Fitch Ratings Assigns 'AA-' To Boston Edison $500MM Debentures.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 11, 2002

Fitch Ratings has assigned an 'AA-' rating to Boston Edison Company's (Boston Edison) issuance of $100 million floating-rate debentures due 2005 and $400 million 4.875% debentures due 2012. The Rating Outlook is Stable. Proceeds from the issuance will be used to reduce commercial paper outstanding at Boston Edison and its parent, Nstar Corp. (Nstar).

Boston Edison's ratings reflect the distribution utility's strong credit protection measures, favorable regulatory environment that allows mechanisms to recover power supply costs, and a service territory that benefits from a diverse economy. The ratings also take into account operating synergies with affiliated utility subsidiaries that continue to provide operating, maintenance and labor cost savings and efficiencies, although Boston Edison maintains a clear financial separation from the other subsidiaries. While Boston Edison retains provider of last resort (POLR) responsibility, the power procurement auction process and cost recovery mechanisms approved by the Massachusetts Department of Telecommunications and Energy (MDTE) significantly mitigates risks associated with power supply volatility.

Boston Edison conducts an auction periodically (every 6 months) soliciting default service power contracts. The power costs are then approved by the MDTE through an accelerated review process and recovered from customers on a fully reconciling basis. Fitch believes that this process substantially removes the supply, volume, and price risk associated with energy delivery away from Boston Edison, allowing it to operate solely as an energy delivery business. In addition, the MDTE has demonstrated both the willingness and ability to raise standard offer service rates to address power market price spikes and rising fuel costs, in effect minimizing the potential for large deferrals during the transition period which extends to Dec. 31, 2004. Furthermore, the region's large reserve margin of over 30% in 2002 helps to limit the probability of severe price spikes in the New England power market. Other credit factors include an acceleration of capital improvements brought on by network outages during the summer of 2001. System improvement costs are estimated at $65 million for 2002 and will be internally funded.

Nstar is an exempt public utility holding company created through the merger of BEC Energy (BEC) and Commonwealth Energy System on Aug. 25, 1999. Nstar's retail utility subsidiaries are Boston Edison, Commonwealth Electric Company, Cambridge Electric Light Company and NSTAR Gas Company and its wholesale electric subsidiary is Canal Electric Company. While Nstar's three retail electric companies operate under the brand name 'NSTAR Electric', they remain legally and financially separate subsidiaries with different rate agreements.