Eversource 2006 Annual Report Download - page 48

46 NU 2006 ANNUAL REPORT
market-based contracts ($41 million). The tracking mechanisms allow
for rates to be changed periodically with overcollections refunded
to customers or undercollections collected from customers in
future periods.
The distribution component of these electric distribution businesses
and the retail transmission component of PSNH which flow through to
earnings increased $14 million primarily due to an increase in regulated
retail rates, partially offset by a decrease in retail sales. The distribution
retail electric sales were negatively affected by weather impacts in 2006
as compared with 2005 and by price elasticity driven by higher energy
prices in 2006. Retail KWH electric sales decreased by 4.0 percent in 2006
compared with 2005 (a 1.6 percent decrease on a weather normalized
basis). Absent the impacts of weather, management believes the
decline in sales is primarily due to higher energy prices in 2006.
The increase in electric distribution revenues is partially offset by lower
gas distribution revenues of $49 million primarily due to lower sales
volumes. Firm gas sales decreased 11.2 percent in 2006 compared with
2005 primarily due to unseasonably warm weather in January, November
and December of 2006 and customer reaction to higher energy prices.
On a weather normalized basis, firm gas sales decreased 3.2 percent.
Transmission businessrevenues increased $48 million primarily due to
ahigher transmission investment base and higher operating expenses
which are recovered under FERC-approved transmission tariffs.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expenses decreased
$898 million in 2006 primarily due to lower costs at NU Enterprises
($1.46 billion), partiallyoffset by higher purchased power costs for
the Utility Group distribution business ($556 million).
NU Enterprises’lower costs of $1.46 billion are primarily due to the
exit from significant components of the competitive businesses which
includes lower mark-to-market expenses of $414 million.
The $556 million increase in distribution purchased power costs is
primarily due to higher standard offer supply costs for CL&P and
WMECO ($523 million) and higher expenses for PSNH primarily due
to higher energy costs ($72 million). The increase in distribution
purchased power costs is partially offset by lower Yankee Gas
expenses as a result of lower gas sales ($39 million).
Other Operation
Other operation expenses increased $71 million in 2006 primarily
due to higher Utility Group distribution and transmission business
expenses ($80 million), partially offset by lower NU Enterprises’
expenses ($10 million).
Higher distribution and transmission expenses of $80 million are
primarily due to higher expenses that are recovered in the distribution
regulatory rate tracking mechanisms. These costs include higher
distribution reliability must run (RMR) costs and other power pool
related expenses ($63 million) and higher CL&P conservation and load
management expenses of $15 million. Distribution and transmission
general and administrative expenses increased primarily due to higher
employee related costs ($19 million), higher regulatory commission,
outside service and other administrative costs ($6 million), partially
offset by the absence of 2005 employee termination and benefit plan
curtailment costs ($23 million) of which $21 million relates to regulated
distribution that impact earnings.
NU Enterprises’ expenses decreased $10 million primarily due to the
exit from the competitive businesses ($88 million), partially offset by
acharge to record the retail marketing business at its fair value less
cost to sell ($53 million) and a donation of $25 million to the NU
Foundation.
Restructuring and Impairment Charges
See Note 2, “Restructuring and Impairment Charges,” to the consolidated
financial statements for a description and explanation of these charges.
Maintenance
Maintenance expenses increased $16 million in 2006 primarily due to
higher PSNH generation costs ($7 million) primarily as a result of a
planned overhaul of a generating plant in 2006 and higher CL&P
maintenance costs ($6 million) primarily due to storm-related tree
trimming and overhead line maintenance expenses.
Depreciation
Depreciation increased $16 million in 2006 primarilydue tohigher
distribution and transmission depreciation expense ($19 million) as
a result of higher plant balances from the ongoing construction
program. This increase is partially offset by lower NU Enterprises’
depreciation ($4 million) from the competitive businesses not classified
as discontinued operations.
Amortization
Amortization decreased $187 million in 2006 for the Utility Group
distribution business primarily due to PSNH distribution ($92 million),
CL&P distribution ($71 million) and WMECO distribution ($24 million).
The PSNH decrease is primarily due to completing the recovery of its
non-securitized stranded costs as of June 30, 2006. The CL&P decrease
is primarily due to lower amortization related to distribution’s recovery
of transition charges ($70 million). The WMECO decrease is primarily
due to the deferral of transmission costs ($18 million), mainly as a result
of higher RMR costs, and the deferral of transition costs ($5 million) as a
result of lower transition revenues and higher transition costs.
Amortization of Rate Reduction Bonds
Amortization of rate reduction bonds increased $12 million in 2006.
The higher portion of principal within the rate reduction bonds payment
results in a corresponding increase in the amortization of regulatory
assets.
Taxes Other Than Income Taxes
Taxes other than income taxes increased $3 million in 2006 primarily
due to higher distribution and transmission property taxes ($7 million)
and higher Connecticut gross earnings tax ($3 million) primarily due to
higher CL&P distribution revenues. These increases are partially offset
by lower NU Enterprises’ other taxes ($4 million) from the competitive
businesses not classified as discontinued operations.