Eversource 2004 Annual Report Download - page 64

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$29.3 million, respectively. These reserve amounts are deducted from
the amount of receivables eligible for sale at the time. Concentrations of
credit risk to the purchaser under this agreement with respect to the
receivables are limited due to CL&P’s diverse customer base within its
service territory.
At December 31, 2004 and 2003, amounts sold to CRC by CL&P but not
sold to the financial institution totaling $139.4 million and $166.5 million,
respectively, are included in investments in securitizable assets on the
accompanying consolidated balance sheets. These amounts would be
excluded from CL&P’s assets in the event of CL&P’s bankruptcy. On
July 7, 2004, CRC renewed its Receivables Purchase and Sale Agreement
with CL&P and the financial institution through July 6, 2005, and the
termination date of the facility was extended to July 3, 2007. CL&P’s
continuing involvement with the receivables that are sold to CRC and the
financial institution is limited to the servicing of those receivables.
The transfer of receivables to the financial institution under this
arrangement qualifies for sale treatment under SFAS No. 140,
“Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities — A Replacement of SFAS No. 125.”
NU Enterprises: SESI has a master purchase agreement with an unaffiliated
third party under which SESI may sell certain monies due or to become
due under delivery orders issued pursuant to federal government energy
savings performance contracts. The sale of a portion of the future cash
flow from the energy savings performance contract is used to reimburse
the costs to construct the energy savings projects. SESI continues to
provide performance period services under the contract with the
government for the remaining term. The portion of future government
payments for performance period services is not sold to the fund or
recorded as a receivable until such services are rendered.
At December 31, 2004, SESI had sold $30 million of accounts receivable
related to the installation of the energy efficiency projects, with limited
recourse, under this master purchase agreement. Under the delivery
order with the government, SESI is responsible for on-going maintenance
and other services related to the energy efficiency project installation.
SESI receives payment for those services in addition to the amounts sold
under the master purchase agreement. NU has provided a guarantee
that SESI will perform its obligations under the master purchase agree-
ment and subsequent individual assignment agreements. The sale of the
receivables to the unaffiliated third party qualifies for sales treatment
under SFAS No. 140, and therefore these receivables are not included in
the consolidated financial statements.
In 2004, SESI entered into assignment agreements to sell an additional
$26.5 million of receivables upon completion of the installation of the
energy savings projects in 2005. Until the construction is completed, the
receivables are recorded under the percentage of completion method
and included in the consolidated financial statements and the advances
under the purchase agreement are recorded as debt.
P. Asset Retirement Obligations
In June 2001, the FASB issued SFAS No. 143. This statement requires
that legal obligations associated with the retirement of property, plant
and equipment be recognized as a liability at fair value when incurred
and when a reasonable estimate of the fair value of the liability can be
made. SFAS No. 143 was effective on January 1, 2003 for NU. Management
has completed its review process for potential asset retirement obligations
(ARO) and has not identified any material AROs that have been incurred.
However, management has identified certain removal obligations that
arise in the ordinary course of business or have a low probability of
occurring. These types of obligations primarily relate to transmission
and distribution lines and poles, telecommunication towers, transmission
cables, and certain FERC or state regulatory agency re-licensing issues.
These obligations are AROs that have not been incurred or are not
material in nature.
On June 17, 2004, the FASB issued the proposed interpretation, “Accounting
for Conditional Asset Retirement Obligations.” The proposed interpretation
requires an entity to recognize a liability for the fair value of an ARO that
is conditional on a future event if the liability’s fair value can be reasonably
estimated and clarifies that there are no circumstances in which a law or
regulation obligates an entity to perform retirement activities but then
allows the entity to permanently avoid settling the obligation.
If adopted in its current form, there may be an impact to NU for
AROs that NU currently concludes have not been incurred (conditional
obligations). These conditional obligations may include utility poles and
asbestos that, if removed or disturbed by construction or demolition,
creates a disposal obligation. Management is in the process of evaluating
the impact of the interpretation on NU. The interpretation is scheduled
to be issued in the first quarter of 2005 and would be effective for NU no
later than December 31, 2005.
A portion of NU’s regulated utilities’ rates is intended to recover the
cost of removal of certain utility assets. The amounts recovered do
not represent AROs and are recorded as regulatory liabilities. At
December 31, 2004 and 2003, cost of removal was approximately
$328.8 million and $334 million, respectively.
Q. Materials and Supplies
Materials and supplies include materials purchased primarily for
construction, operation and maintenance (O&M) purposes. Materials
and supplies are valued at the lower of average cost or market.
R. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and short-term cash
investments that are highly liquid in nature and have original maturities
of three months or less. At the end of each reporting period, overdraft
amounts are reclassified from cash and cash equivalents to accounts
payable.
S. Special Deposits
Special deposits represent amounts Select Energy has on deposit with
unaffiliated counterparties and brokerage firms in the amount of
$46.3 million and amounts included in escrow for SESI that have not
been spent on construction projects of $20 million at December 31, 2004.
Similar amounts totaled $17 million and $32 million, respectively, at
December 31, 2003. Special deposits at December 31, 2004 also included
$16.3 million in escrow for Yankee Gas. The $16.3 million represents
Yankee Gas’ June 1, 2005 first mortgage bond payment. Special deposits
at December 31, 2003 also included $30.1 million in escrow that PSNH
funded to acquire CVEC on January 1, 2004.