I've checked both Edgar and Yardini sites and I've found no information. Does anyone have any information about the Y2k readiness (or not) status of Mass Electric?

-- Anonymous, November 29, 1998

Answers

Debra, here is the URL to go to for the Massachusetts Electric Company's latest SEC 10Q:

http://www.sec.gov/Archives/edgar/data/63073/0000063073-98-000013.txt

I would have copied the year 2000 info here but they used a chart which will not translate well. You'll need to scroll down about 2/3's of the way through the document to get to the year 2000 section.

Good luck to you.

-- Anonymous, November 29, 1998

Thanks, Bonnie.

For others who may be living in Massachusetts, here is the relevant info, messed up table and all. I noticed the report did not mention testing after remediation as one of the steps. Worst case scenario is temporary disruption of service. Did not say how temporary. Could someone help interpret this please?

Year 2000 Computer Issues - ------------------------- Over the next year, most companies will face a potentially serious information systems (computer) problem because many software applications and operational programs written in the past may not properly recognize calendar dates associated with the year 2000 (Y2K). This could cause computers to either shut down or lead to incorrect calculations. During 1996, the NEES companies began the process of identifying the changes required to their computer software and hardware to mitigate Y2K issues. The NEES companies established a Y2K Project team to manage these issues. This team reports project progress to a recently formed Y2K Executive Oversight Committee each month. The team also makes regular reports to NEES' Board of Directors and its Audit Committee. The NEES companies have separated their Y2K Project into four parts as shown below, along with the estimated completion dates for each part.

Substantial Contingency Testing, Completion Documentation, of Critical and Clean Category Specific Example Systems Management - ------- ------------ --------- ------------ Mainframe/Midrange Accounting/Customer Fourth quarter Throughout 1999 Systems service integrated 1998 systems Desktop Systems Personal computers/ Mid-1999 Throughout 1999 Department software/ Networks Operational/ Dispatching systems/ Mid-1999 Throughout 1999 Embedded Transmission and Systems Distribution systems/ Telephone systems External Issues Electronic Data Mid-1999 Throughout 1999 Interchange/Vendor communications

The NEES companies are using a three-phase approach in coordinating their Y2K Project for system-related issues: (I) Assessment and Inventory, (II) Pilot Testing, and (III) Renovation, Conversion, or Replacement of Application and Operating Software Packages and Testing. Phase I, which was an initial assessment of all systems and devices for potential Y2K defects, was completed in mid-1997. Phase II, which consisted of renovation pilots for a cross-section of systems in order to facilitate the establishment of templates for Phase III work, was completed in late 1997. Phase III, which is currently ongoing, requires the renovation, conversion, or replacement of the remaining applications and operating software packages. The NEES companies have also implemented a formalized communication process with third parties to receive information related to their progress in remediating their own Y2K issues, and to communicate the NEES companies' progress in addressing the Y2K issue. These third parties include major customers, suppliers, and significant businesses with which the NEES companies have data links (such as banks). The NEES companies cannot predict the outcome of other companies' remediation efforts. The NEES companies believe total costs associated with making the necessary modifications to all centralized and noncentralized systems will be approximately $25 million. In addition, the NEES companies are spending $4 million related to the implementation of a new human resources and payroll system, the replacement of which is in part due to the Y2K issue. To date, total Y2K-related costs of $19 million have been incurred, of which $1 million has been capitalized. The NEES companies are in the process of developing Y2K contingency plans to allow for critical information and operating systems to function from January 1, 2000 forward. If required, these plans are intended to address both internal risks as well as potential external risks related to both suppliers and customers. Part of the contingency planning for accounting and desktop systems will include taking extensive data back-ups prior to year-end closing. For operational systems, the NEES companies have in place an overall disaster recovery program, which already includes periodic disaster simulation training (for outages due to severe weather, for instance). As part of Y2K contingency planning, the NEES companies will review their disaster recovery plans, modifying them for Y2K-specific issues. The NEES companies expect that these contingency plans will be in place by mid-1999. Interregional and regional contingency plans are being formulated that address emergency scenarios due to the interconnection of utility systems throughout the United States. At a regional level, the NEES companies are participating and cooperating with the New England Power Pool (NEPOOL) and the Independent System Operator of the NEPOOL area (ISO New England). Overall regional activities, including those of NEPOOL and ISO New England, will be coordinated by the Northeast Power Coordinating Council, whose activities will be incorporated into the interregional coordinating effort by the North American Electric Reliability Council. The target for completion of this planning process is mid-1999. The NEES companies have noted that the Y2K coordination efforts by ISO New England began only in May 1998, resulting in a demanding and difficult schedule to attain regional and interregional target dates. The NEES companies believe the worst case scenario with a reasonable chance of occurring is temporary disruptions of electric service. This scenario could result from a failure to adequately remediate Y2K problems at NEES company facilities or could be caused by the inability of entities, such as ISO New England, to maintain the short-term reliability of various generators and/or transmission lines on a regional or superregional basis. The NEES companies believe that the contingency plans being developed both internally and on a regional level, as described above, should substantially mitigate the risks of this potential scenario. In the event that a short-term disruption in service occurs, the Company does not expect that it would have a material impact on its financial position and results of operations. While the NEES companies believe that their overall Y2K program will satisfactorily address all critical operational and system-related issues, significant risks remain. These risks include, but are not limited to, the Y2K readiness of third parties, including other utilities and power suppliers, cost and timeline estimates of remaining Y2K mitigation efforts, and the overall accuracy of assumptions made related to future events in the development of the Y2K mitigation effort.

-- Anonymous, November 29, 1998

Debra, part of the problem is that Massachusetts Electric Co. is part of the New England Electric System (NEES), along with Narragansett Electic Co. and New England Power Co. (NEP). The holding company - NEES- files with the SEC and it is an overall composite year 2000 report of all the utilities in NEES that you are reading about in this 10Q. Therefore, we do not have specifics for each of the utilities which comprise NEES.

To make matters more complicated, NEG and Narragansett just sold their non-nuclear generating business to USgen. Here is that statement: " On September 1, 1998, NEES subsidiaries NEP and The Narragansett Electric Company completed the sale of substantially all of their nonnuclear generating business to USGen New England, Inc. (USGen), an indirect wholly owned subsidiary of PG&E Corporation. Effective September 1, 1998, USGen and TransCanada Power Marketing, Ltd. (TCPM) became the Company's suppliers for meeting its obligations for transition service customers. For more information on the terms and events leading to the sale, the accounting implications of the sale, and the assets sold, see the Company's Annual Report on Form 10-K for the year ended December 31, 1997."

What do we know from NEES? We know they started their Y2K project sometime in 1996. We know the "substantial completion of critical systems" for their Mainframe/Midrange systems in Accounting/Customer is put at "1998". "Contingency testing, Documentation and Clean Management" for the rest of this category of systems is estimated complete "fourth quarter throughout 1999".

Their desktop systems (PC's, department software and networks) are estimated to be complete "mid 1998 throughout 1999".

Their operational/embedded systems is expected to be complete also by "mid 1998 throughout 1999".

They have spent $19 million to date and estimates total costs to be $29 million. Compared to other 10Q's I've read, NEES starting date and amount spent thus far is better than many others, although this may not be saying a lot since everybody was rather slow to get started compared to the size of the job ahead of them.

They have begun contingency planning and this was an interesting sentence: "The NEES companies have noted that the Y2K coordination efforts by ISO New England began only in May 1998, resulting in a demanding and difficult schedule to attain regional and interregional target dates." This is in the section addressing contingency planning for the interconnection of utility systems, and seems to me to be a way of saying "you've made unreasonable demands at a late date". NEES takes another little swipe at ISO in the paragraph on worst case scenarios: " The NEES companies believe the worst case scenario with a reasonable chance of occurring is temporary disruptions of electric service. This scenario could result from a failure to adequately remediate Y2K problems at NEES company facilities or could be caused by the inability of entities, such as ISO New England, to maintain the short-term reliability of various generators and/or transmission lines on a regional or superregional basis."

My take on the overall tone of this 10Q is that NEES started in good time, and is working hard, doing a better job than some utilities, but they have real concerns with their regional transmission connections to others.

-- Anonymous, November 29, 1998