Eversource 2001 Annual Report Download - page 45

The fair value of each stock option grant has been estimated on
the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
2001 2000 1999
Risk-free interest rate 5.34% 6.56% 5.69%
Expected life 10 years 10 years 10 years
Expected volatility 25.47% 26.15% 36.21%
Expected dividend yield 2.11% 1.82% 1.89%
The weighted average grant date fair values of options granted
during 2001, 2000 and 1999 were $6.94, $7.50, and $6.79,
respectively. As of December 31, 2001 and 2000, the weighted
average remaining contractual lives for those options outstanding
are 7.50 years and 7.92 years, respectively.
5. Sale of Customer Receivables
On July 11, 2001, CL&P renewed its accounts receivable securiti-
zation credit line for one year. At that time, the credit line capacity
was reduced from $200 million to $100 million.
As of December 31, 2001, CL&P had no amounts outstand-
ing through the CL&P Receivables Corporation (CRC), a wholly
owned subsidiary of CL&P. As of December 31, 2000, CL&P
had sold accounts receivable of $170 million to a third-party pur-
chaser with limited recourse through the CRC. In addition, at
December 31, 2000, $18.9 million of accounts receivable were
designated as collateral under the agreement with the CRC.
Concentrations of credit risk to the purchaser under the com-
pany’s agreement with respect to the receivables are limited due to
CL&P’s diverse customer base within its service territory.
6. Nuclear Generation Assets Divestiture
On March 31, 2001, CL&P and WMECO consummated the
sale of Millstone 1 and 2 to a subsidiary of Dominion Resources,
Inc., Dominion Nuclear Connecticut, Inc. (DNCI). CL&P,
PSNH and WMECO sold their ownership interests in Millstone
3 to DNCI. This sale included all of the respective joint owner-
ship interests of CL&P, PSNH and WMECO in Millstone 3. The
NU system received approximately $1.2 billion of cash proceeds
from the sale and applied the proceeds to taxes and reductions of
debt and equity at CL&P, PSNH and WMECO. As part of the
sale, DNCI assumed responsibility for decommissioning the three
Millstone units.
In connection with the sale, CL&P and WMECO recorded a
gain in the amount of $642 million which was used to offset
stranded costs. Additionally, NU recorded an after-tax gain of
$115.6 million related to the prior settlement of Millstone 3 joint
owner claims.
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
sale of the Millstone units to DNCI. This application described
and requested DPUC approval for CL&P’s treatment of its share
of the proceeds from the sale. In accordance with Connecticut’s
electric utility industry restructuring legislation, CL&P was
required to utilize any gains from the Millstone sale to offset
stranded costs. There are certain contingencies related to this fil-
ing regarding the potential disallowance of what management
believes were prudently incurred costs. Management believes the
recoverability of these costs is probable. A decision from the
DPUC is expected in the first half of 2002.
New Hampshire: In July 2001, the NHPUC opened a docket
to review the FPPAC cost accruals between August 2, 1999, and
April 30, 2001. Hearings at the NHPUC are expected to be held
during the spring of 2002. Under the Settlement Agreement, the
FPPAC deferrals are recovered as a Part 3 regulatory asset through
a stranded cost recovery charge. At December 31, 2001 and 2000,
PSNH had $183.3 million and $145.9 million, respectively, of
recoverable deferred energy costs deferred under the FPPAC,
excluding previous deferrals of purchases from independent
power producers. Management does not expect the outcome of
these hearings to have a material impact on its earnings.
Massachusetts: During the first quarter of 2000, WMECO
filed its first annual stranded cost reconciliation filing covering the
period March 1, 1998 through December 31, 1999. The hearing
and briefing processes related to this filing were completed during
the second quarter of 2001. A Massachusetts Department of
Telecommunications and Energy (DTE) decision is expected in
the first half of 2002. On March 30, 2001, WMECO also filed its
second annual stranded cost reconciliation with the DTE for cal-
endar year 2000 with the related review and hearing processes
anticipated to be scheduled for the first half of 2002. The cumula-
tive deferral of unrecovered stranded costs, as filed through calen-
dar year 2000, is approximately $4 million. Management believes
these costs are fully recoverable.
WMECO is in the process of finalizing its 2001 annual transi-
tion cost reconciliation which is expected to be filed with the
DTE on March 29, 2002. This filing reconciles the recovery of
stranded generation costs for calendar year 2001. Also included in
this filing are the sales proceeds from WMECO’s portion of Mill-
stone, the impact of securitization and an approximate $13 mil-
lion benefit to ratepayers from WMECO’s nuclear performance-
based ratemaking process. The inclusion of these items as part of
the reconciliation filing allows WMECO to accelerate the recov-
ery of total stranded generation assets. Management anticipates a
formal hearing in 2002 regarding this filing after a period of data
discovery by the DTE and other intervenors.
B. Environmental Matters
The NU system is subject to environmental laws and regulations
intended to mitigate or remove the effect of past operations and
improve or maintain the quality of the environment. As such, the
NU system has active environmental auditing and training pro-
grams and believes it is substantially in compliance with the cur-
rent laws and regulations.
However, the normal course of operations may involve activi-
ties and substances that expose the NU system to potential liabili-
ties of which management cannot determine the outcome. Addi-
tionally, management cannot determine the outcome for
liabilities that may be imposed for past acts, even though such
past acts may have been lawful at the time they occurred. Manage-
43
Return to First pageReturn to First pageReturn to HighlightsReturn to HighlightsReturn to Highlights