National Grid 2006 Annual Report Download - page 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
1. Nature of Operations:
National Grid USA (the Company) is a public utility holding company with regulated subsidiaries
engaged in the transmission, distribution, and sale of electricity and natural gas. The Company
is a wholly owned subsidiary of National Grid plc. The Company’s electricity and gas distribution
subsidiaries serve approximately 3.9 million customers in New York State, Massachusetts, Rhode
Island and New Hampshire. The Company’s transmission subsidiaries provide electricity transmis-
sion in New York through Niagara Mohawk Power Corporation (Niagara Mohawk) and in New
England principally through New England Power Company (NEP) and The Narragansett Electric
Company (Narragansett). Unregulated subsidiaries are engaged in the construction and leasing
of telecommunications infrastructures and energy-related consulting.
2. Basis of Presentation:
The Company’s accounting policies conform to generally accepted accounting principles in the
United States of America (US GAAP), including accounting principles for rate-regulated entities
with respect to the Company’s transmission, distribution and gas operations (regulated sub-
sidiaries), and are in accordance with the accounting requirements and ratemaking practices
of the regulatory authorities having jurisdiction (see below).
The consolidated financial statements include the accounts of the Company and all of its wholly-
owned subsidiaries and minority interests. All intercompany transactions and balances between
consolidated subsidiaries have been eliminated.
The Company owns approximately 53.7% of the outstanding common stock of both New England
Hydro Transmission Electric Company, Inc. and New England Hydro-Transmission Corporation
(together, the Hydro Transmission companies). The Hydro-Transmission companies own and oper-
ate an international transmission interconnection between Hydro-Quebec and New England. The
consolidated financial statements include 100 percent of the assets, liabilities, and earnings of the
Hydro Transmission companies. Minority interests in the Hydro Transmission companies, which
represent the minority stockholders’ proportionate share of the equity and is separately disclosed
on the Company’s consolidated balance sheet and the proportionate share of income is included
in ‘Other income (deductions), net’ on the Company’s statements of income.
NEP has a minority ownership interest in each of three regional nuclear generating companies
which own generating facilities that are permanently shut down. NEP accounts for these owner-
ship interests under the equity method.
3. Use of Estimates:
The preparation of financial statements in conformity with US GAAP requires management to
make estimates that affect the reported amounts of assets and liabilities and disclosures of asset
recovery and contingent liabilities as of the date of the balance sheets, and revenues and expens-
es for the period. These estimates may differ from actual amounts if future circumstances cause a
change in the assumptions used to calculate these estimates.
4. Regulation:
The Company’s regulated subsidiaries must comply with the rules prescribed by the Federal
Energy Regulatory Commission (FERC) and the applicable state utility commissions of New York,
Massachusetts, Rhode Island and New Hampshire. See Note B – “Rate and Regulatory Issues.”
Niagara Mohawk files reports with the Securities and Exchange Commission (SEC) under the
Securities Exchange Act of 1934, as amended.
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National Grid USA / Annual Report