Eversource 2010 Annual Report Download - page 48

31
a large commercial customer who began to take service from Yankee Gas mid-way through the third quarter of 2009 and continued to
take service throughout all of 2010.
Our expense related to uncollectible receivable balances (our uncollectibles expense) is influenced by the economic conditions of our
region. Fluctuations in our uncollectibles expense are mitigated from an earnings perspective because a portion of the total
uncollectibles expense for each of the electric distribution companies is allocated for recovery to the respective company's energy
supply rate and recovered through its tariffs. Additionally, for CL&P and Yankee Gas, write-offs of uncollectible receivable balances
attributable to qualified customers under financial or medical duress (hardship customers) are fully recovered through their respective
tariffs. In 2010, our total pre-tax uncollectibles expense that impacts earnings was $23.4 million as compared to $46.5 million in 2009.
The improvement in 2010 uncollectibles expense was due in part to continued accounts receivable collection efforts and we expect our
2011 uncollectibles expense to be consistent with 2010.
Competitive Businesses: NU Enterprises, which continues to manage to completion Select Energy's remaining wholesale marketing
contracts and to manage its electrical contracting business and other operating and maintenance services contracts, earned $8.3
million, or $0.05 per share, in 2010, compared with $15.8 million, or $0.09 per share, in 2009 and $13.1 million, or $0.08 per share, in
2008. In 2010, NU Enterprises recorded $0.7 million of after-tax mark-to-market gains, compared with after-tax mark-to-market gains of
$3.8 million in 2009 and $1.1 million in 2008.
NU Parent and Other Companies: NU parent and other companies recorded net expenses of $4.4 million, or $0.02 per share, in 2010,
compared with net expenses of $9.3 million, or $0.05 per share, in 2009 and net expenses of $41.4 million, or $0.26 per share, in 2008.
The 2010 results include a fourth quarter non-recurring benefit of $15.7 million, or $0.09 per share, associated with the settlement of tax
issues and a fourth quarter after-tax charge of $9.4 million, or $0.06 per share, associated with expenses related to NU’s proposed
merger with NSTAR. Excluding these impacts, 2010 net expenses increased by $1.4 million as compared to 2009 due primarily to a
$0.9 million after-tax unfavorable change in the HWP environmental reserve and a $0.6 million net after-tax charge associated with the
2010 Healthcare Act, partially offset by lower interest expense at NU parent. The net expenses in 2008 included a $29.8 million, or
$0.19 per share, after-tax charge resulting from the payment of $49.5 million made in March 2008 associated with the settlement of
litigation.
Future Outlook
EPS Guidance: Following is a summary of our projected 2011 EPS by business, which also reconciles consolidated diluted EPS to the
non-GAAP financial measure of EPS by business. Non-GAAP EPS by business also excludes a $0.15 per share charge related to
expected non-recurring merger costs we will incur relating to financial advisor costs, legal, accounting and consulting fees, which will
affect NU parent and other companies' results.
2011 EPS Range
(Approximate amounts) Low High
Diluted EPS (GAAP) $ 2.10 $ 2.25
Regulated Companies:
Distribution Segment $ 1.25 $ 1.35
Transmission Segment 1.05 1.10
Total Regulated Companies 2.30 2.45
NU Parent and Other Companies (0.05) (0.05)
Non-GAAP EPS $ 2.25 $ 2.40
Merger-Related Costs (0.15) (0.15)
Diluted EPS (GAAP) $ 2.10 $ 2.25
This projection assumes we will operate on a stand-alone basis in 2011, although our proposed merger with NSTAR is expected to
close in the second half of 2011. We have included the impacts of the CL&P, PSNH, and WMECO electric distribution rate case
decisions received as well as an anticipated reasonable outcome in the Yankee Gas rate case decision expected in June 2011 in the
assumptions used to develop our 2011 earnings guidance. The 2011 distribution and transmission earnings guidance reflects the
impact of a higher rate base as well as $1.2 billion of projected capital expenditures in 2011. The 2011 distribution segment earnings
guidance assumes that total weather-normalized retail electric sales are essentially unchanged from 2010 and weather-normalized firm
natural gas sales, excluding special contracts as fluctuations in their usage do not impact earnings, are approximately 4 percent higher
than 2010. Offsetting these favorable items are assumed increases in pension costs and certain operation and maintenance costs.
In 2010, the NU effective tax rate was 34.8 percent. For 2011, we estimate that the effective tax rate for NU will be approximately 35
percent.
Long-Term Growth Rate: We project that we will achieve a compound average annual EPS growth rate for the five-year period from
2011 to 2015 of between 6 percent and 9 percent using 2009 EPS of $1.91 per share as the base level. Assuming completion of our
proposed merger with NSTAR in the second half of 2011, we expect to achieve an EPS growth rate at the higher end of the range of
6 percent and 9 percent.