Eversource 2006 Annual Report Download - page 20

18 NU 2006 ANNUAL REPORT
The only common equity securities that are publicly traded are common
shares of NU. The EPS of any segment does not represent a direct
legal interest in the assets and liabilities allocated to any one segment
but rather represents a direct interest in NU’s assets and liabilities as a
whole. A portion of NU Enterprises results are included in discontinued
operations.
Within the Utility Group, NU segments its earnings between its electric
transmission and its electric and its gas distribution businesses,
with PSNH generation included with the distribution business. The
transmission business earned $59.8 million, or $0.39 per share, in
2006, compared with $41.1 million, or $0.31 per share, in 2005, and
$28.2 million, or $0.22 per share, in 2004. The higher level of earnings
in 2006 and 2005 was due primarily to a return on a higher level of
transmission investment at CL&P.
In 2006, the distribution and generation businessearned $197.5 million,
or $1.28 per share, compared with earnings of $122.3 million, or $0.93
per share, in 2005 and $127.4 million, or $0.99 per share, in 2004.
Distribution business results in 2006 were primarily affected by rate
increases and a reduction of $74 million, or $0.48 per share, to CL&P’s
income tax expense as a result of the PLR, partially offset by a 4 percent
reduction in total retail electric sales, an 11.2 percent reduction in firm
natural gas sales and higher operation, depreciation and interest expenses.
NU’s consolidated revenues were $6.9 billion in 2006 compared to $7.4
billion in 2005 and $6.5 billion in 2004. The decrease is a result of a
lower level of activity at NU Enterprises. Utility Group revenues totaled
$6 billion in 2006, compared with $5.5 billion in 2005 and $4.6 billion
in 2004. Higher regulated revenues are primarily caused by higher
fuel and energy costs, which are passed through to customers. NU
Enterprises revenues totaled $0.9 billion before eliminations in 2006,
compared with $2 billion in 2005 and $2.7 billion in 2004. The lower
2006 NU Enterprises revenues reflect the exit from the NU Enterprises
businesses and wholesale contracts in 2006 and 2005.
Utility Group: The Utility Group is comprised of CL&P, PSNH, WMECO,
and Yankee Gas, and is comprised of transmission, distribution and
regulated generation businesses. The Utility Group earned $257.3 million,
or $1.67 per share, in 2006, compared with $163.4 million, or $1.24
per share, in 2005, and $155.6 million, or $1.21 per share, in 2004. A
summary of Utility Group earnings by company and business segment
for 2006, 2005 and 2004 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2006 2005 2004
CL&P Distribution* $147.6 $60.0 $ 64.0
PSNH Distribution and Generation 27.0 33.9 39.9
WMECO Distribution 11.0 11.1 9.4
Yankee Gas 11.9 17.3 14.1
Total Distribution and Generation 197.5 122.3 127.4
CL&P Transmission* 46.9 29.3 18.5
PSNH Transmission 8.3 7.8 6.7
WMECO Transmission 4.6 4.0 3.0
Total Transmission 59.8 41.1 28.2
Total Utility Group Net Income $257.3 $163.4 $155.6
*After preferred dividends in all years.
The increase in 2006 CL&P distribution earnings is due primarily to a
PLR that reduced CL&P’s2006 income tax expense by $74 million.
CL&P’s2006 distribution earnings also include the recognition of an
after-tax deferred gain of $7.7 million related toan unregulated portion
of generation assets CL&P previouslysold toits affiliate, NGC. This
deferred gain was being recognized on a CL&P stand-alone basis over
the lifeof the generation assets. The remainder was recognized in
2006 as a result of the saleof the competitivegeneration business to a
thirdparty. Excluding the impact of these items, CL&P’s distribution
businessearned $65.9 million in 2006, or an increase of $5.9 million
when compared to2005. This increase was due to an $11.9 million
distribution rate increase that took effect on January 1, 2006, the
settlement of a tax appeal with the Stateof Connecticut, and the
absenceof employee termination and benefit curtailment charges
that were recorded in 2005. These factors were partially offset by a 4.9
percent decline in sales, increased storm-related expenses, and higher
interest expense. CL&P’s regulatory return on equity (Regulatory ROE)
for 2006 was approximately 7.5 percent compared to its allowed ROE of
9.85 percent. In 2007, CL&P expects its ROE to be between 6 percent
and 6.5 percent as a result of higher operating expenses being only
partially offset by a $7 million distribution rate increase that took
effect on January 1, 2007.
PSNH’s distribution and generation earnings were $6.9 million lower
in 2006, when compared to 2005, due primarily to higher unitary state
income taxes resulting from the impact of the sale of NU Enterprises’
competitive generation assets. PSNH also experienced a 1.3 percent
decline in sales and increased wholesale transmission costs in 2006,
offset by a temporary annual distribution rate increase of $24.5 million
that was effective on July 1, 2006. PSNH’s Regulatory ROE for 2006
was approximately 6.4 percent, and in 2007, PSNH expects distribution
and generation earnings to improve as a result of the ongoing
distribution rate case and a lower effective tax rate than in 2006.
Asummary of NU’s earnings/(losses) by major business line for 2006, 2005 and 2004 is as follows (millions of dollars):
For the Years Ended December 31,
Segment 2006 2005 2004
Amount Per Share Amount Per Share Amount Per Share
Utility Group $257.3 $1.67 $ 163.4 $ 1.24 $155.6 $1.21
NU Enterprises 211.3 1.37 (398.2) (3.03) (15.1) (0.12)
Parent and affiliates 2.0 0.01 (18.7) (0.14) (23.9) (0.18)
Net Income/(Loss) $470.6 $3.05 $(253.5) $(1.93) $116.6 $0.91