<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                         Washington, D. C. 20549-1004

                                   Form 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 1999
                               -----------------

                                      OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from _______________ to _______________

                        Commission file number 2-30057
                                    -------

                            CANAL ELECTRIC COMPANY
                            ----------------------
            (Exact name of registrant as specified in its charter)

          Massachusetts                                     04-1733577
-------------------------------                         ------------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)

800 Boylston Street, Boston, Massachusetts                    02199
------------------------------------------                    -----
(Address of principal executive offices)                    (Zip Code)

                                (617) 424-2000
              --------------------------------------------------
             (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:

     Title of each class               Name of each exchange on which registered
 ---------------------------           -----------------------------------------
          None                                        None

          Securities registered pursuant to Section 12(g) of the Act:

                                Title of Class
                                --------------
                                     None

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.

                                                   Outstanding at
      Class of Common Stock                        March 30, 2000
   ---------------------------                    ----------------
   Common Stock, $25 par value                    1,523,200 shares

The Company meets the conditions set forth in General Instruction I(1)(a) and
(b) of Form 10-K as a wholly-owned subsidiary and is therefore filing this Form
with the reduced disclosure format.

Documents Incorporated by Reference               Part in Form 10-K
-----------------------------------               -----------------
               None                                 Not Applicable

List of Exhibits begins on page 35 of this report.
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------
                         FORM 10-K  DECEMBER 31, 1999
                         ----------------------------

                               TABLE OF CONTENTS

                                    PART I

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Item  1.    Business....................................................     1

              General...................................................     1

              Electric Industry Restructuring...........................     3

              Fuel Supply...............................................     4

              Power Contracts...........................................     4

              Employees.................................................     6

Item  2.    Properties..................................................     6

Item  3.    Legal Proceedings...........................................     6

                                    PART II

Item  5.    Market for the Registrant's Common Stock and
              Related Stockholder Matters...............................     7

Item  7.    Management's Discussion and Analysis of
              Results of Operations.....................................     8

Item  8.    Financial Statements and Supplementary Data.................    12
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                         <C>
Item  9.    Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure.......................    12

                                    PART IV

Item 14.    Exhibits, Financial Statement Schedules and
              Reports on Form 8-K.......................................    35

Signatures..............................................................    43
</TABLE>

                                     -ii-
<PAGE>

                                    Part I.
                                    -------

Item 1.  Business
-------  --------

     General
     -------

     Canal Electric Company (the Company) is a wholesale electric generating
 company organized in 1902 under the laws of the Commonwealth of Massachusetts.
 The Company assumed its present corporate name in 1966 after the sale to an
 affiliated company of its electric distribution and transmission properties
 together with the right to do business in the territories served.

     The Company is wholly-owned by Commonwealth Energy System (COM/Energy)
 that is a wholly owned indirect subsidiary of NSTAR. NSTAR was formed,
 effective August 25, 1999, upon completion of a merger transaction between
 Commonwealth Energy System and BEC Energy (formerly the parent company of
 Boston Edison Company). The merger creates an energy delivery and related
 services company, that includes the Company, serving approximately 1.3 million
 customers located in Massachusetts including more than one million electric
 customers in 81 communities and 240,000 gas customers in 51 communities. NSTAR
 is an exempt public utility holding company under the provisions of the Public
 Utility Holding Company Act of 1935 and, in addition to its investment in the
 Company, has interests in several other utility and several nonregulated
 companies.

     The Company has a 3.52% interest in the Seabrook 1 nuclear power plant
 located in Seabrook, New Hampshire, to provide for a portion of the capacity
 and energy needs of Cambridge Electric Light Company (Cambridge Electric) and
 Commonwealth Electric Company (Commonwealth Electric), each of which are retail
 distribution companies and wholly-owned subsidiaries of NSTAR. The Seabrook
 plant has a rated capacity of 1,150 MW.

     The Company owned a generating station located in Sandwich, Massachusetts
 at the eastern end of the Cape Cod Canal until December 30, 1998 when the
 station was sold to Southern Energy New England, LLC, an affiliate of The
 Southern Company of Atlanta, Georgia. The station consists of two electric
 generating units: Canal Unit 1 is an oil-fired facility with a rated capacity
 of 569 megawatts (MW), that had been wholly-owned by the Company; and Canal
 Unit 2 which was converted to dual-fuel capability (oil and natural gas) in
 1996, with a rated capacity of 580 MW, that was jointly-owned by the Company
 and Montaup Electric Company (Montaup) (an unaffiliated company). Canal Unit 2
 was operated by the Company under an agreement with Montaup which provided for
 the equal sharing of output, fixed charges and operating expenses. Canal Units
 1 and 2 commenced operation in 1968 and in 1976, respectively.

                                        -1-
<PAGE>

 The sale was conducted through an auction process initiated during 1997 in
 response to electric industry restructuring legislation enacted in
 Massachusetts in November 1997. For further information refer to the "Industry
 Restructuring" section of Management's Discussion and Analysis of Results of
 Operation filed under Item 7 of this report.

     For additional information pertaining to the Company's relationship with
 NSTAR's retail distribution and transmission companies, together with other
 information on the Company's participation in the Seabrook plant and another
 source of power procurement, refer to the "Power Contracts" section of this
 Item 1.

                                      -2-
<PAGE>

     Electric Industry Restructuring
     -------------------------------

     On November 25, 1997, the Governor of Massachusetts signed into law the
 Electric Industry Restructuring Act (the Act). This legislation provided, among
 other things, that customers of retail electric utility companies who take
 standard offer service receive a 10 percent rate reduction and be allowed to
 choose their energy supplier, effective March 1, 1998. The Act also provides
 that utilities be allowed full recovery of transition costs subject to review
 and an audit process. The 10 percent rate reduction mandated by the legislation
 increased to 15 percent effective September 1, 1999 for customers who continue
 to take standard offer service.

     The Company, together with retail affiliates Cambridge Electric and
 Commonwealth Electric, had filed a comprehensive electric restructuring plan
 with the Massachusetts Department of Telecommunications and Energy (MDTE) in
 November 1997 that was substantially approved by the MDTE in February 1998. The
 divestiture of the Company's non-nuclear generation assets was an integral part
 of COM/Energy's restructuring plan and is consistent with the Act.

     On May 27, 1998, the Company selected Southern Energy to buy Canal Units 1
 and 2.  The sale was conducted through an auction process that was outlined in
 a restructuring plan filed with the MDTE in November 1997 in conjunction with
 the state's industry restructuring legislation enacted in 1997.  The sale was
 approved by the MDTE on October 30, 1998 and by the Federal Energy Regulatory
 Commission (FERC) on November 12, 1998.  Proceeds from the sale of the
 Company's non-nuclear generating assets amounted to approximately $395 million
 or 6 times their book value of approximately $65.4 million.  The proceeds from
 the sale, net of book value, transaction costs and certain other adjustments
 amounted to approximately $298 million and are being used to reduce transition
 costs of Cambridge Electric and Commonwealth Electric related to electric
 industry restructuring that otherwise would have been collected through a non-
 bypassable transition charge.  An adjustment of $5.1 million was recorded in
 the first quarter of 1999 that reduced the book value to $60.3 million.

                                      -3-
<PAGE>

     On December 23, 1998, the MDTE approved the divestiture filing and
 COM/Energy's proposal to establish a special purpose affiliate, Energy
 Investment Services, Inc. (EIS), that will administer the above-book value net
 proceeds from the sale of the Company's units with the goal of preserving
 capital and maximizing earnings for the benefit of retail customers.  EIS will
 credit the proceeds and any return earned to the accounts of Commonwealth
 Electric and Cambridge Electric, resulting in a reduction in the transition
 costs to be billed to customers.

     Fuel Supply
     -----------

     The nuclear fuel contract and inventory information for Seabrook 1 has been
 furnished to the Company by North Atlantic Energy Services Corporation
 (NAESCO), the managing agent responsible for operation of the unit.  Sea-
 brook's requirement for nuclear fuel components are 100% covered through 2003
 by existing contracts.

     There are no spent fuel reprocessing or disposal facilities currently
 operating in the United States.  Instead, commercial nuclear electric
 generating units operating in the United States are required to retain spent
 fuel on-site.  As required by the Nuclear Waste Policy Act of 1982 (the Act),
 as amended, the joint-owners entered into a contract with the Department of
 Energy for the transportation and disposal of spent fuel and high level
 radioactive waste at a national nuclear waste repository or Monitored
 Retrievable Storage (MRS) facility.  Owners or generators of spent nuclear fuel
 or its associated wastes are required to bear the costs for such transportation
 and disposal through payment of a fee of approximately 1 mill/KWH based on net
 electric generation to the Nuclear Waste Fund.  Under the Act, a storage or
 disposal facility for nuclear waste was anticipated to be in operation by 1998;
 a reassessment of the project's schedule requires extending the completion date
 of the permanent facility until at least 2010. Seabrook 1 is currently licensed
 for enough on-site storage to accommodate spent fuel expected to be accumulated
 through at least the year 2010.

     Power Contracts
     ---------------

     Prior to the sale of its nonnuclear generating assets, the Company was a
 party to substantially identical life-of-the-unit power contracts with Boston
 Edison Company (an affiliated utility as of the date of the merger), Montaup
 Electric Company and New England Power Company (unaffiliated utilities), under
 which each was severally obligated to purchase one-quarter of the capacity and
 energy of Canal Unit 1. Commonwealth Electric and Cambridge Electric were
 jointly

                                      -4-
<PAGE>

 obligated to purchase the remaining one-quarter of the unit's capacity and
 energy. Agreements with Southern Energy to assume responsibility for these
 contracts following the sale of the unit were approved by the FERC in early
 January 2000. Similar contracts that were in effect between the Company and
 Commonwealth Electric and Cambridge Electric under which those companies are
 jointly obligated to purchase the Company's entire share of the capacity and
 energy of Canal Unit 2 were terminated on December 30, 1998. The price of power
 was based on a two-part rate consisting of a demand charge and an energy
 charge. The demand charge covered all expenses except fuel costs and included
 recovery of the original investment. It also provided for any adjustments to
 that investment over the economic lives of the units. The energy charge was
 based on the cost of fuel and was billed to each purchaser in proportion to its
 purchase of power.

     The Company acts as agent for Commonwealth Electric and/or Cambridge
 Electric in the procurement of additional capacity, and, prior to December 30,
 1998, to sell a portion of each company's entitlement in Unit 2.  Exchange
 agreements are in place with several utilities whereby, in certain
 circumstances, it is possible to exchange capacity so that the mix of power
 improves the pricing for dispatch for both the seller and purchaser.
 Commonwealth Electric and Cambridge Electric thus secure cost savings for their
 respective customers by planning for bulk power supply on a single system
 basis.  A Capacity Acquisition and Disposition Agreement, which has been
 accepted for filing as a rate schedule by the FERC, enables the Company to
 recover costs incurred in connection with any transaction covered by such
 Agreement.  Commonwealth Electric and Cambridge Electric, in turn, bill charges
 to retail customers through rates subject to MDTE regulation.  Currently,
 Agreements are in effect for Seabrook 1 and Phases I and II of the Hydro-Quebec
 Project.

     The Company is a party to support agreements for Phases I and II of the
 Hydro-Quebec Project and is thereby obligated to pay its share of operating and
 capital costs for Phase II over a 25 year period ending in 2015.  Future
 minimum lease payments for Phase II have an estimated present value of $11.4
 million at December 31, 1999.  In addition, the Company has an equity interest
 in Phase II that amounted to $2.8 million in both 1999 and 1998.

                                      -5-
<PAGE>

     Employees
     ---------

     Since December 30, 1998, the sale date of the Company's generating assets,
 the Company has had no employees.

Item 2.   Properties
-------   ----------

     The Company has a 3.52% joint-ownership interest (40.5 MW of capacity) in
 Seabrook 1.  Prior to the sale of the Company's generating assets to an
 affiliate of The Southern Company of Atlanta, Georgia, on December 30, 1998,
 the Company had operated a generating station located at the eastern end of the
 Cape Cod Canal in Sandwich, Massachusetts.  The station consisted of two steam
 electric generating units: Canal Unit 1 with a rated capacity of 569 MW,
 wholly-owned by the Company; and Canal Unit 2, with a rated capacity of 580 MW,
 jointly-owned by the Company and Montaup Electric Company, a wholly-owned
 subsidiary of Eastern Utilities Associates.

 Item 3.  Legal Proceedings
 -------  -----------------

     Pursuant to the terms of the Canal Units 1 and 2 Asset Sale Agreement with
Southern Energy dated May 15, 1998, the Company agreed to fund environment
assessment work up to a $500,000 cap to address a condition of metals
contamination found on the station site. Management is unable at this time to
predict when the resolution of this issue will occur.

     The Company is subject to other legal claims and matters arising from its
 normal course of business, including its ownership interest in the Seabrook
 plant.

                                      -6-
<PAGE>

                                   PART II.
                                   --------

Item 5. Market for the Registrant's Common Stock and Related Stockholder
------- ----------------------------------------------------------------
        Matters
        -------

 (a)   Principal Market
       ----------------

       Not applicable. The Company is wholly-owned by Commonwealth Energy System
       and is a wholly-owned indirect subsidiary of NSTAR.

 (b)   Number of Shareholders at December 31, 1999
       -------------------------------------------

       One

 (c)   Frequency and Amount of Dividends Declared in 1999 and 1998
       -----------------------------------------------------------

<TABLE>
<CAPTION>
                     1999                                  1998
       -----------------------------         --------------------------------
                           Per Share                                Per Share
       Declaration Date      Amount          Declaration Date         Amount
       ----------------    ---------         ----------------       ---------
       <S>                 <C>               <C>                    <C>
       January 27, 1999      $124.00         May 11, 1998             $2.65
       April 28, 1999           3.10         July 31, 1998             1.90
       April 28, 1999           4.29         October 26, 1998          2.20
       July 23, 1999            2.00                                  -----
       October 28, 1999        23.00                                  $6.75
                             -------                                  =====
                             $156.39
                             =======

</TABLE>

(d)    Future dividends may vary depending upon the Company's earnings and
       capital requirements as well as financial and other conditions existing
       at that time.

                                      -7-
<PAGE>

Item 7.  Management's Discussion and Analysis of Results of Operations
-------  -------------------------------------------------------------

     The following is a discussion of certain significant factors which have
affected operating revenues, expenses and net income during the periods included
in the accompanying Statements of Income and is presented to facilitate an
understanding of the results of operations. This discussion should be read in
conjunction with the Notes to Financial Statements filed under Item 8 of this
report.

     In the accompanying statements, Canal Electric Company prior to the
Merger is labeled as the "Predecessor" and after the Merger as the "Successor".
The eight month (predecessor period) and the 4 month (successor period), ended
August 25, 1999 and December 31, respectively, have been combined per the
purpose of comparing the results of the twelve month period ended December 31,
1998 with the twelve month period ended December 31, 1999.

 Revenue, Fuel and Purchased Power
 ---------------------------------

     Operating revenues for 1999 decreased $134.5 million (74%) due to the sale
 of the Company's Unit 1 and 2 generation facilities on December 30, 1998.
 Operating revenues for 1998 decreased by $32.3 million or 15.1%, due primarily
 to decreases in fuel used in production and electricity purchased for resale,
 somewhat offset by a 3.4% increase in unit sales.  The increase in unit sales
 was due primarily to the increased availability of Unit 2 and Seabrook 1.
 Somewhat offsetting the increase in unit sales was the expiration of contracts
 for the purchase of electricity on behalf of affiliated retail distribution
 companies.

     The significant decline in 1999 of fuel used in production of $88 million
 (98.3%) reflects the aforementioned sale of Units 1 and 2. The decrease in fuel
 used in production in 1998 represents the lower average cost of fuel oil in
 1998 over 1997. Fuel, purchased power and transmission costs (included in other
 operation expense) averaged 1.7 cents per kWh in 1999, 1.9 cents per kWh in
 1998 and 2.6 cents in 1997.

     The following is a summary of unit sales for the periods indicated:

<TABLE>
<CAPTION>
                                      Unit Sales (MWH)
                   -----------------------------------------------------
Period Ended              Canal          Seabrook  Purchased
December 31,        Unit 1     Unit 2     Unit 1   For Resale    Total
------------        ------     ------     ------   ----------    -----
<S>                <C>        <C>        <C>       <C>         <C>
    1999                   -          -   306,012           -    306,012
    1998           3,136,328  1,485,797   295,539           -  4,917,664
    1997           3,219,542  1,098,463   279,941     159,914  4,757,860
</TABLE>

 Other Operating Expenses
 ------------------------

     In 1999, other operations expense declined $16.6 million (62.9%) due to the


                                     -8-
<PAGE>

 sale of Units 1 and 2. During 1998, other operations decreased approximately
 $1.3 million (4.6%) due to the absence of amortization related the abandonment
 of Seabrook Unit 2 nuclear unit which resulted in a reduction of $584,000 and
 lower insurance and benefits costs of $293,000.

     Maintenance expense decreased $10.5 million (84.2%)in 1999 due to the sale
 of Units 1 and 2. In 1998, the $2.3 million (22.1%) increase in expense was due
 to greater maintenance costs associated with the Unit 1 boiler plant and
 related equipment ($3.8 million), which was offset, in part, by lower costs
 associated with Unit 2 ($1.4 million).

 Depreciation and Taxes
 ----------------------

     The $13.6 million (66%) decline in depreciation in 1999 was due to the sale
 of Units 1 and 2. In 1998, depreciation increased 6.9% reflecting a higher
 level of plant-in-service and adjustments related to the sale of the Company's
 Units 1 and 2.

     Federal and state income taxes increased in 1999 due to a higher level of
 pre-tax income.  Income tax expense declined 11% or approximately $1 million in
 1998 due to a lower level of pre-tax income from normal operations.

 Other Income
 ------------

     The significant increase in other income, other during 1999 was primarily
 due to an additional gain, related to the sale of the Company's generating
 assets, that resulted from certain adjustments to the assets' book value ($5.1
 million), and a reduction in transaction costs ($4 million) associated with the
 retirement of the Company's long-term debt in 1998. Other income also reflects
 the reversal of interest income on a portion of the proceeds associated with
 the sale of the Company's generating assets that were ultimately provided to
 affiliate Energy Investment Services, Inc. and will ultimately be utilized to
 reduce transition costs to be billed to customers of Cambridge Electric and
 Commonwealth Electric. All of these adjustments are offset at COM/Energy
 reflecting corresponding changes in liabilities to Commonwealth Electric's and
 Cambridge Electric's retail customers. The significant increase in other income
 during 1998 reflects the net gain ($185.7 million) from the sale of the
 Company's Units 1 and 2 on December 30, 1998.

 Interest Charges
 ----------------

     The significant decline in total interest charges for 1999 resulted from
 the retirement of the Company's long-term debt with a portion of proceeds

                                      -9-
<PAGE>

 from the sale of Units 1 and 2, offset, in part, by interest on a higher level
 of short-term borrowings. The decrease in total interest charges during 1998
 was due primarily to a decrease in short-term interest ($698,000) reflecting a
 lower average level of short-term debt.

 Merger with BEC Energy
 ----------------------

     NSTAR, an exempt public utility holding company, was created after
 completion of a merger transaction between BEC Energy (BEC) and Commonwealth
 Energy System (COM/Energy, the former parent of the Company) on August 25,
 1999.  The utility industry has continued to change in response to legislative
 and regulatory mandates that are aimed at lowering prices for energy by
 creating a more competitive marketplace.  These pressures have resulted in an
 increasing trend in the utility industry to seek competitive advantages and
 other benefits through business combinations.  NSTAR is focusing its utility
 operations on the transmission and distribution of energy following the sale of
 BEC's fossil generating facilities to Sithe Energies in May 1998, BEC's nuclear
 generation facility to Entergy Nuclear Generating Company in July 1999 and
 substantially all of COM/Energy's generating facilities to The Southern Company
 in December 1998.

     As a result of the merger, the fourth quarter dividend amounting to
 approximately $35 million was reflected as a return of capital and, as a
 result, reduced paid-in capital. As of August 25, 1999, approximately $54
 million of retained earnings was reclassified as additional paid-in capital.

     The utility companies of NSTAR form an energy delivery company serving
 approximately 1.3 million customers located in Massachusetts, including more
 than one million electric customers in 81 communities and 240,000 gas customers
 in 51 communities.

     The merger became effective after receipt of various regulatory approvals.
 The FERC approved the merger on June 24, 1999.  The Nuclear Regulatory

                                     -10-
<PAGE>

 Commission approved the transfer of control of the Company's interest in the
 Seabrook nuclear plant from COM/Energy to NSTAR on August 11, 1999. The
 Securities and Exchange Commission issued its approval on August 24, 1999.

   Year 2000
   ---------

     NSTAR's mission critical systems and other important business systems were
 considered ready for the year 2000 prior to December 31, 1999.  The North
 American Electric Reliability Council defined mission critical systems as those
 whose mis-operation could result in loss of electric generation, transmission
 or load interruption.  To date, NSTAR has not experienced any significant year
 2000 problems.  NSTAR will continue to monitor systems in order to address any
 potential continuing risk of non-compliant internal business software, internal
 non-business software and embedded chip technology and external noncompliance
 of third parties.

     Under its year 2000 program NSTAR inventoried mission critical systems that
 were date-sensitive and that used embedded technology such as micro-controllers
 or microprocessors.  Approximately 27% and 20% of BEC's and COM/Energy's
 systems, respectively, required modification or replacement.

     NSTAR also inventoried important business systems that were date-sensitive
 and determined that approximately one-third of BEC's systems and approximately
 90% of COM/Energy's systems needed modification or replacement.  Plans were
 developed and implemented to correct and test all affected systems, with
 priorities based on the importance of the supported activity.  As systems were
 remediated, they were tested for operational and year 2000 readiness in their
 own environment.  After implementation, the systems were then tested for their
 integration and compatibility with other interactive systems.

     In addition, all non-critical internal productivity systems were
 inventoried and assessed as part of the year 2000 program. Approximately one-
 third of BEC's systems and approximately 90% of COM/Energy's systems required
 modification or replacement. All of these systems were declared ready by
 September 30, 1999.

     Costs incurred to upgrade or remediate systems have been expensed as
 incurred.  In addition, a decision was made to replace some of the less
 efficient centralized business systems.  Systems replacement costs are being
 capitalized and amortized over future periods. NSTAR has expended a total of
 approximately $39 million on this project through December 31, 1999. Future
 costs are anticipated to be immaterial.

     In addition to its internal efforts, BEC and COM/Energy initiated formal
 communications with their significant suppliers, service providers and other
 vendors to determine the extent to which they may be vulnerable to these
 parties' failure to correct their own year 2000 issues.  To date, NSTAR has

                                     -11-
<PAGE>

 not experienced any significant year 2000 problems associated with its reliance
 on third parties.

     NSTAR's year 2000 program included contingency plans.  If required, these
 plans were intended to address both internal risks as well as potential
 external risks related to vendors, customers and energy suppliers.  Plans were
 developed in conjunction with available national and regional guidance and were
 based on system emergency plans that were developed and successfully tested
 over the past several years.  Included within its contingency plans were
 procedures for the procurement of short-term power supplies and emergency
 distribution system restoration procedures.  In the event that a problem is to
 arise in 2000 (or beyond), these contingency plans would become effective in
 order to remediate the problem.

 Environmental Matters
 ---------------------

     The Company is subject to laws and regulations administered by federal,
 state and local authorities relating to the quality of the environment.  These
 laws and regulations affect, among other things, the siting and operation of
 electric generating and transmission facilities and can require the
 installation of expensive air and water pollution control equipment.  These
 regulations have had an impact on the Company's operations in the past; however
 their impact on future operations, capital costs and construction schedules is
 not expected to be significant since all of the Company's non-nuclear
 generating assets were sold in 1998.

 Safe harbor cautionary statement
 --------------------------------

 Management occasionally makes forward-looking statements such as forecasts and
 projections of expected future performance or statements of its plans and
 objectives. These forward-looking statements may be contained in filings with
 the Securities and Exchange Commission (SEC), press releases and oral
 statements. Actual results could potentially differ materially from these
 statements. Therefore, no assurances can be given that the outcomes stated in
 such forward-looking statements and estimates will be achieved. The preceding
 sections include certain forward-looking statements about operating results,
 year 2000 and environmental and legal issues.

 The impacts of continued cost control procedures on operating results could
 differ from current expectations. The effects of changes in economic
 conditions, tax rates, interest rates, technology and the prices and
 availability of operating supplies could materially affect the projected
 operating results.

 The timing and total costs related to the year 2000 plan could differ from
 current expectations. Factors that may cause such differences include the
 ability to locate and correct all relevant computer codes and the availability
 of personnel trained in this area. In addition, management cannot predict the
 nature or impact on operations of third party noncompliance.

 The impacts of various environmental and legal issues could differ from current
 expectations. New regulations or changes to existing regulations could impose
 additional operating requirements or liabilities other than expected. The
 effects of changes in specific hazardous waste site conditions and cleanup
 technology could affect the estimated cleanup liabilities. The impacts of
 changes in available information and circumstances regarding legal issues could
 affect estimated litigation costs.

 Item 8.  Financial Statements and Supplementary Data
 -------  -------------------------------------------

     The Company's financial statements required by this item are filed herewith
 on pages 13 through 34 of this report.

 Item 9.  Changes in and Disagreements with Accountants on Accounting
 -------  -----------------------------------------------------------
          and Financial Disclosure
          ------------------------

     None

                                     -12-
<PAGE>

Item 8.     Financial Statements and Supplementary Data
-------     -------------------------------------------

                       REPORT OF INDEPENDENT ACCOUNTANTS
                       ---------------------------------

To the Board of Directors of Canal Electric Company:

In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) on page 41 present fairly, in all material respects, the financial
position of Canal Electric Company at December 31, 1999, and the results of its
operations and its cash flows for the period from January 1, 1999 through August
24, 1999 and for the period from August 25, 1999 through December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Boston, Massachusetts
January 26, 2000


                              ARTHUR ANDERSEN LLP
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Board of Directors of Canal Electric Company:

We have audited the accompanying balance sheets of CANAL ELECTRIC COMPANY (a
Massachusetts corporation and wholly-owned subsidiary of Commonwealth Energy
System) as of December 31, 1998, and the related statements of income, retained
earnings and cash flows for each of the two years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Canal Electric Company as of
December 31, 1998, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.


Arthur Andersen LLP
Boston, Massachusetts
February 18, 1999


                                     -13-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------
                  INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
                  -------------------------------------------



                                   PART II.
                                   --------


FINANCIAL STATEMENTS

  Balance Sheets at December 31, 1999 and 1998

  Statements of Income for the 1999 Periods August 25 to December 31 and January
  1 to August 24 and the Years Ended December 31, 1998 and 1997

  Statements of Retained Earnings for the Years Ended December 31, 1999, 1998
  and 1997

  Statements of Cash Flows for the 1999 Periods August 25 to December 31 and
  January 1 to August 24 and the Years Ended December 31, 1998 and 1997

  Notes to Financial Statements


                                   PART IV.
                                   --------


SCHEDULES OMITTED

  Schedules are not submitted because they are not applicable or required or
  because the required information is included in the financial statements or
  notes thereto.

                                     -14-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------
                                BALANCE SHEETS
                                --------------
                          DECEMBER 31, 1999 AND 1998
                          --------------------------

                                    ASSETS
                                    ------

<TABLE>
<CAPTION>
                                                      1999        1998
                                                      ----        ----
                                                   (Dollars in thousands)
<S>                                                  <C>         <C>
PROPERTY, PLANT AND EQUIPMENT, at original cost      $265,067    $265,612
  Less - Accumulated depreciation
    and amortization                                   79,639      77,081
                                                     --------    --------
                                                      185,428     188,531
  Add - Construction work in progress                   2,551       1,852
      Nuclear fuel in process                           1,875       1,568
                                                     --------    --------
                                                      189,854     191,951
                                                     --------    --------
INVESTMENTS
  Equity in corporate joint venture                     2,833       2,800
                                                     --------    --------

CURRENT ASSETS
  Cash and cash equivalents                                52     301,179
  Accounts receivable -
    Affiliated companies                                8,960      13,642
    Other                                                  95       9,736
  Unbilled revenues                                         -         659
  Inventories, at average cost                          1,311       1,268
  Prepaid income taxes                                      -       7,575
  Other                                                   954         884
                                                     --------    --------
                                                       11,372     334,943
                                                     --------    --------
DEFERRED CHARGES
  Regulatory assets                                    18,973      18,745
  Other                                                 5,419       5,840
                                                     --------    --------
                                                       24,392      24,585
                                                     --------    --------
                                                     $228,451    $554,279
                                                     ========    ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                     -15-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------
                                BALANCE SHEETS
                                --------------
                          DECEMBER 31, 1999 AND 1998
                          --------------------------
                        CAPITALIZATION AND LIABILITIES
                        ------------------------------

<TABLE>
<CAPTION>
                                                                    1999      1998
                                                                    ----      ----
                                                                 (Dollars in thousands)
<S>                                                                <C>       <C>
CAPITALIZATION
 Common Equity -
  Common stock, $25 par value -
   Authorized - 2,328,200 shares
   Outstanding - 1,523,200 shares, wholly-owned
   by Commonwealth Energy System                                   $ 38,080  $ 38,080
  Amounts paid in excess of par value                                27,088     8,321
  Retained earnings                                                   5,390   241,965
                                                                   --------  --------
                                                                     70,558   288,366
                                                                   --------  --------

CAPITAL LEASE OBLIGATIONS                                             9,988    10,551
                                                                   --------  --------
CURRENT LIABILITIES
 Interim Financing -
  Notes payable to banks                                             48,575         -
  Advances from affiliates                                            6,240         -
                                                                   --------  --------
                                                                     54,815         -
                                                                   --------  --------
 Other Current Liabilities -
  Accounts payable -
   Affiliated companies                                                 455   137,965
   Other                                                              2,183    31,327
  Accrued income taxes                                               12,855         -
  Capital lease obligations                                             564       568
  Accrued interest and other                                          3,679     3,339
                                                                   --------  --------
                                                                     19,736   173,199
                                                                   --------  --------
                                                                     74,551   173,199
                                                                   --------  --------
</TABLE>

                                     -16-
<PAGE>

<TABLE>
<S>                                                                <C>       <C>
DEFERRED CREDITS
 Accumulated deferred income taxes                                   56,258    64,383
 Unamortized investment tax credits                                   8,126     8,427
 Other                                                                8,970     9,353
                                                                   --------  --------
                                                                     73,354    82,163
                                                                   --------  --------

COMMITMENTS AND CONTINGENCIES

                                                                   $228,451  $554,279
                                                                   ========  ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                     -17-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------
                             STATEMENTS OF INCOME
                             --------------------

<TABLE>
<CAPTION>
                                                         For the 1999 Periods
                                                        ---------------------
                                                     August 25        January 1              Years Ended
                                                         to              to                  December 31,
                                                     December 31      August 24          1998             1997
                                                     -----------      ---------       -----------       ---------
                                                     (Successor)      (Predecessor)
                                                                              (Dollars in thousands)
<S>                                                  <C>              <C>               <C>                <C>
ELECTRIC OPERATING REVENUES
    Sales to affiliated companies                     $  16,502          $  29,437        $ 113,024         $124,903
    Sales to non-affiliated companies                         -              1,349           68,809           89,220
                                                      ---------          ---------        ---------         --------
                                                         16,502             30,786          181,833          214,123
                                                      ---------          ---------        ---------         --------
OPERATING EXPENSES
    Fuel used in production                                 600                944           89,569          115,313
    Electricity purchased for resale                        169                353              551            5,601
    Other operation                                       2,331              5,027           24,134           24,765
    Maintenance                                             220              1,755           12,468           10,209
    Depreciation and amortization                         3,249              6,190           22,839           22,156
    Taxes -
      Income                                              3,863              9,785            8,168            9,178
      Local property                                        215                720            2,510            2,770
      Payroll and other                                      48                274              732              768
                                                      ---------          ---------        ---------         --------
                                                         10,695             25,048          160,971          190,760
                                                      ---------          ---------        ---------         --------

OPERATING INCOME                                          5,807              5,738           20,862           23,363
                                                      ---------          ---------        ---------         --------
OTHER INCOME
    Gain from sale of assets                                  -                  -          329,603                -
    Taxes and transaction costs
     related to sale                                          -                  -         (143,856)               -
    Other                                                 2,978              9,830              776              468
                                                      ---------          ---------        ---------         --------
                                                          2,978              9,830          186,523              468
                                                      ---------          ---------        ---------         --------

INCOME BEFORE INTEREST CHARGES                            8,785             15,568          207,385           23,831
                                                      ---------          ---------        ---------         --------

INTEREST CHARGES
    Long-term debt                                        2,387                  2            7,854            7,910
    Other interest charges                                1,054                626              533            1,231
    Allowance for borrowed funds used
      during construction                                   (46)               (74)            (119)            (138)
                                                      ---------          ---------        ---------         --------
                                                          3,395                554            8,268            9,003
                                                      ---------          ---------        ---------         --------
NET INCOME                                            $   5,390          $  15,014        $ 199,117         $ 14,828
                                                      =========          =========        =========         ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                     -18-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------
                        STATEMENTS OF RETAINED EARNINGS
                        -------------------------------
             FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
             ----------------------------------------------------

<TABLE>
<CAPTION>
                                                  (Dollars in thousands)
                                               1999       1998       1997
                                               ----       ----       ----
<S>                                         <C>        <C>        <C>
Balance at beginning of year                $ 241,965  $  53,130  $  52,620

Add (Deduct)
   Net income -                                    --    199,117     14,828
      January 1, 1999 to August 24, 1999       15,014         --         --
   Dividends on common stock -                     --    (10,282)   (14,318)
      January 1, 1999 to August 24, 1999     (203,180)        --         --
                                            ---------  ---------  ---------
                                               53,799    241,965     53,130

Reclassification to additional
   paid-in capital at August 24, 1999         (53,799)        --         --

Add
   Net Income -
      August 25, 1999 to December 31, 1999      5,390         --         --
                                            =========  =========  =========

Balance at end of year                      $   5,390  $ 241,965  $  53,130
                                            =========  =========  =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                     -19-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------
                           STATEMENTS OF CASH FLOWS
                           ------------------------

<TABLE>
<CAPTION>
                                                                   For the 1999 Periods
                                                               ----------------------------
                                                               August 25         January 1              Years Ended
                                                                   to                to                 December 31
                                                               December 31       August 24       1998               1997
                                                               -----------     ------------   ------------        --------
                                                               (Successor)     (Predecessor)
                                                                                   (Dollars in thousands)
<S>                                                            <C>             <C>            <C>                 <C>
OPERATING ACTIVITIES
  Net income                                                    $   5,390        $   15,014       $ 199,117       $ 14,828
  Gain from sale of assets                                              -                 -        (329,603)             -
  Effects of noncash items -
    Depreciation and amortization                                   3,248             6,190          22,839         22,156
    Deferred income taxes                                          (7,188)              630          (7,673)          (973)
    Investment tax credits                                           (101)             (200)         (2,539)          (526)
    Earnings from corporate joint venture                            (334)             (293)           (454)          (233)
  Dividends from corporate joint venture                              324               270             729            479
  Change in working capital, exclusive
    of cash and interim financing -
      Accounts receivable                                          (3,808)          (18,131)          4,178         (4,872)
      Unbilled revenues                                                 -              (659)           (573)           589
      Income taxes                                                 23,896            (1,325)        119,658          2,118
      Local property and other taxes                                 (269)              239              26              4
      Accounts payable and other                                   (2,410)         (163,991)         15,266          5,473
  All other operating items, net                                   (5,990)           (4,781)         (6,908)        (3,890)
                                                                ---------        ----------       ---------       --------

Net cash provided by (used for) operating activities               12,758          (129,457)         14,063         35,153
                                                                ---------        ----------       ---------       --------

INVESTING ACTIVITIES
  Proceeds from sale of generating assets                               -                 -         408,017              -
  Additions to property, plant and
    equipment (exclusive of AFUDC)                                   (283)             (626)         (5,368)        (7,391)
  Allowance for borrowed funds used
    during construction                                               (46)              (74)           (119)          (138)
                                                                ---------        ----------       ---------       --------

Net cash from (used for)investing activities                         (329)             (700)        402,530         (7,529)
                                                                ---------        ----------       ---------       --------

FINANCING ACTIVITIES
  Proceeds from (payment of)
    short-term borrowings                                          26,250            22,325         (20,850)        (5,700)
  Proceeds from (payment of)
    affiliate borrowings                                           (3,780)           10,020               -         (7,250)
  Payment of dividends                                                  -          (203,180)        (10,282)       (14,318)
  Return of capital                                               (35,034)                -               -              -

</TABLE>

                                     -20-
<PAGE>

<TABLE>
<S>                                                         <C>          <C>        <C>         <C>
  Long-term debt issues refunded                                    -            -     (83,950)         -
  Retirement of long-term debt through
   sinking funds                                                    -            -        (350)      (350)
                                                            ---------    ---------   ---------   --------

Net cash used for financing activities                        (12,564)    (170,835)   (115,432)   (27,618)
                                                            ---------    ---------   ---------   --------

Net (Decrease) increase in cash and cash equivalents             (135)    (300,992)    301,161          6
Cash and cash equivalents, beginning of period                    187      301,179          18         12
                                                            ---------    ---------   ---------   --------
Cash and cash equivalents, end of period                    $      52    $     187   $ 301,179   $     18
                                                            =========    =========   =========   ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid (net of capitalized
   amounts)                                                 $     954    $     542   $   9,028   $  8,700
  Income taxes paid                                         $  10,345    $   5,908   $  10,796   $  8,996
                                                            =========    =========   =========   ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                     -21-
<PAGE>

                         NOTES TO FINANCIAL STATEMENTS
                         -----------------------------

(1) General Information
    -------------------

    Canal Electric Company (the Company) is a wholly-owned subsidiary of
Commonwealth Energy System that is a wholly-owned indirect subsidiary of NSTAR.
NSTAR is the new holding company that was formed, effective August 25, 1999 upon
completion of a merger transaction between Commonwealth Energy System
(COM/Energy, formerly the parent of the Company) and BEC Energy (formerly the
parent company of Boston Edison Company). The merger creates an energy delivery
company that includes the Company, serving approximately 1.3 million customers
located in Massachusetts including more than one million electric customers in
81 communities and 240,000 gas customers in 51 communities. NSTAR is an exempt
public utility holding company under the provisions of the Public Utility
Holding Company Act of 1935 and, in addition to its investment in the Company,
has interests in various other utility and nonregulated companies.

    The Company is a wholesale electric generating company organized in 1902
under the laws of the Commonwealth of Massachusetts.  On December 30, 1998, in
response to the significant changes that have taken place in the utility
industry, COM/Energy sold substantially all of its non-nuclear generating
assets, including the Company's generating station, to affiliates of The
Southern Company of Atlanta, Georgia.  The Company's generating stations,
located in Sandwich, Massachusetts consisted of two units jointly-owned by the
Company and Montaup Electric Company (Montaup) (an unaffiliated company).  The
Company continues to have a 3.52% interest in the Seabrook 1 nuclear power plant
to provide a portion of the capacity and energy needs of affiliates Cambridge
Electric Light Company (Cambridge Electric) and Commonwealth Electric Company
(Commonwealth Electric).

    The Company had 109 employees prior to the sale of Canal Units 1 and 2 on
December 30, 1998; however, following the sale, the Company no longer has any
employees.

(2) Significant Accounting Policies
    -------------------------------

    (a) Accounting Principles
        ---------------------

    The preparation of financial statements in conformity with generally
 accepted accounting principles requires management to make estimates and
 assumptions that affect the reported amounts of assets and liabilities and

                                     -22-
<PAGE>

 disclosure of contingent assets and liabilities at the date of the financial
 statements and the reported amounts of revenues and expenses during the
 reporting period.  Actual results could differ from those estimates.

    Certain prior year amounts are reclassified from time to time to conform
 with the presentation used in the current year's financial statements.

     (b) Merger and Financial Statement Presentation
         -------------------------------------------
 On August 25, 1999 BEC Energy (BEC) and Commonwealth Energy System (Com/Energy)
 merged to form NSTAR as an exempt public utility holding company. NSTAR's
 utility subsidiaries include Canal Electric Company (Canal Electric). The
 merger was accounted for by NSTAR as an acquisition by BEC of Com/Energy and
 all of its subsidiaries including Canal Electric Company under the purchase
 method of accounting.

 In the accompanying statements, Canal Electric Company prior to the merger is
 labeled as the "Predecessor" and after the merger as the "Successor."

 As a result of this merger, the fourth quarter dividend amounting to
 approximately $35 million was reflected as a return of capital and, as a
 result, reduced paid-in capital. As of August 25, 1999, approximately $54
 million of retained earnings was reclassified as additional paid-in capital.

     (c) Regulatory Assets
         -----------------

    The Company is regulated as to rates, accounting and other matters by
 various authorities, including the Federal Energy Regulatory Commission (FERC)
 and the Massachusetts Department of Telecommunications and Energy (MDTE).

    Based on the current regulatory framework, the Company accounts for the
 economic effects of regulation in accordance with the provisions of Statement
 of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
 Certain Types of Regulation."  The Company has established various regulatory
 assets in cases where the FERC has permitted or is expected to permit recovery
 of specific costs over time.  In the event the criteria for applying SFAS No.
 71 are no longer met, the accounting impact would be an extraordinary, non-cash
 charge to operations of an amount that could be material.  Criteria that give
 rise to the discontinuance of SFAS No. 71 include: 1) increasing competition
 restricting the Company's ability to establish prices to recover specific
 costs, and 2) a significant change in the current manner in which rates are set
 by regulators from cost based regulation to another form of regulation.  These
 criteria are reviewed on a regular basis to ensure the continuing application
 of SFAS No. 71 is appropriate.  Based on the current evaluation of the various
 factors and conditions that are expected to impact future cost recovery, the
 Company believes that its regulatory assets are probable of future recovery.

    The principal regulatory assets included in deferred charges at December 31,
 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                         1999        1998
                                         ----        ----
                                      (Dollars in thousands)
         <S>                             <C>         <C>
         Seabrook related costs          $ 1,572     $ 3,008
         Deferred income taxes            17,401      15,737
                                         -------     -------
           Total regulatory assets       $18,973     $18,745
                                         =======     =======
</TABLE>

    As of December 31, 1999, all of the Company's regulatory assets are

                                     -23-
<PAGE>

 reflected in rates charged to customers over a weighted average period of
 approximately 11 years beginning in 1998. Seabrook related costs as outlined
 above include approximately $20,000 in merger-related costs.

    In November 1997, the Commonwealth of Massachusetts enacted the
 Massachusetts Electric Restructuring Act.  On November 19, 1997, the Company,
 along with Cambridge Electric and Commonwealth Electric filed a restructuring
 plan with the MDTE that was approved by the MDTE on February 27, 1998.
 Commonwealth Electric and Cambridge Electric currently provide their standard
 offer customers service at inflation adjusted rates that are 15% lower than
 rates in effect prior to March 1, 1998, the retail access date. As part of the
 plan, the MDTE authorized the recovery of certain strandable costs and provides
 that certain future costs may be deferred to achieve or maintain the rate
 reductions that the restructuring bill mandates. The legislation gives the MDTE
 the authority to determine the amount of strandable costs that will be eligible
 for recovery. Costs that will qualify as strandable costs and be eligible for
 recovery include, but are not limited to, certain above market costs associated
 with generating facilities, costs associated with long-term commitments to
 purchase power at above market prices from independent power producers and
 regulatory assets and associated liabilities related to the generation portion
 of the electric business.

    (c) Divestiture of Generation Assets
        --------------------------------

    The cost of transitioning to competition have been mitigated, in part, by
 the sale of COM/Energy's non-nuclear generating assets.  On May 27, 1998,
 COM/Energy agreed to sell substantially all of its non-nuclear generating
 assets (984 MW) to affiliates of The Southern Company of Atlanta, Georgia.  The
 sale was conducted through an auction process that was outlined in a
 restructuring plan filed with the MDTE in November 1997 in conjunction with the
 state's industry restructuring legislation enacted in 1997.  The sale was
 approved by the MDTE on October 30, 1998 and by the FERC on November 12, 1998.
 Proceeds from the sale of the Company's non-nuclear generating assets amounted
 to approximately $395 million or 6 times their book value of approximately
 $65.4 million.  The proceeds from the sale, net of book value, transaction
 costs and certain other adjustments amounted to approximately $298 million and
 are being used to reduce transition costs of Cambridge Electric and
 Commonwealth Electric related to electric industry restructuring that otherwise
 would have been collected through a non-bypassable transition charge.  An
 adjustment of $5.1 million was recorded in the first quarter of 1999 that
 reduced the book value to $60.3 million.  The Company has determined that this
 transaction was not a taxable event because it provided no economic

                                     -24-
<PAGE>

benefit to the Company.

     COM/Energy established Energy Investment Services, Inc. as the vehicle to
invest the net proceeds from the sale of the Company's generation assets. These
proceeds are invested in a portfolio of securities that is designed to maintain
principal and earn a reasonable return. Both the principal amount and income
earned are being used to reduce the transition costs that would otherwise be
billed to customers of Cambridge Electric and Commonwealth Electric.

     (d)  Transactions with Affiliates
          ----------------------------

     Transactions between the Company and other NSTAR companies include
purchases and sales of electricity, including the Company's acquisition and
resale of capacity entitlements and related energy generated by certain units of
other New England utilities. The Company has functioned as the principal
supplier of electric generation capacity for and on behalf of affiliates
Cambridge Electric and Commonwealth Electric, including nonconstruction costs
related to the Seabrook generating unit. In addition, payments for management,
accounting, data processing and other services are made to affiliated companies.
Transactions with other COM/Energy companies are subject to review by the FERC
and the MDTE.

     The Company's operating revenues included the following intercompany
amounts for the periods indicated:

<TABLE>
<CAPTION>
                               Electricity Sales                                 Seabrook Units
          Period                 (Canal Units)           Purchased Power            and Other
-----------------------------  -----------------         ---------------         --------------
                                                      (Dollars in thousands)
<S>                            <C>                       <C>                     <C>
 January,- August 24, 1999         $    987                  $3,473                 $29,146
August 25,- December 31, 1999             -                       -                  13,055
          1998                       70,283                   3,667                  39,074
          1997                       76,859                   8,885                  39,159
</TABLE>

     (e)  Other Major Customers
          ---------------------

     Prior to the sale of Canal Units 1 and 2 on December 30, 1998, the Company
was a wholesale electric generating company selling power under life-of-the-unit
contracts that were approved by FERC to Boston Edison Company (an affiliate
since the merger with BEC Energy), Montaup Electric Company and New England
Power Company. Each utility was obligated to purchase one-quarter of the
capacity and energy of Canal Unit 1.

                                     -25-
<PAGE>

    (f) Equity Method of Accounting
        ---------------------------

    The Company uses the equity method of accounting for its 3.8% investment in
 the New England/Hydro-Quebec Phase II transmission facilities due in part to
 its ability to exercise significant influence over operating and financial
 policies of the entity.  Under this method, it records as income the
 proportionate share of the net earnings of this project with a corresponding
 increase in the carrying value of the investment.  The investment amount is
 reduced as cash dividends are received.

    (g) Depreciation and Nuclear Fuel Amortization
        ------------------------------------------

    Depreciation is provided using the straight-line method at rates intended to
 amortize the original cost and the estimated cost of removal less salvage of
 properties over their estimated economic lives.  The Company's composite
 depreciation rate, based on average depreciable property in service, was 3.01%
 in 1999, 4.71% in 1998 and 4.45% in 1997.

    The cost of nuclear fuel is amortized to fuel expense based on the quantity
 of energy produced.  Nuclear fuel expense also includes a provision for the
 costs associated with the ultimate disposal of the spent nuclear fuel.

    (h) Maintenance
        -----------

    Expenditures for repairs of property and replacement and renewal of items
 determined to be less than units of property were charged to maintenance
 expense.  Additions, replacements and renewals of property considered to be
 units of property, were charged to the appropriate plant accounts.  Upon
 retirement, accumulated depreciation was charged with the original cost of
 property units and the cost of removal net of salvage.

    (i) Allowance for Funds Used During Construction
        --------------------------------------------

    Under applicable rate-making practices, the Company is permitted to include
 an allowance for funds used during construction (AFUDC) as an element of its
 depreciable property costs.  This allowance is based on the amount of
 construction work in progress that is not included in the rate base on which
 the Company earns a return.  An amount equal to the AFUDC capitalized in the
 current period is reflected in the accompanying Statements of Income.

                                     -26-
<PAGE>

    While AFUDC does not provide funds currently, these amounts are recoverable
 in revenues over the service life of the constructed property.  The Company
 develops rates based upon its current cost of capital and used a compound rate
 of 5.75% in 1999, 5.75% in 1998 and 6% in 1997.

(3) Income Taxes
    ------------

    For financial reporting purposes, the Company provides federal and state
 income taxes on a separate return basis. However, for federal income tax
 purposes, the Company's taxable income and deductions are included in the
 consolidated income tax return of NSTAR (COM/Energy prior to the merger) the
 Parent and it makes tax payments or receives refunds on the basis of its tax
 attributes in the tax return in accordance with applicable regulations.

    Income taxes are accounted for in accordance with Statement of Financial
 Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS
 109 requires the recognition of deferred tax assets and liabilities for the
 future tax effects of temporary differences between the carrying amounts and
 the tax basis of assets and liabilities

    Accumulated deferred income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                1999        1998
                                                ----        ----
                                             (Dollars in thousands)
     <S>                                        <C>         <C>
     Deferred tax liabilities
          Property-related                      $65,815     $74,585
          Seabrook nonconstruction                  707         707
          All other                                 611       1,832
                                                -------     -------
                                                 67,133      77,124
                                                -------     -------
     Deferred tax assets
          Investment tax credits                  7,456       7,844
          Regulatory liability                    2,102       2,102
          All other                               3,458       2,244
                                                -------     -------
                                                 13,016      12,190
                                                -------     -------

    Net accumulated deferred income taxes       $54,117     $64,934
                                                =======     =======
</TABLE>

    Previously deferred investment tax credits are amortized over the estimated
 remaining lives of the property giving rise to the credits. The net year-end
 deferred income tax liability above includes a current deferred tax liability
 of $2,141,000 and $551,000 in 1999 and 1998, respectively, which is

                                     -27-
<PAGE>

 included in accrued income taxes in the accompanying Balance Sheets.

    Components of income tax expense were as follows:

<TABLE>
<CAPTION>
                                             For the 1999 Periods
                                          --------------------------
                                          August 25        January 1
                                             to                to
                                         December 31       August 24       1998         1997
                                         -----------     -------------     ----         ----
                                         (Successor)     (Predecessor)
                                                         (Dollars in thousands)
 <S>                                      <C>            <C>              <C>          <C>
 Federal:
    Current income tax expenses           $10,129        $7,806           $109,267      $9,128
    Deferred income tax expense            (6,834)          514             (6,775)       (764)
    Investment tax credit amortization       (101)         (201)            (2,539)       (526)
                                          -------        ------           --------      ------
                                            3,194         8,119             99,953       7,838
                                          -------        ------           --------      ------
 State:
    Current income tax expense              1,023         1,550             21,413       1,558
    Deferred income tax expense              (354)          116               (776)       (133)
                                          -------        ------           --------      ------
                                              669         1,666             20,637       1,425
                                          -------        ------           --------      ------
                                                                           120,590       9,263
 Amortization of regulatory liability
 relating to deferred income taxes             --            --               (122)        (76)
                                          -------        ------           --------      ------

 Total                                    $ 3,863        $9,785           $120,468      $9,187
                                          =======        ======           ========      ======

 Federal and state income taxes
    charged to:
     Operating expense                    $ 3,863        $9,785           $  8,168      $9,178
     Other income                              --            --            112,300           9
                                          -------        ------           --------      ------
                                          $ 3,863        $9,785           $120,468      $9,187
                                          =======        ======           ========      ======
</TABLE>

    The provision for income taxes in 1998 reflects the current tax related to
 the sale of the generating assets.

    The effective income tax rates reflected in the accompanying financial
statements and the reasons for their differences from the statutory federal
income tax rate were as follows:

<TABLE>
<CAPTION>
                                                          For the 1999 Periods
                                                       --------------------------
                                                       August 25         January 1
                                                          to                 to
                                                      December 31        August 24     1998       1997
                                                      -----------      -------------   ----       ----
                                                      (Successor)      (Predecessor)
<S>                                                   <C>              <C>         <C>          <C>
Federal statutory tax rate                                35%                35%         35%         35%
                                                          ==                 ==          ==          ==
  Federal income tax expense at statutory levels      $3,238             $8,680    $111,854      $8,405
  Increase (Decrease) from statutory rate:
    Tax versus book depreciation                         459                730       1,207       1,515
</TABLE>

                                     -28-
<PAGE>

<TABLE>
    <S>                                           <C>         <C>       <C>        <C>
    State tax, net of federal tax benefit            435        1,083     13,414      927
    Sale of generation assets                          -            -     (2,596)       -
    Amortization of investment tax credits          (100)        (201)    (2,539)    (526)
    Excess deferred reserves                           -            -       (122)     (76)
    Reversals of capitalized expenses               (200)        (446)      (561)    (560)
    Other                                             31          (61)      (189)    (498)
                                                  ------      -------   --------   ------
                                                  $3,863      $ 9,785   $120,468   $9,187
                                                  ======      =======   ========   ======

  Effective federal tax rate                          42%          39%        38%      38%
                                                      ==           ==         ==       ==
</TABLE>

(4) Long-Term Debt and Interim Financing
    ------------------------------------

    (a) Long-Term Debt
        --------------

      On December 30, 1998, upon the sale of the Company's Units 1 and 2, a
 portion of the proceeds from the sale was used to retire all of the Company's
 long-term debt.

    (b) Notes Payable to Banks
        ----------------------

    The Company and other NSTAR companies maintain both committed and
 uncommitted lines of credit for the short-term financing of their construction
 programs and other corporate purposes.  As of December 31, 1999, COM/Energy
 companies had $115 million of committed lines of credit that will expire at
 varying intervals in 2000.  These lines are normally renewed upon expiration
 and require annual fees of approximately .1875% of the outstanding balance. At
 December 31, 1998, COM/Energy's uncommitted lines of credit totaled $10
 million. Interest rates on the Company's outstanding borrowings generally are
 money market rates and averaged 5.8% in both 1999 and 1998. The Company had
 notes payable to banks of $48,575,000 at December 31, 1999 and no notes
 outstanding at December 31, 1998.

    (c) Advances from Affiliates
        ------------------------

    The Company had no short-term notes payable to COM/Energy at December 31,
 1999 and 1998. These notes are written for a term of up to 11 months and 29
 days. Interest is at the prime rate and is adjusted for changes in that rate
 during the terms of the notes. This rate averaged 8% in 1999 and 8.3% in 1998.

    The Company is a member of the COM/Energy Money Pool (the Pool), an

                                     -29-
<PAGE>

 arrangement among the subsidiaries of COM/Energy, whereby short-term cash
 surpluses are used to help meet the short-term borrowing needs of the utility
 subsidiaries. In general, lenders to the Pool receive a higher rate of return
 than they otherwise would on such investments, while borrowers pay a lower
 interest rate than that available from banks. Interest rates on the outstanding
 borrowings are based on the monthly average rate the Company would otherwise
 have to pay banks, less one-half the difference between that rate and the
 monthly average U.S. Treasury Bill weekly auction rate. The borrowings are for
 a period of less than one year and are payable upon demand. The Company had
 $6,240,000 in borrowings from the Pool at December 31, 1999 and had no
 outstanding borrowings at December 31, 1998. Rates on these borrowings averaged
 5.1% in 1999 and 5.3% in 1998.

    (d) Disclosures About Fair Value of Financial Instruments
        -----------------------------------------------------

   The carrying amount of cash, notes payable to banks and advances from
 affiliates approximates the fair value due to the short maturity of these
 financial instruments.

(5)  Commitments and Contingencies
     -----------------------------

     (a)  Seabrook Nuclear Power Station
          ------------------------------

     The Company's 3.52% interest in the Seabrook nuclear power station is to
 provide for a portion of the capacity and energy needs of Cambridge Electric
 and Commonwealth Electric. The Company is recovering 100% of its Seabrook 1
 investment through power contracts pursuant to FERC and MDTE approval.

     The Company and the other joint-owners have established a decommissioning

                                     -30-
<PAGE>

 fund to cover decommissioning costs. The estimated cost to decommission the
 plant is $509.8 million in current dollars. The Company's share of this
 liability (approximately $18 million), less its share of the market value of
 the assets held in a decommissioning trust (approximately $4 million), is
 approximately $14 million at December 31, 1999.

    (b) Environmental Matters
        ---------------------

    The Company is subject to laws and regulations administered by federal,
 state and local authorities relating to the quality of the environment. These
 laws and regulations affect, among other things, the siting and operation of
 electric generating and transmission facilities and can require the
 installation of expensive air and water pollution control equipment. These
 regulations have had an impact on the Company's operations in the past; however
 their impact on future operations, capital costs and construction schedules is
 not expected to be significant since all of the Company's non-nuclear
 generating assets were sold in 1998.

    Pursuant to the terms of the Canal Units 1 and 2 Asset Sale Agreement with
 Southern Energy dated May 15, 1998, the Company agreed to fund assessment work
 up to a $500,000 cap to address a condition of metals contamination found on
 the station site. Management is unable at this time to predict when closure on
 this issue will be determined.

(6) Employee Benefit Plans
    ----------------------

    Effective December 31, 1999, the pension and other postretirment benefit
 plans of BEC and COM/Energy were combined under NSTAR.

    (a) Pension
        -------

    The Company participates with other subsidiaries of NSTAR in a
 noncontributory pension plan with certain contributory features covering
 substantially all employees of NSTAR. Effective January 1, 2000, the defined
 benefit plan was amended to provide management employees lump sum benefits
 under a final average pay pension equity formula. Prior to January 1, 2000
 these pension benefits were provide under a traditional final average pay
 formula. This amendment is reflected in the December 31, 1999 benefit
 obligation. It is the Company's policy to fund the Plan in amounts determined
 to meet the funding standards established by the Employee Retirement Income
 Security Act of 1974.

    The funded status of the Plan cannot be presented separately for the
 Company since the Company participates in the Plan trust with other
 subsidiaries of NSTAR. Plan assets are available to provide benefits for all
 Plan participants. And are commingled.

                                     -31-
<PAGE>


     The periodic costs (income) allocated to the company was $(20,000),
$554,000 and $537,000 in 1999, 1998 and 1997, respectively. The accrued pension
cost in the Company's statement of financial position was $1,911,000 and
$465,000 in 1999 and 1998, respectively.

     (b) Other Postretirement Benefits
         -----------------------------

     Certain employees are eligible for postretirement benefits if they meet
specific requirements.  These benefits could include health and life insurance
coverage and reimbursement of Medicare Part B premiums.  Under certain
circumstances, eligible employees are required to make contributions for
postretirement benefits.

     To fund postretirement benefits, the Company makes contributions to
various voluntary employees' beneficiary association (VEBA) trusts that were
established pursuant to section 501(c)(9) of the Internal Revenue Code (the
Code). The Company also makes contributions to a subaccount of the COM/Energy
pension plan and its successor pursuant to section 401(h) of the Code to fund a
portion of its postretirement benefit obligation.

     The funded status of the Plan cannot be presented separately for the
Company since the Company participates in the Plan trusts and subaccount
with other subsidiaries of NSTAR. Plan assets are available to provide benefits
for all Plan participants who are former employees of the Company and of other
subsidiaries of NSTAR.

                                     -32-
<PAGE>

     The net periodic postretirement benefit cost allocated to the Company was
$311,000, $610,000 and $655,000 in 1999, 1998 and 1997, respectively. The
accrued benefit cost in the Company's statement of financial position was
$2,863,000 and $0 at December 31, 1999 and 1998, respectively.

       (c) Savings Plan
           ------------

     Prior to the sale of Units 1 and 2, the Company had an Employees Savings
Plan that provided for Company contributions equal to contributions by eligible
employees up to four percent

                                     -33-
<PAGE>

of each employee's compensation rate and up to five percent for those employees
no longer eligible for postretirement health benefits. The Company's
contribution was $244,000 in 1998 and $256,000 in 1997.

(7)  Lease Obligations
     -----------------

     Prior to 1999 the Company leased equipment and office space under
arrangements that are classified as operating leases. These lease agreements are
for terms of one year or longer. These leases contained no provisions that
prohibit the Company from entering into future lease agreements or obligations.

     The Company has entered into support agreements with other participating
New England utilities for 3.8% of the Hydro-Quebec Phase II transmission
facilities and makes monthly support payments to cover depreciation and interest
costs.

     Future minimum lease payments, by period and in the aggregate, of capital
leases consisted of the following at December 31, 1999:

<TABLE>
<CAPTION>
                                            Capital Leases
                                            --------------
                                        (Dollars in thousands)
 <S>                                    <C>
 2000                                           $ 1,699
 2001                                             1,633
 2002                                             1,572
 2003                                             1,511
 2004                                             1,450
 Beyond 2004                                     13,850
                                                -------
 Total future minimum lease payments             21,715
 Less:Estimated interest element
  included therein                               11,521
                                                -------
 Estimated present value of future
  minimum lease payments                        $10,464
                                                =======
</TABLE>

      Total rent expense for all operating leases, except those with terms of a
month or less, amounted to $0 in 1999, $356,000 in 1998 and $575,000 in 1997.
There were no contingent rentals and no sublease rentals for the years 1999,
1998 and 1997.

                                     -34-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------

                                   PART IV.
                                   --------

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------- ---------------------------------------------------------------

(a) 1.   Index to Financial Statements
         -----------------------------

    Financial statements and notes thereto of the Company together with the
    Report of Independent Public Accountants, are filed under Item 8 of this
    report and listed on the Index to Financial Statements and Schedule (page
    14).

    2.   Index to Financial Statement Schedules
         --------------------------------------

    None

    3.   Exhibits:
         ---------

            Notes to Exhibits -
            -----------------

    a. Unless otherwise designated, the exhibits listed below are incorporated
       by reference to the appropriate exhibit numbers and the Securities and
       Exchange Commission file numbers indicated in parentheses.

    b. The following is a glossary of COM/Energy acronyms that are used
       throughout the following Exhibit Index:

       CES....................  Commonwealth Energy System
       CE.....................  Commonwealth Electric Company
       CEL....................  Cambridge Electric Light Company
       CEC....................  Canal Electric Company

(b) Reports on Form 8-K
    -------------------

          No reports on Form 8-K were filed during the three months ended
          December 31, 1999.

                                Exhibit Index

Exhibit 3.  Articles of incorporation and by-laws.
----------  --------------------------------------

3.1.      Articles of incorporation of CEC (Exhibit 1 to CEC's 1990 Form
          10-K, File No. 2-30057).

                                     -35-
<PAGE>

3.2.      By-laws of CEC, as amended (Exhibit 2 to the CEC 1990 Form 10-K, File
          No. 2-30057).

Exhibit 10. Material Contracts
------------------------------

10.1      Power contracts.

10.1.1    Power contracts between CEC and NBGEL and CEL dated December 1, 1965
          (Exhibit 13(a)(1-4) to the CEC Form S-1, File No. 2-30057).

10.1.2    Power contract, as amended to February 28, 1990, superseding the Power
          Contract dated September 1, 1986 and amendment dated June 1, 1988,
          between CEC (seller) and CE and CEL (purchasers) for seller's entire
          share of the Net Unit Capability of Seabrook 1 and related energy
          (Exhibit 1 to the CEC Form 10-Q (March 1990), File No. 2-30057).

10.1.3    Purchase and Sale Agreement together with an implementing Addendum
          dated December 31, 1981 between CEC and CE for the purchase and sale
          of the CE 3.52% joint-ownership interest in the Seabrook units, dated
          January 2, 1981 (Exhibit 1 to the Company's Form 8-K (January 13,
          1982), File No. 2-30057).

10.1.4    Agreement for Joint-Ownership, Construction and Operation of the New
          Hampshire Nuclear Units (Seabrook) dated May 1, 1973 and filed by
          NBGEL as Exhibit 13(N) on Form S-1 dated October 1973, File No. 2-
          49013, and as amended below:

10.1.4.1  First through Fifth Amendments to 10.1.4 dated May 24, 1974, June 21,
          1974, September 25, 1974, October 25, 1974, and January 31, 1975,
          respectively (Exhibit 13(m) to the NBGEL Form S-1 (November 7, 1975),
          File No. 2-54995).

10.1.4.2  Sixth through Eleventh Amendments to 10.1.4 dated April 18, 1979,
          April 18, 1979, April 25, 1979, June 8, 1979, October 11, 1979 and
          December 15, 1979, respectively (Exhibit 1 to the CEC 1989 Form 10-K,
          File No. 2-30057).

10.1.4.3  Twelfth and Thirteenth Amendments to 10.1.4 dated May 16, 1980 and
          December 31, 1980, respectively ((Exhibit 1 and 2 to the CE Form 10-Q
          (June 1982), File No. 2-7749).

                                     -36-
<PAGE>

10.1.4.4  Fourteenth Amendment to 10.1.4 dated June 1, 1982 (Exhibit 3 to the CE
          Form 10-Q (June 1982), File No. 2-7749).

10.1.4.5  Fifteenth and Sixteenth Amendments to 10.1.4 dated April 27, 1984 and
          June 15, 1984, respectively (Exhibit 1 to the CEC Form 10-Q (June
          1984), File No. 2-30057).

10.1.4.6  Seventeenth Amendment to 10.1.4 dated March 8, 1985 (Exhibit 1 to the
          CEC Form 10-Q (March 1985), File No. 2-30057).

10.1.4.7  Eighteenth Amendment to 10.1.4 dated March 14, 1986 (Exhibit 1 to the
          CEC Form 10-Q (March 1986), File No. 2-30057).

10.1.4.8  Nineteenth Amendment to 10.1.4 dated May 1, 1986 (Exhibit 1 to the CEC
          Form 10-Q (June 1986), File No. 2-30057).

10.1.4.9  Twentieth Amendment to 10.1.4 dated September 19, 1986 (Exhibit 1 to
          the CEC Form 10-K for 1986, File No. 2-30057).

10.1.4.10 Twenty-First Amendment to 10.1.4 dated November 12, 1987 (Exhibit 1
          to the CEC Form 10-K for 1987, File No. 2-30057).

10.1.4.11 Twenty-Second Amendment and Settlement Agreement to 10.1.4 dated
          January 13, 1989 (Exhibit 4 to the CEC 1988 Form 10-K, File No. 2-
          30057).

10.1.5    Capacity Acquisition Agreement between CEC, CEL and CE dated September
          25, 1980 (Exhibit 1 to the CEC 1991 Form 10-K, File No. 2-30057).

10.1.5.1  Supplement to 10.1.5 consisting of three Capacity Acquisition
          Commitments each dated May 7, 1987, concerning Phases I and II of the
          Hydro-Quebec Project and electricity acquired from Connecticut Light
          and Power Company (CL&P) (Exhibit 1 to the CEC Form 10-Q (September
          1987), File No. 2-30057).

10.1.5.2  Amendment to 10.1.5 as amended, and restated, June 1, 1993, henceforth
          referred to as the Capacity Acquisition and Disposition Agreement,
          whereby CEC, as agent, in addition to acquiring power may also sell
          bulk electric power which CEL and/or CE owns or

                                     -37-
<PAGE>

          otherwise has the right to sell (Exhibit 1 to the CEC Form 10-Q
          (September 1993), File No. 2-30057).

10.1.6    Agreement, dated September 1, 1985, With Respect To Amendment of
          Agreement With Respect To Use Of Quebec Interconnection, dated
          December 1, 1981, among certain NEPOOL utilities to include Phase II
          facilities in the definition of "Project" (Exhibit 1 to the CEC Form
          10-Q (September 1985), File No. 2-30057).

10.1.6.1  Amendatory Agreement No.3 with Respect to Use of Quebec
          Interconnection dated December 1, 1981, as amended to June 1, 1990,
          among certain NEPOOL utilities (Exhibit 1 to the CEC Form 10-Q
          (September 1990), File No. 2-30057).

10.1.7    Preliminary Quebec Interconnection Support Agreement - Phase II among
          certain New England electric utilities dated June 1, 1984 (Exhibit 6
          to the CE Form 10-Q (June 1984), File No. 2-7749).

10.1.7.1  First through Third Amendments to 10.1.7 as amended March 1, 1985,
          January 1, 1986 and March 1, 1987, respectively (Exhibit 1 to the CEC
          Form 10-Q (March 1987), File No. 2-30057).

10.1.7.2  Fifth through Seventh Amendments to 10.1.7 as amended October 15,
          1987, December 15, 1987 and March 1, 1988, respectively (Exhibit 1 to
          the CEC Form 10-Q (June 1988), File No. 2-30057).

10.1.7.3  Fourth and Eighth Amendments to 10.1.7 as amended July 1, 1987 and
          August 1, 1988, respectively (Exhibit 3 to the CEC Form 10-Q
          (September 1988), File No. 2-30057).

10.1.7.4  Ninth and Tenth Amendments to 10.1.7 as amended November 1, 1988 and
          January 15, 1989, respectively (Exhibit 2 to the CEC 1988 Form 10-K,
          File No. 2-30057).

10.1.7.5  Eleventh Amendment to 10.1.7 as amended November 1, 1989 (Exhibit 4 to
          the CEC 1989 Form 10-K, File No. 2-30057).

10.1.7.6  Twelfth Amendment to 10.1.7 as amended April 1, 1990 (Exhibit 1 to the
          CEC Form 10-Q (June 1990) File No. 2-30057).

                                     -38-
<PAGE>

10.1.8    Agreement to Preliminary Quebec Interconnection Support Agreement -
          Phase II among Public Service Company of New Hampshire (PSNH), New
          England Power Co. (NEP), Boston Edison Co. (BECO), and CEC whereby
          PSNH assigns a portion of its interests under the original Agreement
          to the other three parties, dated October 1, 1987 (Exhibit 2 to the
          CEC 1987 Form 10-K, File No. 2-30057).

10.1.9    Phase II Equity Funding Agreement for New England Hydro Transmission
          Electric Company, Inc. (New England Hydro) (Massachusetts), dated June
          1, 1985, between New England Hydro and certain NEPOOL utilities
          (Exhibit 2 to the CEC Form 10-Q (September 1985), File No. 2-30057).

10.1.10   Phase II Equity Funding Agreement for New England Hydro Transmission
          Corporation (New Hampshire Hydro), dated June 1, 1985, between New
          Hampshire Hydro and certain NEPOOL utilities (Exhibit 3 to the CEC
          Form 10-Q (September 1985), File No. 2-30057).

10.1.10.1 Amendment No. 1 to 10.1.10 as amended May 1, 1986 (Exhibit 6 to the
          CEC Form 10-Q (March 1987), File No. 2-30057).

10.1.10.2 Amendment No. 2 to 10.1.10 as amended September 1, 1987 (Exhibit 3 to
          the CEC Form 10-Q (September 1987), File No. 2-30057).

10.1.11   Phase II Massachusetts Transmission Facilities Support Agreement,
          dated June 1, 1985, refiled as a single agreement incorporating
          Amendments 1 through 7 dated May 1, 1986 through January 1, 1989,
          respectively, between New England Hydro and certain NEPOOL utilities
          (Exhibit 2 to the CEC Form 10-Q (September 1990), File No. 2-30057).

10.1.12   Phase II New Hampshire Transmission Facilities Support Agreement,
          dated June 1, 1985, refiled as a single agreement incorporating
          Amendments 1 through 8 dated May 1, 1986 through January 1, 1989,
          respectively, between New Hampshire Hydro and certain NEPOOL utilities
          (Exhibit 3 to the CEC Form 10-Q (September 1990), File No. 2-30057).

10.1.13   Phase II New England Power AC Facilities Support Agreement dated June
          1, 1985, between New England Power and certain NEPOOL utilities
          (Exhibit 6 to the CEC Form 10-Q (September 1985), File

                                     -39-
<PAGE>

          No. 2-30057).

10.1.13.1 Amendments Nos. 1 and 2 to 10.1.13 as amended May 1, 1986 and February
          1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (March 1987),
          File No. 2-30057).

10.1.13.2 Amendments Nos. 3 and 4 to 10.1.13 as amended June 1, 1987 and
          September 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q
          (September 1987), File No. 2-30057).

10.1.14   Agreement Authorizing Execution of Phase II Firm Energy Contract,
          dated September 1, 1985, among certain NEPOOL utilities in regard to
          the purchase of power from Hydro Quebec (Exhibit 8 to the CEC Form 10-
          Q (September 1985), File No. 2-30057).

10.2      Other agreements.

                                     -40-
<PAGE>

10.2.1    New England Power Pool Agreement (NEPOOL) dated September 1, 1971 as
          amended through August 1, 1977, between NEGEA Service Corp. as agent
          for CEL, CEC, NBGEL, and various other electric utilities operating in
          New England, together with amendments dated August 15, 1978 and
          January 31, 1979 and February 1, 1980 (Exhibit 5(c)(13) to the CES
          Form S-16 (April 1980), File No. 2-64731).

10.2.1.1  Thirteenth Amendment to 10.2.1 as amended September 1, 1981 (Exhibit 5
          to the CES Form 10-K for 1981, File No. 1-7316).

10.2.1.2  Fourteenth through Twentieth Amendments to 10.2.1 as amended December
          1, 1981, June 1, 1982, June 15, 1983, October 1, 1983, August 1, 1985,
          August 15, 1985 and September 1, 1985, respectively (Exhibit 4 to the
          CES Form 10-Q (September 1985), File No. 1-7316).

10.2.1.3  Twenty-first Amendment to the New England Power Pool Agreement dated
          September 1, 1971, as amended January 1, 1986 (Exhibit 1 to the CES
          Form 10-Q (March 1986), File No. 1-7316).

10.2.1.4  Twenty-second Amendment to 10.2.1 as amended to September 1, 1986
          (Exhibit 1 to the CES Form 10-Q (September 1986), File No. 1-7316).

10.2.1.5  Twenty-third Amendment to 10.2.1 as amended to April 30, 1987 (Exhibit
          1 to the CES Form 10-Q (June 1987), File No. 1-7316).

10.2.1.6  Twenty-fourth Amendment to 10.2.1 as amended to March 1, 1988 (Exhibit
          1 to the CES Form 10-K for 1987, File No. 1-7316).

10.2.1.7  Twenty-fifth Amendment to 10.2.1 as amended to May 1, 1988 (Exhibit 1
          to the CES Form 10-Q (March 1988), File No. 1-7316).

10.2.1.8  Twenty-sixth Amendment to 10.2.1 as amended to March 15, 1989 (Exhibit
          1 to the CES Form 10-Q (March 1989), File No. 1-7316).

10.2.1.9  Twenty-seventh Amendment to 10.2.1 as amended to October 1, 1990
          (Exhibit 3 to the CES 1990 Form 10-K, File No. 1-7316).

                                     -41-
<PAGE>

10.2.1.10 Twenty-eighth Amendment to 10.2.1 as amended September 15, 1992
          (Exhibit 1 to the CES Form 10-Q (September 1994), File No. 1-7316).


10.2.1.11 Twenty-ninth Amendment to 10.2.1 as amended May 1, 1993 (Exhibit 2 to
          the CES Form 10-Q (September 1994), File No. 1-7316).

Filed herewith:

Exhibit 27.
-----------
          Filed herewith as Exhibit 1 is the Financial Data Schedule for the
          year ended December 31, 1999.

                                     -42-
<PAGE>

                            CANAL ELECTRIC COMPANY
                            ----------------------

                   FORM 10-K             DECEMBER 31, 1999
                   ---------             -----------------

                                  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.

                                         CANAL ELECTRIC COMPANY
                                         -------------------------
                                              (Registrant)

                                    By: /s/ THOMAS J. MAY
                                        -----------------
                                        Thomas J. May,
                                        Chairman of the Board

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Principal Executive Officers:


/s/ THOMAS J. MAY                                      March 30, 2000
-------------------------------------
Thomas J. May,
Chairman of the Board and
Chief Executive Officer

/s/ R.D. WRIGHT                                        March 30, 2000
-------------------------------------
R. D. Wright
President and Chief Operating Officer

Principal Financial Officer:

/s/ ROBERT J. WEAFER, JR                               March 30, 2000
-------------------------------------
Robert J. Weafer, Jr.
Vice President, Controller and Chief
Accounting Officer

A majority of the Board of Directors:

/s/ THOMAS J. MAY                                      March 30, 2000
-------------------------------------
Thomas J. May, Director

/s/ R. D. WRIGHT                                       March 30, 2000
-------------------------------------
Russell D. Wright, Director

/s/ JAMES J. JUDGE                                     March 30, 2000
-------------------------------------
James J. Judge, Director

                                     -43-