Eversource 2001 Annual Report Download - page 38

electricity would qualify for the normal purchases and normal
sales exception provided that certain criteria are met. The compa-
ny has reviewed its capacity contracts and other applicable energy
contracts and has determined that they should not be marked-to-
market under the criteria in the guidance cleared by the FASB on
June 27, 2001.
On December 19, 2001, the FASB issued revised guidance
regarding power purchase and sales agreements. The revised guid-
ance is effective on July 1, 2002. Management is currently evalu-
ating the impacts of the guidance issued by the FASB on Decem-
ber 19, 2001, on its accounting for capacity contracts, however,
management does not expect it to have a material effect on its
consolidated financial statements.
Goodwill and Other Intangible Assets: In June 2001, the FASB
issued SFAS No. 142, “Goodwill and Other Intangible Assets.”
This statement requires that goodwill and indefinite-lived intangi-
ble assets not be amortized effective January 1, 2002. This state-
ment also requires that goodwill will be subject to at least an
annual assessment for impairment by applying a fair value-based
test also effective January 1, 2002. Based on the goodwill and
intangible assets maintained by the NU system companies, man-
agement believes that upon adoption of SFAS No. 142, annual
goodwill amortization expense will be reduced by $9 million.
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. Upon adoption of the impairment test-
ing rules under SFAS No. 142, there may be a cumulative effect of
an accounting change which management has not evaluated at
this time.
Asset Retirement Obligations: Also in June 2001, the FASB
issued SFAS No. 143, “Accounting for Asset Retirement Obliga-
tions.” This statement addresses financial accounting and report-
ing for obligations associated with the retirement of tangible long-
lived assets and the associated asset retirement costs and applies to
(a) all entities and (b) legal obligations associated with the retire-
ment of long-lived assets that result from the acquisition, con-
struction, development, and/or the normal operation of a long-
lived asset, except for certain obligations of lessees. SFAS No. 143
is effective for NU’s 2003 calendar year. Upon adoption of SFAS
No. 143, there may be an impact on NU’s consolidated financial
statements which management has not estimated at this time.
Long-Lived Assets: In August 2001, the FASB issued SFAS No.
144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.” This statement modifies financial accounting and report-
ing for the impairment or disposal of long-lived assets. SFAS No.
144 is effective for NU’s 2002 calendar year. Currently, manage-
ment does not expect the adoption of SFAS No. 144 to have a
material impact on NU’s consolidated financial statements.
D. Investments and Jointly Owned Electric Utility Plant
Regional Nuclear Generating Companies: CL&P, PSNH and
WMECO own common stock in four regional nuclear companies
(Yankee Companies). The NU system’s ownership interests in the
Yankee Companies at December 31, 2001 and 2000, which are
accounted for on the equity method due to the NU system com-
panies’ ability to exercise significant influence over their operating
and financial policies are 49 percent of the Connecticut Yankee
Atomic Power Company (CYAPC), 38.5 percent of the Yankee
Atomic Electric Company (YAEC), 20 percent of the Maine Yan-
kee Atomic Power Company (MYAPC), and 16 percent of the
Vermont Yankee Nuclear Power Corporation (VYNPC). The NU
system’s total equity investment in the Yankee Companies at
December 31, 2001 and 2000, is $52.5 million and $62.5 mil-
lion, respectively. Each Yankee Company owns a single nuclear
generating unit. However, VYNPC was the only unit still in oper-
ation at December 31, 2001.
Seabrook: CL&P and NAEC together have a 40.04 percent
joint ownership interest in Seabrook, a 1,148 megawatt nuclear
generating unit. NAEC sells all of its share of the power generated
by Seabrook to PSNH under the Seabrook Power Contracts.
CL&P and NAEC expect to sell their joint ownership interests in
Seabrook around the end of 2002 through a public auction.
Plant-in-service and the accumulated provision for deprecia-
tion for the NU system’s share of Millstone 2 and 3 and Seabrook
are as follows:
At December 31
(Millions of Dollar) 2001 2000
Plant-in-service:
Millstone 2 $—$962.0
Millstone 3 —2,427.2
Seabrook 912.5 909.3
Accumulated provision for depreciation:
Millstone 2 $—$953.6
Millstone 3 —2,214.3
Seabrook 840.6 821.3
Hydro-Quebec: NU has a 22.66 percent equity ownership
interest, totaling $13.6 million and $15 million at December 31,
2001 and 2000, respectively, in two companies that transmit elec-
tricity imported from the Hydro-Quebec system in Canada.
E. Depreciation
The provision for depreciation is calculated using the straight-line
method based on the estimated remaining useful lives of deprecia-
ble 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 ser-
vice, the original cost of the plant, including costs of removal less
salvage, is charged to the accumulated provision for depreciation.
The depreciation rates for the several classes of electric plant-in-
service are equivalent to a composite rate of 3.1 percent in 2001
and 2000 and 3.3 percent in 1999.
As a result of discontinuing the application of SFAS No. 71,
“Accounting for the Effects of Certain Types of Regulation,” for
CL&P’s and WMECO’s generation businesses in 1999, including
CL&P’s ownership interest in Seabrook, NU recorded a charge to
accumulated depreciation for the nuclear plant in excess of the
estimated fair market value at the time in the amount of approxi-
mately $2 billion and a corresponding regulatory asset was creat-
ed. In 2000, HWP discontinued SFAS No. 71 and recorded a
charge to accumulated depreciation for the plant in excess of fair
value for certain hydroelectric generation assets, which was
recorded as an extraordinary loss. These assets were sold in the
fourth quarter of 2001.
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