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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000
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)
NONE
(Former name, former address and former fiscal year, if changed
since last report.)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 6, 2000
Common Stock, No par value 4,728,904 Shares
UNITIL CORPORATION ANDSUBSIDIARY COMPANIES
INDEX
Part I. Financial Information Page No.
Consolidated Statements of Earnings - Three and Nine 3
Months Ended September 30, 2000 and 1999
Consolidated Balance Sheets, September 30, 2000,
September 30, 1999 and December 31, 1999 4-5
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-14
Exhibit 11 - Computation of Earnings per Average
Common Share Outstanding 15
Exhibit 99 - Selected Quarterly Financial Data 16
Part II. Other Information 17
PART I. FINANCIAL INFORMATION
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
(000's except common shares and per share data)
(UNAUDITED)
Three Months Nine Months
Ended Ended
September 30, September 30,
2000 1999 2000 1999
Operating Revenues
Electric $41,189 $39,818 $118,925 $115,053
Gas 3,252 2,820 14,677 12,648
Other 23 100 87 145
Total Operating Revenues 44,464 42,738 133,689 127,846
Operating Expenses
Fuel and Purchased Power 28,489 26,564 81,127 75,470
Gas Purchased for Resale 1,953 1,620 8,261 6,902
Operation and Maintenance 6,737 6,413 18,929 18,683
Depreciation and Amortization 2,865 2,598 8,926 8,447
Provisions for Taxes:
Local Property and Other 1,180 1,389 3,802 4,214
Federal and State Income 361 762 2,277 2,785
Total Operating Expenses 41,585 39,346 123,322 116,501
Operating Income 2,879 3,392 10,367 11,345
Non-Operating Expenses, Net 61 29 194 79
Income Before Interest Expense 2,818 3,363 10,173 11,266
Interest Expense, Net 1,687 1,654 5,151 5,215
Net Income 1,131 1,709 5,022 6,051
Less Dividends on Preferred Stock 64 66 197 201
Net Income Applicable to $1,067 $1,643 $4,825 $5,850
Common Stock
Average Common Shares
Outstanding 4,725,989 4,703,069 4,720,236 4,673,318
Basic Earnings Per Share $0.23 $0.35 $1.02 $1.25
Diluted Earnings Per Share $0.23 $0.35 $1.02 $1.25
Dividends Declared Per Share
Of Common Stock (Note 1) $0.345 $0.345 $1.38 $1.38
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (000'S)
(UNAUDITED) (AUDITED)
September 30, December 31,
2000 1999 1999
ASSETS:
Utility Plant:
Electric $169,013 $161,994 $161,767
Gas 35,860 33,394 34,031
Common 21,192 21,307 21,541
Construction Work in Progress 3,845 2,338 2,499
Total Utility Plant 229,910 219,033 219,838
Less: Accumulated Depreciation 69,831 67,376 66,429
Net Utility Plant 160,079 151,657 153,409
Other Property and Investments 7,763 3,897 5,051
Current Assets:
Cash 2,170 3,150 2,847
Accounts Receivable - Less
Allowance for Doubtful Accounts
of $589, $496 and $598 17,593 15,469 16,630
Materials and Supplies 3,228 2,829 2,503
Prepayments 1,189 667 713
Accrued Revenue 4,374 (842) 2,262
Taxes Refundable 611 1,914 1,419
Total Current Assets 29,165 23,187 26,374
Noncurrent Assets:
Regulatory Assets 138,391 163,219 143,470
Prepaid Pension Costs 9,807 8,888 9,119
Debt Issuance Costs 1,343 1,367 1,351
Other Noncurrent Assets 24,185 24,970 24,753
Total Noncurrent Assets 173,726 198,444 178,693
TOTAL $370,733 $377,185 $363,527
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (Cont.) (000's)
(UNAUDITED) (AUDITED)
September 30, December 31,
2000 1999 1999
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common Stock Equity $77,615 $76,177 $78,675
Preferred Stock, Non-Redeemable,
Non-Cumulative 225 225 225
Preferred Stock, Redeemable,
Cumulative 3,465 3,532 3,532
Long-Term Debt, Less Current Portion 81,811 85,015 84,966
Total Capitalization 163,116 164,949 167,398
Current Liabilities:
Long-Term Debt, Current Portion 3,203 1,187 1,191
Capitalized Leases, Current Portion 831 813 902
Accounts Payable 15,138 14,777 16,515
Short-Term Debt 21,225 2,500 10,500
Dividends Declared and Payable 1,848 1,838 220
Refundable Customer Deposits 1,298 1,248 1,302
Interest Payable 1,311 1,378 1,245
Other Current Liabilities 7,307 4,036 3,042
Total Current Liabilities 52,161 27,777 34,917
Deferred Income Taxes 44,534 43,255 42,634
Noncurrent Liabilities:
Power Supply Contract Obligations 99,553 128,651 106,184
Capitalized Leases,
Less Current Portion 3,245 3,820 3,860
Other Noncurrent Liabilities 8,124 8,733 8,534
Total Noncurrent Liabilities 110,922 141,204 118,578
TOTAL $370,733 $377,185 $363,527
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (000's)
(UNAUDITED)
Nine Months Ended
September 30,
2000 1999
Net Cash Flow from Operating Activities:
Net Income $5,022 $6,051
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:
Depreciation and Amortization 8,926 8,447
Deferred Taxes Provision 2,151 535
Amortization of Investment Tax Credit (192) (251)
Amortization of Debt Issuance Costs 45 45
Changes in Working Capital:
Accounts Receivable (963) 530
Materials and Supplies (725) 133
Prepayments (1,164) 183
Accrued Revenue (2,112) 2,018
Accounts Payable (1,377) 3,395
Refundable Customer Deposits (4) (45)
Taxes and Interest Payable 874 (321)
Other, Net 743 (1,138)
Net Cash Provided by Operating 11,224 19,582
Activities
Net Cash Flows from Investing Activities:
Acquisition of Property, Plant and Equip. (14,870) (11,916)
Proceeds from Sale of Electric
Generation Assets --- 5,288
Acquisition of Other Property and
Investments (1,257) (3,271)
Net Cash Used in Investing Activities (16,127) (9,899)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term Debt 10,725 (17,500)
Proceeds from Issuance of Long-Term Debt --- 12,000
Repayment of Long-Term Debt (1,143) (1,019)
Dividends Paid (5,085) (5,037)
Issuance of Common Stock 484 1,780
Retirement of Preferred Stock (68) (86)
Repayment of Capital Lease Obligations (687) (754)
Net Cash Flows Provided by
(used in) Financing Activities 4,226 (10,616)
Net Increase (Decrease) in Cash (677) (933)
Cash at Beginning of Year 2,847 4,083
Cash at June 30, $2,170 $3,150
Supplemental Cash Flow Information:
Cash Paid for:
Interest Paid $6,029 $5,153
Federal Income Taxes Paid $350 $3,133
(The accompanying notes are an integral part of these statements.)
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1.
Dividends Declared Per Share:
Four regular quarterly common stock dividends were declared
during the nine-month periods ended September 30, 2000 and 1999.
Common Stock Dividend:
On September 29, 2000, the Company's Board of Directors
declared its regular quarterly dividend on the Company's Common
Stock of $0.345 per share which was payable on November 15, 2000
to shareholders of record as of November 1, 2000.
On June 21, 2000, the Company's Board of Directors declared
its regular quarterly dividend on the Company's Common Stock of
$0.345 per share which was payable on August 15, 2000 to
shareholders of record as of August 1, 2000.
On March 16, 2000, the Company's Board of Directors declared
its regular quarterly dividend on the Company's Common Stock of
$0.345 per share which was payable on May 15, 2000 to
shareholders of record as of May 1, 2000.
On January 19, 2000 the Company's Board of Directors
declared its regular quarterly dividend on the Company's Common
Stock of $0.345 per share which as payable February 15, 2000 to
shareholders of record as of February 1, 2000.
Note 2.
Common Stock:
During the third quarter of 2000, the Company sold 5,768
shares of Common Stock, at an average price of $28.00 per share,
in connection with its Dividend Reinvestment and Stock Purchase
Plan. Net proceeds of $161,481 were used to reduce short-term
borrowings.
Note 3.
Preferred Stock:
Details on preferred stock at September 30, 2000, September
30, 1999 and December 31, 1999 are shown below:
(Amounts in Thousands)
September 30, December 31,
2000 1999 1999
Preferred Stock
Non-Redeemable, Non-Cumulative,
6%, $100 Par Value $225 $225 $225
Redeemable, Cumulative,
$100 Par Value:
8.70% Series 215 215 215
5% Dividend Series 91 91 91
6% Dividend Series 168 168 168
8.75% Dividend Series 333 333 333
8.25% Dividend Series 385 385 385
5.125% Dividend Series 973 987 987
8% Dividend Series 1,300 1,353 1,353
Total Redeemable Preferred Stock 3,465 3,532 3,532
Total Preferred Stock $3,690 $3,757 $3,757
Note 4.
Long-term Debt:
Details on long-term debt at September 30, 2000, September 30, 1999
and December 31, 1999 are shown below:
(Amounts in Thousands)
September 30, December 31,
2000 1999 1999
Concord Electric Company:
First Mortgage Bonds:
Series I, 8.49%, due October 14, 2024 6,000 6,000 6,000
Series J, 6.96%, due September 1,2028 10,000 10,000 10,000
Exeter & Hampton Electric Company:
First Mortgage Bonds:
Series K, 8.49%, due October 14, 2024 9,000 9,000 9,000
Series L, 6.96%, due September 1, 2028 10,000 10,000 10,000
Fitchburg Gas and Electric Light Company:
Promissory Notes:
8.55% Notes due March 31, 2004 12,000 13,000 13,000
6.75% Notes due November 30, 2023 19,000 19,000 19,000
7.37% Notes due January 15, 2029 12,000 12,000 12,000
Unitil Realty Corp.
Senior Secured Notes:
8.00% Notes Due August 1, 2017 7,014 7,202 7,157
Total 85,014 86,202 86,157
Less: Installments due within one year 3,203 1,187 1,191
Total Long-term Debt $81,811 $85,015 $84,966
Note 5.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to
present fairly the consolidated financial position as of
September 30, 2000 and 1999; and results of operations for the
three and nine months ended September 30, 2000 and 1999; and
consolidated statements of cash flows for the nine months ended
September 30, 2000 and 1999.
Reclassifications of amounts are made periodically to
previously issued financial statements to conform with the
current year presentation.
The results of operations for the nine months ended
September 30, 2000 and 1999 are not necessarily indicative of the
results to be expected for the full year.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
EARNINGS
Diluted earnings per average common share were $0.23 for the
third quarter of 2000, a decrease of $0.12 from the third quarter
of 1999. This decrease reflects a $0.06 reduction in earnings
from Utility Operations, as well as a $0.06 reduction in earnings
related to planned start-up costs of the Company's e-commerce
business, Usource.
The decreased earnings in Utility Operations primarily
reflects decreased electric sales, due to a cooler summer, and
the loss of revenues from a major customer. Also impacting net
income was an increase in Operation and Maintenance expenses
related to restructuring activity and an increase in depreciation
and amortization expenses, offset by a decrease in local property
and other taxes.
On a year-to-date basis, diluted earnings decreased $0.23 to
$1.02 per share, compared to $1.25 per share for the first nine
months of 1999. This reflects a $0.04 decrease in earnings from
Utility Operations and a $0.19 decrease in earnings related to
Usource.
Sales (000's)
Three Months Ended Nine Months Ended
kWh Sales 09/30/00 9/30/99 Change 9/30/00 9/30/99 Change
Residential 142,794 150,755 -5.3% 435,741 429,892 1.4%
Commercial/Industrial 265,154 275,382 -3.7% 764,921 788,639 -3.0%
Total kWh Sales 407,948 426,137 -4.3% 1,200,662 1,218,531 -1.5%
Firm Therm Sales
Residential 884 796 11.1% 8,823 8,425 4.7%
Commercial/Industrial 1,215 1,168 4.0% 8,714 8,088 7.7%
Total Firm Therm Sales 2,099 1,964 6.9% 17,537 16,513 6.2%
Segment Information
($000's)
Three Months Ended-9/30/00 Nine Months Ended-9/30/00
Utility Utility
Operations Usource Total Operations Usource Total
Revenues $44,448 $16 $44,464 $133,624 $65 $133,689
Segment Profit(Loss) 1,544 (477) 1,067 5,989 (1,164) 4,825
Diluted Earnings
per Share 0.33 (0.10) 0.23 1.27 (.025) 1.02
Three Months Ended-9/30/00 Nine Months Ended-9/30/00
Utility Utility
Operations Usource Total Operations Usource Total
Revenues $42,724 $14 $42,738 $127,826 $20 $127,846
Segment Profit(Loss) 1,807 (164) 1,643 6,131 (281) 5,850
Diluted Earnings
per Share 0.39 (0.04) 0.35 1.31 (0.06) 1.25
Operating Revenues increased in all three periods in 2000,
when compared to the 1999 periods, largely because of increased
fuel and gas costs, which are a direct pass through on customers'
bills and do not affect the Company's net income. The driver for
revenues net of these fuel costs are electric kWh sales and gas
firm therm sales.
Total electric kWh sales volume decreased 4.3% in the third
quarter and 1.5% on a year-to-date basis, reflecting a cooler
summer period and the loss of a major customer. In the third
quarter of 2000, our service areas experienced approximately 48%
fewer cooling degree-days than in the third quarter of 1999. A
major customer curtailed operations in 1999 and rescinded its
power contracts in the second quarter of 2000. A new owner has
purchased the facility, and has announced plans to retool and
resume operations during 2001. Residential sales decreased by
5.3% in the third quarter. On a year-to-date basis, Residential
sales increased 1.4%, a result of customer growth. Commercial and
Industrial sales decreased 3.7% and 3.0% for the three- and nine-
month periods.
Total firm therm gas sales increased 6.9% and 6.2% in the
three- and nine-month periods, respectively. This reflects
continued growth as a result of the strong regional economy, gas
marketing efforts in our service territories, and a colder winter
heating season compared to the prior year.
For the first nine months ended September 30, 2000,
Operation and Maintenance (O&M) expenses increased slightly. This
1.3% increase in O&M costs reflects restructuring activity costs,
offset by lower pension expenses. In addition, the Company has
incurred planned expenditures for sales, marketing and product
development related to Usource. The 5.7% increase in Depreciation
and Amortization expenses during the same period was due to the
accelerated write-off of electric generating assets as a result
of electric utility industry restructuring in Massachusetts, as
well as additional amortization related to Usource product
development. Local Property and Other taxes decreased 9.8%,
related to divestiture of generating assets and the impact of
state and local property tax changes in New Hampshire.
Unitil began its Usource Internet-based brokering business
in mid-1999, and, in June 2000, launched an enhanced technology
platform at www.usourceonline.com. The Company continues to fund
additional technology development, as well as costs for increased
sales and marketing and product development.
As a result of energy price increases and volatility,
Usource experienced slow growth of transactions and revenues in
the third quarter. Nevertheless, Usource continues to add new
customers, and transaction volumes for natural gas are up.
Usource is in the process of expanding its offerings of products
and services as a comprehensive online energy solutions center
and is extending its market reach to new geographic territories.
Diluted earnings per average common share for the 12 months
ended September 30, 2000 and 1999, were $1.51 and $1.77,
respectively. This decrease is partially attributable to a $0.03
earnings per share decrease related to Utility Operations.
Additionally, Usource's loss increased $0.23 per share during
this period as a result of planned increases in expenditures
related to sales, marketing, and product development.
REGULATORY MATTERS
Electric and gas industry restructuring and the process for
separating the "competitive" retail sale of the electric and gas
energy from the "regulated" delivery of that energy over a
utility's transmission and distribution system has been the
predominant focus of the Company's regulatory initiatives and
activities in both Massachusetts and New Hampshire.
Since March 1, 1998 all electric consumers in Massachusetts
served by investor-owned utilities have had the ability to choose
their electric energy supplier. FG&E, the Company's
Massachusetts utility operating subsidiary, began implementation
of its comprehensive electric restructuring plan that includes
the divestiture of its entire regulated power supply business.
In New Hampshire, CECo and E&H, our electric utility
operating subsidiaries, and Unitil Power Corp., our wholesale
power company, continue to prepare for the transition that will
move them into this new market structure pending resolution of
key restructuring policies and issues that have slowed the
restructuring process in the state.
Massachusetts gas industry restructuring plans continue to
be a major focus of our regulatory activities as well. Since
1997, FG&E has worked in collaboration with the other
Massachusetts Local Distribution Companies (LDCs) and various
other stakeholders to develop and implement the infrastructure to
offer gas customers choice of their competitive gas energy
supplier and to complete the restructuring of gas service
provided by LDCs. FG&E has filed with the Massachusetts
Department of Telecommunications and Energy (MDTE) new gas
tariffs to implement natural gas unbundling in accordance with
Model Terms and Conditions resulting from these collaborative
efforts. The MDTE issued an order approving these tariffs and
final regulations effective November 1, 2000.
Massachusetts(Electric)-On January 15, 1999, the MDTE
approved FG&E's restructuring plan with certain modifications.
The Plan provides customers with: a) the ability to choose an
energy supplier; b) an option to purchase Standard Offer Service
provided by FG&E at regulated rates for up to seven years; and c)
a cumulative 15% rate reduction. The Order also approved FG&E's
power supply divestiture plan for its interest in three
generating units and four long-term power supply contracts. The
Company has been afforded full recovery of any transition costs
through a non-bypassable retail Transition Charge.
Pursuant to the Plan, on October 30, 1998, FG&E filed a
proposed contract with Constellation Power Services Inc. for
provision of Standard Offer Service. Service under the
FG&E/Constellation contract commenced on March 1, 1999, and is
scheduled to continue through February 28, 2005. This contract
is the result of the first successful Standard Offer auction
conducted in Massachusetts.
A contract for the sale of FG&E's interest in the New Haven
Harbor plant was approved by the MDTE on March 31, 1999 and the
sale of the unit closed on April 14, 1999. A contract for the
sale of the entire output from FG&E's remaining generating assets
and purchased power contracts was approved by the MDTE on
December 28, 1999, and went into effect February 1, 2000.
FG&E filed an electric rate decrease effective September 1,
1999, as provided for by the 1997 Massachusetts Electric
Restructuring Act (the Act). The Act mandated a 10% rate
reduction in March 1998, to be followed by an additional,
inflation-adjusted 5% rate reduction by September 1, 1999. The
net rate decrease of 1.3% reflects FG&E's divestiture of its
generation assets and purchased power portfolio.
On December 22, 1999, FG&E filed with the MDTE new rates for
effect January 1, 2000. The revised rates maintain the required
inflation-adjusted 15% rate discount. The MDTE approved the
rates on January 5, 2000, subject to reconciliation pursuant to
an investigation, resulting in an upward inflation adjustment of
2.5% relative to September 1999 rates.
On February 2, 2000 the MDTE initiated a proceeding to
examine FG&E's reconciliation filing and the consistency of the
proposed charges and adjustments with the methods approved in
FG&E's restructuring plan. The MDTE held four days of hearings
in May, 2000 and the Company presented testimony in support of
its filing. As part of his review of FG&E's filing, the
Massachusetts Attorney General also filed testimony challenging
FG&E's recovery of certain transition costs and other cost
reconciliation calculations in this docket. While FG&E is
confident in the reasonableness of its reconciliation filings, it
cannot be certain of the MDTE's ultimate determination of
transition cost recovery and requested approvals.
As a result of restructuring and divestiture of FG&E's
generation and purchased power portfolio, FG&E has accelerated
the write-off of its electric generation assets and on FG&E's
abandoned investment in Seabrook Station. An MDTE Order
established the return to be earned on the unamortized balance of
FG&E's generation plant. The new return reduces FG&E's earnings
on its generation assets. As this portfolio is amortized over
the next 10 years, earnings from this segment of FG&E's utility
business will continue to decline and ultimately cease.
Currently, Unitil's earnings from this business segment represent
approximately 10% of the total consolidated earnings.
On August, 2, 2000, FG&E filed for an increase in its
standard offer service rates pursuant to the Fuel Adjustment
provision of its standard offer service ("SOS") tariff. This
adjustment allows an increase in the SOS rate due to
extraordinary increases in the fuel prices of oil and natural
gas. Any revenues received as a result of this adjustment are
passed on to the Company's wholesale SOS provider. At the time
of the filing, the Company petitioned for an increase in the SOS
rate from $0.038/kWh to $0.043/kWh effective Sept. 1, 2000. The MDTE
suspended the filing for further review. Subsequently, other
electric utility companies, operating in Massachusetts, have made
similar filings and the MDTE has instituted proceedings in each
of those cases. There have been initial and reply comments as
well as a technical session for each of the Companies. There is
a public hearing scheduled for November 16, 2000. The Company is
seeking MDTE approval to increase in the SOS rate effective
January 1, 2001. Fuel prices are expected to be above the fuel
trigger, resulting in expected surcharges in the SOS rates
through 2001.
In 1999, the MDTE initiated an investigation on its own
motion into the pricing and procurement of default service. This
docket, DTE 99-60, paves the road for moving default service
pricing to market based rates. Default service had previously
been priced equivalent to standard offer service. As a result,
Fitchburg issued a Request for Proposals for default service in
September, 2000. In October, while awaiting final bid prices,
FG&E filed interim proxy rates for default service for the month
of December. These rates were based on recent short term market
prices for default service and were approved by the MDTE. FG&E
awarded a contract for default service on October 31, 2000 and
filed resulting rates and a tariff on November 3, 2000 effective
for the period January through May, 2001. Customers will have
the option of receiving either the fixed six-month pricing option
or variable monthly pricing. FG&E has worked with the default
service education working group to provide customers with notice
of changes in the way default service is procured and priced is
working to meeting the guidelines set forth therein. The
Company's default service rates for January through May 2001 are
pending MDTE approval.
In June, 2000, the MDTE opened up an investigation into
whether (1) metering, meter maintenance and testing, customer
billing and information services should be unbundled; and (2) the
service territories of distribution companies should remain
exclusive. If the MDTE determines that MBIS should be unbundled
and provided on a competitive basis, or that the exclusivity of
distribution company service territories should be terminated or
altered, the MDTE is required to file its recommendations, and
draft implementing legislation with the clerk of the House of
Representatives by January 1, 2001. The MDTE had received
comments from interested parties and has held a technical session
focusing on whether advanced metering systems can be efficiently
installed under the current distribution company framework and
the extent to which a supplier single billing option, under which
suppliers would issue to their customers consolidated bills for
both supplier-related and distribution company-related services,
can be implemented within the current system.
Massachusetts(Gas)- In mid-1997, the MDTE directed all
Massachusetts natural gas LDCs to form a collaborative with other
stakeholders to develop common principles and appropriate
regulations for the unbundling of gas service, and directed FG&E
and four other LDCs to file unbundled gas rates for its review.
FG&E's unbundled gas rates were filed with, and approved by, the
MDTE and implemented in November 1998.
On February 1, 1999, the MDTE issued an order in which it
determined that the LDCs would continue to have an obligation to
provide gas supply and delivery services for another five years,
with a review after three years. This order also set forth the
MDTE's decision regarding release by LDCs of their pipeline
capacity contracts to competitive marketers. In March 1999, the
LDCs and other stakeholders filed a settlement with the MDTE
which set forth rules for implementing an interim firm
transportation service through October 31,2000. The MDTE
approved the settlement on April 2, 1999. FG&E has made separate
compliance filings that were approved by the MDTE to implement
its interim firm gas transportation service for its largest
general service customers and to complement this service with a
firm gas peaking service. This interim service is now superseded
by the permanent transportation service, which was approved for
implementation on November 1, 2000.
On November 3, 1999 the Massachusetts LDCs filed Model Terms
and Conditions for Gas Service, including provisions for capacity
assignment, peaking service and default service. In accordance
with the MDTE's approval of these Model Terms and Conditions in
January 2000, FG&E filed Company-specific tariffs that implement
natural gas unbundling. The MDTE also opened a rulemaking
proceeding on proposed regulations that would govern the
unbundling of services related to the provision of natural gas.
The MDTE has issued an order approving the tariffs and final
regulations effective November 1, 2000.
New Hampshire - On February 28, 1997, the New Hampshire
Public Utilities Commission (NHPUC) issued its Final Plan for New
Hampshire electric utilities to transition to a competitive
electric market in the state ("Final Plan"). The Final Plan
linked the interim recovery of stranded cost by the State's
utilities to a comparison of their existing rates with the
regional average utility rates. CECo's and E&H's rates are below
the regional average; thus, the NHPUC found that CECo and E&H
were entitled to full interim stranded cost recovery, as defined
by the NHPUC. However, the NHPUC also made certain legal
rulings, which could affect CECo's and E&H's long-term ability to
recover all of their stranded costs.
Northeast Utilities' affiliate, Public Service Company of
New Hampshire, filed suit in U.S. District Court for protection
from the Final Plan and related orders and was granted an
indefinite stay. In June 1997, Unitil, and other utilities in
New Hampshire, intervened as plaintiffs in the federal court
proceeding. In June 1998, the federal court clarified that the
injunctions issued by the court in 1997 had effectively frozen
the NHPUC's efforts to implement restructuring. This amended
injunction was challenged by the NHPUC, but affirmed by the First
Circuit Court of Appeals in December 1998. Unitil continues to
be a plaintiff-intervenor in federal district court and cross
motions for summary judgment by all parties are now under review
by the court.
Unitil has continued to work actively to explore Settlement
opportunities and to seek a fair and reasonable resolution of key
restructuring policies and issues in New Hampshire. The Company
is also monitoring the regulatory and legislative proceedings
dealing with electric restructuring for other utilities in New
Hampshire.
Rate Proceedings - The last formal regulatory filings to
increase base electric rates for Unitil's three retail operating
subsidiaries occurred in 1985 for CECo, 1984 for FG&E, and 1981
for E&H. A majority of the Company's operating revenues are
collected under various periodic rate adjustment mechanisms
including fuel, purchased power, cost of gas, energy efficiency,
and restructuring-related cost recovery mechanisms. Industry
restructuring will continue to change the methods of how certain
costs are recovered through the Company's regulated rates and
tariffs.
On May 15, 1998, FG&E filed a gas base rate case with the
MDTE. The last base rate case had been in 1984. After
evidentiary hearings, the MDTE issued an Order allowing FG&E to
establish new rates, effective November 30, 1998 that would
produce an annual increase of approximately $1.0 million in gas
revenues. As part of the proceeding, the Massachusetts Attorney
General alleged that FG&E had double-collected fuel inventory
finance charges, and requested that the MDTE require FG&E to
refund approximately $1.6 million in double collections since
1987. The Company believes that the Attorney General's claim is
without merit and that a refund was not justified or warranted.
The MDTE rejected the Attorney General's request and stated its
intent to open a separate proceeding to investigate the Attorney
General's claim. On November 1, 1999, the MDTE issued an Order
of Notice initiating an investigation of this matter. Hearings
were held in early 2000 and were recently reopened to hear new
evidence.
On October 29, 1999, the MDTE initiated a proceeding
designed to result in the eventual implementation of Performance
Based Rate making (PBR) for all electric and gas distribution
utilities in Massachusetts. PBR is a method of setting regulated
distribution rates that provide incentives for utilities to
control costs while maintaining a high level of service quality.
Under PBR, a company's earnings are tied to performance targets,
and penalties can be imposed for deterioration of service
quality. On December 29, 1999, FG&E field a petition with the
MDTE for authority to defer for later recovery costs associated
with its preparation of a PBR filing for its gas division and its
participation in the MDTE-initiated generic gas and electric PBR
proceedings. This petition is pending. The Company is currently
evaluating the impact, if any, that PBR would have on the
Company's ability to continue applying the standards of Statement
of Financial Accounting Standards No. 71 "Accounting for the
Effects of Certain Types of Regulation."
On December 31, 1999, the Massachusetts Attorney General
initiated a Complaint against FG&E. The Attorney General
requested that the MDTE launch an investigation of the
distribution rates, rate of return, and depreciation accrual
rates for FG&E's electric operations in calendar year 1999. To
date, the MDTE has taken no action on the Attorney General's
complaint.
Millstone Unit No. 3 - FG&E has a 0.217% nonoperating
ownership in the Millstone Unit No. 3 (Millstone 3) nuclear
generating unit which supplies it with 2.49 megawatts (MW) of
electric capacity. In January 1996, the Nuclear Regulatory
Commission (NRC) placed Millstone 3 on its Watch List, which
calls for increased NRC inspection attention. In March 1996, as
a result of engineering evaluations, Millstone 3 was taken out of
service. The NRC authorized the restart of Millstone 3 in June
1998.
During the period that Millstone 3 was out of service, FG&E
continued to incur its proportionate share of the unit's ongoing
Operations and Maintenance (O&M) costs, and may incur additional
O&M costs and capital expenditures to meet NRC requirements.
FG&E also incurred costs to replace the power that was expected
to be generated by the unlit. During the outage, FG&E incurred
approximately $1.2 million in replacement power costs, and
recovered those costs through its electric fuel charge, which is
subject to review and reconciliation by the MDTE. Under existing
MDTE precedent, FG&E's replacement power costs of $1.2 million
could be subject to disallowance in rates.
In August 1997, FG&E, in concert with other non operating
joint owners, filed a demand for arbitration in Connecticut and a
lawsuit in Massachusetts, an effort to recover costs associated
with the extended unplanned shutdown. Several preliminary
rulings have been issued in the arbitration and legal cases, and
both cases are continuing. On March 22, 2000, FG&E entered into
a settlement agreement with the defendants under which FG&E will
dismiss its lawsuit and arbitration claims. The settlement is
generally similar to earlier settlements with the defendants, and
three joint owners that own, in the aggregate, approximately19
percent of the unit. The settlement provides for FG&E to receive
an initial payment of $600,000 and other amounts contingent upon
future events and would result in FG&E's entire interest in the
unit being included in the auction of the majority interest, and
certain of the minority interests, in Millstone 3 expected to be
completed by 2001. Upon completion of the sale of Millstone 3,
FG&E will be relieved of all residual liabilities, including
decommissioning liabilities, associated with Millstone 3. FG&E
expects to flow through the net proceeds of the settlement to its
customers.
On September 8, 2000, Western Massachusetts Electric
Company, New England Power Company, and FG&E together filed a
Joint Petition requesting approval by the MDTE of the sale of
their respective interests in Millstone Units 1, 2 and 3. The
Companies also request MDTE findings that the divested assets
qualify as "eligible facilities" pursuant to Section 32 (c) of
the Public Utility Holding Company Act of 1935. The proceeding
is now underway.
CAPITAL REQUIREMENTS
Capital expenditures on plant and equipment for the nine
months ended September 30, 2000 were approximately $14.9 million.
This compares to $11.9 million during the same period last year.
Capital expenditures for plant and equipment for the year 2000
are estimated to be approximately $19.0 million as compared to
$15.4 million for 1999. This projection reflects capital
expenditures for utility system expansions, replacements and
other improvements.
LEGAL PROCEEDINGS
The Company is involved in legal and administrative
proceedings and claims of various types, which arise in the
ordinary course of business. In the opinion of the Company's
management, based upon information furnished by counsel and
others, the ultimate resolution of these claims will not have a
material impact on the Company's financial position.
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements, which are
subject to the inherent uncertainties in predicting future
results and conditions. Certain factors that could cause the
actual results to differ materially from those projected in these
forward-looking statements include, but are not limited to:
variations in weather, changes in the regulatory environment,
customers' preferences on energy sources, general economic
conditions, increased competition and other uncertainties, all of
which are difficult to predict, and many of which are beyond the
control of the Company.
PART I. EXHIBIT 11.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
(UNAUDITED)
(Amounts in Thousands, except Shares and Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
BASIC EARNINGS PER SHARE 2000 1999 2000 1999
Net Income $1,131 $1,709 $5,022 $6,051
Less: Dividend Requirement
On Preferred Stock 64 66 197 201
Net Income Applicable
To Common Stock $1,067 $1,643 $4,825 $5,850
Average Number of Common
Shares Outstanding 4,725,989 4,703,069 4,720,236 4,673,318
Basic Earnings Per Common
Share $0.23 $0.35 $1.02 $1.25
Three Months Ended Nine Months Ended
September 30, September 30,
DILUTED EARNINGS PER SHARE 2000 1999 2000 1999
Net Income $1,131 $1,709 $5,022 $6,051
Less: Dividend Requirement
On Preferred Stock 64 66 197 201
Net Income Applicable
To Common Stock $1,067 $1,643 $4,825 $5,850
Average Number of Common
Shares Outstanding 4,725,989 4,703,069 4,720,236 4,673,318
Diluted Earnings Per
Common Share $0.23 $0.35 $1.02 $1.25
PART I. EXHIBIT 99.
UNITIL CORPORATION AND SUBSIDIARY COMPANIES
SELECTED QUARTERLY FINANCIAL DATA
(000's except for per share data)
(UNAUDITED)
Three Months Ended Three Months Ended
September 30, December 31,
2000 1999 1999 1998
Total Operating Total Operating
Revenues $44,464 $42,738 Revenues $44,527 $40,828
Operating Income $2,879 $3,392 Operating Income $4,063 $4,181
Net Income $1,131 $1,709 Net Income $2,387 $2,432
Basic Earnings Basic Earnings
per Share $0.23 $0.35 per Share $0.49 $0.52
Diluted Earnings Diluted Earnings
per Share $0.23 $0.35 per Share $0.49 $0.50
Dividends Paid Dividends Paid
Common Share $0.345 $0.345 Common Share $0.345 $0.34
Three Months Ended Three Months Ended
March 31, June 30,
2000 1999 2000 1999
Total Operating Total Operating
Revenues $46,317 $42,347 Revenues $42,908 $42,761
Operating Income $4,458 $4,551 Operating Income $3,030 $3,402
Net Income $2,664 $2,744 Net Income $1,227 $1,598
Basic Earnings Basic Earnings
per Share $0.55 $0.58 per Share $0.25 $0.32
Diluted Earnings Diluted Earnings
per Share $0.55 $0.58 per Share $0.24 $0.32
Dividends Paid Dividends Paid
per Common Share $0.345 $0.345 Common Share $0.345 $0.345
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Exhibit Reference
11 Computation in Support of
Earnings Per Average Common Share Filed herewith
99 Selected Quarterly Financial Data Filed herewith
(b) Reports on Form 8-K
During the quarter ended September 30, 2000, the Company did not
file any reports on Form 8-K.
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: November 13, 2000 /s/ Anthony J. Baratta, Jr.
Anthony J. Baratta, Jr.
Chief Financial Officer
Date: November 13, 2000 /s/ Mark H. Collin
Mark H. Collin
Treasurer