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92 NU 2006 ANNUAL REPORT
14. Accumulated Other Comprehensive Income/(Loss)
The accumulated balance for each other comprehensive income/(loss)
item is as follows:
Current
December 31, Period December 31,
(Millions of Dollars, Net of Tax) 2005 Change 2006
Qualified cash flow
hedging instruments $18.2 $(12.3) $5.9
Unrealized gains on securities 2.3 0.7 3.0
Minimum SERP liability (1) (0.5) 0.5 —
Adjustment to record funded
status of pension, SERP
and other postretirement
plans (SFAS No. 158) — (4.4) (4.4)
Accumulated other
comprehensive income/(loss) $20.0 $(15.5) $4.5
Current
December 31, Period December 31,
(Millions of Dollars) 2004 Change 2005
Qualified cash flow
hedging instruments $(3.5) $21.7 $18.2
Unrealized gains on securities 3.2 (0.9) 2.3
Minimum SERP liability (0.9) 0.4 (0.5)
Accumulated other
comprehensive (loss)/income $(1.2) $21.2 $20.0
The changes in the components of other comprehensive income/(loss)
are reported net of the following income tax effects:
(Millions of Dollars) 2006 2005 2004
Qualified cash flow
hedging instruments $ 6.9 $(13.4) $14.4
Unrealized gains on securities (0.5) 0.6 (0.7)
Minimum SERP liability (0.3) (0.3) 0.1
Adjustment to adopt SFAS No. 158 6.1 ——
Accumulated other
comprehensive income/(loss) $12.2 $(13.1) $13.8
(1) The current period change of $0.5 million related to the minimum SERP liability
includes $0.3 million toadjust the additional minimum SERP liability before the
adoption of SFAS No. 158 and $0.2 million to reverse the remaining balance as
part of the adoption of SFAS No. 158. See Note 6A, “Pension Benefits and
Postretirement Benefits Other Than Pensions,” for additional information
regarding the adoption of SFAS No. 158.
Adjustments to accumulated other comprehensive income/(loss) for
NU’s qualified cash flow hedging instruments are as follows:
At December 31,
(Millions of Dollars, Net of Tax) 2006 2005
Balance at beginning of year $18.2 $(3.5)
Hedged transactions
recognized into earnings 2.3 5.6
Amount reclassified into earnings
due to the discontinuation
of cash flow hedges (14.1) —
Change in fair value of hedged
transactions delivered in 2006 (4.5) 11.0
Cash flow transactions entered
into for the period 4.0 5.1
Net change associated with the
current period hedging transactions (12.3) 21.7
Total fair value adjustments
included in accumulated other
comprehensive income $ 5.9 $18.2
For the year ended December 31 2006, $1.3 million, net of tax, was
reclassified from accumulated other comprehensive income in
connection with the consummation of the underlying hedged
transactions and recognized into earnings in revenues and fuel,
purchased, and net interchange power and $1 million was reclassified
into earnings related to the amortization of interest rate hedges. This
$1 million includes the amortization of the remaining balanceof the
NGC rate lock which was sold toECP. In the first quarter of 2006,
$14.1 million was reclassified from accumulated other comprehensive
income intoearnings (specificallyincluded in other operation expense)
due todiscontinuation of cash flow hedge accounting because the
retail marketing contracts hedged beyond June 1, 2006 were no longer
probableof physical delivery due tothe retail business being sold.
In March of 2006, CL&P entered into a forwardlock agreement to
hedge the interest rate associated with $125 million of its planned
$250 million, 30-year fixed ratedebt issuance. Under the agreement,
CL&P locked in a LIBOR swap rate of 5.322 percent based on the
notional amount of $125 million in debt that was issued in June of
2006. On June 1, 2006, the hedged transaction was settled and as a
result $4.6 million, net of tax ($7.8 million pre-tax), was recorded in
accumulated other comprehensive income to be amortized into
earnings over the term of the debt.
At December 31, 2006, it is estimated that a pre-tax $1.6 million
included in the accumulated other comprehensive income balance will
be reclassified as a decrease to earnings in 2007 related to pension
and PBOP expenses and a pre-tax benefit of $0.2 million will be
reclassified into earnings in 2007 related to the amortization of interest
rate locks.