Eversource 2009 Annual Report Download - page 70

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RESULTS OF OPERATIONS - WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
The components of significant income statement variances, higher/(lower) in comparison to the previous year, are provided in the table
below.
Income Statement Variances 2009 versus 2008 2008 versus 2007
(Millions of Dollars) Amount Percent Amount Percent
Operating Revenues $ (39) (9)% $ (23) (5)%
Operating Expenses:
Operation -
Fuel, purchased and net interchange power (45) (19) 1 -
Other operation 9 11 (22) (22)
Maintenance (3) (14) 2 11
Depreciation 1 7 - -
Amortization of regulatory (liabilities)/assets, net (15) (a) 2 17
Amortization of rate reduction bonds 1 7 1 7
Taxes other than income taxes 1 10 - -
Total operating expenses (51) (13) (16) (4)
Operating Income 12 26 (7) (14)
Interest expense, net - - - -
Other income, net - - (2) (50)
Income before income tax expense 12 42 (9) (24)
Income tax expense 4 42 (4) (28)
Net income $ 8 43 % $ (5) (22)%
(a) Percent greater than 100 not shown since not meaningful.
Comparison of the Year 2009 to the Year 2008
Operating Revenues
Operating revenues decreased $39 million in 2009 due to lower distribution segment revenues ($47 million), partially offset by higher
transmission segment revenues ($8 million).
The distribution segment revenues decreased $47 million due primarily to a decrease in the portion of distribution revenues that does
not impact earnings ($49 million). These revenues do not impact earnings, primarily as a result of the inclusion of these distribution
revenues in regulatory tracking mechanisms and intracompany revenues that are eliminated in consolidation. The portion of revenues
that impacts earnings increased $1 million.
The $49 million distribution segment revenues decrease that does not impact earnings was due primarily to a decrease in the portions
of retail revenues that are included in DPU approved tracking mechanisms that track the recovery of certain incurred costs through
WMECO's tariffs ($44 million) and transmission segment intracompany billings to the distribution segment that are eliminated in
consolidation ($5 million). The distribution revenues included in DPU approved tracking mechanisms decreased $44 million due
primarily to lower energy supply costs ($48 million), lower transition cost recoveries ($10 million), and lower wholesale revenues ($5
million), partially offset by higher retail transmission revenues ($15 million). The tracking mechanisms allow for rates to be changed
periodically with overcollections refunded to customers or undercollections recovered from customers in future periods.
The 2009 retail sales as compared to the same period in 2008 decreased 11.7 percent for the industrial, 4.8 percent for the commercial,
and 1.6 percent for the residential classes. Total retail sales decreased overall by 4.8 percent.
Transmission segment revenues increased $8 million due primarily to a higher transmission investment base and higher expenses.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expenses decreased $45 million in 2009 due primarily to lower Basic/Default Service supply
costs ($47 million) and lower other purchased power costs ($2 million), partially offset by higher deferral of excess Basic/Default Service
revenue over Basic/Default Service expense ($4 million). The Basic/Default Service supply costs are the contractual amounts we must
pay to various suppliers that serve this load after winning a competitive solicitation process. These costs decreased as a result of lower
supplier contract rates and reduced load volumes. To the extent that these costs do not match the revenues collected from customers,
the DPU allows the difference to be deferred for future collection or refund. Lower other purchased power costs are due primarily to a
decrease in costs associated with customer generation and IPPs.
Other Operation
Other operation expenses increased $9 million in 2009 as a result of higher retail transmission and other costs that are recovered
through distribution tracking mechanisms and have no earnings impact ($11 million), partially offset by lower distribution segment
expenses ($2 million) mainly as a result of lower administrative and general expenses.