Eversource 2006 Annual Report Download - page 47

NU 2006 ANNUAL REPORT 45
Rate reduction bond amounts are non-recourse to NU or its subsidiaries,
have no required payments over the next five years and are not included
in this table. The Utility Group’s standard offer service contracts and
default service contracts also are not included in this table. The estimated
payments under interest rate swap agreements are not included in this
table as the estimated payment amounts are not determinable. In
addition, there are no Pension Plan contributions expected and therefore
have been excluded from this table. For further information regarding
NU’s contractual obligations and commercial commitments, see the
consolidated statements of capitalization and Note 4, “Short-Term Debt,”
Note 6A, “Employee Benefits – Pension Benefits and Postretirement
Benefits Other Than Pensions,” Note 8D, “Commitments and
Contingencies – Long-Term Contractual Arrangements,” Note 11,
“Leases,” and Note 12, “Long-Term Debt,” to the consolidated
financial statements.
Forward Looking Statements: This discussion and analysis includes
statements concerning NU’s expectations, plans, objectives, future
financial performance and other statements that are not historical
facts. These statements are “forward looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. In
some cases the reader can identify these forward looking statements
by words such as “estimate,” “expect,” “anticipate,” “intend,” “plan,”
“believe,” “forecast,” “should,” “could,” and similar expressions.
Forward looking statements involve risks and uncertainties that may
cause actual results or outcomes to differ materially from those
included in the forward looking statements. Factors that may cause
actual results to differ materially from those included in the forward
looking statements include, but are not limited to, actions by state and
federal regulatory bodies, competition and industry restructuring,
changes in economic conditions, changes in weather patterns, changes
in laws, regulations or regulatory policy, changes in levels or timing of
capital expenditures, developments in legal or public policy doctrines,
technological developments, effectiveness of risk management policies
and procedures, changes in accounting standards and financial reporting
regulations, fluctuations in the value of remaining electricity positions,
actions of rating agencies, terrorist attacks or other intentional
disruptance on domestic energy facilities and other presently unknown
or unforeseen factors. Other risk factors are detailed from time to time
in reports to the Securities and Exchange Commission. Management
undertakes no obligation to update the information contained in any
forward looking statements to reflect developments or circumstances
occurring after the statement is made.
Web Site: Additional financial information is available through NU’s
web site at www.nu.com.
RESULTS OF OPERATIONS
The components of significant income statement variances for the past two years are provided in the table below (millions of dollars).
Income Statement Variances 2006 over/(under) 2005 2005 over/(under) 2004
Amount Percent Amount Percent
Operating Revenues $(513) (7)% $ 855 13%
Operating Expenses:
Fuel, purchased and net interchange power (898) (16) 1,127 26
Other operation 71 7120 13
Restructuring and impairment charges (34) (77) 44 100
Maintenance 16 915 9
Depreciation 16 710 5
Amortization (187) (92) 65 47
Amortization of rate reduction bonds 12 711 7
Taxes other than income taxes 3117 7
Total operating expenses (1,001) (13) 1,409 23
Operating income/(loss) 488 (a) (554) (a)
Interest expense, net (1) —24 11
Other income, net 10 18 32 (a)
Income/(loss) from continuing operations before income tax (benefit)/expense 499 (a) (546) (a)
Income tax (benefit)/expense 106 57 (210) (a)
Preferred dividends of subsidiary ————
Income/(loss) from continuing operations 393 (a) (336) (a)
Income from discontinued operations 330 (a) (33) (70)
Cumulativeeffect of accounting change, net of tax benefit 1100 (1) (100)
Net income/(loss) $724 (a)% $ (370) (a)%
(a) Percentage greater than 100.
2006 Compared to 2005
Operating Revenues
Operating revenues decreased $513 million in 2006 primarily due to
lower revenues from NU Enterprises ($1.02 billion), partially offset by
higher Utility Group revenues for both the distribution business ($450
million) and transmission business($48 million).
NU Enterprises’ revenues decreased $1.02 billion due to the exit from
significant components of the competitive businesses during 2005 and
2006.
Distribution business revenues increased $450 million primarily due to
higher electric distribution revenues ($500 million), partially offset by
lower gas distribution revenues ($49 million). Higher electric distribution
revenues include the components of CL&P, PSNH and WMECO retail
revenues which areincluded in regulatory commission approved tracking
mechanisms that track the recovery of certain incurred costs ($485
million). The distribution revenue tracking components increase of
$485 million is primarilydue tothe passthrough of higher energy supply
costs ($566 million) and higher CL&P FMCC charges ($36 million),
partiallyoffset by lower PSNH SCRC revenues ($85 million) and lower
wholesale revenues primarilydue to the expiration or sale of CL&P