Eversource 2001 Annual Report Download

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&Focus Results
Northeast Utilities
2001 Annual Report
Northeast Utilities 2001 Annual Report
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Table of contents

  • Page 1
    Northeast Utilities 2001 Annual Report Northeast Utilities Focus & Results 2001 Annual Report Return Return to to Highlights First page

  • Page 2
    ...is clear: we're focused on becoming the leading energy delivery and marketing company in the Northeast region. (Page 6) • Our approach to growth... region where 25 percent of the nation's energy is consumed. • Our strategy is standing the test of time. Continuing to deliver on a path set several...

  • Page 3
    ... top energy marketers in the Northeast, we are solidly positioned to continue delivering results. • NU has never been financially stronger. We have a level of financial strength and flexibility needed to fund our future growth. Page 7 • Our key regulated businesses- CL&P, PSNH, Yankee Gas and...

  • Page 4
    ...moves give us a high level of financial strength and flexibility to fund our future growth. And, that future is bright. Our key regulated businesses- Connecticut Light & Power (CL& P) and Yankee Gas as well as Public Service of New Hampshire (PSNH) and Western Massachusetts 2 Electric (WMECO) - are...

  • Page 5
    ... in Connecticut - due primarily to the below-market standard offer rates. To stimulate development of this competitive marketplace, we asked regulators to consider a one-cent increase in customers' energy rates. Although they rejected our initial request, the state Department of Public Utility...

  • Page 6
    ...% of state total; 50% combined from residential and transportation Transportation consumption represents 32% of state total; 50% combined from residential and industrial Delaware Maine Maryland Massachusetts New Hampshire New Jersey New York Pennsylvania Rhode Island Vermont 4 Return to...

  • Page 7
    ...our gas supply, and deliver a more stable supply and lower prices for customers. Our plans for expanding the distribution system were approved in January 2002 by Connecticut regulators. In our competitive businesses, Select Energy is maturing as its revenue growth continues in spite of a challenging...

  • Page 8
    ... industry, Michael G. Morris is serving in his fifth year as Northeast Utilities chairman, president and chief executive officer and is focused on results-driven leadership. "Reliable and affordable energy delivered through dependable systems is a national priority. We are dedicated to finding...

  • Page 9
    ... and Flexibility Financial Performance is the key measure of NU's success in executing its strategy. An A rated company is recognized world-wide as financially strong and stable. NU received multiple rounds of upgrades in a year that saw most utilities' ratings trend lower. NU system ratings are...

  • Page 10
    ...-reaching service territory. The Utility Group companies' focus on improved reliability, operational efficiencies and high quality customer service will continue under the care and support of a new leadership team charged with becoming a cost effective customer focused energy delivery business. An...

  • Page 11
    ...NU's energy marketing and services subsidiary Select Energy is the recognized market leader in wholesale energy, trading, retail and behind-the-meter energy business in New England. An integrated energy solutions company serving wholesale and retail customers, Select Energy's current annual revenues...

  • Page 12
    ... and awareness, in any form, requires commitment. Whether ideas, information or results, a strong sense of purpose is the beginning of every success. At NU, the purpose is clear- deliver to all of the region's 5 million residential, commercial and industrial customers, competitive energy supplies on...

  • Page 13
    .... Expertise, disciplined strategic planning and customer focus are the keys. Bruce Kenyon, president of Northeast Utilities' Generation Group and president and chief executive officer of Northeast Generation Services Company (NGS) believes "Success in the competitive market is achieved with...

  • Page 14
    ... Gas Services Company, the largest natural gas distribution company in Connecticut, and Yankee Energy Financial company, which provides a full range of residential and commercial energy equipment financing options. Competitive Businesses Business and Services Select Energy, Inc. Select Energy...

  • Page 15
    ... operating subsidiary, Yankee Gas, delivers natural gas and related products and services to 187,000 residential, commercial and industrial customers in 69 cities and towns in Connecticut. Yankee Financial offers a full range of energy equipment financing options for residential and business...

  • Page 16
    ... Before Extraordinary Loss (Dollars) Dividends per Share (Dollars) Revenues (Dollars in Thousands) Debt Ratings S&P Moody's Management's Discussion and Analysis Company Report Report of Independent Accountants Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements...

  • Page 17
    ...million reduction in distribution and transmission rates the Connecticut Department of Public Utility Control (DPUC) imposed, which was effective on June 20, 2001. Operating results at Public Service Company of New Hampshire (PSNH) and North Atlantic Energy Corporation (NAEC) declined as a result of...

  • Page 18
    ... 2002, to pay for those costs. PSNH continues to negotiate buyout or buydown arrangements with other plant operators and may require additional funds if successfully renegotiated agreements are approved by the New Hampshire Public Utilities Commission (NHPUC) and result in upfront payments. T he...

  • Page 19
    ...million of insured variable-rate bonds. At current rates, that refinancing is expected to save PSNH in excess of $10 million annually. Also, in late 2001, Holyoke Water Power Company (HWP) repaid all of its public debt in connection with the sale of its hydroelectric generation assets and electric...

  • Page 20
    ... price to make it more competitive with alternative energy suppliers. Select Energy management also continues to work with third parties to arrange new profitable energy contracts to replace a number of wholesale contracts that are in the process of expiring. Management also expects the operations...

  • Page 21
    ...' Market and Other Risks NU's competitive energy subsidiaries, as major providers of electricity and natural gas, are exposed to certain market risks inherent in their business activities. T he competitive energy subsidiaries enter into contracts of varying lengths of time to buy and sell...

  • Page 22
    ... opportunities in competitive energy businesses in the Northeast United States. Over the past three years, NU acquired Denron, a heating, ventilating and air conditioning contractor based in New Hampshire; E.S. Boulos Company (Boulos), a high-voltage electrical contractor based in Maine, and; NMEM...

  • Page 23
    ...048 per kWh. T he significant reduction in supply costs in 2002 will result in a material reduction in WMECO's operating revenues and purchased power costs in 2002, but should not have a significant impact on financial performance since electric supply costs are passed through to customers. For...

  • Page 24
    ... may be a cumulative effect of an accounting change which management has not evaluated at this time. Mark-To-Market Accounting: At each balance sheet date, NU's energy trading positions are marked-to-market using closing exchange prices or quotes from external sources. Market risk represents the...

  • Page 25
    ... below. Income Statement Variances (Millions of Dollars) 2001 over/(under) 2000 Amount Percent 2000 Amount over/(under) 1999 Percent Operating Revenues Operating Expenses: Fuel, purchased and net interchange power Other operation Maintenance Depreciation Amortization of regulatory assets, net...

  • Page 26
    ... transmission revenues ($26 million). T he competitive energy subsidiaries' increase is primarily due to higher revenues from Select Energy as a result of new contracts for energy services. T he Yankee Gas increase is primarily due to a full year of revenue in 2001 versus ten months post merger in...

  • Page 27
    ...of market-based contracts to Select Energy ($15 million). Interest Expense, Net Interest expense, net decreased in 2001, primarily due to reacquisitions and retirements of long-term debt ($54 million) and higher short-term borrowings in 2000 associated with asset transfers and the Yankee merger ($54...

  • Page 28
    ... consolidated financial statements of Northeast Utilities and subsidiaries and other sections of this annual report were prepared by the company. T hese financial statements, which were audited by Arthur Andersen LLP , were prepared in accordance with accounting principles generally accepted in...

  • Page 29
    ...2001 $ 6,873,826 Operating Revenues Operating Expenses: 2000 $ 5,876,620 1999 $ 4,471,251 Operation - Fuel, purchased...on long-term debt Interest on rate reduction bonds Other interest Interest ... of accounting change...securities Foreign currency translation adjustments Other comprehensive (loss)/...

  • Page 30
    ...accounts of $16,353 in 2001 and $12,500 in 2000 Unbilled revenues Fuel, materials and supplies, at average cost... 404,785 5,519,579 Electric utility Gas utility Competitive energy Other Less: Accumulated provision for depreciation Construction work in progress Nuclear fuel, net Deferred Debits and ...

  • Page 31
    ... 151,200 Rate Reduction Bonds Minority Interest in Consolidated Subsidiary Deferred Credits and Other ...2001 and 148,781,861 shares issued and 143,820,405 shares outstanding in 2000 Capital surplus, paid in Temporary equity from stock forward Deferred contribution plan - employee stock ownership plan...

  • Page 32
    ... Deferred Contribution Plan - ESOP Retained Earnings (b) Accumulated Other Comprehensive Income/(Loss) Treasury Stock Total Balance as...239) $ 2,117,640 Balance as of December 31, 2001 $ 744,453 (a) In conjunction with NU's forward share purchase arrangement, 10,112,879 shares or $50.6 million and ...

  • Page 33
    ... unbilled revenues, net Fuel, materials and supplies Accounts payable Accrued taxes Investments in securitizable assets Other working capital (excludes cash) Net cash ï¬,ows provided by operating activities Investing Activities: Investments in regulated plant: Electric, gas and other utility plant...

  • Page 34
    ... Rate and 5.90% 2020 Adjustable Rate 2021-2022 Adjustable Rate and 5.45% to 7.65% 2028 5.85% to 5.95% 2031 Adjustable Rate Total Pollution Control Notes and Other Notes Fees and interest due for spent nuclear fuel disposal costs Other Total Other Long-Term Debt Unamortized Premium and Discount...

  • Page 35
    ... to meet its obligations under the PCRBs. PSNH entered into financing arrangements with the Business Finance Authority (BFA) of the state of New Hampshire. Pursuant to which the BFA issued five series of PCRBs and loaned the proceeds to PSNH. At December 31, 2001 and 2000, $407.3 million of the...

  • Page 36
    ... associated with net operating losses Depreciation, leased nuclear fuel, settlement credits and disposal costs Regulatory deferral Regulatory disallowance Sale of generation assets Pension Loss on bond redemptions Securitized contract termination costs and other Contract settlements Other Deferred...

  • Page 37
    ...for other New England utilities. Northeast Utilities Service Company provides centralized accounting, administrative, engineering, financial, information resources, legal, operational, planning, purchasing, and other services to the NU system companies. North Atlantic Energy Service Corporation has...

  • Page 38
    ...depreciable utility plant-in-service, adjusted for salvage value and removal costs, as approved by the appropriate regulatory agency where applicable. Depreciation rates are applied to plant-in-service from the time they are placed in service. When plant is retired from service, the original cost of...

  • Page 39
    ... nontraditional rate-making arrangements. Revenues for NU's competitive energy subsidiaries, including Select Energy and NGC, are recognized when the energy is delivered or service is provided. At the end of each accounting period, CL& P , PSNH, WMECO, Select Energy, and Yankee Gas accrue a revenue...

  • Page 40
    ... the New Hampshire Public Utilities Commission (NHPUC). I. Cash And Cash Equivalents Cash and cash equivalents includes cash on hand and short-term cash investments which are highly liquid in nature and have original maturities of three months or less. J. Accounting for Competitive Energy Contracts...

  • Page 41
    ... at fixed or variable rates plus an applicable margin based upon certain debt ratings, as rated by the lower of Standard and Poor's or Moody's Investors Service. T he weighted average interest rate on the NU system companies' notes payable to banks outstanding on December 31, 2001 and 2000, was...

  • Page 42
    ...ed service requirements. For current employees and certain retirees, the total benefit is limited to two times the 1993 per retiree health care cost. T hese costs are charged to expense over the estimated work life of the employee. T he NU system companies annually fund postretirement costs through...

  • Page 43
    ... status: At December 31, Pension Benefits Postretirement Benefits 2001 2000 7.50% 4.50 N/ A 2001 7.25% 4.25 11.00 2000 7.50% 4.50 5.26 Discount rate Compensation/ progression rate Health care cost trend rate (a) 7.25% 4.25 N/A (a) The annual per capita cost of covered health care bene...

  • Page 44
    ...members. T he exercise price of stock options, as set at the time of grant, is generally equal to the fair market value per share at the date of grant. Under the Northeast Utilities Incentive Plan (Incentive Plan), the number of shares which may be utilized for awards granted during a given calendar...

  • Page 45
    ... discovery by the DT E and other intervenors. 7. Commitments and Contingencies A. Restructuring and Rate Matters Connecticut: On September 27, 2001, CL& P filed its application with the Connecticut Department of Public Utility Control (DPUC) for approval of the disposition of the proceeds from the...

  • Page 46
    ... new buyer. Energy Procurement Contracts: CL& P, PSNH and WMECO have entered into various arrangements for the purchase of capacity and energy. T he total cost of purchases under these arrangements amounted to $363.9 million in 2001, $482.1 million in 2000 and $461.8 million in 1999. Gas Procurement...

  • Page 47
    ...depreciation. Payments for the NU system's ownership share of the cost of decommissioning Seabrook are paid to an independent decommissioning financing fund managed by the state of New Hampshire. As of December 31, 2001 and 2000, $52 million and $44.2 million, respectively, have been transferred to...

  • Page 48
    ... companies, gas and electric utilities, oil and gas producers, financial institutions, and other energy marketers. Margin accounts exist within this diverse group, and NU realizes interest receipts and payments related to balances outstanding in these accounts. T his wide customer and supplier...

  • Page 49
    ...December 31, 1999 December 31, 2000 Supplemental Executive Retirement Plan (SERP) Investments: Investments held for the bene...stock and long-term debt: T he fair value of the NU system's fixed-rate securities is based upon the quoted market price for those issues or similar issues. Adjustable rate...

  • Page 50
    ... (electric and gas since March 1, 2000) and competitive energy subsidiaries. T he regulated utilities segment represents approximately 68 percent and 85 percent of the NU system's total revenues for the years ended December 31, 2001 and 2000, respectively, and is comprised of several business units...

  • Page 51
    ... the debt of NU parent. Inter-segment eliminations are also included in Other. For the Year Ended December 31, 2001 (Millions of Dollars) Regulated Utilities Electric Gas Competitive Energy Subsidiaries Eliminations and Other Total Operating revenues Operating expenses Operating income/ (loss...

  • Page 52
    ... of Dollars, except per share information) March 31 June 30 September 30 December 31 2001 Operating Revenues Operating Income Income Before Cumulative Effect of Accounting Change Cumulative Effect of Accounting Change, Net of Tax Benefit Net Income Basic Earnings/ (Loss) per Common Share...

  • Page 53
    ... (a) Income Data: Operating Revenues $ 6,873,826 Income/ (Loss) Before Extraordinary Loss and Cumulative Effect of Accounting Change, Net of Tax...Market Price - Closing (high) (c) Market Price - Closing (low) (c) Market Price - Closing (end of year) (c) Book Value Per Share (end of year) Rate of...

  • Page 54
    ... Other Utilities Streetlighting and Railroads Nonfranchised Sales Total Customers: (Average) Residential Commercial Industrial Other Total Electric Gas Total Average Annual Use Per Residential Customer (kWh) Average Annual Bill Per Residential Customer Average Revenue Per kWh: Residential...

  • Page 55
    ... A. Shoop Electric & Gas Operating Company Officers O. Kay Comendul Secretary, CL&P and PSNH Patricia A. Wood President and Chief Executive Officer,Hartford Steam Boiler Inspection & Insurance Company Cotton Mather Cleveland Assistant Treasurer-Finance Northeast Utilities System Officers as of...

  • Page 56
    ... natural gas customers in Connecticut. It is one of the largest competitive energy suppliers in New England. Current NU subsidiaries are listed below: Electric and Gas Operating Subsidiaries T he Connecticut Light and Power Company Holyoke Water Power Company Public Service Company of New Hampshire...

  • Page 57
    Design: Jack Hough Associates Inc., Norwalk, CT Major Photography: Tracey Kroll Printing: W.E. Andrews Co., Inc., Manchester, CT Return Return to to Highlights First page

  • Page 58
    Northeast Utilities P.O. Box 270 Hartford, Connecticut 06141-0270 1-800-286-5000 Return Return to to Highlights First page