishing proposed terms for funding
assurance. The terms of the settlement included a cash "top-off" payment to the decommissioning fund of approximately $57 million at
the time of the sale. In addition, the buyer of the plant would be required to accelerate its annual decommissioning fund
contributions through 2006 and provide a funding assurance package of approximately $125 million that would decline over time as
additional annual contributions are made to the fund.
The Nuclear Waste Policy Act of 1982 establishes that the federal government (through the Department of Energy (DOE)) is responsible
for the disposal of spent nuclear fuel. The federal government requires the Company to pay a fee based on its share of the net
generation from the Seabrook 1 nuclear generating unit. Prior to 1998, the Company recovered this fee through its fuel clause. Under
settlement agreements, substantially all of these costs are recovered through CTCs. Similar costs are billed to the Company by
Vermont Yankee and are also recovered from customers through CTCs. In 1997, ruling on a lawsuit brought against the DOE by numerous
utilities and state regulatory commissions, the U.S. Court of Appeals for the District of Columbia held that the DOE was obligated to
begin disposing of utilities' spent nuclear fuel by January 1998. The DOE failed to meet this deadline and is not expected to have a
temporary or permanent repository for spent nuclear fuel before 2010, at the earliest. Many utilities, including Yankee Atomic,
Connecticut Yankee, and Maine Yankee filed claims for money damages in the U.S. Court of Federal Claims for the costs associated with
the DOE's failure to begin to take fuel in 1998. The court held that the DOE is liable for such failure in October 1998. The Yankee
Companies have filed a further action against the DOE to determine the level of damages. As an interim measure until the DOE meets
its contractual obligations to dispose of their spent fuel, those companies are proceeding with construction of independent spent
fuel storage installations on the plant sites.
Each nuclear unit in which the Company has an ownership interest has established a decommissioning trust fund or escrow fund into
which payments are being made to meet the projected costs of decommissioning. There is no assurance that decommissioning costs
actually incurred by Seabrook 1 or the Yankees will not substantially exceed the estimated amounts. For example, decommissioning cost
estimates assume the availability of permanent repositories for both low-level and high-level nuclear waste; those repositories do
not currently exist. The temporary low-level repository located in Barnwell, South Carolina may become unavailable, which could
increase the cost of decommissioning the Yankee Atomic, Connecticut Yankee, and Maine Yankee plants. If either of the operating units
were shut down prior to the end of its operating license, the funds collected for decommissioning to that point would be
insufficient. Under settlement agreements, the Company will recover decommissioning costs through CTCs.
Nuclear Insurance
The Price-Anderson Act limits the amount of liability claims that would have to be paid in the event of a single incident at a
nuclear plant to $9.5 billion (based upon 106 licensed reactors). The maximum amount of commercially available insurance coverage to
pay such claims is $200 million. The remaining $9.3 billion would be provided by an assessment of up to $88.1 million per incident
levied on each of the participating nuclear units in the United States, subject to a maximum assessment of $10 million per incident
per nuclear unit in any year. The maximum assessment, which was most recently adjusted in 1998, is adjusted for inflation at least
every five years. The Company's current interest in Vermont Yankee and Seabrook 1 would subject the Company to a $29.8 million
maximum assessment per incident. The Company's payment of any such assessment would be limited to a maximum of $3.4 million per year.
As a result of the permanent cessation of power operation of the Yankee Atomic, Connecticut Yankee, and Maine Yankee plants, these
units have received from the NRC an exemption from participating in the secondary financial protection system under the
Price-Anderson Act. However, these plants must continue to maintain $100 million of commercially available nuclear liability insurance
coverage.
Each of the nuclear units in which the Company has either an ownership or purchased power interest also carries nuclear property
insurance to cover the costs of property damage, decontamination, and premature decommissioning resulting from a nuclear incident.
These policies may require additional premium assessments if losses relating to nuclear incidents at units covered by this insurance
occur in a prior six-year period. The Company's maximum potential exposure for these assessments, either directly or indirectly, is
approximately $6.0 million with respect to the current policy period.
Nuclear Fuel Supply
The utilities responsible for the fuel supply for these operating nuclear units are not experiencing any difficulties in
obtaining commitments for the supply of each element of the nuclear fuel cycle.
Purchased Power Transfer Agreement
As part of the sale of NEP's nonnuclear generating business to PG and E Gen on September 1, 1998, NEP signed a purchased power
transfer agreement through which PG and E Gen purchased NEP's entitlement to approximately 1,100 MW of power procured under long-term
contracts. For more information, see the Regulatory Environment and Accounting Implications section of the 2002 NEP Annual Report.
Wyman 4
NEP is a 9 percent owner of the Wyman 4 generating unit, a 600 MW oil fired generating unit located in Yarmouth, ME.
REGULATORY AND ENVIRONMENTAL MATTERS
Regulation
Numerous activities of NEP are subject to regulation by various federal agencies. Under the 1935 Act, many transactions of
NEP are subject to the jurisdiction of the SEC. With the intensifying competitive pressures within the electric utility industry,
there has been increasing debate about modifying or repealing the 1935 Act. Under the Federal Power Act, NEP is subject to the
jurisdiction of the FERC with respect to rates and accounting. In addition, the NRC has broad jurisdiction over nuclear units and
federal environmental agencies have broad jurisdiction over environmental matters.
For more information, see the Regulatory Environment and Accounting Implications section of the 2002 NEP Annual Report,
Nuclear Units, page 15 and Environmental Requirements, below.
Environmental Requirements
Existing Operations
NEP is subject to federal, state, and local environmental regulation of, among other things, wetlands and flood plains; air
and water quality; storage, transportation, and disposal of hazardous wastes and substances; underground storage tanks; and
land-use. Upon completion of the sale of substantially all of NEES' nonnuclear generating business to PG and E Gen, PG and E Gen assumed
responsibility for environmental conditions at the Sellers' nonnuclear generating stations. See the Regulatory Environment and
Accounting Implications section of the 2002 NEP Annual Report.
ISO 14001
In June 2001, the Company announced that its transmission business achieved ISO (International Organization of
Standardization) 14001 registration of its Environmental Management System, the first linear electric utility system in the country
to achieve such designation. This also marks the first ISO 14001 registration of a high-voltage direct current (HVDC) transmission
system in the U.S. The registration certifies that all activities, products, and services required to operate, maintain, and
construct transmission lines, rights-of-way, HVDC converter terminals, and vegetation management activities meet the requirements of
the internationally accepted ISO 14001 environmental standard.
Siting and Construction Activities for New Transmission
Facilities
All New England states require, in certain circumstances, regulatory approval for site selection or construction of major
transmission facilities. Connecticut, Maine, Massachusetts, New Hampshire, and Rhode Island also have programs of coastal zone
management that might restrict construction of electrical facilities in, or potentially affecting, coastal areas. These New England
states have environmental laws which require project proponents to prepare reports of the environmental impact of certain proposed
actions for review by various agencies.
Environmental Protection Facilities Expenditures
NEP estimates that capital expenditures for environmental protection facilities in 2002 and 2003 will not be material.
Hazardous Substances
The electric utility industry typically utilizes and/or generates in its operations a range of potentially hazardous
products and by-products. For more information regarding sites for which NEP has been named as a potentially responsible party,
other sites, a settlement agreement covering rate recovery of certain remediation costs, and reserves, see Note E of the Notes to the
Financial Statements of the NEP 2002 Annual Report.
Nuclear
The NRC, along with other federal and state agencies, has extensive regulations pertaining to environmental aspects of nuclear
reactors. Safety aspects of nuclear reactors, including design controls and inspection programs to mitigate any possibility of
nuclear accidents and to reduce any damages therefrom, are also subject to NRC regulation. See Nuclear Units, page 15.
CONSTRUCTION AND FINANCING
NEP's estimated construction expenditures for the fiscal years ended March 2003 through 2005 are $40 million, $55 million,
$50 million, respectively.
NEP conducts a continuing review of its construction and financing programs. These programs and the estimates shown above are
subject to revision based upon changes in assumptions as to load growth, rates of inflation, receipt of adequate and timely rate
relief, the availability and timing of regulatory approvals, new environmental and legal or regulatory requirements, total costs of
major projects, technological changes, and the availability and costs of external sources of capital.
Financing
All of NEP's construction expenditures during the fiscal years ended March 2003 through March 2005 are expected to be financed
by internally generated funds.
NEP's general practice has been to finance construction expenditures in excess of internally generated funds initially by
issuing unsecured short-term debt. This short-term debt is subsequently reduced through sales of long-term debt securities and
through capital contributions from its parent.
The ability of NEP to issue short-term debt is limited by the need to obtain regulatory approval from the SEC under the 1935
Act and from the NHPUC. Regulatory approval has been granted at March 31, 2002 for short-term debt of up to $375 million. At March 31, 2002,
NEP had no outstanding short-term debt. At March 31, 2002, NEP had lines of credit and standby bond facilities for $456 million. To the
extent bonds ever had to be repurchased under the standby bond facility, they would not be considered short-term debt.
NEP and certain affiliates, with regulatory approval, operate a money pool to more effectively utilize cash resources and to
reduce outside short-term borrowings. Short-term borrowing needs are met first by available funds of the money pool participants.
Borrowing companies pay interest at a rate designed to approximate the cost of outside short-term borrowings. Companies which invest
in the pool share the interest earned on a basis proportionate to their average monthly investment in the money pool. Funds may be
withdrawn from or repaid to the pool at any time without prior notice. At March 31, 2002, NEP had no moneypool borrowings
outstanding.
EXECUTIVE OFFICERS
The Treasurer is elected by the stockholders to hold office until the next annual meeting of stockholders and until the
successor is duly chosen and qualified. The other executive officers are elected by the Board of Directors to hold office subject to
the pleasure of the directors and until the first meeting of directors after the next annual meeting of stockholders and until their
successors are duly chosen and qualified. Certain officers of NEP are, or at various times in the past have been, officers and/or
directors of the affiliated companies with which NEP has entered into contracts and had other business relations. The list below is
as of March 31, 2002.
Peter G. Flynn - Age: 48 - Elected President in 1999 - National Grid USA Vice President since 2000 - Vice President and
Director of Rates for the Service Company from 1996 to 1999.
Michael E. Jesanis - Age: 45 - Vice President since 1998 - National Grid USA Executive Vice President since January 2001 -
NEES Senior Vice President and Chief Financial Officer from 1998 - 2000 - NEES Vice President from 1997 to 1998 - NEES
Treasurer from 1992 to 1998 - Elected Vice President of Narragansett in 1998 - Treasurer of Mass. Electric and NEP from 1992
to 1998.
Marc F. Mahoney - Age: 48- Elected Vice President in 2000 - Vice President, Field Operations for EUA from 1997 to 2000 -
Director, Transmission and Distribution for EUA from 1995 to 1997.
John F. Malley - Age: 53 - Vice President since 1992.
Lawrence J. Reilly - Age: 46 - Vice President since January 2001 - National Grid USA Senior Vice President since 2000 -
National Grid USA Secretary and General Counsel since January 2001 - President of Mass. Electric, Narragansett, Nantucket, and
Granite State from 1996 to 2000.
James S. Robinson - Age: 48 - Treasurer since January 31, 2002 - Vice President since 1998 - Director of Nuclear Investments
from 1997 to 1998 - Manager, Wholesale Business Administration from 1993 to 1997.
Masheed H. Rosenqvist - Age: 47 - Vice President since 1998 - Manager, Transmission Tariffs and Contracts for NEP or Service
Company since 1997.
Herb Schrayshuen - Age: 47 - Elected Vice President effective January 31, 2002 - Director of Electric Assets from 1999 to 2002 -
Director of Energy Transactions from 1998 to 1999 - Director of Power Transactions from 1996 to 1997.
Terry L. Schwennesen - Age: 46 - Elected Vice President in 2000 - Associate General Counsel of Mass. Electric from 1999 to
2000 - Director of Rates for Service Company from 1998 to 1999 - Manager of Rates during 1998 - Manager of Wholesale Rates
until 1998.
John G. Cochrane - Age: 44 Vice President effective January 31, 2002 - Treasurer from 1998 to January 31, 2002 - National Grid
USA Chief Financial Officer since January 2001 - NEES Vice President since 1999 - NEES and Service Company Treasurer from 1998
to 2002 - Vice President of the Service Company since 1993 - Treasurer of Mass. Electric Company from 1998 to 2000 - Treasurer
of Narragansett from 1993 to 2000.
Edward A. Capomacchio - Age: 55 - Elected Controller in 2001 - Controller of Mass. Electric Company, Narragansett, Granite
State and Nantucket Electric, since 2001 - Vice President and Controller of Service Company since February 2002 -
Assistant Controller of Service Company from 1998 to 2002 - Controller of Niagara Mohawk Power Corporation since February 2002
- Director of Internal Audit for Service Company from 1994 - 1998.
ITEM 2. PROPERTIES
See ITEM 1. Business - Transmission Properties, Page 13 and Nuclear Units, page 15.
ITEM 3. LEGAL PROCEEDINGS
See Item 1. Business - TRANSMISSION AND NUCLEAR GENERATION BUSINESS - Regulatory Environment, Page 8 and ELECTRIC UTILITY
PROPERTIES - Nuclear Units, Page 15.
Norwood
From 1983 until 1998, the Company was the wholesale power supplier for the Town of Norwood, Massachusetts (Norwood). In
April 1998, Norwood began taking power from another supplier. Pursuant to a tariff amendment approved by the FERC in May 1998, the
Company has been assessing Norwood a contract termination charge. Through March 2002, the charges assessed Norwood amount to
approximately $43 million, all of which remain unpaid. The Company filed a collection action in Massachusetts Superior Court
(Superior Court). The Superior Court deferred action until the various appeals described below were decided. On March 14, 2001, the
Superior Court ordered Norwood to pay the Company approximately $27 million including interest, and affirmed Norwood's obligation to
make monthly contract termination charge payments to the Company of approximately $600,000, plus interest. Norwood appealed the
order on April 11, 2001. Pending the appeal, Norwood entered into a consent order to establish a segregated account for the benefit
of the Company in the amount of $14 million and to make regular additions to the account.
Separately, Norwood filed suit in Federal District Court (District Court) in April 1997 alleging that the divestiture of the
Company's nonnuclear generation business (the divestiture) violated the terms of the 1983 power contract and contravened antitrust
laws. The District Court dismissed the lawsuit. On appeal, the First Circuit Court of Appeals (First Circuit) also consolidated
appeals Norwood made from FERC's orders approving the divestiture,
the wholesale rate settlement between the Company and its distribution affiliates, and the contract termination charge tariff
amendment. In February 2000, the First Circuit dismissed Norwood's appeal from FERC orders and dismissed its appeal from all but one
of Norwood's District Court claims, which relates to alleged generation market power. Norwood filed several petitions for review.
Finally, in October 2000, the US Supreme Court refused Norwood's petitions to review the First Circuit decisions.
In the District Court action, in April 2000, the Company renewed its motion to dismiss Norwood's remaining claim. Norwood
amended its complaint to reassert a request for rescission of the divestiture, which it had earlier dropped. The Company's motion to
dismiss on the ground that it is not a proper party was denied in July 2001. Still pending is a motion to dismiss the action on the
ground of issue preclusion filed by co-defendant PG and E and joined in by the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the shareholders for vote during the fourth quarter of the fiscal year.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
The information required by this item is not applicable as the common stock of NEP is held solely by National Grid USA.
Information pertaining to payment of dividends and restrictions on payment of dividends is incorporated herein by reference to the
NEP 2002 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to Selected Financial Information, Note K of the NEP
2002 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information required by this item is incorporated herein by reference to the Financial Review section of the NEP 2002
Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated herein by reference to the Risk Management section of the NEP 2002
Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to the financial statements and Notes to Financial
Statements in the NEP 2002 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the directors of NEP, their ages, and a brief account of their business experience during the past five years
appear below. Information required by this item for Executive Officers is provided under the caption EXECUTIVE OFFICERS in Part I of
this report.
Directors are elected to hold office until the next annual meeting of stockholders or special meeting held in lieu thereof and
until their respective successors are chosen and qualified.
The list below is as of March 31, 2002.
L. Joseph Callan - Age: 54 - Elected Director in 2000 - Consultant since 1998 - Several positions at the NRC, including
Regional Administrator and Executive Director of Operations, from 1979 to 1998.
John G. Cochrane* - Elected Director in 2002 - Directorships of National Grid USA Companies: EUA Bioten, Inc., EUA Energy
Investment Corporation, Granite State Electric Company, Massachusetts Electric Company, Nantucket Electric Company, The
Narragansett Electric Company, National Grid Transmission Services Corporation, National Grid USA, National Grid USA Service
Company, Inc., NEES Communications, Inc., NEES Energy, Inc., New England Electric Transmission Corporation, New England Energy
Incorporated, New England Hydro Finance Company, Inc., New England Hydro-Transmission Corporation, New England
Hydro-Transmission Electric Company, Inc., New England Power Company, NEWHC, Inc., Niagara Mohawk Energy, Inc., Niagara Mohawk
Holdings, Inc., NM Properties, Inc., NM Uranium, Opinac North America, Inc., and Wayfinder Group, Inc.
Peter G. Flynn* - Elected Director in 1999.
Michael E. Jesanis* - Elected Director in 2000 -
Directorships of National Grid USA Companies: Granite State Electric Company, Massachusetts Electric Company, Nantucket
Electric Company, National Grid Transmission Services Corporation, National Grid USA, National Grid USA Service Company, Inc.,
NEES Communications, Inc., New England Power Company, The Narragansett Electric Company, Niagara Mohawk Holdings, Inc.,
Niagara Mohawk Power Corporation, Niagara Mohawk Energy, Inc., and Opinac North America, Inc.
Robert G. Powderly - Age: 55 - Elected Director in 2000 - Executive Vice President of EUA until 2000 - Directorships of
National Grid USA Companies: National Grid USA, National Grid USA Service Company, Inc., and New England Power Company.
Lawrence J. Reilly* - Director since 2001. Directorships of National Grid USA companies: EUA Bioten, Inc., EUA Energy
Investment Corporation, Granite State Electric Company, Massachusetts Electric Company, Nantucket Electric Company, National
Grid Transmission Services Corporation, National Grid USA, National Grid USA Service Company, Inc., NEES Communications, Inc.,
NEES Energy, Inc., NEES Telecommunications Corp., New England Electric Transmission Corporation, New England Energy
Incorporated, New England Hydro Finance Company, Inc., New England Hydro-Transmission Corporation, New England Hydro-
Transmission Electric Company, Inc., New England Power Company, NEWHC, Inc., New England Wholesale Electric Company, The
Narragansett Electric Company, Wayfinder Group, Inc, Niagara Mohawk Energy, Inc., Niagara Mohawk Holdings, Inc., NM
Properties, Inc., NM Receivables Corp.II, NM Uranium, and Opinac North America, Inc.
Terry L. Schwewnnesen* - Elected Director in 2000.
Richard P. Sergel - Age: 53 - Director since 1998. Director of National Grid Group plc. Directorships of National Grid USA
companies: EUA Bioten, Inc., EUA Energy Investment Corporation, Granite State Electric Company, Massachusetts Electric
Company, Nantucket Electric Company, National Grid Transmission Services Corporation, National Grid USA, National Grid USA
Service Company, Inc., NEES Communications, Inc., NEES Energy, Inc., NEES Telecommunications Corp., New England Energy
Incorporated, New England Electric Transmission Corporation, New England Hydro Finance Company, Inc., New England
Hydro-Transmission Corporation, New England Hydro-Transmission Electric Company, Inc., New England Power Company, NEWHC, Inc.,
The Narragansett Electric Company, Wayfinder Group, Inc., Niagara Mohawk Energy, Inc., Niagara Mohawk Holdings, Inc., and
Opinac North America, Inc.
Philip R. Sharp - Age: 59 - Elected Director in 2000 - Lecturer, Harvard University John F. Kennedy School of Government since
1995 - US Congressman from 1975 to 1995. Other directorships: Cinergy Corporation and Proton Energy Co.
*Please refer to the material supplied under the caption EXECUTIVE OFFICERS in Part I of this report for other information
regarding these directors.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires NEP's officers and directors, and persons who own more than 10
percent of a registered class of NEP's equity securities, to file reports on Forms 3, 4, and 5 of share ownership and changes in
share ownership with the SEC and the New York Stock Exchange and to furnish NEP with copies of all Section 16(a) forms they file.
Based solely on NEP's review of the copies of such forms received by it, or written representations from certain reporting
persons that such forms were not required for those persons, NEP believes that, during the year ended March 31, 2002, all filing
requirements applicable to its officers, directors, and 10 percent beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table gives information with respect to all compensation (whether paid directly by NEP or billed to it as hourly
charges) for services in all capacities for NEP for the fiscal years ending March 31, 2002 and 2001, the first calendar quarter of
2000, and calendar year 1999 to or for the benefit of the Chief Executive Officer and the four other most highly compensated
executive officers.
NEP
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation (b) Compensation
-------------------------- -------------------
Other Restricted Securities
Name and Annual Share Under All Other
Principal Compensa- Awards(e) Lying LTIP Compensa-
Position Year Salary Bonus tion Options Payouts tion
Payoutstion
(a) ($) ($)(c) ($)(d) (#) ($) ($)(f)
- ---------- ---- ------- ------ ------ --------- ---------- -------- ----------
Peter G. 2002 180,630 109,353 19,313 0 16,825 0 452
Flynn 2001 177,211 30,270 12,175 0 0 0 432
President 2000(g) 40,997 107,889 2,050 0 36,473 118,615 90
1999 154,707 74,812 3,616 30,220 46,464 359
Marc F. 2002 106,485 64,675 12,637 0 9,702 0 165
Mahoney 2001 118,010 78,428 11,352 0 35,886 0 280
Vice
President
Masheed H. 2002 152,196 70,479 18,154 0 14,711 0 464
Rosenqvist 2001 146,112 17,892 18,452 0 0 0 539
Vice 2000(g) 32,745 63,412 1,637 0 16,023 54,855 103
President 1999 124,740 45,569 2,538 17,671 0 412
James S. 2002 139,633 66,344 18,221 12,061 0 221
Robinson 2001 130,137 39,862 18,649 0 0 0 204
Vice 2000(g) 31,811 62,966 1,625 0 14,458 53,878 42
President 1999 115,920 42,415 2,693 16,405 22,018 167
Terry L. 2002 140,004 71,711 17,933 0 13,432 0 201
Schwennesen 2001 124,951 15,992 16,787 0 0 0 168
Vice
President
(a) Certain officers of NEP are also officers of affiliate companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive compensation plan, the all-employee goals program, the variable
match of the incentive thrift plan, including related deferred compensation plan matches, special cash bonuses, and
unrestricted shares under the incentive share plan. See descriptions under Plan Summaries.
(d) Includes amounts reimbursed by NEP for the payment of taxes on certain noncash benefits and NEP contributions to the
incentive thrift plan that are not bonus contributions including related deferred compensation plan match. See description
under Plan Summaries.
(e) The incentive share awards for the named executives who were also NEES executives in 1999 were in the form of restricted
shares (with a five-year restriction) or deferred share equivalents, deferred for receipt for at least five years, at the
executive's option. As cash dividends were declared, the number of deferred share equivalents increased as if the dividends
were reinvested in shares.
(f) Includes NEP contributions to life insurance. See description under Plan Summaries. The life insurance contribution is
calculated based on the value of term life insurance for the named individuals. The premium costs for most of these policies
have been or will be recovered by NEP.
(g) Information is for the first calendar quarter of 2000 only.
Directors' Compensation
Members of the NEP Board who are employees of National Grid USA companies receive no fees for service on the Board. Non-
employee directors receive an annual retainer of $20,000 plus a meeting fee of $1,000 for each Board or committee meeting attended.
The Chairman of the Nuclear Committee, Mr. Callan, receives $1,500 for each committee meeting he chairs.
Retirement Plans
The following table shows estimated annual benefits payable to executive officers under the qualified pension plan and the
supplemental retirement plan, assuming retirement at age 65 in 2002.
PENSION TABLE
Five-Year
Average 15 Years 20 Years 25 Years 30 Years 35 Years
Compensa- of of of of of
tion Service Service Service Service Service
- --------- -------- -------- -------- -------- --------
$100,000 $27,858 $36,478 $44,847 $53,217 $58,586
$150,000 $43,858 $57,478 $70,722 $83,967 $92,711
$200,000 $59,858 $78,478 $96,597 $114,717 $126,836
$250,000 $75,858 $99,478 $122,472 $145,467 $160,961
$300,000 $91,858 $120,478 $148,347 $176,217 $195,086
$350,000 $107,858 $141,478 $174,222 $206,967 $229,211
$400,000 $123,858 $162,478 $200,097 $237,717 $263,336
$450,000 $139,858 $183,478 $225,972 $268,467 $297,461
$500,000 $155,858 $204,478 $251,847 $299,217 $331,586
For purposes of the retirement plans, Mr. Flynn, Mr. Mahoney, Ms. Rosenqvist, Mr. Robinson, and Ms. Schwennesen currently have
20, 26, 20, 14, and 17 credited years of service, respectively.
Benefits under the pension plans are computed using formulae based on percentages of highest average compensation computed
over five consecutive years. The compensation covered by the pension plan includes salary, bonus, and incentive share awards. The
benefits listed in the pension table are not subject to deduction for Social Security and are shown without any joint and survivor
benefits. If the participant elected at age 65 a 100 percent joint and survivor benefit with a spouse of the same age, the benefit
shown would be reduced by approximately 16 percent.
-35-
NEP contributes the full cost of post-retirement health benefits for senior executives.
PAYMENTS UPON A CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT
National Grid USA is a party to a Change in Control Agreement with Mr. Flynn dated November 1, 1998 which remains in effect
for 36 months beyond the month in which a (1) Change in Control of NEES (as defined in the Change in Control Agreement) or (2) Major
Transaction (as defined in the Change in Control Agreement) occurs. In accordance with the terms of the Change in Control Agreement,
if Mr. Flynn's employment is terminated without cause by the Company or for Good Reason (as defined in the Change in Control
Agreement) by Mr. Flynn within 36 months following the event described in clause (1) or (2) National Grid USA will provide Mr. Flynn
with the severance payments and benefits described below.
The shareholder approval of the merger agreement with National Grid Group plc (May 1999) constituted a Major Transaction and
the merger with National Grid Group plc on March 22, 2000 constituted a Change in Control. Accordingly, in the event Mr. Flynn's
employment is terminated without cause by the Company or for Good Reason by Mr. Flynn within 36 months following the month in which
the Major Transaction or Change in Control occurred, Mr. Flynn will be entitled to receive (in addition to any normal post-term
compensation and benefits as they become due), (1) in lieu of any other salary payments: a lump sum cash payment equal to two times
the sum of (a) the higher of (i) his annual base salary in effect at the time of termination and (ii) his annual base compensation in
effect immediately prior to the Change in Control or Major Transaction and (b) the higher of (i) the average of the annual bonuses
awarded him under the National Grid USA Companies' Incentive Compensation Plan and the Incentive Share Plan or successors of any such
plans (collectively, the Incentive Plans) for the three performance years preceding the year in which his Date of Termination (as
defined in the Change in Control Agreement) occurs or (ii) the average of the annual bonuses awarded him pursuant to the Incentive
Plans for the three performance years preceding the year in which the Change in Control or Major Transaction occurs; (2)in addition
to the retirement benefits to which Mr. Flynn is entitled, a lump sum cash payment equal to the excess of (a) the actuarial
equivalent of the retirement pension which he would have accrued under the terms of each Pension Plan (as defined in the Change in
Control Agreement) of National Grid USA (determined as if he (i) were fully vested thereunder and had accumulated 24 additional
months of service credit thereunder and (ii) had been credited under each Pension Plan during such 24 month period with compensation
at the higher of (A) his compensation during the 12 months immediately preceding his Date of Termination or (B) his compensation
during the 12 months immediately preceding the Change in Control or Major Transaction) over (b) the actuarial equivalent of the
retirement pension which he had actually accrued pursuant to the provisions of each pension plan as of the Date of Termination; (3)
the continuation of life, disability, accident and health insurance benefits substantially similar to those which he had received
prior to his Date of Termination for 24 months following the Date of Termination, reduced to the extent he receives such benefits or
such benefits are made available to him from a subsequent employer, without cost to him; (4) if he would have otherwise been entitled
to post-retirement health care or life insurance had his employment terminated at any time during the 24 months following his Date of
Termination such post-retirement health care and life insurance commencing on the later of (a) the date that such coverage would have
first become available to him and (b) the date that the benefits described in clause (3) above terminate; and (5) the reimbursement
of legal fees and expenses, if any, incurred by him in disputing in good faith, any issue relating to the termination of his
employment. Notwithstanding the above, the payments and benefits to be provided to Mr. Flynn will be reduced to the extent necessary
to avoid imposition of the Excise Tax (as defined in the Change in Control Agreement) pursuant to Section 4999 of the Code; provided
that such reduction would yield a greater result to Mr. Flynn than actual payment by Mr. Flynn of the Excise Tax.
Upon a Change in Control a participant in the deferred compensation plan has the option of receiving a full distribution of
the participant's cash and share accounts and the actuarial value of future benefits from the insurance related benefits under
a prior plan, all less 10 percent.
The National Grid USA Companies' bonus plans, including the Incentive Plans, the Incentive Thrift Plan, and the Goals Program,
provide for payments equal to the average of the bonuses for the three prior years in the event of a Change of Control. These
payments would be made in lieu of the regular bonuses for the year in which the Change in Control occurs. The Retirees Health and
Life Insurance Plan has provisions preventing changes in benefits adverse to the participants for three years following a Change in
Control.
PLAN SUMMARIES
A brief description of the various plans through which compensation and benefits have been provided to the named executive
officers is presented below to better enable shareholders to understand the information presented in the tables shown earlier. The
amounts of compensation and benefits provided to the named executive officers under the plans described below (and charged to NEP)
are presented in the Summary Compensation Table.
Goals Program
The Goals cash bonus program is is a broad-based, all-employee bonus program, which focuses employees on both the financial
performance of the Company and operational performance in key categories such as reliability, customer satisfaction and safety.
Payout levels vary depending on both financial performance and the number of goals achieved in each work location and function.
Assuming the minimum financial goal is met, and depending upon the number of other goals attained, an employee may earn a cash bonus
of between 0.8% and 4.5% of their eligible pay.
Incentive Thrift Plan
The Incentive Thrift Plan permits eligible employees to contribute up to 50% of their pay on a on a pre-tax basis into the
plan (subject to legal limits), and to receive a Company matching contribution of up to 5% of their base pay provided the employee
contributes at least 6% of her or his base pay into the plan. Under Internal Revenue Code rules, annual salary deferrals could not
exceed $10,500 and compensation taken into account for determining deferrals could not exceed $170,000. Consequently, matching
contributions were capped at $8,500. Matching contributions are shown under Other Annual Compensation in the Summary Compensation
Table.
Deferred Compensation Plan
The Deferred Compensation Plan offers executives the opportunity to defer bonuses and/or a portion of base pay until a later
elected date. The plan offers returns on deferrals based upon either the prime rate, the S and P 500 Index, or parent company
securities. In addition, the Company credits executives under the Deferred Compensation Plan with the amount of matching
contribution that the executive was unable to contribute under the Incentive Thrift Plan due to the $170,000 compensation limit,
determined by presuming a maximum executive deferral of $10,500. For the year ended March 31, 2002. the maximum make-up contribution
was approximately $250.
Life Insurance
Executives are offered life insurance funded by individual policies with death benefits of either two or three times the
participant's annual salary depending upon the executive's level. These policies are structured in a manner that the employing
company will recoup the premiums it has made into the policies at a later date. This program is under review due to a recently
released Internal Revenue Service Notice on the subject matter.
Incentive Compensation Plan
There are two bonus plans applicable to executives, the
Incentive Compensation Plan and the Incentive Share Plan. The former awards cash bonuses tied to the achievement of financial
results and which are closely aligned with the company's strategic objectives. Annual financial targets and individual goals are
established each year. In addition, depending upon the level of bonus awarded under the Incentive Compensation Plan, executives
receive an award in the form of parent company securities under the Incentive Share Plan. If no cash bonus is paid, no Incentive
Share Plan bonus is paid.
Financial Counseling
NEP pays for personal financial counseling for certain senior executives. As required by the Internal Revenue Service, a
portion of the value of services is reported as taxable income to the executive.
Stock Option Plan
For description, please see the Option Grant and Fiscal Year-End Option Values tables.
OPTION GRANTS IN LAST FISCAL YEAR
----------------------------------
Potential Realizable
Value At Assumed
Annual Rates of Stock
Individual Grants Price Appreciation
For Option Term
- -------------------------------------------------------------------------------------------------------
Percent Of
Number of Options
Securities Granted
Underlying To Exercise
Option Employees Of Base Expi-
Granted In Fiscal Price ration
(#) Year ($/Sh) Date 5%($) 10 % ($)
- -------------------------------------------------------------------------------------------------------
Peter G. Flynn 16,825 1.5% 8.32 June 2011 228,015 363,075
Marc F. Mahoney 9,702 0.8% 8.32 June 2011 131,483 209,365
Masheed Rosenqvist 14,711 1.3% 8.32 June 2011 199,369 317,462
James S. Robinson 12,061 1.1% 8.32 June 2011 163,452 260,270
Terry Schwennesen 13,432 1.2% 8.32 June 2011 182,036 289,862
In June 2001, National Grid granted the stock options shown above. The exercise price is 8.32 dollars (the mid market price
on the day before the grant of the options) per share of National Grid stock. The options are for National Grid shares listed on the
London Stock Exchange - not National Grid ADRs, each ADR being equal to 5 shares. The exercise price is 5.63 GBP and was converted
to dollars for this table using a conversion of 1 GBP to 1.47848 dollars. The options are not vested for 3 years and lapse after 10
years. The number of stock options granted was a multiple of base pay ranging from 0.5 to 1.5 times base pay. The options are
subject to a performance condition. The options are only exercisable if National Grid's total shareholder return (as defined) during
the three years of the performance period place it at least at the median of a stated comparison group. All of the options are
exercisable if National Grid ranks in the top quartile and a portion are exercisable if National Grid ranks between the median and
the top quartile. If the performance condition is not met after the three year period, the National Grid Group Renumeration Committee
may recalculate the performance condition on subsequent anniversaries of the performance period. The Committee may make adjustments
it considers appropriate to take account of any factor which it considers to be relevant (such as a capital reorganization of
National Grid or a member of the comparison group). The Committee may change the performance condition or use an alternative
methodology for calculating total shareholder return.
Messrs. Flynn, Mahoney, and Robinson were granted options that totaled 17,269, 14,071, and 12,152, respectively, however, only those
listed in the table above were allocated as compensation paid by NEP.
FISCAL YEAR-END OPTION VALUES
--------------------------------------
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at 3/31/02 ($)(a)(b)
Name 3/31/02 (#)(a)
- -------------------------------------------------------------------------------------------------
Peter G. Flynn (c) 54,724 $0
Marc F. Mahoney (c) 34,445 $0
Masheed H. Rosenqvist 30,734 $0
James S. Robinson (c) 26,410 $0
Terry L. Schwennesen 27,747 $0
(a) All of these options are unexercisable as the most senior grants do not vest until 2003.
(b) Since the fiscal year-end share price was lower than the exercise price for all issued options,
none of the options are in-the-money.
(c) Messrs. Flynn, Mahoney,and Robinson hold a total of 56,169,49,957, and 26,610 options, respectively,
however only those listed on the table above were allocated as compensation paid by
NEP.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
National Grid USA owns 99.6 percent of the voting securities of NEP.
The following table lists the holdings of National Grid American Depositary Receipts (ADRs) as of June 3, 2002 by the
directors, the executive officers named in the Summary Compensation Table, and all directors and executive officers of the Company,
as a group. The share totals below include ADRs held through the Incentive Thrift Plan described above.
Name ADRs Beneficially Owned
L. Joseph Callan 0
John G. Cochrane 559
Peter G. Flynn 3,339
Michael E. Jesanis 630
Marc F. Mahoney 413
Robert G. Powderly 489
Lawrence J. Reilly 928
James S. Robinson 634
Masheed H. Rosenqvist 449
Herb Schrayshuen 907
Terry L. Schwennesen 536
Richard P. Sergel 588
Philip R. Sharp 0
All directors and
executive officers,
as a group (14 persons) 9,960
Equity Compensation Plans
A summary of our stockholder approved equity compensation plans as of March 31, 2002 is as follows:
(a) (b) (c)
Plan category Number of securities Weighted-average Number of securities
to be issued upon exercise price of out- remaining available
exercise of outstand- standing options, for future issuance
ing options, warrants warrants and rights under equity compen-
and rights(d) sation plans (excluding
securities reflected
in column (a))
Equity compensa-
tion plans approved 2,790,534 $8.32 177,699,048 (e)
by security holders
Equity compensa-
tion plans not __ __ __
approved by
security holders
Total 2,790,534 $8.32 177,699,048
(d) The options are for National Grid shares listed on the London Stock Exchange - not National Grid ADRs,
each ADR being equal to 5 shares.
(e) This is the total number of securities available for future issuance under the plans, however, the
amount available for issuance to senior executives is limited to 88,849,524 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
List of Exhibits
Unless otherwise indicated, the exhibits listed below are incorporated by reference to the appropriate exhibit numbers and the
Commission file numbers indicated in parentheses.
(3) (a) Articles of Organization as amended through June 25, 1987 (Exhibit 3(a) to 1988 Form 10-K, File No. 0-1229).
Articles of Amendment dated January 27, 1998 (Exhibit B.18.a to National Grid USA 1999 Form U-5-S, File No. 30-33);
Articles of Amendment dated February 25, 2000 (Exhibit 3(a) to 2000 Form 10-K, File No. 1-6564); Articles of Merger
dated May 1, 2000 (Exhibit 3(a) to 2001 Form 10-K, File No. 1-6564);.
(b) By-laws of the Company as amended April 19, 2000 (Exhibit 3(b) to 2000 Form 10-K, File No. 1-6564).
(10) Material Contracts
(a) Boston Edison Company et al. and the Company: Amended REMVEC Agreement dated August 12, 1977 (Exhibit 5-4(d),
File No. 2-61881).
(i) Boston Edison Company et al. and the Company: REMVEC II Agreement dated on or about July 1, 1997
(Exhibit 10(a)(I) to NEES' 1997 Form 10- K, File No. 1-3446).
(ii) Boston Edison Company et al. and the Company: Security Analysis Services Agreement dated on or about
July 1, 1997 (Exhibit 10(a)(ii) to NEES' 1997 Form 10-K, File No. 1-3446).
(b) Connecticut Yankee Atomic Power Company et al. and the Company: Stockholders Agreement dated July 1, 1964
(Exhibit 13-9-A, File No. 2-2006); Power Purchase Contract dated July 1, 1964 (Exhibit 13-9-B, File No. 2-23006);
Additional Power Contract dated as of April 30, 1984 and 1996; Amendatory Agreement dated as of December 4, 1996
(Exhibit 10(c) to 1996 Form 10-K, File No. 1-3446); Supplementary Power Contract dated as of April 1, 1987
(Exhibit 10(c) to 1987 Form 10-K, File No. 0-1229); Capital Funds Agreement dated September 1, 1964 (Exhibit
13-9-C, File No. 2-23006); Transmission Agreement dated October 1, 1964 (Exhibit 13-9-D, File No. 2-23006);
Agreement revising Transmission Agreement dated July 1, 1979 (Exhibit to NEES' 1979 Form 10-K, File No. 1-3446);
Amendment revising Transmission Agreement dated as of January 19, 1994 (Exhibit 10(c) to NEES' 1995 Form 10-K,
File No. 1-3446); Five Year Capital Contribution Agreement dated November 1, 1980 (Exhibit 10(e) to NEES' 1980
Form 10-K, File No. 1-3446).
(c) Maine Yankee Atomic Power Company et al. and the Company: Capital Funds Agreement dated May 20, 1968 and Power Purchase
Contract dated May 20, 1968 (Exhibit 4-5, File No. 2-29145); Amendments dated as of January 1, 1984, March 1,
1984 (Exhibit 10(d) to NEES' 1983 Form 10-K, File No. 1-3446); October 1, 1984, and August 1, 1985 (Exhibit 10(d)
to NEES' 1985 Form 10-K, File No. 1-3446); Stockholders Agreement dated May 20, 1968 (Exhibit 10-20; File No.
2-34267); Additional Power Contract dated as of February 1, 1984 (Exhibit 10(d) to NEES' 1985 Form 10-K, File No.
1-3446); 1997 Amendatory Agreement dated as of August 6, 1997 (Exhibit 10(d) to NEES' 1997 Form 10-K, File No.
1-3446).
(d) New England Electric Transmission Corporation et al. and the Company: Phase I Terminal Facility Support Agreement dated
as of December 1, 1981 (Exhibit 10(g) to NEES' 1981 Form 10-K, File No. 1-3446); Amendments dated as of June 1,
1982 and November 1, 1982 (Exhibit 10(f) to NEES' 1982 Form 10-K, File No. 1-3446); Agreement with respect to Use
of the Quebec Interconnection dated as of December 1, 1981 (Exhibit 10(g) to NEES' 1981 Form 10-K, File No.
1-3446); Amendments dated as of May 1, 1982 and November 1, 1982 (Exhibit 10(f) to NEES' 1982 Form 10-K, File No.
1-3446); Amendment dated as of January 1, 1986 (Exhibit 10(f) to NEES' 1986 Form 10-K, File No. 1-3446);
Agreement for Reinforcement and Improvement of the Company's Transmission System dated as of April 1, 1983
(Exhibit 10(f) to NEES' 1983 Form 10-K, File No. 1-3446); Lease dated as of May 16, 1983 (Exhibit 10(f) to NEES'
1983 Form 10-K, File No. 1-3446); Upper Development-Lower Development Transmission Line Support Agreement dated
as of May 16, 1983 (Exhibit 10(f) to NEES' 1983 Form 10-K, File No. 1-3446); Agreement with Respect to Second
Amendment and Restatement of Agreement with Respect to Use of Quebec Interconnection dated November 19, 1997
(Filed herewith).
(e) Vermont Electric Transmission Company, Inc. et al. and the Company: Phase I Vermont Transmission Line Support Agreement
dated as of December 1, 1981; Amendments dated as of June 1, 1982 and November 1, 1982 (Exhibit 10(g) to NEES'
1982 Form 10-K, File No. 1-3446); Amendment dated as of January 1, 1986 (Exhibit 10(h) to NEES' 1986 Form 10-K,
File No. 1-3446).
(f) New England Power Pool Agreement: Restated New England Power Pool Agreement as amended through the Sixty-sixth Agreement
amending New England Power Pool Agreement (Exhibit 10(f) to 2001 Form 10-K, File No. 1-6564); Restated New
England Power Pool Agreement as amended through the Seventy-Sixth Agreement amending New England Power Pool
Agreement and Amendments dated as of July 13, 2001, September 24, 2001, October 12, 2001, December 7, 2001, and
January 18, 2002 (filed herewith).
(g) National Grid USA Service Company, Inc. and the Company: Specimen of Service Contract (Exhibit 10(g) to 2001 Form 10-K,
File No. 1-6564).
(h) Massachusetts Electric Company, et al. and the Company: Form of Mutual Assistance Agreement (Exhibit 10(n) to 1996 Form
10-K, File No. 0-1229).
(i) Public Service Company of New Hampshire et al. and the Company: Agreement for Joint Ownership, Construction and Operation
of New Hampshire Nuclear Units dated as of May 1, 1973; Amendments dated May 24, 1974, June 21, 1974,
September 25, 1974 and October 25, 1974 (Exhibit 10-18(b), File No. 2-52820); Amendment dated January 31, 1975
(Exhibit 10-16(b), File No. 2-57831); Amendments dated April 18, 1979, April 25, 1979, June 8, 1979, October 11,
1979, December 15, 1979, June 16, 1980, and December 31, 1980 (Exhibit 10(i) to NEES' 1980 Form 10-K, File No.
1-3446); Amendments dated June 1, 1982, April 27, 1984, and June 15, 1984 (Exhibit 10(j) to NEES' 1984 Form 10-K,
File No. 1-3446); Amendments dated March 8, 1985, March 14, 1986, May 1, 1986, and September 19, 1986 (Exhibit
10(j) to NEES' 1986 Form 10-K, File No. 1-3446); Amendment dated November 12, 1987 (Exhibit 10(j) to NEES' 1987
Form 10-K, File No. 1-3446); Amendment dated January 13, 1989 (Exhibit 10(j) to NEES' 1990 Form 10-K, File No.
1-3446); Seventh Amendment as of November 1, 1990 (Exhibit 10(m) to NEES' 1991 Form 10-K, File No. 1-3446).
Transmission Support Agreement dated as of May 1, 1973 (Exhibit 10-23, File No. 2-49184); Instrument of Transfer
to the Company with respect to the New Hampshire Nuclear Units and Assumptions of Obligations dated December 17,
1975 and Agreement Among Participants in New Hampshire Nuclear Units, certain Massachusetts Municipal Systems and
Massachusetts Municipal Wholesale Electric Company dated May 28, 1976 (Exhibit 16(c), File No. 2-57831); Seventh
Amendment To and Restated Agreement for Seabrook Project Disbursing Agent dated as of November 1, 1990 (Exhibit
10(m) to NEES' 1991 Form 10-K, File No. 1-3446); Amendments dated as of June 29, 1992 (Exhibit 10(j) to NEES'
1992 Form 10-K, File No. 1- 3446). Settlement Agreement dated as of July 19, 1990 between Northeast Utilities
Service Company and the Company (Exhibit 10(m) to NEES' 1991 Form 10-K, File No. 1-3446). Seabrook Project
Managing Agent Operating Agreement dated as of June 29, 1992, Amendment to Seabrook Project Managing Agent
Operating Agreement dated as of June 29, 1992 (Exhibit 10(j) to NEES' 1992 Form 10-K, File No. 1- 3446).
(j) Vermont Yankee Nuclear Power Corporation et al. and the Company: Capital Funds Agreement dated February
1, 1968, Amendment dated March 12, 1968 and Power Purchase Contract dated February 1, 1968 (Exhibit 4-6,
File No. 2-29145); Amendments dated as of June 1, 1972, April 15, 1983 (Exhibit 10(k) to NEES' 1983 Form
10-K, File No. 0-1229) and April 24, 1985 (Exhibit 10(n) to NEES' 1985 Form 10-K, File No. 1-3446);
Amendment dated as of June 1, 1985 (Exhibit 10(n) to 1988 Form 10-K, File No. 0-1229); Amendments dated
May 6, 1988 (Exhibit 10(n) to 1988 Form 10-K, File No.0-1229); Amendment dated as of June 15, 1989
(Exhibit 10(k) to 1989 NEES Form 10-K, File No. 1-3446); Additional Power Contract dated as of
February 1, 1984 (Exhibit 10(k) to NEES' 1983 Form 10-K, File No. 1-3446); Guarantee Agreement dated as
of November 5, 1981 (Exhibit 10(j) to NEES' 1981 Form 10-K, File No. 1-3446).
(k) Yankee Atomic Electric Company et al. and the Company: Amended and Restated Power Contract dated April
1, 1985 (Exhibit 10(l) to NEES' 1985 Form 10-K, File No. 1-3446); Amendment dated May 6, 1988 (Exhibit
10(l) to NEES' 1988 Form 10-K, File No. 1-3446); Amendments dated as of June 26, 1989 and July 1, 1989
(Exhibit 10(l) to 1989 NEES Form 10-K, File No. 1-3446); Amendment dated as of February 1, 1992 (Exhibit
10(l) to 1992 NEES Form 10-K, File No. 1-3446).
*(l) National Grid USA Companies' Deferred Compensation Plan Amended and Restated December 6, 2001 (filed herewith).
*(m) National Grid USA Companies' Retirement Supplement Plan Revised and Restated December 21, 2001 (filed herewith).
*(n) National Grid USA Companies' Executive Supplemental Retirement Plan Revised and Restated December 21, 2001 (filed herewith).
*(o) New England Electric Companies Executive Retirees Health and Life Insurance Plan as Amended and Restated January 1, 1996
(Exhibit 10(o) to NEES' 1998 Form 10-K, File No. 1-3446).
*(p) National Grid USA Companies' Incentive Compensation Plan as adopted December 6, 2001 (filed herewith).
*(q) Forms of Life Insurance Program (Exhibit 10(s) to NEES' 1986 Form 10-K, File No. 1-3446); and Form of Life Insurance
(Collateral Assignment) (Exhibit 10(t) to NEES' 1991 Form 10-K, File No. 1-3446).
*(r) National Grid USA Companies' Incentive Share Plan as adopted December 6, 2001 (filed herewith).
*(s) Forms of Severance Protection Agreement (Exhibit 10(z) to NEES' 1996 Form 10-K, File No. 1-3446). Forms of Severance
Protection Agreements (Exhibit 10(y) to NEES' 1998 Form 10-K, File No. 1-3446).
(t) New England Hydro-Transmission Electric Company, Inc. et al. and the Company: Phase II Massachusetts
Transmission Facilities Support Agreement dated as of June 1, 1985 (Exhibit 10(t) to NEES' 1986 Form 10-K,
File No. 1-3446); Amendment dated as of May 1, 1986 (Exhibit 10(t) to NEES' 1986 Form 10-K, File No.
1-3446); Amendments dated as of February 1, 1987, June 1, 1987, September 1, 1987, and October 1, 1987
(Exhibit 10(u) to NEES' 1987 Form 10-K, File No. 1-3446); Amendment dated as of August 1, 1988
(Exhibit 10(u) to NEES' 1988 Form 10-K, File No. 1-3446); Amendment dated January 1, 1989 (Exhibit
10(u) to NEES' 1990 Form 10-K, File No. 1-3446).
(u) New England Hydro-Transmission Corporation et al. and the Company: Phase II New Hampshire Transmission
Facilities Support Agreement dated as of June 1, 1985 (Exhibit 10(u) to NEES' 1986 Form 10-K, File No.
1-3446); Amendment dated as of May 1, 1986 (Exhibit 10(u) to NEES' 1986 Form 10-K, File No. 1-3446);
Amendments dated as of February 1, 1987, June 1, 1987, September 1, 1987, and October 1, 1987 (Exhibit
10(v) to NEES' 1987 Form 10-K, File No. 1-3446). Amendment dated as of August 1, 1988 (Exhibit 10(v)
to NEES' 1988 Form 10-K, File No. 1-3446); Amendments dated January 1, 1989 and January 1, 1990 (Exhibit 10
(v) to NEES' 1990 Form 10-K, File No. 1-3446).
(v) Vermont Electric Power Company et al. and the Company: Phase II New England Power AC Facilities
Support Agreement dated as of June 1, 1985 (Exhibit 10(v) to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(v) to NEES' 1986 Form 10-K, File No. 1-3446). Amendments
dated as of February 1, 1987, June 1, 1987, and September 1, 1987 (Exhibit 10(w) to NEES' 1987 Form
10-K, File No. 1-3446); Amendment dated as of August 1, 1988 (Exhibit 10(w) to NEES' 1988 Form
10-K, File No. 1-3446).
(aa)USGen New England Contracts
(i) Asset Purchase Agreement among the Company, The Narragansett Electric Company and, USGen New
England, Inc. dated as of August 5, 1997 (Exhibit 2 to NEES' Form 10-Q for period ended
September 30, 1997, File No. 1-3446); Amendment No. 1 dated as of September 25, 1997, Amendment
No. 2 dated as of October 29, 1997, Amendment No. 3 dated as of August 5, 1997, Amendment No. 4
dated as of September 1, 1998 (Exhibit 10(ee)(i) to 1999 Form 10-K, File No. 1-
6564).
(ii) Wholesale Sales Agreement between the Company and USGen New England, Inc. dated as of August 5,
1997 (Exhibit 10(gg)(ii) to 1997 Form 10-K, File No. 1-6564); Amendment No. 1 dated as of
September 25, 1997, Amendment No. 2 dated as of September 1, 1998 (Exhibit 10(ee)(ii) to 1999
Form 10-K, File No. 1-6564); Amendment No. 3 dated as of December 23, 1999 (Exhibit 10(aa) (ii)
to 2001 Form 10-K, File No. 1-6564); Amendment No. 4 dated as of November 20, 2001 (filed
herewith).
(iii) Amended and Restated PPA Transfer Agreement between the Company and USGen New England, Inc.
dated as of October 29, 1997 (Exhibit 10(aa) (iii) to 2001 Form 10-K, File No. 1-6564); First
Amendment to Amended and Restated PPA Transfer Agreement dated as of October 10, 2001 (filed
herewith).
(iv) Form of PSA Performance Support Agreement between the Company, USGen New England, Inc., and each
of the following; Unitil Power Corp. (Ocean State), Braintree Electric Light Department,
Littleton Electric Light Department, Massachusetts Government Land Bank, Shrewsbury Electric
Light Plant, and Taunton Municipal Light Plant, dated as of August 5, 1997 (Exhibit 10(gg)(iv)
to 1997 Form 10-K, File No. 1-6564).
(v) Quebec Interconnection Transfer Agreement between the Company, The Narragansett
Electric Company, and USGen New England, Inc. dated as of September 1, 1998
(Exhibit 10(ee)(v) to 1999 Form 10-K, File No. 1-6564).
(vi) Service Agreement dated as of December 17, 2001, between New England Power Company and
Morgan Stanley Capital Group Inc. (filed herewith).
(bb) Montaup (now New England Power Company)
(i) Equity Funding Agreement for New England Hydro-Transmission Corporation dated as of
June 1, 1985, between New England Hydro-Transmission Corporation and several New
England electric utilities, including Montaup (now New England Power Company) as amended
as of May 1, 1986 and September 1, 1987 (Exhibits 10-96 and 10-97, Form 10-K of EUA
for 1986, File No. 1-5366; Exhibit 10-116, Form 10-K of EUA for 1987, File No. 1-5366).
(ii) Equity Funding Agreement for New England Hydro-Transmission Electric Company, Inc.
dated as of June 1, 1985, between New England Hydro-Transmission Electric
Company, Inc. and several New England electric utilities, including Montaup (now
New England Power Company) as amended as of May 1, 1986 and September 1, 1987 (Exhibits
10-98 and 10-99, Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-117, Form 10-K
of EUA for 1987, File No. 1-5366).
(iii) Unit Power Agreement for the Sale of Unit Capacity and Energy from Ocean State Power
Project to Montaup Electric Company (now New England Power Company) dated as of May
14, 1986 as amended as of August 27, 1986, September 27, 1988, October 21, 1988,
July 21, 1989, February 7, 1990, December 21, 1990, and February 12, 1996 (Exhibits 10-101
and 10-102, Form 10-K of EUA for 1986, File No. 1-5366; Exhibits 10-106 and 10-107, Form 10-K
of EUA for 1988, File No. 1-5366; Exhibit 10-106, Form 10-K of EUA for 1989, File No. 1-5366;
Exhibits 10-86 and 10-87, Form 10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 10-39.05
and 10-40.05, Form 10-K of EUA for 1996, File No. 1-5366).
(iv) Power Purchase Agreement dated as of October 17, 1986, between Northeast Energy
Associates and Montaup (now New England Power Company) as amended as of June 28,
1989 (Exhibit 10-103, Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-103, Form
10-K of EUA for 1989, File No. 1-5366).
(v) Unit Power Agreement for the Sale of Second Unit Capacity and Energy from Ocean State
Power Project to Montaup Electric Company (now New England Power Company) dated as of
September 28, 1988 as amended as of July 21, 1989, February 7, 1990, and February
12, 1996 and a Supplemental Agreement dated July 21, 1989 (Exhibit 10-104, Form 10-K of
EUA for 1989, File No. 1-5366; Exhibits 10-41.05 and 10-42.05, Form 10-K of EUA for
1996, File No. 1-5366; Exhibit No. 10-88, Form 10-K of Eastern Edison for 1990,
File No. 0-8480).
(vi) Amended and Restated Power Sales Contract by and between Southern Energy Canal L.L.C.
(as assignee of Canal Electric Company) and Montaup Electric Company (now New England
Power Company), dated December 18, 1988 and effective on December 30, 1998 (Exhibit
10(bb)(vi) to 2001 Form 10-K, File No. 1-6564).
(vii) Power Purchase Agreement between Entergy Nuclear Generation Company and Montaup
Electric Company (now New England Power Company), dated November 18, 1998 (Exhibit
10(bb)(vii) to 2001 Form 10-K, File No. 1-6564).
(viii) Power Purchase and Sale Agreement between Montaup Electric Company (now New England
Power Company) and Constellation Power Source, Inc., dated December 21, 1998
(Exhibit 10(bb)(viii) to 2001 Form 10-K, File No. 1-6564).
(ix) PPA Transfer Agreement between Montaup Electric Company (now New England Power
Company) and TransCanada Power Marketing Ltd, dated April 7, 1998 (Exhibit
10(bb)(ix) to 2001 Form 10-K, File No. 1-6564).
(x) Reinstatement Amendment, dated as of July 6, 1999 by and among Southern Energy Canal,
L.L.C. and Montaup Electric Company (now New England Power Company) (Exhibit
10(bb)(x) to 2001 Form 10-K, File No. 1-6564).
*Compensation related plan, contract, or arrangement.
(13) 2002 Annual Report to Stockholders
(24) Power of Attorney (filed herewith).
Reports on Form 8-K
There were no Form 8-K's filed for NEP during the first calendar quarter of 2002.
NEW ENGLAND POWER COMPANY
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. The signature of the undersigned company shall
be deemed to relate only to matters having reference to such company.
NEW ENGLAND POWER COMPANY
s:\Peter G. Flynn
_________________________________
Peter G. Flynn
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated. The signature of each of the undersigned shall
be deemed to relate only to matters having reference to the above-named company.
(Signature and Title)
Principal Executive Officer
Peter G. Flynn
President
Principal Financial Officer
s:/James S. Robinson
________________________________
James S. Robinson
Treasurer
Principal Accounting Officer
s:\Edward A. Capomacchio
________________________________
Edward A. Capomacchio
Controller
Directors (a majority)
L. Joseph Callan
John G. Cochrane
Peter G. Flynn
Michael E. Jesanis
Robert G. Powderly
Lawrence J. Reilly All by: s:\John G. Cochrane
Terry L. Schwennesen John G. Cochrane
Richard P. Sergel Attorney-in-fact
Philip R. Sharp
Date (as to all signatures on this page)
June 28, 2002
INDEX TO FINANCIAL STATEMENTS
Reference (Page)
--------- ------
Form 2002 Annual Report
10-K To Shareholders*
Reports of Independent Accountants 16-17
Statements of Income, Year Ended March 31, 2002 and 2001, Three Months
Ended March 31, 2000 and 1999, and Year Ended December 31, 1999 18
Statements of Retained Earnings, Year Ended March 31, 2002 and 2001,
Three Months Ended March 31, 2000 and 1999, and Year Ended
December 31, 1999 19
Statements of Comprehensive Income, Year Ended March 31, 2002 and 2001,
Three Months Ended March 31, 2000 and 1999, and Year Ended
December 31, 1999
Balance Sheets, March 31, 2002 and 2001 20
Statements of Cash Flows, Year Ended March 31, 2001 and 2001,
Three Months Ended March 31, 2000 and 1999, and Year Ended December 31, 1999 21-22
Notes to Financial Statements 23-45
*Incorporated by Reference.
NEP
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
(3)(a) Articles of Organization as Incorporated
amended through June 27, 1998 by Reference
Articles of Merger dated Incorporated
May 1, 2000 by Reference
(3)(b) By-laws of the Company as Incorporated
amended April 19, 2000 by Reference
(10)(a) Boston Edison Company et al. Incorporated
and the Company: Amended by Reference
REMVEC Agreement dated
August 12, 1977
(10)(a)(i) Boston Edison Company et al. Incorporated
and the Company: REMVEC II by Reference
Agreement dated on or about
July 1, 1997
(10)(a)(ii) Boston Edison Company et al. Incorporated
and the Company: Security by Reference
Analysis Services Agreement
dated on or about July 1, 1997
(10)(b) Connecticut Yankee Atomic Power Incorporated
Company et al. and the Company: by Reference
Stockholders Agreement dated
July 1, 1964; Power Purchase
Contract dated July 1, 1964;
Additional Power Contract dated
as of April 30, 1984 and 1996;
Amendatory Agreement dated as
of December 4, 1996;
Supplementary Power Contract
dated as of April 1, 1987;
Capital Funds Agreement dated
September 1, 1964; Transmission
Agreement dated October 1, 1964;
Agreement revising Transmission
Agreement dated July 1, 1979;
Amendment revising Transmission
Agreement dated as of January 19,
1994; Five Year Capital Contribution
Agreement dated November 1, 1980
(10)(c) Maine Yankee Atomic Power Incorporated
Company et al. and the Company: by Reference
Capital Funds Agreement dated
May 20, 1968 and Power Purchase
Contract dated May 20, 1968;
and Amendments thereto;
Stockholders Agreement dated
May 20, 1968; Additional Power
Contract dated as of February 1,
1984; 1997 Amendatory Agreement
dated as of August 6, 1997
(10)(d) New England Electric Incorporated
Transmission Corporation et al. by Reference
and the Company: Phase I
Terminal Facility Support
Agreement dated as of
December 1, 1981; Amendments
dated as of June 1, 1982 and
November 1, 1982; Agreement with
respect to Use of the Quebec
Interconnection dated as of
December 1, 1981; Amendments
dated as of May 1, 1982 and
November 1, 1982; Amendment
dated as of January 1, 1986;
Agreement for Reinforcement
and Improvement of the Company's
Transmission System dated as
of April 1, 1983; Lease dated
as of May 16, 1983; Upper
Development-Lower Development
Transmission Line Support
Agreement dated as of May 16,
1983; Agreement with Respect to
Second Amendment and Restatement
Of Agreement with Respect to Use
Of Quebec Interconnection dated
November 19, 1997 Filed herewith
(10)(e) Vermont Electric Transmission Incorporated
Company, Inc. et al. and the by Reference
Company: Phase I Vermont
Transmission Line Support
Agreement dated as of
December 1, 1981 and Amendments
thereto
(10)(f) New England Power Pool Filed herewith
Agreement and Amendments
thereto
(10)(g) National Grid USA Service Incorporated
Company, Inc. and the Company: by Reference
Specimen of Service Contract
(10)(h) Massachusetts Electric Incorporated
Company, et al. and the by Reference
Company: Form of Mutual
Assistance Agreement
(10)(i) Public Service Company of New Incorporated
Hampshire et al. and the by Reference
Company: Agreement for Joint
Ownership, Construction and
Operation of New Hampshire
Nuclear Units dated as of
May 1, 1973 and Amendments
thereto; Seventh Amendment
as of November 1, 1990;
Transmission Support Agreement
dated as of May 1, 1973;
Instrument of Transfer to the
Company with respect to the New
Hampshire Nuclear Units and
Assumptions of Obligations
dated December 17, 1975 and
Agreement Among Participants
in New Hampshire Nuclear Units,
certain Massachusetts Municipal
Systems and Massachusetts
Municipal Wholesale Electric
Company dated May 28, 1976;
Seventh Amendment To and
Restated Agreement for Seabrook
Project Disbursing Agent dated
as of November 1, 1990;
Amendments dated as of
June 29, 1992;
Settlement Agreement dated as
of July 19, 1990 between
Northeast Utilities Service
Company and the Company;
Seabrook Project Managing
Agent Operating Agreement
dated as of June 29, 1992;
and Amendment thereto
(10)(j) Vermont Yankee Nuclear Power Incorporated
Corporation et al. and the by Reference
Company: Capital Funds
Agreement dated February 1,
1968, Amendment dated March 12,
1968 and Power Purchase Contract
dated February 1, 1968 and
Amendments thereto; Additional
Power Contract dated as of
February 1, 1984; Guarantee
Agreement dated as of November 5,
1981
(10)(k) Yankee Atomic Electric Company Incorporated
et al. and the Company: by Reference
Amended and Restated Power
Contract dated April 1, 1985
and Amendments thereto
(10)(l) New England Electric Companies' Incorporated
Deferred Compensation Plan as by Reference
amended through February 28,
1998 and amendments thereto;
National Grid USA Companies' Filed Herewith
Deferred Compensation Plan Amended
and Restated December 6, 2001
(10)(m) New England Electric System Incorporated
Companies Retirement Supplement by Reference
Plan as amended through June 1,
1996 and an Amendment thereto;
National Grid USA Companies' Filed Herewith
Retirement Supplement Plan Revised
and Restated December 21, 2001
(10)(n) New England Electric Companies' Incorporated
Executive Supplemental Retirement by Reference
Plan I as amended through
December 11, 1998 and an Amendment
thereto;
National Grid USA Companies' Filed Herewith
Executive Supplemental Retirement
Plan Revised and Restated
December 21, 2001
(10)(o) New England Electric Companies' Incorporated
Executive Retirees Health and Life by Reference
Insurance Plan as Amended and
Restated January 1, 1996
(10)(p) National Grid USA Companies' Filed Herewith
Incentive Compensation Plan as
adopted December 6, 2001
(10)(q) Forms of Life Insurance Program Incorporated
and Form of Life Insurance by Reference
(Collateral Assignment)
(10)(r) National Grid USA Companies' Filed Herewith
Incentive Share Plan as adopted
December 6, 2001
(10)(s) Forms of Severance Protection Incorporated
Agreements by Reference
(10)(t) New England Hydro-Transmission Incorporated
Electric Company, Inc. et al. by Reference
and the Company: Phase II
Massachusetts Transmission
Facilities Support Agreement
dated as of June 1, 1985
and Amendments thereto
(10)(u) New England Hydro-Transmission Incorporated
Corporation et al. and the by Reference
Company: Phase II New Hampshire
Transmission Facilities Support
Agreement dated as of June 1,
1985 and Amendments thereto
(10)(v) Vermont Electric Power Company Incorporated
et al. and the Company: Phase by Reference
II New England Power AC
Facilities Support Agreement
dated as of June 1, 1985 and
Amendments thereto
(10)(aa)(i) Asset Purchase Agreement between Incorporated
USGen New England and the Company by Reference
and The Narragansett Electric
Company dated as of August 5, 1997
(10)(aa)(ii) Wholesale Sales Agreement between Incorporated
the Company and USGen New England, by Reference
Inc. dated as of August 5, 1997 and
Amendments thereto
Amendment No. 4 dated as of Filed Herewith
November 20, 2001
(10)(aa)(iii) Amended and Restated PPA Transfer Incorporated
Agreement between the Company and by Reference
USGen New England, Inc. dated
as of October 29, 1997
First Amendment to Amended and Filed Herewith
Restated PPA Transfer Agreement
Dated as of October 10, 2001
(10)(aa)(iv) Form of PSA Performance Support Incorporated
Agreement between the Company, by Reference
USGen New England, Inc., and
various Wholesale Customers
dated as of August 5, 1997
(10)(aa)(v) Quebec Interconnection Transfer Incorporated
Agreement between the Company, by Reference
The Narragansett Electric Company,
and USGen New England, Inc.,
dated as of September 1, 1998
(10)(aa)(vi) Service Agreement dated as of Filed Herewith
December 17, 2001, between
New England Power Company and
Morgan Stanley Capital Group Inc.
(10)(bb)(i) Equity Funding Agreement for New Incorporated
England Hydro-Transmission by Reference
Corporation dated as of
June 1, 1985, between New England
Hydro-Transmission Corporation and
several New England Electric
utilities, including Montaup
as amended as of May 1, 1986 and
September 1, 1987
(10)(bb)(ii) Equity Funding Agreement for New Incorporated
England Hydro-Transmission by Reference
Corporation dated as of June 1,
1985, between New England Hydro-
Transmission Electric Company, Inc.
and several New England electric
utilities, including Montaup as
amended as of May 1, 1986 and
September 1, 1987
(10)(bb)(iii) Unit Power Agreement for Sale of Incorporated
Unit Capacity and Energy from by Reference
Ocean State Power Project to
Montaup Electric Company dated as
of May 14, 1986 and amendements
thereto.
(10)(bb)(iv) Power Purchase Agreement dated as Incorporated
of October 17, 1986, between by Reference
Northeast Energy Associates and
Montaup as amended as of June 28,
1989
(10)(bb)(v) Unit Power Agreement for the sale Incorporated
of Second Unit Capacity and Energy by Reference
from Ocean State Power Project to
Montaup Electric Company dated as
Of September 28, 1988 and
amendments thereto.
(10)(bb)(vi) Amended and Restated Power Sales Incorporated
Contract by and between Southern by Reference
Energy Canal L.L.C. and Montaup
Electric Company, dated December
18, 1988 and effective on December
30, 1998.
(10)(bb)(vii) Power Purchase Agreement between Incorporated
Entergy Nuclear Generation Company by Reference
and Montaup Electric Company dated
November 18, 1998
(10)(bb)(viii)Power Purchase and Sale Agreement Incorporated
between Montaup Electric Company by Reference
and Constellation Power Source, Inc.
dated December 21, 1998
(10)(bb)(ix) PPA Transfer Agreement between Incorporated
Montaup Electric Company and by Reference
TransCanada Power Marketing Ltd,
Dated April 7, 1998
(10)(bb)(x) Reinstatement Amendment, dated Incorporated
as of July 6, 1999 by and among by Reference
Southern Energy Canal, L.L.C. and
Montaup Electric Company
(13) 2002 Annual Report to Filed herewith
Stockholders
(24) Power of Attorney Filed herewith
Exhibit 10 (f)
SEVENTY-SEVENTH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
(TARIFF UPDATES AND CORRECTIONS)
THIS SEVENTY-SEVENTH AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT, dated as of July 13, 2001 ("Seventy-Seventh
Agreement"), amends the New England Power Pool Agreement (the "NEPOOL Agreement"), as amended.
WHEREAS, the NEPOOL Agreement as in effect on December 1, 1996 was amended and restated by the Thirty-Third Agreement
Amending New England Power Pool Agreement dated as of December 1, 1996 (the "Thirty-Third Agreement") in the form of the Restated New
England Power Pool Agreement ("Restated NEPOOL Agreement") attached to the Thirty-Third Agreement as Exhibit A thereto, and the
Thirty-Third Agreement also provided for the NEPOOL Open Access Transmission Tariff (the "NEPOOL Tariff") which is Attachment B to
the Restated NEPOOL Agreement; and
WHEREAS, the Restated NEPOOL Agreement and the NEPOOL Tariff have subsequently been amended numerous times, the most recent
amendment dated as of June 29, 2001; and
WHEREAS, the Participants desire to amend the NEPOOL Tariff as heretofore amended, to reflect the revisions detailed herein.
NOW, THEREFORE, upon approval of this Seventy-Seventh Agreement by the NEPOOL Participants Committee in accordance with the
procedures set forth in the NEPOOL Agreement, the Participants agree as follows:
SECTION 1
AMENDMENTS TO NEPOOL TARIFF
1.1 Selected sheets of the NEPOOL Tariff are amended to read as set forth in Attachment A hereto.
SECTION 2
MISCELLANEOUS
2.1 This Seventy-Seventh Agreement shall become effective on October 1, 2001 or on such other date as the Commission shall
provide that the amendments reflected herein shall become effective.
2.2 Terms used in this Seventy-Seventh Agreement that are not defined herein shall have the meanings ascribed to them in the
NEPOOL Agreement.
SEVENTY-EIGHTH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
(REVISED SECTIONS 18.4 AND 18.5)
THIS SEVENTY-EIGHTH AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT, dated as of September 24, 2001 ("Seventy-Eighth
Agreement"), amends the New England Power Pool Agreement (the "NEPOOL Agreement"), as amended.
WHEREAS, the NEPOOL Agreement as in effect on December 1, 1996 was amended and restated by the Thirty-Third Agreement
Amending New England Power Pool Agreement dated as of December 1, 1996 (the "Thirty-Third Agreement") in the form of the Restated New
England Power Pool Agreement ("Restated NEPOOL Agreement") attached to the Thirty-Third Agreement as Exhibit A thereto, and the
Thirty-Third Agreement also provided for the NEPOOL Open Access Transmission Tariff (the "NEPOOL Tariff") which is Attachment B to
the Restated NEPOOL Agreement; and
WHEREAS, the Restated NEPOOL Agreement and the NEPOOL Tariff have subsequently been amended numerous times, the most recent
amendment dated as of July 13, 2001; and
WHEREAS, this agreement amends the Restated NEPOOL Agreement to comply with the directives of the Federal Energy Regulatory
Commission in its order issued August 27, 2001 in Docket Nos. ER98-3853-008 and ER00-62-030, New England Power Pool and ISO New
England Inc., et al., 96 FERCP. 61,228 (2001) (the "August 27 Order"); and
WHEREAS, the Participants desire to amend the Restated NEPOOL Agreement as heretofore amended, to reflect the revisions
detailed herein.
NOW, THEREFORE, upon approval of this Seventy-Eighth Agreement by the NEPOOL Participants Committee in accordance with the
procedures set forth in the Restated NEPOOL Agreement, the Participants agree as follows:
SECTION 1
AMENDMENTS TO RESTATED NEPOOL AGREEMENT
1.1 Section 18.4 is amended so that it reads as follows:
18.4 Review of Participants' Proposed Plans. Each Participant shall submit to the System Operator, for review by the
Participants Committee, the Reliability Committee, and the Markets Committee or the Tariff Committee, as
appropriate, in such form, manner and detail as the System Operator may reasonably prescribe, (i) any new or
materially changed plan for additions to, retirements of, or changes in the capacity of any supply and demand-side
resources or transmission facilities rated 69 kV or above subject to control of such Participant, and (ii) any new
or materially changed plan for any other action to be taken by the Participant which may have a significant effect
on the stability, reliability or operating characteristics of its system or the system of any other Participant. No
significant action (other than preliminary engineering action) leading toward implementation of any such new or
changed plan shall be taken earlier than sixty days (or ninety days, if the System Operator determines that it
requires additional time to consider the plan and so notifies the Participant in writing within the sixty days)
after the plan has been submitted to the System Operator. Unless prior to the expiration of the sixty or ninety
days, whichever is applicable, the System Operator notifies the Participant in writing that it has determined that
implementation of the plan will have a significant adverse effect upon the reliability or operating characteristics
of its system or of the systems of one or more other Participants, the Participant shall be free to proceed. The
System Operator shall maintain on its website a list of Section 18.4 applications that are currently under review
and the status of each such application. The System Operator shall provide notice of any action taken with respect
to any Section 18.4 applications, including an explanation of its reasons for such action, to each Participant as
soon as reasonably practicable after such action is taken. The time limits provided by this Section 18.4 may be
changed with respect to any such submission by agreement between the System Operator and the Participant required to
submit the plan.
1.2 Section 18.5 is amended so that it reads as follows:
18.5 Participant to Avoid Adverse Effect. If the System Operator notifies a Participant pursuant to Section 18.4 that
implementation of the Participant's plan has been determined to have a significant adverse effect upon the
reliability or operating characteristics of its system or the systems of one or more other Participants, the
Participant shall not proceed to implement such plan unless the Participant or the Non-Participant on whose behalf
the Participant has submitted its plan takes such action or constructs at its expense such facilities as the System
Operator determines to be reasonably necessary to avoid such adverse effect; provided that if the plan is for the
retirement of a supply or demand-side resource, the Participant may proceed with its plan only if, after engaging
in good faith negotiations with persons designated by the System Operator to address the adverse effects on
reliability or operating characteristics, the negotiations either address the adverse effects to the satisfaction
of the System Operator, or no satisfactory resolution can be achieved on terms acceptable to the parties within 90
days of the Participant's receipt of the System Operator's notice. Any agreement resulting from such negotiations
shall be in writing and shall be filed in accordance with the Commission's filing requirements if it requires any
payment.
SECTION 2
MISCELLANEOUS
2.1 This Seventy-Eighth Agreement shall become effective as of September 1, 2001 or on such other date as the Commission shall
provide that the amendments reflected herein shall become effective.
2.2 Terms used in this Seventy-Eighth Agreement that are not defined herein shall have the meanings ascribed to them in the
Restated NEPOOL Agreement.
2.3 A vote by or on behalf of a Participant in favor of this Seventy-Eighth Agreement evidences an agreement that changes
reflected herein effect compliance with directives of the August 27 Order. Such agreement is not, and is not to be construed as, a
voluntary agreement to the substance of the changes reflected herein and is without prejudice to the voting Participant's right to
challenge the August 27 Order.
SEVENTY-NINTH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
(ICAP COMPLIANCE AMENDMENT)
THIS SEVENTY-NINTH AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT, dated as of September 24, 2001 ("Seventy-Eighth
Agreement"), amends the New England Power Pool Agreement (the "NEPOOL Agreement"), as amended.
WHEREAS, the NEPOOL Agreement as in effect on December 1, 1996 was amended and restated by the Thirty-Third Agreement
Amending New England Power Pool Agreement dated as of December 1, 1996 (the "Thirty-Third Agreement") in the form of the Restated New
England Power Pool Agreement ("Restated NEPOOL Agreement") attached to the Thirty-Third Agreement as Exhibit A thereto, and the
Thirty-Third Agreement also provided for the NEPOOL Open Access Transmission Tariff (the "NEPOOL Tariff") which is Attachment B to
the Restated NEPOOL Agreement; and
WHEREAS, the Restated NEPOOL Agreement and the NEPOOL Tariff have subsequently been amended numerous times, the most recent
amendment dated as of July 13, 2001; and
WHEREAS, this agreement amends the Restated NEPOOL Agreement to comply with the directives of the Federal Energy Regulatory
Commission in its order issued August 28, 2001 in Docket Nos. EL00-62-026 and EL00-62-029, ISO New England Inc., 96 FERCP. 61,234
(2001) (the "August 28 Order"); and
WHEREAS, the Participants desire to amend the Restated NEPOOL Agreement as heretofore amended, to reflect the revisions
detailed herein.
NOW, THEREFORE, upon approval of this Seventy-Ninth Agreement by the NEPOOL Participants Committee in accordance with the
procedures set forth in the Restated NEPOOL Agreement, the Participants agree as follows:
SECTION 1
AMENDMENT TO RESTATED NEPOOL AGREEMENT
1.1 Section 12.5(d) is amended so that it reads as follows:
(d) The revenues from the Installed Capability Responsibility deficiency charge payments for each month shall be
allocated among those Participants whose minimum monthly Installed System Capabilities are equal to or greater than
their Installed Capability Responsibilities. The allocation to each such Participant shall be in the same
proportion as that Participant's minimum monthly Installed System Capability for the month is to the aggregate
minimum monthly Installed System Capabilities of all Participants entitled for the month to such revenues.
SECTION 2
MISCELLANEOUS
2.1 This Seventy-Ninth Agreement shall become effective as of September 1, 2001 or on such other date as the Commission shall
provide that the amendment reflected herein shall become effective.
2.2 Terms used in this Seventy-Ninth Agreement that are not defined herein shall have the meanings ascribed to them in the
Restated NEPOOL Agreement.
2.3 A vote by or on behalf of a Participant in favor of this Seventy-Ninth Agreement evidences an agreement that changes
reflected herein effect compliance with directives of the August 28 Order. Such agreement is not, and is not to be construed as, a
voluntary agreement to the substance of the changes reflected herein and is without prejudice to the voting Participant's right to
challenge the August 28 Order.
EIGHTIETH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
(GIS AGREEMENT)
THIS EIGHTIETH AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT, dated as of October 12, 2001 ("Eightieth Agreement"),
amends the New England Power Pool Agreement (the "NEPOOL Agreement"), as amended.
WHEREAS, the NEPOOL Agreement as in effect on December 1, 1996 was amended and restated by the Thirty-Third Agreement
Amending New England Power Pool Agreement dated as of December 1, 1996 (the "Thirty-Third Agreement") in the form of the Restated New
England Power Pool Agreement ("Restated NEPOOL Agreement") attached to the Thirty-Third Agreement as Exhibit A thereto, and the
Thirty-Third Agreement also provided for the NEPOOL Open Access Transmission Tariff (the "NEPOOL Tariff") which is Attachment B to
the Restated NEPOOL Agreement; and
WHEREAS, the Restated NEPOOL Agreement and the NEPOOL Tariff have subsequently been amended numerous times, the most recent
amendment dated as of September 24, 2001; and
WHEREAS, the Participants desire to amend the NEPOOL Agreement, including the NEPOOL Tariff, to reflect the revisions
detailed herein.
NOW, THEREFORE, upon approval of this Eightieth Agreement by the NEPOOL Participants Committee in accordance with the
procedures set forth in the NEPOOL Agreement, the Participants agree as follows:
SECTION 1
AMENDMENT TO NEPOOL AGREEMENT
1.1 Amendment to Section 19.3(a) of the NEPOOL Agreement. The following is added at the end of Section 19.3(a) of the NEPOOL
Agreement:
Without limiting the generality of the foregoing, the Restructuring Expense shall also include all expenses incurred by
NEPOOL in connection with its generation information system (the "GIS"), including without limitation all amounts payable by
NEPOOL to the entity or entities that develop, administer, operate and maintain the GIS for those services; provided,
however, that such amounts will be allocated to and paid by the Participants that, with respect to their retail loads, are
subject from time to time to any statutes, regulations or orders or decisions of courts and governmental agencies in effect
in New England requiring (a) the disclosure of the fuel source, emissions and/or other attributes of the generation used in
providing electric service to retail customers, (b) the inclusion of specified amounts of generation with particular
attributes in the generation used in providing electric service to retail customers, and/or (c) that generation falling
within specified emission limits be used to serve retail customers, with such allocation and payment to be made according to
the direction of the Participants Committee from time to time.
SECTION 2
AMENDMENT TO NEPOOL TARIFF
2.1 Amendment to Section 3.3(a) of the NEPOOL Billing Policy. Section 3.3(a) of the NEPOOL Billing Policy included as
Attachment N to the NEPOOL Tariff shall be amended as follows:
Priority of Payments. The ISO shall use moneys received by it from Participants and Non-Participant Transmission Customers
to pay all amounts due to the ISO under the ISO Tariff, the ISO Capital Funding Tariff and the ISO Agreement and all amounts
due to the ISO for acting as Project Manager for NEPOOL's generation information system (the "GIS") before making any
payments to any Participants or Non-Participant Transmission Customers. After paying all amounts due to the ISO but prior to
making any payments to any Participants or Non-Participant Transmission Customers, the ISO shall use moneys received by it
from Participants and Non-Participant Transmission Customers to pay all amounts due from NEPOOL to the entity or entities
that develop, administer, operate and maintain the GIS for those services.
2.2 Amendment to Section 3.3(f)(i) of the NEPOOL Billing Policy. The first sentence of Section 3.3(f)(i) of the NEPOOL Billing
Policy included as Attachment N to the NEPOOL Tariff shall be amended to read as follows:
If and to the extent that the procedures described in clauses (b), (c), (d) and (e) above do not yield sufficient funds to
pay all Remittance Advice amounts in full (after payment of amounts due to the ISO and to the entity or entities that
develop, administer, operate and maintain the GIS for those services, in accordance with clause (a) above) on the date such
Payments are due, the ISO shall reduce Payments to those Participants owed monies for that billing period (the "Default
Period"), pro rata based on the amounts owed to such Participants, to the extent necessary to clear its accounts by the close
of banking business on the date such Payments are due.
SECTION 3
MISCELLANEOUS
3.1 This Eightieth Agreement shall become effective on January 1, 2002 or on such other date as the Commission shall provide
that the amendments reflected herein shall become effective.
3.2 Terms used in this Eightieth Agreement that are not defined herein shall have the meanings ascribed to them in the NEPOOL
Agreement.
EIGHTY-FIRST AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
(RESTATEMENT OF FINANCIAL ASSURANCE POLICIES)
THIS EIGHTY-FIRST AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT, dated as of December 7, 2001 (the "Eighty-First
Agreement"), amends the New England Power Pool Agreement (the "NEPOOL Agreement"), as amended.
WHEREAS, the NEPOOL Agreement as in effect on December 1, 1996 was amended and restated by the Thirty-Third Agreement
Amending New England Power Pool Agreement dated as of December 1, 1996 (the "Thirty-Third Agreement") in the form of the Restated New
England Power Pool Agreement ("Restated NEPOOL Agreement") attached to the Thirty-Third Agreement as Exhibit A thereto, and the
Thirty-Third Agreement also provided for the NEPOOL Open Access Transmission Tariff (the "NEPOOL Tariff") which is Attachment B to
the Restated NEPOOL Agreement; and
WHEREAS, the Restated NEPOOL Agreement and the NEPOOL Tariff have subsequently been amended numerous times, the most recent
amendment dated as of October 12, 2001; and
WHEREAS, the Participants desire to amend the NEPOOL Agreement, including the NEPOOL Tariff, as heretofore amended, to
reflect the revisions detailed herein.
NOW, THEREFORE, upon approval of this Eighty-First Agreement by the NEPOOL Participants Committee in accordance with the
procedures set forth in the NEPOOL Agreement, the Participants agree as follows:
SECTION 1
AMENDMENTS TO NEPOOL AGREEMENT
1.1 Amendment to Section 21.2(d). The following sentence is added at the end of Section 21.2(d) of the Restated NEPOOL
Agreement:
Nothing set forth in this Section 21.2 is intended
to limit the additional provisions of the Member
Financial Assurance Policy relating to notices and
suspensions thereunder.
SECTION 2
AMENDMENTS TO NEPOOL TARIFF
2.1 Amendment to Attachment L to NEPOOL Tariff. The Financial Assurance Policy for NEPOOL Members included as Attachment L to
the NEPOOL Tariff is deleted in its entirety and replaced with Attachment 1 hereto.
2.2 Amendment to Attachment M to NEPOOL Tariff. The Financial Assurance Policy for NEPOOL Non-Participant Transmission
Customers included as Attachment M to the NEPOOL Tariff is deleted in its entirety and replaced with Attachment 2 hereto.
SECTION 3
MISCELLANEOUS
3.1 The Eighty-First Agreement shall become effective on the Policy Effective Date (as defined in Attachments 1 and 2 to the
Eighty-First Agreement) or on such other date as the Commission shall provide that the amendments reflected herein shall become
effective.
3.2 Terms used in this Eighty-First Agreement that are not defined herein shall have the meanings ascribed to them in the NEPOOL
Agreement.
EIGHTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
(AMENDMENT TO SCHEDULE 16)
THIS EIGHTY-SECOND AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT, dated as of January 18, 2002 ("Eighty-Second
Agreement"), amends the New England Power Pool Agreement (the "NEPOOL Agreement"), as amended.
WHEREAS, the NEPOOL Agreement as in effect on December 1, 1996 was amended and restated by the Thirty-Third Agreement
Amending New England Power Pool Agreement dated as of December 1, 1996 (the "Thirty-Third Agreement") in the form of the Restated New
England Power Pool Agreement ("Restated NEPOOL Agreement") attached to the Thirty-Third Agreement as Exhibit A thereto, and the
Thirty-Third Agreement also provided for the NEPOOL Open Access Transmission Tariff (the "NEPOOL Tariff") which is Attachment B to
the Restated NEPOOL Agreement; and
WHEREAS, the Restated NEPOOL Agreement and the NEPOOL Tariff have subsequently been amended numerous times, with such
amendments most recently consolidated, respectively, in FERC Electric Third Revised Rate Schedule No. 5, submitted in Docket No.
ER00-2894-000, and FERC Electric Tariff, Fourth Revised Volume No. 1, submitted in Docket Nos. EL00-62-000, et al.; and
WHEREAS, the Participants desire to amend the NEPOOL Tariff as heretofore amended, to reflect the revisions detailed herein.
NOW, THEREFORE, upon approval of this Eighty-Second Agreement by the NEPOOL Participants Committee in accordance with the
procedures set forth in the NEPOOL Agreement, the Participants agree as follows:
SECTION 1
AMENDMENTS TO NEPOOL TARIFF
1.1 The first paragraph of Exhibit 1 to Supplement 1 to Schedule 16 of the NEPOOL Tariff is amended by adding the following new
sentence at the end of the existing text:
However, if a generator is recovering its black start costs under retail rates, it may recover its Black Start
Revenue Requirement under this rate structure provided the generator credits the revenues collected herein against the costs
collected in retail rates for Black Start service.
1.2 The definition of the term "Plant Allocation Factor" as used in the definition of the term "Black Start Related Accumulated
Deferred Taxes" in Section A.1.a.d of Supplement 1 to Schedule 16 of the NEPOOL Tariff is amended to read as follows:
...multiplied by the ratio of total investment in Black Start Plant plus Black Start Related General Plan to total plant in
service.
SECTION 2
MISCELLANEOUS
2.1 Conforming changes shall be made to the corresponding provisions of the System Restoration and Planning Service Billing
Procedure and are also approved.
2.2 This Eighty-Second Agreement shall become effective on April 1, 2002 or on such other date as the Commission shall provide
that the amendments reflected herein shall become effective.
2.3 Terms used in this Eighty-Second Agreement that are not defined herein shall have the meanings ascribed to them in the
NEPOOL Agreement.
EXHIBIT (24)
POWER OF ATTORNEY
-----------------
Each of the undersigned directors of New England Power Company (the "Company"), individually as a director of the Company, hereby
constitutes and appoints John G. Cochrane, Kirk L. Ramsauer, and Geraldine M. Zipser, individually, as attorney-in-fact to execute on behalf
of the undersigned the Company's annual report on Form 10-K for the year ended March 31, 2002 to be filed with the Securities and Exchange
Commission, and to execute any appropriate amendment or amendments thereto as may be required by law.
Dated this 10th day of May, 2002.
s/L. Joseph Callan s/Lawrence J. Reilly
____________________ _______________________
L. Joseph Callan Lawrence J. Reilly
s/John G. Cochrane s/Terry L. Schwennesen
______________________ ________________________
John G. Cochrane Terry L. Schwennesen
s/Peter G. Flynn s/Richard P. Sergel
______________________ ________________________
Peter G. Flynn Richard P. Sergel
s/Michael E. Jesanis s/Philip R. Sharp
______________________ ________________________
Michael E. Jesanis Philip R. Sharp
s/Robert G. Powderly
______________________
Robert G. Powderly
NEP James S.Robinson
Treasurer
June 28, 2002
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: File No. 1-6564
Ladies and Gentlemen:
New England Power Company is a participant in the Electronic Data
Gathering and Retrieval Program.
Submitted herewith in electronic format for filing with the
Commission is an Annual Report for the period ended March 31, 2002 on
Form 10-K for New England Power Company which is required to file
a report pursuant to Section 13 of the Securities Exchange Act of 1934.
This annual report is filed with you pursuant to Rule 13(a)-1
of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
Very truly yours,
s/James S. Robinson