Eversource 2001 Annual Report Download - page 27

Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to
settlement of a property tax appeal with the City of Meriden for
CL&P and Yankee in 2001 ($15 million), the reduction in prop-
erty tax for CL&P and WMECO due to the sale of the Millstone
units ($16 million) and lower New Hampshire franchise tax ($5
million), partially offset by higher Connecticut gross earnings
taxes ($14 million) on higher CL&P revenues.
Taxes other than income taxes decreased in 2000, primarily
due to lower Connecticut gross earnings taxes ($12 million) and
lower payroll taxes ($7 million).
Gain on Sale of Utility Plant
NU recorded gains on the sale of CL&P’s and WMECO’s owner-
ship interests in Millstone. A corresponding amount of amortiza-
tion expense was recorded in 2001.
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.
Other Income/(Loss), Net
Other income/(loss), net increased primarily due to NU’s recogni-
tion in 2001 of a gain in connection with the sale of the Millstone
nuclear units to DNCI (the pretax amount of $189 million is
included in other income with an offsetting income tax expense
impact of $73 million), lower nuclear related costs in 2001 ($18
million), lower environmental reserve expense in 2001 ($10 mil-
lion), and higher interest and dividend income ($20 million), par-
tially offset by the charge related to the forward purchase of 10.1
million NU common shares ($35 million).
Other income/(loss), net increased in 2000, primarily due to
lower nuclear related costs in 2000 ($53 million), a one-time gain
related to the company’s investment in NEON of Mode 1 ($17
million), and the loss in 1999 on the CL&P assignment of mar-
ket-based contracts to Select Energy ($15 million).
Interest Expense, Net
Interest expense, net decreased in 2001, primarily due to reacqui-
sitions and retirements of long-term debt ($54 million) and high-
er short-term borrowings in 2000 associated with asset transfers
and the Yankee merger ($54 million), partially offset by the inter-
est expense associated with the issuance of rate reduction bonds
and certificates in 2001 ($88 million).
Interest expense, net increased in 2000, primarily due to high-
er short-term borrowings associated with the NGC asset transfer
and the Yankee merger, partially offset by lower long-term debt as
a result of reacquisitions and retirements.
Income Tax Expense
The consolidated statement of income taxes provides a reconcilia-
tion of actual and expected tax expense. The tax effect of tempo-
rary differences is accounted for in accordance with the rate-mak-
ing 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 benefits 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 combined increased in 2001,
primarily due to higher taxable income. The increase in income
taxes as a result of higher taxable income was partially offset by a
reduction in income taxes as a result of the favorable resolution of
certain tax contingencies. For further information regarding
income taxes, see the Consolidated Statements of Income Taxes.
Federal and state income tax expense increased approximately
$63 million in 2000. Significant variances responsible for this
increase include higher pretax earnings ($90 million) and lower
adjustments to the tax valuation allowance ($21 million). Reduc-
tion in flow-through depreciation and amortization ($51 million)
partially offset the overall change.
Preferred Dividends of Subsidiaries
Preferred dividends decreased in 1999, 2000, and 2001 primarily
due to lower preferred stock outstanding.
Extraordinary Loss, Net of Tax Benefit
The extraordinary loss, net of tax benefit, is primarily due to an
after-tax write-off by PSNH of approximately $225 million of
stranded costs under an industry restructuring settlement with the
state of New Hampshire, combined with other positive effects on
PSNH from the discontinuance of SFAS No. 71 ($11 million)
and a loss associated with the then pending sale of certain HWP
assets ($20 million).
Cumulative Effect of Accounting Change, Net of Tax Benefit
The cumulative effect of accounting change, net of tax benefit,
recorded in 2001, represents the effect of the adoption of SFAS
No. 133 ($22 million).
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