Eversource 2008 Annual Report Download - page 44

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Other Operation
Other operation increased $60 million in 2008 primarily due to higher NU parent and
other companies’ expenses ($54 million), higher competitive businesses’ expenses ($6
million) and higher regulated companies’ distribution and transmission segment expenses
($1 million).
NU parent and other companies’ expenses are higher by $54 million in 2008 primarily due
to the $49.5 million payment to Con Edison resulting from the settlement of litigation.
Competitive businesses’ expenses are higher by $6 million primarily due to higher
operating costs at the remaining services businesses.
Higher regulated companies’ distribution and transmission segment expenses of $1
million are primarily due to higher transmission segment expenses ($8 million), expenses
at Yankee Energy System, Inc. ($6 million) and higher electric distribution segment
expenses ($4 million), partially oset by consolidation eliminations of transmission
segment intracompany billings to the distribution segment, and further eliminations for
NU consolidations and costs that are tracked and recovered through distribution tracking
mechanisms ($18 million).
Maintenance
Maintenance expenses increased $43 million in 2008 primarily due to higher regulated
companies’ distribution expenses ($38 million) and higher transmission line expenses
($4 million). Distribution expenses are $38 million higher primarily due to higher PSNH
generation expenses that are tracked and recovered through NHPUC approved tracking
mechanisms ($15 million) mainly related to the Merrimack Station maintenance outages,
higher tree trimming ($9 million), higher overhead line maintenance expenses ($5 million),
substation equipment ($3 million) and line transformers ($2 million).
Depreciation
Depreciation increased $13 million in 2008 primarily due to higher regulated transmission
and distribution plant balances resulting from completed construction programs put
into service. 
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased $146 million in 2008 for the distribution
segment primarily due to higher amortization at CL&P ($144 million) resulting from a
higher recovery of transition costs ($62 million), higher amortization of SBC ($50 million)
and a credit in 2007 pertaining to the refund of the GSC overrecovery ($29 million).
Amortization of Rate Reduction Bonds
Amortization of RRBs increased $4 million in 2008. The higher portion of principal within
the RRB payments results in a corresponding increase in the amortization of RRBs. This
increase was partially oset by a decrease at PSNH resulting from the retirement of $50
million of RRBs in the first quarter of 2008.
Taxes Other than Income Taxes
Taxes other than income taxes increased $15 million in 2008 primarily due to higher
Connecticut gross earnings tax ($16 million) mainly as a result of higher CL&P and Yankee
Gas revenues that are subject to gross earnings tax and higher property taxes at CL&P and
PSNH ($5 million) as a result of higher plant balances and higher local municipal tax rates,
partially oset by lower payroll taxes charged to expense ($5 million).
Interest Expense, Net
Interest expense, net increased $29 million in 2008 primarily due to higher long-term debt
interest ($31 million) resulting from the issuance of new long-term debt in 2007 and 2008
and higher other interest ($9 million) mostly related to short-term debt, partially oset by
lower RRB interest resulting from lower principal balances outstanding ($11 million).
Other Income, Net
Other income, net decreased $11 million in 2008 primarily due to lower investment
income ($16 million) primarily due to the absence of the higher NU investment income
interest earned in 2007 on cash the parent received from the November 2006 sale of
NU’s competitive generation, higher investment losses ($14 million) primarily due to the
supplemental benefit trust and lower equity in earnings of regional nuclear generating and
transmission companies ($2 million), partially oset by higher AFUDC equity income
($12 million) and interest income related to the 2008 tax settlement ($10 million).
Income Tax Expense
Income tax expense decreased $4 million in 2008 primarily due to the Con Edison
settlement ($20 million), temporary flow through plant dierences ($6 million), partially
oset by impacts associated with higher pre-tax earnings ($22 million).
Comparison of 2007 to 2006
Operating Revenues
For the Twelve Months Ended December 31,
(Millions of Dollars) 2007 2006 Variance
Electric distribution $ 4,927 $ 5,332 $ (405 )
Gas distribution 514 453 61
Total distribution 5,441 5,785 (344 )
Transmission 283 200 83
Regulated companies 5,724 5,985 (261 )
Competitive businesses 98 892 (794 )
Total $ 5,822 $ 6,877 $ (1,055 )
Net income is $224 million lower in 2007 due to the two significant gains in 2006 that
did not occur in 2007. These gains were an after-tax gain of $314 million associated with
the sale of the competitive generation business and the CL&P $74 million income tax
reduction associated with the PLR. The negative impact on net income of the 2006 gains
was partially oset by the $107 million higher earnings of NU Enterprises due to the $96
million loss in 2006.
Operating Revenues
Operating revenues decreased $1.06 billion in 2007 primarily due to lower revenues
from NU Enterprises ($794 million) and lower revenues from the regulated companies
($261 million). NU Enterprises’ revenues decreased $794 million due to the exit from
components of the competitive businesses during the latter part of 2006. The lower
regulated revenues are being driven by the recovery of a lower level of CL&P distribution
related expenses passed through to customers through regulatory tracking mechanisms.
Revenues from the regulated companies decreased $261 million due to lower distribution
segment revenues ($344 million), partially oset by higher transmission segment
revenues ($83 million). Distribution segment revenues decreased $344 million primarily
due to lower electric distribution revenues ($405 million), partially oset by higher gas
distribution revenues ($61 million). Transmission segment revenues increased $83 million
primarily due to a higher transmission investment base and higher operating expenses
that are recovered under FERC-approved transmission taris.
Lower electric distribution revenues include the components of CL&P, PSNH and
WMECO retail revenues that are included in regulatory commission approved tracking
mechanisms that track the recovery of certain incurred costs ($447 million). The
distribution revenue tracking components decrease of $447 million is primarily due
to the pass through of lower energy supply costs ($305 million), lower CL&P revenue
43