Eversource 2008 Annual Report Download - page 45

associated with the recovery of delivery-related FMCC ($104 million), a decrease in
PSNH’s SCRC revenues mainly as a result of a rate decrease that went into eect July 1,
2006 ($76 million) and lower wholesale revenues ($28 million), partially oset by higher
retail transmission revenues ($43 million), WMECO’s higher transition cost recoveries
($15 million) and WMECO’s pension and default service revenues ($8 million). The
tracking mechanisms allow for rates to be changed periodically with over-collections
refunded to customers or under-collections collected from customers in future periods. 
The distribution component of electric distribution segment revenues that flows through
to earnings increased $42 million primarily due to an increase in retail rates ($31 million)
and retail sales ($11 million). Retail KWH electric sales increased by 1.5 percent in 2007
compared with 2006 (a 0.4 percent increase on a weather normalized basis). Firm gas
sales increased 10.3 percent in 2007 compared with 2006 (a 3.1 percent increase on a
weather normalized basis).
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expenses decreased $1.28 billion in 2007
due to lower expenses at NU Enterprises ($875 million) and lower costs at the regulated
companies ($405 million). NU Enterprises’ fuel expenses decreased due to the exit from
significant components of the competitive businesses. Fuel expense from the regulated
companies decreased primarily due to lower fuel, purchased and net interchange
power expenses at CL&P, PSNH and WMECO ($431 million), mainly due to a decrease
in standard oer supply costs as a result of a reduction in load caused by customer
migration to third party suppliers, partially oset by higher Yankee Gas fuel expense
($26 million). 
Other Operation
Other operation expenses decreased $160 million in 2007 primarily due to lower NU Enterprises
expenses ($115 million) and lower regulated companies distribution and transmission segment
expenses ($49 million).
NU Enterprises’ expenses decreased $115 million primarily due to the exit from components of
the competitive businesses during the latter part of 2006 and the $25 million donation to the
NU Foundation in 2006.
Lower regulated company distribution and transmission segment expenses of $49 million are
primarily due to lower reliability must run (RMR) expenses at CL&P ($133 million), partially oset
by higher Energy Independence Act (EIA) expenses that are tracked and recovered through
the regulatory tracking mechanisms ($29 million), higher administration and general expenses
at CL&P, WMECO and PSNH ($22 million), higher retail transmission expenses at PSNH and
WMECO ($21 million) and Summer Savings Rewards Program that was implemented in 2007 at
CL&P as a result of a legislative act ($14 million).
Maintenance
Maintenance expenses increased $18 million in 2007 primarily due to higher transmission
segment expenses ($7 million) and regulated company distribution ($6 million).
Higher transmission segment expenses of $7 million in 2007 are primarily due to higher
levels of employee support, compliance inspections, deferred maintenance, training, and
unplanned repairs to transmission cables at CL&P.
Higher regulated company distribution expenses of $6 million in 2007 are primarily
due to higher tree trimming ($3 million), equipment maintenance ($2 million) and
underground line network inspection activities ($2 million).
Depreciation
Depreciation increased $25 million in 2007 primarily due to higher distribution and
transmission depreciation expense as a result of higher plant balances from the ongoing
construction program.
Amortization
Amortization increased $24 million in 2007 for the distribution segment primarily due to
higher recovery of transition costs for CL&P ($32 million) and WMECO ($20 million) and
the 2006 $18 million credit associated with the deferral of retail transmission costs for
WMECO, partially oset by PSNH ($46 million). The PSNH decrease is primarily due to
lower ES over recoveries, lower amortization levels of stranded costs, and the deferral of
retail transmission costs.
Amortization of Rate Reduction Bonds
Amortization of RRBs increased $13 million in 2007. The higher portion of principal
within the RRB payment results in a corresponding increase in the amortization of RRBs.
Interest Expense, Net
Interest expense increased $2 million in 2007 primarily due to higher interest for the
regulated company distribution and transmission segments ($22 million), partially
oset by lower interest at NU Enterprises ($19 million). The higher regulated company
distribution and transmission segment interest is primarily due to long-term debt
issuances for all four of the regulated companies. In 2007, $655 million of long-term
debt was issued by the regulated companies consisting of $500 million for CL&P, $70
million for PSNH, $40 million for WMECO and $45 million for Yankee Gas.
Other Income, Net
Other income, net decreased $3 million, primarily due to a lower CL&P Traditional
Standard Oer procurement fee ($11 million) and the absence of the gain on sale of
investment in Globix Corporation (Globix) in 2006 ($3 million), partially oset by higher
EIA incentives ($4 million), higher equity in earnings of regional nuclear generating and
transmission companies ($4 million), and higher AFUDC equity ($4 million) mainly as a
result of higher eligible construction work in progress.
Income Tax (Benefit)/Expense
Income tax expense increased $186 million primarily due to an increase in pre-tax
earnings and lower favorable tax adjustments; partially oset by a decrease in flow
through regulatory amortizations. In 2006, a significant portion of the tax adjustments
included a $74 million tax benefit to remove deferred tax balances associated with the
IRS PLR. Prior year flow through regulatory amortizations were higher as a result of the
regulatory recovery of tax expense associated with nondeductible acquisition costs.
Income/(Loss) from Discontinued Operations
See Note 14, “Restructuring and Impairment Charges and Discontinued Operations,”
to the consolidated financial statements for a description and explanation of the
discontinued operations.
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