Eversource 1999 Annual Report Download - page 27

GENERATION ASSET DIVESTITURES —
CONNECTICUT AND MASSACHUSETTS
The Connecticut and Massachusetts restructuring laws required
CL&P and WMECO to divest of their nonnuclear generation
assets and utilize substantially all of the net gains from any sales
to offset stranded costs. During 1999, WMECO and CL&P sold
their nonnuclear generation assets resulting in net gains of $22.4
million and $286.5 million, respectively. A corresponding
amount of regulatory assets was amortized. In September 1999,
NU announced that the Millstone nuclear generation assets of
its subsidiaries, CL&P and WMECO, will be put up for auction
as soon as practical. For further information regarding commitments
and contingencies related to the Connecticut and Massachusetts
generation asset divestitures, see Note 7A, “Commitments and
Contingencies — Restructuring — Nuclear Generation Assets
Auction,” to the consolidated financial statements.
NEW HAMPSHIRE
In August 1999, NU, PSNH and the state of New Hampshire signed
the Settlement Agreement which will resolve a number of pending
regulatory and court proceedings related to PSNH. The Settlement
Agreement is awaiting approval of the NHPUC and is subject
to legislative approval of securitization. The key components of
the agreement include an after-tax write-off of $225 million of
stranded costs; the recovery of the remaining stranded costs; the
securitization of $725 million of approved stranded costs; the
sale of generation assets and wholesale power entitlements, with
transition service being available to customers for three years; a
reduction in rates of an average of 18.3 percent, and the opening
of the New Hampshire electricity market to competition. For fur-
ther information regarding commitments and contingencies related
to the New Hampshire Settlement Agreement, see Note 7A,
“Commitments and Contingencies — Restructuring —New
Hampshire,” to the consolidated financial statements.
UNREGULATED ENERGY SERVICES
The energy marketing and brokering business is intensely com-
petitive, with many companies with larger financial resources
than NU’s bidding for business in the deregulating New England
market. The sharply fluctuating cost of power supply caused
by, among other things, weather extremes, plant outages and
fuel costs, and a lack of load-following generating facilities,
have made it difficult for Select Energy to economically match
its wholesale power purchases with its power supply obligations.
In 1999, Select Energy recorded a net loss of $38.8 million on
revenues of $554.9 million, compared to a net loss of $13.4
million on revenues of $29.3 million in 1998. Select Energy’s ability
to economically compete has also been affected by NU’s weak-
ened financial position caused by the extended Millstone outages
which ended in mid 1999. In 2000, Select Energy’s expected
contract with an affiliated company, Northeast Generation
Company, to purchase 1,329 MW of capacity and energy
should significantly reduce the load-following risk and allow
Select Energy to better manage its portfolio profitability.
Select Energy’s goal is to be the regional and national leader
in providing standard offer service to those Northeast markets
opened to retail competition. Currently, Select Energy provides
more than 5,000 MW of standard offer load, making it the
largest provider of standard offer service in the Northeast. On
December 22, 1999, Select Energy and an unaffiliated company
signed a 6-month power supply agreement, effective January
1, 2000, to meet the utility's standard offer service requirements,
which are expected to exceed 3,000 MW. This contract does
not include renewal or termination provisions, and payment is
due within ten days of the receipt of the bill. Select Energy has
been serving this standard offer load since December 1998.
During 1999, revenues billed to this customer totaled $276.1
million or approximately 46 percent of Select Energy’s revenues. On
January 1, 2000, Select Energy began serving CL&P with one-
half of its approximately 2,000 MW standard offer requirement
for a 4-year period. The CL&P standard offer contract does
not include renewal provisions. Select Energy can terminate the
contract if the Federal Energy Regulatory Commission (FERC)
or DPUC require changes to the contract which create material
adverse economic impact to Select Energy which cannot be cured.
These power supply contracts are expected to provide Select Energy
with over 50 percent of its revenues in the year 2000. In addition,
beginning in January 2000, Select Energy assumed responsibility
for serving approximately 30 market-based wholesale contracts,
totaling approximately 500 MW, throughout New England with
electric energy supply that was previously provided by CL&P and
WMECO. For the most part, the prices are fixed by contract and
applicable to actual volumes.
NUCLEAR GENERATION
MILLSTONE NUCLEAR UNITS
Millstone 3 received the appropriate Nuclear Regulatory
Commission (NRC) approvals and resumed operation in July
1998. Millstone 2 received similar NRC approvals, resumed
operation and was returned to CL&P’s rate base in May 1999.
Millstone 3 and 2 achieved annual capacity factors of 81.7
percent and 57.9 percent in 1999, respectively. After a 60-day
refueling and maintenance outage, Millstone 3 returned to ser-
vice on June 29, 1999, and has achieved a 98.1 percent capacity
factor through December 31, 1999. Since returning to service
in May 1999, Millstone 2 has achieved a 90.3 percent capacity
factor through December 31, 1999. NU’s total share of O&M
expenses associated with Millstone 3 and 2 totaled $261.8 mil-
lion in 1999, as compared to $323.2 million in 1998 and $406
million in 1997. Millstone 1 is currently in decommissioning status.
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