CURRENT OR FORMER NU COMPANIES, SEGMENTS OR INVESTMENTS: | | | CL&P | | The Connecticut Light and Power Company | CYAPC | | Connecticut Yankee Atomic Power Company | Hopkinton | | Hopkinton LNG Corp., a wholly owned subsidiary of Yankee Energy System, Inc. | HWP | | HWP Company, formerly the Holyoke Water Power Company | MYAPC | | Maine Yankee Atomic Power Company | NGS | | Northeast Generation Services Company | NPT | | Northern Pass Transmission LLC | NSTAR | | Parent Company of NSTAR Electric, NSTAR Gas and other subsidiaries (prior to the merger with NU) | 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 | NU Enterprises | | NU Enterprises, Inc., the parent company of NGS, Select Energy, Select Energy Contracting, Inc., 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, NUSCO and other subsidiaries, which primarily include NU Enterprises, 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’sNU'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’sMoody'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 | NOx | | Nitrogen oxideoxides | NU 2013 Form 10-K | | The Northeast Utilities and Subsidiaries 2013 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 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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NORTHEAST UTILITIES AND SUBSIDIARIES THE CONNECTICUT LIGHT AND POWER COMPANY NSTAR ELECTRIC COMPANY AND SUBSIDIARY PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY WESTERN MASSACHUSETTS ELECTRIC COMPANY
TABLE OF CONTENTS
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| Page | PART I - FINANCIAL INFORMATION | | PART I - FINANCIAL INFORMATION
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| | | 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) | | | | Condensed Balance Sheets — March 31, 2014 and December 31, 2013 | 5 | | | Condensed Statements of Income — Three Months Ended March 31, 2014 and 2013 | 7 | Condensed Statements of Comprehensive Income | 7 | | | Condensed Statements of Comprehensive Income — Three Months Ended March 31, 2014 and 2013
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| | | 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, 2014 and December 31, 2013 | 9 | | | Condensed Consolidated Statements of Income — Three Months Ended March 31, 2014 and 2013 | 11 | | | Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2014 and 2013 | 12 | | | Public Service Company of New Hampshire and Subsidiary (Unaudited) | | | | Condensed Consolidated Balance Sheets — March 31, 2014 and December 31, 2013 | 13 | | | Condensed Consolidated Statements of Income — Three Months Ended March 31, 2014 and 2013 | 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, 2014 and 2013 | 16 | | | Western Massachusetts Electric Company (Unaudited) | | | | Condensed Balance Sheets — March 31, 2014 and December 31, 2013 | 17 | | | Condensed Statements of Income — Three Months Ended March 31, 2014 and 2013 | 19 | | | Condensed Statements of Comprehensive Income — Three Months Ended March 31, 2014 and 2013 | 19 | | | 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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| | | | | | | NORTHEAST UTILITIES AND SUBSIDIARIES | | | | | | CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | ASSETS | | | | | | | | | | | | | Current Assets: | | | | | | | Cash and Cash Equivalents | $ | 41,706 | | $ | 43,364 | | Receivables, Net | | 848,510 | | | 765,391 | | Unbilled Revenues | | 181,284 | | | 224,982 | | Fuel, Materials and Supplies | | 333,869 | | | 303,233 | | Regulatory Assets | | 445,962 | | | 535,791 | | Marketable Securities | | 114,722 | | | 92,427 | | Prepayments and Other Current Assets | | 135,497 | | | 121,861 | Total Current Assets | | 2,101,550 | | | 2,087,049 | | | | | | | | Property, Plant and Equipment, Net | | 18,254,610 | | | 17,576,186 | | | | | | | | Deferred Debits and Other Assets: | | | | | | | Regulatory Assets | | 3,241,122 | | | 3,758,694 | | Goodwill | | 3,519,401 | | | 3,519,401 | | Marketable Securities | | 518,032 | | | 488,515 | | Other Long-Term Assets | | 347,596 | | | 365,692 | Total Deferred Debits and Other Assets | | 7,626,151 | | | 8,132,302 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 27,982,311 | | $ | 27,795,537 | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
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| | | | | | | | NORTHEAST UTILITIES AND SUBSIDIARIES | | | | | | CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | LIABILITIES AND CAPITALIZATION | | | | | | | | | | | | | | Current Liabilities: | | | | | | | Notes Payable | $ | 1,046,961 | | $ | 1,093,000 | | Long-Term Debt - Current Portion | | 245,583 | | | 533,346 | | Accounts Payable | | 608,639 | | | 742,251 | | Regulatory Liabilities | | 398,985 | | | 204,278 | | Other Current Liabilities | | 629,508 | | | 702,776 | Total Current Liabilities | | 2,929,676 | | | 3,275,651 | | | | | | | | | Deferred Credits and Other Liabilities: | | | | | | | Accumulated Deferred Income Taxes | | 4,257,996 | | | 4,029,026 | | Regulatory Liabilities | | 509,889 | | | 502,984 | | Derivative Liabilities | | 420,931 | | | 624,050 | | Accrued Pension, SERP and PBOP | | 787,550 | | | 896,844 | | Other Long-Term Liabilities | | 863,164 | | | 923,053 | Total Deferred Credits and Other Liabilities | | 6,839,530 | | | 6,975,957 | | | | | | | | | Capitalization: | | | | | | | Long-Term Debt | | 8,166,985 | | | 7,776,833 | | | | | | | | | | Noncontrolling Interest - Preferred Stock of Subsidiaries | | 155,568 | | | 155,568 | | | | | | | | | | Equity: | | | | | | | Common Shareholders' Equity: | | | | | | | | Common Shares | | 1,666,767 | | | 1,665,351 | | | Capital Surplus, Paid In | | 6,219,516 | | | 6,192,765 | | | Retained Earnings | | 2,351,421 | | | 2,125,980 | | | Accumulated Other Comprehensive Loss | | (40,172) | | | (46,031) | | | Treasury Stock | | (306,980) | | | (326,537) | | Common Shareholders' Equity | | 9,890,552 | | | 9,611,528 | Total Capitalization | | 18,213,105 | | | 17,543,929 | | | | | | | | | Total Liabilities and Capitalization | $ | 27,982,311 | | $ | 27,795,537 | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | |
| | | | | | | | | | | | | | | NORTHEAST UTILITIES AND SUBSIDIARIES | | | | | | | | | | | | CONDENSED CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Thousands of Dollars, Except Share Information) | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | | | | | | | Operating Revenues | $ | 1,892,532 | | $ | 1,892,590 | | $ | 5,860,736 | | $ | 5,523,475 | | | | | | | | | | | | | | | | Operating Expenses: | | | | | | | | | | | | | Purchased Power, Fuel and Transmission | | 716,631 | | | 645,881 | | | 2,318,993 | | | 1,881,992 | | Operations and Maintenance | | 344,092 | | | 386,700 | | | 1,069,015 | | | 1,089,960 | | Depreciation | | 153,210 | | | 149,105 | | | 456,224 | | | 463,635 | | Amortization of Regulatory Assets/(Liabilities), Net | | (22,531) | | | 70,046 | | | 31,826 | | | 178,668 | | Amortization of Rate Reduction Bonds | | - | | | - | | | - | | | 42,581 | | Energy Efficiency Programs | | 118,693 | | | 106,097 | | | 360,228 | | | 306,010 | | Taxes Other Than Income Taxes | | 141,527 | | | 135,499 | | | 421,862 | | | 391,846 | | | | Total Operating Expenses | | 1,451,622 | | | 1,493,328 | | | 4,658,148 | | | 4,354,692 | Operating Income | | 440,910 | | | 399,262 | | | 1,202,588 | | | 1,168,783 | | | | | | | | | | | | | | | | Interest Expense: | | | | | | | | | | | | | Interest on Long-Term Debt | | 85,208 | | | 84,911 | | | 260,076 | | | 256,205 | | Other Interest | | 4,530 | | | 2,565 | | | 12,132 | | | (5,622) | | | Interest Expense | | 89,738 | | | 87,476 | | | 272,208 | | | 250,583 | Other Income, Net | | 11,860 | | | 8,945 | | | 19,054 | | | 21,655 | Income Before Income Tax Expense | | 363,032 | | | 320,731 | | | 949,434 | | | 939,855 | Income Tax Expense | | 126,539 | | | 109,351 | | | 345,858 | | | 325,442 | Net Income | | 236,493 | | | 211,380 | | | 603,576 | | | 614,413 | Net Income Attributable to Noncontrolling Interests | | 1,879 | | | 1,879 | | | 5,639 | | | 5,803 | Net Income Attributable to Controlling Interest | $ | 234,614 | | $ | 209,501 | | $ | 597,937 | | $ | 608,610 | | | | | | | | | | | | | | | | Basic and Diluted Earnings Per Common Share | $ | 0.74 | | $ | 0.66 | | $ | 1.89 | | $ | 1.93 | | | | | | | | | | | | | | | | Dividends Declared Per Common Share | $ | 0.39 | | $ | 0.37 | | $ | 1.18 | | $ | 1.10 | | | | | | | | | | | | | | | | Weighted Average Common Shares Outstanding: | | | | | | | | | | | | | Basic | | 316,340,691 | | | 315,291,346 | | | 315,941,904 | | | 315,191,752 | | Diluted | | 317,554,925 | | | 316,218,239 | | | 317,186,490 | | | 316,061,131 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | Net Income | $ | 236,493 | | $ | 211,380 | | $ | 603,576 | | $ | 614,413 | Other Comprehensive Income, Net of Tax: | | | | | | | | | | | | | Qualified Cash Flow Hedging Instruments | | 509 | | | 509 | | | 1,528 | | | 1,539 | | Changes in Unrealized Gains/(Losses) on Other Securities | | (216) | | | (38) | | | 242 | | | (810) | | Changes in Funded Status of Pension, SERP and PBOP Benefit Plans | | 1,042 | | | 1,611 | | | 4,089 | | | 4,738 | Other Comprehensive Income, Net of Tax | | 1,335 | | | 2,082 | | | 5,859 | | | 5,467 | Comprehensive Income Attributable to Noncontrolling Interests | | (1,879) | | | (1,879) | | | (5,639) | | | (5,803) | Comprehensive Income Attributable to Controlling Interest | $ | 235,949 | | $ | 211,583 | | $ | 603,796 | | $ | 614,077 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
| | | | | | | | NORTHEAST UTILITIES AND SUBSIDIARIES | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | Operating Activities: | | | | | | | Net Income | $ | 603,576 | | $ | 614,413 | | Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | | | | | | | | Depreciation | | 456,224 | | | 463,635 | | | Deferred Income Taxes | | 64,755 | | | 334,225 | | | Pension, SERP and PBOP Expense | | 74,296 | | | 146,803 | | | Pension and PBOP Contributions | | (74,681) | | | (338,301) | | | Regulatory Overrecoveries, Net | | 290,111 | | | 66,239 | | | Amortization of Regulatory Assets, Net | | 31,826 | | | 178,668 | | | Amortization of Rate Reduction Bonds | | - | | | 42,581 | | | Proceeds from DOE Damages Claim, Net | | 132,138 | | | - | | | Other | | (17,096) | | | 3,158 | | Changes in Current Assets and Liabilities: | | | | | | | | Receivables and Unbilled Revenues, Net | | (66,463) | | | (98,432) | | | Fuel, Materials and Supplies | | (27,147) | | | (13,134) | | | Taxes Receivable/Accrued, Net | | 26,533 | | | (28,609) | | | Accounts Payable | | (69,448) | | | (112,512) | | | Other Current Assets and Liabilities, Net | | (20,607) | | | (81,766) | Net Cash Flows Provided by Operating Activities | | 1,404,017 | | | 1,176,968 | | | | | | | | | Investing Activities: | | | | | | | Investments in Property, Plant and Equipment | | (1,117,493) | | | (1,073,759) | | Proceeds from Sales of Marketable Securities | | 388,352 | | | 487,729 | | Purchases of Marketable Securities | | (389,406) | | | (541,070) | | Decrease in Special Deposits | | - | | | 69,259 | | Other Investing Activities | | (4,669) | | | (1,137) | Net Cash Flows Used in Investing Activities | | (1,123,216) | | | (1,058,978) | | | | | | | | | Financing Activities: | | | | | | | Cash Dividends on Common Shares | | (356,080) | | | (341,720) | | Cash Dividends on Preferred Stock | | (5,639) | | | (5,802) | | Increase/(Decrease) in Notes Payable | | 6,000 | | | (172,000) | | Issuance of Long-Term Debt | | 650,000 | | | 1,350,000 | | Retirements of Long-Term Debt | | (576,650) | | | (840,600) | | Retirements of Rate Reduction Bonds | | - | | | (82,139) | | Other Financing Activities | | (90) | | | (13,536) | Net Cash Flows Used in Financing Activities | | (282,459) | | | (105,797) | Net (Decrease)/Increase in Cash and Cash Equivalents | | (1,658) | | | 12,193 | Cash and Cash Equivalents - Beginning of Period | | 43,364 | | | 45,748 | Cash and Cash Equivalents - End of Period | $ | 41,706 | | $ | 57,941 | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | | | | | | |
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| | | | | | | THE CONNECTICUT LIGHT AND POWER COMPANY | | | | | | CONDENSED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | ASSETS | | | | | | | | | | | | | Current Assets: | | | | | | | Cash | $ | 16,294 | | $ | 7,237 | | Receivables, Net | | 369,492 | | | 319,670 | | Accounts Receivable from Affiliated Companies | | 35,276 | | | 13,777 | | Unbilled Revenues | | 87,806 | | | 92,401 | | Regulatory Assets | | 116,531 | | | 150,943 | | Materials and Supplies | | 47,086 | | | 54,606 | | Accumulated Deferred Income Taxes | | 52,839 | | | - | | Prepaid Property Taxes | | 47,429 | | | 13,962 | | Prepayments and Other Current Assets | | 17,608 | | | 39,120 | Total Current Assets | | 790,361 | | | 691,716 | | | | | | | | Property, Plant and Equipment, Net | | 6,700,798 | | | 6,451,259 | | | | | | | | Deferred Debits and Other Assets: | | | | | | | Regulatory Assets | | 1,369,025 | | | 1,663,147 | | Other Long-Term Assets | | 178,313 | | | 174,380 | Total Deferred Debits and Other Assets | | 1,547,338 | | | 1,837,527 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 9,038,497 | | $ | 8,980,502 | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | | |
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| | | | | | | | THE CONNECTICUT LIGHT AND POWER COMPANY | | | CONDENSED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | LIABILITIES AND CAPITALIZATION | | | | | | | | | | | | | | Current Liabilities: | | | | | | | Notes Payable to NU Parent | $ | 105,400 | | $ | 287,300 | | Long-Term Debt - Current Portion | | 162,000 | | | 150,000 | | Accounts Payable | | 228,379 | | | 201,047 | | Accounts Payable to Affiliated Companies | | 46,977 | | | 56,531 | | Obligations to Third Party Suppliers | | 67,630 | | | 73,914 | | Accrued Taxes | | 54,652 | | | 37,186 | | Regulatory Liabilities | | 195,663 | | | 93,961 | | Derivative Liabilities | | 86,759 | | | 92,233 | | Other Current Liabilities | | 107,284 | | | 97,530 | Total Current Liabilities | | 1,054,744 | | | 1,089,702 | | | | | | | | | Deferred Credits and Other Liabilities: | | | | | | | Accumulated Deferred Income Taxes | | 1,581,344 | | | 1,510,586 | | Regulatory Liabilities | | 87,696 | | | 93,757 | | Derivative Liabilities | | 418,137 | | | 617,072 | | Accrued Pension, SERP and PBOP | | 63,756 | | | 95,895 | | Other Long-Term Liabilities | | 143,838 | | | 163,588 | Total Deferred Credits and Other Liabilities | | 2,294,771 | | | 2,480,898 | | | | | | | | | Capitalization: | | | | | | | Long-Term Debt | | 2,679,775 | | | 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 | | 1,804,228 | | | 1,682,047 | | | Retained Earnings | | 1,029,473 | | | 961,482 | | | Accumulated Other Comprehensive Loss | | (1,046) | | | (1,387) | | Common Stockholder's Equity | | 2,893,007 | | | 2,702,494 | Total Capitalization | | 5,688,982 | | | 5,409,902 | | | | | | | | | Total Liabilities and Capitalization | $ | 9,038,497 | | $ | 8,980,502 | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | |
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| | | | | | | | | | | | | | THE CONNECTICUT LIGHT AND POWER COMPANY | | | | | | | | | | CONDENSED STATEMENTS OF INCOME | | | | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | | 2014 | | | 2013 | | | | | | | | | | | | | | | Operating Revenues | $ | 695,642 | | $ | 648,420 | | $ | 2,017,580 | | $ | 1,841,846 | | | | | | | | | | | | | | | Operating Expenses: | | | | | | | | | | | | | Purchased Power and Transmission | | 255,787 | | | 253,152 | | | 736,952 | | | 667,266 | | Operations and Maintenance | | 127,285 | | | 127,104 | | | 368,562 | | | 359,759 | | Depreciation | | 46,886 | | | 44,786 | | | 139,598 | | | 132,356 | | Amortization of Regulatory Assets/(Liabilities), Net | | 13,098 | | | (27) | | | 62,644 | | | 11,223 | | Energy Efficiency Programs | | 41,399 | | | 24,544 | | | 119,389 | | | 68,211 | | Taxes Other Than Income Taxes | | 64,994 | | | 64,979 | | | 194,105 | | | 182,676 | | | Total Operating Expenses | | 549,449 | | | 514,538 | | | 1,621,250 | | | 1,421,491 | Operating Income | | 146,193 | | | 133,882 | | | 396,330 | | | 420,355 | | | | | | | | | | | | | | | Interest Expense: | | | | | | | | | | | | | Interest on Long-Term Debt | | 34,743 | | | 32,845 | | | 102,290 | | | 98,163 | | Other Interest | | 3,992 | | | 2,439 | | | 8,158 | | | 801 | | | Interest Expense | | 38,735 | | | 35,284 | | | 110,448 | | | 98,964 | Other Income, Net | | 6,456 | | | 3,861 | | | 10,658 | | | 10,946 | Income Before Income Tax Expense | | 113,914 | | | 102,459 | | | 296,540 | | | 332,337 | Income Tax Expense | | 30,038 | | | 36,136 | | | 95,980 | | | 113,149 | Net Income | $ | 83,876 | | $ | 66,323 | | $ | 200,560 | | $ | 219,188 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CONDENSED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | Net Income | $ | 83,876 | | $ | 66,323 | | $ | 200,560 | | $ | 219,188 | Other Comprehensive Income, Net of Tax: | | | | | | | | | | | | | Qualified Cash Flow Hedging Instruments | | 111 | | | 111 | | | 333 | | | 333 | | Changes in Unrealized Gains/(Losses) on Other Securities | | (7) | | | (1) | | | 8 | | | (27) | Other Comprehensive Income, Net of Tax | | 104 | | | 110 | | | 341 | | | 306 | Comprehensive Income | $ | 83,980 | | $ | 66,433 | | $ | 200,901 | | $ | 219,494 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | | | | | |
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| | | | | | | | THE CONNECTICUT LIGHT AND POWER COMPANY | CONDENSED STATEMENTS OF CASH FLOWS | (Unaudited) | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | Operating Activities: | | | | | | | Net Income | $ | 200,560 | | $ | 219,188 | | Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | | | | | | | | Depreciation | | 139,598 | | | 132,356 | | | Deferred Income Taxes | | (14,400) | | | 89,084 | | | Pension, SERP and PBOP Expense, Net of PBOP Contributions | | 8,050 | | | 16,182 | | | Regulatory Overrecoveries, Net | | 62,929 | | | 24,061 | | | Amortization of Regulatory Assets, Net | | 62,644 | | | 11,223 | | | Proceeds from DOE Damages Claim | | 68,610 | | | - | | | Other | | (11,290) | | | (8,759) | | Changes in Current Assets and Liabilities: | | | | | | | | Receivables and Unbilled Revenues, Net | | (87,922) | | | (44,523) | | | Taxes Receivable/Accrued, Net | | 39,805 | | | 841 | | | Accounts Payable | | 16,984 | | | (101,949) | | | Other Current Assets and Liabilities, Net | | (2,575) | | | (29,106) | Net Cash Flows Provided by Operating Activities | | 482,993 | | | 308,598 | | | | | | | | | Investing Activities: | | | | | | | Investments in Property, Plant and Equipment | | (371,660) | | | (294,638) | | Other Investing Activities | | (4,539) | | | 2,013 | Net Cash Flows Used in Investing Activities | | (376,199) | | | (292,625) | | | | | | | | | Financing Activities: | | | | | | | Cash Dividends on Common Stock | | (128,400) | | | (114,000) | | Cash Dividends on Preferred Stock | | (4,169) | | | (4,169) | | Issuance of Long-Term Debt | | 250,000 | | | 400,000 | | Retirements of Long-Term Debt | | (150,000) | | | (125,000) | | Decrease in Notes Payable to NU Parent | | (181,900) | | | (62,200) | | Capital Contribution from NU Parent | | 120,000 | | | - | | Decrease in Short-Term Debt | | - | | | (89,000) | | Other Financing Activities | | (3,268) | | | (6,352) | Net Cash Flows Used in Financing Activities | | (97,737) | | | (721) | Net Increase in Cash | | 9,057 | | | 15,252 | Cash - Beginning of Period | | 7,237 | | | 1 | Cash - End of Period | $ | 16,294 | | $ | 15,253 | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. |
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| | | | | | | NSTAR ELECTRIC COMPANY AND SUBSIDIARY | | | | | | CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | ASSETS | | | | | | | | | | | | | Current Assets: | | | | | | | Cash and Cash Equivalents | $ | 11,040 | | $ | 8,021 | | Receivables, Net | | 275,902 | | | 209,711 | | Accounts Receivable from Affiliated Companies | | 47,215 | | | 27,264 | | Unbilled Revenues | | 39,372 | | | 41,368 | | Materials and Supplies | | 65,073 | | | 44,236 | | Regulatory Assets | | 128,205 | | | 204,144 | | Prepayments and Other Current Assets | | 11,267 | | | 36,710 | Total Current Assets | | 578,074 | | | 571,454 | | | | | | | | Property, Plant and Equipment, Net | | 5,211,681 | | | 5,043,887 | | | | | | | | Deferred Debits and Other Assets: | | | | | | | Regulatory Assets | | 998,030 | | | 1,235,156 | | Other Long-Term Assets | | 62,644 | | | 60,624 | Total Deferred Debits and Other Assets | | 1,060,674 | | | 1,295,780 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 6,850,429 | | $ | 6,911,121 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | |
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| | | | | | | | NSTAR ELECTRIC COMPANY AND SUBSIDIARY | | | | | | CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | LIABILITIES AND CAPITALIZATION | | | | | | | | | | | | | | Current Liabilities: | | | | | | | Notes Payable | $ | 159,500 | | $ | 103,500 | | Long-Term Debt - Current Portion | | 4,700 | | | 301,650 | | Accounts Payable | | 128,056 | | | 202,100 | | Accounts Payable to Affiliated Companies | | 62,625 | | | 75,707 | | Obligations to Third Party Suppliers | | 37,298 | | | 5,459 | | Power Contract Obligations | | 35,783 | | | 30,842 | | Renewable Portfolio Standards Compliance Obligations | | 34,905 | | | 39,686 | | Accrued Taxes | | 42,338 | | | 7,946 | | Accumulated Deferred Income Taxes | | 9,622 | | | 50,128 | | Regulatory Liabilities | | 97,215 | | | 53,958 | | Other Current Liabilities | | 62,436 | | | 39,936 | Total Current Liabilities | | 674,478 | | | 910,912 | | | | | | | | | Deferred Credits and Other Liabilities: | | | | | | | Accumulated Deferred Income Taxes | | 1,425,306 | | | 1,466,835 | | Regulatory Liabilities | | 266,524 | | | 253,108 | | Accrued Pension, SERP and PBOP | | 142,249 | | | 118,010 | | Payable to Affiliated Companies | | - | | | 64,172 | | Other Long-Term Liabilities | | 112,853 | | | 142,214 | Total Deferred Credits and Other Liabilities | | 1,946,932 | | | 2,044,339 | | | | | | | | | Capitalization: | | | | | | | Long-Term Debt | | 1,792,707 | | | 1,499,417 | | | | | | | | | | Preferred Stock Not Subject to Mandatory Redemption | | 43,000 | | | 43,000 | | | | | | | | | | Common Stockholder's Equity: | | | | | | | | Common Stock | | - | | | - | | | Capital Surplus, Paid In | | 993,163 | | | 992,625 | | | Retained Earnings | | 1,400,149 | | | 1,420,828 | | Common Stockholder's Equity | | 2,393,312 | | | 2,413,453 | Total Capitalization | | 4,229,019 | | | 3,955,870 | | | | | | | | | Total Liabilities and Capitalization | $ | 6,850,429 | | $ | 6,911,121 | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | |
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| | | | | | | | | | | | | | NSTAR ELECTRIC COMPANY AND SUBSIDIARY | | | | | | | | | | | | CONDENSED CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | | 2014 | | | 2013 | | | | | | | | | | | | | | | Operating Revenues | $ | 727,909 | | $ | 753,879 | | $ | 1,955,609 | | $ | 1,916,557 | | | | | | | | | | | | | | | Operating Expenses: | | | | | | | | | | | | | Purchased Power and Transmission | | 317,784 | | | 255,244 | | | 879,773 | | | 659,140 | | Operations and Maintenance | | 79,705 | | | 97,069 | | | 244,610 | | | 277,261 | | Depreciation | | 47,455 | | | 45,441 | | | 140,996 | | | 136,323 | | Amortization of Regulatory Assets/(Liabilities), Net | | (15,063) | | | 72,740 | | | (916) | | | 173,289 | | Amortization of Rate Reduction Bonds | | - | | | - | | | - | | | 15,054 | | Energy Efficiency Programs | | 56,915 | | | 58,798 | | | 145,499 | | | 161,180 | | Taxes Other Than Income Taxes | | 34,513 | | | 32,610 | | | 99,121 | | | 95,275 | | | Total Operating Expenses | | 521,309 | | | 561,902 | | | 1,509,083 | | | 1,517,522 | Operating Income | | 206,600 | | | 191,977 | | | 446,526 | | | 399,035 | | | | | | | | | | | | | | | Interest Expense: | | | | | | | | | | | | | Interest on Long-Term Debt | | 17,996 | | | 19,860 | | | 58,485 | | | 59,261 | | Other Interest | | (658) | | | (1,324) | | | 606 | | | (7,612) | | | Interest Expense | | 17,338 | | | 18,536 | | | 59,091 | | | 51,649 | Other Income, Net | | 3,287 | | | 2,126 | | | 3,011 | | | 3,275 | Income Before Income Tax Expense | | 192,549 | | | 175,567 | | | 390,446 | | | 350,661 | Income Tax Expense | | 76,975 | | | 68,558 | | | 156,655 | | | 137,499 | Net Income | $ | 115,574 | | $ | 107,009 | | $ | 233,791 | | $ | 213,162 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
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| | | | | | | | NSTAR ELECTRIC COMPANY AND SUBSIDIARY | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | (Unaudited) | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | Operating Activities: | | | | | | | Net Income | $ | 233,791 | | $ | 213,162 | | Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | | | | | | | | Depreciation | | 140,996 | | | 136,323 | | | Deferred Income Taxes | | (39,399) | | | 26,358 | | | Pension and PBOP Expense, Net of Contributions | | (11,046) | | | (55,195) | | | Regulatory Over/(Under) Recoveries, Net | | 155,357 | | | (11,299) | | | Amortization of Regulatory Assets, Net | | (916) | | | 173,289 | | | Amortization of Rate Reduction Bonds | | - | | | 15,054 | | | Proceeds from DOE Damages Claim | | 30,193 | | | - | | | Bad Debt Expense | | 15,250 | | | 19,012 | | | Other | | (56,851) | | | (48,291) | | Changes in Current Assets and Liabilities: | | | | | | | | Receivables and Unbilled Revenues, Net | | (47,770) | | | (80,575) | | | Materials and Supplies | | (20,837) | | | 7,961 | | | Taxes Receivable/Accrued, Net | | 60,252 | | | (6,345) | | | Accounts Payable | | (40,594) | | | 6,856 | | | Accounts Receivable from/Payable to Affiliates, Net | | 66,758 | | | (59,173) | | | Other Current Assets and Liabilities, Net | | 32,340 | | | (19,547) | Net Cash Flows Provided by Operating Activities | | 517,524 | | | 317,590 | | | | | | | | | Investing Activities: | | | | | | | Investments in Property, Plant and Equipment | | (309,248) | | | (330,635) | | Decrease in Special Deposits | | - | | | 37,899 | | Other Investing Activities | | - | | | 575 | Net Cash Flows Used in Investing Activities | | (309,248) | | | (292,161) | | | | | | | | | Financing Activities: | | | | | | | Cash Dividends on Common Stock | | (253,000) | | | (56,000) | | Cash Dividends on Preferred Stock | | (1,470) | | | (1,633) | | Increase/(Decrease) in Notes Payable | | 56,000 | | | (120,000) | | Issuance of Long-Term Debt | | 300,000 | | | 200,000 | | Retirements of Long-Term Debt | | (301,650) | | | (1,650) | | Retirements of Rate Reduction Bonds | | - | | | (43,493) | | Other Financing Activities | | (5,137) | | | (878) | Net Cash Flows Used in Financing Activities | | (205,257) | | | (23,654) | Net Increase in Cash and Cash Equivalents | | 3,019 | | | 1,775 | Cash and Cash Equivalents - Beginning of Period | | 8,021 | | | 13,695 | Cash and Cash Equivalents - End of Period | $ | 11,040 | | $ | 15,470 | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
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| | | | | | | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY | | | | | | CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | ASSETS | | | | | | | | | | | | | Current Assets: | | | | | | | Cash | $ | 2,750 | | $ | 130 | | Receivables, Net | | 77,602 | | | 76,331 | | Accounts Receivable from Affiliated Companies | | 6,271 | | | 90 | | Unbilled Revenues | | 33,088 | | | 38,344 | | Fuel, Materials and Supplies | | 141,381 | | | 128,736 | | Regulatory Assets | | 102,473 | | | 92,194 | | Prepayments and Other Current Assets | | 22,270 | | | 24,100 | Total Current Assets | | 385,835 | | | 359,925 | | | | | | | | Property, Plant and Equipment, Net | | 2,560,635 | | | 2,467,556 | | | | | | | | Deferred Debits and Other Assets: | | | | | | | Regulatory Assets | | 178,204 | | | 219,346 | | Other Long-Term Assets | | 54,748 | | | 39,891 | Total Deferred Debits and Other Assets | | 232,952 | | | 259,237 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 3,179,422 | | $ | 3,086,718 | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | | | | | | |
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| | | | | | | | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY | | | | | | CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | LIABILITIES AND CAPITALIZATION | | | | | | | | | | | | | | Current Liabilities: | | | | | | | Notes Payable to NU Parent | $ | 153,300 | | $ | 86,500 | | Long-Term Debt - Current Portion | | - | | | 50,000 | | Accounts Payable | | 58,801 | | | 82,920 | | Accounts Payable to Affiliated Companies | | 22,932 | | | 22,040 | | Regulatory Liabilities | | 29,165 | | | 20,643 | | Accumulated Deferred Income Taxes | | 29,936 | | | 28,596 | | Other Current Liabilities | | 38,725 | | | 51,729 | Total Current Liabilities | | 332,859 | | | 342,428 | | | | | | | | | Deferred Credits and Other Liabilities: | | | | | | | Accumulated Deferred Income Taxes | | 566,298 | | | 500,166 | | Regulatory Liabilities | | 50,614 | | | 51,723 | | Accrued SERP and PBOP | | 14,320 | | | 15,272 | | Other Long-Term Liabilities | | 46,874 | | | 46,247 | Total Deferred Credits and Other Liabilities | | 678,106 | | | 613,408 | | | | | | | | | Capitalization: | | | | | | | Long-Term Debt | | 999,230 | | | 999,006 | | | | | | | | | | Common Stockholder's Equity: | | | | | | | | Common Stock | | - | | | - | | | Capital Surplus, Paid In | | 702,923 | | | 701,911 | | | Retained Earnings | | 473,969 | | | 438,515 | | | Accumulated Other Comprehensive Loss | | (7,665) | | | (8,550) | | Common Stockholder's Equity | | 1,169,227 | | | 1,131,876 | Total Capitalization | | 2,168,457 | | | 2,130,882 | | | | | | | | | Total Liabilities and Capitalization | $ | 3,179,422 | | $ | 3,086,718 | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | |
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| | | | | | | | | | | | | | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY | | | | | | | CONDENSED CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | 2014 | | | 2013 | | | | | | | | | | | | | | | Operating Revenues | $ | 223,664 | | $ | 218,608 | | $ | 735,123 | | $ | 708,550 | | | | | | | | | | | | | | | Operating Expenses: | | | | | | | | | | | | | Purchased Power, Fuel and Transmission | | 64,397 | | | 46,668 | | | 247,992 | | | 197,765 | | Operations and Maintenance | | 65,563 | | | 69,477 | | | 198,025 | | | 191,606 | | Depreciation | | 24,568 | | | 22,919 | | | 73,247 | | | 68,433 | | Amortization of Regulatory Assets/(Liabilities), Net | | (9,734) | | | 225 | | | (17,565) | | | (1,745) | | Amortization of Rate Reduction Bonds | | - | | | - | | | - | | | 19,748 | | Energy Efficiency Programs | | 3,766 | | | 3,990 | | | 10,897 | | | 11,036 | | Taxes Other Than Income Taxes | | 18,702 | | | 18,706 | | | 53,051 | | | 52,640 | | | Total Operating Expenses | | 167,262 | | | 161,985 | | | 565,647 | | | 539,483 | Operating Income | | 56,402 | | | 56,623 | | | 169,476 | | | 169,067 | | | | | | | | | | | | | | | Interest Expense: | | | | | | | | | | | | | Interest on Long-Term Debt | | 10,896 | | | 10,345 | | | 33,812 | | | 32,951 | | Other Interest | | 128 | | | 521 | | | 183 | | | 1,230 | | | Interest Expense | | 11,024 | | | 10,866 | | | 33,995 | | | 34,181 | Other Income, Net | | 461 | | | 792 | | | 1,673 | | | 2,454 | Income Before Income Tax Expense | | 45,839 | | | 46,549 | | | 137,154 | | | 137,340 | Income Tax Expense | | 17,603 | | | 18,196 | | | 52,199 | | | 52,797 | Net Income | $ | 28,236 | | $ | 28,353 | | $ | 84,955 | | $ | 84,543 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | Net Income | $ | 28,236 | | $ | 28,353 | | $ | 84,955 | | $ | 84,543 | Other Comprehensive Income, Net of Tax: | | | | | | | | | | | | | Qualified Cash Flow Hedging Instruments | | 290 | | | 290 | | | 871 | | | 872 | | Changes in Unrealized Gains/(Losses) on Other Securities | | (13) | | | (2) | | | 14 | | | (47) | | Changes in Funded Status of Pension, SERP and PBOP Benefit Plans | | - | | | - | | | - | | | (3) | Other Comprehensive Income, Net of Tax | | 277 | | | 288 | | | 885 | | | 822 | Comprehensive Income | $ | 28,513 | | $ | 28,641 | | $ | 85,840 | | $ | 85,365 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
15
| | | | | | | | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | (Unaudited) | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | Operating Activities: | | | | | | | Net Income | $ | 84,955 | | $ | 84,543 | | Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | | | | | | | | Depreciation | | 73,247 | | | 68,433 | | | Deferred Income Taxes | | 67,827 | | | 57,066 | | | Pension, SERP and PBOP Expense | | 4,541 | | | 20,427 | | | Pension and PBOP Contributions | | (1,637) | | | (112,964) | | | Regulatory Over/(Under) Recoveries, Net | | 16,813 | | | (1,346) | | | Amortization of Regulatory Liabilities, Net | | (17,565) | | | (1,745) | | | Amortization of Rate Reduction Bonds | | - | | | 19,748 | | | Proceeds from DOE Damages Claim | | 14,453 | | | - | | | Other | | 7,930 | | | 7,165 | | Changes in Current Assets and Liabilities: | | | | | | | | Receivables and Unbilled Revenues, Net | | (7,467) | | | 8,047 | | | Fuel, Materials and Supplies | | (17,350) | | | (30,456) | | | Taxes Receivable/Accrued, Net | | (24,108) | | | 5,103 | | | Accounts Payable | | (9,297) | | | 29,148 | | | Other Current Assets and Liabilities, Net | | 13,470 | | | 7,220 | Net Cash Flows Provided by Operating Activities | | 205,812 | | | 160,389 | | | | | | | | | Investing Activities: | | | | | | | Investments in Property, Plant and Equipment | | (170,127) | | | (155,676) | | (Increase)/Decrease in Special Deposits | | (45) | | | 22,039 | | Other Investing Activities | | (103) | | | (53) | Net Cash Flows Used in Investing Activities | | (170,275) | | | (133,690) | | | | | | | | | Financing Activities: | | | | | | | Cash Dividends on Common Stock | | (49,500) | | | (51,000) | | Increase in Notes Payable to NU Parent | | 66,800 | | | 165,200 | | Retirements of Long-Term Debt | | (50,000) | | | (108,950) | | Retirements of Rate Reduction Bonds | | - | | | (29,294) | | Other Financing Activities | | (217) | | | 456 | Net Cash Flows Used in Financing Activities | | (32,917) | | | (23,588) | Net Increase in Cash | | 2,620 | | | 3,111 | Cash - Beginning of Period | | 130 | | | 2,493 | Cash - End of Period | $ | 2,750 | | $ | 5,604 | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
16
| | | | | | | WESTERN MASSACHUSETTS ELECTRIC COMPANY | | | | | | CONDENSED BALANCE SHEETS | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | ASSETS | | | | | | | | | | | | | Current Assets: | | | | | | | Cash | $ | 1,737 | | $ | - | | Receivables, Net | | 50,835 | | | 49,018 | | Accounts Receivable from Affiliated Companies | | 14,522 | | | 47,607 | | Unbilled Revenues | | 12,664 | | | 16,562 | | Taxes Receivable | | 11,504 | | | 432 | | Regulatory Assets | | 38,907 | | | 43,024 | | Marketable Securities | | 22,107 | | | 26,628 | | Prepayments and Other Current Assets | | 6,688 | | | 10,479 | Total Current Assets | | 158,964 | | | 193,750 | | | | | | | | Property, Plant and Equipment, Net | | 1,432,368 | | | 1,381,060 | | | | | | | | Deferred Debits and Other Assets: | | | | | | | Regulatory Assets | | 109,690 | | | 146,088 | | Marketable Securities | | 35,963 | | | 31,243 | | Other Long-Term Assets | | 50,902 | | | 40,679 | Total Deferred Debits and Other Assets | | 196,555 | | | 218,010 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 1,787,887 | | $ | 1,792,820 | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | | |
17
| | | | | | | | WESTERN MASSACHUSETTS ELECTRIC COMPANY | CONDENSED BALANCE SHEETS | (Unaudited) | | | | | | | | | | | | | | | | | | | | September 30, | | December 31, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | LIABILITIES AND CAPITALIZATION | | | | | | | | | | | | | | Current Liabilities: | | | | | | | Notes Payable to NU Parent | $ | 13,200 | | $ | - | | Long-Term Debt - Current Portion | | 50,000 | | | - | | Accounts Payable | | 36,558 | | | 62,961 | | Accounts Payable to Affiliated Companies | | 13,312 | | | 9,230 | | Accrued Interest | | 2,839 | | | 7,525 | | Regulatory Liabilities | | 43,462 | | | 19,858 | | Accumulated Deferred Income Taxes | | 1,920 | | | 13,098 | | Counterparty Deposits | | 626 | | | 7,688 | | Other Current Liabilities | | 11,758 | | | 20,629 | Total Current Liabilities | | 173,675 | | | 140,989 | | | | | | | | | Deferred Credits and Other Liabilities: | | | | | | | Accumulated Deferred Income Taxes | | 413,701 | | | 396,933 | | Regulatory Liabilities | | 10,289 | | | 13,873 | | Accrued SERP and PBOP | | 2,623 | | | 3,911 | | Other Long-Term Liabilities | | 38,372 | | | 28,619 | Total Deferred Credits and Other Liabilities | | 464,985 | | | 443,336 | | | | | | | | | Capitalization: | | | | | | | Long-Term Debt | | 578,686 | | | 629,389 | | | | | | | | | | Common Stockholder's Equity: | | | | | | | | Common Stock | | 10,866 | | | 10,866 | | | Capital Surplus, Paid In | | 391,136 | | | 390,743 | | | Retained Earnings | | 171,800 | | | 181,014 | | | Accumulated Other Comprehensive Loss | | (3,261) | | | (3,517) | | Common Stockholder's Equity | | 570,541 | | | 579,106 | Total Capitalization | | 1,149,227 | | | 1,208,495 | | | | | | | | | Total Liabilities and Capitalization | $ | 1,787,887 | | $ | 1,792,820 | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | | |
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| | | | | | | | | | | | | | WESTERN MASSACHUSETTS ELECTRIC COMPANY | | | | | | | | | | CONDENSED STATEMENTS OF INCOME | | | | | | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | | | | | | Operating Revenues | $ | 118,145 | | $ | 121,795 | | $ | 363,843 | | $ | 361,763 | | | | | | | | | | | | | | | Operating Expenses: | | | | | | | | | | | | | Purchased Power and Transmission | | 43,926 | | | 38,797 | | | 130,977 | | | 111,095 | | Operations and Maintenance | | 20,820 | | | 26,148 | | | 67,085 | | | 70,213 | | Depreciation | | 10,506 | | | 9,426 | | | 31,144 | | | 27,707 | | Amortization of Regulatory Liabilities, Net | | (8,519) | | | (1,412) | | | (7,778) | | | (598) | | Amortization of Rate Reduction Bonds | | - | | | - | | | - | | | 7,780 | | Energy Efficiency Programs | | 10,983 | | | 12,222 | | | 33,096 | | | 28,462 | | Taxes Other Than Income Taxes | | 9,200 | | | 7,696 | | | 25,679 | | | 20,188 | | | Total Operating Expenses | | 86,916 | | | 92,877 | | | 280,203 | | | 264,847 | Operating Income | | 31,229 | | | 28,918 | | | 83,640 | | | 96,916 | | | | | | | | | | | | | | | Interest Expense: | | | | | | | | | | | | | Interest on Long-Term Debt | | 6,029 | | | 5,814 | | | 18,195 | | | 17,846 | | Other Interest | | 547 | | | 417 | | | 734 | | | 954 | | | Interest Expense | | 6,576 | | | 6,231 | | | 18,929 | | | 18,800 | Other Income, Net | | 502 | | | 926 | | | 1,670 | | | 2,349 | Income Before Income Tax Expense | | 25,155 | | | 23,613 | | | 66,381 | | | 80,465 | Income Tax Expense | | 10,490 | | | 8,588 | | | 26,596 | | | 30,424 | Net Income | $ | 14,665 | | $ | 15,025 | | $ | 39,785 | | $ | 50,041 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | CONDENSED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | | | | (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | Net Income | $ | 14,665 | | $ | 15,025 | | $ | 39,785 | | $ | 50,041 | Other Comprehensive Income, Net of Tax: | | | | | | | | | | | | | Qualified Cash Flow Hedging Instruments | | 85 | | | 85 | | | 254 | | | 254 | | Changes in Unrealized Gains/(Losses) on Other Securities | | (2) | | | - | | | 2 | | | (8) | Other Comprehensive Income, Net of Tax | | 83 | | | 85 | | | 256 | | | 246 | Comprehensive Income | $ | 14,748 | | $ | 15,110 | | $ | 40,041 | | $ | 50,287 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. | | | | | | |
Table of Contents
| | | | | | | | WESTERN MASSACHUSETTS ELECTRIC COMPANY | CONDENSED STATEMENTS OF CASH FLOWS | (Unaudited) | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | (Thousands of Dollars) | 2014 | | 2013 | | | | | | | | | Operating Activities: | | | | | | | Net Income | $ | 39,785 | | $ | 50,041 | | Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | | | | | | | | Depreciation | | 31,144 | | | 27,707 | | | Deferred Income Taxes | | 13,479 | | | 79,401 | | | Regulatory Overrecoveries, Net | | 33,630 | | | 11,685 | | | Amortization of Regulatory Liabilities, Net | | (7,778) | | | (598) | | | Amortization of Rate Reduction Bonds | | - | | | 7,780 | | | Proceeds from DOE Damages Claim | | 18,883 | | | - | | | Other | | 615 | | | (544) | | Changes in Current Assets and Liabilities: | | | | | | | | Receivables and Unbilled Revenues, Net | | 36,075 | | | (32,231) | | | Taxes Receivable/Accrued, Net | | (15,831) | | | 16,412 | | | Accounts Payable | | (12,847) | | | 20,260 | | | Other Current Assets and Liabilities, Net | | (16,551) | | | (9,857) | Net Cash Flows Provided by Operating Activities | | 120,604 | | | 170,056 | | | | | | | | | Investing Activities: | | | | | | | Investments in Property, Plant and Equipment | | (82,546) | | | (127,352) | | Proceeds from Sales of Marketable Securities | | 58,788 | | | 53,552 | | Purchases of Marketable Securities | | (59,280) | | | (54,042) | | Other Investing Activities | | - | | | 7,401 | Net Cash Flows Used in Investing Activities | | (83,038) | | | (120,441) | | | | | | | | | Financing Activities: | | | | | | | Cash Dividends on Common Stock | | (49,000) | | | (30,000) | | Retirement of Long-Term Debt | | - | | | (55,000) | | Increase in Notes Payable to NU Parent | | 13,200 | | | 47,900 | | Retirement of Rate Reduction Bonds | | - | | | (9,352) | | Other Financing Activities | | (29) | | | (7) | Net Cash Flows Used in Financing Activities | | (35,829) | | | (46,459) | Net Increase in Cash | | 1,737 | | | 3,156 | Cash - Beginning of Period | | - | | | 1 | Cash - End of Period | $ | 1,737 | | $ | 3,157 | | | | | | | | | | | | | | | | | The accompanying notes are an integral part of these unaudited condensed financial statements. |
NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS20
(Unaudited)
| | 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.
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Table of Contents
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.
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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.
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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.
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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
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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
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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 SUBSIDIARY
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.
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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.
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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.
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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.
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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 | | | | | | | | 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.
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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.
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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.
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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
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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.
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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.
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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.
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Table of Contents
NORTHEAST UTILITIES AND SUBSIDIARIES
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. NU’sNU's wholly owned regulated utility subsidiaries consist 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.
The unaudited condensed consolidated financial statements of NU, NSTAR Electric and PSNH include the accounts of each of their respective subsidiaries. Intercompany transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of NU, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P and WMECO are herein collectively referred to as the “financial"financial statements.”"
The combined notes to the financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. The accompanying financial statements should be read in conjunction with the entirety of this combined Quarterly Report on Form 10-Q, the first and second quarter 2014 combined Quarterly Reports on Form 10-Q and the 2013 combined Annual Report on Form 10-K of NU, CL&P, NSTAR Electric, PSNH and WMECO, which waswere filed with the SEC. The preparation of the 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly NU’s,NU's, CL&P’s,&P's, NSTAR Electric’s, PSNH’sElectric's, PSNH's and WMECO’sWMECO's financial position as of March 31,September 30, 2014 and December 31, 2013, and the results of operations and comprehensive income for the three and nine months ended September 30, 2014 and 2013, and the cash flows for the threenine months ended March 31,September 30, 2014 and 2013. The results of operations and comprehensive income for the three and nine months ended September 30, 2014 and 2013, and the cash flows for the threenine months ended March 31,September 30, 2014 and 2013 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 (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 asbecause CL&P’s,&P's, NSTAR Electric’s, PSNH’sElectric's, PSNH's and WMECO’sWMECO'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 of the NU financial statements. For CL&P, NSTAR Electric, PSNH and WMECO, the investments 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 reclassifications of prior period data were made in the accompanying balance sheets for NU, CL&P, NSTAR Electric and PSNH, and in the statements of income for NU, NSTAR Electric, PSNH and WMECO, and statements of cash flows for CL&P, NSTAR Electric and WMECO. These reclassifications were made to conform to the current period’speriod presentation.
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Table of ContentsB.
Accounting Standards B.Recently Adopted Accounting Standards
Standards:On January 1, 2014, as required, NU prospectively adopted the Financial Accounting Standards Board’sBoard's (FASB) final Accounting Standards Updates (ASU) that required presentation of certain unrecognized tax benefits as reductions to deferred tax assets. Implementation of this guidance had an immaterial impact on the balance sheets and no impact on the results of operations or cash flows of NU, CL&P, NSTAR Electric, PSNH and WMECO.
Accounting Standards Issued but not Yet Adopted: In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers, effective January 1, 2017, which amends existing revenue recognition guidance and is required to be applied retrospectively (either to each reporting period presented or cumulatively at the date of initial application). Management is reviewing the requirements of the new ASU, however the ASU's impact is not expected to have a material impact on the financial statements of NU, CL&P, NSTAR Electric, PSNH and WMECO.
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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 accounts. This provision is determined based upon a variety of factors, including the application of an estimated uncollectible percentage to each receivable aging 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 adjusts collectibility estimates 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 balance sheets, was as follows:
| (Millions of Dollars) | | As of March 31, 2014 | | As of December 31, 2013 | | | As of September 30, 2014 | | As of December 31, 2013 | NU | | $ | 180.0 | | $ | 171.3 | | | $ | 181.4 | | $ | 171.3 | CL&P | | 83.4 | | 82.0 | | | | 85.8 | | | 82.0 | NSTAR Electric | | 43.1 | | 41.7 | | | | 42.3 | | | 41.7 | PSNH | | 7.8 | | 7.4 | | | | 7.9 | | | 7.4 | WMECO | | 10.6 | | 10.0 | | | | 11.1 | | | 10.0 | |
D. Fair Value Measurements Fair value measurement guidance is applied to derivative contracts that are not elected or designated as “normal"normal purchases or normal sales”sales" (normal) and to the marketable securities held in trusts. Fair value measurement guidance is also applied to investment valuations used to calculate the funded status of pension and PBOP plans and nonrecurring fair value measurements of nonfinancial assets such as goodwill and AROs.AROs, and is also used to estimate the fair value of preferred stock and long-term debt.
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 9, “Fair10, "Fair Value of Financial Instruments,”" to the financial statements.
E. Other Income, Net Items included within Other Income, Net on the 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"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 as well as NSTAR Electric’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’s investment in two regional transmission companies.
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Table of ContentsF.
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 statements of income as follows:
| | | For the Three Months Ended | | For the Three Months Ended | | For the Nine Months Ended | (Millions of Dollars) | | March 31, 2014 | | March 31, 2013 | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 | | September 30, 2013 | NU | | $ | 44.4 | | $ | 38.4 | | $ | 35.0 | | $ | 37.5 | | $ | 114.6 | | $ | 108.9 | CL&P | | 35.6 | | 32.0 | | | 32.5 | | 35.5 | | | 99.0 | | 97.3 | |
Certain sales taxes are also collected by NU’sNU's companies that serve customers in Connecticut and Massachusetts as agents for state and local governments and are recorded on a net basis with no impact on the statements of income.
G.Supplemental Cash Flow Information
Non-cash investing activities include plant additions included in Accounts Payable as follows:22
(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
| | | | G. | | Supplemental Cash Flow Information | | Non-cash investing activities include plant additions included in Accounts Payable as follows: |
| | | | | | (Millions of Dollars) | As of September 30, 2014 | | As of September 30, 2013 | NU | $ | 128.9 | | $ | 122.9 | CL&P | | 52.2 | | | 36.6 | NSTAR Electric | | 18.1 | | | 31.9 | PSNH | | 21.0 | | | 16.9 | WMECO | | 10.0 | | | 13.8 |
In the first quarternine months of 2014, as a result of damages awarded to the Yankee Companies for spent nuclear fuel lawsuits against the DOE described in Note 9C, "Commitments and Contingencies - Contractual Obligations - Yankee Companies," NU received total proceeds of $132.1 million, which were net of $80.6 million in proceeds CYAPC and YAEC returned to non-affiliated member companies.
H. Severance Benefits NU recorded severance benefit expenses of $4.3$0.7 million and $6.5 million associated with the partial outsourcing of information technology functions and ongoing post-merger integration.integration for the three and nine months ended September 30, 2014, respectively, and $9.2 million for the three and nine months ended September 30, 2013. As of March 31,September 30, 2014 and December 31, 2013, the severance accrual totaled $17.7$6.4 million and $14.7 million, respectively, and was included in Other Current Liabilities on the balance sheets.
I.Restricted Cash2.
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 each company’scompany's costs to provide service, including a return on investment. Therefore, the accounting policies of the Regulated companies follow the application of accounting guidance for entities with rate-regulated operations 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 were 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 | | As of September 30, 2014 | | As of December 31, 2013 | (Millions of Dollars) | | NU | | NU | | NU | | NU | Benefit Costs | | $ | 1,205.4 | | $ | 1,240.2 | | $ | 1,113.2 | | $ | 1,240.2 | Derivative Liabilities | | 564.9 | | 638.0 | | | 427.5 | | | 638.0 | Income Taxes, Net | | 629.2 | | 626.2 | | | 623.2 | | | 626.2 | Storm Restoration Costs | | 580.9 | | 589.6 | | | 493.5 | | | 589.6 | Goodwill | | 520.8 | | 525.9 | | | Goodwill-related | | | 510.5 | | | 525.9 | Regulatory Tracker Mechanisms | | 347.4 | | 323.4 | | | 235.7 | | | 323.4 | Contractual Obligations - Yankee Companies | | | 124.6 | | | 154.2 | Buy Out Agreements for Power Contracts | | 63.4 | | 70.2 | | | 49.8 | | | 70.2 | Other Regulatory Assets | | 147.6 | | 281.0 | | | 109.1 | | | 126.8 | Total Regulatory Assets | | 4,059.6 | | 4,294.5 | | | 3,687.1 | | | 4,294.5 | Less: Current Portion | | 573.0 | | 535.8 | | | 446.0 | | | 535.8 | Total Long-Term Regulatory Assets | | $ | 3,486.6 | | $ | 3,758.7 | | $ | 3,241.1 | | $ | 3,758.7 |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | As of September 30, 2014 | | As of December 31, 2013 | | | | | | NSTAR | | | | | | | | | | | NSTAR | | | | | | | (Millions of Dollars) | CL&P | | Electric | | PSNH | | WMECO | | CL&P | | Electric | | PSNH | | WMECO | Benefit Costs | $ | 242.2 | | $ | 318.1 | | $ | 78.1 | | $ | 44.3 | | $ | 297.7 | | $ | 496.7 | | $ | 100.6 | | $ | 57.3 | Derivative Liabilities | | 421.1 | | | 4.3 | | | - | | | - | | | 630.4 | | | 7.7 | | | - | | | - | Income Taxes, Net | | 427.4 | | | 83.3 | | | 38.3 | | | 35.3 | | | 415.5 | | | 84.0 | | | 40.3 | | | 43.7 | Storm Restoration Costs | | 326.0 | | | 106.2 | | | 29.3 | | | 32.0 | | | 397.8 | | | 109.3 | | | 43.7 | | | 38.8 | Goodwill-related | | - | | | 438.3 | | | - | | | - | | | - | | | 451.5 | | | - | | | - | Regulatory Tracker Mechanisms | | 5.2 | | | 76.4 | | | 94.7 | | | 23.5 | | | 8.0 | | | 169.5 | | | 83.3 | | | 32.6 | Buy Out Agreements for Power Contracts | | - | | | 45.4 | | | 4.4 | | | - | | | - | | | 64.7 | | | 5.5 | | | - | Other Regulatory Assets | | 63.6 | | | 54.2 | | | 35.9 | | | 13.5 | | | 64.6 | | | 55.9 | | | 38.1 | | | 16.7 | Total Regulatory Assets | | 1,485.5 | | | 1,126.2 | | | 280.7 | | | 148.6 | | | 1,814.0 | | | 1,439.3 | | | 311.5 | | | 189.1 | Less: Current Portion | | 116.5 | | | 128.2 | | | 102.5 | | | 38.9 | | | 150.9 | | | 204.1 | | | 92.2 | | | 43.0 | Total Long-Term Regulatory Assets | $ | 1,369.0 | | $ | 998.0 | | $ | 178.2 | | $ | 109.7 | | $ | 1,663.1 | | $ | 1,235.2 | | $ | 219.3 | | $ | 146.1 |
Table of Contents
| | As of March 31, 2014 | | As of December 31, 2013 | | | | | | NSTAR | | | | | | | | NSTAR | | | | | | (Millions of Dollars) | | CL&P | | Electric | | PSNH | | WMECO | | CL&P | | Electric | | PSNH | | WMECO | | Benefit Costs | | $ | 287.1 | | $ | 321.3 | | $ | 96.7 | | $ | 55.1 | | $ | 297.7 | | $ | 496.7 | | $ | 100.6 | | $ | 57.3 | | 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 | | — | | 447.1 | | — | | — | | — | | 451.5 | | — | | — | | 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 | | 64.1 | | 55.5 | | 37.8 | | 15.5 | | 64.6 | | 55.9 | | 38.1 | | 16.7 | | Total Regulatory Assets | | 1,756.5 | | 1,264.5 | | 294.5 | | 181.8 | | 1,814.0 | | 1,439.3 | | 311.5 | | 189.1 | | Less: Current Portion | | 175.9 | | 222.6 | | 83.8 | | 49.6 | | 150.9 | | 204.1 | | 92.2 | | 43.0 | | Total Long-Term Regulatory Assets | | $ | 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’companies' pension and other postretirement benefits, see Note 7, “Pension"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 regulatory asset balance at CL&P, NSTAR Electric, PSNH and WMECO reflects incremental costs incurred for major storm events. Management believes the storm restoration costs were prudent and meet the criteria for specific cost recovery in Connecticut, 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 (with carrying charges) associated with five major storms that occurred in 2011 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.2012. CL&P will recover the $365 million with carrying chargesthese costs in its distribution rates over a six-year period beginning December 1, 2014. The remainingEffective June 1, 2014, CL&P received $65.4 million of DOE Phase II Damages proceeds. On June 17, 2014,
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the PURA ordered CL&P to refund these proceeds to customers by offsetting the deferred storm restoration costs were either disallowed or we believe will be recoveredregulatory asset. For further information on the DOE Phase II Damages proceeds received from other sources. These costs did not have a material impact on CL&P’sthe Yankee Companies, see Note 9C, "Commitments and Contingencies - Contractual Obligations - Yankee Companies," to the financial position, results of operations or cash flows.statements.
Regulatory Costs in Other Long-Term Assets: The Regulated companies had $71.7$64.7 million ($12.43.2 million for CL&P, $33.7$36 million for NSTAR Electric, and $10.2$11.2 million for WMECO) and $65.1 million ($7.3 million for CL&P, $33.4 million for NSTAR Electric, and $10.1 million for WMECO) of additional regulatory costs as of March 31,September 30, 2014 and December 31, 2013, respectively, that were included in Other Long-Term Assets on the balance sheets. These amounts represent incurred costs for which recovery has not yet been specifically approved by the applicable regulatory agency. However, 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 in rates.
Regulatory Liabilities: The components of regulatory liabilities are as follows:
| | | As of March 31, 2014 | | As of December 31, 2013 | | As of September 30, 2014 | | As of December 31, 2013 | (Millions of Dollars) | | NU | | NU | | NU | | NU | Cost of Removal | | $ | 437.3 | | $ | 435.1 | | $ | 439.1 | | $ | 435.1 | Regulatory Tracker Mechanisms | | 203.6 | | 151.2 | | | 339.9 | | 151.2 | AFUDC - Transmission | | 67.8 | | 68.1 | | | 67.2 | | 68.1 | Contractual Obligations - Yankee Companies | | 93.3 | | — | | | Other Regulatory Liabilities | | 53.3 | | 52.9 | | | 62.7 | | | 52.9 | Total Regulatory Liabilities | | 855.3 | | 707.3 | | | 908.9 | | 707.3 | Less: Current Portion | | 263.8 | | 204.3 | | | 399.0 | | | 204.3 | Total Long-Term Regulatory Liabilities | | $ | 591.5 | | $ | 503.0 | | $ | 509.9 | | $ | 503.0 |
| | | As of March 31, 2014 | | As of December 31, 2013 | | | As of September 30, 2014 | | As of December 31, 2013 | | | | | NSTAR | | | | | | | | NSTAR | | | | | | | | | NSTAR | | | | | | | | NSTAR | | | | | (Millions of Dollars) | | CL&P | | Electric | | PSNH | | WMECO | | CL&P | | Electric | | PSNH | | WMECO | | (Millions of Dollars) | CL&P | | Electric | | PSNH | | WMECO | | CL&P | | Electric | | PSNH | | WMECO | Cost of Removal | | $ | 27.5 | | $ | 252.5 | | $ | 49.7 | | $ | — | | $ | 29.1 | | $ | 250.0 | | $ | 49.7 | | $ | — | | Cost of Removal | $ | 22.5 | | $ | 260.7 | | $ | 49.2 | | $ | - | | $ | 29.1 | | $ | 250.0 | | $ | 49.7 | | $ | - | Regulatory Tracker Mechanisms | | 105.6 | | 43.8 | | 27.5 | | 22.4 | | 95.6 | | 21.9 | | 21.6 | | 21.1 | | Regulatory Tracker Mechanisms | | 196.4 | | | 67.3 | | | 25.9 | | | 43.9 | | | 95.6 | | | 21.9 | | | 21.6 | | | 21.1 | AFUDC - Transmission | | 54.5 | | 4.0 | | — | | 9.3 | | 54.7 | | 4.1 | | — | | 9.3 | | AFUDC - Transmission | | 53.9 | | | 4.1 | | | - | | | 9.2 | | | 54.7 | | | 4.1 | | | - | | | 9.3 | Other Regulatory Liabilities | | 9.8 | | 30.4 | | 1.9 | | 0.5 | | 8.4 | | 31.1 | | 1.0 | | 3.4 | | Other Regulatory Liabilities | | 10.6 | | | 31.6 | | | 4.7 | | | 0.7 | | | 8.4 | | | 31.1 | | | 1.0 | | | 3.4 | Total Regulatory Liabilities | | 197.4 | | 330.7 | | 79.1 | | 32.2 | | 187.8 | | 307.1 | | 72.3 | | 33.8 | | Total Regulatory Liabilities | | 283.4 | | | 363.7 | | | 79.8 | | | 53.8 | | | 187.8 | | | 307.1 | | | 72.3 | | | 33.8 | Less: Current Portion | | 107.3 | | 73.6 | | 27.3 | | 21.8 | | 94.0 | | 54.0 | | 20.6 | | 19.9 | | Less: Current Portion | | 195.7 | | | 97.2 | | | 29.2 | | | 43.5 | | | 94.0 | | | 54.0 | | | 20.6 | | | 19.9 | Total Long-Term Regulatory Liabilities | | $ | 90.1 | | $ | 257.1 | | $ | 51.8 | | $ | 10.4 | | $ | 93.8 | | $ | 253.1 | | $ | 51.7 | | $ | 13.9 | | Total Long-Term Regulatory Liabilities | $ | 87.7 | | $ | 266.5 | | $ | 50.6 | | $ | 10.3 | | $ | 93.8 | | $ | 253.1 | | $ | 51.7 | | $ | 13.9 |
For further informationAs a result of two FERC orders issued on matters relatedJune 19, 2014 in the pending base ROE complaint proceedings described in Note 9E, "Commitments and Contingencies – FERC Base ROE Complaints," in the second quarter of 2014 the Company had recorded a series of reserves at its electric subsidiaries to recognize the potential financial impact of these rulings. As of September 30, 2014, the cumulative pre-tax reserves (excluding interest) totaled $76.1 million at NU, $42.9 million at CL&P, $15.6 million at NSTAR Electric, $5.9 million at PSNH and $11.7 million at WMECO. As of December 31, 2013, as a result of the FERC ALJ initial decision in the third quarter of 2013, the Company had an aggregate pre-tax reserve (excluding interest) of $23.7 million at NU, $12.8 million at CL&P, $5.7 million at NSTAR Electric, $2.3 million at PSNH and $2.9 million at WMECO. These reserves were recorded in each electric subsidiary's respective transmission regulatory tracker mechanism and as a reduction of Operating Revenues.
Effective June 1, 2014, as a result of damages awarded to the Yankee Companies seefor spent nuclear fuel lawsuits against the DOE described in Note 8B, “Commitments9C, "Commitments and Contingencies - Contractual Obligations - Yankee Companies,”" the Yankee Companies returned the DOE Phase II Damages proceeds to the financial statements.member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, for the benefit of their respective customers. CL&P's refund obligation to customers of $65.4 million was recorded as an offset to the deferred storm restoration costs regulatory asset, as directed by PURA. NSTAR Electric's, PSNH's and WMECO's refund obligation to customers of $29.1 million, $13.1 million and $18.1 million, respectively, was recorded as a regulatory liability in each electric subsidiary's respective regulatory tracker mechanisms. Refunds to customers for these DOE proceeds began in the third quarter of 2014.
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3. PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION
The following tables summarize the investments in utility property, plant and equipment by asset category:
| | | As of March 31, 2014 | | As of December 31, 2013 | | | As of September 30, 2014 | | As of December 31, 2013 | (Millions of Dollars) | | NU | | NU | | (Millions of Dollars) | NU | | NU | Distribution - Electric | | $ | 12,039.7 | | $ | 11,950.2 | | Distribution - Electric | $ | 12,306.6 | | $ | 11,950.2 | Distribution - Natural Gas | | 2,447.9 | | 2,425.9 | | Distribution - Natural Gas | | 2,494.5 | | 2,425.9 | Transmission | | 6,423.5 | | 6,412.5 | | Transmission | | 6,564.2 | | 6,412.5 | Generation | | 1,154.7 | | 1,152.3 | | Generation | | 1,168.6 | | | 1,152.3 | Electric and Natural Gas Utility | | 22,065.8 | | 21,940.9 | | Electric and Natural Gas Utility | | 22,533.9 | | 21,940.9 | Other (1) | | 510.2 | | 508.7 | | Other (1) | | 541.7 | | | 508.7 | Property, Plant and Equipment, Gross | | 22,576.0 | | 22,449.6 | | Property, Plant and Equipment, Gross | | 23,075.6 | | 22,449.6 | Less: Accumulated Depreciation Electric and Natural Gas Utility | | (5,491.7 | ) | (5,387.0 | ) | | Other | | (204.7 | ) | (196.2 | ) | | Less: Accumulated Depreciation | | Less: Accumulated Depreciation | | | | | | | Electric and Natural Gas Utility | | (5,687.0) | | (5,387.0) | | | Other | | (216.3) | | | (196.2) | Total Accumulated Depreciation | | (5,696.4 | ) | (5,583.2 | ) | Total Accumulated Depreciation | | (5,903.3) | | | (5,583.2) | Property, Plant and Equipment, Net | | 16,879.6 | | 16,866.4 | | Property, Plant and Equipment, Net | | 17,172.3 | | 16,866.4 | Construction Work in Progress | | 833.4 | | 709.8 | | Construction Work in Progress | | 1,082.3 | | | 709.8 | Total Property, Plant and Equipment, Net | | $ | 17,713.0 | | $ | 17,576.2 | | Total Property, Plant and Equipment, Net | $ | 18,254.6 | | $ | 17,576.2 |
(1) These assets represent unregulated property and are primarily comprised of building improvements, computer software, hardware and equipment and telecommunications assets at NU’sNU's unregulated companies.
| | | As of March 31, 2014 | | As of December 31, 2013 | | As of September 30, 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 | | $ | 4,979.8 | | $ | 4,717.6 | | $ | 1,620.3 | | $ | 762.0 | | $ | 4,930.7 | | $ | 4,694.7 | | $ | 1,608.2 | | $ | 756.6 | | $ | 5,104.8 | | $ | 4,812.4 | | $ | 1,654.5 | | $ | 774.8 | | $ | 4,930.7 | | $ | 4,694.7 | | $ | 1,608.2 | | $ | 756.6 | Transmission | | 3,074.8 | | 1,769.0 | | 701.7 | | 831.7 | | 3,071.9 | | 1,772.3 | | 695.7 | | 826.4 | | | 3,125.2 | | 1,824.6 | | 715.8 | | 851.8 | | 3,071.9 | | 1,772.3 | | 695.7 | | 826.4 | Generation | | — | | — | | 1,133.6 | | 21.1 | | — | | — | | 1,131.2 | | 21.1 | | | - | | | - | | | 1,134.7 | | | 33.9 | | | - | | | - | | | 1,131.2 | | | 21.1 | 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 | | | 8,230.0 | | 6,637.0 | | 3,505.0 | | 1,660.5 | | 8,002.6 | | 6,467.0 | | 3,435.1 | | 1,604.1 | Less: Accumulated Depreciation | | (1,838.5 | ) | (1,664.6 | ) | (1,040.6 | ) | (278.4 | ) | (1,804.1 | ) | (1,631.3 | ) | (1,021.8 | ) | (271.5 | ) | | (1,908.2) | | | (1,726.7) | | | (1,069.4) | | | (291.8) | | | (1,804.1) | | | (1,631.3) | | | (1,021.8) | | | (271.5) | Property, Plant and Equipment, Net | | 6,216.1 | | 4,822.0 | | 2,415.0 | | 1,336.4 | | 6,198.5 | | 4,835.7 | | 2,413.3 | | 1,332.6 | | | 6,321.8 | | 4,910.3 | | 2,435.6 | | 1,368.7 | | 6,198.5 | | 4,835.7 | | 2,413.3 | | 1,332.6 | Construction Work in Progress | | 290.1 | | 247.2 | | 71.4 | | 62.4 | | 252.8 | | 208.2 | | 54.3 | | 48.5 | | | 379.0 | | | 301.4 | | | 125.0 | | | 63.7 | | | 252.8 | | | 208.2 | | | 54.3 | | | 48.5 | 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 | | $ | 6,700.8 | | $ | 5,211.7 | | $ | 2,560.6 | | $ | 1,432.4 | | $ | 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.4.
4.DERIVATIVE INSTRUMENTS
The Regulated companies purchase and procure energy and energy-related products, for their customers, which are subject to price volatility.volatility, for their customers. 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 and nonderivative contracts.
Many of the derivative contracts meet the definition of, and are designated as, normal and qualify for accrual accounting under the applicable accounting guidance. The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses or Operating Revenues on the statements of income, as applicable, as electricity or natural gas is delivered.
Derivative contracts that are not designated as normal are recorded at fair value as current or long-term Derivative Assets or Derivative Liabilities on the balance sheets. For the Regulated companies, regulatory assets or regulatory liabilities are recorded to offset the fair values of derivatives, as costs are recovered from, or refunded to, customers in their respective energy supply rates. For NU’sNU's unregulated wholesale marketing contracts that expired on December 31, 2013, changes in fair values of derivatives were included in Net Income.
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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, on the 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 amount recorded as current or long-term derivative asset or liability:
| | As of March 31, 2014 | | | | 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) | | $ | 1.2 | | $ | (0.1 | ) | $ | 1.1 | | Level 3: | | | | | | | | 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: | | | | | | | | Level 3: | | | | | | | | NU, CL&P (1) | | $ | 98.8 | | $ | (31.7 | ) | $ | 67.1 | | | | | | | | | | Current Derivative Liabilities: | | | | | | | | Level 3: | | | | | | | | NU | | $ | (93.3 | ) | $ | — | | $ | (93.3 | ) | CL&P | | (92.0 | ) | — | | (92.0 | ) | NSTAR Electric | | (1.3 | ) | — | | (1.3 | ) | | | | | | | | | Long-Term Derivative Liabilities: | | | | | | | | Level 2: | | | | | | | | NU | | $ | (0.2 | ) | $ | — | | $ | (0.2 | ) | Level 3: | | | | | | | | NU | | (546.2 | ) | — | | (546.2 | ) | CL&P | | (539.4 | ) | — | | (539.4 | ) | NSTAR Electric | | (6.8 | ) | — | | (6.8 | ) |
| | | | | | | | | | | | As of September 30, 2014 | | | 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) | $ | 0.4 | | $ | - | | $ | 0.4 | Level 3: | | | | | | | | | | NU (1) | | 17.4 | | | (6.8) | | | 10.6 | | CL&P (1) | | 16.4 | | | (6.8) | | | 9.6 | | NSTAR Electric | | 1.0 | | | - | | | 1.0 | | | | | | | | | | | Long-Term Derivative Assets: | | | | | | | | | Level 3: | | | | | | | | | | NU (1) | $ | 96.0 | | $ | (20.9) | | $ | 75.1 | | CL&P (1) | | 95.1 | | | (20.9) | | | 74.2 | | NSTAR Electric | | 0.9 | | | - | | | 0.9 | | | | | | | | | | | Current Derivative Liabilities: | | | | | | | | | Level 2: | | | | | | | | | | NU (1) | $ | (2.4) | | $ | 0.4 | | $ | (2.0) | Level 3: | | | | | | | | | | NU | | (88.3) | | | - | | | (88.3) | | CL&P | | (86.8) | | | - | | | (86.8) | | NSTAR Electric | | (1.5) | | | - | | | (1.5) | | | | | | | | | | | Long-Term Derivative Liabilities: | | | | | | | | | Level 3: | | | | | | | | | | NU | $ | (420.9) | | $ | - | | $ | (420.9) | | CL&P | | (418.1) | | | - | | | (418.1) | | NSTAR Electric | | (2.8) | | | - | | | (2.8) |
| | 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 | ) |
| | | | | | | | | | | | 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) |
(1) Amounts represent derivative assets and liabilities that NU elected to record net on the balance sheets. These amounts are subject to master netting agreements or similar agreements for which the right of offset exists.
For further information on the fair value of derivative contracts, see Note 1D, “Summary"Summary of Significant Accounting Policies - Fair Value Measurements,”" to the financial statements. 26
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Derivatives Not Designated as HedgesAt Fair Value with Offsetting Regulatory Amounts Commodity Supply and Price Risk Management: As required by regulation, CL&P, along with UI, 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 combined
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capacity of these contracts is 787 MW. The capacity contracts extend through 2026 and obligate both 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.
NSTAR Electric has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2018 and a capacity relatedcapacity-related contract to purchase up to 35 MW per year through 2019.
As of March 31,September 30, 2014 and December 31, 2013, NU had NYMEX future contracts in order to reduce variability associated with the purchase price of approximately 7.49.7 million and 9.1 million MMBtu of natural gas, respectively.
The following table presents the current change in fair value, primarily recovered through rates from customers, associated with NU’sNU's derivative contracts not designated as hedges:
| | Amounts Recognized on Derivatives | | | | | | | | | | | | | | | Location of Amounts | | For the Three Months Ended March 31, | | | Recognized on Derivatives | | 2014 | | 2013 | | | | | | | Amounts Recognized on Derivatives | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Millions of Dollars) | | | | | | (Millions of Dollars) | | 2014 | | 2013 | | 2014 | | 2013 | NU | | | | | | NU | | | | | | | | | | | | | Balance Sheets: | | | | | | Balance Sheets: | | | | | | | | | | | | | Regulatory Assets and Liabilities | | $ | 54.1 | | $ | 28.0 | | | | | Regulatory Assets and Liabilities | | $ | (15.7) | | $ | 0.3 | | $ | 149.9 | | $ | 48.8 | | Statements of Income: | | | | | | Statements of Income: | | | | | | | | | | | | | Purchased Power, Fuel and Transmission | | — | | 0.3 | | | | | | | | | | | Purchased Power, Fuel and Transmission | | | - | | | 0.2 | | - | | | 0.9 | |
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. As of March 31, 2014 and December 31, 2013, there were no derivative contracts in a net liability position that were subject to credit risk contingent features.
Valuation of Derivative Instruments Derivative contracts classified as Level 2 in the fair value hierarchy relate to the financial contracts for natural gas 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.NYMEX natural gas prices. 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 valuations 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.
The following is a summary of NU’s,NU's, including CL&P’s&P's and NSTAR Electric’s,Electric'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:
| | | | | | | | | | NU
| | $ 57 - 60 per MWh
| | 2018 - 2020
| | $ 49 - 77 per MWh
| | 2018 - 2029
| | CL&P
| | $ 57 - 60 per MWh
| | 2018 - 2020
| | $ 56 - 58 per MWh
| | 2018 - 2029
| | | | | | | | | | | | Capacity Prices:
| | | | | | | | | | NU
| | $ 1.70 - 10.42 per kW-Month
| | 2016 - 2026
| | $ 5.07 - 11.82 per kW-Month
| | 2017 - 2029
| | CL&P
| | $ 5.23 - 10.42 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
| | $ 5.07 - 7.38 per kW-Month
| | 2017 - 2019
| | | | | | | | | | | | Forward Reserve:
| | | | | | | | | | NU, CL&P
| | $ 3.30 - 3.30 per kW-Month
| | 2014 - 2024
| | $ 3.30 - 3.30 per kW-Month
| | 2014 - 2024
| | | | | | | | | | | | REC Prices:
| | | | | | | | | | NU
| | $ 38 - 70 per REC
| | 2014 - 2018
| | $ 36 - 87 per REC
| | 2014 - 2029
| | NSTAR Electric
| | $ 38 - 70 per REC
| | 2014 - 2018
| | $ 36 - 70 per REC
| | 2014 - 2018
| |
| | | | | | | | | | | | | | | | | | | As of September 30, 2014 | | As of December 31, 2013 | | | Range | | Period Covered | | | Range | | Period Covered | Energy Prices: | | | | | | | | | | | | | | | | | | NU | $ | 66 | - | 68 | per MWh | | 2018 - 2020 | | $ | 49 | - | 77 | per MWh | | 2018 - 2029 | CL&P | $ | 66 | - | 68 | per MWh | | 2018 - 2020 | | $ | 56 | - | 58 | per MWh | | 2018 - 2029 | | | | | | | | | | | | | | | | | | | Capacity Prices: | | | | | | | | | | | | | | | | | | NU | $ | 7.03 | - | 12.98 | per kW-Month | | 2016 - 2026 | | $ | 5.07 | - | 11.82 | per kW-Month | | 2017 - 2029 | CL&P | $ | 7.03 | - | 12.98 | per kW-Month | | 2018 - 2026 | | $ | 5.07 | - | 10.42 | per kW-Month | | 2017 - 2026 | NSTAR Electric | $ | 11.00 | - | 11.10 | per kW-Month | | 2016 - 2019 | | $ | 5.07 | - | 7.38 | per kW-Month | | 2017 - 2019 | | | | | | | | | | | | | | | | | | | Forward Reserve: | | | | | | | | | | | | | | | | | | NU, CL&P | $ | 5.80 | - | 9.50 | per kW-Month | | 2014 - 2024 | | $ | 3.30 | - | 3.30 | per kW-Month | | 2014 - 2024 | | | | | | | | | | | | | | | | | | | REC Prices: | | | | | | | | | | | | | | | | | | NU | $ | 41 | - | 70 | per REC | | 2014 - 2018 | | $ | 36 | - | 87 | per REC | | 2014 - 2029 | NSTAR Electric | $ | 41 | - | 70 | per REC | | 2014 - 2018 | | $ | 36 | - | 70 | per REC | | 2014 - 2018 |
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Exit price premiums of 98 percent through 2625 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 energy 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.
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Valuations using significant unobservable inputs: The following tables present changes for the three months ended March 31, 2014 and 2013 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.
| | | For the Three Months Ended March 31, | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | | | 2014 | | 2013 | | | 2014 | | 2013 | | 2014 | | 2013 | (Millions of Dollars) | | NU | | NU | | (Millions of Dollars) | NU | | NU | | NU | | NU | Derivatives, Net: | | | | | | Derivatives, Net: | | | | | | | | | | Fair Value as of Beginning of Period | | $ | (635.2 | ) | $ | (878.6 | ) | Fair Value as of Beginning of Period | $ | (430.9) | | $ | (788.1) | | $ | (635.2) | | $ | (878.6) | Net Realized/Unrealized Gains Included in: | | | | | | Net Realized/Unrealized Gains Included in: | | | | | | | | | | Net Income (1) | | — | | 5.7 | | | Regulatory Assets and Liabilities | | 49.2 | | 26.2 | | | | | Net Income | | - | | 1.2 | | | - | | 8.3 | | | Regulatory Assets and Liabilities | | (13.6) | | 0.8 | | | 147.6 | | 49.6 | Settlements | | 21.7 | | 13.6 | | Settlements | | 21.0 | | | 21.3 | | | 64.1 | | | 55.9 | Fair Value as of End of Period | | $ | (564.3 | ) | $ | (833.1 | ) | Fair Value as of End of Period | $ | (423.5) | | $ | (764.8) | | $ | (423.5) | | $ | (764.8) |
| | | For the Three Months Ended | | | For the Three Months Ended September 30, | | | March 31, 2014 | | March 31, 2013 | | | 2014 | | 2013 | (Millions of Dollars) | | CL&P | | NSTAR Electric | | CL&P | | NSTAR Electric | | (Millions of Dollars) | CL&P | | NSTAR Electric | | | CL&P | | NSTAR Electric | Derivatives, Net: | | | | | | | | | | Derivatives, Net: | | | | | | | | | | | Fair Value as of Beginning of Period | | $ | (630.6 | ) | $ | (7.3 | ) | $ | (866.2 | ) | $ | (14.9 | ) | Fair Value as of Beginning of Period | $ | (424.6) | | $ | (6.3) | | $ | (775.8) | | $ | (13.1) | Net Realized/Unrealized Gains/(Losses) Included in Regulatory Assets and Liabilities | | 52.0 | | (0.1 | ) | 24.3 | | 0.7 | | Net Realized/Unrealized Gains/(Losses) Included in Regulatory Assets and Liabilities | | (15.0) | | 1.4 | | | (1.2) | | | 0.5 | Settlements | | 21.6 | | 0.1 | | 22.3 | | 0.6 | | Settlements | | 18.5 | | | 2.5 | | | 21.7 | | | 1.0 | Fair Value as of End of Period | | $ | (557.0 | ) | $ | (7.3 | ) | $ | (819.6 | ) | $ | (13.6 | ) | Fair Value as of End of Period | $ | (421.1) | | $ | (2.4) | | $ | (755.3) | | $ | (11.6) |
| | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | | 2014 | | | 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 | | 149.4 | | | 0.9 | | | | 45.1 | | | 0.6 | Settlements | | 60.1 | | | 4.0 | | | | 65.8 | | | 2.7 | Fair Value as of End of Period | $ | (421.1) | | $ | (2.4) | | | $ | (755.3) | | $ | (11.6) |
(1)The Net Income impact for the three months ended March 31, 2013 related to the unregulated wholesale marketing sales contract that 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 gain of $0.3 million as of March 31, 2013.
5. 5.MARKETABLE SECURITIES
NU maintains trusts to fund certain non-qualified executive benefits and WMECO maintains a spent nuclear fuel trust to fund WMECO’sWMECO's prior period spent nuclear fuel liability, each of whichliability. These trusts hold marketable securities.These trusts are not subject to regulatory oversight by state or federal agencies. In addition, CYAPC and YAEC maintain legally restricted trusts, each of which holds marketable securities, for settling the decommissioning obligations of their nuclear power plants.
In accordance with applicable accounting guidance, the Company elected to record mutual funds designated as available-for-sale at fair value and certain other equity investments as trading securities, with the changes in fair values recorded in Other Income, Net on the statements of income. As of March 31,September 30, 2014, the mutual funds and equity investments were classified as Level 1 in the fair value hierarchy and totaled $57.4$58.2 million and $24$24.4 million, respectively. As of December 31, 2013, the mutual funds were classified as Level 1 and totaled $57.2 million. Net gains on the mutual funds were $0.2 million and $4.2 million forFor the three months ended March 31,September 30, 2014 and 2013, respectively,net losses of $1.9 million and net gains onof $3 million, respectively, were recorded in Other Income, Net. For the equity investments were $0.5 million for the threenine months ended March 31, 2014.September 30, 2014 and 2013, net gains of $1.9 million and $7.3 million, respectively, were recorded in Other Income, Net. Dividend income is recorded in Other Income, Net on the statements of 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’sWMECO's available-for-sale securities. These securities are recorded at fair value and included in current and long-term Marketable Securities on the balance sheets.
| | | As of March 31, 2014 | | | As of September 30, 2014 | | | | | Pre-Tax | | Pre-Tax | | | | | | | | Pre-Tax | | Pre-Tax | | | | | Amortized | | Unrealized | | Unrealized | | | | | Amortized | | Unrealized | | Unrealized | | | (Millions of Dollars) | | Cost | | Gains(1) | | Losses(1) | | Fair Value | | (Millions of Dollars) | Cost | | Gains | | Losses | | Fair Value | NU | | | | | | | | | | NU | | | | | | | | | Debt Securities (2) | | $ | 300.6 | | $ | 4.8 | | $ | (0.7 | ) | $ | 304.7 | | | Equity Securities (2) | | 163.3 | | 65.6 | | — | | 228.9 | | | | | Debt Securities (1) | $ | 310.6 | | $ | 7.8 | | $ | (0.2) | | $ | 318.2 | | | Equity Securities (1) | | 160.9 | | 71.1 | | - | | 232.0 | | | | | | | | | | | | | | | | | | | | WMECO | | | | | | | | | | WMECO | | | | | | | | | Debt Securities | | 58.0 | | — | | (0.1 | ) | 57.9 | | | | | | | | | | | | | | | | | Debt Securities (2) | | 58.1 | | 0.1 | | (0.1) | | 58.1 |
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| | 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 held by WMECO are recorded in Other Long-Term Assets on the balance sheets.28
(2)NU’s
| | | | | | | | | | | | | | | As of December 31, 2013 | | | | | | Pre-Tax | | Pre-Tax | | | | | | Amortized | | Unrealized | | Unrealized | | | | (Millions of Dollars) | Cost | | Gains | | Losses | | Fair Value | NU | | | | | | | | | | | | | Debt Securities (1) | $ | 299.2 | | $ | 2.5 | | $ | (2.1) | | $ | 299.6 | | Equity Securities (1) | | 163.6 | | | 60.5 | | | - | | | 224.1 | | | | | | | | | | | | | | WMECO | | | | | | | | | | | | | Debt Securities (2) | | 57.9 | | | - | | | - | | | 57.9 |
(1) NU's amounts include CYAPC’sCYAPC's and YAEC’sYAEC's marketable securities held in nuclear decommissioning trusts of $435.9$447.7 million and $424 million as of March 31,September 30, 2014 and December 31, 2013, respectively, the majority of which are legally restricted and can only be used for the costs of decommissioning of the nuclear power plants owned by these companies. Unrealized gains and losses for the nuclear decommissioning trusts are offset in Other Long-Term Liabilities on the balance sheets, with no impact on the statements of income. All of the equity securities accounted for as available-for-sale securities are held in thesethe CYAPC and YAEC trusts.
(2) Unrealized gains and losses on debt securities held by WMECO are recorded in Other Long-Term Assets on the balance sheets.
Unrealized Losses and Other-than-Temporary Impairment: There have been no significant unrealized losses, other-than-temporary impairments or credit losses for NU or 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 NU’sNU's benefit trust, Other Long-Term Assets for WMECO, and offset in Other Long-Term Liabilities for CYAPC and YAEC. NU utilizes the specific identification basis method for the NU benefit trust and the average cost basis method for the WMECO 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,September 30, 2014, the contractual maturities of available-for-sale debt securities are as follows:
| | | NU | | WMECO | | | NU | | WMECO | | | Amortized | | | | Amortized | | | | | Amortized | | | | Amortized | | | (Millions of Dollars) | | Cost | | Fair Value | | Cost | | Fair Value | | (Millions of Dollars) | Cost | | Fair Value | | Cost | | Fair Value | Less than one year (1) | | $ | 54.5 | | $ | 54.4 | | $ | 19.2 | | $ | 19.2 | | Less than one year (1) | $ | 47.6 | | $ | 47.6 | | $ | 21.9 | | $ | 22.1 | One to five years | | 73.3 | | 73.9 | | 33.2 | | 33.2 | | One to five years | | 91.0 | | 91.4 | | 30.7 | | 30.5 | Six to ten years | | 68.1 | | 69.4 | | 1.6 | | 1.6 | | Six to ten years | | 65.6 | | 67.5 | | 1.4 | | 1.4 | Greater than ten years | | 104.7 | | 107.0 | | 4.0 | | 3.9 | | Greater than ten years | | 106.4 | | | 111.7 | | | 4.1 | | | 4.1 | Total Debt Securities | | $ | 300.6 | | $ | 304.7 | | $ | 58.0 | | $ | 57.9 | | Total Debt Securities | $ | 310.6 | | $ | 318.2 | | $ | 58.1 | | $ | 58.1 |
(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 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 | | | | As of | | As of | | (Millions of Dollars) | | March 31, 2014 | | December 31, 2013 | | March 31, 2014 | | December 31, 2013 | | Level 1: | | | | | | | | | | Mutual Funds and Equities | | $ | 310.3 | | $ | 281.3 | | $ | — | | $ | — | | Money Market Funds | | 22.5 | | 32.9 | | 4.3 | | 10.9 | | Total Level 1 | | $ | 332.8 | | $ | 314.2 | | $ | 4.3 | | $ | 10.9 | | Level 2: | | | | | | | | | | 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 | | $ | 282.2 | | $ | 266.7 | | $ | 53.6 | | $ | 47.0 | | Total Marketable Securities | | $ | 615.0 | | $ | 580.9 | | $ | 57.9 | | $ | 57.9 | |
| | | | | | | | | | | | | | | | | | | NU | | WMECO | | | | | As of | | As of | (Millions of Dollars) | September 30, 2014 | | December 31, 2013 | | September 30, 2014 | | December 31, 2013 | Level 1: | | | | | | | | | | | | | Mutual Funds and Equities | $ | 314.6 | | $ | 281.3 | | $ | - | | $ | - | | Money Market Funds | | 27.1 | | | 32.9 | | | 4.4 | | | 10.9 | Total Level 1 | $ | 341.7 | | $ | 314.2 | | $ | 4.4 | | $ | 10.9 | Level 2: | | | | | | | | | | | | | U.S. Government Issued Debt Securities (Agency and Treasury) | $ | 56.5 | | $ | 61.4 | | $ | - | | $ | 6.8 | | Corporate Debt Securities | | 61.2 | | | 53.6 | | | 14.1 | | | 15.1 | | Asset-Backed Debt Securities | | 37.9 | | | 30.4 | | | 14.3 | | | 9.0 | | Municipal Bonds | | 112.5 | | | 105.5 | | | 13.9 | | | 11.2 | | Other Fixed Income Securities | | 23.0 | | | 15.8 | | | 11.4 | | | 4.9 | Total Level 2 | $ | 291.1 | | $ | 266.7 | | $ | 53.7 | | $ | 47.0 | Total Marketable Securities | $ | 632.8 | | $ | 580.9 | | $ | 58.1 | | $ | 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.
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6. SHORT-TERM AND LONG-TERM DEBT
Credit Agreements and Commercial Paper Programs: Effective July 23, 2014, NU parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are parties to a five-yearextended the expiration date of their joint $1.45 billion revolving credit facility duefor one additional year to expire on September 6, 2018.2019. The revolving credit facility is to be used primarily to backstop theNU parent's $1.45 billion commercial paper program at NU.program. The commercial paper program allows NU parent to issue commercial paper as a form of short-term debt. As of March 31,September 30, 2014 and December 31, 2013, NU had approximately $818.5$964.5 million and $1.01 billion, respectively, in short-term borrowings outstanding under the NU parent commercial paper program, leaving $631.5$485.5 million and $435.5 million of available borrowing capacity as of March 31,September 30, 2014 and December 31, 2013, respectively. The weighted-average interest rate on these borrowings as of March 31,September 30, 2014 and December 31, 2013 was 0.230.25 percent and 0.24 percent, respectively, which is generally based on money market rates.A2/P2 rated commercial paper. As of March 31,September 30, 2014, there were intercompany loans from NU of $351.6$105.4 million to CL&P, $39.9$153.3 million to PSNH and $37.4$13.2 million to WMECO. As of December 31, 2013, there were intercompany loans from NU of $287.3 million to CL&P and $86.5 million to PSNH.
Effective July 23, 2014, NSTAR Electric has a five-yearextended the expiration date of its $450 million revolving credit facility duefor one additional year to expire on September 6, 2018.2019. This facility serves to backstop NSTAR Electric’sElectric's existing $450 million commercial paper program. As of March 31,September 30, 2014 NSTAR Electric had no borrowings outstanding under its commercial paper program. As ofand December 31, 2013, NSTAR Electric had $159.5 million and $103.5 million, respectively, in short-term borrowings outstanding under its commercial paper program, leaving $290.5 million and $346.5 million of available borrowing capacity.capacity as of September 30, 2014 and December 31, 2013, respectively. The weighted-average interest rate on these borrowings as of September 30, 2014 and December 31, 2013 was 0.16 percent and 0.13 percent, respectively, which is generally based on money market rates.A2/P1 rated commercial paper.
Amounts outstanding under the commercial paper programs are generally included in Notes Payable for NU and NSTAR Electric and classified in current liabilities on the balance sheets as all borrowings are 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 NU Parent and classified in current liabilities on the balance sheets. See the Long-Term Debt 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 2, 2014, Yankee Gas issued $100 million of 4.82 percent Series L First Mortgage Bonds, 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. In accordance with applicable accounting guidance, these amounts wereAs the debt issuance refinanced short-term debt, the short-term debt was classified as Long-Term Debt on NU’sNU's balance sheet as of December 31, 2013.
On March 7, 2014, NSTAR Electric issued $300 million of 4.40 percent debentures, due to mature in 2044. 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 applicable accounting guidance, Notes Payable
On July 15, 2014, PSNH repaid at maturity the $50 million of $247.45.25 percent Series L First Mortgage Bonds using short-term borrowings.
On September 15, 2014, CL&P repaid at maturity the $150 million of 4.80 percent 2004 Series A First Mortgage Bonds.
On October 14, 2014, PSNH issued $75 million of first mortgage bonds at a yield of 3.144 percent that will mature on November 1, 2023. The first mortgage bonds are part of the same series of PSNH’s existing 3.50 percent Series S First Mortgage Bonds that were initially issued in November 2013. As a result, the aggregate principal amount of PSNH’s outstanding Series S First Mortgage Bonds totals $325 million. The proceeds, net of issuance costs, were used to repay short-term borrowings. As the debt issuance refinanced short-term debt, the short-term debt was classified as Long-Term Debt on NU’sNU's balance sheet as of March 31,September 30, 2014. Working Capital: EachOn August 27, 2014, PURA approved CL&P's request to extend the authorization period for issuance of NU, CL&P, NSTAR Electric, PSNH and WMECO use its available capital resourcesup to fund its respective construction expenditures, meet$366.4 million in long-term 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 recover their electric and natural gas distribution construction expenditures as the related project costs are depreciated over the life of 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 current liabilities exceeding current assets by approximately $424 million, $355 million and $177 million at NU, CL&P and NSTAR Electric, respectively, as of March 31, 2014.
As of Marchfrom December 31, 2014 $501.7 million of NU’s obligations classified as current liabilities relates to long-term debt that will be paid in the next 12 months, consisting of $150 million for CL&P, $301.7 million for NSTAR Electric and $50 million for PSNH. 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, determined considering capital requirements and maintenance of NU’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.December 31, 2015.
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7.PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The components of net periodic benefit expense for the Pension, SERP and PBOP Plans are detailedshown below. The net periodic benefit expense less the capitalized portion of pension and PBOP amounts is included in Operations and Maintenance on the statements of income. Capitalized pension and PBOP amounts relate to employees working on capital projects and are included in Property, Plant and Equipment, Net. Intercompany allocations are not included in the CL&P, NSTAR Electric, PSNH and WMECO net periodic benefit expense amounts.
| | Pension and SERP | | | | For the Three Months Ended | | | | March 31, 2014 | | March 31, 2013 | | (Millions of Dollars) | | NU | | NU | | Service Cost | | $ | 22.3 | | $ | 26.6 | | Interest Cost | | 56.6 | | 51.4 | | Expected Return on Plan Assets | | (77.7 | ) | (70.3 | ) | Actuarial Loss | | 33.0 | | 52.9 | | Prior Service Cost | | 1.1 | | 1.1 | | Total Net Periodic Benefit Expense | | $ | 35.3 | | $ | 61.7 | | Capitalized Pension Expense | | $ | 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 | |
30 | | 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 | |
| | 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 | |
| | | | | | | | | | | | | | | Pension and SERP | | Pension and SERP | | | For the Three Months Ended | | For the Nine Months Ended | | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 | | September 30, 2013 | (Millions of Dollars) | NU | | NU | | NU | | NU | Service Cost | $ | 19.1 | | $ | 25.6 | | $ | 60.7 | | $ | 76.7 | Interest Cost | | 56.4 | | | 51.7 | | | 169.5 | | | 155.0 | Expected Return on Plan Assets | | (77.7) | | | (69.5) | | | (233.1) | | | (208.5) | Actuarial Loss | | 31.7 | | | 52.4 | | | 96.5 | | | 158.1 | Prior Service Cost | | 1.1 | | | 1.1 | | | 3.3 | | | 3.0 | Total Net Periodic Benefit Expense | $ | 30.6 | | $ | 61.3 | | $ | 96.9 | | $ | 184.3 | Capitalized Pension Expense | $ | 8.3 | | $ | 18.3 | | $ | 26.7 | | $ | 54.9 | | | | | | | | | | | | | | | | PBOP | | PBOP | | | For the Three Months Ended | | For the Nine Months Ended | | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 | | September 30, 2013 | (Millions of Dollars) | NU | | NU | | NU | | NU | Service Cost | $ | 3.1 | | $ | 4.2 | | $ | 9.3 | | $ | 12.6 | Interest Cost | | 12.4 | | | 11.8 | | | 37.1 | | | 35.4 | Expected Return on Plan Assets | | (15.8) | | | (13.9) | | | (47.4) | | | (41.6) | Actuarial Loss | | 3.0 | | | 6.5 | | | 9.1 | | | 19.5 | Prior Service Credit | | (0.7) | | | (0.5) | | | (2.1) | | | (1.5) | Total Net Periodic Benefit Expense | $ | 2.0 | | $ | 8.1 | | $ | 6.0 | | $ | 24.4 | Capitalized PBOP Expense | $ | 1.1 | | $ | 2.6 | | $ | 1.9 | | $ | 7.6 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Pension and SERP | | | For the Three Months Ended September 30, 2014 | | For the Three Months Ended September 30, 2013 | | | | | | NSTAR | | | | | | | | | | | NSTAR | | | | | | | (Millions of Dollars) | CL&P | | Electric | | PSNH | | WMECO | | CL&P | | Electric(1) | | PSNH | | WMECO | Service Cost | $ | 5.0 | | $ | 3.0 | | $ | 2.3 | | $ | 0.8 | | $ | 6.3 | | $ | 8.3 | | | 3.3 | | $ | 1.2 | Interest Cost | | 12.5 | | | 10.3 | | | 5.7 | | | 2.5 | | | 12.1 | | | 14.5 | | | 5.8 | | | 2.5 | Expected Return on Plan Assets | | (18.7) | | | (15.7) | | | (9.3) | | | (4.4) | | | (18.4) | | | (21.1) | | | (9.2) | | | (4.3) | Actuarial Loss | | 8.2 | | | 5.9 | | | 2.8 | | | 1.7 | | | 13.9 | | | 14.4 | | | 5.4 | | | 2.9 | Prior Service Cost | | 0.4 | | | - | | | 0.1 | | | 0.1 | | | 0.4 | | | - | | | 0.1 | | | 0.1 | Total Net Periodic Benefit Expense | $ | 7.4 | | $ | 3.5 | | $ | 1.6 | | $ | 0.7 | | $ | 14.3 | | $ | 16.1 | | $ | 5.4 | | $ | 2.4 | Intercompany Allocations | $ | 6.5 | | $ | 2.9 | | $ | 1.8 | | $ | 1.2 | | $ | 11.4 | | $ | (2.1) | | $ | 2.6 | | $ | 2.0 | Capitalized Pension Expense | $ | 4.3 | | $ | 2.6 | | $ | 0.7 | | $ | 0.6 | | $ | 7.0 | | $ | 9.8 | | $ | 1.7 | | $ | 1.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension and SERP | | | For the Nine Months Ended September 30, 2014 | | For the Nine Months Ended September 30, 2013 | | | | | | NSTAR | | | | | | | | | | | NSTAR | | | | | | | (Millions of Dollars) | CL&P | | Electric | | PSNH | | WMECO | | CL&P | | Electric(1) | | PSNH | | WMECO | Service Cost | $ | 15.2 | | $ | 10.6 | | $ | 7.4 | | $ | 2.7 | | $ | 18.7 | | $ | 24.8 | | $ | 9.8 | | $ | 3.5 | Interest Cost | | 38.1 | | | 31.0 | | | 18.0 | | | 7.8 | | | 36.3 | | | 43.5 | | | 17.8 | | | 7.5 | Expected Return on Plan Assets | | (56.7) | | | (47.3) | | | (28.8) | | | (13.5) | | | (55.4) | | | (63.3) | | | (26.2) | | | (13.0) | Actuarial Loss | | 25.5 | | | 17.6 | | | 8.9 | | | 5.2 | | | 42.0 | | | 43.6 | | | 16.2 | | | 8.9 | Prior Service Cost/(Credit) | | 1.4 | | | - | | | 0.5 | | | 0.3 | | | 1.4 | | | (0.2) | | | 0.4 | | | 0.3 | Total Net Periodic Benefit Expense | $ | 23.5 | | $ | 11.9 | | $ | 6.0 | | $ | 2.5 | | $ | 43.0 | | $ | 48.4 | | $ | 18.0 | | $ | 7.2 | Intercompany Allocations | $ | 20.8 | | $ | 6.7 | | $ | 6.0 | | $ | 3.9 | | $ | 33.6 | | $ | (6.2) | | $ | 7.8 | | $ | 6.0 | Capitalized Pension Expense | $ | 13.6 | | $ | 5.5 | | $ | 2.4 | | $ | 2.0 | | $ | 21.0 | | $ | 21.6 | | $ | 5.6 | | $ | 3.9 |
| | | | | | | | | | | | | | | | | | | | | | | | PBOP | | | For the Three Months Ended September 30, 2014 | | For the Three Months Ended September 30, 2013 | (Millions of Dollars) | CL&P | | | NSTAR Electric | | | PSNH | | | WMECO | | CL&P | | PSNH | | WMECO | Service Cost | $ | 0.6 | | $ | 0.8 | | $ | 0.3 | | $ | 0.1 | | $ | 0.9 | | $ | 0.6 | | $ | 0.2 | Interest Cost | | 2.0 | | | 4.9 | | | 1.1 | | | 0.4 | | | 2.0 | | | 1.0 | | | 0.4 | Expected Return on Plan Assets | | (2.6) | | | (6.5) | | | (1.4) | | | (0.6) | | | (2.5) | | | (1.3) | | | (0.6) | Actuarial Loss/(Gain) | | 1.0 | | | (0.1) | | | 0.6 | | | 0.1 | | | 1.8 | | | 0.9 | | | 0.3 | Prior Service Credit | | - | | | (0.5) | | | - | | | - | | | - | | | - | | | - | Total Net Periodic Benefit Expense/(Income) | $ | 1.0 | | $ | (1.4) | | $ | 0.6 | | $ | 0.0 | | $ | 2.2 | | $ | 1.2 | | $ | 0.3 | Intercompany Allocations | $ | 0.9 | | $ | 0.3 | | $ | 0.2 | | $ | 0.2 | | $ | 1.7 | | $ | 0.4 | | $ | 0.3 | Capitalized PBOP Expense/(Income) | $ | 0.5 | | $ | (0.5) | | $ | 0.2 | | $ | - | | $ | 1.3 | | $ | 0.4 | | $ | 0.3 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | PBOP | | | For the Nine Months Ended September 30, 2014 | | For the Nine Months Ended September 30, 2013 | (Millions of Dollars) | CL&P | | | NSTAR Electric | | | PSNH | | | WMECO | | CL&P | | PSNH | | WMECO | Service Cost | $ | 1.7 | | $ | 2.3 | | $ | 1.0 | | $ | 0.3 | | $ | 2.6 | | $ | 1.7 | | $ | 0.5 | Interest Cost | | 6.0 | | | 14.6 | | | 3.2 | | | 1.3 | | | 5.9 | | | 3.1 | | | 1.3 | Expected Return on Plan Assets | | (7.9) | | | (19.5) | | | (4.1) | | | (1.7) | | | (7.6) | | | (3.9) | | | (1.7) | Actuarial Loss/(Gain) | | 3.2 | | | (0.4) | | | 1.7 | | | 0.3 | | | 5.6 | | | 2.7 | | | 0.8 | Prior Service Credit | | - | | | (1.4) | | | - | | | - | | | - | | | - | | | - | Total Net Periodic Benefit Expense/(Income) | $ | 3.0 | | $ | (4.4) | | $ | 1.8 | | $ | 0.2 | | $ | 6.5 | | $ | 3.6 | | $ | 0.9 | Intercompany Allocations | $ | 3.1 | | $ | 0.4 | | $ | 0.8 | | $ | 0.6 | | $ | 5.3 | | $ | 1.2 | | $ | 1.0 | Capitalized PBOP Expense/(Income) | $ | 1.5 | | $ | (1.5) | | $ | 0.6 | | $ | 0.1 | | $ | 3.7 | | $ | 1.1 | | $ | 0.7 |
(1) NSTAR Electric’sElectric's pension amounts for the three and nine months ended March 31,September 30, 2013 do not include SERP expense.
For the three and nine months ended March 31,September 30, 2013, the net periodic PBOP expense allocated to NSTAR Electric was $4.3 million.$1.2 million and $3.5 million, respectively.
As of December 31, 2013, the funded status of the NSTAR Pension Plan was recorded on NSTAR Electric’sElectric's balance sheet while the total SERP obligation and PBOP Plan funded status were recorded on NSTAR Electric & Gas’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’scompany's balance sheets. This change had no impact on the income statement or net assets of NSTAR Electric or NU.
As of March 31,September 30, 2014, the liabilities associated with the Pension, SERP and PBOP plans for NSTAR Electric were $74.8$83.4 million for the Pension Plan, $3.5$3.6 million for the SERP Plans ($0.4 million of which is included in other current liabilities) and $73$55.6 million for the PBOP 31
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Plan. As of December 31, 2013, the liability associated with the NSTAR Pension Plan for NSTAR Electric was $118 million. This change had no impact on
8. INCOME TAXES
In the third quarter of 2014, the Company recorded a reduction to its state credit carryforwards of $11 million (CL&P $10.1 million), net of tax, as a result of an update to reflect the amounts expired. Further, the Company decreased its valuation allowance reserve for state credits by $22.3 million (all at CL&P), net of tax, to reflect the expiration of state credits in its recently filed return and the latest available data. These updates resulted in a net reduction in income statement or net assetstax expense of NSTAR Electric.$11.3 million (CL&P $12.2 million).
8.9.
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, 2014 | | As of December 31, 2013 | | As of September 30, 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 | | 66 | | $ | 35.4 | | 68 | | $ | 35.4 | | | 65 | | $ | 34.7 | | 68 | | $ | 35.4 | CL&P | | 18 | | 3.4 | | 18 | | 3.4 | | | 16 | | 4.0 | | 18 | | 3.4 | NSTAR Electric | | 12 | | 1.2 | | 12 | | 1.2 | | | 13 | | 1.1 | | | 12 | | 1.2 | PSNH | | 13 | | 5.4 | | 15 | | 5.4 | | | 13 | | 5.3 | | 15 | | 5.4 | WMECO | | 5 | | 0.4 | | 5 | | 0.4 | | | 4 | | 0.5 | | 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 $30.9$29.8 million and $31.4 million as of March 31,September 30, 2014 and December 31, 2013, respectively, and relates primarily to the natural gas business segment.
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B. Long-Term Contractual Arrangements The following is an update to the current status of long-term contractual arrangements set forth in Note 12B of the NU 2013 Form 10-K.
Renewable Energy: Renewable energy contracts include non-cancelable commitments under contracts of CL&P, NSTAR Electric and WMECO for the purchase of energy and capacity from renewable energy facilities.
| | | | | | | | | | | | | | | | | | | | | | October - December | | | | | | | | | | | | | | | | | | | (Millions of Dollars) | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | Thereafter | | Total | CL&P | $ | 20.0 | | $ | 60.7 | | $ | 66.1 | | $ | 67.0 | | $ | 67.7 | | $ | 717.0 | | $ | 998.5 | NSTAR Electric | | 21.8 | | | 86.3 | | | 100.0 | | | 96.1 | | | 59.6 | | | 377.6 | | | 741.4 | WMECO | | - | | | - | | | 2.4 | | | 2.4 | | | 2.4 | | | 28.9 | | | 36.1 |
C. Contractual Obligations —– Yankee Companies Spent Nuclear Fuel Litigation -– DOE Phase II Damages -– 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 letter from the U.S. Department of Justice stating that the DOE will not appeal the court’scourt'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 24, 2014, CYAPC received payment of the remaining $36.3 million proceeds. On April 28, 2014, the Yankee Companies made the required informational filing with FERC in accordance with the process and methodology outlined in the 2013 FERC order. It is anticipated that theThe Yankee Companies will receive FERC approval and returnreturned the DOE Phase II Damages proceeds to the member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, for the benefit of their respective customers, effectiveon June 1, 2014.
As of March 31,September 30, 2014, the CYAPC and YAEC proceeds received have been reflected as restricted cash in Other Long-Term Assets and theCL&P's refund obligation to customers of $65.4 millionwas recorded as an offset to the member companiesdeferred storm restoration costs regulatory asset, as directed by PURA. NSTAR Electric's, PSNH's and WMECO's refund obligation to customers of $29.1 million, $13.1 million and $18.1 million, respectively, was reflectedrecorded as Regulatory Liabilities ona regulatory liability in each company's respective regulatory tracker mechanisms. Refunds to customers for these DOE proceeds began in the NU consolidated balance sheet.third quarter of 2014. For further information, see Note 2, "Regulatory Accounting," to the financial statements.
DOE Phase III Damages -–On August 15, 2013, the Yankee Companies each filed subsequent 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 November 18, 2013, and discovery has begun. C.
DOE Phase I Damages - Proceeds Received –On September 17, 2014, in accordance with the MYAPC refund plan, MYAPC returned a portion of the DOE Phase I Damages proceeds to the member companies, including CL&P, NSTAR Electric, PSNH, and WMECO, in the amount of $3.2 million, $1.1 million, $1.4 million and $0.8 million, respectively. These amounts reduced receivables at CL&P, NSTAR Electric, PSNH and WMECO.
D. Guarantees and Indemnifications NU parent 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 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
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The following table summarizes NU’sNU's guarantees of its subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, as of March 31,September 30, 2014:
| | | | Maximum Exposure | | | | Subsidiary | | Description | | (in millions) | | Expiration Dates | | | | | | | | | | Various | | Surety Bonds | | $ | 66.7 | | 2014 - 2016 (1) | | | | | | | | | | Various | | New England Hydro Companies’ Long-Term Debt | | $ | 3.0 | | Unspecified | | | | | | | | | | NUSCO and RRR | | Lease Payments for Vehicles and Real Estate | | $ | 16.8 | | 2019 and 2024 | |
| | | | | | | | | | | | | | Maximum Exposure | | | | | Subsidiary | | Description | | (in millions) | | | Expiration Dates | Various | | Surety Bonds | | $ | 64.3 | | | 2014 - 2016(1) |
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|
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|
|
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| Various | | New England Hydro Companies' Long-Term Debt | | $ | 2.0 | | | Unspecified | | | | | | | | | | NUSCO and RRR | | Lease Payments for Vehicles and Real Estate | | $ | 15.3 | | | 2019 and 2024 |
(1) Surety bond expiration dates reflect termination dates, the majority of which will be renewed or extended.
Certain 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 are downgraded.
D.
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E. FERC Base ROE ComplaintComplaints First Complaint:On September 30, 2011, a complaint was filed jointly at FERC under Sections 206 and 306 of the Federal Power Act (the "first complaint") by 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(the "Complainants"). The Complainants alleged that the base ROE usedof 11.14 percent that has been utilized since 2006 in calculatingthe calculation of formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by NETOs, including CL&P, NSTAR Electric, PSNH and WMECO, iswas unjust and unreasonable. The complainantsunreasonable and asserted that the current 11.14 percent rate which became effective in 2006, iswas excessive due to changes in the capital markets and are seekingmarkets. Complainants sought an order to reduce the rate, which would be effectivebase ROE prospectively from the date of a final FERC order (the "FERC order date"), and for the 15-month period October 1, 2011. In response, the NETOs filed testimony2011 to December 31, 2012 (the "first complaint refund period"), and analysis based on standard FERC methodology and precedent demonstrating that the base ROE of 11.14 percent remained just and reasonable.to require refunds. The FERC set the case for trial before a FERC ALJ after settlement negotiations were unsuccessful in August 2012. Hearings before the FERC ALJ were held in May 2013, followed by the filing of briefs by the complainants, the Massachusetts municipal electric utilities (late interveners 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 each recommended a base ROE of 9 percent or below.
On August 6, 2013, the FERC ALJ issued an initial decision on the first complaint finding that the base ROE in effect from October 2011 through December 2012during the first complaint refund period was not reasonable underand recommended separate base ROEs for the standard applicationfirst complaint refund period of 10.6 percent and for the period beginning when FERC methodology, butissues its final decision (the "prospective period") of 9.7 percent, leaving policy considerations and additional adjustments to the FERC. UsingIn 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 and 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 datethird quarter of the final decision. The parties filed briefs on this decision with the FERC, and a decision from the FERC is expected in 2014. Though NU cannot predict the ultimate outcome of this proceeding, in 2013, the Company recorded a series of reserves at its electric subsidiaries to recognize the potential financial impact from the FERC ALJ’sALJ's initial decision for the first complaint refund period. SeeCumulative Reserves below for further information on the reserves recorded in the third quarter of 2013.
On June 19, 2014, FERC issued an order on the first complaint, partially affirming and partially reversing the FERC ALJ's initial decision. FERC set a single tentative base ROE of 10.57 percent for the first complaint refund period and prospective period. FERC also modified its traditional methodology by adopting a two-step discounted cash flow analysis that it utilizes to determine the ROEs of both natural gas and oil pipeline projects. Using this methodology, FERC determined a new zone of reasonableness of 7.03 percent to 11.74 percent, and set the tentative base ROE halfway between the midpoint and the top of the zone of reasonableness. FERC also stated that a utility's “total ROE, inclusive of transmission incentive ROE adders” should not exceed the top of the new zone of reasonableness produced by this methodology. FERC instituted a paper hearing on the long-term growth rate portion of the methodology (the "paper hearing"). Rehearing requests on this new methodology were filed in July, and briefs were filed in August and September by the parties on the appropriate long-term growth rate. In the second quarter of 2014, the Company recorded additional reserves at its electric subsidiaries to recognize the potential financial impact from the FERC’s June 19th order. SeeCumulative Reserves below for further information on the reserves recorded in the second quarter of 2014.
On October 16, 2014, the FERC issued an order in the paper hearing, which confirmed that the base ROE should be set at 10.57 percent and that a utility’s total or maximum ROE should not exceed the top of the new zone of reasonableness (11.74 percent). The FERC ordered the NETOs to provide refunds to customers for the first complaint refund period, and set the new base ROE prospectively from the order date.
Second Complaint:On December 27, 2012, a second complaint was filed jointly at FERC by several additional consumer groups and municipal parties (the "second complaint"), which challenged the NETOs' base ROE prospectively from the FERC order date and sought refunds for the 15-month period January 1, 2013 to March 31, 2014 (the "second complaint refund period").
On June 19, 2014, FERC issued an order finding that the second complaint raised issues of material fact. On July 21, 2014, the NETOs filed a rehearing request in this proceeding. On October 24, 2014, the FERC assigned the case for trial before a FERC ALJ after settlement negotiations were unsuccessful. The FERC ALJ has set a trial date beginning June 8, 2015, and will issue an initial decision on or before October 26, 2015. In the second quarter of 2014, the Company recorded reserves at its electric subsidiaries to recognize the potential financial impact from the FERC’s June 19th order for the second complaint refund period. SeeCumulative Reserves below for further information on the reserves recorded in the second quarter of 2014.
Third Complaint:On July 31, 2014, a third complaint was filed at FERC (the "third complaint") by most of the Complainants to the first and second complaints, claiming that the base ROE and incentive adders exceed the range of permissible ROEs, requesting FERC to reduce the NETO’s base ROE prospectively from the FERC order date, and seeking refunds for the 15-month period beginning August 1, 2014 (the "third complaint refund period"). FERC has taken no action on this complaint to date. At this time, the Company cannot determine the outcome of this complaint.
Cumulative Reserves: The following is a summary as of September 30, 2014 of the cumulative reserves (excluding interest) that the Company established in the third quarter of 2013 and the second quarter of 2014 to recognize the potential financial impacts of the first and second complaints. Management is currently evaluating the impact of the October 16th order on the previously established reserves.
| | | | | | | | | | | | NU | | | | Third Quarter | | | Second Quarter | | | | (Millions of Dollars) | | 2013 | | | 2014 | | Total | 1st Complaint - Base ROE | $ | 23.7 | | $ | 1.2 | | $ | 24.9 | 2nd Complaint - Base ROE | | - | | | 27.4 | | | 27.4 | Incentive ROE (1st and 2nd Complaint) | | - | | | 23.8 | | | 23.8 | Cumulative Reserve | $ | 23.7 | | $ | 52.4 | | $ | 76.1 |
| | | | | | | | | | | | | | | | | | | | | CL&P | | NSTAR Electric | | | | Third Quarter | | | Second Quarter | | | | | | Third Quarter | | | Second Quarter | | | | (Millions of Dollars) | | 2013 | | | 2014 | | Total | | | 2013 | | | 2014 | | Total | 1st Complaint - Base ROE | $ | 12.8 | | $ | 0.5 | | $ | 13.3 | | $ | 5.7 | | $ | 0.4 | | $ | 6.1 | 2nd Complaint - Base ROE | | - | | | 13.5 | | | 13.5 | | | - | | | 7.5 | | | 7.5 | Incentive ROE (1st and 2nd Complaint) | | - | | | 16.1 | | | 16.1 | | | - | | | 2.0 | | | 2.0 | Cumulative Reserve | $ | 12.8 | | $ | 30.1 | | $ | 42.9 | | $ | 5.7 | | $ | 9.9 | | $ | 15.6 |
| | | | | | | | | | | | | | | | | | | | | PSNH | | WMECO | | | | Third Quarter | | | Second Quarter | | | | | | Third Quarter | | | Second Quarter | | | | (Millions of Dollars) | | 2013 | | | 2014 | | Total | | | 2013 | | | 2014 | | Total | 1st Complaint - Base ROE | $ | 2.3 | | $ | 0.1 | | $ | 2.4 | | $ | 2.9 | | $ | 0.2 | | $ | 3.1 | 2nd Complaint - Base ROE | | - | | | 2.7 | | | 2.7 | | | - | | | 3.7 | | | 3.7 | Incentive ROE (1st and 2nd Complaint) | | - | | | 0.8 | | | 0.8 | | | - | | | 4.9 | | | 4.9 | Cumulative Reserve | $ | 2.3 | | $ | 3.6 | | $ | 5.9 | | $ | 2.9 | | $ | 8.8 | | $ | 11.7 |
The aggregate after-tax charge to second quarter 2014 earnings resulting from the June 19, 2014 FERC orders totaled $32.1 million at NU, $18.5 million at CL&P, $6.1 million at NSTAR Electric, $2 million at PSNH and $5.5 million at WMECO. In the third quarter of 2013, 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.
On December 27, 2012, several additional parties filed a separate complaint concerning the NETOs’ base ROE with the FERC. This complaint seeks to reduce the NETOs’ base ROE effective January 1, 2013, effectively extending the refund period for an additional 15 months, and to consolidate this complaint with the joint complaint filed on September 30, 2011. The NETOs have asked the FERC to reject this complaint. The FERC has not yet acted on this 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.F.
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.
E.CPSL
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’sElectric'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. While management does not believe that any subsequent DPU order would result in revenues that are materially different than the amounts 33
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already recognized, it is reasonably possible that an order could have a material impact on NSTAR Electric’sElectric's results of operations, financial position and cash flows.
F.G.
Basic Service Bad Debt Adder 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’sElectric'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’sDPU'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 2012. NSTAR Electric will continue to maintain the reserve until the proceeding has been concluded with the DPU.
9.10.
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: The fair value of CL&P’s&P's and NSTAR Electric’sElectric'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 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, 2014 | | As of December 31, 2013 | | | As of September 30, 2014 | | As of December 31, 2013 | | | NU | | NU | | | NU | | NU | | | Carrying | | Fair | | Carrying | | Fair | | | Carrying | | Fair | | Carrying | | Fair | (Millions of Dollars) | | Amount | | Value | | Amount | | Value | | (Millions of Dollars) | Amount | | Value | | Amount | | Value | Preferred Stock Not | | | | | | | | | | | Subject to Mandatory Redemption | | $ | 155.6 | | $ | 152.0 | | $ | 155.6 | | $ | 152.7 | | | Preferred Stock Not Subject to Mandatory Redemption | | Preferred Stock Not Subject to Mandatory Redemption | $ | 155.6 | | $ | 151.0 | | $ | 155.6 | | $ | 152.7 | Long-Term Debt | | 8,848.9 | | 9,177.7 | | 8,310.2 | | 8,443.1 | | Long-Term Debt | | 8,412.6 | | 8,876.3 | | 8,310.2 | | 8,443.1 | |
| | | As of March 31, 2014 | | | As of September 30, 2014 | | | CL&P | | NSTAR Electric | | PSNH | | WMECO | | | CL&P | | NSTAR Electric | | PSNH | | WMECO | | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | (Millions of Dollars) | | Amount | | Value | | Amount | | Value | | Amount | | Value | | Amount | | Value | | (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 | | $ | — | | $ | — | | $ | — | | $ | — | | | Preferred Stock Not Subject to Mandatory Redemption | | Preferred Stock Not Subject to Mandatory Redemption | $ | 116.2 | | $ | 110.1 | | $ | 43.0 | | $ | 40.9 | | $ | - | | $ | - | | $ | - | | $ | - | 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 | | Long-Term Debt | | 2,841.8 | | 3,189.5 | | 1,797.4 | | 1,959.4 | | 999.2 | | 1,046.4 | | 628.7 | | 667.4 | |
| | 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | 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 |
Derivative Instruments: Derivative instruments are carried at fair value. For further information, see Note 4, “Derivative"Derivative Instruments,”" to the financial statements.
Other Financial Instruments: Investments in marketable securities are carried at fair value. For further information, see Note 1D, “Summary of Significant Accounting Policies - Fair Value Measurements,” and Note 5, “Marketable"Marketable Securities,”" to the 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.
34
TableSee Note 1D, "Summary of ContentsSignificant Accounting Policies - Fair Value Measurements," for the fair value measurement policy and the fair value hierarchy.
10.11.
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, 2014 | | For the Three Months Ended March 31, 2013 | | | For the Nine Months Ended September 30, 2014 | | For the Nine Months Ended September 30, 2013 | | | | | Unrealized | | Pension, | | | | | | Unrealized | | Pension, | | | | | | | Unrealized | | Pension, | | | | | | Unrealized | | Pension, | | | | | Qualified | | Gains/(Losses) | | SERP and | | | | Qualified | | Gains/(Losses) | | SERP and | | | | | Qualified | | Gains/(Losses) | | SERP and | | | | Qualified | | Gains/(Losses) | | SERP and | | | | | Cash Flow | | on Available- | | PBOP | | | | Cash Flow | | on Available- | | PBOP | | | | | Cash Flow | | on Available- | | PBOP | | | | Cash Flow | | on Available- | | PBOP | | | | | Hedging | | for-Sale | | Benefit | | | | Hedging | | for-Sale | | Benefit | | | | | Hedging | | for-Sale | | Benefit | | | | Hedging | | for-Sale | | Benefit | | | (Millions of Dollars) | | Instruments | | Securities | | Plans | | Total | | Instruments | | Securities | | Plans | | Total | | (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 | ) | 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 | ) | OCI Before Reclassifications | | - | | 0.2 | | 1.2 | | | 1.4 | | | - | | (0.8) | | - | | | (0.8) | Amounts Reclassified from AOCI | | 0.5 | | — | | 1.0 | | 1.5 | | 0.5 | | — | | 1.6 | | 2.1 | | Amounts Reclassified from AOCI | | 1.5 | | | - | | | 2.9 | | | 4.4 | | | 1.5 | | | - | | | 4.8 | | | 6.3 | Net OCI | | 0.5 | | 0.2 | | 1.0 | | 1.7 | | 0.5 | | (0.1 | ) | 1.6 | | 2.0 | | Net OCI | | 1.5 | | | 0.2 | | | 4.1 | | | 5.8 | | | 1.5 | | | (0.8) | | | 4.8 | | | 5.5 | AOCI as of End of Period | | $ | (13.9 | ) | $ | 0.6 | | $ | (31.0 | ) | $ | (44.3 | ) | $ | (15.9 | ) | $ | 1.2 | | $ | (56.2 | ) | $ | (70.9 | ) | AOCI as of End of Period | $ | (12.9) | | $ | 0.6 | | $ | (27.9) | | $ | (40.2) | | $ | (14.9) | | $ | 0.5 | | $ | (53.0) | | $ | (67.4) |
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 financial statements.
The following table sets forth the amounts reclassified from AOCI by component and the impacted line item on the statements of income:
| | 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 | ) | | |
| | | | | | | | | | | | | | | For the Three Months Ended | | For the Nine Months Ended | | | | September 30, | | September 30, | | | | Amounts Reclassified | | Amounts Reclassified | | Statements of Income | | from AOCI | | from AOCI | | Line Item Impacted | (Millions of Dollars) | 2014 | | 2013 | | 2014 | | 2013 | | | Qualified Cash Flow Hedging Instruments | $ | (0.8) | | $ | (0.8) | | $ | (2.5) | | $ | (2.5) | | Interest Expense | Tax Benefit | | 0.3 | | | 0.3 | | | 1.0 | | | 1.0 | | Income Tax Expense | Qualified Cash Flow Hedging Instruments, Net of Tax | $ | (0.5) | | $ | (0.5) | | $ | (1.5) | | $ | (1.5) | | | | | | | | | | | | | | | | | Pension, SERP and PBOP Benefit Plan Costs: | | | | | | | | | | | | | | Amortization of Actuarial Losses | $ | (1.6) | | $ | (2.5) | | $ | (4.7) | | $ | (7.3) | | Operations and Maintenance (1) | Amortization of Prior Service Cost | | - | | | - | | | (0.1) | | | (0.1) | | Operations and Maintenance (1) | Total Pension, SERP and PBOP Benefit Plan Costs | | (1.6) | | | (2.5) | | | (4.8) | | | (7.4) | | | Tax Benefit | | 0.6 | | | 0.9 | | | 1.9 | | | 2.6 | | Income Tax Expense | Pension, SERP and PBOP Benefit Plan Costs, Net of Tax | $ | (1.0) | | $ | (1.6) | | $ | (2.9) | | $ | (4.8) | | | | | | | | | | | | | | | | | Total Amounts Reclassified from AOCI, Net of Tax | $ | (1.5) | | $ | (2.1) | | $ | (4.4) | | $ | (6.3) | | |
(1) These amounts are included in the computation of net periodic Pension, SERP and PBOP costs. See Note 7, “Pension"Pension Benefits and Postretirement Benefits Other Than Pensions,”" for further information.
11.
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12. 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 that were authorized and issued and the respective per share par values:
| | | Shares | | Shares | | | | | Authorized as of | | | | | | | | | Authorized as of | | | | | | | Per Share | | March 31, 2014 and | | Issued as of | | Per Share | | September 30, 2014 and | | Issued as of | | | Par Value | | December 31, 2013 | | March 31, 2014 | | December 31, 2013 | | Par Value | | December 31, 2013 | | September 30, 2014 | | December 31, 2013 | NU | | $ | 5 | | 380,000,000 | | 333,316,045 | | 333,113,492 | | $ | 5 | | 380,000,000 | | 333,353,446 | | 333,113,492 | CL&P | | $ | 10 | | 24,500,000 | | 6,035,205 | | 6,035,205 | | $ | 10 | | 24,500,000 | | 6,035,205 | | 6,035,205 | NSTAR Electric | | $ | 1 | | 100,000,000 | | 100 | | 100 | | $ | 1 | | 100,000,000 | | 100 | | 100 | PSNH | | $ | 1 | | 100,000,000 | | 301 | | 301 | | $ | 1 | | 100,000,000 | | 301 | | 301 | WMECO | | $ | 25 | | 1,072,471 | | 434,653 | | 434,653 | | $ | 25 | | 1,072,471 | | 434,653 | | 434,653 |
As of March 31,September 30, 2014 and December 31, 2013, there were 17,498,32716,730,815 and 17,796,672 NU common shares held as treasury shares, respectively. As of March 31,September 30, 2014 and December 31, 2013, NU common shares outstanding were 315,817,718316,622,631 and 315,273,559, respectively.
| | | | | | | | | | | | | | | | 13. 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 | | | | | September 30, 2014 | | September 30, 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 | $ | 9,753.8 | | $ | 155.6 | | $ | 9,406.6 | | $ | 155.6 | Net Income | | 236.5 | | | - | | | 211.4 | | | - | Dividends on Common Shares | | (124.2) | | | - | | | (114.9) | | | - | Dividends on Preferred Stock | | (1.9) | | | (1.9) | | | (1.9) | | | (1.9) | Issuance of Common Shares | | 1.0 | | | - | | | 1.4 | | | - | Other Transactions, Net | | 24.1 | | | - | | | 12.8 | | | - | Net Income Attributable to Noncontrolling Interests | | - | | | 1.9 | | | - | | | 1.9 | Other Comprehensive Income | | 1.3 | | | - | | | 2.1 | | | - | Balance as of End of Period | $ | 9,890.6 | | $ | 155.6 | | $ | 9,517.5 | | $ | 155.6 |
| | | | | | | | | | | | | | | | | | | For the Nine Months Ended | | | | | September 30, 2014 | | September 30, 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 | | 603.6 | | | - | | | 614.4 | | | - | Dividends on Common Shares | | (372.2) | | | - | | | (346.9) | | | - | Dividends on Preferred Stock | | (5.6) | | | (5.6) | | | (5.8) | | | (5.8) | Issuance of Common Shares | | 6.4 | | | - | | | 10.2 | | | - | Other Transactions, Net | | 41.0 | | | - | | | 3.0 | | | - | Net Income Attributable to Noncontrolling Interests | | - | | | 5.6 | | | - | | | 5.8 | Other Comprehensive Income | | 5.9 | | | - | | | 5.5 | | | - | Balance as of End of Period | $ | 9,890.6 | | $ | 155.6 | | $ | 9,517.5 | | $ | 155.6 |
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37 12.COMMON SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
A summary of the changes in Common Shareholders’ Equity and Noncontrolling Interests of NU is as follows:14. | | 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
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 of certain share-based compensation awards as if they were converted into common shares. There were no antidilutive share awards outstanding for the three and nine months ended March 31, 2014. ForSeptember 30, 2014 or for the three months ended March 31,September 30, 2013. For the nine months ended September 30, 2013, there were 6,2992,100 antidilutive share awards excluded from the computation.
The following table sets forth the components of basic and diluted EPS:
| | For the Three Months Ended | | (Millions of Dollars, except share information) | | March 31, 2014 | | March 31, 2013 | | Net Income Attributable to Controlling Interest | | $ | 236.0 | | $ | 228.1 | | | | | | | | Weighted Average Common Shares Outstanding: | | | | | | 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 | |
| | | | | | | | | | | | | | | For the Three Months Ended | | For the Nine Months Ended | (Millions of Dollars, except share information) | September 30, 2014 | | September 30, 2013 | | September 30, 2014 | | September 30, 2013 | Net Income Attributable to Controlling Interest | $ | 234.6 | | $ | 209.5 | | $ | 597.9 | | $ | 608.6 | | | | | | | | | | | | | | Weighted Average Common Shares Outstanding: | | | | | | | | | | | | | Basic | | 316,340,691 | | | 315,291,346 | | | 315,941,904 | | | 315,191,752 | | Dilutive Effect | | 1,214,234 | | | 926,893 | | | 1,244,586 | | | 869,379 | | Diluted | | 317,554,925 | | | 316,218,239 | | | 317,186,490 | | | 316,061,131 | Basic and Diluted EPS | $ | 0.74 | | $ | 0.66 | | $ | 1.89 | | $ | 1.93 |
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).
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).
14.15.
SEGMENT INFORMATION
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 and nine months ended March 31,September 30, 2014 and 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’sNU's operations is presented as Other 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 expense related to the debt of NU parent, 2) the revenues and expenses of NU’sNU's service company, most of which are eliminated in consolidation, 3) the operations of CYAPC and YAEC, and 4) the results of other non-regulatedunregulated subsidiaries, which are not part of its core business. 36
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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.
NU’sNU's reportable segments are determined based upon the level at which NU’sNU's chief operating decision maker assesses performance and makes decisions about the allocation of company resources. Each of NU’sNU's subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, has one reportable segment. NU’sNU's operating segments and reporting units are consistent with its reportable business segments.
NU’sNU's segment information for the three months ended March 31, 2014 and 2013 is as follows:
| | | For the Three Months Ended March 31, 2014 | | | For the Three Months Ended September 30, 2014 | | | Electric | | Natural Gas | | | | | | | | | | | Electric | | Natural Gas | | | | | | | | | (Millions of Dollars) | | Distribution | | Distribution | | Transmission | | Other | | Eliminations | | Total | | (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 | | Operating Revenues | $ | 1,502.6 | | $ | 109.2 | | $ | 262.5 | | $ | 211.2 | | $ | (193.0) | | $ | 1,892.5 | Depreciation and Amortization | | (148.8 | ) | (17.7 | ) | (37.0 | ) | (7.0 | ) | 1.8 | | (208.7 | ) | Depreciation and Amortization | | (71.7) | | (16.4) | | (37.4) | | (13.8) | | 8.6 | | (130.7) | Other Operating Expenses | | (1,210.9 | ) | (321.4 | ) | (66.4 | ) | (165.4 | ) | 149.9 | | (1,614.2 | ) | Other Operating Expenses | | (1,141.5) | | | (98.4) | | | (74.2) | | | (192.4) | | | 185.6 | | | (1,320.9) | Operating Income/(Loss) | | 226.2 | | 93.7 | | 148.7 | | (0.2 | ) | (0.7 | ) | 467.7 | | Operating Income/(Loss) | | 289.4 | | | (5.6) | | | 150.9 | | | 5.0 | | | 1.2 | | | 440.9 | Interest Expense | | (47.4 | ) | (8.5 | ) | (25.5 | ) | (9.6 | ) | 1.0 | | (90.0 | ) | Interest Expense | | (49.2) | | (8.5) | | (24.5) | | (8.6) | | 1.0 | | (89.8) | Other Income, Net | | 1.4 | | 0.1 | | 1.5 | | 294.8 | | (296.1 | ) | 1.7 | | Other Income, Net | | 9.3 | | 0.1 | | 2.7 | | 226.4 | | (226.6) | | 11.9 | Net Income Attributable to Controlling Interest | | $ | 112.2 | | $ | 52.1 | | $ | 74.9 | | $ | 291.7 | | $ | (294.9 | ) | $ | 236.0 | | Net Income Attributable to Controlling Interest | $ | 153.4 | | $ | (9.9) | | $ | 88.1 | | $ | 228.3 | | $ | (225.3) | | $ | 234.6 | 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:
| | 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 | | | | | | | | | | | | | | | | | | | | | |
38 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 Nine Months Ended September 30, 2014 | | | Electric | | Natural Gas | | | | | | | | | | | | | (Millions of Dollars) | Distribution | | Distribution | | Transmission | | Other | | Eliminations | | Total | Operating Revenues | $ | 4,350.4 | | $ | 737.5 | | $ | 721.4 | | $ | 568.1 | | $ | (516.7) | | $ | 5,860.7 | Depreciation and Amortization | | (309.9) | | | (51.1) | | | (111.4) | | | (28.3) | | | 12.7 | | | (488.0) | Other Operating Expenses | | (3,343.9) | | | (586.2) | | | (211.5) | | | (534.1) | | | 505.6 | | | (4,170.1) | Operating Income | | 696.6 | | | 100.2 | | | 398.5 | | | 5.7 | | | 1.6 | | | 1,202.6 | Interest Expense | | (143.8) | | | (25.6) | | | (78.8) | | | (27.2) | | | 3.2 | | | (272.2) | Other Income, Net | | 13.6 | | | 0.2 | | | 6.9 | | | 657.9 | | | (659.5) | | | 19.1 | Net Income Attributable to Controlling Interest | $ | 349.1 | | $ | 44.2 | | $ | 206.8 | | $ | 653.4 | | $ | (655.6) | | $ | 597.9 | Cash Flows Used for Investments in Plant | $ | 480.1 | | $ | 120.6 | | $ | 469.9 | | $ | 46.9 | | $ | - | | $ | 1,117.5 |
| | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, 2013 | | | Electric | | Natural Gas | | | | | | | | | | | | | (Millions of Dollars) | Distribution | | Distribution | | Transmission | | Other | | Eliminations | | Total | Operating Revenues | $ | 1,508.6 | | $ | 97.1 | | $ | 234.1 | | $ | 212.5 | | $ | (159.7) | | $ | 1,892.6 | Depreciation and Amortization | | (159.6) | | | (16.4) | | | (34.5) | | | (11.2) | | | 2.6 | | | (219.1) | Other Operating Expenses | | (1,064.1) | | | (89.4) | | | (73.4) | | | (206.8) | | | 159.5 | | | (1,274.2) | Operating Income/(Loss) | | 284.9 | | | (8.7) | | | 126.2 | | | (5.5) | | | 2.4 | | | 399.3 | Interest Expense | | (44.3) | | | (8.6) | | | (26.6) | | | (9.2) | | | 1.2 | | | (87.5) | Other Income, Net | | 5.5 | | | 0.5 | | | 2.9 | | | 312.1 | | | (312.1) | | | 8.9 | Net Income/(Loss) Attributable to Controlling Interest | $ | 156.9 | | $ | (10.4) | | $ | 58.6 | | $ | 313.1 | | $ | (308.7) | | $ | 209.5 |
| | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, 2013 | | | Electric | | Natural Gas | | | | | | | | | | | | | (Millions of Dollars) | Distribution | | Distribution | | Transmission | | Other | | Eliminations | | Total | Operating Revenues | $ | 4,104.4 | | $ | 613.0 | | $ | 721.5 | | $ | 650.4 | | $ | (565.8) | | $ | 5,523.5 | Depreciation and Amortization | | (488.7) | | | (50.5) | | | (100.9) | | | (52.0) | | | 7.2 | | | (684.9) | Other Operating Expenses | | (2,952.4) | | | (483.6) | | | (199.1) | | | (599.0) | | | 564.3 | | | (3,669.8) | Operating Income/(Loss) | | 663.3 | | | 78.9 | | | 421.5 | | | (0.6) | | | 5.7 | | | 1,168.8 | Interest Expense | | (129.9) | | | (24.8) | | | (73.7) | | | (26.3) | | | 4.1 | | | (250.6) | Other Income, Net | | 12.6 | | | 0.7 | | | 8.5 | | | 866.2 | | | (866.3) | | | 21.7 | Net Income Attributable to Controlling Interest | $ | 347.5 | | $ | 34.1 | | $ | 215.4 | | $ | 868.7 | | $ | (857.1) | | $ | 608.6 | Cash Flows Used for Investments in Plant | $ | 501.9 | | $ | 91.2 | | $ | 458.2 | | $ | 22.5 | | $ | - | | $ | 1,073.8 |
| | | | | | | | | | | | | | | | | | | The following table summarizes NU's segmented total assets: | | | | | | | | | | | | | | | | | | | | | | Electric | | Natural Gas | | | | | | | | | | | | | (Millions of Dollars) | Distribution | | Distribution | | Transmission | | Other | | Eliminations | | Total | As of September 30, 2014 | $ | 16,702.3 | | $ | 2,801.1 | | $ | 7,404.5 | | $ | 12,270.2 | | $ | (11,195.8) | | $ | 27,982.3 | As of December 31, 2013 | | 17,260.0 | | | 2,759.7 | | | 6,745.8 | | | 11,842.4 | | | (10,812.4) | | | 27,795.5 |
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NORTHEAST UTILITIES AND SUBSIDIARIES
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, the First and Second Quarter 2014 Quarterly Reports on Form 10-Q, and the 2013 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. All per share amounts are reported on a diluted basis. The unaudited condensed consolidated financial statements of NU, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P and WMECO are herein collectively referred to as the “financial"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 year.period. The discussion below also includes non-GAAP financial measures referencing our third quarter and first quarternine months of 2014 and 2013 earnings and EPS excluding certain integration costs related to NU’sNU's merger with NSTAR. We use these non-GAAP financial measures to evaluate and to provide details of earnings by business and to more fully compare and explain our third quarter and first quarternine months of 2014 and 2013 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" and "Financial Condition and Business Analysis – Overview – Regulated Companies" inManagement’sManagement's Discussion and Analysis of Financial Condition and Results of Operations, 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:
· cyber breaches, acts of war or terrorism, or grid disturbances, · actions or inaction of 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, · fluctuations in weather patterns, · changes in laws, regulations or regulatory policy, · changes in levels or 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 statements. For more information, see Item 1A, Risk Factors, included in this Quarterly Report on Form 10-Q and in NU’sNU's 2013 Annual Report on Form 10-K. This Quarterly Report on Form 10-Q and NU’sNU's 2013 Annual Report on Form 10-K also 38
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describe material contingencies and critical accounting policies in the accompanyingManagement’sManagement's Discussion and
40
Analysis of Financial Condition and Results of OperationsandCombined Notes to Condensed Consolidated Financial Statements (Unaudited). We encourage you to review these items.
Financial Condition and Business Analysis
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 compares the three months ended March 31, 2014 with the same period in 2013:·
·We earned $236$234.6 million, or $0.74 per share, in the third quarter of 2014 and $597.9 million, or $1.89 per share, in the first nine months of 2014, compared with $228.1$209.5 million, or $0.72$0.66 per share.share, in the third quarter of 2013 and $608.6 million, or $1.93 per share, in the first nine months of 2013. Excluding integration costs, we earned $241.8$237.6 million, or $0.76$0.75 per share, compared with $229.9in the third quarter of 2014 and $611.3 million, or $0.73$1.93 per share. Improved earnings results were due primarily to higher retail electric and firm natural gas sales as a result of colder weather, partially offset by the absence of a favorable impact from the resolution of a state income tax auditshare, in the first nine months of 2014, compared with $216.5 million, or $0.69 per share, in the third quarter of 2013.
·The resolution of the state income tax audit provided a $13.62013, and $619.2 million, or $0.04$1.96 per share, benefit to ourin the first quarter 2013 earnings, consistingnine months 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.2013.
· Our electric distribution segment, which includes generation, earned $112.2$153.4 million, or $0.35$0.48 per share, in the third quarter of 2014 and $349.1 million, or $1.10 per share, in the first nine months of 2014, compared with $99.5earnings of $156.9 million, or $0.32$0.50 per share.share, in the third quarter of 2013 and $347.5 million, or $1.10 per share, in the first nine months of 2013.
· Our transmission segment earned $74.9$88.1 million, or $0.24$0.28 per share, in the third quarter of 2014 and $206.8 million, or $0.65 per share, in the first nine months of 2014, compared with $79.9$58.6 million, or $0.25$0.18 per share.share, in the third quarter of 2013 and $215.4 million, or $0.68 per share, in the first nine months of 2013. The decreaseincrease in the third quarter of 2014, as compared to the same period in 2013, was due primarily to the absence of an after-tax reserve of $14.3 million recorded in the $5.7third quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaint. The decrease in the first nine months of 2014, as compared to the same period in 2013, was due primarily to the after-tax reserve of $32.1 million favorable impact fromrecorded for the resolution described above.June 2014 FERC ROE orders, as compared to the $14.3 million reserve recorded in the third quarter of 2013.
· Our natural gas distribution segment earned $52.1had a net loss of $9.9 million, or $0.16$0.03 per share, compared with $43.3in the third quarter of 2014 and earnings of $44.2 million, or $0.14 per share. ·NU parent and other companies hadshare, in the first nine months of 2014, compared with a net lossesloss of $3.2$10.4 million, or $0.01$0.03 per share, compared within the third quarter of 2013 and earnings of $5.4$34.1 million, or $0.02$0.11 per share. Excluding integration costs, share, in the first nine months of 2013.
· NU parent and other companies earned $2.6$3 million, or $0.01 per share, in the third quarter of 2014 and had a net loss of $2.2 million in the first nine months of 2014, compared with $7.2earnings of $4.4 million, or $0.02$0.01 per share.share, in the third quarter of 2013 and $11.6 million, or $0.04 per share, in the first nine months of 2013. Third quarter and first nine months 2014 results reflect $3 million and $13.4 million, respectively, of after-tax integration costs. Third quarter and first nine months 2013 results reflect $7 million and $10.6 million, respectively, of after-tax integration costs.
Legislative, Regulatory and Other Items:
· On September 16, 2014, NU and Spectra Energy Corp announced Access Northeast, a natural gas pipeline expansion project. Access Northeast will enhance the Algonquin and Maritimes pipeline systems using existing routes. NU and Spectra Energy Corp will have equal ownership interest in the project. The decrease was duetotal project cost, subject to FERC approval, is expected to be approximately $3 billion and has an anticipated in-service date of November 2018.
· On October 16, 2014, the absenceFERC issued an order on the base ROE complaint filed by several parties in September 2011. The FERC order confirmed that the base ROE should be set at 10.57 percent and that a utility's total or maximum ROE inclusive of transmission incentive ROE adders should not exceed the top of the $6.7 million favorable impact from the resolution described above.new zone of reasonableness (11.74 percent).
Regulatory Items:·
·On March 12,In October 2014, the PURA issued a final decision that approved recovery of CL&P’s $365 million in storm restoration costs and ordered CL&P to capitalize approximately $18 million of the deferred storm restoration costs as utility plant. PURA will allow recovery of the $365 million with carrying charges in CL&P’s distribution rates over a six-year period beginning December 1, 2014.
·Pursuant to an October 2013 request from the New Hampshire Legislative Oversight Committee on Electric Utility 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 be $225 million as of December 31, 2013, compared to their net book value of $660 million, implying potential “stranded costs” in excess of $400 million. The NHPUC staff recommended that any further actions relating to PSNH’s generating assets await a final decisionconcluded its hearings 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 onreview to determine the economic and reliability consequences of retirementprudent costs of PSNH’s fossil generating plants. Incompliance with the eventlaw requiring scrubber installation. The NHPUC is expected to issue a decision on this matter by the end of generation asset divestiture or retirement, both present law and the PSNH Restructuring Settlement Agreement approved in 2000 require that the NHPUC provide stranded cost recovery to PSNH.2014.
Liquidity:
· Cash and cash equivalents totaled $89.2$41.7 million as of March 31,September 30, 2014, compared with $43.4 million as of December 31, 2013, while investments in property, plant and equipment totaled $348.7 million$1.1 billion in both the first quarternine months of 2014 compared with $389 million in the first quarter ofand 2013.
· Cash flows provided by operating activities totaled $493.8 million$1.4 billion in the first quarternine months of 2014, compared with $473.1 million$1.2 billion in the first quarternine months of 2013. The improved operating cash flows were due primarily to approximately $132 million in DOE Damages proceeds resulting from the spent nuclear fuel litigation received by CL&P, NSTAR Electric, PSNH and WMECO from the Yankee Companies, the absence of cash disbursements for major storm restoration costs and athe decrease of approximately $264 million in Pension and PBOP Plan cash contributions, partially offset by an increase in income taxes paidchanges in the first quartertiming of working capital items and higher income tax payments in 2014, as compared to the first quarter of 2013, and the absence of costs recoveredsame period in rates related to the RRBs that were fully amortized in the first half of 2013.
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· In the first quarternine months of 2014, we issued $400$650 million of new long-term debt consisting of $100 million by Yankee Gas on January 2, 2014, and $300 million by NSTAR Electric on March 7, 2014, and $250 million by CL&P on April 24, 2014. TheseProceeds from these new issuances were used primarily to repay approximately $375$525 million of existing long-term debt.debt with remaining proceeds used to pay short-term borrowings.
· In the first nine months of 2014, we had cash dividends on common shares of $356.1 million, compared with $341.7 million in the first nine months of 2013. On February 4,September 30, 2014, we paid a common dividend of $0.3925 per share, which was approved by our Board of Trustees approved a common dividend payment of $0.3925 per share, payable on March 31,September 2, 2014, to shareholders of record as of March 3,September 15, 2014. On May 1, 2014, our Board of Trustees approved a common dividend payment of $0.3925 per share, payable June 30, 2014 to 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 third quarter and first quartersnine months of 2014 and 2013 is as follows:
| | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Millions of Dollars, Except | | 2014 | | 2013 | | 2014 | | 2013 | Per Share Amounts) | | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share | Net Income Attributable to Controlling Interest (GAAP) | | $ | 234.6 | | $ | 0.74 | | $ | 209.5 | | $ | 0.66 | | $ | 597.9 | | $ | 1.89 | | $ | 608.6 | | $ | 1.93 | Regulated Companies
| | $ | 231.6 | | $ | 0.73 | | $ | 205.1 | | $ | 0.65 | | $ | 600.1 | | $ | 1.89 | | $ | 597.0 | | $ | 1.89 | NU Parent and Other Companies | | | 6.0 | | | 0.02 | | | 11.4 | | | 0.04 | | | 11.2 | | | 0.04 | | | 22.2 | | | 0.07 | Non-GAAP Earnings | | | 237.6 | | | 0.75 | | | 216.5 | | | 0.69 | | | 611.3 | | | 1.93 | | | 619.2 | | | 1.96 | Integration Costs (after-tax) | | | (3.0) | | | (0.01) | | | (7.0) | | | (0.03) | | | (13.4) | | | (0.04) | | | (10.6) | | | (0.03) | Net Income Attributable to Controlling Interest (GAAP) | | $ | 234.6 | | $ | 0.74 | | $ | 209.5 | | $ | 0.66 | | $ | 597.9 | | $ | 1.89 | | $ | 608.6 | | $ | 1.93 |
Excluding the impact of integration costs, our third quarter 2014 earnings increased by $21.1 million, as compared to the third quarter of 2013. The increase was due primarily to lower operations and maintenance costs that impact earnings, which were primarily driven by lower labor and other employee-related costs, including pension costs, and the absence of an after-tax reserve of $14.3 million recorded in the third quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaint. Partially offsetting these favorable earnings impacts were higher property taxes, higher depreciation expense and lower retail electric sales volumes as a result of cooler summer weather in 2014, as compared to the same period in 2013.
Excluding the impact of integration costs, our first quarternine months 2014 earnings increaseddecreased by $11.9$7.9 million, as compared to the first quarternine months of 2013, due primarily to higher retail electric and firm natural gas sales as a result of colder weather, partially offset by the absence in 2014 of a favorable impact from the resolution of a state income tax audit in the first quarter of 2013. The resolution2013, net of the favorable impact of a reduction in valuation allowance for state income tax audit providedcredits in the third quarter of 2014. Earnings were also unfavorably impacted by the after-tax reserve of $32.1 million related to the second quarter 2014 FERC ROE orders, as compared to the $14.3 million reserve related to the third quarter 2013 FERC ALJ initial decision in the FERC base ROE complaints. For further information, see "FERC Regulatory Issues – FERC Base ROE Complaints" in thisManagement's Discussion and Analysis of Financial Condition and Results of Operations.In addition, earnings decreased due to higher depreciation expense at our regulated companies, higher property taxes and lower retail electric sales volumes as a $13.6 million, or $0.04 per share, benefitresult of cooler summer weather in 2014, as compared to ourthe same period in 2013. Earnings were favorably impacted by lower operations and maintenance costs that impact earnings, which were primarily driven by lower labor and other employee-related costs, including pension costs, and lower storm restoration costs, as well as higher firm natural gas sales volumes as a result of the colder weather in the first quarter 2013 earnings.of 2014, as compared to the first quarter of 2013.
Regulated Companies: Our Regulated companies consist of the electric distribution, transmission, and natural gas distribution segments. Generation activities of PSNH and WMECO are included in our electric distribution segment. A summary of our segment earnings and EPS for the third quarter and first quartersnine months of 2014 and 2013 is as follows:
| | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | (Millions of Dollars, Except | | 2014 | | 2013 | | 2014 | | 2013 | Per Share Amounts) | | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share | Electric Distribution | | $ | 153.4 | | $ | 0.48 | | $ | 156.9 | | $ | 0.50 | | $ | 349.1 | | $ | 1.10 | | $ | 347.5 | | $ | 1.10 | Transmission | | | 88.1 | | | 0.28 | | | 58.6 | | | 0.18 | | | 206.8 | | | 0.65 | | | 215.4 | | | 0.68 | Natural Gas Distribution | | | (9.9) | | | (0.03) | | | (10.4) | | | (0.03) | | | 44.2 | | | 0.14 | | | 34.1 | | | 0.11 | Net Income - Regulated Companies | | $ | 231.6 | | $ | 0.73 | | $ | 205.1 | | $ | 0.65 | | $ | 600.1 | | $ | 1.89 | | $ | 597.0 | | $ | 1.89 |
Our electric distribution segment earnings decreased $3.5 million in the third quarter of 2014, as compared to the third quarter of 2013, due primarily to a 4.5 percent decrease in retail electric sales volumes as a result of cooler summer weather in 2014, higher depreciation expense and higher property taxes, partially offset by lower operations and maintenance costs that impact earnings, which were primarily driven by lower labor and other employee-related costs, including pension costs, and lower vegetation management costs, all as compared to the same period in 2013.
Our electric distribution segment earnings increased $12.7$1.6 million in the first nine months of 2014, as compared to the first nine months of 2013, due primarily to lower operations and maintenance costs that impact earnings, which were primarily driven by lower labor and other employee-related costs, including pension costs, and lower storm restoration costs. Partially offsetting these favorable earnings impacts were higher depreciation expense, higher property taxes, lower retail electric sales volumes as a result of cooler summer weather in 2014, and the absence in 2014 of regulatory interest income from stranded cost recoveries in 2013, all as compared to the same period in 2013.
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Our transmission segment earnings increased $29.5 million in the third quarter of 2014, as compared to the first quarter of 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 firstthird quarter of 2013, due primarily to the absence of the favorable impact fromafter-tax reserve of $14.3 million recorded in the resolutionthird quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaint, a decrease in transmission segment state income tax auditexpense, which includes the reduction in the first quarter of 2013, which provided a $5.7 million benefit to our first quarter 2013 transmission segment earnings, partially offset byvaluation allowance for state credits, and a higher transmission rate base as a result of an increased investment in our transmission infrastructure.
OurOur transmission segment earnings decreased $8.6 million in the first nine months of 2014, as compared to the first nine months of 2013, due primarily to the after-tax reserve of $32.1 million recorded for the June 2014 FERC ROE orders, as compared to the $14.3 million reserve recorded in the third quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaints. These unfavorable impacts were partially offset by a decrease in transmission segment state income tax expense, which includes the reduction in valuation allowance for state credits, and a higher transmission rate base as a result of an increased investment in our transmission infrastructure.
Our natural gas distribution segment earnings increasedresults improved by $0.5 million in the firstthird quarter of 2014, as compared to the third quarter of 2013, due primarily to higher peak demand revenues and higher firm natural gas sales volumes resulting from additional natural gas heating customers.
Our natural gas distribution segment earnings increased $10.1 million in the first quarternine months of 2014, as compared to the first nine months of 2013, due primarily to higher firm natural gas sales as a result ofvolumes and peak demand revenues resulting from colder weather as well asin the additionfirst quarter of new2014 and additional natural gas heating customers. 40
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A summary of our retail electric GWh sales volumes and percentage changes, as well as percentage changes in CL&P, NSTAR Electric, PSNH and WMECO retail electric GWh sales volumes, is as follows:
| | | For the Three Months Ended March 31, 2014 Compared to 2013 | | For the Three Months Ended September 30, 2014 Compared to 2013 | | For the Nine Months Ended September 30, 2014 Compared to 2013 | | | Sales (GWh) | | Percentage | | Sales Volumes (GWh) | | | | Sales Volumes (GWh) | | Percentage | NU – Electric | | 2014 | | 2013 | | Increase | | 2014 | | 2013 | | PercentageDecrease | | 2014 | | 2013 | | Increase/ (Decrease) | Residential | | 6,139 | | 5,803 | | 5.8 | % | 5,656 | | 6,102 | | (7.3)% | | 16,306 | | 16,625 | | (1.9)% | Commercial (1) | | 6,866 | | 6,695 | | 2.6 | % | | Commercial | | 7,382 | | 7,616 | | (3.1)% | | 20,838 | | 21,064 | | (1.1)% | Industrial | | 1,343 | | 1,298 | | 3.4 | % | 1,517 | | 1,529 | | (0.8)% | | 4,295 | | 4,265 | | 0.7 % | Total | | 14,348 | | 13,796 | | 4.0 | % | 14,555 | | 15,247 | | (4.5)% | | 41,439 | | 41,954 | | (1.2)% |
| | 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 | % |
| | | | | | | | | | | | | | | | Percentage | For the Three Months Ended September 30, 2014 Compared to 2013 | | For the Nine Months Ended September 30, 2014 Compared to 2013 | Increase/(Decrease) Electric | CL&P | | NSTAR Electric | | PSNH | | WMECO | | CL&P | | NSTAR Electric | | PSNH | | WMECO | Residential | (8.2)% | | (6.6)% | | (5.2)% | | (9.2)% | | (2.0)% | | (2.4)% | | (0.3)% | | (2.6)% | Commercial | (3.3)% | | (2.9)% | | (2.6)% | | (4.3)% | | (1.1)% | | (1.2)% | | (0.4)% | | (1.7)% | Industrial | (1.3)% | | 2.2 % | | (1.5)% | | (3.5)% | | 1.9 % | | (0.4)% | | 1.5 % | | (3.0)% | Total | (5.3)% | | (3.8)% | | (3.4)% | | (6.2)% | | (1.2)% | | (1.5)% | | - % | | (2.3)% |
(1)Commercial retail electric GWh sales include streetlighting and railroad retail sales.
A summary of our firm natural gas sales volumes in million cubic feet and percentage changes, as well as percentage changes in Yankee Gas and NSTAR Gas, is as follows:
| | For the Three Months Ended March 31, 2014 Compared to 2013 | | | | | | | | | | | | | | | Sales (million cubic feet) | | Percentage | | For the Three Months Ended September 30, 2014 Compared to 2013 | | For the Nine Months Ended September 30, 2014 Compared to 2013 | NU - Firm Natural Gas | | 2014 | | 2013 | | Increase | | | | | Sales Volumes (million cubic feet) | | Percentage | | Sales Volumes (million cubic feet) | | | NU – Firm Natural Gas | | 2014 | | 2013 | | Increase/ (Decrease) | | 2014 | | 2013 | | Percentage Increase | Residential | | 19,812 | | 17,015 | | 16.4 | % | 2,487 | | 2,407 | | 3.3 % | | 27,468 | | 24,392 | | 12.6% | Commercial | | 19,627 | | 16,771 | | 17.0 | % | 4,565 | | 4,673 | | (2.3)% | | 31,032 | | 28,066 | | 10.6% | Industrial | | 7,478 | | 6,829 | | 9.5 | % | 4,276 | | 4,093 | | 4.4 % | | 16,669 | | 15,588 | | 6.9% | Total | | 46,917 | | 40,615 | | 15.5 | % | 11,328 | | 11,173 | | 1.4 % | | 75,169 | | 68,046 | | 10.5% | Total, Net of Special Contracts (1) | | 45,550 | | 39,422 | | 15.5 | % | 10,200 | | 10,155 | | 0.4 % | | 71,645 | | 64,815 | | 10.5% |
| | For the Three Months Ended March 31, 2014 Compared to 2013 | | | | | | | | | | | Sales (million cubic feet) | | For the Three Months Ended September 30, 2014 Compared to 2013 | | For the Nine Months Ended September 30, 2014 Compared to 2013 | | | Yankee Gas | | NSTAR Gas | | | | | Percentage | | Percentage | | | Percentage Increase/(Decrease) | | Sales Volumes (million cubic feet) | | Sales Volumes (million cubic feet) | Firm Natural Gas | | Increase | | Increase | | Yankee Gas | | NSTAR Gas | | Yankee Gas | | NSTAR Gas | Residential | | 21.8 | % | 12.9 | % | (0.6)% | | 6.3 % | | 14.0% | | 11.6% | Commercial | | 21.0 | % | 13.6 | % | 1.7 % | | (6.2)% | | 14.0% | | 7.5% | Industrial | | 10.2 | % | 7.7 | % | 4.6 % | | 4.0 % | | 7.3% | | 5.9% | Total | | 18.6 | % | 12.7 | % | 2.8 % | | (0.5)% | | 11.8% | | 9.1% | Total, Net of Special Contracts (1) | | 18.9 | % | | | 1.3 % | | | | 12.1% | | |
(1) 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’customers' usage.
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Weather, fluctuations in energy supply costs, conservation measures (including company-sponsored energy efficiency programs), and economic conditions affect customer energy usage. Industrial sales are less sensitive to temperature variations than residential and commercial sales. In our service territories, weather impacts electric sales during the summer and electric and natural gas sales during the winter (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. In addition,
For the third quarter of 2014, our electric and natural gas businesses are susceptible to damage from major storms and other natural events and disasters that could adversely affect our ability to provide energy. Our first quarter 2014 consolidated retail electric sales volumes, consisting of the retail electric sales volumes of CL&P, NSTAR Electric, PSNH, and WMECO, were higher,lower, as compared to the firstsame period in 2013, as a result of cooler summer weather in 2014. The third quarter of 2013, due primarily to colder weather. First quarter 2014 heatingcooling degree days were 1612 percent higherlower in Connecticut and western Massachusetts, 1215 percent higherlower in the Boston metropolitan area, and 1524 percent higherlower in New Hampshire, as compared to the third quarter of 2013. Weather-normalized retail electric sales volumes (based on 30-year average temperatures) decreased 2.3 percent in the third quarter of 2014, as compared to the third quarter of 2013. We believe the decrease was due primarily to increased conservation efforts by our residential and commercial customer classes, which are driven by the energy efficiency programs sponsored by CL&P, NSTAR Electric and WMECO.
For the first nine months of 2014, our consolidated retail electric sales volumes were lower, as compared to the same period in 2013, due primarily to cooler summer weather in 2014, partially offset by colder weather in the first quarter of 2014. The first nine months of 2014 cooling degree days were 14 percent lower in Connecticut and western Massachusetts, 16 percent lower in the Boston metropolitan area, and 24 percent lower in New Hampshire, as compared to the first quarternine months of 2013. Weather-normalized retail electric sales (based on 30-year average temperatures) increased 1.3volumes decreased 0.9 percent in the first quarternine months of 2014, as compared to the first quarternine months of 2013, reflecting a steady improvement2013. We believe the decrease was due primarily to an increase in economic conditions across our service territory.customer conservation efforts as noted above. 41
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For WMECO, fluctuations in retail electric sales volumes do not impact earnings due to the DPU-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 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. In addition, they have benefitted from historically favorable natural gas prices and customer growth across both operating companies. OurIn the third quarter and first quarternine months of 2014, consolidated firm natural gas sales volumes, consisting of the firm natural gas sales volumes of Yankee Gas and NSTAR Gas, were higher, as compared to the third quarter and first quarternine months of 2013, due primarily to colder weather.weather in the first quarter of 2014, as compared to the same period in 2013, and increased customer growth in the first nine months of 2014, as compared to the same period in 2013. The third quarter and first quarternine months of 2014 weather-normalized NU consolidated total firm natural gas sales volumes increased 1 percent and 3.6 percent, respectively, as compared to the same periodperiods in 2013, due primarily to residential and commercial customer growth.2013.
NU Parent and Other Companies: NU parent and other companies, which includes our competitiveunregulated businesses, earned $3 million and had a net lossesloss of $3.2$2.2 million in the third quarter and first quarternine months of 2014, respectively, compared with earnings of $5.4$4.4 million and $11.6 million in the third quarter and first quarternine months of 2013.2013, respectively. Excluding the impact of integration costs, NU parent and other companies earned $2.6$6 million and $11.2 million in the third quarter and first quarternine months of 2014, respectively, compared with $7.2$11.4 million and $22.2 million in the third quarter and first quarternine months of 2013.2013, respectively. The earnings decrease in earningsfor the first nine months of 2014 was due primarily to the absence in 2014 of the favorable impact from the resolution of the Connecticut state income tax audit, in the first quarter of 2013, which provided a $6.7$5.8 million earnings benefit to the first quarter 2013 NU parent earnings.nine months of 2013.
Liquidity
Consolidated: Cash and cash equivalents totaled $89.2$41.7 million as of March 31,September 30, 2014, compared with $43.4 million as of December 31, 2013.
On January 2,July 15, 2014, Yankee Gas issued $100PSNH repaid at maturity the $50 million of 4.825.25 percent Series L First Mortgage Bonds due to mature in 2044. The proceeds, netusing short-term borrowings.
On September 15, 2014, CL&P repaid at maturity the $150 million of issuance costs, were used to repay the4.80 percent 2004 Series A First Mortgage Bonds.
On October 14, 2014, PSNH issued $75 million 4.80of first mortgage bonds at a yield of 3.144 percent that will mature on November 1, 2023. The first mortgage bonds are part of the same series of PSNH’s existing 3.50 percent Series GS First Mortgage Bonds that matured on January 1, 2014 and to repay $25 millionwere initially issued in short-term borrowings. On March 7, 2014, NSTAR Electric issued $300 millionNovember 2013. As a result, the aggregate principal amount of 4.40 percent debentures, due to mature in 2044. 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 2014PSNH’s outstanding Series AS First Mortgage Bonds due to mature in April 2044.totals $325 million. The proceeds, net of issuance costs, were used to repay short-term borrowings.
On August 27, 2014, PURA approved CL&P's request to extend the authorization period for issuance of up to $366.4 million in long-term debt from December 31, 2014 to December 31, 2015.
Effective July 23, 2014, NU parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are parties to aextended the expiration date of their joint five-year $1.45 billion revolving credit facility duefor one additional year to expire on September 6, 2018.2019. The revolving credit facility is to be used primarily to backstop theNU parent's $1.45 billion commercial paper program at NU.program. The commercial paper program allows NU parent to issue commercial paper as a form of short-term debt. As of March 31,September 30, 2014 and December 31, 2013, NU had approximately $818.5$964.5 million and $1.01 billion, respectively, in short-term borrowings outstanding under the NU parent commercial paper program, leaving $631.5$485.5 million and $435.5 million of available borrowing capacity as of March 31,September 30, 2014 and December 31, 2013, respectively. The weighted-average interest rate on these borrowings as of March 31,September 30, 2014 and December 31, 2013 was 0.230.25 percent and 0.24 percent, respectively, which is generally based on money market rates.A2/P2 rated commercial paper. As of March 31,September 30, 2014, there were intercompany loans from NU of $351.6$105.4 million to CL&P, $39.9$153.3 million to PSNH and $37.4$13.2 million to WMECO. As of December 31, 2013, there were intercompany loans from NU of $287.3 million to CL&P and $86.5 million to PSNH.
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Effective July 23, 2014, NSTAR Electric has a five-yearextended the expiration date of its $450 million revolving credit facility duefor one additional year to expire on September 6, 2018.2019. This facility serves to backstop NSTAR Electric’sElectric's existing $450 million commercial paper program. As of March 31,September 30, 2014 NSTAR Electric had no borrowings outstanding under its commercial paper program. As ofand December 31, 2013, NSTAR Electric had $159.5 million and $103.5 million, respectively, in short-term borrowings outstanding under its commercial paper program, leaving $290.5 million and $346.5 million of available borrowing capacity.capacity as of September 30, 2014 and December 31, 2013, respectively. The weighted-average interest rate on these borrowings as of September 30, 2014 and December 31, 2013 was 0.16 percent and 0.13 percent, respectively, which is generally based on money market rates.A2/P1 rated commercial paper.
Cash flows provided by operating activities totaled $493.8 million$1.4 billion in the first quarternine months of 2014, compared with $473.1 million$1.2 billion in the first quarternine months of 2013. The improved operating cash flows were due primarily to approximately $132 million in DOE Damages proceeds resulting from the spent nuclear fuel litigation received by CL&P, NSTAR Electric, PSNH and WMECO from the Yankee Companies, the absence of cash disbursements for major storm restoration costs and the decrease of $40.3approximately $264 million in Pension and PBOP Plan cash contributions, partially offset by an increase in income taxes paidchanges in the timing of working capital items and income tax payments of $256 million for the first quarternine months of 2014, ($82.6 million), as compared to $34 million for the first quarter of 2013 ($22.2 million),same period in 2013. For further information on the spent nuclear fuel litigation, see Note 9C, "Commitments and the absence of costs recovered in rates related to the RRBs that were fully amortized in the first half of 2013. 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, theContingencies – Contractual Obligations – 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 Assetsthis combined Quarterly Report 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.Form 10-Q.
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 outlook of NU, CL&P, NSTAR Electric, PSNH, WMECO and NSTAR Gas. On April 25, 2014, S&P affirmed the corporate credit ratings and revised the outlooks to positive from stable of NU, CL&P, NSTAR Electric, PSNH, WMECO, Yankee Gas and NSTAR Gas.
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In the first quarternine months of 2014, we had cash dividends on common shares of $118.5$356.1 million, compared with $116.4$341.7 million in the first quarternine months of 2013. On February 4,September 30, 2014, we paid a common dividend of $0.3925 per share, which was approved by our Board of Trustees approved a common dividend payment of $0.3925 per share, payable on March 31,September 2, 2014, to shareholders of record as of March 3,September 15, 2014. The dividend represented an increase of 6.8 percent over the dividend paid in December 2013. On May 1, 2014, our Board of Trustees approved a common dividend payment of $0.3925 per share, payable June 30, 2014 to shareholders of record as of May 30, 2014.
In the first quarternine months of 2014, CL&P, NSTAR Electric, PSNH, and WMECO paid $42.8$128.4 million, $253 million, $16.5$49.5 million, and $49 million, respectively, in common dividends to NU parent.
Investments in Property, Plant and Equipment on the accompanying 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. In the first quarternine months of 2014, investments for NU, CL&P, NSTAR Electric, PSNH, and WMECO were $348.7$1.1 billion, $371.7 million, $108$309.2 million, $95 million, $61.9$170.1 million, and $30.3$82.5 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$1.1 billion in the first nine months of both 2014 and 2013. These amounts included $40.9 million and $14.7 million in the first quarter of 2014, compared with $299.8 million in the first quarter of 2013. These amounts included $5.9 million and $5.4 million in the first quartersnine months of 2014 and 2013, respectively, related to our corporate service companies, NUSCO and RRR.
Access Northeast: On September 16, 2014, NU and Spectra Energy Corp announced Access Northeast, a natural gas pipeline expansion project. Access Northeast will enhance the Algonquin and Maritimes pipeline systems using existing routes and is expected to be capable of delivering approximately one billion cubic feet of natural gas per day to New England. NU and Spectra Energy Corp will have equal ownership interest in the project with the option of additional investors joining in the future. The total project cost, subject to FERC approval, is expected to be approximately $3 billion and has an anticipated in-service date of November 2018.
Transmission Business:Overall, transmission business capital expenditures decreasedincreased by $53.3$33.5 million in the first quarternine months of 2014, as compared to the first quarternine months of 2013. A summary of transmission capital expenditures by company for the threefirst nine months ended March 31,of 2014 and 2013 is as follows:
| | | For the Three Months Ended March 31, | | | For the Nine Months Ended September 30, | (Millions of Dollars) | | 2014 | | 2013 | | | 2014 | | 2013 | CL&P | | $ | 36.2 | | $ | 44.0 | | | $ | 201.5 | | $ | 133.5 | NSTAR Electric | | 12.4 | | 49.3 | | | | 111.1 | | | 140.0 | PSNH | | 16.7 | | 14.6 | | | | 76.9 | | | 58.0 | WMECO | | 16.3 | | 17.2 | | | | 50.1 | | | 62.0 | NPT | | 6.7 | | 16.5 | | | | 19.4 | | | 32.0 | Total Transmission Segment | | $ | 88.3 | | $ | 141.6 | | | $ | 459.0 | | $ | 425.5 |
NEEWS: GSRP, the first, largest and most complicated project within the NEEWS family of projects was fully energized on November 20, 2013. As of March 31,September 30, 2014, CL&P and WMECO havehad placed $631.5$640 million in service with minimal remaining close-out activities continuing throughout the first halfremainder of 2014.
The Interstate Reliability Project which(IRP) is the second major NEEWS project. It includes CL&P’s&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 the second major NEEWS project. The Connecticut andin Rhode Island portionsand Massachusetts. As of the projectMay 2014, all three states have been approved by their respectiveissued siting boards. On January 30, 2014, the Massachusetts 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, theapprovals. The Army Corps of Engineers issued its permit on the project which enabled(the last required project permit) in the first quarter of 2014. Project construction on the Connecticut portion of the project to begin. NU’sis underway in all three states. NU's portion of the cost is estimated to be $218 million and construction on its portion of the project is expected to be placed in service in late 2015.was approximately 62 percent complete as of September 30, 2014.
The Greater Hartford Central Connecticut Study (GHCC), which includes the reassessment of the Central Connecticut Reliability Project and 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 each
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of the areas studied and across eachthe interfaces of those areas. These results were presented to the four study areas. ISO-NE is expected to confirmPlanning Advisory Committee in November 2013. On July 15, 2014, ISO-NE presented the preferred transmission solutions in the summerto its Planning Advisory Committee. These solutions are comprised of 2014, which are likely to include many 115 kV upgrades. We continueupgrades that are expected to expect that the specific future projects being identified to address these reliability concerns will cost approximately $300$350 million and that the project will be placed in service from 2016 through 2018. We expect to begin work on the initial solutions in 2017.late 2015 and complete GHCC-related work in 2018.
Included as part of NEEWS are several associated reliability related projects, $90.5$93.1 million of which have been placed in service. As of March 31,the second quarter of 2014, the remainingall construction on the associated reliability related projects totaled $2.9 million, which is scheduled to be completed by mid-2014.was completed.
Through March 31,September 30, 2014, CL&P and WMECO capitalized $259$323.6 million and $571.1$573.6 million, respectively, in costs associated with NEEWS, of which $6.2$70.8 million and $4.1$6.6 million, respectively, were capitalized in the first quarternine months of 2014. Included in the NEEWS amounts are costs for IRP, of which CL&P capitalized $140.9 million in costs through September 30, 2014, and $67.9 million related to costs capitalized in the first nine months of 2014.
Northern Pass: Northern Pass is NU’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. NPT received ISO-NE approval under Section I.3.9 of the ISO tariff in 2013. By approving the project’sproject'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 recommendedour proposed route and various 43
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alternative routes. We now 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 ofMarch 2015. We expect to file the state permit application in Januarythe second quarter of 2015 after receipt of the DOE’s draft EISEIS. The expected $1.4 billion project is received.subject to comprehensive federal and state public permitting processes and is now expected to be operational in the second half of 2018.
Greater Boston Reliability and Boston Network Improvements: Solutions:As a result of continued analysis of the transmission needs 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. For a portion of these new transmission initiatives, ISO-NE and state regulators must decide between two alternative transmission solutions. We expect ISO-NE to select the preferred solutionssolution in late 2014 or early 2015. If ISO-NE selects our solution, which is the first half of 2014. We expect projected costslower overall capital cost plan, then our investments are estimated to be $489 million. If the alternate plan is chosen, then we still expect to invest approximately $480 million for these new initiatives.$356 million.
Distribution Business: A summary of distribution capital expenditures by company for the first quartersnine months of 2014 and 2013 is as follows:
| | | For the Three Months Ended March 31, | | For the Nine Months Ended September 30, | (Millions of Dollars) | | 2014 | | 2013 | | 2014 | | 2013 | CL&P: | | | | | | | | | | | Basic Business | | $ | 10.7 | | $ | 13.2 | | $ | 70.2 | | $ | 42.7 | Aging Infrastructure | | 34.3 | | 29.0 | | | 81.1 | | | 116.6 | Load Growth | | 17.3 | | 17.0 | | | 49.7 | | | 56.9 | Total CL&P | | 62.3 | | 59.2 | | | 201.0 | | | 216.2 | NSTAR Electric: | | | | | | | | | | | Basic Business | | 29.6 | | 15.6 | | | 75.4 | | | 84.6 | Aging Infrastructure | | 22.9 | | 27.3 | | | 76.0 | | | 75.0 | Load Growth | | 6.5 | | 1.9 | | | 25.8 | | | 22.5 | Total NSTAR Electric | | 59.0 | | 44.8 | | | 177.2 | | | 182.1 | PSNH: | | | | | | | | | | | Basic Business | | 5.8 | | 3.8 | | | 33.1 | | | 13.7 | Aging Infrastructure | | 12.5 | | 7.8 | | | 24.2 | | | 32.2 | Load Growth | | 6.1 | | 4.6 | | | 21.4 | | | 18.3 | Total PSNH | | 24.4 | | 16.2 | | | 78.7 | | | 64.2 | WMECO: | | | | | | | | | | | Basic Business | | 1.5 | | 0.5 | | | 6.2 | | | 5.3 | Aging Infrastructure | | 3.3 | | 4.3 | | | 10.2 | | | 16.7 | Load Growth | | 1.4 | | 1.5 | | | 3.6 | | | 5.7 | Total WMECO | | 6.2 | | 6.3 | | | 20.0 | | | 27.7 | Total - Electric Distribution (excluding Generation) | | 151.9 | | 126.5 | | | 476.9 | | | 490.2 | PSNH Generation | | 2.5 | | 0.7 | | | 11.3 | | | 5.5 | WMECO Generation | | 4.1 | | 0.1 | | | 7.5 | | | 0.9 | Total - Natural Gas | | 25.2 | | 25.5 | | | 138.9 | | | 126.7 | Total Electric and Natural Gas Distribution Segment | | $ | 183.7 | | $ | 152.8 | | $ | 634.6 | | $ | 623.3 |
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, distribution 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.
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FERC Regulatory Issues
FERC Base ROE Complaints: First Complaint:On September 30, 2011, a complaint was filed jointly at FERC under Sections 206 and 306 of the Federal Power Act (the "first complaint") by several New England state attorneys general, state regulatory commissions, consumer advocates and other parties (the "Complainants"). The Complainants alleged that the base ROE of 11.14 percent that has been utilized since 2006 in the calculation of formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by NETOs, including CL&P, NSTAR Electric, PSNH and WMECO, was unjust and unreasonable and asserted that the rate was excessive due to changes in the capital markets. Complainants sought an order to reduce the base ROE prospectively from the date of a final FERC order (the "FERC order date"), and for the 15-month period October 1, 2011 to December 31, 2012 (the "first complaint refund period"), and to require refunds. The FERC set the case for trial before a FERC ALJ after settlement negotiations were unsuccessful in August 2012.
On August 6, 2013, the FERC ALJ issued an initial decision on the first complaint finding that the base ROE in effect during the first complaint refund period was not reasonable and recommended separate base ROEs for the first complaint refund period of 10.6 percent and for the period beginning when FERC issues its final decision (the "prospective period") of 9.7 percent, leaving policy considerations and additional adjustments to the FERC. In the third quarter of 2013, the Company recorded a series of reserves at its electric subsidiaries to recognize the potential financial impact from the FERC ALJ's initial decision for the first complaint refund period. SeeCumulative Reserves below for further information on the reserves recorded in the third quarter of 2013.
On June 19, 2014, FERC issued an order on the first complaint, partially affirming and partially reversing the FERC ALJ's initial decision. FERC set a single tentative base ROE of 10.57 percent for the first complaint refund period and prospective period. FERC also modified its traditional methodology by adopting a two-step discounted cash flow analysis that it utilizes to determine the ROEs of both natural gas and oil pipeline projects. Using this methodology, FERC determined a new zone of reasonableness of 7.03 percent to 11.74 percent, and set the tentative base ROE halfway between the midpoint and the top of the zone of reasonableness. FERC also stated that a utility's “total ROE, inclusive of transmission incentive ROE adders” should not exceed the top of the new zone of reasonableness produced by this methodology. FERC instituted a paper hearing on the long-term growth rate portion of the methodology (the "paper hearing"). Rehearing requests on this new methodology were filed in July, and briefs were filed in August and September by the parties on the appropriate long-term growth rate. In the second quarter of 2014, the Company recorded additional reserves at its electric subsidiaries to recognize the potential financial impact from the FERC’s June 19th order. SeeCumulative Reserves below for further information on the reserves recorded in the second quarter of 2014.
On October 16, 2014, the FERC issued an order in the paper hearing, which confirmed that the base ROE should be set at 10.57 percent and that a utility’s total or maximum ROE should not exceed the top of the new zone of reasonableness (11.74 percent). The FERC ordered the NETOs to provide refunds to customers for the first complaint refund period, and set the new base ROE prospectively from the order date.
Second Complaint:On December 27, 2012, a second complaint was filed jointly at FERC by several additional consumer groups and municipal parties (the "second complaint"), which challenged the NETOs' base ROE prospectively from the FERC order date and sought refunds for the 15-month period January 1, 2013 to March 31, 2014 (the "second complaint refund period").
On June 19, 2014, FERC issued an order finding that the second complaint raised issues of material fact. On July 21, 2014, the NETOs filed a rehearing request in this proceeding. On October 24, 2014, the FERC assigned the case for trial before a FERC ALJ after settlement negotiations were unsuccessful. The FERC ALJ has set a trial date beginning June 8, 2015, and will issue an initial decision on or before October 26, 2015. In the second quarter of 2014, the Company recorded reserves at its electric subsidiaries to recognize the potential financial impact from the FERC’s June 19th order for the second complaint refund period. SeeCumulative Reserves below for further information on the reserves recorded in the second quarter of 2014.
Third Complaint:On July 31, 2014, a third complaint was filed at FERC (the "third complaint") by most of the complainants to the first and second complaints, claiming that the base ROE and incentive adders exceed the range of permissible ROEs, requesting FERC to reduce the NETO’s base ROE prospectively from the FERC order date, and seeking refunds for the 15-month period beginning August 1, 2014 (the "third complaint refund period"). FERC has taken no action on this complaint to date. At this time, the Company cannot determine the outcome of this complaint.
Cumulative Reserves: The following is a summary as of September 30, 2014 of the cumulative reserves (excluding interest) that the Company established in the third quarter of 2013 and the second quarter of 2014 to recognize the potential financial impacts of the first and second complaints. Management is currently evaluating the impact of the October 16th order on the previously established reserves.
| | | | | | | | | | | | NU | | | | Third Quarter | | | Second Quarter | | | | (Millions of Dollars) | | 2013 | | | 2014 | | Total | 1st Complaint - Base ROE | $ | 23.7 | | $ | 1.2 | | $ | 24.9 | 2nd Complaint - Base ROE | | - | | | 27.4 | | | 27.4 | Incentive ROE (1st and 2nd Complaint) | | - | | | 23.8 | | | 23.8 | Cumulative Reserve | $ | 23.7 | | $ | 52.4 | | $ | 76.1 |
The aggregate after-tax charge to second quarter 2014 earnings resulting from the June 19, 2014 FERC orders totaled $32.1 million at NU, $18.5 million at CL&P, $6.1 million at NSTAR Electric, $2 million at PSNH and $5.5 million at WMECO. In the third quarter of 2013, the aggregate after-tax charge to earnings totaled $14.3 million at NU, $7.7 million at CL&P, $3.4 million at NSTAR Electric, $1.4 million at PSNH and $1.8 million at WMECO.
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FERC Order No. 1000: On August 15, 2014, the D.C. Circuit Court of Appeals upheld FERC's authority to order major changes to transmission planning and cost allocation in FERC Order No. 1000 and Order No. 1000-A, including transmission planning for public policy needs, and the requirement that utilities remove from their transmission tariffs their rights of first refusal to build transmission. FERC has not yet ruled on the comprehensive compliance filings made in November of 2013 by the NETOs, including CL&P, NSTAR Electric, PSNH and WMECO. We cannot predict the final outcome or impact on us; however implementation of FERC’s goals in New England, including within our service territories, may expose us to competition for construction of transmission projects, additional regulatory considerations, and potential delay with respect to future transmission projects. While the FERC Orders may bring new challenges, we believe there are also opportunities for us to compete for transmission reliability projects outside of our service territories.
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.rates for the recovery of specific incurred costs. Other than as described below, for the first quarternine months of 2014, changes made to the Regulated companies’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 2013 Annual Report on Form 10-K.
Connecticut:
CL&PDistribution Rates: On June 9, 2014, Storm Order: In March 2013, CL&P filed a requestan application with the PURA for approval to recover storm restoration costs associated with five major storms, all of which occurred in 2011 and 2012. CL&P’s deferred storm restoration costs associated with these major storms totaled $462 million. Of that amount, approximately $414 million is subjectamend customer rates, effective December 1, 2014. The application included an increase to recovery inbase distribution rates, after giving effect to CL&P’s agreement to forego the recovery of $40 million of previously deferred storm restoration costs as well as an existing storm reserve fund balance of approximately $8 million. Duringincreases for the second half of 2013, the PURA proceeded with the storm recovery review issuing discovery requests, holding hearings and ultimately on March 12, 2014, issuing a final decision on the level of storm costs recovery.
In its final decision, the PURA approvedannual recovery of $365 million ofpreviously approved 2011 and 2012 deferred storm restoration costs and orderedpreviously approved electric system resiliency costs. Hearings were held in late August through the end of September 2014, followed by the legal briefing process. After the briefing process, CL&P updated its requested increase to capitalize approximately $18 millionreflect a reduction to the storm cost recovery amounts. The reduction primarily relates to applying the impact of the $65.4 million DOE Phase II Damages proceeds received on June 1, 2014 to the total deferred storm restoration costs of $365 million, as utility plant, which will be recovered through depreciation expenseordered by PURA on June 17, 2014. A final decision is expected in future rate proceedings. PURA will allow recoveryDecember 2014. A summary of the $365 million with carrying chargesannual increase in CL&P’s distribution rates over a six-year period beginningrequested in the initial application and the current request is as follows:
| | | | | | | | | | | | (Millions of Dollars) | Base Distribution Rate Increase | | 2011 and 2012 Storm Cost Recovery | | System Resiliency Cost Recovery | | Total Distribution Rate Increase | Initial Application | $ | 116.7 | | $ | 89.5 | | $ | 25.3 | | $ | 231.5 | Adjustments | | 5.7 | | | (16.2) | | | - | | | (10.5) | Current Request | $ | 122.4 | | $ | 73.3 | | $ | 25.3 | | $ | 221.0 |
Massachusetts:
DPU Storm Penalties:In December 1, 2014.2012, in separate orders issued by the DPU, the DPU ordered penalties of $4.1 million and $2 million for NSTAR Electric and WMECO, respectively, related to the electric utilities’ responses to Tropical Storm Irene and the October 2011 snowstorm, which were refunded to their customers. In December 2012, NSTAR Electric and WMECO each filed appeals with the SJC arguing the DPU penalties should be vacated.
On September 4, 2014, the SJC vacated $2 million of NSTAR Electric's $4.1 million penalties. The SJC found that certain of the penalties were not supported by substantial evidence. The remaining costspenalties, as well as the $2 million in penalties related to WMECO, 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.upheld. 44
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New Hampshire:
Generation:In 2013, the NHPUC opened a docket to investigate market conditions affecting PSNH’sPSNH's ES rate, how PSNH will maintain just and reasonable rates in light of those conditions, and any impact of PSNH’sPSNH'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 context 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, 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 November 1, 2013, the Oversight Committee asked for a preliminary 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 those generating assets.
On April 1, 2014, the NHPUC staff issued a “Preliminary"Preliminary Status Report Addressing the Economic Interest of PSNH’sPSNH's Retail Customers as it Relates to the Potential Divestiture of PSNH’sPSNH's Generating Plants”,Plants," which included a consultant’sconsultant's analysis of the fair market value of PSNH generating assets and long-term power purchase contracts. The consultant’sconsultant's analysis estimated the fair market value of PSNH’sPSNH's generation assets to be $225 million as of December 31, 2013 and compared that amount to a stated net book value of $660 million, implying potential “stranded costs”"stranded costs" in excess of $400 million. NHPUC staff made three recommendations: (1) that any further actions relating to PSNH’sPSNH's generating assets await a final decision in the Clean Air Project (scrubber) prudence proceeding; (2) that existing laws regarding divestiture, energy service, and cost recovery be harmonized; and (3) that ISO-NE provide input on the economic and reliability consequences of retirement of PSNH’s fossilPSNH's coal- and oil-fired electric generating plants.
During its 2014 session, in response to the NHPUC staff report, the Legislature enacted changes to the laws governing divestiture of PSNH's generation assets, effective September 30, 2014. The new law requires the NHPUC to initiate a proceeding before January 1, 2015, to determine whether all or some of PSNH's generation assets should be divested. The NHPUC opened its docket DE 14-238 on September 16, 2014 and a Prehearing Conference was held on October 2, 2014. A progress report from the NHPUC must be made by March 31, 2015. The law also gives the NHPUC express authority to order the divestiture of all or some of PSNH's generation assets if the NHPUC finds it is in the economic interest of customers to do so. The law also clarified the definition of "stranded costs" to include costs approved for recovery by the NHPUC in connection with the divestiture or retirement of PSNH's generation assets.
In the event of generation asset divestiture or retirement, both present law and the PSNH Restructuring Settlement Agreement approved in 2000 require that the NHPUC provide recovery of any stranded cost recovery tocosts by PSNH. We continue to believe all costs and generation investments and prudently-incurred costs are probable of recovery.
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Clean Air Project Prudence Proceeding: The Clean Air Project, which involved the installation of wet scrubber technology at PSNH’s Merrimack coal-fired generation station in Bow, New Hampshire, was placed in service in September 2011. In November 2011, the NHPUC opened a docket to review the Clean Air Project, including the establishment of temporary rates for near-term recovery of Clean Air Project costs, a prudence review of PSNH's overall construction program, and establishment of permanent rates for recovery of prudently incurred Clean Air Project costs. In April 2012, the NHPUC issued an order authorizing temporary rates to recover a significant portion of the Clean Air Project costs. The docket will remain open to conduct a comprehensive prudence review of the Clean Air Project and the establishment of permanent rates. The temporary rates will remain in effect until permanent rates allowing full recovery of all prudently incurred costs are approved. At that time, the NHPUC will reconcile recoveries collected under the temporary rates with approved permanent rates.
The NHPUC concluded its hearings in October 2014 to determine the prudent costs of PSNH’s compliance with the law requiring scrubber installation. The NHPUC is expected to issue a decision on this matter by the end of 2014. We continue to believe that we were prudent in the undertaking and completion of the Clean Air Project. While we cannot predict with certainty the outcome of the Clean Air Project prudence review, we believe all costs were incurred appropriately and are probable of recovery.
Legislative and Policy Matters
Massachusetts:
Gas Replacement and Expansion:On July 7, 2014, Massachusetts enacted "An Act Relative to Natural Gas Leaks" (the Act). The Act establishes a uniform natural gas leak classification standard for all Massachusetts natural gas utilities and a program that accelerates the replacement of aging natural gas infrastructure. The program will enable companies, including NSTAR Gas, to better manage the scheduling and costs of replacement. The Act also calls for the DPU to authorize natural gas utilities to design and offer programs to customers that will increase the availability, affordability and feasibility of natural gas service for new customers.
NSTAR Gas filed the Gas System Enhancement Program (GSEP) with the DPU on October 31, 2014. The program accelerates the replacement of gas distribution facilities composed of leak prone materials to eliminate leak prone infrastructure in the system within 25 years. The GSEP includes a new tariff that provides NSTAR Gas an opportunity to collect the costs for the program on an annual basis through a newly designed reconciling factor to be approved by the DPU.
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 the NU 2013 Form 10-K. There have been no material changes with regard to these critical accounting policies.
Other Matters
Accounting Standards Recently Adopted: Standards: For information regarding new accounting standards, see Note 1B, “Summary"Summary of Significant Accounting Policies — Recently Adopted Accounting–Accounting Standards,”" to the financial statements.
Contractual Obligations and Commercial Commitments: There have been no Refer to Note 9B, "Commitments and Contingencies – Long-Term Contractual Arrangements," for discussion of material changes with regard to the contractual obligations and commercial commitments disclosed in the NU 2013 Form 10-K.obligations.
Web Site: Additional financial information is available through our web site at www.nu.com.www.nu.com. Information contained on the Company's website or that can be accessed through the website is not incorporated into and does not constitute a part of this Quarterly Report on Form 10-Q.
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RESULTS OF OPERATIONS —– NORTHEAST UTILITIES AND SUBSIDIARIES
The following provides the amounts and variances in operating revenues and expense line items forin the condensed consolidated statements of income for NU for the three and nine months ended September 30, 2014 and 2013 included in this Quarterly Report on Form 10-Q for10-Q:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | | | | | | | | | | | Increase/ | | | | | | | | | | | Increase/ | | | | (Millions of Dollars) | 2014 | | 2013 | | (Decrease) | | Percent | | | 2014 | | 2013 | | (Decrease) | | Percent | | Operating Revenues | $ | 1,892.5 | | $ | 1,892.6 | | $ | (0.1) | | - | % | | $ | 5,860.7 | | $ | 5,523.5 | | $ | 337.2 | | 6.1 | % | Operating Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Purchased Power, Fuel and Transmission | | 716.6 | | | 645.9 | | | 70.7 | | 10.9 | | | | 2,319.0 | | | 1,882.0 | | | 437.0 | | 23.2 | | | Operations and Maintenance | | 344.1 | | | 386.7 | | | (42.6) | | (11.0) | | | | 1,069.0 | | | 1,090.0 | | | (21.0) | | (1.9) | | | Depreciation | | 153.2 | | | 149.1 | | | 4.1 | | 2.7 | | | | 456.2 | | | 463.6 | | | (7.4) | | (1.6) | | | Amortization of Regulatory Assets/(Liabilities), Net | | (22.5) | | | 70.0 | | | (92.5) | | (a) | | | | 31.8 | | | 178.7 | | | (146.9) | | (82.2) | | | Amortization of Rate Reduction Bonds | | - | | | - | | | - | | - | | | | - | | | 42.6 | | | (42.6) | | (100.0) | | | Energy Efficiency Programs | | 118.7 | | | 106.1 | | | 12.6 | | 11.9 | | | | 360.2 | | | 306.0 | | | 54.2 | | 17.7 | | | Taxes Other Than Income Taxes | | 141.5 | | | 135.5 | | | 6.0 | | 4.4 | | | | 421.9 | | | 391.8 | | | 30.1 | | 7.7 | | | | Total Operating Expenses | | 1,451.6 | | | 1,493.3 | | | (41.7) | | (2.8) | | | | 4,658.1 | | | 4,354.7 | | | 303.4 | | 7.0 | | Operating Income | | 440.9 | | | 399.3 | | | 41.6 | | 10.4 | | | | 1,202.6 | | | 1,168.8 | | | 33.8 | | 2.9 | | Interest Expense | | 89.7 | | | 87.5 | | | 2.2 | | 2.5 | | | | 272.2 | | | 250.6 | | | 21.6 | | 8.6 | | Other Income, Net | | 11.8 | | | 8.9 | | | 2.9 | | 32.6 | | | | 19.0 | | | 21.6 | | | (2.6) | | (12.0) | | Income Before Income Tax Expense | | 363.0 | | | 320.7 | | | 42.3 | | 13.2 | | | | 949.4 | | | 939.8 | | | 9.6 | | 1.0 | | Income Tax Expense | | 126.5 | | | 109.3 | | | 17.2 | | 15.7 | | | | 345.9 | | | 325.4 | | | 20.5 | | 6.3 | | Net Income | | 236.5 | | | 211.4 | | | 25.1 | | 11.9 | | | | 603.5 | | | 614.4 | | | (10.9) | | (1.8) | | Net Income Attributable to Noncontrolling Interests | | 1.9 | | | 1.9 | | | - | | - | | | | 5.6 | | | 5.8 | | | (0.2) | | (3.4) | | Net Income Attributable to Controlling Interest | $ | 234.6 | | $ | 209.5 | | $ | 25.1 | | 12.0 | % | | $ | 597.9 | | $ | 608.6 | | $ | (10.7) | | (1.8) | % | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating Revenues | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | | | | | | | | | | | Increase/ | | | | | | | | | | | Increase/ | | | | (Millions of Dollars) | 2014 | | 2013 | | (Decrease) | | Percent | | | 2014 | | 2013 | | (Decrease) | | Percent | | Electric Distribution | $ | 1,502.6 | | $ | 1,508.6 | | $ | (6.0) | | (0.4) | % | | $ | 4,350.4 | | $ | 4,104.4 | | $ | 246.0 | | 6.0 | % | Natural Gas Distribution | | 109.2 | | | 97.1 | | | 12.1 | | 12.5 | | | | 737.5 | | | 613.0 | | | 124.5 | | 20.3 | | | Total Distribution | | 1,611.8 | | | 1,605.7 | | | 6.1 | | 0.4 | | | | 5,087.9 | | | 4,717.4 | | | 370.5 | | 7.9 | | Transmission | | 262.5 | | | 234.1 | | | 28.4 | | 12.1 | | | | 721.4 | | | 721.5 | | | (0.1) | | - | | | Total Regulated Companies | | 1,874.3 | | | 1,839.8 | | | 34.5 | | 1.9 | | | | 5,809.3 | | | 5,438.9 | | | 370.4 | | 6.8 | | Other and Eliminations | | 18.2 | | | 52.8 | | | (34.6) | | (65.5) | | | | 51.4 | | | 84.6 | | | (33.2) | | (39.2) | | Total Operating Revenues | $ | 1,892.5 | | $ | 1,892.6 | | $ | (0.1) | | - | % | | $ | 5,860.7 | | $ | 5,523.5 | | $ | 337.2 | | 6.1 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) Percent greater than 100 percent not shown as it is not meaningful. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | A summary of our retail electric sales volumes and firm natural gas sales volumes were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | | | | | | | | | | | Increase/ | | | | | | | | | | | Increase/ | | | | | | | 2014 | | 2013 | | (Decrease) | | Percent | | | 2014 | | 2013 | | (Decrease) | | Percent | | Retail Electric Sales Volumes in GWh | | 14,555 | | | 15,247 | | | (692) | | (4.5) | % | | | 41,439 | | | 41,954 | | | (515) | | (1.2) | % | Firm Natural Gas Sales Volumes in Million Cubic Feet | | 11,328 | | | 11,173 | | | 155 | | 1.4 | | | | 75,169 | | | 68,046 | | | 7,123 | | 10.5 | |
Three Months Ended: In the three months ended March 31,third quarter of 2014 and 2013: | | Operating Revenues and Expenses | | | | For the Three Months Ended March 31, | | | | | | | | Increase/ | | | | (Millions of Dollars) | | 2014 | | 2013 | | (Decrease) | | Percent | | Operating Revenues | | $ | 2,290.6 | | $ | 1,995.0 | | $ | 295.6 | | 14.8 | % | Operating Expenses: | | | | | | | | | | 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 | | $ | 467.7 | | $ | 418.9 | | $ | 48.8 | | 11.6 | % |
compared to the third quarter of 2013, Operating Revenues remained essentially flat. | | 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 | |
OperatingElectric base distribution revenues increased $295.6decreased $22.6 million compared to the firstsame period in 2013, reflecting a 4.5 percent decrease in retail electric sales volumes. The decrease in sales volumes reflects the cooler summer weather in 2014 as well as the impact of our utility-sponsored energy efficiency programs. There was an increase in revenues related to the higher costs associated with purchasing electricity and natural gas on behalf of our customers. Fluctuations in these energy supply costs are recovered from customers in rates and have no impact on earnings. Firm natural gas sales volumes increased 1.4 percent from the third quarter of 2013. The increase2013 as customer growth and economic conditions in revenue reflects higherour service territory have shown steady improvement over the past year.
As noted above, our respective utility-sponsored energy efficiency programs have the impact of reducing both retail electric and firm natural gas sales. CL&P and NSTAR Electric bill customers for lost base revenues related to reductions in sales volumesvolume as a result of their energy efficiency. We recognized $15.8 million of lost base revenue in the third quarter of 2014 compared to $5.5 million during the same period of 2013.
Transmission revenues increased in the third quarter of 2014, as compared to the third quarter of 2013, as a result of the significantly colder than normal winter temperatures andrecovery of higher transmission expenses including ongoing investments in our transmission infrastructure.
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Nine Months Ended: In the first nine months of 2014 compared to the first nine months of 2013, Operating Revenues increased $337.2 million.
The most significant factor in the revenue increase was the overall impact of the recovery of costs associated with the procurement of energy supply. The costs incurred to procure energy were significantly higher wholesalein 2014 than in 2013. Our energy supply 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 purchased for our retail electric customers. Fluctuations on wholesalein energy supply costs are recovered from customers in rates and therefore have no impact on earnings.
As noted above, the increase in distributionFirm base natural gas revenues reflectincreased $25.9 million reflecting an increase of approximately 4 percent in retail electric sales and 15.510.5 percent in firm natural gas sales.sales volumes. 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 the same period last year throughout New England. Weather-normalized retail electrictotal firm natural gas sales volumes (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 quarternine months of 2014, as compared to the same period in 2013, due primarily to residential and commercial customer growth.
In the first nine months of 2014, base electric distribution revenues decreased $16 million, compared to the first nine months of 2013. This decrease reflects a 1.2 percent reduction in sales volumes. The positive impacts ondecrease in sales volume were partially offset by customer savings due tovolumes reflects the cooler summer weather in 2014 as well as the impact of our respectiveutility-sponsored energy efficiency programs, partially offset by colder winter weather in the first quarter of 2014. Weather-normalized retail electric sales volumes decreased 0.9 percent in the first nine months of 2014, as compared to the same period in 2013, reflecting the impact of our utility-sponsored energy efficiency programs. Certain utility operating companies are permitted to
CL&P and NSTAR Electric 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 recognitionWe recognized $31.9 million 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.
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Purchased Power, Fuel and Transmission increasedrevenue in the first quarternine months of 2014 compared to $14.6 million during the same period of 2013.
Transmission revenues remained essentially flat in the first nine months of 2014, as compared to the first quarternine months of 2013, due primarily to the following: (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 Maintenance increasedimpact of the reserve recorded in the firstsecond quarter of 2014 as a result of the June 2014 FERC ROE orders as compared to the firstreserve recorded in the third quarter of 2013 due primarily tofor the following:FERC ALJ initial decision in the FERC base ROE complaints. For further information, see "FERC Regulatory Issues - FERC Base ROE Complaints"in thisManagement's Discussion and Analysis of Financial Condition and Results of Operations.
(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 OperationsPurchased Power, Fuel and MaintenanceTransmission expense increase of $5.6 million includes costs thatassociated with purchasing electricity and natural gas on behalf of our customers. These energy supply costs are recovered from customers in rates through cost tracking mechanisms, which have no impact on earnings impact. (tracked costs). Purchased Power, Fuel and Transmission increased for the three and nine months ended September 30, 2014, as compared to the same periods in 2013, due primarily to the following:
| | | | | | | Three Months Ended | | Nine Months Ended | (Millions of Dollars) | Increase/(Decrease) | | Increase/(Decrease) | Electric Distribution | $ | 87.9 | | $ | 366.0 | Natural Gas Distribution | | 10.6 | | | 79.7 | Transmission | | - | | | (3.2) | Other and Eliminations | | (27.8) | | | (5.5) | Total Purchased Power, Fuel and Transmission | $ | 70.7 | | $ | 437.0 |
The increase in purchased power at the electric and natural gas distribution businesses were driven by the higher costs associated with the procurement of energy supply. Our energy supply costs 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 electric energy purchased for our retail electric customers.
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Operations and Maintenance expensesexpense includes tracked costs and costs that are recovered through base electric and natural gas distribution rates (and therefore impact earnings). Operations and Maintenance decreased $3.7 million infor the first quarter ofthree and nine months ended September 30, 2014, as compared to the first quarter ofsame periods in 2013, due primarily to a decrease in pension and employee benefit costs.the following: | | | | | |
| Three Months Ended | | Nine Months Ended | (Millions of Dollars) | Increase/(Decrease) | | Increase/(Decrease) | Base Electric Distribution: | | | | | | Labor and other employee-related costs, including pension costs | $ | (18.8) | | $ | (62.3) | Implementation of a new outage restoration program at CL&P | | 4.8 | | | 9.7 | Vegetation management costs | | (4.7) | | | (0.9) | Storm restoration costs | | (1.6) | | | (10.1) | Other operations and maintenance | | (4.1) | | | 21.6 | Total Base Electric Distribution | | (24.4) | | | (42.0) | Total Base Natural Gas Distribution | | (0.6) | | | 2.3 | Total Base Electric and Natural Gas Distribution | | (25.0) | | | (39.7) | Total Tracked costs (Transmission and Electric and Natural Gas Distribution) | | (3.6) | | | 19.9 | Total Distribution and Transmission | | (28.6) | | | (19.8) | Other and eliminations: | | | | | | Integration and severance costs | | (7.0) | | | 4.5 | All other (including eliminations) | | (7.0) | | | (5.7) | Total Operations and Maintenance | $ | (42.6) | | $ | (21.0) |
Depreciationdecreased inincreased for the first quarter ofthree months ended September 30, 2014, as compared to the first quarter ofsame period in 2013 due primarily to higher utility plant balances resulting from completed construction projects placed into service ($8.8 million), partially offset by a decrease in CYAPC and YAEC decommissioning collectionscosts, which do not impact earnings ($12.54.7 million). For the nine months ended September 30, 2014, depreciation expense decreased due primarily to a decrease in the CYAPC and YAEC decommissioning costs, which do not impact earnings ($29.7 million), partially offset by an increase related to higher utility plant balances resulting from completed construction projects placed into service ($8.322.3 million).
Amortization of Regulatory Assets,Assets/(Liabilities), Net, increasedwhich are tracked costs, include certain regulatory-approved tracking mechanisms. Fluctuations in these costs are recovered from customers in rates and have no impact on earnings. Amortization of Regulatory Assets/(Liabilities), Net, decreased for the first quarter ofthree and nine months ended September 30, 2014, as compared to the first quarter ofsame periods in 2013, due primarily to the 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 | |
| | | | | | | Three Months Ended | | Nine Months Ended | (Millions of Dollars) | Increase/(Decrease) | | Increase/(Decrease) | NSTAR Electric (primarily deferred transition costs) | $ | (87.8) | | $ | (174.2) | PSNH (primarily default energy service charge) | | (10.0) | | | (15.9) | CL&P (primarily energy supply and energy-related costs) | | 13.1 | | | 51.4 | WMECO (primarily deferred transition costs) | | (7.1) | | | (7.2) | Other | | (0.7) | | | (1.0) | Total Amortization of Regulatory Assets/(Liabilities), Net | $ | (92.5) | | $ | (146.9) |
Amortization of Rate Reduction Bonds decreased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due to the maturity in 2013 of RRBs of NSTAR Electric, PSNH, and WMECO.
Energy Efficiency Programs, which are tracked costs, increased infor the first quarter ofthree and nine months ended September 30, 2014, as compared to the first quarter ofsame periods in 2013, due primarily to an increase in energy efficiency costs in accordance with the three-year program guidelines established by the DPU at NSTAR Electric and WMECO and expanded energy conservation programs at CL&P in 2014. All2014 as a result of 2013 legislative action, partially offset by a decrease in the amortization of previously deferred costs are fully recovered through approved tracking mechanisms and therefore do not impact earnings.at NSTAR Electric.
Taxes Other Than Income Taxes increased infor the first quarter ofthree and nine months ended September 30, 2014, as compared to the first quarter of 2013, due primarily to an increasesame periods in property taxes ($7.5 million) as a result of both an increase in utility plant balances and property tax rates, and an increase in the Connecticut gross earnings tax ($6 million) attributable to an increase in retail revenues. Interest Expense increased $13.7 million in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to the absence of the favorable impact from the resolution of a state income tax audit in the first quarter of 2013 ($8.8 million) and lower interest income on deferred transition costs ($4.5 million).
Other Income, Net decreased $6.1 million in the 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.
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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 2014, as compared to the first quarter of 2013, due primarily to higher pre-tax earnings ($13.1 million), the 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).
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RESULTS OF OPERATIONS — THE CONNECTICUT LIGHT AND POWER COMPANY
The following provides the amounts and variances in operating revenues and expense line items for the condensed statements of income for CL&P 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 | | Percent | | Operating Revenues | | $ | 734.6 | | $ | 624.1 | | $ | 110.5 | | 17.7 | % | Operating Expenses: | | | | | | | | | | 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 | | $ | 158.0 | | $ | 149.7 | | $ | 8.3 | | 5.5 | % |
(a) Percent greater than 100 percent not shown as it is not meaningful.
Operating Revenues
CL&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 revenues 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 2014, as compared to the first quarter of 2013, due primarily to the following:
| | 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 | |
The increase in GSC supply costs was due primarily to higher average supply prices and an increase in GSC loads 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. The 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 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 to higher bad debt expense ($5.5 million), higher distribution general and administrative costs ($2.3 million), higher routine maintenance costs ($1.5 million), and other operating costs ($1 million). Offsetting these increases was a decrease in pension and PBOP costs ($9.7 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, Net increased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to an increase in amortization expense related to previously deferred congestion charges.
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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 ancombined with a decrease and increase, respectively, in the Connecticut gross earnings tax for the three months and nine months ended, attributable to an increasefluctuations in retail revenues ($3.6 million).revenues.
Interest Expenseincreased $4.5 million in first quarter offor the three and nine months ended September 30, 2014, as compared to the first quarter ofsame periods in 2013, due primarily to the absence in 2014 of the favorable impact from the resolution of a Connecticut state income tax audit in the first quarter of 2013.2013 ($8.8 million), lower interest income from a decrease in the recovery of previously deferred transition costs ($0.5 million and $8.2 million, respectively), and an increase in interest on long-term debt ($0.3 million and $3.9 million, respectively) as a result of new debt issuances in the first and second quarters of 2014.
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Other Income, Netincreased for the three months ended September 30, 2014, as compared to the same period in 2013, due primarily to a gain on the sale of land ($4.5 million), and higher AFUDC related to equity funds ($3.8 million), partially offset by lower unrealized gains on assets supporting the deferred compensation plans ($3.1 million) and the absence in 2014 of an insurance policy claim received in 2013 ($2.6 million). Other Income, Net decreased $3.1 millionfor the nine months ended September 30, 2014, as compared to the same period in 2013, due primarily to lower unrealized gains on the assets supporting the deferred compensation plans ($6.5 million), and the absence in 2014 of an insurance policy claim received in 2013 ($2.6 million), partially offset by higher AFUDC related to equity funds ($3.8 million), and a net gain on the sale of land ($4.5 million).
Income Tax Expense increased for the three months ended September 30, 2014, as compared to the same period in 2013, due primarily to higher pre-tax earnings ($14.9 million), and higher state taxes, which includes the reduction in valuation allowance for state credits, and various other impacts ($2.3 million).
Income Tax Expense increased for the nine months ended September 30, 2014, as compared to the same period in 2013, due primarily to higher pre-tax earnings ($6.5 million), and higher state taxes, which includes the reduction in valuation allowance for state credits, and various other impacts ($14 million).
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RESULTS OF OPERATIONS – THE CONNECTICUT LIGHT AND POWER COMPANY
The following provides the amounts and variances in operating revenues and expense line items in the firststatements of income for CL&P for the three and nine months ended September 30, 2014 and 2013 included in this Quarterly Report on Form 10-Q:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | | | | | | | | | | | Increase/ | | | | | | | | | | | Increase/ | | | | (Millions of Dollars) | 2014 | | 2013 | | (Decrease) | | Percent | | | 2014 | | 2013 | | (Decrease) | | Percent | | Operating Revenues | $ | 695.6 | | $ | 648.4 | | $ | 47.2 | | 7.3 | % | | $ | 2,017.6 | | $ | 1,841.8 | | $ | 175.8 | | 9.5 | % | Operating Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Purchased Power and Transmission | | 255.8 | | | 253.1 | | | 2.7 | | 1.1 | | | | 737.0 | | | 667.3 | | | 69.7 | | 10.4 | | | Operations and Maintenance | | 127.2 | | | 127.1 | | | 0.1 | | 0.1 | | | | 368.6 | | | 359.7 | | | 8.9 | | 2.5 | | | Depreciation | | 46.9 | | | 44.8 | | | 2.1 | | 4.7 | | | | 139.6 | | | 132.3 | | | 7.3 | | 5.5 | | | Amortization of Regulatory Assets, Net | | 13.1 | | | - | | | 13.1 | | 100.0 | | | | 62.6 | | | 11.2 | | | 51.4 | | (a) | | | Energy Efficiency Programs | | 41.4 | | | 24.5 | | | 16.9 | | 69.0 | | | | 119.4 | | | 68.2 | | | 51.2 | | 75.1 | | | Taxes Other Than Income Taxes | | 65.0 | | | 65.0 | | | - | | - | | | | 194.1 | | | 182.7 | | | 11.4 | | 6.2 | | | | Total Operating Expenses | | 549.4 | | | 514.5 | | | 34.9 | | 6.8 | | | | 1,621.3 | | | 1,421.4 | | | 199.9 | | 14.1 | | Operating Income | | 146.2 | | | 133.9 | | | 12.3 | | 9.2 | | | | 396.3 | | | 420.4 | | | (24.1) | | (5.7) | | Interest Expense | | 38.7 | | | 35.3 | | | 3.4 | | 9.6 | | | | 110.4 | | | 99.0 | | | 11.4 | | 11.5 | | Other Income, Net | | 6.4 | | | 3.9 | | | 2.5 | | 64.1 | | | | 10.6 | | | 10.9 | | | (0.3) | | (2.8) | | Income Before Income Tax Expense | | 113.9 | | | 102.5 | | | 11.4 | | 11.1 | | | | 296.5 | | | 332.3 | | | (35.8) | | (10.8) | | Income Tax Expense | | 30.0 | | | 36.2 | | | (6.2) | | (17.1) | | | | 95.9 | | | 113.1 | | | (17.2) | | (15.2) | | Net Income | $ | 83.9 | | $ | 66.3 | | $ | 17.6 | | 26.5 | % | | $ | 200.6 | | $ | 219.2 | | $ | (18.6) | | (8.5) | % | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) Percent greater than 100 percent not shown as it is not meaningful. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating Revenues | | | | | | | | | | | | | | | | | | | | | | | | CL&P's retail sales volumes were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | | | | | 2014 | | 2013 | | Decrease | | Percent | | | 2014 | | 2013 | | Decrease | | Percent | | Retail Sales Volumes in GWh | | 5,791 | | | 6,119 | | | (328) | | (5.3) | % | | | 16,790 | | | 16,993 | | | (203) | | (1.2) | % |
CL&P's Operating Revenues increased in the third quarter of 2014, as compared to the first quartersame period of 2013. The increase primarily reflects the overall impact of higher costs associated with the procurement of energy supply. Our energy supply costs were impacted by higher natural gas transportation costs, which had an adverse impact on the cost of electric energy purchased for our retail customers. Fluctuations in energy supply costs are recovered from customers in rates and have no impact on earnings. The increase was also driven by a higher level of recovery related to CL&P's energy efficiency programs, which has no impact on earnings, as a result of 2013 due primarily to lower mark-to-market gains associated with marketable securities heldlegislative action. Partially offsetting this increase was a decrease in trust. Income Tax Expense
| | 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 increasedretail sales volumes in the firstthird quarter of 2014, as compared to the same period in 2013, as a result of cooler summer weather in 2014.
CL&P's Operating Revenues increased in the first nine months of 2014, as compared to the first nine months of 2013. The increase primarily reflects the overall impact of higher costs associated with the procurement of energy supply. The energy supply costs were impacted by higher natural gas transportation costs, which had an adverse impact on the cost of electric energy purchased for our retail customers. Fluctuations in energy supply costs are recovered from customers in rates and have no impact on earnings. The increase was also driven by a higher level of recovery related to CL&P's energy efficiency programs, which has no impact on earnings, as a result of 2013 legislative action. Partially offsetting this increase was the impact of the reserve recorded in the second quarter of 2014 as a result of the June 2014 FERC ROE orders as compared to the reserve recorded in the third quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaints. For further information, see "FERC Regulatory Issues - FERC Base ROE Complaints"in thisManagement's Discussion and Analysis of Financial Condition and Results of Operations.
Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P's customers. These energy supply costs are recovered from customers in PURA-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power and Transmission increased for the three and nine months ended September 30, 2014, as compared to the same periods in 2013, due primarily to the following:
| | | | | | | Three Months Ended | | Nine Months Ended | (Millions of Dollars) | Increase/(Decrease) | | Increase/(Decrease) | Purchased Power Costs | $ | 42.4 | | $ | 111.2 | Transmission Costs | | (34.4) | | | (22.6) | Other | | (5.3) | | | (18.9) | Total Purchased Power and Transmission | $ | 2.7 | | $ | 69.7 |
Included in Purchased Power are the costs associated with CL&P's generation services charge (GSC) and deferred energy costs. The GSC recovers energy-related costs incurred as a result of providing electric generation service supply to all customers that have not migrated to competitive energy suppliers. The increase in purchased power was due primarily to higher average supply prices and increased load as a result of customers returning to standard offer from third party suppliers. The decrease in transmission costs was the result of a decrease in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers.
Operations and Maintenanceexpense includes tracked costs and costs that are recovered through base electric distribution rates (and therefore impact earnings). Operations and Maintenance expenses were relatively flat in the third quarter of 2014, as compared to the same period in 2013.
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Tracked costs, which have no earnings impact, increased $4.5 million, which was primarily attributable to higher hardship and other tracked bad debt expense. This increase was offset by a decrease in costs that impact earnings of $4.4 million, which was primarily attributable to lower labor and other employee-related costs, including pension costs, and lower routine vegetation management costs, partially offset by an increase in costs for the implementation of a new outage restoration program that began in the second quarter of 2014.
Operations and Maintenance increased for the nine months ended September 30, 2014, as compared to the same period in 2013, driven by a $14.2 million increase in tracked costs, which have no earnings impact, which was primarily attributable to higher hardship and other tracked bad debt expense. Partially offsetting this increase was a $5.3 million decrease in costs that impact earnings, which was primarily attributable to lower labor and other employee-related costs, including pension costs, and lower storm restoration costs, partially offset by an increase in costs for the implementation of a new outage restoration program that began in the second quarter of 2014.
Depreciation increased for the three and nine months ended September 30, 2014, as compared to the same periods in 2013, due primarily to higher utility plant balances resulting from completed construction projects placed into service.
Amortization of Regulatory Assets, Net¸ increased for the three and nine months ended September 30, 2014, as compared to the same periods in 2013. Fluctuations in energy supply and energy-related costs, which are the primary drivers in amortization, are recovered from customers in rates and have no impact on earnings.
Energy Efficiency Programs, which are tracked costs,increased for the three and nine months ended September 30, 2014, as compared to the same periods in 2013, due primarily to expanded energy conservation programs in 2014 as a result of 2013 legislative action.
Taxes Other Than Income Taxes did not materially change for the three months ended September 30, 2014 and increased for the nine months ended September 30, 2014, as compared to the same periods in 2013, due primarily to an increase in property taxes as a result of both an increase in utility plant balances and property tax rates, and a decrease and increase, respectively, in the Connecticut gross earnings tax for the three months and nine months ended attributable to fluctuations in retail revenues.
Interest Expenseincreased for the three and nine months ended September 30, 2014, as compared to the same periods in 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 ($2.96 million), higher pre-tax earningsan increase in interest on long-term debt ($1.6 million),1.9 million and higher state taxes$4.1 million, respectively) as a result of a new debt issuance in April 2014, and an increase in regulatory interest due to the refund of the DOE proceeds in the third quarter of 2014 ($0.91.2 million).
EARNINGS SUMMARYOther Income, Net
| | 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 inincreased for the first quarter ofthree months ended September 30, 2014, as compared to the firstsame period in 2013, due primarily to a gain on the sale of land ($4.5 million), higher AFUDC related to equity funds ($0.4 million), partially offset by lower unrealized gains on the assets supporting the deferred compensation plans ($2.4 million).
Income Tax Expense decreased for the three months ended September 30, 2014, as compared to the same period in 2013, due primarily to lower state tax expense, which includes the reduction in valuation allowance for state credits, and various other impacts ($10.2 million), partially offset by higher pre-tax earnings ($4 million).
Income Tax Expense decreased for the nine months ended September 30, 2014, as compared to the same period in 2013, due primarily to lower pre-tax earnings ($11.1 million) and lower state taxes, which includes the reduction in valuation allowance for state credits, and various other impacts ($6.1 million).
EARNINGS SUMMARY
CL&P's third quarter of2014 earnings were higher than the same period in 2013 due primarily to the absence in 2014 of the favorable impact from the resolutionan after-tax reserve of a state income tax audit$7.7 million recorded in the firstthird quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaints, lower income tax expense due to the reduction in valuation allowance, and a decrease in operations and maintenance costs attributable to lower employee-related costs. Partially offsetting these favorable earnings impacts were lower retail electric sales volumes as a result of cooler summer weather in 2014, as compared to the same period in 2013, higher depreciation expense and higher property taxes.
For the nine months ended September 30, 2014, CL&P's earnings decreased, as compared to the same period in 2013, due primarily to the after-tax reserve recorded for the second quarter 2014 FERC ROE orders as compared to the reserve recorded in the third quarter 2013 for the FERC ALJ initial decision in the FERC base ROE complaints ($10.8 million increase), higher property tax expense and depreciation.higher interest expense. Partially offsetting these unfavorable earnings impacts were higher retail electric saleslower income tax expense due primarily to colder weather in the first quarter of 2014, as compared to the first quarter of 2013.reduction in valuation allowance and a decrease in operations and maintenance costs primarily attributable to lower employee-related costs.
LIQUIDITY
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LIQUIDITY
CL&P had cash flows provided by operating activities of $95.5$483 million in the first quarternine months of 2014, compared with $26.4$308.6 million in the first quarternine months of 2013. The improved operating cash flows were due primarily to $68.6 million in DOE damages proceeds received in 2014 from the Yankee Companies associated with the spent nuclear fuel litigation, the absence of cash disbursements for major storm restoration costs, an increase in the first quarter of 2014, as compared to the first quarter of 2013, and income tax refunds of $11.7 million in the first quarter of 2014, as compared to $1.6 million in the first quarter of 2013,regulatory overrecoveries, partially offset by changes in working capital items, an unfavorable cash flow impact relating to traditional working capital amounts principally dueincome tax payments of $85.3 million in the first nine months of 2014, as compared to income tax payments of $41.2 million in the timingfirst nine months of accounts receivables.2013.
Investments in Property, Plant and Equipment on the accompanying 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. In the first quarternine months of 2014, investments for CL&P were $108$371.7 million.
On April 24,Effective July 23, 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 from NU parent.
NU parent and certain of its subsidiaries, including CL&P, are parties to aextended the expiration date of their joint five-year $1.45 billion revolving credit facility duefor one additional year to expire on September 6, 2018.2019. The revolving credit facility is to be used primarily to backstop theNU parent's $1.45 billion commercial paper program at NU parent.program. The commercial paper program allows NU parent to issue commercial paper as a form of short-term debt to its subsidiaries, including CL&P. As of March 31,September 30, 2014 and December 31, 2013, there were intercompany loans from NU parent of $351.6$105.4 million and $287.3 million, respectively, to CL&P.
Additional financingOn September 15, 2014, CL&P repaid at maturity the $150 million of 4.80 percent 2004 Series A First Mortgage Bonds.
On August 27, 2014, PURA approved CL&P's request to extend the authorization period for issuance of up to $366.4 million in long-term debt from December 31, 2014 to December 31, 2015.
Financing activities in the first quarternine months of 2014 included $42.8$128.4 million in common stock dividends paid to NU parent.
On January 31, 2014, Moody’s upgraded corporate credit and securities ratings of CL&P by one level. On April 7, 2014, Fitch affirmed the corporate credit rating and outlook of CL&P.
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RESULTS OF OPERATIONS —– NSTAR ELECTRIC COMPANY AND SUBSIDIARY
The following provides the amounts and variances in operating revenues and expense line items forin the condensed consolidated statements of income for NSTAR Electric for the nine months ended September 30, 2014 and 2013 included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2014 and 2013:10-Q:
| | Operating Revenues and Expenses For the Three Months Ended March 31, | | (Millions of Dollars) | | 2014 | | 2013 | | Increase/ (Decrease) | | Percent | | Operating Revenues | | $ | 666.2 | | $ | 592.3 | | $ | 73.9 | | 12.5 | % | Operating Expenses: | | | | | | | | | | 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 | | $ | 118.4 | | $ | 94.5 | | $ | 23.9 | | 25.3 | % |
| | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | (Millions of Dollars) | 2014 | | 2013 | | Increase/ | | Percent | | (Decrease) | | Operating Revenues | $ | 1,955.6 | | $ | 1,916.6 | | $ | 39.0 | | 2.0 | % | Operating Expenses: | | | | | | | | | | | | | Purchased Power and Transmission | | 879.8 | | | 659.1 | | | 220.7 | | 33.5 | | | Operations and Maintenance | | 244.6 | | | 277.3 | | | (32.7) | | (11.8) | | | Depreciation | | 141.0 | | | 136.3 | | | 4.7 | | 3.4 | | | Amortization of Regulatory Assets/(Liabilities), Net | | (0.9) | | | 173.3 | | | (174.2) | | (a) | | | Amortization of Rate Reduction Bonds | | - | | | 15.1 | | | (15.1) | | (100.0) | | | Energy Efficiency Programs | | 145.5 | | | 161.2 | | | (15.7) | | (9.7) | | | Taxes Other Than Income Taxes | | 99.1 | | | 95.3 | | | 3.8 | | 4.0 | | | | Total Operating Expenses | | 1,509.1 | | | 1,517.6 | | | (8.5) | | (0.6) | | Operating Income | | 446.5 | | | 399.0 | | | 47.5 | | 11.9 | | Interest Expense | | 59.1 | | | 51.6 | | | 7.5 | | 14.5 | | Other Income, Net | | 3.0 | | | 3.3 | | | (0.3) | | (9.1) | | Income Before Income Tax Expense | | 390.4 | | | 350.7 | | | 39.7 | | 11.3 | | Income Tax Expense | | 156.6 | | | 137.5 | | | 19.1 | | 13.9 | | Net Income | $ | 233.8 | | $ | 213.2 | | $ | 20.6 | | 9.7 | % | | | | | | | | | | | | | | | (a) Percent greater than 100 percent not shown as it is not meaningful. | | | | | | | | | | | | | | | | Operating Revenues | | | | | | | | | | | | NSTAR Electric's retail sales volumes were as follows: | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | | | | 2014 | | 2013 | | Decrease | | Percent | | Retail Sales Volumes in GWh | | 15,958 | | | 16,204 | | | (246) | | (1.5) | % |
Operating Revenues
NSTAR Electric’s retail sales wereElectric's Operating Revenues increased in the first nine months of 2014, 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 revenues increased $73.9 million compared to the first quarternine months of 2013. The increase in revenueprimarily reflects higher retail sales volumes as a result of the significantly colder than normal winter temperatures and the overall impact of higher wholesalecosts associated with the procurement of energy costs in New England. The wholesalesupply. Our energy marketssupply costs were impacted by higher natural gas transportation costs, which had an adverse impact on the cost of purchased electric energy purchased for our retail customers. Fluctuations on wholesalein energy supply costs are recovered from customers in rates and therefore have no impact on earnings.
As noted above, Partially offsetting this increase was the increaseimpact of the reserve recorded in the second quarter of 2014 as a result of the June 2014 FERC ROE orders as compared to the reserve recorded in the third quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaints. For further information, see "FERC Regulatory Issues - FERC Base ROE Complaints"in thisManagement's Discussion and Analysis of Financial Condition and Results of Operations. Additionally, transition cost recovery revenues decreased during the period, reflecting the full collection in 2013 of previously deferred costs, as well as the full amortization of RRBs. Base distribution revenues reflects a 3.2 percent increasedecreased in retail sales. The increasethe first nine months of 2014, as compared to the same period in sales volume2013, which was due primarily to colder wintercooler summer 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 byand 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 itstheir energy efficiency. In the first quarternine months of 2014, including the impact from the recognition of lost base revenues, increased $4.8 millionbase distribution revenues were flat, compared to the first quarternine months of 2013.
The increase in transmission revenues reflects recovery of higher transmission expenses including continuing transmission infrastructure investments.
Purchased Power and Transmissionexpense includes costs associated with purchasing electricity on behalf of NSTAR Electric's customers. These energy supply costs are recovered from customers in DPU-approved cost tracking mechanisms which have no impact on earnings (tracked costs). Purchased Power and Transmission increased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to the following:
(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 | |
| | | (Millions of Dollars) | Increase | Purchased Power Costs | $ | 167.6 | Transmission Costs | | 49.0 | Other | | 4.1 | Total Purchased Power and Transmission | $ | 220.7 |
The increase in Basic Service costspurchased power was due primarily related to higher averageenergy supply prices. The increase in transmission costs was due primarily to higher RNS expense. The increase in purchased power contracts was due primarily to higher congestion charges. The decrease in deferred fuel costs was due primarily to higher average supply prices, as compared to the prices projected when Basic Service rates were set. Purchased Power and Transmission costs are included in regulatory-approved tracking mechanisms and do not impact earnings.
Operations and Maintenanceexpense includes tracked costs and costs that are recovered through base electric distribution rates (and therefore impact earnings). Operations and Maintenance decreased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, duedriven by a $36.9 million reduction in costs that impact earnings, which was primarily attributable to lower employee benefit costs ($6 million) and lower storm-related costs ($2 million), partially offset by higher bad debt expense ($0.6 million),labor and other operating expenses ($1 million).employee-related costs. Partially offsetting this decrease was a $4.2 million increase in tracked costs, which have no earnings impact, which was primarily attributable to an increased level of recovery of deferred storm costs.
Depreciationincreased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to higher utility plant balances resulting from completed construction projects placed into service.
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Amortization of Regulatory Assets,Assets/(Liabilities), Net, decreased in the first quarter of 2014, as compared to the first quarter of 2013, due primarily toreflects a decrease in the recovery of previously deferred tracked transition costs. Amortization of Rate Reduction Bonds decreased incosts for the first quarter ofnine months ended September 30, 2014, as compared to the first quartersame period in 2013. Fluctuations in these costs are recovered from customers in rates and have no impact on earnings.
Amortization of Rate Reduction Bondsdecreased for the nine months ended September 30, 2014, as compared to the same period in 2013, due to the maturity of the RRBs in March 2013.
Energy Efficiency Programs, which are tracked costs, decreased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to a decrease in the amortization of previously deferred costs ($8 million),costs. This was 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.DPU.
Taxes Other Than Income Taxes remained unchanged in increased for the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due to lower average municipal property tax rates, offset by an increase in property taxes as a result of both an increase in utility plant balances.balances and property tax rates.
Interest Expense increased $5.1 million infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to lower regulatory interest income primarily from a decrease in the recovery of previously deferred transition costs ($4.78.7 million), as well as higher averagepartially offset by a decrease in interest on long-term debt outstanding.($0.8 million).
Other Income/(Loss), Net Income Tax Expensedecreased $0.8 million in increased for the first quarter ofnine months ended September 30, 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 increasedsame period in the first quarter of 2014, as compared to the first quarter of 2013, due primarily to higher pre-tax earnings ($6.313.8 million) and higher state taxes ($1.65.3 million).
EARNINGS SUMMARY | | For the Three Months Ended March 31, | | (Millions of Dollars) | | 2014 | | 2013 | | Net Income | | $ | 58.1 | | $ | 48.1 | | | | | | | | | |
For the nine months ended September 30, 2014, NSTAR Electric’sElectric's earnings increased, $10 million in the first quarter of 2014, as compared to the first quarter ofsame period in 2013, due primarily to higher transmission margin, higher distribution revenues relatedlower operations and maintenance costs primarily attributable to higher retail electric sales due primarily to colder weather inlower employee-related costs. Partially offsetting the firstfavorable earnings impact were the after-tax reserve recorded for the second quarter in 2014 FERC ROE orders as compared to the firstreserve recorded in the third quarter of 2013 higher lostfor the FERC ALJ initial decision in the FERC base revenues, and lower non-tracked operations and maintenance costs. Partially offsetting these favorable earnings impacts wasROE complaints ($2.7 million increase), higher interest cost, primarily on deferred transition costs.expense, higher depreciation expense and higher property tax expense.
LIQUIDITY
NSTAR Electric had cash flows provided by operating activities of $191.4$517.5 million in the first quarternine months of 2014, compared with $89.4$317.6 million in the first quarternine months of 2013. The increase inimproved operating cash flows waswere due primarily to the absence of cash disbursements for major storm restoration costs associated with the February 2013 blizzard, a decreasecollections of accounts receivable from affiliated companies, $30.2 million in income tax paymentsDOE Damages proceeds in 2014 from the Yankee Companies associated with the spent nuclear fuel litigation and the absence of Pension Plan cash contributions in the first quarternine months of 2014, as compared to contributions of $82 million in the first quarternine months of 2013,2013. These favorable cash flow impacts were partially offset by the absence of costs recovered in rates related to the RRBs that were fully amortized in the first quarter of 2013 and an increase in income taxes paid.
Effective July 23, 2014, NSTAR Electric extended the absenceexpiration date of pension contributionsits $450 million revolving credit facility for one additional year to September 6, 2019. This facility serves to backstop NSTAR Electric's existing $450 million commercial paper program. As of September 30, 2014 and December 31, 2013, NSTAR Electric had $159.5 million and $103.5 million, respectively, in the first quartershort-term borrowings outstanding under its commercial paper program, leaving $290.5 million and $346.5 million, respectively, of available borrowing capacity. The weighted-average interest rate on these borrowings as of September 30, 2014 as compared to the first quarter of 2013. 52
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and December 31, 2013 was 0.16 percent and 0.13 percent, respectively, which is generally based on A2/P1 rated commercial paper.
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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 forin the condensed consolidated statements of income for PSNH for the nine months ended September 30, 2014 and 2013 included in this Quarterly Report on Form 10-Q for10-Q:
| | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | | | | | | | | | | Increase/ | | | | (Millions of Dollars) | 2014 | | 2013 | | (Decrease) | | Percent | | Operating Revenues | $ | 735.1 | | $ | 708.6 | | $ | 26.5 | | 3.7 | % | Operating Expenses: | | | | | | | | | | | | | Purchased Power, Fuel and Transmission | | 248.0 | | | 197.8 | | | 50.2 | | 25.4 | | | Operations and Maintenance | | 198.0 | | | 191.6 | | | 6.4 | | 3.3 | | | Depreciation | | 73.2 | | | 68.4 | | | 4.8 | | 7.0 | | | Amortization of Regulatory Assets/(Liabilities), Net | | (17.6) | | | (1.7) | | | (15.9) | | (a) | | | Amortization of Rate Reduction Bonds | | - | | | 19.7 | | | (19.7) | | (100.0) | | | Energy Efficiency Programs | | 10.9 | | | 11.0 | | | (0.1) | | (0.9) | | | Taxes Other Than Income Taxes | | 53.1 | | | 52.7 | | | 0.4 | | 0.8 | | | | Total Operating Expenses | | 565.6 | | | 539.5 | | | 26.1 | | 4.8 | | Operating Income | | 169.5 | | | 169.1 | | | 0.4 | | 0.2 | | Interest Expense | | 34.0 | | | 34.2 | | | (0.2) | | (0.6) | | Other Income, Net | | 1.7 | | | 2.4 | | | (0.7) | | (29.2) | | Income Before Income Tax Expense | | 137.2 | | | 137.3 | | | (0.1) | | (0.1) | | Income Tax Expense | | 52.2 | | | 52.8 | | | (0.6) | | (1.1) | | Net Income | $ | 85.0 | | $ | 84.5 | | $ | 0.5 | | 0.6 | % | | | | | | | | | | | | | | | (a) Percent greater than 100 percent not shown as it is not meaningful. | | | | | | | | | | | | | | | Operating Revenues | | | | | | | | | | | | PSNH's retail sales volumes were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | | | | 2014 | | 2013 | | Decrease | | Percent | | Retail Sales Volumes in GWh | | 5,970 | | | 5,971 | | | (1) | | - | % |
PSNH's Operating Revenues increased in the threefirst nine months ended March 31,of 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 quarternine months of 2013. The increase in revenue reflects higher retail sales volumes as a result of the significantly colder than normal winter temperatures and2013, due primarily to the overall impact of higher wholesalecosts associated with the procurement of energy costs in New England.supply. The wholesale energy marketssupply costs were impacted by higher natural gas transportation costs, which had an adverse impact on the cost of purchased electric energy purchased for our retail customers. Fluctuations on wholesalein energy supply 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 thisthe revenue increase was an increasewere increases of $3.3$6.7 million related to NHPUC-approved distribution rate increases effective July 1, 2013 and increases in transmission revenues as a result of a 2010 distribution rate case settlement.
The increase in transmission revenues reflectsthe recovery of higher transmission expenses including ongoing investments in our transmission infrastructure.infrastructure, partially offset by the impact of the reserve recorded in the second quarter of 2014 as a result of the June 2014 FERC ROE orders as compared to the reserve recorded in the third quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaints. For further information, see "FERC Regulatory Issues - FERC Base ROE Complaints" in thisManagement's Discussion and Analysis of Financial Condition and Results of Operations.
Purchased Power, Fuel and Transmissionexpense includes costs associated with PSNH's generation of electricity as well as purchasing electricity on behalf of its customers. These energy supply costs are recovered from customers in NHPUC-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission increased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to the following:
| | | (Millions of Dollars) | Increase/(Decrease) | Generation Fuel Costs | $ | 43.0 | Transmission Costs | | 12.3 | Purchased Power Costs | | (11.5) | Other | | 6.4 | Total Purchased Power, Fuel and Transmission | $ | 50.2 |
The increase in generation fuel costs was due primarily to an increase in generation fuel costs, partially offsetthe amount of electricity generated by lowerPSNH facilities. The decrease in purchased power costs was a result of purchasing less power due to customer migration, lower renewable energy requirements set byincreased PSNH generation. The increase in transmission costs was as a result of an increase in the NHPUC, and lower regional greenhouse gas initiative auction proceeds. Purchased Power, Fuel and Transmissionretail transmission cost deferral, which reflects the actual costs are included in regulatory-approved tracking mechanisms and do not impact earnings.of transmission service compared to estimated amounts billed to customers.
Operations and Maintenanceexpense includes tracked costs and costs that are recovered through base electric distribution rates (and therefore impact earnings). Operations and Maintenance increased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to andriven by a $6.2 million increase in routinetracked costs, which have no earnings impact, which was primarily attributable to higher operations and 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),due to the timing of planned outages, partially offset by lower labor and other operatingemployee-related costs, ($0.2 million).including pension costs.
Depreciationincreased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to higher utility plant balances resulting from completed construction projects placed into service.
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Amortization of Regulatory Assets/(Liabilities), Net,increased reflects a decrease in the first quarterrecovery of the default energy service charge and other amortizations for the nine months ended September 30, 2014, as compared to the first quarter of 2013, due primarily to increasessame period in the SCRC, ES2013. Fluctuations in these costs are recovered from customers in rates and TCAM amortizations ($7.3 million, $4.8 million, and $6.2 million, respectively).have no impact on earnings.
Amortization of Rate Reduction Bonds decreased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 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 decreased for the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to various tax impacts ($0.6 million).
EARNINGS SUMMARY
For the nine months ended September 30, 2014, PSNH's earnings increased, as compared to the same period in 2013, due primarily to higher pre-tax earnings ($1.9 million). 53
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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, which were favorably impacted by the PSNH annualized distribution 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 thesethis favorable earnings impactsimpact were the after-tax reserve recorded for the second quarter 2014 FERC ROE orders as compared to the reserve recorded in the third quarter 2013 for the FERC ALJ initial decision in the FERC base ROE complaints ($0.6 million increase), and higher operations and maintenance, depreciation and property tax expense.
LIQUIDITY
PSNH had cash flows provided by operating activities of $129.3$205.8 million in the first quarternine months of 2014, compared with $107.2$160.4 million in the first quarternine months of 2013. The improved cash flows were due primarily to $14.5 million in DOE Damages proceeds in 2014 from the Yankee Companies associated with the spent nuclear fuel litigation, the absence of a $35.1$108.3 million NUSCOin Pension and PBOP Plan contributioncash contributions in the first quarternine months of 2014, as compared to the first quarter of 2013,and the favorable impact of the 2010 rate case decisionsettlement 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.2013. These favorable cash flow impacts were partially offset by changes in working capital amounts, income tax payments of $16.1$9 million in the first quarternine months of 2014, compared with income tax refunds of $15.3$8.7 million in the first quarternine months 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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RESULTS OF OPERATIONS —– WESTERN MASSACHUSETTS ELECTRIC COMPANY
The following provides the amounts and variances in operating revenues and expense line items forin the condensed statements of income for WMECO for the nine months ended September 30, 2014 and 2013 included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2014 and 2013:10-Q:
| | 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 | )% |
| | | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | | | | | | Increase/ | | | | (Millions of Dollars) | 2014 | | 2013 | | (Decrease) | | Percent | | Operating Revenues | $ | 363.8 | | $ | 361.8 | | $ | 2.0 | | 0.6 | % | Operating Expenses: | | | | | | | | | | | | | Purchased Power and Transmission | | 131.0 | | | 111.1 | | | 19.9 | | 17.9 | | | Operations and Maintenance | | 67.1 | | | 70.2 | | | (3.1) | | (4.4) | | | Depreciation | | 31.1 | | | 27.7 | | | 3.4 | | 12.3 | | | Amortization of Regulatory Liabilities, Net | | (7.8) | | | (0.6) | | | (7.2) | | (a) | | | Amortization of Rate Reduction Bonds | | - | | | 7.8 | | | (7.8) | | (100.0) | | | Energy Efficiency Programs | | 33.1 | | | 28.5 | | | 4.6 | | 16.1 | | | Taxes Other Than Income Taxes | | 25.7 | | | 20.2 | | | 5.5 | | 27.2 | | | | Total Operating Expenses | | 280.2 | | | 264.9 | | | 15.3 | | 5.8 | | Operating Income | | 83.6 | | | 96.9 | | | (13.3) | | (13.7) | | Interest Expense | | 18.9 | | | 18.8 | | | 0.1 | | 0.5 | | Other Income, Net | | 1.7 | | | 2.3 | | | (0.6) | | (26.1) | | Income Before Income Tax Expense | | 66.4 | | | 80.4 | | | (14.0) | | (17.4) | | Income Tax Expense | | 26.6 | | | 30.4 | | | (3.8) | | (12.5) | | Net Income | $ | 39.8 | | $ | 50.0 | | $ | (10.2) | | (20.4) | % | | | | | | | | | | | | | | | (a) Percent greater than 100 percent not shown as it is not meaningful. | | | | | | | | | | | | | | | | Operating Revenues | | | | | | | | | | | | WMECO's retail sales volumes were as follows: | | | | | | | | | | | | | | | For the Nine Months Ended September 30, | | | | | 2014 | | 2013 | | Decrease | | Percent | | Retail Sales Volumes in GWh | | 2,721 | | | 2,786 | | | (65) | | (2.3) | % |
(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’sWMECO's Operating Revenues increased $12.4 million in the first quarternine months of 2014, as compared to the first quarternine months 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’sWMECO'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. There was also a $3.9 million increase in revenues that impacts earnings due to the reversal of a previously established wholesale billing adjustment. Partially offsetting this increase was the impact of the reserve recorded in the second quarter of 2014 as a result of the June 2014 FERC ROE orders as compared to the reserve recorded in the third quarter of 2013 for the FERC ALJ initial decision in the FERC base ROE complaints. For further information, see "FERC Regulatory Issues - FERC Base ROE Complaints"in thisManagement's Discussion and Analysis of Financial Condition and Results of Operations. Additionally, transition cost recovery revenues decreased due to the refund to customers of proceeds received from the Yankee Companies resulting from the spent nuclear fuel litigation. Fluctuations in WMECO's kWh sales have no impact on earnings, as its revenues are decoupled from sales volumes and changes in revenues are primarily related to changes in its cost tracking mechanisms.
Purchased Power and Transmissionincreasedexpense includes costs associated with purchasing electricity on behalf of WMECO's customers. These energy supply costs are recovered from customers in DPU-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power and Transmissionincreased for the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to an increase in supplier contractpurchased power due primarily to higher average supply prices and increased load as a result of customers returning to basic service from third party suppliers ($10.7 million) and an increase in customers returningtransmission costs as a result of an increase in the retail transmission cost deferral ($9.2 million), which reflects the actual costs of transmission service compared to default service from third party suppliers. Purchased Power and Transmission costs are included in regulatory-approved tracking mechanisms and do not impact earnings.estimated amounts billed to customers.
Operations and Maintenance increased inexpense includes tracked costs and costs that are recovered through base electric distribution rates (and therefore impact earnings). Operations and Maintenance decreased for the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, duedriven by a $3.1 million decrease in tracked costs, which have no earnings impact, which was primarily attributable to an increase in customer related expenses ($0.8 million), an increase in routine maintenancelower labor and other employee-related costs, ($0.6 million), and an increase in distribution vegetation management costs ($0.3 million). Depreciation increased inincluding pension costs. Costs that impact earnings were flat for the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013.
Depreciation increased for the nine months ended September 30, 2014, as compared to the same period in 2013, due primarily to higher utility plant balances resulting from completed construction projects placed into service.
Amortization of Rate Reduction Bonds Regulatory Liabilities, Netdecreased,reflects a decrease in the first quarterrecovery of transition costs primarily due to the refund of the DOE proceeds to customers for the nine months ended September 30, 2014, as compared to the first quartersame period in 2013. Fluctuations in these costs are recovered from customers in rates and have no impact on earnings.
Amortization of Rate Reduction Bondsdecreased for the nine months ended September 30, 2014, as compared to same period in 2013, due to the maturity of the RRBs in June 2013.
Energy Efficiency Programs, which are tracked costs,increased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 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 DPU-approved tracking mechanisms and therefore do not impact earnings.
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Taxes Other Than Income Taxes increased infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to an increase in property taxes as a result of both an increase in utility plant balances and property tax rates.
InterestIncome Tax Expense decreased $0.6 million infor the first quarter ofnine months ended September 30, 2014, as compared to the first quarter ofsame period in 2013, due primarily to lower pre-tax earnings ($4.9 million), partially offset by various other tax impacts ($1.1 million).
EARNINGS SUMMARY
For the nine months ended September 30, 2014, WMECO's earnings decreased, as compared to the same period in 2013, due primarily to the reversal of interest expense related to a previously recognized wholesale billing adjustment. 55
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Other Income, Net decreased $0.4 million inafter-tax reserve recorded for the firstsecond quarter of 2014 FERC ROE orders 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 millionreserve recorded in the firstthird quarter of 2014, as compared to2013 for the first quarter of 2013, due primarily to lower mark-to-market gains associated with marketable securities heldFERC ALJ initial decision in trust,the FERC base ROE complaints ($3.7 million increase), higher operationsdepreciation expense and maintenance and depreciationhigher property tax expense. Partially offsetting these unfavorable earnings impacts was an increase in earnings related towere the reversal of a previously established wholesale billing adjustment.adjustment and an increase in generation earnings.
LIQUIDITY
WMECO had cash flows provided by operating activities of $46.3$120.6 million in the first quarternine months of 2014, compared with $71$170.1 million in the first quarternine months of 2013. The decrease in operating cash flows was due primarily to income tax payments of $14.1$26.5 million in the first quarternine months of 2014, compared with income tax refundspayments of $26.6$16.9 million in the first quarternine months of 2013, changes in working capital items, and the absence of costs recovered in rates related to the RRBs that were fully amortized in the second quarter of 2013, partially offset by the favorable cash flow impacts relating to changesreceipt of $18.9 million in traditional working capital amounts principally due toDOE Damages proceeds received in 2014 from the changesYankee Companies associated with the spent nuclear fuel litigation, and an increase in timing of accounts payable and accounts receivables.regulatory overrecoveries.
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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. NU’sNU's Energy Supply Risk Committee, comprised of senior officers, reviews and approves all large scale energy related transactions entered into 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 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 or its subsidiaries were reduced to below investment grade by either Moody’sMoody's or S&P, certain of NU’sNU's contracts would require additional collateral in the form of cash to be provided to counterparties and independent system operators. 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 Instruments,” to the 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’sNU'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 2013 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure 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,September 30, 2014 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.
ThereChanges in Internal Control over Financial Reporting
During the third quarter of 2014, we implemented a new general ledger system resulting in a material change in internal controls over financial reporting. This new system, which went live effective August 1, 2014, standardized the financial systems for the merged companies and allows for a common set of accounting processes, practices and data structures across all operating companies. Pre-implementation testing and post-implementation reviews were conducted by management to ensure that internal controls surrounding the system implementation process, the applications, and the closing process were properly designed to prevent material financial statement errors. Such procedures included the review of required documents, user acceptance testing, change management procedures, access controls, data migration strategies and reconciliations, application interface testing and other standard application controls.
Except as described above, there have been no other changes in internal controls over financial reporting for NU, CL&P, NSTAR Electric, PSNH and WMECO during the quarter ended March 31,September 30, 2014 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
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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 2013 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 2013 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 2013 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 2013 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table discloses purchases of our common shares 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’sCompany's Long-Term Incentive Plans and its Employee Savings Plan.Plans.
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 | | — | | — | |
| | | | | | | | | | 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) | | July 1 – July 31, 2014 | | - | | $ | - | - | - | | August 1 – August 31, 2014 | | 34,452 | | | 45.37 | - | - | | September 1 – September 30, 2014 | | 5,248 | | | 45.37 | - | - | | Total | | 39,700 | | $ | 45.37 | - | - |
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ITEM 6. EXHIBITS EXHIBITS
Each exhibitdocument 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,November 7, 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,November 7, 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,November 7, 2014 | | | | |
| Listing of Exhibits (CL&P) | | | | | * | 3.1 | | By-laws of CL&P, amended and restated as in effect September 29, 2014 (Exhibit 3.1, CL&P Current Report on Form 8-K filed October 2, 2014, File No. 000-00404) | | | | | * | 4.1 | | Supplemental Indenture (2014 Series A Bond) between CL&P and Deutsche Bank Trust Company Americas, as Trustee dated as of April 1, 2014 (Exhibit 4.1, CL&P Current Report on Form 8-K filed April 29, 2014, File No. 000-00404) | | | | | | 12 | | Ratio of Earnings to Fixed Charges | | | | | | 31 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 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,November 7, 2014 | | | | | | 32 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 2014 | | | | |
| Listing of Exhibits (NSTAR Electric) | | | | | * 4.1 | 3.1 | | A FormBy-laws of 4.40% Debenture Due March 1, 2044. (Incorporated by reference to Exhibit 4 of theNSTAR Electric, amended and restated as in effect September 29, 2014 (Exhibit 3.1, NSTAR Electric Company Current Report on Form 8-K filed March 13,October 2, 2014, File No. 001-02301)
| | | | | | 12 | | Ratio of Earnings to Fixed Charges | | | | | | 31 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 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,November 7, 2014 | | | | | | 32 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 2014 |
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| Listing of Exhibits (PSNH) | | | | | | 3.1 | | By-laws of PSNH, amended and restated as in effect September 29, 2014 | | | | | * | 4.1 | | Twenty-First Supplemental Indenture, between PSNH and U.S. Bank National Association, as Trustee dated as of October 1, 2014 (Exhibit 4.1, PSNH Current Report on Form 8-K filed October 17, 2014, File No. 001-06392) | | | | | | 12 | | Ratio of Earnings to Fixed Charges | | | | | | 31 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 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,November 7, 2014 | | | | | | 32 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 2014 | | | | |
| Listing of Exhibits (WMECO) | | | | | | 3.1 | | By-laws of WMECO, amended and restated as in effect September 29, 2014 | | | | | | 12 | | Ratio of Earnings to Fixed Charges | | | | | | 31 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 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,November 7, 2014 | | | | | | 32 | | Certification of LeonWerner J. Olivier,Schweiger, 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,November 7, 2014 |
Listing of Exhibits (NU, CL&P, NSTAR Electric, PSNH, WMECO)
| | | | | 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 | | | | |
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SIGNATURE
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 2,
| | | | | | | | | NORTHEAST UTILITIES | | | | | November 7, 2014 | | By: | /s/ Jay S. Buth | | | | Jay S. Buth | | | | Vice President, Controller and Chief Accounting Officer | | | |
| | | | |
SIGNATURE
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,
| | | | | | | | | | THE CONNECTICUT LIGHT AND POWER COMPANY | | | | | November 7, 2014 | | By: | /s/ Jay S. Buth | | | | Jay S. Buth | | | | Vice President, Controller and Chief Accounting Officer | | | |
| | | | |
SIGNATURE
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,
| | | | | | | | | | NSTAR ELECTRIC COMPANY | | | | | November 7, 2014 | | By: | /s/ Jay S. Buth | | | | Jay S. Buth | | | | Vice President, Controller and Chief Accounting Officer | | | |
| | | | |
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SIGNATURE
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,
| | | | | | | | | | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE | | | | | November 7, 2014 | | By: | /s/ Jay S. Buth | | | | Jay S. Buth | | | | Vice President, Controller and Chief Accounting Officer | | | |
| | | | |
SIGNATURE
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,
| | | | | | | | | | WESTERN MASSACHUSETTS ELECTRIC COMPANY | | | | | November 7, 2014 | | By: | /s/ Jay S. Buth | | | | Jay S. Buth | | | | Vice President, Controller and Chief Accounting Officer | | | | | | | | |
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