Eversource 2010 Annual Report Download - page 99

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Derivatives not designated as hedges
NU Enterprises' commodity sales contract and related price and supply risk management: As of December 31, 2010 and 2009, NU
Enterprises had approximately 0.3 million and 0.4 million MWh, respectively, of supply volumes remaining in its wholesale portfolio
when expected sales to an agency that is comprised of municipalities are compared with contracted supply, both of which extend
through 2013.
CL&P commodity and capacity contracts required by regulation: As of December 31, 2010 and 2009, CL&P had contracts with two
IPPs to purchase electricity monthly in amounts aggregating approximately 1.5 million MWh per year through March 2015 under one of
these contracts and 0.1 million MWh per year through December 2020 under the second contract. CL&P also has two capacity-related
CfDs to increase energy supply in Connecticut relating to one generating project that has been modified and one generating plant to be
built. The total capacity of these CfDs and two additional CfDs entered into by UI is expected to be approximately 787 MW. CL&P has
an agreement with UI, which is also accounted for as a derivative, under which UI will share the costs and benefits of the four CfDs,
with 80 percent allocated to CL&P and 20 percent to UI. The four CfDs obligate the utilities to pay/receive monthly the difference
between a set capacity price and the forward capacity market price that the projects receive in the ISO-NE capacity markets for periods
of up to 15 years beginning in 2009.
Commodity price and supply risk management: As of December 31, 2010 and 2009, CL&P had 1.8 million and 2.7 million MWh,
respectively, remaining under FTRs that extend through December 2011 and require monthly payments or receipts.
PSNH has electricity procurement contracts with delivery dates through 2011 to purchase an aggregate amount of 0.4 million and
1 million MWh of power as of December 31, 2010 and 2009, respectively, that is used to serve customer load and manage price risk of
its electricity delivery service obligations. These contracts are settled monthly. PSNH also has two energy call options that it received
in exchange for assigning its transmission rights in a direct current transmission line. The options give PSNH the right to purchase a de
minimis amount and 0.6 million MWh of electricity through January 2011 as of December 31, 2010 and 2009, respectively. In addition,
PSNH has entered into FTRs to manage the risk of congestion costs associated with its electricity delivery service. As of December 31,
2010 and 2009, there were 0.3 million and 0.4 million MWh, respectively, remaining under FTRs that extend through December 2011
and required monthly payments or receipts. The purpose of the PSNH derivative contracts is to provide stable rates for customers by
mitigating price uncertainties associated with the New England electricity spot market.
The following table presents the realized and unrealized gains/(losses) associated with derivative contracts not designated as hedges:
Amount of Gain/(Loss)
Recognized on Derivative Instrument
Derivatives Not Designated
as Hedges
Location of Gain or Loss
Recognized on Derivative
For the Years Ended
December 31, 2010 December 31, 2009
(Millions of Dollars)
NU Enterprises:
Commodity Sales Contract and
Related Price and Supply Risk
Management
Fuel, Purchased and Net
Interchange Power $ 2.7 $ 6.2
Regulated Companies:
CL&P Commodity and Capacity
Contracts Required by Regulation Regulatory Assets/Liabilities (74.0) (99.9)
Other Commodity Price and Supply
Risk Management:
CL&P Regulatory Assets/Liabilities (6.2) (7.8)
PSNH Regulatory Assets/Liabilities (15.0) (62.6)
Other Regulatory Assets/Liabilities (0.5) (2.8)
For the Regulated companies, monthly settlement amounts are recorded as receivables or payables and as Operating Revenues or
Fuel, Purchased and Net Interchange Power on the accompanying consolidated financial statements. Regulatory assets/liabilities are
established with no impact to Net Income.
Derivatives designated as hedges
Interest Rate Risk Management: To manage the interest rate risk characteristics of NU parent's fixed rate long-term debt, NU parent
has a fixed to floating interest rate swap on its $263 million, 7.25 percent fixed rate senior notes maturing on April 1, 2012. This interest
rate swap qualifies and was designated as a fair value hedge and requires semi-annual cash settlements. The changes in fair value of
the swap and the interest component of the hedged long-term debt instrument are recorded in Interest Expense on the accompanying
consolidated statements of income. There was no ineffectiveness recorded for the years ended December 31, 2010 and 2009. The
cumulative changes in fair values of the swap and the Long-Term Debt are recorded as a Derivative Asset/Liability and an adjustment
to Long-Term Debt. Interest receivable is recorded as a reduction of Interest Expense and is included in Prepayments and Other
Current Assets.