Eversource 2006 Annual Report Download - page 50

48 NU 2006 ANNUAL REPORT
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased $1.13
billion in 2005, primarily due to higher purchased power costs for the
Utility Group ($1.34 billion), partially offset by lower costs at NU
Enterprises ($217 million). The $1.34 billion increase for the Utility
Group is due to the NU consolidating impact of eliminating lower
intercompany standard offer purchases from NU Enterprises ($687
million) and higher CL&P and WMECO standard offer supply costs and
increased retail sales ($479 million). The increase is also due to higher
PSNH expenses primarily due to higher energy costs and higher retail
sales ($98 million) and higher Yankee Gas expenses primarily due to
increased gas prices ($80 million).
NU Enterprises’ lower fuel costs of $217 million are primarily due to
lower fuel costs at the wholesale marketing business ($304 million)
primarily 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 in the retail marketing business ($355 million).
Other Operation
Other operation expense increased $120 million in 2005, primarily due
to higher RMR and other power pool related expenses ($78 million). In
addition, administrative and general expenses increased primarily due
to higher pension costs and other benefits ($33 million), employee
termination and benefit plan curtailment costs ($27 million) of which
$21 million relates to regulated distribution that impact earnings,
higher uncollectible expenses ($7 million), and a 2005 environmental
reserve for an MGP site at HWP ($5 million). These increases are
partially offset by lower expenses for NU Enterprises as a result of
decreased costof services primarilyin the services business
($28 million).
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 expense increased $15 million in 2005, primarily due to
increased electric distribution expenses ($14 million) in part due to
heat related and storm activity.
Depreciation
Depreciation increased $10 million in 2005 primarily due to higher
Utility Group depreciation expense ($16 million) resulting from higher
plant balances, partially offset by lower Yankee Gas depreciation
expense ($6 million) as allowed in the January 1, 2005 rate decision,
due to adequate reserve levels for cost of removal.
Amortization
Amortization increased $65 million in 2005 primarily due to acceleration
in the recovery of PSNH’s non-securitized stranded costs as a result of
the positive reconciliation of stranded cost revenues and expenses ($47
million). Amortization also increased due to higher amortization related
to the CL&P’s recovery of transition charges as a result of higher
wholesale revenues ($34 million). These increases are partially offset
by lower WMECO recovery of stranded costs ($18 million) primarily due
to the decrease in WMECO’s transition component of retail rates.
Amortization of Rate Reduction Bonds
Amortization of rate reduction bonds increased $11 million in 2005 due
to the repayment of a higher principal amount as compared to 2004.
Taxes Other Than Income Taxes
Taxes other than income taxes increased $17 million in 2005 primarily
due to higher Connecticut gross earnings tax related to higher CL&P
and Yankee Gas revenues.
Interest Expense, Net
Interest expense, net increased $24 million in 2005, primarily due to
higher interest ($23 million) on long-term debt as a result of new
Utility Group long-term debt issuance of $350 million in 2005. New
long-term debt of $350 million includes the issuance of $200 million
related to CL&P in April and the issuance of $50 million per company
related to Yankee Gas, WMECO, and PSNH in July, August and October,
respectively. Interest expense, net is also higher due to higher short-term
debt levels primarily at NU Parent ($6 million) and higher other interest
for CL&P as a result of the final streetlight refund docket ($3 million).
These increases are partially offset by lower rate reduction bond interest
($11 million) resulting from lower principal balances outstanding at
CL&P, PSNH and WMECO.
Other Income, Net
Other income, net increased $32 million in 2005 primarily due to higher
AFUDC ($8 million), higher investment income ($7 million), a net
decrease in investment write-downs ($7 million), and a higher CL&P
procurement fee income ($6 million).
Income Tax (Benefit)/Expense
Income tax expense decreased $210 million to a benefit of $188 million
in 2005 primarily due to a loss before income tax and greater favorable
flow through adjustments, offset by increases to the deferred state
income tax valuation allowance. The increase in the state valuation
allowance was required due to the magnitude of tax losses limiting the
ability to utilize the state tax benefits within the applicable state tax
carryforward period.