Eversource 2005 Annual Report Download - page 19

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For the Years Ended December 31,
(Millions of Dollars) 2005 2004 2003
CL&P Distribution $ 58.6 $ 62.7 $ 46.3
CL&P Transmission 30.7 19.8 17.1
Total CL&P* 89.3 82.5 63.4
PSNH Distribution and Generation 33.9 39.9 38.3
PSNH Transmission 7.8 6.7 7.3
Total PSNH 41.7 46.6 45.6
WMECO Distribution 11.1 9.4 12.4
WMECO Transmission 4.0 3.0 3.8
Total WMECO 15.1 12.4 16.2
Yankee Gas 17.3 14.1 7.3
Total Utility Group Net Income $163.4 $155.6 $132.5
*After preferred dividends of $5.6 million in all years.
CL&P earned $89.3 million in 2005, compared with $82.5 million in
2004 and $63.4 million in 2003. CL&P’s transmission results benefited
from higher revenues due to earning on a higher level of investment.
The 2005 decline in CL&P’s distribution earnings to $58.6 million in 2005
from $62.7 million in 2004 resulted from after-tax employee termination
and benefit plan curtailment charges totaling $8.5 million, the positive
$6.9 million after-tax impact of a regulatory decision in 2004 concerning
a2003 rate case, a negative $2.5 million after-tax impact of a regulatory
decision in 2005 concerning streetlighting refunds, and higher operation,
interest and depreciation expenses, partially offset by a $25 million
distribution rate increase that took effect January 1, 2005 and a 3 percent
increase in retail electric sales. The increase in CL&P’s transmission
earnings resulted primarily from increased investment in its
transmission system.
PSNH earned $41.7 million in 2005, compared with $46.6 million in
2004 and $45.6 million in 2003. PSNH’s distribution and generation
earnings in 2005 were lower primarily due to a lower ROE on the
generation facilities in 2005 and higher interest and operating expenses,
partially offset by delivery rate increases of $3.5 million in October of
2004 and $10 million in June of 2005.
WMECO earned $15.1 million in 2005, compared with $12.4 million
in 2004 and $16.2 million in 2003. Improved 2005 distribution results
were due to a $6 million distribution rate increase that took effect on
January 1, 2005, a 1.4 percent increase in retail electric sales and higher
rate base earnings as a result of WMECO refinancing its prior spent
nuclear fuel obligation, partially offset by higher operating and
interest costs.
Yankee Gas earned $17.3 million in 2005, compared with $14.1 million
in 2004 and $7.3 million in 2003. Yankee Gas results benefited from a
$14 million base rate increase and a reduction in depreciation expense,
both of which resulted from a 2004 rate settlement and were effective
January 1, 2005.
The Utility Group’s retail electric sales were positively impacted by
weather in 2005, particularly by an unseasonably hotter than average
third quarter of 2005, which increased electricity consumption. Overall,
retail kilowatt-hour electric sales increased 2.6 percent in 2005, but
decreased by 0.1 percent on a weather adjusted basis. Residential
sales increased 4.4 percent, or 0.7 percent on a weather adjusted
basis while commercial sales increased 3.6 percent, or 1.4 percent
on a weather adjusted basis, and industrial sales decreased 4 percent,
or 5.5 percent on a weather adjusted basis as a result of the increase
in energy costs, business closings and the installation of
cogeneration equipment.
For the Utility Group, a summary of changes in retail electric sales for
2005 as compared to 2004 is as follows:
Weather Adjusted
Percentage Percentage
Increase/(Decrease) Increase/(Decrease)
CL&P 3.0% 0.1%
PSNH 1.9% (0.2)%
WMECO 1.4% (0.8)%
As noted above, when adjusted for the weather, retail kilowatt-hour
electric sales were virtually unchanged from 2004 to 2005. With
commodity-driven rate increases taking effect early in 2006 and the
weather being much milder to date in 2006, management is concerned
that actual sales could be lower in 2006 than in 2005. While sales
volume does not affect transmission business earnings positively or
negatively, lower electric and natural gas sales do negatively affect
distribution company earnings.
NU Enterprises: During 2005, NU Enterprises was the parent of Select
Energy,Inc. (Select Energy), Select Energy Services, Inc. (SESI) and
its subsidiaries, Northeast Generation Company (NGC), Northeast
Generation Services Company (NGS) and its subsidiaries, E.S. Boulos
Company (Boulos) and Woods Electrical Co., Inc. (Woods Electrical),
Woods Network Services, Inc. (Woods Network), and Select Energy
Contracting, Inc.(SECI), all of which are collectively referred to as
“NU Enterprises.” The generation operations of Holyoke Water Power
Company (HWP), which is a direct subsidiary of NU, are also included
in the results of NU Enterprises. The companies included in the NU
Enterprises segment aregrouped into two business segments: the
merchant energy business segment and the energy services business
segment. The merchant energy business segment is currently comprised
of Select Energy’swholesale marketing business, the competitive
generation businesses which includes 1,296 MW of pumped storage
and hydroelectric generation assets owned by NGC and 146 MW of
coal-fired generation assets owned by HWP, Select Energy’s retail
marketing business, and NGS. The energy services businesses consist
of SESI, Boulos, Woods Electrical, Woods Network, and SECI. SESI,
Select Energy Contracting – New Hampshire (SECI-NH), a division
of SECI, Woods Electrical, and Woods Network are classified as
discontinued operations.
In March of 2005, NU announced the exit from NU Enterprises’ wholesale
marketing business and the energy services businesses, and in
November of 2005, announced the exit from NU Enterprises’ retail
marketing and competitive generation businesses. In the fourth quarter
of 2005, Woods Network and SECI-NH (including Reeds Ferry Supply
Co., Inc. (Reeds Ferry)) were sold for a total of approximately $6.5 million.
In January of 2006, the Massachusetts service location of Select
Energy Contracting – Connecticut (SECI-CT), a division of SECI, was
sold for approximately $2 million.
NU Enterprises also exited all of its New England wholesale sales
obligations by either buying out those contracts or assigning its
obligations to thirdparties. Most of these contracts were with municipal
electric companies. In 2005, NU Enterprises paid approximately $186 million
to exit those obligations and agreed to pay another approximately
$56 million.