Table of Contents

 

 

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


[X]x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2014 

OR

o

For the Quarterly Period EndedMarch 31, 2013

OR     

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________


For the transition period from                           to                          

Commission
File Number

Registrant; State of Incorporation;
Address; and Telephone Number

I.R.S. Employer
Identification No.

1-5324

NORTHEAST UTILITIES

(a Massachusetts voluntary association)
One Federal Street
Building 111-4
Springfield, Massachusetts 01105
Telephone: (413) 785-5871

04-2147929


04-2147929

0-00404

0-00404

THE CONNECTICUT LIGHT AND POWER COMPANY
(a Connecticut corporation)
107 Selden Street
Berlin, Connecticut 06037-1616
Telephone: (860) 665-5000

06-0303850


06-0303850

1-02301

1-02301

NSTAR ELECTRIC COMPANY
(a Massachusetts corporation)
800 Boylston Street
Boston, Massachusetts 02199
Telephone: (617) 424-2000

04-1278810


04-1278810

1-6392

1-6392

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

(a (a New Hampshire corporation)
Energy Park
780 North Commercial Street
Manchester, New Hampshire 03101-1134
Telephone: (603) 669-4000

02-0181050


02-0181050

0-7624

0-7624

WESTERN MASSACHUSETTS ELECTRIC COMPANY
(a Massachusetts corporation)
One Federal Street
Building 111-4
Springfield, Massachusetts 01105
Telephone: (413) 785-5871

04-1961130




































Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.


 

Yes

No

 

 

x

 

ü

o


Indicate by check mark whether the registrants have submitted electronically and posted on its corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


 

Yes

No

 

 

x

 

ü

o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated“accelerated filer and large accelerated filer"filer” in Rule 12b-2 of the Exchange Act.  (Check one):


Large
Accelerated Filer

Accelerated
Filer

Non-accelerated
Filer

Northeast Utilities

ü

x

 

o

 

o

The Connecticut Light and Power Company

 

o

 

o

ü

x

NSTAR Electric Company

 

o

 

o

ü

x

Public Service Company of New Hampshire

 

o

 

o

ü

x

Western Massachusetts Electric Company

 

o

 

o

ü

x


Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):


Yes

No

 

Yes

No

 

 

 

Northeast Utilities

 

üo

x

The Connecticut Light and Power Company

 

üo

x

NSTAR Electric Company

 

üo

x

Public Service Company of New Hampshire

 

üo

x

Western Massachusetts Electric Company

 

üo

x


Indicate the number of shares outstanding of each of the issuers'issuers’ classes of common stock, as of the latest practicable date:


Company - Class of Stock

Outstanding as of April 30, 20132014

Northeast Utilities
Common shares, $5.00 par value

314,621,345

315,985,270 shares

 

 

The Connecticut Light and Power Company
Common stock, $10.00 par value

6,035,205 shares

 

 

NSTAR Electric Company
Common stock, $1.00 par value

100 shares

 

 

Public Service Company of New Hampshire
Common stock, $1.00 par value

301 shares

 

 

Western Massachusetts Electric Company
Common stock, $25.00 par value

434,653 shares


Northeast Utilities directly or indirectly, holds all of the 6,035,205 shares, 100 shares, 301 shares, and 434,653 shares of the outstanding common stock of The Connecticut Light and Power Company, NSTAR Electric Company, Public Service Company of New Hampshire and Western Massachusetts Electric Company, respectively.


NSTAR Electric Company, Public Service Company of New Hampshire and Western Massachusetts Electric Company each meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q, and each is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.




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GLOSSARY OF TERMS


The following is a glossary of abbreviations or acronyms that are found in this report:

CURRENT OR FORMER NU COMPANIES, SEGMENTS OR INVESTMENTS:

The following is a glossary of abbreviations or acronyms that are found in this report.  

CURRENT OR FORMER NU COMPANIES, SEGMENTS OR INVESTMENTS:

CL&P

 

CL&P

The Connecticut Light and Power Company

CYAPC

Connecticut Yankee Atomic Power Company

Hopkinton

Hopkinton LNG Corp., a wholly owned subsidiary of NSTAR LLCYankee Energy System, Inc.

HWP

HWP Company, formerly the Holyoke Water Power Company

MYAPC

Maine Yankee Atomic Power Company

NGS

Northeast Generation Services Company and subsidiaries

NPT

Northern Pass Transmission LLC

NSTAR

Parent Company of NSTAR Electric, NSTAR Gas and other subsidiaries (prior to the merger with NU); also the term used for NSTAR LLC and its subsidiaries

NSTAR Electric

NSTAR Electric Company

NSTAR Electric & Gas

NSTAR Electric & Gas Corporation, a former Northeast Utilities service company (effective January 1, 2014 merged into NUSCO)

NSTAR Gas

NSTAR Gas Company

NSTAR LLCNU Enterprises

Post-merger parent company of NSTAR Electric, NSTAR Gas and other subsidiaries, and successor to NSTAR

NU Enterprises

NU Enterprises, Inc., the parent company of NGS, Select Energy, NGS, NGS Mechanical, Select Energy Contracting, Inc. and, E.S. Boulos Company and NSTAR Communications, Inc.

NU or the Company

Northeast Utilities and subsidiaries

NU parent and other companies

NU parent and other companies is comprised of NU parent, NSTAR LLC, NSTAR Electric & Gas, NUSCO and other subsidiaries, includingwhich primarily include NU Enterprises, NSTAR Communications, Inc., HWP, RRR (a real estate subsidiary), the non-energy-related subsidiaries of Yankee (Yankee Energy Services Company and Yankee Energy Financial Services Company), and the consolidated operations of CYAPC and YAEC

NUSCO

Northeast Utilities Service Company (effective January 1, 2014 includes the operations of NSTAR Electric & Gas)

NUTV

NU Transmission Ventures, Inc., the parent company of NPT and Renewable Properties, Inc.

PSNH

Public Service Company of New Hampshire

Regulated companies

NU's

NU’s Regulated companies, comprised of the electric distribution and transmission businesses of CL&P, NSTAR Electric, PSNH, and WMECO, the natural gas distribution businesses of Yankee Gas and NSTAR Gas, the generation activities of PSNH and WMECO, and NPT

RRR

The Rocky River Realty Company

Select Energy

Select Energy, Inc.

WMECO

Western Massachusetts Electric Company

YAEC

Yankee Atomic Electric Company

Yankee

Yankee Energy System, Inc.

Yankee Companies

CYAPC, YAEC and MYAPC

Yankee Gas

Yankee Gas Services Company

REGULATORS:

 

DEEP

Connecticut Department of Energy and Environmental Protection

DOE

U.S. Department of Energy

DOER

Massachusetts Department of Energy Resources

DPU

Massachusetts Department of Public Utilities

EPA

U.S. Environmental Protection Agency

FERC

Federal Energy Regulatory Commission

ISO-NE

ISO New England, Inc., the New England Independent System Operator

MA DEP

 

Massachusetts Department of Environmental Protection

NHPUC

New Hampshire Public Utilities Commission

PURA

Connecticut Public Utilities Regulatory Authority

SEC

U.S. Securities and Exchange Commission

SJC

Supreme Judicial Court of Massachusetts

OTHER:

AFUDC

 

Allowance For Funds Used During Construction

AOCI

Accumulated Other Comprehensive Income/(Loss)

ARO

Asset Retirement Obligation

C&LM

 

Conservation and Load Management

CfD

Contract for Differences

Clean Air Project

The construction of a wet flue gas desulphurization system, known as "scrubber“scrubber technology," to reduce mercury emissions of the Merrimack coal-fired generation station in Bow, New Hampshire

CO2

Carbon dioxide

CPSL

Capital Projects Scheduling List

CTA

 

Competitive Transition Assessment

CWIP

Construction work in progress

EPS

 

Earnings Per Share

ERISA

Employee Retirement Income Security Act of 1974

ES

 

Default Energy Service

ESOP

Employee Stock Ownership Plan

ESPP

Employee Share Purchase Plan

FERC ALJ

FERC Administrative Law Judge

Fitch

Fitch Ratings

FMCC

 

Federally Mandated Congestion Charge

FTR

 

Financial Transmission Rights

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GAAP

 

Accounting principles generally accepted in the United States of America

GSC

 

Generation Service Charge

GSRP

Greater Springfield Reliability Project

GWh

 

Gigawatt-Hours

HG&E

 

Holyoke Gas and Electric, a municipal department of the City of Holyoke, MA

HQ

Hydro-Québec, a corporation wholly owned by the Québec government, including its divisions that produce, transmit and distribute electricity in Québec, Canada

HVDC

High voltage direct current

Hydro Renewable Energy

Hydro Renewable Energy, Inc., a wholly owned subsidiary of Hydro-Québec

IPP

Independent Power Producers

ISO-NE Tariff

ISO-NE FERC Transmission, Markets and Services Tariff

kV

 

Kilovolt

kW

Kilowatt (equal to one thousand watts)

kWh

Kilowatt-Hours (the basic unit of electricity energy equal to one kilowatt of power supplied for one hour)

LNG

Liquefied natural gas

LOC

 

Letter of Credit

LRS

Supplier of last resort service

MGP

 

Manufactured Gas Plant

Millstone

Millstone Nuclear Generating station, made up of Millstone 1, Millstone 2, and Millstone 3. All three units were sold in March 2001.

MMBtu

One million British thermal units

Moody'sMoody’s

Moody's

Moody’s Investors Services, Inc.

MW

 

Megawatt

MWh

 

Megawatt-Hours

NEEWS

 

New England East-West Solution

Northern Pass

The high voltage direct current transmission line project from Canada into New Hampshire

NU Money PoolNOx

Northeast Utilities Money Pool

Nitrogen oxide

NU supplemental benefit trust 2013 Form 10-K

The NU Trust Under Supplemental Executive Retirement Plan 

NU 2012 Form 10-K

The Northeast Utilities and Subsidiaries 20122013 combined Annual Report on Form 10-K as filed with the SEC

PAM

Pension and PBOP Rate Adjustment Mechanism

PBOP

 

Postretirement Benefits Other Than Pension

PBOP Plan

Postretirement Benefits Other Than Pension Plan that provides certain retiree health care benefits, primarily medical and dental, and life insurance benefits

PCRBs

 

Pollution Control Revenue Bonds

Pension Plan

Single uniform noncontributory defined benefit retirement plan

PPA

Pension Protection Act

RECs

Renewable Energy Certificates

Regulatory ROE

 

The average cost of capital method for calculating the return on equity related to the distribution and generation business segment excluding the wholesale transmission segment

ROE

 

Return on Equity

RRB

 

Rate Reduction Bond or Rate Reduction Certificate

RSUs

 

Restricted share units

S&P

Standard & Poor'sPoor’s Financial Services LLC

SBC

 

Systems Benefits Charge

SCRC

Stranded Cost Recovery Charge

SERP

 

Supplemental Executive Retirement Plan Plans and non-qualified defined benefit retirement plans

Settlement Agreements

The comprehensive settlement agreements reached by NU and NSTAR with the Massachusetts Attorney General and the DOER on February 15, 2012 related to the merger of NU and NSTAR (Massachusetts settlement agreements) and the comprehensive settlement agreement reached by NU and NSTAR with both the Connecticut Attorney General and the Connecticut Office of Consumer Counsel on March 13, 2012 related to the merger of NU and NSTAR (Connecticut settlement agreement).

SIP

Simplified Incentive Plan

SO2

Sulfur dioxide

SS

Standard service

TCAM

 

Transmission Cost Adjustment Mechanism

TSA

Transmission Service Agreement

UI

 

The United Illuminating Company

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ii



NORTHEAST UTILITIES AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARY
NSTAR ELECTRIC COMPANY AND SUBSIDIARIESSUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIESSUBSIDIARY
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

TABLE OF CONTENTS


Page

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1 - Unaudited Condensed Consolidated Financial Statements for the Following Companies:Companies:

Northeast Utilities and Subsidiaries (Unaudited)

Condensed Consolidated Balance Sheets — March 31, 2014 and December 31, 2013

1

Condensed Consolidated Statements of Income — Three Months Ended March 31, 2014 and 2013

3

Condensed Consolidated Statements of Comprehensive Income — Three Months Ended March 31, 2014 and 2013

3

Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2014 and 2013

4

The Connecticut Light and Power Company (Unaudited)

 

 

 

Northeast Utilities and Subsidiaries (Unaudited)

Condensed Consolidated Balance Sheets March 31, 20132014 and December 31, 20122013

1

Condensed Consolidated Statements of Income – Three Months Ended March 31, 2013 and 2012

3

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2013 and 2012

3

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2013 and 2012

4

The Connecticut Light and Power Company and Subsidiary (Unaudited)

Condensed Consolidated Balance Sheets – March 31, 2013 and December 31, 2012

5

 

Condensed Consolidated Statements of Income Three Months Ended March 31, 20132014 and 20122013

7

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2013 and 2012

7

 

 

Condensed Consolidated Statements of Cash Flows –Comprehensive Income — Three Months Ended March 31, 20132014 and 20122013

8

NSTAR Electric Company and Subsidiaries (Unaudited)

7

 

 

Condensed Statements of Cash Flows — Three Months Ended March 31, 2014 and 2013

8

NSTAR Electric Company and Subsidiary (Unaudited)

Condensed Consolidated Balance Sheets March 31, 20132014 and December 31, 20122013

9

 

 

Condensed Consolidated Statements of Income Three Months Ended March 31, 20132014 and 20122013

11

 

 

Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 20132014 and 20122013

12

 

 

Public Service Company of New Hampshire and SubsidiariesSubsidiary (Unaudited)

 

 

Condensed Consolidated Balance Sheets March 31, 20132014 and December 31, 20122013

13

 

Condensed Consolidated Statements of Income Three Months Ended March 31, 20132014 and 2012

15

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2013 and 2012

15

 

 

Condensed Consolidated Statements of Comprehensive Income — Three Months Ended March 31, 2014 and 2013

15

Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 20132014 and 20122013

16

 

Western Massachusetts Electric Company and Subsidiary (Unaudited)

 

 

Condensed Consolidated Balance Sheets March 31, 20132014 and December 31, 20122013

17

 

Condensed Consolidated Statements of Income Three Months Ended March 31, 20132014 and 20122013

19

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2013 and 2012

19

 

 

Condensed Consolidated Statements of Cash Flows –Comprehensive Income — Three Months Ended March 31, 20132014 and 20122013

20

Combined Notes to Condensed Consolidated Financial Statements

21



iii




Page19

 

 

Condensed Statements of Cash Flows — Three Months Ended March 31, 2014 and 2013

20

Combined Notes to Condensed Consolidated Financial Statements (Unaudited)

21

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Page

ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the following companies:

 

 

Northeast Utilities and SubsidiarSubsidiariesies

4138

 

 

The Connecticut Light and Power Company and Subsidiary

5449

 

 

NSTAR Electric Company and SubsidiariesSubsidiary

51

Public Service Company of New Hampshire and Subsidiary

53

Western Massachusetts Electric Company

55

ITEM 3 — Quantitative and Qualitative Disclosures About Market Risk

57

 

 

Public Service Company of New HampshireITEM 4 — Controls and SubsidiariesProcedures

6057

 

 

Western Massachusetts Electric Company and Subsidiary

62

ITEM 3 – Quantitative and Qualitative Disclosures About Market Risk

64

ITEM 4 – Controls and Procedures

64

PART II OTHER INFORMATION

 

 

 

ITEM 1 Legal Proceedings

6558

 

 

ITEM 1A Risk Factors

6558

 

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

6558

 

 

ITEM 6 — Exhibits – Exhibits

6659

 

 

SIGNATURES

68

61



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v


NORTHEAST UTILITIES AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


NORTHEAST UTILITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and Cash Equivalents

$

 60,817 

 

$

 45,748 

 

Receivables, Net

 

 832,989 

 

 

 792,822 

 

Unbilled Revenues

 

 195,870 

 

 

 216,040 

 

Fuel, Materials and Supplies

 

 239,226 

 

 

 267,713 

 

Regulatory Assets

 

 625,542 

 

 

 705,025 

 

Marketable Securities

 

 99,115 

 

 

 91,975 

 

Prepayments and Other Current Assets

 

 104,452 

 

 

 107,972 

Total Current Assets

 

 2,158,011 

 

 

 2,227,295 

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

 16,737,549 

 

 

 16,605,010 

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

 

Regulatory Assets

 

 5,015,108 

 

 

 5,132,411 

 

Goodwill

 

 3,519,401 

 

 

 3,519,401 

 

Marketable Securities

 

 492,003 

 

 

 400,329 

 

Derivative Assets

 

 94,970 

 

 

 90,612 

 

Other Long-Term Assets

 

 311,619 

 

 

 327,766 

Total Deferred Debits and Other Assets

 

 9,433,101 

 

 

 9,470,519 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

 28,328,661 

 

$

 28,302,824 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























(Unaudited)

1

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and Cash Equivalents

 

$

89,150

 

$

43,364

 

Receivables, Net

 

980,033

 

765,391

 

Unbilled Revenues

 

202,867

 

224,982

 

Fuel, Materials and Supplies

 

228,192

 

303,233

 

Regulatory Assets

 

573,028

 

535,791

 

Prepayments and Other Current Assets

 

292,539

 

214,288

 

Total Current Assets

 

2,365,809

 

2,087,049

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

17,713,027

 

17,576,186

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

Regulatory Assets

 

3,486,645

 

3,758,694

 

Goodwill

 

3,519,401

 

3,519,401

 

Marketable Securities

 

507,931

 

488,515

 

Other Long-Term Assets

 

504,057

 

365,692

 

Total Deferred Debits and Other Assets

 

8,018,034

 

8,132,302

 

 

 

 

 

 

 

Total Assets

 

$

28,096,870

 

$

27,795,537

 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


1



NORTHEAST UTILITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

  Notes Payable

$

 1,287,000 

 

$

 1,120,196 

  Long-Term Debt - Current Portion

 

 947,328 

 

 

 763,338 

  Accounts Payable

 

 633,458 

 

 

 764,350 

  Regulatory Liabilities

 

 191,707 

 

 

 134,115 

  Derivative Liabilities

 

 108,964 

 

 

 117,194 

  Other Current Liabilities

 

 671,180 

 

 

 744,497 

Total Current Liabilities

 

 3,839,637 

 

 

 3,643,690 

 

 

 

 

 

 

 

 

Rate Reduction Bonds

 

 19,610 

 

 

 82,139 

 

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

  Accumulated Deferred Income Taxes

 

 3,614,278 

 

 

 3,463,347 

  Regulatory Liabilities

 

 531,546 

 

 

 540,162 

  Derivative Liabilities

 

 840,043 

 

 

 882,654 

  Accrued Pension, SERP and PBOP

 

 2,097,550 

 

 

 2,130,497 

  Other Long-Term Liabilities

 

 873,637 

 

 

 967,561 

Total Deferred Credits and Other Liabilities

 

 7,957,054 

 

 

 7,984,221 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

  Long-Term Debt

 

 7,011,561 

 

 

 7,200,156 

 

 

 

 

 

 

 

 

   Noncontrolling Interest - Preferred Stock of Subsidiaries

 

 155,568 

 

 

 155,568 

 

 

 

 

 

 

 

 

   Equity:

 

 

 

 

 

 

Common Shareholders' Equity:

 

 

 

 

 

 

  Common Shares

 

 1,664,760 

 

 

 1,662,547 

 

  Capital Surplus, Paid In

 

 6,173,801 

 

 

 6,183,267 

 

  Retained Earnings

 

 1,914,371 

 

 

 1,802,714 

 

  Accumulated Other Comprehensive Loss

 

 (70,898)

 

 

 (72,854)

 

  Treasury Stock

 

 (336,803)

 

 

 (338,624)

   Common Shareholders' Equity

 

 9,345,231 

 

 

 9,237,050 

Total Capitalization

 

 16,512,360 

 

 

 16,592,774 

 

 

 

 

 

 

 

 

Total Liabilities and Capitalization

$

 28,328,661 

 

$

 28,302,824 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























Table of Contents

2




NORTHEAST UTILITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars, Except Share Information)

2013 

 

2012 

 

 

 

 

 

 

 

 

 

Operating Revenues

$

 1,995,023 

 

$

 1,099,623 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

 747,809 

 

 

 395,344 

 

Operations and Maintenance

 

 346,092 

 

 

 261,963 

 

Depreciation

 

 154,977 

 

 

 80,839 

 

Amortization of Regulatory Assets, Net

 

 54,049 

 

 

 5,426 

 

Amortization of Rate Reduction Bonds

 

 34,499 

 

 

 18,347 

 

Energy Efficiency Programs

 

 105,771 

 

 

 37,273 

 

Taxes Other Than Income Taxes

 

 132,881 

 

 

 86,038 

 

 

 

Total Operating Expenses

 

 1,576,078 

 

 

 885,230 

Operating Income

 

 418,945 

 

 

 214,393 

 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

Interest on Long-Term Debt

 

 85,295 

 

 

 59,968 

 

Interest on Rate Reduction Bonds

 

 611 

 

 

 1,431 

 

Other Interest

 

 (9,651)

 

 

 5,048 

 

 

 

Interest Expense

 

 76,255 

 

 

 66,447 

Other Income, Net

 

 7,765 

 

 

 8,773 

Income Before Income Tax Expense

 

 350,455 

 

 

 156,719 

Income Tax Expense

 

 120,487 

 

 

 55,964 

Net Income

 

 229,968 

 

 

 100,755 

Net Income Attributable to Noncontrolling Interests

 

 1,879 

 

 

 1,493 

Net Income Attributable to Controlling Interest

$

 228,089 

 

$

 99,262 

 

 

 

 

 

 

 

 

 

Basic and Diluted Earnings Per Common Share

$

 0.72 

 

$

 0.56 

 

 

 

 

 

 

 

 

 

Dividends Declared Per Common Share

$

 0.37 

 

$

 0.29 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

Basic

 

 315,129,782 

 

 

 178,055,716 

 

Diluted

 

 316,002,538 

 

 

 178,437,453 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

��

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

Net Income

$

 229,968 

 

$

 100,755 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

 516 

 

 

 423 

 

Changes in Unrealized Gains/(Losses) on Other Securities

 

 (181)

 

 

 34 

 

Changes in Funded Status of Pension, SERP and PBOP

 

 

 

 

 

 

 

Benefit Plans

 

 1,621 

 

 

 1,407 

Other Comprehensive Income, Net of Tax

 

 1,956 

 

 

 1,864 

Comprehensive Income Attributable to Noncontrolling Interests

 

 (1,879)

 

 

 (1,493)

Comprehensive Income Attributable to Controlling Interest

$

 230,045 

 

$

 101,126 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























3




NORTHEAST UTILITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

Net Income

$

 229,968 

 

$

 100,755 

 

Adjustments to Reconcile Net Income to Net Cash Flows

 

 

 

 

 

 

 

Provided by Operating Activities:

 

 

 

 

 

 

 

 Depreciation

 

 154,977 

 

 

 80,839 

 

 

 Deferred Income Taxes

 

 168,938 

 

 

 52,474 

 

 

 Pension, SERP and PBOP Expense

 

 53,102 

 

 

 42,268 

 

 

 Pension and PBOP Contributions

 

 (47,048)

 

 

 (98,910)

 

 

 Regulatory Over/(Under) Recoveries, Net

 

 39,218 

 

 

 (27,569)

 

 

 Amortization of Regulatory Assets, Net

 

 54,049 

 

 

 5,426 

 

 

 Amortization of Rate Reduction Bonds

 

 34,499 

 

 

 18,347 

 

 

 Proceeds from DOE Damages Claim

 

 77,936 

 

 

 - 

 

 

 Other

 

 (51,106)

 

 

 (5,484)

 

Changes in Current Assets and Liabilities:

 

 

 

 

 

 

 

 Receivables and Unbilled Revenues, Net

 

 (129,431)

 

 

 29,276 

 

 

 Fuel, Materials and Supplies

 

 28,487 

 

 

 30,108 

 

 

 Taxes Receivable/Accrued, Net

 

 (21,295)

 

 

 11,758 

 

 

 Accounts Payable

 

 (86,916)

 

 

 (190,232)

 

 

 Other Current Assets and Liabilities, Net

 

 (32,235)

 

 

 (40,240)

Net Cash Flows Provided by Operating Activities

 

 473,143 

 

 

 8,816 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Investments in Property, Plant and Equipment

 

 (388,950)

 

 

 (304,294)

 

Proceeds from Sales of Marketable Securities

 

98,070 

 

 

 40,947 

 

Purchases of Marketable Securities

 

 (184,030)

 

 

 (41,570)

 

Other Investing Activities

 

 27,997 

 

 

 2,448 

Net Cash Flows Used in Investing Activities

 

 (446,913)

 

 

 (302,469)

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

Cash Dividends on Common Shares

 

 (116,431)

 

 

 (52,104)

 

Cash Dividends on Preferred Stock

 

 (1,879)

 

 

 (1,390)

 

(Decrease)/Increase in Short-Term Debt

 

 (228,000)

 

 

 343,000 

 

Issuance of Long-Term Debt

 

 400,000 

 

 

 300,000 

 

Retirements of Rate Reduction Bonds

 

 (62,529)

 

 

 (17,903)

 

Other Financing Activities

 

 (2,322)

 

 

 (1,130)

Net Cash Flows (Used in)/Provided by Financing Activities

 

 (11,161)

 

 

 570,473 

Net Increase in Cash and Cash Equivalents

 

 15,069 

 

 

 276,820 

Cash and Cash Equivalents - Beginning of Period

 

 45,748 

 

 

 6,559 

Cash and Cash Equivalents - End of Period

$

 60,817 

 

$

 283,379 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

 

 

 

 

 



4






THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

$

 8,307 

 

$

 1 

 

Receivables, Net

 

 318,111 

 

 

 284,787 

 

Accounts Receivable from Affiliated Companies

 

 2,942 

 

 

 6,641 

 

Unbilled Revenues

 

 80,590 

 

 

 85,353 

 

Regulatory Assets

 

 172,883 

 

 

 185,858 

 

Materials and Supplies

 

 63,035 

 

 

 64,603 

 

Prepayments and Other Current Assets

 

 47,906 

 

 

 26,413 

Total Current Assets

 

 693,774 

 

 

 653,656 

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

 6,184,628 

 

 

 6,152,959 

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

 

Regulatory Assets

 

 2,141,137 

 

 

 2,158,363 

 

Derivative Assets

 

 94,970 

 

 

 90,612 

 

Other Long-Term Assets

 

 87,368 

 

 

 86,498 

Total Deferred Debits and Other Assets

 

 2,323,475 

 

 

 2,335,473 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

 9,201,877 

 

$

 9,142,088 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























5




THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Notes Payable to Affiliated Companies

$

 210,400 

 

$

 99,296 

 

Long-Term Debt - Current Portion

 

 125,000 

 

 

 125,000 

 

Accounts Payable

 

 196,526 

 

 

 262,857 

 

Accounts Payable to Affiliated Companies

 

 31,968 

 

 

 52,326 

 

Obligations to Third Party Suppliers

 

 67,833 

 

 

 67,344 

 

Accrued Taxes

 

 53,383 

 

 

 60,109 

 

Regulatory Liabilities

 

 42,324 

 

 

 32,119 

 

Derivative Liabilities

 

 95,573 

 

 

 96,931 

 

Other Current Liabilities

 

 102,094 

 

 

 125,662 

Total Current Liabilities

 

 925,101 

 

 

 921,644 

 

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

Accumulated Deferred Income Taxes

 

 1,401,609 

 

 

 1,336,105 

 

Regulatory Liabilities

 

 110,688 

 

 

 124,319 

 

Derivative Liabilities

 

 826,023 

 

 

 865,571 

 

Accrued Pension, SERP and PBOP

 

 304,549 

 

 

 304,696 

 

Other Long-Term Liabilities

 

 192,624 

 

 

 197,434 

Total Deferred Credits and Other Liabilities

 

 2,835,493 

 

 

 2,828,125 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

Long-Term Debt

 

 2,740,614 

 

 

 2,737,790 

 

 

 

 

 

 

 

 

   Preferred Stock Not Subject to Mandatory Redemption

 

 116,200 

 

 

 116,200 

 

 

 

 

 

 

 

 

 

Common Stockholder's Equity:

 

 

 

 

 

 

 

Common Stock

 

 60,352 

 

 

 60,352 

 

 

Capital Surplus, Paid In

 

 1,640,566 

 

 

 1,640,149 

 

 

Retained Earnings

 

 885,246 

 

 

 839,628 

 

 

Accumulated Other Comprehensive Loss

 

 (1,695)

 

 

 (1,800)

 

Common Stockholder's Equity

 

 2,584,469 

 

 

 2,538,329 

Total Capitalization

 

 5,441,283 

 

 

 5,392,319 

 

 

 

 

 

 

 

 

Total Liabilities and Capitalization

$

 9,201,877 

 

$

 9,142,088 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























6




THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Revenues

$

 624,097 

 

$

 591,965 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

Purchased Power and Transmission

 

 229,259 

 

 

 220,891 

 

Operations and Maintenance

 

 108,895 

 

 

 132,902 

 

Depreciation

 

 42,448 

 

 

 41,070 

 

Amortization of Regulatory Assets, Net

 

 10,787 

 

 

 7,994 

 

Energy Efficiency Programs

 

 22,813 

 

 

 21,973 

 

Taxes Other Than Income Taxes

 

 60,192 

 

 

 55,270 

 

 

Total Operating Expenses

 

 474,394 

 

 

 480,100 

Operating Income

 

 149,703 

 

 

 111,865 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

Interest on Long-Term Debt

 

 32,635 

 

 

 31,521 

 

Other Interest

 

 (2,941)

 

 

 1,987 

 

 

Interest Expense

 

 29,694 

 

 

 33,508 

Other Income, Net

 

 4,187 

 

 

 5,300 

Income Before Income Tax Expense

 

 124,196 

 

 

 83,657 

Income Tax Expense

 

 39,188 

 

 

 29,672 

Net Income

$

 85,008 

 

$

 53,985 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

Net Income

$

 85,008 

 

$

 53,985 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

 111 

 

 

 111 

 

Changes in Unrealized Gains/(Losses) on Other

 

 

 

 

 

 

 

Securities

 

 (6)

 

 

 1 

Other Comprehensive Income, Net of Tax

 

 105 

 

 

 112 

Comprehensive Income

$

 85,113 

 

$

 54,097 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




7




THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

Net Income

$

 85,008 

 

$

 53,985 

 

Adjustments to Reconcile Net Income to Net Cash Flows

 

 

 

 

 

 

 

Provided by/(Used in) Operating Activities:

 

 

 

 

 

 

 

 Depreciation

 

 42,448 

 

 

 41,070 

 

 

 Deferred Income Taxes

 

 65,475 

 

 

 32,460 

 

 

 Pension, SERP and PBOP Expense, Net of PBOP Contributions

 

 8,183 

 

 

 9,095 

 

 

 Regulatory Underrecoveries, Net

 

 (15,835)

 

 

 (39,407)

 

 

 Amortization of Regulatory Assets, Net

 

 10,787 

 

 

 7,994 

 

 

 Other

 

 3,653 

 

 

 (6,399)

 

Changes in Current Assets and Liabilities:

 

 

 

 

 

 

 

 Receivables and Unbilled Revenues, Net

 

 (32,041)

 

 

 28,685 

 

 

 Taxes Receivable/Accrued, Net

 

 (12,777)

 

 

 16,551 

 

 

 Accounts Payable

 

 (106,140)

 

 

 (146,676)

 

 

 Other Current Assets and Liabilities, Net

 

 (22,340)

 

 

 (44,484)

Net Cash Flows Provided by/(Used in) Operating Activities

 

 26,421 

 

 

 (47,126)

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Investments in Property, Plant and Equipment

 

 (89,360)

 

 

 (108,842)

 

Other Investing Activities

 

 447 

 

 

 1,139 

Net Cash Flows Used in Investing Activities

 

 (88,913)

 

 

 (107,703)

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

Cash Dividends on Common Stock

 

 (38,000)

 

 

 (33,495)

 

Cash Dividends on Preferred Stock

 

 (1,390)

 

 

 (1,390)

 

Issuance of Long Term Debt

 

 400,000 

 

 

 - 

 

(Decrease)/Increase in Short-Term Debt

 

 (283,700)

 

 

 194,750 

 

Other Financing Activities

 

 (6,112)

 

 

 (1,200)

Net Cash Flows Provided by Financing Activities

 

 70,798 

 

 

 158,665 

Net Increase in Cash

 

 8,306 

 

 

 3,836 

Cash - Beginning of Period

 

 1 

 

 

 1 

Cash - End of Period

$

 8,307 

 

$

 3,837 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



8






NSTAR ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and Cash Equivalents

$

 17,109 

 

$

 13,695 

 

Receivables, Net

 

 233,438 

 

 

 202,025 

 

Accounts Receivable from Affiliated Companies

 

 303,699 

 

 

 160,176 

 

Unbilled Revenues

 

 35,895 

 

 

 41,377 

 

Regulatory Assets

 

 309,559 

 

 

 347,081 

 

Prepayments and Other Current Assets

 

 42,425 

 

 

 28,086 

Total Current Assets

 

 942,125 

 

 

 792,440 

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

 4,788,158 

 

 

 4,735,297 

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

 

Regulatory Assets

 

 1,489,317 

 

 

 1,444,870 

 

Other Long-Term Assets

 

 57,036 

 

 

 87,382 

Total Deferred Debits and Other Assets

 

 1,546,353 

 

 

 1,532,252 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

 7,276,636 

 

$

 7,059,989 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























9




NSTAR ELECTRIC COMPANY AND SUBSIDIARIES  

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Notes Payable

$

 308,000 

 

$

276,000 

 

Long-Term Debt - Current Portion

 

 1,650 

 

 

 1,650 

 

Accounts Payable

 

 205,738 

 

 

 168,611 

 

Accounts Payable to Affiliated Companies

 

 353,037 

 

 

 247,061 

 

Accumulated Deferred Income Taxes - Current Portion

 

 84,096 

 

 

 104,668 

 

Regulatory Liabilities

 

 67,277 

 

 

 47,539 

 

Other Current Liabilities

 

 148,360 

 

 

 144,433 

Total Current Liabilities

 

 1,168,158 

 

 

 989,962 

 

 

 

 

 

 

 

 

Rate Reduction Bonds

 

 - 

 

 

 43,493 

 

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

Accumulated Deferred Income Taxes

 

 1,365,951 

 

 

 1,321,026 

 

Regulatory Liabilities

 

 248,376 

 

 

 244,224 

 

Accrued Pension

 

 362,432 

 

 

 360,932 

 

Payable to Affiliated Companies

 

 65,668 

 

 

 70,221 

 

Other Long-Term Liabilities

 

 171,439 

 

 

 183,190 

Total Deferred Credits and Other Liabilities

 

 2,213,866 

 

 

 2,179,593 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

Long-Term Debt

 

 1,600,950 

 

 

 1,600,911 

 

 

 

 

 

 

 

 

   Preferred Stock Not Subject to Mandatory Redemption

 

 43,000 

 

 

 43,000 

 

 

 

 

 

 

 

 

 

Common Stockholder's Equity:

 

 

 

 

 

 

 

Common Stock

 

 - 

 

 

 - 

 

 

Capital Surplus, Paid In

 

 992,625 

 

 

 992,625 

 

 

Retained Earnings

 

 1,258,037 

 

 

 1,210,405 

 

Common Stockholder's Equity

 

 2,250,662 

 

 

 2,203,030 

Total Capitalization

 

 3,894,612 

 

 

 3,846,941 

 

 

 

 

 

 

 

 

Total Liabilities and Capitalization

$

 7,276,636 

 

$

 7,059,989 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























10




NSTAR ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Revenues

$

 592,257 

 

$

 556,476 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

Purchased Power and Transmission

 

 214,053 

 

 

 219,010 

 

Operations and Maintenance

 

 92,301 

 

 

 148,180 

 

Depreciation

 

 45,441 

 

 

 42,529 

 

Amortization of Regulatory Assets, Net

 

 46,994 

 

 

 23,880 

 

Amortization of Rate Reduction Bonds

 

 15,054 

 

 

 22,581 

 

Energy Efficiency Programs

 

 51,703 

 

 

 46,904 

 

Taxes Other Than Income Taxes

 

 32,174 

 

 

 30,861 

 

 

Total Operating Expenses

 

 497,720 

 

 

 533,945 

Operating Income

 

 94,537 

 

 

 22,531 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

Interest on Long-Term Debt

 

 19,592 

 

 

 22,288 

 

Interest on Rate Reduction Bonds

 

 399 

 

 

 1,326 

 

Other Interest

 

 (4,068)

 

 

 (5,836)

 

 

Interest Expense

 

 15,923 

 

 

 17,778 

Other Income, Net

 

 773 

 

 

 1,222 

Income Before Income Tax Expense

 

 79,387 

 

 

 5,975 

Income Tax Expense

 

 31,265 

 

 

 2,035 

Net Income

$

 48,122 

 

$

 3,940 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























11




NSTAR ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

Net Income

$

 48,122 

 

$

 3,940 

 

 

Adjustments to Reconcile Net Income to Net Cash Flows

 

 

 

 

 

 

 

 

Provided by Operating Activities:

 

 

 

 

 

 

 

 

 Bad Debt Expense

 

 5,523 

 

 

 21,618 

 

 

 

 Depreciation

 

 45,441 

 

 

 42,529 

 

 

 

 Deferred Income Taxes

 

 26,571 

 

 

 (19,446)

 

 

 

 Pension and PBOP Expense, net of Pension and PBOP Contributions

 

 6,420 

 

 

 16,997 

 

 

 

 Regulatory (Under)/Over Recoveries, Net

 

 (2,951)

 

 

 24,719 

 

 

 

 Amortization of Regulatory Assets, Net

 

 46,994 

 

 

 23,880 

 

 

 

 Amortization of Rate Reduction Bonds

 

 15,054 

 

 

 22,581 

 

 

 

 Other

 

 (23,969)

 

 

 (22,647)

 

 

Changes in Current Assets and Liabilities:

 

 

 

 

 

 

 

 

 Receivables and Unbilled Revenues, Net

 

 (174,978)

 

 

15,109 

 

 

 

 Materials and Supplies

 

 (7,060)

 

 

 (9,340)

 

 

 

 Taxes Receivable/Accrued, Net

 

 (22,501)

 

 

 14,645 

 

 

 

 Accounts Payable

 

 107,843 

 

 

 (72,303)

 

 

 

 Other Current Assets and Liabilities, Net

 

 18,916 

 

 

 34,223 

 

Net Cash Flows Provided by Operating Activities

 

 89,425 

 

 

 96,505 

 

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

Investments in Property, Plant and Equipment

 

 (107,573)

 

 

 (92,870)

 

 

Decrease in Special Deposits

 

 33,631 

 

 

 25,898 

 

 

Other Investing Activities

 

 (86)

 

 

 375 

 

Net Cash Flows Used in Investing Activities

 

 (74,028)

 

 

 (66,597)

 

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

Cash Dividends on Common Stock

 

 - 

 

 

 (57,100)

 

 

Cash Dividends on Preferred Stock

 

 (490)

 

 

 (490)

 

 

Increase in Short-Term Debt

 

 32,000 

 

 

 71,000 

 

 

Retirements of Rate Reduction Bonds

 

 (43,493)

 

 

 (43,548)

 

Net Cash Flows Used in Financing Activities

 

 (11,983)

 

 

 (30,138)

 

Net Increase/(Decrease) in Cash and Cash Equivalents

 

 3,414 

 

 

 (230)

 

Cash and Cash Equivalents - Beginning of Period

 

 13,695 

 

 

 9,373 

 

Cash and Cash Equivalents - End of Period

$

 17,109 

 

$

 9,143 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



12






PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

$

 3,376 

 

$

 2,493 

 

Receivables, Net

 

 86,225 

 

 

 87,164 

 

Accounts Receivable from Affiliated Companies

 

 7,568 

 

 

 723 

 

Unbilled Revenues

 

 39,062 

 

 

 39,982 

 

Taxes Receivable

 

 2,020 

 

 

 17,177 

 

Fuel, Materials and Supplies

 

 94,783 

 

 

 95,345 

 

Regulatory Assets

 

 62,184 

 

 

 62,882 

 

Prepayments and Other Current Assets

 

 8,127 

 

 

 22,205 

Total Current Assets

 

 303,345 

 

 

 327,971 

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

 2,360,753 

 

 

 2,352,515 

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

 

Regulatory Assets

 

 329,314 

 

 

 351,059 

 

Other Long-Term Assets

 

 82,284 

 

 

 83,052 

Total Deferred Debits and Other Assets

 

 411,598 

 

 

 434,111 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 $

 3,075,696 

 

 $

 3,114,597 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

 

 

 

 




13






PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES  

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Notes Payable to Affiliated Companies

$

 53,400 

 

$

 63,300 

 

Long-Term Debt - Current Portion

 

 108,985 

 

 

 - 

 

Accounts Payable

 

 64,619 

 

 

 62,864 

 

Accounts Payable to Affiliated Companies

 

 12,624 

 

 

 21,337 

 

Accrued Interest

 

 13,840 

 

 

 9,317 

 

Regulatory Liabilities

 

 18,132 

 

 

 23,002 

 

Renewable Portfolio Standards Compliance Obligations

 

 21,946 

 

 

 17,383 

 

Other Current Liabilities

 

 43,941 

 

 

 41,633 

Total Current Liabilities

 

 337,487 

 

 

 238,836 

 

 

 

 

 

 

 

 

Rate Reduction Bonds

 

 14,974 

 

 

 29,294 

 

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

Accumulated Deferred Income Taxes

 

 449,979 

 

 

 441,577 

 

Regulatory Liabilities

 

 52,473 

 

 

 52,418 

 

Accrued Pension, SERP and PBOP

 

 186,836 

 

 

 220,129 

 

Other Long-Term Liabilities

 

 45,972 

 

 

 47,896 

Total Deferred Credits and Other Liabilities

 

 735,260 

 

 

 762,020 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

Long-Term Debt

 

 888,999 

 

 

 997,932 

 

 

 

 

 

 

 

 

 

Common Stockholder's Equity:

 

 

 

 

 

 

 

Common Stock

 

 - 

 

 

 - 

 

 

Capital Surplus, Paid In

 

 701,241 

 

 

 701,052 

 

 

Retained Earnings

 

 407,113 

 

 

 395,118 

 

 

Accumulated Other Comprehensive Loss

 

 (9,378)

 

 

 (9,655)

 

Common Stockholder's Equity

 

 1,098,976 

 

 

 1,086,515 

Total Capitalization

 

 1,987,975 

 

 

 2,084,447 

 

 

 

 

 

 

 

 

Total Liabilities and Capitalization

$

 3,075,696 

 

$

 3,114,597 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























14




PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Revenues

$

 273,829 

 

$

 242,997 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

 101,024 

 

 

 81,049 

 

Operations and Maintenance

 

 59,729 

 

 

 64,979 

 

Depreciation

 

 22,568 

 

 

 21,208 

 

Amortization of Regulatory Liabilities, Net

 

 (3,051)

 

 

 (2,622)

 

Amortization of Rate Reduction Bonds

 

 14,756 

 

 

 13,930 

 

Energy Efficiency Programs

 

 3,669 

 

 

 3,581 

 

Taxes Other Than Income Taxes

 

 17,016 

 

 

 15,486 

 

 

Total Operating Expenses

 

 215,711 

 

 

 197,611 

Operating Income

 

 58,118 

 

 

 45,386 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

Interest on Long-Term Debt

 

 11,796 

 

 

 11,563 

 

Interest on Rate Reduction Bonds

 

 85 

 

 

 1,016 

 

Other Interest

 

 287 

 

 

 234 

 

 

Interest Expense

 

 12,168 

 

 

 12,813 

Other Income, Net

 

 1,030 

 

 

 2,042 

Income Before Income Tax Expense

 

 46,980 

 

 

 34,615 

Income Tax Expense

 

 17,984 

 

 

 13,353 

Net Income

$

 28,996 

 

$

 21,262 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

Net Income

$

 28,996 

 

$

21,262 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

 291 

 

 

290 

 

Changes in Unrealized Gains/(Losses) on Other Securities

 

 (11)

 

 

 

Changes in Funded Status of Pension, SERP and PBOP

 

 

 

 

 

 

 

Benefit Plans

 

 (3)

 

 

 - 

Other Comprehensive Income, Net of Tax

 

 277 

 

 

292 

Comprehensive Income

$

 29,273 

 

$

 21,554 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























15




PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

Net Income

$

 28,996 

 

$

 21,262 

 

Adjustments to Reconcile Net Income to Net Cash Flows

 

 

 

 

 

 

 

Provided by Operating Activities:

 

 

 

 

 

 

 

 Depreciation

 

 22,568 

 

 

 21,208 

 

 

 Deferred Income Taxes

 

 10,143 

 

 

 8,908 

 

 

 Pension, SERP and PBOP Expense

 

 8,022 

 

 

 7,032 

 

 

 Pension and PBOP Contributions

 

 (35,146)

 

 

 (89,012)

 

 

 Regulatory (Under)/Over Recoveries, Net

 

 (799)

 

 

 911 

 

 

 Amortization of Regulatory Liabilities, Net

 

 (3,051)

 

 

 (2,622)

 

 

 Amortization of Rate Reduction Bonds

 

 14,756 

 

 

 13,930 

 

 

 Other

 

 (1,505)

 

 

 9,569 

 

Changes in Current Assets and Liabilities:

 

 

 

 

 

 

 

 Receivables and Unbilled Revenues, Net

 

 (13,889)

 

 

 2,480 

 

 

 Fuel, Materials and Supplies

 

 562 

 

 

 9,361 

 

 

 Taxes Receivable/Accrued, Net

 

 23,137 

 

 

 10,138 

 

 

 Accounts Payable

 

 31,257 

 

 

 (16,073)

 

 

 Other Current Assets and Liabilities, Net

 

 22,152 

 

 

 18,869 

Net Cash Flows Provided by Operating Activities

 

 107,203 

 

 

 15,961 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Investments in Property, Plant and Equipment

 

 (64,956)

 

 

 (67,059)

 

Decrease in NU Money Pool Lending

 

 - 

 

 

 55,900 

 

Other Investing Activities

 

 (17)

 

 

 963 

Net Cash Flows Used in Investing Activities

 

 (64,973)

 

 

 (10,196)

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

Cash Dividends on Common Stock

 

 (17,000)

 

 

 (42,891)

 

(Decrease)/Increase in Short-Term Debt

 

 (9,900)

 

 

 52,900 

 

Retirements of Rate Reduction Bonds

 

 (14,320)

 

 

 (13,463)

 

Other Financing Activities

 

 (127)

 

 

 (116)

Net Cash Flows Used in Financing Activities

 

 (41,347)

 

 

 (3,570)

Net Increase in Cash

 

 883 

 

 

 2,195 

Cash - Beginning of Period

 

 2,493 

 

 

 56 

Cash - End of Period

$

 3,376 

 

$

 2,251 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



16






WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

$

 1,768 

 

$

 1 

 

Receivables, Net

 

 48,113 

 

 

 47,297 

 

Accounts Receivable from Affiliated Companies

 

 154 

 

 

 164 

 

Unbilled Revenues

 

 16,071 

 

 

 16,192 

 

Taxes Receivable

 

 3 

 

 

 15,513 

 

Regulatory Assets

 

 43,534 

 

 

 42,370 

 

Marketable Securities

 

 30,588 

 

 

 27,352 

 

Prepayments and Other Current Assets

 

 7,571 

 

 

 7,963 

Total Current Assets

 

 147,802 

 

 

 156,852 

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

 1,305,743 

 

 

 1,290,498 

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

 

Regulatory Assets

 

 207,901 

 

 

 221,752 

 

Marketable Securities

 

 27,169 

 

 

 30,342 

 

Other Long-Term Assets

 

 24,018 

 

 

 23,625 

Total Deferred Debits and Other Assets

 

 259,088 

 

 

 275,719 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

 1,712,633 

 

$

 1,723,069 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   



























17




WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Notes Payable to Affiliated Companies

$

 43,400 

 

$

 31,900 

 

Long-Term Debt - Current Portion

 

 55,000 

 

 

 55,000 

 

Accounts Payable

 

 44,303 

 

 

 68,141 

 

Accounts Payable to Affiliated Companies

 

 3,061 

 

 

 7,103 

 

Accrued Interest

 

 1,918 

 

 

 8,304 

 

Regulatory Liabilities

 

 15,638 

 

 

 21,037 

 

Other Current Liabilities

 

 32,756 

 

 

 24,909 

Total Current Liabilities

 

 196,076 

 

 

 216,394 

 

 

 

 

 

 

 

 

Rate Reduction Bonds

 

 4,636 

 

 

 9,352 

 

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

Accumulated Deferred Income Taxes

 

 316,727 

 

 

 303,111 

 

Regulatory Liabilities

 

 9,736 

 

 

 9,686 

 

Accrued Pension, SERP and PBOP

 

 35,431 

 

 

 36,099 

 

Other Long-Term Liabilities

 

 33,203 

 

 

 40,148 

Total Deferred Credits and Other Liabilities

 

 395,097 

 

 

 389,044 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

Long-Term Debt

 

 550,057 

 

 

 550,270 

 

 

 

 

 

 

 

 

 

Common Stockholder's Equity:

 

 

 

 

 

 

 

Common Stock

 

 10,866 

 

 

 10,866 

 

 

Capital Surplus, Paid In

 

 390,485 

 

 

 390,412 

 

 

Retained Earnings

 

 169,179 

 

 

 160,577 

 

 

Accumulated Other Comprehensive Loss

 

 (3,763)

 

 

 (3,846)

 

Common Stockholder's Equity

 

 566,767 

 

 

 558,009 

Total Capitalization

 

 1,116,824 

 

 

 1,108,279 

 

 

 

 

 

 

 

 

Total Liabilities and Capitalization

$

 1,712,633 

 

$

 1,723,069 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























18




WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Revenues

$

 124,953 

 

$

 114,025 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

Purchased Power and Transmission

 

 40,044 

 

 

 40,554 

 

Operations and Maintenance

 

 20,928 

 

 

 22,601 

 

Depreciation

 

 8,970 

 

 

 7,697 

 

Amortization of Regulatory Assets/(Liabilities), Net

 

 129 

 

 

 (343)

 

Amortization of Rate Reduction Bonds

 

 4,689 

 

 

 4,418 

 

Energy Efficiency Programs

 

 8,315 

 

 

 5,556 

 

Taxes Other Than Income Taxes

 

 6,288 

 

 

 4,882 

 

 

Total Operating Expenses

 

 89,363 

 

 

 85,365 

Operating Income

 

 35,590 

 

 

 28,660 

 

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

 

Interest on Long-Term Debt

 

 5,955 

 

 

 5,766 

 

Interest on Rate Reduction Bonds

 

 127 

 

 

 415 

 

Other Interest

 

 211 

 

 

 214 

 

 

Interest Expense

 

 6,293 

 

 

 6,395 

Other Income, Net

 

 1,004 

 

 

 1,092 

Income Before Income Tax Expense

 

 30,301 

 

 

 23,357 

Income Tax Expense

 

 11,698 

 

 

 9,171 

Net Income

$

 18,603 

 

$

 14,186 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

Net Income

$

 18,603 

 

$

14,186 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

 85 

 

 

85 

 

Changes in Unrealized Gains/(Losses) on Other Securities

 

 (2)

 

 

 - 

Other Comprehensive Income, Net of Tax

 

 83 

 

 

 85 

Comprehensive Income

$

 18,686 

 

$

 14,271 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



























19




WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

(Thousands of Dollars)

2013 

 

2012 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

Net Income

$

 18,603 

 

$

 14,186 

 

Adjustments to Reconcile Net Income to Net Cash Flows

 

 

 

 

 

 

 

Provided by Operating Activities:

 

 

 

 

 

 

 

 Depreciation

 

 8,970 

 

 

 7,697 

 

 

 Deferred Income Taxes

 

 16,828 

 

 

 9,198 

 

 

 Pension, SERP and PBOP Expense, Net of PBOP Contributions

 

 1,246 

 

 

 1,766 

 

 

 Regulatory Underrecoveries, Net

 

 (2,357)

 

 

 (1,778)

 

 

 Amortization of Regulatory Assets/(Liabilities), Net

 

 129 

 

 

(343)

 

 

 Amortization of Rate Reduction Bonds

 

 4,689 

 

 

 4,418 

 

 

 Other

 

 (2,545)

 

 

 (1,071)

 

Changes in Current Assets and Liabilities:

 

 

 

 

 

 

 

 Receivables and Unbilled Revenues, Net

 

 (4,907)

 

 

 (2,274)

 

 

 Taxes Receivable/Accrued, Net

 

 21,600 

 

 

 1,051 

 

 

 Accounts Payable

 

 17,667 

 

 

 (21,870)

 

 

 Other Current Assets and Liabilities, Net

 

 (8,931)

 

 

 (5,885)

Net Cash Flows Provided by Operating Activities

 

 70,992 

 

 

 5,095 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Investments in Property, Plant and Equipment

 

 (66,340)

 

 

 (85,011)

 

Proceeds from Sales of Marketable Securities

 

 21,035 

 

 

 31,579 

 

Purchases of Marketable Securities

 

 (21,191)

 

 

 (31,680)

 

Decrease in NU Money Pool Lending

 

 - 

 

 

 11,000 

 

Other Investing Activities

 

 500 

 

 

 (169)

Net Cash Flows Used in Investing Activities

 

 (65,996)

 

 

 (74,281)

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

Cash Dividends on Common Stock

 

 (10,000)

 

 

 (9,432)

 

Increase in Short-Term Debt

 

 11,500 

 

 

 83,200 

 

Retirement of Rate Reduction Bonds

 

 (4,716)

 

 

 (4,440)

 

Other Financing Activities

 

 (13)

 

 

 (17)

Net Cash Flows (Used in)/Provided by Financing Activities

 

 (3,229)

 

 

 69,311 

Net Increase in Cash

 

 1,767 

 

 

 125 

Cash - Beginning of Period

 

 1 

 

 

 1 

Cash - End of Period

$

 1,768 

 

$

 126 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



20



NORTHEAST UTILITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Notes Payable

 

$

571,147

 

$

1,093,000

 

Long-Term Debt - Current Portion

 

530,533

 

533,346

 

Accounts Payable

 

711,594

 

742,251

 

Regulatory Liabilities

 

263,754

 

204,278

 

Other Current Liabilities

 

713,116

 

702,776

 

Total Current Liabilities

 

2,790,144

 

3,275,651

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

Accumulated Deferred Income Taxes

 

4,209,969

 

4,029,026

 

Regulatory Liabilities

 

591,468

 

502,984

 

Derivative Liabilities

 

546,387

 

624,050

 

Accrued Pension, SERP and PBOP

 

890,019

 

896,844

 

Other Long-Term Liabilities

 

871,050

 

923,053

 

Total Deferred Credits and Other Liabilities

 

7,108,893

 

6,975,957

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

Long-Term Debt

 

8,318,332

 

7,776,833

 

 

 

 

 

 

 

Noncontrolling Interest - Preferred Stock of Subsidiaries

 

155,568

 

155,568

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Common Shareholders’ Equity:

 

 

 

 

 

Common Shares

 

1,666,580

 

1,665,351

 

Capital Surplus, Paid In

 

6,185,027

 

6,192,765

 

Retained Earnings

 

2,237,710

 

2,125,980

 

Accumulated Other Comprehensive Loss

 

(44,321

)

(46,031

)

Treasury Stock

 

(321,063

)

(326,537

)

Common Shareholders’ Equity

 

9,723,933

 

9,611,528

 

Total Capitalization

 

18,197,833

 

17,543,929

 

 

 

 

 

 

 

Total Liabilities and Capitalization

 

$

28,096,870

 

$

27,795,537

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2



Table of Contents

NORTHEAST UTILITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars, Except Share Information)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Revenues

 

$

2,290,590

 

$

1,995,023

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

978,150

 

747,809

 

Operations and Maintenance

 

351,688

 

346,092

 

Depreciation

 

150,807

 

154,977

 

Amortization of Regulatory Assets, Net

 

57,898

 

54,049

 

Amortization of Rate Reduction Bonds

 

 

34,499

 

Energy Efficiency Programs

 

138,825

 

105,771

 

Taxes Other Than Income Taxes

 

145,533

 

132,881

 

Total Operating Expenses

 

1,822,901

 

1,576,078

 

Operating Income

 

467,689

 

418,945

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

Interest on Long-Term Debt

 

87,377

 

85,906

 

Other Interest

 

2,598

 

(9,651

)

Interest Expense

 

89,975

 

76,255

 

Other Income, Net

 

1,667

 

7,765

 

Income Before Income Tax Expense

 

379,381

 

350,455

 

Income Tax Expense

 

141,545

 

120,487

 

Net Income

 

237,836

 

229,968

 

Net Income Attributable to Noncontrolling Interests

 

1,879

 

1,879

 

Net Income Attributable to Controlling Interest

 

$

235,957

 

$

228,089

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

$

0.75

 

$

0.72

 

 

 

 

 

 

 

Diluted Earnings Per Common Share

 

$

0.74

 

$

0.72

 

 

 

 

 

 

 

Dividends Declared Per Common Share

 

$

0.39

 

$

0.37

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

Basic

 

315,534,512

 

315,129,782

 

Diluted

 

316,892,119

 

316,002,538

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Net Income

 

$

237,836

 

$

229,968

 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

509

 

516

 

Changes in Unrealized Gains/(Losses) on Other Securities

 

240

 

(181

)

Changes in Funded Status of Pension, SERP and PBOP Benefit Plans

 

961

 

1,621

 

Other Comprehensive Income, Net of Tax

 

1,710

 

1,956

 

Comprehensive Income Attributable to Noncontrolling Interests

 

(1,879

)

(1,879

)

Comprehensive Income Attributable to Controlling Interest

 

$

237,667

 

$

230,045

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3



Table of Contents

NORTHEAST UTILITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

Net Income

 

$

237,836

 

$

229,968

 

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:

 

 

 

 

 

Depreciation

 

150,807

 

154,977

 

Deferred Income Taxes

 

137,417

 

168,938

 

Pension, SERP and PBOP Expense

 

24,995

 

53,102

 

Pension and PBOP Contributions

 

(6,622

)

(47,048

)

Regulatory Overrecoveries, Net

 

872

 

39,218

 

Amortization of Regulatory Assets, Net

 

57,898

 

54,049

 

Amortization of Rate Reduction Bonds

 

 

34,499

 

Proceeds from DOE Damages Claim

 

163,300

 

77,936

 

Deferred DOE Proceeds

 

(163,300

)

 

Other

 

(7,574

)

(51,106

)

Changes in Current Assets and Liabilities:

 

 

 

 

 

Receivables and Unbilled Revenues, Net

 

(182,221

)

(129,431

)

Fuel, Materials and Supplies

 

75,041

 

28,487

 

Taxes Receivable/Accrued, Net

 

(59,840

)

(21,295

)

Accounts Payable

 

53,905

 

(86,916

)

Other Current Assets and Liabilities, Net

 

11,282

 

(32,235

)

Net Cash Flows Provided by Operating Activities

 

493,796

 

473,143

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

Investments in Property, Plant and Equipment

 

(348,691

)

(388,950

)

Proceeds from Sales of Marketable Securities

 

128,505

 

98,070

 

Purchases of Marketable Securities

 

(132,605

)

(184,030

)

Other Investing Activities

 

1,637

 

27,997

 

Net Cash Flows Used in Investing Activities

 

(351,154

)

(446,913

)

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

Cash Dividends on Common Shares

 

(118,460

)

(116,431

)

Cash Dividends on Preferred Stock

 

(1,879

)

(1,879

)

Decrease in Short-Term Debt

 

(299,500

)

(228,000

)

Issuance of Long-Term Debt

 

400,000

 

400,000

 

Retirements of Long-Term Debt

 

(75,000

)

 

Retirements of Rate Reduction Bonds

 

 

(62,529

)

Other Financing Activities

 

(2,017

)

(2,322

)

Net Cash Flows Used in Financing Activities

 

(96,856

)

(11,161

)

Net Increase in Cash and Cash Equivalents

 

45,786

 

15,069

 

Cash and Cash Equivalents - Beginning of Period

 

43,364

 

45,748

 

Cash and Cash Equivalents - End of Period

 

$

89,150

 

$

60,817

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4



Table of Contents

THE CONNECTICUT LIGHT AND POWER COMPANY

CONDENSED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash

 

$

15,675

 

$

7,237

 

Receivables, Net

 

386,876

 

319,670

 

Accounts Receivable from Affiliated Companies

 

14,721

 

13,777

 

Unbilled Revenues

 

98,095

 

92,401

 

Regulatory Assets

 

175,926

 

150,943

 

Materials and Supplies

 

51,376

 

54,606

 

Prepayments and Other Current Assets

 

73,602

 

53,082

 

Total Current Assets

 

816,271

 

691,716

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

6,506,245

 

6,451,259

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

Regulatory Assets

 

1,580,609

 

1,663,147

 

Other Long-Term Assets

 

170,814

 

174,380

 

Total Deferred Debits and Other Assets

 

1,751,423

 

1,837,527

 

 

 

 

 

 

 

Total Assets

 

$

9,073,939

 

$

8,980,502

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

5



Table of Contents

THE CONNECTICUT LIGHT AND POWER COMPANY

CONDENSED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Notes Payable to NU Parent

 

$

351,600

 

$

287,300

 

Long-Term Debt - Current Portion

 

150,000

 

150,000

 

Accounts Payable

 

186,792

 

201,047

 

Accounts Payable to Affiliated Companies

 

52,760

 

56,531

 

Obligations to Third Party Suppliers

 

76,236

 

73,914

 

Regulatory Liabilities

 

107,284

 

93,961

 

Derivative Liabilities

 

92,040

 

92,233

 

Other Current Liabilities

 

154,312

 

134,716

 

Total Current Liabilities

 

1,171,024

 

1,089,702

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

Accumulated Deferred Income Taxes

 

1,579,498

 

1,510,586

 

Regulatory Liabilities

 

90,053

 

93,757

 

Derivative Liabilities

 

539,444

 

617,072

 

Accrued Pension, SERP and PBOP

 

94,820

 

95,895

 

Other Long-Term Liabilities

 

152,920

 

163,588

 

Total Deferred Credits and Other Liabilities

 

2,456,735

 

2,480,898

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

Long-Term Debt

 

2,591,405

 

2,591,208

 

 

 

 

 

 

 

Preferred Stock Not Subject to Mandatory Redemption

 

116,200

 

116,200

 

 

 

 

 

 

 

Common Stockholder’s Equity:

 

 

 

 

 

Common Stock

 

60,352

 

60,352

 

Capital Surplus, Paid In

 

1,682,900

 

1,682,047

 

Retained Earnings

 

996,591

 

961,482

 

Accumulated Other Comprehensive Loss

 

(1,268

)

(1,387

)

Common Stockholder’s Equity

 

2,738,575

 

2,702,494

 

Total Capitalization

 

5,446,180

 

5,409,902

 

 

 

 

 

 

 

Total Liabilities and Capitalization

 

$

9,073,939

 

$

8,980,502

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

6



Table of Contents

THE CONNECTICUT LIGHT AND POWER COMPANY

CONDENSED STATEMENTS OF INCOME

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Revenues

 

$

734,614

 

$

624,097

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Purchased Power and Transmission

 

281,381

 

229,259

 

Operations and Maintenance

 

109,514

 

108,895

 

Depreciation

 

46,130

 

42,448

 

Amortization of Regulatory Assets, Net

 

29,931

 

10,787

 

Energy Efficiency Programs

 

42,694

 

22,813

 

Taxes Other Than Income Taxes

 

66,953

 

60,192

 

Total Operating Expenses

 

576,603

 

474,394

 

Operating Income

 

158,011

 

149,703

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

Interest on Long-Term Debt

 

32,908

 

32,635

 

Other Interest

 

1,335

 

(2,941

)

Interest Expense

 

34,243

 

29,694

 

Other Income, Net

 

1,072

 

4,187

 

Income Before Income Tax Expense

 

124,840

 

124,196

 

Income Tax Expense

 

45,541

 

39,188

 

Net Income

 

$

79,299

 

$

85,008

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Net Income

 

$

79,299

 

$

85,008

 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

111

 

111

 

Changes in Unrealized Gains/(Losses) on Other Securities

 

8

 

(6

)

Other Comprehensive Income, Net of Tax

 

119

 

105

 

Comprehensive Income

 

$

79,418

 

$

85,113

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

7



Table of Contents

THE CONNECTICUT LIGHT AND POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

Net Income

 

$

79,299

 

$

85,008

 

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:

 

 

 

 

 

Depreciation

 

46,130

 

42,448

 

Deferred Income Taxes

 

59,334

 

65,475

 

Pension, SERP and PBOP Expense, Net of PBOP Contributions

 

4,086

 

8,183

 

Regulatory Underrecoveries, Net

 

(40,399

)

(15,835

)

Amortization of Regulatory Assets, Net

 

29,931

 

10,787

 

Other

 

4,536

 

3,653

 

Changes in Current Assets and Liabilities:

 

 

 

 

 

Receivables and Unbilled Revenues, Net

 

(82,833

)

(32,041

)

Taxes Receivable/Accrued, Net

 

7,015

 

(12,777

)

Accounts Payable

 

(2,872

)

(106,140

)

Other Current Assets and Liabilities, Net

 

(8,730

)

(22,340

)

Net Cash Flows Provided by Operating Activities

 

95,497

 

26,421

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

Investments in Property, Plant and Equipment

 

(107,993

)

(89,360

)

Other Investing Activities

 

1,027

 

447

 

Net Cash Flows Used in Investing Activities

 

(106,966

)

(88,913

)

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

Cash Dividends on Common Stock

 

(42,800

)

(38,000

)

Cash Dividends on Preferred Stock

 

(1,390

)

(1,390

)

Issuance of Long Term Debt

 

 

400,000

 

Increase/(Decrease) in Notes Payable to NU Parent

 

64,300

 

(194,700

)

Decrease in Short-Term Debt

 

 

(89,000

)

Other Financing Activities

 

(203

)

(6,112

)

Net Cash Flows Provided by Financing Activities

 

19,907

 

70,798

 

Net Increase in Cash

 

8,438

 

8,306

 

Cash - Beginning of Period

 

7,237

 

1

 

Cash - End of Period

 

$

15,675

 

$

8,307

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

8



Table of Contents

NSTAR ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and Cash Equivalents

 

$

42,035

 

$

8,021

 

Receivables, Net

 

231,082

 

209,711

 

Accounts Receivable from Affiliated Companies

 

123,953

 

27,264

 

Unbilled Revenues

 

28,249

 

41,368

 

Materials and Supplies

 

47,843

 

44,236

 

Regulatory Assets

 

222,598

 

204,144

 

Prepayments and Other Current Assets

 

5,686

 

36,710

 

Total Current Assets

 

701,446

 

571,454

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

5,069,203

 

5,043,887

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

Regulatory Assets

 

1,041,925

 

1,235,156

 

Other Long-Term Assets

 

65,983

 

60,624

 

Total Deferred Debits and Other Assets

 

1,107,908

 

1,295,780

 

 

 

 

 

 

 

Total Assets

 

$

6,878,557

 

$

6,911,121

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9



Table of Contents

NSTAR ELECTRIC COMPANY AND SUBSIDIARIESSUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Notes Payable

 

$

 

$

103,500

 

Long-Term Debt - Current Portion

 

301,650

 

301,650

 

Accounts Payable

 

264,834

 

207,559

 

Accounts Payable to Affiliated Companies

 

42,879

 

75,707

 

Accumulated Deferred Income Taxes

 

55,763

 

50,128

 

Regulatory Liabilities

 

73,596

 

53,958

 

Other Current Liabilities

 

140,146

 

118,410

 

Total Current Liabilities

 

878,868

 

910,912

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

Accumulated Deferred Income Taxes

 

1,400,532

 

1,466,835

 

Regulatory Liabilities

 

257,101

 

253,108

 

Accrued Pension, SERP and PBOP

 

150,938

 

118,010

 

Payable to Affiliated Companies

 

 

64,172

 

Other Long-Term Liabilities

 

132,679

 

142,214

 

Total Deferred Credits and Other Liabilities

 

1,941,250

 

2,044,339

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

Long-Term Debt

 

1,797,389

 

1,499,417

 

 

 

 

 

 

 

Preferred Stock Not Subject to Mandatory Redemption

 

43,000

 

43,000

 

 

 

 

 

 

 

Common Stockholder’s Equity:

 

 

 

 

 

Common Stock

 

 

 

Capital Surplus, Paid In

 

992,625

 

992,625

 

Retained Earnings

 

1,225,425

 

1,420,828

 

Common Stockholder’s Equity

 

2,218,050

 

2,413,453

 

Total Capitalization

 

4,058,439

 

3,955,870

 

 

 

 

 

 

 

Total Liabilities and Capitalization

 

$

6,878,557

 

$

6,911,121

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10



Table of Contents

NSTAR ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Revenues

 

$

666,188

 

$

592,257

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Purchased Power and Transmission

 

319,082

 

214,053

 

Operations and Maintenance

 

85,924

 

92,301

 

Depreciation

 

46,626

 

45,441

 

Amortization of Regulatory Assets, Net

 

15,664

 

46,994

 

Amortization of Rate Reduction Bonds

 

 

15,054

 

Energy Efficiency Programs

 

48,329

 

51,703

 

Taxes Other Than Income Taxes

 

32,151

 

32,174

 

Total Operating Expenses

 

547,776

 

497,720

 

Operating Income

 

118,412

 

94,537

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

Interest on Long-Term Debt

 

20,756

 

19,991

 

Other Interest

 

304

 

(4,068

)

Interest Expense

 

21,060

 

15,923

 

Other Income/(Loss), Net

 

(31

)

773

 

Income Before Income Tax Expense

 

97,321

 

79,387

 

Income Tax Expense

 

39,234

 

31,265

 

Net Income

 

$

58,087

 

$

48,122

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

11



Table of Contents

NSTAR ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Activities, SERP:

 

 

 

 

 

Net Income

 

$

58,087

 

$

48,122

 

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:

 

 

 

 

 

Depreciation

 

46,626

 

45,441

 

Deferred Income Taxes

 

1,585

 

26,571

 

Pension, SERP and PBOP Expense, Net of Contributions

 

(4,908

)

6,420

 

Regulatory Underrecoveries, Net

 

6,423

 

(2,951

)

Amortization of Regulatory Assets, Net

 

15,664

 

46,994

 

Amortization of Rate Reduction Bonds

 

 

15,054

 

Bad Debt Expense

 

6,096

 

5,523

 

Other

 

(15,538

)

(23,969

)

Changes in Current Assets and Liabilities:

 

 

 

 

 

Receivables and Unbilled Revenues, Net

 

(14,348

)

(31,455

)

Materials and Supplies

 

(3,606

)

(7,060

)

Taxes Receivable/Accrued, Net

 

21,504

 

(22,501

)

Accounts Payable

 

86,309

 

1,867

 

Accounts Receivable from/Payable to Affiliates, Net

 

(43,654

)

(37,547

)

Other Current Assets and Liabilities, Net

 

31,112

 

18,916

 

Net Cash Flows Provided by Operating Activities

 

191,352

 

89,425

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

Investments in Property, Plant and Equipment

 

(94,957

)

(107,573

)

(Increase)/Decrease in Special Deposits

 

(530

)

33,631

 

Other Investing Activities

 

41

 

(86

)

Net Cash Flows Used in Investing Activities

 

(95,446

)

(74,028

)

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

Cash Dividends on Common Stock

 

(253,000

)

 

Cash Dividends on Preferred Stock

 

(490

)

(490

)

(Decrease)/Increase in Notes Payable

 

(103,500

)

32,000

 

Issuance of Long-Term Debt

 

300,000

 

 

Retirements of Rate Reduction Bonds

 

 

(43,493

)

Other Financing Activities

 

(4,902

)

 

Net Cash Flows Used in Financing Activities

 

(61,892

)

(11,983

)

Net Increase in Cash and Cash Equivalents

 

34,014

 

3,414

 

Cash and Cash Equivalents - Beginning of Period

 

8,021

 

13,695

 

Cash and Cash Equivalents - End of Period

 

$

42,035

 

$

17,109

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

12



Table of Contents

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash

 

$

4,284

 

$

130

 

Receivables, Net

 

88,143

 

76,331

 

Accounts Receivable from Affiliated Companies

 

479

 

90

 

Unbilled Revenues

 

38,327

 

38,344

 

Taxes Receivable

 

20,968

 

2,180

 

Fuel, Materials and Supplies

 

94,410

 

128,736

 

Regulatory Assets

 

83,832

 

92,194

 

Prepayments and Other Current Assets

 

7,270

 

21,920

 

Total Current Assets

 

337,713

 

359,925

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

2,486,440

 

2,467,556

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

Regulatory Assets

 

210,702

 

219,346

 

Other Long-Term Assets

 

40,621

 

39,891

 

Total Deferred Debits and Other Assets

 

251,323

 

259,237

 

 

 

 

 

 

 

Total Assets

 

$

3,075,476

 

$

3,086,718

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

13



Table of Contents

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIESSUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Notes Payable to NU Parent

 

$

39,900

 

$

86,500

 

Long-Term Debt - Current Portion

 

50,000

 

50,000

 

Accounts Payable

 

59,847

 

82,920

 

Accounts Payable to Affiliated Companies

 

28,009

 

22,040

 

Regulatory Liabilities

 

27,333

 

20,643

 

Accumulated Deferred Income Taxes

 

22,811

 

28,596

 

Other Current Liabilities

 

46,880

 

51,729

 

Total Current Liabilities

 

274,780

 

342,428

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

Accumulated Deferred Income Taxes

 

539,255

 

500,166

 

Regulatory Liabilities

 

51,769

 

51,723

 

Accrued SERP and PBOP

 

15,321

 

15,272

 

Other Long-Term Liabilities

 

46,559

 

46,247

 

Total Deferred Credits and Other Liabilities

 

652,904

 

613,408

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

Long-Term Debt

 

999,081

 

999,006

 

 

 

 

 

 

 

Common Stockholder’s Equity:

 

 

 

 

 

Common Stock

 

 

 

Capital Surplus, Paid In

 

702,304

 

701,911

 

Retained Earnings

 

454,653

 

438,515

 

Accumulated Other Comprehensive Loss

 

(8,246

)

(8,550

)

Common Stockholder’s Equity

 

1,148,711

 

1,131,876

 

Total Capitalization

 

2,147,792

 

2,130,882

 

 

 

 

 

 

 

Total Liabilities and Capitalization

 

$

3,075,476

 

$

3,086,718

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

14



Table of Contents

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Revenues

 

$

299,833

 

$

273,829

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

115,246

 

101,024

 

Operations and Maintenance

 

62,212

 

59,729

 

Depreciation

 

24,215

 

22,568

 

Amortization of Regulatory Assets/(Liabilities), Net

 

12,562

 

(3,051

)

Amortization of Rate Reduction Bonds

 

 

14,756

 

Energy Efficiency Programs

 

3,839

 

3,669

 

Taxes Other Than Income Taxes

 

17,715

 

17,016

 

Total Operating Expenses

 

235,789

 

215,711

 

Operating Income

 

64,044

 

58,118

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

Interest on Long-Term Debt

 

11,526

 

11,881

 

Other Interest

 

445

 

287

 

Interest Expense

 

11,971

 

12,168

 

Other Income, Net

 

265

 

1,030

 

Income Before Income Tax Expense

 

52,338

 

46,980

 

Income Tax Expense

 

19,700

 

17,984

 

Net Income

 

$

32,638

 

$

28,996

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Net Income

 

$

32,638

 

$

28,996

 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

290

 

291

 

Changes in Unrealized Gains/(Losses) on Other Securities

 

14

 

(11

)

Changes in Funded Status of Pension, SERP and PBOP Benefit Plans

 

 

(3

)

Other Comprehensive Income, Net of Tax

 

304

 

277

 

Comprehensive Income

 

$

32,942

 

$

29,273

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

15



Table of Contents

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

Net Income

 

$

32,638

 

$

28,996

 

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:

 

 

 

 

 

Depreciation

 

24,215

 

22,568

 

Deferred Income Taxes

 

33,667

 

10,143

 

Pension, SERP and PBOP Expense

 

1,961

 

8,022

 

Pension and PBOP Contributions

 

(30

)

(35,146

)

Regulatory Over/(Under) Recoveries, Net

 

6,827

 

(799

)

Amortization of Regulatory Assets/(Liabilities), Net

 

12,562

 

(3,051

)

Amortization of Rate Reduction Bonds

 

 

14,756

 

Other

 

2,729

 

(1,505

)

Changes in Current Assets and Liabilities:

 

 

 

 

 

Receivables and Unbilled Revenues, Net

 

(14,268

)

(13,889

)

Fuel, Materials and Supplies

 

34,326

 

562

 

Taxes Receivable/Accrued, Net

 

(30,254

)

23,137

 

Accounts Payable

 

3,403

 

31,257

 

Other Current Assets and Liabilities, Net

 

21,505

 

22,152

 

Net Cash Flows Provided by Operating Activities

 

129,281

 

107,203

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

Investments in Property, Plant and Equipment

 

(61,864

)

(64,956

)

Other Investing Activities

 

(76

)

(17

)

Net Cash Flows Used in Investing Activities

 

(61,940

)

(64,973

)

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

Cash Dividends on Common Stock

 

(16,500

)

(17,000

)

Decrease in Notes Payable to NU Parent

 

(46,600

)

(9,900

)

Retirements of Rate Reduction Bonds

 

 

(14,320

)

Other Financing Activities

 

(87

)

(127

)

Net Cash Flows Used in Financing Activities

 

(63,187

)

(41,347

)

Net Increase in Cash

 

4,154

 

883

 

Cash - Beginning of Period

 

130

 

2,493

 

Cash - End of Period

 

$

4,284

 

$

3,376

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

16



Table of Contents

WESTERN MASSACHUSETTS ELECTRIC COMPANY

CONDENSED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash

 

$

4,227

 

$

 

Receivables, Net

 

54,844

 

49,018

 

Accounts Receivable from Affiliated Companies

 

5,996

 

47,607

 

Unbilled Revenues

 

16,531

 

16,562

 

Taxes Receivable

 

12,845

 

432

 

Regulatory Assets

 

49,578

 

43,024

 

Marketable Securities

 

19,194

 

26,628

 

Prepayments and Other Current Assets

 

9,663

 

10,479

 

Total Current Assets

 

172,878

 

193,750

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

1,398,810

 

1,381,060

 

 

 

 

 

 

 

Deferred Debits and Other Assets:

 

 

 

 

 

Regulatory Assets

 

132,181

 

146,088

 

Marketable Securities

 

38,710

 

31,243

 

Other Long-Term Assets

 

40,956

 

40,679

 

Total Deferred Debits and Other Assets

 

211,847

 

218,010

 

 

 

 

 

 

 

Total Assets

 

$

1,783,535

 

$

1,792,820

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

17



Table of Contents

WESTERN MASSACHUSETTS ELECTRIC COMPANY

CONDENSED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

December 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

LIABILITIES AND CAPITALIZATION

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Notes Payable to NU Parent

 

$

37,400

 

$

 

Accounts Payable

 

38,407

 

62,961

 

Accounts Payable to Affiliated Companies

 

18,154

 

9,230

 

Accrued Interest

 

2,837

 

7,525

 

Regulatory Liabilities

 

21,816

 

19,858

 

Accumulated Deferred Income Taxes

 

15,361

 

13,098

 

Counterparty Deposits

 

3,188

 

7,688

 

Other Current Liabilities

 

15,563

 

20,629

 

Total Current Liabilities

 

152,726

 

140,989

 

 

 

 

 

 

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

Accumulated Deferred Income Taxes

 

409,493

 

396,933

 

Regulatory Liabilities

 

10,445

 

13,873

 

Accrued SERP and PBOP

 

3,850

 

3,911

 

Other Long-Term Liabilities

 

29,411

 

28,619

 

Total Deferred Credits and Other Liabilities

 

453,199

 

443,336

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

Long-Term Debt

 

629,162

 

629,389

 

 

 

 

 

 

 

Common Stockholder’s Equity:

 

 

 

 

 

Common Stock

 

10,866

 

10,866

 

Capital Surplus, Paid In

 

390,895

 

390,743

 

Retained Earnings

 

150,117

 

181,014

 

Accumulated Other Comprehensive Loss

 

(3,430

)

(3,517

)

Common Stockholder’s Equity

 

548,448

 

579,106

 

Total Capitalization

 

1,177,610

 

1,208,495

 

 

 

 

 

 

 

Total Liabilities and Capitalization

 

$

1,783,535

 

$

1,792,820

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

18



Table of Contents

WESTERN MASSACHUSETTS ELECTRIC COMPANY

CONDENSED STATEMENTS OF INCOME

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Revenues

 

$

137,409

 

$

124,953

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Purchased Power and Transmission

 

49,431

 

40,044

 

Operations and Maintenance

 

22,579

 

20,928

 

Depreciation

 

10,321

 

8,970

 

Amortization of Regulatory Assets, Net

 

399

 

129

 

Amortization of Rate Reduction Bonds

 

 

4,689

 

Energy Efficiency Programs

 

11,865

 

8,315

 

Taxes Other Than Income Taxes

 

8,082

 

6,288

 

Total Operating Expenses

 

102,677

 

89,363

 

Operating Income

 

34,732

 

35,590

 

 

 

 

 

 

 

Interest Expense:

 

 

 

 

 

Interest on Long-Term Debt

 

6,062

 

6,082

 

Other Interest

 

(416

)

211

 

Interest Expense

 

5,646

 

6,293

 

Other Income, Net

 

574

 

1,004

 

Income Before Income Tax Expense

 

29,660

 

30,301

 

Income Tax Expense

 

11,558

 

11,698

 

Net Income

 

$

18,102

 

$

18,603

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Net Income

 

$

18,102

 

$

18,603

 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

Qualified Cash Flow Hedging Instruments

 

85

 

85

 

Changes in Unrealized Gains/(Losses) on Other Securities

 

2

 

(2

)

Other Comprehensive Income, Net of Tax

 

87

 

83

 

Comprehensive Income

 

$

18,189

 

$

18,686

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

19



Table of Contents

WESTERN MASSACHUSETTS ELECTRIC COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Three Months Ended March 31,

 

(Thousands of Dollars)

 

2014

 

2013

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

Net Income

 

$

18,102

 

$

18,603

 

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:

 

 

 

 

 

Depreciation

 

10,321

 

8,970

 

Deferred Income Taxes

 

14,688

 

16,828

 

Regulatory Over/(Under) Recoveries, Net

 

5,780

 

(2,357

)

Amortization of Regulatory Assets, Net

 

399

 

129

 

Amortization of Rate Reduction Bonds

 

 

4,689

 

Other

 

(1,351

)

(1,299

)

Changes in Current Assets and Liabilities:

 

 

 

 

 

Receivables and Unbilled Revenues, Net

 

34,905

 

(4,907

)

Taxes Receivable/Accrued, Net

 

(17,126

)

21,600

 

Accounts Payable

 

(10,516

)

17,667

 

Other Current Assets and Liabilities, Net

 

(8,869

)

(8,931

)

Net Cash Flows Provided by Operating Activities

 

46,333

 

70,992

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

Investments in Property, Plant and Equipment

 

(30,347

)

(66,340

)

Proceeds from Sales of Marketable Securities

 

34,656

 

21,035

 

Purchases of Marketable Securities

 

(34,804

)

(21,191

)

Other Investing Activities

 

 

500

 

Net Cash Flows Used in Investing Activities

 

(30,495

)

(65,996

)

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

Cash Dividends on Common Stock

 

(49,000

)

(10,000

)

Increase in Notes Payable to NU Parent

 

37,400

 

11,500

 

Retirement of Rate Reduction Bonds

 

 

(4,716

)

Other Financing Activities

 

(11

)

(13

)

Net Cash Flows Used in Financing Activities

 

(11,611

)

(3,229

)

Net Increase in Cash

 

4,227

 

1,767

 

Cash - Beginning of Period

 

 

1

 

Cash - End of Period

 

$

4,227

 

$

1,768

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

20



Table of Contents

NORTHEAST UTILITIES AND SUBSIDIARYSUBSIDIARIES


THE CONNECTICUT LIGHT AND POWER COMPANY

NSTAR ELECTRIC COMPANY AND SUBSIDIARY

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY

WESTERN MASSACHUSETTS ELECTRIC COMPANY

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout the combined notes to the unaudited condensed consolidated financial statements.


1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


A.

Basis of Presentation

NU is a public utility holding company primarily engaged through its wholly owned regulated utility subsidiaries in the energy delivery business.  On April 10, 2012, NU acquired 100 percent of the outstanding common shares of NSTAR and NSTAR (through a successor, NSTAR LLC) became a direct wholly owned subsidiary of NU.  NU'sNU’s wholly owned regulated utility subsidiaries includeconsist of CL&P, NSTAR Electric, PSNH, WMECO, Yankee Gas and NSTAR Gas.  NU provides energy delivery service to approximately 3.6 million electric and natural gas customers through these six regulated utilities in Connecticut, Massachusetts and New Hampshire.  NU's

The unaudited condensed consolidated financial information does not include NSTAR and its subsidiaries' resultsstatements of operations for the three months ended March 31, 2012.NU, NSTAR Electric continues to maintain reporting requirements as an SEC registrant.  The information disclosed for NSTAR Electric represents its resultsand PSNH include the accounts of operations for the three months ended March 31, 2013 and 2012, presented on a comparable basis.


each of their respective subsidiaries.  Intercompany transactions have been eliminated in consolidation.  The accompanying unaudited condensed consolidated financial statements of NU, CL&P, NSTAR Electric and PSNH and WMECO include the accountsunaudited condensed financial statements of each of their respective subsidiariesCL&P and WMECO are herein collectively referred to as “consolidated financialthe “financial statements.”  Intercompany transactions have been eliminated in consolidation.  


The combined notes to consolidatedthe financial statements have been prepared pursuant to the rules and regulations of the SEC.  Certain information and footnote disclosures included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations.  The accompanying consolidated financial statements should be read in conjunction with the entirety of this combined Quarterly Report on Form 10-Q and the 20122013 combined Annual Report on Form 10-K of NU, CL&P, NSTAR Electric, PSNH and WMECO, (NU 2012 Form 10-K), which was filed with the SEC.  The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


The consolidated financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly NU’s, CL&P’s, NSTAR Electric’s, PSNH’s and the above companies’WMECO’s financial positionsposition as of March 31, 20132014 and December 31, 20122013, and the results of operations, comprehensive income and cash flows for the three months ended March 31, 20132014 and 2012.2013.  The results of operations, comprehensive income and cash flows for the three months ended March 31, 20132014 and 20122013 are not necessarily indicative of the results expected for a full year.  The demand for electricity and natural gas is affected by weather conditions, economic conditions, and consumer conservation behavior.(including company-sponsored energy efficiency programs).  Electric energy sales and revenues are typically higher in the winter and summer months than in the spring and fall months.  Natural gas sales and revenues are typically higher in the winter months than during other periods of the year.


NU consolidates CYAPC and YAEC as CL&P’s, NSTAR Electric’s, PSNH’s and WMECO’s combined ownership interest in each of these entities is greater than 50 percent.  Intercompany transactions between CL&P, NSTAR Electric, PSNH and WMECO and the CYAPC and YAEC companies have been eliminated in consolidation.consolidation of the NU financial statements.  For CL&P, NSTAR Electric, PSNH and WMECO, the investmentinvestments in CYAPC and YAEC continue to be accounted for under the equity method.


NU'sNU’s utility subsidiaries are subject to the application of accounting guidance for entities with rate-regulated operations that considers the effect of regulation resulting from differences in the timing of the recognition of certain revenues and expenses from those of other businesses and industries.  NU'sNU’s utility subsidiaries'subsidiaries’ energy delivery business is subject to rate-regulation that is based on cost recovery and meets the criteria for application of rate-regulated accounting.  See Note 2, "Regulatory“Regulatory Accounting," for further information.


Certain prior period amounts in NSTAR Electric's accompanying consolidated statements of income and cash flows have been reclassified between line items for comparative purposes and in order to conform to NU's presentation.  The reclassifications did not affect NSTAR Electric's net income.  


The NSTAR Electric consolidated statement of cash flows was revised to correct an error in the presentation of cash deposits related to the RRBs. The impact of this revision was an increase in investing cash inflows from Other Investing Activities in an amount of $24.8 million and a corresponding increase to financing cash outflows from Retirements of Rate Reduction Bonds for the three months ended March 31, 2012.  This revision had no impact on NSTAR Electric’s results of operations or cash balance and is not deemed material, individually or in the aggregate, to the previously issued consolidated financial statements.




21



Certain changes in classification and corresponding reclassifications of prior period data were made in the accompanying consolidatedbalance sheets for NU, CL&P and PSNH, statements of income for NU, NSTAR Electric, PSNH and WMECO, and statements of cash flows for NU, CL&P, PSNHNSTAR Electric and WMECO for comparative purposesWMECO.  These reclassifications were made to conform to the current periodperiod’s presentation.  The consolidated statement

21



Table of income reflects the reclassification of transmission expenses from Other Operating Expenses, as originally reported, to Purchased Power, Fuel and Transmission and the reclassification of energy efficiency expenses primarily from Other Operating Expenses, as originally reported, to Energy Efficiency Programs.  In addition, Other Operating Expenses and Maintenance, as originally reported, were combined and are reported in aggregate as Operations and Maintenance.  The reclassifications on the statement of income were as follows:Contents


 

 

For the Three Months Ended March 31, 2012

(Millions of Dollars)

 

Transmission Expense

 

Energy Efficiency Expense

NU

 

$

(2.7)

 

$

37.3 

CL&P

 

 

(2.9)

 

 

22.0 

PSNH

 

 

7.9 

 

 

3.6 

WMECO

 

 

1.0 

 

 

5.6 


Effective January 1, 2012, NSTAR Electric changed its estimates with respect to the allowance for doubtful accounts, incurred but not reported claims on medical benefits, general and workers' compensation liabilities and compensation accruals.  The total aggregate impact of these changes in estimates on NSTAR Electric's accompanying consolidated statement of income was a decrease to net income of $11.4 million, after-tax, for the three months ended March 31, 2012.  


NU evaluates events and transactions that occur after the balance sheet date but before financial statements are issued and recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the balance sheet date and discloses, but does not recognize, in the financial statements subsequent events that provide evidence about the conditions that arose after the balance sheet date but before the financial statements are issued.  See Note 6, "Short-Term and Long-Term Debt," for further information.


B.

Recently Adopted Accounting Standards

In the first quarter of 2013,On January 1, 2014, as required, NU prospectively adopted the following Financial Accounting Standards Board’s (FASB) final Accounting Standards Updates (ASU) relatingthat required presentation of certain unrecognized tax benefits as reductions to additional disclosure requirements:


·

Reportingdeferred tax assets.  Implementation of Amounts Reclassified Out of Accumulated Other Comprehensive IncomeRequires entities to disclose additional information about items reclassified out of AOCI.  The ASU does not change existingthis guidance on which items should be reclassified out of AOCI but requires disclosures about the components of AOCI and the amount of reclassification adjustments to be presented in one location.  The ASU is effective beginning in the first quarter of 2013 and is applied prospectively.  For further information, see Note 11, “Accumulated Other Comprehensive Income/(Loss),” to the consolidated financial statements.  The ASU did not affect the calculation of net income, comprehensive income or EPS and did not havehad an immaterial impact on financial position,the balance sheets and no impact on the results of operations or cash flows.flows of NU, CL&P, NSTAR Electric, PSNH and WMECO.


·

Clarifying the Scope of Disclosures about Offsetting Assets and LiabilitiesClarifies the scope of the offsetting disclosure requirements under GAAP.  The disclosure requirements apply to derivative instruments, do not change existing guidance on which items should be offset in the balance sheets and require disclosures about the items that are offset. The ASU is effective beginning in the first quarter of 2013 with retrospective application.  For further information, see Note 4, “Derivative Instruments,” to the consolidated financial statements. The ASU did not have an impact on financial position, results of operations or cash flows.  


C.

Provision for Uncollectible Accounts

NU, including CL&P, NSTAR Electric, PSNH and WMECO, presents its receivables at estimated net realizable value by maintaining a provision for uncollectible amounts.accounts.  This provision is determined based upon a variety of factors, including applyingthe application of an estimated uncollectible account percentage to each receivable aging category,category.  The estimate is based upon historical collection and write-off experience and management'smanagement’s assessment of collectibility from individual customers.  Management continuously assesses the collectibility of receivables, and if circumstances change,adjusts collectibility estimates are adjusted accordingly.based on actual experience.  Receivable balances are written off against the provision for uncollectible accounts when the accounts are terminated and these balances are deemed to be uncollectible.


The provision for uncollectible accounts, which is included in Receivables, Net on the consolidated balance sheets, was as follows:


(Millions of Dollars)

 

As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

NU

 

$

178.6 

 

$

165.5 

 

$

180.0

 

$

171.3

 

CL&P

 

 

85.0 

 

 

77.6 

 

83.4

 

82.0

 

NSTAR Electric

 

 

44.8 

 

 

44.1 

 

43.1

 

41.7

 

PSNH

 

 

7.4 

 

 

6.8 

 

7.8

 

7.4

 

WMECO

 

 

9.0 

 

 

8.5 

 

10.6

 

10.0

 


D.

Restricted Cash and Other Deposits

As of March 31, 2013, NU, CL&P and PSNH had $3.8 million, $1.4 million and $1.7 million, respectively, of restricted cash, primarily relating to amounts held in escrow, insurance proceeds on bondable property at PSNH and amounts related to the sale of land, which were included in Prepayments and Other Current Assets on the consolidated balance sheets.  As of December 31, 2012, these amounts were $3.3 million, $1.3 million and $1.7 million for NU, CL&P and PSNH, respectively.




22



As of March 31, 2013, NU had $12.8 million of cash collateral posted not subject to master netting agreements.  As of December 31, 2012, this amount was $14.6 million.


E.

Fair Value Measurements

NU, including CL&P, NSTAR Electric, PSNH, and WMECO, applies fairFair value measurement guidance is applied to derivative contracts recorded at fair valuethat are not elected or designated as “normal purchases or normal sales” (normal) and to the marketable securities held in the NU supplemental benefit trust, WMECO's spent nuclear fuel trust and CYAPC's and YAEC's nuclear decommissioning trusts.  Fair value measurement guidance is also applied to investment valuations used to calculate the funded status of NU's Pensionpension and PBOP Plans, including NSTAR Electric's Pension Plan,plans and nonrecurring fair value measurements of nonfinancial assets such as goodwill and AROs.


Fair Value Hierarchy:  In measuring fair value, NU uses observable market data when available and minimizes the use of unobservable inputs.  Inputs used in fair value measurements are categorized into three fair value hierarchy levels for disclosure purposes.  The entire fair value measurement is categorized based on the lowest level of input that is significant to the fair value measurement.  NU evaluates the classification of assets and liabilities measured at fair value on a quarterly basis, and NU'sNU’s policy is to recognize transfers between levels of the fair value hierarchy as of the end of the reporting period.  The three levels of the fair value hierarchy are described below:


Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities as of the reporting date.  Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.


Level 2 - Inputs are quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs are observable.


Level 3 - Quoted market prices are not available.  Fair value is derived from valuation techniques in which one or more significant inputs or assumptions are unobservable.  Where possible, valuation techniques incorporate observable market inputs that can be validated to external sources such as industry exchanges, including prices of energy and energy-related products.


Determination of Fair Value:  The valuation techniques and inputs used in NU'sNU’s fair value measurements are described in Note 4, "Derivative“Derivative Instruments," Note 5, "Marketable“Marketable Securities," and Note 10, "Fair9, “Fair Value of Financial Instruments," to the consolidated financial statements.


F.

E.Other Income, Net

Items included within Other Income, Net on the consolidated statements of income primarily consist of investment income/(loss), interest income, AFUDC related to equity funds, and equity in earnings.  Investment income/(loss) primarily relates to debt and equity securities held in trust.  For further information, see Note 5, “Marketable Securities,” to the financial statements.  For CL&P, NSTAR Electric, PSNH and WMECO, equity in earnings relate to investments in CYAPC, YAEC and MYAPC and alsoas well as NSTAR Electric'sElectric’s investment in two regional transmission companies, which are all accounted for on the equity method.  On an NU consolidated basis, equity in earnings relate to the investment in MYAPC and NU'sNU’s investment in two regional transmission companies.


G.22



Table of Contents

F.Other Taxes

Gross receipts taxes levied by the state of Connecticut are collected by CL&P and Yankee Gas from their respective customers.  These gross receipts taxes are shown on a gross basis with collections in Operating Revenues and payments in Taxes Other Than Income Taxes on the consolidated statements of income as follows:


For the Three Months Ended

 

For the Three Months Ended

 

(Millions of Dollars)

March 31, 2013

 

March 31, 2012

 

March 31, 2014

 

March 31, 2013

 

NU

$

 38.4 

 

$

 35.0 

 

$

44.4

 

$

38.4

 

CL&P

 

 32.0 

 

 29.4 

 

35.6

 

32.0

 


Certain sales taxes are also collected by CL&P, NSTAR ElectricNU’s companies that serve customers in Connecticut and WMECO from their respective customersMassachusetts as agents for state and local governments and are recorded on a net basis with no impact on the consolidated statements of income.


H.

 

Supplemental Cash Flow Information

Non-cash investing activities include plant additions included in Accounts Payable as follows:

 

 

 

 

 

 

 

 

 

 

(Millions of Dollars)

As of March 31, 2013

 

As of March 31, 2012

 

NU

$

98.7 

 

$

 138.5 

 

CL&P

 

28.2 

 

 

 36.6 

 

NSTAR Electric (1)

 

30.7 

 

 

29.5 

 

PSNH

 

12.9 

 

 

 32.5 

 

WMECO

 

15.8 

 

 

 56.6 

 

 

 

 

 

 

 

 

 

 

 

(1)  NSTAR Electric amounts are not included in NU consolidated as of March 31, 2012.




G.Supplemental Cash Flow Information

23Non-cash investing activities include plant additions included in Accounts Payable as follows:


(Millions of Dollars)

 

As of March 31, 2014

 

As of March 31, 2013

 

NU

 

$

108.5

 

$

98.7

 

CL&P

 

36.2

 

28.2

 

NSTAR Electric

 

28.0

 

30.7

 

PSNH

 

14.4

 

12.9

 

WMECO

 

14.4

 

15.8

 


H.Severance Benefits

2.In the first quarter of 2014, NU recorded severance benefit expenses of $4.3 million associated with the partial outsourcing of information technology functions and ongoing post-merger integration.  As of March 31, 2014 and December 31, 2013, the severance accrual totaled $17.7 million and $14.7 million, respectively, and was included in Other Current Liabilities on the balance sheets.

I.Restricted Cash

On March 28, 2014, CYAPC and YAEC received payment of $163.3 million of the DOE Phase II Damages proceeds. It is anticipated that in the second quarter of 2014, the Yankee Companies will complete the FERC review process and return these amounts to the member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, for the benefit of their respective customers.  As a result of the consolidation of CYAPC and YAEC, the cash received is included in Other Long-Term Assets on the NU consolidated balance sheet pending refund.  For further information, see Note 8B, “Commitments and Contingencies - Contractual Obligations - Yankee Companies.”

2.REGULATORY ACCOUNTING


The rates charged to the customers of NU'sNU’s Regulated companies are designed to collect the companies'each company’s costs to provide service, including a return on investment.  Therefore, the accounting policies of the Regulated companies apply GAAP applicable tofollow the application of accounting guidance for entities with rate-regulated enterprisesoperations and reflect the effects of the rate-making process.


Management believes it is probable that each of the Regulated companies will recover their respective investments in long-lived assets, including regulatory assets.  If management determinedwere to determine that it could no longer apply the accounting guidance applicable to rate-regulated enterprises to any of the Regulated companies'companies’ operations, or that management could not conclude it is probable that costs would be recovered from customers in future rates, the costs would be charged to net income in the period in which the determination is made.


Regulatory Assets:  The components of regulatory assets are as follows:

 

 

As of March 31, 2014

 

As of December 31, 2013

 

(Millions of Dollars)

 

NU

 

NU

 

Benefit Costs

 

$

1,205.4

 

$

1,240.2

 

Derivative Liabilities

 

564.9

 

638.0

 

Income Taxes, Net

 

629.2

 

626.2

 

Storm Restoration Costs

 

580.9

 

589.6

 

Goodwill

 

520.8

 

525.9

 

Regulatory Tracker Mechanisms

 

347.4

 

323.4

 

Buy Out Agreements for Power Contracts

 

63.4

 

70.2

 

Other Regulatory Assets

 

147.6

 

281.0

 

Total Regulatory Assets

 

4,059.6

 

4,294.5

 

Less: Current Portion

 

573.0

 

535.8

 

Total Long-Term Regulatory Assets

 

$

3,486.6

 

$

3,758.7

 

23



Table of Contents

 

As of March 31, 2013

 

As of December 31, 2012

(Millions of Dollars)

NU

 

NU

Benefit Costs

$

 2,390.4 

 

$

 2,452.1 

Regulatory Assets Offsetting Derivative Liabilities

 

 835.0 

 

 

 885.6 

Goodwill

 

 532.5 

 

 

 537.6 

Storm Restoration Costs

 

 656.1 

 

 

 547.7 

Income Taxes, Net

 

 521.7 

 

 

 516.2 

Securitized Assets

 

 157.6 

 

 

 232.6 

Contractual Obligations

 

 124.9 

 

 

 217.6 

Power Contracts Buy Out Agreements

 

 87.3 

 

 

 92.9 

Regulatory Tracker Deferrals

 

 177.2 

 

 

 190.1 

Asset Retirement Obligations

 

 90.2 

 

 

 88.8 

Other Regulatory Assets

 

 67.7 

 

 

 76.2 

Total Regulatory Assets

 

 5,640.6 

 

 

 5,837.4 

Less:  Current Portion

 

 625.5 

 

 

 705.0 

Total Long-Term Regulatory Assets

$

 5,015.1 

 

$

 5,132.4 


 

As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

(Millions of Dollars)

(Millions of Dollars)

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

Benefit Costs

Benefit Costs

$

 546.9 

 

$

 769.0 

 

$

 217.2 

 

$

 112.6 

 

$

 563.2 

 

$

 781.2 

 

$

 223.7 

 

$

 116.0 

 

$

287.1

 

$

321.3

 

$

96.7

 

$

55.1

 

$

297.7

 

$

496.7

 

$

100.6

 

$

57.3

 

Regulatory Assets Offsetting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liabilities

 

 819.6 

 

 13.6 

 

 - 

 

 1.8 

 

 

 866.2 

 

 14.9 

 

 - 

 

 3.0 

Derivative Liabilities

 

557.0

 

7.9

 

 

 

630.4

 

7.7

 

 

 

Income Taxes, Net

 

419.7

 

82.5

 

39.4

 

43.5

 

415.5

 

84.0

 

40.3

 

43.7

 

Storm Restoration Costs

 

395.3

 

109.2

 

40.3

 

36.1

 

397.8

 

109.3

 

43.7

 

38.8

 

Goodwill

Goodwill

 

 - 

 

 457.2 

 

 - 

 

 - 

 

 

 - 

 

 461.5 

 

 - 

 

 - 

 

 

447.1

 

 

 

 

451.5

 

 

 

Storm Restoration Costs

 

 448.7 

 

 132.7 

 

 32.3 

 

 42.4 

 

 

 413.9 

 

 55.8 

 

 34.5 

 

 43.5 

Income Taxes, Net

 

 371.7 

 

 46.7 

 

 37.3 

 

 31.1 

 

 

 367.5 

 

 47.1 

 

 36.2 

 

 31.0 

Securitized Assets

 

 - 

 

 149.5 

 

 5.0 

 

 3.1 

 

 

 - 

 

 205.1 

 

 19.7 

 

 7.8 

Contractual Obligations

 

 59.7 

 

 20.9 

 

 - 

 

 13.7 

 

 

 64.0 

 

 22.8 

 

 - 

 

 14.9 

Power Contracts Buy Out Agreements

 

 - 

 

 80.7 

 

 6.6 

 

 - 

 

 

 - 

 

 85.9 

 

 7.0 

 

 - 

Regulatory Tracker Deferrals

 

 10.1 

 

 84.5 

 

 49.7 

 

 31.3 

 

 

 12.2 

 

 71.4 

 

 49.3 

 

 31.9 

Asset Retirement Obligations

 

 30.0 

 

 29.8 

 

 14.3 

 

 3.6 

 

 

 29.4 

 

 29.4 

 

 14.2 

 

 3.5 

Regulatory Tracker Mechanisms

 

33.3

 

182.7

 

75.2

 

31.6

 

8.0

 

169.5

 

83.3

 

32.6

 

Buy Out Agreements for Power Contracts

 

 

58.3

 

5.1

 

 

 

64.7

 

5.5

 

 

Other Regulatory Assets

Other Regulatory Assets

 

 27.3 

 

 

 14.3 

 

 

 29.1 

 

 

 11.8 

 

 

 27.9 

 

 

 16.9 

 

 

 29.4 

 

 

 12.6 

 

64.1

 

55.5

 

37.8

 

15.5

 

64.6

 

55.9

 

38.1

 

16.7

 

Total Regulatory Assets

Total Regulatory Assets

 

 2,314.0 

 

 1,798.9 

 

 391.5 

 

 251.4 

 

 

 2,344.3 

 

 1,792.0 

 

 414.0 

 

 264.2 

 

1,756.5

 

1,264.5

 

294.5

 

181.8

 

1,814.0

 

1,439.3

 

311.5

 

189.1

 

Less: Current Portion

Less: Current Portion

 

 172.9 

 

 

 309.6 

 

 

 62.2 

 

 

 43.5 

 

 

 185.9 

 

 

 347.1 

 

 

 62.9 

 

 

 42.4 

 

175.9

 

222.6

 

83.8

 

49.6

 

150.9

 

204.1

 

92.2

 

43.0

 

Total Long-Term Regulatory Assets

Total Long-Term Regulatory Assets

$

 2,141.1 

 

$

 1,489.3 

 

$

 329.3 

 

$

 207.9 

 

$

 2,158.4 

 

$

 1,444.9 

 

$

 351.1 

 

$

 221.8 

 

$

1,580.6

 

$

1,041.9

 

$

210.7

 

$

132.2

 

$

1,663.1

 

$

1,235.2

 

$

219.3

 

$

146.1

 


Benefit Costs:  For information related to the Regulated companies’ pension and other postretirement benefits, see Note 7, “Pension Benefits and Postretirement Benefits Other Than Pensions.”

Storm Restoration Costs:  From 2011 to 2013, CL&P, NSTAR Electric, PSNH and WMECO experienced several significant storm events.  As a result of these storm events, each company suffered extensive damage to its distribution and transmission systems resulting in customer outages.  Each company incurred significant costs to repair damage and restore customer service.  The storm restoration cost deferrals relate to costs incurredregulatory asset balance at CL&P, NSTAR Electric, PSNH and WMECO that each company expects to collect from customers.  Areflects incremental costs incurred for major storm must meet certain criteria specific to each state and utility company to be declared a major storm.  Once a storm is declared major, all qualifying expenses incurred during storm restoration efforts, if deemed prudent, are deferred and recovered from customers in future periods.  In Connecticut, qualifyingevents.  Management believes the storm restoration costs must exceed $5 million for a storm to be declared a major storm.  In Massachusetts, qualifying storm restoration costs must exceed $1 million for NSTAR Electricwere prudent and $300,000 for WMECO and an emergency response plan must be initiated for a storm to be declared a major storm.  In New Hampshire, (1) at least 10 percent of customers must be without power with at least 200 concurrent locations requiring repairs (trouble spots), or (2) at least 300 concurrent trouble spots must be reported for a storm to be declared a major storm.  In addition, PSNH is permitted to defer pre-staging costs for storms that may not ultimately qualify as a major storm.


On February 8, 2013, a blizzard caused damage to the electric delivery systems of CL&P and NSTAR Electric.  This blizzard resulted in estimated deferred storm restoration costs of approximately $13 million at CL&P and approximately $80 million at NSTAR Electric.  On January 31, 2013, a major storm caused damage to CL&P's electric delivery system, which resulted in estimated deferred storm restoration costs of approximately $19 million. Management believes these storm restoration costs meet the criteria for specific cost recovery in Connecticut, and Massachusetts and New Hampshire and that recovery from customers is probable through the applicable regulatory recovery process.

On March 12, 2014, the PURA issued a final decision on CL&P’s request to recover storm restoration costs associated with five major storms, which occurred in 2011 and 2012.  The PURA approved recovery of $365 million of deferred storm restoration costs and ordered CL&P to capitalize approximately $18 million of the deferred storm restoration costs as utility plant, which will be recovered through depreciation expense in future rate proceedings.  CL&P will recover the $365 million with carrying charges in its distribution rates over a result, are probable of recovery.  Therefore, management doessix-year period beginning December 1, 2014.  The remaining costs were either disallowed or we believe will be recovered from other sources.  These costs did not expect these storms to have a material impact on CL&P's or NSTAR Electric’s&P’s financial position, results of operations.  CL&P and NSTAR Electric will seek recovery of these deferred storm restoration costs through their applicable regulatory recovery process.operations or cash flows.


Regulatory Costs Not Yet Approved:in Other Long-Term Assets:  The Regulated companies had $78.8$71.7 million ($3.712.4 million for CL&P, $26.3$33.7 million for NSTAR Electric, $37.2 million for PSNH, and $6$10.2 million for WMECO) and $69.9$65.1 million ($3.97.3 million for CL&P, $25.4$33.4 million for NSTAR Electric, $35.7 million for PSNH, and $1.4$10.1 million for WMECO) of additional regulatory costs as of March 31, 20132014 and December 31, 2012,2013, respectively,



24



which that were included in Other Long-Term Assets on the consolidated balance sheets.  These amounts represent incurred costs that havefor which recovery has not yet been specifically approved for recovery by the applicable regulatory agency.  ManagementHowever, based on regulatory policies or past precedent on similar costs, management believes it is probable that these costs will ultimately be approved and recovered from customers.customers in rates.


Regulatory Liabilities:  The components of regulatory liabilities are as follows:


As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

(Millions of Dollars)

NU

 

NU

 

NU

 

NU

 

Cost of Removal

$

 441.3 

 

$

 440.8 

 

$

437.3

 

$

435.1

 

Regulatory Tracker Deferrals

 

 147.0 

 

 95.1 

AFUDC Transmission Incentive

 

 68.9 

 

 70.0 

Spent Nuclear Fuel Costs and Contractual Obligations

 

 15.4 

 

 15.4 

Regulatory Tracker Mechanisms

 

203.6

 

151.2

 

AFUDC - Transmission

 

67.8

 

68.1

 

Contractual Obligations - Yankee Companies

 

93.3

 

 

Other Regulatory Liabilities

 

 50.6 

 

 

 53.0 

 

53.3

 

52.9

 

Total Regulatory Liabilities

 

 723.2 

 

 674.3 

 

855.3

 

707.3

 

Less: Current Portion

 

 191.7 

 

 

 134.1 

 

263.8

 

204.3

 

Total Long-Term Regulatory Liabilities

$

 531.5 

 

$

 540.2 

 

$

591.5

 

$

503.0

 


 

As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

(Millions of Dollars)

(Millions of Dollars)

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

Cost of Removal

Cost of Removal

$

 39.3 

 

$

 244.5 

 

$

 51.3 

 

$

 - 

 

$

 44.2 

 

$

 240.3 

 

$

 51.2 

 

$

 - 

 

$

27.5

 

$

252.5

 

$

49.7

 

$

 

$

29.1

 

$

250.0

 

$

49.7

 

$

 

Regulatory Tracker Deferrals

 

 39.1 

 

 

 37.3 

 

 

 13.8 

 

 

 12.5 

 

 

 39.1 

 

 

 14.4 

 

 

 20.4 

 

 

 13.7 

AFUDC Transmission Incentive

 

 55.5 

 

 

 4.1 

 

 

 - 

 

 

 9.3 

 

 

 56.6 

 

 

 4.1 

 

 

 - 

 

 

 9.3 

Spent Nuclear Fuel Costs and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual Obligations

 

 15.4 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 15.4 

 

 

 - 

 

 

 - 

 

 

 - 

Wholesale Transmission Overcollections

 

 2.3 

 

 

 - 

 

 

 1.1 

 

 

 0.9 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 5.3 

Regulatory Tracker Mechanisms

 

105.6

 

43.8

 

27.5

 

22.4

 

95.6

 

21.9

 

21.6

 

21.1

 

AFUDC - Transmission

 

54.5

 

4.0

 

 

9.3

 

54.7

 

4.1

 

 

9.3

 

Other Regulatory Liabilities

Other Regulatory Liabilities

 

 1.4 

 

 

 29.8 

 

 

 4.4 

 

 

 2.6 

 

 

 1.1 

 

 

 32.9 

 

 

 3.8 

 

 

 2.4 

 

9.8

 

30.4

 

1.9

 

0.5

 

8.4

 

31.1

 

1.0

 

3.4

 

Total Regulatory Liabilities

Total Regulatory Liabilities

 

 153.0 

 

 

 315.7 

 

 

 70.6 

 

 

 25.3 

 

 

 156.4 

 

 

 291.7 

 

 

 75.4 

 

 

 30.7 

 

197.4

 

330.7

 

79.1

 

32.2

 

187.8

 

307.1

 

72.3

 

33.8

 

Less: Current Portion

Less: Current Portion

 

 42.3 

 

 

 67.3 

 

 

 18.1 

 

 

 15.6 

 

 

 32.1 

 

 

 47.5 

 

 

 23.0 

 

 

 21.0 

 

107.3

 

73.6

 

27.3

 

21.8

 

94.0

 

54.0

 

20.6

 

19.9

 

Total Long-Term Regulatory Liabilities

Total Long-Term Regulatory Liabilities

$

 110.7 

 

$

 248.4 

 

$

 52.5 

 

$

 9.7 

 

$

 124.3 

 

$

 244.2 

 

$

 52.4 

 

$

 9.7 

 

$

90.1

 

$

257.1

 

$

51.8

 

$

10.4

 

$

93.8

 

$

253.1

 

$

51.7

 

$

13.9

 


3.For further information on matters related to the Yankee Companies, see Note 8B, “Commitments and Contingencies - Contractual Obligations - Yankee Companies,” to the financial statements.

24



Table of Contents

3.PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION


The following tables summarize the NU, CL&P, NSTAR Electric, PSNH and WMECO investments in utility property, plant and equipment by asset category:


As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

(Millions of Dollars)

(Millions of Dollars)

NU

 

NU

 

NU

 

NU

 

Distribution - Electric

Distribution - Electric

$

 11,504.0 

 

$

 11,438.2 

 

$

12,039.7

 

$

11,950.2

 

Distribution - Natural Gas

Distribution - Natural Gas

 

 2,290.8 

 

 2,274.2 

 

2,447.9

 

2,425.9

 

Transmission

Transmission

 

 5,721.2 

 

 5,541.1 

 

6,423.5

 

6,412.5

 

Generation

Generation

 

 1,146.7 

 

 

 1,146.6 

 

1,154.7

 

1,152.3

 

Electric and Natural Gas Utility

Electric and Natural Gas Utility

 

 20,662.7 

 

 20,400.1 

 

22,065.8

 

21,940.9

 

Other (1)

Other (1)

 

 503.0 

 

 

 429.3 

 

510.2

 

508.7

 

Property, Plant and Equipment, Gross

Property, Plant and Equipment, Gross

 

 21,165.7 

 

 20,829.4 

 

22,576.0

 

22,449.6

 

Less: Accumulated Depreciation

 

 

 

 

Electric and Natural Gas Utility   

 

 (5,157.7)

 

 (5,065.1)

Other

 

 (178.5)

 

 

 (171.5)

Less: Accumulated Depreciation Electric and Natural Gas Utility

 

(5,491.7

)

(5,387.0

)

Other

 

(204.7

)

(196.2

)

Total Accumulated Depreciation

Total Accumulated Depreciation

 

 (5,336.2)

 

 

 (5,236.6)

 

(5,696.4

)

(5,583.2

)

Property, Plant and Equipment, Net

Property, Plant and Equipment, Net

 

 15,829.5 

 

 15,592.8 

 

16,879.6

 

16,866.4

 

Construction Work in Progress

Construction Work in Progress

 

 908.0 

 

 

 1,012.2 

 

833.4

 

709.8

 

Total Property, Plant and Equipment, Net

Total Property, Plant and Equipment, Net

$

 16,737.5 

 

$

 16,605.0 

 

$

17,713.0

 

$

17,576.2

 



(1)

These assets represent unregulated property and are primarily comprised of building improvements, at RRR,computer software, hardware and equipment at NUSCO and telecommunications equipmentassets at NSTAR Communications, Inc.NU’s unregulated companies.


As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

(Millions of Dollars)

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

Distribution

$

 4,724.3 

 

$

 4,552.0 

 

$

 1,535.7 

 

$

 730.0 

 

$

 4,691.3 

 

$

 4,539.9 

 

$

 1,520.1 

 

$

 724.2 

 

$

4,979.8

 

$

4,717.6

 

$

1,620.3

 

$

762.0

 

$

4,930.7

 

$

4,694.7

 

$

1,608.2

 

$

756.6

 

Transmission

 

 2,874.6 

 

 1,542.8 

 

 602.3 

 

 656.7 

 

 2,796.1 

 

 1,529.7 

 

 599.2 

 

 583.7 

 

3,074.8

 

1,769.0

 

701.7

 

831.7

 

3,071.9

 

1,772.3

 

695.7

 

826.4

 

Generation

 

 - 

 

 

 - 

 

 

 1,125.6 

 

 

 21.1 

 

 

 - 

 

 

 - 

 

 

 1,125.5 

 

 

 21.1 

 

 

 

1,133.6

 

21.1

 

 

 

1,131.2

 

21.1

 

Property, Plant and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment, Gross

 

 7,598.9 

 

 6,094.8 

 

 3,263.6 

 

 1,407.8 

 

 7,487.4 

 

 6,069.6 

 

 3,244.8 

 

 1,329.0 

Property, Plant and Equipment, Gross

 

8,054.6

 

6,486.6

 

3,455.6

 

1,614.8

 

8,002.6

 

6,467.0

 

3,435.1

 

1,604.1

 

Less: Accumulated Depreciation

 

 (1,727.5)

 

 

 (1,573.2)

 

 

 (968.4)

 

 

 (257.5)

 

 

 (1,698.1)

 

 

 (1,540.1)

 

 

 (954.0)

 

 

 (252.1)

 

(1,838.5

)

(1,664.6

)

(1,040.6

)

(278.4

)

(1,804.1

)

(1,631.3

)

(1,021.8

)

(271.5

)

Property, Plant and Equipment, Net

 

 5,871.4 

 

 4,521.6 

 

 2,295.2 

 

 1,150.3 

 

 5,789.3 

 

 4,529.5 

 

 2,290.8 

 

 1,076.9 

 

6,216.1

 

4,822.0

 

2,415.0

 

1,336.4

 

6,198.5

 

4,835.7

 

2,413.3

 

1,332.6

 

Construction Work in Progress

 

 313.2 

 

 

 266.6 

 

 

 65.6 

 

 

 155.4 

 

 

 363.7 

 

 

 205.8 

 

 

 61.7 

 

 

 213.6 

 

290.1

 

247.2

 

71.4

 

62.4

 

252.8

 

208.2

 

54.3

 

48.5

 

Total Property, Plant and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment, Net

$

 6,184.6 

 

$

 4,788.2 

 

$

 2,360.8 

 

$

 1,305.7 

 

$

 6,153.0 

 

$

 4,735.3 

 

$

 2,352.5 

 

$

 1,290.5 

Total Property, Plant and Equipment, Net

 

$

6,506.2

 

$

5,069.2

 

$

2,486.4

 

$

1,398.8

 

$

6,451.3

 

$

5,043.9

 

$

2,467.6

 

$

1,381.1

 




As discussed in Note 2, “Regulatory Accounting,” during the first quarter of 2014, as a result of a regulatory proceeding, CL&P reclassified approximately $18 million from Regulatory Assets to Property, Plant and Equipment, Net.

25



4.

DERIVATIVE INSTRUMENTS


The Regulated companies purchase and procure energy and energy-related products for their customers, which are subject to price volatility.  The costs associated with supplying energy to customers are recoverable through customer rates.  The Regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative contracts, manyand nonderivative contracts.

Many of whichthe derivative contracts meet the definition of, and are designated as, "normal purchases or normal sales" (normal)and qualify for accrual accounting under the applicable accounting guidance, and the use of nonderivative contracts.


Derivative contracts that are not recorded as normal are recorded at fair value as current or long-term derivative assets or liabilities.  For the Regulated companies, regulatory assets or liabilities are recorded for the changes in fair values of derivatives, as costs are, and management believes they will continue to be, recovered from or refunded in customer rates.  For NU's remaining unregulated wholesale marketing contracts, changes in fair values of derivatives are included in Net Income.guidance.  The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses or Operating Revenues on the consolidated statements of income, as applicable, as electricity or natural gas is delivered.


CL&P, NSTAR Electric and WMECO mitigate the risks associated with the price volatility of energy and energy-related products through the use of SS, LRS, and basic service contracts, which fix the price of electricity purchased for customers and are accounted for as normal.  CL&P, NSTAR Electric and WMECO have entered into derivative and nonderivative contracts for the purchase of energy and energy-related products andDerivative contracts that are derivatives.  NU also has NYMEX future contracts in order to reduce variability associated withnot designated as normal are recorded at fair value as current or long-term Derivative Assets or Derivative Liabilities on the purchase price of approximately 5.2 million MMBtu of natural gas.  


The costs or benefits from all ofbalance sheets.  For the Regulated companies' derivative contractscompanies, regulatory assets or regulatory liabilities are recoverablerecorded to offset the fair values of derivatives, as costs are recovered from, or refundablerefunded to, customers and therefore,in their respective energy supply rates.  For NU’s unregulated wholesale marketing contracts that expired on December 31, 2013, changes in fair value are recorded as Regulatory Assets or Regulatory Liabilities on the consolidated balance sheets.values of derivatives were included in Net Income.

25



Table of Contents

The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative Assets or Derivative Liabilities, with current and long-term portions, inon the consolidated balance sheets.  Cash collateral posted or collected under master netting agreements is recorded as an offset to the derivative asset or liability.  The following tables present the gross fair values of contracts categorized by risk type and the net amountsamount recorded as current or long-term derivative asset or liability:


 

As of March 31, 2013

 

As of March 31, 2014

 

 

Commodity Supply and

 

 

 

Net Amount Recorded as

 

Commodity Supply and

 

 

 

Net Amount Recorded as

 

(Millions of Dollars)

(Millions of Dollars)

Price Risk Management

 

Netting (1)

 

Derivative Asset/(Liability) (2)

 

Price Risk Management

 

Netting (1)

 

Derivative Asset/(Liability)

 

Current Derivative Assets:

Current Derivative Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 2:

Level 2:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (1)

$

1.6 

 

$

 - 

 

$

 1.6 

NU (1)

 

$

1.2

 

$

(0.1

)

$

1.1

 

Level 3:

Level 3:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CL&P (1)

 

 17.5 

 

 

 (10.5)

 

 

 7.0 

Other

 

 1.9 

 

 

 - 

 

 

 1.9 

Total Current Derivative Assets

$

 21.0 

 

$

 (10.5)

 

$

 10.5 

NU (1)

 

17.8

 

(9.7

)

8.1

 

CL&P (1)

 

17.0

 

(9.7

)

7.3

 

NSTAR Electric

 

0.8

 

 

0.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Derivative Assets:

Long-Term Derivative Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 3:

Level 3:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CL&P (1)

$

 152.3 

 

$

 (57.3)

 

$

 95.0 

Total Long-Term Derivative Assets

$

 152.3 

 

$

 (57.3)

 

$

 95.0 

NU, CL&P (1)

 

$

98.8

 

$

(31.7

)

$

67.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Derivative Liabilities:

Current Derivative Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 2:

 

 

 

 

 

 

 

 

Other (1) (3)

$

 (12.0)

 

$

 - 

 

$

 (12.0)

Level 3:

Level 3:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CL&P

 

 (95.6)

 

 

 - 

 

 

 (95.6)

NSTAR Electric

 

 (1.3)

 

 

 - 

 

 

 (1.3)

WMECO

 

 (0.1)

 

 

 - 

 

 

 (0.1)

Total Current Derivative Liabilities

$

 (109.0)

 

$

 - 

 

$

 (109.0)

NU

 

$

(93.3

)

$

 

$

(93.3

)

CL&P

 

(92.0

)

 

(92.0

)

NSTAR Electric

 

(1.3

)

 

(1.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Derivative Liabilities:

Long-Term Derivative Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 2:

 

 

 

 

 

 

 

NU

 

$

(0.2

)

$

 

$

(0.2

)

Level 3:

Level 3:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CL&P

$

 (826.0)

 

$

 - 

 

$

 (826.0)

NSTAR Electric

 

 (12.3)

 

 

 - 

 

 

 (12.3)

WMECO

 

 (1.7)

 

 

 - 

 

 

 (1.7)

Total Long-Term Derivative Liabilities

$

 (840.0)

 

$

 - 

 

$

 (840.0)

NU

 

(546.2

)

 

(546.2

)

CL&P

 

(539.4

)

 

(539.4

)

NSTAR Electric

 

(6.8

)

 

(6.8

)


 

 

As of December 31, 2013

 

 

 

Commodity Supply and

 

 

 

Net Amount Recorded as

 

(Millions of Dollars)

 

Price Risk Management

 

Netting (1)

 

Derivative Asset/(Liability)

 

Current Derivative Assets:

 

 

 

 

 

 

 

Level 2:

 

 

 

 

 

 

 

NU (1)

 

$

1.9

 

$

(0.3

)

$

1.6

 

Level 3:

 

 

 

 

 

 

 

NU (1)

 

18.4

 

(9.8

)

8.6

 

CL&P (1)

 

17.1

 

(9.8

)

7.3

 

NSTAR Electric

 

1.2

 

 

1.2

 

 

 

 

 

 

 

 

 

Long-Term Derivative Assets:

 

 

 

 

 

 

 

Level 2:

 

 

 

 

 

 

 

NU

 

$

0.2

 

$

 

$

0.2

 

Level 3:

 

 

 

 

 

 

 

NU (1)

 

116.2

 

(42.2

)

74.0

 

CL&P (1)

 

113.6

 

(42.2

)

71.4

 

 

 

 

 

 

 

 

 

Current Derivative Liabilities:

 

 

 

 

 

 

 

Level 3:

 

 

 

 

 

 

 

NU

 

$

(93.7

)

$

 

$

(93.7

)

CL&P

 

(92.2

)

 

(92.2

)

NSTAR Electric

 

(1.5

)

 

(1.5

)

 

 

 

 

 

 

 

 

Long-Term Derivative Liabilities:

 

 

 

 

 

 

 

Level 3:

 

 

 

 

 

 

 

NU

 

$

(624.1

)

$

 

$

(624.1

)

CL&P

 

(617.1

)

 

(617.1

)

NSTAR Electric

 

(7.0

)

 

(7.0

)




26




 

 

As of December 31, 2012

 

 

Commodity Supply and

 

 

 

Net Amount Recorded as

(Millions of Dollars)

Price Risk Management

 

Netting (1)

 

Derivative Asset/(Liability) (2)

Current Derivative Assets:

 

 

 

 

 

 

 

 

Level 2:

 

 

 

 

 

 

 

 

 

Other  (1)

$

 0.2 

 

$

 - 

 

$

 0.2 

Level 3:

 

 

 

 

 

 

 

 

 

CL&P (1)

 

 17.7 

 

 

 (12.0)

 

 

 5.7 

 

Other

 

 5.5 

 

 

 - 

 

 

 5.5 

Total Current Derivative Assets

$

 23.4 

 

$

 (12.0)

 

$

 11.4 

 

 

 

 

 

 

 

 

 

 

Long-Term Derivative Assets:

 

 

 

 

 

 

 

 

Level 3:

 

 

 

 

 

 

 

 

 

CL&P (1)

$

 159.7 

 

$

 (69.1)

 

$

 90.6 

Total Long-Term Derivative Assets

$

 159.7 

 

$

 (69.1)

 

$

 90.6 

 

 

 

 

 

 

 

 

 

 

Current Derivative Liabilities:

 

 

 

 

 

 

 

 

Level 2:

 

 

 

 

 

 

 

 

 

Other (1), (3)

$

 (19.9)

 

$

 0.6 

 

$

 (19.3)

Level 3:

 

 

 

 

 

 

 

 

 

CL&P

 

 (96.9)

 

 

 - 

 

 

 (96.9)

 

NSTAR Electric

 

 (1.0)

 

 

 - 

 

 

 (1.0)

Total Current Derivative Liabilities

$

 (117.8)

 

$

 0.6 

 

$

 (117.2)

 

 

 

 

 

 

 

 

 

 

Long-Term Derivative Liabilities:

 

 

 

 

 

 

 

 

Level 2:

 

 

 

 

 

 

 

 

 

Other (1)

$

 (0.2)

 

$

 - 

 

$

 (0.2)

Level 3:

 

 

 

 

 

 

 

 

 

CL&P

 

 (865.6)

 

 

 - 

 

 

 (865.6)

 

NSTAR Electric

 

 (13.9)

 

 

 - 

 

 

 (13.9)

 

WMECO

 

 (3.0)

 

 

 - 

 

 

 (3.0)

Total Long-Term Derivative Liabilities

$

 (882.7)

 

$

 - 

 

$

 (882.7)


(1)

Amounts represent derivative assets and liabilities whichthat NU has elected to record net on the consolidated balance sheets.  These amounts are subject to master netting agreements or similar agreements for which the right of offset exists.


(2)

Current derivative assets are included in Prepayments and Other Current Assets on the consolidated balance sheets.  NSTAR Electric and WMECO derivative liabilities are included in Other Current Liabilities and Other Long-Term Liabilities on the consolidated balance sheets.  


(3)

As of March 31, 2013 and December 31, 2012, NU had $3.5 million and $4.1 million, respectively, of cash posted related to these contracts, which is not offset against the derivative liability and is recorded as Prepayments and Other Current Assets on the consolidated balance sheets.


For further information on the fair value of derivative contracts, see Note 1E, "Summary1D, “Summary of Significant Accounting Policies - Fair Value Measurements," to the consolidated financial statements.

26



Table of Contents

Derivatives Not Designated as Hedges

Commodity Supply and Price Risk Management:  As required by regulation, CL&P has capacity-related contracts with generation facilities.  These contracts and similar UI contracts have an expected capacity of 787 MW.  CL&P has a sharing agreement with UI, with 80 percent of each contract allocated to CL&P and 20 percent allocated to UI.  The capacity contracts extend through 2026 and obligate the utilitiesboth CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the forward capacity market price received in the ISO-NE capacity markets.  In addition, CL&P has a contract to purchase 0.1 million MWh of energy per year through 2020.2020.


NSTAR Electric has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2018.NSTAR Electric also has2018 and a capacity related contract forto purchase up to 35 MW per year that extends through 2019.


WMECO has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2028 with a facility that is expected to achieve commercial operation by November 2013.  


As of March 31, 20132014 and December 31, 2012,2013, NU had NYMEX future contracts in order to reduce variability associated with the purchase price of approximately 5 thousand MWh7.4 million and 24 thousand MWh, respectively,9.1 million MMBtu of supply volumes remaining in its unregulated wholesale portfolio when expected sales are compared with supply contracts.natural gas, respectively.




27



The following table presents the realized and unrealized gains/(losses)current change in fair value, primarily recovered through rates from customers, associated with NU’s derivative contracts not designated as hedges (See Level 3 tables in the "Valuations using significant unobservable inputs" section for CL&P, NSTAR Electric and WMECO gains and losses on derivative contracts):hedges:


 

Amounts Recognized on Derivatives

 

Location of Amounts

Location of Amounts

 

Amounts Recognized on Derivatives

 

For the Three Months Ended March 31,

 

Recognized on Derivatives

Recognized on Derivatives

 

For the Three Months Ended March 31,

 

2014

 

2013

 

(Millions of Dollars)

(Millions of Dollars)

 

2013 

 

2012 

 

 

 

 

 

 

NU

NU

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet:

 

 

 

 

 

Balance Sheets:

 

 

 

 

 

Regulatory Assets and Liabilities

 

$

54.1

 

$

28.0

 

Statements of Income:

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

 

0.3

 

Regulatory Assets

 

$

 28.0 

 

$

 6.0 

 

Statement of Income:

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

 0.3 

 

 (0.8)

 


Hedging

Fair Value Hedge:  NU parent had a fixed to floating interest rate swap on its $263 million, fixed rate senior note that matured on April 1, 2012.  This interest rate swap qualified and was designated as a fair value hedge.  Prior to the settlement of the swap on April 2, 2012, $2.5 million of interest benefit was recorded in Net Income in the first quarter of 2012.  


Cash Flow Hedges:  For information on the treatment of previously settled cash flow hedges, see Note 11, "Accumulated Other Comprehensive Income/(Loss)," to the consolidated financial statements.


Credit Risk

Certain of NU’s derivative contracts contain credit risk contingent features.  These features require NU to maintain investment grade credit ratings from the major rating agencies and to post collateral for contracts in a net liability position over specified credit limits.  The following summarizes the fair valueAs of March 31, 2014 and December 31, 2013, there were no derivative contracts that were in a net liability position andthat were subject to credit risk contingent features, the fair value of cash collateral, and the additional collateral that would be required to be posted by NU if the unsecured debt credit ratings of NU parent were downgraded to below investment grade as of March 31, 2013 and December 31, 2012:features.


 

As of March 31, 2013

 

As of December 31, 2012

 

 

 

 

 

 

 

Additional Collateral

 

 

 

 

 

 

 

Additional Collateral

 

Fair Value Subject

 

 

 

 

Required if

 

Fair Value Subject

 

 

 

 

Required if

 

to Credit Risk

 

Cash

 

Downgraded Below

 

to Credit Risk

 

Cash

 

Downgraded Below

(Millions of Dollars)

Contingent Features

 

Collateral Posted

 

Investment Grade

 

Contingent Features

 

Collateral Posted

 

Investment Grade

NU

$

 (8.4)

 

$

 - 

 

$

 9.4 

 

$

 (15.3)

 

$

 - 

 

$

 17.4 


Fair Value MeasurementsValuation of Derivative Instruments

Valuation of Derivative Instruments:Derivative contracts classified as Level 2 in the fair value hierarchy relate to the financial contracts for natural gas futures and the remaining unregulated wholesale marketing sourcing contracts to purchase energy for periods in which prices are quoted in an active market.futures.  Prices are obtained from broker quotes and are based on actual market activity.  The contracts are valued using the mid-point of the bid-ask spread.  Valuations of these contracts also incorporate discount rates using the yield curve approach.


The fair value of derivative contracts classified as Level 3 utilizes significant unobservable inputs.  The fair value is modeled using income techniques, such as discounted cash flow approachesvaluations adjusted for assumptions relating to exit price.  Significant observable inputs for valuations of these contracts include energy and energy-related product prices in future years for which quoted prices in an active market exist.  Fair value measurements categorized in Level 3 of the fair value hierarchy are prepared by individuals with expertise in valuation techniques, pricing of energy and energy-related products, and accounting requirements.  The future power and capacity prices for periods that are not quoted in an active market or established at auction are based on available market data and are escalated based on estimates of inflation to address the full time period of the contract.


Valuations of derivative contracts using a discounted cash flow methodology include assumptions regarding the timing and likelihood of scheduled payments and also reflect non-performance risk, including credit, using the default probability approach based on the counterparty'scounterparty’s credit rating for assets and the company'sCompany’s credit rating for liabilities.  Valuations incorporate estimates of premiums or discounts that would be required by a market participant to arrive at an exit price, using historical market transactions adjusted for the terms of the contract.




28



The following is a summary of NU’s, including CL&P’s and NSTAR Electric’s, and WMECO’s, Level 3 derivative contracts and the range of the significant unobservable inputs utilized in the valuations over the duration of the contracts:


As of March 31, 2014

As of December 31, 2013

Range

Period Covered

Range

Period Covered

Energy Prices:

 

As of December 31, 2012

Range

Period Covered

Range

Period Covered

Energy Prices:

 

 

 

 

 

 

 

NU

$44 - $90 per MWh

2018 – 2028

 

$43    57  - $90 per MWh

2018 - 2028

  CL&P

$50 - $54 per MWh

2018 – 2020

$50 - $5560  per MWh

 

2018 - 2020

  WMECO

$44 - $90 per MWh

2018 – 2028

 

$43    49  - $9077  per MWh

 

2018 - 20282029

CL&P

$    57  - 60  per MWh

2018 - 2020

$    56  - 58  per MWh

2018 - 2029

 

 

 

 

 

 

 

 

Capacity Prices:

 

 

 

 

 

 

 

NU

$1.40 - $10.53 per kW-Month

2016 – 2028

 

$1.40 1.70  - $10.53 per kW-Month

2016 - 2028

  CL&P

$1.40 - $9.83 per kW-Month

2016 – 2026

$1.40 - $9.8310.42  per kW-Month

 

2016 - 2026

 NSTAR Electric

$1.40 5.07  - $3.3911.82  per kW-Month

 

2016 – 20192017 - 2029

CL&P

 

$1.40 5.23  - $3.3910.42  per kW-Month

2018 - 2026

$ 5.07  - 10.42  per kW-Month

2017 - 2026

NSTAR Electric

$ 1.70  - 7.38  per kW-Month

 

2016 - 2019

 WMECO

$1.40 5.07  - $10.537.38  per kW-Month

 

2016 – 20282017 - 2019

 

$1.40 - $10.53 per kW-Month

 

2016 - 2028

 

 

 

 

 

 

 

 

Forward Reserve:

 

 

 

 

 

 

 

NU, CL&P

$3.00 3.30  - 3.30  per kW-Month

 

2013 –2014 - 2024

 

$0.35 3.30  - $0.903.30  per kW-Month

 

20132014 - 2024

 

 

 

 

 

 

 

 

REC Prices:

 

 

 

 

 

 

 

NU

$25    38  - $8570  per REC

 

2013 – 20282014 - 2018

 

$25    36  - $8587  per REC

 

20132014 - 20282029

NSTAR Electric

$25    38  - $7170  per REC

 

2013 –2014 - 2018

 

$25    36  - $7170  per REC

 

20132014 - 2018

  WMECO

$25 - $85 per REC

 

2013 – 2028

$25 - $85 per REC

2013 - 2028

27



Table of Contents

Exit price premiums of 119 percent through 3226 percent are also applied on these contracts and reflect the most recent market activity available for similar type contracts.


Significant increases or decreases in future powerenergy or capacity prices in isolation would decrease or increase, respectively, the fair value of the derivative liability.  Any increases in the risk premiums would increase the fair value of the derivative liabilities.  Changes in these fair values are recorded as a regulatory asset or liability and would not impact net income.


Valuations using significant unobservable inputs:  The following tables present changes for the three months ended March 31, 20132014 and 20122013 in the Level 3 category of derivative assets and derivative liabilities measured at fair value on a recurring basis.  The derivative assets and liabilities are presented on a net basis.  The fair value as of January 1, 2012 reflects a reclassification of remaining unregulated wholesale marketing sourcing contracts that had previously been presented as a portfolio along with the unregulated wholesale marketing sales contract as Level 3 under the highest and best use valuation premise.  These contracts are now classified within Level 2 of the fair value hierarchy.


 

For the Three Months Ended

 

For the Three Months Ended March 31,

 

 

March 31, 2013

 

March 31, 2012

 

2014

 

2013

 

(Millions of Dollars)

(Millions of Dollars)

NU

 

NU

 

NU

 

NU

 

Derivatives, Net:

Derivatives, Net:

 

 

 

 

 

 

 

 

 

Fair Value as of Beginning of Period

Fair Value as of Beginning of Period

$

 (878.6)

 

$

 (962.2)

 

$

(635.2

)

$

(878.6

)

Transfer to Level 2

 

 - 

 

 32.2 

Net Realized/Unrealized Gains Included in:

Net Realized/Unrealized Gains Included in:

 

 

 

 

 

 

 

 

 

  Net Income (2)

 

 5.7 

 

 8.0 

  Regulatory Assets

 

 26.2 

 

 6.0 

Net Income (1)

 

 

5.7

 

Regulatory Assets and Liabilities

 

49.2

 

26.2

 

Settlements

Settlements

 

 13.6 

 

 

 14.5 

 

21.7

 

13.6

 

Fair Value as of End of Period

Fair Value as of End of Period

$

 (833.1)

 

$

 (901.5)

 

$

(564.3

)

$

(833.1

)


 

 

For the Three Months Ended

 

 

 

March 31, 2014

 

March 31, 2013

 

(Millions of Dollars)

 

CL&P

 

NSTAR Electric

 

CL&P

 

NSTAR Electric

 

Derivatives, Net:

 

 

 

 

 

 

 

 

 

Fair Value as of Beginning of Period

 

$

(630.6

)

$

(7.3

)

$

(866.2

)

$

(14.9

)

Net Realized/Unrealized Gains/(Losses) Included in Regulatory Assets and Liabilities

 

52.0

 

(0.1

)

24.3

 

0.7

 

Settlements

 

21.6

 

0.1

 

22.3

 

0.6

 

Fair Value as of End of Period

 

$

(557.0

)

$

(7.3

)

$

(819.6

)

$

(13.6

)


 

 

For the Three Months Ended

 

 

March 31, 2013

 

March 31, 2012

(Millions of Dollars)

CL&P

 

NSTAR Electric

 

WMECO

 

CL&P

 

NSTAR Electric(1)

 

WMECO

Derivatives, Net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value as of Beginning of Period

$

 (866.2)

 

$

 (14.9)

 

$

 (3.0)

 

$

 (931.6)

 

$

 (3.4)

 

$

 (7.3)

Net Realized/Unrealized Gains/(Losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in Regulatory Assets

 

 24.3 

 

 

 0.7 

 

 

 1.2 

 

 

 10.9 

 

 

 (3.4)

 

 

 (5.0)

Settlements

 

 22.3 

 

 

 0.6 

 

 

 - 

 

 

 21.1 

 

 

 1.4 

 

 

 - 

Fair Value as of End of Period

$

 (819.6)

 

$

 (13.6)

 

$

 (1.8)

 

$

 (899.6)

 

$

 (5.4)

 

$

 (12.3)


(1)

NSTAR Electric amounts are not included in NU consolidated for the three months ended March 31, 2012.


(2)

The Net Income impact for the three months ended March 31, 2013 and 2012 relatesrelated to the unregulated wholesale marketing sales contract and isthat was offset by the gains/(losses) on the unregulated sourcing contracts classified as Level 2 in the fair value hierarchy, resulting in a total net gainsgain of $0.3 million and net lossesas of $0.8 million, respectively.March 31, 2013.


5.

MARKETABLE SECURITIES (NU, WMECO)


NU maintains a supplemental benefit trusttrusts to fund certain of NU’s non-qualified executive retirement benefit obligationsbenefits and WMECO maintains a spent nuclear fuel trust to fund WMECO’s prior period spent nuclear fuel liability, each of which hold marketable securities. 



29



These trusts are not subject to regulatory oversight by state or federal agencies.  NU's marketable securities also includeIn addition, CYAPC and YAEC maintain legally restricted trusts, each of which holds marketable securities, for settling the decommissioning obligations of their nuclear power plants that are part of CYAPC and YAEC.plants.


TheIn accordance with applicable accounting guidance, the Company electselected to record mutual funds purchased by the NU supplemental benefit trustdesignated as available-for-sale at fair value.  As such, any changevalue and certain other equity investments as trading securities, with the changes in fair valuevalues recorded in Other Income, Net on the statements of theseincome.  As of March 31, 2014, the mutual funds is reflected in Net Income.  These mutual funds,and equity investments were classified as Level 1 in the fair value hierarchy and totaled $51.2$57.4 million and $47$24 million, asrespectively.  As of MarchDecember 31, 2013, the mutual funds were classified as Level 1, and December 31, 2012, respectively, and are included in current Marketable Securities.totaled $57.2 million.  Net gains on these securities of $4.2the mutual funds were $0.2 million and $3.2$4.2 million for the three months ended March 31, 2014 and 2013, respectively, and 2012, respectively, were recorded in Other Income, Netnet gains on the consolidated statements of income.equity investments were $0.5 million for the three months ended March 31, 2014.  Dividend income is recorded when dividends are declared and is recorded in Other Income, Net on the consolidated statements of income.income when dividends are declared.  All other marketable securities are accounted for as available-for-sale.


Available-for-Sale Securities:  The following is a summary of NU'sNU’s and WMECO’s available-for-sale securities held in the NU supplemental benefit trust, WMECO's spent nuclear fuel trust and CYAPC and YAEC's nuclear decommissioning trusts.securities.  These securities are recorded at fair value and included in current and long-term Marketable Securities on the consolidated balance sheets.


 

As of March 31, 2013

 

As of March 31, 2014

 

 

 

 

 

Pre-Tax

 

Pre-Tax

 

 

 

 

 

Pre-Tax

 

Pre-Tax

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

(Millions of Dollars)

(Millions of Dollars)

Cost

 

Gains(1)

 

Losses(1)

 

Fair Value

 

Cost

 

Gains(1)

 

Losses(1)

 

Fair Value

 

NU

NU

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities (2)

$

 355.3 

 

$

 10.0 

 

$

 (0.1)

 

$

 365.2 

Equity Securities (2)

 

 144.0 

 

 30.7 

 

 - 

 

 174.7 

Debt Securities (2)

 

$

300.6

 

$

4.8

 

$

(0.7

)

$

304.7

 

Equity Securities (2)

 

163.3

 

65.6

 

 

228.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WMECO

WMECO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities

 

58.0

 

 

(0.1

)

57.9

 

Debt Securities

 

 57.7 

 

 0.1 

 

 - 

 

 57.8 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2012

 

 

 

 

Pre-Tax

 

Pre-Tax

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

(Millions of Dollars)

Cost

 

Gains(1)

 

Losses(1)

 

Fair Value

NU

 

 

 

 

 

 

 

 

Debt Securities (2)

$

 266.6 

 

$

 13.3 

 

$

 (0.1)

 

$

 279.8 

Equity Securities (2)

 

 145.5 

 

 20.0 

 

 - 

 

 165.5 

 

 

 

 

 

 

 

 

 

WMECO

 

 

 

 

 

 

 

 

Debt Securities

 

 57.7 

 

 0.1 

 

 (0.1)

 

 57.7 


(1)28



Table of Contents

 

 

As of December 31, 2013

 

 

 

 

 

Pre-Tax

 

Pre-Tax

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

(Millions of Dollars)

 

Cost

 

Gains(1)

 

Losses(1)

 

Fair Value

 

NU

 

 

 

 

 

 

 

 

 

Debt Securities (2)

 

$

299.2

 

$

2.5

 

$

(2.1

)

$

299.6

 

Equity Securities (2)

 

163.6

 

60.5

 

 

224.1

 

 

 

 

 

 

 

 

 

 

 

WMECO

 

 

 

 

 

 

 

 

 

Debt Securities

 

57.9

 

 

 

57.9

 


(1)Unrealized gains and losses on debt securities for the NU supplemental benefit trust andheld by WMECO spent nuclear fuel trust are recorded in AOCI and Other Long-Term Assets respectively, on the consolidated balance sheets.


(2)

NU'sNU’s amounts include CYAPC'sCYAPC’s and YAEC'sYAEC’s marketable securities held in nuclear decommissioning trusts of $434.9$435.9 million and $340.4$424 million as of March 31, 20132014 and December 31, 2012,2013, respectively, the majority of which are legally restricted and can only be used for the decommissioning of the nuclear power plants owned by these companies. In 2013, CYAPC and YAEC received cash from the DOE that was invested in the nuclear decommissioning trusts. For further information see Note 9B "Commitments and Contingencies - Deferred Contractual Obligations" to the consolidated financial statements.  Unrealized gains and losses for the nuclear decommissioning trusts are offset in Other Long-Term Liabilities on the consolidated balance sheets.sheets, with no impact on the statements of income.  All of the equity securities accounted for as available-for-sale securities are held in these trusts.


Unrealized Losses and Other-than-Temporary Impairment:  There have been no significant unrealized losses, other-than-temporary impairments or credit losses for the NU supplemental benefit trust, the WMECO spent nuclear fuel trust, and in the trusts held by CYAPC and YAEC.Factorsor WMECO. Factors considered in determining whether a credit loss exists include the duration and severity of the impairment, adverse conditions specifically affecting the issuer, and the payment history, ratings and rating changes of the security.  For asset-backed debt securities, underlying collateral and expected future cash flows are also evaluated.


Realized Gains and Losses:  Realized gains and losses on available-for-sale securities are recorded in Other Income, Net for the NU supplementalNU’s benefit trust, Other Long-Term Assets for the WMECO, spent nuclear fuel trust, and offset in Other Long-Term Liabilities for CYAPC and YAEC.  NU utilizes the specific identification basis method for the NU supplemental benefit trust securities and the average cost basis method for the WMECO spent nuclear fuel trust and the CYAPC and YAEC nuclear decommissioning trusts to compute the realized gains and losses on the sale of available-for-sale securities.


Contractual Maturities:  As of March 31, 2013,2014, the contractual maturities of available-for-sale debt securities are as follows:


 

NU

 

WMECO

 

NU

 

WMECO

 

 

Amortized

 

 

 

Amortized

 

 

 

Amortized

 

 

 

Amortized

 

 

 

(Millions of Dollars)

(Millions of Dollars)

Cost

 

Fair Value

 

Cost

 

Fair Value

 

Cost

 

Fair Value

 

Cost

 

Fair Value

 

Less than one year (1)

Less than one year (1)

$

 150.7 

 

$

 150.8 

 

$

 30.4 

 

$

 30.6 

 

$

54.5

 

$

54.4

 

$

19.2

 

$

19.2

 

One to five years

One to five years

 

 62.2 

 

 63.5 

 

 18.7 

 

 18.5 

 

73.3

 

73.9

 

33.2

 

33.2

 

Six to ten years

Six to ten years

 

 51.2 

 

 53.4 

 

 4.1 

 

 4.1 

 

68.1

 

69.4

 

1.6

 

1.6

 

Greater than ten years

Greater than ten years

 

 91.2 

 

 

 97.5 

 

 

 4.5 

 

 

 4.6 

 

104.7

 

107.0

 

4.0

 

3.9

 

Total Debt Securities

Total Debt Securities

$

 355.3 

 

$

 365.2 

 

$

 57.7 

 

$

 57.8 

 

$

300.6

 

$

304.7

 

$

58.0

 

$

57.9

 



(1)

Amounts in the Less than one year NU category include securities in the CYAPC and YAEC nuclear decommissioning trusts, which are restricted and are classified in long-term Marketable Securities on the consolidated balance sheets.


Fair Value Measurements:  The following table presents the marketable securities recorded at fair value on a recurring basis by the level in which they are classified within the fair value hierarchy:


 

 

NU

 

WMECO

 

NU

 

WMECO

 

 

 

As of

 

As of

 

As of

 

As of

 

(Millions of Dollars)

(Millions of Dollars)

March 31, 2013

 

December 31, 2012

 

March 31, 2013

 

December 31, 2012

 

March 31, 2014

 

December 31, 2013

 

March 31, 2014

 

December 31, 2013

 

Level 1:

Level 1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds and Equities

$

 225.9 

 

$

 212.5 

 

$

 - 

 

$

 - 

Money Market Funds

 

 120.1 

 

 

 40.2 

 

 

 3.6 

 

 

 5.2 

Mutual Funds and Equities

 

$

310.3

 

$

281.3

 

$

 

$

 

Money Market Funds

 

22.5

 

32.9

 

4.3

 

10.9

 

Total Level 1

Total Level 1

$

 346.0 

 

$

 252.7 

 

$

 3.6 

 

$

 5.2 

 

$

332.8

 

$

314.2

 

$

4.3

 

$

10.9

 

Level 2:

Level 2:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Issued Debt Securities

 

 

 

 

 

 

 

 

 

(Agency and Treasury)

$

 78.5 

 

$

 69.9 

 

$

 18.2 

 

$

 18.7 

Corporate Debt Securities

 

 41.1 

 

 33.0 

 

 11.7 

 

 7.0 

Asset-Backed Debt Securities

 

 26.4 

 

 28.5 

 

 9.6 

 

 10.9 

Municipal Bonds

 

 82.6 

 

 93.8 

 

 8.6 

 

 11.6 

Other Fixed Income Securities

 

 16.5 

 

 

 14.4 

 

 

 6.1 

 

 

 4.3 

U.S. Government Issued Debt Securities (Agency and Treasury)

 

$

56.7

 

$

61.4

 

$

 

$

6.8

 

Corporate Debt Securities

 

56.3

 

53.6

 

14.1

 

15.1

 

Asset-Backed Debt Securities

 

35.3

 

30.4

 

14.0

 

9.0

 

Municipal Bonds

 

109.6

 

105.5

 

12.3

 

11.2

 

Other Fixed Income Securities

 

24.3

 

15.8

 

13.2

 

4.9

 

Total Level 2

Total Level 2

$

 245.1 

 

$

 239.6 

 

$

 54.2 

 

$

 52.5 

 

$

282.2

 

$

266.7

 

$

53.6

 

$

47.0

 

Total Marketable Securities

Total Marketable Securities

$

 591.1 

 

$

 492.3 

 

$

 57.8 

 

$

 57.7 

 

$

615.0

 

$

580.9

 

$

57.9

 

$

57.9

 


U.S. government issued debt securities are valued using market approaches that incorporate transactions for the same or similar bonds and adjustments for yields and maturity dates.  Corporate debt securities are valued using a market approach, utilizing recent trades of the same or similar instrument and also incorporating yield curves, credit spreads and specific bond terms and conditions.  Asset-backed debt securities include collateralized mortgage obligations, commercial mortgage backed securities, and securities collateralized by auto loans, credit card loans or receivables.  Asset-backed debt securities are valued using recent trades of similar instruments, prepayment assumptions, yield curves, issuance and maturity dates and tranche information.  Municipal bonds are valued using a market approach that incorporates reported trades and benchmark yields.  Other fixed income securities are valued using pricing models, quoted prices of securities with similar characteristics, and discounted cash flows.


6.29



Table of Contents

6.SHORT-TERM AND LONG-TERM DEBT


Limits:  The amount of short-term borrowings that may be incurred by CL&P, NSTAR Electric and WMECO is subject to periodic approval by the FERC.  On November 30, 2011, the FERC granted authorization to allow CL&P and WMECO to incur total short-term borrowings up to a maximum of $450 million and $300 million, respectively, effective January 1, 2012 through December 31, 2013.  On March 22, 2012, the FERC approved CL&P's application requesting to increase its total short-term borrowing capacity from a maximum of $450 million to a maximum of $600 million for the authorization period through December 31, 2013.  On May 16, 2012, the FERC granted authorization to allow NSTAR Electric to issue total short-term debt securities in an aggregate principal amount not to exceed $655 million outstanding at any one time, effective October 23, 2012 through October 23, 2014.  As a result of the NHPUC having jurisdiction over PSNH's short-term debt, PSNH is not currently required to obtain FERC approval for its short-term borrowings.


Credit Agreements and Commercial Paper Programs:  NU parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are parties to a five-year $1.45 billion revolving credit facility due to expire on September 6, 2018.  The revolving credit facility is to be used primarily to backstop the $1.45 billion commercial paper program at NU.  The commercial paper program allows NU parent to issue commercial paper as a form of short-term debt.  As of March 31, 20132014 and December 31, 2012,2013, NU had $979approximately $818.5 million and $1.15$1.01 billion, respectively, in short-term borrowings outstanding under itsthe NU parent commercial paper program, leaving $171$631.5 million and $435.5 million of available borrowing capacity as of March 31, 2013.2014 and December 31, 2013, respectively.  The weighted-average interest rate on these borrowings as of March 31, 20132014 and December 31, 20122013 was 0.350.23 percent and 0.460.24 percent, respectively, which is generally based on money market rates.  As of March 31, 2013,2014, there were inter-companyintercompany loans of $832 million from NU to its subsidiaries ($210.4of $351.6 million atto CL&P, $53.4$39.9 million atto PSNH and $43.4$37.4 million at WMECO).to WMECO.  As of December 31, 2012,2013, there were inter-companyintercompany loans of $987.5 million from NU to its subsidiaries ($405.1of $287.3 million atto CL&P $63.3and $86.5 million at PSNH, and $31.9to PSNH.

NSTAR Electric has a five-year $450 million at WMECO).revolving credit facility due to expire on September 6, 2018.  This facility serves to backstop NSTAR Electric’s existing $450 million commercial paper program.  As of March 31, 2013 and December 31, 2012,2014, NSTAR Electric had $308no borrowings outstanding under its commercial paper program.  As of December 31, 2013, NSTAR Electric had $103.5 million and $276 million, respectively, in short-term borrowings outstanding under its commercial paper program, leaving $142$346.5 million and $174 million, respectively, of available borrowing capacity.  The weighted-average interest rate on these borrowings as of MarchDecember 31, 2013 and December 31, 2012 was 0.280.13 percent, and 0.31 percent, respectively, which is generally based on money market rates.


Amounts outstanding under the commercial paper programprograms are generally included in Notes Payable for NU and NSTAR Electric and classified in current liabilities on the consolidated balance sheets as management anticipates that all borrowings under these credit facilities will beare outstanding for no more than 364 days at one time.  Intercompany loans from NU to CL&P, PSNH and WMECO are included in Notes Payable to Affiliated CompaniesNU Parent and classified in current liabilities on the consolidated balance sheets. 


See the Long-Term Debt Issuances:  portion of this Note for further information on the CL&P $250 million bond issuance and the Yankee Gas $100 million bond issuance and their impacts on the NU balance sheet as of March 31, 2014 and December 31, 2013, respectively.

Long-Term Debt:  On January 15, 2013, CL&P2, 2014, Yankee Gas issued $400$100 million of 4.82 percent Series AL First and Refunding Mortgage Bonds, with a coupon rate of 2.5 percent and a maturity date of January 15, 2023.due to mature in 2044.  The proceeds, net of issuance costs, were used to repay the $75 million 4.80 percent Series G First Mortgage Bonds that matured on January 1, 2014 and to pay $25 million in short-term borrowings outstanding under the CL&P credit agreement and the NU commercial paper program.  Therefore, as of December 31, 2012, CL&P's credit agreement borrowings of $89 million and intercompany loans related to the commercial paper program of $305.8 million have beenborrowings.  In accordance with applicable accounting guidance, these amounts were classified as Long-Term Debt on the consolidatedNU’s balance sheet.sheet as of December 31, 2013.




31



On May 1, 2013, PSNH redeemed at par approximately $109March 7, 2014, NSTAR Electric issued $300 million of the 2001 Series C PCRBs that were4.40 percent debentures, due to mature in 20212044.  The proceeds, net of issuance costs, were used to repay the $300 million of 4.875 percent debentures that matured on April 15, 2014.

On April 24, 2014, CL&P issued $250 million of 4.30 percent 2014 Series A First Mortgage Bonds, due to mature in April 2044.  The proceeds, net of issuance costs, were used to repay short-term borrowings.  In accordance with short-term debt.  As a result, the PCRBsapplicable accounting guidance, Notes Payable of $247.4 million were recordedclassified as Long-Term Debt - Current Portion.on NU’s balance sheet as of March 31, 2014.


Working Capital:  Each of NU, CL&P, NSTAR Electric, PSNH and WMECO use theirits available capital resources to fund theirits respective construction expenditures, meet debt requirements, pay operating costs, including storm-related costs, pay dividends and fund other corporate obligations, such as pension contributions.  The current growth in NU’s transmission construction expenditures utilizes a significant amount of cash for projects that have a long-term return on investment and recovery period.  In addition, NU’s Regulated companies operate in an environment where recovery of itsrecover their electric and natural gas distribution construction expenditures takes placeas the related project costs are depreciated over an extended periodthe life of time.the assets.  This impacts the timing of the revenue stream designed to fully recover the total investment plus a return on the equity portion of the cost and related financing costs.  These factors have resulted in NU’s current liabilities exceeding current assets by approximately $1.7 billion, $231$424 million, $226 million, $34$355 million and $48$177 million at NU, CL&P and NSTAR Electric, PSNH and WMECO, respectively, as of March 31, 2013.2014.


As of March 31, 2013, $947.32014, $501.7 million of NU'sNU’s obligations classified as current liabilities relates to long-term debt that will be paid in the next 12 months, consisting of $550 million for NU parent, $125$150 million for CL&P, $109$301.7 million for PSNH, $75NSTAR Electric and $50 million for Yankee Gas and $55 million for WMECO.  Approximately $32PSNH.  In addition, $28.8 million relates to the amortization of the purchase accounting fair value adjustment that will be amortized in the next twelve months.  NU, with its strong credit ratings, has several options available in the financial markets to repay or refinance these maturities with the issuance of new long-term debt.  NU, CL&P, NSTAR Electric, PSNH and WMECO will reduce their short-term borrowings with cash received from operating cash flows or with the issuance of new long-term debt, as deemed appropriate givendetermined considering capital requirements and maintenance of NU'sNU’s credit rating and profile.  Management expects the future operating cash flows of NU, CL&P, NSTAR Electric, PSNH and WMECO, along with the access to financial markets, will be sufficient to meet any future operating requirements and capital investment forecasted opportunities.


7.30



Table of Contents

7.PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS


NUSCO sponsors a defined benefit retirement plan that covers most employees, including CL&P, PSNH, and WMECO employees, hired before 2006 (or as negotiated, for bargaining unit employees), referred to as the NUSCO Pension Plan. NSTAR Electric serves as plan sponsor for a defined benefit retirement plan that covers most employees of NSTAR Electric & Gas, hired before October 1, 2012, or as negotiated by bargaining unit employees, referred to as the NSTAR Pension Plan.  Both plans are subject to the provisions of ERISA, as amended by the PPA of 2006.  NUSCO and NSTAR Electric & Gas each maintain SERPs and other non-qualified defined benefit retirement plans (herein collectively referred to as the SERP Plans), which provide benefits in excess of Internal Revenue Code limitations to eligible current and retired participants that would have otherwise been provided under the Pension Plans.  


NUSCO and NSTAR Electric & Gas also sponsor postretirement benefit plans that provide retiree medical, dental and life insurance benefits to employees that meet certain age and service eligibility requirements (NUSCO PBOP Plans and NSTAR PBOP Plan, respectively).  Under certain circumstances, eligible retirees are required to contribute to the costs of postretirement benefits.  The benefits provided under the NUSCO and NSTAR PBOP Plans are not vested and the Company has the right to modify any benefit provision.


The funded status of each of the plans is recorded on the respective sponsor's balance sheet:  NUSCO (NUSCO Pension, NUSCO PBOP and NUSCO SERP), NSTAR Electric (NSTAR Pension) and NSTAR Electric & Gas (NSTAR SERP and NSTAR PBOP).  The NUSCO plans are accounted for under the multiple-employer approach and the NSTAR plans are accounted for under the multi-employer approach.  Accordingly, the balance sheet of NSTAR Electric reflects the full funded status of the NSTAR Pension Plan.


The components of net periodic benefit expense for the Pension, Plans (including the SERP Plans) and PBOP Plans are detailed below.  The net periodic benefit expense less the capitalized portion of pension and PBOP amounts capitalized relatedis included in Operations and Maintenance on the statements of income. Capitalized pension and PBOP amounts relate to employees working on capital projects and intercompanyare included in Property, Plant and Equipment, Net. Intercompany allocations are not included in the net periodic benefit expense are as follows:amounts.


 

Pension and SERP

 

Pension and SERP

 

 

For the Three Months Ended

 

For the Three Months Ended

 

 

March 31, 2013

 

March 31, 2012

 

March 31, 2014

 

March 31, 2013

 

(Millions of Dollars)

(Millions of Dollars)

NU

 

NU

 

NU

 

NU

 

Service Cost

Service Cost

$

 26.6 

 

$

 15.3 

 

$

22.3

 

$

26.6

 

Interest Cost

Interest Cost

 

 51.4 

 

 38.1 

 

56.6

 

51.4

 

Expected Return on Plan Assets

Expected Return on Plan Assets

 

 (70.3)

 

 (42.5)

 

(77.7

)

(70.3

)

Actuarial Loss

Actuarial Loss

 

 52.9 

 

 30.1 

 

33.0

 

52.9

 

Prior Service Cost

Prior Service Cost

 

 1.1 

 

 

 2.1 

 

1.1

 

1.1

 

Total Net Periodic Benefit Expense

Total Net Periodic Benefit Expense

$

 61.7 

 

$

 43.1 

 

$

35.3

 

$

61.7

 

Capitalized Pension Expense

Capitalized Pension Expense

$

 16.7 

 

$

 10.6 

 

$

9.7

 

$

16.7

 

 

 

 

 

 


 

 

PBOP

 

 

 

For the Three Months Ended

 

 

 

March 31, 2014

 

March 31, 2013

 

(Millions of Dollars)

 

NU

 

NU

 

Service Cost

 

$

3.0

 

$

4.8

 

Interest Cost

 

12.6

 

12.8

 

Expected Return on Plan Assets

 

(15.7

)

(13.8

)

Actuarial Loss

 

3.0

 

8.2

 

Prior Service Credit

 

(0.6

)

(0.6

)

Total Net Periodic Benefit Expense

 

$

2.3

 

$

11.4

 

Capitalized PBOP Expense

 

$

0.4

 

$

3.5

 



 

 

Pension and SERP

 

 

 

For the Three Months Ended March 31, 2014

 

For the Three Months Ended March 31, 2013

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

(Millions of Dollars)

 

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric(1)

 

PSNH

 

WMECO

 

Service Cost

 

$

5.2

 

$

4.6

 

$

2.8

 

$

1.0

 

$

6.1

 

$

9.3

 

$

3.3

 

$

1.2

 

Interest Cost

 

13.3

 

10.2

 

6.5

 

2.7

 

12.1

 

14.2

 

6.0

 

2.5

 

Expected Return on Plan Assets

 

(19.4

)

(15.8

)

(10.2

)

(4.6

)

(18.5

)

(22.0

)

(7.7

)

(4.3

)

Actuarial Loss

 

9.1

 

5.8

 

3.3

 

1.9

 

14.1

 

14.5

 

5.5

 

3.0

 

Prior Service Cost

 

0.5

 

 

0.2

 

0.1

 

0.5

 

 

0.1

 

0.1

 

Total Net Periodic Benefit Expense

 

$

8.7

 

$

4.8

 

$

2.6

 

$

1.1

 

$

14.3

 

$

16.0

 

$

7.2

 

$

2.5

 

Intercompany Allocations

 

$

6.8

 

$

2.4

 

$

1.9

 

$

1.3

 

$

10.7

 

$

(2.0

)

$

2.6

 

$

1.8

 

Capitalized Pension Expense

 

$

4.9

 

$

1.9

 

$

0.9

 

$

0.8

 

$

7.0

 

$

5.3

 

$

2.2

 

$

1.3

 

32

 

 

PBOP

 

 

 

For the Three Months Ended March 31, 2014

 

For the Three Months Ended March 31, 2013

 

(Millions of Dollars)

 

CL&P

 

NSTAR
Electric

 

PSNH

 

WMECO

 

CL&P

 

PSNH

 

WMECO

 

Service Cost

 

$

0.6

 

$

0.7

 

$

0.4

 

$

0.1

 

$

0.9

 

$

0.6

 

$

0.2

 

Interest Cost

 

2.1

 

4.9

 

1.1

 

0.5

 

2.0

 

1.0

 

0.4

 

Expected Return on Plan Assets

 

(2.7

)

(6.4

)

(1.4

)

(0.6

)

(2.5

)

(1.3

)

(0.6

)

Actuarial Loss/(Gain)

 

1.1

 

(0.1

)

0.5

 

0.1

 

1.7

 

0.9

 

0.3

 

Prior Service Credit

 

 

(0.5

)

 

 

 

 

 

Total Net Periodic Benefit Expense/(Income)

 

$

1.1

 

$

(1.4

)

$

0.6

 

$

0.1

 

$

2.1

 

$

1.2

 

$

0.3

 

Intercompany Allocations

 

$

1.1

 

$

0.1

 

$

0.3

 

$

0.2

 

$

1.6

 

$

0.4

 

$

0.3

 

Capitalized PBOP Expense/(Income)

 

$

0.5

 

$

(0.5

)

$

0.2

 

$

0.1

 

$

1.2

 

$

0.3

 

$

0.2

 







 

 

PBOP

 

 

For the Three Months Ended

 

 

March 31, 2013

 

March 31, 2012

(Millions of Dollars)

NU

 

NU

Service Cost

$

 4.8 

 

$

 2.3 

Interest Cost

 

 12.8 

 

 

 6.2 

Expected Return on Plan Assets

 

 (13.8)

 

 

 (5.6)

Actuarial Loss

 

 8.2 

 

 

 5.5 

Prior Service Credit

 

 (0.6)

 

 

 (0.1)

Net Transition Obligation Cost

 

 - 

 

 

 2.9 

Total Net Periodic Benefit Expense

$

 11.4 

 

$

 11.2 


 

 

Pension and SERP

 

 

For the Three Months Ended March 31, 2013

 

For the Three Months Ended March 31, 2012

 

 

 

 

 

NSTAR

 

 

 

 

 

 

 

 

 

 

NSTAR

 

 

 

 

 

 

(Millions of Dollars)

CL&P

 

Electric

 

PSNH

 

WMECO

 

CL&P

 

Electric(1)

 

PSNH

 

WMECO

Service Cost

$

 6.1 

 

$

 9.3 

 

$

 3.3 

 

$

 1.2 

 

$

 5.4 

 

$

 7.8 

 

$

 2.9 

 

$

 1.1 

Interest Cost

 

 12.1 

 

 

 14.2 

 

 

 6.0 

 

 

 2.5 

 

 

 12.8 

 

 

 14.8 

 

 

 6.1 

 

 

 2.6 

Expected Return on Plan Assets

 

 (18.5)

 

 

 (22.0)

 

 

 (7.7)

 

 

 (4.3)

 

 

 (17.5)

 

 

 (16.5)

 

 

 (6.7)

 

 

 (4.1)

Actuarial Loss

 

 14.1 

 

 

 14.5 

 

 

 5.5 

 

 

 3.0 

 

 

 11.9 

 

 

 15.7 

 

 

 3.9 

 

 

 2.5 

Prior Service Cost/(Credit)

 

 0.5 

 

 

 - 

 

 

 0.1 

 

 

 0.1 

 

 

 0.9 

 

 

 (0.2)

 

 

 0.4 

 

 

 0.2 

Total Net Periodic Benefit Expense

$

 14.3 

 

$

 16.0 

 

$

 7.2 

 

$

 2.5 

 

$

 13.5 

 

$

 21.6 

 

$

 6.6 

 

$

 2.3 

Related Intercompany

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocations

$

 10.7 

 

$

 (2.0)

 

$

 2.6 

 

$

 1.8 

 

$

 10.6 

 

$

 (3.1)

 

$

 2.5 

 

$

 2.0 

Capitalized Pension Expense

$

 7.0 

 

$

 5.3 

 

$

 2.2 

 

$

 1.3 

 

$

 6.6 

 

$

 6.3 

 

$

 2.0 

 

$

 1.2 


 

 

PBOP

 

 

For the Three Months Ended March 31, 2013

 

For the Three Months Ended March 31, 2012

(Millions of Dollars)

CL&P

 

 

PSNH

 

 

WMECO

 

CL&P

 

PSNH

 

WMECO

Service Cost

$

 0.9 

 

$

 0.6 

 

$

 0.2 

 

$

 0.8 

 

$

 0.5 

 

$

 0.2 

Interest Cost

 

 2.0 

 

 

 1.0 

 

 

 0.4 

 

 

 2.4 

 

 

 1.2 

 

 

 0.5 

Expected Return on Plan Assets

 

 (2.5)

 

 

 (1.3)

 

 

 (0.6)

 

 

 (2.3)

 

 

 (1.1)

 

 

 (0.5)

Actuarial Loss

 

 1.7 

 

 

 0.9 

 

 

 0.3 

 

 

 2.0 

 

 

 1.0 

 

 

 0.3 

Net Transition Obligation Cost

 

 - 

 

 

 - 

 

 

 - 

 

 

 1.5 

 

 

 0.6 

 

 

 0.3 

Total Net Periodic Benefit Expense

$

 2.1 

 

$

 1.2 

 

$

 0.3 

 

$

 4.4 

 

$

 2.2 

 

$

 0.8 

Related Intercompany

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocations

$

 1.6 

 

$

 0.4 

 

$

 0.3 

 

$

 2.1 

 

$

 0.5 

 

$

 0.4 


(1)

NSTAR ElectricElectric’s pension amounts are not included in NU consolidated for the three months ended March 31, 2012.


For the NSTAR PBOP Plan, NSTAR allocates the net periodic postretirement expenses to its subsidiaries based on actual labor charges to each of its subsidiaries.  The net periodic postretirement expense allocated to NSTAR Electric was $4.3 million and $9 million for the three months ended March 31, 2013 and 2012, respectively.  The three months ended March 31, 2012 amount wasdo not included in NU consolidated.include SERP expense.


Contributions:NU’s policy is to annually fund the NUSCO and NSTAR Pension Plans in an amount at least equal to an amount that will satisfy federal requirements.  Based on the current status of the NUSCO Pension Plan, NU anticipates making a contribution of approximately $203 million in 2013, of which $107 million is required to meet minimum federal funding requirements.  NSTAR Electric anticipates making a contribution of approximately $82 million in 2013 to the NSTAR Pension Plan, of which $38 million is required to meet minimum federal funding requirements.  Contributions are being made in installments and began in January 2013.  For the three months ended March 31, 2013, NU contributed $35.1 millionthe net periodic PBOP expense allocated to the NUSCO Pension Plan, all of which was contributed by PSNH, and NSTAR Electric contributedwas $4.3 million tomillion.

As of December 31, 2013, the funded status of the NSTAR Pension Plan.Plan was recorded on NSTAR Electric’s balance sheet while the total SERP obligation and PBOP Plan funded status were recorded on NSTAR Electric & Gas’ balance sheet.  As of December 31, 2013, all NSTAR employees were employed by NSTAR Electric & Gas.  On January 1, 2014, NSTAR Electric & Gas was merged into NUSCO and, concurrently, all employees were transferred to the company they predominately provide services for: NUSCO, NSTAR Electric or NSTAR Gas.  As a result of the employee transfers, the pension and PBOP assets and liabilities were attributed by participant and transferred to the respective company’s balance sheets.


ForAs of March 31, 2014, the liabilities associated with the Pension, SERP and PBOP plans for NSTAR Electric were $74.8 million for the Pension Plan, $3.5 million for the SERP Plans ($0.4 million of which is included in other current liabilities) and $73 million for the PBOP Plans, it is NU’s policy to annually fund

31



Table of Contents

Plan.  As of December 31, 2013, the NUSCO PBOP Plans in an amount equal to the PBOP Plans' postretirement benefit cost, excluding curtailment and termination benefits, if applicable.  NU anticipates making $25.7 million in contributions in 2013.  NU contributes an amount that approximates annual benefit payments toliability associated with the NSTAR PBOP Plan.  NU anticipates making $30 million in contributions in 2013, of which $7.5 millionPension Plan for NSTAR Electric was contributed during the three months ended March 31, 2013.  


8.

INCOME TAXES


Tax Positions: InMarch 2013, NU received a Final Determination from the Connecticut Department of Revenue Services (DRS) Appellate Division that concluded its audit of NU's Connecticut income tax returns for the years 2005 through 2008, bringing closure to, and effective settlement of, issues concerning the deductibility of expenses and credits through 2008.  The DRS Determination resulted in total NU and CL&P after-tax benefits of $13.6 million and $6.9 million, respectively, recorded in the first quarter of 2013 that included a reduction in NU and CL&P pre-tax interest expense of $8.7 million and $4 million, or $5.2 million and $2.4 million after-tax, respectively.  Further,$118 million.  This change had no impact on the income tax expense impact resulted in a tax benefit to NU and CL&Pstatement or net assets of $8.4 million and $4.5 million after-tax, respectively.  Management estimates that resolution of this audit decreases NU's and CL&P's unrecognized tax benefits by approximately $49.8 million and $39.4 million, respectively, that was largely offset by NU's and CL&P's valuation allowance and other tax impacts of $44.9 million and $36.5 million, respectively.  NSTAR Electric.




33



NU currently has open tax years.  It is reasonably possible that at least one of these open tax years could be resolved within the next twelve months.  Management estimates that the potential resolutions could result in a $1 million to $2 million decrease, net of any related valuation allowance, in unrecognized tax benefits for NU.  


9.

8.COMMITMENTS AND CONTINGENCIES


A.

Environmental Matters

General:  NU, CL&P, NSTAR Electric, PSNH and WMECO are subject to environmental laws and regulations intended to mitigate or remove the effect of past operations and improve or maintain the quality of the environment.  These laws and regulations require the removal or the remedy of the effect on the environment of the disposal or release of certain specified hazardous substances at current and former operating sites.  NU, CL&P, NSTAR Electric, PSNH and WMECO have an active environmental auditing and training program and believe that they are substantially in compliance with all enacted laws and regulations.


The number of environmental sites and reserves related to these sites for which remediation or long-term monitoring, preliminary site work or site assessment are being performed are as follows:


 

As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

 

 

 

 

Reserve

 

 

 

Reserve

 

 

 

 

Reserve

 

 

 

Reserve

 

 

Number of Sites

 

(in millions)

 

Number of Sites

 

(in millions)

 

 

Number of Sites

 

(in millions)

 

Number of Sites

 

(in millions)

 

NU

 

 

 72 

 

$

 40.7 

 

 77 

 

$

 39.4 

 

 

66

 

$

35.4

 

68

 

$

35.4

 

CL&P

 

 

 19 

 

 3.6 

 

 19 

 

 3.7 

 

 

18

 

3.4

 

18

 

3.4

 

NSTAR Electric

 

 

 14 

 

 1.5 

 

 16 

 

 1.7 

 

 

12

 

1.2

 

12

 

1.2

 

PSNH

 

 

 16 

 

 5.6 

 

 16 

 

 4.9 

 

 

13

 

5.4

 

15

 

5.4

 

WMECO

 

 

 5 

 

 0.5 

 

 6 

 

 0.6 

 

 

5

 

0.4

 

5

 

0.4

 


Included in the NU number of sites and reserve amounts above are former MGP sites that were operated several decades ago and manufactured gas from coal and other processes, which resulted in certain by-products remaining in the environment that may pose a potential risk to human health and the environment. The reserve balance related to these former MGP sites was $34.3$30.9 million and $34.5$31.4 million as of March 31, 20132014 and December 31, 2012,2013, respectively, and relates primarily to the natural gas business segment.


B.Contractual Obligations — Yankee Companies

HWP:Spent Nuclear Fuel Litigation - DOE Phase II Damages  HWP, - On November 15, 2013, the Court of Federal Claims issued an award to CYAPC for $126.3 million, YAEC for $73.3 million and MYAPC for $35.8 million for lawsuits against the DOE seeking recovery of actual damages incurred in the years following 2001 and 2002 (DOE Phase II Damages).  On January 14, 2014, the Yankee Companies received a subsidiaryletter from the U.S. Department of NU, continues to investigateJustice stating that the potential need for additional remediation at a river siteDOE will not appeal the court’s final judgment.

On March 28, 2014, CYAPC, YAEC and MYAPC received payment of $90 million, $73.3 million and $35.8 million, respectively, of the DOE Phase II Damages proceeds.  On April 28, 2014, the Yankee Companies made the required informational filing with FERC in Massachusetts containing tar deposits associatedaccordance with an MGP sitethe process and methodology outlined in the 2013 FERC order.  It is anticipated that HWP sold to HG&E, a municipal utility, dating back to 1902.  HWP shares responsibility for site remediation with HG&Ethe Yankee Companies will receive FERC approval and has conducted substantial investigative and remediation activities.  The cumulative expense recordedreturn the DOE Phase II Damages proceeds to the reserve for this site since 1994 through March 31, 2013 was $19.5 million, of which $17.5 million had been spent, leaving $2 million in the reserve as of March 31, 2013.  There were no charges recorded to the reserve for the three months ended March 31, 2013 and 2012.  HWP's share of the costs related to this site is not recoverable from customers.


The $2 million reserve balance as of March 31, 2013 represents estimated costs that HWP considers probable over the remaining life of the project,member companies, including testing and related costs in the near term and field activities to be agreed upon with the MA DEP, further studies and long-term monitoring that are expected to be required by the MA DEP, and certain soft tar remediation activities.  Various factors could affect management's estimates and require an increase to the reserve, which would be reflected as a charge to Net Income.  Although a material increase to the reserve is not presently anticipated, management cannot reasonably estimate potential additional investigation or remediation costs because these costs would depend on, among other things, the nature, extent and timing of additional investigation and remediation that may be required by the MA DEP.  


B.

Deferred Contractual Obligations

CL&P, NSTAR Electric, PSNH, and WMECO, have decommissioning and plant closure cost obligations to the Yankee Companies, which have each completed the physical decommissioning of their respective nuclear facilities and are now engaged in the long-term storage of their spent fuel.  The Yankee Companies collect decommissioning and closure costs through wholesale, FERC-approved rates charged under power purchase agreements with several New England utilities, including CL&P, NSTAR Electric, PSNH and WMECO.  These companies in turn recover these costs from their customers through state regulatory commission-approved retail rates.  


CL&P, NSTAR Electric, PSNH and WMECO's percentage share of the obligations to support the Yankee Companies under FERC-approved rate tariffs is the same as their respective ownership percentages in the Yankee Companies.


The Yankee Companies are currently collecting amounts that management believes are adequate to recover the remaining decommissioning and closure cost estimates for the respective plants.  Management believes CL&P, NSTAR Electric and WMECO will recover their shares of these decommissioning and closure obligations from their customers.  PSNH has already recovered its share of these costs from its customers.


Spent Nuclear Fuel Litigation:

DOE Phase I Damages - In 1998, the Yankee Companies filed separate complaints against the DOE in the Court of Federal Claims seeking monetary damages resulting from the DOE's failure to begin accepting spent nuclear fuel for disposal by January 31, 1998 pursuant to the terms of the 1983 spent fuel and high level waste disposal contracts between the Yankee Companies and the DOE (DOE Phase I Damages).  Following multiple appeals filed by the DOE and cross-appeals filed by the Yankee Companies, on September 5, 2012, the judgment to award CYAPC $39.7 million, YAEC $38.2 million and MYAPC $81.7 million became final and non-appealable and interest on the judgments began to accrue on or about December 5, 2012.



34




In January 2013, the proceeds from the DOE Phase I Damages Claim were received by CYAPC in the amount of $39.7 million, YAEC in the amount of $38.2 million, and MYAPC in the amount of $81.7 million.  The funds were transferred to each Yankee Company’s respective decommissioning trust.  As a result of NU's consolidation of CYAPC and YAEC, the consolidated financial statements reflect an increase of $77.9 million in marketable securities for CYAPC and YAEC’s Phase I damage awards that were invested in the nuclear decommissioning trusts as of March 31, 2013.


The final application of the proceeds for the benefit of their respective customers, effective June 1, 2014.

As of CL&P, NSTAR Electric, PSNHMarch 31, 2014, the CYAPC and WMECO will be determined following rate proceedings that wereYAEC proceeds received have been reflected as restricted cash in Other Long-Term Assets and the refund obligation to the member companies was reflected as Regulatory Liabilities on the NU consolidated balance sheet.

DOE Phase III Damages - On August 15, 2013, the Yankee Companies each filed by each Yankee Company at FERCsubsequent lawsuits against the DOE seeking recovery of actual damages incurred in the years 2009 through 2012.  Responsive pleading from the U.S. Department of Justice was filed on May 1, 2013.  Final FERC determinations are expected by the end of the third quarter of 2013.November 18, 2013, and discovery has begun.


C.

Guarantees and Indemnifications

NU parent or NSTAR LLC, as applicable, provides credit assurances on behalf of its subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, in the form of guarantees in the normal course of business.


NU provided guarantees and various indemnifications on behalf of external parties as a result of the sales of former subsidiaries of NU Enterprises and the termination of an unregulated business, with maximum exposures either not specified or not material.


NU also issued a guaranty for the benefit of Hydro Renewable Energy under which, beginning at the time the Northern Pass Transmission line goes into commercial operation, NU will guarantee the financial obligations of NPT under the TSA in an amount not to exceed $25 million.  NU'sNU’s obligations under the guaranty expire upon the full, final and indefeasible payment of the guaranteed obligations.


Management does not anticipate a material impact to Net Income as a result of these various guarantees and indemnifications.

32



Table of Contents

The following table summarizes NU'sNU’s guarantees of its subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, as of March 31, 2013:  2014:


 

 

 

Maximum

 

 

 

 

 

 

Exposure

 

 

 

 

 

 

Maximum Exposure

 

 

 

Subsidiary

 

Description

 

(in millions)

 

Expiration Dates

 

Description

 

(in millions)

 

Expiration Dates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Various

 

Surety Bonds

 

$

33.1 

 

2013 - 2015 (1)

 

Surety Bonds

 

$

66.7

 

2014 - 2016 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Various

 

NE Hydro Companies' Long-Term Debt

 

$

5.6 

 

Unspecified

 

New England Hydro Companies’ Long-Term Debt

 

$

3.0

 

Unspecified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NUSCO and RRR

 

Lease Payments for Vehicles and Real Estate

 

$

19.2 

 

2019 and 2024

 

Lease Payments for Vehicles and Real Estate

 

$

16.8

 

2019 and 2024

 

 

 

 

 

 

 

 

 

NU Enterprises

 

Surety Bonds, Insurance Bonds and Performance Guarantees

 

$

67.8 

 (2)

(2)



(1)

Surety bond expiration dates reflect bond termination dates, the majority of which will be renewed or extended.


(2)

The maximum exposure includes $8.4 million related to performance guarantees on wholesale purchase contracts, which expire December 31, 2013.  Also included in the maximum exposure is $1 million related to insurance bonds with no expiration date that are billed annually on their anniversary date.  The remaining $58.4 million of maximum exposure relates to surety bonds covering ongoing projects, which expire upon project completion.


Many of the underlying contracts that NU parent guarantees, as well as certainCertain surety bonds contain credit ratings triggers that would require NU parent to post collateral in the event that the unsecured debt credit ratings of NU or NSTAR LLC, as applicable, are downgraded.


D.

FERC Base ROE Complaint

On September 30, 2011, several New England state attorneys general, state regulatory commissions, consumer advocates and other parties filed a joint complaint with the FERC under Sections 206 and 306 of the Federal Power Act alleging that the base ROE used in calculating formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by New England transmission owners,NETOs, including CL&P, NSTAR Electric, PSNH and WMECO, is unjust and unreasonable.  The complainants asserted that the current 11.14 percent rate, which became effective in 2006, is excessive due to changes in the capital markets and are seeking an order to reduce the rate, which would be effective October 1, 2011.  In response, the New England transmission ownersNETOs filed testimony and analysis based on standard FERC methodology and precedent demonstrating that the base ROE of 11.14 percent remained just and reasonable.  The FERC set the case for trial before a FERC administrative law judgeALJ after settlement negotiations were unsuccessful in August 2012.2012.


As partHearings before the FERC ALJ were held in May 2013, followed by the filing of the pre-trial process, on April 17, 2013,briefs by the complainants, the Massachusetts municipal electric utilities (late intervenorsinterveners to the case), the FERC trial staff and the NETOs.  The NETOs recommended that the current base ROE of 11.14 percent should remain in effect for the refund period (October 1, 2011 through December 31, 2012) and the prospective period (beginning when FERC issues its final decision).  The complainants, the Massachusetts municipal electric utilities, and the FERC trial staff updated their respective ROE analyses, which demonstratedeach recommended a base ROE of approximately 8.9 percent.  The New England transmission owners also filed9 percent or below.

On August 6, 2013, the FERC ALJ issued an updated analysis, including a supplement on April 26, 2013, that continues to demonstrateinitial decision, finding that the currentbase ROE in effect from October 2011 through December 2012 was not reasonable under the standard application of 11.14FERC methodology, but leaving policy considerations and additional adjustments to the FERC.  Using the established FERC methodology, the FERC ALJ determined that separate base ROEs should be set for the refund period and the prospective period.  The FERC ALJ found those base ROEs to be 10.6 percent remains within an updated rangeand 9.7 percent, respectively.  The FERC may adjust the prospective period base ROE in its final decision to reflect movement in 10-year Treasury bond rates from the date that the case was filed (April 2013) to the date of reasonableness of 7.3 percent to 13.2 percent.  Hearingsthe final decision.  The parties filed briefs on this complaint are scheduled to commence on May 6, 2013decision with the FERC, and the trial judge’s recommended decision is due in September 2013.  Aa decision from the FERC commissioners is expected in 2014.  RefundsThough NU cannot predict the ultimate outcome of this proceeding, in 2013 the Company recorded a series of reserves at its electric subsidiaries to customers, if any, as a result of a reduction inrecognize the NU transmission companies’ base ROE would bepotential financial impact from the FERC ALJ’s initial decision for the period October 1, 2011 through December 31, 2012.refund period.  The aggregate after-tax charge to earnings totaled $14.3 million at NU, which represents reserves of $7.7 million at CL&P, $3.4 million at NSTAR Electric, $1.4 million at PSNH and $1.8 million at WMECO.



35




On December 27, 2012, several additional parties filed a separate complaint concerning the New England transmission owners'NETOs’ base ROE with the FERC.  This new complaint seeks to reduce the New England transmission owners’NETOs’ base ROE effective January 1, 2013, effectively extending the refund period for an additional 15 months, and to consolidate this new complaint with the joint complaint filed on September 30, 2011.  The New England transmission ownersNETOs have asked the FERC to reject this new complaint.  The FERC has not yet acted on this request.complaint, and management is unable to predict the ultimate outcome or estimate the impacts of this complaint on the financial position, results of operations or cash flows.


E.Management expects the CL&P, NSTAR Electric, PSNH, and WMECO aggregate shareholder equity invested in their transmission facilities will be approximately $2.4 billion at the end of 2014.  As a result, each 10 basis point change in the prospective period authorized base ROE would change annual consolidated earnings by an approximate $2.4 million.

DPU Safety and Reliability Programs -

E.CPSL (NSTAR Electric)

Since 2006, NSTAR Electric has been recovering incremental costs related to the DPU-approved Safety and Reliability Programs.  From 2006 through 2011, cumulative costs associated with the CPSL program resulted in an incremental revenue requirement to customers of approximately $83 million.  These amounts included incremental operations and maintenance costs and the related revenue requirement for specific capital investments relative to the CPSL programs.


On May 28, 2010, the DPU issued an order on NSTAR Electric’s 2006 CPSL cost recovery filing (the May 2010 Order).  In October 2010, NSTAR Electric filed a reconciliation of the cumulative CPSL program activity for the periods 2006 through 2009 with the DPU in order to determine a proposed rate adjustment.  The DPU allowed the proposed rates to go into effect January 1, 2011, subject to final reconciliation of CPSL program costs through a future DPU proceeding.  In February 2013, NSTAR Electric updated the October 2010 filing with final activity through 2011.  NSTAR Electric recorded its 2006 through 2011 revenues under the CPSL programs based on the May 2010 Order.


NSTAR Electric cannot predict the timing of a final DPU order related to its CPSL filings for the period 2006 through 2011.  Therefore, NSTAR Electric recorded its 2006 through 2011 revenues under the CPSL programs based on the May 2010 Order.  While management does not believe that any subsequent DPU order would result in revenues that are materially different than the amounts

33



Table of Contents

already recognized, it is reasonably possible that an order could have a material impact on NSTAR Electric’s results of operations, financial position and cash flows.


F.

Basic Service Bad Debt Adder (NSTAR Electric)

In accordance with a generic DPU order, electric utilities in Massachusetts recover the energy-related portion of bad debt costs in their Basic Service rates.  In 2007, NSTAR Electric filed its 2006 Basic Service reconciliation with the DPU proposing an adjustment related to the increase of its Basic Service bad debt charge-offs.  The DPU issued an order approving the implementation of a revised Basic Service rate but instructed NSTAR Electric to reduce distribution rates by an amount equal to the increase in its Basic Service bad debt charge-offs.  This adjustment to NSTAR Electric’s distribution rates would eliminate the fully reconciling nature of the Basic Service bad debt adder.


In 2010, NSTAR Electric filed an appeal of the DPU’s order with the SJC.  In 2012, the SJC vacated the DPU order and remanded the matter to the DPU for further review.  The DPU has not taken any action on the remand.


NSTAR Electric deferred approximately $34 million of costs associated with energy-related bad debt as a regulatory asset through 2011 as NSTAR Electric had concluded that it was probable that these costs would ultimately be recovered from customers.  Due to the delays and the duration of the proceedings, NSTAR Electric concluded that while an ultimate outcome on the matter in its favor remained "more“more likely than not," it could no longer be deemed "probable."“probable.”  As a result, NSTAR Electric recognized a reserve related to the regulatory asset in the first quarter of 2011.2012.  NSTAR Electric will continue to maintain the reserve until the ultimate outcome is determined byproceeding has been concluded with the DPU.


10.

9.FAIR VALUE OF FINANCIAL INSTRUMENTS


The following methods and assumptions were used to estimate the fair value of each of the following financial instruments:


Preferred Stock and Long-Term Debt and Rate Reduction Bonds:Debt:  The fair value of CL&P's&P’s and NSTAR Electric’s preferred stock is based upon pricing models that incorporate interest rates and other market factors, valuations or trades of similar securities and cash flow projections.  The fair value of fixed-rate long-term debt securities and RRBs is based upon pricing models that incorporate quoted market prices for those issues or similar issues adjusted for market conditions, credit ratings of the respective companies and treasury benchmark yields.  Adjustable rate long-term debt securities are assumed to have a fair value equal to their carrying value.  The fair values provided in the tables below are classified as Level 2 within the fair value hierarchy.  Carrying amounts and estimated fair values are as follows:


 

As of March 31, 2013

 

As of December 31, 2012

 

As of March 31, 2014

 

As of December 31, 2013

 

 

NU

 

NU

 

NU

 

NU

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

(Millions of Dollars)

(Millions of Dollars)

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Preferred Stock Not

Preferred Stock Not

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subject to Mandatory Redemption

 

$

155.6

 

$

152.0

 

$

155.6

 

$

152.7

 

Long-Term Debt

 

8,848.9

 

9,177.7

 

8,310.2

 

8,443.1

 

Subject to Mandatory Redemption

$

 155.6 

 

$

 154.2 

 

$

 155.6 

 

$

 152.2 

Long-Term Debt

 

 7,958.9 

 

 8,634.1 

 

 7,963.5 

 

 8,640.7 

Rate Reduction Bonds

 

 19.6 

 

 19.7 

 

 82.1 

 

 83.0 


 

 

As of March 31, 2014

 

 

 

CL&P

 

NSTAR Electric

 

PSNH

 

WMECO

 

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

(Millions of Dollars)

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Preferred Stock Not

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subject to Mandatory Redemption

 

$

116.2

 

$

110.9

 

$

43.0

 

$

41.1

 

$

 

$

 

$

 

$

 

Long-Term Debt

 

2,741.4

 

3,033.1

 

2,099.0

 

2,224.0

 

1,049.1

 

1,096.5

 

629.2

 

661.0

 



 

 

As of December 31, 2013

 

 

 

CL&P

 

NSTAR Electric

 

PSNH

 

WMECO

 

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

(Millions of Dollars)

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Preferred Stock Not

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subject to Mandatory Redemption

 

$

116.2

 

$

110.5

 

$

43.0

 

$

42.2

 

$

 

$

 

$

 

$

 

Long-Term Debt

 

2,741.2

 

2,952.8

 

1,801.1

 

1,888.0

 

1,049.0

 

1,073.9

 

629.4

 

640.1

 

36




 

 

As of March 31, 2013

 

 

CL&P

 

NSTAR Electric

 

PSNH

 

WMECO

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

(Millions of Dollars)

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

Preferred Stock Not

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subject to Mandatory Redemption

$

 116.2 

 

$

 111.6 

 

$

 43.0 

 

$

 42.6 

 

$

 - 

 

$

 - 

 

$

 - 

 

$

 - 

Long-Term Debt

 

 2,865.6 

 

 

 3,295.9 

 

 

 1,602.6 

 

 

 1,809.0 

 

 

 998.0 

 

 

 1,091.6 

 

 

 605.1 

 

 

 665.0 

Rate Reduction Bonds

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 15.0 

 

 

 15.0 

 

 

 4.6 

 

 

 4.7 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2012

 

 

CL&P

 

NSTAR Electric

 

PSNH

 

WMECO

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

 

Carrying

 

Fair

(Millions of Dollars)

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

 

Amount

 

Value

Preferred Stock Not

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subject to Mandatory Redemption

$

 116.2 

 

$

 110.0 

 

$

 43.0 

 

$

 42.2 

 

$

 - 

 

$

 - 

 

$

 - 

 

$

 - 

Long-Term Debt

 

 2,862.8 

 

 

 3,295.4 

 

 

 1,602.6 

 

 

 1,818.8 

 

 

 997.9 

 

 

 1,088.0 

 

 

 605.3 

 

 

 660.4 

Rate Reduction Bonds

 

 - 

 

 

 - 

 

 

 43.5 

 

 

 43.9 

 

 

 29.3 

 

 

 29.6 

 

 

 9.4 

 

 

 9.5 


Derivative Instruments:  NU, including CL&P, NSTAR Electric and WMECO, holds various derivativeDerivative instruments that are carried at fair value.  For further information, see Note 4, "Derivative“Derivative Instruments," to the consolidated financial statements.


Other Financial Instruments:  Investments in marketable securities are carried at fair value on the accompanying consolidated balance sheets.value. For further information, see Note 1E, "Summary1D, “Summary of Significant Accounting Policies - Fair Value Measurements," and Note 5, "Marketable“Marketable Securities," to the consolidated financial statements.


The carrying value of other financial instruments included in current assets and current liabilities, including cash and cash equivalents and special deposits, approximates their fair value due to the short-term nature of these instruments.


11.34



Table of Contents

10.ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)


The changes in accumulated other comprehensive income/(loss) by component, net of tax, is as follows:


 

 

For the Three Months Ended March 31, 2013

(Millions of Dollars)

Qualified Cash Flow Hedging Instruments

 

Unrealized Gains/(Losses) on Available-for-Sale Securities

 

Pension, SERP and PBOP

  Benefit Plans

 

Total

AOCI as of January 1, 2013

 (16.4)

 

 1.3 

 

 (57.8)

 

 (72.9)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income Before Reclassifications

 

 - 

 

 

 (0.1)

 

 

 - 

 

 

 (0.1)

Amounts Reclassified from AOCI

 

0.5 

 

 

 - 

 

 

1.6 

 

 

2.1 

Net Other Comprehensive Income

 

0.5 

 

 

(0.1)

 

 

1.6 

 

 

2.0 

AOCI as of March 31, 2013

$

(15.9)

 

$

1.2 

 

$

(56.2)

 

$

(70.9)

 

 

For the Three Months Ended March 31, 2014

 

For the Three Months Ended March 31, 2013

 

 

 

 

 

Unrealized

 

Pension,

 

 

 

 

 

Unrealized

 

Pension,

 

 

 

 

 

Qualified

 

Gains/(Losses)

 

SERP and

 

 

 

Qualified

 

Gains/(Losses)

 

SERP and

 

 

 

 

 

Cash Flow

 

on Available-

 

PBOP

 

 

 

Cash Flow

 

on Available-

 

PBOP

 

 

 

 

 

Hedging

 

for-Sale

 

Benefit

 

 

 

Hedging

 

for-Sale

 

Benefit

 

 

 

(Millions of Dollars)

 

Instruments

 

Securities

 

Plans

 

Total

 

Instruments

 

Securities

 

Plans

 

Total

 

AOCI as of Beginning of Period

 

$

(14.4

)

$

0.4

 

$

(32.0

)

$

(46.0

)

$

(16.4

)

$

1.3

 

$

(57.8

)

$

(72.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OCI Before Reclassifications

 

 

0.2

 

 

0.2

 

 

(0.1

)

 

(0.1

)

Amounts Reclassified from AOCI

 

0.5

 

 

1.0

 

1.5

 

0.5

 

 

1.6

 

2.1

 

Net OCI

 

0.5

 

0.2

 

1.0

 

1.7

 

0.5

 

(0.1

)

1.6

 

2.0

 

AOCI as of End of Period

 

$

(13.9

)

$

0.6

 

$

(31.0

)

$

(44.3

)

$

(15.9

)

$

1.2

 

$

(56.2

)

$

(70.9

)


NU'sNU’s qualified cash flow hedging instruments represent interest rate swap agreements on debt issuances that were settled in prior years.  The settlement amount was recorded in AOCI and is being amortized into Net Income over the term of the underlying debt instrument.  CL&P, PSNH and WMECO continue to amortize interest rate swaps settled in prior years from AOCI into Interest Expense over the remaining life of the associated long-term debt, which are not material to their respective consolidated financial statements.


The following table sets forth the amounts reclassified from AOCI by component and the affectedimpacted line item on the statementstatements of income:


For the Three Months Ended March 31, 2013

Amount

Reclassified

Statement of Income

(Millions of Dollars)

from AOCI

Line Item Impacted

Qualified Cash Flow Hedging Instruments

$

 (0.8)

Interest Expense

Tax Benefit

0.3 

Income Tax Expense

Qualified Cash Flow Hedging Instruments, Net of Tax

$

(0.5)

Pension, SERP and PBOP Benefit Plan Costs:

Amortization of Actuarial Losses

$

(2.6)

(1)

Amortization of Prior Service Cost

 - 

(1)

Total Pension, SERP and PBOP Benefit Plan Costs

(2.6)

(1)

Tax Benefit

1.0 

Income Tax Expense

Pension, SERP and PBOP Benefit Plan Costs, Net of Tax

$

 (1.6)

Total Amount Reclassified from AOCI, Net of Tax

$

(2.1)

 

 

For the Three Months Ended March 31,

 

 

 

Amounts Reclassified from AOCI

 

Statements of Income Line Item
Impacted

 

(Millions of Dollars)

 

2014

 

2013

 

 

 

Qualified Cash Flow Hedging Instruments

 

$

(0.8

)

$

(0.8

)

Interest Expense

 

Tax Benefit

 

0.3

 

0.3

 

Income Tax Expense

 

Qualified Cash Flow Hedging Instruments, Net of Tax

 

$

(0.5

)

$

(0.5

)

 

 

 

 

 

 

 

 

 

 

Pension, SERP and PBOP Benefit Plan Costs:

 

 

 

 

 

 

 

Amortization of Actuarial Losses

 

$

(1.7

)

$

(2.6

)

Operations and Maintenance (1)

 

Tax Benefit

 

0.7

 

1.0

 

Income Tax Expense

 

Pension, SERP and PBOP Benefit Plan Costs, Net of Tax

 

$

(1.0

)

$

(1.6

)

 

 

 

 

 

 

 

 

 

 

Total Amount Reclassified from AOCI, Net of Tax

 

$

(1.5

)

$

(2.1

)

 

 



(1)

These AOCI amounts are included in the computation of net periodic Pension, SERP and PBOP costs.  See Note 7, “Pension Benefits and Postretirement Benefits Other Than Pensions,” for further information.




37



12.

11.COMMON SHARES


The following table sets forth the NU common shares and the shares of common stock of CL&P, NSTAR Electric, PSNH and WMECO common stockthat were authorized and issued as of March 31, 2013 and December 31, 2012 and the respective per share par values:


Shares

 

Shares

 

Authorized

 

Issued

 

 

 

Authorized as of

 

 

 

 

 

Per Share

 

As of

 

As of

 

Per Share

 

March 31, 2014 and

 

Issued as of

 

Par Value

 

March 31, 2013

 

December 31, 2012

 

March 31, 2013

 

December 31, 2012

 

Par Value

 

December 31, 2013

 

March 31, 2014

 

December 31, 2013

 

NU

$

 

380,000,000 

 

380,000,000 

 

 

332,951,956 

 

 

332,509,383 

 

$

5

 

380,000,000

 

333,316,045

 

333,113,492

 

CL&P

$

10 

 

24,500,000 

 

24,500,000 

 

 

 6,035,205 

 

 

6,035,205 

 

$

10

 

24,500,000

 

6,035,205

 

6,035,205

 

NSTAR Electric

$

 

100,000,000 

 

100,000,000 

 

 

 100 

 

 

100 

 

$

1

 

100,000,000

 

100

 

100

 

PSNH

$

 

100,000,000 

 

100,000,000 

 

 

 301 

 

 

301 

 

$

1

 

100,000,000

 

301

 

301

 

WMECO

$

25 

 

1,072,471 

 

1,072,471 

 

 

 434,653 

 

 

434,653 

 

$

25

 

1,072,471

 

434,653

 

434,653

 


As of March 31, 20132014 and December 31, 2012, 18,356,4872013, there were 17,498,327 and 18,455,74917,796,672 NU common shares were held as treasury shares, respectively.  As of March 31, 2014 and December 31, 2013, NU common shares outstanding were 315,817,718 and 315,273,559, respectively.


13.

COMMON SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS (NU)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A summary of the changes in Common Shareholders' Equity and Noncontrolling Interests of NU is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

 

 

March 31, 2013

 

March 31, 2012

 

 

 

 

 

 

 

 

Noncontrolling

 

 

 

 

 

 

 

 

 

 

Noncontrolling

 

 

 

 

 

 

 

Interest -

 

 

 

 

 

 

 

 

 

 

Interest -

 

 

 

 

 

Common

 

Preferred

 

Common

 

Non-

 

 

 

Preferred

 

 

 

 

 

Shareholders'

 

Stock of

 

Shareholders'

 

Controlling

 

Total

 

Stock of

 

(Millions of Dollars)

Equity

 

Subsidiaries

 

Equity

 

Interest

 

Equity

 

Subsidiaries

 

Balance - Beginning of Period

$

 9,237.1 

 

$

 155.6 

 

$

 4,012.7 

 

$

 3.0 

 

$

 4,015.7 

 

$

 116.2 

 

Net Income

 

 230.0 

 

 

 - 

 

 

 100.8 

 

 

 - 

 

 

 100.8 

 

 

 - 

 

Dividends on Common Shares

 

 (116.4)

 

 

 - 

 

 

 (52.6)

 

 

 - 

 

 

 (52.6)

 

 

 - 

 

Dividends on Preferred Stock

 

 (1.9)

 

 

 (1.9)

 

 

 (1.4)

 

 

 - 

 

 

 (1.4)

 

 

 (1.4)

 

Issuance of Common Shares

 

 8.4 

 

 

 - 

 

 

 6.2 

 

 

 - 

 

 

 6.2 

 

 

 - 

 

Contributions to NPT

 

 - 

 

 

 - 

 

 

 - 

 

 

 0.3 

 

 

 0.3 

 

 

 - 

 

Other Transactions, Net

 

 (14.0)

 

 

 - 

 

 

 0.8 

 

 

 - 

 

 

 0.8 

 

 

 - 

 

Net Income Attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling Interests

 

 - 

 

 

 1.9 

 

 

 (0.1)

 

 

 0.1 

 

 

 - 

 

 

 1.4 

 

Other Comprehensive Income

 

 2.0 

 

 

 - 

 

 

 1.9 

 

 

 - 

 

 

 1.9 

 

 

 - 

 

Balance - End of Period

$

 9,345.2 

 

$

 155.6 

 

$

 4,068.3 

 

$

 3.4 

 

$

 4,071.7 

 

$

 116.2 

 


14.35



Table of Contents

12.COMMON SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS

A summary of the changes in Common Shareholders’ Equity and Noncontrolling Interests of NU is as follows:

 

 

For the Three Months Ended

 

 

 

March 31, 2014

 

March 31, 2013

 

 

 

 

 

Noncontrolling

 

 

 

Noncontrolling

 

 

 

 

 

Interest -

 

 

 

Interest -

 

 

 

Common

 

Preferred

 

Common

 

Preferred

 

 

 

Shareholders’

 

Stock of

 

Shareholders’

 

Stock of

 

(Millions of Dollars)

 

Equity

 

Subsidiaries

 

Equity

 

Subsidiaries

 

Balance as of Beginning of Period

 

$

9,611.5

 

$

155.6

 

$

9,237.1

 

$

155.6

 

Net Income

 

237.8

 

 

230.0

 

 

Dividends on Common Shares

 

(123.9

)

 

(116.4

)

 

Dividends on Preferred Stock

 

(1.9

)

(1.9

)

(1.9

)

(1.9

)

Issuance of Common Shares

 

5.2

 

 

8.4

 

 

Other Transactions, Net

 

(6.5

)

 

(14.0

)

 

Net Income Attributable to Noncontrolling Interests

 

 

1.9

 

 

1.9

 

Other Comprehensive Income

 

1.7

 

 

2.0

 

 

Balance as of End of Period

 

$

9,723.9

 

$

155.6

 

$

9,345.2

 

$

155.6

 

13.EARNINGS PER SHARE (NU)


Basic EPS is computed based upon the weighted average number of common shares outstanding during each period.  Diluted EPS is computed on the basis of the weighted average number of common shares outstanding plus the potential dilutive effect ifof certain share-based compensation awards areas if they were converted into common shares.  There were no antidilutive share awards outstanding for the three months ended March 31, 2014.  For the three months ended March 31, 2013, there were 6,299 antidilutive share awards excluded from the computation as these awards were antidilutive.  There were no antidilutive share awards for the three months ended March 31, 2012.  computation.


The following table sets forth the components of basic and diluted EPS:


 

For the Three Months Ended March 31,

 

For the Three Months Ended

 

(Millions of Dollars, except share information)

(Millions of Dollars, except share information)

2013 

 

2012 

 

 

March 31, 2014

 

March 31, 2013

 

Net Income Attributable to Controlling Interest

Net Income Attributable to Controlling Interest

$

 228.1 

 

$

 99.3 

 

 

$

236.0

 

$

228.1

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 315,129,782 

 

 178,055,716 

 

Dilutive Effect

 

 872,756 

 

 

 381,737 

 

Diluted

 

 316,002,538 

 

 

 178,437,453 

 

Basic and Diluted EPS

$

 0.72 

 

$

 0.56 

 

Basic

 

315,534,512

 

315,129,782

 

Dilutive Effect

 

1,357,607

 

872,756

 

Diluted

 

316,892,119

 

316,002,538

 

Basic EPS

 

$

0.75

 

$

0.72

 

Diluted EPS

 

$

0.74

 

$

0.72

 


On April 10, 2012, NU issued approximately 136 million common shares as a result of the merger with NSTAR, which are reflected in weighted average common shares outstanding as of March 31, 2013.


RSUs and performance shares are included in basic weighted average common shares outstanding as of the date that all necessary vesting conditions have been satisfied.  The dilutive effect of unvested RSUs and performance shares is calculated using the treasury stock method.  Assumed proceeds of these units under the treasury stock method consist of the remaining compensation cost to be recognized and a theoretical tax benefit.  The theoretical tax benefit is calculated as the tax impact of the intrinsic value of the units (the difference between the market value of the average units outstanding for the period, using the average market price during the period, and the grant date market value).




38



The dilutive effect of stock options to purchase common shares is also calculated using the treasury stock method.  Assumed proceeds for stock options consist of cash proceeds that would be received upon exercise, and a theoretical tax benefit.  The theoretical tax benefit is calculated as the tax impact of the intrinsic value of the stock options (the difference between the market value of the average stock options outstanding for the period, using the average market price during the period, and the exercise price).


15.

14.SEGMENT INFORMATION (NU)


Presentation:  NU is organized between the Electric Distribution, Electric Transmission and Natural Gas Distribution reportable segments and Other based on a combination of factors, including the characteristics of each segments'segments’ products and services, the sources of operating revenues and expenses and the regulatory environment in which each segment operates.  These reportable segments represented substantially all of NU'sNU’s total consolidated revenues for the three month periodsmonths ended March 31, 20132014 and 2012.2013.  Revenues from the sale of electricity and natural gas primarily are derived from residential, commercial and industrial customers and are not dependent on any single customer.  The Electric Distribution reportable segment includes the generation activities of PSNH and WMECO.


The remainder of NU’s operations is presented as Other operations in the tables below and primarily consists of 1) the equity in earnings of NU parent from its subsidiaries and intercompany interest income, both of which are eliminated in consolidation, and interest income and expense related to the cash and debt of NU parent, and NSTAR LLC, respectively, 2) the revenues and expenses of NU'sNU’s service companies,company, most of which are eliminated in consolidation, 3) the operations of CYAPC and YAEC, and 4) the results of other non-regulated subsidiaries, which are comprisednot part of NU Enterprises, NSTAR Communications, Inc., RRR (a real estate subsidiary), the non-energy-related subsidiariesits core business.

36



Table of Yankee and the remaining operations of HWP.Contents


Cash flows used for investments in plant included in the segment information below are cash capital expenditures that do not include amounts incurred but not paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension expense.


As discussed in Note 1A, “Summary of Significant Accounting Policies – Basis of Presentation,” certain reclassifications of prior period data were made in the consolidated statements of income for NU.  Accordingly, the corresponding items of segment information have been recast for prior periods for comparative purposes.


NU’s reportable segments are the combined Electric Distribution, Electric Transmission and Natural Gas Distribution segments,determined based upon the level at which NU’s chief operating decision maker assesses performance and makes decisions about the allocation of company resources.  Each of NU’s subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, has one reportable segment.  Therefore, separate Transmission and Distribution information is not disclosed for CL&P, NSTAR Electric, PSNH or WMECO. NU’s operating segments and reporting units are consistent with its reportable business segments.


NSTAR amounts are not included in NU consolidated as of March 31, 2012, but are included as of March 31, 2013.


NU'sNU’s segment information for the three month periodsmonths ended March 31, 20132014 and 20122013 is as follows:


 

 

For the Three Months Ended March 31, 2013

 

 

Electric

 

Natural Gas

 

 

 

 

 

 

 

 

 

 

 

 

(Millions of Dollars)

Distribution

 

Distribution

 

Transmission

 

Other

 

Eliminations

 

Total

Operating Revenues

$

 1,374.2 

 

$

 361.8 

 

$

 239.5 

 

$

 217.2 

 

$

 (197.7)

 

$

 1,995.0 

Depreciation and Amortization

 

 (177.0)

 

 

 (17.4)

 

 

 (31.8)

 

 

 (19.0)

 

 

 1.7 

 

 

 (243.5)

Other Operating Expenses

 

 (1,004.9)

 

 

 (267.2)

 

 

 (62.2)

 

 

 (197.4)

 

 

 199.2 

 

 

 (1,332.5)

Operating Income

 

 192.3 

 

 

 77.2 

 

 

 145.5 

 

 

 0.8 

 

 

 3.2 

 

 

 419.0 

Interest Expense

 

 (42.1)

 

 

 (7.4)

 

 

 (21.9)

 

 

 (6.4)

 

 

 1.5 

 

 

 (76.3)

Interest Income

 

 1.0 

 

 

 - 

 

 

 0.1 

 

 

 1.6 

 

 

 (1.6)

 

 

 1.1 

Other Income, Net

 

 3.8 

 

 

 0.2 

 

 

 2.7 

 

 

 320.3 

 

 

 (320.3)

 

 

 6.7 

Income Tax (Expense)/Benefit

 

 (54.3)

 

 

 (26.7)

 

 

 (45.8)

 

 

 6.5 

 

 

 (0.2)

 

 

 (120.5)

Net Income

 

 100.7 

 

 

 43.3 

 

 

 80.6 

 

 

 322.8 

 

 

 (317.4)

 

 

 230.0 

Net Income Attributable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to Noncontrolling Interests

 

 (1.2)

 

 

 - 

 

 

 (0.7)

 

 

 - 

 

 

 - 

 

 

 (1.9)

Net Income Attributable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to Controlling Interest

$

 99.5 

 

$

 43.3 

 

$

 79.9 

 

$

 322.8 

 

$

 (317.4)

 

$

 228.1 

Total Assets (as of)

$

 18,208.2 

 

$

 2,735.4 

 

$

 6,269.1 

 

$

 18,749.8 

 

$

 (17,633.8)

 

$

 28,328.7 

Cash Flows Used for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Plant

$

 157.8 

 

$

 31.2 

 

$

 185.4 

 

$

 14.6 

 

$

 - 

 

$

 389.0 

 

 

For the Three Months Ended March 31, 2014

 

 

 

Electric

 

Natural Gas

 

 

 

 

 

 

 

 

 

(Millions of Dollars)

 

Distribution

 

Distribution

 

Transmission

 

Other

 

Eliminations

 

Total

 

Operating Revenues

 

$

1,585.9

 

$

432.8

 

$

252.1

 

$

172.2

 

$

(152.4

)

$

2,290.6

 

Depreciation and Amortization

 

(148.8

)

(17.7

)

(37.0

)

(7.0

)

1.8

 

(208.7

)

Other Operating Expenses

 

(1,210.9

)

(321.4

)

(66.4

)

(165.4

)

149.9

 

(1,614.2

)

Operating Income/(Loss)

 

226.2

 

93.7

 

148.7

 

(0.2

)

(0.7

)

467.7

 

Interest Expense

 

(47.4

)

(8.5

)

(25.5

)

(9.6

)

1.0

 

(90.0

)

Other Income, Net

 

1.4

 

0.1

 

1.5

 

294.8

 

(296.1

)

1.7

 

Net Income Attributable to Controlling Interest

 

$

112.2

 

$

52.1

 

$

74.9

 

$

291.7

 

$

(294.9

)

$

236.0

 

Cash Flows Used for Investments in Plant

 

$

189.4

 

$

28.9

 

$

112.2

 

$

18.2

 

$

 

$

348.7

 


 

 

For the Three Months Ended March 31, 2013

 

 

 

Electric

 

Natural Gas

 

 

 

 

 

 

 

 

 

(Millions of Dollars)

 

Distribution

 

Distribution

 

Transmission

 

Other

 

Eliminations

 

Total

 

Operating Revenues

 

$

1,374.2

 

$

361.8

 

$

239.5

 

$

217.2

 

$

(197.7

)

$

1,995.0

 

Depreciation and Amortization

 

(177.0

)

(17.4

)

(31.8

)

(19.0

)

1.7

 

(243.5

)

Other Operating Expenses

 

(1,004.9

)

(267.2

)

(62.2

)

(197.4

)

199.2

 

(1,332.5

)

Operating Income

 

192.3

 

77.2

 

145.5

 

0.8

 

3.2

 

419.0

 

Interest Expense

 

(42.1

)

(7.4

)

(21.9

)

(6.4

)

1.5

 

(76.3

)

Other Income, Net

 

4.8

 

0.2

 

2.8

 

321.9

 

(321.9

)

7.8

 

Net Income Attributable to Controlling Interest

 

$

99.5

 

$

43.3

 

$

79.9

 

$

322.8

 

$

(317.4

)

$

228.1

 

Cash Flows Used for Investments in Plant

 

$

157.8

 

$

31.2

 

$

185.4

 

$

14.6

 

$

 

$

389.0

 



The following table summarizes NU’s segmented total assets:

39

 

 

Electric

 

Natural Gas

 

 

 

 

 

 

 

 

 

(Millions of Dollars)

 

Distribution

 

Distribution

 

Transmission

 

Other

 

Eliminations

 

Total

 

As of March 31, 2014

 

$

18,882.9

 

$

2,846.7

 

$

5,165.6

 

$

11,913.6

 

$

(10,711.9

)

$

28,096.9

 

As of December 31, 2013

 

17,260.0

 

2,759.7

 

6,745.8

 

11,842.4

 

(10,812.4

)

27,795.5

 


15.SUBSEQUENT EVENT



See Note 6, “Short-Term and Long-Term Debt,” for information regarding the April 2014 CL&P long-term debt issuance.

 

 

For the Three Months Ended March 31, 2012

 

 

Electric

 

Natural Gas

 

 

 

 

 

 

 

 

 

 

 

 

(Millions of Dollars)

Distribution

 

Distribution

 

Transmission

 

Other

 

Eliminations

 

Total

Operating Revenues

$

 786.0 

 

$

 139.0 

 

$

 162.8 

 

$

 133.3 

 

$

 (121.5)

 

$

 1,099.6 

Depreciation and Amortization

 

 (72.2)

 

 

 (7.7)

 

 

 (21.1)

 

 

 (3.9)

 

 

 0.3 

 

 

 (104.6)

Other Operating Expenses

 

 (622.1)

 

 

 (102.2)

 

 

 (47.6)

 

 

 (134.9)

 

 

 126.2 

 

 

 (780.6)

Operating Income/(Loss)

 

 91.7 

 

 

 29.1 

 

 

 94.1 

 

 

 (5.5)

 

 

 5.0 

 

 

 214.4 

Interest Expense

 

 (33.0)

 

 

 (5.4)

 

 

 (19.7)

 

 

 (9.4)

 

 

 1.1 

 

 

 (66.4)

Interest Income

 

 1.1 

 

 

 - 

 

 

 0.1 

 

 

 1.3 

 

 

 (1.3)

 

 

 1.2 

Other Income, Net

 

 4.4 

 

 

 - 

 

 

 3.3 

 

 

 122.6 

 

 

 (122.7)

 

 

 7.6 

Income Tax (Expense)/Benefit

 

 (21.4)

 

 

 (9.0)

 

 

 (30.8)

 

 

 6.0 

 

 

 (0.8)

 

 

 (56.0)

Net Income

 

 42.8 

 

 

 14.7 

 

 

 47.0 

 

 

 115.0 

 

 

 (118.7)

 

 

 100.8 

Net Income Attributable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to Noncontrolling Interests

 

 (0.8)

 

 

 - 

 

 

 (0.7)

 

 

 - 

 

 

 - 

 

 

 (1.5)

Net Income Attributable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to Controlling Interest

$

 42.0 

 

$

 14.7 

 

$

 46.3 

 

$

 115.0 

 

$

 (118.7)

 

$

 99.3 

Total Assets (as of)

$

 9,553.3 

 

$

 1,498.2 

 

$

 3,900.7 

 

$

 7,261.7 

 

$

 (6,235.5)

 

$

 15,978.4 

Cash Flows Used for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Plant

$

 130.7 

 

$

 20.5 

 

$

 135.9 

 

$

 17.2 

 

$

 - 

 

$

 304.3 


37





Table of Contents

40



NORTHEAST UTILITIES AND SUBSIDIAIRIESSUBSIDIARIES


Management'sManagement’s Discussion and Analysis of
Financial Condition and Results of Operations


The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related combined notes included in this combined Quarterly Report on Form 10-Q and the 20122013 Annual Report on Form 10-K.  References in this Form 10-Q to "NU,"“NU,” the "Company," "we," "us"“Company,” “we,” “us,” and "our"“our” refer to Northeast Utilities and its consolidated subsidiaries, including NSTAR LLC and its subsidiaries for the periods after April 10, 2012.subsidiaries.  All per share amounts are reported on a diluted basis.  The unaudited condensed consolidated financial statements of NU, CL&P, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P and WMECO are herein collectively referred to as “consolidated financial statements”.  the “financial statements.”


Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout thisManagement'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.


The only common equity securities that are publicly traded are common shares of NU.  The earnings and EPS of each business discussed below do not represent a direct legal interest in the assets and liabilities allocated to such business but rather represent a direct interest in our assets and liabilities as a whole.  EPS by business is a financial measure not recognized under GAAP that is calculated by dividing the Net Income Attributable to Controlling Interest of each business by the weighted average diluted NU common shares outstanding for the period.year.  The discussion below also includes non-GAAP financial measures referencing our first quarter 20132014 and 20122013 earnings and EPS excluding certain impactsintegration costs related to NU'sNU’s merger with NSTAR.  We use these non-GAAP financial measures to evaluate and to provide details of earnings results by business and to more fully compare and explain our first quarter 20132014 and 20122013 results without including the impact of these non-recurring items.  Due to the nature and significance of these items on Net Income Attributable to Controlling Interest, we believe that the non-GAAP presentation is more representative of our financial performance and provides additional and useful information to readers of this report in analyzing historical and future performance by business.  These non-GAAP financial measures should not be considered as an alternative to reported Net Income Attributable to Controlling Interest or EPS determined in accordance with GAAP as an indicator of operating performance.


Reconciliations of the above non-GAAP financial measures to the most directly comparable GAAP measures of consolidated diluted EPS and Net Income Attributable to Controlling Interest are included under "Financial“Financial Condition and Business Analysis Overview – Consolidated"— Consolidated” inManagement'sManagement’s Discussion and Analysis, herein.


Forward-Looking Statements:  From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth and other statements that are not historical facts.  These statements are "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  You can generally identify our forward-looking statements through the use of words or phrases such as "estimate," "expect," "anticipate," "intend," "plan," "project," "believe," "forecast," "should," "could,"“estimate,” “expect,” “anticipate,” “intend,” “plan,” “project,” “believe,” “forecast,” “should,” “could,” and other similar expressions.  Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance.  These expectations, estimates, assumptions or projections may vary materially from actual results.  Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to:


·

the possibility that expected merger synergies will not be realized or will not be realized within the expected time period,

·

cyber breaches, acts of war or terrorism, or grid disturbances,

·

actions or inaction byof local, state and federal regulatory and taxing bodies,

·

changes in business and economic conditions, including their impact on interest rates, bad debt expense, and demand for our products and services,

·

changesfluctuations in weather patterns,

·

changes in laws, regulations or regulatory policy,

·

changes in levels andor timing of capital expenditures,

·

disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly,

·

developments in legal or public policy doctrines,

·

technological developments,

·

changes in accounting standards and financial reporting regulations,

·

actions of rating agencies, and

·

other presently unknown or unforeseen factors.


Other risk factors are detailed in our reports filed with the SEC and updated as necessary, and we encourage you to consult such disclosures.


All such factors are difficult to predict, contain uncertainties that may materially affect our actual results and are beyond our control.  You should not place undue reliance on the forward-looking statements, each speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking



41



statements.  For more information, see Item 1A, Risk Factors, included in this Quarterly Report on Form 10-Q and in NU’s 20122013 Annual Report on Form 10-K.  This Quarterly Report on Form 10-Q and NU’s 20122013 Annual Report on Form 10-K also

38



Table of Contents

describe material contingencies and critical accounting policies in the accompanyingManagement’s Discussion and Analysis of Financial Condition and Results of Operations andCombined Notes to Condensed Consolidated Financial Statements (Unaudited).  We encourage you to review these items.


Financial Condition and Business Analysis


Merger with NSTAR:  


On April 10, 2012, NU and NSTAR completed our merger.  Unless otherwise noted, the results of NSTAR LLC and its subsidiaries, hereinafter referred to as "NSTAR," are included in NU’s financial position, results of operations and cash flows as of and for the three months ended March 31, 2013 throughout thisManagement's Discussion and Analysis of Financial Condition and Results of Operations.


Executive Summary


The followingfollowing items in this executive summary are explained in more detail in this combined Quarterly Report on Form 10-Q:


Results:


The earnings discussion below is forcompares the three months ended March 31, 2013, compared2014 with the same period in 2012:2013:


·

We earned $236 million, or $0.74 per share, compared with $228.1 million, or $0.72 per share.  Excluding integration costs, we earned $241.8 million, or $0.76 per share, compared with $99.3 million, or $0.56 per share.  Excluding merger related costs, we earned $229.9 million, or $0.73 per share, compared with $100.4 million, or $0.56 per share.  Improved earnings results in 2013 were due primarily to the inclusion of NSTAR, higher retail electric and firm natural gas sales due primarily to colder weather in the first quarter of 2013, as compared to the first quarter of 2012, higher transmission segment earnings as a result of increased investments incolder weather, partially offset by the transmission infrastructure, lower overall operations and maintenance costs andabsence of a favorable impact of $13.6 million, or $0.04 per share, from the resolution of a state income tax audit.


·

The addition of NSTAR provided an earnings contribution of $67.5 million foraudit in the first quarter of 2013.  Due to the timing

·The resolution of the merger closing, April 10, 2012, NSTAR’sstate income tax audit provided a $13.6 million, or $0.04 per share, benefit to our first quarter 2012 results are not reflected in NU’s first quarter 2012 results.2013 earnings, consisting of a $6.7 million benefit to NU parent, a $5.7 million benefit to our transmission segment, and a $1.2 million benefit to our electric distribution segment.


·

Our electric distribution segment, which includes generation, earned $112.2 million, or $0.35 per share, compared with $99.5 million, or $0.32 per share, compared with $42share.

·Our transmission segment earned $74.9 million, or $0.24 per share.  


·

Our transmission segment earnedshare, compared with $79.9 million, or $0.25 per share, compared with $46.3share.  The decrease was due to the absence of the $5.7 million or $0.26 per share.favorable impact from the resolution described above.


·

Our natural gas distribution segment earned $52.1 million, or $0.16 per share, compared with $43.3 million, or $0.14 per share, compared with $14.7 million, or $0.08 per share.


·

NU parent and other companies earned $5.4had net losses of $3.2 million, or $0.02$0.01 per share, compared with net lossesearnings of $3.7$5.4 million, or $0.02 per share.  Excluding merger relatedintegration costs, NU parent and other companies earned $2.6 million, or $0.01 per share, compared with $7.2 million, or $0.02 per share, compared with net losses of $2.6 million, or $0.02 per share. 


Legislative, Regulatory, Policy and Other Items:


·

On February 8, 2013, a blizzard caused damageThe decrease was due to the electric delivery systemsabsence of CL&P and NSTAR Electric.  Approximately 71,000 and 320,000the $6.7 million favorable impact from the resolution described above.

Regulatory Items:

·On March 12, 2014, the PURA issued a final decision that approved recovery of CL&P’s $365 million in storm restoration costs and NSTAR Electric's distribution customers, respectively, were without power during or followingordered CL&P to capitalize approximately $18 million of the blizzard.  The blizzard resulted in estimated deferred storm restoration costs as utility plant.  PURA will allow recovery of approximately $93 million.  We believe the storm restoration costs meet the criteria for specific cost recovery$365 million with carrying charges in each respective state and, as a result, we do not expect the blizzard to have a material impact on our results of operations.


·

In March 2013, CL&P and NSTAR Electric filed a request with the PURA and DPU, respectively, seeking approval to recover storm restoration costs.  CL&P requested approval to recover approximately $414 million of prudently incurred storm restoration costs, plus carrying costs, related to five major storms, all of which occurred in 2012 and 2011, in&P’s distribution rates over a six-year period beginning on December 1, 2014.  NSTAR

·Pursuant to an October 2013 request from the New Hampshire Legislative Oversight Committee on Electric requested approvalUtility Restructuring, staff of the NHPUC issued a report on April 1, 2014 that included a consultant’s analysis of the fair market value of PSNH generating assets and long-term power purchase contracts.  The consultant’s analysis estimated the fair market value of PSNH’s generation assets to recover approximately $35be $225 million as of December 31, 2013, compared to their net book value of $660 million, implying potential “stranded costs” in prudently incurred storm restoration costs, plus carrying costs, relatedexcess of $400 million.  The NHPUC staff recommended that any further actions relating to Tropical Storm IrenePSNH’s generating assets await a final decision in the Clean Air Project prudence proceeding, that existing laws regarding divestiture, energy service, and cost recovery be harmonized, and that ISO-NE provide input on the economic and reliability consequences of retirement of PSNH’s fossil generating plants.  In the event of generation asset divestiture or retirement, both present law and the October snowstormPSNH Restructuring Settlement Agreement approved in distribution rates over a five-year period beginning on January 1, 2014.2000 require that the NHPUC provide stranded cost recovery to PSNH.


Liquidity:


·

Cash and cash equivalents totaled $60.8$89.2 million as of March 31, 2013,2014, compared with $45.7$43.4 million as of December 31, 2012,2013, while cash capital expendituresinvestments in property, plant and equipment totaled $389$348.7 million forin the first quarter of 2013,2014, compared with $304.3$389 million forin the first quarter of 2012.2013.


·

Cash flows provided by operating activities totaled $410.6$493.8 million in the first quarter of 2013,2014, compared with cash flows used in operating activities of $9.1$473.1 million in the first quarter of 2012 (amounts are net of RRB payments).2013.  The improved operating cash flows were due primarily to the absence of cash disbursements for major storm restoration costs and a decrease in storm restoration costs, the addition of NSTAR, the proceeds CYAPCPension and YAEC



42



received from the DOEPBOP Plan cash contributions, partially offset by an increase in income taxes paid in the first quarter of 2014, as compared to the first quarter of 2013, a decrease in NUSCO Pension Plan cash contributions, and the absence of costs recovered in rates related to the February 2012 CL&P customer bill credits.RRBs that were fully amortized in the first half of 2013.


·39



Table of Contents

On January 15, 2013, CL&P

·In the first quarter of 2014, we issued $400 million of 2.5 percent first mortgage bonds that will maturenew long-term debt consisting of $100 million by Yankee Gas on January 15, 2023.  The proceeds, net of issuance costs,2, 2014 and $300 million by NSTAR Electric on March 7, 2014.  These new issuances were used primarily to repay CL&P’s revolving credit facility borrowingsapproximately $375 million of $89 million and intercompany loans relatedexisting long-term debt.

·On February 4, 2014, our Board of Trustees approved a common dividend payment of $0.3925 per share, payable on March 31, 2014 to our commercial paper program borrowingsshareholders of $305.8 million.


·

record as of March 3, 2014.  On May 1, 2013, PSNH redeemed at par approximately $109 million2014, our Board of PCRBs, dueTrustees approved a common dividend payment of $0.3925 per share, payable June 30, 2014 to mature in 2021, with short-term debt.  shareholders of record as of May 30, 2014.


Overview


Consolidated:  A summary of our earnings by business, which also reconciles the non-GAAP financial measures of consolidated non-GAAP earnings and EPS, as well as EPS by business, to the most directly comparable GAAP measures of consolidated Net Income Attributable to Controlling Interest and diluted EPS, for the first quarters of 20132014 and 20122013 is as follows:


 

 

For the Three Months Ended March 31,

 

 

2013(1)

 

2012

(Millions of Dollars, Except Per Share Amounts)

 

Amount

 

Per Share

 

Amount

 

Per Share

Net Income Attributable to Controlling Interest (GAAP)

$

228.1 

 

$

0.72 

 

$

99.3 

 

$

0.56 


Regulated Companies

$

222.7 

 

$

0.71 

 

$

103.0 

 

$

0.58 

NU Parent and Other Companies

 

7.2 

 

 

0.02 

 

 

(2.6)

 

 

(0.02)

Non-GAAP Earnings

 

229.9 

 

 

0.73 

 

 

100.4 

 

 

0.56 

Merger Related Costs (after-tax)

 

(1.8)

 

 

(0.01)

 

 

(1.1)

 

 

Net Income Attributable to Controlling Interest (GAAP)

$

228.1 

 

$

0.72 

 

$

99.3 

 

$

0.56 


(1) Results include the operations of NSTAR.  


 

 

For the Three Months Ended March 31,

 

 

 

2014

 

2013

 

(Millions of Dollars, Except Per Share Amounts)

 

Amount

 

Per Share

 

Amount

 

Per Share

 

Net Income Attributable to Controlling Interest (GAAP)

 

$

236.0

 

$

0.74

 

$

228.1

 

$

0.72

 

 

 

 

 

 

 

 

 

 

 

Regulated Companies

 

$

239.2

 

$

0.75

 

$

222.7

 

$

0.71

 

NU Parent and Other Companies

 

2.6

 

0.01

 

7.2

 

0.02

 

Non-GAAP Earnings

 

241.8

 

0.76

 

229.9

 

0.73

 

Integration Costs (after-tax)

 

(5.8

)

(0.02

)

(1.8

)

(0.01

)

Net Income Attributable to Controlling Interest (GAAP)

 

$

236.0

 

$

0.74

 

$

228.1

 

$

0.72

 

Excluding the impactsimpact of the merger relatedintegration costs, our first quarter 20132014 earnings increased by $129.5$11.9 million, as compared to the first quarter 2012,of 2013, due primarily to the inclusion of NSTAR, higher retail electric and firm natural gas sales due primarily to colder weather in the first quarter of 2013, as compared to the first quarter of 2012, higher transmission segment earnings as a result of increased investments incolder weather, partially offset by the transmission infrastructure, lower overall operations and maintenance costs, andabsence of a favorable impact of $13.6 million, or $0.04 per share, from the resolution of a state income tax audit.  On an earnings per share basis,audit in the first quarter of 2013.  The resolution of the state income tax audit provided a $13.6 million, or $0.04 per share, benefit to our first quarter 2013 NSTAR earnings contribution of $67.5 million ($67.8 million in non-GAAP earnings) was partially offset by the issuance of approximately 136 million common shares to close the merger.  Partially offsetting these favorable earnings impacts were higher depreciation and property tax expense.earnings.


Regulated Companies:  Our Regulated companies consist of the electric distribution, transmission, and natural gas distribution and transmission segments.  Generation activities of PSNH and WMECO are included in our electric distribution segment.  A summary of our segment earnings for the first quarters of 20132014 and 20122013 is as follows:


 

 

For the Three Months
Ended March 31,

(Millions of Dollars)

 

2013(1)

 

2012

Electric Distribution

 

$

99.5

 

$

42.0

Transmission

 

 

79.9

 

 

46.3

Natural Gas Distribution

 

 

43.3

 

 

14.7

Net Income - Regulated Companies

 

$

222.7

 

$

103.0


(1) Results include the operations of NSTAR.  


 

 

For the Three Months
Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Electric Distribution

 

$

112.2

 

$

99.5

 

Transmission

 

74.9

 

79.9

 

Natural Gas Distribution

 

52.1

 

43.3

 

Net Income - Regulated Companies

 

$

239.2

 

$

222.7

 

The higherOur electric distribution segment earnings increased $12.7 million in the first quarter 2013 transmission segment earnings,of 2014, as compared to the first quarter of 2012,2013, due primarily to higher retail electric sales as a result of colder weather.  The 2014 results were also favorably impacted by a PSNH rate increase effective July 1, 2013 as a result of the 2010 distribution rate case settlement.  Partially offsetting these favorable impacts were higher depreciation and property tax expense.

Our transmission segment earnings decreased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to the inclusionabsence of the $17.8 million NSTAR Electric transmission business’ earnings, increased investments in the transmission infrastructure, including GSRP, which is under construction in western Massachusetts and northern Connecticut, and the favorable impact from the resolution of athe state income tax audit.


The higheraudit in the first quarter of 2013, which provided a $5.7 million benefit to our first quarter 2013 electrictransmission segment earnings, partially offset by a higher transmission rate base as a result of an increased investment in our transmission infrastructure.

Our natural gas distribution segment earnings increased in the first quarter of 2014, as compared to the first quarter of 2012, were2013, due primarily to the inclusion of the $29.9 million NSTAR Electric distribution business’ earnings, higher retail electric sales due primarily to colder weather in the first quarter of 2013, as compared to the first quarter of 2012, and lower overall operations and maintenance costs.  In addition, we had a favorable impact resulting from the PSNH 2010 distribution rate case decision.  As a result of the decision, the PSNH rates increased effective July 1, 2012.  Partially offsetting these favorable earnings impacts were higher depreciation and property tax expense. For further information regarding NSTAR Electric’s earnings, see "Results of Operations – NSTAR Electric Company and Subsidiaries – Earnings Summary" in thisManagement's Discussion and Analysis of Financial Condition and Results of Operations.  


The higher first quarter 2013 natural gas distribution segment earnings, as compared to the first quarter of 2012, were due primarily to the inclusion of the $19.3 million NSTAR Gas business’ earnings, higher firm natural gas sales due primarily toas a result of colder weather, inas well as the first quarteraddition of 2013, as compared to the first quarternew natural gas heating customers.

40



Table of 2012, the favorable impact of the Yankee Gas 2011 rate case decision resulting in theContents



43



additional increase to annualized rates effective July 1, 2012, and lower interest expense, partially offset by higher depreciation expense and property tax expense.


A summary of our retail electric GWh sales and percentage changes, as well as percentage changes in CL&P, NSTAR Electric, PSNH and WMECO retail electric GWh sales, is as follows:

 

 

For the Three Months Ended
March 31, 2014 Compared to 2013

 

 

 

Sales (GWh)

 

Percentage

 

NU – Electric

 

2014

 

2013

 

Increase

 

Residential

 

6,139

 

5,803

 

5.8

%

Commercial (1)

 

6,866

 

6,695

 

2.6

%

Industrial

 

1,343

 

1,298

 

3.4

%

Total

 

14,348

 

13,796

 

4.0

%

 

 

For the Three Months Ended
March 31, 2014 Compared to 2013

 

 

 

CL&P

 

NSTAR
Electric

 

PSNH

 

WMECO

 

Electric

 

Percentage
Increase

 

Percentage
Increase

 

Percentage
Increase

 

Percentage
Increase/
(Decrease)

 

Residential

 

6.9

%

4.1

%

5.8

%

5.7

%

Commercial (1)

 

2.3

%

2.6

%

2.3

%

4.2

%

Industrial

 

4.2

%

3.5

%

4.8

%

(2.4

)%

Total

 

4.7

%

3.2

%

4.2

%

3.8

%


(1)Commercial retail electric GWh sales include streetlighting and railroad retail sales.

A summary of our firm natural gas sales in million cubic feet and percentage changes, as well as percentage changes in Yankee Gas and NSTAR Gas’ sales in million cubic feet, for the first quarter of 2013, as compared to the first quarter 2012,Gas, is as follows:


 

For the Three Months Ended
March 31, 2014 Compared to 2013

 

 

For the Three Months Ended
March 31, 2013 Compared to 2012

 

Sales (million cubic feet)

 

Percentage

 

 

Sales (GWh)

 

Percentage

NU – Electric

 

2013(1)

 

2012

 

Increase

NU - Firm Natural Gas

 

2014

 

2013

 

Increase

 

Residential

 

5,803

 

3,787

 

53.2%

 

19,812

 

17,015

 

16.4

%

Commercial

 

6,570

 

3,381

 

94.3%

 

19,627

 

16,771

 

17.0

%

Industrial

 

1,298

 

1,015

 

28.0%

 

7,478

 

6,829

 

9.5

%

Other

 

125

 

88

 

42.5%

Total

 

13,796

 

8,271

 

66.8%

 

46,917

 

40,615

 

15.5

%

Total, Net of Special Contracts (1)

 

45,550

 

39,422

 

15.5

%


 

For the Three Months Ended
March 31, 2014 Compared to 2013

 

 

For the Three Months Ended
March 31, 2013 Compared to 2012

 

Sales (million cubic feet)

 

 

CL&P

 

NSTAR
Electric
(2)

 

PSNH

 

WMECO

 

Yankee Gas

 

NSTAR Gas

 

Electric

 

Percentage
Increase/
(Decrease)

 

Percentage
Increase/
(Decrease)

 

Percentage
Increase/
(Decrease)

 

Percentage
Increase/
(Decrease)

 

Percentage

 

Percentage

 

Firm Natural Gas

 

Increase

 

Increase

 

Residential

 

9.2 %

 

4.1 %

 

4.3 %

 

5.6 %

 

21.8

%

12.9

%

Commercial

 

2.0 %

 

1.9 %

 

2.2 %

 

(1.0)%

 

21.0

%

13.6

%

Industrial

 

(4.6)%

 

(5.2)%

 

0.6 %

 

(0.8)%

 

10.2

%

7.7

%

Other

 

0.6 %

 

(10.1)%

 

(2.7)%

 

22.6 %

Total

 

4.7 %

 

2.0 %

 

2.8 %

 

2.1 %

 

18.6

%

12.7

%

Total, Net of Special Contracts (1)

 

18.9

%

 

 



(1)

Results include retail electric sales of NSTAR Electric.  

(2)

Results for NSTAR Electric include its standalone first quarter March 31, 2013 retail electric sales, as compared to 2012.


 

 

For the Three Months Ended
March 31, 2013 Compared to 2012

 

 

Sales (million cubic feet)

NU – Firm Natural Gas

 

2013(1)

 

2012

Residential

 

17,015

 

5,375

Commercial

 

16,771

 

6,382

Industrial

 

6,829

 

5,062

Total

 

40,615

 

16,819

Total, Net of Special Contracts(2)

 

39,422

 

14,744


 

 

For the Three Months Ended
March 31, 2013 Compared to 2012

 

 

Yankee Gas

 

NSTAR Gas(3)

Firm Natural Gas

 

Percentage
Increase/(Decrease)

 

Percentage Increase

Residential

 

25.9 %

 

22.9%

Commercial

 

21.4 %

 

16.3%

Industrial

 

(4.4)%

 

29.3%

Total

 

15.1 %

 

20.6%

Total, Net of Special Contracts(2)

 

23.2 %

 

 


(1)

Results include firm natural gas sales of NSTAR Gas.

(2)

Special contracts are unique to the customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to Yankee Gas regardless of the customers’ usage.

(3)

NSTAR Gas’ sales data for the three months ended March 31, 2013 compared to 2012 has been provided for comparative purposes only.


Weather, fluctuations in fuelenergy supply costs, conservation measures (including company-sponsored energy efficiency programs), and economic conditions affect sales to our customers.customer energy usage.  Industrial sales are less sensitive to temperature variations than residential and commercial sales.  WeatherIn our service territories, weather impacts electric sales primarily during the summer and electric and natural gas sales during the winter in our service territories (natural gas sales are more sensitive to temperature variations than electric sales).  Customer heating or cooling usage may not directly correlate with historical levels or with the level of degree-days that occur, particularly when weather patterns experienced are consistently colder or warmer.occur.  In addition, our electric and natural gas businesses are sensitive to variations in daily weather, are highly influenced by New England’s seasonal weather variations, and are susceptible to damage from major storms and other natural events and disasters that could adversely affect our ability to provide energy.



44




Our first quarter 2014 consolidated retail electric sales, consisting of the retail electric sales of CL&P, NSTAR Electric, PSNH, and firm natural gas salesWMECO, were higher, in the first quarter of 2013, as compared to the first quarter of 2012, due to the inclusion of NSTAR Electric and NSTAR Gas sales.  


Actual retail electric sales for CL&P, NSTAR Electric, PSNH, and WMECO increased in the first quarter of 2013, as compared to 2012, due primarily to the colder weather in the firstweather.  First quarter of 2013, as compared to the first quarter of 2012.  In the first quarter of 2013,2014 heating degree days were 2116 percent higher in Connecticut and western Massachusetts, 22 percenthigher12 percent higher in the Boston metropolitan area, and 15 percent higher in New Hampshire, as compared to 2012.  On a weather-normalized basisthe first quarter of 2013.  Weather-normalized retail electric sales (based on 30-year average temperatures), the average NU combined consolidated total retail electric sales was relatively unchanged increased 1.3 percent in the first quarter of 2013,2014, as compared to 2012, assuming NSTAR Electric had been partthe first quarter of the NU combined electric distribution system for all periods under consideration.  2013, reflecting a steady improvement in economic conditions across our service territory.

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Table of Contents

For WMECO, the fluctuations in retail electric sales do not impact earnings asdue to the DPU approved aDPU-approved revenue decoupling mechanism.  Under this decoupling mechanism, WMECO has an overall fixed annual level of distribution delivery service revenues of $132.4 million, comprised of customer base rate revenues of$125.4 $125.4 million and a baseline low income discount recovery of $7 million.  These two mechanisms effectively break the relationship between sales volume and revenues recognized.


Our firm natural gas sales are subject to many of the same influences as our retail electric sales, butsales.  In addition, they have benefitted from lowerhistorically favorable natural gas prices and customer growth across all three customer classes.  In theboth operating companies.  Our first quarter 2014 consolidated firm natural gas sales, consisting of 2013, excluding the impactfirm natural gas sales of Yankee Gas and NSTAR Gas, sales, actual sales increased,were higher, as compared to the first quarter of 2012,2013, due primarily to the colder weather in theweather.  The first quarter of 2013, as compared to the first quarter of 2012.  On a2014 weather-normalized basis, Yankee Gas’ first quarter 2013 sales also increased due primarily to customer growth, lower cost of natural gas when compared to the cost of other energy sources, the migration of interruptible customers switching to firm service rates, and the addition of gas-fired distributed generation in Yankee Gas’ service territory.


On a weather-normalized basis, the average NU combined consolidated total firm natural gas sales increased 2.6 percentin the first quarter of 2013,3.6 percent, as compared to the first quarter of 2012, assuming NSTAR Gas had been part of the NU combined natural gas distribution system for all periods under consideration.same period in 2013, due primarily to residential and commercial customer growth.


NU Parent and Other Companies:  NU parent and other companies, (whichwhich includes our competitive businesses, held by NU Enterprises and, forhad net losses of $3.2 million in the first quarter of 2013, NSTAR LLC) earned2014, compared with earnings of $5.4 million in the first quarter of 2013, compared with net losses of $3.7 million in the first quarter of 2012.2013.  Excluding the impact of the merger relatedintegration costs, NU parent and other companies earned $2.6 million in the first quarter of 2014, compared with $7.2 million in the first quarter of 2013, compared with net losses of $2.6 million.  Improved results were2013.  The decrease in earnings was due primarily to lower interest expense, a lower effective tax rate and the inclusion of NSTAR Communications.


Major Storm Restoration Costs:  A storm must meet certain criteria specific to each state and utility company to be declared a major storm.  Once a storm is declared major, all qualifying expenses incurred during storm restoration efforts, if deemed prudent, are deferred and recovered from customers in future periods.  In Connecticut, qualifying storm restoration costs must exceed $5 million for a storm to be declared a major storm.  In Massachusetts, qualifying storm restoration costs must exceed $1 million for NSTAR Electric and $300,000 for WMECO and an emergency response plan must be initiated for a storm to be declared a major storm.  In New Hampshire, (1) at least 10 percent of customers must be without power with at least 200 concurrent locations requiring repairs (trouble spots), or (2) at least 300 concurrent trouble spots must be reported for a storm to be declared a major storm.  


On February 8, 2013, a blizzard caused damage to the electric delivery systemsabsence of CL&P and NSTAR Electric.  Approximately 71,000 and 320,000the favorable impact from the resolution of CL&P’s and NSTAR Electric's distribution customers, respectively, were without power during or following the blizzard.  The blizzard resultedstate income tax audit in estimated deferred storm restoration coststhe first quarter of approximately $132013, which provided a $6.7 million at CL&P and approximately $80 million at NSTAR Electric.  We believe the storm restoration costs meet the criteria for specific cost recovery in Connecticut and Massachusetts and, as a result, we do not expect the blizzardbenefit to have a material impact on CL&P’s or NSTAR Electric’s results of operations.  CL&P and NSTAR Electric will seek recovery of these deferred storm restoration costs through their applicable regulatory recovery process.first quarter 2013 NU parent earnings.


Liquidity


Consolidated:  Cash and cash equivalents totaled $60.8$89.2 million as of March 31, 2013,2014, compared with $45.7$43.4 million as of December 31, 2012.  2013.


On January 15, 2013, CL&P2, 2014, Yankee Gas issued $400$100 million of 2.54.82 percent first mortgage bonds that willSeries L First Mortgage Bonds, due to mature on January 15, 2023.in 2044.  The proceeds, net of issuance costs, were used to repay CL&P’s revolving credit facility borrowings of $89the $75 million 4.80 percent Series G First Mortgage Bonds that matured on January 1, 2014 and intercompany loans related to our commercial paper program borrowings of $305.8 million.repay $25 million in short-term borrowings.


On May 1, 2013, PSNH redeemed at par approximately $109March 7, 2014, NSTAR Electric issued $300 million of the 2001 Series C PCRBs that were4.40 percent debentures, due to mature in 2021 with2044.  The proceeds, net of issuance costs, were used to repay the $300 million of 4.875 percent debentures that matured on April 15, 2014.

On April 24, 2014, CL&P issued $250 million of 4.30 percent 2014 Series A First Mortgage Bonds, due to mature in April 2044.  The proceeds, net of issuance costs, were used to repay short-term borrowings.

NU parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are parties to a joint five-year $1.45 billion revolving credit facility due to expire on September 6, 2018.  The revolving credit facility is to be used primarily to backstop the $1.45 billion commercial paper program at NU.  The commercial paper program allows NU parent to issue commercial paper as a form of short-term debt.  As a result, the PCRBs were recorded as Long-Term Debt - Current Portion.


of March 31, 2014 and December 31, 2013, NU CL&P, NSTAR Electric, PSNH and WMECO use their available capital resources to fund their respective construction expenditures, meet debt requirements, pay costs, including storm-related costs, pay dividends and fund other corporate obligations, such as pension contributions.  The current growth in NU’s transmission construction expenditures utilizes a significant amount of cash for projects that have a long-term return on investment and recovery period.  In addition, NU’s Regulated companies operate in an environment where recovery of its electric and natural gas distribution construction expenditures takes place over an extended period of time.  This impacts the timing of the revenue stream designed to fully recover the total investment plus a return on the equity portion of the cost and related financing costs.  These factors have resulted in NU’s current liabilities exceeding current assets byhad approximately



45



$1.7 billion, $231 million, $226 million, $34 $818.5 million and $48$1.01 billion, respectively, in short-term borrowings outstanding under the NU parent commercial paper program, leaving $631.5 million at NU, CL&P, NSTAR Electric, PSNH,and WMECO, respectively,$435.5 million of available borrowing capacity as of March 31, 2013.


2014 and December 31, 2013, respectively.  The weighted-average interest rate on these borrowings as of March 31, 2014 and December 31, 2013 was 0.23 percent and 0.24 percent, respectively, which is generally based on money market rates.  As of March 31, 2014, there were intercompany loans from NU of $351.6 million to CL&P, $39.9 million to PSNH and $37.4 million to WMECO.  As of December 31, 2013, approximately $914there were intercompany loans from NU of $287.3 million to CL&P and $86.5 million to PSNH.

NSTAR Electric has a five-year $450 million revolving credit facility due to expire on September 6, 2018.  This facility serves to backstop NSTAR Electric’s existing $450 million commercial paper program.  As of March 31, 2014, NSTAR Electric had no borrowings outstanding under its commercial paper program.  As of December 31, 2013, NSTAR Electric had $103.5 million in short-term borrowings outstanding under its commercial paper program, leaving $346.5 million of NU's current liabilities relates to long-term debt that will be paid in the next 12 months, consistingavailable borrowing capacity.  The weighted-average interest rate on these borrowings as of $550 million for NU parent, $125 million for CL&P, $109 million for PSNH, $75 million for Yankee Gas, and $55 million for WMECO.  NU, with its strong credit ratings, has several options available in the financial markets to repay or refinance these maturities with the issuance of new long-term debt.  NU, CL&P, NSTAR Electric, PSNH,and WMECO will reduce their short-term borrowings with cash received from operating cash flows or with the issuance of new long-term debt, as deemed appropriate given our capital requirements and maintenance of our credit rating and profile.  Management expects the future operating cash flows of NU and its subsidiaries, along with the access to financial markets, will be sufficient to meet any future operating requirements and capital investment forecasted opportunities.December 31, 2013 was 0.13 percent, which is generally based on money market rates.


Cash flows provided by operating activities in the first quarter of 2013 totaled $410.6 million, compared with cash flows used in operating activities of $9.1$493.8 million in the first quarter of 2012 (all amounts are net2014, compared with $473.1 million in the first quarter of RRB payments, which are included in financing activities on the accompanying consolidated statements of cash flows).2013.  The improved operating cash flows were due primarily to the absence inof cash disbursements for major storm restoration costs and the first quarterdecrease of 2013 of approximately $153$40.3 million in Pension and PBOP Plan cash disbursements associated with Tropical Storm Irene and the October snowstorm, the addition of NSTAR, which contributed $138.1 million of operating cash flows (net of RRB payments) in the first quarter of 2013, as well as the $77.9 million in proceeds CYAPC and YAEC received from the DOE in the first quarter of 2013 that were subsequently invested in marketable securities and are expected to benefit CL&P, NSTAR Electric, PSNH and WMECO customers.  Also contributing to the improved operating cash flows was a reduction of NUSCO Pension Plan contributions, of $56.9 million in the first quarter of 2013, as compared to the first quarter of 2012, the absence in the first quarter of 2013 of approximately $27 million in 2012 CL&P customer bill credits and the favorable cash flow impacts associated with transmission regulatory tracking mechanisms of $16.1 million. Partially offsetting these favorable impacts was a $19.6 millionpartially offset by an increase in income taxes paid in the first quarter of 2013,2014 ($82.6 million), as compared to the first quarter of 2012.  2013 ($22.2 million), and the absence of costs recovered in rates related to the RRBs that were fully amortized in the first half of 2013.


A summaryOn March 28, 2014, CYAPC and YAEC received payment of $163.3 million of the currentDOE Phase II Damages proceeds.  It is anticipated that in the second quarter of 2014, the Yankee Companies will complete the FERC review process and return these amounts to the member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, for the benefit of their respective customers.  As a result of the consolidation of CYAPC and YAEC, the cash received was included in Other Long-Term Assets on the NU consolidated balance sheet pending refund as of March 31, 2014 and in Proceeds from DOE Damages Claim with an offset in Deferred DOE Proceeds on the NU consolidated statement of cash flows for the three months ended March 31, 2014.  These proceeds had no impact on NU’s earnings or net cash flows provided by operating activities for the three months ended March 31, 2014.

On January 31, 2014, Moody’s upgraded corporate credit and securities ratings of NU, CL&P and PSNH by one level and WMECO by two-levels.  On April 7, 2014, Fitch affirmed the corporate credit ratings and outlooks by Moody's,outlook of NU, CL&P, NSTAR Electric, PSNH, WMECO and NSTAR Gas.  On April 25, 2014, S&P affirmed the corporate credit ratings and Fitch for senior unsecured debtrevised the outlooks to positive from stable of NU, parent,CL&P, NSTAR Electric, PSNH, WMECO, Yankee Gas and WMECO and senior secured debtNSTAR Gas.

42



Table of CL&P and PSNH is as follows:Contents


Moody's

S&P

Fitch

Current

Outlook

Current

Outlook

Current

Outlook

NU Parent

Baa2

Stable

BBB+ 

Stable

BBB+ 

Stable

CL&P

A3

Stable

Stable

Stable

NSTAR Electric

A2

Stable

A-

Stable

A+

Stable

PSNH

A3

Stable

Stable

A  

Stable

WMECO

Baa2

Stable

A-

Stable

A-

Stable


In the first quarter of 2014, we had cash dividends on common shares of $118.5 million, compared with $116.4 million in the first quarter of 2013.  On February 14, 2013, S&P revised its criteria for rating utility first mortgage bonds, resulting in one-level upgrades of CL&P and PSNH first mortgage bonds by S&P.  


On February 5, 2013,4, 2014, our Board of Trustees approved a common dividend payment of $0.3675$0.3925 per share, payable on March 28, 201331, 2014 to shareholders of record as of March 1,3, 2014.  The dividend represented an increase of 6.8 percent over the dividend paid in December 2013.  On April 2, 2013,May 1, 2014, our Board of Trustees approved a common dividend payment of $0.3675$0.3925 per share, payable June 28, 201330, 2014 to shareholders of record as of May 31, 2013.30, 2014.


In the first quarter of 2013,2014, CL&P, NSTAR LLC,Electric, PSNH, and WMECO paid $38$42.8 million, $8$253 million, $17$16.5 million, and $10$49 million, respectively, in common dividends to NU parent.


The NSTAR Electric RRBs were fully amortizedInvestments in the first quarter of 2013.  The PSNHProperty, Plant and WMECO RRBs are scheduled to fully amortize in the second quarter of 2013.


Cash capital expenditures includedEquipment on the accompanying consolidated statements of cash flows and described in this "Liquidity" section do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension expense.  A summary of our cash capital expenditures by company for the first quarters of 2013 and 2012 is as follows:


 

 

For the Three Months Ended March 31,

(Millions of Dollars)

 

2013(1)

 

2012

CL&P

 

$

89.4

 

$

108.8

NSTAR Electric

 

 

107.6

 

 

N/A

PSNH

 

 

65.0

 

 

67.1

WMECO

 

 

66.3

 

 

85.0

Natural Gas

 

 

31.2

 

 

20.4

NPT

 

 

14.9

 

 

5.7

Other

 

 

14.6

 

 

17.3

Total

 

$

389.0

 

$

304.3


(1)

Results include cash capital expenditures of NSTAR.




46



The increase in our cash capital expenditures was the result of the addition of NSTAR’s capital expenditures forIn the first quarter of 2013, as compared to the first quarter of 2012.2014, investments for NU, CL&P, NSTAR Electric, PSNH, and WMECO were $348.7 million, $108 million, $95 million, $61.9 million, and $30.3 million, respectively.


Business Development and Capital Expenditures


Consolidated:  Our consolidated capital expenditures, including amounts incurred but not paid, cost of removal, AFUDC, and the capitalized portions of pension expense (all of which are non-cash factors), totaled $277.9 million in the first quarter of 2014, compared with $299.8 million in the first quarter of 2013, compared with $306.5 million in the first quarter of 2012.2013.  These amounts included $5.4$5.9 million and $11.6$5.4 million in the first quarters of 20132014 and 2012,2013, respectively, related to our corporate service companies, NUSCO and RRR.


Transmission Business:Overall, transmission business capital expenditures increaseddecreased by $4.8$53.3 million in the first quarter of 2013,2014, as compared to the first quarter of 2012.  The first quarter 2013 results reflect the addition of NSTAR Electric's capital expenditures and an increase at NPT, offset by a decrease at WMECO related to the construction of GSRP nearing completion.2013.  A summary of transmission capital expenditures by company for the three months ended March 31, 20132014 and 20122013 is as follows:


 

For the Three Months Ended March 31,

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2013(1)

 

2012

 

2014

 

2013

 

CL&P

 

$

44.0

 

$

40.2

 

$

36.2

 

$

44.0

 

NSTAR Electric

 

 

49.3

 

 

N/A

 

12.4

 

49.3

 

PSNH

 

 

14.6

 

 

15.1

 

16.7

 

14.6

 

WMECO

 

 

17.2

 

 

74.6

 

16.3

 

17.2

 

NPT

 

 

16.5

 

 

6.9

 

6.7

 

16.5

 

Total Transmission Segment

 

$

141.6

 

$

136.8

 

$

88.3

 

$

141.6

 


(1)

Results include transmission capital expenditures of NSTAR Electric.


NEEWS: GSRP, a project that involves the construction of 115 kV and 345 kV overhead lines by CL&P and WMECO from Ludlow, Massachusetts to Bloomfield, Connecticut, is the first, largest and most complicated project within the NEEWS family of projects.  The $718 million project is expected to beprojects was fully placed in service in lateenergized on November 20, 2013.  If all events surrounding completion of the project continue at their current state, the total cost could be approximately five percent lower.  As of March 31, 2013, the project was approximately 95 percent complete2014, CL&P and we hadWMECO have placed $440$631.5 million in service.  service with minimal remaining close-out activities continuing throughout the first half of 2014.


The Interstate Reliability Project, which includes CL&P’s construction of an approximately 40-mile, 345 kV overhead line from Lebanon, Connecticut to the Connecticut-Rhode Island border in Thompson, Connecticut where it will connect to transmission enhancements being constructed by National Grid, is ourthe second major NEEWS project.  All siting applicationsThe Connecticut and Rhode Island portions of the project have been filedapproved by CL&P and National Grid.  Ontheir respective siting boards.  On January 2, 2013,30, 2014, the Connecticut Siting CouncilMassachusetts EFSB voted unanimously to draft a tentative opinion approving the MA component of the project; a siting approval decision in Massachusetts is expected in the second quarter of 2014.  In the first quarter of 2014, the Army Corps of Engineers issued a final decision and order approvingits permit on the project, which enabled construction on the Connecticut portion of the project.  Decisions in Rhode Islandproject to begin.  NU’s portion of the cost is estimated to be $218 million and Massachusetts are expected between the end of 2013 and early 2014.  The $218 million project is expected to be placed in service in late 2015.


The Greater Hartford Central Connecticut Study (GHCC), which includes the reassessment of the Central Connecticut Reliability Project, continues to make progress.  The final need results, which were presented to the ISO-NE Planning Advisory Committee in November 2013, showed existing and worsening severe regional and local thermal overloads and voltage violations within and across each of the four study areas.  ISO-NE is expected to confirm the preferred transmission solutions in the summer of 2014, which are likely to include many 115 kV upgrades.  We continue to expect that the specific future projects being identified to address these reliability concerns will cost approximately $300 million and that the project will be placed in service in 2017.

Included as part of NEEWS are associated reliability related projects, approximately $72$90.5 million of which have been placed in service and approximately $24service.  As of March 31, 2014, the remaining construction on the associated reliability related projects totaled $2.9 million, of which are in various phases of construction and will continueis scheduled to go into service through 2013.  be completed by mid-2014.


Through March 31, 2013,2014, CL&P and WMECO had capitalized $225$259 million and $531$571.1 million, respectively, in costs associated with NEEWS, of which $13$6.2 million and $12.9$4.1 million, respectively, were capitalized in the first quarter of 2013.  2014.


Greater Hartford Central Connecticut Project (GHCC):  In August 2012, ISO-NE presented its preliminary needs analysis for the GHCC to the ISO-NE Planning Advisory Committee.  The results showed severe thermal overloads and voltage violations in each of the four study areas now and in the near future.  A combination of 345 kV and 115 kV transmission solutions are being considered to address these reliability concerns and a set of preferred solutions are expected to be identified by ISO-NE in late 2013 or early 2014.  We included approximately $300 million in our five-year capital program for future projects being identified to address these reliability concerns, which have recently been confirmed by ISO-NE.


Cape Cod Reliability Projects:  Transmission projects serving Cape Cod in the Southeastern Massachusetts (SEMA) reliability region consist of an expansion and upgrade of NSTAR Electric's existing transmission infrastructure including construction of a new 345 kV transmission line that will cross the Cape Cod Canal and associated 115 kV upgrades in the center of Cape Cod (Lower SEMA Transmission Project) and related 115 kV projects (Mid-Cape Project).  All regulatory licensing and permitting is complete for the Lower SEMA Transmission Project and construction commenced in September 2012.  The 345 kV line is expected to be energized by mid-2013 and the 115 kV line upgrades are expected to be completed in late 2013.  The Mid-Cape Project is scheduled to be completed in 2017.  The total estimated construction cost for the Cape Cod projects is approximately $150 million.


Northern Pass:  Northern Pass is NPT'sNU’s planned HVDC transmission line from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire.  Northern Pass will interconnect at the Québec-New Hampshire border with a planned HQ HVDC transmission line.  We estimate the costsNPT received ISO-NE approval under Section I.3.9 of the ISO tariff in 2013.  By approving the project’s Section I.3.9 application, ISO-NE determined that Northern Pass can reliably interconnect with the New England grid with no significant adverse effect on the reliability or operating characteristics of the regional energy grid and its participants.  The $1.4 billion project is subject to comprehensive federal and state public permitting processes and is expected to be operational in the second half of 2017.  The DOE continues to work on the draft Environmental Impact Statement (EIS) for Northern Pass.  This includes a review of both the recommended route and various

43



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alternative routes.  We expect the DOE to issue the draft EIS in late 2014.  Once it is published, DOE will commence a process of receiving written and verbal comments on the draft EIS and we expect the DOE to issue a final EIS in the second half of 2015.  We expect to file the state permit application in January 2015 after the DOE’s draft EIS is received.

Greater Boston Reliability and Boston Network Improvements:  As a result of continued analysis of the transmission project willneeds to enhance system reliability and improve capacity in eastern Massachusetts, NSTAR Electric and PSNH expect to implement a series of new transmission initiatives over the next five years.  We expect ISO-NE to select preferred solutions in the first half of 2014.  We expect projected costs to be approximately $1.2 billion (including capitalized AFUDC) and we believe the project will be completed in mid-2017.  $480 million for these new initiatives.




47



Distribution Business:  A summary of distribution capital expenditures by company for the first quarters of 20132014 and 20122013 is as follows:


For the Three Months Ended March 31,

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013(1)

 

2012(2)

 

2014

 

2013

 

CL&P:

 

 

 

 

 

 

 

 

 

 

Basic Business

$

13.2

 

$

23.3

 

$

10.7

 

$

13.2

 

Aging Infrastructure

 

29.0

 

 

49.0

 

34.3

 

29.0

 

Load Growth

 

17.0

 

 

24.8

 

17.3

 

17.0

 

Total CL&P

 

59.2

 

 

97.1

 

62.3

 

59.2

 

NSTAR Electric:

 

 

 

 

 

 

 

 

 

 

Basic Business

 

15.6

 

 

N/A

 

29.6

 

15.6

 

Aging Infrastructure

 

27.3

 

 

N/A

 

22.9

 

27.3

 

Load Growth

 

1.9

 

 

N/A

 

6.5

 

1.9

 

Total NSTAR Electric

 

44.8

 

 

N/A

 

59.0

 

44.8

 

PSNH:

 

 

 

 

 

 

 

 

 

 

Basic Business

 

3.8

 

 

5.3

 

5.8

 

3.8

 

Aging Infrastructure

 

7.8

 

 

9.1

 

12.5

 

7.8

 

Load Growth

 

4.6

 

 

4.2

 

6.1

 

4.6

 

Total PSNH

 

16.2

 

 

18.6

 

24.4

 

16.2

 

WMECO:

 

 

 

 

 

 

 

 

 

 

Basic Business

 

0.5

 

 

3.9

 

1.5

 

0.5

 

Aging Infrastructure

 

4.3

 

 

3.4

 

3.3

 

4.3

 

Load Growth

 

1.5

 

 

2.2

 

1.4

 

1.5

 

Total WMECO

 

6.3

 

 

9.5

 

6.2

 

6.3

 

Total - Electric Distribution (excluding Generation)

 

126.5

 

 

125.2

 

151.9

 

126.5

 

PSNH Generation

 

2.5

 

0.7

 

WMECO Generation

 

4.1

 

0.1

 

Total - Natural Gas

 

25.5

 

 

16.3

 

25.2

 

25.5

 

Other Distribution

 

-

 

 

0.3

Total Electric and Natural Gas

 

152.0

 

 

141.8

PSNH Generation:

 

 

 

 

 

Clean Air Project

 

0.2

 

 

13.4

Other

 

0.5

 

 

2.8

Total PSNH Generation

 

0.7

 

 

16.2

WMECO Generation

 

0.1

 

 

0.1

Total Distribution Segment

$

152.8

 

$

158.1

Total Electric and Natural Gas Distribution Segment

 

$

183.7

 

$

152.8

 


(1)

Includes the electric and natural gas distribution capital expenditures of NSTAR.

(2)

The prior period amounts have been reclassified to conform to current period presentation.  


For the electric distribution business, basic business includes the purchase of meters, tools, vehicles, information technology, transformer replacements, equipment facilities, and the relocation of plant.  Aging infrastructure relates to reliability and the replacement of overhead lines, plantdistribution substations, underground cable replacement, and equipment failures.  Load growth includes requests for new business and capacity additions on distribution lines and substation additions and expansions.


CL&P System Resiliency Plan:  On January 16, 2013, PURA approved the $300 million plan CL&P filed to improve the resiliency of its electric distribution system.  The plan includes vegetation management (both enhanced tree trimming and trimming on a shorter cycle), structural hardening (strengthening field structures through upgrades to the current structure design and material standards as well as upgrades to the poles and conductors), and electrical hardening (upgrading electrical distribution conductors and protective devices on overhead circuits).  CL&P expects to complete the plan in five years in two separate phases.  The estimated cost of Phase 1 of the plan, which will be primarily focused on vegetation management, is $32 million in 2013 and $53 million in 2014.  The estimated cost of Phase 2 of the plan is the remaining $215 million over the period from 2015 through 2017.


FERC Regulatory Issues


FERC Base ROE Complaint:  On September 30, 2011, several New England state attorneys general, state regulatory commissions, consumer advocates and other parties filed a joint complaint with the FERC under Sections 206 and 306 of the Federal Power Act alleging that the base ROE used in calculating formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by New England transmission owners, including CL&P, NSTAR Electric, PSNH and WMECO, is unjust and unreasonable.  The complainants asserted that the current 11.14 percent rate, which became effective in 2006, is excessive due to changes in the capital markets and are seeking an order to reduce the rate, which would be effective October 1, 2011.  In response, the New England transmission owners filed testimony and analysis based on standard FERC methodology and precedent, demonstrating that the base ROE of 11.14 percent remained just and reasonable.  The FERC set the case for trial before a FERC administrative law judge after settlement negotiations were unsuccessful in August 2012.  


As part of the pre-trial process, on April 17, 2013, the complainants, the Massachusetts municipal electric utilities (late intervenors to the case), and the FERC trial staff updated their respective ROE analyses, which demonstrated a base ROE of approximately 8.9 percent.  The New England transmission owners also filed an updated analysis, including a supplement on April 26, 2013, that



48



continues to demonstrate that the current ROE of 11.14 percent remains within an updated range of reasonableness of 7.3 percent to 13.2 percent.  Hearings on this complaint are scheduled to commence on May 6, 2013 and the trial judge’s recommended decision is due in September 2013.  A decision from FERC commissioners is expected in 2014.  Refunds to customers, if any, as a result of a reduction in the NU transmission companies’ base ROE would be for the period October 1, 2011 through December 31, 2012.


On December 27, 2012, several additional parties filed a separate complaint concerning the New England transmission owners' base ROE with the FERC.  This new complaint seeks to reduce the New England transmission owners’ base ROE effective January 1, 2013, effectively extending the refund period for an additional 15 months, and to consolidate this new complaint with the joint complaint filed on September 30, 2011.  The New England transmission owners have asked the FERC to reject this new complaint.  The FERC has not yet acted on this request.


As of March 31, 2013, CL&P, NSTAR Electric, PSNH, and WMECO had approximately $2.1 billion of aggregate shareholder equity invested in their transmission facilities.  As a result, each 10 basis point change in the authorized base ROE would change annual consolidated earnings by an approximate $2.1 million.  We cannot at this time predict the ultimate outcome of this proceeding or the estimated impact on CL&P’s, NSTAR Electric’s, PSNH’s, or WMECO’s respective financial position, results of operations or cash flows.


Regulatory Developments and Rate Matters


The Regulated companies'companies’ distribution rates are set by their respective state regulatory commissions, and their tariffs include mechanisms for periodically adjusting their rates.  Other than as described below, for the first quarter of 2013,2014, changes made to the Regulated companies’ rates did not have a material impact on their earnings, financial position, or cash flows.  For further information, see "Financial“Financial Condition and Business Analysis Regulatory Developments and Rate Matters"Matters” included in Item 7, "Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations," of the NU 20122013 Annual Report on Form 10-K.


Major Storms:Connecticut:


2013, 2012 and 2011 Major Storms:  In 2012 and 2011, CL&P NSTAR Electric, PSNH and WMECO each experienced significant storms that impacted their service territories, including Tropical2014 Storm Irene, the October snowstorm, and Storm Sandy.


On February 8, 2013, a blizzard caused damage to CL&P’s and NSTAR Electric’s electric delivery systems.  Approximately 71,000 and 320,000 of CL&P’s and NSTAR Electric's distribution customers, respectively, were without power as a result of damages caused by this blizzard.Order:  In addition to the blizzard, a major storm impacted CL&P’s service territory in the first quarter of 2013.


As of March 31, 2013, the estimated storm restoration costs deferred for future recovery at CL&P, NSTAR Electric, PSNH, and WMECO were as follows:


(Millions of Dollars)

 

2012
and 2011

 

2013

 

Total

 

CL&P

 

$

465.3

 

$

32.4

 

$

497.7

 

NSTAR Electric

 

65.4

 

80.4

 

145.8

 

PSNH

 

33.3

 

2.6

 

35.9

 

WMECO

 

35.9

 

-

 

35.9

 

Total

 

$

599.9

 

$

115.4

 

$

715.3

 


The magnitude of these storm restoration costs met the criteria for cost deferral in Connecticut, New Hampshire, and Massachusetts and as a result, the storms had no material impact on the results of operations of CL&P, NSTAR Electric, PSNH and WMECO.  We believe our response to all of these storms was prudent and therefore we believe it is probable that CL&P, NSTAR Electric, PSNH and WMECO will be allowed to recover the deferred storm restoration costs.  Each operating company will seek recovery of its estimated deferred storm restoration costs through its applicable regulatory recovery process.  


Connecticut March 2013 Storm Filing:  On March 28, 2013, CL&P filed a request with PURA for approval to recover thestorm restoration costs ofassociated with five major storms, all of which occurred in 20122011 and 2011.2012.  CL&P requested approval of approximately $462 million in prudently incurred&P’s deferred storm restoration costs.costs associated with these major storms totaled $462 million.  Of that amount, approximately $414 million is subject to recovery in rates after giving effect to CL&P’s agreement to forego the recovery of $40 million of previously deferred storm restoration costs associated with Tropical Storm Irene and the October snowstorm under the merger-related PURA-approved Connecticut comprehensive settlement agreement (Connecticut settlement agreement), as well as an existing storm reserve fund balance of approximately $8 million.  TheDuring the second half of 2013, the PURA proceeded with the storm reserve fund balance is an accumulationrecovery review issuing discovery requests, holding hearings and ultimately on March 12, 2014, issuing a final decision on the level of amounts previously collected from customersstorm costs recovery.

In its final decision, the PURA approved recovery of $365 million of deferred storm restoration costs and ordered CL&P to capitalize approximately $18 million of the deferred storm restoration costs as utility plant, which will be recovered through depreciation expense in future rate proceedings.  PURA will allow recovery of the $365 million with carrying charges in CL&P’s existing distribution rate structure.  CL&P is seeking to recover the $414 million, plus carrying costs, in its distribution rates over a six-year period beginning on December 1, 2014,2014.  The remaining costs were either disallowed or we believe will be recovered from other sources.  These costs did not have a material impact on CL&P’s financial position, results of operations or cash flows.

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Table of Contents

New Hampshire:

Generation:  In 2013, the NHPUC opened a docket to investigate market conditions affecting PSNH’s ES rate, how PSNH will maintain just and reasonable rates in accordancelight of those conditions, and any impact of PSNH’s generation ownership on the New Hampshire competitive electric market.  In a 2013 NHPUC staff report accepted by the NHPUC, the NHPUC staff recommended that the NHPUC examine whether default service rates remain sustainable on a going forward basis, define “just and reasonable” with respect to default service in the Connecticut settlement agreement.


Massachusetts Marchcontext of competitive retail markets, analyze the current and expected value of PSNH’s generating units, and identify means to mitigate and address stranded cost recovery.  In October 2013, Storm Filing:  the New Hampshire Legislative Oversight Committee on Electric Utility Restructuring (Oversight Committee) requested that the NHPUC conduct an analysis to determine whether it is now in the economic interest of PSNH’s retail customers for PSNH to divest its interest in generation plants.  On MarchNovember 1, 2013, NSTAR Electric filedthe Oversight Committee asked for a request with the DPU for approval to recover approximately $35 million of prudently incurred storm restoration costs, plus carrying costs, related to Tropical Storm Irene and the October snowstorm.  NSTAR Electric is seeking to recover these costs in its distribution rates over a five-year period beginning on Januarypreliminary report by April 1, 2014 that would include a third party valuation of PSNH’s generating assets and a report from NHPUC staff members concerning customers’ economic interests in accordance withthose generating assets.

On April 1, 2014, the merger-related DPU-approved Massachusetts comprehensive settlement agreement.  




49



NSTAR Electric intendsNHPUC staff issued a “Preliminary Status Report Addressing the Economic Interest of PSNH’s Retail Customers as it Relates to filethe Potential Divestiture of PSNH’s Generating Plants”, which included a proposal withconsultant’s analysis of the DPU infair market value of PSNH generating assets and long-term power purchase contracts.  The consultant’s analysis estimated the latter halffair market value of 2013 for approval to recover the estimated deferred storm restoration costs, which was estimatedPSNH’s generation assets to be approximately $108$225 million as of MarchDecember 31, 2013 relatedand compared that amount to Storm Sandy,a stated net book value of $660 million, implying potential “stranded costs” in excess of $400 million.  NHPUC staff made three recommendations: (1) that any further actions relating to PSNH’s generating assets await a final decision in the February 2013 blizzard,Clean Air Project (scrubber) prudence proceeding; (2) that existing laws regarding divestiture, energy service, and other 2012 storms.


New Hampshire:  On April 30, 2013,cost recovery be harmonized; and (3) that ISO-NE provide input on the economic and reliability consequences of retirement of PSNH’s fossil generating plants.  In the event of generation asset divestiture or retirement, both present law and the PSNH filed a request withRestructuring Settlement Agreement approved in 2000 require that the NHPUC provide stranded cost recovery to increase distribution rates by $12.6 million,effective July 1, 2013.  The increase primarily consistsPSNH.  We continue to believe all costs and generation investments are probable of $7.7 million associated with net plant additions and a $5 million increase to the current level of funding for the Major Storm Cost reserve.  The requested items are consistent with the NHPUC approved 2010 distribution rate case decision.  We expect the NHPUC to issue an order on PSNH’s request in June 2013.  recovery.


Critical Accounting Policies


The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and, at times, difficult, subjective or complex judgments.  Changes in these estimates, assumptions and judgments, in and of themselves, could materially impact our financial position, results of operations or cash flows.  Our management communicates to and discusses with the Audit Committee of our Board of Trustees significant matters relating to critical accounting policies.  Our critical accounting policies that we believed were the most critical in nature were reported in NU’s 2012the NU 2013 Form 10-K.  There have been no material changes with regard to these critical accounting policies.


Other Matters


Accounting Standards Recently Adopted:  For information regarding new accounting standards, see Note 1B, “Summary of Significant Accounting Policies — Recently Adopted Accounting Standards,” to the financial statements.

Contractual Obligations and Commercial Commitments:  There have been no material contractual obligations identified and no material changes with regard to the contractual obligations and commercial commitments previously disclosed in the NU 20122013 Form 10-K.


Web Site:  Additional financial information is available through our web site atwww.nu.com.


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50



RESULTS OF OPERATIONS NORTHEAST UTILITIES AND SUBSIDIARIES


The following table provides the amounts and variances in operating revenues and expense line items for the condensed consolidated statements of income for NU included in this Quarterly Report on Form 10-Q for the three months ended March 31, 20132014 and 2012.  The three months ended March 31, 2013 amounts include the operations of NSTAR:  2013:


 

Operating Revenues and Expenses

 

 

 

Operating Revenues and Expenses

 

 

 

For the Three Months Ended March 31,

 

For the Three Months Ended March 31,

 

 

 

 

 

 

Increase/

 

 

 

(Millions of Dollars)

(Millions of Dollars)

2013 

 

2012 

 

Increase

 

Percent

 

 

 

2014

 

2013

 

(Decrease)

 

Percent

 

Operating Revenues

Operating Revenues

$

 1,995.0 

 

$

 1,099.6 

 

$

 895.4 

 

 81.4 

%

 

 

$

2,290.6

 

$

1,995.0

 

$

295.6

 

14.8

%

Operating Expenses:

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

 747.8 

 

 395.3 

 

 352.5 

 

 89.2 

 

 

Operations and Maintenance

 

 346.1 

 

 262.0 

 

 84.1 

 

 32.1 

 

 

Depreciation

 

 155.0 

 

 80.8 

 

 74.2 

 

 91.8 

 

 

Amortization of Regulatory Assets, Net

 

 54.0 

 

 5.4 

 

 48.6 

 

(a)

 

 

Amortization of Rate Reduction Bonds

 

 34.5 

 

 18.3 

 

 16.2 

 

 88.5 

 

 

Energy Efficiency Programs

 

 105.8 

 

 37.3 

 

 68.5 

 

(a)

 

 

Taxes Other Than Income Taxes

 

 132.9 

 

 

 86.1 

 

 

 46.8 

 

 54.4 

 

 

 

Total Operating Expenses

 

 1,576.1 

 

 

 885.2 

 

 

 690.9 

 

 78.1 

 

 

Purchased Power, Fuel and Transmission

 

978.2

 

747.8

 

230.4

 

30.8

 

Operations and Maintenance

 

351.7

 

346.1

 

5.6

 

1.6

 

Depreciation

 

150.8

 

155.0

 

(4.2

)

(2.7

)

Amortization of Regulatory Assets, Net

 

57.9

 

54.0

 

3.9

 

7.2

 

Amortization of Rate Reduction Bonds

 

 

34.5

 

(34.5

)

(100.0

)

Energy Efficiency Programs

 

138.8

 

105.8

 

33.0

 

31.2

 

Taxes Other Than Income Taxes

 

145.5

 

132.9

 

12.6

 

9.5

 

Total Operating Expenses

 

1,822.9

 

1,576.1

 

246.8

 

15.7

 

Operating Income

Operating Income

$

 418.9 

 

$

 214.4 

 

$

 204.5 

 

 95.4 

%

 

 

$

467.7

 

$

418.9

 

$

48.8

 

11.6

%

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Percent greater than 100 percent not shown as it is not meaningful.  

 


Operating Revenues

 

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013 

 

2012 

 

Increase

 

Percent

 

Electric Distribution

$

 1,374.2 

 

$

 786.0 

 

$

 588.2 

 

 74.8 

%

Natural Gas Distribution

 

 361.8 

 

 

 139.0 

 

 

 222.8 

 

(a)

 

 

Total Distribution

 

 1,736.0 

 

 

 925.0 

 

 

 811.0 

 

 87.7 

 

Transmission

 

 239.5 

 

 

 162.8 

 

 

 76.7 

 

 47.1 

 

 

Total Regulated Companies

 

 1,975.5 

 

 

 1,087.8 

 

 

 887.7 

 

 81.6 

 

Other and Eliminations

 

 19.5 

 

 

 11.8 

 

 

 7.7 

 

 65.3 

 

Total Operating Revenues

$

 1,995.0 

 

$

 1,099.6 

 

$

 895.4 

 

 81.4 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Percent greater than 100 percent not shown as it is not meaningful.  


A summary of our retail electric sales and firm natural gas sales were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2013 

 

2012 

 

Increase

 

Percent

 

Retail Electric Sales in GWh

 13,796 

 

 8,271 

 

 5,525 

 

 66.8 

%

Firm Natural Gas Sales in Million Cubic Feet

 40,615 

 

 16,819 

 

 23,796 

 

(a)

 

 

 

 

 

 

 

 

 

 

 

(a) Percent greater than 100 percent not shown as it is not meaningful.


Our Operating Revenues

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Increase

 

Percent

 

Electric Distribution

 

$

1,585.9

 

$

1,374.2

 

$

211.7

 

15.4

%

Natural Gas Distribution

 

432.8

 

361.8

 

71.0

 

19.6

 

Total Distribution

 

2,018.7

 

1,736.0

 

282.7

 

16.3

 

Transmission

 

252.1

 

239.5

 

12.6

 

5.3

 

Total Regulated Companies

 

2,270.8

 

1,975.5

 

295.3

 

14.9

 

Other and Eliminations

 

19.8

 

19.5

 

0.3

 

1.5

 

Total Operating Revenues

 

$

2,290.6

 

$

1,995.0

 

$

295.6

 

14.8

%

A summary of our retail electric sales and firm natural gas sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2014

 

2013

 

Increase

 

Percent

 

Retail Electric Sales in GWh

 

14,348

 

13,796

 

552

 

4.0

%

Firm Natural Gas Sales in Million Cubic Feet

 

46,917

 

40,615

 

6,302

 

15.5

 

Operating revenues increased $295.6 million compared to the first quarter of 2013.  The increase in revenue reflects higher retail electric and firm natural gas sales volumes as a result of the significantly colder than normal winter temperatures and the overall impact of higher wholesale energy costs in New England.  The wholesale energy markets were impacted by higher natural gas transportation costs which, in addition to its impact on the cost of natural gas purchased on behalf of our retail natural gas customers, had an adverse impact on the cost of purchased electric energy for our retail electric customers.  Fluctuations on wholesale energy costs are recovered from customers in rates and therefore have no impact on earnings.

As noted above, the increase in distribution revenues reflect an increase of approximately 4 percent in retail electric sales and 15.5 percent in firm natural gas sales.  The increase in sales volumes was driven primarily by the cold winter weather experienced throughout our service territories in the first quarter of 2014.  The winter was significantly colder than both normal and last year throughout New England.  Weather-normalized retail electric sales (based on 30-year average temperatures) increased 1.3 percent in the first quarter of 2014, as compared to the same period in 2013, reflecting a steady improvement in economic conditions across our service territory.  Weather-normalized total firm natural gas sales increased 3.6 percent in the first quarter of 2014, as compared to the same period in 2013, due primarily to residential and commercial customer growth.

The positive impacts on sales volume were partially offset by customer savings due to the impact of our respective utility-sponsored energy efficiency programs.  Certain utility operating companies are permitted to bill customers for lost base revenues related to reductions in sales volume as a result of their energy efficiency.  In the first quarter of 2014, the recognition of lost base revenues increased $4.8 million compared to the first quarter of 2013.

The increase in transmission revenues, net of applicable eliminations, reflects the recovery of higher transmission expenses including ongoing investments in our transmission infrastructure.

46



Table of Contents

Purchased Power, Fuel and Transmission increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to the addition of NSTAR, which included electric distribution revenues of approximately $530 million, transmission revenues of approximately $60 million, natural gas revenues of approximately $200 millionfollowing:

(Millions of Dollars)

 

Increase/(Decrease)

 

Electric distribution segment fuel and energy supply costs

 

$

238.8

 

Firm natural gas sales related costs

 

33.9

 

Transmission segment costs

 

35.2

 

Other and eliminations

 

11.1

 

Partially offset by:

 

 

 

Electric distribution segment deferred fuel costs

 

(88.6

)

 

 

$

230.4

 

Operations and other revenues of approximately $10 million, and the consolidation of CYAPC and YAEC revenues of approximately $15 million.  Excluding the impact of NSTAR's operations and the consolidation of CYAPC and YAEC, our Operating Revenues Maintenance increased due to the following:


·

Higher electric distribution segment revenues related to the portions that are included in regulatory commission approved tracking mechanisms that recover certain incurred costs and do not impact earnings.  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections recovered from customers in future periods.  The tracked electric distribution revenues increased due primarily to higher retail transmission revenues ($34.6 million), higher energy related revenues ($27.2 million) and higher federally mandated congestion charge delivery-related revenues ($8.6 million).  Partially offsetting these increases were lower generation service revenues ($10.1 million), lower stranded cost recovery revenues ($9.1 million) and lower combined public benefits charge revenues ($4.2 million).


·

An increase in natural gas segment revenues due primarily to a 15.1 percent increase in Yankee Gas' sales volume related to colder weather in the first quarter of 2013,2014, as compared to the first quarter of 2012.


·

The portion of electric distribution segment revenues that impacts earnings increased $15 million2013, due primarily to a 4.7 percentthe following:

(Millions of Dollars)

 

Increase/(Decrease)

 

Electric Distribution:

 

 

 

Bad debt expense

 

$

6.9

 

General and administrative

 

7.4

 

Pension and employee benefit costs

 

(15.3

)

Storm costs

 

(5.3

)

Total Electric Distribution

 

(6.3

)

Total Natural Gas Distribution

 

4.1

 

Total Distribution

 

(2.2

)

Total Transmission maintenance costs

 

2.4

 

Other and eliminations:

 

 

 

Integration and severance costs

 

6.9

 

Other

 

(1.5

)

Total Operations and Maintenance

 

$

5.6

 

The Operations and 2.8 percentMaintenance expense increase in sales volume at CL&Pof $5.6 million includes costs that are recovered through cost tracking mechanisms, which have no earnings impact.  The Operations and PSNH, respectively, related to colder weatherMaintenance expenses that are recovered through base distribution rates (and therefore impact earnings) decreased $3.7 million in the first quarter of 2013,2014, as compared to the first quarter of 2012.2013, due primarily to a decrease in pension and employee benefit costs.




51



·

Improved transmission segment revenues resulting from a higher level of investment in transmission infrastructure and the recovery of higher overall expenses, which are tracked and result in a related increase in revenues.  The increase in expenses is directly related to the increase in transmission plant, primarily at WMECO, including costs associated with higher property taxes, depreciation and operation and maintenance expenses.


Purchased Power, Fuel and TransmissionDepreciation increaseddecreased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to the following:


(Millions of Dollars)

Increase/(Decrease)

The addition of NSTAR's operations

$

321.4 

Higher fuel costs and higher transmission costs at PSNH

20.0 

An increase related to higher sales at Yankee Gas

13.3 

Higher transmission costs, deferred fuel costs and CfD costs, partially offset by
  lower GSC supply costs

8.4 

Other and eliminations

(10.6)

$

352.5 


Operations and Maintenanceincreaseda decrease in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to the following:


(Millions of Dollars)

Increase/(Decrease)

The addition of NSTAR’s operations

$

123.6 

Partially offset by lower:

  Electric distribution segment costs

(11.9)

  General and administrative costs

(7.2)

  Transmission segment costs

(5.1)

  NU’s unregulated contracting business costs

(2.2)

  PSNH’s generation business costs

(1.9)

  Natural gas segment operating costs

(1.6)

  Other and eliminations

(9.6)

$

84.1 


Depreciationincreased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to the addition of NSTAR's utility plant balances ($54.2 million) and an increase as a result of the consolidation of CYAPC and YAEC decommissioning collections ($13.712.5 million).  Excluding the impact of NSTAR and the consolidation of CYAPC and YAEC, depreciation increased due primarily, partially offset by an increase related to higher utility plant balances resulting from completed construction projects placed into service.service ($8.3 million).


Amortization of Regulatory Assets, Net increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to the addition of NSTAR’s amortization ($45.8 million).following:


(Millions of Dollars)

 

Increase/(Decrease)

 

Recovery of transition costs at NSTAR Electric

 

$

(31.2

)

Increases in the SCRC, ES and TCAM amortizations at PSNH

 

15.7

 

Amortization related to deferred energy efficiency program costs at CL&P

 

14.3

 

Other

 

5.1

 

 

 

$

3.9

 

Amortization of RRBsRate Reduction Bonds increased decreased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to the additionmaturity in 2013 of RRBs of NSTAR Electric’s amortization ($15.1 million).Electric, PSNH, and WMECO.


Energy Efficiency Programs increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to an increase in energy efficiency costs in accordance with the addition of NSTAR's operations ($68.6 million).  three-year program guidelines established by the DPU at NSTAR Electric and WMECO and expanded energy conservation programs at CL&P in 2014.  All costs are fully recovered through approved tracking mechanisms and therefore do not impact earnings.


Taxes Other Than Income Taxes increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to the addition of NSTAR's operations ($37.8 million).  In addition, there was an increase in property taxes ($7.5 million) as a result of both an increase in Property, Plantutility plant balances and Equipment related to our regulated capital programsproperty tax rates, and an increase in the propertyConnecticut gross earnings tax rates.($6 million) attributable to an increase in retail revenues.


Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

Increase/

 

 

 

(Millions of Dollars)

2013

 

2012

 

(Decrease)

 

Percent

 

Interest on Long-Term Debt

$

85.3 

 

$

60.0

 

$

25.3 

 

42.2 

%

Interest on RRBs

 

0.6 

 

 

1.4

 

 

(0.8)

 

(57.1)

 

Other Interest

 

(9.6)

 

 

5.0

 

 

(14.6)

 

(a)

 

 

 

$

76.3 

 

$

66.4

 

$

9.9 

 

14.9 

%


(a) Percent greater than 100 percent is not shown as it is not meaningful.


Interest Expense increased $13.7 million in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to the additionabsence of NSTAR's operations ($22 million).  Offsetting the impact of NSTAR’s operations, Other Interest decreased due primarily to a favorable impact from the resolution of a state income tax audit in the first quarter of 2013.2013 ($8.8 million) and lower interest income on deferred transition costs ($4.5 million).




52






Other Income, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013 

 

2012 

 

Decrease

 

Percent

 

Other Income, Net

$

7.8

 

$

8.8

 

$

(1.0)

 

(11.4)

%


Other Income, Net decreased $6.1 million in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to lower AFUDC related to equity funds ($1.3 million) and lower netmark-to-market gains on the NU supplemental benefit trustassociated with marketable securities held in 2013 ($0.6 million), partially offset by the additiontrust.

47



Table of NSTAR ($0.9 million).Contents


Income Tax Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013

 

2012 

 

Increase

 

Percent

 

Income Tax Expense

$

120.5

 

$

56.0

 

$

64.5

 

(a)

%


(a) Percent greater than 100 percent is not shown as it is not meaningful.Income Tax Expense


 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Increase

 

Percent

 

Income Tax Expense

 

$

141.5

 

$

120.5

 

$

21.0

 

17.4

%

Income Tax Expense increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to an increase inhigher pre-tax earnings ($52.8 million NSTAR, $12.8 million CL&P and $4.6 million other affiliates)13.1 million), partially offset by athe absence of the favorable impact from the resolution of a state income tax audit in the first quarter of 2013 ($4.8 million), and higher state taxes ($3.7 million).



5348



Table of Contents




RESULTS OF OPERATIONS THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARY


The following table provides the amounts and variances in operating revenues and expense line items for the consolidatedcondensed statements of income for CL&P included in this Quarterly Report on Form 10-Q for the three months ended March 31, 20132014 and 2012:  2013:


 

 

Operating Revenues and Expenses

 

 

Operating Revenues and Expenses

 

For the Three Months Ended March 31,

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

(Millions of Dollars)

2013 

 

2012 

 

Increase/

 

Percent

 

 

2014

 

2013

 

Increase

 

Percent

 

(Decrease)

 

Operating Revenues

Operating Revenues

$

 624.1 

 

$

 592.0 

 

$

 32.1 

 

 5.4 

%

 

$

734.6

 

$

624.1

 

$

110.5

 

17.7

%

Operating Expenses:

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased Power and Transmission

 

 229.3 

 

 220.9 

 

 8.4 

 

 3.8 

 

Operations and Maintenance

 

 108.9 

 

 132.9 

 

 (24.0)

 

 (18.1)

 

Depreciation

 

 42.4 

 

 41.1 

 

 1.3 

 

 3.2 

 

Amortization of Regulatory Assets, Net

 

 10.8 

 

 8.0 

 

 2.8 

 

 35.0 

 

Energy Efficiency Programs

 

 22.8 

 

 21.9 

 

 0.9 

 

 4.1 

 

Taxes Other Than Income Taxes

 

 60.2 

 

 

 55.3 

 

 

 4.9 

 

 8.9 

 

 

Total Operating Expenses

 

 474.4 

 

 

 480.1 

 

 

 (5.7)

 

 (1.2)

 

Purchased Power and Transmission

 

281.4

 

229.3

 

52.1

 

22.7

 

Operations and Maintenance

 

109.5

 

108.9

 

0.6

 

0.6

 

Depreciation

 

46.1

 

42.4

 

3.7

 

8.7

 

Amortization of Regulatory Assets, Net

 

29.9

 

10.8

 

19.1

 

(a)

 

Energy Efficiency Programs

 

42.7

 

22.8

 

19.9

 

87.3

 

Taxes Other Than Income Taxes

 

67.0

 

60.2

 

6.8

 

11.3

 

Total Operating Expenses

 

576.6

 

474.4

 

102.2

 

21.5

 

Operating Income

Operating Income

$

 149.7 

 

$

 111.9 

 

$

 37.8 

 

 33.8 

%

 

$

158.0

 

$

149.7

 

$

8.3

 

5.5

%


Operating Revenues

 

 

 

 

 

 

 

 

CL&P's retail sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2013 

 

2012 

 

Increase

 

Percent

 

Retail Sales in GWh

 5,681 

 

 5,427 

 

 254 

 

 4.7 

%



(a) Percent greater than 100 percent not shown as it is not meaningful.

Operating Revenues

CL&P's&P’s retail sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2014

 

2013

 

Increase

 

Percent

 

Retail Sales in GWh

 

5,949

 

5,681

 

268

 

4.7

%

CL&P’s Operating Revenuesrevenues increased $110.5 million compared to the first quarter of 2013.  The increase in revenue reflects higher retail sales volumes as a result of the significantly colder than normal winter temperatures and the overall impact of higher wholesale energy costs in New England.  The wholesale energy markets were impacted by higher natural gas transportation costs, which had an adverse impact on the cost of purchased electric energy for our retail customers.  Fluctuations on wholesale energy costs are recovered from customers in rates and therefore have no impact on earnings.

As noted above, the increase in base distribution revenues reflects an increase of 4.7 percent in retail sales.  This increase was due primarily to the colder winter weather experienced in the first quarter of 2014, when the average daily temperature was 5 degrees lower than the same period in 2013.

The increase in transmission revenues reflects recovery of higher transmission expenses including ongoing investments in our transmission infrastructure.

Purchased Power and Transmission increased in the first quarter of 2013,2014, as compared to the first quarter of 2012, due primarily to:


·

A $26.7 million increase in distribution revenues related to the portions that are included in PURA approved tracking mechanisms that recover certain incurred costs and do not impact earnings.  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections recovered from customers in future periods.  The tracked distribution revenues increased due primarily to higher retail transmission revenues ($28.1 million), higher federally mandated congestion charge delivery-related revenues ($8.6 million) and higher other tracked revenues.  Partially offsetting these increases were lower generation service revenues ($10.1 million) and lower combined public benefits charge revenues ($4.2 million).


·

A $10.2 million increase in the portion of distribution revenues that impacts earnings in the first quarter of 2013, as compared to the first quarter of 2012, due primarily toa 4.7 percent increase in sales volume due to colder weather in the first quarter of 2013, as compared to the first quarter of 2012.


·

A $4.8 million increase in transmission revenues resulting from an increased level of investment in transmission infrastructure and the recovery of higher overall expenses, which are subject to tracking mechanisms or processes and result in a related increase in revenues.  The increase in expenses is directly related to the increase in transmission plant, including costs associated with higher property taxes, depreciation, and operation and maintenance expenses.


Purchased Power and Transmission increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to the following:


(Millions of Dollars)

Increase/(Decrease)

Transmission Costs

$

17.9 

Deferred Fuel Costs

 

 

Three Months Ended

 

(Millions of Dollars)

 

Increase/(Decrease)

 

GSC Supply Costs

 

$

101.1

 

Transmission Costs

 

6.5

 

Deferred Fuel Costs

 

(55.8

)

Other

 

0.3

 

 

 

$

52.1

 

 

6.3 

CfD Costs

5.2 

GSC Supply Costs

(15.7)

Purchased Power Contracts

(5.2)

Other

(0.1)

$

8.4 


The increase in transmission costs was the result of an increase in the amortization of a retail transmission deferral.  The decrease in GSC supply costs was due primarily to lowerhigher average supply prices.  Theprices and an increase in GSC supply costsloads as a result of an increase in retail sales and customers returning to standard offer from third party suppliers.   On July 1, 2013, CL&P began to procure approximately 30 percent of GSC load.  Costs associated with the remaining 70 percent of the GSC load are the contractual amounts CL&P must pay to various suppliers that have been awarded the right to supply SS and LRS load through a competitive solicitation process.  TheseThe increase in transmission costs was the result of an increase in the retail transmission deferral, which reflects the actual costs of transmission service compared to estimated billed amounts.  The decrease in deferred fuel costs was due primarily to higher average supply prices, as compared to prices projected when standard service rates were set. Purchased Power and Transmission costs are included in PURA approvedregulatory-approved tracking mechanisms and do not impact earnings.


Operations and Maintenance decreasedincreased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to lowerhigher bad debt expense ($5.5 million), higher distribution maintenance ($7.9 million).  The mild weather in the first quarter of 2012 allowed CL&P to perform its annual inspections and maintenance ahead of schedule, while the colder than normal weather, as well as two majors storms, in the first quarter of 2013, precluded CL&P from performing these procedures ahead of schedule.  Management expects these routine maintenance procedures to be performed in 2013.  Other costs that impacted the reduction in Operations and Maintenance included lower distribution and



54



transmission business expenses as a result of lower general and administrative expensescosts ($7.92.3 million), higher routine maintenance costs ($1.5 million), and lower other routine operating costs.  costs ($1 million).  Offsetting these increases was a decrease in pension and PBOP costs ($9.7 million).


Amortization of Regulatory Assets, NetDepreciation increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to lower CTA transition costs ($5.3 million) and higher CTA revenues ($3.2 million).  Partially offsetting these impacts were lower retail SBC revenues ($5.2 million).utility plant balances resulting from completed construction projects placed into service.


Taxes Other Than Income TaxesAmortization of Regulatory Assets, Net increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to an increase in amortization expense related to previously deferred congestion charges.

49



Table of Contents

Energy Efficiency Programs increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to expanded energy conservation programs in 2014.  All costs are fully recovered through PURA-approved tracking mechanisms and therefore do not impact earnings.

Taxes Other Than Income Taxes increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to an increase in property taxes as a result of both an increase in utility plant balances and property tax rates ($3.9 million).  In addition, there was an increase in the Connecticut gross earnings tax ($2.6 million) attributable to an increase in gross earnings and an increaseretail revenues ($3.6 million).

Interest Expense increased $4.5 million in property taxes ($1.9 million) as a result of an increase in Property, Plant and Equipment related to CL&P’s capital program and an increase in the property tax rates.


Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

Increase/

 

 

 

(Millions of Dollars)

2013

 

2012

 

(Decrease)

 

Percent

 

Interest on Long-Term Debt

$

32.6 

 

$

31.5

 

$

1.1 

 

3.5 

%

Other Interest

 

(2.9)

 

 

2.0

 

 

(4.9)

 

(a)

 

 

 

$

29.7 

 

$

33.5

 

$

(3.8)

 

(11.3)

%


(a) Percent greater than 100 percent not shown since it is not meaningful.


Other Interest decreased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to athe absence in 2014 of the favorable impact from the resolution of a state income tax audit in the first quarter of 2013.


Other Income, Net

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013

 

2012

 

Decrease

 

Percent

 

Other Income, Net

$

4.2

 

$

5.3

 

$

(1.1)

 

(20.8)

%


Other Income, Net decreased $3.1 million in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to lower AFUDC related to equity funds ($0.6 million) and lower netmark-to-market gains on the NU Supplemental benefit trust ($0.4 million).associated with marketable securities held in trust.


Income Tax Expense

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013

 

2012

 

Increase

 

Percent

 

Income Tax Expense

$

39.2

 

$

29.7

 

$

9.5

 

32.0

%


 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Increase

 

Percent

 

Income Tax Expense

 

$

45.5

 

$

39.2

 

$

6.3

 

16.1

%

Income Tax Expense increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to an increasethe absence in pre-tax earnings ($12.8 million), partially offset by a2014 of the favorable impact from the resolution of a state income tax audit in the first quarter of 2013 ($2.9 million), higher pre-tax earnings ($1.6 million), and higher state taxes ($0.9 million).


LIQUIDITYEARNINGS SUMMARY


 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Net Income

 

$

79.3

 

$

85.0

 

CL&P’s earnings decreased $5.7 million in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to the absence in 2014 of the favorable impact from the resolution of a state income tax audit in the first quarter of 2013 and higher property tax expense and depreciation.  Partially offsetting these unfavorable earnings impacts were higher retail electric sales due primarily to colder weather in the first quarter of 2014, as compared to the first quarter of 2013.

LIQUIDITY

CL&P had cash flows provided by operating activities of $95.5 million in the first quarter of 2014, compared with $26.4 million in the first quarter of 2013, compared with cash flows used in operating activities of $47.1 million in the first quarter of 2012.2013.  The improved cash flows were due primarily to the absence of cash disbursements for major storm restoration costs in the first quarter of 2014, as compared to the first quarter of 2013, and income tax refunds of approximately $132$11.7 million in cash disbursements for storm costs associated with Tropical Storm Irene and the October snowstorm in the first quarter of 2012, the absence of approximately $27 million in 2012 CL&P customer bill credits, the favorable cash flow impacts associated with transmission regulatory tracking mechanisms of $16.1 million, and income tax refunds of2014, as compared to $1.6 million in the first quarter of 2013, compared with income tax payments of $9.2 million in the first quarter of 2012.  Partially offsetting improvedpartially offset by an unfavorable cash flows was the change inflow impact relating to traditional working capital amounts principally due to the changes in timing of accounts payable, accounts receivablereceivables.

Investments in Property, Plant and accrued liabilities.  


Cash capital expenditures includedEquipment on the accompanying consolidated statements of cash flows do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension expense.  CL&P’s cash capital expenditures totaled $89.4 million inIn the first quarter of 2013, compared with $108.8 million in the first quarter of 2012.2014, investments for CL&P were $108 million.


On January 15, 2013,April 24, 2014, CL&P issued $400$250 million of 2.54.30 percent first mortgage bonds that will2014 Series A First Mortgage Bonds, due to mature on January 15, 2023.in April 2044.  The proceeds, net of issuance costs, were used to repay short-term borrowings from NU parent.

NU parent and certain of its subsidiaries, including CL&P’s&P, are parties to a joint five-year $1.45 billion revolving credit facility borrowings of $89 million and intercompany loans relateddue to NU'sexpire on September 6, 2018.  The revolving credit facility is to be used primarily to backstop the $1.45 billion commercial paper program borrowingsat NU parent.  The commercial paper program allows NU parent to issue commercial paper as a form of $305.8 million.short-term debt to its subsidiaries, including CL&P.  As of March 31, 2014 and December 31, 2013, there were intercompany loans from NU parent of $351.6 million and $287.3 million, respectively, to CL&P.


Additional financing activities in the first quarter of 20132014 included $38$42.8 million in common stock dividends paid to NU parentparent.

On January 31, 2014, Moody’s upgraded corporate credit and an increase in intercompany short-term borrowingssecurities ratings of $111.1 million, which was offsetCL&P by one level.  On April 7, 2014, Fitch affirmed the $394.8 million pay down of commercial paper and revolver borrowings described above.


CL&P uses available capital resources to fund its construction expenditures, meet debt requirements, pay costs, including storm-related costs, pay dividends and fund other corporate obligations.  The current growth in CL&P’s transmission construction expenditures



55



utilizes a significant amount of cash for projects that have a long-term return on investment and recovery period.  In addition, CL&P operates in an environment where recovery of its electric construction expenditures takes place over an extended period of time.  This impacts the timing of the revenue stream designed to fully recover the total investment plus a return on the equity portion of the cost and related financing costs.  These factors have resulted in CL&P’s current liabilities exceeding current assets by approximately $231 million as of March 31, 2013.


As of March 31, 2013, approximately $125 million of CL&P's current liabilities relates to long-term debt that will be paid in the next 12 months.  CL&P, with its strong credit ratings, has several options available in the financial markets to repay or refinance this maturity with the issuance of new long-term debt.  CL&P will reduce its short-term borrowings with cash received from operating cash flows or with the issuance of new long-term debt, as deemed appropriate given its capital requirements and maintenance of its credit rating and profile.  Management expects the future operating cash flowsoutlook of CL&P, along with the access to financial markets, will be sufficient to meet any future operating requirements and capital investment forecasted opportunities.&P.


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56




RESULTS OF OPERATIONS NSTAR ELECTRIC COMPANY AND SUBSIDIARIESSUBSIDIARY


The following table  provides the amounts and variances in operating revenues and expense line items for the condensed consolidated statements of income for NSTAR Electric included in this Quarterly Report on Form 10-Q for the three months ended March 31, 20132014 and 2012:  2013:


 

Operating Revenues and Expenses
For the Three Months Ended March 31,

 

 

 

Operating Revenues and Expenses

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013 

 

2012 

 

Increase/

 

Percent

 

(Decrease)

 

 

2014

 

2013

 

Increase/
(Decrease)

 

Percent

 

Operating Revenues

Operating Revenues

$

 592.3 

 

$

 556.5 

 

$

35.8 

 

 6.4 

%

 

$

666.2

 

$

592.3

 

$

73.9

 

12.5

%

Operating Expenses:

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased Power and Transmission

 

 214.1 

 

 

 219.0 

 

 

(4.9)

 

 (2.2)

 

Operations and Maintenance

 

 92.3 

 

 

 148.2 

 

 

(55.9)

 

 (37.7)

 

Depreciation

 

 45.4 

 

 

 42.5 

 

 

2.9 

 

 6.8 

 

Amortization of Regulatory Assets, Net

 

 47.0 

 

 

 23.9 

 

 

23.1 

 

 96.7 

 

Amortization of Rate Reduction Bonds

 

 15.1 

 

 

 22.6 

 

 

(7.5)

 

 (33.2)

 

Energy Efficiency Programs

 

 51.7 

 

 

 46.9 

 

 

4.8 

 

 10.2 

 

Taxes Other Than Income Taxes

 

 32.2 

 

 

 30.9 

 

 

1.3 

 

 4.2 

 

 

Total Operating Expenses

 

 497.8 

 

 

 534.0 

 

 

(36.2)

 

 (6.8)

 

Purchased Power and Transmission

 

319.1

 

214.1

 

105.0

 

49.0

 

Operations and Maintenance

 

85.9

 

92.3

 

(6.4

)

(6.9

)

Depreciation

 

46.6

 

45.4

 

1.2

 

2.6

 

Amortization of Regulatory Assets, Net

 

15.7

 

47.0

 

(31.3

)

(66.6

)

Amortization of Rate Reduction Bonds

 

 

15.1

 

(15.1

)

(100.0

)

Energy Efficiency Programs

 

48.3

 

51.7

 

(3.4

)

(6.6

)

Taxes Other Than Income Taxes

 

32.2

 

32.2

 

 

 

Total Operating Expenses

 

547.8

 

497.8

 

50.0

 

10.0

 

Operating Income

Operating Income

$

 94.5 

 

$

 22.5 

 

$

72.0 

 

(a)

%

 

$

118.4

 

$

94.5

 

$

23.9

 

25.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Percent greater than 100 percent not shown as it is not meaningful.


Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NSTAR Electric's retail sales were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

2013 

 

2012 

 

Increase

 

Percent

 

Retail Sales in GWh

 

 5,194 

 

 

5,090 

 

 

104 

 

 2.0 

%


Operating Revenues

NSTAR Electric'sElectric’s retail sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2014

 

2013

 

Increase

 

Percent

 

Retail Sales in GWh

 

5,358

 

5,194

 

164

 

3.2

%

NSTAR Electric’s Operating Revenuesrevenues increased $73.9 million compared to the first quarter of 2013.  The increase in revenue reflects higher retail sales volumes as a result of the significantly colder than normal winter temperatures and the overall impact of higher wholesale energy costs in New England.  The wholesale energy markets were impacted by higher natural gas transportation costs, which had an adverse impact on the cost of purchased electric energy for our retail customers.  Fluctuations on wholesale energy costs are recovered from customers in rates and therefore have no impact on earnings.

As noted above, the increase in base distribution revenues reflects a 3.2 percent increase in retail sales.  The increase in sales volume was due primarily to colder winter weather in the first quarter of 2014.  The average daily temperature in Boston was over 3 degrees lower than the first quarter of 2013.

The positive impacts on sales volume were partially offset by customer savings due to the impact of our energy efficiency programs.  NSTAR Electric is permitted to bill customers for lost base revenues related to reductions in sales volume as a result of its energy efficiency.  In the first quarter of 2014, the recognition of lost base revenues increased $4.8 million compared to the first quarter of 2013.

The increase in transmission revenues reflects recovery of higher transmission expenses including continuing transmission infrastructure investments.

Purchased Power and Transmission increased in the first quarter of 2013,2014, as compared to the first quarter of 2012, due primarily to:


·

A $25 million increase in distribution revenues related to the portions that are included in DPU approved tracking mechanisms that recover certain incurred costs and do not impact earnings.  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections recovered from customers in future periods.  This increase primarily related to higher retail transmission revenues ($14.2 million), higher transition revenues ($11.5 million), higher energy efficiency program revenues ($5.8 million), and higher PAM revenues ($1.7 million), partially offset by lower Basic Service revenues ($8.2 million).  


·

A $4.3 million increase in the portion of distribution revenues that impacts earnings.   


Purchased Powerand Transmission decreased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to the following:


(Millions of Dollars)

Increase/(Decrease)

Basic Service Costs

$

(17.9)

Transmission Costs

(Millions of Dollars)

 

Three Months Ended
Increase/(Decrease)

 

Basic Service Costs

 

$

106.8

 

Transmission Costs

 

18.8

 

Purchased Power Contracts

 

12.2

 

Deferred Fuel Costs

 

(32.8

)

 

 

$

105.0

 

 

7.8 

Deferred Fuel Costs

4.8 

Other

0.4 

$

(4.9)


The decreaseincrease in Basic Service costs was due primarily related to lowerhigher average supply prices.   The increase in transmission costs was due primarily to a higher regional rate leadingRNS expense.  The increase in purchased power contracts was due primarily to higher regional network service costs, as well as higher forward capacity market reliabilitycongestion charges.  The increasedecrease in deferred fuel costs was due primarily to lowerhigher average supply prices, as compared to the prices projected when Basic Service rates were set.  ThesePurchased Power and Transmission costs are included in DPU approvedregulatory-approved tracking mechanisms and do not impact earnings.


Operations and Maintenance decreased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to the absence of the cumulative adjustment recorded in 2012 to establish a reserve against the regulatory asset related to Basic Servicelower employee benefit costs ($6 million) and lower storm-related costs ($2 million), partially offset by higher bad debt costsexpense ($270.6 million).  In addition, first quarter 2012 adjustments were recognized for changes in accounting estimates related primarily to the allowance for doubtful accounts, workers’ compensation, employee medical benefits,, and general liability claimsother operating expenses ($18.71 million).  Also contributing to the decrease in costs was a March 2012 substation fire in theBack Bay/Prudential area of Boston ($9.5 million).  


Amortization of Regulatory Assets, NetDepreciation , increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to higher amortization related to transition costs.utility plant balances resulting from completed construction projects placed into service.



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Energy Efficiency Programs increased

Amortization of Regulatory Assets, Net decreased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to a decrease in the recovery of previously deferred transition costs.

Amortization of Rate Reduction Bonds decreased in the first quarter of 2014, as compared to the first quarter of 2013, due to the maturity of the RRBs in March 2013.

Energy Efficiency Programs decreased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to a decrease in the amortization of previously deferred costs ($8 million), partially offset by an increase in energy efficiency costs incurred in accordance with the three-year program guidelines established by the DPU ($4.6 million).  All costs are fully recovered through DPU-approved tracking mechanisms and therefore do not impact earnings.

Taxes Other Than Income Taxes remained unchanged in the first quarter of 2014, as compared to the first quarter of 2013, due to lower average municipal property tax rates, offset by an increase in property taxes as a result of an increase in utility plant balances.

Interest Expense increased $5.1 million in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to lower regulatory interest income primarily from deferred transition costs ($4.7 million), as well as higher average long-term debt outstanding.

Other Income/(Loss), Net decreased $0.8 million in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to lower gains on the deferred compensation plans.

Income Tax Expense

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Increase

 

Percent

 

Income Tax Expense

 

$

39.2

 

$

31.3

 

$

7.9

 

25.2

%

Income Tax Expense increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to higher pre-tax earnings ($6.3 million) and higher state taxes ($1.6 million).

EARNINGS SUMMARY

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Net Income

 

$

58.1

 

$

48.1

 

NSTAR Electric’s earnings increased $10 million in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to higher transmission margin, higher distribution revenues related to higher retail electric sales due primarily to colder weather in the first quarter in 2014, as compared to the first quarter of 2013, higher lost base revenues, and lower non-tracked operations and maintenance costs.  Partially offsetting these favorable earnings impacts was higher interest cost, primarily on deferred transition costs.

LIQUIDITY

NSTAR Electric had cash flows provided by operating activities of $191.4 million in the first quarter of 2014, compared with $89.4 million in the first quarter of 2013.  The increase in operating cash flows was due primarily to the absence of cash disbursements for major storm restoration costs associated with the February 2013 blizzard, a decrease in income tax payments in the first quarter of 2014, as compared to the first quarter of 2013, the absence of costs recovered in rates related to the RRBs that were fully amortized in the first quarter of 2013, and the absence of pension contributions in the first quarter of 2014, as compared to the first quarter of 2013.

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Table of Contents

RESULTS OF OPERATIONS — PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY

The following provides the amounts and variances in operating revenues and expense line items for the condensed consolidated statements of income for PSNH included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2014 and 2013:

 

 

Operating Revenues and Expenses

 

 

 

For the Three Months Ended March 31,

 

 

 

 

 

 

 

Increase/

 

 

 

(Millions of Dollars)

 

2014

 

2013

 

(Decrease)

 

Percent

 

Operating Revenues

 

$

299.8

 

$

273.8

 

$

26.0

 

9.5

%

Operating Expenses:

 

 

 

 

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

115.3

 

101.0

 

14.3

 

14.2

 

Operations and Maintenance

 

62.2

 

59.7

 

2.5

 

4.2

 

Depreciation

 

24.2

 

22.6

 

1.6

 

7.1

 

Amortization of Regulatory Assets/(Liabilities), Net

 

12.6

 

(3.1

)

15.7

 

(a)

 

Amortization of Rate Reduction Bonds

 

 

14.8

 

(14.8

)

(100.0

)

Energy Efficiency Programs

 

3.8

 

3.7

 

0.1

 

2.7

 

Taxes Other Than Income Taxes

 

17.7

 

17.0

 

0.7

 

4.1

 

Total Operating Expenses

 

235.8

 

215.7

 

20.1

 

9.3

 

Operating Income

 

$

64.0

 

$

58.1

 

$

5.9

 

10.2

%


(a) Percent greater than 100 percent not shown as it is not meaningful.

Operating Revenues

PSNH’s retail sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2014

 

2013

 

Increase

 

Percent

 

Retail Sales in GWh

 

2,076

 

1,992

 

84

 

4.2

%

PSNH’s Operating revenues increased $26 million compared to the first quarter of 2013.  The increase in revenue reflects higher retail sales volumes as a result of the significantly colder than normal winter temperatures and the overall impact of higher wholesale energy costs in New England.  The wholesale energy markets were impacted by higher natural gas transportation costs, which had an adverse impact on the cost of purchased electric energy for our retail customers.  Fluctuations on wholesale energy costs are recovered from customers in rates and therefore have no impact on earnings.

As noted above, the increase in base distribution revenues reflects an increase of 4.2 percent in retail sales.  PSNH experienced strong sales in 2014 due to colder winter weather than what was experienced in 2013.  The average daily temperature in New Hampshire was over 5 degrees lower than the first quarter of 2013.  Also reflected in this revenue increase was an increase of $3.3 million related to NHPUC-approved distribution rate increases effective July 1, 2013 as a result of a 2010 distribution rate case settlement.

The increase in transmission revenues reflects recovery of higher transmission expenses including ongoing investments in our transmission infrastructure.

Purchased Power, Fuel and Transmission increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to an increase in generation fuel costs, partially offset by lower purchased power costs due to customer migration, lower renewable energy requirements set by the NHPUC, and lower regional greenhouse gas initiative auction proceeds.  Purchased Power, Fuel and Transmission costs are included in regulatory-approved tracking mechanisms and do not impact earnings.

Operations and Maintenance increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to an increase in routine maintenance costs at the generation business ($1.2 million), an increase in routine transmission maintenance costs ($0.9 million) and higher bad debt expense ($0.6 million), partially offset by other operating costs ($0.2 million).

Depreciation increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to higher utility plant balances resulting from completed construction projects placed into service.

Amortization of Regulatory Assets/(Liabilities), Net increased in the first quarter of  2014, as compared to the first quarter of 2013, due primarily to increases in the SCRC,  ES and TCAM amortizations ($7.3 million, $4.8 million, and $6.2 million, respectively).

Amortization of Rate Reduction Bonds decreased in the first quarter of 2014, as compared to the first quarter of 2013, due to the maturity of the RRBs in May 2013.

Income Tax Expense

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Increase

 

Percent

 

Income Tax Expense

 

$

19.7

 

$

18.0

 

$

1.7

 

9.4

%

Income Tax Expense increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to higher pre-tax earnings ($1.9 million).

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Table of Contents

EARNINGS SUMMARY

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Increase

 

Net Income

 

$

32.6

 

$

29.0

 

$

3.6

 

PSNH’s earnings increased due primarily to higher generation earnings and distribution retail revenues.  The first quarter 2014 distribution retail revenues were favorably impacted by the PSNH rate increases effective July 1, 2013 as a result of the 2010 distribution rate case settlement and a 4.2 percent increase in retail sales.  PSNH experienced strong sales in the first quarter of 2014 due to colder winter weather than what was experienced in 2013.  Partially offsetting these favorable earnings impacts were higher operations and maintenance, depreciation and property tax expense.

LIQUIDITY

PSNH had cash flows provided by operating activities of $129.3 million in the first quarter of 2014, compared with $107.2 million in the first quarter of 2013.  The improved cash flows were due primarily to the absence of a $35.1 million NUSCO Pension and PBOP Plan contribution in the first quarter of 2014, as compared to the first quarter of 2013, the favorable impact of the 2010 rate case decision related to the additional increase to annualized rates that was effective July 1, 2013, and the favorable cash flow impacts relating to changes in traditional working capital amounts.  These favorable cash flow impacts were partially offset by income tax payments of $16.1 million in the first quarter of 2014, compared with income tax refunds of $15.3 million in the first quarter of 2013, and the absence of costs recovered in rates related to the RRBs that were fully amortized in the second quarter of 2013.

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Table of Contents

RESULTS OF OPERATIONS — WESTERN MASSACHUSETTS ELECTRIC COMPANY

The following provides the amounts and variances in operating revenues and expense line items for the condensed statements of income for WMECO included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2014 and 2013:

 

 

Operating Revenues and Expenses
For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Increase/
(Decrease)

 

Percent

 

Operating Revenues

 

$

137.4

 

$

125.0

 

$

12.4

 

9.9

%

Operating Expenses:

 

 

 

 

 

 

 

 

 

Purchased Power and Transmission

 

49.4

 

40.1

 

9.3

 

23.2

 

Operations and Maintenance

 

22.6

 

20.9

 

1.7

 

8.1

 

Depreciation

 

10.3

 

9.0

 

1.3

 

14.4

 

Amortization of Regulatory (Liabilities)/Assets, Net

 

0.4

 

0.1

 

0.3

 

(a)

 

Amortization of Rate Reduction Bonds

 

 

4.7

 

(4.7

)

(100.0

)

Energy Efficiency Programs

 

11.9

 

8.3

 

3.6

 

43.4

 

Taxes Other Than Income Taxes

 

8.1

 

6.3

 

1.8

 

28.6

 

Total Operating Expenses

 

102.7

 

89.4

 

13.3

 

14.9

 

Operating Income

 

$

34.7

 

$

35.6

 

$

(0.9

)

(2.5

)%


(a) Percent greater than 100 percent not shown as it is not meaningful.

Operating Revenues

WMECO’s retail sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2014

 

2013

 

Increase

 

Percent

 

Retail Sales in GWh

 

965

 

929

 

36

 

3.8

%

WMECO’s Operating Revenues increased $12.4 million in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to:

·A $3.9 million increase in revenues that impacts earnings due to the reversal of a previously established wholesale billing adjustment.

·Base distribution revenues are consistent with 2013.  WMECO’s kWh sales have no impact on earnings, as its revenues are decoupled from sales volumes.

·A $0.8 million increase in transmission revenues reflecting recovery of higher transmission expenses including investments in our transmission infrastructure, primarily related to the NEEWS project.

·The remaining increase primarily reflects a higher level of recovery related to WMECO’s energy supply and energy efficiency programs.  These revenues are fully reconciled to the related costs.  Therefore this increase in revenues had no material impact on earnings.

Purchased Power and Transmission increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to an increase in supplier contract prices and an increase in customers returning to default service from third party suppliers.  Purchased Power and Transmission costs are included in regulatory-approved tracking mechanisms and do not impact earnings.

Operations and Maintenance increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to an increase in customer related expenses ($0.8 million), an increase in routine maintenance costs ($0.6 million), and an increase in distribution vegetation management costs ($0.3 million).

Depreciation increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to higher utility plant balances resulting from completed construction projects placed into service.

Amortization of Rate Reduction Bonds decreased in the first quarter of 2014, as compared to the first quarter of 2013, due to the maturity of the RRBs in June 2013.

Energy Efficiency Programs increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to an increase in energy efficiency costs in accordance with the three-year program guidelines established by the DPU.  All costs are fully recovered through DPUDPU-approved tracking mechanisms and therefore do not impact earnings.


Interest Expense

 

 

For the Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

Increase/

 

 

 

(Millions of Dollars)

2013 

 

2012 

 

(Decrease)

 

Percent

 

Interest on Long-Term Debt

$

19.6 

 

$

22.3 

 

$

(2.7)

 

(12.1)

%

Interest on RRBs

 

0.4 

 

 

1.3 

 

 

(0.9)

 

(69.2)

 

Other Interest

 

(4.1)

 

 

(5.8)

 

 

1.7 

 

29.3 

 

 

 

$

15.9 

 

$

17.8 

 

$

(1.9)

 

(10.7)

%


Interest expense decreasedTaxes Other Than Income Taxes increased in the first quarter of 2013,2014, as compared to the first quarter of 2012,2013, due primarily to lower average long-term bond rates, partially offset by lower regulatory interest income primarily from deferred transition costs.  an increase in property taxes as a result of both an increase in utility plant balances and property tax rates.


Income TaxInterest Expense

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013

 

2012

 

Increase

 

Percent

 

Income Tax Expense

$

31.3

 

$

2.0

 

$

29.3

 

(a)

%


(a) Percent greater than 100 percent not shown as it is not meaningful.


Income Tax Expense increased decreased $0.6 million in the first quarter of 2013,2014, as compared to the first quarter of 2012, due primarily to an increase in pre-tax earnings including state tax impacts ($28.8 million).


EARNINGS SUMMARY


 

For the Three Months
Ended March 31,

(Millions of Dollars)

 

2013

 

 

2012

Income Before Merger-Related Costs

$

48.1

 

$

4.5

Merger-Related Costs (after-tax)

 

-

 

 

0.6

Net Income

$

48.1

 

$

3.9


Excluding the merger-related costs, NSTAR Electric’s 2013, earnings were $43.6 million higher than 2012 due primarily to the absencereversal of 2012 adjustments recorded to establish a reserve against the regulatory assetinterest expense related to Basic Service bad debt costs ($17 million), and for changesa previously recognized wholesale billing adjustment.

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Table of Contents

Other Income, Net decreased $0.4 million in accounting estimates relatedthe first quarter of 2014, as compared to the first quarter of 2013, due primarily to lower mark-to-market gains associated with marketable securities held in trust.

EARNINGS SUMMARY

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

 

2014

 

2013

 

Net Income

 

$

18.1

 

$

18.6

 

WMECO’s earnings decreased $0.5 million in the allowance for doubtful accounts, workers’ compensation, employee medical benefits, and general liability claims ($11.4 million).  Also contributingfirst quarter of 2014, as compared to the increase was a March 2012 substation fire in theBack Bay/Prudential areafirst quarter of Boston ($4.1 million) and a reserve recorded relating to lost base revenues based on 2012 developments during hearings in the merger proceeding ($3.7 million).  In addition, there were higher transmission revenues in 2013, due primarily to lower mark-to-market gains associated with marketable securities held in trust, higher operations and maintenance and depreciation expense.  Partially offsetting these unfavorable earnings impacts was an increased levelincrease in earnings related to the reversal of investment in transmission infrastructure, as well as higher distribution revenues not included in tracking mechanisms.  These factors are partially offset by higher depreciation and property taxes.  a previously established wholesale billing adjustment.


CAPITAL EXPENDITURESLIQUIDITY


A summary of capital expenditures, including amounts incurred but not paid, cost of removal, AFUDC, and the capitalized portions of pension expense, is as follows:


 

For the Three Months
Ended March 31,

(Millions of Dollars)

 

2013

 

 

2012

Transmission

$

49.3

 

$

32.2

Distribution:

 

 

 

 

 

  Basic Business 

 

15.6

 

 

38.5

  Aging Infrastructure

 

27.3

 

 

8.1

  Load Growth

 

1.9

 

 

15.8

Total Distribution

 

44.8

 

 

62.4

Total

$

94.1

 

$

94.6




58



LIQUIDITY


NSTAR ElectricWMECO had cash flows provided by operating activities of $45.9$46.3 million in the first quarter of 2013,2014, compared with $53$71 million in the first quarter of 2012 (amounts are net of RRB payments, which are included in financing activities).2013.  The decrease in operating cash flows was due primarily to an increase in cash disbursements for storm costsincome tax payments of $14.1 million in the first quarter of 2013 associated2014, compared with the February 2013 blizzard, as compared to cash disbursements for storm costs in the first quarter of 2012 associated with Tropical Storm Irene and the October snowstorm, a $20 million increase in income tax payments in the first quarterrefunds of 2013, as compared to the first quarter of 2012, and a $4.3 million increase in pension contributions in the first quarter of 2013, as compared to the first quarter of 2012.



59



RESULTS OF OPERATIONS – PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES


The following table provides the amounts and variances in operating revenues and expense line items for the consolidated statements of income for PSNH included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2013 and 2012:  


 

 

 

Operating Revenues and Expenses

 

 

For the Three Months Ended March 31,

(Millions of Dollars)

2013 

 

2012 

 

Increase/

 

Percent

 

(Decrease)

Operating Revenues

$

 273.8 

 

$

 243.0 

 

$

 30.8 

 

 12.7 

%

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Purchased Power, Fuel and Transmission

 

 101.0 

 

 

 81.0 

 

 

 20.0 

 

 24.7 

 

 

Operations and Maintenance

 

 59.7 

 

 

 65.0 

 

 

 (5.3)

 

 (8.2)

 

 

Depreciation

 

 22.6 

 

 

 21.2 

 

 

 1.4 

 

 6.6 

 

 

Amortization of Regulatory Liabilities, Net

 

 (3.1)

 

 

 (2.6)

 

 

 (0.5)

 

 (19.2)

 

 

Amortization of Rate Reduction Bonds

 

 14.8 

 

 

 13.9 

 

 

 0.9 

 

 6.5 

 

 

Energy Efficiency Programs

 

 3.7 

 

 

 3.6 

 

 

 0.1 

 

 2.8 

 

 

Taxes Other Than Income Taxes

 

 17.0 

 

 

 15.5 

 

 

 1.5 

 

 9.7 

 

 

 

Total Operating Expenses

 

 215.7 

 

 

 197.6 

 

 

 18.1 

 

 9.2 

 

Operating Income

$

 58.1 

 

$

 45.4 

 

$

 12.7 

 

 28.0 

%


Operating Revenues

 

 

 

 

 

 

 

 

PSNH's retail sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2013 

 

2012 

 

Increase

 

Percent

 

Retail Sales in GWh

 1,992 

 

 1,937 

 

 55 

 

 2.8 

%


PSNH's Operating Revenues increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to:


·

A $25 million increase in distribution revenues related to the portions that are included in NHPUC approved tracking mechanisms that recover certain incurred costs and do not impact earnings.  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections recovered from customers in future periods.  This increase is related primarily to higher energy related revenues ($27.2 million), higher retail transmission revenues ($4.1 million) and higher purchased power and fuel costs related revenues ($2.6 million).  These higher revenues were partially offset by lower stranded cost recovery revenues ($9.1 million).


·

A $5.3 million increase in the portion of distribution revenues that impacts earnings resulting from the favorable impact of the 2010 rate case decision related to the additional increase to annualized rates that was effective July 1, 2012 and a 2.8 percent increase in sales volume due to colder than normal weather in the first quarter of 2013, as compared to the first quarter of 2012.


·

A $2 million increase in transmission revenues resulting from an increased level of investment in transmission infrastructure and the recovery of higher overall expenses, which are tracked and result in a related increase in revenues.  The increase in expenses is directly related to the increase in transmission plant, including costs associated with higher property taxes, depreciation, and operation and maintenance expenses.


Purchased Power, Fuel and Transmission increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to an increase in fuel costs resulting from an increase in sales and an increase in transmission costs resulting from an increase in regional transmission rates leading to higher RNS costs.


Operations and Maintenance decreased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to lower general and administrative costs ($1.6 million) and lower maintenance costs at the generation business ($1.9 million).  These lower costs were partially offset by higher routine distribution maintenance costs ($0.4 million).


Other Income, Net

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013

 

2012

 

Decrease

 

Percent

 

Other Income, Net

$

1.0

 

$

2.0

 

$

(1.0)

 

(50.0)

%


Other Income, Net decreased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to lower AFUDC related to equity funds.


Income Tax Expense

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013

 

2012

 

Increase

 

Percent

 

Income Tax Expense

$

18.0

 

$

13.4

 

$

4.6

 

34.3

%




60



Income Tax Expense increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to an increase in pre-tax earnings ($4.3 million).


LIQUIDITY


PSNH had cash flows provided by operating activities of $92.9$26.6 million in the first quarter of 2013 compared with operating cash flowsand the absence of $2.5 millioncosts recovered in rates related to the RRBs that were fully amortized in the first quarter of 2012 (amounts are net of RRB payments, which are included in financing activities).  The improved cash flows were due primarily to a reduction in NUSCO Pension Plan contributions of $52.6 million in the firstsecond quarter of 2013, as compared to the first quarter of 2012, income tax refunds of $15.3 million in the first quarter of 2013, compared with income tax payments of $5.2 million in the first quarter of 2012, andpartially offset by the favorable impact of the 2010 rate case decision relatedcash flow impacts relating to the additional increase to annualized rates that was effective July 1, 2012.  In addition, changes in traditional working capital amounts principally due to the changes in timing of accounts payable and accrued liabilities also contributed to the improved operating cash flows.accounts receivables.


56




Table of Contents

61




RESULTS OF OPERATIONS – WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY


The following table provides the amounts and variances in operating revenues and expense line items for the consolidated statements of income for WMECO included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2013 and 2012:  


 

 

 

Operating Revenues and Expenses

 

 

For the Three Months Ended March 31,

(Millions of Dollars)

2013 

 

2012 

 

Increase/

 

Percent

 

(Decrease)

Operating Revenues

$

 125.0 

 

$

 114.0 

 

$

 11.0 

 

 9.6 

%

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Purchased Power and Transmission

 

 40.1 

 

 

 40.5 

 

 

 (0.4)

 

 (1.0)

 

 

Operations and Maintenance

 

 20.9 

 

 

 22.6 

 

 

 (1.7)

 

 (7.5)

 

 

Depreciation

 

 9.0 

 

 

 7.7 

 

 

 1.3 

 

 16.9 

 

 

Amortization of Regulatory Assets/(Liabilities), Net

 

 0.1 

 

 

 (0.3)

 

 

 0.4 

 

(a)

 

 

Amortization of Rate Reduction Bonds

 

 4.7 

 

 

 4.4 

 

 

 0.3 

 

 6.8 

 

 

Energy Efficiency Programs

 

 8.3 

 

 

 5.5 

 

 

 2.8 

 

 50.9 

 

 

Taxes Other Than Income Taxes

 

 6.3 

 

 

 4.9 

 

 

 1.4 

 

 28.6 

 

 

 

Total Operating Expenses

 

 89.4 

 

 

 85.3 

 

 

 4.1 

 

 4.8 

 

Operating Income

$

 35.6 

 

$

 28.7 

 

$

 6.9 

 

 24.0 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Percent greater than 100 percent not shown as it is not meaningful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Operating Revenues

 

 

 

 

 

 

 

 

WMECO's retail sales were as follows:

 

 

For the Three Months Ended March 31,

 

 

 

2013 

 

2012 

 

Increase

 

Percent

 

Retail Sales in GWh

 929 

 

 911 

 

 18 

 

 2.1 

%


WMECO's Operating Revenues increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to:


·

A $7.9 million increase in transmission revenues resulting from an increased level of investment in transmission infrastructure, primarily related to the NEEWS projects, and the recovery of higher overall expenses, which are tracked and result in a related increase in revenues.  The increase in expenses is directly related to the increase in transmission plant, including costs associated with higher property taxes, depreciation, and operation and maintenance expenses.


·

A $5.3 million increase in distribution revenues related to the portions that are included in DPU approved tracking mechanisms that recover certain incurred costs and do not impact earnings.  The tracking mechanisms allow for rates to be changed periodically with overcollections refunded to customers or undercollections recovered from customers in future periods.  Included in these amounts are Basic Service, pension, transition and energy efficiency program costs.  


Operations and Maintenance decreased in the first quarter of 2013, as compared to the first quarter of 2012, due to lower distribution general and administrative expenses ($1 million) and lower uncollectible expenses ($1 million).  Partially offsetting these decreases was an increase related to higher pension costs ($1.3 million), which are recovered through DPU approved tracking mechanisms and have no earnings impact.


Depreciation increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to higher utility plant balances resulting from completed construction projects placed into service related to WMECO's capital programs.


Energy Efficiency Programsincreased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to an increase in expenses attributable to an increase in spending in accordance with the three-year program guidelines established by the DPU.  All costs are fully recovered through DPU tracking mechanisms and therefore do not impact earnings.


Taxes Other Than Income Taxes increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to an increase in property taxes as a result of an increase in Property, Plant and Equipment related to WMECO’s capital program and an increase in the property tax rates.


Income Tax Expense

 

 

For the Three Months Ended March 31,

 

(Millions of Dollars)

2013

 

2012

 

Increase

 

Percent

 

Income Tax Expense

$

11.7

 

$

9.2

 

$

2.5

 

27.2

%


Income Tax Expense increased in the first quarter of 2013, as compared to the first quarter of 2012, due primarily to an increase in pre-tax earnings ($2.4 million).




62



LIQUIDITY


WMECO had cash flows provided by operating activities of $66.3 million in the first quarter of 2013, compared with operating cash flows of $0.7 million in the first quarter of 2012 (amounts are net of RRB payments, which are included in financing activities).  The improved cash flows were due primarily to income tax refunds of $26.6 million in the first quarter of 2013, compared with income tax refunds of $0.8 million in the first quarter of 2012, and the absence in the first quarter of 2013 of $14.4 million in cash disbursements for storm costs made in the first quarter of 2012.  In addition, changes in traditional working capital amounts principally due to the changes in timing of accounts payable and accrued liabilities contributed to the improved operating cash flows.




63



ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Market Risk Information


Commodity Price Risk Management:  Our Regulated companies enter into energy contracts to serve our customers and the economic impacts of those contracts are passed on to our customers.  Accordingly, the Regulated companies have no exposure to loss of future earnings or fair values due to these market risk-sensitive instruments.  The remaining unregulated wholesale portfolio held by SelectNU’s Energy includes contracts that are market risk-sensitive, including a wholesale energy sales contract through December 2013 with an agencySupply Risk Committee, comprised of municipalities.  As Select Energy's contract volumes are winding down,senior officers, reviews and as the wholesaleapproves all large scale energy sales contract is substantially hedged against price risks, we have limited exposure to commodity price risks.  We have notrelated transactions entered into any energy contracts for trading purposes.  by its Regulated companies.


Other Risk Management Activities


Interest Rate Risk Management: We manage our interest rate risk exposure in accordance with our written policies and procedures by maintaining a mix of fixed and variable rate long-term debt.


Credit Risk Management: Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties pursuant to the terms of our contractual obligations.  We serve a wide variety of customers and transact with suppliers that include independent power producers,IPPs, industrial companies, gas and electric utilities, oil and gas producers, financial institutions, and other energy marketers.  Margin accounts exist within this diverse group, and we realize interest receipts and payments related to balances outstanding in these margin accounts.  This wide customer and supplier mix generates a need for a variety of contractual structures, products and terms that, in turn, require us to manage the portfolio of market risk inherent in those transactions in a manner consistent with the parameters established by our risk management process.


If the respective unsecured debt ratings of NU parentor its subsidiaries were reduced to below investment grade by either Moody’s or S&P, certain of NU’s contracts would require additional collateral in the form of cash to be provided to counterparties and independent system operators.  If such an event occurred as of March 31, 2013, NU would have been required to provide additional collateral.  NU would have been and remains able to provide that collateral.


For further information on cash collateral deposited and posted with counterparties as well as any cash collateral netted against the fair value of the related derivative contracts, see Note 4, "Derivative“Derivative Instruments," to the consolidated financial statements.


We have provided additional disclosures regarding interest rate risk management and credit risk management in Part II, Item 7A, "Quantitative“Quantitative and Qualitative Disclosures about Market Risk," in NU's 2012NU’s 2013 Form 10-K, which is incorporated herein by reference. There have been no additional risks identified and no material changes with regard to the items previously disclosed in the NU 20122013 Form 10-K.


ITEM 4.

CONTROLS AND PROCEDURES


Management, on behalf of NU, CL&P, NSTAR Electric, PSNH and WMECO, evaluated the design and operation of the disclosure controls and procedures as of March 31, 20132014 to determine whether they are effective in ensuring that the disclosure of required information is made timely and in accordance with the Securities Exchange Act of 1934 and the rules and regulations of the SEC.  This evaluation was made under management'smanagement’s supervision and with management'smanagement’s participation, including the principal executive officers and principal financial officer as of the end of the period covered by this Quarterly Report on Form 10-Q.  There are inherent limitations of disclosure controls and procedures, including the possibility of human error and the circumventing or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  The principal executive officers and principal financial officer have concluded, based on their review, that the disclosure controls and procedures of NU, CL&P, NSTAR Electric, PSNH and WMECO are effective to ensure that information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and regulations and (ii) is accumulated and communicated to management, including the principal executive officers and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.


There have been no changes in internal controls over financial reporting for NU, CL&P, NSTAR Electric, PSNH and WMECO during the quarter ended March 31, 2013, other than changes resulting from the April 10, 2012 merger with NSTAR,2014 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.


57




Table of Contents

64



PART II.  OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS


We are parties to various legal proceedings.  We have identified these legal proceedings in Part I, Item 3, "Legal“Legal Proceedings," and elsewhere in our 20122013 Form 10-K, which disclosures are incorporated herein by reference.  There have been no additional material legal proceedings identified and no material changes with regard to the legal proceedings previously disclosed in our 20122013 Form 10-K.


ITEM 1A.

RISK FACTORS


We are subject to a variety of significant risks in addition to the matters set forth under "Forward-Looking“Forward-Looking Statements," in Item 2, "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations," of this Quarterly Report on Form 10-Q.  We have identified a number of these risk factors in Part I, Item 1A, "Risk“Risk Factors," in our 20122013 Form 10-K, which risk factors are incorporated herein by reference.  These risk factors should be considered carefully in evaluating our risk profile.  There have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed in our 20122013 Form 10-K.


ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


The following table discloses purchases of shares of our common stockshares made by us or on our behalf for the periods shown below.  The common shares purchased consist of open market purchases made by the Company or an independent agent.  These share transactions related to the Company’s Long-Term Incentive Plans and its Employee Savings Plan.


Period

 

Total Number of Shares Purchased

 

 

Average Price Paid per Share

Total Number of Shares Purchased as
Part of Publicly Announced Plans or Programs

Approximate Dollar
Value of Shares that
May Yet Be Purchased Under the Plans and Programs (at month end)

January 1 – January 31, 2013

 

 9,895

 

$

39.22 

 - 

 - 

February 1 – February 28, 2013

 

 20,091

 

 

41.29 

 - 

 - 

March 1 – March 31, 2013

 

 425,736

 

 

42.69 

 - 

 - 

Total

 

 455,722

 

$

42.55 

 - 

 - 

Period

 

Total Number
of Shares
Purchased

 

Average
Price
Paid per
Share

 

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs

 

Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Plans and
Programs (at month end)

 

January 1 – January 31, 2014

 

503,821

 

$

43.30

 

 

 

February 1 – February 28, 2014

 

37,241

 

43.42

 

 

 

March 1 – March 31, 2014

 

138,094

 

44.52

 

 

 

Total

 

679,156

 

$

43.55

 

 

 


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Table of Contents

65



ITEM 6.       EXHIBITS

EXHIBITS


Each exhibit described below is filed herewith, unless designated with an asterisk (*), which exhibits are incorporated by reference by the registrant under whose name the exhibit appears.

Exhibit No.

Exhibit No.

Description

Listing of Exhibits (NU)

* 10.1

Composite Amended and Restated Indenture, effective January 2, 2014, between Yankee Gas Services Company and The Bank of New York Mellon Trust Company, N.A., successor as Trustee to The Bank of New York, as successor to Fleet National Bank (formerly known as The Connecticut National Bank, as Trustee, dated July 1, 1989 (Composite including all amendments) (incorporated by reference to Exhibit B to the Eleventh Supplemental Indenture, filed as Exhibit 10.2 hereto)

10.2

Eleventh Supplemental Indenture of Mortgage and Deed of Trust, dated as of January 1, 2014, between Yankee Gas Services Company and The Bank of New York Mellon Trust Company, N.A., successor as Trustee to The Bank of New York, as successor to Fleet National Bank (formerly known as The Connecticut National Bank)

12

Ratio of Earnings to Fixed Charges

31

Certification of Thomas J. May, Chairman, President and Chief Executive Officer of NU, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of NU, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

32

Certification of Thomas J. May, Chairman, President and Chief Executive Officer of NU, and James J. Judge, Executive Vice President and Chief Financial Officer of NU, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

Listing of Exhibits (CL&P)

12

Ratio of Earnings to Fixed Charges

31

Certification of Leon J. Olivier, Chief Executive Officer of CL&P, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of CL&P, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

32

Certification of Leon J. Olivier, Chief Executive Officer of CL&P, and James J. Judge, Executive Vice President and Chief Financial Officer of CL&P, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

Listing of Exhibits (NSTAR Electric)

* 4.1

A Form of 4.40% Debenture Due March 1, 2044. (Incorporated by reference to Exhibit 4 of the NSTAR Electric Company Current Report on Form 8-K, filed March 13, 2014, File No. 001-02301)

12

Ratio of Earnings to Fixed Charges

31

Certification of Leon J. Olivier, Chief Executive Officer of NSTAR Electric, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of NSTAR Electric, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

32

Certification of Leon J. Olivier, Chief Executive Officer of NSTAR Electric, and James J. Judge, Executive Vice President and Chief Financial Officer of NSTAR Electric, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

Description59



Table of Contents


Listing of Exhibits (PSNH)

12

Ratio of Earnings to Fixed Charges

31

Certification of Leon J. Olivier, Chief Executive Officer of PSNH, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of PSNH, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

32

Certification of Leon J. Olivier, Chief Executive Officer of PSNH, and James J. Judge, Executive Vice President and Chief Financial Officer of PSNH, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

Listing of Exhibits (WMECO)

12

Ratio of Earnings to Fixed Charges

31

Certification of Leon J. Olivier, Chief Executive Officer of WMECO, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of WMECO, required by Rule 13a - 14(a)/15d - 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

32

Certification of Leon J. Olivier, Chief Executive Officer of WMECO, and James J. Judge, Executive Vice President and Chief Financial Officer of WMECO, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 2, 2014

Listing of Exhibits (NU)


12

Ratio of Earnings to Fixed Charges


31

Certification of Thomas J. May, President and Chief Executive Officer of Northeast Utilities, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of Northeast Utilities, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


32

Certification of Thomas J. May, President and Chief Executive Officer of Northeast Utilities and James J. Judge, Executive Vice President and Chief Financial Officer of Northeast Utilities, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


Listing of Exhibits (CL&P)


12

Ratio of Earnings to Fixed Charges


31

Certification of Leon J. Olivier, Chief Executive Officer of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, dated May 3, 2013


31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


32

Certification of Leon J. Olivier, Chief Executive Officer of The Connecticut Light and Power Company and James J. Judge, Executive Vice President and Chief Financial Officer of The Connecticut Light and Power Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


Listing of Exhibits (NSTAR Electric)


12

Ratio of Earnings to Fixed Charges


31

Certification of Leon J. Olivier, Chief Executive Officer of NSTAR Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of NSTAR Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


32

Certification of Leon J. Olivier, Chief Executive Officer of NSTAR Electric Company and James J. Judge, Executive Vice President and Chief Financial Officer of NSTAR Electric Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


Listing of Exhibits (PSNH)


12

Ratio of Earnings to Fixed Charges


31

Certification of Leon J. Olivier, Chief Executive Officer of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, dated May 3, 2013


31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


32

Certification of Leon J. Olivier, Chief Executive Officer of Public Service Company of New Hampshire and James J. Judge, Executive Vice President and Chief Financial Officer of Public Service Company of New Hampshire, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013



66




Listing of Exhibits (WMECO)


12

Ratio of Earnings to Fixed Charges


31

Certification of Leon J. Olivier, Chief Executive Officer of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, dated May 3, 2013


31.1

Certification of James J. Judge, Executive Vice President and Chief Financial Officer of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


32

Certification of Leon J. Olivier, Chief Executive Officer of Western Massachusetts Electric Company and James J. Judge, Executive Vice President and Chief Financial Officer of Western Massachusetts Electric Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 3, 2013


Listing of Exhibits (NU, CL&P, NSTAR Electric, PSNH, WMECO)


101.INS

XBRL Instance Document


101.SCH

XBRL Taxonomy Extension Schema


101.CAL

XBRL Taxonomy Extension Calculation


101.DEF

XBRL Taxonomy Extension Definition


101.LAB

XBRL Taxonomy Extension Labels


101.PRE

XBRL Taxonomy Extension Presentation




67



SIGNATURE



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



NORTHEAST UTILITIES

May 3, 2013

By:

/s/

Jay S. Buth

Jay S. Buth

Vice President, Controller and

Chief Accounting Officer

 

 


101.SCH




SIGNATURE



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



XBRL Taxonomy Extension Schema

THE CONNECTICUT LIGHT AND POWER COMPANY

May 3, 2013

By:

/s/

Jay S. Buth

Jay S. Buth

Vice President, Controller and

Chief Accounting Officer

 

 


101.CAL






SIGNATURE



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




XBRL Taxonomy Extension Calculation

NSTAR ELECTRIC COMPANY

May 3, 2013

By:

/s/

Jay S. Buth

Jay S. Buth

Vice President, Controller and

Chief Accounting Officer

 

 



101.DEF

68



SIGNATURE



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




XBRL Taxonomy Extension Definition

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

May 3, 2013

By:

/s/

Jay S. Buth

Jay S. Buth

Vice President, Controller and

Chief Accounting Officer

 

 


101.LAB




SIGNATURE



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




XBRL Taxonomy Extension Labels

WESTERN MASSACHUSETTS ELECTRIC COMPANY

May 3, 2013

By:

/s/

Jay S. Buth

Jay S. Buth

Vice President, Controller and

Chief Accounting Officer

 

 


101.PRE










XBRL Taxonomy Extension Presentation

60



Table of Contents

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

69


NORTHEAST UTILITIES


May 2, 2014

By:

/s/ Jay S. Buth

Jay S. Buth

Vice President, Controller and Chief Accounting Officer

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE CONNECTICUT LIGHT AND POWER COMPANY

May 2, 2014

By:

/s/ Jay S. Buth

Jay S. Buth

Vice President, Controller and Chief Accounting Officer

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NSTAR ELECTRIC COMPANY

May 2, 2014

By:

/s/ Jay S. Buth

Jay S. Buth

Vice President, Controller and Chief Accounting Officer

61



Table of Contents

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

May 2, 2014

By:

/s/ Jay S. Buth

Jay S. Buth

Vice President, Controller and Chief Accounting Officer

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTERN MASSACHUSETTS ELECTRIC COMPANY

May 2, 2014

By:

/s/ Jay S. Buth

Jay S. Buth

Vice President, Controller and Chief Accounting Officer

62