For the fiscal year ended December 31, 1999 Commission File No. 1-3429
Maine Public Service Company
(Exact name of registrant as specified in its charter)
Maine 01-0113635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
209 State Street, Presque Isle, Maine 04769
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 207-768-5811
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $7.00 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates at March 21, 2000: $ 27,925,969.
The number of shares outstanding of each of the issuer's classes of common stock as of March 21, 2000.
1. The Company's 1999 Annual Report to Stockholders is incorporated by reference into Parts I, II and IV.
2. The Company's definitive proxy statement, to be filed pursuant to Regulation 14A no later than 120 days after December 31, 1999, which is the end of the fiscal year covered by this report, is incorporated by reference into Part III.
Item 1. Business
General
The Company was originally incorporated as the Gould Electric Company in April, 1917 by a special act of the Maine legislature. Its name was changed to Maine Public Service Company in August, 1929. Until 1947, when its capital stock was sold to the public, it was a subsidiary of Consolidated Electric & Gas Company. Maine and New Brunswick Electrical Power Company, Limited, the Company's wholly-owned Canadian subsidiary (the "Canadian Subsidiary") was incorporated in 1903 under the laws of the Province of New Brunswick, Canada. Energy Atlantic, LLC (EA), the Company's unregulated marketing subsidiary, formally began operations in January, 1999.
The Company, until the generating assets were sold on June 8, 1999, produced electric energy, and currently engages in the transmission and distribution of electric energy to retail and wholesale customers in all of Aroostook County and a small portion of Penobscot County in northern Maine. Geographically, the service territory is approximately 120 miles long and 30 miles wide, with a population of approximately 82,000.
The service area of the Company includes one of the most important potato growing and processing sections in the United States. In addition, the area produces wood products, principally pulp wood for paper manufacturing.
The Canadian Subsidiary was primarily a hydro-electric generating company. It owned and operated the Tinker hydro plant in New Brunswick, Canada until June 8, 1999, when these assets were sold to WPS-PDI. Prior to the generating asset sale, the Canadian Subsidiary sold to the Company the energy not needed to supply its wholesale New Brunswick customer. During 1999, sales to the Company amounted to 65,333 MWH out of the 78,109 MWH generated for sale at Tinker.
See Items 3(a) and (b) of the "Legal Proceedings" section of this Form 10-K for further discussion of Maine's electric utility deregulation law and the sale of the Company's generating assets.
EA participated in the wholesale power market during 1999 and will be selling energy in the retail market when the Maine retail electrical industry opens for competition on March 1, 2000.
The Company, the Canadian Subsidiary and EA required 942,974 MWH to serve all customers for the twelve months ended December 31, 1999. The following table sets forth the sources of their power requirements in 1999:
1999 Megawatt-hours Generated
Sources of Power or Purchased
Net Generation:
Hydro 81,543
Steam 28,783
Diesel (443)
Total 109,883
Purchases:
Fossil Fuel Generated 475,858
Biomass Generated 359,353
Total 835,211
Inadvertent Received (2,120)
Total System 942,974
As of June 4, 1984, the Company entered into a Power Purchase Agreement (PPA) with Sherman Power Company, which assigned its interest in the Agreement to Wheelabrator-Sherman Energy Company (W-S), formerly Signal-Sherman Energy Company, (a cogenerator), for 17.6 MW of capacity which began July, 1986. The original contract was scheduled to expire in 2001. The Company and W-S agreed to amend the PPA. Under the terms of this amendment, W-S agreed to reductions in the price of purchased power of approximately $10 million over the PPA's current term. The Company and W-S have agreed to renew the PPA for an additional six years at agreed-upon prices. The Company made an up-front payment to W-S of $8.7 million on May 29, 1998, with the financing provided by the Finance Authority of Maine (FAME). This payment has been reflected as a regulatory asset and, based on an MPUC order, will be included in stranded costs and will be recovered in the rates of the transmission and distribution utility. The Company believes the amended PPA will help relieve the financial pressure caused by the closure of Maine Yankee as well as the need for substantial increases in its retail rates, and is therefore in the best interests of the Company, its customers and shareholders.
1999 1998 1997
Revenues from
Unaffiliated Customers:
Parent-United States 58,677 55,958 54,291
Subsidiary-United States 8,429 - -
Total Domestic 67,106 55,958 54,291
Subsidiary-Canada 350 669 781
Intercompany Revenues:
Parent-United States 323 644 728
Subsidiary-United States 311 - -
Total Domestic 634 644 728
Subsidiary-Canada 1,027 1,748 1,672
Operating Income (Loss):
Parent-United States 7,308 5,785 567
Subsidiary-United States (335) - -
Total Domestic 6,973 5,785 567
Subsidiary-Canada 104 380 344
Net Income (Loss)
Parent-United States 3,811 1,886 (2,521)
Subsidiary-United States (354) - -
Total Domestic 3,457 1,886 (2,521)
Subsidiary-Canada 549 367 344
Identifiable Assets:
Parent-United States 160,782 157,476 156,207
Subsidiary-United States 1,445 - -
Total Domestic 162,227 157,476 156,207
Subsidiary-Canada 9,321 6,820 7,274
The identifiable assets, by company, are those assets used in each company's operations, excluding intercompany receivables and investments.
Source of Revenues
In 1999, consolidated operating revenues totaled $67,456,117. The percentages of revenues derived from customer classes are as follows:
%
Residential 32.2
Small Commercial and Industrial 28.9
Large Commercial and Industrial 15.7
Sales to Wholesale Customers for Resale 2.3
Secondary Sales 16.3
Other Sales and Other Revenues 4.6
Total 100.0
Sales to wholesale customers for resale includes two wholesale customers, Van Buren Light and Power District (Van Buren) and Eastern Maine Electric Cooperative, Inc. (EMEC). In accordance with the deregulation of Maine's electric utility industry, beginning on March 1, 2000, Van Buren and EMEC will be purchasing electricity from other suppliers for their standard offer service. Van Buren and EMEC represented 3.0% of consolidated MWH sales and 1.8% of consolidated operating revenues for the year ended December 31, 1999. These contracts contained rates lower than those typically allowed under FERC's traditional ratemaking. Capitalizing on the availability of low cost power in New England, the wholesale customers issued a request for proposal in September, 1994 for their purchased power requirements effective January 1, 1996. Houlton Water Company (Houlton), selected an offer from another utility, and began taking service from that utility starting January 1, 1996. In 1995, Houlton was the Company's largest customer. On July 1, 1998, Houlton entered into a new contract, effective February 3, 1999, to purchase its power at a reduced rate from the Company's energy marketing subsidiary, Energy Atlantic, LLC (EA). This contract was effective through December 31, 2000, but could be terminated on or after March 1, 2000. Like Van Buren and EMEC, effective March 1, 2000, Houlton will be purchasing electricity from other suppliers for their standard offer service. Including the sales to Houlton, EA's power marketing activities accounted for 30.2% of the consolidated MWH sales in 1999.
During 1996 and 1997, the Company entered into long-term power contracts with five of its largest customers. In exchange for discounts from the Company's standard rates, these customers agreed to purchase all of their electrical requirements from the Company through the year 2000. All five of these customers produced evidence of hardship to continue operations in the area or were investigating self generation, criteria that the Maine Public Utilities Commission (MPUC) reviewed before approving these load-retention contracts.
On November 13, 1995, the Maine Public Utilities Commission approved a Stipulation signed by Maine Public Service Company, the Commission Staff and the Maine Office of the Public Advocate. This Stipulation, which became effective January 1, 1996, established a multi-year rate plan for the Company that will provide our customers with predictable rates until March 1, 2000 and shares operating risks and benefits between the Company's shareholders and customers. The multi-year rate plan was subsequently amended in January, 1998. On April 6, 1999, the MPUC approved a March 25, 1999 Stipulation under which customer rates would not increase on April 1, 1999 as scheduled. For more information on the rate plan, see Item 3(f) of the "Legal Proceedings" section of this Form 10-K.
For additional discussion on revenues, see the 1999 Annual Report to Stockholders, pages 6 and 7, "Analysis of Financial Condition and Review of Operations-Operating Revenues and Energy Sales" and pages 11 to 15, "Regulatory Proceedings", which information is incorporated herein by reference.
Regulation and Rates
The Company is subject to the regulatory authority of the Maine Public Utilities Commission (MPUC) as to retail rates, accounting, service standards, territory served, the issuance of securities and various other matters. With respect to wholesale rates and certain other matters, the Company is or may be subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC). The Company maintains its accounts in accordance with the accounting requirements of the FERC which generally conform with the accounting requirements of the MPUC. At this time, the Company is not subject to the Public Utilities Regulatory Policies Act of 1978 ("PURPA") because it has not exceeded the threshold of 2,000,000,000 kilowatt-hours excluding wholesale sales. However, the Maine Legislature has by statute instructed the MPUC that it may consider PURPA standards in rate proceedings before that Commission.
As discussed in Items 3(a) and (b) of the "Legal Proceedings" section of this Form 10-K, on June 8, 1999, the Company sold its generating assets in accordance with Maine's new electric deregulation law.
See the 1999 Annual Report to Stockholders, pages 11 to 15, "Analysis of Financial Condition and Review of Operations - Regulatory Proceedings", which information is incorporated herein by reference, for additional information on regulatory matters.
Franchises and Competition
Except for consumers served at retail by the Company's wholesale customers, the Company has practically an exclusive franchise to provide electric energy in the Company's service area. For additional information on changes to the future structure of the electric utility industry in Maine and the generating asset sale, see Items 3(a) and (b) of the "Legal Proceedings" section of this Form 10-K.
Employees
The information with respect to employees is presented in the 1999 Annual Report to Stockholders, page 11, "Employees", which information is incorporated herein by reference.
Subsidiaries and Affiliated Companies
The Company owns 100% of the Common Stock of Maine and New Brunswick Electrical Power Company, Limited (the Canadian Subsidiary). The Canadian Subsidiary owned and operated the Tinker Station located in the Province of New Brunswick, Canada prior to its sale on June 8, 1999.
On August 24, 1998, the MPUC approved the formation of the Company's unregulated subsidiary, Energy Atlantic, LLC (EA). EA began formal operations on January 1, 1999, performing various non-core activities, such as wholesale marketing of electric power and the sales of energy-related products and services. EA will begin retail sales activity on March 1, 2000, the start of retail competition in Maine. As a start-up unregulated subsidiary, the Board of Directors and the MPUC limited the capital contributions to a maximum of $2 million.
The Company owns 5% of the Common Stock of Maine Yankee, which operated an 860 MW nuclear power plant (the "Plant") in Wiscasset, Maine. On August 6, 1997, the Board of Directors of Maine Yankee voted to permanently cease power operations and to begin decommissioning the Plant. The Plant experienced a number of operational and regulatory problems and did not operate after December 6, 1996. The decision to close the Plant permanently was based on an economic analysis of the costs, risks and uncertainties associated with operating the Plant compared to those associated with closing and decommissioning it. The Plant's operating license from the Nuclear Regulatory Commission (NRC) was due to expire on October 21, 2008.
The Maine Public Utilities Commission (MPUC) stayed an investigation of the prudency of the shutdown decision and the operation of Maine Yankee prior to the shutdown decision, pending the outcome of Maine Yankee's rate case before the Federal Energy Regulatory Commission (FERC).
During 1998 and early 1999 the active interveners, including among others the MPUC Staff, the OPA, the Company and other owners, the Secondary Purchasers, and a Maine environmental group (the "Settling Parties"), engaged in extensive discovery and negotiations which resulted in the filing of a settlement agreement with the FERC on January 19, 1999. A separate negotiated settlement filed with the FERC on February 5, 1999 resolved the issues raised by the Secondary Purchasers by limiting the amounts they will pay for decommissioning the Plant and by settling other points of contention affecting individual Secondary Purchasers. Both settlements were found to be in the public interest and approved by the FERC on June 1, 1999. The settlements constitute a full settlement of all issues raised in the FERC proceeding including decommissioning-cost issues and issues pertaining to the prudence of management, operation and decision to permanently cease operation of the Plant.
The primary settlement provided for Maine Yankee to collect $33.1 million in the aggregate annually, effective August 1, 1999, including both decommissioning costs and costs related to Maine Yankee's planned independent spent fuel storage installation (ISFSI). The 1997 FERC filing had called for an aggregate annual collection rate of $36.4 million for decommissioning and the ISFSI, based on a 1997 estimate. Pursuant to the approved settlement the amount collected annually has been reduced to approximately $25.6 million, effective October 1, 1999, as a result of 1999 Maine legislation allowing Maine Yankee to (1) use for decommissioning the ISFSI funds held in trust under Maine law for spent-fuel disposal, and (2) access approximately $6.8 million held by the State of Maine for eventual payment to the State of Texas pursuant to a compact for low-level nuclear waste disposal, the future of which is now in question after rejection of the selected disposal site in west Texas by a Texas regulatory agency.
The settlement also provides for recovery of all unamortized investment (including fuel) in the Plant, together with a return on equity of 6.50 percent, effective January 15, 1998, on equity balances up to maximum allowed equity amounts, which resulted in a pro-rata refund of $9.3 million (including tax impacts) to the sponsors on July 15, 1999. The Settling Parties also agreed not to contest the effectiveness of the Amendatory Agreements submitted to FERC as part of the original filing, subject to certain limitations including the right to challenge any accelerated recovery of unamortized investment under the terms of the Amendatory Agreements after a required informational filing with the FERC by Maine Yankee.
Under the Maine Agreement, the Company would continue to recover its Maine Yankee costs in accordance with its most recent Rate Stabilization Plan ("RSP") order from the MPUC without any adjustment reflecting the outcome of the FERC proceeding. To the extent that the Company has collected from its retail customers a return on equity in excess of the 6.50 percent contemplated by the settlement, no refunds would be required, but such excess amounts would be credited to the customers to the extent required by the RSP.
Finally, the Maine Agreement requires the Maine owners, for the period from March 1, 2000 through December 1, 2004, to hold their Maine retail ratepayers harmless from the amounts by which the replacement power costs for Maine Yankee exceed the replacement power costs assumed in the report to the Maine Yankee Board of Directors that served as a basis for the Plant shutdown decision, up to a maximum cumulative amount of $41 million. The Company's share of the maximum amount would be $4.1 million for the period.
With the closing of Maine Yankee, a provision of the Company's rate plan allowing the deferral of 50% of the Maine Yankee replacement power costs went into effect on June 6, 1997. Beginning in May, 1998, Maine Yankee replacement power costs have been offset by net savings from the restructured Purchase Power Agreement with Wheelabrator-Sherman, in accordance with the rate plan stipulation. Beginning in April, 1999 the Company began amortizing an additional $150,000 per month as part of a stipulation described in Item 3(f) of the "Legal Proceedings" section of this Form 10-K. As of December 31, 1999, the Company has a deferred Maine Yankee replacement power cost balance of approximately $3.0 million, subject to recovery in accordance with the rate plan.
On September 1, 1997, Maine Yankee estimated the sum of the future payments for the closing, decommissioning and recovery of the remaining investment in Maine Yankee to be approximately $930 million, of which the Company's 5% share would be approximately $46.5 million. In December, 1998 and again in June, 1999, Maine Yankee updated its estimate of decommissioning costs based on the Settlement, as discussed above. Legislation enacted in Maine in 1997 calls for restructuring the electric utility industry and provides for recovery of decommissioning costs, to the extent allowed by federal regulation, through the rates charged by the transmission and distribution companies.
Based on the Maine legislation and regulation precedent established by the FERC in its opinion relating to the decommissioning of the Yankee Atomic nuclear plant, the Company believes that it is entitled to recover substantially all of its share of such costs from its customers and, as of December 31, 1999, is carrying on its consolidated balance sheet a regulatory asset and a corresponding liability in the amount of $32.2 million, which is the September, 1997 cost estimate of $46.5 million discussed above reduced by the Company's post-September 1, 1997 cost-of-service payments to Maine Yankee and reflects the cost adjustments agreed to in the settlement. As discussed in Item 3(d), the MPUC on January 27, 2000, approved a Stipulation providing for the recovery of stranded investment, which includes the Company's share of Maine Yankee decommissioning expenses, Maine Yankee replacement costs, and the remaining Maine Yankee investment.
The Company also owns 7.49% of the Common Stock of Maine Electric Power Company, Inc. (MEPCO). MEPCO owns and operates a 345-KV (kilovolt) transmission line about 180 miles long which connects the New Brunswick Power (NB Power) system with the New England Power Pool.
Year 2000 Issues
The Company encountered no computer system or operational difficulties related to Year 2000 computer issues. The Company incurred approximately $33,000 of internal labor for review and testing prior to December 31, 1999, which did not identify material modifications.
Executive Officers
The executive officers of the registrant are as follows:
Office
Continuously
Name Age Held Since
Paul R. Cariani President and Chief 59 6/1/94
Executive Officer
Frederick C. Bustard Vice President, 62 6/1/99
Power Delivery
Larry E. LaPlante Vice President, 48 6/1/99
Treasurer and Chief
Financial Officer
Stephen A. Johnson Vice President, 52 6/1/99
Energy Atlantic
and General Counsel
Paul R. Cariani has been an employee of the Company since November 1, 1977, starting as an Assistant to the Treasurer. In May 1978, he was appointed Assistant Treasurer until his election as Treasurer, Secretary and Clerk, on March 1, 1983. In May 1985, he was elected Vice President-Finance and Treasurer effective June 1, 1985. On February 25, 1992, Mr. Cariani was elected a Director of the Company to fill an existing vacancy on the Board. On May 11, 1993, he was elected Executive Vice President, Chief Financial Officer and Treasurer, effective June 1, 1993. Effective June 1, 1994, he was elected President and CEO, replacing the retiring G. Melvin Hovey. Mr. Hovey remains Chairman of the Board of Directors.
Frederick C. Bustard was elected to the position of Vice President, Power Delivery effective June 1, 1999. He has been a full-time employee of the Company since June 15, 1959 in various engineering capacities until July 1, 1980, when he was appointed Assistant to the President. On June 1, 1983, he was elected Vice President, Engineering & Operations. On September 1, 1988, he was elected to the new position of Vice President of Customer Service and Division Operations, a position he held until his reappointment to Vice President of Engineering & Operations on June 1, 1990. Effective June 1, 1996, he was elected to Vice President, Power Supply and Environment.
Larry E. LaPlante was elected to the position of Vice President, Treasurer and Chief Financial Officer on June 1, 1999. He has been an employee of the Company since November 4, 1983, starting as Controller. In May, 1984, he was also appointed Assistant Secretary and Assistant Treasurer until his election as Vice President, Finance and Treasurer effective June 1, 1994. Effective June 1, 1996, he was elected to Vice President, Finance, Administration and Treasurer.
Stephen A. Johnson was elected to the position of Vice President, Energy Atlantic and General Counsel, effective June 1, 1999. Mr. Johnson also continues in his capacity as Secretary and Clerk of the Company, a position he has held since June 1, 1985. Mr. Johnson was appointed General Counsel of the Company on March 5, 1985. On September 1, 1988, he was elected Vice President of Administration and General Counsel, a position he held until his election as Vice President, Customer Service and General Counsel. Effective June 1, 1990, he was elected to Vice President, Customer Service and General Counsel. Prior to joining the Company, Mr. Johnson was the General Counsel of the Maine Office of the Public Advocate from 1983 to 1985 and prior to that was a Staff Attorney of the Maine Public Utilities Commission.
Each executive office is a full-time position and has been the principal occupation of each officer since first elected. All officers were elected to serve until the next annual election of officers and until their successors shall have been duly chosen and qualified. The next annual election of officers will be on May 9, 2000.
There are no family relationships among the executive officers.
Item 2. Properties
The Company owned and operated electric generating facilities consisting of: oil-fired steam units with a total capability of 23,000 kilowatts, diesel generation totaling 12,300 kilowatts, and hydro-electric facilities of 2,300 kilowatts. The Canadian Subsidiary owned and operated a hydro-electric plant of 33,500 kilowatts and a small diesel unit with 1,000 kilowatt capacity. As discussed in Items 3(a) and (b) of the "Legal Proceedings" section of this Form 10-K, the Company sold its generating assets on June 8, 1999 in accordance with the State's electric deregulation law.
Form 10-K
Item I. Business - Continued
As of December 31, 1999, the Company and Subsidiary had approximately 392 pole miles of transmission lines and the Company owned approximately 1,728 miles of distribution lines.
The Company was a part-owner of a 600,000 kilowatt oil-fired steam unit built by Central Maine Power Company at its Wyman Station in Yarmouth, Maine. The Company's share of that unit was 3.3455%, or approximately 20,000 kilowatts, and was included in the generating asset sale on June 8, 1999, as more fully described in Item 3(a) and (b) of the "Legal Proceedings" section of this Form 10-K.
Substantially all of the properties owned by the Company are subject to the liens of the First and Second Mortgage Indentures and Deeds of Trust.
Form 10-K
PART I
Item 3. Legal Proceedings
(a) Restructuring of Maine's Electric Utility Industry.
In the Company's Form 10-K's for December 31, 1996, 1997 and 1998, the Company described electric utility restructuring efforts in Maine, including the Maine Public Utilities Commission's (MPUC) recommendation to the legislature. After months of hearings and deliberations, the Maine legislature passed L.D. 1804, "An Act to Restructure the State's Electric Industry", which the Governor signed into law on May 29, 1997.
The principal provisions of the new law are as follows:
1) Beginning on March 1, 2000, all consumers of electricity have the right to purchase generation services directly from competitive electricity suppliers who will not be subject to rate regulation.
2) By March 1, 2000, the Company, Central Maine Power Company (CMP) and Bangor Hydro-Electric Company (BHE) must divest of all generation related assets and business functions except for:
(a) contracts with qualifying facilities, such as the Company's power contract with Wheelabrator-Sherman (W-S), and conservation providers;
(b) nuclear assets, namely, the Company's investment in the Maine Yankee Atomic Power Company, however, the MPUC may require divestiture on or after January 1, 2009;
(c) facilities located outside the United States, i.e., the Company's hydro facility in New Brunswick, Canada; and
(d) assets that the MPUC determines necessary for the operation of the transmission and distribution services.
The MPUC can grant an extension of the divestiture deadline if the extension will improve the selling price. For assets not divested, the utilities are required to sell the rights to the energy and capacity from these
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
assets. See Item 3(b) below regarding the divestiture of the Company's generating assets.
3) Billing and metering services will be subject to competition beginning March 1, 2002, but permits the MPUC to establish an earlier date, no sooner than March 1, 2000.
4) The Company, through an unregulated affiliate, may market and sell electricity both within and outside its current service territory, without limitation. Both CMP and BHE are limited to 33% of the load within their respective service territories, but may sell an unlimited amount outside their service territories. Consumer-owned utilities are allowed to market and sell within their service territories, but the MPUC can limit or prohibit competition in their service territory, if the tax-exempt status of the consumer-owned utility is threatened.
5) The Company will continue to provide transmission and distribution services which will be subject to continued regulation by the MPUC.
6) Maine electric utilities will be permitted a reasonable opportunity to recover legitimate, verifiable and unmitigable costs that are otherwise unrecoverable as a result of retail competition in the electric utility industry. The MPUC shall determine these stranded costs by considering:
a) the utility's regulatory assets related to generation, i.e., the Company's unrecovered Seabrook investment;
b) the difference between net plant investment in generation assets compared to the market value for those assets; and
c) the difference between future contract payments and the market value of the purchased power contracts, i.e., the W-S contract.
Item 3. Legal Proceedings - Continued
In a December 15, 1999 MPUC filing, as detailed further in Item 3(d) below, the Company updated its estimate of stranded costs to be approximately $95.7 million, net of available value from the sale of generating assets when deregulation occurs on March 1, 2000.
The MPUC shall include in the rates to be charged by the transmission and distribution utility decommissioning expenses for Maine Yankee. By 2003 and no later than every three years thereafter until the stranded costs are recovered, the MPUC shall review and revaluate the stranded cost recovery.
7) All competitive providers of retail electricity must be licensed and registered with the MPUC and meet certain financial standards, comply with customer notification requirements, adhere to customer solicitation requirements and are subject to unfair trade practice laws. Competitive electricity providers must have at least 30% renewable resources in their energy portfolios, including hydro-electric generation.
8) A standard-offer service will be available, ensuring access for all customers to reasonably priced electric power. Unregulated affiliates of CMP and BHE providing retail electric power are prohibited from providing more than 20% of the load within their respective service territories under the standard offer service, while any unregulated affiliate of the Company does not have a similar restriction.
9) Unregulated affiliates of CMP and BHE marketing and selling retail electric power must adhere to specific codes of conduct, including, among others:
a) employees of the unregulated affiliate providing retail electric power must be physically separated from the regulated distribution affiliate and cannot be shared;
b) the regulated distribution affiliate must provide equal access to customer information;
Item 3. Legal Proceedings - Continued
c) the regulated distribution company cannot participate in joint advertising or marketing programs with the unregulated affiliate providing retail electric power;
d) the distribution company and its unregulated affiliated provider of retail electric power must keep separate books of accounts and records; and
(e) the distribution company cannot condition or tie the provision of any regulated service to the provision of any service provided by the unregulated affiliated provider of electricity.
The MPUC shall determine the extent of separation required in the case of the Company to avoid cross-subsidization and shall consider all similar relevant issues as well as the Company's small size.
10) Employees, other than officers, displaced as a result of retail competition will be entitled to certain severance benefits and retraining programs. These costs will be recovered through charges collected by the regulated distribution company.
11) Other provisions of the new law include provisions for:
a) consumer education;
b) continuation of low-income programs and demand side
management activities;
c) consumer protection provisions;
d) new enforcement authority for the MPUC to protect consumers.
(b) Maine Public Service Company, Request for Approval of Sale of Generating Assets, Docket No. 98-584
Reference is made to the Company's Form 10-K for 1998, in which the Company reported an agreement to sell all of its generating assets to WPS Power Development, Inc. (WPS-PDI) for $37.4 million. Further reference is made to the Company's Form 10-Q for the quarter ended March 31,
Item 3. Legal Proceedings - Continued
1999 in which the Company described the process through which it obtained all necessary State and Federal approvals.
The Company consummated the sale to WPS-PDI on June 8, 1999, as reported in its Form 8-K dated June 9, 1999, after receiving all of the major regulatory approvals. The Company's 5% ownership in Maine Yankee was not part of the sale, since the plant is being decommissioned. After paying Canadian, Federal and State income taxes, the remaining proceeds, along with interest in the trust account, will be used to reduce the Company's debt by $22.4 million. The gain from the sale has been deferred, as required by the MPUC. The components of the deferred gain are as follows:
(Dollars in Millions)
Gross proceeds $ 37.5
Settlement adjustments (.1)
Net proceeds 37.4
Net book value (11.5)
Excess taxes on sale of
Canadian assets (3.4)
Transition costs, net (1.8)
Deferred RSP rate increase (1.3)
Other .5
Deferred gain* $ 19.9
___________________
* The $19.9 million deferred gain above is the $20.2 million "Deferred Gain and Related Accounts" as of December 31, 1999, as presented on page 21, "Statement of Consolidated Balance Sheets" of the 1999 Annual Report, which information is incorporated by reference, reduced by the remaining deferral of transition costs allowed by the MPUC.
Upon liquidation of the subsidiary in December, 1999, $14.1 million of the proceeds was transferred to the first mortgage trustee for eventual paydown of long-term debt.
Item 3. Legal Proceedings - Continued
As part of the generating asset sale on June 8, 1999, the Company has entered into two indemnity obligations with the purchaser, WPS-PDI.
First, the Company will be liable, with certain limitations, for certain Aroostook River flowage damage. This liability will continue for ten years after the sale and shall not exceed $2,000,000 in the aggregate. Second, the Company has warranteed the condition of the sites sold to WPS-PDI, with an aggregate limit of $3,000,000 for two years after the date of sale, and five years after the sale for environmental claims. The Company is unaware of any pending claims under either of these indemnity obligations.
(c) Maine Public Utilities Commission, Inquiry Into Bulk Power System Administration and Settlement System in Northern Maine, MPUC Docket No. 98-929.
On December 1, 1998, the MPUC issued its Notice of Inquiry into the structure and operation of a bulk power system administrator and retail settlement system for northern Maine. This Inquiry was assigned MPUC Docket No. 98-529. The MPUC based the need for this proceeding on the fact that northern Maine is not electrically connected to the New England grid and therefore systems in place in the rest of New England that are necessary to support a marketable competitive environment do not yet exist in northern Maine.
The MPUC Notice acknowledges that the four northern Maine utilities - the Company, the Houlton Water Company, the Eastern Maine Electric Cooperative, Inc. and the Van Buren Light and Power District - have formed a working group for the express purpose of developing these systems. The northern Maine utilities developed and filed a proposal for these systems on April 30, 1999. The proposal consisted of a Northern Maine Independent System Administrator (NMISA) for northern Maine, which must be approved by the FERC. The NMISA has been organized as a non-profit corporation under Maine law. On August 25, 1999, the NMISA filed its tariff with the FERC (Docket No. ER99-4225-000). The FERC approved this tariff on November 15, 1999.
Item 3. Legal Proceedings - Continued
(d) Maine Public Service Company Investigation of Stranded Costs, Transmission and Distribution Utility Revenue Requirements and Rate Design, Docket No. 98-577
On October 14, 1998, and subsequently amended on February 9, 1999, August 11, 1999 and December 15, 1999, the Company filed its determination of stranded costs, transmission and distribution costs and rate design with the MPUC. The Company's amended testimony supports its $95.7 million estimate of stranded costs, net of available value from the sale of the generating assets, when deregulation occurs on March 1, 2000. The major components include the remaining investment in Seabrook, the above market costs of the amended power purchase agreement and recovery of fuel expense deferrals related to Wheelabrator-Sherman, the obligation for remaining operating expenses and recovery of the Company's remaining investment in Maine Yankee, and the recovery of several other regulatory assets.
On October 15, 1999, the Company filed with the MPUC a Stipulation resolving the revenue requirement and rate design issues for the Company's Transmission and Distribution (T&D) utility. This Stipulation has been signed by the Public Advocate and approval will be recommended by the MPUC staff. Under the Stipulation, the Company's total annual T&D revenue requirement will be $16,640,000, effective March 1, 2000. This revenue requirement includes a 10.7% return on equity with a capital structure based on 51% common equity. The Stipulation further provides that the precise level of stranded cost recovery cannot be determined until final determination of all costs associated with the sale of the Company's generating assets (see Item 3(b) above), but does set forth some general principles concerning the Company's ultimate stranded costs recovery, including agreement that the major components of the Company's stranded costs are legitimate, verifiable and unmitigable, and therefore subject to recovery in rates, and that the 3.66% recovery foregone in Docket 98-865 shall be added to stranded cost recovery in the manner specified in the stipulation in that Docket (see Item 3(e) below). The stipulation also provides that the Company's recovery of unamortized investment tax credits and excess deferred income taxes associated with the Company's generating assets must await a final determination ruling
Item 3. Legal Proceedings - Continued
from the IRS, which ruling has been sought by Central Maine Power Company (CMP). On December 1, 1999, the MPUC approved this Stipulation. In early January, 2000, CMP received its ruling from the IRS which concluded that the unamortized investment tax credits and excess deferred income taxes associated with the sale of the generating assets could not be used to reduce customer rates without violating the tax normalization rules for public utilities. Therefore, the Company has recognized these excess deferred taxes in income, which amounted to an increase in net income of approximately $389,000, $.24 per share.
On January 27, 2000, the MPUC approved a Stipulation in Phase II of Docket No. 98-577 that provided for the recovery in rates of the Company's stranded investment. The major element of the Phase II Stipulation was the $12.5 million of stranded investment recoverable annually beginning March 1, 2000. This revenue requirement includes a return on unrecovered stranded investment based on the capital structure approved by the MPUC in its December 1, 1999 Order. The approved capital structure will consist of 51% common equity with an authorized return on equity of 10.7%. The Phase II Stipulation also allowed the Company to offset its unrecovered stranded investment in Seabrook by approximately $7 million, representing an amount equal to 35% of the available value from the sale of the generation assets. The parties to the Phase II Stipulation also resolved several rate design issues, principally the elimination of the inclining block rate for residential customers. In addition, the Company was granted several accounting orders incorporating certain accounting methodologies used in determining the elements of stranded costs. The annual revenue requirement associated with the recovery of stranded costs will be reviewed every two years.
With the award of the standard offer rate on November 18, 1999, and orders approving the Company's T&D rates and stranded investment recovery rates described above, the MPUC has established all elements of customer rates effective March 1, 2000, the beginning of deregulation in Maine. On average, our customers' rates will be reduced by approximately 6%.
Item 3. Legal Proceedings - Continued
(e) Maine Public Utilities Commission Approves Common Stock Repurchase Program, Docket No. 99-610
Reference is made to the Company's Form 10-Q, Part II, Legal Proceedings, Item 1(d) for the quarter ended September 30, 1999, Form 8-K, Item 5(b) filed on December 1, 1999 and Item 3(d) of this Form 10-K, in which the Company reported that stipulations resolving revenue requirements and rate design issues for transmission and distribution rates, as well as stranded investment, have been approved by the Maine Public Utilities Commission (MPUC). In the Stipulations, approved by the MPUC, the parties also agreed to a capital structure consisting of 51% common equity and 49% of debt. After paying off debt with proceeds from the sale of the Company's generating assets, as required under the Company's mortgage indentures, the Company projects that the percentage of common equity as a component in its capital structure would exceed 51%.
In order to manage its capital structure to limit common equity to 51%, the MPUC on November 17, 1999, approved the Company's request to repurchase up to 500,000 shares of its common stock over a period of five years. The shares will be repurchased through an open-market program. Previously over a five-year period from September, 1989 to September, 1994, the Company purchased 250,000 shares at a cost of $5.7 million, all of which are held in treasury shares, in order to maintain the Company's capital structure at levels appropriate for an investor-owned electric utility.
(f) Maine Public Utilities Commission Approves Rate Plan Stipulation, Docket No. 98-685
Reference is made to the Company's Form 10-K for December 31, 1996 where the Company's rate stabilization plan approved by the Maine Public Utilities Commission (MPUC) (Docket No. 95-052) in November, 1995 is described. In addition, the Company's Form 10-K for December 31, 1998 describes a January, 1998 Stipulation approved by the MPUC in Docket No. 97-830, which established the rate increase beginning February 1, 1998 and the minimum rate increase effective February 1, 1999. The Stipulation also prescribes that the savings from the restructured Wheelabrator-Sherman (W-S) Power Contract would offset Maine Yankee
Item 3. Legal Proceedings - Continued
replacement power costs. For the final year of the rate plan beginning February 1, 1999, the Company filed, on November 13, 1998, with the MPUC for a 6.4% increase. The Company also stated that it would forego part or all of this 1999 increase if the sale of its generating assets was allowed to go forward. On December 15, 1998, the MPUC granted the Company's request to defer the increase to April 1, 1999, as well as extend the rate plan by one month to February 29, 2000, to coincide with the start of retail competition in Maine.
In its April 6, 1999 Order, the MPUC approved a March 25, 1999 Stipulation between the Office of the Public Advocate (OPA) and the Company. Under this Stipulation, customer rates would not increase on April 1, 1999, if the MPUC approved the sale of the Company's generation assets as described in Item (b) above. The approval of the Stipulation also resolved certain issues associated with the treatment of capacity cost savings from the closure of Maine Yankee under the Company's rate stabilization plan.
The principal provisions are as follows:
1) The Company is entitled to a 3.66% specified rate increase as of April 1, 1999. Rather than increase customer rates, the Company will recognize the revenues that this increase would have generated and, correspondingly, record a deferred asset on the Company's books of account. The parties to the Stipulation also agreed to recommend the use in rates of available value from the asset sale corresponding with the specified rate increase once the MPUC determines the Company's allowed stranded cost recovery in Docket No. 98-577, Public Utilities Commission, Investigation of Stranded Costs, Transmission and Distribution Utility, Revenue Requirements and Rate Design of Maine Public Service Company. As described in Item 3(d) above, the MPUC approved the use of available value in its December 1, 1999 order.
2) The Stipulation also resolves a dispute over the determination of Maine Yankee replacement power costs. The Stipulation allows the Company to continue to recognize and defer Maine Yankee replacement power costs on an energy-only basis, offset by
Item 3. Legal Proceedings - Continued
Wheelabrator-Sherman contract restructuring savings, through the end of the rate plan. The Company agreed to begin amortizing on April 1, 1999, Maine Yankee replacement power costs in the amount of $150,000 per month or a total of $1,650,000 for the remaining eleven months of the rate plan.
3) With the Commission's approval of the generation asset sale, the parties agreed that the Company would not increase retail rates on April 1, 1999, to reflect any increase under the Maine Yankee replacement power provision of the rate plan. Any Maine Yankee deferred replacement costs will be deferred, and, beginning on March 1, 2000, will be offset by a corresponding amount of available value as allowed in Docket No. 98-577.
Item 4. Submission of Matters To a Vote of Security Holders
At the Company's Annual Meeting of Stockholders, held on May 11, 1999 the only matter voted upon was the uncontested election of the following directors to serve until the 2002 Annual Meeting of Stockholders, each of whom received the votes shown:
Non-votes and
Nominee For Against Abstentions
D. James Daigle 1,322,208 18,886 276,156
Deborah L. Gallant 1,322,741 18,353 276,156
G. Melvin Hovey 1,320,288 20,806 276,156
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is listed and traded on the American Stock Exchange. As of December 31, 1999, there were 1,175 holders of record of the Company's Common Stock.
Dividend data and market price related to the Common Stock are tabulated as follows for the two most recent calendar years:
Dividends
Market Price Dividends Declared
High Low Paid Per Share Per Share
1999
First Quarter $16-1/8 $13-1/8 $ .25 $ .25
Second Quarter $17-7/8 $12-7/8 .25 .25
Third Quarter $19-1/8 $17-7/16 .25 .30
Fourth Quarter $19 $16-1/2 .30 .30
Total Dividends $ 1.05 $1.10
1998
First Quarter $14-1/4 $11-3/4 $ .25 $ .25
Second Quarter $15-1/16 $13-15/16 .25 .25
Third Quarter $15-1/8 $14-1/16 .25 .25
Fourth Quarter $17-3/16 $13-5/16 .25 .25
Total Dividends $1.00 $1.00
Dividends declared within the quarter are paid on the first day of the succeeding quarter.
See Note 7 to the financial statements incorporated herein by reference concerning restrictions on payment of dividends on Common Stock.
Item 6. Selected Financial Data
A five-year summary of selected financial data (1995-1999) is included on page 16 of the Company's 1999 Annual Report to Stockholders, which summary is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information required to be furnished in response to this Item is submitted as pages 6 to 15, Exhibit 13, 1999 Annual Report to Shareholders, which pages are hereby incorporated herein by reference. Information regarding "Construction" is also furnished in Note 11, "Commitments, Contingencies, and Regulatory Matters", of the Notes to the Consolidated Financial Statements, pages 30 to 35 of the 1999 Annual Report to Shareholders, which pages are hereby incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
(a) The following financial statements and supplementary data are included in the Company's 1999 Annual Report to Stockholders on pages 17 through 35, and are incorporated herein by reference:
Report of Independent Accountants.
Statements of Consolidated Operations for the years ended December 31, 1999, 1998 and 1997.
Statements of Consolidated Cash Flows for the years ended December 31, 1999, 1998 and 1997.
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Statements of Consolidated Common Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Capitalization as of December 31, 1999 and 1998.
Notes to Consolidated Financial Statements.
Item 9. Changes In And Disagreements With Accountants On Accounting and Financial Disclosure
None.
Form 10-K
Item 10. Directors and Executive Officers of the Registrant
Information with regard to the Directors of the registrant is set forth in the proxy statement of the registrant relating to its 2000 Annual Meeting of Stockholders, which information is incorporated herein by reference. Certain information regarding executive officers is set forth under the caption "Executive Officers" in Item 1 of Part I of this Form 10-K and also in the proxy statement of the registrant relating to the 2000 Annual Meeting of Stockholders, under "Compliance with Section 16(a) of the Securities and Exchange Act of 1934", which information is incorporated by reference.
Item 11. Executive Compensation
Information for this item is set forth in the proxy statement of the registrant relating to its 2000 Annual Meeting of Stockholders, which information (with the exception of the "Board Executive Compensation Committee Report") is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information for this item is set forth in the proxy statement of the registrant relating to its 2000 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Not applicable.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Financial Statements
Report of Independent Accountants.
Incorporated by reference into Part II of this report from pages 18 through 35 of the 1999 Annual Report to Stockholders:
Statements of Consolidated Operations for years ended December 31, 1999, 1998 and 1997.
Statements of Consolidated Cash Flows for the years ended December 31, 1999, 1998 and 1997.
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Statements of Consolidated Common Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Capitalization as of December 31, 1999 and 1998.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules
Included in Part IV of this report:
Form 10-K
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - Continued
Page
Report of Independent Accountants 45
Schedule II - Valuation of Qualifying Accounts 46
and Reserves
Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto.
(3) Exhibits
Certain of the following exhibits are filed herewith. Certain other of the following exhibits have heretofore been filed with the Commission and are incorporated herein by reference.
(* indicates filed herewith).
3(a) Restated Articles of Incorporation with all amendments through May 8, 1990. (Exhibit 3(a) to 1990 form 10-K)
3(b) By-laws of the Company, as amended through May 12, 1987. (Exhibit 3(b) to 1987 Form 10-K)
4(a) Indenture of Mortgage and Deed of Trust defining the rights of the holders of the Company's First Mortgage Bonds. (Exhibit 4(a) to 1980 Form 10-K)
4(b) First Supplemental Indenture. (Exhibit 4(b) to 1980 Form 10-K)
4(c) Second Supplemental Indenture. (Exhibit 4(c) to 1980 Form 10-K)
4(d) Third Supplemental Indenture. (Exhibit 4(d) to 1980 Form 10-K)
4(e) Fourth Supplemental Indenture. (Exhibit 4(e) to 1980 Form 10-K)
4(f) Fifth Supplemental Indenture. (Exhibit A to Form 8-K dated May 10, 1968)
4(g) Sixth Supplemental Indenture. (Exhibit A to Form 8-K dated April 10, 1973)
4(h) Seventh Supplemental Indenture. (Exhibit A to Form 8-K dated November 7, 1975)
4(i) Eighth Supplemental Indenture. (Exhibit 4(i) to 1980 Form 10-K)
4(j) Ninth Supplemental Indenture. (Exhibit B to Form 10-Q for the second quarter of 1978)
4(k) Tenth Supplemental Indenture. (Exhibit 4(k) to 1980 Form 10-K)
4(l) Eleventh Supplemental Indenture. (Exhibit 4(l) to 1982 Form 10-K)
4(m) Indenture defining the rights of the holders of the Company's 9 7/8% debentures. (Exhibit A to Form 8-K, dated June 10, 1970)
4(n) Indenture defining the rights of the holders of the Company's 14% debentures. (Exhibit 4(n) to 1982 Form 10-K)
4(o) Twelfth Supplemental Indenture. (Exhibit 4(o) to Form 10-Q for the quarter ended September 30, 1984)
4(p) Thirteenth Supplemental Indenture. (Exhibit 4(p) to Form 10-Q for the quarter ended September 30, 1984)
4(q) Fourteenth Supplemental Indenture, Dated July 1, 1985. (Exhibit 4(q) to 1985 Form 10-K)
4(r) Fifteenth Supplemental Indenture, Dated March 1, 1986. (Exhibit 4(r) to 1985 Form 10-K)
4(s) Sixteenth Supplemental Indenture, Dated September 1, 1991. (Exhibit 4(s) to the Company's 1991 Form 10-K)
4(t) Seventeenth Supplemental Indenture, Dated April 1, 1997. (Exhibit 4(t) to the Company's 1998 Form 10-K)
4(u) Eighteenth Supplemental Indenture, Dated April 1, 1998.
(Exhibit 4(u) to the Company's 1998 Form 10-K)
4(v) Nineteenth Supplemental Indenture, Dated May 1, 1998.
(Exhibit 4(v) to the Company's 1998 Form 10-K)
9 Not applicable.
10(a)(1) Joint Ownership Agreement with Public Service of New Hampshire in respect to construction of two nuclear generating units designated as Seabrook Units 1 and 2, together with related amendments to date. (Exhibit 10 to the Company's 1980 Form 10-K)
10(a)(2) Twentieth Amendment to Joint Ownership Agreement. (Exhibit 10(a)(6) to the Company's 1986 Form 10-K)
10(a)(3) Twenty-Second Amendment to Joint Ownership Agreement. (Exhibit 10(a)(3) to the 1988 Form 10-K)
10(b)(1) Capital Funds Agreement, dated as of May 20, 1968 between Maine Yankee Atomic Power Company and the Company. (Exhibit 10(b)(1) to Form 10-Q for the quarter ended March 31, 1983)
10(b)(2) Power Contract, dated as of May 20, 1968 between Maine Yankee Atomic Power Company and the Company. (Exhibit 10(b)(2) to Form 10-Q for the quarter ended March 31, 1983)
10(c)(1) Participation Agreement, as of June 20, 1969, with Maine Electric Power Company, Inc. (Exhibit 10(c)(1) to Form 10-Q for the quarter ended March 31, 1983)
10(c)(2) Agreement, as of June 20, 1969, among the Company and the other Maine Participants. (Exhibit 10(c)(2) to Form 10-Q for quarter ended March 31, 1983)
10(c)(3) Power Purchase and Transmission Agreement Supplement to Participation Agreement, dated as of August 1, 1969, with Maine Electric Power Company, Inc. (Exhibit 10(c)(3) to Form 10-Q for quarter ended March 31, 1983)
10(c)(4) Supplement Amending Participation Agreement, as of June 24, 1970, with Maine Electric Power Company, Inc. (Exhibit 10(c)(4) to Form 10-Q for quarter ended March 31, 1983)
10(c)(5) Second Supplement to Participation Agreement, dated as of December 1, 1971, including as Exhibit A the Unit Participation Agreement dated November 15, 1971, as amended, between Maine Electric Power Company, Inc. and the New Brunswick Electric Power Commission. (Exhibit 10(c)(5) to Form 10-Q for quarter ended March 31, 1983)
10(c)(6) Agreement and Assignment, as of August 1, 1977, by Connecticut Light & Power Company, Hartford Electric Company, Holyoke Water Power Company, Holyoke Power Company, Western Massachusetts Electric Company and the Company. (Exhibit 10(c)(6) to Form 10-Q for the quarter ended March 31, 1983)
10(c)(7) Amendment dated November 30, 1980 to Agreement and Assignment as of August 1, 1977, between Connecticut Light & Power Company, Hartford Electric Company, Holyoke Water Power Company, Holyoke Power Company, Western Massachusetts Electric Company and the Company. (Exhibit 10(c)(7) to Form 10-Q for the quarter ended March 31, 1983)
10(c)(8) Assignment Agreement as of January 1, 1981, between Central Maine Power Company and the Company. (Exhibit 10(c)(8) to Form 10-Q for the quarter ended March 31, 1983)
10(d) Wyman Unit #4 Agreement for Joint Ownership as of November 1, 1974, with Amendments 1, 2, and 3, dated as of June 30, 1975, August 16, 1976, December 31, 1978, respectively. (Exhibit 10(d) to Form 10-Q for the quarter ended March 31, 1983)
10(e) Agreement between Sherman Power Company and Maine Public Service Company, dated June 4, 1984, with amendments dated July 12, 1984 and February 14, 1985. (Exhibit 10(f) to 1984 Form 10-K)
10(f) Credit Agreement, dated as of October 8, 1987 among the Registrant and The Bank of New York, Bank of New England, N.A., The Merrill Trust Company and The Bank of New York, as agent for the Participating Banks. (Exhibit 10(g) to Form 8-K dated October 13, 1987)
10(g) Amendment No. 1, dated as of October 8, 1989, to the Revolving Credit Agreement, dated as of October 8, 1987, among the Registrant and The Bank of New York, Bank of New England, N.A., Fleet Bank (formerly the Merrill Trust Company) and The Bank of New York as agent for the participating banks. (Exhibit 10(l) to Form 8-K dated September 22, 1989)
10(h) Amendment No. 2, dated as of June 5, 1992, to the Revolving Credit Agreement, among the Registrant and The Bank of New York, Bank of New England, N.A., Shawmut Bank and the Bank of New York, as agent for the participating banks. (Exhibit 10(h) to the Company's 1992 Form 10-K)
10(i) Indenture of Second Mortgage and Deed of Trust, dated as of October 1, 1985, made by the Registrant to J. Henry Schroder Bank and Trust Company, as Trustee. (Exhibit 10(i) to Form 8-K dated November 1, 1985)
10(j) First Supplemental Indenture Dated March 1, 1991. (Exhibit 10(i) to the Company's 1991 Form 10-K)
10(k) Second Supplemental Indenture Dated September 1, 1991. Exhibit 10(j) to the Company's 1991 Form 10-K)
10(l) Agency Agreement dated as of October 1, 1985, between J. Henry Schroder Bank and Trust Company, as Trustee under the Indenture of Second Mortgage and Deed of Trust dated as of October 1, 1985, made by the Registrant to J. Henry Schroder Bank and Trust Company, as Trustee, and Continental Illinois National Bank and Trust Company, as Trustee, under an Indenture of Mortgage and Deed of Trust, dated as of October 1, 1945, as amended and supplemented, made by the Registrant to Continental Illinois National Bank and Trust Company, as Trustee. (Exhibit 10(j) to Form 8-K dated November 1, 1985)
Executive Compensation Plans and Arrangements
10(m) Employment Contract between Frederick C. Bustard and Maine Public Service Company dated August 22, 1989. (Exhibit 10(h) to 1989 Form 10-K)
*10(n) Employment Contract between Paul R. Cariani and Maine Public Service Company dated November 5, 1999.
*10(o) Employment Contract between Stephen A. Johnson and Maine Public Service Company dated November 5, 1999.
*10(p) Employment Contract between Larry E. LaPlante and Maine Public Service Company, dated November 5, 1999.
*10(q) Employment Contract between William L. Cyr and Maine Public Service Company, dated November 5, 1999.
10(r) Maine Public Service Company, Prior Service Executive Retirement Plan, dated May 12, 1992. (Exhibit 10(s) to 1992 Form 10-K)
10(s) Maine Public Service Company Pension Plan. (Exhibit 10(t) to 1992 Form 10-K)
10(t) Maine Public Service Company Retirement Savings Plan. (Exhibit 10(u) to 1992 Form 10-K)
10(u) Third Supplemental Indenture Dated as of June 1, 1996. (Exhibit 10(t) to 1996 Form 10-K)
10(v) Amendment No. 3, dated as of October 8, 1995, to the Revolving Credit Agreement, dated as of October 7, 1987, among the Registrant and The Bank of New York, Shawmut Bank of Boston, Fleet Bank of Maine, and The Bank of New York, an agent for the participating Banks. (Exhibit 10(u) to 1996 Form 10-K)
10(w) Fourth Supplemental Indenture dated May 1, 1998. (Exhibit 10(v) to the Company's 1998 Form 10-K)
10(x) Agreement between WPS Power Development, Inc. and Maine Public Service Company, dated July 7, 1998. (Exhibit 10(w) to the Company's 1998 Form 10-K)
10(y) Agreement between Wheelabrator-Sherman Energy Company and Maine Public Service Company, dated October 15, 1997, with amendments dated January 30, 1998 and April 28, 1998. (Exhibit 10(x) to the Company's 1998 Form 10-K)
10(z) Agreement between Loring Development Authority of Maine and Maine Public Service Company, dated July 9, 1998. (Exhibit 10(y) to the Company's 1998 Form 10-K)
11 Not applicable.
12 Not applicable.
*13 1999 Annual Report to Shareholders.
16 March 8, 1996 Letter regarding change in certifying accountant from Deloitte & Touche LLP. (Exhibit 16 to the Company's 1996 Form 10-K)
18 Not applicable.
19 Not applicable.
21 Maine and New Brunswick Electrical Power Company, Limited, a Canadian corporation.
22 Not applicable.
23 Not applicable.
99(a) Agreement of Purchase and Sale between Maine Public Service and Eastern Utilities Associates, dated April 7, 1986. (Exhibit 28(a) to Form 10-Q for the quarter ended June 30, 1986)
99(b) Addendum to Agreement of Purchase and Sale, dated June 26, 1986. (Exhibit 28(b) to Form 10-Q for the Quarter ended June 30, 1986)
99(c) Stipulation between Maine Public Service Company, the Staff of the Commission and the Maine Public Utilities Commission and the Maine Public Advocate, dated July 14, 1986. (Exhibit 28(c) to Form 10-Q for the quarter ended June 30, 1986)
99(d) Amendment to July 14, 1986 Stipulation, dated July 18, 1986. (Exhibit 28(d) to Form 10-Q for the quarter ended June 30, 1986)
99(e) Order of the Maine Public Utilities Commission dated July 21, 1986, Docket Nos 84-80, 84-113 and 86-3. (Exhibit 28(g) to 1986 Form 10-K)
99(f) Order of the Maine Public Utilities Commission, dated May 9, 1986, Docket Nos. 84-113 and 86-3 (with attached Stipulations). (Exhibit 28(r) to 1986 Form 10-K)
99(g) Order of the Maine Public Utilities Commission, dated July 31, 1987, Docket Nos. 84-80, 84-113, 87-96 and 87-167 (with attached Stipulation). (Exhibit 28(i) to 1988 Form 10-K)
99(h) Agreement between Maine Public Service Company and various current Seabrook Nuclear Project Joint Owners, dated January 13, 1989. (Exhibit 28(o) to 1988 Form 10-K)
99(i) Order of the Maine Public Utilities Commission dated November 30, 1995 (with attached Stipulation) in Docket No. 95-052. (Exhibit 28(p) to 1995 Form 10-K)
99(j) Order of the Federal Energy Regulatory Commission dated May 31, 1995 in Docket No. ER 95-836-000. (Exhibit 28(r) to 1995 Form 10-K)
99(k) Order of Maine Public Utilities Commission dated June 26, 1996 in Docket 95-052 (Rate Design). (Exhibit 99(n) to 1996 Form 10-K)
99(l) Independent Auditors Report of Deloitte & Touche L.L.P. dated February 14, 1996 regarding year ended December 31, 1995. (Exhibit 99(l) to 1997 Form 10-K)
99(m) Amendment No. 1, dated as of March 28, 1997, to the Letter of Credit and Reimbursement Agreement, dated as of June 1, 1996, among the Registrant, The Bank of New York, Fleet Bank of Maine, and The Bank of New York, as Agent and Issuing Bank. (Exhibit 99(m) to 1997 Form 10-K)
99(n) Amendment No. 4, dated as of March 28, 1997, to the Revolving Credit Agreement, dated as of October 8, 1987, by and among the Registrant, the signatory Banks thereto and The Bank of New York, as Agent. (Exhibit 99(n) to 1997 Form 10-K)
99(o) Order of Maine Public Utilities Commission dated January 30, 1998 in Docket No. 97-830 (Annual Increase under Rate Stabilization Plan). (Exhibit 99(o) to 1997 Form 10-K)
99(p) Order by the Maine Public Utilities Commission dated January 15, 1998 in Docket No. 97-727. (Exhibit 99(q) to 1997 Form 10-K)
99(q) Order of Maine Public Utilities Commission dated February 20, 1998 in Docket 97-670 (Divestiture of Generation Assets). (Exhibit 99(q) to the Company's 1998 Form 10-K)
99(r) Order of Maine Public Utilities Commission dated September 21, 1998 in Docket 98-138 (Formation of marketing affiliate). (Exhibit 99(r) to the Company's 1998 Form 10-K)
99(s) Order of Maine Public Utilities Commission dated December 15, 1998 in Docket 98-865 (Annual Increase Under Rate Stabilization Plan). (Exhibit 99(s) to the Company's 1998 Form 10-K)
99(t) Report of Synapse Energy Economics regarding competition and market power in the northern Maine market for the Maine Public Utilities Commission for Docket 97-586. (Exhibit 99(t) to the Company's 1998 Form 10-K)
99(u) Final Report of the MPUC and the Maine Attorney General regarding market power issues raised by the prospect of retail competition in the electric industry in Docket 97-877. (Exhibit 99(u) to the Company's 1998 Form 10-K)
99(v) Order of the Federal Energy Regulatory Commission dated December 22, 1998 in Docket No. ER95-836-000. (Exhibit 99(v) to the Company's 1998 Form 10-K)
*99(w) Order of Maine Public Utilities Commission dated April 5, 1999 in Docket 98-584 (Generating Asset Sale Approval).
*99(x) Order of the Federal Energy Regulatory Commission dated April 14, 1999 in Docket EC 99-29-000 (Generating Asset Sale Approval).
*99(y) Order of the Federal Energy Regulatory Commission dated November 15, 1999 in Docket ER 99-4225-000 (Independent System Administrator).
*99(z) Order of Maine Public Utilities Commission dated December 1, 1999 in Docket 98-577 (Stipulation Approval).
*99(aa) Order of Maine Public Utilities Commission dated December 3, 1999 in Docket 99-111 (Energy Atlantic as Central Maine Power Standard Offer Provider).
*99(ab) Order of Maine Public Utilities Commission dated February 17, 2000 in Docket 98-577 (Order Approving Phase II Stipulation).
(b) A Form 8-K was filed on: January 27, 1999, under item 5, Other Events; April 28, 1999, under item 5, Other Events; June 9, 1999, under item 5, Other Events; December 1, 1999, under item 5, Other Events and February 8, 2000, under item 5, Other Events.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 21st of March, 2000.
MAINE PUBLIC SERVICE COMPANY
By: /s/ Larry E. LaPlante
Larry E. LaPlante
Vice President, Treasurer and CFO
Form 10-K
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated.
Signature Title Date
Chairman of the Board,
/s/ G. Melvin Hovey and Director 3/3/00
(G. Melvin Hovey)
/s/ Paul R. Cariani President and Director 3/3/00
(Paul R. Cariani)
/s/ Robert E. Anderson Director 3/3/00
(Robert E. Anderson)
/s/ Donald F. Collins Director 3/3/00
(Donald F. Collins)
/s/ D. James Daigle Director 3/3/00
(D. James Daigle)
/s/ Richard G. Daigle Director 3/3/00
(Richard G. Daigle)
/s/ J. Gregory Freeman Director 3/7/00
(J. Gregory Freeman)
/s/ Deborah L. Gallant Director 3/3/00
(Deborah L. Gallant)
/s/ Nathan L. Grass Director 3/3/00
(Nathan L. Grass)
/s/ J. Paul Levesque Director 3/7/00
(J. Paul Levesque)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of
Maine Public Service Company
Our audits of the consolidated financial statements referred to in our report dated February 10, 2000 appearing on page 17 of the 1999 Annual Report to Shareholders of Maine Public Service Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Portland, Maine
February 10, 2000
Maine Public Service Company & Subsidiary
Valuation of Qualifying Accounts & Reserves
For the Years Ended December 31, 1999, 1998, & 1997
Additions Deductions
Balance Recoveries Accounts Balance
at Costs of Accounts Written Off at
Beginning & Previously As End of
Description of Period Expenses Written Off Uncollectible Period
Reserve Deducted From
Asset To Which It Applies:
Allowance for
Uncollectible Accounts
Year Ended December 31:
1999 215,000 171,323 119,690 291,013 215,000
1998 215,000 181,360 129,022 310,382 215,000
1997 207,029 182,706 124,397 299,132 215,000
Exhibit 10(n)
This Agreement made as of this 5th day of November, 1999, but effective September 13, 1999, by and between MAINE PUBLIC SERVICE COMPANY, a Maine corporation with its principal place of business in Presque Isle, Maine (the "Company") and Paul R. Cariani of Presque Isle, Maine, ("Officer").
WHEREAS, the Officer has been employed by the Company in a senior management capacity for over16 years, and is now its President and CEO ; and
WHEREAS, the Officer's knowledge of the Company's affairs and his experience are critical to the protection and enhancement of the best interests of the Company, its employees, ratepayers and stockholders; and
WHEREAS, in the current business climate acquisitions of smaller, independently-operated utility companies is common; and
WHEREAS, the Company desires to assure itself of the continued employment of the Officer and the benefit of his independent judgment in the operation of the Company, particularly in the event that any such acquisition was being considered, in light of the disruption resulting from such event;
WHEREAS, the Company and the Officer entered into an Employment Continuity Agreement, dated August 22, 1989; and
WHEREAS, Section 14 of the Agreement provides that the Agreement may be amended in writing by the parties; and
WHEREAS, the parties desire to amend and restate the Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and undertakings herein contained and for other good and valuable consideration, the receipt and adequacy of which is acknowledged by each of the parties, the Officer and the Company agree as follows:
1. Term of the Agreement and Renewal. The term of this Agreement shall be for a period beginning September 13, 1999, and ending December 31, 2001. On January 1, 2002, and on January 1 of each period of three (3) years thereafter (in each case such date to be a "Renewal Date") this Agreement automatically shall be renewed for an additional three (3) year term, unless at least one (1) year prior to any such Renewal Date, either party shall have given written notice to the other that such renewal shall not take place. Such notice may be given by the Company only upon the affirmative vote of the Compensation Committee of the Board of Directors.
2. Rights Upon Involuntary Termination of Employment. If, within twenty-four (24) months after the occurrence of a Change in Control Event, the Company terminates the Officer's employment for any reason other than Good Cause as defined in Paragraph 4, or if the Officer voluntarily terminates employment for Good Reason as defined in Paragraph 3, the Company shall provide the Officer with the following:
(a) Within thirty (30) days of such termination, a lump sum cash payment in an amount equal to the sum of:
(i) two hundred percent (200%) of the Officer's annual base salary in effect upon the date of the Change in Control Event, and
(ii) two hundred percent (200%) of the award the Officer would have received for the year in which such termination occurs, pursuant to the Maine Public Service Company Incentive Compensation Plan, assuming that his employment had not terminated and that for such year all applicable performance goals will be met.
(b) The continuation of the Officer's participation and the participation of his dependents (to the extent they were participating prior to his termination of employment) in the Company's health, life, disability and other employee benefit plans, programs and arrangements (excluding the Maine Public Service Company Pension Plan and the Maine Public Service Company Non-Union Retirement Savings Plan) for a period of twenty-four (24) months after such termination as if he were still employed during such period; provided, however, if such participation in any such plan, program or arrangement is specifically prohibited by the terms thereof, the Company shall provide the Officer (and his dependents) with benefits substantially similar to those which he was entitled to receive under such plan, program or arrangement immediately prior to his termination of employment. Additionally, at the end of any period of such coverage, the Officer shall have the right to have assigned to him, for the cash surrender value thereof, any assignable insurance owned by the Company on the life of the Officer. For purposes of this Paragraph 2(b), any employee benefit determined with reference to the Officer's compensation or earnings shall be based on his annual base salary unless otherwise provided under the terms of the applicable employee benefit plan, program or arrangement.
(c) The Company shall pay the Officer an amount equal to the award he would have been entitled to receive under the Company's Incentive Compensation Plan, if his employment had not terminated, based on the base salary he had earned as of his termination date, and assuming that for such year all applicable performance goals will be met. Such payment shall be made within ninety (90) days after his employment terminates.
3. Termination for Good Reason. For purposes of this Agreement, termination by the Officer of his employment for "Good Reason," except upon the Officer's express written consent otherwise, shall mean:
(a) the assignment of duties to the Officer which:
(i) are materially different from his duties immediately prior to the Change in Control Event, or
(ii) result in his having significantly less authority or responsibility than he had prior to the Change in Control Event; or
(b) the Officer's removal from, or any failure to re-elect him to, any position he held immediately prior to the Change in Control Event with either the Company or any majority-owned subsidiary; or
(c) a reduction of the Officer's annual base salary in effect on the date of the Change in Control Event or as the same may be increased from time to time thereafter; or
(d) the Company's transferring or assigning the Officer to a place of employment more than twenty-five (25) miles from Presque Isle, Maine, except for required business travel to an extent substantially consistent with his business travel obligations immediately prior to the Change in Control Event; or
(e) the Company's failure to provide the Officer with substantially the same health, life and other employee benefit plans, programs and arrangements (specifically including the Company's compensation and incentive plans, as the same may be amended in the future), and substantially the same perquisites of employment, as provided to him immediately prior to the Change in Control Event or as the same may be increased thereafter; or
4. Termination by Reason of Death or for Good Cause. Notwithstanding any provision of this Agreement to the contrary, no benefits are payable hereunder upon the Officer's death prior to his involuntary termination of employment pursuant to Paragraph 2 or voluntary termination of employment for Good Reason pursuant to Paragraph 3. The Company retains the right to terminate the Officer for "Good Cause," in which event he shall not be entitled to receive any payment or benefits pursuant to this Agreement. "Good Cause" shall mean:
(a) the Officer's conviction, by a court of competent jurisdiction, of a crime adversely reflecting on his honesty, trustworthiness or fitness to carry out the responsibilities of his position with the Company in other respects; or
(b) a willful breach by him of any material duty or obligation imposed upon him under the terms of his employment, as those terms existed immediately prior to any Change in Control Event, and his failure to cure such breach within thirty (30) days after receiving notice thereof from the Company.
5. "Change in Control Event." Each of the following events shall constitute a "Change in Control Event" for purposes of this Agreement:
(a) Any person acquires beneficial ownership of Company securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding stock.
For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Company securities would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.
(b) The Company ceases to be a reporting company pursuant to Section 13(a) of the Securities Exchange Act of 1934 or any similar successor provision.
(c) The number of the Company's Outside Directors, as defined herein, is decreased by more than fifty percent (50%) in any twenty-five (25) month period or the number of the Company's directors is increased such that the Outside Directors constitute less than a majority of the Board.
(d) Within any twenty-five (25) month period, individuals who were Outside Directors at the beginning of such period, together with any other Outside Directors first elected as directors of the Company pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Outside Directors in office immediately prior to such respective elections, cease to constitute a majority of the board of directors of the Company.
(e) The Company is subject to a change in control which would require reporting in response to Item 1 of Form 8-K under Regulation 13a-11 promulgated under the Securities Exchange Act of 1934, as amended, or any similar successor statute or rule, whether or not the Company is a reporting company under such Act.
(f) The Company's stockholders approve:
(i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company common stock would be converted into cash, securities or other property, other than a merger or consolidation of the Company in which the holders of the Company's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or
(ii) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company.
Notwithstanding subparagraphs (i) and (ii) above, the term "Change in Control Event" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of the Company is owned, directly or indirectly, by a holding company, and the holders of the Compa