Eversource 2005 Annual Report Download - page 33

31
(Millions of Dollars)
Current retail derivative assets $35.3
Long-term retail derivative assets —
Current retail derivative liabilities (18.3)
Long-term retail derivative liabilities —
Portfolio position $17.0
The methods used to determine the fair value of retail energy sourcing
contracts are identified and segregated in the table of fair value of
contracts at December 31, 2005. A description of each method is as
follows: 1) prices actively quoted primarily represent exchange traded
futures and swaps that are marked to closing exchange prices; and 2)
prices provided by external sources primarily include over-the-counter
forwards, including bilateral contracts for the purchase or sale of
electricity or natural gas, and are marked to the mid-point of bid and
ask market prices.
As of and for the year ended December 31, 2005, the sources of the
fair value of retail energy sourcing contracts and the changes in fair
value of these contracts are included in the following tables:
(Millions of Dollars) Fair Value of Retail Sourcing Contracts at December 31, 2005
Maturity Maturity Maturity in
Less than of One to Excess of Total
Sources of Fair Value One Year Four Years Four Years Fair Value
Prices actively quoted $(8.8) $— $— $ (8.8)
Prices provided by
external sources 25.8 — — 25.8
Totals $17.0 $— $— $17.0
Year Ended December 31, 2005
(Millions of Dollars) Total Portfolio Fair Value
Fair value of retail sourcing contracts
outstanding at the beginning of the year $—
Contracts realized or otherwise settled during the year (25.7)
Changes in fair value recorded:
Wholesale contract market changes, net 30.0
Fuel, purchased power and net interchange power 12.7
Fair value of retail sourcing contracts outstanding
at the end of the year $17.0
Upon the decision to exit the wholesale marketing business in March
of 2005, Select Energy identified $30 million of previously designated
wholesale contracts and redesignated them to help support its retail
marketing business. Subsequent changes in fair value are now recorded
in fuel, purchased and net interchange power. Fuel, purchased and net
interchange power increased $12.7 million primarily due to power
price increases in the PJM power pool in the second half of 2005.
Competitive Generation Activities: The competitive generation assets,
owned by NU Enterprises are subject to certain operational risks,
including but not limited to the length of scheduled and non-scheduled
outages, bidding and scheduling with various ISOs, environmental
issues and fuel costs. Competitive generation activities are also subject
to various federal, state and local regulations. These risks may result in
changes in the anticipated gross margins which the merchant energy
business realizes from its competitive generation portfolio/activities.
For the year ended December 31, 2005, NU Enterprises’ competitive
generation assets continued to run well while energy prices increased
and reserve margins started to tighten. NU Enterprises believes that
generating unit availability will become increasingly important as the
capacity market tightens in New England due to load growth and the
absence of new plant construction. For the year ended December 31,
2005, the 146 MW Mt. Tom plant at HWP had a capacity factor of just
over 80 percent while the 1,080 MW Northfield Mountain facility had
an availability factor of nearly 95 percent. The approximately 200 MW
of other hydroelectric units had an aggregate availability factor of
85 percent.
Total competitive generation was 2.6 million MWhs through
December 31, 2005. HWP’s Mt. Tom station, a coal-fired unit located
in Holyoke, Massachusetts, generated more than one million MWhs
in 2005, while NGC’s Northfield Mountain facility and other hydroelectric
units generated approximately 0.9 million MWhs and approximately
0.7 million MWhs, respectively, in 2005.
For the Northfield Mountain facility, the ratio of on-peak to off-peak
spreads averaged 1.5 for 2005. As a result, NU Enterprises realized
$17.5 million of energy-related gross margin in 2005.
The value of NGC’s generating assets could be affected by the adoption
of FCM in place of the prior LICAP proposal. For further information,
see “Utility Group Regulatory Issues and Rate Matters - LICAP,”
included in this management’s discussion and analysis.
At December 31, 2005, Select Energy had generation derivative assets
and liabilities as follows:
(Millions of Dollars)
Current generation derivative assets $9.2
Long-termgeneration derivative assets —
Current generation derivative liabilities (5.1)
Long-term generation derivative liabilities (15.5)
Portfolio position $(11.4)
The methods used to determine the fair value of generation contracts
are identified and segregated in the table of fair value of contracts at
December 31, 2005. A description of each method is as follows: 1)
prices actively quoted primarily represent exchange traded futures
and swaps that are marked to closing exchange prices; and 2) prices
provided by external sources primarily include over-the-counter forwards,
including bilateral contracts for the purchase or sale of electricity and
aremarked to the mid-point of bid and ask market prices.
As of and for the year ended December 31, 2005, the sources of the
fair value of generation contracts and the changes in fair value of these
contracts are included in the following tables:
(Millions of Dollars) Fair Value of Generation Contracts at December 31, 2005
Maturity Maturity Maturity in
Less than of One to Excess of Total
Sources of Fair Value One Year Four Years Four Years Fair Value
Prices actively quoted $(1.8) $ — $— $ (1.8)
Prices provided by
external sources 5.9 (15.5) — (9.6)
Totals $4.1 $(15.5) $— $(11.4)
Year Ended December 31, 2005
(Millions of Dollars) Total Portfolio Fair Value
Fair value of competitive generation contracts
outstanding at the beginning of the year $ —
Contracts realized or otherwise settled during the year (0.1)
Changes in fair value recorded:
Wholesale contract market changes, net (15.5)
Operating revenues 4.2
Fair value of competitive generation contracts outstanding
at the end of the year $(11.4)