Eversource 2001 Annual Report Download - page 24

agement must reaffirm this conclusion at each balance sheet date.
If, as a result of a change in circumstances, it is determined that
any portion of these investments is no longer recoverable under
SFAS No. 71, that portion would be written off. Such a write-off
could have a material impact on NU’s consolidated financial state-
ments. Management currently believes that all long-lived assets,
including regulatory assets, are recoverable.
Goodwill and Other Intangible Assets: Effective January 1,
2002, under SFAS No. 142, “Goodwill and Other Intangible
Assets,” NU is required to perform at least an annual assessment
for impairment of goodwill by applying a fair value-based test.
Management is in the process of the first assessment of impair-
ment of goodwill and expects to complete this assessment by the
June 30, 2002, deadline imposed by SFAS No. 142. Upon adop-
tion of the impairment testing rules under SFAS No. 142, there
may be a cumulative effect of an accounting change which man-
agement 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 rep-
resents the risk of loss that may impact NU’s financial statements
due to adverse changes in commodity market prices which could
affect the realizability of the positive mark-to-market position of
$44.4 million at December 31, 2001.
Additionally, the mark-to-market position for certain effective
hedging activities is currently included in other comprehensive
income. If it is determined that these hedging activities are no
longer effective, as defined in SFAS No. 133, this mark-to-market
position would be included currently in earnings. This mark-to-
market position was a negative $36.9 million at December 31,
2001, net of tax (decrease to equity).
Pension and Postretirement Benefit Obligations: The NU sys-
tem companies participate in a uniform noncontributory defined
benefit retirement plan covering substantially all regular NU sys-
tem employees and also provide certain health care benefits, pri-
marily medical and dental, and life insurance benefits through a
benefit plan to retired employees. For each of these plans, the
development of the benefit obligation, fair value of plan assets,
funded status and net periodic benefit credit or cost is based on
several significant assumptions. These assumptions primarily
relate to the application of a discount rate, expected long-term
rate of return and other trend rates. If these assumptions were
changed, the resultant change in benefit obligations, fair values of
plan assets, funded status and net periodic benefit credits or costs
could have a material impact on NU’s consolidated financial state-
ments.
For further information regarding these types of activities, see
Note 1G, “Regulatory Accounting and Assets,” Note 1C, “New
Accounting Standards,” Note 9, “Market Risk and Risk Manage-
ment Instruments,” and Note 4, “Employee Benefits,” to the con-
solidated financial statements.
Environmental Matters: The NU system is subject to environ-
mental laws and regulations structured to mitigate or remove the
effect of past operations and to improve or maintain the quality of
the environment. For further information regarding environmen-
tal matters, see Note 7B, “Commitments and Contingencies -
Environmental Matters,” to the consolidated financial statements.
22
March 31, 2001. As of December 31, 2001, costs related to this
search totaled $7.1 million. The report concluded that the pins
are currently located in one of four facilities licensed to store low
or high-level nuclear waste and that they are not a threat to public
health and safety. A follow-up review by the NRC commenced
shortly after the report was filed and resulted in a NRC sponsored
public meeting on January 15, 2002. In February 2002, the NRC
issued a written inspection report which concluded that NU’s
investigation was thorough and complete, and that its conclusions
were reasonable and supportable.
Nuclear Decommissioning
In connection with the aforementioned sale of the Millstone
units, DNCI has agreed to assume responsibility for decommis-
sioning those units.
For further information regarding nuclear decommissioning,
see Note 8, “Nuclear Decommissioning and Plant Closure
Costs,” to the consolidated financial statements.
Spent Nuclear Fuel Disposal Costs
The United States Department of Energy (DOE) originally was
scheduled to begin accepting delivery of spent nuclear fuel on Jan-
uary 31, 1998. However, delays in confirming the suitability of a
permanent storage site continually have postponed plans for the
DOE’s long-term storage and disposal site. Extended delays or a
default by the DOE could lead to consideration of costly alterna-
tives. NU has the primary responsibility for the interim storage of
its spent nuclear fuel prior to divestiture of its remaining operat-
ing nuclear units, Seabrook and Vermont Yankee, as well as the
three nuclear units currently undergoing decommissioning, Con-
necticut Yankee, Maine Yankee and Yankee Rowe.
For further information regarding spent nuclear fuel disposal
costs, see Note 7C, “Commitments and Contingencies – Spent
Nuclear Fuel Disposal Costs,” to the consolidated financial state-
ments.
Other Matters
Critical Accounting Policies: The preparation of financial state-
ments in conformity with accounting principles generally accept-
ed in the United States requires management to make estimates,
assumptions and at times difficult, subjective or complex judg-
ments. Accounting policies related to the recoverability of certain
regulatory assets, the performance of impairment assessments of
recorded goodwill and other long-lived assets, mark-to-market
accounting and the related treatment of derivative instruments
and certain trading and hedging activities, and the assumptions
used in developing the pension and postretirement benefit obliga-
tions are the accounting principles that management believes are
critical and could have a significant impact on NU’s consolidated
financial statements.
Regulatory Assets: The accounting policies of the NU system’s
regulated operating companies historically reflect the effects of the
rate-making process in accordance with SFAS No. 71, “Account-
ing for the Effects of Certain Types of Regulation.” Through their
cost-of-service rate regulated transmission and distribution busi-
nesses, CL&P, PSNH and WMECO are currently recovering
their investments in long-lived assets, including regulatory assets,
and management believes that the application of SFAS No. 71 to
that portion of their businesses continues to be appropriate. Man-
Return to First pageReturn to First pageReturn to HighlightsReturn to HighlightsReturn to Highlights