Eversource 1999 Annual Report Download - page 31

FUEL, PURCHASED AND NET
INTERCHANGE POWER
Fuel, purchased and net interchange power expense increased
in 1999, primarily due to higher purchased energy and capacity
costs as a result of higher sales for Select Energy ($521 million),
regulated wholesale ($86 million) and regulated retail ($36 million),
partially offset by lower replacement power costs due to the return
to service of Millstone 2 and 3 ($215 million).
The change in fuel, purchased and net interchange power
expense in 1998 was not significant.
OTHER OPERATION AND MAINTENANCE
Other O&M expenses decreased in 1999, primarily due to
lower costs at the Millstone units ($125 million), partially
offset by the recognition of environmental insurance proceeds
in 1998 and additional environmental reserves in 1999 ($30
million), higher transmission and power exchange expenses ($35
million), higher spending at Seabrook ($10 million) as a result
of the refueling outage, higher expenditures for HEC and the
competitive businesses ($32 million), and expenses associated
with the Con Edison merger ($12 million) in 1999.
Other O&M expenses decreased in 1998, primarily due to
lower costs at the Millstone units ($159 million), lower costs
at the Seabrook and Yankee companies’ nuclear units ($50 mil-
lion), the recognition of environmental insurance proceeds ($27
million), and lower administrative and general expenses ($26
million). These decreases were offset partially by higher recognition
of nuclear refueling outage costs primarily as a result of the
1996 CL&P rate settlement ($29 million).
DEPRECIATION
Depreciation decreased in 1999 and 1998, primarily due to the
retirement of Millstone 1.
AMORTIZATION OF REGULATORY ASSETS, NET
Amortization of regulatory assets, net increased in 1999, pri-
marily due to the increased amortization associated with the
gain on the sale of CL&P’s and WMECO’s fossil and hydro-
electric generation assets ($309 million), the amortization of
CL&P’s and WMECO’s Millstone 1 remaining investment ($56
million) and the reclassification of the depreciation on the
nuclear plants to regulatory assets ($23 million).
Amortization of regulatory assets, net increased in 1998,
primarily due to accelerated amortizations in accordance with
regulatory decisions for CL&P ($49 million), the amortization
of NAEC’s Seabrook deferred return ($79 million) and the begin-
ning of the amortization of CL&P’s Millstone 1 investment
($23 million). These increases were partially offset by the lower
amortization of the PSNH acquisition premium ($40 million).
FEDERAL AND STATE INCOME TAXES
The consolidated statement of income taxes provides a recon-
ciliation of actual and expected tax expense. The tax effect of
temporary differences is accounted for in accordance with the
rate-making treatment of the applicable regulatory commissions.
In past years, this rate-making treatment has required the
company to provide the customers with a portion of the tax bene-
fits associated with accelerated tax depreciation in the year it
is generated (flow-through depreciation). As these flow-through
differences turn around, higher tax expense is recorded.
Federal and state income taxes increased approximately $93
million in 1999, primarily due to the significant increase in
pretax earnings. Significant variances of other items include a
$10 million increase in flow-through depreciation turnaround
and $4.6 million of nontax deductible merger related expendi-
tures offset by the elimination of a $23 million deferred tax
asset valuation reserve.
Federal and state income taxes increased in 1998, primarily
due to higher book taxable income, partially offset by an
increase in income tax credits primarily due to the Millstone 1
write-off of unrecoverable costs as a result of the February
1999 CL&P rate decision.
GAIN ON SALE OF UTILITY PLANT
CL&P and WMECO recorded gains on the sale of their fossil
and hydroelectric generation assets in 1999. A corresponding
amount of amortization expense was recorded.
EQUITY IN EARNINGS OF REGIONAL NUCLEAR
GENERATING AND TRANSMISSION COMPANIES
Equity in earnings of regional nuclear generating and transmission
companies decreased in 1999 and 1998, primarily due to lower
earnings from the Connecticut Yankee Atomic Power Company.
NUCLEAR UNRECOVERABLE COSTS
Nuclear unrecoverable costs in 1999 are comprised of one-time
charges related to the CL&P write-off of CMEEC nuclear
costs ($19.9 million), the CL&P write-off of capital projects as
a result of the Connecticut standard offer decision ($11
million), the CL&P/WMECO settlement of Millstone 3 joint
owner litigation, net of insurance proceeds ($27 million), the
WMECO return disallowed on Millstone 1 unrecovered plant
from March 1998 forward ($10.8 million), and the WMECO
disallowed Millstone 1 plant per the Massachusetts restructuring
order ($2.1 million). In comparison, 1998 is comprised of the
write-off of the Millstone 1 entitlement formerly held by CMEEC
($27.8 million) and the write-off of unrecoverable costs as a
result of the February 1999 CL&P rate decision ($115.3 million).
OTHER INCOME/(LOSS), NET
Other income/(loss), net decreased in 1999, primarily due to the
PSNH settlement with the New Hampshire Electric Cooperative
($6.2 million) and the loss on the CL&P assignment of market-
based contracts to Select Energy ($15 million).
The 1998 increase over 1997 is primarily due to the proceeds
resulting from the shareholder derivative suit.
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