Eversource 2002 Annual Report Download - page 33

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due to the sale of the Millstone units ($16 million), the property tax
settlement with the City of Meriden for CL&P and Yankee in 2001
($15 million), and lower New Hampshire franchise tax ($5 million),
partially offset by higher Connecticut gross earnings taxes ($14 million)
on higher CL&P revenues.
Gain on Sale of Utility Plant
Gain on the sale of utility plant decreased $455 million in 2002 primarily
due to the gain recognized in the 2001 sale of CL&P’s and WMECO’s
ownership interests in the Millstone units ($642 million), partially offset
by CL&P’s and NAEC’s 2002 sale of Seabrook ($187 million).
Interest Expense, Net
Interest expense, net decreased $9 million in 2002, primarily due to
NAEC’s reduction of debt.
Interest charges, net decreased in 2001, primarily due to reacquisitions
and retirements of long-term debt ($54 million) and higher short-term
borrowings in 2000 associated with asset transfers and the Yankee
merger ($54 million), partially offset by the interest expense associated
with the issuance of rate reduction bonds in 2001 ($88 million).
Other Income/(Loss), Net
Other income/(loss), net decreased $144 million in 2002 primarily due
to the 2001 gain related to the Millstone sale ($202 million) and the
2002 investment write-downs ($18 million), partially offset by the
2002 Seabrook related gains ($39 million) and the 2001 loss on share
repurchase contracts ($35 million).
Other income/(loss), net increased primarily due to NU’s recognition
in 2001 of a gain in connection with the sale of the Millstone nuclear
units to a subsidiary of Dominion Resources, Inc. (the pre-tax amount of
$189 million is included in other income with an offsetting income tax
expense impact of $73 million), higher interest and dividend income
($20 million), lower nuclear related costs in 2001 ($18 million), and
lower environmental reserve expense in 2001 ($10 million), partially
offset by the charge related to the forward purchase of 10.1 million NU
common shares ($35 million).
Income Taxes
The consolidated statement of income taxes provides a reconciliation of
actual and expected tax expense. The tax effect of temporary differences
is accounted for in accordance with the rate-making treatment of the
applicable regulatory commissions. In past years, this rate-making
treatment has required the company to provide the customers with a
portion of the tax benefits associated with accelerated tax depreciation
in the year it is generated (flow-through depreciation). As these flow-
through differences turn around, higher tax expense is recorded.
Income tax expense decreased by $92 million in 2002, primarily due to
the recognition of WMECO investment tax credits in the second quarter
of 2002 and the tax impacts of the Millstone sale in 2001, partially
offset by tax impacts of the sale of Seabrook in 2002.
Federal and state income taxes combined increased in 2001, primarily
due to higher taxable income. The increase in income taxes as a result
of higher taxable income was partially offset by a reduction in income
taxes as a result of the favorable resolution of open tax years. For
further information regarding income taxes, see the Consolidated
Statements of Income Taxes.
Preferred Dividends of Subsidiaries
Preferred dividends decreased in 2001 and 2002 primarily due to lower
preferred stock outstanding.
Extraordinary Loss, Net of Tax Benefit
The extraordinary loss in 2000 is primarily due to an after-tax write-off
by PSNH of approximately $225 million of stranded costs under the
Restructuring Settlement with the state of New Hampshire, combined
with other positive effects on PSNH from the discontinuance of SFAS
No. 71 ($11 million) and a loss associated with the then pending
discontinuance of SFAS No. 71 at HWP and the sale of its assets
($20 million).
Cumulative Effect of Accounting Change, Net of Tax Benefit
The cumulative effect of accounting change, net of tax benefit, recorded
in 2001, represents the effect of the adoption of SFAS No. 133, as
amended ($22 million).