1999 Annual Report

Public Service Company of New Hampshire

Index

Contents Page
- -------- ----

Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 1

Report of Independent Public Accountants.......................... 10-11

Statements of Income.............................................. 13

Statements of Comprehensive Income................................ 13

Balance Sheets.................................................... 14-15

Statements of Common Stockholder's Equity......................... 16

Statements of Cash Flows.......................................... 17

Notes to Financial Statements..................................... 18

Selected Financial Data........................................... 43

Quarterly Financial Data (Unaudited).............................. 43

Statistics (Unaudited)............................................ 44

Preferred Stockholder and Bondholder Information.................. Back Cover

Public Service Company of New Hampshire

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Condition

Overview
Public Service Company of New Hampshire (PSNH or the company) is a wholly
owned operating subsidiary of Northeast Utilities (NU) and is part of the
Northeast Utilities system (NU system). North Atlantic Energy Corporation
(NAEC) is another wholly owned subsidiary of NU. PSNH is obligated to
purchase the capacity and output from NAEC's 35.98 percent joint ownership
interest in the Seabrook Station (Seabrook) nuclear unit under the terms of
two life-of-unit, full cost recovery contracts (Seabrook Power Contracts).

During 1999, PSNH made significant progress toward resolving industry
restructuring issues in the state of New Hampshire by negotiating a global
restructuring settlement that is still subject to regulatory approval.
The "Agreement to Settle PSNH Restructuring" (Settlement Agreement) includes
an after-tax write-off of $225 million. However, that write-off was not
recorded in 1999, as key aspects of the Settlement Agreement still required
regulatory and legislative approval and it was not possible to determine the
ultimate resolution of this matter at year end. Also, upon the approval and
implementation of the Settlement Agreement, PSNH and NAEC will restructure the
Seabrook Power Contracts to provide for the buydown of the value of the
Seabrook Asset.

During 1999, PSNH's revenues increased to $1.16 billion, up 6.7 percent from
revenues of $1.09 billion in 1998. During 1999, PSNH had net income of $84.2
million, compared to $91.7 million in 1998 and $92.2 million in 1997.

Mergers

In 1998 and 1999, NU management concluded that the pace of deregulation was
accelerating throughout the northeastern United States and that shareholders
would benefit from NU not only remaining a major provider of electric
transmission and distribution service, but also becoming an unregulated
marketer of both electricity and natural gas. NU management also concluded
that as a result of the changes occurring in the highly competitive electric
utility industry, increased size would be crucial to achieve its objective of
being a leading provider of energy products and services in the Northeast.

On October 13, 1999, NU announced an agreement to merge with Consolidated
Edison, Inc. (Con Edison), a financially stronger utility based in New York.
The merger will create the nation's largest electric distribution system
with more than 5 million customers and one of the 15 largest natural gas
distribution systems with 1.4 million customers.

NU and Con Edison filed with various state and federal regulatory bodies
in January 2000 to secure approval of the merger. The two companies expect
these regulatory proceedings can be completed by the end of July 2000.

Also in 1999, NU management concluded that the NU system would be stronger
and customers could be better served if NU reentered the natural gas
distribution business that it had exited in 1989 and examined several potential
businesses in New England. By adding gas to NU's energy mix, NU will be able
to broaden its services to its existing customers and will have additional
opportunities for long-term growth. In June 1999, NU announced an agreement
to merge with Yankee Energy System, Inc. (Yankee). The merger will return
to NU, Connecticut's largest natural gas distribution system, as well as
several unregulated businesses involved in energy services, collections and
other areas. The Yankee merger received Yankee shareholder approval in
October 1999, final Connecticut Department of Public Utility Control approval
in December 1999 and Securities and Exchange Commission (SEC) approval in
January 2000. The merger closed on March 1, 2000.

Liquidity

During 1999, net cash flows provided by operations were $199.1 million,
compared to $217.6 million in 1998 and $231.7 million in 1997. The decrease
in 1999 is primarily related to a decrease in net income and increased tax
payments.

Net cash flows used in financing activities included $31.6 million in 1999,
compared to $204.3 million in 1998 and $121.9 million in 1997. This
included $25 million paid in 1999 to retire long-term debt and preferred
stock, compared to $195 million in 1998 and $25 million in 1997. Payments
made for preferred stock dividends were $6.6 million, $9.3 million and $11.9
million for 1999, 1998 and 1997, respectively. There were no cash dividends
on common shares paid in 1999 and 1998 and $85 million in 1997.

Including construction expenditures and investments in nuclear decommissioning
trusts, net cash flows used in investing activities were $45.8 million in 1999,
compared to $46.9 million in 1998 and $16.3 million in 1997.

PSNH's access to capital also benefited from the continued progress toward the
resolution of all restructuring issues in New Hampshire. During 1999, PSNH's
securities received several upgrades from three credit rating agencies. PSNH's
bonds were upgraded to investment grade by Standard & Poor's (S&P) for the
first time since early 1994. At year end, all securities were under review for
possible upgrades, or on "credit watch" with positive implications by S&P,
Moody's Investors Service and Fitch IBCA.

PSNH's $75 million revolving credit agreement was terminated on April 14, 1999.
PSNH currently funds its operations through cash on hand and operating cash
flows. As of December 31, 1999, PSNH had $182.6 million of cash and cash
equivalents. On April 14, 1999, PSNH renewed bank letters of credit that
support nearly $110 million of taxable variable-rate pollution control bonds.

During 2000, pending the approval of the Settlement Agreement and enactment of
legislation, PSNH hopes to begin the process of securitizing approximately
$725 million of approved stranded costs. Securitization involves issuing rate
reduction bonds with interest rates lower than the company's weighted average
cost of capital. Proceeds from securitization will be used to significantly
reduce the capitalization of PSNH and other purposes as set forth in the
Settlement Agreement.

Restructuring

The process of restructuring the electric utility industry in New Hampshire has
not yet been resolved; however, significant progress has been made over the
past year. In August 1999, NU, PSNH and the state of New Hampshire signed the
Settlement Agreement which, once approved and implemented, will resolve a
number of pending regulatory and court proceedings related to PSNH. The
Settlement Agreement is awaiting approval of the New Hampshire Public Utilities
Commission and is subject to legislative approval for securitization. Some of
the key components of the agreement for PSNH include an after-tax write-off of
$225 million of stranded costs; the recovery of the remaining stranded costs;
the securitization of $725 million of approved stranded costs; a reduction in
rates of an average of 18.3 percent; the opening of the New Hampshire
electricity market to competition; and the sale of generation assets and
wholesale power entitlements with transition service being available to
customers for three years.

Upon the approval and implementation of the Settlement Agreement, PSNH and NAEC
will restructure the Seabrook Power Contract to provide for the buydown of the
value of NAEC's Seabrook asset to $100 million. Subsequent to the contract
buydown, NAEC will continue to bill PSNH for recovery of the remaining Seabrook
cost of $100 million. The Settlement Agreement also requires NAEC to sell via
public auction its share of Seabrook, with the sale to occur no later than
December 31, 2003. Upon a successful sale of NAEC's share of Seabrook, the
existing Seabrook Power Contracts between PSNH and NAEC will be terminated.
For further information regarding commitments and contingencies related to
restructuring, see Note 10A, "Commitments and Contingencies - Restructuring"
to the financial statements.

Nuclear Generation

Seabrook
Seabrook achieved an annual capacity factor of 86.4 percent in 1999. However,
since returning to service on May 13, 1999, after a 48-day refueling and
maintenance outage, Seabrook has achieved a 99 percent capacity factor through
December 31, 1999. PSNH receives 35.98 percent of Seabrook's output under
long-term contracts with NAEC.

NAEC anticipates auctioning its 35.98 percent share of Seabrook with the 4.06
percent owned by its affiliate, The Connecticut Light and Power Company, after
approval of the Settlement Agreement.

Millstone 3
PSNH has a 2.85 percent ownership share of the Millstone 3 nuclear unit.
Millstone 3 received the appropriate Nuclear Regulatory Commission approvals,
resumed operation in July 1998 and achieved an annual capacity factor of 81.7
percent in 1999. After a 60-day refueling and maintenance outage, Millstone 3
returned to service on June 29, 1999, and has achieved a 98.1 percent capacity
factor through December 31, 1999.

An auction of the NU system's ownership interests in the Millstone units is
expected in 2000 with a closing in 2001. Based on regulatory decisions
received in 1999, management expects to recover all of its remaining nuclear
stranded costs from retail customers.

Yankee Companies
On June 1, 1999, the Federal Energy Regulatory Commission accepted the offer of
settlement which was filed on January 15, 1999, by the Maine Yankee Atomic
Power Company (MYAPC). The significant aspects of the settlement allowed MYAPC
to collect $33.1 million annually to pay for decommissioning and spent fuel,
approved its return on equity of 6.5 percent, permitted full recovery of
MYAPC's unamortized investment, including fuel, and set an incentive budget
for decommissioning at $436.3 million.

PSNH is a 4 percent shareholder and sponsor company of the Vermont Yankee
Nuclear Power Corporation (VYNPC). On October 15, 1999, VYNPC agreed to sell
its unit for $22 million to an unaffiliated company. Among other commitments,
the acquiring company agreed to assume the decommissioning cost of the unit
after it is taken out of service, and the VYNPC owners have agreed to fund
the uncollected decommissioning cost to a negotiated amount at the time of
the closing of the sale. VYNPC's owners have also agreed either to enter into
a new purchased-power agreement with the acquiring company or to buy out such
future power payment obligations by making a fixed payment to them. PSNH has
elected the buyout option. The VYNPC owners' obligations to close and pay such
amounts are conditioned upon their receipt of satisfactory regulatory approval
of the transaction, including provision for adequate recovery of these
payments.

Nuclear Decommissioning
The staff of the SEC has questioned certain of the current accounting practices
of the electric utility industry regarding the recognition, measurement and
classification of decommissioning costs for nuclear units in their financial
statements.

Currently, the Financial Accounting Standards Board plans to review the
accounting for obligations associated with the retirement of long-lived assets,
including the decommissioning of nuclear units. If current accounting
practices for nuclear decommissioning change, the annual provision for
decommissioning could increase relative to 1999, and the estimated cost for
decommissioning could be recorded as a liability with recognition of an
increase in the cost of the related nuclear unit. However, management does
not believe that such a change will have a material impact on PSNH's financial
statements due to its current and future ability to recover decommissioning
costs through rates.

Spent Nuclear Fuel Disposal Costs
The United States Department of Energy (DOE) originally was scheduled to begin
accepting delivery of spent fuel in 1998. However, delays in confirming the
suitability of a permanent storage site continually have postponed plans for
the DOE's long-term storage and disposal site. Extended delays or a default
by the DOE could lead to consideration of costly alternatives. PSNH has the
primary responsibility for the interim storage of its share of spent nuclear
fuel for Millstone 3. The facilities for Millstone 3 are expected to provide
adequate storage for its projected life with the addition of new storage
racks. Seabrook is expected to have spent fuel storage capacity until at
least 2010. Meeting spent fuel storage requirements beyond these periods
could require new and separate storage facilities. For further information
regarding spent nuclear fuel disposal costs, see Note 10D, "Commitments and
Contingencies - Spent Nuclear Fuel Disposal Costs," to the financial
statements.

Other Matters

Environmental Matters
PSNH is subject to environmental laws and regulations structured to mitigate
or remove the effect of past operations and to improve or maintain the quality
of the environment. For further information regarding environmental matters,
see Note 10C, "Commitments and Contingencies - Environmental Matters," to
the financial statements.

Other Commitments and Contingencies
PSNH is subject to other commitments and contingencies primarily relating to
nuclear litigation, nuclear insurance contingencies, its construction program,
long-term contractual arrangements, the New England Power Pool generation
pricing and its deferred receivable from an affiliate company. For further
information regarding these other commitments and contingencies, see Note 10,
"Commitments and Contingencies," to the financial statements.

Year 2000 Issues
The transition into the year 2000 was a success for the NU system and PSNH.
Its mission to provide safe, reliable energy to its customers and to ensure
continued operability of critical business functions was not affected by any
year 2000 related issues.

The projected total cost of the year 2000 program is estimated at $21 million
for the NU system. The total cost to date was funded through operating cash
flows. The NU system has incurred and expensed $20 million related to year
2000 readiness efforts.

Forward Looking Statements
This discussion and analysis includes forward looking statements, which are
statements of future expectations and not facts. Words such as estimates,
expects, anticipates, intends, plans, and similar expressions identify forward
looking statements. Actual results or outcomes could differ materially as a
result of further actions by state and federal regulatory bodies, competition
and industry restructuring, changes in economic conditions, changes in
historical weather patterns, changes in laws, developments in legal or public
policy doctrines, technological developments, and other presently unknown or
unforeseen factors.

RESULTS OF OPERATIONS

The components of significant income statement variances for the past
two years are provided in the table below.

Income Statement Variances
Millions of Dollars

1999 over(under) 1998 1998 over/(under) 1997
--------------------- ----------------------
Amount Percent Amount Percent
------ ------- ------ -------

Operating Revenues $73 7% $(21) (2)%

Operating Expenses:
Fuel, purchased and
net interchange power 86 14 44 8
Other operation and maintenance 11 7 (2) (1)
Depreciation 2 5 1 2
Amortization of regulatory
assets, net 8 30 (30) (53)
Federal and state income taxes (31) (44) (16) (18)
Taxes other than income taxes - - (1) (1)
Operating Income (7) (5) (13) (9)

Equity in earnings of
regional nuclear
generating companies (2) (58) 1 93
Other, net (4) (38) 9 (a)
Interest charges, net (1) (1) (7) (15)

Net Income (7) (8) - -

(a) Percent greater than 100.

Operating Revenues
Operating revenues increased by $73 million or 7 percent in 1999, primarily
due to higher retail revenues ($43 million), higher wholesale energy and
capacity sales and transmission revenues ($30 million). Retail kilowatt-hour
sales increased by 5.3 percent.

Operating revenues decreased $21 million in 1998, primarily due to the 1997
retail rate decrease. Retail kilowatt-hour sales were 2.3 percent higher for
1998 and contributed approximately $9 million to operating revenues.

Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 1999, primarily
due to higher purchased-power expenses ($48 million) and higher deferred
expenses ($25 million) associated with the company's fuel clause and higher
capacity costs for Seabrook ($8 million). Seabrook's capacity costs are higher
due to costs associated with the refueling outage in 1999 and the amortization
of the return that was deferred by PSNH through November 1998.

Fuel, purchased and net interchange power expense increased in 1998, primarily
due to higher costs associated with the Seabrook Power Contract as a result of
the amortization of Seabrook phase-in costs that began in June 1998 ($57
million), partially offset by lower costs at the Millstone 3 and Maine Yankee
nuclear units ($6 million).

Other Operation and Maintenance
Other operation and maintenance (O&M) expenses increased in 1999, primarily due
to the recognition of environmental insurance proceeds which reduced O&M
expense in 1998 ($12 million), higher fossil maintenance expenses ($3 million)
and higher transmission expenses ($2 million), partially offset by lower storm
costs in 1999 ($6 million).

Other O&M expenses decreased in 1998, primarily due to the recognition of
environmental insurance proceeds ($12 million), partially offset by higher costs
related to the January ice storm, net of insurance proceeds ($8 million).

Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 1999, primarily due to an
increase in the amortization of the Seabrook deferred return which began in
June 1998. The reduction of the acquisition premium amortization ($21
million) was offset by the completion of the amortization of net operating
loss carryforwards ($21 million).

Amortization of regulatory assets, net decreased in 1998, primarily due to
the completion of the amortization of a portion of the company's acquisition
premium ($40 million), partially offset by the additional amortization of
Seabrook phase-in costs ($10 million).

Federal and State Income Taxes
Federal and state income taxes decreased in 1999, primarily due to the
utilization of net operating loss carryforwards.

Federal and state income taxes decreased in 1998, primarily due to lower
taxable income.

Equity Earnings of Regional Nuclear Generating Companies
Equity in earnings of regional nuclear generating companies decreased in
1999 and 1998, primarily due to lower earnings from the Connecticut Yankee
Atomic Power Company.

Other, Net
Other, net decreased in 1999, primarily due to the settlement with the New
Hampshire Electric Cooperative which required a $6.2 million write-off.

Other, net increased in 1998, primarily due to the amortization of the
taxes associated with the Seabrook phase-in costs which began in December
1997.

Interest Charge, Net
The change in interest charges, net in 1999 were not significant compared
to 1998.

Interest charges, net decreased in 1998, primarily due to the maturity of
bonds ($170 million) in May 1998.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
of Public Service Company of New Hampshire:

We have audited the accompanying balance sheets of Public Service Company
of New Hampshire (a New Hampshire corporation and a wholly owned
subsidiary of Northeast Utilities) as of December 31, 1999 and 1998, and
the related statements of income, comprehensive income, common
stockholder's equity and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Public
Service Company of New Hampshire as of December 31, 1999 and 1998, and
the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. As discussed in Note 10A,
the company, Northeast Utilities, and the state of New Hampshire are
involved in litigation regarding the proposed implementation of
restructuring legislation. The restructuring legislation as currently
contemplated would require the company to discontinue the application of
Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation." The discontinuance would
result in the company being in technical default under its current
financial covenants, which would, if not waived or renegotiated, give
rise to the rights of lenders to accelerate the payment of approximately
$516 million of the company's indebtedness and approximately $405
million of an affiliate's indebtedness. Although a settlement agreement
on restructuring has been reached among the company, the state of New
Hampshire, and others, implementation is subject to significant
contingencies, including New Hampshire legislative, federal and state
regulatory, and financial lender approvals. These conditions raise
substantial doubt about the company's ability to continue as a going
concern. The financial statements referred to above do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

Hartford, Connecticut
January 25, 2000

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

STATEMENTS OF INCOME

- ------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues................................. $ 1,160,572 $ 1,087,247 $ 1,108,459
------------ ------------ ------------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power..... 691,743 605,518 561,197
Other......................................... 129,041 118,565 133,911
Maintenance...................................... 52,481 51,734 38,320
Depreciation..................................... 47,695 45,342 44,377
Amortization of regulatory assets, net........... 34,915 26,758 56,557
Federal and state income taxes................... 36,810 65,079 86,450
Taxes other than income taxes.................... 43,282 43,052 43,623
------------ ------------ ------------
Total operating expenses................... 1,035,967 956,048 964,435
------------ ------------ ------------
Operating Income................................... 124,605 131,199 144,024
------------ ------------ ------------
Other Income/(Loss):
Equity in earnings of regional nuclear
generating companies and subsidary company..... 1,112 2,649 1,373
Other, net....................................... 5,681 9,222 698
Income taxes..................................... (3,914) (7,473) (2,391)
------------ ------------ ------------
Other income/(loss), net................... 2,879 4,398 (320)
------------ ------------ ------------
Income before interest charges............. 127,484 135,597 143,704
------------ ------------ ------------
Interest Charges:
Interest on long-term debt....................... 42,728 43,317 51,259
Other interest................................... 547 594 273
------------ ------------ ------------
Interest charges, net...................... 43,275 43,911 51,532
------------ ------------ ------------

Net Income......................................... $ 84,209 $ 91,686 $ 92,172
============ ============ ============

STATEMENTS OF COMPREHENSIVE INCOME

Net Income......................................... $ 84,209 $ 91,686 $ 92,172
------------ ------------ ------------
Other comprehensive income, net of tax:
Unrealized gains on securities..................... 70 1,198 -
Minimum pension liability adjustments.............. - (194) -
------------ ------------ ------------
Other comprehensive income, net of tax........... 70 1,004 -
------------ ------------ ------------
Comprehensive Income............................... $ 84,279 $ 92,690 $ 92,172
============ ============ ============

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

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

BALANCE SHEETS

- -----------------------------------------------------------------------------------------
AT DECEMBER 31 1999 1998
- -----------------------------------------------------------------------------------------
(Thousands of Dollars)

ASSETS
- ------
Utility Plant, at cost:
Electric................................................ $ 1,939,856 $ 1,927,341

Less: Accumulated provision for depreciation......... 674,155 631,584
------------- -------------
1,265,701 1,295,757
Unamortized acquisition costs........................... 324,437 352,855
Construction work in progress........................... 17,160 20,735
Nuclear fuel, net....................................... 1,734 1,323
------------- -------------
Total net utility plant............................. 1,609,032 1,670,670
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 6,880 5,580
Investments in regional nuclear generating
companies and subsidiary company, at equity............ 18,855 19,836
Other, at cost.......................................... 3,149 4,319
------------- -------------
28,884 29,735
------------- -------------
Current Assets:
Cash and cash equivalents............................... 182,588 60,885
Receivables, less the accumulated provision for
uncollectible accounts of $1,359 in 1999 and
and $2,041 in 1998..................................... 79,290 89,044
Accounts receivable from affiliated companies........... 9,091 12,018
Taxes receivable from affiliated companies.............. 11,661 -
Accrued utility revenues................................ 48,822 42,145
Fuel, materials, and supplies, at average cost.......... 38,076 36,642
Recoverable energy costs - current portion.............. 73,721 65,257
Prepayments and other................................... 18,121 22,744
------------- -------------
461,370 328,735
------------- -------------
Deferred Charges:
Regulatory assets....................................... 490,921 610,222
Deferred receivable from affiliated company............. 12,984 22,728
Unamortized debt expense................................ 11,896 13,995
Other................................................... 7,346 5,510
------------- -------------
523,147 652,455
------------- -------------

Total Assets........................................ $ 2,622,433 $ 2,681,595
============= =============

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

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

BALANCE SHEETS

CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock, $1 par value - authorized
100,000,000 shares; 1,000 shares outstanding
in 1999 and 1998....................................... $ 1 $ 1
Capital surplus, paid in................................ 424,654 424,250
Retained earnings....................................... 319,938 252,912
Accumulated other comprehensive income.................. 1,074 1,004
------------- -------------
Total common stockholder's equity.............. 745,667 678,167
Preferred stock subject to mandatory redemption......... 25,000 50,000
Long-term debt.......................................... 516,485 516,485
------------- -------------
Total capitalization........................... 1,287,152 1,244,652
------------- -------------

Obligations Under Seabrook Power Contracts
and Other Capital Leases................................. 624,477 703,411
------------- -------------
Current Liabilities:
Long-term debt and preferred stock - current portion.... 25,000 25,000
Obligations under Seabrook Power Contracts and other
capital leases - current portion....................... 101,676 138,812
Accounts payable........................................ 38,685 26,227
Accounts payable to affiliated companies................ 38,229 28,410
Accrued taxes........................................... 33,443 82,743
Accrued interest........................................ 6,294 5,894
Accrued pension benefits................................ 45,504 46,004
Other................................................... 10,184 8,540
------------- -------------
299,015 361,630
------------- -------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 266,644 225,091
Accumulated deferred investment tax credits............. 12,532 3,460
Deferred contractual obligations........................ 56,544 66,400
Deferred revenue from affiliated company................ 12,984 22,728
Other................................................... 63,085 54,223
------------- -------------
411,789 371,902
------------- -------------

Total Capitalization and Liabilities........... $ 2,622,433 $ 2,681,595
============= =============

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

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

STATEMENTS OF COMMON STOCKHOLDER'S EQUITY

- ---------------------------------------------------------------------------------------------------------
Accumulated
Capital Other
Common Surplus, Retained Comprehensive
Stock Paid In Earnings Income Total
- ---------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Balance at January 1, 1997............... $ 1 $423,058 $175,254 $ - $ 598,313

Net income for 1997.................. 92,172 92,172
Cash dividends on preferred stock.... (11,925) (11,925)
Cash dividends on common stock....... (85,000) (85,000)
Capital stock expenses, net.......... 655 655
-------- --------- --------- ------------- ----------
Balance at December 31, 1997............. 1 423,713 170,501 - 594,215

Net income for 1998.................. 91,686 91,686
Cash dividends on preferred stock.... (9,275) (9,275)
Capital stock expenses, net.......... 537 537
Other comprehensive income........... 1,004 1,004
-------- --------- --------- ------------- ----------
Balance at December 31, 1998............. 1 424,250 252,912 1,004 678,167

Net income for 1999.................. 84,209 84,209
Cash dividends on preferred stock.... (6,625) (6,625)
Capital stock expenses, net.......... 404 404
Allocation of benefits - ESOP........ (10,558) (10,558)
Other comprehensive income........... 70 70
-------- --------- --------- ------------- ----------
Balance at December 31, 1999............. $ 1 $424,654 $319,938 $ 1,074 $ 745,667
======== ========= ========= ============= ==========

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

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

STATEMENTS OF CASH FLOWS

- --------------------------------------------------------------------------------------------------
For the Years Ended December 31,
- --------------------------------------------------------------------------------------------------
(Thousands of Dollars) 1999 1998 1997
- --------------------------------------------------------------------------------------------------

Operating Activities:
Net income.................................................. $ 84,209 $ 91,686 $ 92,172
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation.............................................. 47,695 45,342 44,377
Deferred income taxes and investment tax credits, net..... (5,297) 78,366 21,645
Amortization of recoverable energy costs, net............. 27,065 2,065 (12,336)
Amortization of regulatory assets, net.................... 34,915 26,758 56,557
Amortization/(deferral) of Seabrook capital costs......... 16,920 (31,587) (8,376)
Allocation of ESOP benefits.............................. (10,558) - -
Other sources/(uses) of cash.............................. 32,117 (20,360) (17,536)
Changes in working capital:
Receivables and accrued utility revenues.................. 6,004 21,536 9,407
Fuel, materials and supplies.............................. (1,434) 3,519 4,691
Accounts payable.......................................... 22,277 729 (14,897)
Accrued taxes............................................. (49,300) 13,298 69,364
Other working capital (excludes cash)..................... (5,494) (13,710) (13,365)
----------- ----------- -----------
Net cash flows provided by operating activities............... 199,119 217,642 231,703
----------- ----------- -----------

Financing Activities:
Reacquisitions and retirements of long-term debt............ - (170,000) -
Reacquisitions and retirements of preferred stock........... (25,000) (25,000) (25,000)
Cash dividends on preferred stock........................... (6,625) (9,275) (11,925)
Cash dividends on common stock.............................. - - (85,000)
----------- ----------- -----------
Net cash flows used in financing activities................... (31,625) (204,275) (121,925)
----------- ----------- -----------

Investing Activities:
Investment in plant:
Electric utility plant.................................... (46,096) (43,780) (33,570)
Nuclear fuel.............................................. (1,168) (307) 5
----------- ----------- -----------
Net cash flows used for investments in plant.............. (47,264) (44,087) (33,565)

Investment in NU system Money Pool.......................... - - 18,250
Investment in nuclear decommissioning trusts................ (678) (641) (490)
Other investment activities, net............................ 2,151 (2,213) (529)
----------- ----------- -----------
Net cash flows used in investing activities................... (45,791) (46,941) (16,334)
----------- ----------- -----------
Net increase/(decrease) in cash for the period................ 121,703 (33,574) 93,444
Cash and cash equivalents - beginning of period............... 60,885 94,459 1,015
----------- ----------- -----------
Cash and cash equivalents - end of period..................... $ 182,588 $ 60,885 $ 94,459
=========== =========== ===========
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest, net of amounts capitalized........................ $ 39,895 $ 42,677 $ 51,775
=========== =========== ===========
Income taxes................................................ $ 38,511 $ 18,948 $ 10,612
=========== =========== ===========
(Decrease)/increase in obligations:
Seabrook Power Contracts.................................... $ (115,065) $ (78,939) $ 6,197
=========== =========== ===========

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

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. About Public Service Company of New Hampshire
Public Service Company of New Hampshire (PSNH or the company) along
with The Connecticut Light and Power Company (CL&P), Western
Massachusetts Electric Company (WMECO), North Atlantic Energy
Corporation (NAEC), and Holyoke Water Power Company (HWP) are the
operating companies comprising the Northeast Utilities system (NU
system) and are wholly owned by Northeast Utilities (NU). The NU
system serves in excess of 30 percent of New England's electric needs
and is one of the 20 largest electric utility systems in the country
as measured by revenues. The NU system furnishes franchised retail
electric service in New Hampshire, Connecticut, and western
Massachusetts through PSNH, CL&P and WMECO. NAEC sells all of
its entitlement to the capacity and output of Seabrook Station
(Seabrook) nuclear unit to PSNH under the terms of two life-of-unit,
full cost recovery contracts (Seabrook Power Contacts). HWP, also is
engaged in the production and distribution of electric power.

NU is registered with the Securities and Exchange Commission (SEC) as
a holding company under the Public Utility Holding Company Act of 1935
(1935 Act) and the NU system, including PSNH, is subject to provisions
of the 1935 Act. Arrangements among the NU system companies, outside
agencies and other utilities covering interconnections, interchange of
electric power and sales of utility property are subject to regulation
by the Federal Energy Regulatory Commission (FERC) and/or the SEC. PSNH
is subject to further regulation for rates, accounting and other matters
by the FERC and/or applicable state regulatory commissions.

Several wholly owned subsidiaries of NU provide support services for the
NU system companies including PSNH, and, in some cases, for other New
England utilities. Northeast Utilities Service Company (NUSCO) provides
centralized accounting, administrative, information resources,
engineering, financial, legal, operational, planning, purchasing, and
other services to the NU system companies, including PSNH. Northeast
Nuclear Energy Company acts as agent for the NU system companies and
other New England utilities in operating the Millstone nuclear units.
North Atlantic Energy Service Corporation has operational responsibility
for Seabrook.

On October 13, 1999, NU and Consolidated Edison, Inc. (Con Edison)
announced that they have agreed to a merger to combine the two
companies. For further information, see Note 14, "Merger Agreement
with Con Edison."

B. Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at 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.

Certain reclassifications of prior years' data have been made to conform
with the current year's presentation.

All transactions among affiliated companies are on a recovery of cost
basis which may include amounts representing a return on equity and are
subject to approval by various federal and state regulatory agencies.

C. New Accounting Standards
The Financial Accounting Standards Board (FASB) has issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative
instruments and hedging activities. This statement will require
derivative instruments utilized by the NU system companies to be
recognized as assets or liabilities at fair value.

In June 1999, the FASB delayed the adoption date of SFAS No. 133
until January 1, 2001.

There may be an impact on earnings upon adoption of SFAS No. 133
which management has not estimated at this time.

D. Investments and Jointly Owned Electric Utility Plant
Regional Nuclear Generating Companies: PSNH owns common stock in
four regional nuclear companies (Yankee Companies). PSNH's ownership
interests in the Yankee Companies at December 31, 1999 and 1998, which
are accounted for on the equity basis due to PSNH's ability to exercise
significant influence over their operating and financial policies are
5 percent of the Connecticut Yankee Atomic Power Company (CYAPC), 7
percent of the Yankee Atomic Electric Company (YAEC), 5 percent of
Maine Yankee Atomic Power Company (MYAPC), and 4 percent of Vermont
Yankee Nuclear Power Corporation (VYNPC). PSNH's total equity
investment in the Yankee Companies at December 31, 1999 and 1998 is
$12.3 million and $13.4 million, respectively. Each Yankee Company owns
a single nuclear generating unit. However, VYNPC is the only unit still
in operation at December 31, 1999.

Millstone: PSNH has a 2.85 percent joint ownership interest in
Millstone 3, a 1,154 megawatt (MW) nuclear generating unit. At
December 31, 1999 and 1998, plant-in-service included $119.3 million
and $118.8 million, respectively, and the accumulated provision for
depreciation included $39 million and $35.5 million, respectively,
related to PSNH's share of Millstone 3.

Wyman Unit 4: PSNH has a 3.14 percent ownership interest in Wyman
Unit 4, a 632 MW oil-fired generating unit. At December 31, 1999 and
1998, plant-in-service included $6.1 million in each year and the
accumulated provision for depreciation included $4.2 million and
$4 million, respectively.

E. Depreciation
The provision for depreciation is calculated using the straight-
line method based on estimated remaining useful lives of depreciable
utility plant-in-service, adjusted for salvage value and removal
costs, as approved by the appropriate regulatory agency where
applicable. Except for major facilities, depreciation rates are
applied to the average plant-in-service during the period. Major
facilities are depreciated from the time they are placed in service.
When plant is retired from service, the original cost of plant,
including costs of removal, less salvage, is charged to the accumulated
provision for depreciation. The costs of closure and removal of
nonnuclear facilities are accrued over the life of the plant as a
component of depreciation. The depreciation rates for the several
classes of electric plant-in-service are equivalent to a composite
rate of 3.7 percent in 1999, 3.6 percent in 1998 and 3.7 percent in
1997.

At December 31, 1999 and 1998, the accumulated provision for
depreciation included $40.4 million and $37.3 million, respectively,
accrued for the cost of removal, net of salvage, for nonnuclear
generation property.

F. Revenues
Revenues are based on authorized rates applied to each customer's use
of electricity. In general, rates can be changed only through a formal
proceeding before the appropriate regulatory commission. Regulatory
commissions also have authority over the terms and conditions of non-
traditional rate-making arrangements. At the end of each accounting
period, PSNH accrues a revenue estimate for the amount of energy
delivered but unbilled.

G. PSNH Acquisition Costs
PSNH acquisition costs represent the aggregate value placed by the
1989 Rate Agreement with the state of New Hampshire (Rate Agreement) on
PSNH's assets in excess of the net book value of PSNH's non-Seabrook
assets, plus the $700 million value assigned to Seabrook by the Rate
Agreement as part of the bankruptcy resolution on June 5, 1992,
(Acquisition Date). The Rate Agreement provides for the recovery
through rates, with a return, of the PSNH acquisition costs. The
unrecovered balance was $324.4 million and $352.9 million, at
December 31, 1999 and 1998, respectively, and is being recovered
ratably over a 20-year period ending May 1, 2011, in accordance with
the Rate Agreement. Through December 31, 1999 and 1998, $668 million
and $640 million, respectively, have been collected.

H. Regulatory Accounting and Assets
The accounting policies of PSNH and the accompanying financial
statements conform to generally accepted accounting principles
applicable to rate-regulated enterprises and reflect the effects
of the rate-making process in accordance with SFAS No. 71, "Accounting
for the Effects of Certain Types of Regulation." Assuming a cost-of-
service based regulatory structure, regulators may permit incurred
costs, normally treated as expenses, to be deferred and recovered
through future revenues. Through their actions, regulators may also
reduce or eliminate the value of an asset, or create a liability.
If any portion of PSNH's operations were no longer subject to the
provisions of SFAS No. 71, PSNH would be required to write off all
of its related regulatory assets and liabilities, unless there is a
formal transition plan that provides for the recovery, through
established rates, for the collection of these costs through a portion
of the business which would remain regulated on a cost-of-service
basis. At the time of transition, PSNH would be required to determine
any impairment to the carrying costs of deregulated plant and
inventory assets.

Based on a current evaluation of the various factors and conditions that
are expected to impact future cost recovery, management continues to
believe it is probable that PSNH will recover its investments in long-
lived assets, including regulatory assets. In addition, all material
regulatory assets are earning a return. The components of PSNH's
regulatory assets are as follows:

------------------------------------------------------------------------
At December 31, 1999 1998
------------------------------------------------------------------------
(Millions of Dollars)
Recoverable energy costs, net.............. $120.7 $156.3
Income taxes, net.......................... 166.2 139.7
Unrecovered contractual obligations........ 56.5 66.4
Deferred costs - nuclear plants............ 144.4 244.6
Other...................................... 3.1 3.2
------ ------
$490.9 $610.2
====== ======
------------------------------------------------------------------------

At this time, management continues to believe that the application of
SFAS No. 71 for PSNH remains appropriate. If the "Agreement to Settle
PSNH Restructuring" (Settlement Agreement), as filed, is approved by
the New Hampshire Public Utilities Commission (NHPUC) and implemented,
then PSNH will discontinue the application of SFAS No. 71 for the
generation portion of its business and record an after-tax write-off of
$225 million. Additionally, PSNH will make a payment to NAEC to buydown
the Seabrook Power Contracts to $100 million. PSNH's transmission and
distribution business will continue to be rate-regulated on a cost-of-
service basis as the Settlement Agreement allows for the recovery of the
remaining regulatory assets through that portion of the business.

I. Income Taxes
The tax effect of temporary differences (differences between the periods
in which transactions affect income in the financial statements and the
periods in which they affect the determination of taxable income) is
accounted for in accordance with the rate-making treatment of the
applicable regulatory commissions.

The tax effect of temporary differences, including timing differences
accrued under previously approved accounting standards, that give rise
to the accumulated deferred tax obligation is as follows:

------------------------------------------------------------------------
At December 31, 1999 1998
------------------------------------------------------------------------
(Millions of Dollars)

Accelerated depreciation and other
plant-related differences................ $102.4 $100.8

Net operating loss carryforwards........... - (25.6)

Regulatory assets - income tax gross up.... 62.0 52.4

Other...................................... 102.2 97.5
------ ------
$266.6 $225.1
====== ======
------------------------------------------------------------------------

As of December 31, 1999, PSNH had an Investment Tax Credit carryforward
of $23 million, which if unused, expires in 2004.

J. Recoverable Energy Costs
Under the Energy Policy Act of 1992 (Energy Act), PSNH is assessed for
its proportionate share of the costs of decontaminating and
decommissioning uranium enrichment plants owned by the United States
Department of Energy (DOE) (D&D Assessment). The Energy Act requires
that regulators treat D&D Assessments as a reasonable and necessary
current cost of fuel, to be fully recovered in rates like any other fuel
cost. PSNH is currently recovering these costs through rates. As of
December 31, 1999 and 1998, PSNH's total D&D deferrals were
approximately $0.2 million in each year.

The Rate Agreement includes a fuel and purchased-power adjustment clause
(FPPAC) permitting PSNH to pass through to retail customers, for a 10-
year period that began in May 1991, the retail portion of differences
between the fuel and purchased-power costs assumed in the Rate Agreement
and PSNH's actual costs, which include the costs related to the Seabrook
Power Contracts and the Clean Air Act Amendment. The cost components of
the FPPAC are subject to a prudence review by the NHPUC. At
December 31, 1999 and 1998, PSNH had $120.5 million and $156 million,
respectively, of noncurrent recoverable energy costs deferred under the
FPPAC. If the Settlement Agreement is approved, these FPPAC costs will
be recovered through a transition charge.

In addition, under the Rate Agreement, charges made by NAEC through the
Seabrook Power Contracts, including the deferred Seabrook capital
expenses, are to be collected by PSNH through the FPPAC. Beginning on
June 1, 1998, the Seabrook deferred capital expenses began to be
recovered over a 36-month period.

K. Deferred Costs - Nuclear Plants
Under the Rate Agreement, the plant costs of Seabrook were phased into
rates over a 7-year period beginning May 15, 1991. Total costs deferred
under the phase-in plan were $288 million. This plan is accounted for
in compliance with SFAS No. 92, "Regulated Enterprises - Accounting for
Phase-In Plans." The Rate Agreement provides for these costs to be
fully recovered from PSNH's customers by May 2001.

L. Unrecovered Contractual Obligations
Under the terms of contracts with the Yankee companies, the shareholder-
sponsor companies, including PSNH, are each responsible for their
proportionate share of the remaining costs of the units, including
decommissioning. As management expects that PSNH will be allowed to
recover these costs from its customers, PSNH has recorded a regulatory
asset, with a corresponding obligation on its balance sheet.

M. Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and short-term cash
investments which are highly liquid in nature and have original
maturities of three months or less.

2. SEABROOK POWER CONTRACTS
PSNH and NAEC have entered into two power contracts that obligate PSNH
to purchase NAEC's 35.98 percent ownership of the capacity and output
of Seabrook for the term of Seabrook's operating license. Under these
power contracts, PSNH is obligated to pay NAEC's cost of service during
this period, regardless of whether Seabrook is operating. NAEC's cost
of service includes all of its Seabrook-related costs, including operation
and maintenance (O&M) expenses, fuel expense, income and property tax
expense, depreciation expense, certain overhead and other costs, and a
return on its allowed investment.

In August 1999, NU, PSNH and the state of New Hampshire signed the
Settlement Agreement which, once approved and implemented, will resolve
a number of pending regulatory and court proceedings related to PSNH.
The Settlement Agreement is awaiting approval of the NHPUC and is subject
to legislative approval for the issuance of rate reduction bonds
(securitization). The Settlement Agreement also requires NAEC to sell via
public auction its share of Seabrook, with the sale to occur no later than
December 31, 2003. Upon the approval and implementation of the Settlement
Agreement, PSNH and NAEC will restructure the power contracts to provide
for the buydown of the value of the Seabrook asset to $100 million. Upon
a successful sale of NAEC's share of Seabrook, the existing Seabrook Power
Contracts between PSNH and NAEC will be terminated. However, PSNH will
continue to be responsible for funding NAEC's ownership share of Seabrook's
decommissioning liability.

Currently, PSNH has included its right to buy power from NAEC on its
balance sheet as part of utility plant and regulatory assets with a
corresponding obligation. At December 31, 1999, this right to buy power
was valued at $723.1 million.

Under the current Seabrook Power Contracts, if Seabrook is shut down prior
to the expiration of its operating license, PSNH will be unconditionally
required to pay NAEC termination costs for 39 years, less the period during
which Seabrook has operated. These termination costs will reimburse NAEC
for its share of Seabrook shut-down and decommissioning costs, and will pay
NAEC a return of and on any undepreciated balance of its initial investment
over the remaining term of the power contracts, and the return of and on
any capital additions to the plant made after the Acquisition Date over
a period of five years after shut down (net of any tax benefits to NAEC
attributable to the cancellation).

Contract payments charged to operating expenses in 1999, 1998 and 1997
were $280 million, $272 million and $188 million, respectively. Interest
included in the contract payments in 1999, 1998 and 1997 was $49 million,
$54 million and $57 million, respectively.

Future minimum payments, excluding executory costs, such as property taxes,
state use taxes, insurance and maintenance, under the terms of the
contracts, as of December 31, 1999, were approximately:

Year Seabrook Power Contracts
---- ------------------------
(Millions of Dollars)
2000................................. $ 193.0
2001................................. 116.8
2002................................. 77.5
2003................................. 75.2
2004................................. 72.9
After 2005........................... 1,006.8
--------
Future minimum payments.............. 1,542.2

Less amount representing interest.... 819.1
--------
Present value of Seabrook Power
Contracts payments................. $ 723.1
========

3. LEASES
PSNH has entered into lease agreements, some of which are capital leases,
for the use of data processing and office equipment, vehicles and office
space. The provisions of these lease agreements generally provide for
renewal options.

Capital lease rental payments charged to operating expense were $1.5
million in 1999 and $1.6 million in 1998 and 1997. Interest included in
capital lease rental payments was $0.4 million in 1999, $0.2 million in
1998 and $0.3 million in 1997. Operating lease rental payments charged
to expense were $3.1 million in 1999, $5.4 million in 1998 and $5.7
million in 1997.

Future minimum rental payments, excluding executory costs such as property
taxes, state use taxes, insurance and maintenance, under long-term
noncancelable leases, as of December 31, 1999, are:

---------------------------------------------------------------------------
Year Capital Leases Operating Leases
---------------------------------------------------------------------------
(Millions of Dollars)
2000............................... $ 1.2 $ 7.6
2001............................... 1.2 7.1
2002............................... 0.4 4.4
2003............................... 0.4 3.0
2004............................... 0.4 2.5
After 2004......................... 1.1 3.9
----- -----
Future minimum lease payments...... 4.7 $28.5
=====
Less amount representing interest.. 1.7
-----
Present value of future minimum
lease payments..................... $ 3.0
=====
---------------------------------------------------------------------------

4. NUCLEAR DECOMMISSIONING AND PLANT CLOSURE COSTS
Millstone and Seabrook: Under the terms of the Rate Agreement, PSNH is
obligated to pay NAEC's share of Seabrook's decommissioning costs, even if
the unit is shut down prior to the expiration of its operating license.
Accordingly, NAEC bills PSNH directly for its share of the costs of
decommissioning Seabrook. PSNH records its Seabrook decommissioning costs
as a component of purchased-power expense. Under the Rate Agreement, these
costs are recovered through base rates. The Seabrook decommissioning costs
will continue to be increased annually by its respective escalation rates
until the unit is sold. Under New Hampshire law, Seabrook decommissioning
funding requirements are set by the New Hampshire Nuclear Decommissioning
Financing Committee (NDFC). During April 1999, the NDFC issued an order
that adjusted the decommissioning collection period and funding levels
assuming that Seabrook's anticipated energy producing life was 25 years
from the date it went into commercial operation. Decommissioning
collections are now expected to be completed by October 2015, as opposed
to 2026, for the decommissioning collection period only. The cost of
funding decommissioning Seabrook is now accrued over the estimated
remaining accelerated funding period that was ordered by the NDFC.
This is eleven years earlier than the service life established by
Seabrook's Nuclear Regulatory Commission's operating license.

Millstone 3 and Seabrook's service lives are expected to end during the
years 2025 and 2026, respectively, and upon retirement, must be
decommissioned. Current decommissioning studies conclude that complete
and immediate dismantlement as soon as practical after retirement continues
to be the most viable and economic method of decommissioning a unit.
These studies are reviewed and updated periodically to reflect changes in
decommissioning requirements, costs, technology, and inflation. Changes
in requirements or technology, the timing of funding or dismantling or
adoption of a decommissioning method other than immediate dismantlement
would change decommissioning cost estimates and the amounts required to be
recovered. PSNH attempts to recover sufficient amounts through its
allowed rates to cover its expected decommissioning costs.

PSNH's ownership share of the estimated cost of decommissioning Millstone 3
and NAEC's ownership share of Seabrook, in year end 1999 dollars, is $17.6
million and $203.3 million, respectively. Nuclear decommissioning costs
are accrued over the expected service life of Millstone 3 and are included
in depreciation expense. Nuclear decommissioning expenses for PSNH's
ownership share of Millstone 3 amounted to $0.5 million in 1999 and $0.4
million in 1998 and 1997. Nuclear decommissioning, as a cost of removal,
is included in the accumulated provision for depreciation.

External decommissioning trusts have been established for the costs of
decommissioning the Millstone units. PSNH payments for NAEC's ownership
share of the cost of decommissioning Seabrook are paid by NAEC to an
independent decommissioning financing fund managed by the state of New
Hampshire. Funding of the estimated decommissioning costs assumes
levelized collections for the Millstone units and escalated collections
for Seabrook and after-tax earnings on the Millstone and Seabrook
decommissioning funds of 5.5 percent and 6.5 percent, respectively.

As of December 31, 1999 and 1998, PSNH collected a total of $3.5 million
and $3 million, respectively, through rates toward the future
decommissioning costs of its share of Millstone 3, all of which have been
transferred to external decommissioning trusts. As of December 31, 1999
and 1998, NAEC has paid approximately $32.7 million and $25.6 million
(including payments made prior to the Acquisition Date by PSNH) into
Seabrook's decommissioning fund. Earnings on the decommissioning trusts
increase the decommissioning trust balances and the accumulated reserves
for depreciation. Unrealized gains and losses associated with the
decommissioning trusts and financing funds also impact the balance of
the trusts and the accumulated reserve for depreciation. The fair values
of the amounts in the external decommissioning trusts for Millstone 3
were $6.9 million and $5.6 million for 1999 and 1998, respectively.

Yankee Companies: VYNPC owns and operates a nuclear generating unit with
a service life that is expected to end in 2012. PSNH's ownership share
of estimated costs, in year end 1999 dollars, of decommissioning this unit
is $17.2 million. On October 15, 1999, VYNPC agreed to sell the unit for
$22 million to an unaffiliated company. Among other commitments, the
acquiring company agreed to assume the decommissioning cost of the unit
after it is taken out of service, and the VYNPC owners have agreed to
fund the uncollected decommissioning cost to a negotiated amount at the
time of the closing of the sale.

As of December 31, 1999 and 1998, PSNH's remaining estimated obligation,
including decommissioning for the units owned by CYAPC, YAEC and MYAPC,
which have been shut down, was $56.5 million and $66.4 million,
respectively.

5. SHORT-TERM DEBT
Limits: PSNH is authorized under an order of the NHPUC to incur short-term
borrowings up to a maximum of $68.3 million.

Money Pool: Certain subsidiaries of NU, including PSNH, are members of
the Northeast Utilities System Money Pool (Pool). The Pool provides a
more efficient use of the cash resources of the NU system and reduces
outside short-term borrowings. NUSCO administers the Pool as agent for
the member companies. Short-term borrowing needs of the member companies
are first met with available funds of other member companies, including
funds borrowed by NU parent. NU parent may lend to the Pool but may
not borrow. Funds may be withdrawn from or repaid to the Pool at any
time without prior notice. Investing and borrowing subsidiaries receive
or pay interest based on the average daily federal funds rate. Borrowings
based on loans from NU parent, however, bear interest at NU parent's cost
and must be repaid based upon the terms of NU parent's original borrowing.
At December 31, 1999 and 1998, PSNH had no outstanding borrowings from
the Pool. Due to the conditions placed on PSNH by lenders and the NHPUC
during April 1998, PSNH is presently restricted from lending money to the
Pool. Maturities of short-term debt obligations were for periods of
three months or less.

6. PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
Details of preferred stock subject to mandatory redemption are:

---------------------------------------------------------------------------
Shares
Outstanding December 31,
Description December 31, 1999 1999 1998
---------------------------------------------------------------------------

10.60% Series A of 1991........ 2,000,000 $50.0 $75.0

Less preferred stock to be
redeemed within one year..... 1,000,000 25.0 25.0
----- -----
$25.0 $50.0
===== =====
---------------------------------------------------------------------------

The Series A preferred stock is not subject to optional redemption by
PSNH. It is subject to an annual sinking fund requirement of $25 million
each year, which began on June 30, 1997, sufficient to retire annually
1,000,000 shares at $25 per share. In case of default on dividends or
sinking fund payments, no payments may be made on any junior stock by way
of dividends or otherwise (other than in shares of junior stock) so long as
the default continues. If PSNH is in arrears in the payment of dividends
on any outstanding shares of preferred stock, PSNH would be prohibited from
redeeming or purchasing less than all of the outstanding preferred stock.

7. LONG-TERM DEBT
Details of long-term debt outstanding are:

---------------------------------------------------------------------------
At December 31, 1999 1998
---------------------------------------------------------------------------
(Millions of Dollars)
Pollution Control Revenue Bonds:
7.65% Tax-Exempt Series A, due 2021......... $ 66.0 $ 66.0
7.50% Tax-Exempt Series B, due 2021......... 109.0 109.0
7.65% Tax-Exempt Series C, due 2021......... 112.5 112.5
6.00% Tax-Exempt Series D, due 2021......... 75.0 75.0
6.00% Tax-Exempt Series E, due 2021......... 44.8 44.8
Adjustable Rate, Series D, due 2021 (a)..... 39.5 39.5
Adjustable Rate, Series E, due 2021 (a)..... 69.7 69.7
------ ------
Long-term debt.............................. $516.5 $516.5
====== ======
---------------------------------------------------------------------------

(a) On April 14, 1999, PSNH renewed bank letters of credit that support
nearly $110 million of taxable variable-rate pollution control bonds.

There are no cash sinking fund requirements or debt maturities for the
years 2000 through 2004. There are annual renewal and replacement fund
requirements equal to 2.25 percent of the average of net depreciable
utility property owned by PSNH at the reorganization date, plus cumulative
gross property additions thereafter. PSNH expects to meet these future
fund requirements by certifying property additions. Any deficiency would
need to be satisfied by the deposit of cash or bonds.

Concurrent with the issuance of PSNH's Series A and B first mortgage bonds,
PSNH entered into financing arrangements with the Business Finance
Authority of the State of New Hampshire (BFA). Pursuant to these
arrangements, the BFA issued seven series of Pollution Control Revenue
Bonds (PCRBs) and loaned the proceeds to PSNH. PSNH's obligation to repay
each series of PCRBs is secured by the first mortgage bonds. Each such
series of first mortgage bonds contains similar terms and provisions as the
applicable series of PCRBs. For financial reporting purposes, these bonds
would not be considered outstanding unless PSNH failed to meet its
obligations under the PCRBs.

The average effective interest rates on the variable-rate pollution control
notes ranged from 2.2 percent to 6.1 percent in 1999 and from 3.1 percent
to 5.6 percent in 1998.

8. INCOME TAX EXPENSE
The components of the federal and state income tax provisions were charged/
(credited) to operations as follows:

---------------------------------------------------------------------------
For the Years Ended December 31, 1999 1998 1997
---------------------------------------------------------------------------
(Millions of Dollars)
Current income taxes:
Federal............................... $41.4 $(6.6) $67.1
State................................. 4.6 0.8 0.1
----- ----- -----
Total current....................... 46.0 (5.8) 67.2
----- ----- -----
Deferred income taxes, net:
Federal............................... 4.6 78.0 21.0
State................................. (2.2) 0.9 1.2
----- ----- -----
Total deferred...................... 2.4 78.9 22.2
----- ----- -----

Investment tax credits, net............. (7.7) (0.5) (0.5)
----- ----- -----
Total income tax expense................ $40.7 $72.6 $88.9
===== ===== =====
---------------------------------------------------------------------------

The components of total income tax expense are classified as follows:

Deferred income taxes are comprised of the tax effects of temporary
differences as follows:

Depreciation........................... $ (6.5) $(12.1) $(1.9)
Regulatory deferral.................... (12.6) 22.6 28.3
State net operating loss carryforward.. 29.5 69.2 -
Regulatory disallowance................ (2.3) - -
Contractual settlements................ (6.7) - -
Other.................................. 1.0 (0.8) (4.2)
------ ------ -----
Deferred income taxes, net............. $ 2.4 $ 78.9 $22.2
====== ====== =====
---------------------------------------------------------------------------

A reconciliation between income tax expense and the expected tax expense
at 35 percent of pretax income is as follows:

Expected federal income tax............ $43.7 $57.5 $63.4
Tax effect on differences:
Depreciation......................... 0.9 (2.2) 1.1
Amortization of regulatory assets.... 9.9 17.3 31.3
Investment tax credit amortization... (7.7) (0.5) (0.5)
State income taxes, net of
federal benefit.................... 1.6 1.0 0.8
Adjustment for prior years' taxes.... - (0.9) (0.6)
Adjustment to tax asset
valuation allowance................ (7.4) - -
Other, net........................... (0.3) 0.4 (6.6)
----- ----- -----
Total income tax expense............... $40.7 $72.6 $88.9
===== ===== =====
---------------------------------------------------------------------------

9. EMPLOYEE BENEFITS

A. Pension Benefits and Postretirement Benefits Other Than Pensions
The NU system's subsidiaries, including PSNH, participate in a uniform
noncontributory defined benefit retirement plan covering substantially
all regular NU system employees. Benefits are based on years of
service and employees' highest eligible compensation during 60
consecutive months of employment. PSNH's portion of the NU system's
pension (credit)/cost, part of which was (credited)/charged to utility
plant, was $(0.5) million in 1999, $(0.1) million in 1998 and $1.3
million in 1997.

Currently, PSNH annually funds an amount at least equal to that which
will satisfy the requirements of the Employee Retirement Income Security
Act and Internal Revenue Code (the Code).

The NU system companies, including PSNH, also provide certain health
care benefits, primarily medical and dental, and life insurance benefits
through a benefit plan to retired employees. These benefits are
available for employees retiring from PSNH who have met specified
service requirements. For current employees and certain retirees, the
total benefit is limited to two times the 1993 per retiree health care
cost. These costs are charged to expense over the future estimated work
life of the employee. PSNH annually funds postretirement costs through
external trusts with amounts that have been rate-recovered and which
also are tax deductible under the Code.

Pension and trust assets are invested primarily in domestic and
international equity securities and bonds.

The following table represents information on the plans' benefit
obligation, fair value of plan assets, and the respective plans' funded
status:

- -------------------------------------------------------------------------------
At December 31,
- -------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
(Millions of Dollars) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation
at beginning of year......... $(201.0) $(188.0) $(50.1) $(46.6)
Service cost................... (4.9) (4.3) (1.0) (0.9)
Interest cost.................. (14.3) (13.2) (3.6) (3.4)
Plan amendment................. (11.2) - - -
Transfers...................... 0.5 (0.7) - -
Actuarial gain/(loss).......... 19.1 (5.0) (1.5) (2.8)
Benefits paid.................. 10.3 10.2 5.0 3.6
- -------------------------------------------------------------------------------
Benefit obligation
at end of year............... $(201.5) $(201.0) $(51.2) $(50.1)
- -------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets
at beginning of year......... $ 213.2 $ 195.6 $ 27.3 $ 22.9
Actual return on plan assets... 30.4 27.1 3.4 3.2
Employer contribution.......... - - 4.9 4.8
Benefits paid.................. (10.3) (10.2) (5.0) (3.6)
Transfers...................... 0.5 0.7 - -
- -------------------------------------------------------------------------------
Fair value of plan assets
at end of year............... $ 233.8 $ 213.2 $ 30.6 $ 27.3
- -------------------------------------------------------------------------------
Funded status at December 31... $ 32.3 $ 12.2 $(20.6) $(22.8)
Unrecognized transition
obligation................... 3.3 3.7 38.2 41.2
Unrecognized prior
service cost................. 16.9 7.0 - -
Unrecognized net gain.......... (98.0) (68.9) (17.6) (18.4)
- -------------------------------------------------------------------------------
Accrued benefit cost........... $ (45.5) $ (46.0) $ - $ -
- -------------------------------------------------------------------------------

The following actuarial assumptions were used in calculating the
plans' year end funded status:

(a) The annual per capita cost of covered health care benefits was assumed
to decrease to 4.90 percent by 2001.

The components of net periodic benefit (credit)/cost are:

- -------------------------------------------------------------------------------
For the Years Ended December 31,
- -------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
(Millions of Dollars) 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------
Service cost.............. $ 4.9 $ 4.3 $ 4.0 $ 1.0 $ 0.9 $ 0.8
Interest cost............. 14.3 13.2 13.4 3.6 3.4 3.4
Expected return on
plan assets............. (17.7) (15.6) (13.9) (2.1) (1.8) (1.4)
Amortization of
unrecognized
transition
obligation.............. 0.3 0.3 0.3 2.9 2.9 2.9
Amortization of
prior service cost...... 1.3 0.5 0.5 - - -
Amortization of
actuarial gain.......... (3.6) (2.8) (2.0) - - -
Other amortization, net... - - - (0.5) (0.5) (0.8)
Settlements............... - - (1.0) - - -
- -------------------------------------------------------------------------------
Net periodic benefit
(credit)/cost........... $ (0.5) $ (0.1) $ 1.3 $ 4.9 $ 4.9 $ 4.9
- -------------------------------------------------------------------------------

For calculating pension and postretirement benefit costs, the following
assumptions were used:

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. The effect of changing the
assumed health care cost trend rate by one percentage point in each
year would have the following effects:

- -------------------------------------------------------------------------------
One Percentage One Percentage
(Millions of Dollars) Point Increase Point Decrease
- -------------------------------------------------------------------------------
Effect on total service and
interest cost components............ $0.3 $(0.3)
Effect on postretirement
benefit obligation.................. $3.3 $(3.0)
- -------------------------------------------------------------------------------

The trust holding the health plan assets is subject to federal income
taxes.

B. Employee Stock Ownership Plan
In June 1999, PSNH paid NU parent $10.6 million for NU shares issued
from 1992 through 1998 on behalf of their employees in accordance with
NU's 401(k) plan. Each operating company, including PSNH, appropriately
charged retained earnings for this payment, as compensation expense had
already been recorded in the respective years at the fair market value
of the shares allocated.

10. COMMITMENTS AND CONTINGENCIES

A. Restructuring
In August 1999, NU, PSNH and the state of New Hampshire signed a
Settlement Agreement intended to settle a number of pending regulatory
and court proceedings related to PSNH. Parties to the agreement
included the governor of New Hampshire, the Governor's Office of Energy
and Community Service, the New Hampshire attorney general, certain
members of the staff of the NHPUC, PSNH and NU. The Settlement
Agreement was submitted to the NHPUC on August 2, 1999 and is awaiting
approval. If approved by the NHPUC, the Settlement Agreement would
resolve 11 NHPUC dockets and PSNH's federal lawsuit which had enjoined
the state of New Hampshire from implementing its restructuring
legislation, would require PSNH to write off $225 million after-tax of
its stranded costs and would allow for the recovery of the remaining
amount. Also, implementation of the Settlement Agreement is contingent
upon securitization. Securitization requires the initial approval of
the NHPUC and final approval from the New Hampshire Legislature via
enactment of appropriate legislation. Other approvals are also required
from various federal and state regulatory agencies and financial
lenders. Under the terms of the Settlement Agreement, on the effective
date, PSNH's rates will be reduced from current levels by an average of
18.3 percent. Due to the number of approvals required and still pending
to implement the Settlement Agreement, management continues to believe
the application of SFAS No. 71 is appropriate for PSNH at this time.

The Settlement Agreement also requires PSNH to sell its generation
assets and certain power contracts, including PSNH's current purchased-
power contracts with NAEC for the output from Seabrook. The net
proceeds from all sales will be used to recover a portion of PSNH's
stranded costs. The sales would be accomplished through an auction
process subject to approval by the NHPUC. Following the divestiture,
the transmission and distribution portion of the business will continue
to be cost-of-service based.

Phase I of the proceeding regarding the Settlement Agreement allowed
proponents to provide sufficient record for the NHPUC to compare the
Settlement Agreement to a range of reasonable outcomes in the other
associated dockets. The NHPUC also determined during Phase I that the
Con Edison merger is relevant to the Settlement Agreement and
intervening parties should have discovery in Phase II to evaluate the
impact of the merger on the Settlement Agreement. Phase II allowed
opponents to file testimony concerning the Settlement Agreement and then
allowed proponents to conduct discovery and file rebuttal testimony.
A decision on the Settlement Agreement is expected in the first
quarter of 2000.

B. Environmental Matters
The NU system, including PSNH, is subject to environmental laws and
regulations intended to mitigate or remove the effect of past operations
and improve or maintain the quality of our environment. As such, the NU
system and PSNH have active environmental auditing and training programs
and believe they are in compliance with the current laws and
regulations.

However, the normal course of operations may necessarily involve
activities and substances that expose PSNH to potential liabilities
of which management cannot determine the outcome. Additionally,
management cannot determine the outcome for liabilities that may be
imposed for past acts, even though such past acts may have been lawful
at the time they occurred. Management does not believe, however,
that this will have a material impact on PSNH's financial statements.

Based upon currently available information for the estimated remediation
costs as of December 31, 1999 and 1998, the liability recorded by PSNH
for its estimated environmental remediation costs amounted to $9.5
million and $7.9 million, respectively.

C. Spent Nuclear Fuel Disposal Costs
Under the Nuclear Waste Policy Act of 1982, PSNH must pay the DOE for
the disposal of spent nuclear fuel and high-level radioactive waste.
The DOE is responsible for the selection and development of repositories
for, and the disposal of, spent nuclear fuel and high-level radioactive
waste. Fees for nuclear fuel burned are billed currently to customers
and paid to the DOE on a quarterly basis.

D. Nuclear Insurance Contingencies
Insurance policies covering PSNH's ownership share of the NU system's
nuclear facilities have been purchased for the primary cost of repair,
replacement or decontamination of utility property, certain extra costs
incurred in obtaining replacement power during prolonged accidental
outages and the excess cost of repair, replacement or decontamination or
premature decommissioning of utility property.

PSNH is subject to retroactive assessments if losses under those
policies exceed the accumulated funds available to the insurer. The
maximum potential assessments, including costs resulting from PSNH's
contracts with NAEC, with respect to losses arising during the current
policy year for the primary property insurance program, the replacement
power policies and the excess property damage policies are $0.2 million,
$1.2 million and $4.1 million, respectively. In addition, insurance has
been purchased in the aggregate amount of $200 million on an industry
basis by the NU system for coverage of worker claims.

Under certain circumstances, in the event of a nuclear incident at one
of the nuclear facilities covered by the federal government's third-
party liability indemnification program, the NU system, including PSNH,
could be assessed liabilities in proportion to its ownership interest in
each of its nuclear units up to $83.9 million. The NU system's payment
of this assessment would be limited to, in proportion to its ownership
interest in each of its nuclear units, $10 million in any one year per
nuclear unit. In addition, if the sum of all claims and costs from any
one nuclear incident exceeds the maximum amount of financial protection,
the NU system would be subject to an additional 5 percent or $4.2
million liability, in proportion to its ownership interests in each of
its nuclear units. Under the terms of the Seabrook Power Contracts,
PSNH could be obligated to pay for any assessment charged to NAEC as a
cost of service. Based upon its ownership interest in Millstone 3 and
NAEC's ownership interest in Seabrook, PSNH's maximum liability,
including any additional assessments, would be $33.8 million per
incident, of which payments would be limited to $3.9 million per
year. In addition, through purchased-power contracts with VYNPC,
PSNH would be responsible for up to an additional assessment of $3.5
million per incident, of which payments would be limited to $0.3
million per year.

E. Construction Program
PSNH currently forecasts construction expenditures of $314.3 million
for the years 2000-2004, including $51.6 million for 2000. PSNH
estimates that nuclear fuel requirements for its share of Millstone 3
will be $3.2 million for the years 2000-2004, including $1.2 million
for 2000.

F. Long-Term Contractual Arrangements
Yankee Companies: The NU system companies relied on VYNPC for 1.5
percent of their capacity under long-term contracts. Under the terms
of its agreement, PSNH paid its ownership (or entitlement) shares of
costs, which included depreciation, O&M expenses, taxes, the estimated
cost of decommissioning, and a return on invested capital. These costs
were recorded as purchased-power expenses and recovered through PSNH's
rates. PSNH's cost of purchases under contracts with VYNPC amounted to
$7.5 million in 1999, $7 million in 1998 and $6.2 million in 1997.
VYNPC has agreed to sell its nuclear unit. Upon completion of the
sale, this long-term contract will be terminated.

Nonutility Generators (NUGs): PSNH is obligated under various
arrangements for the purchase of capacity and energy from NUGs. For
the years ended December 31, 1999 and 1998, 13 percent and for the
year ended December 31, 1997, 14 percent, of NU system electricity
requirements were met by NUGs. PSNH's total cost of purchases under
these arrangements amounted to $139.8 million in 1999, $139.1 million
in 1998 and $133.1 million in 1997. The company expects to renegotiate
the terms of these contracts through either a contract buydown or
buyout. The company expects any payments to the NUGs as a result of
any successful renegotiations to be recovered from the company's
customers.

Hydro-Quebec: Along with other New England utilities, PSNH has entered
into an agreement to support transmission and terminal facilities to
import electricity from the Hydro-Quebec system in Canada. PSNH is
obligated to pay, over a 30-year period ending in 2020, its
proportionate share of the annual O&M expenses and capital costs of
those facilities.

New Hampshire Electric Cooperative (NHEC): PSNH entered into a buy-back
agreement to purchase the capacity and energy of the NHEC's share of
Seabrook and to pay all of NHEC's Seabrook costs for a 10-year period,
which began on July 1, 1990. The total cost of purchases under this
agreement was $33 million in 1999, $29.7 million in 1998 and $23.4
million in 1997. These costs are recoverable through the FPPAC. The
estimated annual cost of this agreement for year 2000 was $14.6 million.

Estimated Annual Costs: The estimated annual costs of PSNH's
significant long-term contractual arrangements, absent the effects
of any contract terminations or buydowns are as follows:

------------------------------------------------------------------------
2000 2001 2002 2003 2004
------------------------------------------------------------------------
(Millions of Dollars)

VYNPC................. $ 3.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5
NUGs.................. 145.1 150.0 154.6 159.3 163.7
Hydro-Quebec.......... 9.7 9.4 9.2 8.9 8.6
------------------------------------------------------------------------

G. New England Power Pool (NEPOOL) Generation Pricing
Disputes with respect to interpretation and implementation of the
NEPOOL market rules have arisen with respect to various competitive
product markets. In certain cases, PSNH stands to gain as a result
of resolution of such disputes. In other cases, PSNH could incur
additional costs as the result of resolution of the disputes. The
various disputes are in various stages of resolution through alternative
dispute resolution and regulatory review. It is too early to tell the
level of potential gain or loss that may result upon resolution of these
issues.

H. Deferred Receivable from Affiliated Company
At the time PSNH emerged from bankruptcy on May 16, 1991, in accordance
with the phase-in under the Rate Agreement, it began to accrue a
deferred return on a portion of its Seabrook investment. From May 16,
1991, to the Acquisition Date, PSNH accrued a deferred return of $50.9
million. On the Acquisition Date, PSNH sold the $50.9 million deferred
return to NAEC as part of the Seabrook-related assets.

At the time PSNH transferred the deferred return to NAEC, it realized,
for income tax purposes, a gain that was deferred under the consolidated
income tax rules. Beginning December 1, 1997, the gain is being
amortized into income for income tax purposes, as the deferred return
of $50.9 million, and the associated income taxes of $32.9 million, are
being collected by NAEC through the Seabrook Power Contracts. As NAEC
recovers the $32.9 million in years eight through ten of the Rate
Agreement, corresponding payments are being made to PSNH. The balance
of the deferred receivable from NAEC at December 31, 1999 and 1998,
was $13 million and $22.7 million, respectively.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each of the following financial instruments:

Cash and cash equivalents: The carrying amounts approximate fair value
due to the short-term nature of cash and cash equivalents.

Supplemental Executive Retirement Plan (SERP) Investments: PSNH's portion
of the investments held for the benefit of the SERP are recorded at fair
value. The investments having a cost basis of $0.3 million held for
benefit of the SERP were recorded at their fair market values at
December 31, 1999 and 1998, of $2.2 million.

Nuclear decommissioning trusts: PSNH's portion of the investments held
in the NU system companies' nuclear decommissioning trusts were marked-to-
market by $2.2 million as of December 31, 1999, and $1.6 million as of
December 31, 1998, with corresponding offsets to the accumulated provision
for depreciation. The amounts adjusted in 1999 and 1998 represent
cumulative net unrealized gains. The cumulative gross unrealized holding
losses were immaterial for both 1999 and 1998.

Preferred stock and long-term debt: The fair value of PSNH's fixed-rate
securities is based upon the quoted market price for those issues or
similar issues. Adjustable rate securities are assumed to have a fair
value equal to their carrying value. The carrying amounts of PSNH's
financial instruments and the estimated fair values are as follows:

--------------------------------------------------------------------------
At December 31, 1999
--------------------------------------------------------------------------
Carrying Fair
(Millions of Dollars) Amount Value
--------------------------------------------------------------------------
Preferred stock subject
to mandatory redemption................. $ 50.0 $ 52.0

Other long-term debt....................... 516.5 517.4
--------------------------------------------------------------------------

--------------------------------------------------------------------------
At December 31, 1998
--------------------------------------------------------------------------
Carrying Fair
(Millions of Dollars) Amount Value
--------------------------------------------------------------------------
Preferred stock subject
to mandatory redemption................. $ 75.0 $ 78.0

Other long-term debt....................... 516.5 535.4
--------------------------------------------------------------------------

12. OTHER COMPREHENSIVE INCOME
The accumulated balance for each other comprehensive income item is
as follows:

---------------------------------------------------------------------------
Current
December 31, Period December 31,
1998 Change 1999
---------------------------------------------------------------------------
(Thousands of Dollars)
---------------------------------------------------------------------------
Unrealized gains on securities.... $1,198 $70 $1,268
Minimum pension liability
adjustments...................... (194) - (194)
---------------------------------------------------------------------------
Accumulated other
comprehensive income............ $1,004 $70 $1,074
---------------------------------------------------------------------------

---------------------------------------------------------------------------
Current
December 31, Period December 31,
1997 Change 1998
---------------------------------------------------------------------------
(Thousands of Dollars)
---------------------------------------------------------------------------
Unrealized gains on securities.... $ - $1,198 $1,198
Minimum pension liability
adjustments...................... - (194) (194)
---------------------------------------------------------------------------
Accumulated other
comprehensive income............ $ - $1,004 $1,004
--------------------------------------------------------------------------

The changes in the components of other comprehensive income are reported
net of the following income tax effects:

---------------------------------------------------------------------------
(Thousands of Dollars) 1999 1998 1997
---------------------------------------------------------------------------
Unrealized gains on securities....... $ 39 $(660) $ -
Minimum pension liability
adjustments........................ - 107 -
---------------------------------------------------------------------------
Other comprehensive income........... $ 39 $(553) $ -
---------------------------------------------------------------------------

13. SEGMENT INFORMATION
Effective January 1, 1999, the NU system companies, including PSNH, adopted
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The NU system is organized between regulated utilities
and unregulated energy services. PSNH is included in the regulated
utilities segment of the NU system and has no other reportable segments.

14. MERGER AGREEMENT WITH CON EDISON
On October 13, 1999, NU and Con Edison announced that they have agreed
to a merger to combine the two companies. The shareholders of NU will
receive $25 per share in a combination of cash and Con Edison common
stock.

NU shareholders also have the right to receive an additional $1 per share
if a definitive agreement to sell its interests (other than that now held
by PSNH) in Millstone 2 and 3 is entered into and recommended by the
Utility Operations and Management Unit of the Connecticut Department of
Public Utility Control on or prior to the later of December 31, 2000,
or the closing of the merger. Further, the value of the amount of cash
or common stock to be received by NU shareholders is subject to increase
by an amount of $0.0034 per share per day for each day that the
transaction does not close after August 5, 2000.

Upon completion of the merger, NU will become a wholly owned subsidiary
of Con Edison. The purchase is subject to the approval of the shareholders
of both companies and several regulatory agencies. The companies
anticipate that these regulatory procedures can be completed by July
2000.

Public Service Company of New Hampshire
- -----------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------------

Operating Revenues..................... $1,160,572 $1,087,247 $1,108,459 $1,110,169 $ 979,971

Operating Income....................... 124,605 131,199 144,024 155,758 155,628

Net Income............................. 84,209 91,686 92,172 97,465 83,255

Cash Dividends on Common Stock......... - - 85,000 52,000 52,000

Total Assets........................... 2,622,433 2,681,595 2,837,159 2,851,212 2,920,487

Long-Term Debt(a)...................... 516,485 516,485 686,485 686,485 858,985

Preferred Stock Subject to
Mandatory Redemption (a)............. 50,000 75,000 100,000 125,000 125,000

Obligations Under Seabrook Power
Contracts and Other Capital
Leases (a)........................... 726,153 842,223 921,813 914,617 915,288

- -----------------------------------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA (Unaudited)
- -----------------------------------------------------------------------------------------------------------
Quarter Ended
- -----------------------------------------------------------------------------------------------------------
1999 March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues..................... $286,799 $286,824 $310,739 $276,210
======== ======== ======== ========
Operating Income....................... $ 35,449 $ 29,419 $ 34,666 $ 25,071
======== ======== ======== ========
Net Income............................. $ 25,281 $ 20,695 $ 25,584 $ 12,649
======== ======== ======== ========

- -----------------------------------------------------------------------------------------------------------
1998
- -----------------------------------------------------------------------------------------------------------
Operating Revenues..................... $261,745 $250,784 $286,614 $288,104
======== ======== ======== ========
Operating Income....................... $ 18,769 $ 42,406 $ 37,434 $ 32,590
======== ======== ======== ========
Net Income............................. $ 6,791 $ 31,601 $ 29,892 $ 23,402
======== ======== ======== ========

(a) Includes portions due within one year.

Public Service Company of New Hampshire

- -------------------------------------------------------------------------------
STATISTICS (Unaudited)
- -------------------------------------------------------------------------------
Average
Gross Electric Annual
Utility Plant Use Per
December 31, kWh Residential Electric
(Thousands of Sales Customer Customers Employees
Dollars)(a) (Millions) (kWh) (Average) December 31,
- -------------------------------------------------------------------------------
1999 $2,283,187 12,832 6,665 427,694 1,258
1998 2,302,254 12,579 6,347 421,602 1,265
1997 2,312,628 13,340 6,528 407,642 1,254
1996 2,382,009 13,601 6,567 407,082 1,279
1995 2,469,474 11,001 6,524 (b) 406,077 1,339

(a) Includes unamortized acquisition costs.

(b) Effective January 1, 1996, the amounts shown reflect billed and unbilled
sales. The 1995 amounts have been restated to reflect this change.