Back to GetFilings.com
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 the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8858
UNITIL CORPORATION
(Exact name of registrant as specified in its charter)
New Hampshire 02-0381573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
216 Epping Road, Exeter, New Hampshire 03833-4571
(Address of principal executive office (Zip Code)
Registrant's telephone number, including area code: (603) 772-0775
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
Common Stock, No Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendments to this Form 10-K [ X ]
Based on the closing price of March 1, 1996, the aggregate market
value of common stock held by non-affiliates of the registrant was
$103,580,088.
The number of common shares outstanding of the registrant was 4,338,433 as of
March 1, 1996.
Documents Incorporated by Reference:
Portions of the Proxy Statement relating to the Annual Meeting of
Shareholders to be held April 18, 1996, are incorporated by reference
into Part III of this Report.
UNITIL CORPORATION
FORM 10-K
For the Fiscal Year Ended December 31, 1995
Table of Contents
Item Description Page
PART I
1 Business
General.............................................. 2
Competition and Industry Restructuring............... 3
Rates and Regulation................................. 5
Resource Planning.................................... 6
Energy Requirements.................................. 7
Fuel Supplyz......................................... 8
Gas Operations and Supply............................ 8
Environmental Matters................................ 9
Capital Requirements................................. 9
Financing Activities................................. 10
Employee Relations................................... 10
Executive Officers of Registrant..................... 10
2 Properties............................................... 11
3 Legal Proceedings........................................ 12
4 Submission of Matters to a Vote of Securities Holders.... 13
PART II
5 Market for Registrant's Common Equity and Related Stockholders
Matters.................................................... 14
6 Selected Financial Data.................................. 14
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................... 15
8 Financial Statements and Supplementary Data.............. 23
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure....................................... 41
PARTIII
10 Directors and Executive Officers of the Registrant..... 42
11 Executive Compensation................................. 42
12 Security Ownership of Certain Beneficial Owners and Management42
13 Certain Relationships and Related Transactions......... 42
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 43
Signatures.................................................. 50
Schedule VIII Valuation and Qualifying Accounts and Reserves 52
Exhibit 10.2 E&H Labor Agreement effective June 25, 1995
Exhibit 11.1 Computation in Support of Earnings per Share
Exhibit 12.1 Computation in Support of Ratio of Earnings to Fixed Charges
Exhibit 21.1 Subsidiaries of Registrant
Exhibit 27.0 Financial Data Schedule
Exhibit 28.1 Form 11-K Annual Report of the UNITIL Corporation Tax
Deferred Savings and Investment Plan for the year ended
December 31, 1995
Exhibit 99.1 1996 Proxy Statement
PART I
Item 1. Business.
General
Unitil Corporation (the Company), a registered public utility
holding company, was incorporated under the laws of The State of New
Hampshire on September 7, 1984. Through Concord Electric Company
(CECo), Exeter & Hampton Electric Company (E&H), Fitchburg Gas and
Electric Light Company (FG&E) and Unitil Power Corp. (Unitil Power),
all of which are wholly owned utility subsidiaries of the Company, the
Company's principal business is the purchase, transmission,
distribution and sale of electricity at retail, and the distribution
and sale of natural gas at retail by FG&E. The Company was initially
incorporated in connection with a business combination between CECo
and E&H, which became subsidiaries of the Company on January 23, 1985
through a share exchange. Prior to this share exchange, the Company
conducted no business operations and had no assets. FG&E became a
wholly owned subsidiary of the Company by a "pooling of interests"
merger between FG&E and the Company on April 28, 1992. Unitil Power, a
New Hampshire corporation incorporated on October 9 , 1984, is the
wholesale supplier of electricity to CECo and E&H. The Company has
three additional subsidiaries: Unitil Realty Corp. (Unitil Realty),
Unitil Resources, Inc. (Unitil Resources) and Unitil Service Corp.
(Unitil Service). The Company's principal executive office is located
at 216 Epping Road, Exeter, New Hampshire 03833-4571. (Telephone (603)
772-0775)
CECo, a New Hampshire corporation incorporated in 1901, is engaged
in the purchase, transmission, distribution and sale of electricity at
retail to approximately 26,350 customers in the City of Concord, which
is the state capital, and twelve surrounding towns, all in New
Hampshire. CECo's service area consists of approximately 240 square
miles in the Merrimack River Valley of south central New Hampshire.
The service area includes the City of Concord and major portions of
the surrounding towns of Bow, Boscawen, Canterbury, Chichester, Epsom,
Salisbury and Webster, and limited areas in the towns of Allenstown,
Dunbarton, Hopkinton, Loudon and Pembroke.
CECo serves residential, commercial and industrial customers. The
State of New Hampshire's government operations are located within
CECo's service area, including the executive, legislative, judicial
branches and offices and facilities for all major state government
services. In addition, CECo's service area is a retail trading center
for the north central part of the state and has over sixty diversified
businesses relating to insurance, printing, electronics, granite,
belting, plastic yarns, furniture, machinery, sportswear and lumber.
Of CECo's 1995 retail electric revenues, approximately 34% was derived
from residential sales, 52% from commercial and non-manufacturing
sales, 12% from industrial/manufacturing sales and 2% from other
sales.
E&H, a New Hampshire corporation incorporated in 1908, is engaged
in the purchase, transmission, distribution and sale of electricity at
retail to approximately 37,120 customers in Exeter and in all or part
of seventeen surrounding towns, all in New Hampshire. E&H's service
area consists of approximately 168 square miles in southeastern New
Hampshire. The service area includes all of the towns of Atkinson,
Danville, East Kingston, Exeter, Hampton, Hampton Falls, Kensington,
Kingston, Newton, Plaistow, Seabrook, South Hampton and Stratham, and
portions of the towns of Derry, Brentwood, Greenland, Hampstead and
North Hampton.
E&H serves residential, commercial and industrial customers.
Commercial and industrial customers are quite diversified and include
retail stores, shopping centers, motels, farms, restaurants, apple
orchards and office buildings, as well as manufacturing firms engaged
in the production of sportswear, automobile parts and electronic
components. It is estimated that there are over 150,000 daily summer
visitors to E&H's territory, which includes several popular resort
areas and beaches along the Atlantic Ocean. Of E&H's 1995 retail
electric revenues, approximately 47% was derived from residential
sales, 41% from commercial and non-manufacturing sales, 10% from
industrial/manufacturing sales and 2% from other sales.
FG&E, a Massachusetts corporation organized in 1852, is an
operating public utility providing electric and natural gas service in
the City of Fitchburg and several surrounding communities. FG&E's
service area encompasses approximately 170 square miles in north
central Massachusetts.
Electric service is supplied by FG&E to approximately 25,250
customers in the communities of Fitchburg, Ashby, Townsend and
Lunenburg. FG&E provides electric service to residential, commercial,
and industrial customers. FG&E's industrial customers include paper
manufacturing and allied products companies, rubber and plastics
manufacturers, chemical products companies and printing, publishing
and allied industries. Of FG&E's 1995 electric revenues, approximately
36% was derived from residential sales, 35% from commercial and
non-manufacturing sales, 28% from industrial/manufacturing sales and
1% from other sales.
Natural gas service is supplied by FG&E to approximately 15,000
customers in the communities of Fitchburg, Lunenburg, Townsend, Ashby,
Gardner and Westminster, all located in Massachusetts. Of FG&E's 1995
gas operating revenues, approximately 52% was derived from residential
sales, 24% from commercial sales, 11% from firm sales to industrial
customers, and 13% from interruptible sales (which are sales to
customers who possess alternative energy sources and who use gas on an
as-available basis). Approximately 30% of FG&E's industrial gas
revenue was derived from firm sales to paper manufacturing and allied
products companies. The industrial gas revenue was derived from firm
sales to fabricated metal products manufacturers, rubber and plastics
manufacturers, primary iron manufacturers and other miscellaneous
industries.
Natural gas sales in New England are seasonal, and the Company's
results of operations reflect this seasonality. Accordingly, results
of operations are typically positively impacted by gas operations
during the five heating season months from November through March of
the following year. Electric sales in New England are far less
seasonal than natural gas sales; however, the highest usage typically
occurs in the summer and winter months due to air conditioning and
heating requirements, respectively.
Unitil Power, a New Hampshire corporation incorporated in 1984, is
the full requirements wholesale supplier of electricity to CECo and
E&H. (See Energy Requirements and Regulation and Rates.)
Unitil Realty, a New Hampshire corporation incorporated in 1986,
was established to acquire real estate to support the growth and
expansion of the Company's utility and energy related business. Unitil
Realty, until February 1995, owned the Company's corporate
headquarters and related land located on Epping Road in Exeter, New
Hampshire. This property was taken by the State of New Hampshire,
through eminent domain, for the planned expansion of Route 101. (See
"Capital Requirements" under Item 1 of this report) UNITIL Realty did
purchase land in Hampton, New Hampshire during 1995, on which it is
currently constructing UNITIL's new corporate headquarters.
Unitil Resources, a New Hampshire corporation incorporated in
1993, provides consulting and other services on energy related matters
to non-affiliates. These services include power brokering, financial,
accounting, regulatory and related operational services.
Unitil Service, a New Hampshire corporation incorporated in 1984,
supplies centralized professional and support services to the Unitil
System of Companies.
Competition and Industry Restructuring
The current focus on restructuring the electric industry has been
building in recent years due to a variety of economic, social, and
political forces. They include legislative and regulatory changes,
technological advances and consumer demands for lower prices.
Competition at the wholesale level has existed for a number of
years, and has been increasing as a result of the passage of the
Energy Policy Act of 1992, initiatives in transmission pricing and
policy at the Federal Energy Regulatory Commission (FERC), and greater
contracting activity among utility and non-utility suppliers. As a
wholesale purchaser of electric energy for resale to customers,
wholesale competition has provided the Company with many opportunities
for achieving significant power supply savings for its customers. The
focus of industry restructuring has now shifted to the retail electric
market, however, where electricity is provided directly to the
ultimate users.
For many utilities this shift from natural monopoly to open
competition is causing dramatic changes in their traditional way of
doing business. Increasing competition is moving the industry towards
an unbundling of the traditional vertically integrated utility
structure into separate generation, transmission and distribution
activities. As the industry continues to unbundle into these separate
functional areas, it is likely that the transmission and distribution
of electricity will remain largely regulated as monopoly services,
while the generation and sale of energy will shift to open
competition.
For Unitil, preparation for and adaptation to a competitive
environment has long been part of the Company's business strategy.
Unitil has always been structured along functional business lines
reflecting a separation of its core distribution operations from its
market based energy acquisition and supply business. For over a
decade Unitil has managed and delivered competitively priced, market
based energy supplies to its customers, putting it "ahead of the
curve" as many utilities are now just beginning to struggle to make
this transition. As a result of this strategy, Unitil has a track
record of offering reliable energy services at prices that are now
among the lowest in our region. Further, as new competitive
opportunities emerge, Unitil is designing new services and pricing its
products to be the supplier of choice.
The Unitil Companies have received regulatory approval for the
Company's Energy Bank(TM) program. Energy Bank(TM) is an innovative
economic development program designed to bring low-cost energy to new
and expanding industrial customers. With rates in the range of 5
cents/KWH, this program offers electric energy at a price that is
equal to the national average industrial rate and is 40% below the
current average industrial rate in New England. In addition to
providing substantial benefits to new and expanding industrial
customers in the form of very competitive market pricing, Energy
Bank(TM) will also provide significant benefits to all the System's
customers in the form of local economic development activity, reduced
power costs, and lower costs to all customers through the issuance of
Power Dividends.
Unitil has also taken steps to prepare for competitive
opportunities in new, unregulated energy markets. On January 5, 1996,
Unitil filed an application on Form U-1 with the SEC to allow Unitil
Resources to engage in electric power, natural gas and other energy
commodity marketing at wholesale and at retail. Unitil Resources is
currently authorized to engage in the business of providing energy
related management and consulting services, including power brokering,
to entities outside the Unitil holding company system. Unitil
Resources will have to comply with any applicable federal and state
regulation on its activities in the wholesale and retail
electricity and natural gas markets, but will otherwise be free to
compete on an unregulated basis with other competitive energy
suppliers in the evolving competitive marketplace. Approval of this
request is expected in the spring of 1996.
Unitil continues to actively participate in industry, legislative
and regulatory proceedings on the issues of competition and industry
restructuring at both the federal and state levels, favoring a
reasonable and orderly transition to competition and more choice for
all customers.
Both the New Hampshire Public Utilities Commission ( the "NHPUC")
and the New Hampshire Legislature have been involved in discussions
and analysis relative to competition in the industry. Early in 1995,
in response to a petition by a power marketer seeking to sell to
certain industrial customers of an investor-owned New Hampshire
utility, the NHPUC ruled that utilities in New Hampshire do not have
exclusive franchise territories as a matter of law. This decision has
been appealed to the New Hampshire Supreme Court, where a decision is
now pending. In June 1995, New Hampshire Senate Bill 168 (SB 168),
was signed into law. SB 168 established a legislative committee to
consider changes in the structure of the electric utility industry and
directed the NHPUC to begin a retail wheeling pilot program. The
legislative committee and its subcommittees met regularly during the
summer and fall of 1995, and several members sponsored new
legislation, now actively under consideration, that would require
utility restructuring and retail customer choice as early as 1997.
The NHPUC issued its final guidelines on a retail wheeling pilot
program on February 28, 1996, requiring utility compliance filings by
March 15, 1996, and implementation on May 28, 1996.
During 1995, the MDPU concluded initial hearings in an
electric industry restructuring docket, and issued an order requiring
the three largest Massachusetts electric utilities to file
restructuring plans in February 1996, and the remaining Massachusetts'
electric utilities (including FG&E) to file restructuring plans three
months after the MDPU issues orders regarding the first three plans.
The three utilities filed plans on February 19, 1996, but the
Department subsequently decided to undertake a generic rulemaking
proceeding in order to establish consistent statewide ground rules for
industry restructuring. This process is expected to take several
months, culminating in utility compliance filings on October 6, 1996.
One aspect of the restructuring of the electric industry which
could have an adverse impact on the Company is the rate treatment
accorded by regulators to a utility company's potentially "stranded
costs", i.e., investments in electric generation facilities and
contractual obligations from purchased power contracts, which have a
fair market value, based upon current wholesale market conditions, which
is less than the book value of such assets or the contract price. To
the extent that regulators implement open retail competition and
resulting retail market rates are comparable to current wholesale
prices, and to the extent utilities are unable to recover such costs
from ratepayers or to mitigate such costs through expense reductions
or other means, such utilities may incur losses and may be forced to
write-down certain investments in connection with the restructuring of
the industry. The Company's subsidiaries which own relatively few electric
generation assets, rely more heavily than most other utilities on
competitively-acquired purchased power contracts subject to FERC
regulation, and offer retail rates that are among the lowest in the
New England region, but the financial impact, if any, on the Company
of regulatory treatment of stranded costs in industry restructuring is
impossible to predict at this time.
Although regulatory change with respect to natural gas utilities
has been much less active in 1995 than for electric utilities, the
Department issued an Order on March 15, 1996, clarifying its standards
for review of gas purchase contracting decisions by local gas
distribution companies. The Department has also ordered a
Massachusetts gas company subject to its jurisdiction to undertake a
pilot program on retail competition for residential customers, and the
Unitil companies are now participating on the committees which have
been set up to advise, develop and monitor the pilot program.
Although the Company cannot predict the outcome of these
legislative changes and regulatory proceedings, the Company believes
that increasing competition in the industry is inevitable. The Company
also believes that it is well positioned to respond positively to the
changing regulatory environment and the shift to more open
competition.
Rates and Regulation
The Company is registered with the Securities and Exchange
Commission (SEC) as a holding company under the Public Utility Holding
Company Act of 1935 (1935 Act), and it and its subsidiaries are
subject to the provisions of the 1935 Act. The Company and its
subsidiaries, where applicable, are subject to regulation by the
Federal Energy Regulatory Commission (FERC), the NHPUC and the MDPU
with respect to rates, adequacy of service, issuance of securities,
accounting and other matters. Unitil Power, as a wholesale utility, is
subject to rate regulation by the FERC. Both CECo and E&H, as retail
electric utilities in New Hampshire, are subject to rate regulation by
the NHPUC, and FG&E is subject to MDPU regulation with respect to gas
and electric retail rates, and FERC regulation with respect to New
England Power Pool (NEPOOL) interchanges and other wholesale sales of
electricity.
The revenues of the Company's three retail operating subsidiaries
are collected pursuant to rates on file with the NHPUC, the MDPU and,
to a minor extent, the FERC. In general, retail rates are comprised
of a base rate component, established during comprehensive base rate
cases, and various periodic rate adjustment mechanisms, which track
and reconcile particular expense elements with associated collected
revenues. The last comprehensive regulatory proceedings to increase
base rates for the Company's retail operating subsidiaries were in
1985 for CECo, 1984 for FG&E, and 1982 for E&H. The majority of the
System's utility operating revenues are collected under various rate
adjustment mechanisms, including revenues collected from customers for
fuel, purchased power, cost of gas, and demand-side management program
costs.
The Unitil System Agreement (System Agreement), as approved by the
FERC, governs wholesale sales by Unitil Power to its New Hampshire
retail distribution affiliates, CECo and E&H, and provides for
recovery by Unitil Power of all costs incurred in the provision of
service. Unitil Power has continued to adjust its wholesale rates
every six months in accordance with the System Agreement, and CECo and
E&H have continued to file corresponding semi-annual changes in their
retail fuel and purchased power adjustment clauses with the NHPUC for
approval.
FG&E also files a quarterly electric fuel charge and a
semi-annual gas adjustment factor with the MDPU for approval to adjust
its rates for changes in fuel and gas related costs. Although all of
FG&E's fuel costs and the largest portion of its purchased power costs
are fully recovered under the Department's Electric Fuel Charge
regulations, FG&E's electric generation entitlements are subject to
annual performance reviews. Performance targets are filed by FG&E in
advance and approved by the Department, and in January of each year
FG&E files data on actual unit performance for the prior November to
October period. The Department will investigate reasons why units
failed to meet target performance criteria, and has in some cases
disallowed recovery of replacement power costs for unplanned outages
which the Department deemed to be due to imprudent operations or
actions.
The NHPUC issued its final guidelines on a retail wheeling pilot
program on February 28, 1996, requiring utility compliance filings by
March 15, 1996, and implementation on May 28, 1996. The guidelines
provide that up to 3% of each utility's retail customer's will be
allowed to select from among competing electric supply providers and
have this supply delivered across the local utility system. All
utilities, including Unitil's New Hampshire based retail operating
companies, CECo and E&H, have filed plans with the Commission and
hearings are scheduled in early April. The Commission Guidelines
have, in some cases, raised legal and jurisdictional issues which
parties in the proceeding have tried to resolve through alternative
proposals and settlements in order to avoid protracted litigation.
The Unitil companies, on March 20, 1996, filed a settlement agreement
with the Office of the Consumer Advocate which, if accepted by the
NHPUC, would resolve the companies' key concerns regarding federal and
state ratemaking jurisdiction. Unitil's plans for the pilot program
involve CECo and E&H providing delivery services to customers
participating in the pilot within their own service areas, and Unitil
Resources offering competitive electric supply services to pilot
program customers throughout the entire state.
FG&E, the Company's combination gas and electric retail operating
subsidiary, has been incurring FERC-approved transition charges from
interstate pipeline suppliers, resulting from the transition to a
comprehensive set of new regulations under FERC Order 636. In June,
1994, the MDPU opened an investigation for the purpose of setting
standards for the recovery by Massachusetts gas utilities of FERC
Ordered 636-related transition costs billed by interstate pipeline
companies. On March 8, 1995, the MDPU issued its final Order in this
proceeding, which authorized and directed all gas utilities to recover
Order 636-related transition costs as incurred through the cost of gas
adjustment mechanism on a flat volumetric rate. Through the end of
1995, the amount of transition costs incurred by FG&E totaled
approximately $2.2 million. These costs have been recovered directly
from FG&E's gas customers through the cost of gas adjustment
mechanism. Based on estimates included in rate filings before the
FERC, and on other publicly available information, it is estimated
that FG&E may incur up to an additional $1.2 million of transition
costs in future years. FG&E expects full recovery of these costs
through billings to customers.
On May 2, 1995, Unitil made an application to the SEC on Form U-1
seeking renewed authority and approval for short-term bank borrowings
by Unitil and its subsidiaries and for renewed approval for and
operation of the Unitil System Companies' cash pooling and loan
arrangement. The SEC published the requisite notice with respect to
this filing on May 26, 1995. On July 11, 1995, the SEC approved
Unitil's application on this matter.
Resource Planning
Within both New Hampshire and Massachusetts state jurisdictions,
the Company's utility operating subsidiaries are subject to regulatory
review of their forecasting, planning, and long term resource
acquisition processes. The operating companies are required to file
resource planning documents and plans every two years, in accordance
with Integrated Resource Management (IRM) rules in Massachusetts and
the Integrated Resource Planning (IRP) process in New Hampshire.
Additionally, the operating companies are currently required to file
annually comprehensive Demand-Side Management (DSM)Program Plans with
their respective state regulatory commissions.
Electric Resource Planning
In New Hampshire, an IRP was filed with the NHPUC on April 30,
1994. The NHPUC approved the IRP on February 22, 1995. The 1995/96 DSM
Program Plan was filed with the NHPUC on February 1, 1995 and was
approved June 28, 1995, for implementation beginning on July 1, 1995.
In Massachusetts, FG&E filed its first IRM with the MDPU on
August 3, 1992. In January 1993, FG&E filed a Comprehensive Settlement
of Phase I of the IRM process. On November 15, 1993, FG&E made its
Phase III IRM filing, in which it proposed DSM programs for 1994-1995,
and supply side initiatives. On February 15, 1994, the MDPU approved
this filing, authorized the DSM programs to proceed through July 1995,
and approved the supply resources. A 12-month DSM Program Plan was
filed on April 7, 1995, covering the period from August, 1995 to July,
1996. This plan was approved on July 18, 1995.
Gas Resource Planning
The MDPU requires that gas companies file long term gas
forecasts and resource plans consistent with IRP principles, and
further requires that all contracts in excess of one year be filed for
approval in advance. FG&E filed a gas IRP on July 29, 1994. The MDPU
has initiated a review of FG&E's gas IRP, which is currently ongoing.
Anorder is expected in early 1996.
Energy Requirements
CECo, E&H, FG&E and Unitil Power are members of NEPOOL. Under the
NEPOOL Agreement, to which virtually all New England electric
utilities are parties, substantially all operation and dispatching of
electric generation and bulk transmission capacity in New England is
performed on a regional basis. The NEPOOL Agreement imposes generating
capacity and reserve obligations and provides for the use of major
transmission facilities and payments associated therewith. Each
company's capability responsibility under NEPOOL involves carrying an
allocated share of New England capacity requirements which is
determined for each six-month period based on regional reliability
criteria. Unitil Power, as the full requirements supplier to CECo and
E&H, had a capability responsibility as of December, 1995 of 224.85 MW
and a corresponding peak demand of 195.61 MW that occurred on July 14,
1995. FG&E's capability responsibility as of December, 1995 was 91.99
MW, with a corresponding peak demand of 79.69 MW that occurred on June
20, 1995.
To meet the needs of CECo and E&H, Unitil Power has contracted for
generating capacity and energy and for associated transmission
services as needed to meet NEPOOL requirements and to provide a
diverse and economical energy supply. Unitil Power's purchases are
from various utility and non-utility generating units using a variety
of fuels and from several utility systems in the U.S. and Canada. For
the twelve months ending December 31,1995, Unitil Power's energy needs
were provided by the following fuel sources: nuclear (32%), oil (21%),
coal (19%), gas (13%), wood and refuse (5%) , hydro (1%), and system
and other (9%).
FG&E meets its capacity requirements through ownership interests
and power purchase contracts. FG&E's purchases are from various
utility and non-utility generating units using a variety of fuels and
from several utility systems in the U.S. and Canada. For the twelve
months ending December 31, 1995, FG&E's energy needs, including
generation from joint-owned units, were provided from the following
fuel sources: nuclear (24%), oil (22%), wood (25%), hydro (4%), coal
(7%) and system and other (18%).
FG&E has a 4.5% ownership interest, or 20.12 MW, in an oil and
natural gas-fired generating plant in New Haven, Connecticut, which is
operated by The United Illuminating Company, the plants' majority
owner. FG&E also has a 0.1822% ownership interest, or 1.13 MW, in an
oil-fired generating plant in Yarmouth, Maine, which is operated by
Central Maine Power Company as the majority owner, and a 0.217%
ownership interest, or 2.5 MW, in the Millstone 3 nuclear unit
operated by Northeast Utilities, parent of the principal owners of
that unit. In addition, FG&E operates an oil-fired combustion turbine
with a current capability of 26.6 MW under a long-term financing
lease.
Fuel Supply
Oil. Approximately 22% of FG&E's and 21% of Unitil Power's
electric power in 1995 was provided by oil-fired units, some of which
are owned by FG&E. Most fuel oil used by New England electric
utilities is acquired from foreign sources and is subject to
interruption and price increases by foreign governments.
Coal. Approximately 7% of FG&E's and 19% of Unitil Power's 1995
requirements were from coal-burning facilities. The facilities
generally purchase their coal under long term supply agreements with
prices tied to economic indices. Although coal is stored both on-site
and by fuel suppliers, long term interruptions of coal supply may
result in limitations in the production of power or fuel switching to
oil and thus result in higher energy prices.
Nuclear. FG&E has a 0.217% ownership interest in Millstone Unit
No. 3 (the Unit). The Unit has contracted for certain segments of the
nuclear fuel production cycle through various dates. This cycle
includes, among other things, mining, enrichment and disposal of used
fuel. Contracts for various segments of the fuel cycle will be
required in the future, and their availability, prices and terms
cannot now be predicted.
Pursuant to the Nuclear Waste Policy Act of 1982, the participants
in Millstone 3 were required to enter into contracts with the United
States Department of Energy, prior to the operation of that Unit, for
the transport and disposal of spent fuel at a nuclear waste
repository. Under the Act, a national repository for nuclear waste was
anticipated to be in operation by 1998. FG&E cannot predict whether
the Federal government will be able to provide interim storage or
permanent disposal repositories for spent fuel.
Gas Operations and Supply
FG&E distributes gas purchased from domestic and Canadian
suppliers under long term contracts as well as gas purchased from
producers and marketers on the spot market. The diversity and
flexibility of supply reflects FG&E's commitment to securing a
reliable gas supply at the lowest possible cost. The following tables
summarize actual gas purchases by source of supply and the cost of gas
sold for the years 1993 through 1995:
Sources of Gas Supply
(Expressed as percent of total MMBtu of gas purchased)
Natural Gas: 1995 1994 1993
Domestic firm.................. 82.3% 81.9% 58.4%
Canadian firm.................. 5.6% 6.2% 11.0%
Domestic spot market........... 11.1% 9.0% 25.2%
Total natural gas.................. 99.0% 97.1% 94.6%
Supplemental gas................... 1.0% 2.9% 5.4%
Total gas purchases................ 100.0% 100.0% 100.0%
Cost of Gas Sold
1995 1994 1993
Cost of gas purchased and sold per MMBtu $3.03 $3.47 $3.78
Percent Increase (Decrease) from prior year(12.7)% (8.2)% 0.8%
Under Order 636, issued by the FERC in 1992, FG&E's former sole
supplier of pipeline services, TGP, was required to unbundle its
transportation services and its sales services. As a result, all Local
Distribution Companies (LDCs) now arrange for a portfolio of
transport, storage and supply contracts to meet customer requirements.
In 1993, FG&E added two long term purchases of gas supply that
replaced supplies previously provided by TGP. These contracts expire
on October 1999 and October 1996 respectively. The MDPU approved these
contracts in March 1994. FG&E also has underground storage contracts
which provide significant natural gas storage capacity. TGP also
provides FG&E with underground storage. FG&E has firm transportation
agreements with TGP for delivery of storage gas .
As a supplement to pipeline natural gas, FG&E owns a propane air
gas plant and has under a financial lease a liquefied natural gas
(LNG) storage and vaporization facility. These plants are used
principally during peak load periods to augment the supply of pipeline
natural gas.
Environmental Matters
The Company does not expect that compliance with environmental
laws or regulations will have a material effect on its business, or
the businesses of its subsidiaries. The Company does not know whether,
or to what extent, such regulations may affect it or its subsidiaries
by impinging on the operations of other electric and gas utilities in
New England.
Unitil Power and FG&E purchase wholesale capacity and energy from
a diverse group of suppliers using various fuel sources and FG&E has
ownership interests in certain generating plants. Some of the purchase
power contracts contain cost adjustment provisions that may allow the
supplier to pass through environmental remediation costs. The Company
has not been informed whether any of these suppliers are likely to
incur significant environmental remediation costs and, if so, which if
any such costs may be passed through.
The Company continues to work with federal and state environmental
agencies to assess the environmental contamination in the vicinity of
former gas manufacturing sites operated by Fitchburg Gas and Electric
Light Company, the Company's combination gas and electric operating
subsidiary. Based on information developed over the last several
years, it has been discovered that there is environmental
contamination at a former gas manufacturing plant in Fitchburg, MA
(the Sawyer Passway site). In December 1995 the Company accepted a
Tier 1B permit from the Massachusetts Department of Environmental
Protection (DEP) to address the site pursuant to the requirements of
the Massachusetts Contingency Plan. Further investigations are
necessary to assess the extent and nature of the contamination, and to
evaluate potential remedies. Reports on those investigations are due
to be filed with the DEP in early 1997. Because these investigations
are at an early stage management cannot, at this time, predict the
costs of future analysis and remediation. The costs of such
assessments and any remedial action determined to be necessary will
initially be funded from traditional sources of capital and recovered
from customers under a rate recovery mechanism approved by the MDPU.
The Company also has a number of liability insurance policies that may
provide coverage for environmental remediation at this site.
Capital Requirements
Net capital expenditures increased approximately $3.7 million in
1995 as a result of planned spending for utility system improvements,
as well as the taking by the State of New Hampshire of the Company's
current headquarters and the commencement of construction of a new
corporate headquarters. This increase in capital expenditures from
1994 to 1995 reflects increased spending of approximately $5.7
million, $2.3 million for normal utility system improvements and $3.4
million for the construction on a new corporate headquarters, offset
by proceeds of $2.0 million from the taking of the Company's corporate
headquarters.
In February 1995, Unitil's corporate headquarters, located in
Exeter, New Hampshire, was taken by the State of New Hampshire through
eminent domain in connection with the Route 101 highway expansion
project. As a result of this taking, the Company purchased land in
Hampton, New Hampshire, during 1995, and began construction of a new
corporate headquarters, which is scheduled for completion during the
summer of 1996.
In 1996, total capital expenditures are expected to approximate
$18.9 million. This projection reflects capital expenditures of
approximately $14.8 million for normal utility system expansions,
replacements and other improvements and capital expenditures of
approximately $4.1 million related to the completion of construction
of the new corporate headquarters.
Financing Activities
No long-term debt was issued by any of the Unitil System companies
during 1995, however, during both 1994 and 1993 various Unitil System
Companies completed private placements of long-term debt. The funds
generated by these transactions were primarily used to repay the
short-term indebtedness incurred by each system company to fund their
ongoing construction programs, and also to redeem higher coupon
long-term debt issues prior to their maturity. The impact of these
transactions has been to gradually lower the average cost of the
System's long-term debt portfolio.
The Company currently has unsecured committed bank lines for
short-term debt aggregating $10,000,000 with three banks for which it
pays commitment fees. At December 31, 1995, the unused portion of the
committed credit lines outstanding was $7,300,000. The average
interest rate on all short-term borrowings outstanding during 1995 was
6.59%.
Employee Relations
As of December 31, 1995, the Company and its subsidiaries had 324
full-time employees. The Company considers its relationship with its
employees to be good and has not experienced any major labor
disruptions since the early 1960's.
There are 120 employees represented by labor unions. In 1995, one
of Unitil's retail operating subsidiaries, E&H, reached a new three
year pact with its employees covered by a collective bargaining
agreement. In 1994, two of Unitil's retail operating subsidiaries,
CECo and FG&E, reached new three year pacts with their respective
employees covered by collective bargaining agreements. The agreements
provide for discreet salary adjustments, established work practices
and provided uniform benefit packages.
The Company and its subsidiaries, where applicable, have in effect
funded Retirement Plans and related Trust Agreements providing
retirement annuities for participating employees at age 65. The
Company's policy is to fund the pension cost accrued. (See Note 9 of
Notes to Consolidated Financial Statements contained in Part II Item
8. , page 35 .)
Executive Officers of the Registrant
The names, ages and positions of all of the executive officers of
the Company as of March 1, 1995 are listed below, along with a brief
account of their business experience during the past five years. All
officers are elected annually by the Board of Directors at the
Directors' first meeting following the annual meeting which is held on
the third Thursday in April, or at a special meeting held in lieu
thereof. There are no family relationships among these officers, nor
is there any arrangement or understanding between any officer and any
other person pursuant to which the officer was selected. Officers of
the Company also hold various Director and Officer positions with
subsidiary companies.
NAME, AGE BUSINESS EXPERIENCE
and Position During Past 5 years
PETER J. STULGIS, 45, MR. STULGIS HAS BEEN A DIRECTOR
Chairman of the Board of of the Company since its
Directors and Chief incorporation in 1984, and
Executive Officer Chairman of the Board and Chief
Executive Officer since 1992.
From 1987 - 1992, Mr. Stulgis
was Executive Vice President and
Chief Financial Officer of the
Company.
MICHAEL J. DALTON, 55, MR. DALTON HAS BEEN A DIRECTOR,
President and President and Chief Operating
Chief Operating Officer Officer of the Company since its
incorporation in 1984.
GAIL A. SIART, 37, MS. SIART WAS PROMOTED TO CHIEF
Chief Financial Officer, Financial Officer in 1994. Ms.
Secretary and Treasurer Siart has been Secretary of the
Company since 1988 and Treasurer
since 1992. Prior to being
elected Treasurer in 1992, Ms.
Siart was the System's
Subsidiary Treasurer since 1988.
JAMES G. DALY, 38 MR. DALY WAS PROMOTED TO SENIOR
Senior Vice President Vice President of Unitil Service
Energy Resources in 1994. Mr. Daly was Vice
Unitil Service President of Unitil Service from
1992 to 1994, and Asst. Vice
President of Unitil Service from
1988 to 1992.
GEORGE R. GANTZ, 44 MR. GANTZ WAS PROMOTED TO SENIOR
Senior Vice President Vice President of Unitil Service
Business Development in 1994. Mr. Gantz was Vice
Unitil Service President of Unitil Service from
1989 to 1994, and Asst. Vice
President of Unitil Service from
1986 to 1989.
Item 2. Properties
CECo's distribution service center building and adjoining
administration building, totaling 37,560 square feet of office,
warehouse and garage area, are located on land in the City of Concord
owned by CECo in fee. CECo's seventeen electric distribution
substations constitute 94,400 KVA of capacity for the transformation
of electric energy from the 34.5 KV transmission voltage to primary
distribution voltage levels. The electric substations are, with one
exception, located on land owned by CECo in fee. The sole exception is
located on land occupied pursuant to a perpetual easement.
CECo has in excess of 39 pole miles of 34.5 KV electric
transmission facilities located, with minor exceptions, either on land
owned by CECo in fee or on land occupied pursuant to perpetual
easements. CECo also has 618 pole miles of overhead electric
distribution primary voltage lines and approximately 97 cable miles of
underground primary voltage lines. The electric distribution lines are
located in, on or under public highways or private lands pursuant to
lease, easement, permit, municipal consent, tariff conditions,
agreement or license, expressed or implied through use by CECo without
objection by the owners. In the case of certain distribution lines,
CECo owns only a part interest in the poles upon which its wires are
installed, the remaining interest being owned by telephone and
telegraph companies.
Additionally, CECo owns in fee 137.7 acres of land located on the
east bank of the Merrimack River in the City of Concord. Of the total
acreage, 81.2 acres are located within an industrial park zone, as
specified in the zoning ordinances of the City of Concord.
The physical properties of CECo (with certain exceptions) and
its franchises are subject to the lien of its Indenture of Mortgage
and Deed of Trust, as supplemented, under which the respective series
of First Mortgage Bonds of CECo are outstanding.
E&H's distribution and engineering service center building is
located on land owned by E&H in fee. E&H's fourteen electric
distribution substations, together with a 5,000 KVA mobile substation,
constitute 91,400 KVA of capacity for the transformation of electric
energy from the 34.5 KV transmission voltage to primary distribution
voltage levels. The electric substations are located on land owned by
E&H in fee.
E&H has in excess of 68 pole miles of 34.5 KV electric
transmission facilities located on land either owned or occupied
pursuant to perpetual easements. E&H also has 688 pole miles of
overhead electric distribution primary voltage lines and approximately
74 cable miles of underground primary voltage lines. The electric
distribution lines are located in, on or under public highways or
private lands pursuant to lease, easement, permit, municipal consent,
tariff conditions, agreement or license, expressed or implied through
use by E&H without objection by the owners. In the case of certain
distribution lines, E&H owns only a part interest in the poles upon
which its wires are installed, the remaining interest being owned by
telephone and telegraph companies.
Certain physical properties of E&H and its franchises are subject
to the lien of its Indenture of Mortgage and Deed of Trust, as
supplemented, under which the respective series of First Mortgage
Bonds of E&H are outstanding.
FG&E owns a propane gas plant and leases an LNG plant, both of
which are located on land owned by it in fee. The Company has entered
into agreements for joint ownership with others of one nuclear and two
fossil fuel generating facilities. At December 31, 1995, the electric
properties of the Company consisted principally of 70 miles of
transmission lines, 18 transmission and distribution substations with
a total capacity of 383,275 KVA and 656 miles of distribution lines.
Electric transmission facilities (including substations) and steel,
cast iron and plastic gas mains owned by the Company are, with minor
exceptions, located on land owned by the Company in fee or occupied
pursuant to perpetual easements. The Company leases its service
building, and its combustion turbine electric peaking generator and
LNG facility. (See Business - Electric Operations and Energy Supply
and Gas Operations and Supply above for additional information
regarding the Company's plants, facilities and gas mains and
services.)
Unitil Realty currently owns 12 acres of land in fee, which is
located in the Town of Hampton, New Hampshire. This land, which was
purchased during 1995, is the site of Unitil's future corporate
headquarters building. This facility, which began construction during
the fall of 1995, is scheduled to be completed during the summer of
1996, with occupancy by the Company to follow completion. The
Company believes that its facilities are currently adequate for their
intended uses.
Unitil Realty was, until February 13, 1995, the owner of the
Company's corporate headquarters and 36 acres of related land located
in the Town of Exeter, New Hampshire. On that date, the State of New
Hampshire (the "State") took title to and possession of the land and
building through eminent domain. The building is to be demolished in
connection with the State's Route 101 highway expansion. (See Capital
Requirements under Item 1. of this Report). The State of New
Hampshire is currently renting this facility back to the Company,
until the Company completes the construction of its new corporate
headquarters building.
Item 3. Legal Proceedings
In June, 1993, E&H was served with a complaint from Zeabrook
Associates, the owner of an apartment complex. In that complaint filed
in the New Hampshire Superior Court for Rockingham County, the owner
asserts that the Company improperly imposed a cash deposit requirement
for new residential customers in the claimant's apartment complex
resulting in lost rental income and damages to reputation. The Company
believes that these claims are entirely without merit, and it has
continued to defend itself against them. The likelihood of an
unfavorable outcome or extent of loss cannot be estimated at this
time.
The Company is also involved in other legal and administrative
proceedings and claims of various types which arise in the ordinary
course of business. In the opinion of the Company's management, based
upon information furnished by counsel and others, the ultimate
resolution of these claims will not have a material impact on the
Company's financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
Item 5. Market For the Registrant's Common Equity and Related
Stockholder Matters
Common Stock Data
Dividends Paid Per Common Share
1995 1994
1st Quarter $0.32 $0.31
2nd Quarter 0.32 0.31
3rd Quarter 0.32 0.31
4th Quarter 0.32 0.31
The Year $1.28 $1.24
Price Range of Common Stock
1995 1994
High/Ask Low/Bid High/Ask Low/Bid
1st Quarter 17 5/8 16 19 5/8 18 1/4
2nd Quarter 17 5/8 16 1/8 19 1/2 16 3/4
3rd Quarter 20 1/8 16 5/8 19 15 7/8
4th Quarter 21 3/8 19 1/8 18 1/4 16
ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
Consolidated Statements of
Earnings (000's)
Operating Income $14,225 $13,754 $14,066 $13,328 $12,358
Non-operating Expenses 217 64 62 94 626
Income Before Interest 14,008 13,690 14,004 13,238 11,732
Expense
Interest Expense, Net 5,639 5,652 6,404 6,822 7,796
Unsolicited Tender
Offer and Merger Expenses
(Net of Taxes) ---- ---- ---- (155) 1,571
Net Income 8,369 8,038 7,600 6,416 3,936
Dividends on 284 291 298 352 315
Preferred Stock
Net Income Applicable to
Common Stock $8,085 $7,747 $7,302 $6,064 $3,621
Balance Sheet Data (000's)
Utility Plant (original $190,177 $178,777 $171,540 $165,880 $160,775
cost)
Total Assets 211,702 204,521 201,509 172,348 170,390
Capitalization and
Short-term Debt:
Common Stock Equity 63,895 59,997 56,234 52,608 49,887
Preferred Stock 3,999 4,094 4,198 4,277 4,412
Long-Term Debt 63,505 65,580 57,378 62,041 60,442
Short-Term Notes 2,700 ---- 8,400 4,780 9,550
Payable
Total Capitalization 134,099 129,671 126,210 123,706 124,291
Capitalization Ratios:
Common Stock Equity 49% 46% 45% 43% 40%
Preferred Stock 3% 3% 3% 3% 4%
Long-Term & 48% 51% 52% 54% 56%
Short-Term Debt
Common Stock Data (000's)
Shares of Common Stock 4,330 4,268 4,205 4,152 4,119
(Year-End)
Shares of Common Stock 4,299 4,234 4,181 4,133 4,115
(Average)
Per Share Data
Earnings Per Average $1.88 $1.83 $1.75 $1.50 $0.50
Share
Dividends Paid Per $1.28 $1.24 $1.15 $1.10 $1.04
Share
Book Value Per Share $14.76 $14.06 $13.37 $12.67 $12.11
Electric and Gas
Statistics
Electric Sales-(MWH) 1,401,292 1,358,165 1,303,326 1,260,747 1,230,049
Customers Served-Year End 88,316 86,782 85,383 85,131 84,222
Gas Sales-(000's of Therms) 22,303 23,057 22,763 23,281 20,394
Customers Served-Year End 14,846 15,012 15,340 15,514 15,713
Note: The above data have been combined and restated to reflect the
merger of FG&E into the Unitil System and the two-for-one stock split
that occurred in 1992.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Earnings and Dividends
Unitil's earnings were $1.88 per common share for the year ending
December 31, 1995, an increase over the prior year record earnings per
share achieved in 1994 and 1993 of $1.83 and $1.75, respectively. The
average return on common equity in 1995 was 13.1%. 1995's earnings'
performance primarily reflects increased electric base revenue from
higher energy sales by Unitil's retail operating companies as well as
the continued ability to effectively manage and control the System's
operating costs.
In 1995, Unitil continued its history of steadily increasing its
dividend. Common stock dividends in 1995 were $1.28 per share, an
increase of 3.2% over the 1994's annual dividend and a dividend payout
ratio of 68%. At its January 1996 meeting, the Unitil Board of
Director's increased the quarterly dividend by 3.1% to $0.33 per
share, resulting in the current effective annualized dividend of $1.32
per share.
Year in Review
The System's total electric base revenue was up by 2.5% in 1995
due to an overall increase in kilowatt-hour sales and kilowatt billing
demands of 3.2% and 4.4%, respectively. This increase was mainly due
to continuing growth in the demand for energy by the System's largest
industrial and commercial customers. In 1995, kilowatt-hour sales grew
by 7.9% to this group of customers. In addition, extreme seasonal
weather patterns in 1995 also played a significant role on sales to
the more weather-sensitive residential and commercial customer groups.
In the third quarter, electric sales used for cooling purposes was
supported by one of the hottest third quarters on record in New
England. In contrast, there was a significant decline in
weather-sensitive energy sales during the first quarter of the year,
during one of the mildest winter heating seasons in 30 years. The
weather in this quarter, as measured by heating degree days, was 16%
warmer than the same period last year. As a result, electric
kilowatt-hour sales to residential customers, whose usage was impacted
most by the mild first quarter, remained relatively unchanged from the
prior year.
The following table details total kilowatt -hour sales in each of
the last three years by customer group:
KWH Sales (000's)
1995 1994 1993
Residential 507,233 507,071 495,395
Commercial 381,292 374,769 375,413
Large Commercial/Industrial 500,945 464,357 419,989
Other Sales 11,822 11,968 12,053
Total KWH Sales 1,401,292 1,358,165 1,302,848
The mild winter in the first quarter of 1995 also had a negative
impact on gas sales for the year. In 1995, gas base revenue decreased
by 3.3% due to lower gas firm therm sales compared to the prior year.
The bulk of the decrease in firm therm sales was caused by a decrease
of more than 6% in sales to residential customers, reflecting the
extremely mild winter heating season. The following table details
total firm therm sales in each of the last three years by customer
group:
Firm Therm Sales (000's)
1995 1994 1993
Residential 12,523 13,345 13,399
Commercial 6,208 5,892 5,642
Industrial 3,572 3,820 3,722
Total Therm Sales 22,303 23,057 22,763
With more normal winter weather, growth of both electric and gas
sales in the first quarter of 1996 should show marked improvement over
1995. In addition, electric energy sales to industrial and commercial
customers are also expected to continue to increase in 1996 as new
businesses look to Unitil for their energy services and existing
customers expand their operations. In particular, the Company will be
aggressively marketing its Energy BankTM program throughout 1996.
Energy BankTM is an innovative economic development program designed
to bring low-cost energy to new and expanding industrial customers.
With rates in the range of 5 cents/KWH this program offers electric
energy at a price that is equal to the National Average industrial
rate and is 40% below the current average industrial rate in New
England.
The System's operations-related costs (not including fuel,
purchased power and conservation program costs, which are normally
recovered from customers through periodic cost recovery adjustment
mechanisms) were relatively unchanged in 1995 compared to 1994,
reflecting the continued success of the Company's disciplined approach
to cost management practices and procedures. Local property taxes
increased 13.2% in1995, compared to prior year levels, mainly
reflecting annual property tax increases on utility property.
OPERATING REVENUES
The following Table compares the major components of Operating
Revenues for 1995, 1994 and 1993.
Operating Revenue ($000's)
1995 1994 1993
Base Electric Revenue $45,458 $44,381 $43,406
Fuel and Purchased Power 90,558 88,103 88,001
Conservation Program Costs 2,084 1,613 1,348
Total Electric Revenue 138,099 134,097 132,755
Base Gas Revenue 7,105 7,348 7,332
Cost of Gas 8,202 9,935 10,066
Interruptible Revenue 2,323 1,412 1,088
Total Gas Revenue 17,630 18,695 18,486
Other Revenue 941 625 368
Total Operating Revenue $156,670 $153,416 $151,609
Electric Operating Revenue increased by approximately $4.0
million, or 3%, in 1995 compared to 1994. Total electric operating
revenue is comprised of electric base revenue, fuel and purchased
power revenue and conservation and load management program revenue.
Fuel and purchased power revenue are collected from customers through
the operation of periodic cost recovery adjustment mechanisms. Changes
in this component of operating revenue do not affect net income as
they normally mirror corresponding changes in fuel and purchased power
costs. Conservation and load management program revenue is also
collected from customers through a periodic cost recovery mechanisms,
reflecting underlying changes in conservation and load management
program costs. Electric base revenue is that portion of electric
operating revenue that has a direct impact on net income. In 1995,
electric base revenue rose by approximately $1.0 million. This 2.5%
increase in electric base revenue was due to the continued growth in
the System's electric energy sales to its customers.
In 1994, the System's electric operating revenue increased by
approximately $1.3 million, or 1% with the electric base revenue
portion increasing by approximately 2.2%. This increase in electric
base revenue in 1994, compared to 1993, was due to the growth in the
System's total electric kilowatt-hour sales and kilowatt billing
demands of 4.2% and 3.3%, respectively. Partially offsetting this
comparative year-over-year increase in electric base revenue was the
full-year impact of a voluntary base rate reduction that was
implemented by the Company's Massachusetts retail operating subsidiary
in December 1993.
Gas Operating Revenue decreased by about $1.1 million, or 5.7%, in
1995 compared to 1994. Gas operating revenue is comprised of three
components: cost of gas revenue, interruptible revenue and gas base
revenue. Cost of gas revenue is collected from customers through the
operation of a cost of gas adjustment mechanism. Changes in this
component of gas operating revenue does not affect net income as it
reflects corresponding changes in gas supply costs. Interruptible
revenue increased by about $900,000, an increase of more than 64%, due
to very favorable spot market prices for gas in 1995. Margins earned
on interruptible gas sales are used to directly lower rates to firm
customers through the cost of gas adjustment mechanism and do not
directly impact the Company's net income. Gas base revenue is that
portion of gas operating revenue that has a direct impact on net
income. In 1995, gas base revenue decreased approximately $243,000
based on an overall decrease of 3.3% in firm therm sales, due to an
extremely mild heating season.
In 1994, total gas operating revenue increased by about $200,000,
or 1%, as compared to 1993. Interruptible revenue increased more than
29%, reflecting an improvement in the competitive pricing of gas a
fuel choice for duel-fuel interruptible customers in 1994, as compared
to 1993. Gas base revenue increased slightly in 1994 due to an
increase of 1.3% in therm sales to firm customers. Partially
offsetting this comparative year-over-year increase in gas base
revenue was a full year impact of a voluntary base-rate reduction that
was implemented by the Company's Massachusetts retail operating
subsidiary in December 1993.
Other Revenue of $940,954 in 1995 and $624,560 in 1994 was
principally derived from Unitil Resources, the Company's energy
consulting subsidiary, which began providing consulting services to
non-affiliate companies in mid-1993. These consulting services have
chiefly related to the provision of administrative, management, and
power brokering services. One of Unitil Resources principal customers
terminated its service agreement with the Company as of December 31,
1995, which will reduce Unitil Resource's contributions to earnings in
1996, unless new agreements are entered into to replace the revenue
that was billed under this former agreement.
OPERATING EXPENSES
Fuel and Purchased Power reflects the cost of fuel used in
electric generation and wholesale energy and capacity purchased to
meet the Unitil System's electric energy requirements. Fuel and
purchased power expenses (normally recoverable from customers through
periodic cost recovery adjustment mechanisms) increased $2.0 million,
or 2.2% in 1995 compared to 1994. The change reflects an increase in
the System's total energy requirements in 1995, partially offset by
reduction in the average unit cost of the System's power supply
portfolio. Power supply markets continued to be very competitive in
1995, providing many opportunities to achieve cost savings through
active participation in the market and management of the System's
resource portfolio. The combined resource portfolio of the Unitil
System is comprised of a variety of power supply sources, including
owned generation, utility purchase power contracts and purchases from
non-utility generators. The Unitil System's total energy supply
resources for 1995 were comprised of: 16% from subsidiary-owned
generation; 61% from various utility-purchased power contracts; and
23% representing purchases from non-utility generation units.
In 1994 compared to 1993, fuel and purchase power expenses were
relatively unchanged reflecting favorable pricing of existing
long-term power supply commitments and competitive short-term power
supply markets.
Purchased Gas reflects gas purchased and made to supply the
System's total gas energy requirements. Purchased Gas decreased by
approximately $617,000 or 5.5% in 1995 as compared to 1994.
Significant decreases in gas prices due to favorable gas supply
markets more than offset the 10.5% increase in therms purchased
(including gas purchased for interruptible sales). Purchased Gas
increased by almost $44,000, or 0.4% in 1994 as compared to 1993,
based on an increase of 7.2% in therms purchased, offset by a lower
unit cost of gas. Purchased Gas is normally recoverable from customers
through the cost of gas adjustment mechanism.
Under Order 636, the Federal Energy Regulatory Commission (FERC)
has allowed gas pipeline suppliers to recover prudently incurred costs
resulting from the transition into a deregulated environment. The
Company's combination gas & electric utility operating subsidiary, has
been incurring FERC-approved transition charges from its natural gas
pipeline supplier since 1992. Through the end of 1995, the amount of
transition costs incurred by the Company totaled approximately
$2,200,000. These costs are being recovered directly from gas
customers customers through the cost of gas adjustment mechanism. On
the basis of estimates included in rate filings before the FERC and
other publicly available information, the Company currently estimates
that it may incur up to an additional $1,200,000 of transition costs
in future years. The Company expects full recovery of these costs
through billings to customers.
Operation and Maintenance expense increased by about $900,000, or
4.2% in 1995 compared to 1994. This increase primarily reflects higher
conservation and load management program expenditures (which are
recoverable from customers through periodic cost recovery mechanisms).
In 1995, expenditures on this component of operation and maintenance
expenses was over $2.1 million -- a 30% increase over 1994's
conservation and load management program expenditure level. Excluding
these costs, the System's total operating and maintenance costs were
relatively unchanged in 1995 compared to 1994. This performance
primarily reflects the success of the Company's disciplined approach
to cost management practices and procedures.
In 1994, Operation and Maintenance expense increased by almost
$900,000 million, or 4.3%. Almost one-third of the increase in
Operating and Maintenance was due to a 20% rise in expenditures on
demand-side management and conservation programs during 1994, as
compared to 1993. The remaining increase in 1994's Operating and
Maintenance reflects modest overall growth of about $500,000, or 2.7%
in the System's operation and maintenance costs. The majority of this
increase was due to extensive gas distribution system maintenance and
repairs conducted in 1994.
DEPRECIATION, AMORTIZATION and TAXES
Depreciation and Amortization expense increased more than 3% for
both 1995 and 1994 over the prior year due primarily to a higher level
of plant in service.
Amortization of the Cost of Abandoned Properties principally
relates to the abandonment of an investment in the Seabrook Nuclear
Power Plant by the Company's Massachusetts retail operating
subsidiary. A portion of the former investment in this project is
being recovered in rates to electric customers as allowed by the
Massachusetts Department of Public Utilities.
Federal and State Income Taxes remained relatively unchanged in
1995 compared to 1994 despite an increase in net income before taxes
of approximately $309,000, or 2.5%. This result primarily reflects
non-recurring tax benefits realized by the Company from a donation of
land to the Park 2000 project in Fitchburg, Massachusetts and the tax
loss realized on the State of New Hampshire's taking by eminent domain
of the Company's corporate headquarters in Exeter, New Hampshire.
Federal and State Income Taxes increased by $462,000 or 12.5% in 1994
due to higher net income before taxes of approximately $900,000.
Local Property Taxes increased $353,956, or 13.2%, in 1995. This
increase mainly reflects the annual property tax increases set by
local communities. Local Property taxes increased in 1994, compared to
1993 by 14.4%.
NON-OPERATING EXPENSES
For 1995, Non-Operating Expenses increased by approximately
$152,700, primarily reflecting a $141,000 non-operating loss as a
result of the State of New Hampshire's taking by eminent domain of the
Company's corporate headquarters in Exeter, New Hampshire.
INTEREST EXPENSE
Interest Expense, Net remained relatively unchanged in 1995 over
1994, as interest income and reduced short-term borrowing costs
offset increased long-term debt related interest costs. Higher
long-term debt interest costs in1995, compared to the prior year,
reflect the conversion of short-termdebt into long-term debt in late
1994 by the Company's New Hampshire retail operating subsidiaries.
Interest Expense decreased approximately 12% in 1994 compared to
1993, due primarily to the refinancing of long-term debt at lower
interest rates. Also contributing to lower interest costs was the
general decline in short-term borrowing costs during this period.
CAPITAL REQUIREMENTS AND LIQUIDITY
The Unitil System companies require capital for the acquisition of
property, plant and equipment in order to improve, protect, maintain
and expand their electric and gas operating systems. Capital necessary
to meet these requirements are derived primarily from the Company's
retained earnings and through the System's Dividend Reinvestment and
Common Share Purchase Plan. When internally-generated funds are not
available, it is the Company's policy to borrow interim funds on a
short-term basis to meet the capital requirements of its subsidiaries
and, when necessary, to repay short-term debt through the issuance of
permanent financing on an individual company basis. The size and
timing of such financings depend on developments in the securities
markets, the ability to meet certain financing covenants and the
receipt of appropriate regulatory approval. The Company attempts to
maintain a conservative capitalization structure, which contributes to
both the stability of Unitil and its ability to market new securities.
The Company has been able to access the financial markets to meet its
capital requirements and does not anticipate a change in its access
to, or the availability of, capital in the coming year.
Operating Activities (in $000's):
1995 1994 1993
Net Cash Provided by
Operating Activities $17,018 $16,349 $12,989
Cash flow from operations increased by $0.7 million in 1995 after
increasing by $3.4 million in 1994. These larger cash flow balances in
recent years reflect increased earnings by the Company and changes in
its working capital requirements, as detailed in the Consolidated Cash
Flow Statements.
Investing Activities (in $000's):
1995 1994 1993
Net Cash Used in Investing Activities $12,645 $8,943 $7,714
Cash flow from investing activities increased approximately $3.7
million in 1995 as a result of planned spending for utility system
improvements, as well as the State of New Hampshire's taking by
eminent domain of the Company's current headquarters and the
associated commencement of construction of a new corporate
headquarters. Total capital expenditures increased by $5.7 million in
1995, to $14.6 million, reflecting increased spending of approximately
$2.3 million for normal utility system improvements and $3.4 million
for the construction on a new corporate headquarters. These increases
in capital expenditures were offset by proceeds of $2.0 million from
the taking of the Company's corporate headquarters.
In February 1995 Unitil's corporate headquarters located in
Exeter, New Hampshire was taken by the State of New Hampshire through
eminent domain, in connection with the State's Route 101 highway
expansion project. While the impact of this transaction has been fully
recognized in the financial results for 1995, Unitil is currently
appealing the valuation placed upon its land and building by the State
during the taking process and is seeking additional compensation. As a
result of this taking, the Company purchased land in Hampton, New
Hampshire during 1995 and began construction of a new corporate
headquarters, which is scheduled for completion during the summer of
1996.
In 1996, total capital expenditures are expected to approximate
$18.9 million. This projection reflects capital expenditures of
approximately $14.8 million for normal utility system expansions,
replacements and other improvements and capital expenditures of
approximately $4.1 million related to the completion of construction
of its new corporate headquarters.
Financing Activities (in $000's):
1995 1994 1993
Net Cash Used In Financing Activities
Financing $4,785 $5,301 $5,789
The change in cash flows from financing activities in 1995
compared to 1994 primarily reflects increases in the System's
short-term borrowings and capitalized lease obligations at year end as
detailed in the Consolidated Cash Flow Statements. Short term
borrowing requirements are met through Unitil's committed credit
facilities with three different banks, which currently total $10
million.
No long-term debt was issued by any of the Unitil System companies
during 1995, however during both 1994 and 1993 Unitil's three retail
operating companies completed private placements of long-term debt.
The funds generated by these transactions were primarily used to repay
the short-term indebtedness incurred by each System company to fund
their ongoing construction programs, and to redeem higher coupon
long-term debt issues prior to their maturity. The impact of these
transactions has been to lower the average cost of the System's
long-term debt portfolio.
The Company does expect to undertake a long-term financing for
Unitil Realty Corp. during 1996, following the completion of
construction on its new corporate headquarters. The purpose of this
financing will be to repay short-term debt incurred to finance
construction of the building.
During 1995, the Company raised $1,009,499 of additional common
equity capital through the issuance of 58,457 shares of common stock
in connection with the Dividend Reinvestment and Tax Deferred Savings
and Investment plans. The Company raised $1,037,809 of additional
common equity capital in 1994 and $880,154 of additional equity
capital in 1993, through the respective issuance of 58,229 and 46,291
shares of common stock in connection with these plans. The Company
also issued shares during each of the years from 1993 through 1995 as
a result of the exercise of options granted under the Company's Key
Employee Stock Option Plan (KESOP). The total number of shares issued
under the KESOP plan in 1995, 1994 and 1993 were 3,291 shares, 4,110
shares and 6,966 shares, respectively.
REGULATORY MATTERS
At the state level in both New Hampshire and Massachusetts, and at
the federal level, recent regulatory activity has focused on
determining how to deregulate the retail sale of electricity to allow
for a more competitive market. As the trend continues towards
competition in the electric utility industry, Unitil has actively
participated in industry, legislative and regulatory proceedings on
the issues of competition and industry restructuring at both the
federal and state levels, favoring a reasonable and orderly transition
to competition and more choice for all customers.
Both the New Hampshire Public Utilities Commission (the "NHPUC")
and the New Hampshire Legislature have been involved in discussions
and analysis relative to competition in the industry. Early in 1995,
the NHPUC issued an order in response to a petition by a power
marketer seeking to sell to certain industrial customers of an
investor-owned New Hampshire utility. In that order the NHPUC ruled
that utilities in New Hampshire do not have exclusive franchise
territories as a matter of law and directed the marketer to seek a
declaratory order from the Federal Energy Regulatory Commission
regarding its proposed transactions. This decision has been appealed
to the New Hampshire Supreme Court. In June 1995 New Hampshire
Senate Bill 168 (SB 168), was signed into law. SB 168 establishes a
legislative committee to consider changes in the structure of the
electric utility industry. The act also directs the NHPUC to begin a
retail competition pilot program and to act within five months to
establish standards for utility discounts to industrial customers.
The legislative committee and its subcommittees met regularly during
the summer and fall of 1995. Several members sponsored new
legislation, including legislation currently being debated that would
require utilities to file restructuring plans with the NHPUC by June
1996, with statewide retail competition by June 1998. The NHPUC has
issued its preliminary guidelines for the retail wheeling pilot
program incorporating implementation by May 1996 and is expected to
issue its final guidelines in March 1996. The NHPUC issued its final
guidelines on discount rates for industrial customers in November
1995. The NHPUC aproved the Company's Energy BankTM program in
accordance with these guidelines in December 1995.
During 1995, the Massachusetts Department of Public Utilities (the
"MDPU") concluded the initial hearings in an electric industry
restructuring docket and has issued an order requiring the three
largest Massachusetts' electric utilities to file restructuring plans
in February1996 and the remaining Massachusetts' electric utilities
(including FG&E) to file restructuring plans three months after the
MDPU issues orders regarding the first three plans.
CECo, E&H, and FG&E have all received regulatory approval for the
Company's Energy BankTM program. Energy Bank is an innovative
economic development program designed to bring low-cost energy to new
and expanding industrial customers. With rates in the range of 5
cents/KWH this program offers electric energy at a price that is equal
to the National Average industrial rate and is 40% below the current
average industrial rate in New England. In addition to providing
substantial benefits to new and expanding industrial customers in the
form of very competitive and responsive market pricing, Energy Bank
will also provide significant benefits to all the System's customers
in the form of local economic development activity, reduced power
costs, and lower costs to all customers through the issuance of Power
Dividends.
The last formal regulatory hearings to increase base rates for
Unitil's three retail operating subsidiaries occurred in 1985 for
Concord Electric Company, 1984 for Fitchburg Gas and Electric Light
Company and 1981 for Exeter & Hampton Electric Company. A majority of
the System's operating revenues are collected under various periodic
rate adjustment mechanisms including: fuel, purchased power, cost of
gas and conservation program cost recovery mechanisms.
ENVIRONMENTAL
The Company continues to work with federal and state environmental
agencies to assess the environmental contamination in the vicinity of
former gas manufacturing sites operated by Fitchburg Gas and Electric
Light Company, the Company's combination gas and electric operating
subsidiary. Based on information developed over the last several
years, it has been discovered that there is environmental
contamination at a former gas manufacturing plant in Fitchburg, MA
(the Sawyer Passway site). In December 1995 the Company accepted a
Tier 1B permit from the Massachusetts Department of Environmental
Protection (DEP) to address the site pursuant to the requirements of
the Massachusetts Contingency Plan. Further investigations are
necessary to assess the extent and nature of the contamination, and to
evaluate potential remedies. Reports on those investigations are due
to be filed with the DEP in early 1997. Because these investigations
are at an early stage management cannot, at this time, predict the
costs of future analysis and remediation. The costs of such
assessments and any remedial action determined to be necessary will
initially be funded from traditional sources of capital and recovered
from customers under a rate recovery mechanism approved by the MDPU.
The Company also has a number of liability insurance policies that may
provide coverage for environmental remediation at this site.
NEW ACCOUNTING STANDARDS
Effective for fiscal years beginning after December 15, 1995,
Statement of Financial Accounting Standards No. 121 (SFAS 121)
"Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of," will require the Company to review
long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. It is expected that the adoption of this standard will
not have a material impact on the results of operations. financial
condition, or cash flows of the Company.
Effective for fiscal 1996, SFAS No. 123, "Accounting for
Stock-Based Compensation," is required to be implemented. This
statement provides the Company with the choice to continue with its
current method of accounting for stock-based compensation or to adopt
a new "fair value" method contained in SFAS No. 123. The Company
expects to continue with its current method of accounting for
stock-based compensation and to provide the SFAS No. 123 required
disclosures in the notes to the financial statements.
Item 8. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants
To the Shareholders of Unitil Corporation:
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Unitil Corporation and
subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, cash flows and changes in common
stock equity for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Unitil Corporation and subsidiaries as of December 31, 1995 and
1994, and the consolidated results of their operations and their
consolidated cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted
accounting principles.
We have also audited Schedule VIII of Unitil Corporation and
subsidiaries as of December 31, 1995 and for the three years then
ended included in Part IV Item 14(a)(2). In our opinion, the schedule
presents fairly, in all material respects, the information required to
be set forth therein.
GRANT THORNTON LLP
Boston, Massachusetts
February 9, 1996
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1995 1994
Utility Plant:
Electric $148,458,414 $142,311,415
Gas 27,220,705 25,652,522
Common 8,494,093 9,783,183
Construction Work in Progress 6,003,991 1,029,681
Utility Plant 190,177,203 178,776,801
Less: Accumulated Depreciation 60,682,742 57,203,799
Net Utility Plant 129,494,461 121,573,002
Other Property & Investments 42,448 137,698
Current Assets:
Cash 3,397,931 3,810,123
Accounts Receivable - Less
Allowance for Doubtful Accounts of 14,931,699 13,281,686
$622,596 and $573,849
Materials and Supplies 2,275,865 2,089,979
Prepayments 434,727 408,701
Accrued Revenue 2,577,715 2,292,297
Total Current Assets 23,617,937 21,882,786
Deferred Assets:
Debt Issuance Costs 885,258 955,931
Cost of Abandoned Properties 27,254,791 28,772,838
Prepaid Pension Costs 6,689,093 5,801,714
Other Deferred Assets 23,718,296 25,397,492
Total Deferred Assets 58,547,438 60,927,975
TOTAL $211,702,284 $204,521,461
(The accompanying Notes are an integral part of these statements.)
CAPITALIZATION AND LIABILITIES
December 31,
1995 1994
Capitalization:
Common Stock Equity $63,894,789 $59,997,198
Preferred Stock, 225,000 225,000
Non-Redeemable, Non-Cumulative
Preferred Stock, Redeemable, 3,773,900 3,868,600
Cumulative
Long-Term Debt, Less Current 62,211,000 65,288,231
Portion
Total Capitalization 130,104,689 129,379,029
Capitalized Leases, Less Current 3,732,947 3,377,389
Portion
Current Liabilities:
Long-Term Debt, Current Portion 1,294,000 292,090
Short-Term Debt 2,700,000 ----
Accounts Payable 14,565,075 12,491,041
Dividends Declared and Payable 170,796 152,210
Refundable Customer Deposits 2,237,851 2,482,779
Taxes Accrued 216,596 (345,243)
Interest Accrued 1,425,876 1,376,477
Capitalized Leases, Current Portion 741,832 460,152
Accrued and Other Current 2,202,096 2,546,878
Liabilities
Total Current Liabilities 25,554,122 19,456,384
Deferred Liabilities:
Investment Tax Credits 1,803,821 2,006,168
Other Deferred Liabilities 9,763,878 9,212,872
Total Deferred Liabilities 11,567,699 11,219,040
Deferred Income Taxes 40,742,827 41,089,619
Commitments and Contingencies (Note 10)
TOTAL $211,702,284 $204,521,461
(The accompanying Notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended December 31,
1995 1994 1993
Operating Revenues:
Electric $138,099,371 $134,096,627 $132,754,707
Gas 17,629,879 18,694,703 18,486,105
Other 940,954 624,560 368,010
Total Operating Revenues 156,670,204 153,415,890 151608822
Operating Expenses:
Fuel and Purchased Power 92,346,024 90,342,737 90,485,320
Gas Purchased for Resale 10,522,742 11,139,311 11,094,848
Operation and Maintenance 22,824,218 21,903,619 21,010,303
Depreciation 6,315,613 6,129,617 5,949,072
Amortization of Cost of 1,518,047 1,605,640 1,528,873
Abandoned Properties
Provisions for Taxes:
Local Property and Other 4,784,109 4,384,032 3,779,459
Federal and State Income 4,134,826 4,156,479 3,694,573
Total Operating Expenses 142,445,579 139,661,435 137,542,448
Operating Income 14,224,625 13,754,455 14,066,374
Non-Operating Expenses 216,860 64,108 62,084
Income Before Interest Expense 14,007,765 13,690,347 14,004,290
Interest Expense, Net 5,638,969 5,652,148 6,404,223
Net Income 8,368,796 8,038,199 7,600,067
Less Dividends on Preferred 283,749 291,543 297,577
Stock
Net Income Applicable to Common $8,085,047 $7,746,656 $7,302,490
Stock
Average Common Shares Outstanding 4,298,752 4,234,062 4,180,534
Earnings Per Average Common Share $1.88 $1.83 $1.75
Share
(The accompanying Notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1995 1994
Common Stock Equity
Common Stock, No Par Value (Authorized - $32,822,673 $31,751,984
8,000,000 shares; Outstanding - 4,329,585
and 4,267,837 Shares)
Paid in Capital - Stock Options 1,299,177 1,062,198
Retained Earnings 29,772,939 27,183,016
Total Common Stock Equity 63,894,789 59,997,198
Preferred Stock
CECo Preferred Stock, Non-Redeemable, 225,000 225,000
Non-Cumulative:
6% Series, $100 Par Value
CECo Preferred Stock, Redeemable, 215,000 230,000
Cumulative:
8.70% Series, $100 Par Value
E&H Preferred Stock, Redeemable, Cumulative:
5% Series, $100 Par Value 98,000 105,000
6% Series, $100 Par Value 168,000 175,000
8.75% Series, $100 Par Value 344,300 344,300
8.25% Series, $100 Par Value 406,000 436,000
FG&E Preferred Stock, Redeemable, Cumulative:
5.125% Series, $100 Par Value 1,076,600 1,108,100
8% Series, $100 Par Value 1,466,000 1,470,200
Total Preferred Stock 3,998,900 4,093,600
Long-Term Debt
CECo First Mortgage Bonds:
Series C, 6.75%, due January 15, 1998 1,584,000 1,584,000
Series H, 9.43%, due September 1, 2003 6,500,000 6,500,000
Series I, 8.49%, due October 14, 2024 6,000,000 6,000,000
E&H First Mortgage Bonds:
Series E, 6.75%, due January 15, 1998 511,000 518,000
Series H, 8.50%, due December 15, 2002 910,000 1,015,000
Series J, 9.43%, due September 1, 2003 5,000,000 5,000,000
Series K, 8.49%, due October 14, 2024 9,000,000 9,000,000
FG&E Long-term Notes:
Twelve year Notes, 8.55%, due March 31, 15,000,000 15,000,000
2004
Thirty year Notes, 6.75%, due November 19,000,000 19,000,000
30, 2023
Unitil Realty Promissory Note:
10.59%, due October 25, 1998 ---- 1,963,321
Total Long-Term Debt 63,505,000 65,580,321
Less: Long-Term Debt, Current Portion 1,294,000 292,090
Total Long-Term Debt, Less Current 62,211,000 65,288,231
Portion
Total Capitalization $130,104,689 $129,379,029
(The accompanying Notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1995 1994 1993
Cash Flows From Operating Activities:
Net Income $8,368,796 $8,038,199 $7,600,067
Adjustments to Reconcile
Net Income to Net Cash Provided
by Operating Activities:
Depreciation and 7,833,660 7,735,257 7,477,945
Amortization
Deferred Taxes (314,365) 257,630 (333,569)
Amortization of (202,347) (210,676) (216,698)
Investment Tax Credit
Amortization of Debt 72,252 63,882 118,602
Issuance Costs
Provision for Doubtful 889,320 717,735 837,589
Accounts
Loss on Taking of Land 140,698 ---- ----
and Building
Changes in Assets and Liabilities:
(Increase) Decrease In:
Accounts Receivable (2,539,334) (281,549) (301,328)
Materials and Supplies (185,886) 437,485 96,069
Prepayments and (913,405) (704,790) (567,381)
Prepaid Pension
Accrued Revenue (285,418) 1,354,192 (174,327)
Increase (Decrease) In:
Accounts Payable 2,074,034 (949,245) 1,501,166
Refundable Customer (244,928) 744,325 (160,621)
Deposits
Taxes and Interest 611,238 (396,700) (791,986)
Accrued
Other, Net 1,713,521 (456,528) (2,096,725)
Net Cash Provided by Operating
Activities 17,017,836 16,349,217 12,988,803
Cash Flows From Investing Activities:
Acqusition of Property, (14,644,963) (8,943,491) (7,713,542)
Plant & Equipment
Proceeds from Taking of 2,000,000 0 0
Land & Building
Net Cash Used in Investing
Activities (12,644,963) (8,943,491) (7,713,542)
Cash Flows from Financing Activities:
Proceeds From (Repayment 2,700,000 (8,400,000) 3,620,000
of) Short-Term Debt
Proceeds From Issuance of ---- 15,000,000 19,000,000
Long-Term Debt
Repayment of Long-Term Debt (2,075,321) (6,797,773) (23,662,436)
Dividends Paid (5,760,286) (5,514,283) (5,076,146)
Issuance of Common Stock 1,070,689 1,108,976 1,016,590
Retirement of Preferred (94,700) (104,100) (78,800)
Stock
Repayment of Capital Lease (625,447) (594,209) (608,569)
Obligations
Net Cash Used in Financing (4,785,065) (5,301,389) (5,789,361)
Activities
Net Increase (Decrease) in Cash (412,192) 2,104,337 (514,100)
Cash at Beginning of Year 3,810,123 1,705,786 2,219,886
Cash at End of Year $3,397,931 $3,810,123 $1,705,786
Supplemental Cash Flow Information:
Interest Paid $5,942,933 $5,518,586 $6,633,002
Federal Income Taxes Paid $3,435,000 $4,141,527 $3,930,700
Non-Cash Financing Activities:
Capital Leases Incurred $1,262,685 $237,243 $206,502
(The accompanying Notes are an integral part of these statements.)
CONSOLIDATED STATEMENTS OF
CHANGES IN COMMON STOCK EQUITY
Deferred
Stock
Common Option Retained
Shares Plan Earnings Total
Balance at January 01,1993 $29,626,419 $800,674 $22,180,481 $52,607,574
Net income for 1993 7,600,067 7,600,067
Dividends on preferred shares (297,577) (297,577)
Dividends on common shares-
at an annual rate of $1.15 per share (4,803,095) (4,803,095)
Stock Option Plan 177,425 177,425
Exercised stock options -
6,966 shares 136,436 (67,207) 69,229
Issuance of 46,291 common 880,154 880,154
shares (a)
Balance at December 31, 1993 30,643,009 910,892 24,679,876 56,233,777
Net income for 1994 8,038,199 8,038,199
Dividends on preferred shares (291,543) (291,543)
Dividends on common shares -
at an annual rate of $1.24 per share (5,243,516) (5,243,516)
Stock Option Plan 180,475 180,475
Exercised stock options -
4,110 shares 71,166 (29,169) 41,997
Issuance of 58,229 common 1,037,809 1,037,809
shares (a)
Balance at December 31, 1994 31,751,984 1,062,198 27,183,016 59,997,198
Net income for 1995 8,368,796 8,368,796
Dividends on preferred shares (283,749) (283,749)
Dividends on common shares -
at an annual rate of $1.28 per share (5,495,124) (5,495,124)
Stock Option Plan 248,127 248,127
Exercised stock options -
3,291 shares 61,190 (11,148) 50,042
Issuance of 58,457 common
shares (a) 1,009,499 1,009,499
Balance at December 31, 1995 $32,822,673 $1,299,177 $29,772,939 $63,894,789
(a) Shares sold and issued in connection with the Company's Dividend
Reinvestment and Stock Purchase Plan and Employee 401(k) Tax Deferred
Savings and Investment Plan (See Note 2).
(The accompanying Notes are an integral part of these statements.)
Note 1: Summary of Significant Accounting Policies
Nature of Operations--- The Company is registered with the Securities
and Exchange Commission (SEC) as a holding company (with subsidiaries
providing electric service in New Hampshire, electric and gas service
in Massachusetts and consulting services on energy related
matters)under the Public Utility Holding Company Act of 1935 (1935
Act), and it and its subsidiaries are subject to the provisions of the
1935 Act. In addition, the Company and several of its wholly-owned
utility operating subsidiaries; Concord Electric Company (CECo),
Exeter & Hampton Electric Company (E&H), Fitchburg Gas and Electric
Light Company (FG&E), and Unitil Power Corp. (Unitil Power), are
subject to regulation by various other agencies. With respect to their
rates and accounting; two of the retail subsidiaries, CECo and E&H,
are subject to regulation by the New Hampshire Public Utilities
Commission (NHPUC), FG&E is subject to regulation by the Massachusetts
Department of Public Utilities (MDPU) and Unitil Power is regulated by
the Federal Energy Regulatory Commission (FERC). CECo, E&H, FG&E and
Unitil Power conform with generally accepted accounting principles, as
applied in the case of regulated public utilities, and conform with
the accounting requirements and ratemaking practices of the regulatory
authorities having jurisdiction.
Principles of Consolidation --- Unitil Corporation (the Company) is
the parent company of the Unitil System (the System). The consolidated
financial statements include the accounts of the Company and all of
its wholly-owned subsidiaries. All material inter-company balances and
transactions have been eliminated in consolidation.
Use of Estimates --- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition --- The Company's operating subsidiaries record
electric and gas operating revenues based upon the amount of
electricity and gas delivered to customers through the end of the
accounting period.
Depreciation --- Depreciation provisions for the Company's utility
operating subsidiaries are determined on a group straight-line basis.
Provisions for depreciation were equivalent to the following composite
rates, based on the average depreciable property balances at the
beginning and end of each year: 1995 - 3.48 percent; 1994 - 3.49
percent, and 1993 - 3.53 percent.
Amortization of Abandoned Properties --- FG&E is recovering a portion
of its former investment in the Seabrook Nuclear Power Plant in rates
to its' customers through a Seabrook Amortization Surcharge as ordered
by the MDPU.
Federal Income Taxes --- Income taxes are accounted for in accordance
with the Statement of Financial Accounting Standards No. 109 ("SFAS
No. 109") "Accounting for Income Taxes." Under SFAS No. 109, deferred
tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities, and
are measured by applying tax rates applicable to the taxable years in
which those differences are expected to reverse.
The Tax Reduction Act of 1986 eliminated investment tax credits.
Investment tax credits generated prior to 1986 are being amortized,
for financial reporting purposes, over the productive lives of the
related assets.
New Accounting Standards --- Effective for fiscal years beginning
after December 15, 1995, Statement of Financial Accounting Standards
No. 121 (SFAS 121) "Accounting for the Impairment of Long-Lived Assets
and For Long-Lived Assets to be Disposed of," will require a review of
long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. It is expected that the adoption of this standard will
not have a material impact on the cash flows, financial condition or
results of operations of the Company.
Effective for fiscal 1996, SFAS No. 123, "Accounting for
Stock-Based Compensation," is required to be implemented. This
statement provides the Company with the choice to continue with its
current method of accounting for stock-based compensation or to adopt
a new "fair value" method contained in SFAS No. 123. The Company
expects to continue with its current method of accounting for
stock-based compensation and to provide the SFAS No. 123 required
disclosures in the notes to the financial statements.
Reclassifications --- Reclassification of amounts are made
periodically to previously issued financial statements to conform with
the current year presentation.
Note 2: Common Stock
New Shares Issued --- During 1995, the Company raised $1,009,499 of
additional common equity capital through the issuance of 58,457 shares
of common stock in connection with the Dividend Reinvestment and Stock
Purchase Plan and Employee 401(k)Tax Deferred Savings and Investment
Plan. The Dividend Reinvestment and Stock Purchase Plan provides
participants in the plan a method for investing cash dividends on the
Company's Common Stock and cash payments in additional shares of the
Company's Common Stock. The Employee 401(k)Tax Deferred Savings and
Investment Plan is described in Note 9 below. In 1994, the Company
raised $1,037,809 of additional common equity capital through the
issuance of 58,229 shares of common stock in connection with these
plans.
The Company maintains a Key Employee Stock Option Plan (KESOP ),
which provides for the granting of options to key employees. The
number of shares granted under this plan, as well as the terms and
conditions of each grant , are determined by the Board of Directors,
subject to plan limitations. All options granted under the KESOP
expire within ten years of the grant date, and no option can be issued
under the current plan after 1999. The plan provides for dividend
equivalents on options granted, which are recorded as compensation
expense. The total compensation expenses recorded by the Company with
respect to this plan were $248,127, $180,475 and $177,425 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Share Option Activity of the KESOP is presented in the following
table:
1995 1994 1993
Beginning Options 147,981 142,354 133,216
Outstanding & Exercisable
Options Granted 17,000 --- 9,000
Dividend Equivalents Earned 11,672 9,737 8,404
Options Exercised (3,291) (4,110) (6,966)
Options Canceled --- --- (1,300)
Ending Options Outstanding & 173,362 147,981 142,354
Exercisable
Range of Option Grant Price $12.11-$14.93 $12.11-$17.74 $12.11-$17.74
per Share
Restrictions on Retained Earnings ---Unitil Corporation has no
restriction on the payment of common dividends from retained earnings.
Its three retail distribution subsidiaries do have restrictions. Under
the terms of the First Mortgage Bond Indentures, CECo and E&H had
$5,402,238 and $8,031,846, respectively, available for the payment of
cash dividends on their common stock at December 31, 1995. Under the
terms of long-term debt Purchase Agreements, FG&E had $11,500,927 of
retained earnings available for the payment of cash dividends on its
common stock at December 31, 1995.
Note 3: Preferred Stock
Certain of the Unitil subsidiaries have redeemable Cumulative
Preferred Stock outstanding and one subsidiary, CECo, has a
Non-Redeemable, Non-Cumulative Preferred Stock issue outstanding. All
such subsidiaries are required to offer to redeem annually a given
number of shares of each series of Redeemable Cumulative Preferred
Stock and to purchase such shares that shall have been tendered by
holders of the respective stock. All such subsidiaries may redeem, at
their option, the Redeemable Cumulative Preferred Stock at a given
redemption price, plus accrued dividends.
The aggregate purchases of Redeemable Cumulative Preferred Stock
during 1995, 1994 and 1993 were: 1995 - $94,700; 1994 - $104,100; and
1993 - $78,800. The aggregate amount of sinking fund requirements of
the redeemable Cumulative Preferred Stock for each of the five years
following 1995 are $206,000 per year.
Note 4: Long-Term Debt
On October 14, 1994, CECo arranged for the private placement, at
par, of $6,000,000 of 30-year Series I First Mortgage Bonds, bearing a
fixed annual interest rate of 8.49% and maturing in 2024. The proceeds
of this financing were utilized to repay short-term indebtedness and
to redeem two higher coupon long-term debt issues prior to their
maturity. The redemption's included $930,000 of Series D First
Mortgage Bonds, 8.70%, due November 15, 2001, and $1,500,000 of Series
G First Mortgage Bonds, 9.85%, due October 15, 1997.
On October 14, 1994, E&H arranged for the private placement, at
par, of $9,000,000 of 30-year Series K First Mortgage Bonds, bearing a
fixed annual interest rate of 8.49% and maturing in 2024. The proceeds
of this financing were utilized to repay short-term indebtedness and
to redeem three higher coupon long-term debt issues prior to their
maturity. The redemption's included $1,235,000 of Series F First
Mortgage Bonds, 8.70%, due November 15, 2001, $930,000 of Series G
First Mortgage Bonds, 8.875%, due April 1, 2004, and $1,400,000 of
Series I First Mortgage Bonds, 9.85%, due October 15, 1997.
Under the terms of both CECo's Indenture of Mortgage and Deed of
Trust and the supplemental indenture thereto relating to long-term
debt, the sinking fund requirements of CECo's Series C Bonds may be
satisfied by certifying to the Mortgage Trustee net additional
property in lieu of making cash redemptions. In 1995 and 1994, CECo
satisfied its requirements with respect to its Series C Bonds by
certifying to the Mortgage Trustee net additional property. In 1995,
sinking fund payments relating to long-term debt amounted to $112,000.
Certain of the loan agreements contain provisions which, among
other things, limit the incurrence of additional long-term debt.
The aggregate amount of sinking fund requirements and normal
scheduled redemptions for each of the five years following 1995 are:
1996-$1,294,000; 1997-$1,294,000; 1998-$4,307,000; 1999-$2,290,000,
and 2000-$2,290,000.
The fair value of the Company's long-term debt is estimated based
on the quoted market prices for the same or similar issues, or on the
current rates offered to the Company for debt of the same remaining
maturities. In management's opinion, the carrying value of the debt
approximated its fair value at December 31, 1995 and 1994.
Note 5: Credit Arrangements
At December 31, 1995, the Company had unsecured committed bank
lines for short-term debt aggregating $10,000,000 with three banks for
which it pays commitment fees. At December 31, 1995, the unused
portion of the committed credit lines outstanding was $7,300,000. The
average interest rates on all short-term borrowings were 6.59% and
4.43% during 1995 and 1994, respectively.
Note 6: Leases
The Company's subsidiaries conduct a portion of their operations
in leased facilities and also lease some of their operations and
office equipment. FG&E has a facility lease for twenty-two years which
began in February 1981. The lease allows five, five-year renewal
periods at the option of FG&E. The equipment leases include a
twenty-five-year lease, which began on April 1, 1973, for a combustion
turbine and a liquefied natural gas storage and vaporization facility.
This lease provides for a ten-year renewal period at the option of
FG&E. In addition, FG&E leases some equipment under operating leases.
The following schedule of the leased property under capital leases
by major classes:
Asset Balances at
December 31,
Classes of Utility Plant 1995 1994
Electric $2,054,025 $2,054,025
Gas 726,329 726,329
Common 5,061,846 3,816,643
Gross Plant 7,842,200 6,596,997
Less: Accumulated Depreciation 3,367,421 2,759,456
Net Plant $4,474,779 $3,837,541
The following is a schedule by years of future minimum lease payments
and present value of net minimum lease payments under capital and
operating leases as of December 31, 1995:
Year Ending December 31, Capital Operating
1996 $1,087,343 $228,727
1997 846,578 258,369
1998 583,106 226,174
1999 559,785 190,618
2000 545,498 189,912
2001 - 2005 1,776,339 47,478
Total Minimum Lease Payments $5,398,649 $1,141,278
Less: Amount Representing 923,870
Interest
Present Value of Net Minimum $4,474,779
Lease Payments
Total rental expense charged to operations for the years ended
December 31, 1995, 1994 and 1993 amounted to $447,000; $320,000; and
$601,000, respectively.
Note 7: Income Taxes
The components of the Federal and State income tax provisions
reflected in the accompanying consolidated statements of earnings for
the years ended December 31, 1995, 1994 and 1993 were as follows:
1995 1994 1993
Federal:
Current $3,959,976 $3,497,311 $3,633,205
Deferred (298,192) 186,060 (179,080)
Amortization of (202,347) (210,676) (216,698)
Investment Tax Credits
Total Federal Tax 3,459,437 3,472,695 3,237,427
Provision
State:
Current 691,563 612,214 611,635
Deferred (16,174) 71,570 (154,489)
Total State Tax 675,389 683,784 457,146
Provision
Total Provision for Federal
and State Income Taxes $4,134,826 $4,156,479 $3,694,573
On January 1, 1993, the Company adopted the provisions of SFAS 109.
The adoption of SFAS No. 109 had no material effect on net earnings
for 1993. Federal Income Taxes have been provided as follows:
Year Ended December 31,
1995 1994 1993
Current Federal Tax Provision
Operating Income $3,959,976 $3,497,311 $3,633,205
Amortization of Investment
Tax Credits (202,347) (210,676) (216,698)
Total Current Federal
Tax Provision 3,757,629 3,286,635 3,416,507
Deferred Federal Tax Provision:
Accelerated Tax Depreciation 545,233 590,655 528,500
Abandoned Properties (578,255) (611,620) (582,378)
Allowance for Funds Used
During Construction
and Overheads (73,191) (73,192) (73,192)
Post Retirement Benefits (19,941) (27,162) (25,238)
Other Than Pensions
Deferred Maintenance Cost and (86,178) (122,382) (89,471)
Miscellaneous Percentage Repair
Allowance 106,630 145,927 139,424
Unbilled Fuel --- --- (172,226)
Deferred Advances (482,112) 26,967 (95,877)
Deferred Pensions 289,622 256,867 191,378
Total Deferred Federal Tax (298,192) 186,060 (179,080)
Provision
Total Federal Tax $3,459,437 $3,472,695 $3,237,427
Provision
The differences between the Company's provisions for Federal
Income Taxes and the provisions calculated at the statutory federal
tax rate, expressed in percentages, are shown below:
Year Ended December 31,
1995 1994 1993
Statutory Federal Income Tax Rate 34% 34% 34%
Income Tax Effects of:
Investment Tax Credits (2) (2) (2)
Donation of Appreciated Land (1) 0 0
Federal Income Tax - Prior (1) 0 (1)
Other, Net (1) (2) (1)
Effective Federal Income Tax Rate 29% 30% 30%
At December 31, 1995, the Company has the following deferred tax
assets and liabilities recorded for temporary differences which
originated as a result of the application of the Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation"; a regulatory asset of approximately
$22,400,000 which is included in Other Deferred Assets, a regulatory
liability of approximately $7,500,000 which is included in Other
Deferred Liabilities, and additional deferred tax liabilities of
approximately $14,900,000 which are included in certain of the amounts
listed below.
SFAS No. 109, adopted on January 1, 1993, requires the use of the
asset and liability method of accounting for deferred income taxes on
all temporary differences. The major temporary differences which give
rise to deferred tax assets and liabilities at December 31, 1995, are
as follows:
Deferred Income Taxes for the Year Ended December 31,
1995 1994
Accelerated Depreciation $23,971,624 $23,526,226
Abandoned Property 10,381,893 10,960,148
Contributions in Aid to (3,166,565) (2,626,042)
Construction
Percentage Repair Allowance 1,599,813 1,517,573
Cathodic Protection 294,978 253,863
Retirement Loss 1,288,346 1,121,792
Deferred Pensions 2,303,456 2,091,056
AFUDC 78,878 96,211
Overheads 360,470 420,896
KESOP (451,009) (361,080)
Bad Debts (235,785) (217,220)
Accumulated Deferred (SFAS 109) 4,442,755 4,475,182
Other (126,027) (168,986)
Total Deferred Income Taxes $40,742,827 $41,089,619
Note 8: Joint Ownership Units
FG&E is participating, on a tenancy-in-common basis with other New
England utilities, in the ownership of three generating units. New
Haven Harbor is a dual-fired oil-and-gas station, and Wyman Unit No. 4
is an oil-fired station. They have been in commercial operation since
August 1975 and December 1978, respectively. Millstone Unit No. 3, a
nuclear generating unit, has been in commercial operation since April
1986. Kilowatt-hour generation and operating expenses of the joint
ownership units are divided on the same basis as ownership. FG&E's
proportionate costs are reflected in the 1995 Consolidated Statements
of Earnings. Information with respect to these units is set forth in
the table below:
Company's Share
Joint Amount of
Ownership Proportionate Share of Utility Plant Accumulated
Units State Ownership % Total MW in Service Depreciation
Millstone Unit No.3 CT 0.2170 2.50 $11,595,060 $3,155,675
Wyman Unit No.4 ME 0.1822 1.13 408,141 257,934
New Haven Harbor CT 4.5000 20.12 7,065,274 4,802,423
23.75 $19,068,475 $8,216,032
Note 9: Benefit Plans
Pension Plans --- Four of the Company's subsidiaries have Retirement
and Pension plans and related Trust Agreements to provide retirement
annuities for participating employees at age 65. These subsidiaries
follow the provisions of Statement of Financial Accounting Standards
No. 87, Employer's Accounting for Pensions (SFAS 87). The entire cost
of the plans is borne by the respective subsidiaries.
Net periodic pension (income) cost for 1995, 1994 and 1993
included the following components:
1995 1994 1993
Service Cost -- Benefits Earned
During the Period $616,016 $693,340 $645,226
Interest Cost on Projected
Benefit Obligation 1,811,981 1,795,836 1,758,782
Expected Return on Plan Assets (6,412,405) (2,714,751) (2,437,232)
Net Amortization and Deferral 3,652,029 (20,546) (2,742)
Net Periodic Pension (Income) Cost $(332,379) $(246,121) $(35,966)
The following table sets forth the plans' funded status at December
31, 1995, 1994 and 1993:
Projected Benefit Obligation:
1995 1994 1993
Vested $24,250,626 $19,970,389 $19,971,230
Non-Vested 148,106 331,910 149,810
Accumulated 24,398,732 20,302,299 20,121,040
Due to Recognition of Future 3,837,798 2,521,055 3,278,283
Salary Increases
Total 28,236,530 22,823,354 23,399,323
Plan Assets at Fair Value 32,858,602 27,343,779 29,273,216
Funded Status 4,622,072 4,520,425 5,873,893
Unrecognized Net Loss (Gain) 1,736,643 953,653 (1,181,666)
Unrecognized Prior Service Cost 124,718 138,204 151,690
Unrecognized Transition Obligation 205,660 189,432 173,204
Prepaid Pension Cost $6,689,093 $5,801,714 $5,017,121
Plan assets are invested in common stock, short-term investments
and various other fixed income security funds.
The weighted-average discount rates used in determining the
projected benefit obligation in 1995, 1994 and 1993 were 7.75%, 8.25%,
and 7.75%, respectively, while the rate of increase in future
compensation levels was 4.50 %, 4.50%, and 4.50%, respectively. The
expected long-term rate of return on assets was 9.50% in each of the
years 1995, 1994 and 1993.
Effective January 1, 1987, Unitil Service Corp. adopted a
Supplemental Executive Retirement Plan (SERP). The SERP is an unfunded
retirement plan with participation limited to executives selected by
the Board of Directors. The cost associated with the SERP amounted to
$60,000; $53,000; and $53,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
Employee 401(k) Tax Deferred Savings Plan--- The Company sponsors a
defined contribution plan ((under Section 401 (k) of the Internal
Revenue Code)) covering substantially all of the Company's employees.
Participants may elect to defer from 1% to 12% of current compensation
to the plan. The Company matches contributions, with a maximum
matching contribution of 3% of current compensation. Employees may
direct the investment of their savings plan balances into a variety of
investment options, including a Company common stock fund.
Participants are 100% vested once completing three years of service in
contributions made on their behalf. The Company's share of
contributions to the plan were $308,454; $284,248; and $266,645 for
the years ended December 31, 1995, 1994 and 1993, respectively.
Post-Retirement Benefits --- Effective as of January 1, 1993, the
Company's subsidiaries significantly modified the duration of
post-retirement health care benefits. From that date forward, all
current retirees were offered such benefits only for an additional
twelve-month period and all future retirees will be entitled to such
benefits for a twelve-month period following their retirement. The
Company's subsidiaries continue to provide life insurance coverage to
retirees by making monthly premium payments to a life insurer. Life
insurance and limited health care post-retirement benefits required
the Company to adopt the provisions of Statement of Financial
Accounting Standard No. 106,"Employers' Accounting for Post-retirement
Benefits Other than Pensions --- (SFAS 106). For 1995 and 1994, the
costs associated with providing health care and life insurance
benefits under this arrangement were $86,522 and $82,625. This
statement requires accrual accounting for postretirement benefits
during the employee's years of service with the Company and the
recognition of the actuarially determined total postretirement benefit
obligation earned by existing retirees. At December 31, 1995 and 1994,
the accumulated postretirement benefit obligation (transition
obligation) was approximately $364,000 and $385,000, respectively,
under SFAS 106. This obligation is being recognized on a delayed basis
over the average remaining service period of active participants and
such period will not exceed 20 years. The Company has omitted certain
disclosures relating to SFAS 106, as the accumulated post-retirement
benefit obligation (transition obligation) is not material.
Note 10: Commitments and Contingencies
Environmental Matters --- The Company continues to work with federal
and state environmental agencies to assess the environmental
contamination in the vicinity of former gas manufacturing sites
operated by Fitchburg Gas and Electric Light Company, the Company's
combination gas and electric operating subsidiary. Based on
information developed over the last several years, it has been
discovered that there is environmental contamination at a former gas
manufacturing plant in Fitchburg, MA (the Sawyer Passway site). In
December 1995 the Company accepted a Tier 1B permit from the
Massachusetts Department of Environmental Protection (DEP) to address
the site pursuant to the requirements of the Massachusetts Contingency
Plan. Further investigations are necessary to assess the extent and
nature of the contamination, and to evaluate potential remedies.
Reports on those investigations are due to be filed with the DEP in
early 1997. Because these investigations are at an early stage
management cannot, at this time, predict the costs of future analysis
and remediation. The costs of such assessments and any remedial action
determined to be necessary will initially be funded from traditional
sources of capital and recovered from customers under a rate recovery
mechanism approved by the MDPU. The Company also has a number of
liability insurance policies that may provide coverage for
environmental remediation at this site.
Regulatory --- At the state level in both New Hampshire and
Massachusetts, and at the federal level, recent regulatory activity
has focused on determining how to deregulate the retail sale of
electricity to allow for a more competitive market. As the trend
continues towards competition in the electric utility industry, Unitil
has actively participated in industry, legislative and regulatory
proceedings on the issues of competition and industry restructuring at
both the federal and state levels, favoring a reasonable and orderly
transition to competition and more choice for all customers.
Both the New Hampshire Public Utilities Commission (the "NHPUC") and
the New Hampshire Legislature have been involved in discussions and
analysis relative to competition in the industry. Early in 1995, the
NHPUC issued an order in response to a petition by a power marketer
seeking to sell to certain industrial customers of an investor-owned
New Hampshire utility. In that order the NHPUC ruled that utilities
in New Hampshire do not have exclusive franchise territories as a
matter of law and directed the marketer to seek a declaratory order
from the Federal Energy Regulatory Commission regarding its proposed
transactions. This decision has been appealed to the New Hampshire
Supreme Court. In June 1995 New Hampshire Senate Bill 168 (SB 168),
was signed into law. SB 168 establishes a legislative committee to
consider changes in the structure of the electric utility industry.
The act also directs the NHPUC to begin a retailcompetitionpilot
program and to act within five months to establish standards for
utility discounts to industrial customers. The legislative committee
and its subcommittees met regularly during the summer and fall of
1995, and several members sponsored new legislation, including
legislation currently being debated that would require utilities to
file restructuring plans with the NHPUC by June 1996, with statewide
retail competition by June 1998. The NHPUC has issued its preliminary
guidelines for the retail wheeling pilot program incorporating
implementation by May 1996 and is expected to issue its final
guidelines in March 1996. The NHPUC issued its final guidelines on
discount rates for industrial customers in November 1995. The NHPUC
aproved the Company's Energy Bank program in accordance with these
guidelines in December 1995.
During 1995, the Massachusetts Department of Public Utilities (the
"MDPU") concluded the initial hearings in an electric industry
restructuring docket and has issued an order requiring the three
largest Massachusetts' electric utilities to file restructuring plans
in February1996 and the remaining Massachusetts' electric utilities
(including FG&E) to file restructuring plans three months after the
MDPU issues orders regarding the first three plans.
CECo, E&H, and FG&E have all received regulatory approval for the
Company's Energy Bank program. Energy Bank is an innovative economic
development program designed to bring low-cost energy to new and
expanding industrial customers. With rates in the range of 5 cents/KWH
this program offers electric energy at a price that is equal to the
National Average industrial rate and is 40% below the current average
industrial rate in New England. In addition to providing substantial
benefits to new and expanding industrial customers in the form of very
competitive and responsive market pricing, Energy Bank will also
provide significant benefits to all the System's customers in the form
of local economic development activity, reduced power costs, and lower
costs to all customers through the issuance of Power Dividends.
The last formal regulatory hearings to increase base rates for
Unitil's three retail operating subsidiaries occurred in 1985 for
Concord Electric Company, 1984 for Fitchburg Gas and Electric Light
Company and 1981 for Exeter & Hampton Electric Company. A majority of
the System's operating revenues are collected under various periodic
rate adjustment mechanisms including: fuel, purchased power, cost of
gas and conservation program cost recovery mechanisms.
Litigation --- The Company is also involved in other legal and
administrative proceedings and claims of various types which arise in
the ordinary course of business. In the opinion of the Company's
management, based upon information furnished by counsel and others,
the ultimate resolution of these claims will not have a material
impact on the Company's financial position.
Purchased Power and Gas Supply Contracts --- FG&E and Unitil Power
have commitments under long-term contracts for the purchase of
electricity and gas from various suppliers. Generally, these contracts
are for fixed periods and require payment of demand and energy
charges. Total costs under these contracts are included in Electricity
and Gas Purchased for Resale in the Consolidated Statements of
Earnings. These costs are normally recoverable in revenues under
various cost recovery mechanisms.
The status of the electric purchased power contracts at December 31,
1995, was as follows:
Unit 1995 Est. Annual Min.
Fuel Energy Purchased Contract Payments Which
Type [1] MW (MWH's) End-Date Cover Future Debt
Entitlement Service Regs. ($000)
Non-Utility Purchases
Unitil Power
Refuse 6.0 [2] 45,546 2003 None
System 9.5 [7] 2,368 1995 None
System 9.5 [7] 2,047 1995 None
Gas 1.5 7,558 2012 None
Coal 20.0 68,156 2009 None
System 18.3 [8] 804 2002 None
FG&E
Wood 14.0 99,659 2012 None
Hydro 3.0 18,328 2012 None
Utility Purchases
Unitil Power
Nuclear 25.5 185,505 1998 None
Oil/Gas 23.0 52,797 1998 None
Hydro 8.9 2001 $1,080 [3]
Various 16.0 [2] 44,426 1999 None
Coal/Oil 15.0 [2] 65,837 2005 None
Oil/Gas 25.0 86,309 1996 None
Gas 12.0 [2] 56,750 2010 $2,776 [4]
Nuclear 3.0 [2] 7,092 2005 None
Nuclear 2.0 [2] 4,307 2005 None
Coal/Oil 9.3 [2] 23,362 2005 None
Nuclear 1.9 [2] 18,035 2013 None
Nuclear 10.0 72,881 2010 None
Oil 5.0 [2] 11,994 2005 None
Oil 5.0 [2] 12,766 2005 None
System 8.0 12,777 1996 None
Oil/Gas 10.0 [2] 8,607 2008 None
Various [5] 66,959 None
Various [6] 171,770 None
FG&E
Nuclear 10.0 74,780 1996 None
Hydro 2.1 1996 $73 [3]
Hydro 3.2 2001 $426 [3]
Oil/Gas 20.0 69,445 2015 None
System 15.0 [2] 27,582 2001 None
Various [5] 86,048 None
Various [6] 108,967 None
Notes:
[1] Total Annual Cost of Purchase Power Contracts are
included on Consolidated Statement of Earnings.
[2] Capacity amounts vary over time. Represents maximum
capacity purchased under the contract.
[3] Total support charges including debt service requirements.
[4] Total estimated 1995 annualized capacity payments, including
debt service requirements.
[5] Short-term purchases of a month or less in duration.
[6] Net energy purchases from NEPOOL.
[7] Contract Ended 6/30/95 and was replacted by [8].
[8] Replacement for [7].
Note 11: Segment Information
The following additional information is presented about the
electric and gas operations of the Company:
1995 1994 1993
Operating Revenues $138,099,371 $134,096,627 $132,754,707
Operating Income Before Income Taxes $16,781,348 $15,884,879 $15,248,660
Identifiable Assets as of December 31 $174,269,584 $171,757,678 $169,360,726
Depreciation $5,504,701 $5,359,212 $5,215,489
Construction Expenditures $11,846,778 $7,364,344 $6,849,060
Gas Operations 1995 1994 1993
Operating Revenues $17,629,879 $18,694,703 $18,486,105
Operating Income Before Income Taxes $1,578,103 $2,026,055 $2,512,287
Identifiable Assets as of December 31 $30,013,418 $28,181,365 $27,168,106
Depreciation $810,912 $770,405 $733,583
Construction Expenditures $2,007,922 $1,816,390 $1,070,984
Total Company 1995 1994 1993
Electric and Gas Operating Revenues $155,729,250 $152,791,330 $151,240,812
Other Revenue 940,954 624,560 368,010
Total Operating Revenues $156,670,204 $153,415,890 $151,608,822
Operating Income Before Income Taxes $18,359,451 $17,910,934 $17,760,947
Income Tax Expense (4,097,161) (4,137,430) (3,687,538)
Non-Operating Income 171,089 62,887 50,145
Net Interest and Other Expenses (6,064,583) (5,798,192) (6,523,487)
Net Income $8,368,796 8,038,199 7,600,067
Dividend Requirements on Preferred Stock 283,749 291,543 297,577
Net Income Applicable to Common Stock $8,085,047 $7,746,656 $7,302,490
Identifiable Assets as of December 31 $204,283,002 $199,939,043 $196,528,832
Unallocated Assets 7,419,282 4,582,418 4,979,923
Total Assets as of December 31 $211,702,284 $204,521,461 $201,508,755
Depreciation $6,315,613 $6,129,617 $5,949,072
Construction Expenditures $14,644,963 $8,943,491 $7,713,542
Expenses used to determine operating income before taxes are
charged directly to either segment or are allocated in accordance with
factors contained in cost of service studies which were included in
rate applications approved by the NHPUC and MDPU. Assets allocated to
each segment are based upon specific identification of such assets
provided by Company records. Assets not so identified represent
primarily working capital items and real property.
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
Information required by this Item is set forth in Exhibit 99.1
on pages 2 through 6 of the 1996 Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
Information required by this Item is set forth in Exhibit 99.1
on pages 8 through 12 of the 1996 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is set forth in
Exhibit 99.1 on pages 2 through 4 of the 1996 Proxy Statement and is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) -
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements are included herein under Part
II, Item 8, Financial Statements and Supplementary Data.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Earnings - for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Capitalization - December 31, 1995 and 1994
Consolidated Statements of Cash Flows
for the years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Common Stock Equity -
for the years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of the
Company and subsidiaries are included in Item 14(d):
Report of Independent Certified Public Accountants
Schedule VIII Valuation and Qualifying Accounts for December 31,
1995; 1994 and 1993
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions, are inappropriate, or
information required is included in the financial statements or notes
thereto and, therefore, have been omitted.
(3) - List of Exhibits
Exhibit No. Description of Exhibit Reference*
3.1 Articles of Incorporation Exhibit 3.1 to Form
of the Company. S-14 Registration
Statement 2-93769
3.2 Articles of Amendment to the
Articles of Incorporation
filed on March 4, 1992 and Exhibit 3.2 to Form
April 30, 1992. 10-K for 1992
3.3 By-Laws of the Company. Exhibit 3.2 to
Form S-14
Registration
Statement 2-93769
3.4 Articles of Exchange of Concord
Electric Company (CECo),
Exeter & Hampton Exhibit 3.3 to
Electric Company (E&H) 10-K
and the Company for 1984
3.5 Articles of Exchange of CECo,
E&H, and the Company -
Stipulation of the Parties Exhibit 3.4 to
Relative to Recordation and Form 10-K
Effective Date. for 1984
3.6 The Agreement and Plan of Merger
dated March 1, 1989 among the
Company, Fitchburg Gas and Exhibit 25(b) to
Electric Light Company (FG&E) Form 8-K dated
and UMC Electric Co.,Inc.(UMC).March 1, 1989
3.7 Amendment No. 1 to The Agreement
and Plan of Merger dated March Exhibit 28(b) to
1, 1989 among the Company, Form 8-K, dated
FG&E and UMC December 14, 1989
4.1 Indenture of Mortgage and Deed
of Trust dated July 15, 1958 of
CECo relating to First
Mortgage Bonds, Series B, 4 3/8%
due September 15, 1988 and all
series unless supplemented. **
4.2 First Supplemental Indenture
dated January 15, 1968
relating to CECo's First
Mortgage Bonds, Series C,
6 3/4% due January 5, 1998
and all additional series
unless supplemented. **
4.3 Second Supplemental Indenture
dated November 15, 1971
relating to CECo's First
Mortgage Bonds, Series D,
8.70% due
November 15, 2001 and all
additional series
unless supplemented. **
4.4 Fourth Supplemental Indenture
dated March 28, 1984 amending
CECo's Original First Mortgage
Bonds Indenture, and First,
Second and Third Supplemental
Indentures and all additional
series unless supplemented. **
4.5 Fifth Supplemental Indenture
dated June 1, 1984 relating
to CECo's First Mortgage
Bonds, Series F, 14 7/8% due
June 1, 1999 and all additional
series unless supplemented. **
4.6 Sixth Supplemental Indenture
dated October 29, 1987
relating to CECo's First
Mortgage Bonds, Series G,
9.85% due October 15, 1997 Exhibit 4.6 to
and all additional series Form 10-K
unless supplemented. for 1987
4.7 Seventh Supplemental Indenture
dated August 29, 1991 relating
to CECo's First Mortgage
Bonds, Series H, 9.43% due
September 1, 2003 and all Exhibit 4.7 to
additional series Form 10-K
unless supplemented. for 1991
4.8 Eighth Supplemental Indenture
dated October 14, 1994
relating to CECo's First
Mortgage Bonds,
Series I, 8.49% due October Exhibit 4.8 to
14, 2024 and all additional Form 10-K
series unless supplemented. for 1994
4.9 Indenture of Mortgage and Deed
of Trust dated December 1,
1952 of E&H relating to all
series unless Registration Exhibit 4.5 to
supplemented. Statement 2-49218
4.10 Third Supplemental Indenture
dated June 1, 1964 relating
to E&H's First Mortgage Bonds,
Series D, 4 3/4% due June 1, Exhibit 4.5 to
1994 and all additional series Registration
unless supplemented. Statement 2-49218
4.11 Fourth Supplemental Indenture
dated January 15, 1968
relating to E&H's
First Mortgage Bonds, Series
E, 6 3/4% due January 15, Exhibit 4.6 to
1998 and all additional Registration
series unless supplemented. Statement 2-49218
4.12 Fifth Supplemental Indenture
dated November 15, 1971
relating to E&H's
First Mortgage Bonds, Series
F, 8.70% due November 15, Exhibit 4.7 to
2001 and all additional Registration
series unless supplemented. Statement 2-49218
4.13 Sixth Supplemental Indenture
dated April 1, 1974 relating
to E&H's First Mortgage Bonds,
Series G, 8 7/8%
due April 1, 2004 and all
additional series unless
supplemented. **
4.14 Seventh Supplemental Indenture
dated December 15, 1977
relating to E&H's
First Mortgage Bonds, Series Exhibit 4 to
H, 8.50% due December 15, Form 10-K
2002 andall additional for 1977
series unless supplemented. (File No. 0-7751)
4.15 Eighth Supplemental Indenture
dated October 29, 1987
relating to E&H's
First Mortgage Bonds, Series
I, 9.85% due October
15, 1997 and all additional Exhibit 4.15 to
series unless supplemented. Form 10-K for 1987
4.16 Ninth Supplemental Indenture
dated August 29, 1991 relating
to E&H's First Mortgage Bonds,
Series J, 9.43% due September Exhibit 4.18 to
1, 2003 and all additional Form 10-K
series unless supplemented. for 1991
4.17 Tenth Supplemental Indenture
dated October 14, 1994
relating to E&H's
First Mortgage Bonds, Series
K, 8.49% due October 14, 2024 Exhibit 4.17 to
and all additional series Form 10-K
unless supplemented. for 1994
4.18 Bond Purchase Agreement dated
August 29, 1991 relating to
E&H's First Mortgage Bonds,
Series J Form 10-K Exhibit 4.19 to
9.43% due September 1, 2003 for 1991
4.19 Purchase Agreement dated March
20, 1992 for the 8.55% Senior Exhibit 4.18 to
Notes due March 31, 2004 Form 10-K for 1993
4.20 Note Agreement dated November
30, 1993 for the 6.75% Exhibit 4.18 to
Notes due November 30, 2023 Form 10-K for 1993
4.21 First Mortgage Loan Agreement
dated October 24, 1988 with an
Institutional Investor in
connection with Unitil Realty
Corp.'s acquisition of the Exhibit 4.16 to
Company's facilities in Form 10-K
Exeter,New Hampshire. for 1988
10.1 Labor Agreement effective June
1, 1994 between CECo
and The International
Brotherhood of Electrical Exhibit 10.1 to
Workers, Local Union No. 1837 Form 10-K for 1994
10.2 Labor Agreement effective June
25, 1995 between E&H
and The International
Brotherhood of Electrical Workers,
Local Union No. 1837, Unit 1. Filed herewith
10.3 Labor Agreement effective May 1,
1994 between FG&E and The
Brotherhood of Utility Workers
of New England, Inc., Local Exhibit 10.3 to
Union No. 340. Form 10-K for 1994
10.4 Unitil System Agreement dated
June 19, 1986 providing that
Unitil Power will supply
wholesale requirements
electric Exhibit 10.9 to
service to CECo and E&H Form 10-K for 1986
10.5 Supplement No. 1 to Unitil
System Agreement providing that
Unitil Power will supply
wholesale Exhibit 10.8 to
requirements electric service Form 10-K for 1987
to CECo and E&H.
10.6 Transmission Agreement Between
Unitil Power Corp. and Public
Service Company of New
Hampshire, Exhibit 10.6 to
Effective November 11, 1992 Form 10-K for 1993
10.7 Form of Severance Agreement
dated February 21, 1989, Exhibit 10.55 to
between the Company and Form 8
the persons named in the dated
schedule attached thereto. April 12, 1989
10.8 Key Employee Stock Option Exhibit 10.56 to
Plan effective as of Form 8 dated
January 17, 1989. April 12, 1989
10.9 Unitil Corporation Key Employee Exhibit 10.63 to
Stock Option Plan Award Form 10-K
Agreement. for 1989
10.10 Unitil Corporation Management Exhibit 10.94 to
Performance Compensation Form 10-K/A for
Program. 1993
10.11 Unitil Corporation Supplemental
Executive Retirement Plan Exhibit 10.95 to
effective as of January 1, Form 10-K/A for
1987. 1993
11.1 Statement Re Computation in
Support of Earnings Per Share
for the Company Filed herewith
12.1 Statement Re Computation in
Support of Ratio of Earnings
to Fixed Charges for the
Company. Filed herewith
21.1 Statement Re Subsidiaries of
Registrant. Filed herewith
27.0 Financial Data Schedule Filed herewith
28.1 Form 11-K Annual Report of the
UNITIL Corporation Tax
Deferred Savings and
Investment Plan for the
year ended December 31, 1995 Filed herewith
99.1 1995 Proxy Statement Filed herewith
* The exhibits referred to in this column by specific designations
and dates have heretofore been filed with the Securities and Exchange
Commission under such designations and are hereby incorporated by
reference.
** Copies of these debt instruments will be furnished to the
Securities and Exchange Commission upon request.
(b) Report on Form 10-K
No reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1995.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 9, 1996, accompanying
the consolidated financial statements and schedules incorporated in
the Annual Report of Unitil Corporation and subsidiaries on Form 10-K
for the year ended December 31, 1995. We hereby consent to the
incorporation by reference of said report in the Registration
Statements of Unitil Corporation and subsidiaries on Form S-3 and on
Form S-8.
GRANT THORNTON LLP
Boston, Massachusetts
March 28, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Unitil Corporation
Date March 11, 1996 By Peter J. Stulgis
Peter J. Stulgis
Chairman of the Board of
Directors, and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Capacity Date
Peter J. Stulgis Principal Executive March 11, 1996
Peter J. Stulgis Officer; Director
(Chairman of the Board of Directors
and Chief Executive Officer)
Michael J. Dalton Principal Operating March 11, 1996
Michael J. Dalton Officer; Director
(President and Chief
Operating Officer)
Gail A. Siart Principal Financial March 11, 1996
Gail A. Siart Officer
(Treasurer and Chief
Financial Officer)
Douglas K. MacDonald Director March 11, 1996
Douglas K. Macdonald
J. Parker Rice, Jr. Director March 11, 1996
J. Parker Rice, Jr.
Charles H. Tenney III Director March 11, 1996
Charles H. Tenney III
William W. Treat Director March 11, 1996
William W. Treat
W. William Vanderwolk, Jr. Director March 11, 1996
W. William VanderWolk, Jr.
J. D. Wheeler Director March 11, 1996
J. D. Wheeler
Franklin Wyman, Jr. Director March 11, 1996
Franklin Wyman, Jr.
SCHEDULE VIII.
UNITIL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and Other from End of
Description of Period Expenses Accounts(A) Reserves(B) Period
Year Ended December 31, 1995
Reserves Deducted from A/R
Electric 504,790 627,197 170,563 812,278 490,272
Gas 69,059 254,387 49,271 240,393 132,324
573,849 881,584 219,834 1,052,671 622,596
Year Ended December 31, 1994
Reserves Deducted from A/R
Electric 510,853 552,905 193,202 752,170 504,790
Gas 70,402 157,098 58,714 217,155 69,059
581,255 710,003 251,916 969,325 573,849
Year Ended December 31, 1993
Reserves Deducted from A/R
Electric 461,048 654,959 154,355 759,509 510,853
Gas 95,008 152,720 54,733 232,059 70,402
556,056 807,679 209,088 991,568 581,255
(A) Collections on Accounts Previously Charged Off
(B) Bad Debts Charged Off