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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 | ||
FORM | 10-Q | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Quarterly Period Ended | June 30, 2020 | |
or | ||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ____________ to ____________ |
Registrant; State of Incorporation; Address; Telephone Number;
Commission File Number; and I.R.S. Employer Identification No.
EVERSOURCE ENERGY
(a Massachusetts voluntary association)
300 Cadwell Drive, Springfield, Massachusetts 01104
Telephone: (800) 286-5000
Commission File Number: 1-5324
I.R.S. Employer Identification No. 04-2147929
THE CONNECTICUT LIGHT AND POWER COMPANY
(a Connecticut corporation)
107 Selden Street, Berlin, Connecticut 06037-1616
Telephone: (800) 286-5000
Commission File Number: 0-00404
I.R.S. Employer Identification No. 06-0303850
NSTAR ELECTRIC COMPANY
(a Massachusetts corporation)
800 Boylston Street, Boston, Massachusetts 02199
Telephone: (800) 286-5000
Commission File Number: 1-02301
I.R.S. Employer Identification No. 04-1278810
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
(a New Hampshire corporation)
Energy Park
780 North Commercial Street, Manchester, New Hampshire 03101-1134
Telephone: (800) 286-5000
Commission File Number: 1-6392
I.R.S. Employer Identification No. 02-0181050
Securities registered pursuant to Section 12(b) of the Act: | ||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Shares, $5.00 par value per share | ES | New York Stock Exchange |
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Yes | No | |
☒ | ☐ |
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).
Yes | No | |
☒ | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Eversource Energy | Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
The Connecticut Light and Power Company | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
NSTAR Electric Company | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Public Service Company of New Hampshire | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):
Yes | No | |
Eversource Energy | ☐ | ☒ |
The Connecticut Light and Power Company | ☐ | ☒ |
NSTAR Electric Company | ☐ | ☒ |
Public Service Company of New Hampshire | ☐ | ☒ |
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
Company - Class of Stock | Outstanding as of July 31, 2020 | ||
Eversource Energy Common Shares, $5.00 par value | 342,667,836 | shares | |
The Connecticut Light and Power Company Common Stock, $10.00 par value | 6,035,205 | shares | |
NSTAR Electric Company Common Stock, $1.00 par value | 200 | shares | |
Public Service Company of New Hampshire Common Stock, $1.00 par value | 301 | shares |
Eversource Energy holds all of the 6,035,205 shares, 200 shares, and 301 shares of the outstanding common stock of The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire, respectively.
NSTAR Electric Company and Public Service Company of New Hampshire each meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q, and each is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10‑Q.
Eversource Energy, The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire each separately file this combined Form 10-Q. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
GLOSSARY OF TERMS
The following is a glossary of abbreviations and acronyms that are found in this report:
Current or former Eversource Energy companies, segments or investments: | |
Eversource, ES or the Company | Eversource Energy and subsidiaries |
Eversource parent or ES parent | Eversource Energy, a public utility holding company |
ES parent and other companies | ES parent and other companies are comprised of Eversource parent, Eversource Service, Eversource Water Ventures, Inc. (parent company of Aquarion), and other subsidiaries, which primarily includes our unregulated businesses, HWP Company, The Rocky River Realty Company (a real estate subsidiary), the consolidated operations of CYAPC and YAEC, and Eversource parent's equity ownership interests that are not consolidated |
CL&P | The Connecticut Light and Power Company |
NSTAR Electric | NSTAR Electric Company |
PSNH | Public Service Company of New Hampshire |
PSNH Funding | PSNH Funding LLC 3, a bankruptcy remote, special purpose, wholly-owned subsidiary of PSNH |
NSTAR Gas | NSTAR Gas Company |
Yankee Gas | Yankee Gas Services Company |
Aquarion | Eversource Aquarion Holdings, Inc. and its subsidiaries |
NPT | Northern Pass Transmission LLC |
Northern Pass | The HVDC and associated alternating-current transmission line project from Canada into New Hampshire |
HEEC | Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric |
Eversource Service | Eversource Energy Service Company |
Bay State Wind | Bay State Wind LLC, an offshore wind business being developed jointly by Eversource and Denmark-based Ørsted, which holds the Sunrise Wind project |
North East Offshore | North East Offshore, LLC, an offshore wind business holding company being developed jointly by Eversource and Denmark-based Ørsted, which holds the Revolution Wind and South Fork Wind projects |
CYAPC | Connecticut Yankee Atomic Power Company |
MYAPC | Maine Yankee Atomic Power Company |
YAEC | Yankee Atomic Electric Company |
Yankee Companies | CYAPC, YAEC and MYAPC |
Regulated companies | The Eversource regulated companies are comprised of the electric distribution and transmission businesses of CL&P, NSTAR Electric and PSNH, the natural gas distribution businesses of Yankee Gas and NSTAR Gas, NPT, Aquarion, and the solar power facilities of NSTAR Electric |
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 Terms and Abbreviations: | |
ADIT | Accumulated Deferred Income Taxes |
AFUDC | Allowance For Funds Used During Construction |
AOCI | Accumulated Other Comprehensive Income |
ARO | Asset Retirement Obligation |
Bcf | Billion cubic feet |
C&LM | Conservation and Load Management |
CfD | Contract for Differences |
CTA | Competitive Transition Assessment |
CWIP | Construction Work in Progress |
EDC | Electric distribution company |
EDIT | Excess Deferred Income Taxes |
EPS | Earnings Per Share |
ERISA | Employee Retirement Income Security Act of 1974 |
i
ESOP | Employee Stock Ownership Plan |
Eversource 2019 Form 10-K | The Eversource Energy and Subsidiaries 2019 combined Annual Report on Form 10-K as filed with the SEC |
Fitch | Fitch Ratings |
FMCC | Federally Mandated Congestion Charge |
FTR | Financial Transmission Rights |
GAAP | Accounting principles generally accepted in the United States of America |
GSC | Generation Service Charge |
GSRP | Greater Springfield Reliability Project |
GWh | Gigawatt-Hours |
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 |
kVa | Kilovolt-ampere |
kW | Kilowatt (equal to one thousand watts) |
LBR | Lost Base Revenue |
LNG | Liquefied natural gas |
LRS | Supplier of last resort service |
MG | Million gallons |
MGP | Manufactured Gas Plant |
MMBtu | One million British thermal units |
MMcf | Million cubic feet |
Moody's | Moody's Investors Services, Inc. |
MW | Megawatt |
MWh | Megawatt-Hours |
NEEWS | New England East-West Solution |
NETOs | New England Transmission Owners (including Eversource, National Grid and Avangrid) |
OCI | Other Comprehensive Income/(Loss) |
PAM | Pension and PBOP Rate Adjustment Mechanism |
PBOP | Postretirement Benefits Other Than Pension |
PBOP Plan | Postretirement Benefits Other Than Pension Plan |
Pension Plan | Single uniform noncontributory defined benefit retirement plan |
PPA | Power purchase agreement |
RECs | Renewable Energy Certificates |
Regulatory ROE | The average cost of capital method for calculating the return on equity related to the distribution business segment excluding the wholesale transmission segment |
ROE | Return on Equity |
RRBs | Rate Reduction Bonds or Rate Reduction Certificates |
RSUs | Restricted share units |
S&P | Standard & Poor'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 |
SS | Standard service |
TCAM | Transmission Cost Adjustment Mechanism |
TSA | Transmission Service Agreement |
UI | The United Illuminating Company |
VIE | Variable Interest Entity |
ii
EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
TABLE OF CONTENTS
Page | ||
PART I – FINANCIAL INFORMATION | ||
Condensed Consolidated Statements of Common Shareholders' Equity | ||
Condensed Statements of Common Stockholder's Equity | ||
Condensed Consolidated Statements of Common Stockholder's Equity | ||
Public Service Company of New Hampshire and Subsidiaries (Unaudited) | ||
Condensed Consolidated Statements of Common Stockholder's Equity | ||
PART II – OTHER INFORMATION | ||
iii
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars) | As of June 30, 2020 | As of December 31, 2019 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash | $ | 64,890 | $ | 15,432 | |||
Receivables, Net (net of allowance for uncollectible accounts of $270,047 and $224,821 as of June 30, 2020 and December 31, 2019, respectively) | 996,290 | 989,383 | |||||
Unbilled Revenues | 171,475 | 181,006 | |||||
Fuel, Materials, Supplies and REC Inventory | 176,138 | 235,471 | |||||
Regulatory Assets | 805,050 | 651,112 | |||||
Prepayments and Other Current Assets | 191,570 | 342,135 | |||||
Total Current Assets | 2,405,413 | 2,414,539 | |||||
Property, Plant and Equipment, Net | 28,610,776 | 27,585,470 | |||||
Deferred Debits and Other Assets: | |||||||
Regulatory Assets | 4,729,531 | 4,863,639 | |||||
Goodwill | 4,427,266 | 4,427,266 | |||||
Investments in Unconsolidated Affiliates | 884,273 | 871,633 | |||||
Marketable Securities | 427,001 | 449,130 | |||||
Other Long-Term Assets | 554,458 | 512,238 | |||||
Total Deferred Debits and Other Assets | 11,022,529 | 11,123,906 | |||||
Total Assets | $ | 42,038,718 | $ | 41,123,915 | |||
LIABILITIES AND CAPITALIZATION | |||||||
Current Liabilities: | |||||||
Notes Payable | $ | 493,500 | $ | 889,084 | |||
Long-Term Debt – Current Portion | 700,960 | 327,411 | |||||
Rate Reduction Bonds – Current Portion | 43,210 | 43,210 | |||||
Accounts Payable | 952,132 | 1,147,872 | |||||
Regulatory Liabilities | 442,004 | 361,152 | |||||
Other Current Liabilities | 694,252 | 836,834 | |||||
Total Current Liabilities | 3,326,058 | 3,605,563 | |||||
Deferred Credits and Other Liabilities: | |||||||
Accumulated Deferred Income Taxes | 3,882,293 | 3,755,777 | |||||
Regulatory Liabilities | 3,679,927 | 3,658,042 | |||||
Derivative Liabilities | 328,313 | 338,710 | |||||
Asset Retirement Obligations | 497,262 | 488,511 | |||||
Accrued Pension, SERP and PBOP | 1,307,967 | 1,370,245 | |||||
Other Long-Term Liabilities | 839,791 | 810,553 | |||||
Total Deferred Credits and Other Liabilities | 10,535,553 | 10,421,838 | |||||
Long-Term Debt | 13,697,762 | 13,770,828 | |||||
Rate Reduction Bonds | 518,517 | 540,122 | |||||
Noncontrolling Interest – Preferred Stock of Subsidiaries | 155,570 | 155,570 | |||||
Common Shareholders' Equity: | |||||||
Common Shares | 1,789,092 | 1,729,292 | |||||
Capital Surplus, Paid In | 7,979,146 | 7,087,768 | |||||
Retained Earnings | 4,384,093 | 4,177,048 | |||||
Accumulated Other Comprehensive Loss | (62,558 | ) | (65,059 | ) | |||
Treasury Stock | (284,515 | ) | (299,055 | ) | |||
Common Shareholders' Equity | 13,805,258 | 12,629,994 | |||||
Commitments and Contingencies (Note 9) | |||||||
Total Liabilities and Capitalization | $ | 42,038,718 | $ | 41,123,915 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars, Except Share Information) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Operating Revenues | $ | 1,953,128 | $ | 1,884,495 | $ | 4,326,854 | $ | 4,300,287 | |||||||
Operating Expenses: | |||||||||||||||
Purchased Power, Fuel and Transmission | 630,132 | 620,904 | 1,506,703 | 1,595,786 | |||||||||||
Operations and Maintenance | 332,055 | 328,010 | 674,117 | 663,606 | |||||||||||
Depreciation | 240,516 | 219,084 | 476,727 | 434,032 | |||||||||||
Amortization | 23,397 | 38,945 | 73,172 | 109,906 | |||||||||||
Energy Efficiency Programs | 115,354 | 105,837 | 263,747 | 245,953 | |||||||||||
Taxes Other Than Income Taxes | 178,019 | 181,083 | 359,613 | 365,672 | |||||||||||
Impairment of Northern Pass Transmission | — | 239,644 | — | 239,644 | |||||||||||
Total Operating Expenses | 1,519,473 | 1,733,507 | 3,354,079 | 3,654,599 | |||||||||||
Operating Income | 433,655 | 150,988 | 972,775 | 645,688 | |||||||||||
Interest Expense | 134,285 | 132,705 | 269,000 | 264,438 | |||||||||||
Other Income, Net | 30,243 | 45,866 | 54,347 | 76,850 | |||||||||||
Income Before Income Tax Expense | 329,613 | 64,149 | 758,122 | 458,100 | |||||||||||
Income Tax Expense | 75,501 | 30,815 | 167,379 | 114,209 | |||||||||||
Net Income | 254,112 | 33,334 | 590,743 | 343,891 | |||||||||||
Net Income Attributable to Noncontrolling Interests | 1,880 | 1,880 | 3,759 | 3,759 | |||||||||||
Net Income Attributable to Common Shareholders | $ | 252,232 | $ | 31,454 | $ | 586,984 | $ | 340,132 | |||||||
Basic and Diluted Earnings Per Common Share | $ | 0.75 | $ | 0.10 | $ | 1.75 | $ | 1.07 | |||||||
Weighted Average Common Shares Outstanding: | |||||||||||||||
Basic | 337,946,663 | 319,664,998 | 334,524,452 | 318,644,796 | |||||||||||
Diluted | 338,561,649 | 320,388,490 | 335,749,404 | 319,352,287 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net Income | $ | 254,112 | $ | 33,334 | $ | 590,743 | $ | 343,891 | |||||||
Other Comprehensive Income, Net of Tax: | |||||||||||||||
Qualified Cash Flow Hedging Instruments | 387 | 262 | 616 | 578 | |||||||||||
Changes in Unrealized Gains on Marketable Securities | 269 | 444 | 429 | 1,099 | |||||||||||
Changes in Funded Status of Pension, SERP and PBOP Benefit Plans | (103 | ) | 3,457 | 1,456 | 4,682 | ||||||||||
Other Comprehensive Income, Net of Tax | 553 | 4,163 | 2,501 | 6,359 | |||||||||||
Comprehensive Income Attributable to Noncontrolling Interests | (1,880 | ) | (1,880 | ) | (3,759 | ) | (3,759 | ) | |||||||
Comprehensive Income Attributable to Common Shareholders | $ | 252,785 | $ | 35,617 | $ | 589,485 | $ | 346,491 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(Unaudited)
For the Six Months Ended June 30, 2020 | ||||||||||||||||||||
Common Shares | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Common Shareholders' Equity | |||||||||||||||
(Thousands of Dollars, Except Share Information) | Shares | Amount | ||||||||||||||||||
Balance as of January 1, 2020 | 329,880,645 | $ | 1,729,292 | $ | 7,087,768 | $ | 4,177,048 | $ | (65,059 | ) | $ | (299,055 | ) | $ | 12,629,994 | |||||
Net Income | 336,633 | 336,633 | ||||||||||||||||||
Dividends on Common Shares - $0.5675 Per Share | (187,462 | ) | (187,462 | ) | ||||||||||||||||
Dividends on Preferred Stock | (1,880 | ) | (1,880 | ) | ||||||||||||||||
Issuance of Common Shares - $5 par value | 5,960,000 | 29,800 | 402,300 | 432,100 | ||||||||||||||||
Long-Term Incentive Plan Activity | (15,295 | ) | (15,295 | ) | ||||||||||||||||
Issuance of Treasury Shares | 570,542 | 17,230 | 10,516 | 27,746 | ||||||||||||||||
Capital Stock Expense | (12,314 | ) | (12,314 | ) | ||||||||||||||||
Adoption of New Accounting Standard (See Note 1B) | (1,514 | ) | (1,514 | ) | ||||||||||||||||
Other Comprehensive Income | 1,948 | 1,948 | ||||||||||||||||||
Balance as of March 31, 2020 | 336,411,187 | 1,759,092 | 7,479,689 | 4,322,825 | (63,111 | ) | (288,539 | ) | 13,209,956 | |||||||||||
Net Income | 254,112 | 254,112 | ||||||||||||||||||
Dividends on Common Shares - $0.5675 Per Share | (190,964 | ) | (190,964 | ) | ||||||||||||||||
Dividends on Preferred Stock | (1,880 | ) | (1,880 | ) | ||||||||||||||||
Issuance of Common Shares - $5 par value | 6,000,000 | 30,000 | 487,560 | 517,560 | ||||||||||||||||
Long-Term Incentive Plan Activity | 7,694 | 7,694 | ||||||||||||||||||
Issuance of Treasury Shares | 216,675 | 12,524 | 4,024 | 16,548 | ||||||||||||||||
Capital Stock Expense | (8,321 | ) | (8,321 | ) | ||||||||||||||||
Other Comprehensive Income | 553 | 553 | ||||||||||||||||||
Balance as of June 30, 2020 | 342,627,862 | $ | 1,789,092 | $ | 7,979,146 | $ | 4,384,093 | $ | (62,558 | ) | $ | (284,515 | ) | $ | 13,805,258 |
For the Six Months Ended June 30, 2019 | ||||||||||||||||||||
Common Shares | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Common Shareholders' Equity | |||||||||||||||
(Thousands of Dollars, Except Share Information) | Shares | Amount | ||||||||||||||||||
Balance as of January 1, 2019 | 316,885,808 | $ | 1,669,392 | $ | 6,241,222 | $ | 3,953,974 | $ | (60,000 | ) | $ | (317,771 | ) | $ | 11,486,817 | |||||
Net Income | 310,558 | 310,558 | ||||||||||||||||||
Dividends on Common Shares - $0.535 Per Share | (169,757 | ) | (169,757 | ) | ||||||||||||||||
Dividends on Preferred Stock | (1,880 | ) | (1,880 | ) | ||||||||||||||||
Long-Term Incentive Plan Activity | (16,609 | ) | (16,609 | ) | ||||||||||||||||
Issuance of Treasury Shares | 461,662 | 17,476 | 8,633 | 26,109 | ||||||||||||||||
Other Comprehensive Income | 2,196 | 2,196 | ||||||||||||||||||
Balance as of March 31, 2019 | 317,347,470 | 1,669,392 | 6,242,089 | 4,092,895 | (57,804 | ) | (309,138 | ) | 11,637,434 | |||||||||||
Net Income | 33,334 | 33,334 | ||||||||||||||||||
Dividends on Common Shares - $0.535 Per Share | (169,857 | ) | (169,857 | ) | ||||||||||||||||
Dividends on Preferred Stock | (1,880 | ) | (1,880 | ) | ||||||||||||||||
Issuance of Common Shares - $5 par value | 5,980,000 | 29,900 | 403,650 | 433,550 | ||||||||||||||||
Long-Term Incentive Plan Activity | 6,470 | 6,470 | ||||||||||||||||||
Issuance of Treasury Shares | 246,969 | 13,448 | 4,579 | 18,027 | ||||||||||||||||
Capital Stock Expense | (6,648 | ) | (6,648 | ) | ||||||||||||||||
Other Comprehensive Income | 4,163 | 4,163 | ||||||||||||||||||
Balance as of June 30, 2019 | 323,574,439 | $ | 1,699,292 | $ | 6,659,009 | $ | 3,954,492 | $ | (53,641 | ) | $ | (304,559 | ) | $ | 11,954,593 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, | |||||||
(Thousands of Dollars) | 2020 | 2019 | |||||
Operating Activities: | |||||||
Net Income | $ | 590,743 | $ | 343,891 | |||
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||
Depreciation | 476,727 | 434,032 | |||||
Deferred Income Taxes | 86,550 | 36,535 | |||||
Uncollectible Expense | 20,579 | 31,546 | |||||
Pension, SERP and PBOP Expense, Net | 5,441 | 13,227 | |||||
Pension and PBOP Contributions | (1,323 | ) | (6,648 | ) | |||
Regulatory (Under)/Over Recoveries, Net | (58,501 | ) | 23,830 | ||||
Amortization | 73,172 | 109,906 | |||||
Proceeds from DOE Spent Nuclear Fuel Litigation | — | 68,840 | |||||
Impairment of Northern Pass Transmission | — | 239,644 | |||||
Other | (40,764 | ) | (137,428 | ) | |||
Changes in Current Assets and Liabilities: | |||||||
Receivables and Unbilled Revenues, Net | (66,460 | ) | 6,357 | ||||
Fuel, Materials, Supplies and REC Inventory | 59,332 | 63,918 | |||||
Taxes Receivable/Accrued, Net | 120,717 | (6,883 | ) | ||||
Accounts Payable | (169,251 | ) | (156,077 | ) | |||
Other Current Assets and Liabilities, Net | (91,587 | ) | (140,103 | ) | |||
Net Cash Flows Provided by Operating Activities | 1,005,375 | 924,587 | |||||
Investing Activities: | |||||||
Investments in Property, Plant and Equipment | (1,400,198 | ) | (1,377,753 | ) | |||
Proceeds from Sales of Marketable Securities | 250,589 | 348,904 | |||||
Purchases of Marketable Securities | (239,698 | ) | (302,950 | ) | |||
Investments in Unconsolidated Affiliates, Net | (12,324 | ) | (265,955 | ) | |||
Other Investing Activities | 11,129 | 4,055 | |||||
Net Cash Flows Used in Investing Activities | (1,390,502 | ) | (1,593,699 | ) | |||
Financing Activities: | |||||||
Issuance of Common Shares, Net of Issuance Costs | 929,025 | 426,902 | |||||
Cash Dividends on Common Shares | (366,817 | ) | (323,346 | ) | |||
Cash Dividends on Preferred Stock | (3,759 | ) | (3,759 | ) | |||
Decrease in Notes Payable | (741,870 | ) | (181,000 | ) | |||
Repayment of Rate Reduction Bonds | (21,605 | ) | (30,727 | ) | |||
Issuance of Long-Term Debt | 940,000 | 1,000,000 | |||||
Retirement of Long-Term Debt | (270,456 | ) | (250,437 | ) | |||
Other Financing Activities | (19,534 | ) | (10,682 | ) | |||
Net Cash Flows Provided by Financing Activities | 444,984 | 626,951 | |||||
Net Increase/(Decrease) in Cash and Restricted Cash | 59,857 | (42,161 | ) | ||||
Cash and Restricted Cash - Beginning of Period | 117,063 | 209,324 | |||||
Cash and Restricted Cash - End of Period | $ | 176,920 | $ | 167,163 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars) | As of June 30, 2020 | As of December 31, 2019 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash | $ | 6,918 | $ | — | |||
Receivables, Net (net of allowance for uncollectible accounts of $136,665 and $97,348 as of June 30, 2020 and December 31, 2019, respectively) | 397,235 | 400,927 | |||||
Accounts Receivable from Affiliated Companies | 33,510 | 24,577 | |||||
Unbilled Revenues | 56,913 | 56,465 | |||||
Materials and Supplies | 52,176 | 50,700 | |||||
Regulatory Assets | 349,177 | 178,607 | |||||
Prepayments and Other Current Assets | 31,791 | 73,184 | |||||
Total Current Assets | 927,720 | 784,460 | |||||
Property, Plant and Equipment, Net | 9,913,257 | 9,625,765 | |||||
Deferred Debits and Other Assets: | |||||||
Regulatory Assets | 1,487,764 | 1,557,261 | |||||
Other Long-Term Assets | 248,761 | 217,705 | |||||
Total Deferred Debits and Other Assets | 1,736,525 | 1,774,966 | |||||
Total Assets | $ | 12,577,502 | $ | 12,185,191 | |||
LIABILITIES AND CAPITALIZATION | |||||||
Current Liabilities: | |||||||
Notes Payable to Eversource Parent | $ | 272,000 | $ | 63,800 | |||
Accounts Payable | 310,178 | 374,698 | |||||
Accounts Payable to Affiliated Companies | 102,289 | 97,793 | |||||
Obligations to Third Party Suppliers | 46,652 | 56,952 | |||||
Regulatory Liabilities | 155,239 | 82,763 | |||||
Derivative Liabilities | 70,145 | 67,804 | |||||
Other Current Liabilities | 126,724 | 132,339 | |||||
Total Current Liabilities | 1,083,227 | 876,149 | |||||
Deferred Credits and Other Liabilities: | |||||||
Accumulated Deferred Income Taxes | 1,291,833 | 1,244,551 | |||||
Regulatory Liabilities | 1,183,643 | 1,164,991 | |||||
Derivative Liabilities | 328,058 | 338,594 | |||||
Accrued Pension, SERP and PBOP | 354,520 | 391,159 | |||||
Other Long-Term Liabilities | 151,244 | 147,586 | |||||
Total Deferred Credits and Other Liabilities | 3,309,298 | 3,286,881 | |||||
Long-Term Debt | 3,518,121 | 3,518,136 | |||||
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 | 2,535,765 | 2,535,765 | |||||
Retained Earnings | 1,954,221 | 1,791,392 | |||||
Accumulated Other Comprehensive Income | 318 | 316 | |||||
Common Stockholder's Equity | 4,550,656 | 4,387,825 | |||||
Commitments and Contingencies (Note 9) | |||||||
Total Liabilities and Capitalization | $ | 12,577,502 | $ | 12,185,191 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Operating Revenues | $ | 817,421 | $ | 740,846 | $ | 1,717,124 | $ | 1,590,092 | |||||||
Operating Expenses: | |||||||||||||||
Purchased Power and Transmission | 315,398 | 246,540 | 690,115 | 566,373 | |||||||||||
Operations and Maintenance | 134,633 | 133,351 | 270,230 | 263,989 | |||||||||||
Depreciation | 79,718 | 74,555 | 158,152 | 147,844 | |||||||||||
Amortization of Regulatory (Liabilities)/Assets, Net | (5,698 | ) | 12,376 | 850 | 48,047 | ||||||||||
Energy Efficiency Programs | 32,347 | 20,780 | 67,826 | 46,768 | |||||||||||
Taxes Other Than Income Taxes | 79,867 | 86,465 | 162,855 | 178,463 | |||||||||||
Total Operating Expenses | 636,265 | 574,067 | 1,350,028 | 1,251,484 | |||||||||||
Operating Income | 181,156 | 166,779 | 367,096 | 338,608 | |||||||||||
Interest Expense | 38,722 | 36,972 | 76,605 | 72,754 | |||||||||||
Other Income, Net | 8,459 | 2,853 | 10,357 | 6,733 | |||||||||||
Income Before Income Tax Expense | 150,893 | 132,660 | 300,848 | 272,587 | |||||||||||
Income Tax Expense | 33,622 | 27,856 | 64,839 | 57,312 | |||||||||||
Net Income | $ | 117,271 | $ | 104,804 | $ | 236,009 | $ | 215,275 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net Income | $ | 117,271 | $ | 104,804 | $ | 236,009 | $ | 215,275 | |||||||
Other Comprehensive Income, Net of Tax: | |||||||||||||||
Qualified Cash Flow Hedging Instruments | (6 | ) | (7 | ) | (13 | ) | (13 | ) | |||||||
Changes in Unrealized Gains on Marketable Securities | 9 | 15 | 15 | 38 | |||||||||||
Other Comprehensive Income, Net of Tax | 3 | 8 | 2 | 25 | |||||||||||
Comprehensive Income | $ | 117,274 | $ | 104,812 | $ | 236,011 | $ | 215,300 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
6
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
For the Six Months Ended June 30, 2020 | ||||||||||||||||||||||
Common Stock | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Income | Total Common Stockholder's Equity | ||||||||||||||||||
(Thousands of Dollars, Except Stock Information) | Stock | Amount | ||||||||||||||||||||
Balance as of January 1, 2020 | 6,035,205 | $ | 60,352 | $ | 2,535,765 | $ | 1,791,392 | $ | 316 | $ | 4,387,825 | |||||||||||
Net Income | 118,738 | 118,738 | ||||||||||||||||||||
Dividends on Preferred Stock | (1,390 | ) | (1,390 | ) | ||||||||||||||||||
Dividends on Common Stock | (69,500 | ) | (69,500 | ) | ||||||||||||||||||
Adoption of New Accounting Standard (See Note 1B) | (900 | ) | (900 | ) | ||||||||||||||||||
Other Comprehensive Loss | (1 | ) | (1 | ) | ||||||||||||||||||
Balance as of March 31, 2020 | 6,035,205 | 60,352 | 2,535,765 | 1,838,340 | 315 | 4,434,772 | ||||||||||||||||
Net Income | 117,271 | 117,271 | ||||||||||||||||||||
Dividends on Preferred Stock | (1,390 | ) | (1,390 | ) | ||||||||||||||||||
Other Comprehensive Income | 3 | 3 | ||||||||||||||||||||
Balance as of June 30, 2020 | 6,035,205 | $ | 60,352 | $ | 2,535,765 | $ | 1,954,221 | $ | 318 | $ | 4,550,656 |
For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||
Common Stock | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Income | Total Common Stockholder's Equity | ||||||||||||||||||
(Thousands of Dollars, Except Stock Information) | Stock | Amount | ||||||||||||||||||||
Balance as of January 1, 2019 | 6,035,205 | $ | 60,352 | $ | 2,410,765 | $ | 1,727,899 | $ | 301 | $ | 4,199,317 | |||||||||||
Net Income | 110,471 | 110,471 | ||||||||||||||||||||
Dividends on Preferred Stock | (1,390 | ) | (1,390 | ) | ||||||||||||||||||
Dividends on Common Stock | (99,000 | ) | (99,000 | ) | ||||||||||||||||||
Other Comprehensive Income | 17 | 17 | ||||||||||||||||||||
Balance as of March 31, 2019 | 6,035,205 | 60,352 | 2,410,765 | 1,737,980 | 318 | 4,209,415 | ||||||||||||||||
Net Income | 104,804 | 104,804 | ||||||||||||||||||||
Dividends on Preferred Stock | (1,390 | ) | (1,390 | ) | ||||||||||||||||||
Dividends on Common Stock | (176,400 | ) | (176,400 | ) | ||||||||||||||||||
Other | 1 | 1 | ||||||||||||||||||||
Other Comprehensive Income | 8 | 8 | ||||||||||||||||||||
Balance as of June 30, 2019 | 6,035,205 | $ | 60,352 | $ | 2,410,765 | $ | 1,664,995 | $ | 326 | $ | 4,136,438 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
7
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, | |||||||
(Thousands of Dollars) | 2020 | 2019 | |||||
Operating Activities: | |||||||
Net Income | $ | 236,009 | $ | 215,275 | |||
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||
Depreciation | 158,152 | 147,844 | |||||
Deferred Income Taxes | 33,275 | 16,513 | |||||
Uncollectible Expense | 6,187 | 7,627 | |||||
Pension, SERP, and PBOP Expense, Net | 5,886 | 6,926 | |||||
Regulatory Underrecoveries, Net | (45,886 | ) | (40,460 | ) | |||
Amortization of Regulatory Assets, Net | 850 | 48,047 | |||||
Other | (43,064 | ) | (40,290 | ) | |||
Changes in Current Assets and Liabilities: | |||||||
Receivables and Unbilled Revenues, Net | (49,800 | ) | (37,101 | ) | |||
Taxes Receivable/Accrued, Net | 31,139 | 19,701 | |||||
Accounts Payable | (49,574 | ) | 5,443 | ||||
Other Current Assets and Liabilities, Net | (244 | ) | (3,941 | ) | |||
Net Cash Flows Provided by Operating Activities | 282,930 | 345,584 | |||||
Investing Activities: | |||||||
Investments in Property, Plant and Equipment | (407,175 | ) | (466,112 | ) | |||
Other Investing Activities | 146 | 551 | |||||
Net Cash Flows Used in Investing Activities | (407,029 | ) | (465,561 | ) | |||
Financing Activities: | |||||||
Cash Dividends on Common Stock | (69,500 | ) | (275,400 | ) | |||
Cash Dividends on Preferred Stock | (2,779 | ) | (2,779 | ) | |||
Issuance of Long-Term Debt | — | 300,000 | |||||
Retirement of Long-Term Debt | — | (250,000 | ) | ||||
Increase in Notes Payable to Eversource Parent | 208,200 | 259,400 | |||||
Other Financing Activities | (795 | ) | 4,237 | ||||
Net Cash Flows Provided by Financing Activities | 135,126 | 35,458 | |||||
Net Increase/(Decrease) in Cash and Restricted Cash | 11,027 | (84,519 | ) | ||||
Cash and Restricted Cash - Beginning of Period | 4,971 | 91,613 | |||||
Cash and Restricted Cash - End of Period | $ | 15,998 | $ | 7,094 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
8
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars) | As of June 30, 2020 | As of December 31, 2019 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash | $ | 1,158 | $ | 52 | |||
Receivables, Net (net of allowance for uncollectible accounts of $68,682 and $75,406 as of June 30, 2020 and December 31, 2019, respectively) | 387,124 | 346,785 | |||||
Accounts Receivable from Affiliated Companies | 29,010 | 29,914 | |||||
Unbilled Revenues | 44,927 | 37,482 | |||||
Materials, Supplies and REC Inventory | 70,461 | 124,060 | |||||
Regulatory Assets | 296,366 | 285,591 | |||||
Prepayments and Other Current Assets | 33,912 | 31,150 | |||||
Total Current Assets | 862,958 | 855,034 | |||||
Property, Plant and Equipment, Net | 9,773,248 | 9,472,770 | |||||
Deferred Debits and Other Assets: | |||||||
Regulatory Assets | 1,217,978 | 1,250,029 | |||||
Prepaid PBOP | 186,260 | 166,058 | |||||
Other Long-Term Assets | 140,294 | 144,368 | |||||
Total Deferred Debits and Other Assets | 1,544,532 | 1,560,455 | |||||
Total Assets | $ | 12,180,738 | $ | 11,888,259 | |||
LIABILITIES AND CAPITALIZATION | |||||||
Current Liabilities: | |||||||
Notes Payable | $ | 142,000 | $ | 10,500 | |||
Notes Payable to Eversource Parent | 38,100 | 30,300 | |||||
Long-Term Debt – Current Portion | — | 95,000 | |||||
Accounts Payable | 262,249 | 363,691 | |||||
Accounts Payable to Affiliated Companies | 116,682 | 96,307 | |||||
Obligations to Third Party Suppliers | 97,289 | 108,827 | |||||
Renewable Portfolio Standards Compliance Obligations | 66,543 | 150,429 | |||||
Regulatory Liabilities | 185,262 | 209,180 | |||||
Other Current Liabilities | 55,472 | 71,333 | |||||
Total Current Liabilities | 963,597 | 1,135,567 | |||||
Deferred Credits and Other Liabilities: | |||||||
Accumulated Deferred Income Taxes | 1,399,292 | 1,357,265 | |||||
Regulatory Liabilities | 1,527,194 | 1,516,585 | |||||
Accrued Pension and SERP | 96,979 | 108,243 | |||||
Other Long-Term Liabilities | 347,882 | 320,629 | |||||
Total Deferred Credits and Other Liabilities | 3,371,347 | 3,302,722 | |||||
Long-Term Debt | 3,642,558 | 3,247,086 | |||||
Preferred Stock Not Subject to Mandatory Redemption | 43,000 | 43,000 | |||||
Common Stockholder's Equity: | |||||||
Common Stock | — | — | |||||
Capital Surplus, Paid In | 1,813,442 | 1,813,442 | |||||
Retained Earnings | 2,346,504 | 2,346,287 | |||||
Accumulated Other Comprehensive Income | 290 | 155 | |||||
Common Stockholder's Equity | 4,160,236 | 4,159,884 | |||||
Commitments and Contingencies (Note 9) | |||||||
Total Liabilities and Capitalization | $ | 12,180,738 | $ | 11,888,259 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Operating Revenues | $ | 660,971 | $ | 681,893 | $ | 1,394,804 | $ | 1,479,505 | |||||||
Operating Expenses: | |||||||||||||||
Purchased Power and Transmission | 192,304 | 228,397 | 434,742 | 558,501 | |||||||||||
Operations and Maintenance | 115,831 | 108,924 | 238,149 | 221,887 | |||||||||||
Depreciation | 79,520 | 73,055 | 157,865 | 145,639 | |||||||||||
Amortization of Regulatory Assets, Net | 19,604 | 23,184 | 46,612 | 45,768 | |||||||||||
Energy Efficiency Programs | 56,756 | 65,904 | 125,423 | 142,633 | |||||||||||
Taxes Other Than Income Taxes | 50,583 | 48,226 | 99,306 | 93,047 | |||||||||||
Total Operating Expenses | 514,598 | 547,690 | 1,102,097 | 1,207,475 | |||||||||||
Operating Income | 146,373 | 134,203 | 292,707 | 272,030 | |||||||||||
Interest Expense | 32,955 | 28,238 | 63,972 | 56,120 | |||||||||||
Other Income, Net | 13,112 | 10,657 | 25,350 | 21,743 | |||||||||||
Income Before Income Tax Expense | 126,530 | 116,622 | 254,085 | 237,653 | |||||||||||
Income Tax Expense | 29,062 | 26,888 | 56,228 | 53,906 | |||||||||||
Net Income | $ | 97,468 | $ | 89,734 | $ | 197,857 | $ | 183,747 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net Income | $ | 97,468 | $ | 89,734 | $ | 197,857 | $ | 183,747 | |||||||
Other Comprehensive Income, Net of Tax: | |||||||||||||||
Changes in Funded Status of SERP Benefit Plan | (43 | ) | 1 | (86 | ) | 2 | |||||||||
Qualified Cash Flow Hedging Instruments | 109 | 109 | 218 | 219 | |||||||||||
Changes in Unrealized Gains on Marketable Securities | 2 | 4 | 3 | 10 | |||||||||||
Other Comprehensive Income, Net of Tax | 68 | 114 | 135 | 231 | |||||||||||
Comprehensive Income | $ | 97,536 | $ | 89,848 | $ | 197,992 | $ | 183,978 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
For the Six Months Ended June 30, 2020 | ||||||||||||||||||||||
Common Stock | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Income | Total Common Stockholder's Equity | ||||||||||||||||||
(Thousands of Dollars, Except Stock Information) | Stock | Amount | ||||||||||||||||||||
Balance as of January 1, 2020 | 200 | $ | — | $ | 1,813,442 | $ | 2,346,287 | $ | 155 | $ | 4,159,884 | |||||||||||
Net Income | 100,390 | 100,390 | ||||||||||||||||||||
Dividends on Preferred Stock | (490 | ) | (490 | ) | ||||||||||||||||||
Dividends on Common Stock | (196,500 | ) | (196,500 | ) | ||||||||||||||||||
Adoption of New Accounting Standard (See Note 1B) | (161 | ) | (161 | ) | ||||||||||||||||||
Other Comprehensive Income | 67 | 67 | ||||||||||||||||||||
Balance as of March 31, 2020 | 200 | — | 1,813,442 | 2,249,526 | 222 | 4,063,190 | ||||||||||||||||
Net Income | 97,468 | 97,468 | ||||||||||||||||||||
Dividends on Preferred Stock | (490 | ) | (490 | ) | ||||||||||||||||||
Other Comprehensive Income | 68 | 68 | ||||||||||||||||||||
Balance as of June 30, 2020 | 200 | $ | — | $ | 1,813,442 | $ | 2,346,504 | $ | 290 | $ | 4,160,236 |
For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||
Common Stock | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Loss | Total Common Stockholder's Equity | ||||||||||||||||||
(Thousands of Dollars, Except Stock Information) | Stock | Amount | ||||||||||||||||||||
Balance as of January 1, 2019 | 200 | $ | — | $ | 1,633,442 | $ | 2,098,091 | $ | (1,378 | ) | $ | 3,730,155 | ||||||||||
Net Income | 94,014 | 94,014 | ||||||||||||||||||||
Dividends on Preferred Stock | (490 | ) | (490 | ) | ||||||||||||||||||
Dividends on Common Stock | (60,600 | ) | (60,600 | ) | ||||||||||||||||||
Capital Contributions from Eversource Parent | 20,000 | 20,000 | ||||||||||||||||||||
Other Comprehensive Income | 117 | 117 | ||||||||||||||||||||
Balance as of March 31, 2019 | 200 | — | 1,653,442 | 2,131,015 | (1,261 | ) | 3,783,196 | |||||||||||||||
Net Income | 89,734 | 89,734 | ||||||||||||||||||||
Dividends on Preferred Stock | (490 | ) | (490 | ) | ||||||||||||||||||
Dividends on Common Stock | (121,200 | ) | (121,200 | ) | ||||||||||||||||||
Other Comprehensive Income | 114 | 114 | ||||||||||||||||||||
Balance as of June 30, 2019 | 200 | $ | — | $ | 1,653,442 | $ | 2,099,059 | $ | (1,147 | ) | $ | 3,751,354 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, | |||||||
(Thousands of Dollars) | 2020 | 2019 | |||||
Operating Activities: | |||||||
Net Income | $ | 197,857 | $ | 183,747 | |||
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||
Depreciation | 157,865 | 145,639 | |||||
Deferred Income Taxes | 26,062 | 11,603 | |||||
Uncollectible Expense | 6,826 | 11,605 | |||||
Pension, SERP and PBOP Income, Net | (9,296 | ) | (7,052 | ) | |||
Pension and PBOP Contributions | — | (3,007 | ) | ||||
Regulatory (Under)/Over Recoveries, Net | (59,685 | ) | 17,063 | ||||
Amortization of Regulatory Assets, Net | 46,612 | 45,768 | |||||
Other | (12,534 | ) | (36,973 | ) | |||
Changes in Current Assets and Liabilities: | |||||||
Receivables and Unbilled Revenues, Net | (36,627 | ) | (6,769 | ) | |||
Materials, Supplies and REC Inventory | 53,599 | 49,688 | |||||
Taxes Receivable/Accrued, Net | 5,279 | 25,572 | |||||
Accounts Payable | (49,881 | ) | (82,326 | ) | |||
Other Current Assets and Liabilities, Net | (113,276 | ) | (103,054 | ) | |||
Net Cash Flows Provided by Operating Activities | 212,801 | 251,504 | |||||
Investing Activities: | |||||||
Investments in Property, Plant and Equipment | (447,545 | ) | (418,571 | ) | |||
Other Investing Activities | 40 | 41 | |||||
Net Cash Flows Used in Investing Activities | (447,505 | ) | (418,530 | ) | |||
Financing Activities: | |||||||
Cash Dividends on Common Stock | (196,500 | ) | (181,800 | ) | |||
Cash Dividends on Preferred Stock | (980 | ) | (980 | ) | |||
Issuance of Long-Term Debt | 400,000 | 400,000 | |||||
Retirement of Long-Term Debt | (95,000 | ) | — | ||||
Capital Contributions from Eversource Parent | — | 20,000 | |||||
Increase in Notes Payable to Eversource Parent | 7,800 | 40,300 | |||||
Increase/(Decrease) in Notes Payable | 131,500 | (115,500 | ) | ||||
Other Financing Activities | (4,946 | ) | (3,287 | ) | |||
Net Cash Flows Provided by Financing Activities | 241,874 | 158,733 | |||||
Net Increase/(Decrease) in Cash and Restricted Cash | 7,170 | (8,293 | ) | ||||
Cash and Restricted Cash - Beginning of Period | 6,312 | 14,659 | |||||
Cash and Restricted Cash - End of Period | $ | 13,482 | $ | 6,366 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars) | As of June 30, 2020 | As of December 31, 2019 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash | $ | 77 | $ | 413 | |||
Receivables, Net (net of allowance for uncollectible accounts of $11,777 and $10,497 as of June 30, 2020 and December 31, 2019, respectively) | 105,902 | 99,934 | |||||
Accounts Receivable from Affiliated Companies | 5,001 | 6,763 | |||||
Unbilled Revenues | 45,837 | 48,146 | |||||
Materials, Supplies and REC Inventory | 22,745 | 24,957 | |||||
Regulatory Assets | 110,267 | 84,053 | |||||
Special Deposits | 30,895 | 32,513 | |||||
Prepayments and Other Current Assets | 27,682 | 19,431 | |||||
Total Current Assets | 348,406 | 316,210 | |||||
Property, Plant and Equipment, Net | 3,258,620 | 3,129,506 | |||||
Deferred Debits and Other Assets: | |||||||
Regulatory Assets | 838,931 | 861,672 | |||||
Other Long-Term Assets | 38,400 | 43,270 | |||||
Total Deferred Debits and Other Assets | 877,331 | 904,942 | |||||
Total Assets | $ | 4,484,357 | $ | 4,350,658 | |||
LIABILITIES AND CAPITALIZATION | |||||||
Current Liabilities: | |||||||
Notes Payable to Eversource Parent | $ | 119,300 | $ | 27,000 | |||
Long-Term Debt – Current Portion | 122,000 | — | |||||
Rate Reduction Bonds – Current Portion | 43,210 | 43,210 | |||||
Accounts Payable | 133,686 | 127,081 | |||||
Accounts Payable to Affiliated Companies | 38,136 | 37,946 | |||||
Regulatory Liabilities | 83,588 | 65,766 | |||||
Accrued Interest | 18,585 | 19,138 | |||||
Other Current Liabilities | 26,958 | 32,736 | |||||
Total Current Liabilities | 585,463 | 352,877 | |||||
Deferred Credits and Other Liabilities: | |||||||
Accumulated Deferred Income Taxes | 518,097 | 506,212 | |||||
Regulatory Liabilities | 405,773 | 413,381 | |||||
Accrued Pension, SERP and PBOP | 148,047 | 157,638 | |||||
Other Long-Term Liabilities | 37,886 | 37,075 | |||||
Total Deferred Credits and Other Liabilities | 1,109,803 | 1,114,306 | |||||
Long-Term Debt | 829,645 | 951,620 | |||||
Rate Reduction Bonds | 518,517 | 540,122 | |||||
Common Stockholder's Equity: | |||||||
Common Stock | — | — | |||||
Capital Surplus, Paid In | 903,134 | 903,134 | |||||
Retained Earnings | 538,939 | 490,306 | |||||
Accumulated Other Comprehensive Loss | (1,144 | ) | (1,707 | ) | |||
Common Stockholder's Equity | 1,440,929 | 1,391,733 | |||||
Commitments and Contingencies (Note 9) | |||||||
Total Liabilities and Capitalization | $ | 4,484,357 | $ | 4,350,658 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
13
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Operating Revenues | $ | 255,224 | $ | 240,900 | $ | 531,592 | $ | 517,335 | |||||||
Operating Expenses: | |||||||||||||||
Purchased Power and Transmission | 82,560 | 85,768 | 176,698 | 199,299 | |||||||||||
Operations and Maintenance | 54,017 | 52,729 | 101,146 | 105,359 | |||||||||||
Depreciation | 24,750 | 23,261 | 49,084 | 46,180 | |||||||||||
Amortization of Regulatory Assets, Net | 11,563 | 5,857 | 31,673 | 19,523 | |||||||||||
Energy Efficiency Programs | 8,786 | 6,215 | 18,150 | 12,929 | |||||||||||
Taxes Other Than Income Taxes | 20,457 | 20,725 | 40,158 | 38,037 | |||||||||||
Total Operating Expenses | 202,133 | 194,555 | 416,909 | 421,327 | |||||||||||
Operating Income | 53,091 | 46,345 | 114,683 | 96,008 | |||||||||||
Interest Expense | 14,607 | 13,909 | 29,087 | 28,276 | |||||||||||
Other Income, Net | 3,626 | 2,984 | 6,817 | 10,006 | |||||||||||
Income Before Income Tax Expense | 42,110 | 35,420 | 92,413 | 77,738 | |||||||||||
Income Tax Expense | 10,478 | 8,568 | 21,180 | 18,104 | |||||||||||
Net Income | $ | 31,632 | $ | 26,852 | $ | 71,233 | $ | 59,634 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(Thousands of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net Income | $ | 31,632 | $ | 26,852 | $ | 71,233 | $ | 59,634 | |||||||
Other Comprehensive Income, Net of Tax: | |||||||||||||||
Qualified Cash Flow Hedging Instruments | 269 | 269 | 538 | 538 | |||||||||||
Changes in Unrealized Gains on Marketable Securities | 16 | 27 | 25 | 65 | |||||||||||
Other Comprehensive Income, Net of Tax | 285 | 296 | 563 | 603 | |||||||||||
Comprehensive Income | $ | 31,917 | $ | 27,148 | $ | 71,796 | $ | 60,237 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
14
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
For the Six Months Ended June 30, 2020 | ||||||||||||||||||||||
Common Stock | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Loss | Total Common Stockholder's Equity | ||||||||||||||||||
(Thousands of Dollars, Except Stock Information) | Stock | Amount | ||||||||||||||||||||
Balance as of January 1, 2020 | 301 | $ | — | $ | 903,134 | $ | 490,306 | $ | (1,707 | ) | $ | 1,391,733 | ||||||||||
Net Income | 39,601 | 39,601 | ||||||||||||||||||||
Dividends on Common Stock | (22,300 | ) | (22,300 | ) | ||||||||||||||||||
Adoption of New Accounting Standard (See Note 1B) | (300 | ) | (300 | ) | ||||||||||||||||||
Other Comprehensive Income | 278 | 278 | ||||||||||||||||||||
Balance as of March 31, 2020 | 301 | — | 903,134 | 507,307 | (1,429 | ) | 1,409,012 | |||||||||||||||
Net Income | 31,632 | 31,632 | ||||||||||||||||||||
Other Comprehensive Income | 285 | 285 | ||||||||||||||||||||
Balance as of June 30, 2020 | 301 | $ | — | $ | 903,134 | $ | 538,939 | $ | (1,144 | ) | $ | 1,440,929 |
For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||
Common Stock | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Loss | Total Common Stockholder's Equity | ||||||||||||||||||
(Thousands of Dollars, Except Stock Information) | Stock | Amount | ||||||||||||||||||||
Balance as of January 1, 2019 | 301 | $ | — | $ | 678,134 | $ | 627,258 | $ | (2,851 | ) | $ | 1,302,541 | ||||||||||
Net Income | 32,781 | 32,781 | ||||||||||||||||||||
Dividends on Common Stock | (19,000 | ) | (19,000 | ) | ||||||||||||||||||
Other Comprehensive Income | 307 | 307 | ||||||||||||||||||||
Balance as of March 31, 2019 | 301 | — | 678,134 | 641,039 | (2,544 | ) | 1,316,629 | |||||||||||||||
Net Income | 26,852 | 26,852 | ||||||||||||||||||||
Dividends on Common Stock | (214,000 | ) | (214,000 | ) | ||||||||||||||||||
Other Comprehensive Income | 296 | 296 | ||||||||||||||||||||
Balance as of June 30, 2019 | 301 | $ | — | $ | 678,134 | $ | 453,891 | $ | (2,248 | ) | $ | 1,129,777 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
15
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, | |||||||
(Thousands of Dollars) | 2020 | 2019 | |||||
Operating Activities: | |||||||
Net Income | $ | 71,233 | $ | 59,634 | |||
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||
Depreciation | 49,084 | 46,180 | |||||
Deferred Income Taxes | 9,193 | 12,030 | |||||
Uncollectible Expense | 1,255 | 3,143 | |||||
Regulatory Underrecoveries, Net | (31,159 | ) | (29,377 | ) | |||
Amortization of Regulatory Assets, Net | 31,673 | 19,523 | |||||
Other | (5,191 | ) | (10,524 | ) | |||
Changes in Current Assets and Liabilities: | |||||||
Receivables and Unbilled Revenues, Net | (3,237 | ) | 7,658 | ||||
Materials, Supplies and REC Inventory | 2,212 | 14,225 | |||||
Taxes Receivable/Accrued, Net | (5,790 | ) | 18,029 | ||||
Accounts Payable | 8,219 | (1,159 | ) | ||||
Other Current Assets and Liabilities, Net | (8,673 | ) | (17,620 | ) | |||
Net Cash Flows Provided by Operating Activities | 118,819 | 121,742 | |||||
Investing Activities: | |||||||
Investments in Property, Plant and Equipment | (169,239 | ) | (132,791 | ) | |||
Other Investing Activities | 250 | 743 | |||||
Net Cash Flows Used in Investing Activities | (168,989 | ) | (132,048 | ) | |||
Financing Activities: | |||||||
Cash Dividends on Common Stock | (22,300 | ) | (233,000 | ) | |||
Issuance of Long-Term Debt | — | 300,000 | |||||
Repayment of Rate Reduction Bonds | (21,605 | ) | (30,727 | ) | |||
Increase/(Decrease) in Notes Payable to Eversource Parent | 92,300 | (36,900 | ) | ||||
Other Financing Activities | (43 | ) | (2,703 | ) | |||
Net Cash Flows Provided by/(Used in) Financing Activities | 48,352 | (3,330 | ) | ||||
Net Decrease in Cash and Restricted Cash | (1,818 | ) | (13,636 | ) | |||
Cash and Restricted Cash - Beginning of Period | 36,688 | 52,723 | |||||
Cash and Restricted Cash - End of Period | $ | 34,870 | $ | 39,087 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
16
EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
COMBINED NOTES TO CONDENSED 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 financial statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
Eversource Energy is a public utility holding company primarily engaged, through its wholly-owned regulated utility subsidiaries, in the energy delivery business. Eversource Energy's wholly-owned regulated utility subsidiaries consist of CL&P, NSTAR Electric and PSNH (electric utilities), Yankee Gas and NSTAR Gas (natural gas utilities) and Aquarion (water utilities). Eversource provides energy delivery and/or water service to approximately 4000000 electric, natural gas and water customers through 8 regulated utilities in Connecticut, Massachusetts and New Hampshire.
The unaudited condensed consolidated financial statements of Eversource, 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 Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P are herein collectively referred to as the "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 Combined Notes to Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of the Eversource 2019 Form 10-K, which was filed with the SEC on February 27, 2020. 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 the 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 Eversource's, CL&P's, NSTAR Electric's and PSNH's financial position as of June 30, 2020 and December 31, 2019, and the results of operations, comprehensive income and common shareholders' equity for the three and six months ended June 30, 2020 and 2019, and the cash flows for the six months ended June 30, 2020 and 2019. The results of operations and comprehensive income for the three and six months ended June 30, 2020 and 2019 and the cash flows for the six months ended June 30, 2020 and 2019 are not necessarily indicative of the results expected for a full year.
Eversource consolidates the operations of CYAPC and YAEC, both of which are inactive regional nuclear power companies engaged in the long-term storage of their spent nuclear fuel. Eversource consolidates CYAPC and YAEC because CL&P's, NSTAR Electric's and PSNH's combined ownership and voting interests in each of these entities is greater than 50 percent. Intercompany transactions between CL&P, NSTAR Electric, PSNH and the CYAPC and YAEC companies have been eliminated in consolidation of the Eversource financial statements.
Eversource holds several equity ownership interests that are not consolidated and are accounted for under the equity method.
Eversource's utility subsidiaries' electric, natural gas and water distribution and transmission businesses are subject to rate-regulation that is based on cost recovery and meets the criteria for application of accounting guidance for entities with rate-regulated operations, which considers the effect of regulation on the differences in the timing of the recognition of certain revenues and expenses from those of other businesses and industries. See Note 2, "Regulatory Accounting," for further information.
COVID-19 has adversely affected workers and the economy and caused significant volatility in the financial markets. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we continue to closely monitor how COVID-19 related developments affect Eversource. As of the date of our filing and based on available information, we have not experienced, nor are we able to predict, significant impacts directly related to the pandemic that could adversely affect our current or future operations, financial position, results of operations, and cash flows. The extent of the impact to us in the future will vary and depend in large part on the duration, scope and severity of the pandemic, and the resulting impact on economic, health care and capital market conditions.
17
Our customer receivable balances and uncollectible accounts have not been materially adversely impacted by COVID-19. We believe that we are developing successful mechanisms with our state regulatory commissions that allow, or will allow, us to recover our incremental costs associated with COVID-19, which include uncollectible customer receivable expenses, while balancing the impact on our customers’ bills and our operating cash flows. See Note 1C, "Summary of Significant Accounting Policies - Allowance for Uncollectible Accounts," for further discussion of our evaluation of the allowance for doubtful accounts as of June 30, 2020 in light of the COVID-19 pandemic.
An extended economic slowdown could result in lower demand for electricity, natural gas and/or water by our commercial and industrial customers. However, fluctuations in retail sales volumes for CL&P, NSTAR Electric, Yankee Gas, NSTAR Gas and our Connecticut water distribution business are not expected to materially impact earnings due to their respective state regulatory commission-approved distribution revenue decoupling mechanisms.
As of June 30, 2020, we did not identify indicators or triggering events for impairments to our goodwill, long-lived assets, available-for-sale debt securities, or equity method investment carrying values.
Certain reclassifications of prior period data were made in the accompanying financial statements to conform to the current period presentation.
B. Accounting Standards
Accounting Standards Issued but Not Yet Effective: In December 2019, the FASB issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which eliminates certain exceptions to the general principles of current income tax guidance in ASC 740 and simplifies and improves consistency in application of that income tax guidance through clarifications of and amendments to ASC 740. The guidance is effective in the first quarter of 2021. The ASU is not expected to have a material impact on the financial statements of Eversource, CL&P, NSTAR Electric and PSNH.
Accounting Standards Recently Adopted: On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides a model for recognizing credit losses on financial instruments based on an estimate of current expected losses, requiring immediate recognition of credit losses expected over the life of a financial instrument. The Company determined the impacts of this standard on the allowance for credit losses on its financial instruments, primarily accounts receivable. As of January 1, 2020, the Company recorded increases to the allowance for uncollectible accounts for late fees and other receivable amounts of $1.6 million, $0.9 million, $0.2 million and $0.3 million at Eversource, CL&P, NSTAR Electric and PSNH, respectively. The impact to retained earnings, net of tax, was $1.5 million, $0.9 million, $0.2 million and $0.3 million at Eversource, CL&P, NSTAR Electric and PSNH, respectively.
The Company also adjusted the allowance for uncollectible amounts of hardship receivables and other low-income assistance programs, which are ultimately collectible in rates at specified points in time under approved regulatory mechanisms. The impact on the allowance, which was offset in other long-term assets on the balance sheets, was an increase of $22.2 million and $21.3 million at Eversource and CL&P, respectively, and a decrease of $1.5 million at NSTAR Electric. See Note 1C, “Summary of Significant Accounting Policies - Allowance for Uncollectible Accounts,” for further information.
The Company adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment as of January 1, 2020. The ASU simplified the accounting for goodwill impairment by removing a complex step in the goodwill impairment test. Under the guidance, goodwill impairment is measured as the amount by which its carrying value exceeds its fair value. The ASU is not expected to have an impact on the financial statements of Eversource.
On January 1, 2020, the Company adopted ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU aligned the requirements for capitalizing costs incurred to implement a cloud computing arrangement with existing internal-use software guidance. The prospective implementation of this standard did not have any impact on the financial statements of Eversource, CL&P, NSTAR Electric or PSNH for the period ending June 30, 2020.
On January 1, 2020, the Company prospectively adopted ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modified fair value disclosure requirements. The standard includes new disclosure requirements for Level 3 unobservable inputs and eliminated the requirement to disclose certain information relating to transfers between levels. The modified disclosures are included in Note 1D, “Summary of Significant Accounting Policies - Fair Value Measurements,” and Note 4, “Derivative Instruments.”
C. Allowance for Uncollectible Accounts
Receivables, Net on the balance sheets primarily includes trade receivables from retail customers and customers related to wholesale transmission contracts, wholesale market sales, sales of RECs and property rentals. Receivables, Net also includes customer receivables for the purchase of electricity from a competitive third party supplier, the current portion of customer energy efficiency loans, property damage receivables and other miscellaneous receivables. There is no material concentration of receivables. Receivables are recorded at amortized cost, net of a credit loss provision (or allowance for uncollectible accounts).
Receivables are presented net of expected credit losses at estimated net realizable value by maintaining an allowance for uncollectible accounts. Effective January 1, 2020, the current expected credit loss (CECL) model was applied to receivables for purposes of calculating the allowance for uncollectible accounts. This model is based on expected losses and results in the recognition of estimated expected credit losses, including uncollectible amounts for both billed and unbilled revenues, over the life of the receivable at the time a receivable is recorded.
18
The allowance for uncollectible accounts is determined based upon a variety of judgments and factors, including the application of an estimated uncollectible percentage to each receivable aging category. Factors in determining credit loss include historical collection, write-off experience, and management's assessment of collectibility from customers, including current conditions, reasonable forecasts, and expectations of future collectibility and collection efforts. Management continuously assesses the collectibility of receivables and adjusts estimates based on actual experience and future expectations based on economic indicators, collection efforts and other factors. Management also monitors the aging analysis of receivables to determine if there are changes in the collections of accounts receivable. Receivable balances are written off against the allowance for uncollectible accounts when the customer accounts are no longer in service and these balances are deemed to be uncollectible.
As of June 30, 2020, management evaluated the adequacy of the allowance for uncollectible accounts in light of the COVID-19 pandemic and the related economic downturn. This evaluation included an analysis of collection and customer payment trends in 2020, economic conditions, flexible payment plans and financial hardship arrearage management programs being offered to customers, and the impacts of federal governmental pandemic relief programs for our customers and the expansion of unemployment benefit initiatives, which help to mitigate the potential for increasing customer account delinquencies. Additionally, management considered past economic declines and corresponding uncollectible reserves as part of the current assessment. The collection analysis has shown that our operating companies have experienced some lower cash collections from customers because of the moratorium on disconnections and the economic slowdown resulting from the COVID-19 pandemic, primarily at our natural gas distribution businesses driven by the seasonality of their usage patterns. However, overall it is not a significant reduction in customer payments. Based upon the evaluation performed, in the second quarter of 2020, management increased the allowance for uncollectible accounts by $4.1 million at our natural gas distribution segment. Management concluded that the reserve balance as of June 30, 2020 adequately reflected the collection risk and net realizable value for Eversource’s receivables. Management will continue to evaluate the adequacy of the uncollectible allowance in future reporting periods based on an ongoing assessment of accounts receivable collections, delinquency statistics, and analysis of aging-based quantitative assessments.
The PURA allows CL&P and Yankee Gas to accelerate the recovery of accounts receivable balances attributable to qualified customers under financial or medical duress (uncollectible hardship accounts receivable) outstanding for greater than 180 days and 90 days, respectively. The DPU allows NSTAR Electric and NSTAR Gas to recover in rates amounts associated with certain uncollectible hardship accounts receivable. These uncollectible hardship customer account balances are included in Regulatory Assets or Other Long-Term Assets on the balance sheets. Hardship customers are protected from shut-off in certain circumstances, and historical collection experience has reflected a higher default risk as compared to the rest of the receivable population. As a result of the adoption of ASU 2016-13, management aligned the allowance for uncollectible hardship accounts across all regulatory jurisdictions, using a higher credit risk profile for this pool of trade receivables as compared to non-hardship receivables. Implementation impacts of the accounting standard on the allowance for uncollectible hardship accounts are reflected in the rollforward of the uncollectible allowance in the table below. The allowance for uncollectible hardship accounts is included in the total uncollectible allowance balance.
The total allowance for uncollectible accounts is included in Receivables, Net on the balance sheets. The activity in the allowance for uncollectible accounts by portfolio segment is as follows:
For the Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||
Eversource | CL&P | NSTAR Electric | PSNH | ||||||||||||||||||||||||||||||||||||
(Millions of Dollars) | Hardship Accounts | Retail (Non-Hardship), Wholesale, and Other Receivables | Total Allowance | Hardship Accounts | Retail (Non-Hardship), Wholesale and Other Receivables | Total Allowance | Hardship Accounts | Retail (Non-Hardship), Wholesale, and Other Receivables | Total Allowance | Total Allowance | |||||||||||||||||||||||||||||
Beginning Balance | $ | 143.3 | $ | 81.5 | $ | 224.8 | $ | 80.1 | $ | 17.2 | $ | 97.3 | $ | 43.9 | $ | 31.5 | $ | 75.4 | $ | 10.5 | |||||||||||||||||||
ASU 2016-13 Implementation Impact on January 1, 2020 | 21.6 | 2.2 | 23.8 | 21.3 | 0.9 | 22.2 | (1.6 | ) | 0.3 | (1.3 | ) | 0.3 | |||||||||||||||||||||||||||
Uncollectible Expense (1) | — | 20.6 | 20.6 | — | 6.2 | 6.2 | — | 6.8 | 6.8 | 1.3 | |||||||||||||||||||||||||||||
Uncollectible Costs Deferred (2) | 18.9 | 17.0 | 35.9 | 21.5 | 3.4 | 24.9 | (7.1 | ) | 6.9 | (0.2 | ) | 2.4 | |||||||||||||||||||||||||||
Write-Offs | (9.1 | ) | (33.4 | ) | (42.5 | ) | (7.4 | ) | (9.5 | ) | (16.9 | ) | (0.6 | ) | (14.2 | ) | (14.8 | ) | (3.0 | ) | |||||||||||||||||||
Recoveries Collected | 0.8 | 6.6 | 7.4 | 0.8 | 2.2 | 3.0 | — | 2.8 | 2.8 | 0.3 | |||||||||||||||||||||||||||||
Ending Balance | $ | 175.5 | $ | 94.5 | $ | 270.0 | $ | 116.3 | $ | 20.4 | $ | 136.7 | $ | 34.6 | $ | 34.1 | $ | 68.7 | $ | 11.8 |
(1) Uncollectible expense associated with customer and other accounts receivable is included in Operations and Maintenance expense on the statements of income. For the three and six months ended June 30, 2019, uncollectible expense included in Operations and Maintenance Expense was $13.0 million and $31.5 million for Eversource, $3.5 million and $7.6 million for CL&P, $5.7 million and $11.6 million for NSTAR Electric and $1.4 million and $3.1 million for PSNH, respectively.
(2) The current period provision for expected credit losses for hardship accounts and other customer receivables, including uncollectible amounts related to COVID-19, that are ultimately recovered in rates is deferred as a regulatory cost on the balance sheets.
19
D. Fair Value Measurements
Fair value measurement guidance is applied to derivative contracts that are not elected or designated as "normal purchases" or "normal sales" (normal) and to the marketable securities held in trusts. Fair value measurement guidance is also applied to valuations of the investments used to calculate the funded status of pension and PBOP plans, the nonrecurring fair value measurements of nonfinancial assets such as goodwill, long-lived assets and AROs, and the estimated fair value of preferred stock, long-term debt and RRBs.
Fair Value Hierarchy: In measuring fair value, Eversource uses observable market data when available in order to minimize 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. Eversource evaluates the classification of assets and liabilities measured at fair value on a quarterly basis. 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.
Uncategorized - Investments that are measured at net asset value are not categorized within the fair value hierarchy.
Determination of Fair Value: The valuation techniques and inputs used in Eversource's fair value measurements are described in Note 4, "Derivative Instruments," Note 5, "Marketable Securities," and Note 10, "Fair Value of Financial Instruments," to the financial statements.
E. Other Income, Net
The components of Other Income, Net on the statements of income were as follows:
For the Three Months Ended | |||||||||||||||||||||||||||||||
June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Pension, SERP and PBOP Non-Service Income/(Expense) Components | $ | 10.7 | $ | 0.9 | $ | 7.1 | $ | 1.6 | $ | 5.8 | $ | (0.9 | ) | $ | 5.4 | $ | 1.5 | ||||||||||||||
AFUDC Equity | 10.8 | 3.9 | 5.3 | 1.2 | 13.1 | 3.2 | 5.1 | 0.9 | |||||||||||||||||||||||
Equity in Earnings of Unconsolidated Affiliates (1) | 5.9 | — | 0.1 | — | 25.9 | 0.1 | 0.2 | — | |||||||||||||||||||||||
Investment Income/(Loss) | 1.8 | 2.2 | — | 0.3 | (0.6 | ) | (0.1 | ) | (0.3 | ) | (0.1 | ) | |||||||||||||||||||
Interest Income | 1.0 | 1.4 | 0.5 | 0.5 | 1.3 | 0.5 | 0.2 | 0.7 | |||||||||||||||||||||||
Other | — | 0.1 | 0.1 | — | 0.4 | 0.1 | 0.1 | — | |||||||||||||||||||||||
Total Other Income, Net | $ | 30.2 | $ | 8.5 | $ | 13.1 | $ | 3.6 | $ | 45.9 | $ | 2.9 | $ | 10.7 | $ | 3.0 | |||||||||||||||
For the Six Months Ended | |||||||||||||||||||||||||||||||
June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Pension, SERP and PBOP Non-Service Income/(Expense) Components | $ | 23.4 | $ | 2.1 | $ | 15.0 | $ | 3.5 | $ | 13.1 | $ | (1.6 | ) | $ | 12.4 | $ | 2.0 | ||||||||||||||
AFUDC Equity | 21.4 | 7.9 | 10.3 | 2.6 | 24.1 | 5.8 | 9.1 | 1.1 | |||||||||||||||||||||||
Equity in Earnings of Unconsolidated Affiliates (1) | 9.8 | — | 0.2 | — | 30.9 | 0.1 | 0.4 | — | |||||||||||||||||||||||
Investment Income/(Loss) | (2.5 | ) | (1.3 | ) | (1.3 | ) | (0.2 | ) | 0.6 | 1.7 | (0.6 | ) | 0.2 | ||||||||||||||||||
Interest Income | 1.8 | 1.6 | 0.7 | 0.8 | 7.8 | 0.8 | 0.4 | 6.6 | |||||||||||||||||||||||
Other | 0.4 | 0.1 | 0.5 | 0.1 | 0.4 | (0.1 | ) | — | 0.1 | ||||||||||||||||||||||
Total Other Income, Net | $ | 54.3 | $ | 10.4 | $ | 25.4 | $ | 6.8 | $ | 76.9 | $ | 6.7 | $ | 21.7 | $ | 10.0 |
(1) | Equity in Earnings of Unconsolidated Affiliates includes $2.4 million of primarily realized gains associated with an investment in renewable energy fund for the three and six months ended June 30, 2020, respectively. For both the three and six months ended June 30, 2019, unrealized gains on this investment totaled $20.4 million. |
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F. Other Taxes
Eversource's companies that serve customers in Connecticut collect gross receipts taxes levied by the state of Connecticut from their customers. These gross receipts taxes are recorded separately with collections in Operating Revenues and with payments in Taxes Other Than Income Taxes on the statements of income as follows:
For the Three Months Ended | For the Six Months Ended | ||||||||||||||
(Millions of Dollars) | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||
Eversource | $ | 37.6 | $ | 36.4 | $ | 80.7 | $ | 81.4 | |||||||
CL&P | 33.1 | 31.8 | 68.6 | 68.0 |
Separate from above were amounts recorded as Taxes Other Than Income Taxes at CL&P related to the remittance to the State of Connecticut of energy efficiency funds collected from customers of $10.7 million and $21.4 million for the three and six months ended June 30, 2019, respectively. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. These amounts were recorded separately, with collections in Operating Revenues and with payments in Taxes Other Than Income Taxes on the Eversource and CL&P statements of income.
As agents for state and local governments, Eversource's companies that serve customers in Connecticut and Massachusetts collect certain sales taxes that 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:
(Millions of Dollars) | As of June 30, 2020 | As of June 30, 2019 | |||||
Eversource | $ | 336.1 | $ | 323.7 | |||
CL&P | 95.0 | 114.0 | |||||
NSTAR Electric | 75.5 | 85.2 | |||||
PSNH | 48.3 | 29.9 |
The following table reconciles cash as reported on the balance sheets to the cash and restricted cash balance as reported on the statements of cash flows:
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Cash as reported on the Balance Sheets | $ | 64.9 | $ | 6.9 | $ | 1.2 | $ | 0.1 | $ | 15.4 | $ | — | $ | 0.1 | $ | 0.4 | |||||||||||||||
Restricted cash included in: | |||||||||||||||||||||||||||||||
Special Deposits | 63.4 | 8.7 | 12.2 | 30.9 | 52.5 | 4.6 | 6.2 | 32.5 | |||||||||||||||||||||||
Marketable Securities | 45.4 | 0.4 | 0.1 | 0.7 | 46.0 | 0.4 | — | 0.6 | |||||||||||||||||||||||
Other Long-Term Assets | 3.2 | — | — | 3.2 | 3.2 | — | — | 3.2 | |||||||||||||||||||||||
Cash and Restricted Cash reported on the Statements of Cash Flows | $ | 176.9 | $ | 16.0 | $ | 13.5 | $ | 34.9 | $ | 117.1 | $ | 5.0 | $ | 6.3 | $ | 36.7 |
Special Deposits represent cash collections related to the PSNH RRB customer charges that are held in trust, required ISO-NE cash deposits, and CYAPC and YAEC cash balances. Special Deposits are included in Current Assets on the balance sheets. Restricted cash included in Marketable Securities represents money market funds held in trusts to fund certain non-qualified executive benefits and restricted trusts to fund CYAPC and YAEC's spent nuclear fuel storage obligations.
H. Pending Acquisition of Assets of Columbia Gas of Massachusetts
On February 26, 2020, Eversource and NiSource Inc. entered into an asset purchase agreement (the Agreement) pursuant to which Eversource would acquire certain assets that comprise NiSource’s local natural gas distribution business in Massachusetts, which is doing business as Columbia Gas of Massachusetts (CMA). The purchase price of $1.1 billion includes a target working capital amount that is subject to adjustment to reflect actual working capital as of the closing date.
The liabilities to be assumed by Eversource under the Agreement specifically exclude any liabilities (past or future) arising out of, or related to, the fires and explosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by CMA, including certain subsequent events, all as described and in the DPU's Order on Scope dated December 23, 2019 (D.P.U. 19-141) (the Greater Lawrence Incident or GLI). The liabilities to be assumed also exclude any further emergency events prior to the closing of the acquisition related to the restoration and reconstruction with respect to the GLI, including any losses arising out of, or related to, any litigation, demand, cause of action, claim, suit, investigation, proceeding, indemnification agreements or rights. Eversource is not assuming any of CMA's or NiSource Inc.'s debt obligations or notes payable.
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The transaction requires approval from the DPU, the Maine Public Utilities Commission, the FERC, and the Federal Communications Commission, and the resulting rate plan requires DPU approval as well. The relevant review period under the Hart-Scott-Rodino Act has expired. On July 2, 2020, Eversource, CMA and NiSource filed an application with the DPU seeking approval of the sale of CMA assets to Eversource, which included a settlement with the Massachusetts Attorney General’s Office, the DOER, and the Low-Income Weatherization and Fuel Assistance Program Network. The application requests approval of the transaction and the related rate plan by September 30, 2020.
Eversource expects to finance the asset acquisition through a combination of debt and equity issuances in a ratio that is consistent with its current consolidated capital structure. The transaction is expected to close shortly after the end of the third quarter of 2020.
2. REGULATORY ACCOUNTING
Eversource's utility companies are subject to rate regulation that is based on cost recovery and meets the criteria for application of accounting guidance for rate-regulated operations, which considers the effect of regulation on the timing of the recognition of certain revenues and expenses. The regulated companies' financial statements reflect the effects of the rate-making process. The rates charged to the customers of Eversource's regulated companies are designed to collect each company's costs to provide service, plus a return on investment.
The application of accounting guidance for rate-regulated enterprises results in recording regulatory assets and liabilities. Regulatory assets represent the deferral of incurred costs that are probable of future recovery in customer rates. Regulatory assets are amortized as the incurred costs are recovered through customer rates. Regulatory liabilities represent either revenues received from customers to fund expected costs that have not yet been incurred or probable future refunds to customers.
Management believes it is probable that each of the regulated companies will recover its 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' operations, or if 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 were as follows:
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Benefit Costs | $ | 2,306.7 | $ | 493.5 | $ | 615.6 | $ | 209.9 | $ | 2,382.9 | $ | 539.0 | $ | 629.8 | $ | 218.2 | |||||||||||||||
Income Taxes, Net | 731.8 | 462.4 | 109.1 | 12.6 | 725.8 | 458.8 | 108.0 | 12.8 | |||||||||||||||||||||||
Securitized Stranded Costs | 543.7 | — | — | 543.7 | 565.3 | — | — | 565.3 | |||||||||||||||||||||||
Storm Restoration Costs, Net | 486.6 | 251.9 | 176.9 | 57.8 | 540.6 | 274.6 | 200.6 | 65.4 | |||||||||||||||||||||||
Regulatory Tracker Mechanisms | 590.7 | 251.0 | 222.4 | 106.7 | 411.5 | 78.3 | 207.1 | 65.8 | |||||||||||||||||||||||
Derivative Liabilities | 321.9 | 322.0 | — | — | 334.5 | 329.2 | — | — | |||||||||||||||||||||||
Goodwill-related | 323.1 | — | 277.4 | — | 331.5 | — | 284.6 | — | |||||||||||||||||||||||
Asset Retirement Obligations | 102.5 | 31.7 | 53.8 | 3.7 | 97.2 | 30.8 | 50.3 | 3.6 | |||||||||||||||||||||||
Other Regulatory Assets | 127.6 | 24.5 | 59.2 | 14.8 | 125.4 | 25.2 | 55.2 | 14.7 | |||||||||||||||||||||||
Total Regulatory Assets | 5,534.6 | 1,837.0 | 1,514.4 | 949.2 | 5,514.7 | 1,735.9 | 1,535.6 | 945.8 | |||||||||||||||||||||||
Less: Current Portion | 805.1 | 349.2 | 296.4 | 110.3 | 651.1 | 178.6 | 285.6 | 84.1 | |||||||||||||||||||||||
Total Long-Term Regulatory Assets | $ | 4,729.5 | $ | 1,487.8 | $ | 1,218.0 | $ | 838.9 | $ | 4,863.6 | $ | 1,557.3 | $ | 1,250.0 | $ | 861.7 |
Regulatory Costs in Long-Term Assets: Eversource's regulated companies had $176.3 million (including $85.2 million for CL&P, $49.0 million for NSTAR Electric and $15.0 million for PSNH) and $146.0 million (including $51.8 million for CL&P, $55.7 million for NSTAR Electric and $18.0 million for PSNH) of additional regulatory costs as of June 30, 2020 and December 31, 2019, respectively, that were included in 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. As of June 30, 2020, COVID-19 related costs deferred by Eversource totaled $6.6 million, of which $4.1 million was related to uncollectible expense incurred at our natural gas distribution segment.
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Regulatory Liabilities: The components of regulatory liabilities were as follows:
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
EDIT due to Tax Cuts and Jobs Act | $ | 2,817.7 | $ | 1,016.7 | $ | 1,056.5 | $ | 390.1 | $ | 2,844.6 | $ | 1,022.8 | $ | 1,071.2 | $ | 392.8 | |||||||||||||||
Cost of Removal | 590.5 | 84.6 | 345.7 | 12.1 | 559.8 | 64.6 | 330.6 | 16.3 | |||||||||||||||||||||||
Benefit Costs | 83.9 | — | 72.4 | — | 84.5 | — | 72.2 | — | |||||||||||||||||||||||
Regulatory Tracker Mechanisms | 417.7 | 156.4 | 154.9 | 78.6 | 325.1 | 94.8 | 165.6 | 57.0 | |||||||||||||||||||||||
AFUDC - Transmission | 75.5 | 45.3 | 30.2 | — | 73.2 | 46.0 | 27.2 | — | |||||||||||||||||||||||
Other Regulatory Liabilities | 136.6 | 35.8 | 52.8 | 8.6 | 132.0 | 19.6 | 59.0 | 13.1 | |||||||||||||||||||||||
Total Regulatory Liabilities | 4,121.9 | 1,338.8 | 1,712.5 | 489.4 | 4,019.2 | 1,247.8 | 1,725.8 | 479.2 | |||||||||||||||||||||||
Less: Current Portion | 442.0 | 155.2 | 185.3 | 83.6 | 361.2 | 82.8 | 209.2 | 65.8 | |||||||||||||||||||||||
Total Long-Term Regulatory Liabilities | $ | 3,679.9 | $ | 1,183.6 | $ | 1,527.2 | $ | 405.8 | $ | 3,658.0 | $ | 1,165.0 | $ | 1,516.6 | $ | 413.4 |
3. PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION
The following tables summarize property, plant and equipment by asset category:
Eversource | As of June 30, 2020 | As of December 31, 2019 | |||||
(Millions of Dollars) | |||||||
Distribution - Electric | $ | 16,289.5 | $ | 15,880.0 | |||
Distribution - Natural Gas | 4,025.6 | 3,931.1 | |||||
Transmission - Electric | 11,330.7 | 10,958.4 | |||||
Distribution - Water | 1,760.4 | 1,726.5 | |||||
Solar | 201.2 | 200.2 | |||||
Utility | 33,607.4 | 32,696.2 | |||||
Other (1) | 1,136.3 | 1,025.6 | |||||
Property, Plant and Equipment, Gross | 34,743.7 | 33,721.8 | |||||
Less: Accumulated Depreciation | |||||||
Utility | (7,689.5 | ) | (7,483.5 | ) | |||
Other | (431.4 | ) | (387.4 | ) | |||
Total Accumulated Depreciation | (8,120.9 | ) | (7,870.9 | ) | |||
Property, Plant and Equipment, Net | 26,622.8 | 25,850.9 | |||||
Construction Work in Progress | 1,988.0 | 1,734.6 | |||||
Total Property, Plant and Equipment, Net | $ | 28,610.8 | $ | 27,585.5 |
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||
(Millions of Dollars) | CL&P | NSTAR Electric | PSNH | CL&P | NSTAR Electric | PSNH | |||||||||||||||||
Distribution - Electric | $ | 6,683.8 | $ | 7,328.8 | $ | 2,317.2 | $ | 6,485.5 | $ | 7,163.7 | $ | 2,271.1 | |||||||||||
Transmission - Electric | 5,166.4 | 4,509.3 | 1,650.2 | 5,043.0 | 4,411.9 | 1,498.7 | |||||||||||||||||
Solar | — | 201.2 | — | — | 200.2 | — | |||||||||||||||||
Property, Plant and Equipment, Gross | 11,850.2 | 12,039.3 | 3,967.4 | 11,528.5 | 11,775.8 | 3,769.8 | |||||||||||||||||
Less: Accumulated Depreciation | (2,445.6 | ) | (2,969.8 | ) | (826.0 | ) | (2,385.7 | ) | (2,895.3 | ) | (799.9 | ) | |||||||||||
Property, Plant and Equipment, Net | 9,404.6 | 9,069.5 | 3,141.4 | 9,142.8 | 8,880.5 | 2,969.9 | |||||||||||||||||
Construction Work in Progress | 508.7 | 703.7 | 117.2 | 483.0 | 592.3 | 159.6 | |||||||||||||||||
Total Property, Plant and Equipment, Net | $ | 9,913.3 | $ | 9,773.2 | $ | 3,258.6 | $ | 9,625.8 | $ | 9,472.8 | $ | 3,129.5 |
(1) | These assets are primarily comprised of computer software, hardware and equipment at Eversource Service and buildings at The Rocky River Realty Company. |
4. DERIVATIVE INSTRUMENTS
The electric and natural gas companies purchase and procure energy and energy-related products, which are subject to price volatility, for their customers. The costs associated with supplying energy to customers are recoverable from customers in future rates. These regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative and non-derivative 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 on the statements of income, as applicable, as electricity or natural gas is delivered.
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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 electric and natural gas companies, regulatory assets or regulatory liabilities are recorded to offset the fair values of derivatives, as contract settlement amounts are recovered from, or refunded to, customers in their respective energy supply rates.
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. The following table presents the gross fair values of contracts, categorized by risk type, and the net amounts recorded as current or long-term derivative assets or liabilities:
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||
(Millions of Dollars) | Fair Value Hierarchy | Commodity Supply and Price Risk Management | Netting (1) | Net Amount Recorded as a Derivative | Commodity Supply and Price Risk Management | Netting (1) | Net Amount Recorded as a Derivative | ||||||||||||||||||
Current Derivative Assets: | |||||||||||||||||||||||||
CL&P | Level 3 | $ | 13.3 | $ | (0.4 | ) | $ | 12.9 | $ | 12.2 | $ | (0.4 | ) | $ | 11.8 | ||||||||||
Other | Level 2 | 0.8 | (0.5 | ) | 0.3 | — | — | — | |||||||||||||||||
Long-Term Derivative Assets: | |||||||||||||||||||||||||
CL&P | Level 3 | 65.3 | (2.0 | ) | 63.3 | 67.5 | (2.1 | ) | 65.4 | ||||||||||||||||
Current Derivative Liabilities: | |||||||||||||||||||||||||
CL&P | Level 3 | (70.1 | ) | — | (70.1 | ) | (67.8 | ) | — | (67.8 | ) | ||||||||||||||
Other | Level 2 | — | — | — | (5.2 | ) | — | (5.2 | ) | ||||||||||||||||
Long-Term Derivative Liabilities: | |||||||||||||||||||||||||
CL&P | Level 3 | (328.1 | ) | — | (328.1 | ) | (338.6 | ) | — | (338.6 | ) | ||||||||||||||
Other | Level 2 | (0.2 | ) | — | (0.2 | ) | (0.1 | ) | — | (0.1 | ) |
(1) | Amounts represent derivative assets and liabilities that Eversource 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 of Significant Accounting Policies - Fair Value Measurements," to the financial statements.
Derivative Contracts at 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. CL&P has a sharing agreement with UI, with 80 percent of the costs or benefits of each contract borne by or allocated to CL&P and 20 percent borne by or allocated to UI. The combined capacities of these contracts as of both June 30, 2020 and December 31, 2019, were 676 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 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.
As of June 30, 2020 and December 31, 2019, Eversource had New York Mercantile Exchange (NYMEX) financial contracts for natural gas futures in order to reduce variability associated with the price of 6.0 million and 9.6 million MMBtu of natural gas, respectively.
For the three months ended June 30, 2020 and 2019, there were losses of less than $0.1 million and $5.1 million, respectively, deferred as regulatory costs, which reflect the change in fair value associated with Eversource's derivative contracts. For the six months ended June 30, 2020 and 2019, there were losses of $18.0 million and $10.3 million, respectively.
Fair Value Measurements 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 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 related 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 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 in order to address the full term 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's credit rating for assets and the Company'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.
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The following is a summary of Level 3 derivative contracts and the range of the significant unobservable inputs utilized in the valuations over the duration of the contracts:
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||
CL&P | Range | Weighted Average (1) | Period Covered | Range | Period Covered | ||||||||||||||||||||||
Capacity Prices | $ | 4.30 | — | $5.95 | $ | 4.85 | per kW-Month | 2024 - 2026 | $ | 3.01 | — | $7.34 | per kW-Month | 2023 - 2026 | |||||||||||||
Forward Reserve Prices | 0.80 | — | 0.90 | 0.85 | per kW-Month | 2020 - 2024 | 0.80 | — | 1.90 | per kW-Month | 2020 - 2024 |
(1) | Unobservable inputs were weighted by the relative future capacity and forward reserve prices and contractual MWs over the periods covered. |
Exit price premiums of 1 percent through 12.5 percent, or a weighted average of 11.4 percent, are also applied to these contracts and reflect the uncertainty and illiquidity premiums that would be required based on the most recent market activity available for similar type contracts. The risk premium was weighted by the relative fair value of the net derivative instruments.
Significant increases or decreases in future capacity or forward reserve prices in isolation would decrease or increase, respectively, the fair value of the derivative liability. Any increases in risk premiums would increase the fair value of the derivative liability. Changes in these fair values are recorded as a regulatory asset or liability and do not impact net income.
Valuations using significant unobservable inputs: The following table presents changes 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.
CL&P | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
(Millions of Dollars) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Derivatives, Net: | |||||||||||||||
Fair Value as of Beginning of Period | $ | (333.8 | ) | $ | (353.1 | ) | $ | (329.2 | ) | $ | (356.5 | ) | |||
Net Realized/Unrealized Losses Included in Regulatory Assets | (1.3 | ) | (2.5 | ) | (17.6 | ) | (7.8 | ) | |||||||
Settlements | 13.1 | 10.2 | 24.8 | 18.9 | |||||||||||
Fair Value as of End of Period | $ | (322.0 | ) | $ | (345.4 | ) | $ | (322.0 | ) | $ | (345.4 | ) |
5. MARKETABLE SECURITIES
Eversource holds marketable securities that are primarily used to fund certain non-qualified executive benefits. The trusts that hold marketable securities are not subject to regulatory oversight by state or federal agencies. CYAPC and YAEC maintain legally restricted trusts, each of which holds marketable securities, to fund the spent nuclear fuel removal obligations of their nuclear fuel storage facilities.
Equity Securities: Unrealized gains and losses on equity securities held in Eversource's non-qualified executive benefit trust are recorded in Other Income, Net on the statements of income. The fair value of these equity securities as of June 30, 2020 and December 31, 2019 was $41.6 million and $45.7 million, respectively. For the three months ended June 30, 2020 and 2019, there were unrealized gains of $6.6 million and $2.3 million, respectively, recorded in Other Income, Net related to these equity securities. For the six months ended June 30, 2020 and 2019, there were unrealized losses of $2.5 million and unrealized gains of $3.3 million, respectively.
Eversource's equity securities also include CYAPC's and YAEC's marketable securities held in spent nuclear fuel trusts, which had fair values of $172.3 million and $182.8 million as of June 30, 2020 and December 31, 2019, respectively. Unrealized gains and losses for these spent nuclear fuel trusts are subject to regulatory accounting treatment and are recorded in Marketable Securities with the corresponding offset to Other Long-Term Liabilities on the balance sheets, with no impact on the statements of income.
Available-for-Sale Debt Securities: The following is a summary of the available-for-sale debt securities, which are recorded at fair value and are included in current and long-term Marketable Securities on the balance sheets.
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Amortized Cost | Pre-Tax Unrealized Gains | Pre-Tax Unrealized Losses | Fair Value | Amortized Cost | Pre-Tax Unrealized Gains | Pre-Tax Unrealized Losses | Fair Value | |||||||||||||||||||||||
Debt Securities | $ | 219.0 | $ | 9.6 | $ | (0.2 | ) | $ | 228.4 | $ | 228.4 | $ | 5.8 | $ | (0.1 | ) | $ | 234.1 |
Eversource's debt securities include CYAPC's and YAEC's marketable securities held in spent nuclear fuel trusts in the amounts of $193.6 million and $198.1 million as of June 30, 2020 and December 31, 2019, respectively.
Unrealized gains and losses on available-for-sale debt securities held in Eversource's non-qualified benefit trust are recorded in Accumulated Other Comprehensive Income, excluding amounts related to credit losses or losses on securities intended to be sold, which are recorded in Other Income, Net. There have been no significant unrealized losses and no credit losses for the three and six months ended June 30, 2020 and 2019, and no allowance for credit losses as of June 30, 2020. Factors considered in determining whether a credit loss exists include adverse conditions specifically affecting the issuer, the payment history, ratings and rating changes of the security, and the severity of the impairment. For asset-
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backed debt securities, underlying collateral and expected future cash flows are also evaluated. Debt securities included in Eversource's non-qualified benefit trust portfolio are investment-grade bonds with a lower default risk based on their credit quality.
As of June 30, 2020, the contractual maturities of available-for-sale debt securities were as follows:
Eversource (Millions of Dollars) | Amortized Cost | Fair Value | |||||
Less than one year (1) | $ | 51.0 | $ | 51.0 | |||
One to five years | 44.7 | 46.5 | |||||
Six to ten years | 41.0 | 43.3 | |||||
Greater than ten years | 82.3 | 87.6 | |||||
Total Debt Securities | $ | 219.0 | $ | 228.4 |
(1) | Amounts in the Less than one year category include securities in the CYAPC and YAEC spent nuclear fuel trusts, which are restricted and are classified in long-term Marketable Securities on the balance sheets. |
Realized Gains and Losses: Realized gains and losses are recorded in Other Income, Net for Eversource's benefit trust and are offset in Other Long-Term Liabilities for CYAPC and YAEC. Eversource utilizes the specific identification basis method for the Eversource non-qualified benefit trust, and the average cost basis method for the CYAPC and YAEC spent nuclear fuel trusts to compute the realized gains and losses on the sale of marketable securities.
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:
Eversource (Millions of Dollars) | As of June 30, 2020 | As of December 31, 2019 | |||||
Level 1: | |||||||
Mutual Funds and Equities | $ | 213.9 | $ | 228.5 | |||
Money Market Funds | 45.4 | 46.0 | |||||
Total Level 1 | $ | 259.3 | $ | 274.5 | |||
Level 2: | |||||||
U.S. Government Issued Debt Securities (Agency and Treasury) | $ | 62.6 | $ | 96.8 | |||
Corporate Debt Securities | 64.1 | 44.0 | |||||
Asset-Backed Debt Securities | 12.8 | 12.9 | |||||
Municipal Bonds | 33.8 | 26.7 | |||||
Other Fixed Income Securities | 9.7 | 7.7 | |||||
Total Level 2 | $ | 183.0 | $ | 188.1 | |||
Total Marketable Securities | $ | 442.3 | $ | 462.6 |
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 instruments and also incorporating yield curves, credit spreads and specific bond terms and conditions. Asset-backed debt securities include collateralized mortgage obligations, commercial mortgage backed securities, and securities collateralized by auto loans, credit card loans or receivables. Asset-backed debt securities are valued using recent trades of similar instruments, prepayment assumptions, yield curves, issuance and maturity dates, and tranche information. Municipal bonds are valued using a market approach that incorporates reported trades and benchmark yields. Other fixed income securities are valued using pricing models, quoted prices of securities with similar characteristics, and discounted cash flows.
6. SHORT-TERM AND LONG-TERM DEBT
Short-Term Debt - Commercial Paper Programs and Credit Agreements: Eversource parent has a $1.45 billion commercial paper program allowing Eversource parent to issue commercial paper as a form of short-term debt. Eversource parent, CL&P, PSNH, NSTAR Gas, Yankee Gas and Aquarion Water Company of Connecticut are also parties to a five-year $1.45 billion revolving credit facility, which terminates on December 6, 2024. The revolving credit facility serves to backstop Eversource parent's $1.45 billion commercial paper program.
NSTAR Electric has a $650 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. NSTAR Electric is also a party to a five-year $650 million revolving credit facility, which terminates on December 6, 2024. The revolving credit facility serves to backstop NSTAR Electric's $650 million commercial paper program.
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The amount of borrowings outstanding and available under the commercial paper programs were as follows:
Borrowings Outstanding as of | Available Borrowing Capacity as of | Weighted-Average Interest Rate as of | |||||||||||||||||||
June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | ||||||||||||||||
(Millions of Dollars) | |||||||||||||||||||||
Eversource Parent Commercial Paper Program | $ | 351.5 | $ | 1,224.9 | $ | 1,098.5 | $ | 225.1 | 0.18 | % | 1.98 | % | |||||||||
NSTAR Electric Commercial Paper Program | 142.0 | 10.5 | 508.0 | 639.5 | 0.12 | % | 1.63 | % |
There were 0 borrowings outstanding on either the Eversource parent or NSTAR Electric revolving credit facilities as of June 30, 2020 or December 31, 2019.
On May 15, 2020, CL&P and PSNH entered into uncommitted line of credit agreements, which will expire by May 14, 2021. The CL&P agreements total $450 million and the PSNH agreements total $300 million. There are 0 borrowings outstanding on either the CL&P or PSNH uncommitted line of credit agreements as of June 30, 2020.
Amounts outstanding under the commercial paper programs are included in Notes Payable and classified in current liabilities on the Eversource and NSTAR Electric balance sheets, as all borrowings are outstanding for no more than 364 days at one time.
The Company expects the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with existing borrowing availability and access to both debt and equity markets, will be sufficient to meet any working capital and future operating requirements, and capital investment forecasted opportunities.
Intercompany Borrowings: Eversource parent uses its available capital resources to provide loans to its subsidiaries to assist in meeting their short-term borrowing needs. Eversource parent records intercompany interest income from its loans to subsidiaries, which is eliminated in consolidation. Intercompany loans from Eversource parent to its subsidiaries are eliminated in consolidation on Eversource's balance sheets. As of June 30, 2020, there were intercompany loans from Eversource parent to CL&P of $272.0 million, to PSNH of $119.3 million, and to a subsidiary of NSTAR Electric of $38.1 million. As of December 31, 2019, there were intercompany loans from Eversource parent to CL&P of $63.8 million, to PSNH of $27.0 million, and to a subsidiary of NSTAR Electric of $30.3 million. Intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and classified in current liabilities on the respective subsidiary's balance sheets.
Long-Term Debt Issuance Authorization: On January 27, 2020, the DPU approved NSTAR Gas' request for authorization to issue up to $270 million in long-term debt through December 31, 2021. On July 31, 2020, the NHPUC approved PSNH's request for authorization to issue up to $200 million in long-term debt through December 31, 2020.
Long-Term Debt: The following table summarizes long-term debt issuances and repayments:
(Millions of Dollars) | Issuance/(Repayment) | Issue Date or Repayment Date | Maturity Date | Use of Proceeds for Issuance/ Repayment Information | |||||
NSTAR Electric: | |||||||||
3.95% 2020 Debentures | $ | 400.0 | March 2020 | April 2030 | Refinanced investments in eligible green expenditures, which were previously financed in 2018 and 2019 | ||||
5.10% Series E Senior Notes | (95.0 | ) | March 2020 | March 2020 | Paid at maturity | ||||
Other: | |||||||||
Eversource Parent 3.45% Series P Senior Notes | 350.0 | January 2020 | January 2050 | Paid short-term borrowings | |||||
NSTAR Gas 4.46% Series N First Mortgage Bonds | (125.0 | ) | January 2020 | January 2020 | Paid at maturity | ||||
Yankee Gas 4.87% Series K First Mortgage Bonds | (50.0 | ) | April 2020 | April 2020 | Paid at maturity | ||||
NSTAR Gas 2.33% Series R First Mortgage Bonds | 75.0 | May 2020 | May 2025 | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes | |||||
NSTAR Gas 3.15% Series S First Mortgage Bonds | 115.0 | May 2020 | May 2050 | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes |
In June 2020, Aquarion Water Company of Massachusetts provided notice to its bondholders that it will redeem $32.2 million of long-term debt in connection with the sale to the town of Hingham, Massachusetts of its water system and treatment plant that supplies water to the towns of Hingham, Hull and North Cohasset. As a result, this debt was classified as current as of June 30, 2020.
7. RATE REDUCTION BONDS AND VARIABLE INTEREST ENTITIES
Rate Reduction Bonds: On May 8, 2018, PSNH Funding, a wholly-owned subsidiary of PSNH, issued $635.7 million of securitized RRBs in multiple tranches with a weighted average interest rate of 3.66 percent, and final maturity dates ranging from 2026 to 2035. The RRBs are expected to be repaid by February 1, 2033. RRB payments consist of principal and interest and are paid semi-annually, beginning on February 1, 2019. The RRBs were issued pursuant to a finance order issued by the NHPUC on January 30, 2018 to recover remaining costs resulting from the divestiture of PSNH’s generation assets.
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PSNH Funding was formed solely to issue RRBs to finance PSNH's unrecovered remaining costs associated with the divestiture of its generation assets. PSNH Funding is considered a VIE primarily because the equity capitalization is insufficient to support its operations. PSNH has the power to direct the significant activities of the VIE and is most closely associated with the VIE as compared to other interest holders. Therefore, PSNH is considered the primary beneficiary and consolidates PSNH Funding in its consolidated financial statements. The following tables summarize the impact of PSNH Funding on PSNH's balance sheets and income statements:
(Millions of Dollars) | |||||||
Balance Sheet: | As of June 30, 2020 | As of December 31, 2019 | |||||
Restricted Cash - Current Portion (included in Current Assets) | $ | 30.6 | $ | 32.5 | |||
Restricted Cash - Long-Term Portion (included in Other Long-Term Assets) | 3.2 | 3.2 | |||||
Securitized Stranded Cost (included in Regulatory Assets) | 543.7 | 565.3 | |||||
Other Regulatory Liabilities (included in Regulatory Liabilities) | 4.1 | 5.6 | |||||
Accrued Interest (included in Other Current Liabilities) | 8.3 | 8.6 | |||||
Rate Reduction Bonds - Current Portion | 43.2 | 43.2 | |||||
Rate Reduction Bonds - Long-Term Portion | 518.5 | 540.1 |
(Millions of Dollars) | For the Three Months Ended | For the Six Months Ended | |||||||||||||
Income Statement: | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||
Amortization of RRB Principal (included in Amortization of Regulatory Assets, Net) | $ | 10.8 | $ | 10.8 | $ | 21.6 | $ | 21.5 | |||||||
Interest Expense on RRB Principal (included in Interest Expense) | 5.0 | 5.3 | 10.0 | 10.7 |
8. PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSION
Eversource provides defined benefit retirement plans (Pension Plans) that cover eligible employees. In addition to the Pension Plans, Eversource maintains non-qualified defined benefit retirement plans (SERP Plans), which provide benefits in excess of Internal Revenue Code limitations to eligible participants consisting of current and retired employees. Eversource also provides defined benefit postretirement plans (PBOP Plans) that provide life insurance and a health reimbursement arrangement created for the purpose of reimbursing retirees and dependents for health insurance premiums and certain medical expenses to eligible employees that meet certain age and service eligibility requirements.
The components of net periodic benefit expense/(income) for the Pension, SERP and PBOP Plans, prior to amounts capitalized as Property, Plant and Equipment or deferred as regulatory assets for future recovery, are shown below. The service cost component of net periodic benefit expense/(income), less the capitalized portion, is included in Operations and Maintenance expense on the statements of income. The remaining components of net periodic benefit expense/(income), less the deferred portion, are included in Other Income, Net on the statements of income. Pension, SERP and PBOP expense reflected in the statements of cash flows for CL&P, NSTAR Electric and PSNH does not include the intercompany allocations or the corresponding capitalized and deferred portion, as these amounts are cash settled on a short-term basis.
Pension and SERP | PBOP | ||||||||||||||||||||||||||||||
For the Three Months Ended June 30, 2020 | For the Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Service Cost | $ | 18.7 | $ | 5.4 | $ | 3.8 | $ | 2.0 | $ | 2.0 | $ | 0.4 | $ | 0.5 | $ | 0.2 | |||||||||||||||
Interest Cost | 44.3 | 9.3 | 9.7 | 4.8 | 6.4 | 1.0 | 1.6 | 0.8 | |||||||||||||||||||||||
Expected Return on Plan Assets | (99.3 | ) | (19.8 | ) | (25.7 | ) | (11.1 | ) | (18.7 | ) | (2.5 | ) | (8.5 | ) | (1.4 | ) | |||||||||||||||
Actuarial Loss | 50.7 | 9.7 | 14.0 | 3.9 | 2.0 | 0.2 | 0.5 | 0.3 | |||||||||||||||||||||||
Prior Service Cost/(Credit) | 0.3 | — | 0.1 | — | (5.2 | ) | 0.2 | (4.3 | ) | 0.1 | |||||||||||||||||||||
Total Net Periodic Benefit Expense/(Income) | $ | 14.7 | $ | 4.6 | $ | 1.9 | $ | (0.4 | ) | $ | (13.5 | ) | $ | (0.7 | ) | $ | (10.2 | ) | $ | — | |||||||||||
Intercompany Allocations | N/A | $ | 2.4 | $ | 2.3 | $ | 0.8 | N/A | $ | (0.2 | ) | $ | (0.2 | ) | $ | (0.1 | ) |
Pension and SERP | PBOP | ||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2020 | For the Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Service Cost | $ | 38.3 | $ | 11.1 | $ | 7.6 | $ | 4.2 | $ | 4.9 | $ | 0.9 | $ | 1.1 | $ | 0.4 | |||||||||||||||
Interest Cost | 88.6 | 18.8 | 19.3 | 9.7 | 12.2 | 2.2 | 3.3 | 1.4 | |||||||||||||||||||||||
Expected Return on Plan Assets | (199.6 | ) | (39.8 | ) | (51.5 | ) | (22.4 | ) | (36.8 | ) | (4.9 | ) | (17.0 | ) | (2.8 | ) | |||||||||||||||
Actuarial Loss | 100.0 | 19.7 | 27.3 | 8.0 | 4.1 | 0.6 | 1.2 | 0.4 | |||||||||||||||||||||||
Prior Service Cost/(Credit) | 0.6 | — | 0.2 | — | (10.6 | ) | 0.4 | (8.5 | ) | 0.2 | |||||||||||||||||||||
Total Net Periodic Benefit Expense/(Income) | $ | 27.9 | $ | 9.8 | $ | 2.9 | $ | (0.5 | ) | $ | (26.2 | ) | $ | (0.8 | ) | $ | (19.9 | ) | $ | (0.4 | ) | ||||||||||
Intercompany Allocations | N/A | $ | 4.3 | $ | 4.2 | $ | 1.4 | N/A | $ | (0.6 | ) | $ | (0.6 | ) | $ | (0.3 | ) |
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Pension and SERP | PBOP | ||||||||||||||||||||||||||||||
For the Three Months Ended June 30, 2019 | For the Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Service Cost | $ | 16.1 | $ | 4.4 | $ | 3.6 | $ | 1.5 | $ | 1.8 | $ | 0.3 | $ | 0.4 | $ | 0.1 | |||||||||||||||
Interest Cost | 54.8 | 11.4 | 12.3 | 6.0 | 8.2 | 1.6 | 2.4 | 0.8 | |||||||||||||||||||||||
Expected Return on Plan Assets | (91.7 | ) | (18.1 | ) | (24.2 | ) | (10.1 | ) | (16.8 | ) | (2.3 | ) | (7.5 | ) | (1.3 | ) | |||||||||||||||
Actuarial Loss | 35.6 | 6.3 | 11.8 | 2.3 | 1.6 | 0.3 | 0.7 | — | |||||||||||||||||||||||
Prior Service Cost/(Credit) | 0.3 | — | — | — | (5.8 | ) | 0.3 | (4.2 | ) | 0.1 | |||||||||||||||||||||
Total Net Periodic Benefit Expense/(Income) | $ | 15.1 | $ | 4.0 | $ | 3.5 | $ | (0.3 | ) | $ | (11.0 | ) | $ | 0.2 | $ | (8.2 | ) | $ | (0.3 | ) | |||||||||||
Intercompany Allocations | N/A | $ | 5.8 | $ | 5.3 | $ | — | N/A | $ | (0.3 | ) | $ | (0.4 | ) | $ | (0.1 | ) |
Pension and SERP | PBOP | ||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2019 | For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||
(Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||
Service Cost | $ | 35.4 | $ | 9.2 | $ | 7.5 | $ | 4.1 | $ | 3.9 | $ | 0.7 | $ | 0.9 | $ | 0.4 | |||||||||||||||
Interest Cost | 109.1 | 23.0 | 24.2 | 12.2 | 16.3 | 3.1 | 4.7 | 1.7 | |||||||||||||||||||||||
Expected Return on Plan Assets | (183.8 | ) | (36.9 | ) | (48.6 | ) | (20.4 | ) | (33.4 | ) | (4.5 | ) | (15.1 | ) | (2.8 | ) | |||||||||||||||
Actuarial Loss | 72.1 | 14.3 | 21.2 | 5.9 | 4.1 | 0.7 | 1.7 | 0.2 | |||||||||||||||||||||||
Prior Service Cost/(Credit) | 0.6 | — | 0.1 | — | (11.6 | ) | 0.5 | (8.5 | ) | 0.2 | |||||||||||||||||||||
Total Net Periodic Benefit Expense/(Income) | $ | 33.4 | $ | 9.6 | $ | 4.4 | $ | 1.8 | $ | (20.7 | ) | $ | 0.5 | $ | (16.3 | ) | $ | (0.3 | ) | ||||||||||||
Intercompany Allocations | N/A | $ | 13.6 | $ | 8.4 | $ | 2.5 | N/A | $ | (0.4 | ) | $ | (0.6 | ) | $ | (0.2 | ) |
9. COMMITMENTS AND CONTINGENCIES
A. Environmental Matters
Eversource, CL&P, NSTAR Electric and PSNH 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. Eversource, CL&P, NSTAR Electric and PSNH have an active environmental auditing and training program and each believes it is substantially in compliance with all enacted laws and regulations.
The number of environmental sites and related reserves for which remediation or long-term monitoring, preliminary site work or site assessment is being performed are as follows:
As of June 30, 2020 | As of December 31, 2019 | ||||||||||||
Number of Sites | Reserve (in millions) | Number of Sites | Reserve (in millions) | ||||||||||
Eversource | 55 | $ | 78.5 | 57 | $ | 81.0 | |||||||
CL&P | 15 | 11.2 | 15 | 11.4 | |||||||||
NSTAR Electric | 13 | 5.8 | 15 | 8.0 | |||||||||
PSNH | 9 | 7.3 | 9 | 7.5 |
Included in the 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, for which Eversource may have potential liability. The reserve balances related to these former MGP sites were $67.5 million and $67.9 million as of June 30, 2020 and December 31, 2019, respectively, and related primarily to the natural gas business segment.
These reserve estimates are subjective in nature as they take into consideration several different remediation options at each specific site. The reliability and precision of these estimates can be affected by several factors, including new information concerning either the level of contamination at the site, the extent of Eversource's, CL&P's, NSTAR Electric's and PSNH's responsibility for remediation or the extent of remediation required, recently enacted laws and regulations or changes in cost estimates due to certain economic factors. It is possible that new information or future developments could require a reassessment of the potential exposure to required environmental remediation. As this information becomes available, management will continue to assess the potential exposure and adjust the reserves accordingly.
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B. Guarantees and Indemnifications
In the normal course of business, Eversource parent provides credit assurances on behalf of its subsidiaries, including CL&P, NSTAR Electric and PSNH, in the form of guarantees. Management does not anticipate a material impact to net income or cash flows as a result of these various guarantees and indemnifications. The following table summarizes Eversource parent's exposure to guarantees and indemnifications of its subsidiaries and affiliates to external parties as of June 30, 2020:
Company | Description | Maximum Exposure (in millions) | Expiration Dates | |||||
Various | Surety Bonds (1) | $ | 30.9 | 2020 - 2023 | ||||
Rocky River Realty Company and Eversource Service | Lease Payments for Real Estate | 5.9 | 2024 | |||||
Bay State Wind LLC | Real Estate Purchase | 2.5 | 2021 | |||||
Sunrise Wind LLC | Offshore Wind (2) | 2.2 | - |
(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 Eversource parent to post collateral in the event that the unsecured debt credit ratings of Eversource parent are downgraded. |
(2) | On October 25, 2019, Eversource parent issued a guaranty on behalf of its 50 percent-owned affiliate, Sunrise Wind LLC, whereby Eversource parent will guaranty Sunrise Wind LLC’s performance of certain obligations, in an amount not to exceed $15.4 million, under the Offshore Wind Renewable Energy Certificate Purchase and Sale Agreement (the Agreement). The Agreement was executed on October 23, 2019, by and between the New York State Energy Research and Development Authority (NYSERDA) and Sunrise Wind LLC. The Company regularly reviews performance risk under this arrangement, and in the event it becomes probable that Eversource parent will be required to perform under the guarantee, the amount of probable payment will be recorded. As of June 30, 2020, the fair value of the guarantee was immaterial. |
C. Spent Nuclear Fuel Obligations - Yankee Companies
CL&P, NSTAR Electric and PSNH have plant closure and fuel storage cost obligations to the Yankee Companies, which have each completed the physical decommissioning of their respective nuclear power facilities and are now engaged in the long-term storage of their spent fuel. The Yankee Companies fund these costs through litigation proceeds received from the DOE and, to the extent necessary, through wholesale, FERC-approved rates charged under power purchase agreements with several New England utilities, including CL&P, NSTAR Electric and PSNH. CL&P, NSTAR Electric and PSNH, in turn recover these costs from their customers through state regulatory commission-approved retail rates. The Yankee Companies collect amounts that management believes are adequate to recover the remaining plant closure and fuel storage cost estimates for the respective plants. Management believes CL&P and NSTAR Electric will recover their shares of these obligations from their customers. PSNH has recovered its total share of these costs from its customers.
Spent Nuclear Fuel Litigation:
The Yankee Companies have filed complaints against the DOE in the Court of Federal Claims seeking monetary damages resulting from the DOE's failure to accept delivery of, and provide for a permanent facility to store, spent nuclear fuel pursuant to the terms of the 1983 spent fuel and high-level waste disposal contracts between the Yankee Companies and the DOE. The court previously awarded the Yankee Companies damages for Phases I, II and III of litigation resulting from the DOE's failure to meet its contractual obligations. These Phases covered damages incurred in the years 1998 through 2012, and the awarded damages have been received by the Yankee Companies with certain amounts of the damages refunded to their customers.
DOE Phase IV Damages - On May 22, 2017, each of the Yankee Companies filed a fourth set of lawsuits against the DOE in the Court of Federal Claims. The Yankee Companies sought monetary damages totaling $104.4 million for CYAPC, YAEC and MYAPC, resulting from the DOE's failure to begin accepting spent nuclear fuel for disposal covering the years from 2013 to 2016 (DOE Phase IV). On February 21, 2019, the Yankee Companies received a partial summary judgment and partial final judgment in their favor for the undisputed amount of monetary damages of $103.2 million. The court awarded CYAPC, YAEC and MYAPC damages of $40.7 million, $28.1 million and $34.4 million, respectively. The DOE did not appeal the court's judgment and the decision became final on April 23, 2019. On June 12, 2019, each of the Yankee Companies received the damages proceeds. On June 12, 2019, the court accepted an offer of judgment in the amount of $0.5 million to settle the disputed amount of approximately $1 million in Phase IV contested damages. The Yankee Companies received the $0.5 million payment in July 2019.
In September 2019, the Yankee Companies made a required informational filing with FERC as to the use of proceeds, for which approval was received in the fourth quarter of 2019. In December 2019, YAEC and MYAPC returned proceeds of $5.4 million and $21.0 million, respectively, to its member companies, of which the Eversource utilities (CL&P, NSTAR Electric and PSNH) received a total of $2.8 million from YAEC and $5.0 million from MYAPC. The Eversource utilities refund these amounts received to their utility customers. Also, in December 2019, CYAPC paid $29.0 million to the DOE to partially settle its pre-1983 spent nuclear fuel obligation.
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D. FERC ROE Complaints
Four separate complaints were filed at the FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (collectively, the Complainants). In each of the first three complaints, filed on October 1, 2011, December 27, 2012, and July 31, 2014, respectively, the Complainants challenged the NETOs' base ROE of 11.14 percent that had been utilized since 2005 and sought an order to reduce it prospectively from the date of the final FERC order and for the separate 15-month complaint periods. In the fourth complaint, filed April 29, 2016, the Complainants challenged the NETOs' base ROE billed of 10.57 percent and the maximum ROE for transmission incentive (incentive cap) of 11.74 percent, asserting that these ROEs were unjust and unreasonable.
The ROE originally billed during the period October 1, 2011 (beginning of the first complaint period) through October 15, 2014 consisted of a base ROE of 11.14 percent and incentives up to 13.1 percent. On October 16, 2014, the FERC set the base ROE at 10.57 percent and the incentive cap at 11.74 percent for the first complaint period. This was also effective for all prospective billings to customers beginning October 16, 2014. This FERC order was vacated on April 14, 2017 by the U.S. Court of Appeals for the D.C. Circuit (the Court).
All amounts associated with the first complaint period have been refunded, which totaled $38.9 million (pre-tax and excluding interest) at Eversource and reflected both the base ROE and incentive cap prescribed by the FERC order. The refund consisted of $22.4 million for CL&P, $13.7 million for NSTAR Electric and $2.8 million for PSNH.
Eversource has recorded a reserve of $39.1 million (pre-tax and excluding interest) for the second complaint period as of June 30, 2020 and December 31, 2019. This reserve represents the difference between the billed rates during the second complaint period and a 10.57 percent base ROE and 11.74 percent incentive cap. The reserve consisted of $21.4 million for CL&P, $14.6 million for NSTAR Electric and $3.1 million for PSNH as of June 30, 2020 and December 31, 2019.
On October 16, 2018, FERC issued an order on all four complaints describing how it intends to address the issues that were remanded by the Court. FERC proposed a new framework to determine (1) whether an existing ROE is unjust and unreasonable and, if so, (2) how to calculate a replacement ROE. Initial briefs were filed by the NETOs, Complainants and FERC Trial Staff on January 11, 2019 and reply briefs were filed on March 8, 2019. The NETOs' brief was supportive of the overall ROE methodology determined in the October 16, 2018 order provided the FERC does not change the proposed methodology or alter its implementation in a manner that has a material impact on the results.
The FERC order included illustrative calculations for the first complaint using FERC's proposed frameworks with financial data from that complaint. Those illustrative calculations indicated that for the first complaint period, for the NETOs, which FERC concludes are of average financial risk, the preliminary just and reasonable base ROE is 10.41 percent and the preliminary incentive cap on total ROE is 13.08 percent.
If the results of the illustrative calculations were included in a final FERC order for each of the complaint periods, then a 10.41 percent base ROE and a 13.08 percent incentive cap would not have a significant impact on our financial statements for all of the complaint periods. These preliminary calculations are not binding and do not represent what we believe to be the most likely outcome of a final FERC order.
On November 21, 2019, FERC issued Opinion No. 569 affecting the two pending transmission ROE complaints against the Midcontinent ISO (MISO) transmission owners, in which FERC adopted a new methodology for determining base ROEs. Various parties sought rehearing. On December 23, 2019, the NETOs filed supplementary materials in the NETOs' four pending cases to respond to this new methodology because of the uncertainty of the applicability to the NETOs’ cases.
On May 21, 2020, the FERC issued its order in Opinion No. 569-A on the rehearing of the MISO transmission owners' cases, in which FERC again changed its methodology for determining the MISO transmission owners' base ROEs. Various parties have appealed the MISO transmission owners' opinion. This new methodology differs significantly from the methodology proposed by FERC in its October 16, 2018 order to determine the NETOs' base ROEs in its four pending cases.
Given the significant uncertainty regarding the applicability of the FERC opinions in the MISO transmission owners' two complaint cases to the NETOs' pending four complaint cases, Eversource concluded that there is no reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods at this time. As well, Eversource cannot reasonably estimate a range of any gain or loss for any of the four complaint proceedings at this time.
Eversource, CL&P, NSTAR Electric and PSNH currently record revenues at the 10.57 percent base ROE and incentive cap at 11.74 percent established in the October 16, 2014 FERC order.
A change of 10 basis points to the base ROE used to establish the reserves would impact Eversource's after-tax earnings by an average of approximately $3 million for each of the four 15-month complaint periods.
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E. Eversource and NSTAR Electric Boston Harbor Civil Action
In 2016, the United States Attorney on behalf of the United States Army Corps of Engineers filed a civil action in the United States District Court for the District of Massachusetts against NSTAR Electric, HEEC, and the Massachusetts Water Resources Authority (together with NSTAR Electric and HEEC, the "Defendants"). The action alleged that the Defendants failed to comply with certain permitting requirements related to the placement of the HEEC-owned electric distribution cable beneath Boston Harbor.
The parties reached a settlement pursuant to which HEEC agreed to install a new 115kV distribution cable across Boston Harbor to Deer Island, utilizing a different route, and remove portions of the existing cable. Construction of the new distribution cable was completed in August 2019 and removal of the portions of the existing cable was completed in January 2020. All issues surrounding the current permit from the United States Army Corps of Engineers are expected to be resolved, and subsequently, such litigation then dismissed with prejudice.
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, Long-Term Debt and Rate Reduction Bonds: The fair value of CL&P's and NSTAR Electric's preferred stock is based upon pricing models that incorporate interest rates and other market factors, valuations or trades of similar securities and cash flow projections. The fair value of long-term debt and RRB 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. The fair values provided in the table below are classified as Level 2 within the fair value hierarchy. Carrying amounts and estimated fair values are as follows:
Eversource | CL&P | NSTAR Electric | PSNH | ||||||||||||||||||||||||||||
(Millions of Dollars) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||
As of June 30, 2020: | |||||||||||||||||||||||||||||||
Preferred Stock Not Subject to Mandatory Redemption | $ | 155.6 | $ | 164.9 | $ | 116.2 | $ | 120.5 | $ | 43.0 | $ | 44.4 | $ | — | $ | — | |||||||||||||||
Long-Term Debt | 14,398.7 | 16,329.6 | 3,518.1 | 4,251.6 | 3,642.6 | 4,240.9 | 951.6 | 1,050.3 | |||||||||||||||||||||||
Rate Reduction Bonds | 561.7 | 619.2 | — | — | — | — | 561.7 | 619.2 | |||||||||||||||||||||||
As of December 31, 2019: | |||||||||||||||||||||||||||||||
Preferred Stock Not Subject to Mandatory Redemption | $ | 155.6 | $ | 162.0 | $ | 116.2 | $ | 117.8 | $ | 43.0 | $ | 44.2 | $ | — | $ | — | |||||||||||||||
Long-Term Debt | 14,098.2 | 15,170.2 | 3,518.1 | 4,058.0 | 3,342.1 | 3,659.9 | 951.6 | 1,005.7 | |||||||||||||||||||||||
Rate Reduction Bonds | 583.3 | 625.9 | — | — | — | — | 583.3 | 625.9 |
Derivative Instruments and Marketable Securities: Derivative instruments and investments in marketable securities are carried at fair value. For further information, see Note 4, "Derivative Instruments," and Note 5, "Marketable Securities," to the financial statements.
See Note 1D, "Summary of Significant Accounting Policies - Fair Value Measurements," for the fair value measurement policy and the fair value hierarchy.
11. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The changes in accumulated other comprehensive income/(loss) by component, net of tax, are as follows:
For the Six Months Ended June 30, 2020 | For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Qualified Cash Flow Hedging Instruments | Unrealized Gains on Marketable Securities | Defined Benefit Plans | Total | Qualified Cash Flow Hedging Instruments | Unrealized Gains/(Losses) on Marketable Securities | Defined Benefit Plans | Total | |||||||||||||||||||||||
Balance as of January 1st | $ | (3.0 | ) | $ | 0.7 | $ | (62.8 | ) | $ | (65.1 | ) | $ | (4.4 | ) | $ | (0.5 | ) | $ | (55.1 | ) | $ | (60.0 | ) | ||||||||
OCI Before Reclassifications | — | 0.4 | (1.6 | ) | (1.2 | ) | — | 1.1 | 2.6 | 3.7 | |||||||||||||||||||||
Amounts Reclassified from AOCI | 0.6 | — | 3.1 | 3.7 | 0.6 | — | 2.1 | 2.7 | |||||||||||||||||||||||
Net OCI | 0.6 | 0.4 | 1.5 | 2.5 | 0.6 | 1.1 | 4.7 | 6.4 | |||||||||||||||||||||||
Balance as of June 30th | $ | (2.4 | ) | $ | 1.1 | $ | (61.3 | ) | $ | (62.6 | ) | $ | (3.8 | ) | $ | 0.6 | $ | (50.4 | ) | $ | (53.6 | ) |
Defined benefit plan OCI amounts before reclassifications relate to actuarial gains and losses that arose during the year and were recognized in AOCI. The unamortized actuarial gains and losses and prior service costs on the defined benefit plans are amortized from AOCI into Other Income, Net over the average future employee service period, and are reflected in amounts reclassified from AOCI.
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12. COMMON SHARES
The following table sets forth the Eversource parent common shares and the shares of common stock of CL&P, NSTAR Electric and PSNH that were authorized and issued, as well as the respective per share par values:
Shares | ||||||||||||
Authorized as of June 30, 2020 and December 31, 2019 | Issued as of | |||||||||||
Par Value | June 30, 2020 | December 31, 2019 | ||||||||||
Eversource | $ | 5 | 380,000,000 | 357,818,402 | 345,858,402 | |||||||
CL&P | $ | 10 | 24,500,000 | 6,035,205 | 6,035,205 | |||||||
NSTAR Electric | $ | 1 | 100,000,000 | 200 | 200 | |||||||
PSNH | $ | 1 | 100,000,000 | 301 | 301 |
Common Share Issuances and 2019 Forward Sale Agreement: On June 15, 2020, Eversource completed an equity offering of 6,000,000 common shares at a price per share of $86.26. Eversource plans to use the net proceeds of this offering to fund a portion of the planned purchase of the assets of CMA. The issuance of these common shares resulted in proceeds of $509.2 million, net of issuance costs.
In June 2019, Eversource completed an equity offering consisting of 5,980,000 common shares issued directly by the Company and 11,960,000 common shares issuable pursuant to a forward sale agreement with an investment bank. Under the forward sale agreement, 11,960,000 common shares were borrowed from third parties and sold by the underwriters. The forward sale agreement allowed Eversource, at its election and prior to May 29, 2020, to physically settle the forward sale agreement by issuing common shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially, $71.48 per share) or, alternatively, to settle the forward sale agreement in whole or in part through the delivery or receipt of shares or cash. The forward sale price was subject to adjustment daily based on a floating interest rate factor and would decrease in respect of certain fixed amounts specified in the agreement, such as dividends.
Eversource previously issued 6,000,000 common shares under the forward sale agreement in December 2019. On March 23, 2020, Eversource physically settled a portion of the forward sale agreement by delivering 1,500,000 common shares in exchange for net proceeds of $105.7 million. Subsequently, on March 26, 2020, Eversource physically settled the remaining portion of the forward sale agreement by delivering 4,460,000 common shares in exchange for net proceeds of $314.1 million. The forward sale price used to determine the cash proceeds received by Eversource was calculated based on the initial forward sale price, as adjusted in accordance with the forward sale agreement.
The March and June 2020 common share issuances of 5,960,000 and 6,000,000, respectively, resulted in total proceeds of $929.0 million, net of issuance costs, and were reflected in shareholders' equity and as financing activities on the statement of cash flows.
Issuances of shares under the forward sale agreement are classified as equity transactions. Accordingly, no amounts relating to the forward sale agreement were recorded in the financial statements until settlements took place. Prior to any settlements, the only impact to the financial statements was the inclusion of incremental shares within the calculation of diluted EPS using the treasury stock method. See Note 14, "Earnings Per Share," to the financial statements for information on the forward sale agreement’s impact on the calculation of diluted EPS.
Eversource used the net proceeds received upon the direct issuance of common shares and the net proceeds received upon settlement of the forward sale agreement to repay short-term debt under the commercial paper program, to fund capital spending and clean energy initiatives, and for general corporate purposes.
Treasury Shares: As of June 30, 2020 and December 31, 2019, there were 15,190,540 and 15,977,757 Eversource common shares held as treasury shares, respectively. As of June 30, 2020 and December 31, 2019, Eversource common shares outstanding were 342,627,862 and 329,880,645, respectively.
Eversource issues treasury shares to satisfy awards under the Company's incentive plans, shares issued under the dividend reinvestment and share purchase plan, and matching contributions under the Eversource 401k Plan. The issuance of treasury shares represents a non-cash transaction, as the treasury shares were used to fulfill Eversource's obligations that require the issuance of common shares.
13. COMMON SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
Dividends on the preferred stock of CL&P and NSTAR Electric totaled $1.9 million for each of the three months ended June 30, 2020 and 2019 and $3.8 million for each of the six months ended June 30, 2020 and 2019. These dividends were presented as Net Income Attributable to Noncontrolling Interests on the Eversource statements of income. Noncontrolling Interest – Preferred Stock of Subsidiaries on the Eversource balance sheets totaled $155.6 million as of June 30, 2020 and December 31, 2019. On the Eversource balance sheets, Common Shareholders' Equity was fully attributable to Eversource parent and Noncontrolling Interest – Preferred Stock of Subsidiaries was fully attributable to the noncontrolling interest.
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14. 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 and the equity forward sale agreement, as if they were converted into outstanding common shares. The dilutive effect of unvested RSU and performance share awards, as well as the equity forward sale agreement, is calculated using the treasury stock method. RSU and performance share awards are included in basic weighted average common shares outstanding as of the date that all necessary vesting conditions have been satisfied.
As described in Note 12, "Common Shares," earnings per share dilution, if any, related to the forward sale agreement is determined under the treasury stock method until settlement of the forward sale agreement. Under this method, the number of Eversource common shares used in calculating diluted EPS is deemed to be increased by the excess, if any, of the number of shares that would be issued upon physical settlement of the forward sale agreement less the number of shares that would be purchased by Eversource in the market (based on the average market price during the same reporting period) using the proceeds receivable upon settlement (based on the adjusted forward sale price at the end of that reporting period). Share dilution occurs when the average market price of Eversource's common shares is higher than the adjusted forward sale price.
For the three and six months ended June 30, 2020, there were 158,242 and 79,121 antidilutive share awards excluded from the EPS computation, respectively, as their impact would have been antidilutive. Antidilutive shares pertained to a purchase option extended to underwriters in connection with Eversource's common share issuance on June 15, 2020. See Note 12, "Common Shares," for further information. There were 0 antidilutive share awards excluded from the computation for the three and six months ended June 30, 2019.
The following table sets forth the components of basic and diluted EPS:
Eversource (Millions of Dollars, except share information) | For the Three Months Ended | For the Six Months Ended | |||||||||||||
June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||
Net Income Attributable to Common Shareholders | $ | 252.2 | $ | 31.5 | $ | 587.0 | $ | 340.1 | |||||||
Weighted Average Common Shares Outstanding: | |||||||||||||||
Basic | 337,946,663 | 319,664,998 | 334,524,452 | 318,644,796 | |||||||||||
Dilutive Effect of: | |||||||||||||||
Share-Based Compensation Awards and Other | 614,986 | 645,450 | 681,110 | 668,470 | |||||||||||
Equity Forward Sale Agreement | — | 78,042 | 543,842 | 39,021 | |||||||||||
Total Dilutive Effect | 614,986 | 723,492 | 1,224,952 | 707,491 | |||||||||||
Diluted | 338,561,649 | 320,388,490 | 335,749,404 | 319,352,287 | |||||||||||
Basic and Diluted EPS | $ | 0.75 | $ | 0.10 | $ | 1.75 | $ | 1.07 |
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15. REVENUES
The following tables present operating revenues disaggregated by revenue source:
For the Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Revenues from Contracts with Customers | |||||||||||||||||||||||||||
Retail Tariff Sales | |||||||||||||||||||||||||||
Residential | $ | 916.0 | $ | 116.1 | $ | — | $ | 39.7 | $ | — | $ | — | $ | 1,071.8 | |||||||||||||
Commercial | 526.0 | 67.8 | — | 15.9 | — | (1.3 | ) | 608.4 | |||||||||||||||||||
Industrial | 77.7 | 21.1 | — | 1.2 | — | (3.4 | ) | 96.6 | |||||||||||||||||||
Total Retail Tariff Sales Revenues | 1,519.7 | 205.0 | — | 56.8 | — | (4.7 | ) | 1,776.8 | |||||||||||||||||||
Wholesale Transmission Revenues | — | — | 383.4 | — | 19.2 | (332.2 | ) | 70.4 | |||||||||||||||||||
Wholesale Market Sales Revenues | 60.5 | 10.1 | — | 0.9 | — | — | 71.5 | ||||||||||||||||||||
Other Revenues from Contracts with Customers | 18.8 | 0.9 | 3.3 | 1.8 | 264.6 | (262.8 | ) | 26.6 | |||||||||||||||||||
Amortization/(Reserve) for Revenues Subject to Refund | 2.3 | 0.5 | — | (0.9 | ) | — | — | 1.9 | |||||||||||||||||||
Total Revenues from Contracts with Customers | 1,601.3 | 216.5 | 386.7 | 58.6 | 283.8 | (599.7 | ) | 1,947.2 | |||||||||||||||||||
Alternative Revenue Programs | 14.2 | (5.3 | ) | (10.2 | ) | (3.2 | ) | — | 9.4 | 4.9 | |||||||||||||||||
Other Revenues (1) | 0.7 | — | 0.2 | 0.1 | — | — | 1.0 | ||||||||||||||||||||
Total Operating Revenues | $ | 1,616.2 | $ | 211.2 | $ | 376.7 | $ | 55.5 | $ | 283.8 | $ | (590.3 | ) | $ | 1,953.1 | ||||||||||||
For the Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Revenues from Contracts with Customers | |||||||||||||||||||||||||||
Retail Tariff Sales | |||||||||||||||||||||||||||
Residential | $ | 1,879.7 | $ | 354.1 | $ | — | $ | 67.5 | $ | — | $ | — | $ | 2,301.3 | |||||||||||||
Commercial | 1,133.0 | 202.4 | — | 30.6 | — | (2.3 | ) | 1,363.7 | |||||||||||||||||||
Industrial | 157.5 | 49.5 | — | 2.3 | — | (6.6 | ) | 202.7 | |||||||||||||||||||
Total Retail Tariff Sales Revenues | 3,170.2 | 606.0 | — | 100.4 | — | (8.9 | ) | 3,867.7 | |||||||||||||||||||
Wholesale Transmission Revenues | — | — | 719.7 | — | 36.6 | (615.8 | ) | 140.5 | |||||||||||||||||||
Wholesale Market Sales Revenues | 151.5 | 23.2 | — | 1.8 | — | — | 176.5 | ||||||||||||||||||||
Other Revenues from Contracts with Customers | 38.0 | 1.7 | 6.6 | 3.7 | 541.9 | (538.9 | ) | 53.0 | |||||||||||||||||||
Amortization/(Reserve) for Revenues Subject to Refund | 4.6 | 1.1 | — | (1.7 | ) | — | — | 4.0 | |||||||||||||||||||
Total Revenues from Contracts with Customers | 3,364.3 | 632.0 | 726.3 | 104.2 | 578.5 | (1,163.6 | ) | 4,241.7 | |||||||||||||||||||
Alternative Revenue Programs | 53.1 | 26.9 | 19.6 | (2.1 | ) | — | (18.1 | ) | 79.4 | ||||||||||||||||||
Other Revenues (1) | 4.2 | 0.9 | 0.4 | 0.3 | — | — | 5.8 | ||||||||||||||||||||
Total Operating Revenues | $ | 3,421.6 | $ | 659.8 | $ | 746.3 | $ | 102.4 | $ | 578.5 | $ | (1,181.7 | ) | $ | 4,326.9 |
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For the Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Revenues from Contracts with Customers | |||||||||||||||||||||||||||
Retail Tariff Sales | |||||||||||||||||||||||||||
Residential | $ | 805.0 | $ | 100.2 | $ | — | $ | 33.6 | $ | — | $ | — | $ | 938.8 | |||||||||||||
Commercial | 612.8 | 69.5 | — | 16.0 | — | (0.9 | ) | 697.4 | |||||||||||||||||||
Industrial | 81.3 | 23.5 | — | 1.1 | — | (2.8 | ) | 103.1 | |||||||||||||||||||
Total Retail Tariff Sales Revenues | 1,499.1 | 193.2 | — | 50.7 | — | (3.7 | ) | 1,739.3 | |||||||||||||||||||
Wholesale Transmission Revenues | — | — | 281.2 | — | 14.7 | (239.8 | ) | 56.1 | |||||||||||||||||||
Wholesale Market Sales Revenues | 39.4 | 14.4 | — | 0.9 | — | — | 54.7 | ||||||||||||||||||||
Other Revenues from Contracts with Customers | 15.1 | 0.4 | 3.7 | 1.8 | 236.1 | (236.8 | ) | 20.3 | |||||||||||||||||||
(Reserve)/Amortization for Revenues Subject to Refund | (3.1 | ) | 1.5 | — | (0.6 | ) | — | — | (2.2 | ) | |||||||||||||||||
Total Revenues from Contracts with Customers | 1,550.5 | 209.5 | 284.9 | 52.8 | 250.8 | (480.3 | ) | 1,868.2 | |||||||||||||||||||
Alternative Revenue Programs | 6.3 | (2.7 | ) | 64.6 | 0.7 | — | (58.8 | ) | 10.1 | ||||||||||||||||||
Other Revenues (1) | 5.0 | 0.9 | 0.1 | 0.2 | — | — | 6.2 | ||||||||||||||||||||
Total Operating Revenues | $ | 1,561.8 | $ | 207.7 | $ | 349.6 | $ | 53.7 | $ | 250.8 | $ | (539.1 | ) | $ | 1,884.5 | ||||||||||||
For the Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Revenues from Contracts with Customers | |||||||||||||||||||||||||||
Retail Tariff Sales | |||||||||||||||||||||||||||
Residential | $ | 1,838.3 | $ | 359.1 | $ | — | $ | 60.5 | $ | — | $ | — | $ | 2,257.9 | |||||||||||||
Commercial | 1,265.3 | 213.3 | — | 30.3 | — | (2.0 | ) | 1,506.9 | |||||||||||||||||||
Industrial | 163.4 | 54.4 | — | 2.2 | — | (5.5 | ) | 214.5 | |||||||||||||||||||
Total Retail Tariff Sales Revenues | 3,267.0 | 626.8 | — | 93.0 | — | (7.5 | ) | 3,979.3 | |||||||||||||||||||
Wholesale Transmission Revenues | — | — | 606.1 | — | 28.3 | (510.7 | ) | 123.7 | |||||||||||||||||||
Wholesale Market Sales Revenues | 90.8 | 36.1 | — | 1.9 | — | — | 128.8 | ||||||||||||||||||||
Other Revenues from Contracts with Customers | 27.7 | 1.4 | 6.9 | 3.5 | 480.7 | (482.2 | ) | 38.0 | |||||||||||||||||||
(Reserve)/Amortization for Revenues Subject to Refund | (6.1 | ) | 3.1 | — | (1.2 | ) | — | — | (4.2 | ) | |||||||||||||||||
Total Revenues from Contracts with Customers | 3,379.4 | 667.4 | 613.0 | 97.2 | 509.0 | (1,000.4 | ) | 4,265.6 | |||||||||||||||||||
Alternative Revenue Programs | 8.4 | 7.7 | 77.0 | 1.5 | — | (69.8 | ) | 24.8 | |||||||||||||||||||
Other Revenues (1) | 7.8 | 1.5 | 0.1 | 0.5 | — | — | 9.9 | ||||||||||||||||||||
Total Operating Revenues | $ | 3,395.6 | $ | 676.6 | $ | 690.1 | $ | 99.2 | $ | 509.0 | $ | (1,070.2 | ) | $ | 4,300.3 |
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For the Three Months Ended June 30, 2020 | For the Three Months Ended June 30, 2019 | ||||||||||||||||||||||
(Millions of Dollars) | CL&P | NSTAR Electric | PSNH | CL&P | NSTAR Electric | PSNH | |||||||||||||||||
Revenues from Contracts with Customers | |||||||||||||||||||||||
Retail Tariff Sales | |||||||||||||||||||||||
Residential | $ | 469.3 | $ | 311.5 | $ | 135.2 | $ | 402.8 | $ | 282.3 | $ | 119.9 | |||||||||||
Commercial | 199.3 | 261.0 | 66.1 | 224.7 | 315.8 | 72.7 | |||||||||||||||||
Industrial | 33.3 | 24.8 | 19.6 | 33.8 | 28.9 | 18.6 | |||||||||||||||||
Total Retail Tariff Sales Revenues | 701.9 | 597.3 | 220.9 | 661.3 | 627.0 | 211.2 | |||||||||||||||||
Wholesale Transmission Revenues | 191.4 | 142.5 | 49.5 | 115.9 | 127.5 | 37.8 | |||||||||||||||||
Wholesale Market Sales Revenues | 39.3 | 13.2 | 8.0 | 12.1 | 17.2 | 10.1 | |||||||||||||||||
Other Revenues from Contracts with Customers | 8.1 | 11.1 | 3.6 | 9.1 | 6.1 | 4.2 | |||||||||||||||||
Amortization/(Reserve) for Revenues Subject to Refund | — | — | 2.3 | — | — | (3.1 | ) | ||||||||||||||||
Total Revenues from Contracts with Customers | 940.7 | 764.1 | 284.3 | 798.4 | 777.8 | 260.2 | |||||||||||||||||
Alternative Revenue Programs | (7.5 | ) | 3.6 | 7.9 | 55.1 | 2.1 | 13.7 | ||||||||||||||||
Other Revenues (1) | 0.2 | 0.7 | — | 2.7 | 1.9 | 0.5 | |||||||||||||||||
Eliminations | (116.0 | ) | (107.4 | ) | (37.0 | ) | (115.4 | ) | (99.9 | ) | (33.5 | ) | |||||||||||
Total Operating Revenues | $ | 817.4 | $ | 661.0 | $ | 255.2 | $ | 740.8 | $ | 681.9 | $ | 240.9 | |||||||||||
For the Six Months Ended June 30, 2020 | For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||
(Millions of Dollars) | CL&P | NSTAR Electric | PSNH | CL&P | NSTAR Electric | PSNH | |||||||||||||||||
Revenues from Contracts with Customers | |||||||||||||||||||||||
Retail Tariff Sales | |||||||||||||||||||||||
Residential | $ | 959.2 | $ | 642.4 | $ | 278.1 | $ | 913.4 | $ | 653.2 | $ | 271.7 | |||||||||||
Commercial | 425.6 | 562.9 | 145.3 | 461.3 | 652.3 | 152.6 | |||||||||||||||||
Industrial | 67.3 | 51.6 | 38.6 | 68.4 | 57.8 | 37.2 | |||||||||||||||||
Total Retail Tariff Sales Revenues | 1,452.1 | 1,256.9 | 462.0 | 1,443.1 | 1,363.3 | 461.5 | |||||||||||||||||
Wholesale Transmission Revenues | 343.2 | 277.3 | 99.2 | 270.7 | 250.1 | 85.3 | |||||||||||||||||
Wholesale Market Sales Revenues | 104.0 | 27.6 | 19.9 | 25.8 | 41.6 | 23.4 | |||||||||||||||||
Other Revenues from Contracts with Customers | 17.0 | 21.8 | 7.2 | 18.0 | 10.1 | 7.8 | |||||||||||||||||
Amortization/(Reserve) for Revenues Subject to Refund | — | — | 4.6 | — | — | (6.1 | ) | ||||||||||||||||
Total Revenues from Contracts with Customers | 1,916.3 | 1,583.6 | 592.9 | 1,757.6 | 1,665.1 | 571.9 | |||||||||||||||||
Alternative Revenue Programs | 37.1 | 23.0 | 12.6 | 60.9 | 9.3 | 15.2 | |||||||||||||||||
Other Revenues (1) | 1.9 | 2.1 | 0.6 | 3.7 | 3.4 | 0.8 | |||||||||||||||||
Eliminations | (238.2 | ) | (213.9 | ) | (74.5 | ) | (232.1 | ) | (198.3 | ) | (70.6 | ) | |||||||||||
Total Operating Revenues | $ | 1,717.1 | $ | 1,394.8 | $ | 531.6 | $ | 1,590.1 | $ | 1,479.5 | $ | 517.3 |
(1) | Other Revenues include certain fees charged to customers that are not considered revenue from contracts with customers. Other revenues also include lease revenues under lessor accounting guidance of $1.1 million (including $0.2 million at CL&P and $0.7 million at NSTAR Electric) and $1.1 million (including $0.3 million at CL&P and $0.7 million at NSTAR Electric) for the three months ended June 30, 2020 and 2019, respectively, and $2.2 million (including $0.4 million at CL&P and $1.4 million at NSTAR Electric) and $2.2 million (including $0.5 million at CL&P and $1.3 million at NSTAR Electric) for the six months ended June 30, 2020 and 2019, respectively. |
CL&P, NSTAR Electric, Yankee Gas, NSTAR Gas and the Connecticut water distribution business each have a revenue decoupling mechanism approved by a regulatory commission. The revenue decoupling mechanisms mitigate the impact of lower demand and resulting lost sales revenues by replacing actual customer usage with a fixed annual revenue stream, which is reconciled each year as part of our annual decoupling filing in each respective jurisdiction. These revenue decoupling mechanisms qualify as alternative revenue programs in accordance with accounting guidance for rate-regulated operations. The increase in Eversource's revenues from Alternative Revenue Programs for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, was primarily the result of a higher decoupling deferral adjustment driven by lower distribution sales volumes in the first half of 2020. The decoupling deferral adjustment to revenues is recorded as a regulatory tracker mechanism within Regulatory Assets on the balance sheets.
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16. SEGMENT INFORMATION
Eversource is organized into the Electric Distribution, Electric Transmission, Natural Gas Distribution and Water Distribution reportable segments and Other based on a combination of factors, including the characteristics of each segments' services, the sources of operating revenues and expenses and the regulatory environment in which each segment operates. These reportable segments represent substantially all of Eversource's total consolidated revenues. Revenues from the sale of electricity, natural gas and water primarily are derived from residential, commercial and industrial customers and are not dependent on any single customer. The Electric Distribution reportable segment includes the results of NSTAR Electric's solar power facilities. Eversource's reportable segments are determined based upon the level at which Eversource's chief operating decision maker assesses performance and makes decisions about the allocation of company resources.
The remainder of Eversource's operations is presented as Other in the tables below and primarily consists of 1) the equity in earnings of Eversource parent from its subsidiaries and intercompany interest income, both of which are eliminated in consolidation, and interest expense related to the debt of Eversource parent, 2) the revenues and expenses of Eversource Service, most of which are eliminated in consolidation, 3) the operations of CYAPC and YAEC, 4) Eversource Water Ventures, Inc., parent company of Aquarion, 5) the results of other unregulated subsidiaries, which are not part of its core business, and 6) Eversource parent's equity ownership interests that are not consolidated, which primarily include the offshore wind business, a natural gas pipeline owned by Enbridge, Inc., and a renewable energy investment fund.
In the ordinary course of business, Yankee Gas and NSTAR Gas purchase natural gas transmission services from the Enbridge, Inc. natural gas pipeline project described above. These affiliate transaction costs total $62.5 million annually and are classified as Purchased Power, Fuel and Transmission on the Eversource statements of income.
Each of Eversource's subsidiaries, including CL&P, NSTAR Electric and PSNH, has 1 reportable segment.
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 and PBOP expense.
Eversource's segment information is as follows:
For the Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Operating Revenues | $ | 1,616.2 | $ | 211.2 | $ | 376.7 | $ | 55.5 | $ | 283.8 | $ | (590.3 | ) | $ | 1,953.1 | ||||||||||||
Depreciation and Amortization | (140.7 | ) | (21.2 | ) | (68.8 | ) | (10.8 | ) | (22.7 | ) | 0.3 | (263.9 | ) | ||||||||||||||
Other Operating Expenses | (1,293.3 | ) | (176.1 | ) | (111.2 | ) | (25.4 | ) | (243.1 | ) | 593.5 | (1,255.6 | ) | ||||||||||||||
Operating Income | $ | 182.2 | $ | 13.9 | $ | 196.7 | $ | 19.3 | $ | 18.0 | $ | 3.5 | $ | 433.6 | |||||||||||||
Interest Expense | $ | (54.3 | ) | $ | (10.7 | ) | $ | (32.1 | ) | $ | (8.4 | ) | $ | (37.6 | ) | $ | 8.8 | $ | (134.3 | ) | |||||||
Other Income, Net | 16.4 | 0.4 | 10.6 | — | 306.5 | (303.7 | ) | 30.2 | |||||||||||||||||||
Net Income Attributable to Common Shareholders | 115.0 | 3.3 | 129.5 | 10.4 | 285.4 | (291.4 | ) | 252.2 | |||||||||||||||||||
For the Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Operating Revenues | $ | 3,421.6 | $ | 659.8 | $ | 746.3 | $ | 102.4 | $ | 578.5 | $ | (1,181.7 | ) | $ | 4,326.9 | ||||||||||||
Depreciation and Amortization | (308.1 | ) | (40.3 | ) | (136.2 | ) | (22.2 | ) | (44.0 | ) | 0.9 | (549.9 | ) | ||||||||||||||
Other Operating Expenses | (2,732.9 | ) | (487.7 | ) | (218.0 | ) | (50.4 | ) | (500.0 | ) | 1,184.8 | (2,804.2 | ) | ||||||||||||||
Operating Income | $ | 380.6 | $ | 131.8 | $ | 392.1 | $ | 29.8 | $ | 34.5 | $ | 4.0 | $ | 972.8 | |||||||||||||
Interest Expense | $ | (107.4 | ) | $ | (22.0 | ) | $ | (62.7 | ) | $ | (17.1 | ) | $ | (80.3 | ) | $ | 20.5 | $ | (269.0 | ) | |||||||
Other Income, Net | 28.9 | 1.8 | 15.7 | 0.1 | 774.7 | (766.9 | ) | 54.3 | |||||||||||||||||||
Net Income Attributable to Common Shareholders | 245.1 | 87.8 | 256.2 | 12.5 | 727.8 | (742.4 | ) | 587.0 | |||||||||||||||||||
Cash Flows Used for Investments in Plant | 563.2 | 205.6 | 460.8 | 46.0 | 124.6 | — | 1,400.2 |
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For the Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Operating Revenues | $ | 1,561.8 | $ | 207.7 | $ | 349.6 | $ | 53.7 | $ | 250.8 | $ | (539.1 | ) | $ | 1,884.5 | ||||||||||||
Depreciation and Amortization | (150.1 | ) | (19.5 | ) | (62.3 | ) | (12.0 | ) | (14.7 | ) | 0.6 | (258.0 | ) | ||||||||||||||
Impairment of Northern Pass Transmission | — | — | (239.6 | ) | — | — | — | (239.6 | ) | ||||||||||||||||||
Other Operating Expenses | (1,243.0 | ) | (179.8 | ) | (108.4 | ) | (25.0 | ) | (218.4 | ) | 538.7 | (1,235.9 | ) | ||||||||||||||
Operating Income/(Loss) | $ | 168.7 | $ | 8.4 | $ | (60.7 | ) | $ | 16.7 | $ | 17.7 | $ | 0.2 | $ | 151.0 | ||||||||||||
Interest Expense | $ | (50.8 | ) | $ | (11.9 | ) | $ | (30.5 | ) | $ | (8.6 | ) | $ | (44.5 | ) | $ | 13.6 | $ | (132.7 | ) | |||||||
Other Income/(Loss), Net | 12.2 | 0.7 | 8.7 | 0.1 | (114.9 | ) | 139.1 | 45.9 | |||||||||||||||||||
Net Income/(Loss) Attributable to Common Shareholders | 105.4 | (1.8 | ) | (87.4 | ) | 8.0 | (145.6 | ) | 152.9 | 31.5 | |||||||||||||||||
For the Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
Operating Revenues | $ | 3,395.6 | $ | 676.6 | $ | 690.1 | $ | 99.2 | $ | 509.0 | $ | (1,070.2 | ) | $ | 4,300.3 | ||||||||||||
Depreciation and Amortization | (329.3 | ) | (39.9 | ) | (123.7 | ) | (23.9 | ) | (28.3 | ) | 1.1 | (544.0 | ) | ||||||||||||||
Impairment of Northern Pass Transmission | — | — | (239.6 | ) | — | — | — | (239.6 | ) | ||||||||||||||||||
Other Operating Expenses | (2,718.6 | ) | (521.1 | ) | (207.2 | ) | (49.9 | ) | (444.0 | ) | 1,069.8 | (2,871.0 | ) | ||||||||||||||
Operating Income | $ | 347.7 | $ | 115.6 | $ | 119.6 | $ | 25.4 | $ | 36.7 | $ | 0.7 | $ | 645.7 | |||||||||||||
Interest Expense | $ | (100.0 | ) | $ | (23.7 | ) | $ | (61.0 | ) | $ | (17.2 | ) | $ | (88.6 | ) | $ | 26.1 | $ | (264.4 | ) | |||||||
Other Income, Net | 30.4 | 1.0 | 16.8 | 0.4 | 316.8 | (288.5 | ) | 76.9 | |||||||||||||||||||
Net Income Attributable to Common Shareholders | 225.4 | 74.7 | 30.9 | 8.8 | 262.0 | (261.7 | ) | 340.1 | |||||||||||||||||||
Cash Flows Used for Investments in Plant | 571.3 | 202.7 | 449.2 | 51.4 | 103.2 | — | 1,377.8 |
The following table summarizes Eversource's segmented total assets:
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||
As of June 30, 2020 | $ | 23,166.1 | $ | 4,503.3 | $ | 11,224.7 | $ | 2,394.6 | $ | 21,202.0 | $ | (20,452.0 | ) | $ | 42,038.7 | ||||||||||||
As of December 31, 2019 | 22,541.9 | 4,345.5 | 10,904.0 | 2,351.7 | 20,469.6 | (19,488.8 | ) | 41,123.9 |
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EVERSOURCE ENERGY AND SUBSIDIARIES
Management'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 combined Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as well as the Eversource 2019 combined Annual Report on Form 10-K. References in this combined Quarterly Report on Form 10-Q to "Eversource," the "Company," "we," "us," and "our" refer to Eversource Energy and its consolidated subsidiaries. All per-share amounts are reported on a diluted basis. The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P are herein collectively referred to as the "financial statements."
Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations.
The only common equity securities that are publicly traded are common shares of Eversource. The earnings and EPS of each business discussed below do not represent a direct legal interest in the assets and liabilities of 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, calculated by dividing the Net Income Attributable to Common Shareholders of each business by the weighted average diluted Eversource common shares outstanding for the period. Our earnings discussion also includes non-GAAP financial measures referencing our 2020 earnings and EPS excluding certain acquisition costs and our Q2 2019 earnings and EPS excluding the impairment charge for the NPT project.
We use these non-GAAP financial measures to evaluate and provide details of earnings results by business and to more fully compare and explain our 2020 and 2019 results without including these items. We believe the acquisition costs and the NPT impairment charge are not indicative of our ongoing costs and performance. Due to the nature and significance of these items on Net Income Attributable to Common Shareholders, we believe that the non-GAAP presentation is a more meaningful representation of our financial performance and provides additional and useful information to readers of this report in analyzing historical and future performance of our business. These non-GAAP financial measures should not be considered as alternatives to reported Net Income Attributable to Common Shareholders or EPS determined in accordance with GAAP as indicators of operating performance.
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" 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," 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:
• | cyberattacks or breaches, including those resulting in the compromise of the confidentiality of our proprietary information and the personal information of our customers, |
• | disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly, |
• | the negative impacts of the 2019 novel coronavirus (COVID-19) pandemic on our customers, vendors, employees, regulators, and operations, |
• | changes in economic conditions, including impact on interest rates, tax policies, and customer demand and payment ability, |
• | ability or inability to commence and complete our major strategic development projects and opportunities, |
• | acts of war or terrorism, physical attacks or grid disturbances that may damage and disrupt our electric transmission and electric, natural gas, and water distribution systems, |
• | actions or inaction of local, state and federal regulatory, public policy and taxing bodies, |
• | substandard performance of third-party suppliers and service providers, |
• | fluctuations in weather patterns, including extreme weather due to climate change, |
• | changes in business conditions, which could include disruptive technology or development of alternative energy sources related to our current or future business model, |
• | contamination of, or disruption in, our water supplies, |
• | changes in levels or timing of capital expenditures, including the Columbia Gas of Massachusetts asset acquisition; |
• | changes in laws, regulations or regulatory policy, including compliance with environmental laws and regulations, |
• | 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 and contain uncertainties that may materially affect our actual results, many of which are beyond our control. You should not place undue reliance on the forward-looking statements, as each speaks only as of the date on which such statement is made, and, except as required by federal securities laws, 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
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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 combined Quarterly Report on Form 10-Q and in Eversource's 2019 combined Annual Report on Form 10-K. This combined Quarterly Report on Form 10-Q and Eversource's 2019 combined Annual Report on Form 10-K also describe material contingencies and critical accounting policies in the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations and Combined Notes to Financial Statements. We encourage you to review these items.
Financial Condition and Business Analysis
Executive Summary
The following items in this executive summary are explained in more detail in this combined Quarterly Report on Form 10-Q:
Earnings Overview and Future Outlook:
• | We earned $252.2 million, or $0.75 per share, in the second quarter of 2020, and $587.0 million, or $1.75 per share, in the first half of 2020, compared with $31.5 million, or $0.10 per share, in the second quarter of 2019, and $340.1 million, or $1.07 per share, in the first half of 2019. Our 2020 results include after-tax acquisition costs related to our planned purchase of the assets of Columbia Gas of Massachusetts (CMA) of $3.9 million, or $0.01 per share, in the second quarter of 2020, and $7.4 million, or $0.02 per share, in the first half of 2020. Our 2019 results include an after-tax impairment charge of $204.4 million, or $0.64 per share, related to our investment in the NPT project. Excluding those acquisition costs in 2020, we earned $256.1 million, or $0.76 per share, in the second quarter of 2020, and $594.4 million, or $1.77 per share, in the first half of 2020. Excluding the NPT impairment charge in 2019, we earned $235.9 million, or $0.74 per share, in the second quarter of 2019, and $544.5 million, or $1.71 per share, in the first half of 2019. |
• | Our electric distribution segment earned $115.0 million, or $0.34 per share, in the second quarter of 2020, and $245.1 million, or $0.73 per share, in the first half of 2020, compared with $105.4 million, or $0.33 per share, in the second quarter of 2019, and $225.4 million, or $0.71 per share, in the first half of 2019. Our natural gas distribution segment earned $3.3 million, or $0.01 per share, in the second quarter of 2020, and $87.8 million, or $0.26 per share, in the first half of 2020, compared with a loss of $1.8 million in the second quarter of 2019, and earnings of $74.7 million, or $0.23 per share, in the first half of 2019. Our water distribution segment earned $10.4 million, or $0.03 per share, in the second quarter of 2020, and $12.5 million, or $0.04 per share, in the first half of 2020, compared with $8.0 million, or $0.02 per share, in the second quarter of 2019, and $8.8 million, or $0.03 per share, in the first half of 2019. |
• | Our electric transmission segment earned $129.5 million, or $0.39 per share, in the second quarter of 2020, and $256.2 million, or $0.76 per share, in the first half of 2020, compared with a net loss of $87.4 million, or $0.27 per share, in the second quarter of 2019, and earnings of $30.9 million, or $0.10 per share in the first half of 2019. Excluding the after-tax NPT impairment charge of $204.4 million, or $0.64 per share, our electric transmission segment earned $117.0 million, or $0.37 per share, in the second quarter of 2019, and $235.3 million, or $0.74 per share, in the first half of 2019. |
• | Eversource parent and other companies had net losses of $6.0 million, or $0.02 per share, in the second quarter of 2020, and $14.6 million, or $0.04 per share, in the first half of 2020, compared with earnings of $7.3 million, or $0.02 per share, in the second quarter of 2019, and $0.3 million in the first half of 2019. Excluding acquisition costs, Eversource parent and other companies had net losses of $2.1 million, or $0.01 per share, in the second quarter of 2020, and $7.2 million, or $0.02 per share, in the first half of 2020. |
• | We reaffirm 2020 earnings of between $3.60 per share and $3.70 per share and our long-term EPS growth rate through 2024 from our regulated utility businesses of between 5 to 7 percent. |
• | As of the date of our filing, the outbreak of COVID-19 has not resulted in significant financial or operational impacts. We are continuing to closely monitor the COVID-19 pandemic, and we continue to operate under our pandemic response plan. However, we cannot at this time predict the impacts that the COVID-19 pandemic will have on our future financial condition, results of operations, cash flows, and our business operations. |
Liquidity:
• | Cash flows provided by operating activities totaled $1.01 billion in the first half of 2020, compared with $924.6 million in the first half of 2019. Investments in property, plant and equipment totaled $1.40 billion in the first half of 2020, compared with $1.38 billion in the first half of 2019. Cash totaled $64.9 million as of June 30, 2020, compared with $15.4 million as of December 31, 2019. Our available borrowing capacity under our commercial paper programs totaled $1.61 billion as of June 30, 2020. |
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• | In the first half of 2020, we issued 11,960,000 common shares, which resulted in proceeds of $929.0 million, net of issuance costs. |
• | In the first half of 2020, we issued $940 million of new long-term debt, consisting of $400 million by NSTAR Electric, $350 million by Eversource parent, and $190 million by NSTAR Gas. Proceeds from these new issuances were used primarily to refinance investments in eligible green expenditures at NSTAR Electric, to pay short-term borrowings at Eversource parent, and to refinance existing indebtedness, fund capital expenditures and for general corporate purposes at NSTAR Gas. |
• | On May 6, 2020, our Board of Trustees approved a common share dividend payment of $0.5675 per share, which was paid on June 30, 2020 to shareholders of record as of May 20, 2020. |
Impact of COVID-19
COVID-19 has adversely affected workers and the economy and caused significant volatility in the financial markets. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we continue to closely monitor how COVID-19 related developments affect Eversource. As of the date of our filing and based on available information, we have not experienced, nor are we able to predict, significant impacts directly related to the pandemic that could adversely affect our current or future operations, financial position, results of operations, and cash flows. The extent of the impact to us in the future will vary and depend in large part on the duration, scope and severity of the pandemic, and the resulting impact on economic, health care and capital market conditions.
Operational: We provide a critical service to our customers and have taken extensive measures to maintain its safety and reliability. We have implemented our company-wide pandemic plan, which guides our emergency response, business continuity, and the precautionary measures we are taking to ensure the safety, health, and well-being of our employees, our customers, and our communities. We continue to adjust our company-wide pandemic plan to address various scenarios, including reduced workforce levels and limited mutual aid in the event of a significant storm event, and have implemented protective measures to mitigate the impact of COVID-19 on our workforce. We have implemented work from home policies where appropriate, resulting in nearly half of our employees working remotely. For our employees performing essential functions that are required onsite, such as field crews and system operations, we have taken significant safety measures, including establishing social distancing measures, enabling critical operations to be shifted to different control center locations if necessary, and increasing facility sanitization efforts and promoting both the availability and use of personal protective equipment.
In mid-March, we suspended non-critical work inside customer premises, which included energy audits inside our customers’ homes and businesses. These activities resumed in early July with the implementation of new health and safety guidelines for the restart of energy efficiency services to customers. As of the date of our filing, we do not expect a significant impact on our 2020 energy efficiency program spending and efforts, which assumes the resumption of energy efficiency programs throughout the second half of 2020. Actual energy efficiency spending levels will depend on the extent and duration of the pandemic.
At this time, our workforce staffing levels continue to enable us to safely and reliably deliver our critical services to customers. Through August 5, 2020, a total of 50 employees had contracted COVID-19, and a cumulative total of 772 employees had self-quarantined, of which 751 employees have returned to the workforce. The number of quarantined employees peaked at 215 in April.
We are also preparing for the re-entry of our employees working remotely. Our re-entry plan includes a multi-phase approach that is measured, cautious and gradual. The plan is informed by public health guidance with the safety of our employees and customers as our highest priority. We are in the early phases of our re-entry plan and have returned fewer than 100 remote employees back to the workplace. State and federal guidelines, external conditions, and critical business priorities continue to inform the pace of our re-entry plan. Significant health and safety measures and pandemic protocols, including social distancing requirements, the use of personal protective equipment, sanitization efforts and employee training, are in place for all employees working onsite today and specific plans have been developed for our eventual re-entry to the workplace.
In the states we serve, COVID-19 is currently spreading in a slower manner, as compared to the initial outbreak that began in mid-March, and measures used to control it, such as social distancing and face coverings, are having a positive reduction in its spread. Each of our states has seen a decrease in the infection rate and in the number of positive tests, as well as more capacity in hospitals, and improved testing availability and contact tracing.
Financial: Overall, our future financial position, results of operations, and cash flows could be negatively impacted by COVID-19 as it relates to the valuation of customer receivables, collectibility estimates and customer payment plans, elimination of late payment revenues, lower sales volumes primarily from PSNH's commercial and industrial customers, energy efficiency spending levels and incentives earned, and increased expenses for cleaning and supplies for personal protective equipment. Other potential negative financial impacts relate to market volatility on our equity and debt securities, access to, as well as cost of, capital resources, and the ability of various third-party vendors and suppliers to fulfill their obligations.
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As of June 30, 2020, our allowance for uncollectible customer receivable balances of $270.0 million, of which $175.5 million relates to hardship accounts that are specifically recovered in rates charged to customers, adequately reflected the collection risk and net realizable value for our receivables and has not been materially impacted by COVID-19. We will continue to evaluate the adequacy of the uncollectible allowance in future reporting periods based on an ongoing assessment of accounts receivable collections, delinquency statistics, the impact on electric residential customer bills because of higher usage in July driven by warmer than normal weather, COVID-19 developments, including any potential federal legislation, and analysis of aging-based quantitative assessments. We continue to work closely with our state regulatory commissions and consumer advocates on several customer assistance measures, including more flexible and new payment plan options in order to mitigate the impact on customer rates in the future, as well as financial hardship and arrearage management programs for those customers who are unable to pay their utility bills. We developed these long-term solutions for customers in order to help minimize the extent of the impact of COVID-19 on customer receivable balances and customers’ affordability in light of the current financial impact they may experience. Our operating companies have also eliminated late payment charges at this time.
Beginning in March 2020, Connecticut, Massachusetts and New Hampshire established moratoriums on disconnections of residential and commercial customers for non-payment for utility service. In Connecticut, the moratorium on disconnections remains in place for residential customers, but the moratorium for commercial customers ended on August 1, 2020. In Massachusetts, the moratorium remains in place until it is lifted by the governor or state regulatory commission. In New Hampshire, the moratorium for both residential and commercial customers ended on July 15, 2020, however, PSNH has not yet begun to disconnect customers. As of the date of our filing, our operating companies have experienced some lower cash collections from customers because of the moratorium on disconnections and the economic slowdown resulting from the COVID-19 pandemic, primarily at our natural gas distribution businesses driven by the seasonality of their usage patterns. However, overall it is not a significant reduction in customer payments. We believe that we are developing successful mechanisms with our state regulatory commissions that allow, or will allow, us to recover our incremental costs associated with COVID-19, which include uncollectible customer receivable expenses, while balancing the impact on our customers’ bills and our operating cash flows. As such, as of the date of our filing, our reserve for uncollectible accounts has not been materially adversely impacted.
As of June 30, 2020, net incremental costs as a result of COVID-19 that we have deferred totaled $6.6 million, of which $4.1 million was related to uncollectible expense incurred at our natural gas distribution segment. In the second quarter and first half of 2020, respectively, incremental COVID-19 expenses that reduced pre-tax earnings totaled $6.2 million and $7.5 million and related to facilities and fleet cleaning, sanitizing costs and supplies for personal protective equipment. For further information on Connecticut, Massachusetts and New Hampshire COVID-19-related regulatory developments, see "Regulatory Developments and Rate Matters - COVID-19 Regulatory Dockets" included in this Management’s Discussion and Analysis.
An extended economic slowdown could result in lower demand for electricity, natural gas and/or water by our commercial and industrial customers. However, fluctuations in retail sales volumes for CL&P, NSTAR Electric, Yankee Gas, NSTAR Gas and our Connecticut water distribution business are not expected to materially impact earnings due to their respective state regulatory commission-approved distribution revenue decoupling mechanisms. Overall, we believe our risk of exposure to lower demand and resulting lost sales revenues is limited as our regulated utilities, with the exception of PSNH, are under cost-of-service rates with revenue decoupling mechanisms and a significant portion of uncollectible expenses are tracked for ultimate recovery. Our revenue decoupling mechanisms replace actual customer usage with a fixed annual revenue stream, and is reconciled each year as part of our annual decoupling filing in each respective jurisdiction.
As of June 30, 2020, we did not identify indicators or triggering events for impairments to our goodwill, long-lived assets, available-for-sale debt securities, or equity method investment carrying values. As of the date of our filing, based on available information and the current market trends, we do not expect an impairment to these assets for the remainder of 2020.
We continue to monitor Eversource parent’s and our operating companies’ ability to access the global capital and credit markets. At the onset of the pandemic in the United States, liquidity in the commercial paper credit market began to deteriorate rapidly. However, federal legislative actions, including actions taken by the Federal Reserve, have provided sufficient liquidity and stabilization of the credit markets. An extended economic slowdown could result in Eversource parent and our operating companies finding difficulty in accessing necessary capital resources and incurring higher costs for those capital resources. As of the date of our filing, based on available information and the current market trends, we believe we will continue to have access to needed liquidity and capital resources to successfully execute our projected 2020 capital expenditures and strategies. We expect our existing borrowing availability under our commercial paper programs, our existing revolving credit facilities that serve to backstop those commercial paper programs, in addition to access to the debt and equity markets, will be sufficient to meet our future liquidity and capital resource needs.
In addition, the successful execution of our timeline for developing our offshore wind projects is based on several factors, including state and federal siting and permitting approvals. We are developing mitigation plans to address permitting delays due to COVID-19 restrictions on our offshore wind projects. For further information, see "Business Development and Capital Expenditures - Offshore Wind Business" included in this Management’s Discussion and Analysis.
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Pension and PBOP plan assets and obligations are remeasured annually using a December 31st measurement date. Our future pension and PBOP obligations are highly dependent on benefit plan asset returns, interest rates, and discount rates, all of which could be materially impacted by an extended economic slowdown. Should these financial metrics be negatively impacted by COVID-19 as of December 31, 2020, it could result in the underperformance of our pension and PBOP plan investments, an increase in pension and PBOP obligations and employee benefit plan costs, and in a minimum pension funding requirement due by March 31, 2022 for the 2021 Plan year. We continue to monitor federal legislative pension developments that could provide additional pension funding relief. As of the date of our filing, we are unable to determine whether the pandemic will have a material impact to our future pension and PBOP obligations and plan costs and minimum funding requirements. NSTAR Electric and NSTAR Gas recover qualified pension and PBOP expenses through a rate reconciling mechanism that fully tracks the change in net pension and PBOP expenses each year. Our electric transmission companies' rates provide for an annual true-up of estimated to actual costs, which include pension and PBOP expenses.
Earnings Overview
Consolidated: Below is 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 Common Shareholders and diluted EPS.
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||
(Millions of Dollars, Except Per Share Amounts) | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||
Net Income Attributable to Common Shareholders (GAAP) | $ | 252.2 | $ | 0.75 | $ | 31.5 | $ | 0.10 | $ | 587.0 | $ | 1.75 | $ | 340.1 | $ | 1.07 | |||||||||||||||
Regulated Companies (non-GAAP) | $ | 258.2 | $ | 0.77 | $ | 228.6 | $ | 0.72 | $ | 601.6 | $ | 1.79 | $ | 544.2 | $ | 1.71 | |||||||||||||||
Eversource Parent and Other Companies (non-GAAP) | (2.1 | ) | (0.01 | ) | 7.3 | 0.02 | (7.2 | ) | (0.02 | ) | 0.3 | — | |||||||||||||||||||
Non-GAAP Earnings | $ | 256.1 | $ | 0.76 | $ | 235.9 | $ | 0.74 | $ | 594.4 | $ | 1.77 | $ | 544.5 | $ | 1.71 | |||||||||||||||
Acquisition-Related Costs (after-tax) (1) | (3.9 | ) | (0.01 | ) | — | — | (7.4 | ) | (0.02 | ) | — | — | |||||||||||||||||||
Impairment of Northern Pass Transmission (after-tax) | — | — | (204.4 | ) | (0.64 | ) | — | — | (204.4 | ) | (0.64 | ) | |||||||||||||||||||
Net Income Attributable to Common Shareholders (GAAP) | $ | 252.2 | $ | 0.75 | $ | 31.5 | $ | 0.10 | $ | 587.0 | $ | 1.75 | $ | 340.1 | $ | 1.07 |
(1) These costs are associated with our pending acquisition of the assets of Columbia Gas of Massachusetts.
Regulated Companies: Our regulated companies comprise the electric distribution, electric transmission, natural gas distribution and water distribution segments. A summary of our segment earnings and EPS is as follows:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||
(Millions of Dollars, Except Per Share Amounts) | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||
Net Income - Regulated Companies (GAAP) | $ | 258.2 | $ | 0.77 | $ | 24.2 | $ | 0.08 | $ | 601.6 | $ | 1.79 | $ | 339.8 | $ | 1.07 | |||||||||||||||
Electric Distribution | $ | 115.0 | $ | 0.34 | $ | 105.4 | $ | 0.33 | $ | 245.1 | $ | 0.73 | $ | 225.4 | $ | 0.71 | |||||||||||||||
Electric Transmission, excluding Northern Pass Transmission impairment (Non-GAAP) | 129.5 | 0.39 | 117.0 | 0.37 | 256.2 | 0.76 | 235.3 | 0.74 | |||||||||||||||||||||||
Natural Gas Distribution | 3.3 | 0.01 | (1.8 | ) | — | 87.8 | 0.26 | 74.7 | 0.23 | ||||||||||||||||||||||
Water Distribution | 10.4 | 0.03 | 8.0 | 0.02 | 12.5 | 0.04 | 8.8 | 0.03 | |||||||||||||||||||||||
Net Income - Regulated Companies (Non-GAAP) | $ | 258.2 | $ | 0.77 | $ | 228.6 | $ | 0.72 | $ | 601.6 | $ | 1.79 | $ | 544.2 | $ | 1.71 | |||||||||||||||
Impairment of Northern Pass Transmission (after-tax) | — | — | (204.4 | ) | (0.64 | ) | — | — | (204.4 | ) | (0.64 | ) | |||||||||||||||||||
Net Income - Regulated Companies (GAAP) | $ | 258.2 | $ | 0.77 | $ | 24.2 | $ | 0.08 | $ | 601.6 | $ | 1.79 | $ | 339.8 | $ | 1.07 |
Our electric distribution segment earnings increased $9.6 million in the second quarter of 2020, as compared to the second quarter of 2019, due primarily to base distribution rate increases at PSNH effective July 1, 2019, at CL&P effective May 1, 2020 and May 1, 2019, and at NSTAR Electric effective January 1, 2020, and higher earnings from CL&P's capital tracker mechanism due to increased electric system improvements. The earnings increase was partially offset by higher operations and maintenance expense, higher depreciation expense, and higher interest expense.
Our electric distribution segment earnings increased $19.7 million in the first half of 2020, as compared to the first half of 2019, due primarily to base distribution rate increases at PSNH effective July 1, 2019, at CL&P effective May 1, 2020 and May 1, 2019, and at NSTAR Electric effective January 1, 2020, and higher earnings from CL&P's capital tracker mechanism due to increased electric system improvements. The earnings increase was partially offset by higher depreciation expense, higher operations and maintenance expense, higher interest expense, and the absence of the first quarter 2019 recognition of carrying charges on PSNH's 2013 through 2016 storm costs approved for recovery.
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Our electric transmission segment earnings increased $216.9 million and $225.3 million in the second quarter and first half of 2020, respectively, as compared to the second quarter and first half of 2019, due primarily to the absence in 2020 of the second quarter 2019 impairment of NPT, which resulted in an after-tax charge of $204.4 million, or $0.64 per share. Excluding the NPT impairment charge, earnings increased $12.5 million and $20.9 million in the second quarter and first half of 2020, respectively, as compared to the second quarter and first half of 2019, due primarily to a higher transmission rate base as a result of our continued investment in our transmission infrastructure and a higher benefit from the annual billing and cost reconciliation filing with FERC.
Our natural gas distribution segment earnings increased $5.1 million in the second quarter of 2020, as compared to the second quarter of 2019, due primarily to higher earnings from capital tracker mechanisms due to continued investments in natural gas infrastructure, a base distribution rate increase at Yankee Gas effective January 1, 2020 and lower interest expense, partially offset by higher property tax expense, higher operations and maintenance expense, and higher depreciation expense.
Our natural gas distribution segment earnings increased $13.1 million in the first half of 2020, as compared to the first half of 2019, due primarily to a base distribution rate increase at Yankee Gas effective January 1, 2020, higher earnings from capital tracker mechanisms due to
continued investments in natural gas infrastructure and lower interest expense, partially offset by higher operations and maintenance expense, higher depreciation expense, and higher property tax expense.
Our water distribution segment earnings increased $2.4 million and $3.7 million in the second quarter and first half of 2020, respectively, as compared to the second quarter and first half of 2019, due primarily to higher revenues from Connecticut's capital tracker mechanism due to increased infrastructure improvements and lower depreciation expense.
Eversource Parent and Other Companies: Eversource parent and other companies had increased losses of $13.3 million and $14.9 million in the second quarter and first half of 2020, respectively, as compared to the second quarter and first half of 2019, due primarily to lower unrealized gains associated with our equity method investment in a renewable energy fund, and acquisition costs related to the pending acquisition of the assets of Columbia Gas of Massachusetts of $3.9 million and $7.4 million in the second quarter and first half of 2020, respectively, partially offset by a higher return at Eversource Service as a result of increased investments in property, plant and equipment and lower interest expense.
Liquidity
Cash totaled $64.9 million as of June 30, 2020, compared with $15.4 million as of December 31, 2019.
Short-Term Debt - Commercial Paper Programs and Credit Agreements: Eversource parent has a $1.45 billion commercial paper program allowing Eversource parent to issue commercial paper as a form of short-term debt. Eversource parent, CL&P, PSNH, NSTAR Gas, Yankee Gas and Aquarion Water Company of Connecticut are also parties to a five-year $1.45 billion revolving credit facility, which terminates on December 6, 2024. The revolving credit facility serves to backstop Eversource parent's $1.45 billion commercial paper program.
NSTAR Electric has a $650 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. NSTAR Electric is also a party to a five-year $650 million revolving credit facility, which terminates on December 6, 2024. The revolving credit facility serves to backstop NSTAR Electric's $650 million commercial paper program.
The amount of borrowings outstanding and available under the commercial paper programs were as follows:
Borrowings Outstanding as of | Available Borrowing Capacity as of | Weighted-Average Interest Rate as of | |||||||||||||||||||
June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | ||||||||||||||||
(Millions of Dollars) | |||||||||||||||||||||
Eversource Parent Commercial Paper Program | $ | 351.5 | $ | 1,224.9 | $ | 1,098.5 | $ | 225.1 | 0.18 | % | 1.98 | % | |||||||||
NSTAR Electric Commercial Paper Program | 142.0 | 10.5 | 508.0 | 639.5 | 0.12 | % | 1.63 | % |
There were no borrowings outstanding on either the Eversource parent or NSTAR Electric revolving credit facilities as of June 30, 2020 or December 31, 2019.
On May 15, 2020, CL&P and PSNH entered into uncommitted line of credit agreements, which will expire by May 14, 2021. The CL&P agreements total $450 million and the PSNH agreements total $300 million. There are no borrowings outstanding on either the CL&P or PSNH uncommitted line of credit agreements as of June 30, 2020.
Amounts outstanding under the commercial paper programs are included in Notes Payable and classified in current liabilities on the Eversource and NSTAR Electric balance sheets, as all borrowings are outstanding for no more than 364 days at one time.
Intercompany Borrowings: Eversource parent uses its available capital resources to provide loans to its subsidiaries to assist in meeting their short-term borrowing needs. Eversource parent records intercompany interest income from its loans to subsidiaries, which is eliminated in consolidation. Intercompany loans from Eversource parent to its subsidiaries are eliminated in consolidation on Eversource's balance sheets. As of June 30, 2020, there were intercompany loans from Eversource parent to CL&P of $272.0 million, to PSNH of $119.3 million, and to a subsidiary of NSTAR Electric of $38.1 million. As of December 31, 2019, there were intercompany loans from Eversource parent to CL&P of $63.8 million, to PSNH of $27.0 million, and to a subsidiary of NSTAR Electric of $30.3 million. Intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and classified in current liabilities on the respective subsidiary's balance sheets.
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Long-Term Debt: The following table summarizes long-term debt issuances and repayments:
(Millions of Dollars) | Issuance/(Repayment) | Issue Date or Repayment Date | Maturity Date | Use of Proceeds for Issuance/ Repayment Information | |||||
NSTAR Electric: | |||||||||
3.95% 2020 Debentures | $ | 400.0 | March 2020 | April 2030 | Refinanced investments in eligible green expenditures, which were previously financed in 2018 and 2019 | ||||
5.10% Series E Senior Notes | (95.0 | ) | March 2020 | March 2020 | Paid at maturity | ||||
Other: | |||||||||
Eversource Parent 3.45% Series P Senior Notes | 350.0 | January 2020 | January 2050 | Paid short-term borrowings | |||||
NSTAR Gas 4.46% Series N First Mortgage Bonds | (125.0 | ) | January 2020 | January 2020 | Paid at maturity | ||||
Yankee Gas 4.87% Series K First Mortgage Bonds | (50.0 | ) | April 2020 | April 2020 | Paid at maturity | ||||
NSTAR Gas 2.33% Series R First Mortgage Bonds | 75.0 | May 2020 | May 2025 | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes | |||||
NSTAR Gas 3.15% Series S First Mortgage Bonds | 115.0 | May 2020 | May 2050 | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes |
In June 2020, Aquarion Water Company of Massachusetts provided notice to its bondholders that it will redeem $32.2 million of long-term debt in connection with the sale to the town of Hingham, Massachusetts of its water system and treatment plant that supplies water to the towns of Hingham, Hull and North Cohasset. As a result, this debt was classified as current as of June 30, 2020.
Long-Term Debt Issuance Authorization: On January 27, 2020, the DPU approved NSTAR Gas' request for authorization to issue up to $270 million in long-term debt through December 31, 2021. On July 31, 2020, the NHPUC approved PSNH's request for authorization to issue up to $200 million in long-term debt through December 31, 2020.
Rate Reduction Bonds: PSNH's RRB payments consist of principal and interest and are paid semi-annually. PSNH paid $21.6 million of RRB principal payments and $10.3 million of interest payments in the first half of 2020 and paid $30.7 million of RRB principal payments and $16.2 million of interest payments in the first half of 2019.
Common Share Issuances and 2019 Forward Sale Agreement: On June 15, 2020, Eversource completed an equity offering of 6,000,000 common shares at a price per share of $86.26. Eversource plans to use the net proceeds of this offering to fund a portion of the planned purchase of the assets of CMA. The issuance of these common shares resulted in proceeds of $509.2 million, net of issuance costs.
In June 2019, Eversource completed an equity offering consisting of 5,980,000 common shares issued directly by the Company and 11,960,000 common shares issuable pursuant to a forward sale agreement with an investment bank. Under the forward sale agreement, 11,960,000 common shares were borrowed from third parties and sold by the underwriters. The forward sale agreement allowed Eversource, at its election and prior to May 29, 2020, to physically settle the forward sale agreement by issuing common shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially, $71.48 per share) or, alternatively, to settle the forward sale agreement in whole or in part through the delivery or receipt of shares or cash. The forward sale price was subject to adjustment daily based on a floating interest rate factor and would decrease in respect of certain fixed amounts specified in the agreement, such as dividends.
Eversource previously issued 6,000,000 common shares under the forward sale agreement in December 2019. On March 23, 2020, Eversource physically settled a portion of the forward sale agreement by delivering 1,500,000 common shares in exchange for net proceeds of $105.7 million. Subsequently, on March 26, 2020, Eversource physically settled the remaining portion of the forward sale agreement by delivering 4,460,000 common shares in exchange for net proceeds of $314.1 million. The forward sale price used to determine the cash proceeds received by Eversource was calculated based on the initial forward sale price, as adjusted in accordance with the forward sale agreement.
The March and June 2020 common share issuances of 5,960,000 and 6,000,000, respectively, resulted in total proceeds of $929.0 million, net of issuance costs, and were reflected in shareholders' equity and as financing activities on the statement of cash flows.
Eversource used the net proceeds received upon the direct issuance of common shares and the net proceeds received upon settlement of the forward sale agreement to repay short-term debt under the commercial paper program, to fund capital spending and clean energy initiatives, and for general corporate purposes.
Cash Flows: Cash flows provided by operating activities totaled $1.01 billion in the first half of 2020, compared with $924.6 million in the first half of 2019. The increase in operating cash flows was due primarily to income tax refunds received of $37.9 million in the first half of 2020, as compared to income tax payments of $51.3 million in the same period in 2019 and the timing of other working capital items. The income tax cash flow increase was driven primarily by the deferral of estimated tax payments from the second quarter of 2020 to July 2020 under COVID-19 relief legislation. Partially offsetting these favorable impacts were the timing of cash collections on our accounts receivable and cash payments made on our accounts payable, the timing of collections for regulatory tracking mechanisms primarily related to transmission costs and the absence of $68.8 million in DOE Phase IV proceeds received by CYAPC and YAEC in the second quarter of 2019.
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On May 6, 2020, our Board of Trustees approved a common share dividend payment of $0.5675 per share, which was paid on June 30, 2020 to shareholders of record as of May 20, 2020. In the first half of 2020, we paid cash dividends of $366.8 million and issued non-cash dividends of $11.6 million in the form of treasury shares, totaling dividends of $378.4 million. In the first half of 2019, we paid cash dividends of $323.3 million and issued non-cash dividends of $16.3 million in the form of treasury shares, totaling dividends of $339.6 million.
Eversource issues treasury shares to satisfy awards under the Company's incentive plans, shares issued under the dividend reinvestment and share purchase plan, and matching contributions under the Eversource 401k Plan.
In the first half of 2020, CL&P, NSTAR Electric and PSNH paid $69.5 million, $196.5 million, and $22.3 million, respectively, in common stock dividends to Eversource parent.
Investments in Property, Plant and Equipment on the 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 and deferred portions of pension and PBOP expense. In the first half of 2020, investments for Eversource, CL&P, NSTAR Electric, and PSNH were $1.40 billion, $407.2 million, $447.5 million, and $169.2 million, respectively.
We expect the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with our existing borrowing availability and access to both debt and equity markets, will be sufficient to meet any working capital and future operating requirements, and capital investment forecasted opportunities.
Business Development and Capital Expenditures
Our consolidated capital expenditures, including amounts incurred but not paid, cost of removal, AFUDC, and the capitalized and deferred portions of pension and PBOP expense (all of which are non-cash factors), totaled $1.44 billion in the first half of 2020, compared to $1.41 billion in the first half of 2019. These amounts included $127.0 million and $97.6 million in the first half of 2020 and 2019, respectively, related to information technology and facilities upgrades and enhancements, primarily at Eversource Service and The Rocky River Realty Company.
Electric Transmission Business: Our consolidated electric transmission business capital expenditures increased by $1.0 million in the first half of 2020, as compared to the first half of 2019. A summary of electric transmission capital expenditures by company is as follows:
For the Six Months Ended June 30, | |||||||
(Millions of Dollars) | 2020 | 2019 | |||||
CL&P | $ | 192.7 | $ | 220.6 | |||
NSTAR Electric | 159.9 | 166.4 | |||||
PSNH | 104.7 | 59.6 | |||||
NPT | — | 9.7 | |||||
Total Electric Transmission Segment | $ | 457.3 | $ | 456.3 |
Eastern Massachusetts Transmission Projects: These projects consist of a portfolio of electric transmission upgrades in southern New Hampshire, northern Massachusetts and continuing into the greater Boston metropolitan area, of which 28 upgrades are in Eversource's service territory (two in New Hampshire and 26 in Massachusetts). The two New Hampshire upgrades, including the Merrimack Valley Reliability Project, have been placed in service, and 20 Massachusetts upgrades have been placed in service. On December 17, 2019, the Massachusetts Siting Board issued a favorable decision on the Sudbury-Hudson Reliability Project, the last project requiring such approval. On January 17, 2020, the Town of Sudbury and Protect Sudbury, a community group, appealed the decision to the Massachusetts Supreme Judicial Court and oral arguments were conducted on March 17, 2020. On July 9, 2020, a similar appeal by the Town of Winchester of the Massachusetts Siting Board’s order approving the Wakefield - Woburn Reliability Project was unanimously rejected by the Massachusetts Appeals Court. The Court simultaneously rejected the Town’s subsequent appeal of the Siting Board’s decision allowing local permitting processes to be bypassed. Construction on our portion of the project had commenced in the Towns of Stoneham and Woburn in May 2020. The remaining upgrades are under construction and are expected to be placed in service in 2021. We estimate our portion of the investment will be approximately $750 million, of which $466.8 million has been spent and capitalized through June 30, 2020.
Hartford-Area Transmission Projects: These projects consist of 27 projects in the Hartford, Connecticut area with an expected investment of
approximately $350 million. As of June 30, 2020, 26 projects have been placed in service, and one project is in active construction and is expected to be placed in service in the fourth quarter of 2020. As of June 30, 2020, CL&P had spent and capitalized $290.8 million in costs associated with these projects.
Seacoast Reliability Project: The Seacoast Reliability Project consists of a 13-mile, 115kV transmission line within several New Hampshire communities, using a combination of overhead, underground and underwater line designs to help meet the growing demand for electricity in the Seacoast region. The project was placed in service on May 29, 2020 and resulted in an investment of approximately $123 million.
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Ready Path Solution: The Ready Path Solution was chosen by ISO-NE as part of the first competitive solicitation for reliability upgrades in New England to meet the energy shortfall that will be created with the retirement of the Mystic Generating Station in Massachusetts in 2024. Our portion of the portfolio consists of installing new equipment at Eversource’s existing North Cambridge Substation with an estimated investment of approximately $14 million.
All project costs are anticipated to be fully recoverable through transmission rates.
Distribution Business: A summary of distribution capital expenditures is as follows:
For the Six Months Ended June 30, | |||||||||||||||||||||||||||
(Millions of Dollars) | CL&P | NSTAR Electric | PSNH | Total Electric | Natural Gas | Water | Total | ||||||||||||||||||||
2020 | |||||||||||||||||||||||||||
Basic Business | $ | 92.8 | $ | 101.9 | $ | 22.1 | $ | 216.8 | $ | 38.3 | $ | 4.9 | $ | 260.0 | |||||||||||||
Aging Infrastructure | 91.0 | 113.6 | 45.0 | 249.6 | 175.8 | 49.6 | 475.0 | ||||||||||||||||||||
Load Growth and Other | 36.2 | 51.0 | 8.1 | 95.3 | 23.4 | 0.4 | 119.1 | ||||||||||||||||||||
Total Distribution | 220.0 | 266.5 | 75.2 | 561.7 | 237.5 | 54.9 | 854.1 | ||||||||||||||||||||
Solar | — | 1.0 | — | 1.0 | — | — | 1.0 | ||||||||||||||||||||
Total | $ | 220.0 | $ | 267.5 | $ | 75.2 | $ | 562.7 | $ | 237.5 | $ | 54.9 | $ | 855.1 | |||||||||||||
2019 | |||||||||||||||||||||||||||
Basic Business | $ | 142.9 | $ | 142.4 | $ | 19.1 | $ | 304.4 | $ | 29.4 | $ | 5.6 | $ | 339.4 | |||||||||||||
Aging Infrastructure | 96.0 | 96.6 | 52.7 | 245.3 | 125.8 | 42.9 | 414.0 | ||||||||||||||||||||
Load Growth and Other | 32.0 | 28.6 | 7.1 | 67.7 | 26.3 | 0.9 | 94.9 | ||||||||||||||||||||
Total Distribution | 270.9 | 267.6 | 78.9 | 617.4 | 181.5 | 49.4 | 848.3 | ||||||||||||||||||||
Solar | — | 4.8 | — | 4.8 | — | — | 4.8 | ||||||||||||||||||||
Total | $ | 270.9 | $ | 272.4 | $ | 78.9 | $ | 622.2 | $ | 181.5 | $ | 49.4 | $ | 853.1 |
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, plant substations, underground cable replacement, and equipment failures. Load growth and other includes requests for new business and capacity additions on distribution lines and substation additions and expansions.
For the natural gas distribution business, basic business addresses daily operational needs including meters, pipe relocations due to public works projects, vehicles, and tools. Aging infrastructure projects seek to improve the reliability of the system through enhancements related to cast iron and bare steel replacement of main and services, corrosion mediation, and station upgrades. Load growth and other reflects growth in existing service territories including new developments, installation of services, and expansion.
For the water distribution business, basic business addresses daily operational needs including periodic meter replacement, water main relocation, facility maintenance, and tools. Aging infrastructure relates to reliability and the replacement of water mains, regulators, storage tanks, pumping stations, wellfields, reservoirs, and treatment facilities. Load growth and other reflects growth in our service territory, including improvements of acquisitions, installation of new services, and interconnections of systems.
Pending Acquisition of Assets of Columbia Gas of Massachusetts: On February 26, 2020, Eversource and NiSource Inc. entered into an asset purchase agreement (the Agreement) pursuant to which Eversource would acquire certain assets that comprise NiSource’s local natural gas distribution business in Massachusetts, which is doing business as Columbia Gas of Massachusetts (CMA). The purchase price of $1.1 billion includes a target working capital amount that is subject to adjustment to reflect actual working capital as of the closing date. Eversource would acquire approximately 330,000 residential, commercial, and industrial natural gas customers, as well as over 5,000 miles of natural gas distribution pipeline across more than 60 communities in Massachusetts.
The liabilities to be assumed by Eversource under the Agreement specifically exclude any liabilities (past or future) arising out of, or related to, the fires and explosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by CMA, including certain subsequent events, all as described and in the DPU's Order on Scope dated December 23, 2019 (D.P.U. 19-141) (the Greater Lawrence Incident or GLI). The liabilities to be assumed also exclude any further emergency events prior to the closing of the acquisition related to the restoration and reconstruction with respect to the GLI, including any losses arising out of, or related to, any litigation, demand, cause of action, claim, suit, investigation, proceeding, indemnification agreements or rights. Eversource is not assuming any of CMA's or NiSource Inc.'s debt obligations or notes payable.
The transaction requires approval from the DPU, the Maine Public Utilities Commission, the FERC, and the Federal Communications Commission, and the resulting rate plan requires DPU approval as well. The relevant review period under the Hart-Scott-Rodino Act has expired. On July 2, 2020, Eversource, CMA and NiSource filed an application with the DPU seeking approval of the sale of CMA assets to Eversource, which included a settlement with the Massachusetts Attorney General’s Office, the DOER, and the Low-Income Weatherization and Fuel Assistance Program Network. The application requests approval of the transaction and the related rate plan by September 30, 2020.
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Eversource expects to finance the asset acquisition through a combination of debt and equity issuances in a ratio that is consistent with our current consolidated capital structure. The transaction is expected to close shortly after the end of the third quarter of 2020.
Offshore Wind Business: Our offshore wind business includes ownership interests in North East Offshore and Bay State Wind, which together hold PPAs and contracts for the Revolution Wind, South Fork Wind and Sunrise Wind projects, as well as offshore leases through BOEM. Our offshore wind projects are being developed and constructed through a joint and equal partnership with Ørsted. This partnership also participates in new procurement opportunities for offshore wind energy in the Northeast U.S. On July 21, 2020, New York's second offshore wind RFP for up to 2,500 MW was issued, and we expect to participate in that RFP.
Eversource has a 50 percent ownership interest in North East Offshore, which holds the Revolution Wind and South Fork Wind projects, as well as a 257 square-mile ocean lease off the coasts of Massachusetts and Rhode Island. Eversource also has a 50 percent ownership interest in Bay State Wind, which holds the Sunrise Wind project. Bay State Wind's separate 300-square-mile ocean lease is located approximately 25 miles south of the coast of Massachusetts adjacent to the North East Offshore area. In aggregate, the Bay State Wind and the North East Offshore ocean lease sites jointly-owned by Eversource and Ørsted could eventually develop at least 4,000 MW of clean, renewable offshore wind energy. As of June 30, 2020, Eversource's total equity investment balance in its offshore wind business was $660.3 million.
We are preparing our final project designs and advancing the appropriate federal, state and local siting and permitting processes along with our offshore wind partner, Ørsted, all of which is competitively sensitive. We currently expect to make investments in our offshore wind business of approximately $200 million to $400 million during 2020, subject to advancing our final project designs and federal, state and local permitting processes.
The following table provides a summary of the Eversource and Ørsted major projects with announced contracts:
Wind Project | State Servicing | Size (MW) | Term (Years) | Price per MWh | Pricing Terms | Contract Status |
Revolution Wind | Rhode Island | 400 | 20 | $98.43 | Fixed price contract; no price escalation | Approved |
Revolution Wind | Connecticut | 304 | 20 | (1) | Fixed price contracts; no price escalation | Approved |
South Fork Wind | New York (LIPA) | 90 | 20 | $160.33 | 2 percent average price escalation | Approved |
South Fork Wind | New York (LIPA) | 40 | 20 | $86.25 | 2 percent average price escalation | (3) |
Sunrise Wind | New York (NYSERDA) | 880 | 25 | $110.37 (2) | Fixed price contract; no price escalation | Approved |
(1) | The pricing for the Revolution Wind contracts in Connecticut has not been publicly disclosed. |
(2) | Index Offshore Wind Renewable Energy Certificate (OREC) strike price. |
(3) | The Long Island Power Authority (LIPA) agreed to expand the original 20-year PPA from 90 MW to 130 MW through an amendment to the original agreement. Negotiations are currently underway, and a final amendment is expected in 2020. |
The in-service dates for our offshore wind projects are subject to receipt of federal, state and local approvals necessary to construct and operate the projects. The federal permitting process is governed by BOEM, and state approvals are required from New York, Rhode Island and Massachusetts. Significant delays in the siting and permitting process resulting from the timeline for obtaining approval from BOEM and the state and local agencies, as well as the impact of COVID-19, could adversely impact the timing of these projects' in-service dates.
In June 2020, BOEM released its Offshore Wind Cumulative Impact Analysis as part of the Draft Supplemental Environmental Impact Statement (EIS) for a non-affiliated offshore wind project. The study assessed the environmental, social, and economic impacts of constructing 22 GW of offshore wind projects in every federal lease area along the East Coast. While this analysis was performed for the purpose of completing the permitting review of a non-affiliated project, we anticipate that this analysis has produced a replicable methodology for completing this analysis that should reduce the timeline for completing future BOEM reviews.
The South Fork Wind project has commenced the federal siting and permitting process with the filing of its Construction Operations Plan (COP) application with BOEM in October 2018. The first major milestone in the BOEM review process is an issuance of a Notice of Intent to complete an Environmental Impact Statement (NOI), which South Fork Wind has received. Although we have received BOEM's NOI for the South Fork Wind project, we are awaiting a confirmed review schedule outlining when BOEM will complete its review of the South Fork Wind COP. South Fork Wind is designated as a “Covered Project” pursuant to Title 41 of the Fixing America’s Surface Transportation Act (“FAST41”) and a Major Infrastructure Project under Section 3(e) of Executive Order 13807, which provides greater federal attention on meeting the project’s permitting timelines. South Fork Wind’s FAST41 designation is due for reauthorization in 2020.
Revolution Wind filed its COP application with BOEM in March 2020 and will seek FAST41 designation by the end of 2020. We are awaiting BOEM to outline its timeline for completing the review of the Revolution Wind COP in an NOI. The Sunrise Wind COP application is expected to be filed in 2020.
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South Fork Wind commenced the New York state sitting process in 2018. On April 8, 2020, the state of New York Administrative Law Judge granted a change to the start of the South Fork Wind evidentiary hearing schedule to September 30, 2020, due to ongoing COVID-19 work and travel restrictions. Onshore and near-shore site investigation activities occurring within New York’s jurisdiction were suspended in March 2020 due to work restrictions imposed in response to the COVID-19 pandemic. The activities that were suspended included offshore site investigations, and onshore environmental and geotechnical surveys. These activities resumed in early June following the release of revised guidance from the New York State Energy Research and Development Authority (NYSERDA). We are developing mitigation plans to address the impacts of the approximately two-month suspension of field activities due to these COVID-19 restrictions. These mitigation plans are intended to limit the impact and risk to our project timelines.
Because BOEM has not yet released a confirmed permit schedule outlining when BOEM will complete its review of the South Fork Wind COP, as well as the impacts from the COVID-19 related shut-downs in New York, these impacts will very likely delay the in-service date of the South Fork Wind project to beyond the projected end of 2022 in-service date.
We anticipate the principal state permitting applications for Revolution Wind and Sunrise Wind will be filed in Rhode Island and New York, respectively, in the second half of 2020. Sunrise Wind was subject to the same New York work restrictions as South Fork Wind between March 2020 and June 2020. For Sunrise Wind, these restrictions prevented progressing our site surveys in New York and within New York jurisdictional waters due to COVID-19 restrictions. These restrictions adversely impact the preparation of our federal and state permitting applications. At this time, we are unable to predict the potential impact of those delays on the projected in-service dates of the end of 2023 and the end of 2024 for Revolution Wind and Sunrise Wind, respectively.
FERC Regulatory Matters
FERC ROE Complaints: Four separate complaints were filed at the FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (collectively, the Complainants). In each of the first three complaints, filed on October 1, 2011, December 27, 2012, and July 31, 2014, respectively, the Complainants challenged the NETOs' base ROE of 11.14 percent that had been utilized since 2005 and sought an order to reduce it prospectively from the date of the final FERC order and for the separate 15-month complaint periods. In the fourth complaint, filed April 29, 2016, the Complainants challenged the NETOs' base ROE billed of 10.57 percent and the maximum ROE for transmission incentive (incentive cap) of 11.74 percent, asserting that these ROEs were unjust and unreasonable.
The ROE originally billed during the period October 1, 2011 (beginning of the first complaint period) through October 15, 2014 consisted of a base ROE of 11.14 percent and incentives up to 13.1 percent. On October 16, 2014, the FERC set the base ROE at 10.57 percent and the incentive cap at 11.74 percent for the first complaint period. This was also effective for all prospective billings to customers beginning October 16, 2014. This FERC order was vacated on April 14, 2017 by the U.S. Court of Appeals for the D.C. Circuit (the Court).
All amounts associated with the first complaint period have been refunded. Eversource has recorded a reserve of $39.1 million (pre-tax and excluding interest) for the second complaint period as of June 30, 2020 and December 31, 2019. This reserve represents the difference between the billed rates during the second complaint period and a 10.57 percent base ROE and 11.74 percent incentive cap. The reserve consisted of $21.4 million for CL&P, $14.6 million for NSTAR Electric and $3.1 million for PSNH as of June 30, 2020 and December 31, 2019.
On October 16, 2018, FERC issued an order on all four complaints describing how it intends to address the issues that were remanded by the Court. FERC proposed a new framework to determine (1) whether an existing ROE is unjust and unreasonable and, if so, (2) how to calculate a replacement ROE. Initial briefs were filed by the NETOs, Complainants and FERC Trial Staff on January 11, 2019 and reply briefs were filed on March 8, 2019. The NETOs' brief was supportive of the overall ROE methodology determined in the October 16, 2018 order provided the FERC does not change the proposed methodology or alter its implementation in a manner that has a material impact on the results.
The FERC order included illustrative calculations for the first complaint using FERC's proposed frameworks with financial data from that complaint. Those illustrative calculations indicated that for the first complaint period, for the NETOs, which FERC concludes are of average financial risk, the preliminary just and reasonable base ROE is 10.41 percent and the preliminary incentive cap on total ROE is 13.08 percent.
If the results of the illustrative calculations were included in a final FERC order for each of the complaint periods, then a 10.41 percent base ROE and a 13.08 percent incentive cap would not have a significant impact on our financial statements for all of the complaint periods. These preliminary calculations are not binding and do not represent what we believe to be the most likely outcome of a final FERC order.
On November 21, 2019, FERC issued Opinion No. 569 affecting the two pending transmission ROE complaints against the Midcontinent ISO (MISO) transmission owners, in which FERC adopted a new methodology for determining base ROEs. Various parties sought rehearing. On December 23, 2019, the NETOs filed supplementary materials in the NETOs' four pending cases to respond to this new methodology because of the uncertainty of the applicability to the NETOs’ cases.
On May 21, 2020, the FERC issued its order in Opinion No. 569-A on the rehearing of the MISO transmission owners' cases, in which FERC again changed its methodology for determining the MISO transmission owners' base ROEs. Various parties have appealed the MISO transmission owners' opinion. This new methodology differs significantly from the methodology proposed by FERC in its October 16, 2018 order to determine the NETOs' base ROEs in its four pending cases.
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Given the significant uncertainty regarding the applicability of the FERC opinions in the MISO transmission owners' two complaint cases to the NETOs' pending four complaint cases, Eversource concluded that there is no reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods at this time. As well, Eversource cannot reasonably estimate a range of any gain or loss for any of the four complaint proceedings at this time.
Eversource, CL&P, NSTAR Electric and PSNH currently record revenues at the 10.57 percent base ROE and incentive cap at 11.74 percent established in the October 16, 2014 FERC order.
A change of 10 basis points to the base ROE used to establish the reserves would impact Eversource's after-tax earnings by an average of approximately $3 million for each of the four 15-month complaint periods.
FERC Notice of Inquiry on ROE: On March 21, 2019, FERC issued a Notice of Inquiry (NOI) seeking comments from all stakeholders on FERC's policies for evaluating ROEs for electric public utilities, and interstate natural gas and oil pipelines. On June 26, 2019, the NETOs jointly filed comments supporting the methodology established in the FERC’s October 16, 2018 order with minor enhancements going forward. The NETOs jointly filed reply comments in the FERC ROE NOI on July 26, 2019. On May 12, 2020, the NETOs filed supplemental comments in the NOI ROE docket. At this time, Eversource cannot predict how this proceeding will affect its transmission ROEs.
FERC Notice of Inquiry and Proposed Rulemaking on Transmission Incentives: On March 21, 2019, FERC issued an NOI seeking comments on FERC's policies for implementing electric transmission incentives. On June 26, 2019, Eversource filed comments requesting that FERC retain policies that have been effective in encouraging new transmission investment and remain flexible enough to attract investment in new and emerging transmission technologies. Eversource filed reply comments on August 26, 2019. On March 20, 2020, FERC issued a Notice of Proposed Rulemaking (NOPR) on transmission incentives. The NOPR intends to revise FERC’s electric transmission incentive policies to reflect competing uses of transmission due to generation resource mix, technological innovation and shifts in load patterns. FERC proposes to grant transmission incentives based on measurable project economics and reliability benefits to consumers rather than its current project risks and challenges framework. On July 1, 2020, Eversource filed comments generally supporting the NOPR. At this time, Eversource cannot predict how these proceedings will affect its transmission incentives.
FERC Transmission Rate Settlement: On December 28, 2015, FERC initiated a proceeding to review the NETOs' regional and local transmission formula rates due to a lack of transparency, finding that the formula rates appeared to lack sufficient details to determine how costs are derived and recovered in rates. Parties have been engaged in further settlement negotiations and reached an agreement in principle on October 22, 2019. On June 15, 2020, the NETOs (including CL&P, NSTAR Electric and PSNH) filed an uncontested Settlement Agreement with FERC, which was signed by all six New England state regulatory commissions, New England States Committee on Electricity, New England Municipals and all the NETOs. The Settlement Agreement proposes to implement a new regional and local rate structure effective on January 1, 2021, establishes annual formula rate transparency procedures effective June 15, 2021 and contains a rate moratorium through December 31, 2024. There is no time requirement under which the FERC must issue an order, which is required for the new formula rate template to go into effect.
U.S. Federal Corporate Income Taxes: Local and regional transmission service rates do not currently reflect amortization of excess ADIT (EDIT) balances that resulted from the Tax Cuts and Job Act (the Act). On November 15, 2018, FERC issued a Policy Statement and a separate Notice of Proposed Rulemaking addressing accounting and rate issues related to ADIT changes resulting from the Act. On November 21, 2019, FERC issued its final rule requiring public utilities with transmission formula rates to make adjustments to ADIT and EDIT. On July 30, 2020, Eversource submitted its filing in compliance with FERC's final rule to address the EDIT resulting from the Act.
Regulatory Developments and Rate Matters
Electric, Natural Gas and Water Utility Base Distribution Rates: The regulated companies’ distribution rates are set by their respective state regulatory commissions, and their tariffs include mechanisms for periodically adjusting their rates for the recovery of specific incurred costs. Other than as described below, for the first half of 2020, changes made to the regulated companies’ rates did not have a material impact on their earnings, financial position, or cash flows. For further information, see "Financial Condition and Business Analysis – Regulatory Developments and Rate Matters" included in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of the Eversource 2019 Form 10-K.
COVID-19 Regulatory Dockets: Beginning in March 2020, Connecticut, Massachusetts and New Hampshire established moratoriums on disconnections of residential and commercial customers for non-payment for utility service. In Connecticut, the moratorium for residential customers will remain in place until the declared COVID-19 state of emergency is lifted by the governor or state regulatory commission, but ended on August 1, 2020 for commercial customers. In New Hampshire, the moratorium on residential and commercial utility disconnections ended on July 15, 2020, however PSNH has not yet begun to disconnect customers. In Massachusetts, although several utilities petitioned the state regulatory commission on May 29, 2020 to extend the moratorium until September 1, 2020 for commercial customers and November 15, 2020 for residential customers, the commission has not acted on that petition, and therefore, the moratorium will remain in place until it is lifted by the governor or commission.
In Connecticut, PURA opened a docket to address COVID-19 developments, including issuing orders on March 18, 2020, April 29, 2020 and May 15, 2020 that authorized electric, natural gas and water utilities to establish a regulatory asset for COVID-19 uncollectible customer receivable expenses and costs associated with the related orders. PURA’s April 29, 2020 order, as supplemented on May 15, 2020, also allowed the inclusion of working capital costs in the regulatory asset, and authorized electric, natural gas and water utilities to establish a payment plan program designed to assist any customer who requests financial assistance during the COVID-19 pandemic. On July 10, 2020, PURA denied a request from a coalition of large industrial customers to reduce or suspend certain electric and natural gas charges during the COVID-19 pandemic.
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In Massachusetts, on April 17, 2020, a coalition of electric, natural gas and water utilities submitted a comprehensive proposal to the DPU that would enable the state’s utilities to provide flexible payment arrangements to those customers who need financial assistance, while simultaneously maintaining the financial integrity necessary to continue to conduct and finance utility operations through appropriate ratemaking treatment and the establishment of a regulatory asset for COVID-19 related expenses, including uncollectible customer receivable expenses, among other proposals. On May 11, 2020, the DPU opened an inquiry into establishing policies and practices regarding customer assistance and ratemaking measures for electric and natural gas companies in response to the effects of COVID-19. On June 26, 2020, the DPU approved a COVID-19 customer outreach plan.
Consistent with the above-described developments in Connecticut and Massachusetts, Eversource continues to work closely with the NHPUC on COVID-19 developments impacting our New Hampshire electric and water utilities, including the proposed establishment of flexible payment plan options for those customers who need financial assistance in order to mitigate the size of the uncollectible customer receivable balances that would be borne by all customers in the future.
For information on COVID-19-related regulatory deferrals recorded and COVID-19 charges incurred, see "Impact of COVID-19" included in this Management’s Discussion and Analysis.
Storm Event:
On August 4, 2020, Tropical Storm Isaias caused extensive and catastrophic damage to our electric distribution system and significant customer outages, primarily in Connecticut. In terms of customer outages, this storm was one of the worst in CL&P’s history. As the restoration process is currently underway, costs cannot be estimated at this time. Management expects the costs to meet the criteria for specific cost recovery and, as a result, does not expect the storm costs incurred to have a material impact to the results of operations of Eversource or CL&P. CL&P expects to seek recovery of these anticipated deferred storm costs through its applicable regulatory recovery process.
Connecticut:
CL&P Rate Suspension: On July 31, 2020, PURA temporarily suspended its June 26, 2020 approval of certain delivery rate components effective July 1, 2020, and ordered CL&P to restore rates to those in effect as of June 30, 2020. PURA ordered that it will reexamine the administrative changes to the energy and transmission adjustment clauses provisionally permitted by its June 26, 2020 letter. PURA indicated that this was due to the convergence of a number of recent events, including the COVID-19 crisis and its corresponding effect on customer energy usage, as well as the warmer than normal weather in July. PURA intends to reexamine rates to ensure that CL&P is not over-collecting revenues in the short-term. These rates, the Revenue Decoupling Mechanism Charge, the Transmission Adjustment Clause charge, the Non-Bypassable Federally Mandated Congestion Charge, and the Electric System Improvements Tracker charge, are adjusted periodically and reconciled annually in accordance with the policies and procedures of the PURA, with any differences refunded to, or recovered from, customers. We do not expect the delay in changes of the rates will have a material impact on our financial position, results of operations or cash flows.
Massachusetts:
NSTAR Gas Rate Case: On November 8, 2019, NSTAR Gas filed its application with the DPU, which sought a distribution rate increase of $38.0 million. As part of this filing, NSTAR Gas also proposed to continue its ongoing Gas System Enhancement Program (GSEP), include the GSEP investments since 2015 into base rates, and implement a performance-based ratemaking plan. A final decision from the DPU is expected by October 30, 2020, with rates effective November 1, 2020.
New Hampshire:
Distribution Rates: On April 26, 2019, PSNH filed an application with the NHPUC for approval of a temporary annual base distribution rate increase, effective July 1, 2019. On June 27, 2019, the NHPUC approved a settlement agreement that was reached by PSNH, the NHPUC Staff, the Office of the Consumer Advocate, and another settling party, to implement a temporary annual base distribution rate increase of $28.3 million. Although new rates were implemented on August 1, 2019 to customers, the provisions of the temporary base distribution rate increase were effective July 1, 2019. The settlement agreement also permits PSNH to recover approximately $68.5 million in unrecovered storm costs over a five-year period beginning August 1, 2019, with debt carrying charges, which is included in the temporary rate increase.
On May 28, 2019, PSNH filed an application with the NHPUC for a permanent increase in base distribution rates of approximately $70 million, effective July 1, 2020, which includes the temporary rate increase request. The temporary rates are subject to reconciliation based on the outcome of the permanent rate case now before the NHPUC. The NHPUC is permitted up to twelve months to adjudicate the permanent rate application from the date of filing. On April 24, 2020, Governor Sununu issued an emergency order, which extends the maximum adjudication period by six months, for a maximum of 18 months. A decision by the NHPUC is now expected in the fourth quarter of 2020. Temporary rates will remain in effect with a reconciliation of permanent rates retroactive to July 1, 2019 once permanent rates are set.
Audit Report of Generation Asset Divestiture-Related Costs: On May 15, 2020, the NHPUC Audit Staff issued a final report on the audit of PSNH’s generation asset divestiture-related costs and resulting securitized and stranded costs. The findings in the audit report as well as other aspects of the divestiture process were further investigated by NHPUC Staff through the discovery phase, which was completed in July. Technical sessions and settlement discussions will continue through the third quarter of 2020 and a final decision is expected by the end of 2020. We continue to believe the amounts deferred are probable of recovery.
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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 Eversource 2019 Form 10-K. There have been no material changes with regard to these critical accounting policies.
Other Matters
Accounting Standards: For information regarding new accounting standards, see Note 1B, "Summary of Significant Accounting Policies – Accounting Standards," to the financial statements.
Contractual Obligations and Commercial Commitments: There have been no material contractual obligations identified and no material changes
with regard to the contractual obligations and commercial commitments previously disclosed in the Eversource 2019 Form 10-K.
Web Site: Additional financial information is available through our website at www.eversource.com. We make available through our website a link to the SEC's EDGAR website (http://www.sec.gov/edgar/searchedgar/companysearch.html), at which site Eversource's, CL&P's, NSTAR Electric's and PSNH's combined Annual Reports on Form 10-K, combined Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports may be reviewed. 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 combined Quarterly Report on Form 10-Q.
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RESULTS OF OPERATIONS – EVERSOURCE ENERGY AND SUBSIDIARIES
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for Eversource for the three and six months ended June 30, 2020 and 2019 included in this combined Quarterly Report on Form 10-Q:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
(Millions of Dollars) | 2020 | 2019 | Increase/ (Decrease) | 2020 | 2019 | Increase/ (Decrease) | |||||||||||||||||
Operating Revenues | $ | 1,953.1 | $ | 1,884.5 | $ | 68.6 | $ | 4,326.9 | $ | 4,300.3 | $ | 26.6 | |||||||||||
Operating Expenses: | |||||||||||||||||||||||
Purchased Power, Fuel and Transmission | 630.1 | 620.9 | 9.2 | 1,506.7 | 1,595.8 | (89.1 | ) | ||||||||||||||||
Operations and Maintenance | 332.1 | 328.0 | 4.1 | 674.1 | 663.6 | 10.5 | |||||||||||||||||
Depreciation | 240.5 | 219.1 | 21.4 | 476.7 | 434.0 | 42.7 | |||||||||||||||||
Amortization | 23.4 | 38.9 | (15.5 | ) | 73.2 | 109.9 | (36.7 | ) | |||||||||||||||
Energy Efficiency Programs | 115.4 | 105.8 | 9.6 | 263.7 | 246.0 | 17.7 | |||||||||||||||||
Taxes Other Than Income Taxes | 178.0 | 181.2 | (3.2 | ) | 359.7 | 365.7 | (6.0 | ) | |||||||||||||||
Impairment of Northern Pass Transmission | — | 239.6 | (239.6 | ) | — | 239.6 | (239.6 | ) | |||||||||||||||
Total Operating Expenses | 1,519.5 | 1,733.5 | (214.0 | ) | 3,354.1 | 3,654.6 | (300.5 | ) | |||||||||||||||
Operating Income | 433.6 | 151.0 | 282.6 | 972.8 | 645.7 | 327.1 | |||||||||||||||||
Interest Expense | 134.2 | 132.7 | 1.5 | 268.9 | 264.5 | 4.4 | |||||||||||||||||
Other Income, Net | 30.2 | 45.9 | (15.7 | ) | 54.3 | 76.9 | (22.6 | ) | |||||||||||||||
Income Before Income Tax Expense | 329.6 | 64.2 | 265.4 | 758.2 | 458.1 | 300.1 | |||||||||||||||||
Income Tax Expense | 75.5 | 30.8 | 44.7 | 167.4 | 114.2 | 53.2 | |||||||||||||||||
Net Income | 254.1 | 33.4 | 220.7 | 590.8 | 343.9 | 246.9 | |||||||||||||||||
Net Income Attributable to Noncontrolling Interests | 1.9 | 1.9 | — | 3.8 | 3.8 | — | |||||||||||||||||
Net Income Attributable to Common Shareholders | $ | 252.2 | $ | 31.5 | $ | 220.7 | $ | 587.0 | $ | 340.1 | $ | 246.9 |
Operating Revenues
Sales Volumes: A summary of our retail electric GWh sales volumes, our firm natural gas MMcf sales volumes, and our water MG sales volumes, and percentage changes, is as follows:
Electric | Firm Natural Gas | Water | ||||||||||||||||||||||||
Sales Volumes (GWh) | Percentage Increase/(Decrease) | Sales Volumes (MMcf) | Percentage Increase/(Decrease) | Sales Volumes (MG) | Percentage Increase | |||||||||||||||||||||
Three Months Ended June 30: | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Traditional | 1,789 | 1,757 | 1.8 | % | — | — | — | % | 482 | 459 | 5.0 | % | ||||||||||||||
Decoupled and Special Contracts (1) | 9,658 | 9,853 | (2.0 | )% | 18,506 | 18,191 | 1.7 | % | 5,185 | 4,834 | 7.3 | % | ||||||||||||||
Total Sales Volumes | 11,447 | 11,610 | (1.4 | )% | 18,506 | 18,191 | 1.7 | % | 5,667 | 5,293 | 7.1 | % | ||||||||||||||
Six Months Ended June 30: | ||||||||||||||||||||||||||
Traditional | 3,695 | 3,724 | (0.8 | )% | — | — | — | % | 916 | 910 | 0.7 | % | ||||||||||||||
Decoupled and Special Contracts (1) | 20,123 | 21,037 | (4.3 | )% | 57,568 | 63,358 | (9.1 | )% | 9,557 | 9,212 | 3.7 | % | ||||||||||||||
Total Sales Volumes | 23,818 | 24,761 | (3.8 | )% | 57,568 | 63,358 | (9.1 | )% | 10,473 | 10,122 | 3.5 | % |
(1) | Special contracts are unique to Yankee Gas natural gas distribution customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to Yankee Gas regardless of the customers' usage. |
Weather, fluctuations in energy supply costs, conservation measures (including utility-sponsored energy efficiency programs), and economic conditions affect customer energy usage and water consumption. Industrial sales volumes are less sensitive to temperature variations than residential and commercial sales volumes. In our service territories, weather impacts both electric and water sales volumes during the summer and both electric and natural gas sales volumes during the winter; however, natural gas sales volumes are more sensitive to temperature variations than electric sales volumes. Customer heating or cooling usage may not directly correlate with historical levels or with the level of degree-days that occur.
Fluctuations in retail electric sales volumes at PSNH impact earnings ("Traditional" in the table above). For CL&P, NSTAR Electric, Yankee Gas, NSTAR Gas and our Connecticut water distribution business, fluctuations in retail sales volumes do not materially impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms ("Decoupled" in the table above). These distribution revenues are decoupled from their customer sales volumes, which breaks the relationship between sales volumes and revenues recognized.
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Operating Revenues: Operating Revenues by segment increased/(decreased) for the three and six months ended June 30, 2020, as compared to the same periods in 2019, as follows:
(Millions of Dollars) | Three Months Ended | Six Months Ended | |||||
Electric Distribution | $ | 54.4 | $ | 26.0 | |||
Natural Gas Distribution | 3.5 | (16.8 | ) | ||||
Electric Transmission | 27.1 | 56.2 | |||||
Water Distribution | 1.8 | 3.2 | |||||
Other | 33.0 | 69.5 | |||||
Eliminations | (51.2 | ) | (111.5 | ) | |||
Total Operating Revenues | $ | 68.6 | $ | 26.6 |
Electric and Natural Gas Distribution Revenues:
Base Distribution Revenues:
• | Base electric distribution revenues increased $32.1 million and $63.9 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019, respectively, due primarily to the impact of a PSNH temporary base distribution rate increase effective July 1, 2019, which includes recovery of storm costs and certain other items that do not impact earnings, CL&P's base distribution rate increases effective May 1, 2020 and May 1, 2019, which include recovery of storm costs and certain other items that do not impact earnings, and an NSTAR Electric base distribution rate increase effective January 1, 2020. |
• | Base natural gas distribution revenues increased $3.4 million and $12.0 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019, respectively, due primarily to a base distribution rate increase at Yankee Gas effective January 1, 2020. |
Tracked Distribution Revenues: Tracked distribution revenues consist of certain costs that are recovered from customers in retail rates through regulatory commission-approved cost tracking mechanisms and therefore, recovery of these costs has no impact on earnings. However, tracked revenues do include certain incentives earned, return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings. Costs recovered through cost tracking mechanisms include, among others, energy supply and natural gas supply procurement and other energy-related costs, electric retail transmission charges, energy efficiency program costs, electric restructuring and stranded cost recovery revenues (including securitized RRB charges), and additionally for NSTAR Electric, pension and PBOP benefits and net metering for distributed generation. Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market and the sale of RECs to various counterparties.
Tracked distribution revenues increased/(decreased) for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to the following:
Electric Distribution | Natural Gas Distribution | ||||||||||||||
(Millions of Dollars) | Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||
Retail Tariff Tracked Revenues: | |||||||||||||||
Energy supply procurement | $ | (31.3 | ) | $ | (142.3 | ) | $ | (6.9 | ) | $ | (34.9 | ) | |||
Other distribution tracking mechanisms | 26.6 | 25.7 | 12.0 | 22.8 | |||||||||||
Wholesale Market Sales Revenue | 21.1 | 60.7 | (4.3 | ) | (12.9 | ) |
The decrease in energy supply procurement within electric distribution was driven primarily by lower average prices for the three month period and lower average sales volumes and lower average prices for the six month period. The increase in wholesale market sales revenue within electric distribution was due primarily to a new zero-carbon PPA entered into by CL&P in 2019, as required by regulation, from which the energy purchased from Millstone Nuclear Power Station (Millstone) was sold into the market beginning in the fourth quarter of 2019.
Electric Transmission Revenues: Electric transmission revenues increased $27.1 million and $56.2 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to continued investment in our transmission infrastructure and a higher benefit from the annual billing and cost reconciliation filing with FERC.
Other Revenues and Eliminations: Other revenues primarily include the revenues of Eversource's service company, most of which are eliminated in consolidation. Eliminations are also primarily related to the Eversource electric transmission revenues that are derived from ISO-NE regional transmission charges to the distribution businesses of CL&P, NSTAR Electric and PSNH that recover the costs of the wholesale transmission business.
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Purchased Power, Fuel and Transmission expense includes costs associated with purchasing electricity and natural gas on behalf of our customers. These electric and natural gas supply costs are recovered from customers in rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission expense increased/(decreased) for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to the following:
(Millions of Dollars) | Three Months Ended | Six Months Ended | |||||
Purchased Power Costs | $ | 47.1 | $ | 23.1 | |||
Natural Gas Costs | (10.9 | ) | (45.8 | ) | |||
Transmission Costs | (3.9 | ) | (18.2 | ) | |||
Eliminations | (23.1 | ) | (48.2 | ) | |||
Total Purchased Power, Fuel and Transmission | $ | 9.2 | $ | (89.1 | ) |
The increase in purchased power expense at the electric distribution business for the three months ended June 30, 2020, as compared to the same period in 2019, was driven primarily by the impact of energy purchases from the new Millstone PPA, partially offset by lower expense related to the procurement of energy supply resulting from lower average prices. The increase in purchased power expense at the electric distribution business for the six months ended June 30, 2020, as compared to the same period in 2019, was driven primarily by the impact of energy purchases from the new Millstone PPA, partially offset by lower expense related to the procurement of energy supply resulting from lower average sales volumes and lower average prices.
The decrease in natural gas supply costs at our natural gas distribution business for the three months ended June 30, 2020, as compared to the same period in 2019, was due primarily to lower average prices, partially offset by higher average sales volumes. The decrease in natural gas supply costs for the six months ended June 30, 2020, as compared to the same period in 2019, was due primarily to lower average sales volumes and lower average prices.
The decrease in transmission costs for the three months ended June 30, 2020, as compared to the same period in 2019, was primarily 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. This was partially offset by an increase in Local Network Service charges, which reflects the cost of transmission service provided by Eversource over our local transmission network and an increase in costs billed by ISO-NE that support regional grid investments.
The decrease in transmission costs for the six months ended June 30, 2020, as compared to the same period in 2019, was primarily the result of a decrease in the retail transmission cost deferral, and a decrease in costs billed by ISO-NE that support regional grid investments. This was partially offset by an increase in Local Network Service charges, which reflects the cost of transmission service provided by Eversource over our local transmission network.
Operations and Maintenance expense includes tracked costs and costs that are part of base electric, natural gas and water distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance expense increased/(decreased) for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to the following:
(Millions of Dollars) | Three Months Ended | Six Months Ended | |||||
Base Electric Distribution (Non-Tracked Costs): | |||||||
Employee-related expenses, including labor and benefits | $ | (7.4 | ) | $ | (9.8 | ) | |
Operations-related expenses, including vegetation management, storm restoration, vehicles, and outside services | 12.5 | 4.5 | |||||
Shared corporate costs (including computer software depreciation at Eversource Service) | 5.6 | 10.8 | |||||
COVID-19 Costs | 5.5 | 6.7 | |||||
Other non-tracked operations and maintenance | (3.1 | ) | (1.0 | ) | |||
Total Base Electric Distribution (Non-Tracked Costs) | 13.1 | 11.2 | |||||
Base Natural Gas Distribution (Non-Tracked Costs) | 1.2 | 2.4 | |||||
Water Distribution | 0.2 | (0.1 | ) | ||||
Tracked Costs (Electric Distribution, Electric Transmission and Natural Gas Distribution) | (3.4 | ) | 7.3 | ||||
Other and eliminations: | |||||||
Eversource Parent and Other Companies - other operations and maintenance | 18.7 | 45.1 | |||||
Acquisition costs related to our planned purchase of the assets of CMA | 5.4 | 10.3 | |||||
Eliminations | (31.1 | ) | (65.7 | ) | |||
Total Operations and Maintenance | $ | 4.1 | $ | 10.5 |
Depreciation expense increased for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due to higher utility plant in service balances.
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Amortization expense includes the deferral of energy supply, energy-related costs and other costs that are included in certain regulatory commission-approved cost tracking mechanisms, and the amortization of certain costs as those costs are collected in rates. This deferral adjusts expense to match the corresponding revenues. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. Amortization decreased for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to the under recovery of energy purchases related to the Millstone PPA and deferral of energy supply and energy-related costs at CL&P, partially offset by an increase in storm cost recovery at PSNH.
Energy Efficiency Programs expense increased for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to the deferral adjustment at CL&P, PSNH and NSTAR Gas, which reflects the actual costs of energy efficiency programs compared to the amounts billed to customers and the timing of the recovery of energy efficiency costs. The increase was partially offset by a decrease in spending on certain large energy efficiency projects in 2020 compared to 2019 at NSTAR Electric due to timing. The costs for the majority of the state energy policy initiatives and expanded energy efficiency programs are recovered from customers in rates and have no impact on earnings.
Taxes Other Than Income Taxes expense decreased for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to a decrease of $10.7 million and $21.4 million related to CL&P's remittance of energy efficiency funds to the State of Connecticut, respectively. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. The decrease is partially offset by an increase in property taxes as a result of higher utility plant balances.
Interest Expense increased for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to an increase in interest on long-term debt as a result of new debt issuances ($6.6 million and $13.4 million, respectively) and an increase in interest expense on regulatory deferrals ($1.5 million and $3.2 million, respectively). Partially offsetting these increases were a decrease in interest on notes payable ($6.5 million and $8.8 million, respectively) and an increase in AFUDC related to debt funds and other capitalized interest ($0.4 million and $3.5 million, respectively).
Other Income, Net decreased for the three and six months ended June 30, 2020, as compared to the same periods in 2019, due primarily to a decrease in equity in earnings related to Eversource's equity method investments ($20.0 million and $21.1 million, respectively), partially offset by an increase related to pension, SERP and PBOP non-service income components ($4.9 million and $10.3 million, respectively).
Other Income, Net further decreased for the six month period due to the absence in 2020 of the recognition of the equity component of the carrying charges related to PSNH storm costs recorded in interest income in the first quarter of 2019 ($5.2 million), and investment losses in 2020, as compared to investment income in 2019 driven by market volatility ($3.1 million).
Income Tax Expense increased for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to higher pre-tax earnings ($5.4 million), higher state taxes ($3.0 million), by the absence in 2020 of the impairment of NPT ($35.2 million), and an increase in items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($2.5 million), partially offset by an increase in share-based payment excess tax benefits ($0.4 million) and an increase in amortization of EDIT ($1.0 million).
Income Tax Expense increased for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to higher pre-tax earnings ($12.7 million), higher state taxes ($8.0 million), by the absence in 2020 of the impairment of NPT ($35.2 million), and an increase in flow-through items and permanent differences ($5.1 million), partially offset by an increase in share-based payment excess tax benefits ($5.1 million) and an increase in amortization of EDIT ($2.7 million).
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RESULTS OF OPERATIONS –
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for CL&P, NSTAR Electric and PSNH for the six months ended June 30, 2020 and 2019 included in this combined Quarterly Report on Form 10-Q:
For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||
(Millions of Dollars) | 2020 | 2019 | Increase/ (Decrease) | 2020 | 2019 | Increase/ (Decrease) | 2020 | 2019 | Increase/ (Decrease) | ||||||||||||||||||||||||||
Operating Revenues | $ | 1,717.1 | $ | 1,590.1 | $ | 127.0 | $ | 1,394.8 | $ | 1,479.5 | $ | (84.7 | ) | $ | 531.6 | $ | 517.3 | $ | 14.3 | ||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||||||||||||
Purchased Power and Transmission | 690.1 | 566.4 | 123.7 | 434.7 | 558.5 | (123.8 | ) | 176.7 | 199.3 | (22.6 | ) | ||||||||||||||||||||||||
Operations and Maintenance | 270.2 | 264.0 | 6.2 | 238.1 | 221.9 | 16.2 | 101.1 | 105.4 | (4.3 | ) | |||||||||||||||||||||||||
Depreciation | 158.2 | 147.8 | 10.4 | 157.9 | 145.6 | 12.3 | 49.1 | 46.2 | 2.9 | ||||||||||||||||||||||||||
Amortization of Regulatory Assets, Net | 0.9 | 48.0 | (47.1 | ) | 46.6 | 45.8 | 0.8 | 31.7 | 19.5 | 12.2 | |||||||||||||||||||||||||
Energy Efficiency Programs | 67.8 | 46.8 | 21.0 | 125.4 | 142.6 | (17.2 | ) | 18.2 | 12.9 | 5.3 | |||||||||||||||||||||||||
Taxes Other Than Income Taxes | 162.8 | 178.5 | (15.7 | ) | 99.4 | 93.1 | 6.3 | 40.1 | 38.0 | 2.1 | |||||||||||||||||||||||||
Total Operating Expenses | 1,350.0 | 1,251.5 | 98.5 | 1,102.1 | 1,207.5 | (105.4 | ) | 416.9 | 421.3 | (4.4 | ) | ||||||||||||||||||||||||
Operating Income | 367.1 | 338.6 | 28.5 | 292.7 | 272.0 | 20.7 | 114.7 | 96.0 | 18.7 | ||||||||||||||||||||||||||
Interest Expense | 76.7 | 72.7 | 4.0 | 64.0 | 56.1 | 7.9 | 29.1 | 28.3 | 0.8 | ||||||||||||||||||||||||||
Other Income, Net | 10.4 | 6.7 | 3.7 | 25.4 | 21.7 | 3.7 | 6.8 | 10.0 | (3.2 | ) | |||||||||||||||||||||||||
Income Before Income Tax Expense | 300.8 | 272.6 | 28.2 | 254.1 | 237.6 | 16.5 | 92.4 | 77.7 | 14.7 | ||||||||||||||||||||||||||
Income Tax Expense | 64.8 | 57.3 | 7.5 | 56.2 | 53.9 | 2.3 | 21.2 | 18.1 | 3.1 | ||||||||||||||||||||||||||
Net Income | $ | 236.0 | $ | 215.3 | $ | 20.7 | $ | 197.9 | $ | 183.7 | $ | 14.2 | $ | 71.2 | $ | 59.6 | $ | 11.6 |
Operating Revenues
Sales Volumes: A summary of our retail electric GWh sales volumes is as follows:
For the Six Months Ended June 30, | |||||||||||
2020 | 2019 | Decrease | Percentage Decrease | ||||||||
CL&P | 9,520 | 9,953 | (433 | ) | (4.4 | )% | |||||
NSTAR Electric | 10,603 | 11,084 | (481 | ) | (4.3 | )% | |||||
PSNH | 3,695 | 3,724 | (29 | ) | (0.8 | )% |
Fluctuations in retail electric sales volumes at PSNH impact earnings. For CL&P and NSTAR Electric, fluctuations in retail electric sales volumes do not impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms.
Operating Revenues: Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased $127.0 million at CL&P and $14.3 million at PSNH, and decreased $84.7 million at NSTAR Electric, for the six months ended June 30, 2020, as compared to the same period in 2019.
Base Distribution Revenues:
• | CL&P's distribution revenues increased $22.8 million due primarily to the impact of its base distribution rate increases effective May 1, 2020 and May 1, 2019, which includes recovery of storm costs and certain other items that do not impact earnings. |
• | NSTAR Electric's distribution revenues increased $14.9 million due primarily to the impact of its base distribution rate increase effective January 1, 2020. |
• | PSNH's distribution revenues increased $26.2 million due primarily to the impact of its temporary base distribution rate increase effective July 1, 2019, which includes recovery of storm costs and certain other items that do not impact earnings. |
Tracked Revenues: Tracked distribution revenues consist of certain costs that are recovered from customers in retail rates through regulatory commission-approved cost tracking mechanisms and therefore, recovery of these costs has no impact on earnings. However, tracked revenues do include certain incentives earned, return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings. Costs recovered through cost tracking mechanisms include, among others, energy supply procurement and other energy-related costs, retail transmission charges, energy efficiency program costs, electric restructuring and stranded cost recovery revenues (including securitized RRB charges), and additionally for NSTAR Electric, pension and PBOP benefits and net metering for distributed generation. Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market and the sale of RECs to various counterparties.
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Tracked revenues increased/(decreased) for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
(Millions of Dollars) | CL&P | NSTAR Electric | PSNH | ||||||||
Retail Tariff Tracked Revenues: | |||||||||||
Energy supply procurement | $ | (46.1 | ) | $ | (79.1 | ) | $ | (17.1 | ) | ||
CL&P FMCC | 40.8 | — | — | ||||||||
Other distribution tracking mechanisms | 16.0 | (33.2 | ) | 2.1 | |||||||
Wholesale Market Sales Revenue | 78.2 | (14.0 | ) | (3.5 | ) |
The decreases in energy supply procurement at CL&P and NSTAR Electric reflect both lower average sales volumes and lower average prices and at PSNH reflect lower average prices for the six months ended June 30, 2020, as compared to the same period in 2019.
Revenues from CL&P's other distribution tracking mechanisms include higher earnings from its capital tracker mechanism due to increased electric system improvements. CL&P's wholesale market sales revenue increased due primarily to energy sold in the wholesale market resulting from energy purchased from the new Millstone PPA.
Transmission Revenues: Transmission revenues increased $20.0 million at CL&P, $24.8 million at NSTAR Electric, and $11.4 million at PSNH for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to continued investment in our transmission infrastructure and a higher benefit from the annual billing and cost reconciliation filing with FERC.
Eliminations: Eliminations are primarily related to the Eversource electric transmission revenues that are derived from ISO-NE regional transmission charges to the distribution businesses of CL&P, NSTAR Electric and PSNH that recover the costs of the wholesale transmission business. The impact of eliminations decreased revenues by $6.1 million at CL&P, $15.6 million at NSTAR Electric and $3.9 million at PSNH for the six months ended June 30, 2020, as compared to the same period in 2019.
Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P, NSTAR Electric and PSNH's customers. These energy supply costs are recovered from customers in rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power and Transmission expense increased/(decreased) for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
(Millions of Dollars) | CL&P | NSTAR Electric | PSNH | ||||||||
Purchased Power Costs | $ | 149.0 | $ | (102.3 | ) | $ | (23.6 | ) | |||
Transmission Costs | (17.3 | ) | (5.9 | ) | 5.0 | ||||||
Eliminations | (8.0 | ) | (15.6 | ) | (4.0 | ) | |||||
Total Purchased Power and Transmission | $ | 123.7 | $ | (123.8 | ) | $ | (22.6 | ) |
Purchased Power Costs: Included in purchased power costs are the costs associated with providing electric generation service supply to all customers who have not migrated to third party suppliers and the cost of energy purchase contracts, as required by regulation.
• | The increase at CL&P was due primarily to the new Millstone PPA energy purchases, partially offset by lower expense related to the procurement of energy supply resulting from lower average sales volumes and lower average prices. |
• | The decrease at NSTAR Electric was due primarily to lower expense related to the procurement of energy supply resulting from lower average sales volumes and lower average prices. |
• | The decrease at PSNH was due primarily to lower expense related to the procurement of energy supply resulting from lower average prices. |
Transmission Costs: Included in transmission costs are charges that recover the cost of transporting electricity over high-voltage lines from generation facilities to substations, including costs allocated by ISO-NE to maintain the wholesale electric market.
• | The decrease in transmission costs at CL&P and NSTAR Electric was due primarily to a reduction to the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers and a decrease in costs billed by ISO-NE that support regional grid investments. This was partially offset by an increase in Local Network Service charges, which reflects the cost of transmission service provided by Eversource over our local transmission network. |
• | The increase in transmission costs at PSNH was primarily the result of an increase in Local Network Service charges and an increase in costs billed by ISO-NE that support regional grid investments. This was partially offset by a decrease in the retail transmission cost deferral. |
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Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance expense increased/(decreased) for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
(Millions of Dollars) | CL&P | NSTAR Electric | PSNH | ||||||||
Base Electric Distribution (Non-Tracked Costs): | |||||||||||
Employee-related expenses, including labor and benefits | $ | 0.7 | $ | (7.8 | ) | $ | (2.7 | ) | |||
Operations-related expenses, including vegetation management, storm restoration, vehicles, and outside services | (0.5 | ) | 0.6 | 4.4 | |||||||
Shared corporate costs (including computer software depreciation at Eversource Service) | 4.3 | 5.1 | 1.4 | ||||||||
COVID-19 Costs | 2.8 | 2.8 | 1.1 | ||||||||
Other non-tracked operations and maintenance | (3.3 | ) | 1.4 | 0.9 | |||||||
Total Base Electric Distribution (Non-Tracked Costs) | 4.0 | 2.1 | 5.1 | ||||||||
Tracked Costs: | |||||||||||
Transmission expenses | (4.7 | ) | 3.9 | (1.3 | ) | ||||||
Other tracked operations and maintenance | 6.9 | 10.2 | (8.1 | ) | |||||||
Total Tracked Costs | 2.2 | 14.1 | (9.4 | ) | |||||||
Total Operations and Maintenance | $ | 6.2 | $ | 16.2 | $ | (4.3 | ) |
Depreciation increased for the six months ended June 30, 2020, as compared to the same period in 2019, for CL&P, NSTAR Electric and PSNH due to higher net plant in service balances.
Amortization of Regulatory Assets, Net expense includes the deferral of energy supply, energy-related costs and other costs that are included in certain regulatory-approved cost tracking mechanisms, and the amortization of certain costs as those costs are collected in rates. This deferral adjusts expense to match the corresponding revenues. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. Amortization of Regulatory Assets, Net increased/decreased for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
• | The decrease at CL&P was due primarily to the under recovery of energy purchases related to the Millstone PPA and deferral of energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. |
• | The increase at PSNH was due to an increase in storm cost recovery, partially offset by the deferral of energy supply and energy related costs. |
Energy Efficiency Programs expense includes costs of various state energy policy initiatives and expanded energy efficiency programs that are recovered from customers in rates, most of which have no impact on earnings. Energy Efficiency Programs expense increased/decreased for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
• | The increase at CL&P and PSNH was due to the deferral adjustment, which reflects actual costs of energy efficiency programs compared to the estimated amounts billed to customers and the timing of the recovery of energy efficiency costs. |
• | The decrease at NSTAR Electric was due to the timing of spending on certain large energy efficiency projects in 2020, as compared to 2019. |
Taxes Other Than Income Taxes increased/decreased for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
• | The decrease at CL&P was related to a $21.4 million decrease in the remittance of energy efficiency funds to the State of Connecticut. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. The decrease was partially offset by higher property taxes as a result of higher utility plant balances. |
• | The increases at NSTAR Electric and PSNH were due to higher property taxes as a result of higher utility plant balances. |
Interest Expense increased for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
• | The increase at CL&P was due to higher interest on long-term debt ($5.0 million), partially offset by an increase in AFUDC related to debt funds ($0.3 million). |
• | The increase at NSTAR Electric was due to higher interest on long-term debt ($7.5 million), an increase in interest expense on regulatory deferrals ($3.5 million), and a decrease in AFUDC related to debt funds ($0.6 million). Partially offsetting these increases was a decrease in interest on notes payable ($2.6 million). |
• | The increase at PSNH was due to higher interest on long-term debt ($1.9 million), partially offset by a decrease on RRB interest expense ($0.7 million) and a decrease in interest expense on regulatory deferrals ($0.6 million). |
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Other Income, Net increased/decreased for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
• | The increase at CL&P was due to an increase related to pension, SERP and PBOP non-service income components ($3.7 million) and an increase in AFUDC related to equity funds ($2.1 million), partially offset by investment losses in 2020, as compared to investment income in 2019 driven by market volatility ($3.0 million). |
• | The increase at NSTAR Electric was due to an increase related to pension, SERP and PBOP non-service income components ($2.6 million) and an increase in AFUDC related to equity funds ($1.2 million), partially offset by higher investment losses driven by market volatility ($0.7 million). |
• | The decrease at PSNH was due to the absence in 2020 of the recognition of the equity component of the carrying charges related to storm costs recorded in interest income in 2019 ($5.2 million) and investment losses in 2020, as compared to investment income in 2019 driven by market volatility ($0.4 million). Partially offsetting these decreases were an increase related to pension, SERP and PBOP non-service income components ($1.5 million) and an increase in AFUDC related to equity funds ($1.5 million). |
Income Tax Expense increased for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
• | The increase at CL&P was due primarily to higher pre-tax earnings ($5.9 million), higher state taxes ($1.0 million) and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($2.4 million), partially offset by an increase in share-based payment excess tax benefits ($1.8 million). |
• | The increase at NSTAR Electric was due primarily to higher pre-tax earnings ($3.5 million) and higher state taxes ($1.1 million), partially offset by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.5 million), and an increase in share-based payment excess tax benefits ($1.8 million). |
• | The increase at PSNH was due primarily to higher pre-tax earnings ($3.0 million) and higher state taxes ($0.9 million), partially offset by an increase in share-based payment excess tax benefits ($0.6 million) and in items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.2 million). |
EARNINGS SUMMARY
CL&P's earnings increased $20.7 million for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to an increase in transmission earnings driven by a higher transmission rate base, the base distribution rate increases effective May 1, 2020 and May 1, 2019, and higher earnings from its capital tracker mechanism due to increased electric system improvements. The earnings increase was partially offset by higher depreciation expense, higher operations and maintenance expense, and higher interest expense.
NSTAR Electric's earnings increased $14.2 million for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the base distribution rate increase effective January 1, 2020 and an increase in transmission earnings driven by a higher transmission rate base. The earnings increase was partially offset by higher depreciation expense, higher interest expense, and higher property tax expense.
PSNH's earnings increased $11.6 million for the six months ended June 30, 2020, as compared to the same period in 2019, due primarily to the temporary base distribution rate increase effective July 1, 2019, and an increase in transmission earnings driven by a higher transmission rate base. The earnings increase was partially offset by the absence of the first quarter 2019 recognition of carrying charges on its 2013 through 2016 storm costs approved for recovery and higher operations and maintenance expense.
LIQUIDITY
Cash Flows: CL&P had cash flows provided by operating activities of $282.9 million for the six months ended June 30, 2020, as compared to $345.6 million in the same period of 2019. The decrease in operating cash flows was due primarily to the timing of cash payments made on our accounts payable and the timing of cash collections on our accounts receivable and regulatory tracking mechanisms. Partially offsetting these unfavorable impacts were income tax refunds received of $26.4 million in the first half of 2020, as compared to income tax payments of $3.9 million in the same period in 2019 driven primarily by the deferral of estimated tax payments from the second quarter of 2020 to July 2020 under COVID-19 relief legislation.
NSTAR Electric had cash flows provided by operating activities of $212.8 million for the six months ended June 30, 2020, as compared to $251.5 million in the same period of 2019. The decrease in operating cash flows was due primarily to the timing of collections for regulatory tracking mechanisms primarily related to transmission costs and the timing of cash collections on our accounts receivable. Partially offsetting these unfavorable impacts were the timing of cash payments made on our accounts payable and income tax refunds received of $10.9 million in the first half of 2020, as compared to income tax payments of $10.9 million in the same period in 2019 driven by the deferral of estimated tax payments under COVID-19 relief legislation.
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PSNH had cash flows provided by operating activities of $118.8 million for the six months ended June 30, 2020, as compared to $121.7 million in the same period of 2019. The decrease in operating cash flows was due primarily to income tax payments of $4.8 million in the first half of 2020, as compared to income tax refunds received of $11.8 million in the same period in 2019, the timing of REC inventories and the timing of cash collections on our accounts receivable. Partially offsetting these unfavorable impacts were the temporary base distribution rate increase effective July 1, 2019 and the timing of cash payments on our accounts payable and other working capital items.
For further information on CL&P's, NSTAR Electric's and PSNH's liquidity and capital resources, see "Liquidity" and "Business Development and Capital Expenditures" included in this Management's Discussion and Analysis of Financial Condition and Results of Operations.
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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 statements of income for CL&P for the three months ended June 30, 2020 and 2019 included in this combined Quarterly Report on Form 10-Q:
For the Three Months Ended June 30, | |||||||||||
(Millions of Dollars) | 2020 | 2019 | Increase/(Decrease) | ||||||||
Operating Revenues | $ | 817.4 | $ | 740.8 | $ | 76.6 | |||||
Operating Expenses: | |||||||||||
Purchased Power and Transmission | 315.4 | 246.5 | 68.9 | ||||||||
Operations and Maintenance | 134.6 | 133.4 | 1.2 | ||||||||
Depreciation | 79.7 | 74.6 | 5.1 | ||||||||
Amortization of Regulatory (Liabilities)/Assets, Net | (5.7 | ) | 12.4 | (18.1 | ) | ||||||
Energy Efficiency Programs | 32.3 | 20.8 | 11.5 | ||||||||
Taxes Other Than Income Taxes | 80.0 | 86.4 | (6.4 | ) | |||||||
Total Operating Expenses | 636.3 | 574.1 | 62.2 | ||||||||
Operating Income | 181.1 | 166.7 | 14.4 | ||||||||
Interest Expense | 38.7 | 36.9 | 1.8 | ||||||||
Other Income, Net | 8.5 | 2.9 | 5.6 | ||||||||
Income Before Income Tax Expense | 150.9 | 132.7 | 18.2 | ||||||||
Income Tax Expense | 33.6 | 27.9 | 5.7 | ||||||||
Net Income | $ | 117.3 | $ | 104.8 | $ | 12.5 |
Operating Revenues
Sales Volumes: CL&P's retail electric GWh sales volumes were 4,579 and 4,602 for the three months ended June 30, 2020 and 2019, respectively, resulting in a decrease of 0.5 percent. Fluctuations in retail electric sales volumes do not impact earnings due to its PURA-approved distribution revenue decoupling mechanism.
Operating Revenues: Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased $76.6 million for the three months ended June 30, 2020, as compared to the same period in 2019.
Base Distribution Revenues: CL&P's distribution revenues increased $9.4 million due primarily to the impact of its base distribution rate increases effective May 1, 2020 and May 1, 2019, which includes recovery of storm costs and certain other items that do not impact earnings.
Tracked Revenues: Tracked revenues increased/(decreased) for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
(Millions of Dollars) | |||
Retail Tariff Tracked Revenues | |||
Energy supply procurement | $ | (5.7 | ) |
FMCC | 23.4 | ||
Other distribution tracking mechanisms | 13.4 | ||
Wholesale Market Sales Revenue | 27.2 |
Transmission Revenues: Transmission revenues increased $8.7 million due primarily to continued investment in our transmission infrastructure and a higher benefit from the annual billing and cost reconciliation filing with FERC.
Eliminations: Eliminations are primarily related to transmission revenues derived from ISO-NE regional transmission charges to the distribution business that recover the costs of the wholesale transmission business. The impact of eliminations decreased revenues by $0.6 million.
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 expense increased/(decreased) for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
(Millions of Dollars) | |||
Purchased Power Costs | $ | 77.8 | |
Transmission Costs | (6.5 | ) | |
Eliminations | (2.4 | ) | |
Total Purchased Power and Transmission | $ | 68.9 |
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The increase in purchased power costs was due primarily to the new Millstone PPA energy purchases, partially offset by lower expense related to the procurement of energy supply resulting from lower average prices. The decrease in transmission costs was due primarily to a reduction to the retail transmission cost deferral and a decrease in costs billed by ISO-NE that support regional grid investments. This was partially offset by an increase in Local Network Service charges.
Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance expense increased/(decreased) for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to the following:
(Millions of Dollars) | |||
Base Electric Distribution (Non-Tracked Costs): | |||
Operations-related expenses, including vegetation management, vehicles, and outside services | $ | (4.4 | ) |
Storm Restoration Costs | 2.6 | ||
COVID-19 Costs | 2.4 | ||
Other non-tracked operations and maintenance | 1.9 | ||
Total Base Electric Distribution (Non-Tracked Costs) | 2.5 | ||
Total Tracked Costs | (1.3 | ) | |
Total Operations and Maintenance | $ | 1.2 |
Depreciation expense increased for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to a higher net plant in service balance.
Amortization of Regulatory (Liabilities)/Assets, Net expense includes the deferral of energy supply, energy-related costs and other costs that are included in certain regulatory-approved cost tracking mechanisms, and the amortization of certain costs as those costs are collected in rates. This deferral adjusts expense to match the corresponding revenues. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. Amortization of Regulatory (Liabilities)/Assets, Net decreased at CL&P for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to the under recovery of energy purchases related to the Millstone PPA and to the deferral adjustment of energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs.
Energy Efficiency Programs expense includes costs of various state energy policy initiatives and expanded energy efficiency programs that are recovered from customers in rates, most of which have no impact on earnings. Energy Efficiency Programs expense increased for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to the deferral adjustment, which reflects the actual costs of energy efficiency programs compared to the estimated amounts billed to customers and the timing of the recovery of energy efficiency costs.
Taxes Other Than Income Taxes decreased for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to a decrease of $10.7 million related to the remittance of energy efficiency funds to the State of Connecticut. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. The decrease was partially offset by higher property taxes as a result of higher utility plant balances.
Interest Expense increased at CL&P for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to an increase in interest expense on long-term debt ($1.6 million).
Other Income, Net increased for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to investment income in 2020, as compared to investment losses in 2019 driven by market volatility ($2.3 million) and an increase related to pension, SERP and PBOP non-service income components ($1.8 million).
Income Tax Expense increased for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to higher pre-tax earnings ($3.8 million), higher state taxes ($0.4 million) and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($1.5 million).
EARNINGS SUMMARY
CL&P's earnings increased $12.5 million for the three months ended June 30, 2020, as compared to the same period in 2019, due primarily to an increase in transmission earnings driven by a higher transmission rate base, the base distribution rate increases effective May 1, 2020 and May 1, 2019, and higher earnings from its capital tracker mechanism due to increased electric system improvements. The earnings increase was partially offset by higher depreciation expense, higher operations and maintenance expense, and higher interest expense.
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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. Eversource'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.
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, natural gas and electric utilities, oil and natural 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.
Our regulated companies are subject to credit risk from certain long-term or high-volume supply contracts with energy marketing companies. Our regulated companies manage the credit risk with these counterparties in accordance with established credit risk practices and monitor contracting risks, including credit risk. As of June 30, 2020, our regulated companies held collateral (letters of credit or cash) of $15.0 million from counterparties related to our standard service contracts. As of June 30, 2020, Eversource had $29.6 million of cash posted with ISO-NE related to energy transactions.
We have provided additional disclosures regarding interest rate risk management and credit risk management in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," in Eversource's 2019 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 Eversource 2019 Form 10-K.
ITEM 4. | CONTROLS AND PROCEDURES |
Management, on behalf of Eversource, CL&P, NSTAR Electric and PSNH, evaluated the design and operation of the disclosure controls and procedures as of June 30, 2020 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's supervision and with management's participation, including the principal executive officer 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 officer and principal financial officer have concluded, based on their review, that the disclosure controls and procedures of Eversource, CL&P, NSTAR Electric and PSNH 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 officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
There have been no changes in internal controls over financial reporting for Eversource, CL&P, NSTAR Electric and PSNH during the quarter ended June 30, 2020 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 disclosed certain legal proceedings in Part I, Item 3, "Legal Proceedings," and elsewhere in our 2019 Form 10-K. These disclosures are incorporated herein by reference.
There have been no material legal proceedings identified and no material changes with regard to the legal proceedings previously disclosed in our 2019 Form 10-K.
ITEM 1A. | RISK FACTORS |
We are subject to a variety of significant risks in addition to the matters set forth under our forward-looking statements section in Item 2, "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 Factors," in our 2019 Form 10-K, which risk factors are incorporated herein by reference. These risk factors should be considered carefully in evaluating our risk profile. The following risk factor should be read in conjunction with the risk factors described in the 2019 Form 10-K.
The global pandemic of the 2019 novel coronavirus (COVID-19) has resulted in widespread disruption to the many systems and processes of daily life, as well as the overall economic market and outlook, which could cause various unfavorable impacts to our customers, vendors, employees, regulators, and operations and could adversely affect our financial position, results of operations and cash flows.
We are responding to COVID-19 by taking steps to mitigate the potential risks to Eversource posed by its spread. We provide a critical service to our customers, which means it is paramount that we keep our employees who operate our businesses safe and minimize unnecessary risk of exposure to COVID-19. We have updated and implemented our company-wide pandemic plan to address specific aspects of the COVID-19 pandemic. This plan guides our emergency response, business continuity, and the precautionary measures we are taking on behalf of employees and our customers. As part of our pandemic plan, we are taking extra precautions to mitigate an adverse material impact to the following risk factors that we believe could continue to be impacted by COVID-19:
• | Cybersecurity attacks: We have seen a consistent volume of perimeter scanning for vulnerabilities throughout the COVID-19 time frame, which is higher than pre-COVID-19 volumes. This scanning can be leveraged to compromise a system. We have also seen increased phishing attempts targeted at our employees by outside parties to gain control of our systems and network. We continue to implement strong cybersecurity measures and have increased the education of our employees and contractors to ensure that our systems remain functional in order to both serve our operational needs with a remote workforce and to ensure uninterrupted service to our customers. We also continuously review and update our response plans to include responding to an event while in a remote work environment. |
• | Access to, or cost of, capital resources: We utilize the commercial paper market extensively for our short-term borrowing needs. At the onset of the pandemic in the United States, there had been reduced liquidity in the commercial paper credit market. However, federal legislative actions, as well as increased liquidity and the reduction in the federal funds rate by the Federal Reserve, have enabled the credit markets to function. We continue to monitor the ability for us to access the global capital and credit markets; however, if we are unable to access these markets, then our financial condition may be adversely affected. |
• | Actions of regulators: We continue to work closely with our state regulatory commissions and consumer advocates on several customer assistance measures, including more flexible and new payment plan options in order to mitigate the impact on customer rates in the future, as well as financial hardship and arrearage management programs for those customers who are unable to pay their utility bills. We developed these long-term solutions for customers in order to help minimize the extent of the impact of COVID-19 on customer receivable balances and customers’ affordability in light of the adverse financial impact they may experience. We believe that we are developing successful mechanisms with our state regulatory commissions to recover our costs associated with COVID-19, while balancing the impact on our customers’ bills. |
• | Timing of strategic development opportunities: The successful execution of our timeline for developing our offshore wind projects is based on several factors, including state and federal siting and permitting approvals. Between March 2020 and June 2020, COVID-19-related work restrictions prohibited work in New York and within New York jurisdictional waters. Those restrictions delayed offshore site investigations, and onshore environmental and geotechnical surveys, which could adversely impact our project siting and permit filing timelines. On April 8, 2020, the state of New York Administrative Law Judge granted a change to the start of the South Fork Wind evidentiary hearing schedule to September 30, 2020, due to ongoing COVID-19 work and travel restrictions. Although we are unable to predict the impact of those delays on our offshore wind projects at this time, we are currently developing mitigation plans to address permitting delays due to COVID-19 restrictions on our offshore wind projects. Similarly, we are unable to assess the potential impact that a reintroduction of these work restrictions in response to a future increase in COVID-19 infections would have on our projects. |
• | Suppliers and Vendors: We have instituted measures to ensure our supply chain remains open to us; however, there could be global shortages that will impact our maintenance, capital programs, and storm response that we currently cannot anticipate. |
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• | Loss of key personnel: We continue to adjust our pandemic plan to address various scenarios including reduced workforce levels and limited mutual aid in the event of a significant storm event. We have implemented remote work arrangements for our workforce by enabling nearly half of our employees to work from home and taking extra precautions for our field-based employees. We have taken significant safety measures to ensure adequate social distancing for our field crews to safely provide essential services to our customers. We have also adopted protocols to ensure the safety and health of those employees who work onsite in critical facilities. We continue to monitor COVID-19 developments affecting our workforce and will take additional precautions that we determine are necessary in order to mitigate the impacts. Although to date our workforce continues to be able to safely and reliably deliver our critical services to customers, we are unable to predict the extent of the impact of COVID-19 on our employees. |
• | Impact to Benefit Plans: As of June 30, 2020, under the Pension Protection Act, the funded status of our pension plan was approximately 99 percent. The pension and PBOP plans' funded status is highly dependent on benefit plan asset returns, interest rates, and discount rates, all of which could be materially impacted by an extended economic slowdown. Should these financial metrics be negatively impacted by COVID-19 as of December 31, 2020, it could result in the underperformance of our pension and PBOP plan investments, an increase in pension and PBOP obligations and employee benefit plan costs, and in a minimum pension funding requirement due by March 31, 2022 for the 2021 Plan year. We continue to monitor federal legislative pension developments that could provide additional pension funding relief. |
We are currently unable to estimate the potential impact of COVID-19 to our financial position, results of operations and cash flows.
Other than as set forth above, there have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed in our 2019 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 matching contributions under the Eversource 401k Plan.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans and Programs (at month end) | |||||
April 1 - April 30, 2020 | — | $ | — | — | — | ||||
May 1 - May 31, 2020 | 108 | 75.69 | — | — | |||||
June 1 - June 30, 2020 | 2,309 | 83.35 | — | — | |||||
Total | 2,417 | $ | 83.01 | — | — |
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ITEM 6. | EXHIBITS |
Each document 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. | Description | ||
Listing of Exhibits (Eversource) | |||
31 | |||
31.1 | |||
32 | |||
Listing of Exhibits (CL&P) | |||
31 | |||
31.1 | |||
32 | |||
Listing of Exhibits (NSTAR Electric Company) | |||
31 | |||
31.1 | |||
32 | |||
Listing of Exhibits (PSNH) | |||
31 | |||
31.1 | |||
32 | |||
Listing of Exhibits (Eversource, CL&P, NSTAR Electric, PSNH) | |||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document | ||
101.SCH | Inline XBRL Taxonomy Extension Schema | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation | ||
101.DEF | Inline XBRL Taxonomy Extension Definition | ||
101.LAB | Inline XBRL Taxonomy Extension Labels | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation | ||
104 | The cover page from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL |
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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.
EVERSOURCE ENERGY | |||
August 7, 2020 | By: | /s/ Jay S. Buth | |
Jay S. Buth | |||
Vice President, Controller and Chief Accounting Officer |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE CONNECTICUT LIGHT AND POWER COMPANY | |||
August 7, 2020 | By: | /s/ Jay S. Buth | |
Jay S. Buth | |||
Vice President, Controller and Chief Accounting Officer |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NSTAR ELECTRIC COMPANY | |||
August 7, 2020 | By: | /s/ Jay S. Buth | |
Jay S. Buth | |||
Vice President, Controller and Chief Accounting Officer |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE | |||
August 7, 2020 | By: | /s/ Jay S. Buth | |
Jay S. Buth | |||
Vice President, Controller and Chief Accounting Officer |
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