Eversource 2006 Annual Report Download - page 60

58 NU 2006 ANNUAL REPORT
1. Summary of Significant Accounting Policies
A. About Northeast Utilities
Consolidated: Northeast Utilities (NU or the company) is the parent
company of the companies comprising the Utility Group and NU
Enterprises. Until February 8, 2006, NU was registered with the
Securities and Exchange Commission (SEC) as a holding company
under the Public Utility Holding Company Act of 1935 (PUHCA). On
February 8, 2006, PUHCA was repealed. NU is now registered with
the Federal Energy Regulatory Commission (FERC) as a public utility
holding company under PUHCA 2005. Arrangements among the Utility
Group, NU Enterprises and other NU companies, outside agencies and
other utilities covering interconnections, interchange of electric power
and sales of utility property are subject to regulation by the FERC
and/or the SEC. The Utility Group is subject to further regulation for
rates, accounting and other matters by the FERC and/or applicable
state regulatory commissions.
Several wholly-owned subsidiaries of NU provide support services
for NU’s companies. Northeast Utilities Service Company (NUSCO)
provides centralized accounting, administrative, engineering, financial,
information technology, legal, operational, planning, purchasing,
and other services to NU’s companies. Three other subsidiaries
construct, acquireor lease some of the property and facilities used
by NU’s companies.
In 2006, NU Enterprises paid $25 million tothe NU Foundation, Inc.
(Foundation), an independent not-for-profit charitable entity designed
toinvestin projects that emphasize newjob creation, workforce training
and education, and a clean and healthy environment. The board of
directors of the Foundation is comprised of certain NU officers.
Utility Group: The Utility Group furnishes franchised retail electric
servicein Connecticut, NewHampshireand Massachusetts through
three companies: The Connecticut Light and Power Company (CL&P),
Public Service Company of New Hampshire (PSNH) and Western
Massachusetts Electric Company (WMECO). Another Utility Group
company is Yankee Gas Services Company (Yankee Gas), which owns
and operates Connecticut’s largest natural gas distribution system.
The Utility Group includes three reportable business segments: the
regulated electric utility distribution segment (which includes PSNH’s
generation activities), the regulated gas utility distribution segment
and the regulated electric utility transmission segment.
NU Enterprises: NU Enterprises, Inc. is the parent company of Select
Energy, Inc. (Select Energy), 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. For information
regarding the exit from these businesses, see Note 3, “Assets Held
for Sale and Discontinued Operations,” to the consolidated financial
statements. For further information regarding NU Enterprises’
businesssegments, see Note16, “Segment Information,” to the
consolidated financial statements.
B. Presentation
The consolidated financial statements of NU and of its subsidiaries,
as applicable, include the accounts of all their respective subsidiaries.
Intercompany transactions have been eliminated in consolidation.
The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Certain reclassifications of prior period data included in the accompanying
consolidated financial statements have been made to conform with the
current years’ presentation.
In 2005, wholesale contract market changes, net were separately
stated on the consolidated statement of income/(loss) to increase
the transparency of the mark-to-market related to Select Energy’s
wholesale marketing portfolio. As the disclosure of this amount is
currently not as meaningful as it was in 2005, $425.4 million has been
reclassified to fuel, purchased and net interchange power on the
accompanying consolidated statement of income/(loss) for the year
ended December 31, 2005. For further information regarding Select
Energy’s derivatives, see Note 5, “Derivative Instruments,” to the
consolidated financial statements.
In the company’s consolidated statements of income/(loss) for the
years ended December 31, 2005 and 2004, the classification of
expense amounts relating to costs not recoverable from regulated
customersand certain other cost and income items previously included
in other income, net was changed to a preferable presentation to
no longer reflect these costs as they would appear for rate-making
purposes. These amounts, which werereclassified to other operation
expense and depreciation expense totaled $4.6 million and $2.2 million,
respectively, for the year ended December 31, 2005. Similar amounts
for the year ended December 31, 2004 totaled $0.7 million and
$2.1 million, respectively. These reclassifications had no impact on
results of operations, cash flows, financial condition or changes in
shareholders’ equity.
NU’s consolidated statements of income/(loss) for the years ended
December 31, 2006, 2005 and 2004 classify the operations for the
following as discontinued operations:
• Northeast Generation Company (NGC) (including certain
components of NGS),
• The Mt. Tom generating plant (Mt. Tom) formerly owned by Holyoke
Water Power Company (HWP),
• Select Energy Services, Inc. (SESI) and its wholly-owned subsidiaries
HEC/Tobyhanna Energy Project, Inc. and HEC/CJTS Energy Center LLC,
• The services business of Woods Electrical (Woods Electrical – Services),
• The New Hampshire division of Select Energy Contracting, Inc.
(SECI-NH) (including Reeds Ferry Supply Co., Inc. (Reeds Ferry)), and
• Woods Network Services, Inc. (Woods Network).
For further information regarding these companies, see Note 3,
“Assets Held for Sale and Discontinued Operations,” to the
consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS