Eversource 2004 Annual Report Download - page 22

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The increase in 2003 revenues was due to increased revenues from
NU Enterprises totaling $0.6 billion as a result of higher wholesale and
retail sales volumes and higher prices. The remainder of the increase
in 2003 revenues was due to increases in electric sales at the Utility
Group in 2003 as compared to 2002.
Utility Group: The Utility Group is comprised of CL&P, PSNH, WMECO,
and Yankee Gas, including their transmission, distribution and generation
businesses. After the payment of preferred dividends, earnings at the
Utility Group increased by $23.1 million to $155.6 million, or $1.21 per
share, in 2004 compared with $132.5 million, or $1.04 per share, in
2003. Earnings at the Utility Group were $198.3 million in 2002. The
increase in Utility Group earnings during 2004 was primarily due to
increases in CL&P’s retail rates. CL&P’s earnings increased in 2004
compared to 2003 by approximately $12 million due to amounts
disallowed in the December 2003 rate case decision and subsequently
allowed in the reconsideration decision. Those improvements were
partially offset by lower pension income and higher interest and
depreciation expense. A summary of Utility Group earnings by company
for 2004, 2003 and 2002 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2004 2003 2002
CL&P*$ 82.5 $ 63.4 $ 80.1
PSNH 46.6 45.6 62.9
WMECO 12.4 16.2 37.7
Yankee Gas 14.1 7.3 17.6
Net Income $155.6 $132.5 $198.3
* After preferred dividends.
CL&P earned $82.5 million in 2004 after preferred dividends of $5.6 million,
compared with $63.4 million in 2003 after preferred dividends of $5.6 million.
CL&P’s improved earnings resulted primarily from a retail rate
increase that took effect January 1, 2004. These higher retail rates
were offset by higher operating expenses, lower pension income and
a higher effective tax rate. CL&P also benefited from the final decision
on the reconsideration of CL&P’s rate case, which had a positive
after-tax impact of $6.9 million in 2004. In 2003, after-tax write-offs
of approximately $5 million were recorded based on the DPUC’s
December 2003 rate case order. The higher effective tax rate was
due to higher reversal of prior flow-through depreciation and other
adjustments to tax expense totaling a negative $3.2 million recorded
in the third quarter of 2004 as opposed to a positive $5.5 million
recorded in 2003.
PSNH earned $46.6 million in 2004, compared with $45.6 million in
2003. PSNH earnings were higher primarily due to a lower effective tax
rate and an increase in retail sales of 3.1 percent. The lower effective
tax rate and increase in sales were largely offset by higher operating
expenses and higher pension expense. The lower effective tax rate was
due to other adjustments to tax expense totaling a positive $5.4 million
recorded in the third quarter of 2004.
WMECO earned $12.4 million in 2004, compared with $16.2 million in
2003. WMECO’s 2004 earnings were lower due to lower pension income
and higher interest and depreciation expense, offset by a 1.6 percent
increase in retail sales.
Yankee Gas earned $14.1 million in 2004, compared with $7.3 million
in 2003. Yankee Gas’ 2004 results benefited from the absence of a
negative $6.2 million adjustment to the estimate of unbilled revenues
in 2003 and a lower effective tax rate. The lower effective tax rate was
due to other adjustments to tax expense totaling a positive $4.3 million
recorded in the second and third quarters of 2004.
Included in Utility Group company earnings are the results of the
transmission business. Transmission business earnings were $29.5 million
in 2004 as compared to $28.2 million in 2003. Transmission business
earnings in 2004 are higher than 2003 primarily due to higher revenues
resulting from the implementation of a FERC approved formula rate
resulting in increased rates and $123 million of transmission projects
that were placed in service. This forward-looking formula rate allows
NU to place capital investments in rates immediately upon being
placed in service. The formula rate took effect on October 28, 2003.
NU Enterprises: NU Enterprises, Inc. is the parent company of Northeast
Generation Company (NGC), Northeast Generation Services Company
(NGS), Select Energy, Select Energy Services, Inc. (SESI) and their
respective subsidiaries, and Woods Network Services, Inc. (Woods
Network), all of which are collectively referred to as “NU Enterprises.”
The generation operations of Holyoke Water Power Company (HWP) are
also included in the results of NU Enterprises. The companies included
in the NU Enterprises segment are grouped into two business segments:
the merchant energy segment and the energy services business segment.
The merchant energy business segment is comprised of Select
Energy’s wholesale marketing business, Select Energy’s retail marketing
business, and approximately 1,296 megawatts (MW) of pumped storage
and hydroelectric generation assets owned by NGC and 147 MW of
coal-fired generation assets owned by HWP. The energy services business
consists of the operations of NGS, SESI and Woods Network.
On March 9, 2005, NU completed its previously announced comprehensive
review of its competitive energy businesses and decided that NU
Enterprises will exit the wholesale marketing business. NU also
concluded that NU Enterprises’ energy services businesses are not
central to NU’s long-term strategy and do not meet the company’s
expectations of profitability. As a result, the company will explore ways
to divest those businesses in a manner that maximizes their value.
NU will retain its competitive generation and retail energy marketing
businesses, because it believes that the generation assets and retail
business are competitively positioned to create significant opportunities
for those businesses over the next several years.
NU Enterprises had a loss of $15.1 million in 2004, or $0.12 per share,
compared with a loss of $3.4 million, or $0.03 per share in 2003, and a
loss of $53.2 million, or $0.41 per share, in 2002.
NU Enterprises 2004 loss includes an after-tax loss of $48.3 million,
or $0.38 per share, associated with mark-to-market accounting for
certain natural gas positions established to mitigate the risk of
electricity purchased in anticipation of winning certain levels of
wholesale electric load in New England.