Eversource 2006 Annual Report Download - page 21

NU 2006 ANNUAL REPORT 19
WMECO’s distribution earnings in 2006 were approximately the same as
2005 due to a $3 million distribution rate increase that took effect on
January 1, 2006 offset by a 4.2 percent decrease in sales, and higher
operating and interest expenses. WMECO’s Regulatory ROE for 2006
was approximately 9.6 percent and in 2007, WMECO expects the ROE
to be between 9 and 10 percent in 2007 and 2008.
The decline in Yankee Gas earnings from 2005 to 2006 was due
primarily to unseasonably warm weather in the early and late months
of 2006. Overall firm sales of natural gas in 2006 were 11.2 percent
lower than 2005 and Yankee Gas’ Regulatory ROE was approximately
5.9 percent in 2006 compared to its allowed ROE of 9.9 percent. In
2007, Yankee Gas expects its earnings and ROE to improve as a result
of its request for a distribution rate increase that was filed with the DPUC
on December 29, 2006 for new rates to be effective on July 1, 2007.
The increase in transmission earnings in 2006 is due to higher levels
of investment in the transmission system, particularly in Connecticut,
partially offset by the October 31, 2006 FERC ROE decision.
For the Utility Group, a summary of changes in CL&P, PSNH and
WMECO electric kilowatt-hour (KWH) sales and Yankee Gas firm natural
gas sales for 2006 as compared to 2005 on an actual and weather
normalized basis is as follows:
Electric Firm Natural Gas
CL&P PSNH WMECO Total Yankee Gas
Weather Weather Weather Weather Weather
Normalized Normalized Normalized Normalized Normalized
Percentage Percentage Percentage Increase/ Percentage Percentage Percentage Percentage Percentage Percentage
Decrease Decrease Decrease (Decrease) Decrease Decrease Decrease Decrease Decrease Decrease
Residential (6.6)% (2.1)% (2.4)% 0.5% (5.3)% (1.3)% (5.6)% (1.5)% (13.9)% (2.9)%
Commercial (3.0)% (1.5)% — 1.4% (2.6)% (1.3)% (2.3)% (0.8)% (12.7)% (2.7)%
Industrial (5.6)% (4.8)% (1.9)% (1.1)% (5.3)% (4.8)% (4.5)% (3.8)% (6.8)% (3.9)%
Other (4.7)% (4.7)% (5.4)% (5.4)% (0.5)% (0.5)% (4.4)% (4.4)% N/A N/A
Total (4.9)% (2.3)% (1.3)% 0.5% (4.2)% (2.1)% (4.0)% (1.6)% (11.2)% (3.2)%
Regulated electric sales in 2006 declined due to lower use per
customer as a result of a combination of milder summer and winter
weather in 2006, compared with 2005, and customer reaction to higher
energy prices. Firm gas sales in 2006 were lower largely as a result of
milder weather in 2006. The company forecasts retail sales growth for
CL&P, PSNH and WMECO for the period 2007 through 2011 to be
1.1 percent, 2.3 percent and 0.1 percent, respectively.
NU Enterprises: The companies that have been included in NU
Enterprises are reported in two business segments: the merchant
energy business segment and the energy services business segment.
At December 31, 2006, the one remaining merchant energy business
is Select Energy’s wholesale marketing contracts, while the energy
services business segment is comprised of 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). NGS provides maintenance, operations and
testing services under two contracts that remain to be exited. Boulos
provides third-party electrical services. Woods Electrical – Other and
SECI-CT are in the wind down stage. The remainder of the NU
Enterprises businesses were exited in 2005 and 2006.
NU’s consolidated statements of income/(loss) for all periods presented
classify the operations for the following as discontinued operations:
• NGC, which was sold in November of 2006 to ECP,
• Mt. Tom, which was sold in November of 2006 to ECP,
• Select Energy Services, Inc. (SESI), which was sold in May of 2006 to
Ameresco, Inc. (Ameresco),
• The services businessof Woods Electrical Co., Inc. (Woods Electrical
–Services), which was sold in April of 2006,
• The New Hampshire division of Select Energy Contracting, Inc.
(SECI-NH), which was sold in November of 2005, and
• Woods Network Services, Inc. (Woods Network), which was sold in
November of 2005.
Asummary of NU Enterprises’ earnings/(losses) for 2006, 2005 and
2004 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2006 2005 2004
Merchant Energy $268.8 $(360.6) $(17.3)
Energy Services and Other (57.5) (37.6) 2.2
Total NU Enterprises Net Income/(Loss) $211.3 $(398.2) $(15.1)
Asummary of NU Enterprises’(losses)/earnings from continuing
operations and discontinued operations for 2006, 2005 and 2004 is
as follows:
For the Years Ended December 31,
(Millions of Dollars) 2006 2005 2004
Continuing Operations:
Merchant Energy $(93.5) $(397.0) $(60.5)
Energy Services and Other (32.5) (14.3) (1.4)
(126.0) (411.3) (61.9)
Discontinued Operations:
Merchant Energy 362.3 37.4 43.2
Energy Services and Other (25.0) (23.3) 3.6
337.3 14.1 46.8
Cumulativeeffect of accounting change —(1.0) —
Net Income/(Loss) $211.3 $(398.2) $(15.1)
Merchant energy earnings included in discontinued operations relate to
NGC’s and 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 presentation. Retail marketing business
results are also not included in discontinued operations, as separate
financial information for the retail marketing business is not available
due to the manner in which the merchant energy business operated