Eversource 1999 Annual Report Download - page 41

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Several wholly owned subsidiaries of NU provide support
services for the NU system companies and, in some cases, for
other New England utilities. Northeast Utilities Service Company
provides centralized accounting, administrative, information
resources, engineering, financial, legal, operational, planning,
purchasing, and other services to the NU system companies.
Northeast Nuclear Energy Company acts as agent for the NU
system companies and other New England utilities in operating
the Millstone nuclear units. North Atlantic Energy Service
Corporation has operational responsibility for Seabrook. Three
other subsidiaries construct, acquire or lease some of the
property and facilities used by the NU system companies.
On October 13, 1999, NU and Consolidated Edison, Inc.
(Con Edison) announced that they have agreed to a merger to
combine the two companies. For further information, see
Note 15, “ Merger Agreement with Con Edison.”
On October 12, 1999, Yankee Energy System, Inc. share-
holders approved the proposed merger with NU. On December
20, 1999, the Connecticut Department of Public Utility Control
(DPUC) issued its final decision approving the merger. In January
2000, the SEC granted final approval of the merger. The trans-
action is expected to close in early March 2000.
B. PRESENTATION
The consolidated financial statements of the NU system include
the accounts of all subsidiaries. Intercompany transactions have
been eliminated in consolidation.
The preparation of financial statements in conformity with gen-
erally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Certain reclassifications of prior years’ data have been made
to conform with the current year’s presentation.
C. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) has issued
Statement of Financial Accounting Standards (SFAS) No. 133,
“Accounting for Derivative Instruments and Hedging Activities.”
SFAS No. 133 establishes accounting and reporting standards
for derivative instruments and hedging activities. This state-
ment will require derivative instruments utilized by the NU
system companies to be recognized on the balance sheets as
assets or liabilities at fair value.
In June 1999, the FASB delayed the adoption date of SFAS
No. 133 until January 1, 2001.
Based on the derivative instruments which currently are being
utilized by the NU system companies to hedge some of their
interest rate risk and certain power contracts, there may be an
impact on earnings upon adoption of SFAS No. 133 which
management has not estimated at this time.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ABOUT NORTHEAST UTILITIES
Northeast Utilities (NU or the company) is the parent company
of the Northeast Utilities system (NU system). Through its reg-
ulated utilities and unregulated energy service companies, the
NU system serves in excess of 30 percent of New England’s elec-
tric needs and is one of the 20 largest electric utility systems in
the country as measured by revenues. The NU system’s regulated
utilities furnish franchised retail electric service in Connecticut,
New Hampshire and western Massachusetts through three wholly
owned subsidiaries: The Connecticut Light and Power Company
(CL&P), Public Service Company of New Hampshire (PSNH)
and Western Massachusetts Electric Company (WMECO). Another
wholly owned subsidiary, North Atlantic Energy Corporation
(NAEC), sells all of its entitlement to the capacity and output
of the Seabrook Station (Seabrook) nuclear unit to PSNH under
the terms of two life-of-unit, full cost recovery contracts (Seabrook
Power Contracts). A fifth wholly owned subsidiary, Holyoke
Water Power Company (HWP), also is engaged in the
production and distribution of electric power.
NU is registered with the Securities and Exchange Commission
(SEC) as a holding company under the Public Utility Holding
Company Act of 1935 (1935 Act), and the NU system is subject
to the provisions of the 1935 Act. Arrangements among the NU
system companies, outside agencies and other utilities covering
interconnections, interchange of electric power and sales of
utility property are subject to regulation by the Federal Energy
Regulatory Commission (FERC) and/or the SEC. The operating
subsidiaries are subject to further regulation for rates, accounting
and other matters by the FERC and/or applicable state regula-
tory commissions.
NU Enterprises, Inc. (NUEI) is a wholly owned subsidiary of
NU and acts as the holding company for NU’s unregulated
energy service companies. Northeast Generation Company (NGC)
was formed to acquire generating facilities. Northeast Generation
Services Company (NGS) was formed to provide services to
the electric generation market as well as to large commercial
and industrial customers in the Northeast. Select Energy, Inc.
(Select Energy), HEC Inc. (HEC) and Mode 1 Communications,
Inc. (Mode 1) engage in a variety of energy-related and telecom-
munications activities, as applicable, primarily in the unregulated
energy retail and wholesale commodity, marketing and services
fields. During 1999 and 1998, NUEI accounted for 13.6 per-
cent and 1.4 percent of consolidated revenues, respectively.