Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995. 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. [X]
Aggregate market value of the voting stock held by non-affiliates at March
15, 1996: $31,536,375.
The number of shares outstanding of each of the issuer's classes of common
stock as of March 15, 1996.
Common Stock, $7.00 par value - 1,617,250 shares
DOCUMENTS INCORPORATED BY REFERENCE
1. The Company's 1995 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, 1995, which is
the end of the fiscal year covered by this report, is incorporated by
reference into Part III.
(Page 1 of 39 pages)
PART I Form 10-K
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 "Subsidiary") was incorporated in 1903 under the laws of
the Province of New Brunswick, Canada. The properties of the Company
and Subsidiary are operated as a single integrated system.
The Company engages in the production, 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 90,000.
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 Subsidiary is primarily a hydro-electric generating company.
It owns and operates the Tinker hydro plant in New Brunswick, Canada,
and sells to the Company the energy not needed to supply its wholesale
New Brunswick customer. During 1995, sales to the Company amounted to
92,538 MWH out of the 116,513 MWH generated for sale at Tinker.
The Company and the Subsidiary's net energy production, including
generated and purchased power, required to serve all customers, was
661,700 MWH for the twelve months ended December 31, 1995. The
following table sets forth the sources from which the Company and the
Subsidiary obtained their power requirements in 1995.
1995 Megawatt-hours Generated
Sources of Power or Purchased
Net Generation:
Hydro 121,252
Steam 22,867
Diesel 1,046
Total 145,165
Purchases:
Nuclear Generated 9,718
Fossil Fuel Generated 382,530
Biomass Generated 125,736
Total 517,984
Inadvertent Received (1,449)
Total System 661,700
- 2 -
PART I Form 10-K
As of June 4, 1984, the Company entered into a Power Purchase
Agreement with Sherman Power Company, which assigned its interest in the
Agreement to Wheelabrator-Sherman Energy Company, formerly Signal-
Sherman Energy Company, (a cogenerator), for approximately 18 MW of
capacity which began July, 1986. The contract expires in 2001.
Financial Information about Foreign and Domestic Operations
Financial Information Relating
To Foreign and Domestic Operations
(In Thousands of U.S. Dollars)
1995 1994 1993
Revenues from
Unaffiliated Customers:
Company-United States 54,553 57,600 59,886
Subsidiary-Canada 694 706 690
Intercompany Revenues:
Company-United States 719 646 649
Subsidiary-Canada 1,877 1,824 2,312
Operating Income:
Company-United States 3,997 7,932 8,347
Subsidiary-Canada 367 387 579
Income before Extraordinary Items
Company-United States 503 4,469 4,687
Subsidiary-Canada 418 377 614
Extraordinary Items, Net of Tax
Company-United States (6,236) - -
Net Income (Loss)
Company-United States (5,733) 4,469 4,687
Subsidiary-Canada 418 377 614
Identifiable Assets:
Company-United States 106,906 115,912 118,323
Subsidiary-Canada 6,936 6,463 6,613
The identifiable assets, by company, are those assets used in each
company's operations, excluding intercompany receivables and
investments.
- 3 -
PART I Form 10-K
Source of Revenues
In 1995, consolidated operating revenues totaled $55,246,626.
The percentages of revenues derived from customer classes are as
follows:
%
Residential 34.5
Small Commercial and Industrial 28.5
Large Commercial and Industrial 17.1
Public Authorities 1.6
Sales to Wholesale Customers for Resale 12.6
Other Sales and Other Revenues 5.7
Total 100.0
Sales to wholesale customers for resale includes three wholesale
customers that entered into various contracts with the Company. 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
a proposal in September, 1994 for their purchased power requirements
effective January 1, 1996. Houlton Water Company (Houlton), the
Company's largest customer, selected an offer from another utility, and
began taking service from that utility starting January 1, 1996. In
1995, sales to Houlton, under an earlier contract, represented 11.1% of
the Company's consolidated MWH sales and 8.4% of consolidated operating
revenues. The remaining wholesale customers, Van Buren Light and Power
District (Van Buren) and Eastern Maine Electric Cooperative, Inc. (EMEC)
selected the Company's six-year proposal, which cannot be terminated
before December 31, 1998. The new rates for these two customers were
effective January 1, 1995. Van Buren and EMEC represented 4.3% of
consolidated MWH sales and 3.0% of consolidated operating revenues.
The closing of Loring Air Force Base (Loring) was completed in
September, 1994, and accounts for the small percentage of total revenues
from Public Authorities. In 1993, when the Base was operating for the
entire year, Loring accounted for 7.3% of consolidated MWH sales and
5.7% of consolidated operating revenues. A civilian authority is now
the caretaker of the facility charged with finding tenants. The
Department of Defense has established a Defense Finance and Accounting
Service Center, which will employ approximately 600 people when fully
implemented. In addition, Loring has been chosen as a Jobs Corp Center,
which is scheduled to open in 1996.
The Company has offered load retention rates to several major
industrial customers. These customers have the option to self-generate;
- 4 -
PART I Form 10-K
however, the Company believes it can compete with self-generation. The
Company's proposals have been accepted by two major customers, pending
execution of the final contracts. Any load retention rates must be
approved by the Maine Public Utilities Commission.
On November 13, 1995, the Maine Public Utilities Commission
approved a Stipulation signed by Maine Public Service Company, the
Commission Staff and the Maine Public Advocate, but opposed by McCain
Foods, Inc. 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 through 1999 and shares operating risks
and benefits between the Company's shareholders and customers. For more
information on the rate plan, see Item 3(d) of the "Legal Proceedings"
section of this Form 10-K.
For additional discussion on revenues, see the 1995 Annual Report
to Stockholders, pages 4 and 5, "Analysis of Financial Condition and
Review of Operations-Operating Revenues and Energy Sales" and pages 9 to
11, "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.
The generating facilities of the Company and Subsidiary meet the
applicable current environmental regulations of State and Federal
governments of the United States and Provincial and Dominion governments
of Canada, except for the three diesel stations (12 MW) and the oil-
fired generating plant located in Caribou, Maine (23 MW). As discussed
in Item 2. "Properties" below, the oil-fired Steam Units 1 and 2 at the
Caribou facility have been placed on an inactive status. The Maine
Department of Environmental Protection (DEP), in response to the
Company's application for air emission licenses, has indicated that the
application did not demonstrate that Ambient Air Quality Standards and
- 5 -
PART I Form 10-K
Increments will not be violated. With the cooperation of the DEP Staff,
the Company is studying what steps, if any, are required for licensing,
and cannot determine at this time what, if any, additional capital
expenditures may be required.
See the 1995 Annual Report to Stockholders, pages 9 to 11,
"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.
Employees
The information with respect to employees is presented in the 1995
Annual Report to Stockholders, page 9, "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 Subsidiary). The
Subsidiary owns and operates the Tinker Station located in the Province
of New Brunswick, Canada. The Tinker Station has five hydro units with
total capacity of 33,500 kilowatts and a small diesel unit of 1,000
kilowatts. The Subsidiary serves the community of Perth-Andover in New
Brunswick, with the remaining energy exported to the Parent Company in
Maine under license of the National Energy Board of Canada. On June 16,
1988, the export license was renewed to 2008.
The Parent Company owns 5% of the Common Stock of the Maine Yankee
Atomic Power Company (Maine Yankee). Maine Yankee owns and operates an
860,000 kilowatt nuclear generating plant in Wiscasset, Maine. The
Company is entitled to purchase approximately 4.9% of the energy
produced by the plant. During 1995, 1994 and 1993, purchases from Maine
Yankee were $7,972,000, $9,645,000 and $8,760,000, respectively.
The Maine Yankee Plant was out of service for most of 1995, while
the Plant's steam generator tubes were resleeved. During a scheduled
refueling and maintenance shutdown in February, 1995, an increased rate
of degradation was detected in the tubes. The Company's share of the
cost of the repair was approximately $1.3 million and repairs were
complete by mid-December, 1995. On January 22, 1996, Maine Yankee
attained the 90 percent level of the Plant's capacity. For further
- 6 -
PART I Form 10-K
discussion on the incremental operational and repair costs and their
treatment, see 1995 Annual Report to Stockholders, pages 6 and 7,
"Analysis of Financial Condition and review of Operations - Maine
Yankee", which information is incorporated herein by reference.
On March 15, 1996, Maine Yankee received from the NRC a copy of a
petition filed with the NRC by Friends of the Coast - Opposing Nuclear
Pollution, a Maine-based group, alleging certain deficiencies in the
Plant's containment, piping, and pipe welds, dating from the time of the
Plant's construction. The petition seeks a suspension of the Plant's
operating license until the issues raised in the petition are resolved.
The Company believes the petition is without merit, but cannot predict
the result of the filing of the petition.
For information with respect to the business, properties and legal
proceedings and environmental matters relating to Maine Yankee, and the
obligations of the Company in respect of Maine Yankee, see Exhibit
28(a), which information is incorporated herein by reference.
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. The
MEPCO transmission line is also the path by which Maine Yankee and Wyman
No. 4 energy is delivered northerly into the NB Power system and then
wheeled to the Parent Company through its interconnection with NBEPC at
the international border.
Executive Officers
The executive officers of the registrant are as follows:
Office
Continuously
Name Age Held Since
Paul R. Cariani President and Chief 55 6/1/94
Executive Officer
Frederick C. Bustard Vice President, 58 6/1/90
Engineering & Operations
Larry E. LaPlante Vice President, 44 6/1/94
Finance and Treasurer
Stephen A. Johnson Vice President, 48 6/1/90
Customer Service and
General Counsel
Secretary and Clerk
- 7 -
PART I Form 10-K
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
of Engineering & Operations effective June 1, 1990. 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.
Larry E. LaPlante 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.
Stephen A. Johnson was elected to the new position of Vice
President, Customer Service and General Counsel, effective June 1, 1990.
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. Prior to joining the Company Mr.
Johnson was the General Counsel of the Maine Public Advocate Office 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 14, 1996.
There are no family relationships among the executive officers.
- 8 -
PART I Form 10-K
Item 2. Properties
The Company owns and operates 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 Subsidiary owns and
operates a hydro-electric plant of 33,500 kilowatts and a small diesel
unit with 1,000 kilowatt capacity.
Reference is made to the Company's Form 8-K dated July 13, 1995 in
which the Company reported that, at a regular meeting on July 7, 1995,
the Board of Directors authorized placing on inactive status Steam Units
1 and 2 of the Company's Caribou Generating Facility in Caribou, Maine.
The Company will lay-up the Units by January 1, 1996 and expects that
they will remain inactive for five years or longer. These two units,
which represent 23 MW of capacity, have become surplus to the Company's
needs due to the closure of Loring Air Force Base and the loss in 1996
of the Company's largest customer, the Houlton Water Company. During
the Units' inactive period, the plant equipment will be protected and
maintained by the installation of a dehumidification system that will
permit the Plant to return to service in approximately six months.
Placing Steam Units 1 and 2 on inactive status will save the
Company approximately $3.5 million over the next five years. These
savings result primarily from a savings in operation and maintenance
expense. The Company eliminated 12 positions at the Plant and offered
a Company-wide voluntary early retirement program that was successful in
avoiding involuntary termination of some of the employees whose positions
at the units had been eliminated.
Steam Unit No. 1 went into operation in the early 1950s and Unit
No. 2, in the mid 1950s. The Company still has a diesel generation station of
approximately 7 MW and a hydro facility of approximately 1 MW
and will continue to employ 11 employees at the Caribou facility.
As of December 31, 1995, the Company and Subsidiary had
approximately 443 pole miles of transmission lines and the Company owned
approximately 1,591 miles of distribution lines.
The Company is 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 is 3.3455%, or
approximately 20,000 kilowatts.
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.
- 9 -
Form 10-K
PART I
Item 3. Legal Proceedings
(a) Maine Public Service Company, Re: Squa Pan Hydro Project,
FERC Project Number 2368-001-Maine.
The Company owns and operates a 1.4 megawatt hydro
project located on the Squa Pan Stream in Masardis,
Maine. Since 1965, the Company has operated this project
pursuant to a water power project license granted by the
FERC, which license expired on December 31, 1990. On
December 28, 1988, the Company filed its application with
the FERC to relicense the project for a term of 40 years.
As part of this relicensing application, the Company,
pursuant to requirements of the Federal Power Act,
negotiated with various state and federal environmental
and resource agencies concerning the Company's efforts to
mitigate any adverse environmental impacts of the
project.
The FERC issued the Company a 30-year license on December
4, 1991. On January 4, 1992, however, the U.S.
Department of the Interior, which had been a party to
previous negotiations, petitioned the FERC to reconsider
its December 4, 1991 license approval. Alleging certain
procedural irregularities, the Department of the Interior
asked the FERC to revoke the December 4, 1991 license and
to require the Company to undertake additional measures
to protect and enhance the fish and wildlife resources
affected by the project. On February 7, 1996, the FERC
issued its Order denying the Department of the Interior's
request.
(b) Maine Public Utilities Commission, Re: Electric Utility
Industry Restructuring Study, Docket No. 95-462.
In 1995, the Maine Legislature passed Resolve 89 "To
Require a Study of Retail Competition in the Electric
Utility Industry" (the "Resolve"), to begin a process for
developing recommendations on the future structure of the
electric utility industry in Maine. The process included
the appointment of a Work Group on Electric Utility
Restructuring to develop a plan for the orderly
transition to a competitive market for retail purchases
and sales of electricity. The Company participated in
this Work Group, which was unable to reach a consensus on
a recommended plan by its reporting deadline.
The Resolve also directed the MPUC to conduct a study to
develop at least two plans for the orderly transition to
- 10 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
retail competition in the electric utility industry in
Maine and to submit a report of its findings by January
1, 1997. One plan would be designed to achieve "... full
retail market competition for purchases and sales of
electric energy by the year 2000" and the other to
achieve a more limited form of competition. The Resolve
also stated that the MPUC's findings would have no legal
effect, but would "... provide the Legislature with
information in order to allow the Legislature to make
informal decisions when it evaluates these plans."
On December 12, 1995, the MPUC issued a Notice of Inquiry
(the "Notice") initiating its study. In the Notice, the
MPUC solicited detailed proposals and plans for achieving
retail competition in Maine by the year 2000 and
requested the proposals include specific plans for an
orderly transition to a more competitive market. The
Notice required that plans and proposals be filed with
the MPUC by interested parties no later than January 31,
1996, and outlined a schedule calling for submittal of a
final report to the Legislature in December, 1996.
On January 30, 1996, the Company filed its restructuring
proposal with the MPUC. The major elements of this
proposal are:
(a) The separation of the Company's generation assets
(including contracts and entitlements) from its
transmission and distribution assets. The Company
suggested this separation could be accomplished by either
a functional separation of generation from distribution
and transmission within the Company's existing corporate
structure or by separating generation, on the one hand,
and distribution and transmission, on the other, into two
wholly-owned subsidiaries. The Company strongly opposes
any recommendation that it be required to divest itself
of its generation assets.
(b) The economic and resource planning regulation of
generation would cease. The FERC would continue to
regulate transmission, and distribution would remain a
franchised monopoly subject to continued regulation by
the MPUC. The owner of the distribution system would be
obligated to connect all willing customers.
- 11 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
(c) If certain necessary changes in the operation and
management of the regional transmission grid are in
place, all retail customers in Maine would, by the year
2000, be entitled to purchase electric energy directly
from any entity that wished to supply it to them.
(d) The Company would be entitled to full recovery of
all its stranded costs. This recovery would be
accomplished by a charge on the distribution system that
would apply to all retail customers. In its filing, the
Company estimates that its stranded costs could be as
high as $68 million. This amount consists primarily of
the above-market costs of the Company's contract with
Wheelabrator-Sherman, a non-utility generator, estimated
at $44 million and deferred regulatory assets, such as
its Seabrook investment of $24 million.
The Company's proposal, however, was only one of over a
dozen received by the MPUC in response to its Notice,
some of which take positions on these matters that vary
substantially from the Company's. The Company cannot
predict the results of its filing with the MPUC, what
form of restructuring, if any, the electric utility
industry in Maine will take, or what effect that
restructuring will have on the Company's business
operations or financial results.
(c) Houlton Water Company's Application for Certificate of
Public Convenience and Necessity for Purchase of Firm
Requirements Service from Central Maine Power Company,
MPUC Docket No. 94-476
Reference is made to the Company's Form 8-K of February
13, 1995, in which the Company reported that its largest
wholesale customer, the Houlton Water Company (HWC), had
executed a long-term power contract with Central Maine
Power Company (CMP) for HWC's power requirements
beginning January 1, 1996 and that HWC was therefore
terminating its contract with the Company effective
December 31, 1995.
On December 29, 1994, HWC filed with the MPUC for
approval of the purchase from CMP. This proceeding was
given the MPUC Docket No. 94-476. On January 12, 1995,
the Company requested permission to intervene in this
proceeding. This request was granted on February 1,
1995. The Company contended that the MPUC should not
- 12 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
grant HWC's requested approval. The Company based its
contention on CMP's intention to serve HWC's load from a
facility that CMP acquired using State financing. The
Company believed that State energy and regulatory policy
should prohibit CMP from using a facility supported by
State financing to the detriment of the retail customers
of any other utility.
On March 30, 1995, the MPUC issued its decision on the
Company's argument. The MPUC concluded that the statutes
granted it the authority to approve the contract between
CMP and HWC did not confer upon the MPUC authority to
consider the effects of that contract upon the Company
and its customers. The MPUC also found that the statute
granting CMP the right to use State funds to acquire the
facility did not give the MPUC any authority to establish
conditions concerning the operation of the facility. As
a result, the MPUC declined to take into account, in its
approval of the CMP-HWC contract, the effect of that
contract upon the Company and its customers.
(d) Multi-year Rate Plan is Approved for the Company by the
MPUC in Maine Public Service Company Re: Proposed
Increase in Retail Rates, MPUC Docket No. 95-052
On May 1, 1995, Maine Public Service Company filed with
the Maine Public Utilities Commission a proposed increase
in the rates it charges its retail customers. The
Company at the same time filed a five-year rate plan
requesting new rates beginning in January, 1996 as
detailed below. Reference is made to the Company's Form
10-Q for the quarter ended June 30, 1995 for a complete
description of the Company's filed rate plan.
In general, the Company's five-year rate plan provided
for total annual average increases in retail rates,
including fuel, in accordance with the following
schedule:
1996 - 4.5% $2.2 million
1997 - 4.5% 2.3 million
1998 - 3.5% 1.9 million
1999 - 3.0% 1.7 million
2000 - 3.0% 1.7 million
As part of its plan, the Company proposed to eliminate
the annual fuel adjustment clause except for the cost of
- 13 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
power purchased from the Wheelabrator-Sherman Energy
Company (W/S). The Company's plan included deferrals of
up to $3 million annually of its W/S power costs and the
deferral of any uncollected fuel costs under the present
fuel clause as approved in Docket 95-001 (see item (f)
below) now estimated to be approximately $6 million. The
Company proposed to begin collecting the deferred costs,
in an amount of up to $21 million, in 2001.
The Company also proposed to write off and not recover in
rates approximately $4.9 million, net of income taxes, of
its remaining investment in the Seabrook project
previously supported by rates to its wholesale customers,
principally the Houlton Water Company, which began
purchasing its full requirements from another supplier in
January 1, 1996.
In its rebuttal filing on September 22, 1995, the Company
further proposed a sharing mechanism based on an allowed
return on equity (ROE) of 11.75%. Under this profit-
sharing mechanism, earnings in excess of the proposed ROE
were to be shared equally by stockholders and customers
via rate reductions or reductions in the W/S deferral.
If earnings were less than 300 basis points below the
proposed ROE, that loss was to be borne by shareholders;
if earnings were less than 300 basis points above the
ROE, the excess would be retained by shareholders and
half would be used to reduce the W/S deferral. If
earnings were more than 300 basis points below the
proposed ROE, shareholders and customers would bear the
loss equally; similarly, earnings of more than 300 basis
points in excess of the ROE would be shared equally.
The Company's rate plan was vigorously opposed by both
the MPUC Staff and the Maine Public Advocate. Both these
parties took the position that no expenses or investment
previously associated with any of the Company's sales to
its wholesale customers should be borne by its retail
customers. As a result, the MPUC Staff, for example,
proposed an increase of 4.4% in 1996, but only 2.2% for
each year of the plan thereafter. Moreover, neither the
MPUC Staff nor the Public Advocate proposed allowing any
deferral of the W/S expenses or deferred fuel.
After extensive negotiations, the Company, the MPUC Staff
and the Public Advocate filed a Stipulation with the
Commission on November 6, 1995, which established a four-
- 14 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
year rate plan for the Company. The one remaining party
to this proceeding, McCain Foods, Inc., opposed this
Stipulation. After a hearing on November 13, 1995, the
MPUC approved this Stipulation over the objection of
McCain Foods, Inc.
Under the terms of the Stipulation, the Company has the
right to receive the following increases:
January 1, 1996 4.4% $2.1 million
February 1, 1997 2.9% 1.4 million
February 1, 1998 2.75% 1.4 million
February 1, 1999 2.75% 1.4 million
These increases will be subject to increases or decreases
resulting from the operation of the profit-sharing
mechanism, as well as the mandated costs and plant outage
provisions described below. The Company agreed that it
will seek no other increases, for either base or fuel
rates, except as provided under the terms of the rate
plan. There will be no fuel clause adjustments during
the term of the plan.
The Company also agreed to write off, in 1995, and not
collect in retail rates the following amounts:
(a) $4,845,812, net of income taxes, of its
investment in Seabrook previously allocated to wholesale
sales.
(b) $1,390,000, net of income taxes, in other plant
investment, i.e. rate base, except transmission plant,
previously associated with the wholesale customers.
(c) $3,500,000 ($2,104,000, net of income taxes) in
deferred fuel (see item (f) below).
The total amount of the write-offs, net of income taxes,
in 1995 are approximately $8,340,000, or approximately
$5.16 per share of common stock.
As a condition of the Stipulation, the Company requested
waivers for interest coverage tests under its revolving
credit arrangement and the Letter of Credit supporting
the public utility revenue bonds, 1991 series. Unless
these write-offs were considered extraordinary for
purposes of the interest coverage tests, the Company
- 15 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
would have been in violation of these interest coverage
tests. The waivers were received from the various
lenders prior to the MPUC's issuance of its order in
this proceeding.
The Company will also be permitted to defer an amount of
$1.5 million annually of the costs of the W/S purchases
over the term of the rate plan. The approved rate plan
provides that the Company can seek recovery of this
deferred amount (up to a total of $6 million) in rates
beginning in the year 2001, after the current term of the
W/S contract has expired. The Company will further
amortize over each of the four years of the rate plan,
$300,000, net of income taxes, in deferred fuel with the
remainder, approximately $1.3 million net of income
taxes, being deferred until the year 2000.
The approved rate plan further provides for the following
treatment of the Maine Yankee steam generator sleeving
costs: the Company will amortize its share of these
costs in equal amounts over a five-year period beginning
on January 1, 1996. At the expiration of the rate plan,
the remaining one-fifth of the costs will be amortized in
2000 subject to rate treatment at that time.
The approved rate plan contains a profit-sharing
mechanism based upon a target return of equity (ROE) of
11%, calculated according to retail ratemaking
mechanisms. This profit-sharing mechanism will apply
only to the last two rate increases scheduled to occur on
February 1, 1998 and February 1, 1999. As part of this
review process, the target ROE will be subject to
adjustment based on an index by averaging over a twelve-
month period the dividend yields on Moody's group of 24
electric utilities and Moody's utility bond yields. The
profit-sharing mechanism works as follows:
If the Company's ROE exceeds the target ROE by less than
300 basis points, this gain accrues entirely to
shareholders. Similarly, any deficiency of up to 300
basis points below the target ROE is borne entirely by
the shareholders.
All deficiencies of 300 or more basis points below the
target ROE will be shared equally by shareholders and
customers. All earnings of 300 or more basis points
above the target ROE must first be applied to reduce any
- 16 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
of deferred W/S costs described above. Any remaining
excess earnings will be shared equally by customers and
shareholders.
The plan also allows the Company to terminate the rate
plan and file for rate increases under traditional rate
application procedures if its earnings fall 500 or more
basis points below the target ROE during any twelve-month
period during the term of the plan.
The method agreed to by the parties for measuring earned
ROE for the purpose of the profit-sharing mechanism and
rate termination provision described above, allocates
various revenues and expenses between the wholesale and
retail jurisdictions using allocators that, in part,
reflect the Company's 1994 allocations. With the loss of
sales to Houlton Water Company in 1996, the Company
estimates that the use of the agreed-upon allocators will
produce a calculation of earnings for the profit-sharing
and termination mechanisms that could be as much as 400
basis points above the Company's actual financial ROE.
Because of this disparity, the Stipulation provides that
the agreed-upon allocation methodology will not apply if
the use of those allocators will require the Company to
write off any additional assets in accordance with
Generally Accepted Accounting Principles (GAAP). In that
event, the parties have agreed to develop a different
method for calculating profit-sharing and termination
that will not require the Company to write off any
additional assets.
The plan also provides that if either Maine Yankee or
Wheelabrator-Sherman cease operation for more than six
months, the Company shall be allowed to adjust its
allowed rate increases by 50% of the net costs or net
savings resulting from the outage, together with any
carrying costs on the balance deferred. Any net costs or
net savings during the first six months of the outage
would accrue entirely to shareholders.
The plan further contains a mechanism for allocating the
savings resulting from any restructuring of the W/S
contract during the term of the plan. Any savings would
be allocated first to the W/S deferred costs accumulating
at $1.5 million annually, then to the deferred fuel
balance as of December 31, 1995 being deferred until
2000, next to eliminate any on-going W/S deferrals and
- 17 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
finally, any savings that remain will be allocated 95% to
customers and 5% to shareholders.
The plan provides that the Company can flow through to
customers at the time of the scheduled rate increases,
increases or decreases resulting from certain mandated
costs, such as tax or accounting changes, but not costs
resulting from natural disasters. To qualify, a mandated
cost must receive MPUC approval, must be beyond the
control of the Company's management, must effect the
Company specifically or the electric utility generally
and must exceed $300,000 in annual revenue requirements.
The Stipulation also provides for a number of accounting
orders. Among these are orders: permitting the Company
to amortize deferred post-retirement benefits other than
pension (SFAS 106) expenses in equal amounts over a ten-
year period beginning January 1, 1996, along with the
recovery of current year SFAS 106 costs; permitting the
Company to continue rate base treatment for unrecovered
plant costs and depreciation on the Caribou Steam Units
as well as the deferral and amortization over five years
of the reduction in force expenses (including pension
expenses under SFAS 88) resulting from the closing of
those units; and continued deferral and amortization of
replacement power and capacity costs associated with
Maine Yankee scheduled outages. Finally, the Stipulation
clarifies that the rate plan is not deregulation for
accounting purposes and provides for the continuing
recovery in rates of certain "regulatory assets", such as
the retail portion of the Company's Seabrook investment,
previously allowed by the MPUC.
On January 2, 1996, McCain Foods, Inc., which had
objected to the Stipulation, appealed the MPUC's approval
of the rate plan to the Maine Supreme Judicial Court.
This action was docketed as PUC 96-13. The Company does
not believe this appeal has any merit and intends to
oppose it vigorously, but cannot predict its ultimate
outcome.
In addition to the four-year rate plan, the MPUC, under
this docket, also approved the Company's proposal to
develop flexible rates to retain or attract new
customers. On October 23, 1995, the Company implemented
a reduced Rate AH for residential electric space heat.
Customers who have a permanent electric space heat system
- 18 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
that supplies at least 50% of their heating requirements
have been offered a discount up to 40% from October to
April.
On November 27, 1995, the MPUC approved two new rates
that became effective December 1, 1995. The first, Rate
F, provides farmers with a discounted price for
electricity used in storage facilities, reducing their
winter electric rate ten percent from November through
March. The second, Rate EDR, an economic development
rate, provides a multi-year discount in the cost of
electric service for large commercial and industrial
customers who create new electrical load. This reduced
rate should encourage development in our electrical
service territory by providing an incentive rate while a
new business gets established or an existing business,
meeting certain criteria, completes expansion. Depending
on eligibility, the discount offered will range from 20%
the first year to 5% in the fourth year. After the four-
year period, EDR customers will be billed under the
Company's standard electric rates.
(e) Peoples Heritage Bank v. Maine Public Service Company
U.S. District Court (D. ME) Civil Action No. 95-0180-B
On September 18, 1995, Peoples Heritage Bank filed
against the Company a civil action for declaratory and
monetary relief seeking recovery for response costs,
damages and attorneys fees incurred because of the
release of hazardous substance at a site in Presque Isle,
Maine. In 1992, Peoples Heritage purchased the property
and shortly thereafter discovered that the soil at the
site was contaminated with polychlorinated biphenyls
(PCBs) which it now alleges originated with two
electrical transformers placed on the site by the
Company. Peoples Heritage claims to have spent in excess
of $250,000 to remove the PCB contaminated soil and seeks
reimbursement of this amount.
The suit is brought pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of
1980 (CERCLA), the Federal Declaratory Judgment Act and
under common law grounds of strict liability for
abnormally dangerous activities, negligence and trespass.
The Company has denied liability in this matter but
cannot predict the outcome of this action.
- 19 -
Form 10-K
PART I
Item 3. Legal Proceedings - Continued
(f) Maine Public Service Company, Application for Fuel Cost
Adjustment, MPUC Docket No. 95-001
On January 3, 1995, the Company submitted an application
to the MPUC for an increase of approximately $1.4 million
for the twelve month period ended March 31, 1996,
resulting in a total increase in the Company's retail
rates of 3% effective April 1, 1995. In order to limit
the increase to 3%, the Company proposed to defer
recovery of approximately $1.5 million in the cost of
power purchased from the Wheelabrator-Sherman Energy
Company. The deferred amount would be combined with the
additional deferrals of these costs permitted under the
Company's rate plan (see item (d) above).
On March 15, 1995, the Company and the MPUC Staff signed
a Stipulation that embodied the Company's proposal. This
Stipulation was approved by the MPUC on March 27, 1995.
Under the Company's rate plan, as described in item (d)
above, the Company will not be entitled to any further
fuel clause adjustments.
(g) Maine Public Service Company, Request For Open Access
Transmission Tariff, FERC Docket No. ER 95-836-000.
On March 31, 1995, the Company filed an open access
transmission tariff with the Federal Energy Regulatory
Commission (FERC). This tariff provides fees for various
types and levels of transmission and transmission-related
services that are required by transmission customers.
The tariff, as filed, substantially increases some of the
fees for transmission services and provides separate fees
for various transmission-related services. On May 31,
1995, the FERC approved the filed tariff, subject to
refund. The filing has been vigorously contested by the
Company's wholesale customers and a decision by the FERC
is not expected until later in 1996. The Company cannot
predict FERC's ultimate decision in this matter.
- 20 -
Form 10-K
PART I
Item 4. Submission of Matters To a Vote of Security Holders
At the Company's Annual Meeting of Stockholders, held on
May 9, 1995, the only matter voted upon was the
uncontested election of the following directors to serve
until the 1998 Annual Meeting of Stockholders, each of
whom received the votes shown:
Non-votes and
Nominee For Against Abstentions
Paul R. Cariani 1,292,443 44,981 279,826
Donald F. Collins 1,292,543 44,881 279,826
Richard G. Daigle 1,292,543 44,881 279,826
J. Gregory Freeman 1,290,004 47,420 279,826
- 21 -
Form 10-K
PART II
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, 1995, there were
1,634 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
1995
First Quarter $23-7/8 $20-5/8 $ .46 $ .46
Second Quarter $22-3/4 $19-7/8 .46 .46
Third Quarter $23-1/4 $21 .46 .46
Fourth Quarter $23-1/2 $20-5/8 .46 .46
Total Dividends $1.84 $1.84
1994
First Quarter $27-3/8 $26 $ .46 $ .46
Second Quarter $27 $25-1/4 .46 .46
Third Quarter $26 $22-3/4 .46 .46
Fourth Quarter $24 $20-1/2 .46 .46
Total Dividends $1.84 $1.84
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 (1991-1995) is
included on page 12 of the Company's 1995 Annual Report to
Stockholders, which summary is incorporated herein by
reference.
- 22 -
Form 10-K
PART II
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 4-11, Exhibit 13, 1995 Annual
Report to Shareholders, which pages are hereby incorporated
herein by reference. Information regarding "Construction" is
also furnished in Note 10, "Commitments and Contingencies", of
the Notes to the Consolidated Financial Statements, pages 25
to 27 of the 1995 Annual Report to Shareholders, which pages
are hereby incorporated herein by reference.
- 23 -
Form 10-K
PART II
Item 8. Financial Statements and Supplementary Data
(a) The following financial statements and supplementary
data are included in the Company's 1995 Annual Report to
Stockholders on pages 13 through 27 and are incorporated
herein by reference:
Independent Auditors' Report.
Statements of Consolidated Operations for the years
ended December 31, 1995, 1994 and 1993.
Statements of Consolidated Cash Flows for the years
ended December 31, 1995, 1994 and 1993.
Consolidated Balance Sheets as of December 31, 1995
and 1994.
Statements of Consolidated Common Shareholders'
Equity for the years ended December 31, 1995, 1994
and 1993.
Consolidated Statements of Capitalization as of
December 31, 1995 and 1994.
Notes to Consolidated Financial Statements.
Item 9. Changes In And Disagreements With Accountants On
Accounting and Financial Disclosure
For many years, including fiscal year 1995, the firm of
Deloitte & Touche, LLP, (Deloitte & Touche) independent public
accountants, was engaged by the Company as the principal
independent accountant to audit the Company's financial
statements. On March 1, 1996, the Company's entire Board of
Directors, based on a recommendation of the Audit Committee of
the Board, voted to engage the firm of Coopers & Lybrand, LLP,
(Coopers & Lybrand) independent public accountants, as the
Company's principal accountant beginning with the 1996 fiscal
year audit and not to use the services of Deloitte & Touche.
This change in accountants followed the Company's issuance, in
November 1995, of a request for proposal to six major
independent accounting firms to audit the Company's financial
statements. The Company issued this request solely to
determine whether it could reduce the fees it pays for
accounting services. Three firms, including Deloitte & Touche
and Coopers and Lybrand, responded to the request. Based
- 24 -
Form 10-K
Item 9. Changes In And Disagreements With Accountants On
Accounting and Financial Disclosure - Continued
solely upon the Audit Committee's review of those responses,
and the terms of the request, the Board determined to engage
Coopers & Lybrand, whose bid was substantially lower than any
other received by the Company, as the Company's principal
accountant for a term of at least three years, beginning in
fiscal year 1996. As a result of this vote, the Company
informed Deloitte & Touche that it would not renew its year to
year engagement letter with that firm.
Deloitte & Touche's report on the Company's financial
statements for either fiscal years 1995 or 1994 did not
contain an adverse opinion or disclaimer of opinion or any
modification or qualification.
At no time during the Company's two most recent fiscal years
or any time thereafter has there been any disagreement between
the Company and the firm of Deloitte & Touche on any matter of
accounting principles or practices, financial statement
disclosure or auditing scope or procedure. At no time during
the Company's two most recent fiscal years or any time
thereafter did any event occur between the Company and
Deloitte & Touche that would require further reporting in this
Form 10-K.
At no time during the Company's two most recent fiscal years
and any time thereafter prior to the Company's engaging
Coopers & Lybrand did the Company consult Coopers & Lybrand
regarding either the application of accounting principles to
a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the Company's
financial statements.
- 25 -
Form 10-K
PART III
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 1996 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
1996 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 1996 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 1996 Annual Meeting of
Stockholders, which information is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Not applicable.
- 26 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) (1) Financial Statements
Independent Auditors' Report appears on page 38
of this Form 10-K.
Incorporated by reference into Part II of this
report from pages 13 through 27 of the 1995 Annual
Report to Stockholders:
Independent Auditors' Report.
Statements of Consolidated Operations for years
ended December 31, 1995, 1994 and 1993.
Statements of Consolidated Cash Flows for the years
ended December 31, 1995, 1994 and 1993.
Consolidated Balance Sheets as of December 31, 1995
and 1994.
Statements of Consolidated Common Shareholders'
Equity for the years ended December 31, 1995, 1994
and 1993.
Consolidated Statements of Capitalization as of
December 31, 1995 and 1994.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules
Included in Part IV of this report:
- 27 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
Page
Report of Independent Public Accountants 38
Schedule II - Valuation of Qualifying Accounts 39
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)
- 28 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
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).
9 Not applicable.
- 29 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
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 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)
- 30 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
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)
- 31 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
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
- 32 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
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 August
22, 1989. (Exhibit 10(l) to 1989 Form 10-K)
10(o) Employment Contract between Stephen A. Johnson
and Maine Public Service Company dated August
22, 1989. (Exhibit 10(m) to 1989 Form 10-K)
*10(p) Employment Contract between Larry E. LaPlante
and Maine Public Service Company, dated May 9,
1995.
10(q) Maine Public Service Company, Prior Service
Executive Retirement Plan, dated May 12, 1992.
(Exhibit 10(s) to 1992 Form 10-K)
10(r) Maine Public Service Company Pension Plan.
(Exhibit 10(t) to 1992 Form 10-K)
10(s) Maine Public Service Company Retirement
Savings Plan. (Exhibit 10(u) to 1992 Form 10-
K)
11 Not applicable.
12 Not applicable.
*13 1995 Annual Report to Shareholders.
18 Not applicable.
- 33 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
19 Not applicable.
22 Maine and New Brunswick Electrical Power
Company, Limited, a Canadian corporation.
23 Not applicable.
24 Not applicable.
*28(a) Information with respect to Maine Yankee
Atomic Power Company. Extracts from Maine
Yankee Atomic Power Company's Annual Report
for the year ended December 31, 1995 under the
captions "The Company", "The Plant",
"Regulation and Environmental Matters" and
"1995 Extended Shutdown".
28(b) 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).
28(c) 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).
28(d) 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).
28(e) Amendment to July 14, 1986 Stipulation, dated
July 18, 1986 (Exhibit 28(d) to Form 10-Q for
the quarter ended June 30, 1986).
28(f) Order of the Maine Public Utilities Commission
dated July 21, 1986, Docket Nos 84-80, 84-113
and 86-3.
28(g) Order of the Maine Public Utilities
Commission, dated May 9, 1986, Docket Nos. 84-
- 34 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
113 and 86-3 (with attached Stipulations).
(Exhibit 28(r) to 1986 Form 10-K).
28(h) 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).
28(i) 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).
28(j) Order (corrected) of the Maine Public
Utilities Commission dated December 5, 1990 in
Docket No. 87-167 (with attached Stipulation).
(Exhibit 28(l) to 1990 Form 10-K).
28(k) Order of the Federal Energy Regulatory
Commission Dated September 30, 1992 in Docket
No. ER92-774-000 and EL91-56-000. (Exhibit
28(k) to 1992 Form 10-K)
28(l) Order of the Federal Energy Regulatory
Commission dated December 11, 1992 in Docket
ER93-17-000. (Exhibit 28(l) to 1992 Form 10-
K)
28(m) Order of the Maine Public Utilities Commission
approving Chapter 720 Waiver Request dated
September 23, 1993. (Exhibit 28(p) to 1993
Form 10-K)
*28(n) Order of the Maine Public Utilities Commission
dated March 30, 1995 in Docket No. 94-476.
*28(o) Order of the Maine Public Utilities Commission
dated March 27, 1995 in Docket No. 95-001.
*28(p) Order of the Maine Public Utilities Commission
dated November 30, 1995 (with attached
Stipulation) in Docket No. 95-052.
- 35 -
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K - Continued
*28(q) Notice of Investigation of the Maine Public
Utilities Commission dated December 12, 1995
in Docket No. 95-462.
*28(r) Order of the Federal Energy Regulatory
Commission dated May 31, 1995 in Docket No. ER
95-836-000.
(b) A Form 8-K was filed on: April 11, 1995, under item 5,
Other Events; April 18, 1995, under item 5, Other Events;
May 24, 1995, under item 5, Other Events; July 13, 1995,
under item 5, Other Events; January 23, 1996, under item
5, Other Events, and; March 8, 1996, under item 4 Change
in Registrant's Independent Accountants. No financial
statements were included with the above Form 8-K's.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 27th day of March, 1996.
MAINE PUBLIC SERVICE COMPANY
By:Larry E. LaPlante
Larry E. LaPlante
Vice President, Finance
and Treasurer
- 36 -
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,
G. Melvin Hovey and Director 3/16/96
(G. Melvin Hovey)
Paul R. Cariani President and Director 3/14/96
(Paul R. Cariani)
Robert E. Anderson Director 3/18/96
(Robert E. Anderson)
Donald F. Collins Director 3/16/96
(Donald F. Collins)
D. James Daigle Director 3/16/96
(D. James Daigle)
Richard G. Daigle Director 3/14/96
(Richard G. Daigle)
Director
(J. Gregory Freeman)
Deborah L. Gallant Director 3/18/96
(Deborah L. Gallant)
Nathan L. Grass Director 3/19/96
(Nathan L. Grass)
J. Paul Levesque Director 3/14/96
(J. Paul Levesque)
Walter M. Reed, Jr Director 3/14/96
(Walter M. Reed, Jr.)
- 37 -
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Maine Public Service Company
Presque Isle, Maine
We have audited the consolidated financial statements of Maine Public
Service Company and its subsidiary, Maine and New Brunswick Electrical
Power Company, Limited, as of December 31, 1995 and 1994, and for each
of the three years in the period ended December 31, 1995, and have
issued our report thereon dated February 14, 1996; such consolidated
financial statements and report are included in your 1995 Annual Report
to Shareholders and are incorporated herein by reference. Our audits
also included the consolidated financial statement schedule of Maine
Public Service Company and its subsidiary, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such consolidated financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
Deloitte & Touche LLP
Boston, Massachusetts
February 14, 1996
- 38 -
Maine Public Service Company & Subsidiary
Valuation of Qualifying Accounts & Reserves
For the Years Ended December 31, 1995, 1994, & 1993
Column A Column B Column C Column D Column E
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:
1995 214,215 150,800 109,390 260,275 214,130
1994 214,329 119,000 164,999 284,113 214,215
1993 204,302 160,400 99,986 250,359 214,329
- 39 -
EXHIBIT 10 (p)
EMPLOYMENT CONTINUITY AGREEMENT
This Agreement made as of this 9th day of May, 1995, by
and between MAINE PUBLIC SERVICE COMPANY, a Maine
corporation with its principal place of business in Presque
Isle, Maine (the "Company") and LARRY E. LAPLANTE
("LaPlante").
WHEREAS, LaPlante has been employed by the Company in a
senior management capacity for over 11 years and is now its
Vice President-Finance and Treasurer; and
WHEREAS, LaPlante'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 not
uncommon; and
WHEREAS, the Company wants to assure itself of the
continued employment of LaPlante and the benefit of his
independent judgment in the operation of the Company,
particularly in the event that any such attempted
acquisition were made, in light of the disruption resulting
from any such attempt;
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, LaPlante and the
Company agree as follows:
1. Term of Agreement and Renewal. The term of this
Agreement shall be for a period beginning May 9, 1995, and
ending December 31, 1999. On January 1, 2000, and on
January 1 of each period of three (3) years thereafter (in
each case such date to be a "Renewal Date") this Agreement
shall be automatically renewed for an additional three (3)
year term, unless at least one hundred and eighty (180) days
prior to any such Renewal Date, either party shall have
given written notice to the other that such renewal shall
not take place. In all events, this Agreement shall
terminate upon LaPlante's reaching his sixty-fifth birthday,
except as to rights accrued and obligations arising prior
thereto.
2. Rights Upon an Unfriendly Change in Control Event.
If LaPlante's employment with the Company terminates, for
any reason other than good cause, within twelve (12) months
after the occurrence of a Change in Control Event that is
determined to be unfriendly, the Company shall provide
LaPlante with the following:
(a) Within thirty (30) days of such termination, a
cash payment in an amount equal to two hundred percent
(200%) of LaPlante's annual base salary in effect upon
the date of the Change in Control Event; and
(b) The continuation of LaPlante's participation in
the Company's health, life, disability and other
employee benefit plans, programs and arrangements
(excluding the Company's retirement plan and the
Company's 401(k) plan) for a period of eighteen (18)
months after such termination as if he were still
employed during such period; provided, however, if
LaPlante's continued participation in any such plan,
program or arrangement is specifically prohibited by the
terms thereof, the Company shall provide LaPlante 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 such period
LaPlante shall have the right to have assigned to him,
for the cash surrender value thereof, any assignable
insurance owned by the Company on his life. For
purposes of this Section, any employee benefit
determined with reference to compensation shall be based
on the compensation used to determine the payment under
Paragraph 2(a).
3. Rights Upon a Friendly Change in Control Event.
Upon a Change in Control Event determined by a majority of
Outside Directors to be friendly:
(a) Except as hereinafter provided, LaPlante shall
be obligated to remain in the employ of the Company or
its successors for a period of six (6) months after the
Event.
If during such six (6) month period, LaPlante is
given one or more good reasons, he may immediately or at
any time within such six month period terminate his
employment, and he shall thereupon become entitled to
receive the same cash payment and benefits as described
in Paragraphs 2(a) and (b) hereof, except that the
percentage described in Paragraph 2(a) shall be one
hundred percent (100%), and the period described in 2(b)
shall be twelve (12) months.
"Good reason" shall mean the occurrence of any of
the following events with LaPlante's written consent:
(1) The assignment of duties to LaPlante 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;
(2) LaPlante'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 subsidiary;
(3) A reduction of LaPlante'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;
(4) The Company's transferring or assigning
LaPlante 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 for the period immediately prior to the
Change in Control Event;
(5) The Company's failure to provide LaPlante
with substantially the same health, life,
disability and other employee benefit plans,
programs and arrangements, as provided to him
immediately prior to the Change in Control Event;
or
(6) The Company's failure to obtain from any
successor a satisfactory agreement to assume and
perform the terms of this Agreement.
(b) If during the period from the seventh through
the twelfth months after the Event, LaPlante determines
for any reason that he no longer desires to be employed
by the Company or its successors, he may terminate his
employment, in which event he shall thereupon become
entitled to receive the same cash payment and benefits
as described in Paragraphs 2(a) and (b) hereof, as
modified in accordance with the terms of Paragraph 3(a)
hereof; provided that such cash payment shall be paid in
accordance with the Company's regular practices and
shall be reduced by any salary payments received by
LaPlante from any subsequent employer within said
period, and further provided that such benefits shall
also be reduced by any substantially similar rights and
benefits received by LaPlante from any subsequent
employer within said period.
4. Termination for Good Cause. Notwithstanding the
provisions of paragraphs 2 and 3 hereof, the Company retains
the right to terminate LaPlante for good cause, in which
event LaPlante shall not be entitled to receive any payments
or benefits pursuant to this Agreement. "Good cause" shall
mean:
(a) LaPlante's conviction, by a court of competent
jurisdiction, of a crime involving moral turpitude; 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, as to which breach the
Company shall have given him thirty (30) days' notice,
and which breach shall not have been cured within such
thirty-day period.
5. "Change in Control Event". Any one of the following
events shall be a "Change in Control Event" or sometimes
also referred to as an "Event":
(a) Any person shall become the beneficial owner,
directly or indirectly, of securities representing
twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding stock.
As used in this Paragraph 5(a), "beneficial owner"
shall have the meaning ascribed to it from time to time
under rules promulgated by the Securities and Exchange
Commission pursuant to Section 13(d) of the Securities
Exchange Act of 1934, or any similar successor statute
or rule; and a "person" shall include any natural
person, corporation, partnership, trust, association, or
any group or combination thereof, whose ownership of the
Company stock would be reportable pursuant to such
provision of the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder;
(b) The Company shall cease to be a reporting
company pursuant to the Securities Exchange Act of 1934;
(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) A majority of the Company's board of directors
changes within a twenty-five (25) month period unless
the election or nomination for election by the Company's
stockholders of each new director was approved by the
vote of two-thirds of the directors then in office who
were in office at the beginning of the twenty-five (25
month period;
(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 then a reporting company under such Act; or
(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, 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; or
(g) Any other event which a majority of all of the
Company's "Outside Directors" determines constitutes a
change in control event.
6. "Outside Directors". For purposes of this Agreement
"Outside Directors" shall mean those members of the
Company's Board, at the time a determination is to be made
hereunder by the Outside Directors, who were not Company
employees and who were directors of the Company six (6)
months prior to the Change in Control Event.
7. Presumption as to the Nature of the Event. For the
purposes of this Agreement, it shall be presumed that an
Event is unfriendly unless within ninety (90) days after the
Event, a majority of all Outside Directors shall determine
that the Event is friendly.
8. Notices. Any and all notices required or permitted
to be given hereunder shall be in writing and shall be
deemed to have been given when deposited in the United
States mails, certified or registered mail, postage prepaid
and addressed as follows:
To LaPlante:
Larry E. LaPlante
95 Hardy Street
Presque Isle, Maine 04769-3005
To the Company:
Maine Public Service Company
209 State Street, P.O. Box 1209
Presque Isle, Maine 04769-1209
Either party may change by notice to the other the
address to which notices to it are to be addressed.
9. Applicable Law, Taxes, Binding Agreement,
Severability, Construction.
(a) This Agreement shall be governed by and
construed in accordance with the laws of the State of
Maine, except as to any matter which is preempted by
federal law.
(b) Notwithstanding anything to the contrary herein
contained, the Company may withhold from any amounts
payable under this Agreement all federal, state or other
taxes or assessments which may be required by applicable
statute or regulation to be withheld.
(c) This Agreement shall be binding upon and inure
to the benefit of LaPlante his heirs, executors and
legal representatives; and the Company, its successors
and assigns.
(d) If any provision of this Agreement shall be
invalid or unenforceable, the remainder of this
Agreement shall not be affected thereby.
(e) The Outside Directors shall have the authority
to construe and interpret this Agreement on behalf of
the Company, and any such determination by the Outside
Directors shall be conclusive on the Company.
10. Limitations on Amounts to be Received.
Notwithstanding anything to the contrary herein contained,
if any amount payable to LaPlante or for his benefit
pursuant to the terms of this Agreement would not be
deductible by the Company by reason of Section 280G of the
Internal Revenue Code, as amended from time to time, or any
regulations promulgated pursuant thereto, then such amount
shall not be paid to the extent that it would cause the
aggregate amount payable by the Company to LaPlante or for
his benefit pursuant to the terms of this Agreement to
exceed the amount which may be paid without causing a loss
of deduction under said Section 280G.
11. Funding. This Agreement shall not be construed to
create or require the Company to create a trust or to
otherwise act to fund the amounts payable hereunder.
12. Assignment. Except as required by law, the right to
receive payments hereunder shall not be subject to
alienation, assignment, garnishment, attachment, execution
or levy of any kind, and any attempt to cause such payments
to be so subject shall not be recognized by the Company.
13. Execution of Further Documents. In the event
LaPlante receives payments or benefits pursuant to the terms
hereof and the Company's independent counsel deems it
necessary for the Company to receive a release or other
acknowledgement, LaPlante agrees to execute any such
document, as may be reasonably required as a condition of
his receipt of such payment or benefits.
14. Amendment and Waiver. The Agreement may be amended
only in writing, by the parties hereto, and no condition or
provision of the Agreement may be waived except in writing.
Waiver by either party at any time of the other party's
breach of, or failure to comply with, any condition or
provision of this agreement to be performed by such other
party shall not be deemed a waiver of any other provision or
condition at the same time or of any provision or condition
at any prior or subsequent time, unless specifically stated
therein.
15. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration, in accordance with the
provisions of the Maine Uniform Arbitration Act Any
arbitration decision shall, except as otherwise provided
under any applicable state or federal law, be final and
binding on LaPlante, his heirs, legal representatives and
assigns, and the Company, its successors and assigns, and
judgment may be entered thereon in any court of competent
jurisdiction.
16. No Additional Effect. Except as expressly provided
in connection with a Change in Control Event, nothing
contained herein shall confer upon LaPlante any specific
period of employment, right to be retained in the service of
the Company or other rights, nor shall this Agreement be
construed to otherwise limit the rights of the Company to
discharge or take other action with respect to LaPlante.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
Witness: MAINE PUBLIC SERVICE
COMPANY
Alice E. Shepard P. R. Cariani
Alice E. Shepard By P. R. Cariani
Its President and CEO
Alice E. Shepard Larry E. LaPlante
Alice E. Shepard LARRY E. LAPLANTE
(Front Outside Cover)
Maine Public Service
1995 Annual Report
An innovative utility
providing superior service
at competitive rates
(Front Inside Cover)
Maine Public Service Company
209 State Street
P. O. Box 1209
Presque Isle, Maine 04769-1209
Tel. No. (207) 768-5811
(Page 1)
Maine Public Service Company
(Graphic - Map of Territory Served)
The primary goal of Maine Public Service Company is to supply reliable,
economical electrical power to Northern Maine. The Company is an
investor-owned electric utility with a wholly-owned subsidiary, Maine and New
Brunswick Electrical Power Company, Ltd., located at Tinker, New Brunswick.
Together both companies provide energy to more than 35,000 retail customers in
a 3,600 square mile area.
Maine Public Service Company has a favorable mixture of generation sources
made up of power produced by hydro-electric, nuclear, and oil-fueled
facilities, as well as an independent wood-burning cogenerator. The system is
strengthened by electrical interconnections with New Brunswick, Canada,
allowing electrical support from the New Brunswick system and indirectly from
the Hydro-Quebec system.
Major business activities in the area center around the production of
agricultural and forest products. Service was provided at a high reliability
rate over the last year, and it is our aim to meet customer needs fully and
efficiently, at the lowest possible cost.
Table of Contents
President's Letter 2-3
Analysis of Financial Condition
and Review of Operations _ 1995 4-11
Shareholder Information 11
Five-Year Summary of Selected Financial Data 12
Independent Auditors' Report 13
Financial Statements and Notes 14-27
Consolidated Financial Statistics 28-29
Consolidated Operating Statistics 30-31
Directors 32
Executive Officers and Stock Back Cover
Transfer Information
(Pages 2 and 3)
President's Letter
to our Shareholders and
Employees
(Photo of Paul R. Cariani - No Caption)
The year 1995 was my first full year as President and Chief Executive
Officer of your Company. Unfortunately, this year the Company reports the
highly unusual results of a net loss of $3.29 per share as compared to net
income of $2.99 per share in 1994. The 1995 loss is attributable to two major
events: the loss of Houlton Water Company as a customer, effective January 1,
1996, and the unavailability of the Maine Yankee Nuclear Plant, our major
source of economical power, for essentially the entire year. These two events
resulted in the write-offs of $8.3 million after taxes ($5.16 per share),
under an agreement approved by the Maine Public Utilities Commission (MPUC)
establishing a four-year rate stabilization plan. More about this later. The
write-offs consisted primarily of $4.8 million of the wholesale portion of the
Seabrook regulatory asset, $1.4 million of generation assets allocated to
wholesale and $2.1 million of fuel costs incurred as a result of Maine Yankee
being out of service for most of 1995. Absent these write-offs, earnings
would have been $1.87 per share with the reduced earnings primarily the result
of the closure of Loring Air Force Base in September 1994. Last year was the
first full year without Loring and that, along with warmer than usual winter
weather, caused a significant reduction in sales to our retail customers (24.3
million KWH, 4.8%).
While this is admittedly a bleak picture, I believe nevertheless that we
enter 1996 much better positioned to respond to the uncertainty of the future
and to lead the Company through the transition from regulation to competition.
First, the rate stabilization plan provides predictable and stable rates to
our customers over the next four years. The major elements of this rate plan
are as follows:
Increases of 4.4%, 2.9%, 2.75%, and 2.75% from 1996 through 1999,
respectively.
Elimination of the Fuel Adjustment Clause.
Deferral of $8 million in fuel costs - $6 million of
Wheelabrator-Sherman and $2 million of Maine Yankee replacement power incurred
in 1995.
Shareholder write-off of $8.3 million.
Flexible Rate provision.
Elimination of the fuel adjustment clause exposes the Company to risks we
did not previously have, such as higher fuel prices, closure of a plant, or
poor hydro conditions. By the same token, lower fuel prices and good hydro
conditions would be to our benefit, as would the closure of the
Wheelabrator-Sherman Plant which is our highest cost power (currently .12 per
KWH).
The $6 million deferral of the Wheelabrator-Sherman cost is being treated as
if the Company negotiated a buy-down of a portion of the contract and this
deferral will be treated as a regulatory asset.
A return on equity (ROE) of 11% on retail rates was also agreed to as part
of the rate plan. However, I must caution you that the methodology used by
the MPUC to calculate ROE is not the same as that used to calculate financial
ROE and, as a result, financial ROE is likely to be less than 11%. In
addition, the wholesale portion of our business is deregulated with pricing
based on market conditions and open competition, which today produces prices
that are significantly less than they would be under traditional Federal
Energy Regulatory Commission (FERC) ratemaking.
As we move forward in 1996, the Company will continue to emphasize cost
control and seek further efficiencies where possible. Since 1993, we will
have reduced our work force by approximately 20%, with our most recent
reduction achieved through the lay-up of our Caribou Steam Plant and a
reorganization of th