Eversource 2006 Annual Report Download

Download and view the complete annual report

Please find the complete 2006 Eversource annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

NORTHEAST UTILITIES
2006 ANNUAL REPORT
The energy to make a difference

Table of contents

  • Page 1
    NORTHEAST UTILITIES 2006 ANNUAL REPORT The energy to make a difference

  • Page 2
    ...customers and communities for over 40 years. Transmission www.transmission-nu.com The Connecticut Light and Power Company www.cl-p.com Yankee Gas Services Company www.yankeegas.com Public Service Company of New Hampshire www.psnh.com Western Massachusetts Electric Company www.wmeco.com Northeast...

  • Page 3
    Northeast Utilities successfully achieved our goals set for 2006 by investing in the energy delivery infrastructure to meet New England's growing needs, which helps our customers and increases shareholder value ENERGY It's our product, and the way we work - with spirit, dedication and pride GROWTH...

  • Page 4
    ... successes in 2006, as we provided greater investment capital for ventures such as our transmission build-out program, and greater focus to realize high-benefit projects such as the environmentally friendly Northern Wood Power Project - now generating electricity for customers in New Hampshire...

  • Page 5
    ... and economic benefits for our customers in New Hampshire, it also reaffirmed our company's ability to provide innovative energy solutions through the construction of regulated generating stations. Charles W. Shivery Chairman, President and Chief Executive Officer NU 2006 ANNUAL REPORT 3

  • Page 6
    NU used state-of-the-art gas-insulated technology at the B/N Plumtree substation, an approach typically used in urban areas where space is limited. Not only did this technology enable us to shrink the "footprint" of the new substation, it also reduced environmental impacts.

  • Page 7
    ... to meeting regional and national reliability standards. These New England East-West projects are in the early design and development stage, with siting activities scheduled to start late in 2007. These infrastructure investments reflect NU's sense of commitment to our customers and communities, the...

  • Page 8
    ... by CL&P's Conservation & Load Management Department and funded by customers, provide incentives and assistance to customers for the installation of energy-efficient equipment. Pictured at Tolland High School are (l to r) Senator John Fonfara, Chairman of the Energy and Technology Committee; William...

  • Page 9
    ... High School replaced and upgraded its lighting equipment and completed many other energy-efficiency upgrades. By participating in CEEF programs administered by CL&P's Conservation & Load Management Department, the town of Tolland, Connecticut, received a $228,573 incentive for installing the energy...

  • Page 10
    ... stumps, and other low-grade wood materials unusable in timber or paper production, the NWPP promotes sustainable forestry practices and creates business for local loggers. Pictured are, from left, Roger Garland, president of Garland Lumber Company, Inc., and Richard Roy, procurement forester, PSNH.

  • Page 11
    ...-burning Merrimack Station in Bow, NH. Resulting legislation, which was supported by this coalition, calls for the installation of scrubber technology at the plant by 2013. These projects demonstrate how NU's ownership of regulated generation helps to generate revenue for the company, meet customer...

  • Page 12
    NU's investment in customer service outfitted our call centers with the latest technology to ensure callers consistently receive the best response as we handle everything from service start-ups to giving advice on efficient energy use. Supervisor Susan Green, standing, and Customer Service Center ...

  • Page 13
    ...- because the difference in customer service often comes down to the way a single phone call is handled. 7 MILLION PAPERLESS TRANSACTIONS In 2006, NU handled 7 million electronic billing and payment transactions, saving our customers and the company time, money and paper. NU 2006 ANNUAL REPORT 11

  • Page 14
    ... Enterprise Zones, it helps boost the local economy while it helps control NU's and customers' costs. Pictured are Waterbury Mayor Michael Jarjura, foreground, and Yankee Gas employees, from left, LNG Plant and Gas Control Manager Thomas Kennedy, LNG Project Director Marc Andrukiewicz, and LNG...

  • Page 15
    ..., company benefits and shareholder benefits all in one package. GAS SUPPLY GUARANTEED The LNG facility provides a reliable and safe supply of natural gas. On the coldest days, when gas prices are highest, this facility will provide a lower-cost supply for our customers. NU 2006 ANNUAL REPORT 13

  • Page 16
    ... tons annually, while providing much-needed support to the state's forestry industry In service December 2006, on schedule and under budget by $3 million, increasing system reliability Killingly Substation $29 million new bulk power transmission substation in northeast Connecticut PROJECTS UNDER...

  • Page 17
    ... report of Deloitte & Touche LLP 52 Consolidated Balance Sheets The company's total assets were $11.3 billion at December 31, 2006 54 2006 FINANCIAL INFORMATION Consolidated Statements of Income/(Loss) and Consolidated Statements of Comprehensive Income/(Loss) The company's net income for 2006...

  • Page 18
    ... 1, 2006, NU completed the sale of NU Enterprises' competitive generation business, which includes 100 percent ownership interest in Northeast Generation Company (NGC) and Holyoke Water Power Company's (HWP) 146 megawatt (MW) Mt. Tom coal-fired plant (Mt. Tom), to affiliates of Energy Capital...

  • Page 19
    ...needs of NU Enterprises. In December of 2006, NU reduced the maximum borrowing limit of its parent company credit facility to $500 million from $700 million as a result of its current cash balance and lower projected liquidity requirements of NU Enterprises' wholesale marketing contracts. There were...

  • Page 20
    ... The lower 2006 NU Enterprises revenues reflect the exit from the NU Enterprises businesses and wholesale contracts in 2006 and 2005. Utility Group: The Utility Group is comprised of CL&P, PSNH, WMECO, and Yankee Gas, and is comprised of transmission, distribution and regulated generation businesses...

  • Page 21
    ... Mt. Tom's contracts with Select Energy through the sale date of November 1, 2006 as well as the gain on the sale of the competitive generation business. NU Enterprises' wholesale marketing business is not included in discontinued operations because it does not meet the accounting criteria for this...

  • Page 22
    ... to the services, parent and other, loss in 2006. NU Enterprises' 2005 loss was primarily due to net after-tax charges of $322.6 million as a result of restructuring and impairment charges, mark-to-market charges, primarily on wholesale electric marketing contracts, and losses on the sale of...

  • Page 23
    ... were partially offset by increases in working capital items, including an accounts payable increase related to timing of payments to standard offer suppliers and a change in year over year accrued taxes. At December 31, 2006, NU maintained a parent company credit facility of $500 million which...

  • Page 24
    ... credit agreement and the ability of its subsidiaries to pay dividends to it. The Federal Power Act limits the payment of dividends by CL&P, PSNH and WMECO to their retained earnings balances, and PSNH is required to reserve an additional amount under its FERC hydroelectric license conditions...

  • Page 25
    ...21, 2006, PSNH converted $89.3 million variable interest rate insured tax-exempt pollution control revenue bonds to a fixed interest rate of 4.75 percent with maturity in 2021. NU Enterprises: Most of the working capital and LOCs required by NU Enterprises are currently used to support the wholesale...

  • Page 26
    .... The decline in generation capital expenditures projected for 2007 is due to the completion in 2006 of the Northern Wood Power Project. The project became operational on December 1, 2006. The total cost was on budget at approximately $74 million. Under the terms of the order issued by the NHPUC...

  • Page 27
    ... Massachusetts service location of SECI-CT was sold. In April of 2006, NU Enterprises sold Woods Electrical - Services. In May of 2006, SESI was sold. In connection with the sale of the retail marketing business, the competitive generation business and certain of the energy services businesses, NU...

  • Page 28
    ... provides for a true-up to actual costs, which ensures that NU's transmission business recovers its total transmission revenue requirements, including the allowed ROE. FERC ROE Decision: On October 31, 2006, the FERC issued its decision on the RTO ROE and incentives for the New England transmission...

  • Page 29
    ...federally mandated congestion cost (FMCC) charges. The legislation requires regulators to a) implement near-term measures as soon as possible and b) commence new request for proposals (RFP) to build customerside distributed resources and contracts for new or repowered larger generating facilities in...

  • Page 30
    ...reduction to CL&P's 2006 income tax expense with an increase to CL&P's earnings by the same amount. Procurement Fee Rate Proceedings: CL&P was allowed to collect a fixed procurement fee of 0.50 mills per KWH from customers who purchase Transitional Standard Offer (TSO) service through 2006. One mill...

  • Page 31
    ... 2007 and updated wholesale transmission costs. Supplier of last resort rates will vary, and total bills for those customers increased by 19 percent on January 1, 2007. CL&P is fully recovering the cost of its standard service supply. CTA and SBC Reconciliation: The Competitive Transition Assessment...

  • Page 32
    ... REC sales revenues. DS Rate Case: On May 30, 2006, PSNH filed a petition with the NHPUC requesting an increase in its delivery service (DS) rate by approximately $50 million, the approval of a transmission cost tracking mechanism, a decrease in its stranded cost charge and energy charge to...

  • Page 33
    ... and plant closure cost obligations to the Yankee Companies. The Yankee Companies collect decommissioning and closure costs through wholesale, FERC-approved rates charged under power purchase agreements with several New England utilities, including NU's electric utility companies. A summary of...

  • Page 34
    ... an updated estimate of the cost of completing the decommissioning of its plant. On January 31, 2006, the FERC issued an order accepting the rate increase, effective on February 1, 2006, subject to refund. On July 31, 2006, the FERC approved a settlement agreement with the DPUC, the Massachusetts...

  • Page 35
    ... the sale of competitive retail and wholesale gas and electricity services, electric generation and energy services, primarily in New England, New York and PJM. Implementation of the decision to exit all of its competitive businesses has reduced significantly the risk profile of NU Enterprises. NU...

  • Page 36
    ... in fair value recorded: Fuel, purchased and net interchange power Operating revenues Changes in model-based assumption included in operating revenues Fair value of wholesale contracts outstanding at the end of the year Total Portfolio Fair Value Year Ended December 31, 2006 2005 $(230.1) 118.9 (15...

  • Page 37
    ... 2006, the competitive generation assets owned by NU Enterprises were subject to certain operational risks, including but not limited to the length of scheduled and non-scheduled outages, bidding and scheduling with various ISOs, environmental issues and fuel costs. Competitive generation activities...

  • Page 38
    ...," and that meets the criteria for discontinued operations. At December 31, 2006, based on the status of exiting the NU Enterprises businesses, management concluded that discontinued operations presentation is appropriate for NGC, Mt. Tom, SESI, Woods Electrical - Services, SECI-NH and Woods Network...

  • Page 39
    ... revenues when these transactions settled. The settlement of wholesale non-trading derivative contracts for the sale of energy or gas by the Utility Group that are related to customers' needs are recorded net in operating expenses. For further information regarding the accounting for these contracts...

  • Page 40
    ...that estimate could significantly impact operating revenues and earnings. Derivative Accounting: Most of the contracts comprising Select Energy's competitive wholesale marketing and generation businesses were classified as derivatives, as were certain Utility Group contracts for the purchase or sale...

  • Page 41
    ... distribution companies of entering into long-term contracts for capacity or contracts to purchase renewable energy products from new generating plants. CL&P has submitted filings to the DPUC related to the accounting implications of entering into these long-term contracts. If CL&P were required to...

  • Page 42
    ... benefit (K-Vantage Plan) rather than under the Pension Plan. The approval of the new plan resulted in the recording of an estimated precapitalization, pre-tax curtailment expense of $6.2 million in 2005, as a certain number of employees hired before that date were expected 40 NU 2006 ANNUAL REPORT

  • Page 43
    ... with nineteen former employees, NU was ordered by the court to modify its Pension Plan to include special retirement benefits for fifteen of these former employees retroactive to the dates of their retirement and provide increased future monthly benefit payments. NU recorded $2.1 million in...

  • Page 44
    ...represents the increase/(decrease) to the Pension Plan's, SERP's and PBOP Plan's reported cost as a result of a change in the following assumptions by 50 basis points (in millions): Pension Plan Cost Assumption Change 2006 2005 Lower long-term $10.2 $10.0 rate of return Lower discount rate $15.0 $15...

  • Page 45
    ...the consolidated balance sheets represent management's best estimate of the liability for environmental costs based on current site information from site assessments and remediation estimates. These liabilities are estimated on an undiscounted basis. PSNH and Yankee Gas have rate recovery mechanisms...

  • Page 46
    ...related to the estimated future annual Utility Group or NU Enterprises costs that could trigger a change in terms and conditions, such as acceleration of payment obligations. (f) Amounts are not included on NU's consolidated balance sheets. (g) Amount represents open purchase orders, excluding those...

  • Page 47
    ... $485 million is primarily due to the pass through of higher energy supply costs ($566 million) and higher CL&P FMCC charges ($36 million), partially offset by lower PSNH SCRC revenues ($85 million) and lower wholesale revenues primarily due to the expiration or sale of CL&P NU 2006 ANNUAL REPORT 45

  • Page 48
    ... program. This increase is partially offset by lower NU Enterprises' depreciation ($4 million) from the competitive businesses not classified as discontinued operations. Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expenses decreased $898 million in 2006...

  • Page 49
    ... through of higher energy supply costs ($447 million), CL&P FMCC charges ($235 million) and higher wholesale revenues ($69 million). The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections collected from customers in future...

  • Page 50
    ...due to lower sales volumes. Additionally, fuel costs are lower due to the mark-to-market accounting for certain wholesale contracts related to the business being exited ($268 million) as a result of netting revenues with expenses. These decreases are partially offset by higher fuel costs and volumes...

  • Page 51
    ... of Accounting Change, Net of Tax Benefit A cumulative effect of accounting change, net of tax benefit ($1 million) was recorded in the fourth quarter of 2005 in connection with the adoption of FIN 47, which required NU to recognize a liability for the fair value of AROs. NU 2006 ANNUAL REPORT 49

  • Page 52
    ... annual report. These financial statements, which were audited by Deloitte & Touche LLP, have been prepared in conformity with accounting principles generally accepted in the United States of America using estimates and judgments, where required, and giving consideration to materiality. Management...

  • Page 53
    ...'s rates following the sale of the generation business. As discussed in Note 6, the Company adopted Statement of Financial Accounting Standard No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans. Hartford, Connecticut February 26, 2007 NU 2006 ANNUAL REPORT 51

  • Page 54
    ...for uncollectible accounts of $22,369 in 2006 and $24,444 in 2005 Unbilled revenues Fuel, materials and supplies Marketable securities - current Derivative assets - current Prepayments and other Assets held for sale Property, Plant and Equipment: Electric utility Gas utility Competitive energy Other...

  • Page 55
    ...: Notes payable to banks Long-term debt - current portion Accounts payable Accrued taxes Accrued interest Derivative liabilities - current Counterparty deposits Other Liabilities of assets held for sale Rate Reduction Bonds Deferred Credits and Other Liabilities: Accumulated deferred income taxes...

  • Page 56
    ...Taxes Gain/(Loss) from Sale of Discontinued Operations Income Tax Expense Income from Discontinued Operations Income/(Loss) Before Cumulative Effect of Accounting Change, Net of Tax Benefit Cumulative effect of accounting change, net of tax benefit of $689 Net Income/(Loss) Basic Earnings/(Loss) Per...

  • Page 57
    ..., net Tax deduction for stock options exercised and Employee Stock Purchase Plan disqualifying dispositions Capital stock expenses, net Adjustment to record funded status of pension, SERP and other postretirement plans (SFAS No. 158) Other comprehensive loss Balance as of December 31, 2006 1,112...

  • Page 58
    ... energy costs Pension expense Wholesale contract buyout payments Regulatory refunds Derivative assets and liabilities Deferred contractual obligations Other non-cash adjustments Other sources of cash Other uses of cash Changes in current assets and liabilities: Receivables and unbilled revenues, net...

  • Page 59
    ... nuclear fuel disposal costs Change in Fair Value Unamortized premium and discount, net Total Long-Term Debt Less: Amounts due within one year Long-Term Debt, Net Total Capitalization The accompanying notes are an integral part of these consolidated financial statements. NU 2006 ANNUAL REPORT 57

  • Page 60
    ... Northeast Generation Services Company (NGS), the remaining contracts of the former Woods Electrical Co., Inc. (Woods Electrical - Other), the E. S. Boulos Company (Boulos) and the Connecticut division of Select Energy Contracting, Inc. (SECI-CT), which are collectively referred to as NU Enterprises...

  • Page 61
    ... are applied to customers' use of energy to calculate a bill. In general, rates can only be changed through formal proceedings with the state regulatory commissions. However, certain Utility Group companies utilize regulatory commission-approved tracking mechanisms to track NU 2006 ANNUAL REPORT 59

  • Page 62
    ... interchange power. Select Energy reported the settlement of all derivative wholesale contracts, including any remaining full requirements sales contracts in fuel, purchased and net interchange power as a result of applying mark-to-market accounting to those contracts. Certain competitive generation...

  • Page 63
    ..., PSNH fully recovered these costs. The regulated rates of Yankee Gas include a purchased gas adjustment (PGA) clause under which gas costs above or below base rate levels are charged to or credited to customers. Differences between the actual $2,449.1 $2,483.9 Additionally, the Utility Group had...

  • Page 64
    ... the recovery of hardship protection costs. At December 31, 2005, the $1.8 million balance was included in the CL&P CTA, GSC and SBC regulatory liability. Deferred Benefit Costs: At December 31, 2006, the company implemented SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other...

  • Page 65
    ..., CL&P requested from the Internal Revenue Service (IRS) a Private Letter Ruling (PLR) regarding the treatment of unamortized investment tax credits (UITC) and excess deferred income taxes (EDIT) related to generation assets that were sold. On April 18, 2006, the IRS At December 31, 2006, NU had...

  • Page 66
    ... Accounting Policies - Other Income, Net," to the consolidated financial statements. J. Jointly Owned Electric Utility Plant Regional Nuclear Companies: At December 31, 2006, CL&P, PSNH and WMECO own common stock in three regional nuclear companies (Yankee Companies). Each of the Yankee Companies...

  • Page 67
    ... effect of accounting change of $1 million, net of tax benefit, related to NU Enterprises. Because the Utility Group companies are cost-of-service rate regulated entities, these companies utilized regulatory accounting in accordance with SFAS No. 71, and the Utility Group companies' AROs are...

  • Page 68
    ... $ 0.91 $ 0.91 Other Income: Investment income CL&P procurement fee AFUDC - equity funds Conservation and load management incentive Equity in earnings of regional nuclear generating and transmission companies Gain on sale of RMS Gain on sale of Globix Other Total Other Income Other Loss: Investment...

  • Page 69
    ... circumstances change, collectibility estimates are adjusted accordingly. Receivable balances are written-off against the provision for uncollectible accounts when these balances are deemed to be uncollectible. In November of 2006, the DPUC issued an order allowing CL&P and Yankee Gas to accelerate...

  • Page 70
    ...Select Energy New York, Inc. operations. Restructuring charges totaling $6.7 were recorded in 2005 for consulting fees, legal fees, employee-related and other costs. Retail Marketing: On June 1, 2006, NU Enterprises completed the sale of the retail marketing business to Hess. In 2006, NU Enterprises...

  • Page 71
    ... for Sale Status as of December 31, December 31, Discontinued 2006 2005 Operations At December 31, 2006, management continues to believe the wholesale marketing business, NGS, Woods Electrical - Other, Boulos, and SECI-CT do not meet the held for sale criteria under applicable accounting guidance...

  • Page 72
    ... the Utility Group and NU Parent credit agreements, NU and its subsidiaries may borrow at variable rates plus an applicable margin based upon the higher of Standard and Poor's (S&P) or Moody's Investors Service (Moody's) credit ratings. The weighted average interest rate on NU's notes payable to...

  • Page 73
    ... of Select Energy's wholesale marketing business that the company is in the process of exiting. These contracts include wholesale short-term and long-term electricity supply and sales contracts, which include contracts to sell electricity to utilities under full requirements contracts, a contract to...

  • Page 74
    ... the competitive generation business. Utility Group - Gas - Non-Trading: Yankee Gas' non-trading derivatives consist of peaking supply arrangements to serve winter load obligations and firm retail sales contracts with options to curtail delivery. These contracts are subject to fair value accounting...

  • Page 75
    ...retirement and provide increased future monthly benefit payments. NU recorded $2.1 million in termination benefits related to this litigation in 2004 and made a lump sum benefit payment totaling $1.5 million to these former employees. NU 2006 ANNUAL REPORT 73 6. Employee Benefits A.Pension Benefits...

  • Page 76
    ... available for employees retiring from NU who have met specified service requirements. For current employees and certain retirees, the total benefit is limited to two times the 1993 per retiree health care cost. These costs are charged to expense over the estimated work life of the employee. NU uses...

  • Page 77
    ... of the new 401(k) benefit were much lower than expected and is reflected above as an increase to the obligation. For the Pension Plan, the company amortizes its transition obligation over the remaining service lives of its employees as calculated on an individual operating company basis and...

  • Page 78
    ... the plans' year end funded status: At December 31, Pension Benefits and SERP Postretirement Benefits 2006 2005 2006 2005 5.90% 4.00% N/A 5.80% 4.00% N/A 5.80% N/A 9.00% 5.65% N/A 10.00% Balance Sheets Discount rate Compensation/progression rate Health care cost trend rate 76 NU 2006 ANNUAL REPORT

  • Page 79
    ... Percentage Point Decrease $ (1.0) $ (14.6) Asset Category Equity Securities: United States Non-United States Emerging markets Private Debt Securities: Fixed income High yield fixed income Real Estate NU's investment strategy for its Pension Plan and PBOP Plan is to maximize the long-term rate of...

  • Page 80
    ...'s benefit payments. Contributions: Currently, NU's policy is to annually fund the Pension Plan in an amount at least equal to that which will satisfy the requirements of the Employee Retirement Income Security Act and Internal Revenue Code. For the PBOP Plan, it is currently NU's policy to annually...

  • Page 81
    ...stock, respectively, registered for issuance under the Incentive Plan. Restricted Shares and RSUs: NU has granted restricted shares under the 2002, 2003 and 2004 incentive programs that are subject to threeyear and four-year graded vesting schedules. NU has granted RSUs under the 2004, 2005 and 2006...

  • Page 82
    .... An income tax rate of 40 percent is used to estimate the tax effect on total share-based payments determined under the fair value-based method for all awards. E. Other Retirement Benefits NU provides benefits for retirement and other benefits for certain current and past company officers. The...

  • Page 83
    ... reporting unit was estimated using both discounted cash flow methodologies and an analysis of comparable companies and transactions. As a result of NU's 2005 announcements to exit the competitive wholesale and retail marketing businesses, the competitive generation business and the energy services...

  • Page 84
    ...The DPUC has hired a consulting firm who has begun an audit of Yankee Gas' previously recovered PGA costs. The company expects that the audit will be completed in the first half of 2007. Management believes the unbilled sales and revenue adjustments and resulting charges to customers through the PGA...

  • Page 85
    .... At December 31, 2006, in addition to the 51 sites, there are 11 sites for which there are unasserted claims; however, any related remediation costs are not probable or estimable at this time. NU's environmental liability also takes into account recurring costs of managing hazardous substances and...

  • Page 86
    .... The Yankee Companies collect decommissioning and closure costs through wholesale, FERC-approved rates charged under power purchase agreements with several New England utilities, including NU's electric utility companies. These companies in turn pass these costs on to their customers through state...

  • Page 87
    ... and plant closure cost obligations to the Yankee Companies. The Yankee Companies collect decommissioning and closure costs through wholesale, FERCapproved rates charged under power purchase agreements with several New England utilities, including NU's electric utility companies. A summary of...

  • Page 88
    ... an updated estimate of the cost of completing the decommissioning of its plant. On January 31, 2006, the FERC issued an order accepting the rate increase, effective on February 1, 2006, subject to refund. On July 31, 2006, the FERC approved a settlement agreement with the DPUC, the Massachusetts...

  • Page 89
    ..., and various claims Specific indemnifications in connection with the sale of SESI for estimated costs to complete or modify specific projects Indemnifications to lenders for payment of shortfalls in the event of early termination of government contracts Surety bonds covering certain projects Not...

  • Page 90
    ... in the event that NU's credit ratings are downgraded below investment grade. In July 2006, under its former SESI guarantee, NU was required to purchase for $10.4 million the contract payments relating to the only guaranteed SESI project that was behind schedule. In 2006, NU recorded losses totaling...

  • Page 91
    ... stock not subject to mandatory redemption Long-term debt - First mortgage bonds Other long-term debt Rate reduction bonds (Millions of Dollars) United States equity securities Non-United States equity securities Fixed income securities Totals Amortized Cost $ 21.2 7.2 84.7 $113.1 Estimated...

  • Page 92
    ... other income, net on the accompanying consolidated statements of income/(loss). NU utilizes the specific identification basis method for SERP and nonSERP securities and the average cost basis method for the WMECO prior spent nuclear fuel trust to compute the realized gains and losses on the sale of...

  • Page 93
    ... credit agreement and the ability of its subsidiaries to pay dividends to it. The Federal Power Act limits the payment of dividends by CL&P, PSNH and WMECO to their retained earnings balances, and PSNH is required to reserve an additional amount under its FERC hydroelectric license conditions...

  • Page 94
    ... income into earnings (specifically included in other operation expense) due to discontinuation of cash flow hedge accounting because the retail marketing contracts hedged beyond June 1, 2006 were no longer probable of physical delivery due to the retail business being sold. In March of 2006, CL...

  • Page 95
    ... sets forth the components of basic and diluted EPS: (Millions of Dollars, except share information) Income/(loss) from continuing operations Income from discontinued operations Income/(loss) before cumulative effect of accounting change Cumulative effect of accounting change, net of tax benefit Net...

  • Page 96
    .... Utility Group revenues from the sale of electricity and natural gas are primarily derived from residential, commercial and industrial customers and are not dependent on any single customer. The NU Enterprises merchant energy business segment includes: 1) Select Energy, consisting of the wholesale...

  • Page 97
    ... business, including full requirements sales contracts and intercompany revenues, in fuel, purchased and net interchange power. This presentation is a result of applying mark-to-market accounting to those contracts due to the decision to exit the wholesale marketing business. NU 2006 ANNUAL REPORT...

  • Page 98
    ... effect of accounting change, net of tax benefit Net income/(loss) Total assets (2) Cash flows for total investments in plant (1) Includes PSNH generation activities. (2) Information for segmenting total assets between electric distribution and transmission is not available at December 31, 2006 or...

  • Page 99
    ..., net Income tax benefit Loss from continuing operations Income/(loss) from discontinued operations Loss before cumulative effect of accounting change Cumulative effect of accounting change, net of tax benefit Net loss NU Enterprises - For the Year Ended December 31, 2005 Merchant Services Energy...

  • Page 100
    ...and amortization Other operating expenses Operating loss Interest expense Interest income Other loss, net Income tax benefit Loss from continuing operations Income from discontinued operations Net (loss)/income NU Enterprises - For the Year Ended December 31, 2004 Merchant Services Energy and Other...

  • Page 101
    ... Operating Revenues Operating Loss Loss from Continuing Operations (Loss)/Income from Discontinued Operations Cumulative effect of accounting change, net of tax benefit Net Loss Basic ... - (0.89) $ (0.30) $ 0.09 - (0.21) $ (0.77) $ 0.04 - (0.73) $ (0.11) 0.02 (0.01) (0.10) $ NU 2006 ANNUAL REPORT 99

  • Page 102
    ...Operations Income from Discontinued Operations Cumulative Effects of Accounting Changes, Net of Tax Benefits Net Income/(Loss) Basic Common Shares Outstanding (Average) Fully Diluted Common Shares Outstanding (Average) Dividends Per Share Market Price - Closing (high) (b) Market Price - Closing (low...

  • Page 103
    ...,550 Utility Group Customers: (Average) Residential Commercial Industrial Wholesale Total Electric Gas Total Utility Group - Average Annual Use Per Residential Customer (KWH) Utility Group - Average Annual Bill Per Residential Customer Utility Group - Average Revenue Per KWH: Residential Commercial...

  • Page 104
    ... Power Company PSNH - Public Service Company of New Hampshire WMECO - Western Massachusetts Electric Company Yankee - Yankee Gas Services Company Charles W. Shivery Chairman, CL&P, PSNH, WMECO and Yankee Competitive Company Officers NUEI - NU Enterprises, Inc. Select - Select Energy, Inc. William...

  • Page 105
    ...shares. Northeast Utilities is the parent company of the NU system (collectively referred to as NU). NU operates New England's largest energy delivery system with 1,885,729 electric customers in Connecticut, New Hampshire and Massachusetts and 199,377 natural gas customers in Connecticut. Current NU...

  • Page 106
    P.O. Box 270 Hartford, Connecticut 06141-0270 1 800.286.5000 www.nu.com