Eversource 2015 Annual Report Download - page 61

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Energy Efficiency Programs, which are tracked costs, increased in 2014, as compared to 2013, due primarily to the expanded energy conservation
programs at CL&P in 2014 as a result of 2013 legislative action, and an increase in energy efficiency costs in accordance with the three-year program
guidelines established by the DPU at NSTAR Electric and WMECO, partially offset by a decrease in the amortization of previously deferred costs at
NSTAR Electric.
Taxes Other Than Income Taxes increased in 2014, as compared to 2013, due primarily to an increase in property taxes as a result of both an
increase in utility plant balances and property tax rates.
Interest Expense increased in 2014, as compared to 2013, due primarily to lower interest income related to a decrease in the recovery of previously
deferred transition costs ($9.9 million), an increase in interest on long-term debt ($4 million) as a result of new debt issuances in 2014 and the
absence in 2014 of the favorable impact from the resolution of a Connecticut state income tax audit in 2013.
Other Income, Net decreased in 2014, as compared to 2013, due primarily to lower unrealized gains on the assets supporting the deferred
compensation plans ($13 million), and the absence in 2014 of an insurance policy claim received in 2013 ($1.5 million), partially offset by higher
AFUDC related to equity funds ($6.6 million), and a net gain on the sale of land ($4.5 million).
Income Tax Expense increased in 2014, as compared to 2013, due primarily to higher pre-tax earnings ($26.1 million), and higher state taxes and
various other impacts ($15.3 million). The higher state taxes include a net reduction in the valuation allowance for state tax positions, which is based
on the most recent available data.
EARNINGS SUMMARY
Excluding the impact of integration costs, our 2014 earnings increased by $41.8 million, as compared to 2013. The increase was due primarily to
lower operations and maintenance costs that impact earnings, which were primarily driven by lower labor and other employee-related costs,
including approximately $30 million of non-tracked pension costs, and lower storm restoration costs, as well as higher firm natural gas sales volumes
as a result of the colder weather in the first quarter of 2014, as compared to the first quarter of 2013. Partially offsetting this increase was the absence
in 2014 of a favorable impact from the resolution of a state income tax audit in 2013, higher property taxes, higher depreciation expense at our
regulated companies, and lower retail electric sales volumes as a result of cooler summer weather in 2014, as compared to the same period in 2013.
Earnings were also unfavorably impacted by the 2014 after-tax net reserve of $22.4 million related to the 2014 FERC ROE orders, as compared to
the 2013 after-tax reserve of $14.3 million related to the 2013 FERC ALJ initial decision in the FERC base ROE complaints.
Our
electric distribution segment earnings increased $35.4 million in 2014, as compared to 2013, due primarily to lower operations and maintenance
costs that impact earnings, which were primarily driven by lower labor and other employee-related costs, including pension costs, and lower storm
restoration costs. Partially offsetting these favorable earnings impacts, as compared to 2013, were higher property taxes and depreciation expense,
lower retail electric sales volumes as a result of cooler summer weather in 2014, and the absence in 2014 of regulatory interest income on stranded
cost deferrals in 2013.
Our transmission segment earnings increased $8.4 million in 2014, as compared to 2013, due primarily to a decrease in transmission segment state
income tax expense and a higher transmission rate base as a result of an increased investment in our transmission infrastructure. These favorable
impacts were partially offset by the after-tax net reserve of $22.4 million related to the 2014 FERC ROE orders, as compared to the $14.3 million
after-tax reserve related to the 2013 FERC ALJ initial decision in the FERC base ROE complaints.
Our natural gas distribution segment earnings increased $11.4 million in 2014, as compared to 2013, due primarily to higher firm natural gas sales
volumes and peak demand revenues resulting from colder weather in the first quarter of 2014 and additional natural gas heating customers.
ES parent and other companies, which include our unregulated businesses, had a net loss of $10.6 million in 2014, compared with earnings of $11.1
million in 2013. Excluding the impact of integration costs, ES parent and other companies earned $11.5 million in 2014, compared with $24.9
million in 2013. The earnings decrease in 2014 was due primarily to a higher effective tax rate.
LIQUIDITY
Cash flows provided by operating activities totaled $1.64 billion in 2014, compared with $1.66 billion in 2013. The 2014 operating cash flows were
favorably impacted by approximately $132 million in DOE Damages proceeds resulting from the spent nuclear fuel litigation received by CL&P,
NSTAR Electric, PSNH and WMECO from the Yankee Companies, the absence of 2013 cash disbursements for major storm restoration costs, the
decrease of approximately $130 million in Pension and PBOP Plan cash contributions and changes in the timing of working capital items. These
favorable impacts were more than offset by higher income tax payments in 2014 and the unfavorable cash flow impact resulting from lower
recoveries from customers in 2014, as compared to 2013, relating to regulatory cost recovery tracking mechanisms. For further information on the
spent nuclear fuel litigation, see Note 11C, “Commitments and Contingencies – Contractual Obligations – Yankee Companies,” in this combined
Annual Report on Form 10-K.
Results of Operations for each of CL&P, NSTAR Electric, PSNH and WMECO have been omitted from this report but are set forth in the
Annual Report on Form 10-K for 2015 filed with the SEC on a combined basis with Eversource Energy on February 26, 2016. Such report is
also available in the Investors section at www.eversource.com.