Eversource 2009 Annual Report Download - page 39

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A summary of our retail electric sales in GWh for CL&P, PSNH and WMECO and firm natural gas sales in million cubic feet for Yankee
Gas for 2009 and 2008 is as follows:
Electric Firm Natural Gas
2009 2008
Percentage
Decrease 2009 2008
Percentage
Increase
Residential 14,412 14,509 (0.7)% 13,562 13,467 0.7%
Commercial 14,474 14,885 (2.8)% 14,063 12,939 8.7%
Industrial 4,423 5,149 (14.1)% 14,825 13,311 11.3%
Other 336 340 (1.6)% - - -
Total 33,645 34,883 (3.5)% 42,450 39,717 6.9%
Actual retail electric sales in 2009 were lower than 2008 and were significantly impacted by the weather and economic conditions. The
spring and summer months in 2009 were significantly cooler than normal and when compared to 2008, the amount of cooling degree
days was approximately 23 percent lower in Connecticut and Western Massachusetts and approximately 22 percent lower in New
Hampshire. The negative trend in our sales continues to be most prevalent in the industrial class where many customers have been
negatively impacted by the weak economic conditions of our region and nation. We believe the reduction in industrial sales is primarily
driven by a reduced number of shifts and days of operations. Commercial sales and residential sales in 2009 were also lower than
2008, although residential sales increased by 1.2 percent over 2008 on a weather-normalized basis. In 2010, we expect the economic
conditions to continue to affect our customers and on a weather normalized basis, we estimate our retail electric sales, across all three
states, will be approximately 1 percent lower than 2009.
Recovery of our distribution revenues, however, is not wholly dependent on sales and it varies between customer classes. About two-
thirds of CL&P’s and WMECO’s distribution revenues and about one-half of PSNH’s distribution revenues are recovered through
charges, such as the customer charge and demand charge, that are not dependent on overall sales volumes. As compared to other
customer classes, a greater portion of residential revenues is recovered through volumetric charges. In contrast to residential rates, a
much smaller portion of commercial and industrial revenues is recovered through volumetric charges. Distribution rates for certain large
businesses are structured so that we recover 100 percent of the distribution revenues through non-volumetric charges. In this regard,
rate design has significantly mitigated the impact of the declining commercial and industrial sales on distribution revenues and earnings.
Actual and weather normalized firm natural gas sales in 2009 were higher than 2008. The 2009 results have improved due to an
increase in customers and, for the commercial and industrial sectors, have benefited substantially from the addition of new gas-fired
distributed generation in Yankee Gas' service region during the last fifteen to eighteen months ended December 31, 2009. Yankee Gas
recovers almost half of its total distribution revenues through non-usage charges, and thus, similar to our electric distribution
companies, changes in sales have less of an impact on revenues. In 2010, we estimate our total weather normalized firm natural gas
sales will be essentially the same as 2009, but the change will vary for each customer class.
Our expense related to uncollectible receivable balances (our uncollectibles expense) is influenced by the economic conditions of our
region and the weak conditions in the Northeast continue to have a negative effect on our customers. Fluctuations in our uncollectibles
expense are mitigated, however, from an earnings perspective because a portion of the total uncollectibles expense for each of the
electric distribution companies is allocated to the respective company’s energy supply rate and recovered through its tariffs.
Additionally, for CL&P and Yankee Gas, write-offs of uncollectible receivable balances attributable to qualified customers under financial
or medical duress (or hardship customers) are fully recovered through their respective tariffs. In 2009, our total uncollectibles expense
was approximately $21 million higher than 2008 and approximately $19 million of the increase impacted our 2009 earnings. The
majority of the $19 million increase was incurred by Yankee Gas and CL&P. In 2010, we expect the uncollectibles expense that
impacts earnings to be approximately $12 million lower than it was in 2009 and approximately $10 million of the $12 million
improvement is expected to be recognized by Yankee Gas. The anticipated decrease in 2010 uncollectibles expense is based on
continued account receivable collection efforts, a small decline in overall Yankee Gas revenues as a result of lower natural gas prices,
and an expectation that the economic conditions will begin to improve.
Competitive Businesses: NU Enterprises, which continues to manage to completion Select Energy, Inc.'s (Select Energy) remaining
wholesale marketing contracts and to manage its electrical contracting business, earned $15.8 million, or $0.09 per share, in 2009,
compared with $13.1 million, or $0.08 per share, in 2008 and $11.7 million, or $0.08 per share, in 2007. Competitive business earnings
in 2009 included an after-tax mark-to-market gain of $3.8 million associated with Select Energy’s wholesale marketing contracts, as
compared to a $1.1 million after-tax mark-to-market gain in 2008 and a $3.8 million after-tax mark-to-market loss in 2007. The mark-to-
market gain in 2008 included a net after-tax charge to Net income of $3.2 million associated with the implementation of accounting
guidance for fair value measurements. Results for NU Enterprises are not expected to continue at the earnings levels of the past three
years, as the margins Select Energy earns on its remaining contracts are expected to decline in future years. We project that NU
Enterprises will earn between zero and $0.05 per share in 2010.
NU Parent and Other Companies: NU parent and other companies recorded net expenses of $9.3 million, or $0.05 per share, in 2009,
compared with net expenses of $41.4 million, or $0.26 per share, in 2008 and net income of $6.1 million, or $0.04 per share, in 2007.
The net expenses in 2008 included a $29.8 million, or $0.19 per share, after-tax charge resulting from the payment of $49.5 million
made in March 2008 associated with the settlement of litigation. Excluding the charge, the 2009 net expenses decreased by $2.3
million as compared to 2008 due primarily to a favorable return on equity investments and lower interest expense. Net income in 2007
included interest income for NU parent on a higher level of cash received from the sale of our competitive generation business in late
2006.