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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act 1934
Date of Report (Date of earliest event reported): January 15, 1999
Commission File Number 1-8858
Unitil Corporation
(Exact name of registrant as specified in its charter)
New Hampshire 02-0381573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Liberty Lane West, Hampton, New Hampshire 03842
(Address of principal executive office) (Zip Code)
(603) 772-0775
(Registrant's telephone number, including area code)
Item 5. Other Events
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On January 15, 1999, the Massachusetts Department of
Telecommunications and Energy (MDTE) approved Fitchburg Gas and Electric
Light Company's (FG&E) Electric Restructuring Plan (the Plan). FG&E is a
wholly owned combination electric and gas utility subsidiary of Unitil
Corporation (the Company).
Background:
In November 1997, the Massachusetts Legislature enacted restructuring
legislation (the Act) that, in December 1997, was signed into law. The Act
required all electric utilities that did not have a restructuring plan on
file with the MDTE to file a plan by December 31, 1997, and set March 1, 1998
as the date that competition would start for all Massachusetts electricity
consumers, the "Retail Access Date". The Act required utilities to provide:
a) an estimate and detailed accounting of its total transition costs
eligible for recovery; b) a description of its strategies to mitigate its
transition costs; c) unbundled prices for distribution, transmission,
generation and other services; d) proposed charges for recovery of transition
costs; e) proposed programs for universal service for all customers;
f) proposed programs and recovery mechanisms to promote energy conservation
and demand side management; g) procedures for ensuring direct retail access
to all generation suppliers; and h) discussions of the impact of the plan on
FG&E's employees and the communities served by FG&E. In addition, the Act
required all Massachusetts utilities to reduce their rates to all consumers
by 10 percent, effective March 1, 1998.
FG&E filed its Plan with the MDTE on December 31, 1997. The Plan,
which substantially complies with the Act, was conditionally approved by the
MDTE in February 1998. It was the subject of an MDTE investigation,
including evidentiary hearings, held in the first half of 1998 and an audit
conducted in the second half of 1998.
The Order:
On January 15, 1999, the MDTE approved the Plan with certain
modifications and ordered FG&E (the Order) to make a compliance filing to
establish permanent rates. The compliance filing is scheduled to be made on
February 1, 1999.
The Plan:
Under the Plan, FG&E will divest itself of its generation related
assets and power supply contracts. FG&E has developed and started to
implement its divestiture plan with a goal of completing divestiture by
September, 1999. Divestiture will define the actual market value for the
generation assets and contract liabilities. FG&E has been allowed recovery
of its transition costs, estimated at $140 million, including the
above-market or stranded generation and power supply related costs via a
non-bypassable uniform Transition Charge.
The Plan provided FG&E's customers with: a choice of supplier on
March 1, 1998; unbundled rates (i.e., rates separated into Distribution,
Transmission, Generation and Transition components); and a 10 percent
discount which took effect March 1, 1998. An additional 5 percent discount,
inflation adjusted, will be provided by September, 1999. To ensure universal
service so that all consumers may receive electric service, the Plan
provides for offering "Standard Offer Service", "Default Service" and "Open
Access" to transmission facilities. The Plan includes a substantial
commitment to increasing FG&E's annual expenditures on energy efficiency
programs and providing funding for a state-run renewable resources program.
Standard Offer Service is being offered by FG&E for up to seven years,
at no profit, to consumers who elect not to choose a competitive supplier.
The purpose of this service is to offer consumers an energy supply at a known
price against which they can measure offers from competitive suppliers.
Standard Offer Service has been secured by FG&E from Constellation Power
Services, Inc. who was the winning bidder in a solicitation conducted by FG&E.
Default Service is available to customers who begin taking service
after March 1,1998 and to all customers who for whatever reason do not
receive their power supply from their chosen supplier. This service will be
offered at rates approved by the MDTE, at no profit to FG&E.
Open Access guarantees all consumers access to competitive power
supplies from any registered supplier, once the supplier delivers the power
to the New England transmission grid now controlled by an Independent System
Operator, ISO-New England.
Balance Sheet Implications:
The Company plans to record the total estimated effect of the Order
on its December 31, 1998 Balance Sheet. The final impact of the Order will
be determined upon completion of the Divestiture process described above.
Presented below is a pro-forma Balance Sheet, based upon the Company's
unaudited September 30, 1998 Balance Sheet, reflecting the Company's
estimate of the financial impact of the Order on financial position.
Estimated Regulatory Assets, based upon transition charges to be
collected, will be recorded and offset by the recognition of certain
adjustments related to power supply contract liabilities and generation
assets. FG&E's estimate, based on the competitive bidding process, of the
above-market portion of its power supply contracts obligations is
approximately $129 million. FG&E's net book value of its investment in
other generation assets, principally investments in Joint Owned generation
facilities, is approximately $11 million. Also, as a result of the
competitive bidding process, FG&E will receive approximately $5 million in
proceeds from the disposition of its investments in Joint Owned facilities.
Deferred Tax Assets and Liabilities related to the adjustments, above, are
reflected in the Company's pro-forma adjustments, shown below. Regulatory
assets related to FG&E's recovery of other transition costs allowed by the
Order will also be recorded.
Item 7. Pro Forma Financial Information
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UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
September 30, 1998
(Actual and Pro Forma)
(Unaudited)
(Amounts in Thousands)
Actual Adjustments Pro Forma
ASSETS:
Utility Plant:
Electric $172,371 $(21,298) $151,073
Gas 31,314 31,314
Common 20,655 20,655
Construction Work in Progress 5,096 5,096
Total Utility Plant 229,436 (21,298) 208,138
Less: Accumulated Depreciation 72,824 (9,996) 62,828
Net Utility Plant 156,612 (11,302) 145,310
Other Property & Investments 42 42
Current Assets:
Cash 4,375 4,375
Accounts Receivable and Other 23,381 4,750 28,131
Total Current Assets 27,756 4,750 32,506
Deferred Assets:
Regulatory Assets 22,550 136,121 158,671
Other Deferred Assets 34,581 34,581
Total Deferred Assets 57,131 136,121 193,252
TOTAL $241,541 $129,569 $371,110
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
September 30, 1998
(Actual and Pro Forma)
(Unaudited)
(Amounts in Thousands)
Actual Adjustments Pro Forma
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock Equity $72,319 $72,319
Preferred Stock 3,844 3,844
Long-Term Debt, Less Current Portion 74,152 74,152
Total Capitalization 150,315 150,315
Capitalized Leases, Less Current Portion 4,163 4,163
Current Liabilities:
Long-Term Debt, Current Portion 1,175 1,175
Short-Term Debt 12,575 12,575
Accounts Payable and Other 23,308 23,308
Total Current Liabilities 37,058 37,058
Deferred Liabilities 9,387 $129,688 139,075
Deferred Income Taxes 40,618 (119) 40,499
TOTAL $241,541 $129,569 $371,110
Notes to Unaudited Pro Forma Financial Statements:
Basis of Presentation:
As a result of the Order, the Company is required to stop applying
the provisions of Statement of Financial Accounting Standards 71, "Accounting
for the Effects of Certain Types of Regulation" (FASB Statement 71), to the
generation and power supply portion of FG&E's business. FG&E's distribution
business, as well as the power supply and distribution business of the
Company's New Hampshire electric utility subsidiaries (Concord Electric
Company, Hampton and Exeter Electric Company and Unitil Power Corporation),
will continue to apply FASB 71. The Order provides that FG&E's distribution
business will be allowed to recover FG&E's transition costs. Accordingly,
the cash flows to recover the impairment loss in FG&E's generation and power
supply business are authorized through the regulated distribution portion of
FG&E's business.
The Company has reviewed the measurement and recording of regulatory
assets and liabilities arising from the Order. The Company will recover its
generation investments and above-market portion of its power supply contract
liabilities, as well as the other transition costs described above, through
the regulated cash flows (Transition Charges) to be realized from the
Distribution portion of FG&E's business.
Regulatory Assets:
The Actual September 30, 1998 balance for regulatory assets of $22,550
relates to unamortized costs of property abandoned in prior years .
SIGNATURES
Pursuant to the requirements 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.
UNITIL CORPORATION
(Registrant)
Date: January 29, 1999 Anthony Baratta
Chief Financial Officer
Date: January 29,1999 Mark H. Collin
Treasurer
SIGNATURES
Pursuant to the requirements 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.
UNITIL CORPORATION
(Registrant)
Date: January 29, 1999 /s/ Anthony Baratta
Anthony Baratta
Chief Financial Officer
Date: January 29,1999 /s/ Mark H. Collin
Mark H. Collin
Treasurer