FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-5324 NORTHEAST UTILITIES 04-2147929
(a Massachusetts voluntary association)
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-2010
Telephone: (413) 785-5871
0-11419 THE CONNECTICUT LIGHT AND POWER COMPANY 06-0303850
(a Connecticut corporation)
107 Selden Street
Berlin, Connecticut 06037-1616
Telephone: (860) 665-5000
1-6392 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE 02-0181050
(a New Hampshire corporation)
1000 Elm Street
Manchester, New Hampshire 03105-0330
Telephone: (603) 669-4000
0-7624 WESTERN MASSACHUSETTS ELECTRIC COMPANY 04-1961130
(a Massachusetts corporation)
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-2010
Telephone: (413) 785-5871
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuers' classes
of common stock, as of the latest practicable date:
Company - Class of Stock Outstanding at July 31, 2001
- ------------------------ ----------------------------
Northeast Utilities
Common shares, $5.00 par value 133,892,185 shares
The Connecticut Light and Power Company
Common stock, $10.00 par value 7,584,884 shares
Public Service Company of New Hampshire
Common stock, $1.00 par value 388 shares
Western Massachusetts Electric Company
Common stock, $25.00 par value 509,696 shares
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms that
are found throughout this report:
COMPANIES
CL&P.......................... The Connecticut Light and Power Company
NAEC.......................... North Atlantic Energy Corporation
NU............................ Northeast Utilities
NU system..................... The Northeast Utilities system companies,
including NU and its wholly owned operating
subsidiaries: CL&P, PSNH, WMECO, NAEC,
and Yankee Gas
PSNH.......................... Public Service Company of New Hampshire
Select Energy................. Select Energy, Inc.
WMECO......................... Western Massachusetts Electric Company
Yankee........................ Yankee Energy System, Inc.
Yankee Gas.................... Yankee Gas Services Company
NUCLEAR UNIT
Seabrook...................... Seabrook Unit No. 1, a 1,148 megawatt
nuclear electric generating unit completed
in 1986; Seabrook went into service in 1990.
REGULATORS
DPUC.......................... Connecticut Department of Public Utility Control
FERC.......................... Federal Energy Regulatory Commission
OTHER
EPS........................... Earnings per share
FASB.......................... Financial Accounting Standards Board
NU 2000 Form 10-K............. The NU system combined 2000 Form 10-K as filed
with the Securities and Exchange Commission
O&M........................... Operation and maintenance
SFAS.......................... Statement of Financial Accounting Standards
Northeast Utilities and Subsidiaries
The Connecticut Light and Power Company and Subsidiaries
Public Service Company of New Hampshire and Subsidiaries
Western Massachusetts Electric Company and Subsidiary
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
and
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
For the following companies:
Northeast Utilities and Subsidiaries
Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000..................... 2
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 2001 and 2000.................................. 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000................. 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 6
Report of Independent Public Accountants................ 18
The Connecticut Light and Power Company
and Subsidiaries
Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000..................... 20
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 2001 and 2000.................................. 22
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000................. 23
Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 24
Public Service Company of New Hampshire
and Subsidiaries
Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000..................... 30
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 2001 and 2000.................................. 32
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000................. 33
Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 34
Western Massachusetts Electric Company and Subsidiary
Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000..................... 38
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 2001 and 2000.................................. 40
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000................. 41
Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 42
Notes to Financial Statements
(unaudited - all companies).................................. 46
Part II. Other Information
Item 1. Legal Proceedings.................................. 58
Item 4. Submission of Matters to a Vote
of Security Holders................................ 60
Item 6. Exhibits and Reports on Form 8-K................... 61
Signatures............................................................. 63
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
---------------- ----------------
(Thousands of Dollars)
ASSETS
- ------
Utility Plant, at Cost:
Electric...............................................$ 5,988,999 $ 9,370,176
Gas and other........................................... 863,859 861,727
---------------- ----------------
6,852,858 10,231,903
Less: Accumulated provision for depreciation......... 3,435,530 7,041,279
---------------- ----------------
3,417,328 3,190,624
Construction work in progress........................... 222,884 228,330
Nuclear fuel, net....................................... 26,038 128,261
---------------- ----------------
Total net utility plant.............................. 3,666,250 3,547,215
---------------- ----------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 59,903 740,058
Investments in regional nuclear generating
companies, at equity................................... 59,442 62,477
Other, at cost.......................................... 192,345 137,291
---------------- ----------------
311,690 939,826
---------------- ----------------
Current Assets:
Cash and cash equivalents............................... 197,646 200,017
Investments in securitizable assets..................... 40,599 98,146
Receivables, net........................................ 784,053 472,863
Unbilled revenues....................................... 85,909 121,090
Fuel, materials and supplies, at average cost........... 102,583 163,711
Prepayments and other................................... 178,269 94,528
---------------- ----------------
1,389,059 1,150,355
---------------- ----------------
Deferred Charges:
Regulatory assets ...................................... 4,077,781 3,910,801
Goodwill and other purchased intangible assets, net..... 325,846 324,389
Unamortized debt expense, net........................... 25,632 33,475
Prepaid pensions........................................ 190,145 139,546
Other .................................................. 174,305 171,542
---------------- ----------------
4,793,709 4,579,753
---------------- ----------------
Total Assets.............................................$ 10,160,708 $ 10,217,149
================ ================
</Table>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
---------------- ----------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common shareholders' equity:
Common shares, $5 par value - authorized
225,000,000 shares; 148,888,790 shares issued and
133,864,193 shares outstanding in 2001 and
148,781,861 shares issued and 143,820,405 shares
outstanding in 2000.................................$ 744,444 $ 693,345
Capital surplus, paid in.............................. 902,562 927,059
Temporary equity from stock forward................... - 215,000
Deferred contribution plan - employee stock
ownership plan...................................... (108,122) (114,463)
Retained earnings..................................... 610,248 495,873
Accumulated other comprehensive income................ (26,470) 1,769
---------------- ----------------
Total common shareholders' equity.............. 2,122,662 2,218,583
Preferred stock......................................... 116,200 151,200
Long-term debt.......................................... 1,930,142 2,029,593
---------------- ----------------
Total capitalization........................... 4,169,004 4,399,376
---------------- ----------------
Rate Reduction Bonds...................................... 2,118,400 -
---------------- ----------------
Minority Interest in Consolidated Subsidiary.............. - 100,000
---------------- ----------------
Obligations Under Capital Leases.......................... 17,180 47,234
---------------- ----------------
Current Liabilities:
Notes payable to banks.................................. 455,400 1,309,977
Long-term debt and preferred stock - current portion.... 24,365 340,041
Obligations under capital leases - current portion...... 931 112,645
Accounts payable........................................ 685,485 538,983
Accrued taxes........................................... 83,032 54,088
Accrued interest........................................ 55,899 41,131
Other................................................... 120,409 144,931
---------------- ----------------
1,425,521 2,541,796
---------------- ----------------
Deferred Credits and Other Long-Term Liabilities:
Accumulated deferred income taxes....................... 1,447,536 1,585,494
Accumulated deferred investment tax credits............. 126,422 153,155
Decommissioning obligation - Millstone 1................ - 692,560
Deferred contractual obligations........................ 228,701 244,608
Other................................................... 627,944 452,926
---------------- ----------------
2,430,603 3,128,743
---------------- ----------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities.....................$ 10,160,708 $ 10,217,149
================ ================
</Table>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
(Thousands of Dollars, except share information)
Operating Revenues....................................$ 1,583,294 $ 1,414,973 $ 3,383,838 $ 2,797,294
-------------- -------------- -------------- --------------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power......... 1,009,877 795,089 2,140,717 1,563,461
Other............................................. 189,014 214,036 407,942 415,497
Maintenance.......................................... 59,738 70,722 148,419 121,490
Depreciation......................................... 49,891 58,946 110,520 119,338
Amortization of regulatory assets, net............... 86,098 68,318 805,954 113,450
Federal and state income taxes....................... 46,801 47,445 91,182 109,870
Taxes other than income taxes........................ 55,204 61,325 131,091 119,687
Gain on sale of utility plant........................ - - (653,872) -
-------------- -------------- -------------- --------------
Total operating expenses........................ 1,496,623 1,315,881 3,181,953 2,562,793
-------------- -------------- -------------- --------------
Operating Income....................................... 86,671 99,092 201,885 234,501
-------------- -------------- -------------- --------------
Other Income/(Loss):
Gain related to Millstone sale....................... - - 202,159 -
Gain/(loss) on share repurchase contracts............ 8,049 - (35,394) -
Nuclear related costs................................ - (15,572) - (18,373)
Other, net........................................... 7,673 (8,362) 6,155 (3,213)
Income taxes......................................... 18,321 21,119 (49,597) 28,955
-------------- -------------- -------------- --------------
Other income/(loss), net........................ 34,043 (2,815) 123,323 7,369
-------------- -------------- -------------- --------------
Income before interest charges.................. 120,714 96,277 325,208 241,870
-------------- -------------- -------------- --------------
Interest Charges:
Interest on long-term debt........................... 62,063 52,300 105,731 108,184
Other interest....................................... 9,482 27,858 33,009 38,222
-------------- -------------- -------------- --------------
Interest charges, net........................... 71,545 80,158 138,740 146,406
-------------- -------------- -------------- --------------
Income after interest charges................... 49,169 16,119 186,468 95,464
Preferred Dividends of Subsidiaries.................... 2,437 3,913 5,141 8,671
-------------- -------------- -------------- --------------
Income before cumulative effect of
accounting change............................. 46,732 12,206 181,327 86,793
Cumulative effect of accounting change,
net of tax benefit of $14,908........................ - - (22,432) -
-------------- -------------- -------------- --------------
Net Income............................................$ 46,732 $ 12,206 $ 158,895 $ 86,793
============== ============== ============== ==============
Basic Earnings Per Common Share:
Income before cumulative effect of
accounting change.................................$ 0.35 $ 0.09 $ $1.30 $ $0.62
Cumulative effect of accounting change,
net of tax benefit................................. - - (0.16) -
-------------- -------------- -------------- --------------
Basic Earnings per Common Share.......................$ 0.35 $ 0.09 $ 1.14 $ 0.62
============== ============== ============== ==============
Fully Diluted Earnings Per Common Share:
Income before cumulative effect of
accounting change.................................$ 0.35 $ 0.08 $ 1.30 $ $0.62
Cumulative effect of accounting change,
net of tax benefit................................ - - (0.16) -
-------------- -------------- -------------- --------------
Fully Diluted Earnings Per Common Share...............$ 0.35 $ 0.08 $ 1.14 $ 0.62
============== ============== ============== ==============
Basic Common Shares Outstanding (average)............. 133,908,739 143,284,493 138,910,719 139,476,432
============== ============== ============== ==============
Fully Diluted Common Shares Outstanding (average)......134,149,873 143,907,964 139,256,968 140,055,610
============== ============== ============== ==============
</Table>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Six Months Ended
June 30,
------------------------
2001 2000
------------ -----------
(Thousands of Dollars)
Operating Activities:
Income after interest charges.............................. $ 186,468 $ 95,464
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation............................................. 110,520 119,338
Deferred income taxes and investment tax credits, net.... (120,505) (18,035)
Amortization of regulatory assets, net................... 805,954 113,450
Net deferral of recoverable energy costs................. (19,051) (1,435)
Gain on sale of utility plant............................ (678,884) -
Cumulative effect of accounting change................... (22,432) -
Net other (uses)/sources of cash......................... (1,353) 26,903
Changes in working capital:
Receivables and unbilled revenues, net................... (276,009) (87,260)
Fuel, materials and supplies............................. 61,128 4,595
Accounts payable......................................... 146,502 179,674
Accrued taxes............................................ 28,944 (39,305)
Investments in securitizable assets...................... 57,547 41,691
Other working capital (excludes cash).................... (63,509) (167,876)
------------ -----------
Net cash flows provided by operating activities.............. 215,320 267,204
------------ -----------
Investing Activities:
Investments in plant:
Electric, gas and other utility plant.................... (214,227) (137,143)
Nuclear fuel............................................. (1,092) (28,983)
------------ -----------
Net cash flows used for investments in plant............... (215,319) (166,126)
Investments in nuclear decommissioning trusts.............. (122,456) (32,911)
Net proceeds from the sale of utility plant................ 1,035,135 -
Buyout/buydown of IPP contracts............................ (1,128,502) -
Other investment activities, net........................... (52,019) (25,696)
Payment for the purchase of Yankee, net of cash acquired... - (260,347)
------------ -----------
Net cash flows used in investing activities.................. (483,161) (485,080)
------------ -----------
Financing Activities:
Issuance of common shares.................................. 1,725 2,456
Repurchase of common shares................................ (219,237) -
Issuance of long-term debt................................. 268,145 26,477
Issuance of rate reduction bonds........................... 2,118,400 -
Net (decrease)/increase in short-term debt................. (854,577) 756,000
Reacquisitions and retirements of long-term debt........... (658,457) (357,227)
Reacquisitions and retirements of preferred stock.......... (60,868) (126,039)
Retirement of monthly income preferred securities.......... (100,000) -
Retirement of capital lease obligation..................... (180,000) -
Cash dividends on preferred stock.......................... (5,141) (8,671)
Cash dividends on common shares............................ (44,520) (28,638)
------------ -----------
Net cash flows provided by financing activities.............. 265,470 264,358
------------ -----------
Net (decrease)/increase in cash and cash equivalents......... (2,371) 46,482
Cash and cash equivalents - beginning of period.............. 200,017 255,154
------------ -----------
Cash and cash equivalents - end of period.................... $ 197,646 $ 301,636
============ ===========
Supplemental schedule of noncash investing and financing activities:
In conjunction with the Yankee acquisition on March 1, 2000,
common stock was issued and debt was assumed as follows:
Fair value of assets acquired, net of liabilities assumed $ 712,484
Cash paid (261,370)
NU common stock issued (217,114)
-----------
$ 234,000
===========
</Table>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This discussion should be read in conjunction with the consolidated financial
statements and footnotes in this Form 10-Q, the First Quarter 2001 Form 10-Q,
current reports on Form 8-K dated April 11, 2001, April 24, 2001, April 25,
2001, May 17, 2001, June 28, 2001, July 10, 2001, and July 24, 200l, and the
2000 Form 10-K.
FINANCIAL CONDITION
Overview
Northeast Utilities (NU) reported second quarter 2001 earnings of $46.7
million, or $0.35 per share on a fully diluted basis, compared with earnings
of $12.2 million, or $0.08 per share on a fully diluted basis, for the same
period of 2000. Second quarter 2001 results included an after-tax gain of
$8 million, or $0.06 per share, as a result of the closing out of certain
equity forward purchase arrangements for 10.1 million NU common shares in
April 2001, at a share price of $18.30.
Including the effects related to the adoption of Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, NU
reported earnings of $158.9 million, or $1.14 per share, for the six
months ended June 30, 2001, compared with earnings of $86.8 million,
or $0.62 per share, for the six months ended June 30, 2000. Excluding
the effect of the adoption of SFAS No. 133, NU earned $181.3 million,
or $1.30 per share, for the six months ended June 30, 2001.
The marked improvement in NU's second quarter earnings in 2001
resulted from better results at NU's competitive energy subsidiaries
and the absence of write-offs related to the settlement of litigation.
In the second quarter of 2001, NU's competitive energy subsidiaries
earned $13.6 million, or $0.10 per share, compared with essentially
break-even results for the same period of 2000. Also, second quarter
2000 results included after-tax charges of $8.1 million, or $0.06 per
share, associated with the settlement of litigation related to the
Millstone nuclear units, which NU sold to Dominion Resources, Inc.
(Dominion) on March 31, 2001.
NU's results in the first half of 2001 were aided considerably by the
sale of Millstone to Dominion. In the first quarter of 2001, NU
received approximately $1.2 billion as a result of the sale and
recorded a gain and a corresponding amount of amortization expense in
the amount of $653.9 million for the portion of the total gain related
to The Connecticut Light and Power Company (CL&P) and Western
Massachusetts Electric Company (WMECO). The majority of the $1.2
billion of cash proceeds was received by CL&P and WMECO. NU also
recognized an after-tax gain of $124.8 million, or $0.87 per share,
related to the sale of the Millstone 3 interests of Public Service
Company of New Hampshire (PSNH) and several unaffiliated owners and
not to the Millstone interests of CL&P and WMECO.
The aforementioned $8 million after-tax gain NU recorded in the second
quarter of 2001, related to the equity forward purchase arrangements,
offset a portion of a $43.4 million, or $0.30 per share, after-tax
charge in the first quarter of 2001, related to the same forward
purchase arrangements. As a result, NU's net after-tax charge in the
first half of 2001, related to these forward purchase arrangements
amounted to $35.4 million, or $0.24 per share. NU contracted with
certain financial institutions to purchase these shares prior to NU's
March 1, 2000, merger with Yankee Energy System, Inc. (Yankee). The
shares were purchased at an average share price of $21.26. Effective
January 1, 2001, the accounting for the forward purchase arrangements
was revised requiring NU to treat the arrangements as derivative
instruments and mark them to market. As a result of the company's
actions to close out these forward purchase arrangements, no further
gains or losses are anticipated.
In the first half of 2001, NU had increased electric sales, a reduced
number of outstanding shares, lower interest and preferred dividend
costs and a full six months of Yankee earnings, compared to four
months in 2001. Regulated retail electric sales increased by 3.1
percent in the second quarter of 2001, as compared to the same period
of 2000 and increased by 2.2 percent over the first six months of
2001, as compared to the same period of 2000.
NU currently projects operating earnings of between $1.35 per share and
$1.50 per share in 2001. That estimate excludes nonrecurring items.
That range is lower than the $1.40 per share to $1.60 per share NU had
previously projected. The lower earnings range reflects the delay in the
timing of additional share repurchases. As a result, NU now projects a
higher than previously estimated average share count for 2001, resulting
in a lower earnings per share estimate for the year. In July 2001, the
NU Board of Trustees authorized the repurchase of up to 15 million
additional NU common shares by July 1, 2003. This is above and beyond
the shares represented by the aforementioned 10.1 million equity
forward purchase arrangements and the 217,400 NU common shares
repurchased in June 2001. Subsequent to June 2001, no additional NU
common shares have been repurchased.
Liquidity
NU's liquidity was strengthened considerably by the receipt of
approximately $3.3 billion of cash proceeds in the first half of 2001
from the Millstone sale (approximately $1.2 billion) and the
securitization of stranded costs (approximately $2.1 billion). On
April 25, 2001, PSNH issued $525 million of rate reduction bonds and
on May 17, 2001, WMECO issued $155 million of rate reduction
certificates. Previously, at the end of the first quarter of 2001,
the NU system received, in excess of, $2.6 billion of cash proceeds
from the Millstone sale and CL&P securitization.
The NU system utilized most of the proceeds from these transactions by
the end of the second quarter of 2001. Approximately $1.1 billion was
used to buyout or buydown 16 high-cost, long-term purchased-power
contracts CL&P and WMECO had with certain independent power producers.
CL&P and WMECO used another $180 million to repay their respective
obligations under the Niantic Bay Fuel Trust. CL&P used $100 million
to repay the notes associated with its monthly income preferred
securities and also used a portion of the proceeds to repay all but
$199 million of its first mortgage bonds. Combined, PSNH and WMECO
used $60.9 million of the proceeds to repay the last of their
preferred stock and WMECO used $100 million to repay all of its first
mortgage bonds and extinguish its mortgage indenture. As a result of
WMECO repaying its first mortgage bonds, Fitch upgraded WMECO's
unsecured debt ratings on July 9, 2001, to BBB+ from BBB.
PSNH used most of its rate reduction bond proceeds to buydown its
power contracts with North Atlantic Energy Corporation (NAEC). In
turn, NAEC repaid all $135 million of its outstanding first mortgage
bonds and more than half of its outstanding bank debt.
Together, CL&P, PSNH, WMECO, and NAEC, returned approximately $436
million to the parent company in the first half of 2001 either in the
form of dividends or subsidiary stock repurchases. The parent company
used $215 million of that amount to repurchase 10.1 million NU common
shares under the aforementioned forward purchase arrangements and
another $4.2 million to buy back 217,400 additional NU common shares
in June 2001. In June 2001, NU also purchased $15 million of 18
percent convertible subordinated notes of NEON Communications, Inc.,
due in 2008.
As of June 30, 2001, the parent company had approximately $205 million
of cash in the NU system Money Pool. Management plans to use that
cash for either new investments or the repurchase of additional
shares.
Primarily as a result of the cash held by the parent company and
another $177 million held by CL&P as of June 30, 2001, NU, CL&P,
WMECO, and Yankee Gas Services Company (Yankee Gas) had no borrowings
outstanding under their aggregate $710 million of lines of credit as
of June 30, 2001.
On June 28, 2001, NU's Board of Trustees declared a quarterly dividend
of $0.125 per share, payable on September 28, 2001, to shareholders of
record as of September 1, 2001, an increase of 25 percent from a
quarterly dividend of $0.10 per share declared in the previous six
quarters.
Competitive Energy Subsidiaries
NU's competitive energy subsidiaries engage in a variety of energy-
related activities, primarily in the competitive energy retail and
wholesale commodity, marketing and services fields. In addition,
these subsidiaries own and manage 1,481 megawatts (MW) of capacity, as
well as provide services to the electric generation market and large
commercial and industrial customers in the Northeast.
NU's competitive energy subsidiaries earned $9.4 million before the
cumulative effect of an accounting change related to the adoption of
SFAS No. 133 for the six months ended June 30, 2001, compared with
earnings of $3.5 million for the six months ended June 30, 2000.
Unconsolidated revenues for the competitive energy subsidiaries were
$1.3 billion for the six months ended June 30, 2001, compared with
$881.7 million for the six months ended June 30, 2000. The increased
revenues are the result of sales growth and higher energy prices.
CL&P's standard offer purchases from Select Energy, Inc. (Select
Energy) represented $326.7 million of the total competitive energy
subsidiaries' revenues for the six months ended June 30, 2001,
compared with $318.5 million for the six months ended June 30, 2000.
These amounts are eliminated in consolidation.
Competitive Energy Subsidiaries' Market and Other Risks
NU's competitive energy subsidiaries, as major providers of
electricity and natural gas, are exposed to certain market risks which
are inherent in their business activities. The competitive energy
subsidiaries enter into contracts of varying length of time to buy and
sell energy commodities, primarily electricity, natural gas and oil.
Market risk represents the risk of loss that may impact the companies'
financial statements due to adverse changes in commodity market
prices.
The competitive energy subsidiaries manage their portfolio of
contracts and assets to maximize value and minimize associated risks.
The length of contracts to buy and sell energy vary in duration from
daily/hourly to several years. At any point in time, the portfolio
may be long (purchases exceed sales) or short (sales exceed
purchases). Portfolio and risk management disciplines are used to
manage exposures to market risks. Policies and procedures have been
established to manage these risks. At market spot prices in effect at
June 30, 2001, the portfolio had a negative mark-to-market position.
There is significant volatility in the energy commodities market, and
for certain of the energy products and contracts there has been
limited liquidity. Management does not believe the ultimate
settlement through physical delivery of its energy portfolio will
result in realization of this negative mark-to-market position. The
negative mark-to-market position at June 30, 2001, has declined since
December 31, 2000, due to the decline in energy prices in the region
and new transactions entered into during the first six months of 2001.
The servicing of CL&P's standard offer load was one such risk for
Select Energy, as this contract is for a 4-year period ending
December 31, 2003, at fixed prices. Select Energy has contracted to
acquire the vast majority of the energy supplies it expects to need in
2002 and 2003 to serve its current power supply obligations, including
CL&P's standard offer load. Recently, given the sharp reduction in
energy prices, Select Energy has acquired significant additional
resources within its target price range. As a result, management
considers Select Energy's energy supply book to be satisfactorily
hedged for both 2002 and 2003.
Select Energy also engages in the trading of commodity derivatives,
which are accounted for using the mark-to-market method under Emerging
Issues Task Force (EITF) Issue No. 98-10, "Accounting for Energy
Trading and Risk Management Activities." All other nontrading
transactions are recognized when settled.
For further information see Note 3, "Market Risk and Risk Management
Instruments," and Note 4, "Comprehensive Income," to the consolidated
financial statements.
Business Development
On June 28, 2001, NU announced four preliminary proposals to enhance
the high-voltage electric transmission grid around southwest
Connecticut. Each of these preliminary proposals is subject to the
approval by various federal and state regulatory agencies. One
proposal would involve the replacement of an underwater 138,000 volt
electric cable between Norwalk, Connecticut and Northport, Long
Island. That project would cost approximately $80 million and would
be jointly sponsored by the Long Island Power Authority, which will
have a 50 percent interest in the new cable. A second project
involves the construction of a 20-mile, 345,000 volt transmission line
along an existing CL&P right-of-way between Bethel, Connecticut and
Norwalk, Connecticut, estimated to cost approximately $120 million.
If approved, the construction of these two projects would begin in
2002. A third project involves the construction of a 65-mile, 345,000
volt transmission line from Middlefield, Connecticut to Norwalk,
Connecticut, estimated to cost approximately $400 million. This
project would likely begin around the time the Bethel/Norwalk project
is completed. Finally, a new NU transmission subsidiary would build a
30-mile, 300,000 volt direct current cable from Norwalk, Connecticut
to Hempstead Harbor, Long Island. Construction is estimated to begin
in late 2002 and end in 2004. No cost estimate has yet been made for
that project.
Restructuring and Rate Matters
Connecticut - CL&P: The Connecticut Department of Public Utility
Control (DPUC) issued an interim order effective March 1, 2001,
directing CL&P to pay down stranded costs using 50 percent of all
earnings in excess of an 11.3 percent return on equity.
On June 20, 2001, the DPUC issued a final order in CL&P's over-
earnings docket ordering a $21.1 million write-off of CL&P's stranded
costs through reduced transmission and distribution rates. Also, the
Generation Services Charge (GSC) was ordered to be increased by $21.1
million, with any excess GSC revenues to be applied to write-off
stranded costs. The DPUC also ordered that 50 percent of CL&P's
earnings above a 10.3 percent return on equity be used to amortize
stranded costs. While total rates will not change, amortization of
regulatory assets will be increased without a corresponding increase
in revenues resulting in reduced earnings in the second half of 2001
and in 2002.
Connecticut - Yankee Gas: On July 24, 2001, Yankee Gas filed an
application with the DPUC to increase customers' rates by an average
of 7.64 percent. Yankee Gas requested the increase primarily as a
result of a proposed significant expansion of its gas delivery system
in Connecticut. In May 2001, Yankee Gas announced $23 million of
expansion projects in Connecticut, which would add approximately 70
miles of additional gas main when constructed. Additional projects,
including the aforementioned expansion projects, are expected to
increase Yankee Gas' construction expenditures to an annual amount in
excess of $60 million through 2003, significantly in excess of
previous levels.
New Hampshire: On April 25, 2001, PSNH Funding LLC, a subsidiary of
PSNH, sold $525 million of rate reduction bonds, at an average
interest rate of 5.90 percent. The bonds, which were rated AAA by
three credit agencies, were issued in three different tranches having
maturity dates between one and 12 years. PSNH used the net proceeds
of the issue to buydown and securitize $498 million of its over-market
Seabrook Power Contract obligations, and securitize $18 million of
Millstone 3 stranded costs.
May 1, 2001, was designated as the beginning of electric competition
(Competition Day) in New Hampshire. On that date, PSNH's average
retail rates were reduced by an additional 11 percent resulting in a
total rate decrease in excess of 15 percent from rates in effect on
September 30, 2000, as required by the "Agreement to Settle PSNH
Restructuring." PSNH's retail customers were also permitted to
purchase generation service from third parties commencing on
Competition Day.
Massachusetts: In April 2001, the Massachusetts Department of
Telecommunications and Energy approved WMECO's default service rates
effective for the six-month periods July 1, 2001, through December 31,
2001, and January 1, 2002, through June 30, 2002. These six-month
average rates ranged from $0.0749 per kilowatt-hour to $0.0855 per
kilowatt-hour for the 2001 six-month period and $0.0669 per kilowatt-
hour to $0.0763 per kilowatt-hour for the 2002 six-month period for
WMECO's estimated 97 MW default service load. These rates were based
on the results of a competitive bidding process. A contract was
signed with the unaffiliated winning bidder on April 9, 2001.
On May 17, 2001, WMECO Funding LLC, a subsidiary of WMECO, sold $155
million of rate reduction certificates at an interest rate of 6.59
percent. The certificates, which were rated AAA by three credit
agencies, were issued in a single series with a maturity date in 2013.
WMECO used the proceeds of the sale of the certificates to reduce its
purchased-power obligations and to repay short-term debt.
During September 2001, WMECO will issue a request for proposal to
parties interested in supplying energy to WMECO's standard offer
service customers beginning on January 1, 2002.
For information regarding commitments and contingencies related to
restructuring and rate matters, see Note 2A, "Commitments and
Contingencies - Restructuring," to the consolidated financial statements.
Nuclear Plant Performance
Seabrook operated at a capacity factor of 75.2 percent through the
first six months of 2001. The unit began a scheduled refueling outage
on October 21, 2000. This outage was extended by approximately ten
weeks as a result of repairs to a back-up diesel generator. Seabrook
returned to service on January 28, 2001.
On December 15, 2000, NU filed its divestiture plan for Seabrook with
the New Hampshire Public Utilities Commission and the DPUC. An agent
to administer the sales process is expected to be named by the end of
August 2001, and NU believes the sale will be completed in 2002.
Other Matters
Other Commitments and Contingencies: For further information regarding
other commitments and contingencies, see Note 2, "Commitments and
Contingencies," to the consolidated financial statements.
Forward Looking Statements: This discussion and analysis includes
forward looking statements, which are statements of future
expectations and not facts including, but not limited to, statements
regarding future earnings, refinancings, the use of proceeds from
restructuring, and the recovery of operating costs. 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
second quarter of 2001 and the first six months of 2001 are provided
in the table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $ 168 12% $ 586 21%
Operating Expenses:
Fuel, purchased and net
interchange power 214 27 577 37
Other operation (25) (12) (8) (2)
Maintenance (11) (16) 27 22
Depreciation (9) (15) (9) (7)
Amortization of regulatory
assets, net 18 26 693 (a)
Federal and state income taxes (1) (1) (19) (17)
Taxes other than income taxes (6) (10) 12 10
Gain on sale of utility plant - - (654) (a)
---- --- ---- ---
Total operating expenses 180 14 619 24
---- --- ---- ---
Operating income (12) (13) (33) (14)
---- --- ---- ---
Other Income/(Loss):
Gain related to Millstone sale - - 202 (a)
Gain/(loss)on share repurchase
contracts 8 (a) (35) (a)
Nuclear related costs 16 (a) 18 (a)
Other, net 16 (a) 9 (a)
Income taxes (3) (13) (78) (a)
---- --- ---- ---
Other income, net 37 (a) 116 (a)
Interest charges, net (8) (11) (8) (5)
Preferred dividends of subsidiaries (1) (38) (3) (41)
---- --- ---- ---
Income before cumulative effect of
accounting change 34 (a) 94 (a)
---- --- ---- ---
Cumulative effect of accounting
change, net of tax benefit - - (22) (a)
---- --- ---- ---
Net income $ 34 (a)% $ 72 83%
==== === ==== ===
(a) Percent greater than 100.
Comparison of the Second Quarter 2001 to the Second Quarter of 2000
Operating Revenues
Total revenues increased by $168 million or 12 percent in the second
quarter of 2001, compared with the same period in 2000, primarily due
to higher revenues from the competitive energy companies ($225 million),
higher Yankee revenues ($4 million), and higher regulated retail
revenues ($9 million), partially offset by lower regulated wholesale
revenues for the regulated subsidiaries ($60 million) and lower
transmission revenues ($11 million).
The competitive energy companies' increase is primarily due to higher
revenues from Select Energy as a result of new contracts for energy
services. The regulated retail increase is primarily due to higher
retail sales ($13 million) and the increase in WMECO's standard offer
service rate ($15 million), partially offset by 5 and 11 percent rate
decreases for PSNH that were effective October 1, 2000 and May 1,
2001, respectively ($23 million). Regulated retail kilowatt-hour sales
also increased by 3.1 percent in 2001.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2001,
primarily due to higher purchased energy and capacity costs as a
result of higher sales for Select Energy ($201 million, of which $3
million represents purchases from other NU affiliates), Yankee
expenses ($10 million) and higher purchased power costs for the
regulated subsidiaries ($6 million).
Other Operation and Maintenance
Other operation and maintenance (O&M) expenses decreased by $36 million
in 2001, primarily due to lower nuclear expenses ($52 million) as a
result of the sale of the Millstone units at the end of the first
quarter in 2001, partially offset by higher O&M expenses for the
competitive energy companies ($13 million).
Depreciation
Depreciation expense decreased in 2001, primarily due to the sale of
the Millstone units at the end of the first quarter in 2001.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2001, primarily
due to higher amortization related to restructuring.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to
lower local property taxes as a result of the sale of the Millstone
units in the first quarter of 2001.
Gain/(Loss) On Share Repurchase Contracts
In the second quarter of 2001, NU recorded a noncash gain of
approximately $8 million associated with the marking to market of 10.1
million NU common shares acquired through forward share repurchase
arrangements.
Nuclear Related Costs
Nuclear related costs decreased in 2001, primarily due to costs
associated with the settlement of Millstone litigation in 2000.
Other, Net
Other, net increased primarily due to costs associated with
nonrecurring legal costs in 2000 ($5 million), higher environmental
reserves in 2000 ($3 million) and the gain on the disposition of
property for PSNH in 2001 ($4 million).
Interest Charges, Net
Interest charges, net decreased in 2001, primarily due to reacquisitions
and retirements of long-term debt in 2001 and higher short-term borrowings
in 2000 associated with asset transfers and the Yankee merger, partially
offset by interest associated with the issuance of rate reduction bonds
in 2001.
Comparison of the First Six Months of 2001 to the First Six Months of 2000
Operating Revenues
Total revenues increased by $586 million or 21 percent in the first
six months of 2001, compared with the same period in 2000, primarily
due to higher revenues from the competitive energy companies ($441 million)
higher Yankee revenues ($144 million) and higher regulated retail
revenues ($34 million), partially offset by lower transmission
revenues ($23 million) and lower wholesale regulated revenues ($11 million).
The competitive energy companies' increase is primarily due to higher
revenues from Select Energy as a result of new contracts for energy
services. The regulated retail increase is primarily due to higher
retail sales ($36 million) and the increase in WMECO's standard offer
service rate ($29 million), partially offset by the 5 and 11 percent
rate decreases for PSNH that were effective October 1, 2000 and May 1,
2001, respectively ($34 million). Regulated retail kilowatt-hour sales
also increased by 2.2 percent in 2001.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2001,
primarily due to higher purchased energy and capacity costs as a
result of higher sales for Select Energy ($393 million, of which $9
million represents purchases from other NU affiliates), Yankee
expenses ($102 million) and higher purchased power costs for the
regulated subsidiaries ($82 million).
Other Operation and Maintenance
Other O&M expenses increased $19 million in 2001, primarily due to
higher O&M expenses for the competitive energy companies ($39 million),
partially offset by lower nuclear expenses ($18 million) as a result
of the sale of the Millstone units at the end of the first quarter.
Depreciation
Depreciation expense decreased in 2001, primarily due to the sale of
the Millstone units at the end of the first quarter of 2001.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2001, primarily
due to the amortization in 2001 related to the gain on sale of the
Millstone units by CL&P and WMECO ($654 million) and higher amortization
related to restructuring.
Federal and State Income Taxes
Federal and state income taxes combined increased in 2001, primarily
due to the tax impacts of the Millstone sale.
Taxes Other Than Income Taxes
Taxes other than income taxes increased in 2001, primarily due to
higher Connecticut gross earnings taxes ($14 million) resulting from
the phase-in of restructuring in Connecticut in 2000, partially offset
by lower property taxes ($4 million).
Gain on Sale of Utility Plant
NU recorded gains on the sale of CL&P's and WMECO's ownership
interests in Millstone. A corresponding amount of amortization
expense was recorded.
Gain Related to Millstone Sale
NU recognized an after-tax gain of approximately $125 million
primarily related to the sale of the Millstone 3 interests of PSNH
and several unaffiliated owners.
Nuclear Related Costs
Nuclear related costs decreased in 2001, primarily due to the
CL&P/WMECO settlement in 2000 of Millstone litigation.
Other, Net
Other, net increased primarily due to costs associated with
nonrecurring legal costs in 2000 ($5 million), higher environmental
reserves in 2000 and the gain on the disposition of property for PSNH
in 2001 ($4 million), partially offset by lower miscellaneous interest
income in 2001.
Interest Charges, Net
Interest charges, net decreased in 2001, primarily due to
reacquisitions and retirements of long-term debt and higher short-term
borrowings in 2000 associated with asset transfers and the Yankee
merger, partially offset by the interest expense associated with the
issuance of rate reduction bonds in 2001.
Gain/(Loss) on Share Repurchase Contracts
In the first half of 2001, NU recorded a net noncash charge of approximately
$35 million related to the forward purchase of 10.1 million NU common shares
in December 1999 and January 2000. Under the new accounting standard EITF
Issue No. 00-19 "Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company's Own Stock," NU was required to
recognize a net charge for the difference between the average purchase
price and the price of the NU shares upon the closing of these forward
repurchase arrangements, plus carrying charges.
Cumulative Effect of Accounting Change, Net of Tax Benefit
The cumulative effect of accounting change, net of tax benefit, recorded in
2001, represents the effect of the adoption of SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ($22 million).
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Northeast Utilities:
We have reviewed the accompanying consolidated balance sheet of Northeast
Utilities (a Massachusetts trust) and subsidiaries as of June 30, 2001, and
the related consolidated statements of income for the three and six-month
periods ended June 30, 2001 and 2000 and the consolidated statements of cash
flows for the six-month periods ended June 30, 2001 and 2000. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial statements referred to above for
them to be in conformity with accounting principles generally accepted
in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the consolidated balance
sheet and consolidated statement of capitalization as of December 31,
2000 and the related consolidated statements of income, comprehensive
income, shareholders' equity, cash flows, and income taxes for the
year then ended (not presented herein), and, in our report dated
January 23, 2001 (except with respect to the matters discussed in Note 15,
as to which the date is March 13, 2001), we expressed an unqualified opinion
on those financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of December 31, 2000, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Hartford, Connecticut
August 9, 2001
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
------------- -------------
(Thousands of Dollars)
ASSETS
- ------
Utility Plant, at Original Cost:
Electric................................................ $ 3,047,411 $ 5,756,098
Less: Accumulated provision for depreciation......... 1,224,771 4,210,429
------------- -------------
1,822,640 1,545,669
Construction work in progress........................... 114,010 128,835
Nuclear fuel, net....................................... 2,625 79,672
------------- -------------
Total net utility plant.............................. 1,939,275 1,754,176
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 6,077 536,912
Investments in regional nuclear generating
companies, at equity................................... 39,182 41,395
Other, at cost.......................................... 71,451 33,708
------------- -------------
116,710 612,015
------------- -------------
Current Assets:
Cash.................................................... 611 5,461
Investment in securitizable assets...................... 40,599 98,146
Notes receivable from affiliated companies.............. 177,100 38,000
Receivables, net........................................ 232,812 29,245
Accounts receivable from affiliated companies........... 53,167 103,763
Accrued utility revenues................................ 7,554 -
Fuel, materials and supplies, at average cost........... 33,625 36,332
Prepayments and other................................... 5,255 32,291
------------- -------------
550,723 343,238
------------- -------------
Deferred Charges:
Regulatory assets....................................... 2,046,161 1,835,967
Prepaid pension......................................... 202,839 170,672
Unamortized debt expense................................ 6,359 14,794
Other................................................... 56,939 33,336
------------- -------------
2,312,298 2,054,769
------------- -------------
Total Assets.............................................. $ 4,919,006 $ 4,764,198
============= =============
</Table>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
------------- -------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock, $10 par value - authorized
24,500,000 shares; 7,584,884 shares outstanding
in 2001 and 2000......................................... $ 75,849 $ 75,849
Capital surplus, paid in.................................. 413,743 413,192
Retained earnings......................................... 267,272 243,197
Accumulated other comprehensive income.................... 204 506
------------- -------------
Total common stockholder's equity................ 757,068 732,744
Preferred stock........................................... 116,200 116,200
Long-term debt............................................ 821,365 1,072,688
------------- -------------
Total capitalization............................. 1,694,633 1,921,632
------------- -------------
Rate Reduction Bonds........................................ 1,438,400 -
------------- -------------
Minority Interest in Consolidated Subsidiary................ - 100,000
------------- -------------
Obligations Under Capital Leases............................ 15,779 39,910
------------- -------------
Current Liabilities:
Notes payable to banks.................................... - 115,000
Long-term debt and preferred stock - current portion...... - 160,000
Obligations under capital leases - current portion........ 507 89,959
Accounts payable.......................................... 133,887 153,944
Accounts payable to affiliated companies.................. 115,463 122,106
Accrued taxes............................................. 79,828 32,901
Accrued interest.......................................... 30,870 13,995
Other..................................................... 25,963 31,324
------------- -------------
386,518 719,229
------------- -------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes......................... 840,321 977,439
Accumulated deferred investment tax credits............... 97,297 99,771
Decommissioning obligation - Millstone 1.................. - 580,320
Deferred contractual obligations.......................... 150,069 160,590
Other..................................................... 295,989 165,307
------------- -------------
1,383,676 1,983,427
------------- -------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities........................ $ 4,919,006 $ 4,764,198
============= =============
</Table>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------------
2001 2000 2001 2000
--------- --------- ----------- -----------
(Thousands of Dollars)
Operating Revenues................................. $610,275 $683,585 $1,344,180 $1,431,561
--------- --------- ----------- -----------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power..... 337,164 392,286 763,966 822,710
Other......................................... 73,081 99,708 171,625 201,036
Maintenance...................................... 18,909 39,122 65,753 66,701
Depreciation..................................... 22,204 28,876 51,108 61,396
Amortization of regulatory assets, net........... 60,773 18,721 619,016 26,439
Federal and state income taxes................... 26,606 27,359 48,939 65,950
Taxes other than income taxes.................... 30,030 34,790 70,226 68,585
Gain on sale of utility plant.................... - - (530,724) -
--------- --------- ----------- -----------
Total operating expenses................... 568,767 640,862 1,259,909 1,312,817
--------- --------- ----------- -----------
Operating Income................................... 41,508 42,723 84,271 118,744
--------- --------- ----------- -----------
Other Income/(Loss):
Gain related to Millstone sale................... - - 29,402 -
Other, net....................................... 5,246 (13,737) 1,819 (16,083)
Income taxes..................................... 6,830 14,466 (1,035) 15,722
--------- --------- ----------- -----------
Other income/(loss), net................... 12,076 729 30,186 (361)
--------- --------- ----------- -----------
Income before interest charges............. 53,584 43,452 114,457 118,383
--------- --------- ----------- -----------
Interest Charges:
Interest on long-term debt....................... 35,031 22,030 56,361 46,129
Other interest................................... (259) 2,236 984 3,425
--------- --------- ----------- -----------
Interest charges, net...................... 34,772 24,266 57,345 49,554
--------- --------- ----------- -----------
Net Income......................................... $ 18,812 $ 19,186 $ 57,112 $ 68,829
========= ========= =========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Six Months Ended
June 30,
-----------------------
2001 2000
------------ ----------
(Thousands of Dollars)
Operating Activities:
Net income................................................. $ 57,112 $ 68,829
Adjustments to reconcile to net cash flows
(used in)/provided by operating activities:
Depreciation............................................. 51,108 61,396
Deferred income taxes and investment tax credits, net.... (127,859) 11,682
Amortization of regulatory assets, net................... 619,016 26,439
Gain on sale of utility plant............................ (530,724) -
Net other (uses)/sources of cash......................... (84,138) 35,206
Changes in working capital:
Receivables and accrued utility revenues................. (160,525) (103,002)
Fuel, materials and supplies............................. 2,707 (489)
Accounts payable......................................... (26,700) 147,723
Accrued taxes............................................ 46,927 (131,928)
Investments in securitizable assets...................... 57,547 41,691
Other working capital (excludes cash).................... 38,550 (59,415)
------------ ----------
Net cash flows (used in)/provided by operating activities.... (56,979) 98,132
------------ ----------
Investing Activities:
Investments in plant:
Electric utility plant................................... (113,734) (80,495)
Nuclear fuel............................................. (648) (13,851)
------------ ----------
Net cash flows used for investments in plant............... (114,382) (94,346)
Investment in NU system Money Pool......................... (139,100) (36,700)
Investments in nuclear decommissioning trusts.............. (95,263) (24,336)
Other investment activities, net........................... (35,530) 560
Net proceeds from the sale of utility plant................ 832,353 686,807
Buyout/buydown of IPP contracts............................ (1,028,802) -
------------ ----------
Net cash flows (used in)/provided by investing activities.... (580,724) 531,985
------------ ----------
Financing Activities:
Net decrease in short-term debt............................ (115,000) (11,700)
Issuance of rate reduction bonds........................... 1,438,400 (179,071)
Retirement of capital lease obligation..................... (145,800) -
Retirement of monthly income preferred securities.......... (100,000) -
Reacquisitions and retirements of long-term debt........... (411,932) (99,539)
Repurchase of common shares................................ - (300,000)
Cash dividends on preferred stock.......................... (2,779) (4,622)
Cash dividends on common stock............................. (30,036) (25,000)
------------ ----------
Net cash flows provided by/(used in) financing activities.... 632,853 (619,932)
------------ ----------
Net (decrease)/increase in cash for the period............... (4,850) 10,185
Cash - beginning of period................................... 5,461 364
------------ ----------
Cash - end of period......................................... $ 611 $ 10,549
============ ==========
</Table>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
CL&P is a wholly owned subsidiary of NU. This discussion should be
read in conjunction with NU's management's discussion and analysis of
financial condition and results of operations, consolidated financial
statements and footnotes in this Form 10-Q, the First Quarter 2001
Form 10-Q, the current report on Form 8-K dated April 11, 2001, and
the NU 2000 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the
second quarter of 2001 and the first six months of 2001 are provided
in the table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $(73) (11)% $ (87) (6)%
Operating Expenses:
Fuel, purchased and net
interchange power (55) (14) (59) (7)
Other operation (26) (27) (29) (15)
Maintenance (20) (52) (1) (1)
Depreciation (7) (23) (11) (17)
Amortization of regulatory
assets, net 42 (a) 593 (a)
Federal and state income taxes (1) (3) (17) (26)
Taxes other than income taxes (5) (14) 2 2
Gain on sale of utility plant - - (531) (a)
---- --- ----- ---
Total operating expenses (72) (11) (53) (4)
---- --- ----- ---
Operating income (1) (3) (34) (29)
---- --- ----- ---
Other Income/(Loss):
Gain related to Millstone sale - - 29 (a)
Other, net 19 (a) 18 (a)
Income taxes (8) (53) (16) (a)
---- --- ----- ---
Other income, net 11 (a) 31 (a)
Interest charges, net 11 43 8 16
---- --- ----- ---
Net income $ - - % $ (11) (17)%
==== === ===== ===
(a) Percent greater than 100.
Comparison of the Second Quarter 2001 to the Second Quarter of 2000
Operating Revenues
Total revenues decreased by $73 million or 11 percent in the second
quarter of 2001, compared with the same period in 2000, primarily due
to lower wholesale revenues ($82 million) and lower other electric
revenues ($8 million), partially offset by higher retail revenues ($17
million). Wholesale revenues were lower primarily as a result of the
sale of the Millstone units at the end of the first quarter of 2001.
Other electric revenues decreased primarily due to lower transmission
revenues. Retail revenues increased primarily due to higher retail
sales. Retail sales increased 4.2 percent compared to the second quarter
of 2000.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense decreased in 2001,
primarily due to lower purchased power costs resulting from the buydown
and buyout of various contracts.
Other Operation and Maintenance
Other O&M expenses decreased $46 million in 2001, primarily due to
lower nuclear expenses ($31 million) as a result of the sale of the
Millstone units at the end of the first quarter of 2001, lower
distribution maintenance expenses ($4 million) and lower transmission
expenses ($9 million).
Depreciation
Depreciation decreased in 2001, primarily due to the sale of the
Millstone units.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2001, primarily
due to higher amortization related to restructuring.
Federal and State Income Taxes
Federal and state income taxes combined increased in 2001, primarily
due to higher taxable income.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to lower
local property taxes as a result of the sale of the Millstone units.
Other, Net
Other, net increased in 2001, primarily due to the settlement, in 2000,
of Millstone-related litigation, net of insurance proceeds ($9 million)
and a write-off associated with the former Connecticut Municipal Electric
Energy Cooperative (CMEEC) nuclear entitlement ($3 million) in 2000 and
higher miscellaneous income in 2001.
Interest Charges, Net
Interest charges, net increased in 2001, primarily due to the interest
expense associated with the issuance, in 2001, of rate reduction
bonds, partially offset by lower long-term debt outstanding as a
result of reacquisitions and retirements of long-term debt in 2001.
Comparison of the First Six Months of 2001 to the First Six Months of 2000
Operating Revenues
Total revenues decreased by $87 million or 6 percent in the first six
months of 2001, compared with the same period in 2000, primarily due
to lower wholesale revenues ($98 million) and lower other electric
revenues ($16 million), partially offset by higher retail revenues
($26 million). Wholesale revenues were lower primarily as a result of
the sale of the Millstone units at the end of the first quarter of
2001. Other electric revenues decreased primarily due to lower
transmission revenues. Retail revenues increased primarily due to
higher retail sales. Retail sales increased 2.9 percent compared to
2000.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense decreased in 2001,
primarily due to lower purchased power costs resulting from the buydown
and buyout of various contracts.
Other Operation and Maintenance
Other O&M expenses decreased by $30 million in 2001, primarily due to
lower nuclear expenses ($11 million) as a result of the sale of the
Millstone units and lower transmission expenses ($18 million).
Depreciation
Depreciation decreased in 2001, primarily due to the sale of the
Millstone units.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2001, primarily
due to the amortization in 2001 of the gain on sale of the Millstone
units ($531 million) and higher amortization related to restructuring.
Gain on Sale of Utility Plant
CL&P recorded a gain on the sale of its ownership share in the Millstone
units. A corresponding amount of amortization expense was recorded.
Gain Related to Millstone Sale
CL&P recognized a gain related to the former CMEEC's portion of Millstone 2.
Other, Net
Other, net increased in 2001, primarily due to the settlement, in 2000,
of Millstone-related litigation, net of insurance proceeds ($9 million)
and a write-off associated with the former CMEEC nuclear entitlement
($6 million).
Interest Charges, Net
Interest charges, net increased in 2001, primarily due to the interest
expense associated with the issuance, in 2001, of rate reduction
bonds, partially offset by lower long-term debt outstanding as a
result of reacquisitions and retirements of long-term debt in 2001.
LIQUIDITY
At the end of the first quarter of 2001, CL&P received, in excess of,
$1.4 billion of cash proceeds from securitization. CL&P utilized most
of the proceeds from this transaction by the end of the second quarter
of 2001. Approximately $1 billion was used to buyout or buydown 15
high-cost, long-term purchased-power contracts CL&P had with certain
independent power producers. CL&P and WMECO used another $180 million
to repay their respective obligations under the Niantic Bay Fuel
Trust. CL&P used $100 million to repay the notes associated with its
monthly income preferred securities, used a portion of the proceeds to
repay all but $199 million of its first mortgage bonds, and also used
$170 million to repay its obligation related to the receivables program.
CL&P returned approximately $15 million to the parent company in the
first half of 2001 in the form of dividends.
Primarily as a result of the cash held by the parent company and
another $177 million held by CL&P as of June 30, 2001, CL&P, NU, WMECO,
and Yankee Gas had no borrowings outstanding under their aggregate
$710 million of lines of credit as of June 30, 2001.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
------------- -------------
(Thousands of Dollars)
ASSETS
- ------
Utility Plant, at Cost:
Electric................................................ $ 1,407,909 $ 1,505,967
Other................................................... 6,221 -
------------- -------------
1,414,130 1,505,967
Less: Accumulated provision for depreciation......... 677,508 711,340
------------- -------------
736,622 794,627
Construction work in progress........................... 31,989 27,251
Nuclear fuel, net....................................... - 1,924
------------- -------------
Total net utility plant.............................. 768,611 823,802
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... - 7,362
Investments in regional nuclear generating
companies and subsidiary company, at equity............ 9,670 16,293
Other, at cost.......................................... 14,673 3,225
------------- -------------
24,343 26,880
------------- -------------
Current Assets:
Cash and cash equivalents............................... 6,237 115,135
Receivables, net........................................ 70,950 71,992
Accounts receivable from affiliated companies........... 11,355 2,798
Taxes receivable from affiliated companies.............. 212,386 9,983
Accrued utility revenues................................ 36,957 41,844
Fuel, materials and supplies, at average cost........... 39,849 28,760
Prepayments and other................................... 23,692 14,750
------------- -------------
401,426 285,262
------------- -------------
Deferred Charges:
Regulatory assets....................................... 989,053 924,847
Deferred receivable from affiliated company............. - 3,240
Unamortized debt expense................................ 10,300 9,067
Other................................................... 12,656 9,096
------------- -------------
1,012,009 946,250
------------- -------------
Total Assets.............................................. $ 2,206,389 $ 2,082,194
============= =============
</Table>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
------------- -------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock, $1 par value - authorized
100,000,000 shares; 388 shares outstanding
in 2001, and 1,000 shares outstanding in 2000.......... $ - $ 1
Capital surplus, paid in................................ 165,000 424,909
Retained earnings....................................... 147,665 123,177
Accumulated other comprehensive income.................. 658 1,207
------------- -------------
Total common stockholder's equity.............. 313,323 549,294
Long-term debt.......................................... 407,285 407,285
------------- -------------
Total capitalization........................... 720,608 956,579
------------- -------------
Rate Reduction Bonds...................................... 525,000 -
------------- -------------
Obligations Under Seabrook Power Contracts
and Other Capital Leases................................. 72,879 91,702
------------- -------------
Current Liabilities:
Notes payable to affiliated company..................... 26,200 -
Preferred stock - current portion............ - 24,268
Obligations under Seabrook Power Contracts and other
capital leases - current portion....................... 25,907 537,528
Accounts payable........................................ 45,244 45,847
Accounts payable to affiliated companies................ 230,941 54,157
Accrued taxes........................................... 17,331 656
Accrued interest........................................ 13,919 4,962
Other................................................... 9,716 13,112
------------- -------------
369,258 680,530
------------- -------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 379,261 179,723
Accumulated deferred investment tax credits............. 16,708 27,348
Deferred contractual obligations........................ 38,935 41,499
Deferred pension costs.................................. 38,968 41,216
Deferred revenue from affiliated company................ - 3,240
Other................................................... 44,772 60,357
------------- -------------
518,644 353,383
------------- -------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities...................... $ 2,206,389 $ 2,082,194
============= =============
</Table>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
2001 2000 2001 2000
---------- ---------- ---------- -----------
(Thousands of Dollars)
Operating Revenues................................. $ 286,799 $ 326,458 $ 627,634 $ 655,152
---------- ---------- ---------- -----------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power..... 181,083 212,809 418,763 423,339
Other......................................... 33,096 30,520 63,995 63,542
Maintenance...................................... 19,304 12,607 34,794 24,566
Depreciation..................................... 11,296 10,727 21,810 23,049
Amortization of regulatory assets, net........... 1,438 11,469 12,905 22,939
Federal and state income taxes................... 10,283 12,759 18,588 25,812
Taxes other than income taxes.................... 9,574 11,133 21,138 22,229
---------- ---------- ---------- -----------
Total operating expenses................... 266,074 302,024 591,993 605,476
---------- ---------- ---------- -----------
Operating Income................................... 20,725 24,434 35,641 49,676
---------- ---------- ---------- -----------
Other Income/(Loss):
Gain related to Millstone sale................... - - 25,913 -
Other, net....................................... 4,393 1,851 12,575 8,365
Income taxes..................................... 3,020 (1,755) (10,088) (5,188)
---------- ---------- ---------- -----------
Other income, net.......................... 7,413 96 28,400 3,177
---------- ---------- ---------- -----------
Income before interest charges............. 28,138 24,530 64,041 52,853
---------- ---------- ---------- -----------
Interest Charges:
Interest on long-term debt....................... 12,747 10,307 20,349 21,104
Other interest................................... (126) (29) (187) 66
---------- ---------- ---------- -----------
Interest charges, net...................... 12,621 10,278 20,162 21,170
---------- ---------- ---------- -----------
Net Income......................................... $ 15,517 $ 14,252 $ 43,879 $ 31,683
========== ========== ========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Six Months Ended
June 30,
------------------------
2001 2000
------------ -----------
(Thousands of Dollars)
Operating activities:
Net income................................................. $ 43,879 $ 31,683
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation............................................. 21,810 23,049
Deferred income taxes and investment tax credits, net.... 186,753 2,129
Net deferral of recoverable energy costs................. (28,300) (16,786)
Amortization of regulatory assets, net................... 12,905 22,939
Gain on sale of utility plant............................ (25,012) -
Net other sources/(uses) of cash......................... 8,393 (10,815)
Changes in working capital:
Receivables and accrued utility revenues................. (2,628) 8,809
Fuel, materials and supplies............................. (11,089) 5,200
Accounts payable......................................... 176,181 3,884
Accrued taxes............................................ 16,675 27,965
Taxes receivable......................................... (202,403) -
Other working capital (excludes cash).................... (3,381) (8,535)
------------ -----------
Net cash flows provided by operating activities.............. 193,783 89,522
------------ -----------
Investing Activities:
Investments in plant:
Electric utility plant................................... (46,332) (26,596)
Nuclear fuel............................................. (37) (4)
------------ -----------
Net cash flows used for investments in plant............... (46,369) (26,600)
Investment in nuclear decommissioning trusts............... (1,625) (320)
Other investment activities, net........................... (4,825) 586
------------ -----------
Net cash flows used in investing activities.................. (52,819) (26,334)
------------ -----------
Financing Activities:
Net increase in short-term debt............................ 26,200 -
Issuance of rate reduction bonds........................... 525,000 -
Repurchase of common shares................................ (260,000) -
Reacquisitions and retirements of preferred stock.......... (24,268) (25,000)
Buydown of capital lease obligation........................ (497,508) -
Cash dividends on preferred stock.......................... (1,286) (2,650)
Cash dividends on common stock............................. (18,000) -
------------ -----------
Net cash flows used in financing activities.................. (249,862) (27,650)
------------ -----------
Net (decrease)/increase in cash and cash equivalents......... (108,898) 35,538
Cash and cash equivalents - beginning of period.............. 115,135 182,588
------------ -----------
Cash and cash equivalents - end of period.................... $ 6,237 $ 218,126
============ ===========
</Table>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PSNH is a wholly owned subsidiary of NU. This discussion should be
read in conjunction with NU's management's discussion and analysis of
financial condition and results of operations, consolidated financial
statements and footnotes in this Form 10-Q, the First Quarter 2001
Form 10-Q, the current report on Form 8-K dated April 25, 2001, and
the NU 2000 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the
second quarter of 2001 and the first six months of 2001 are provided
in the table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $ (40) (12)% $(28) (4)%
Operating Expenses:
Fuel, purchased and net
interchange power (32) (15) (5) (1)
Other operation 2 8 - -
Maintenance 7 53 10 42
Depreciation 1 5 (1) (5)
Amortization of regulatory
assets, net (10) (87) (10) (44)
Federal and state income taxes (2) (19) (7) (28)
Taxes other than income taxes (2) (14) (1) (5)
Gain on sale of utility plant - - - -
---- --- ---- ---
Total operating expenses (36) (12) (14) (2)
---- --- ---- ---
Operating income (4) (15) (14) (28)
---- --- ---- ---
Other Income/(Loss):
Gain related to Millstone sale - - 26 (a)
Other, net 2 (a) 4 50
Income taxes 5 (a) (5) (94)
---- --- ---- ---
Other income, net 7 (a) 25 (a)
Interest charges, net 2 23 (1) (5)
---- --- ---- ---
Net income $ 1 9% $ 12 38%
==== === ==== ===
(a) Percent greater than 100.
Comparison of the Second Quarter 2001 to the Second Quarter of 2000
Operating Revenues
Total operating revenues decreased $40 million or 12 percent in the
second quarter of 2001, compared with the same period of 2000,
primarily due to lower retail revenue ($22 million), lower wholesale
revenues from lower capacity and energy sales to the market ($15
million) and lower miscellaneous revenues ($3 million). Retail
revenues decreased due to 5 and 11 percent rate decreases that were
effective October 1, 2000 and May 1, 2001, respectively ($23 million),
partially offset by higher retail sales. Retail kilowatt-hour sales
increased by 2.0 percent in 2001. Miscellaneous revenues decreased
primarily due to lower transmission revenues ($3 million).
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense decreased in 2001,
primarily due to lower purchased power expenses as a result of the
lower wholesale sales, and lower expenses from NAEC as a result of the
buydown of the Seabrook Power Contracts.
Other Operation and Maintenance
Other O&M expenses increased in 2001, primarily due to higher costs
associated with fossil production ($10 million) and higher
administrative and general expenses ($2 million), partially offset by
lower transmission expense ($3 million).
Federal and State Income Taxes
Federal and state income taxes decreased in 2001, as compared to 2000,
primarily due to lower book taxable income.
Other, Net
Other, net increased in 2001, primarily due to a $4 million gain on
the disposition of property in 2001 and higher environmental reserves
recorded in 2000.
Interest Charges, Net
Interest charges, net were higher in 2001, primarily due to the
issuance of rate reduction bonds in 2001, partially offset by lower
long-term debt outstanding in 2001.
Comparison of the First Six Months of 2001 to the First Six Months of 2000
Operating Revenues
Total operating revenues decreased $28 million or 4 percent in the
first six months of 2001, compared to the same period of 2000,
primarily due to lower retail revenues ($29 million) and lower
miscellaneous revenues ($5 million), partially offset by higher
wholesale revenues from higher capacity and energy sales to the market
($6 million). Retail revenues decreased due to 5 and 11 percent rate
decreases that were effective October 1, 2000 and May 1, 2001,
respectively ($34 million), partially offset by higher retail sales.
Retail kilowatt-hour sales increased by 1.3 percent in 2001.
Miscellaneous revenues decreased due to lower transmission revenues in
2001.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense decreased in 2001,
primarily due to lower expenses from NAEC as a result of the buydown
of the Seabrook Power Contracts, partially offset by higher purchased
power expenses as a result of the higher wholesale sales.
Other Operation and Maintenance
Other O&M expenses increased in 2001, primarily due to higher costs
associated with fossil production ($12 million), the costs associated
with the early retirement program ($2 million) and higher costs at
Millstone 3 due to an extended outage ($1 million), partially offset by
lower transmission expenses ($5 million).
Federal and State Income Taxes
Federal and state income taxes combined decreased in 2001, as compared
to 2000, primarily due to lower book taxable income.
Gain Related to Millstone Sale
PSNH recognized a gain as a result of the sale of its ownership share
in Millstone 3.
Other, Net
Other, net increased in 2001, primarily due to a gain on the
disposition of property in 2001 and higher environmental reserves
recorded in 2000.
Interest Charges, Net
Interest charges, net were lower in 2001, primarily due to lower long-
term debt outstanding in 2001, partially offset by the issuance of
rate reduction bonds in 2001.
LIQUIDITY
On April 25, 2001, PSNH issued $525 million of rate reduction bonds.
PSNH used $24.3 million of the proceeds to repay the last of its
preferred stock. PSNH used most of the remainder of its rate
reduction bond proceeds to buydown its power contract with NAEC.
PSNH returned approximately $278 million to the parent company in the
first half of 2001 either in the form of dividends or subsidiary stock
repurchases.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
------------- ------------
(Thousands of Dollars)
ASSETS
- ------
Utility Plant, at Original Cost:
Electric................................................ $ 553,715 $ 1,112,405
Less: Accumulated provision for depreciation......... 182,838 792,923
------------- ------------
370,877 319,482
Construction work in progress........................... 16,149 22,813
Nuclear fuel, net....................................... - 18,296
------------- ------------
Total net utility plant.............................. 387,026 360,591
------------- ------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... - 144,921
Investments in regional nuclear generating
companies, at equity................................... 10,590 11,117
Other, at cost.......................................... 4,903 6,249
------------- ------------
15,493 162,287
------------- ------------
Current Assets:
Cash.................................................... 1 985
Receivables, net........................................ 41,459 36,364
Accounts receivable from affiliated companies........... 7,330 16,146
Taxes receivable........................................ 12,882 -
Accrued utility revenues................................ 13,298 21,222
Fuel, materials and supplies, at average cost........... 1,591 1,606
Prepayments and other................................... - 4,817
------------- ------------
76,561 81,140
------------- ------------
Deferred Charges:
Regulatory assets....................................... 324,100 392,247
Prepaid pension......................................... 52,696 45,473
Unamortized debt expense................................ 790 1,822
Other................................................... 4,197 4,258
------------- ------------
381,783 443,800
------------- ------------
Total Assets.............................................. $ 860,863 $ 1,047,818
============= ============
</Table>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30,
2001 December 31,
(Unaudited) 2000
------------- ------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock, $25 par value - authorized
1,072,471 shares; 509,696 shares outstanding
in 2001 and 590,093 shares outstanding in 2000......... $ 12,742 $ 14,752
Capital surplus, paid in................................ 82,224 94,010
Retained earnings....................................... 60,670 62,952
Accumulated other comprehensive income.................. 98 182
------------- ------------
Total common stockholder's equity.............. 155,734 171,896
Preferred stock......................................... - 35,000
Long-term debt.......................................... 100,435 139,425
------------- ------------
Total capitalization........................... 256,169 346,321
------------- ------------
Rate Reduction Bonds...................................... 155,000 -
------------- ------------
Obligations Under Capital Leases.......................... 99 5,935
------------- ------------
Current Liabilities:
Notes payable to banks.................................. - 110,000
Notes payable to affiliated company..................... 38,700 600
Long-term debt and preferred stock - current portion.... - 61,500
Obligations under capital leases - current portion...... 20 20,986
Accounts payable........................................ 49,891 25,298
Accounts payable to affiliated companies................ 6,061 8,611
Accrued taxes........................................... 243 8,471
Accrued interest........................................ 2,130 4,703
Other................................................... 8,248 7,671
------------- ------------
105,293 247,840
------------- ------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 230,946 224,711
Accumulated deferred investment tax credits............. 4,166 17,580
Decommissioning obligation - Millstone 1................ - 136,130
Deferred contractual obligations........................ 39,697 42,519
Other................................................... 69,493 26,782
------------- ------------
344,302 447,722
------------- ------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities...................... $ 860,863 $ 1,047,818
============= ============
</Table>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------------
2001 2000 2001 2000
--------- --------- ---------- -----------
(Thousands of Dollars)
Operating Revenues............................. $106,866 $120,090 $ 250,166 $ 249,500
--------- --------- ---------- -----------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power. 79,332 58,383 169,451 124,628
Other..................................... 13,352 15,811 32,147 34,313
Maintenance.................................. 2,677 10,503 12,549 18,048
Depreciation................................. 3,118 4,357 7,551 8,945
Amortization of regulatory assets............ (1,080) 14,167 125,410 21,485
Federal and state income taxes............... 2,752 2,733 5,909 8,195
Taxes other than income taxes................ 3,061 4,162 7,924 9,130
Gain on sale of utility plant................ - - (123,148) -
--------- --------- ---------- -----------
Total operating expenses............... 103,212 110,116 237,793 224,744
--------- --------- ---------- -----------
Operating Income............................... 3,654 9,974 12,373 24,756
--------- --------- ---------- -----------
Other Income/(Loss):
Other, net................................... 434 (1,810) (690) (1,624)
Income taxes................................. (184) 940 434 4,600
--------- --------- ---------- -----------
Other income/(loss), net............... 250 (870) (256) 2,976
--------- --------- ---------- -----------
Income before interest charges......... 3,904 9,104 12,117 27,732
--------- --------- ---------- -----------
Interest Charges:
Interest on long-term debt................... 1,621 3,317 4,615 8,108
Other interest............................... 765 2,831 2,665 5,615
--------- --------- ---------- -----------
Interest charges, net.................. 2,386 6,148 7,280 13,723
--------- --------- ---------- -----------
Net Income..................................... $ 1,518 $ 2,956 $ 4,837 $ 14,009
========= ========= ========== ==========
</Table>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Six Months Ended
June 30,
-----------------------
2001 2000
----------- -----------
(Thousands of Dollars)
Operating Activities:
Net income................................................. $ 4,837 $ 14,009
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation............................................. 7,551 8,945
Deferred income taxes and investment tax credits, net.... 8,183 (14,458)
Net amortization of recoverable energy costs............. 3,437 4,742
Amortization of regulatory assets, net................... 125,410 21,485
Gain on sale of utility plant............................ (123,148) -
Net other sources of cash................................ 23,256 2,051
Changes in working capital:
Receivables and accrued utility revenues................. 11,645 (10,232)
Fuel, materials and supplies............................. 15 1,517
Accounts payable......................................... 22,043 12,025
Accrued taxes............................................ (8,228) 19,223
Other working capital (excludes cash).................... (10,061) (18,690)
----------- -----------
Net cash flows provided by operating activities.............. 64,940 40,617
----------- -----------
Investing Activities:
Investments in plant:
Electric utility plant................................... (15,315) (9,207)
Nuclear fuel............................................. (140) (2,929)
----------- -----------
Net cash flows used for investments in plant............... (15,455) (12,136)
Investments in nuclear decommissioning trusts.............. (21,767) (4,043)
Other investment activities, net........................... 1,873 (14)
Net proceeds from the sale of utility plant................ 177,821 185,787
Buyout of IPP contract..................................... (99,700) -
Investment in NU system Money Pool......................... - (9,600)
----------- -----------
Net cash flows provided by investing activities.............. 42,772 159,994
----------- -----------
Financing Activities:
Net decrease in short-term debt............................ (71,900) (14,400)
Issuance of rate reduction bonds........................... 155,000 -
Reacquisitions and retirements of long-term debt........... (99,022) (94,150)
Reacquisitions and retirements of preferred stock.......... (36,500) (1,500)
Retirement of capital lease obligation..................... (34,200) -
Repurchase of common shares................................ (15,000) (90,000)
Cash dividends on preferred stock.......................... (1,076) (1,399)
Cash dividends on common stock............................. (5,998) -
----------- -----------
Net cash flows used in financing activities.................. (108,696) (201,449)
----------- -----------
Net decrease in cash for the period.......................... (984) (838)
Cash - beginning of period................................... 985 950
----------- -----------
Cash - end of period......................................... $ 1 $ 112
=========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
WMECO is a wholly owned subsidiary of NU. This discussion should be read
in conjunction with NU's management's discussion and analysis of financial
condition and results of operations, consolidated financial statements and
footnotes in this Form 10-Q, the First Quarter 2001 Form 10-Q, current
reports on Form 8-K dated April 11, 2001, and May 17, 2001, and the
NU 2000 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the
second quarter of 2001 and the first six months of 2001 are provided
in the table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $(13) (11)% $ 1 -%
Operating Expenses:
Fuel, purchased and net
interchange power 21 36 45 36
Other operation (3) (15) (2) (6)
Maintenance (8) (75) (6) (30)
Depreciation (1) (28) (2) (16)
Amortization of regulatory
assets, net (15) (a) 104 (a)
Federal and state income taxes - - (2) (28)
Taxes other than income taxes (1) (26) (1) (13)
Gain on sale of utility plant - - (123) (a)
---- ---- ---- ---
Total operating expenses (7) (6) 13 6
---- ---- ---- ---
Operating income (6) (63) (12) (50)
---- ---- ---- ---
Other Income/(Loss):
Other, net 2 (a) 1 58
Income taxes (1) (a) (4) (91)
---- ---- ---- ---
Other income, net 1 (a) (3) (a)
Interest charges, net (4) (61) (6) (47)
---- ---- ---- ---
Net income $ (1) (49)% $ (9) (65)%
==== ==== ==== ===
(a) Percent greater than 100.
Comparison of the Second Quarter 2001 to the Second Quarter of 2000
Operating Revenues
Total revenues decreased by $13 million or 11 percent in the second
quarter of 2001, compared with the same period in 2000, primarily due
to lower wholesale revenues ($23 million), partially offset by higher
retail revenues ($10 million). Wholesale revenues decreased primarily
due to the sale of the Millstone units at the end of the first
quarter of 2001. Retail revenues were higher primarily due to an
increase in the standard offer service rate. Retail sales were the
same as the second quarter of 2000.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2001,
primarily due to higher purchased power costs associated with the
standard offer supply.
Other Operation and Maintenance
Other O&M expenses decreased by $11 million in 2001, primarily due to
lower nuclear expenses ($12 million) as a result of the sale of the
Millstone units at the end of the first quarter of 2001.
Depreciation
Depreciation decreased in 2001, primarily due to the sale of the
Millstone units.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net decreased in 2001, primarily
due to lower amortization related to restructuring.
Other, Net
Other, net increased in 2001, primarily due to the settlement, in 2000,
of Millstone-related litigation, net of insurance proceeds ($3 million).
Interest Charges, Net
Interest charges, net decreased in 2001, primarily due to lower long-
term debt outstanding in 2001.
Comparison of the First Six Months of 2001 to the First Six Months of 2000
Operating Revenues
Total revenues were slightly higher by $1 million in the first six
months of 2001, as compared to the same period in 2000. Higher retail
revenues ($30 million) were partially offset by lower wholesale
revenues ($29 million). Retail revenues were higher primarily due to
an increase in the standard offer service rate. Retail sales were 0.9
percent higher in 2001. Wholesale revenues decreased due to the sale
of the Millstone units at the end of the first quarter of 2001.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2001,
primarily due to higher purchased power costs associated with the
standard offer supply.
Other Operation and Maintenance
Other O&M expenses decreased by $8 million in 2001, primarily due to
lower nuclear expenses ($9 million) as a result of the sale of the
Millstone units, and lower transmission expenses ($3 million),
partially offset by higher administrative and general expenses ($6
million), primarily due to pension credits recorded in the second
quarter of 2000 associated with the sale of certain fossil and
hydroelectric generation assets.
Depreciation
Depreciation decreased in 2001, primarily due to the sale of the
Millstone units.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2001, primarily
due to the amortization in 2001 of the gain on sale of the Millstone
units ($123 million), partially offset by lower amortization related
to restructuring.
Gain on Sale of Utility Plant
WMECO recorded a gain on the sale of its ownership share in the Millstone
units. A corresponding amount of amortization expense was recorded.
Other, Net
Other, net increased in 2001, primarily due to the settlement, in 2000,
of Millstone-related litigation, net of insurance proceeds ($3 million).
Interest Charges, Net
Interest charges, net decreased in 2001, primarily due to lower long-
term debt outstanding in 2001.
LIQUIDITY
Although WMECO's earnings declined for the six months ended June 30,
2001, as compared to the same period in 2000, its cash flows provided
by operating activities increased primarily due to the effects of the
Millstone sale. The earnings decline in 2001 is attributed to the
delay in the transfer of certain hydroelectric generation assets to an
affiliated company in 2000.
On May 17, 2001, WMECO issued $155 million of rate reduction
certificates. WMECO utilized most of the proceeds from this
transaction by the end of the second quarter of 2001. Approximately
$100 million was used to buyout a high-cost, long-term purchased-power
contract WMECO had with a certain independent power producer. WMECO
and CL&P used another $180 million to repay their respective
obligations under the Niantic Bay Fuel Trust. WMECO used $36.6.
million of the proceeds to repay the last of its preferred stock and
used $100 million to repay all of its first mortgage bonds and
extinguish its mortgage indenture. As a result of WMECO repaying its
first mortgage bonds, Fitch upgraded WMECO's unsecured debt ratings on
July 9, 2001, to BBB+ from BBB.
WMECO returned approximately $18 million to the parent company in the
first half of 2001 either in the form of dividends or subsidiary stock
repurchases.
Primarily as a result of the cash held by the parent company and
another $177 million held by CL&P as of June 30, 2001, WMECO, NU,
CL&P, and Yankee Gas had no borrowings outstanding under their
aggregate $710 million of lines of credit as of June 30, 2001.
Northeast Utilities and Subsidiaries
The Connecticut Light and Power Company and Subsidiaries
Public Service Company of New Hampshire and Subsidiaries
Western Massachusetts Electric Company and Subsidiary
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (All Companies)
A. Presentation
The accompanying unaudited financial statements should be
read in conjunction with management's discussion and
analysis of financial condition and results of operations in
this Form 10-Q, the First Quarter 2001 Form 10-Q and the
Annual Reports of Northeast Utilities (NU), The Connecticut
Light and Power Company (CL&P), Public Service Company of
New Hampshire (PSNH), and Western Massachusetts Electric
Company (WMECO), which were filed as part of the NU 2000
Form 10-K, and the current reports on Form 8-K dated
April 11, 2001, April 24, 2001, April 25, 2001, May 17,
2001, June 28, 2001, July 10, 2001, and July 24, 2001. The
accompanying financial statements contain, in the opinion of
management, all adjustments necessary to present fairly NU's
and each NU system company's financial position as of
June 30, 2001, the results of operations for the three-month
and six-month periods ended June 30, 2001 and 2000, and
statements of cash flows for the six-month periods ended
June 30, 2001 and 2000. All adjustments are of a normal,
recurring nature except those described in Notes 1C and 2.
The results of operations for the three-month and six-month
periods ended June 30, 2001 and 2000, are not indicative of
the results expected for a full year.
The consolidated financial statements of NU and of its
subsidiaries include the accounts of all their respective
subsidiaries. Intercompany transactions have been eliminated
in consolidation.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United
States 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 period data have been
made to conform with the current period presentation.
B. Regulatory Accounting and Assets
The accounting policies of the NU system operating companies
and the accompanying consolidated financial statements
conform to accounting principles generally accepted in the
United States applicable to rate-regulated enterprises and
historically reflect the effects of the rate-making process
in accordance with Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation." In 1999, CL&P and WMECO
discontinued the application of SFAS No. 71 for the
generation portion of their businesses. During the fourth
quarter of 2000, PSNH discontinued the application of SFAS
No. 71 for the generation portion of its business.
In March 2001, CL&P and WMECO sold their ownership interests
in the Millstone units, and the gain on the sale was used to
offset recoverable nuclear costs. Also in March 2001, CL&P
issued rate reduction bonds and used a portion of those
proceeds to buyout or buydown certain contracts with
independent power producers. These payments were recorded
as regulatory assets.
In April 2001, PSNH issued rate reduction bonds and used a
portion of those proceeds to retire preferred stock and
buydown the Seabrook Power Contracts with North Atlantic
Energy Corporation (NAEC), an affiliated company.
In May 2001, WMECO issued rate reduction certificates and
used those proceeds to reduce its purchased-power
obligations and to repay short-term debt.
As a result of the issuance of rate reduction bonds and
certificates, certain regulatory assets, which are
collateral, have been separately segregated as securitized
regulatory assets and are being collected through a
specified reconciling customer charge.
CL&P's, PSNH's and WMECO's transmission and distribution
businesses will continue to be cost-based, and management
believes the application of SFAS No. 71 to that portion of
those businesses continues to be appropriate. Management
also believes it is probable that the NU system operating
companies will recover their investments in long-lived
assets, including regulatory assets, through charges to
their transmission and distribution customers. These costs
will be recovered over a period of time ranging from 7 to 26
years, subject to certain adjustments. Stranded costs for
CL&P and WMECO will be recovered through a transition charge
over a 12-year period. PSNH has three categories of
stranded costs. Part 1 costs are securitized regulatory
assets that are recovered over the life of the rate
reduction bonds. Part 2 costs are ongoing costs consisting
of nuclear decommissioning and independent power producer
costs that are recovered as incurred, over the time period
PSNH is responsible for those costs. Part 3 costs are
nonsecuritized regulatory assets which must be recovered by
a recovery end date to be determined in accordance with the
"Agreement to Settle PSNH Restructuring" (Settlement
Agreement), or which will be written off as stipulated by that
Settlement Agreement. Based on current projections, PSNH expects
to fully recover all of its Part 3 costs by the recovery end date.
In addition, all material regulatory assets are earning a
return. The components of the NU system companies'
regulatory assets are as follows:
--------------------------------------------------------------
June 30, December 31,
(Millions of Dollars) 2001 2000
--------------------------------------------------------------
Recoverable nuclear costs $1,509.7 $2,565.8
Securitized assets 1,375.3 -
Income taxes, net 473.7 504.7
Unrecovered contractual obligations 79.1 255.8
Recoverable energy costs, net 351.5 332.5
Other 288.5 252.0
--------------------------------------------------------------
Totals $4,077.8 $3,910.8
--------------------------------------------------------------
C. New Accounting Standards
Derivative Instruments: Effective January 1, 2001, NU
adopted SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended. All derivative
instruments have been identified and recorded at fair value
effective January 1, 2001. In addition, for those
derivative instruments which are hedging an identified risk,
NU has designated and documented all hedging relationships
anew.
For those contracts that do not meet the hedging
requirements, the changes in fair value of those contracts
were recognized currently in earnings. As explained within
Note 3, commodity derivatives that are utilized for trading
purposes, are accounted for using the mark-to-market method,
under Emerging Issues Task Force (EITF) Issue No. 98-10,
"Accounting for Energy Trading and Risk Management
Activities."
Transfer of Assets and Securitization: In September 2000,
the Financial Accounting Standards Board (FASB) issued SFAS
No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities - a
Replacement of FASB Statement No. 125." This statement
revises the accounting standards for securitizations and
other transfers and servicing of financial assets and
collateral and requires certain disclosures. SFAS No. 140
is effective for transfers and servicing of financial assets
occurring after March 31, 2001. This statement is also
effective for recognition and reclassification of collateral
and for disclosures relating to securitization transactions
and collateral for fiscal years ending after December 15,
2000.
Business Combinations: In June 2001, the FASB issued SFAS No. 141,
"Business Combinations." This statement addresses financial
accounting and reporting for business combinations. All business
combinations in the scope of this statement are to be accounted for
using the purchase method.
Goodwill and Other Intangible Assets: Also in June 2001, the
FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." This statement addresses financial accounting and
reporting for acquired goodwill and other intangible assets.
It requires that certain goodwill and intangible assets
acquired after June 30, 2001, not be amortized and certain
other goodwill and intangible assets not be amortized
effective January 1, 2002. This statement also requires
that goodwill will be subject to at least an annual
assessment for impairment by applying a fair value-based
test. Based on the goodwill and intangible assets
maintained by the NU system companies, management believes
that upon adoption of SFAS No. 142, annual goodwill
amortization expense will be reduced by approximately $10.4
million. However, upon adoption of the impairment testing
rules under SFAS No. 142, there may be a cumulative effect
of an accounting change which management has not evaluated
at this time.
2. COMMITMENTS AND CONTINGENCIES
A. Restructuring (PSNH, WMECO)
New Hampshire: In January 2001, the New Hampshire Supreme
Court upheld a comprehensive restructuring order based on
the Settlement Agreement. On April 16, 2001, two of the
appellants requested a review of the New Hampshire Supreme
Court decision by the United States Supreme Court (Court).
On June 18, 2001, the Court refused to hear the appeal.
In April 2001, the New Hampshire legislature passed a bill
amending the existing restructuring legislation and
materially changing a portion of the Settlement Agreement.
This legislation was signed by the Governor of New Hampshire
on May 22, 2001. The new legislation delays the sale of
PSNH's approximately 1,200 megawatts of fossil and
hydroelectric generation assets to no sooner than 33 months
after May 1, 2001, the day customer choice was implemented
in New Hampshire (Competition Day), or February 2004. The
new legislation requires PSNH to supply transition service
to residential and small commercial customers until at least
57 months after Competition Day, and requires that
transition service be provided at fixed rates for certain
classes of customers for the first 33 months after
Competition Day. The old law would have required
divestiture of PSNH's fossil and hydroelectric generation
assets during 2001.
The delay in the sale of PSNH's fossil and hydroelectric
generation assets should minimize any deferrals caused by
the provision for transition service at fixed prices.
However, management cannot precisely quantify the impacts of
the delay in the sale of PSNH's fossil and hydroelectric
generation assets and the extension of transition service at
fixed rates on its financial position, including the
recovery of certain stranded costs, as well as its results
of operations. Although PSNH no longer applies SFAS No. 71
for the generation portion of its business, it expects to
fully recover all operating costs related to its generation
assets, including a return, under the terms of the
Settlement Agreement. In addition, management believes that
an adverse impact related to the recovery of certain
stranded costs is unlikely.
The new legislation did not delay the planned sale of CL&P's
and NAEC's shares of Seabrook. An agent to administer the
sales process is expected to be named by the end of August
2001, and NU believes the sale will be completed in 2002.
Massachusetts: During the first quarter of 2000 WMECO filed
its first annual stranded cost reconciliation filing
covering the period March 1, 1998 through December 31, 1999.
The hearing and briefing processes related to this filing
were completed during the second quarter of 2001. A
Massachusetts Department of Telecommunications and Energy
(DTE) decision is expected by the end of 2001. On March 30,
2001, WMECO also filed its second annual stranded cost
reconciliation with the DTE for calendar year 2000 with the
related review and hearing processes scheduled for the second
half of 2001. The cumulative deferral of unrecovered
stranded costs as filed, is approximately $4 million.
Management believes these costs are fully recoverable.
B. Long-Term Contractual Arrangements (Select Energy)
Select Energy, Inc. (Select Energy) maintains long-term
agreements to purchase energy in the normal course of
business as part of its portfolio of resources to meet its
actual or expected sales commitments. The aggregate amount
of these purchase contracts was $2.1 billion at June 30,
2001. These contracts extend through 2005 as follows
(millions of dollars):
Year
----
2001 $ 921.5
2002 717.1
2003 408.3
2004 41.2
2005 28.4
--------
Total $2,116.5
========
3. MARKET RISK AND RISK MANAGEMENT INSTRUMENTS (Select Energy,
Yankee, Yankee Gas)
Competitive Energy Subsidiaries: Select Energy provides both firm
requirement energy services to its customers and engages in
energy trading and marketing activities. Select Energy manages
its exposure to risk from existing contractual commitments and
provides risk management services to its customers through
forward contracts, futures, over-the-counter swap agreements, and
options (commodity derivatives).
Select Energy has utilized the sensitivity analysis methodology
to disclose the quantitative information for its commodity price
risks. Sensitivity analysis provides a presentation of the
potential loss of future earnings, fair values or cash flows from
market risk-sensitive instruments over a selected time period due
to one or more hypothetical changes in commodity prices, or other
similar price changes.
Commodity Price Risk - Trading Activities: As a market
participant in the Northeast area of the United States, Select
Energy conducts commodity-trading activities in electricity and
its related products, natural gas and oil and, therefore,
experiences net open positions. Select Energy manages these open
positions with strict policies which limit its exposure to market
risk and require daily reporting to management of potential
financial exposure. Commodity derivatives utilized for trading
purposes are accounted for using the mark-to-market method, under
EITF No. 98-10. Under this methodology, these instruments
are adjusted to market value, and the unrealized gains and losses
are recognized in income in the current period in the
consolidated statements of income as fuel, purchased and net
interchange power and in the consolidated balance sheets as
prepayments and other. The mark-to-market position at June 30,
2001, was a positive $68 million.
Under sensitivity analysis, the fair value of the portfolio is a
function of the underlying commodity, contract prices and market
prices represented by each derivative commodity contract. For
swaps, forward contracts and options, market value reflects
management's best estimates considering over-the-counter
quotations, time value and volatility factors of the underlying
commitments. Exchange-traded futures and options are recorded at
market, based on closing exchange prices.
As of June 30, 2001, Select Energy has calculated the market
price resulting from a 10 percent unfavorable change in forward
market prices. That 10 percent change would result in
approximately a $4 million decline in the fair value of the
Select Energy trading portfolio. In the normal course of
business, Select Energy also faces risks that are either
nonfinancial or nonquantifiable. Such risks principally include
credit risk, which is not reflected in the sensitivity analysis
above.
Commodity Price Risk - Nontrading Activities: Select Energy
utilizes derivative financial and commodity instruments
(derivatives), including futures and forward contracts, to reduce
market risk associated with fluctuations in the price of
electricity and natural gas sold under firm commitments with
certain customers. Select Energy also utilizes derivatives,
including price swap agreements, call and put option contracts,
and futures and forward contracts, to manage the market risk
associated with a portion of its anticipated supply requirements.
These derivative instruments have been designated as cash flow
hedging instruments.
When conducting sensitivity analysis of the change in the fair
value of Select Energy's electricity, natural gas and oil
nontrading portfolio, which would result from a hypothetical
change in the future market price of electricity, natural gas and
oil, the fair value of the contracts are determined from models
which take into account estimated future market prices of
electricity, natural gas and oil, the volatility of the market
prices in each period, as well as the time value factors of the
underlying commitments. In most instances, market prices and
volatility are determined from quoted prices on the futures
exchange.
Select Energy has determined a hypothetical change in the fair
value for its nontrading electricity, natural gas and oil
contracts, assuming a 10 percent unfavorable change in forward
market prices. As of June 30, 2001, an unfavorable 10 percent
change in forward market price would have resulted in a decrease
in fair value of approximately $17 million.
The impact of a change in electricity, natural gas and oil prices
on Select Energy's nontrading contracts on June 30, 2001, is not
necessarily representative of the results that will be realized
when these contracts are physically delivered.
Select Energy also maintains natural gas service agreements with
certain customers to supply gas at fixed prices for terms
extending through 2003. Select Energy has hedged its gas supply
risk under these agreements through NYMEX contracts. Under these
contracts, the purchase price of a specified quantity of gas is
effectively fixed over the term of the gas service agreements,
which extend through 2003. As of June 30, 2001, the NYMEX
contracts had a notional value of $75.2 million and a negative
mark-to-market position of $17.2 million.
Derivative Cash Flow Hedge Accounting: Derivative instruments
recorded which were effective cash flow hedges resulted in an
increase in other comprehensive income of $19.5 million upon the
adoption of SFAS No. 133. During the first six months of 2001,
$13.7 million was reclassified from other comprehensive income
upon the conclusion of these hedged transactions and recognized
in earnings. An additional $1 million was recognized in earnings
for those derivatives that were determined to be ineffective.
Also, during the second quarter of 2001, new cash flow hedge
transactions were entered into which hedge cash flows through
2005. As a result of these new transactions and market value
changes since January 1, 2001, other comprehensive income
decreased by $34 million. Accumulated other comprehensive income
at June 30, 2001 was a negative $27.3 million (decrease to
equity) relating to hedged transactions and it is estimated that
$19.9 million will be reclassified as a charge to earnings within
the next twelve months. Cash flows from the hedge contracts are
reported in the same category as cash flows from the hedged
assets.
These estimates do not include certain long-term energy and
option-type contracts which management believes represent "normal
purchases and sales." The accounting for these types of
contracts has been cleared by the FASB in the second quarter of
2001 and will be implemented in the third quarter of 2001.
Management does not believe that the recording of these
transactions in accordance with the aforementioned FASB
guidelines will have a material effect on the consolidated
financial statements.
Regulated Entities:
Interest Rate Risk - Nontrading Activities: NU manages its
interest rate risk exposure by maintaining a mix of fixed and
variable rate debt. In addition, Yankee Energy System, Inc.
(Yankee) has entered into an interest rate sensitive derivative.
Yankee uses swap instruments with financial institutions to
exchange fixed-rate interest obligations to a blend between fixed
and variable-rate obligations without exchanging the underlying
notional amounts. These instruments convert fixed interest rate
obligations to variable rates. The notional amounts parallel the
underlying debt levels and are used to measure interest to be
paid or received and do not represent the exposure to credit
loss. As of June 30, 2001, Yankee had outstanding agreements
with a total notional value of $48 million and a negative mark-to-
market position of $0.4 million.
Commodity Price Risk - Nontrading Activities: Yankee Gas Services
Company (Yankee Gas) maintains a master swap agreement with one
customer to supply gas at fixed prices for a 10-year term
extending through 2005. Under this master swap agreement, the
purchase price of a specified quantity of gas is effectively
fixed over the term of the gas service agreement, which extends
through 2005. As of June 30, 2001, the commodity swap agreement
had a notional value of $15.4 million and a negative mark-to-
market position of $0.3 million, which is included within the
$27.3 million reported for accumulated other comprehensive income
related to hedging activities.
4. COMPREHENSIVE INCOME (NU, CL&P, PSNH, WMECO)
The total comprehensive income, which includes all comprehensive
income items, for the NU system is as follows:
Six Months Ended June 30,
-------------------------
2001 2000
---- ----
(Millions of Dollars)
NU Consolidated $130.7 $86.8
CL&P 54.0 64.2
PSNH 42.0 29.0
WMECO 3.7 12.6
Accumulated other comprehensive income mark-to-market adjustments
of NU's qualified cash flow hedging instruments are as follows:
-------------------------------------------------------------------
(Millions of Dollars) June 30, 2001
-------------------------------------------------------------------
Balance at January 1, 2001 (Inception date) $ 19.5
------
Hedged transactions recognized into earnings (12.8)
Change in fair value (14.8)
Cash flow transactions entered into for the period (19.2)
------
Net change associated with the current period
hedging transactions (46.8)
-------------------------------------------------------------------
Total included in accumulated other
comprehensive income $(27.3)
-------------------------------------------------------------------
5. EARNINGS PER SHARE (NU)
Earnings per share (EPS) is computed based upon the weighted
average number of common shares outstanding during each period.
Diluted EPS is computed on the basis of the weighted average
number of common shares outstanding plus the potential dilutive
effect if certain securities are converted into common stock.
The following table sets forth the components of basic and
diluted EPS:
--------------------------------------------------------------------
(Millions of Dollars, Six Months Ended June 30,
except share information) 2001 2000
--------------------------------------------------------------------
Income after interest charges $186.4 $95.5
Preferred dividends
of subsidiaries 5.1 8.7
--------------------------------------------------------------------
Income before cumulative effect
of accounting change $181.3 $86.8
Cumulative effect
of accounting change,
net of tax benefit (22.4) -
--------------------------------------------------------------------
Net income $158.9 $86.8
--------------------------------------------------------------------
Basic EPS common shares
outstanding (average) 138,910,719 139,476,432
Dilutive effect of employee
stock options 346,249 579,178
--------------------------------------------------------------------
Diluted EPS common shares
outstanding (average) 139,256,968 140,055,610
--------------------------------------------------------------------
Basic and Diluted EPS:
Income before cumulative effect
of accounting change $1.30 $0.62
Cumulative effect
of accounting change,
net of tax benefit (0.16) -
--------------------------------------------------------------------
Net income $1.14 $0.62
--------------------------------------------------------------------
6. SEGMENT INFORMATION (NU)
The NU system is organized between regulated utilities (electric
and gas since March 1, 2000) and competitive energy subsidiaries.
The regulated utilities segment represented approximately 73
percent and 87 percent of the NU system's total revenues for the
six months ended June 30, 2001 and 2000, respectively, and is
comprised of several business units.
Regulated utilities revenues primarily are derived from
residential, commercial and industrial customers and are not
dependent on any single customer. The competitive energy
subsidiaries segment has two major customers, one unaffiliated
company and CL&P. The purchases by these customers represented
approximately 14 percent and 25 percent, respectively, of total
competitive energy subsidiaries' revenues for the six months
ended June 30, 2001. The purchases by these customers
represented approximately 19 percent and 36 percent,
respectively, of total competitive energy subsidiaries' revenues
for the six months ended June 30, 2000.
The competitive energy subsidiaries segment in the following
table includes Select Energy Services, Inc. (formerly HEC Inc.),
a provider of energy management, demand-side management and
related consulting services for commercial, industrial and
institutional electric companies and electric utility companies;
Holyoke Water Power Company, a company engaged in the production
and distribution of electric power; Northeast Generation Company,
a corporation that acquires and manages generation facilities;
Northeast Generation Services Company, a corporation that
maintains and services any fossil or hydroelectric facility that
is acquired or contracted with for fossil or hydroelectric
generation services, and its subsidiaries and; Select Energy, a
corporation engaged in the marketing, transportation, storage,
and sale of energy commodities, at wholesale, in designated
geographical areas and in the marketing of electricity to retail
customers.
Other, in the following table, includes the results of Mode 1
Communications, Inc., an investor in a fiber-optic communications
network. Other also includes the results of the nonenergy related
subsidiaries of Yankee. Interest expense included in Other
primarily relates to the debt of NU parent. Inter-segment
eliminations of revenues and expenses are also included in Other.
- -------------------------------------------------------------------------
For the Six Months Ended June 30, 2001
- -------------------------------------------------------------------------
Competitive Eliminations
(Millions of Regulated Utilities Energy and
Dollars) Electric Gas Subsidiaries Other Total
- -------------------------------------------------------------------------
Operating
revenues $ 2,219.5 $ 240.4 $ 1,324.2 $(400.3) $ 3,383.8
Operating
expenses (2,071.1) (222.7) (1,295.4) 407.2 (3,182.0)
- -------------------------------------------------------------------------
Operating
income 148.4 17.7 28.8 6.9 201.8
Other
income/
(loss) 62.6 (0.1) 3.6 57.2 123.3
Interest
charges (94.7) (7.0) (23.0) (14.0) (138.7)
Preferred
dividends (5.1) - - - (5.1)
- -------------------------------------------------------------------------
Income before
cumulative
effect of
accounting
change 111.2 10.6 9.4 50.1 181.3
Cumulative
effect of
accounting
change,
net of
tax benefit - - (22.0) (0.4) (22.4)
- -------------------------------------------------------------------------
Net income/
(loss) $ 111.2 $ 10.6 $ (12.6) $ 49.7 $ 158.9
- -------------------------------------------------------------------------
Total assets $ 9,155.7 $ 848.4 $ 670.4 $(513.8) $10,160.7
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
For the Six Months Ended June 30, 2000
Competitive Eliminations
(Millions of Regulated Utilities Energy and
Dollars) Electric Gas Subsidiaries Other Total
- -------------------------------------------------------------------------
Operating
revenues $ 2,332.6 $ 91.3 $ 881.7 $(508.3) $ 2,797.3
Operating
expenses (2,116.2) (84.1) (858.8) 496.3 (2,562.8)
- -------------------------------------------------------------------------
Operating
income/
(loss) 216.4 7.2 22.9 (12.0) 234.5
Other
income/
(loss) 15.9 (1.7) 2.1 (8.9) 7.4
Interest
charges (101.8) (5.1) (21.5) (18.0) (146.4)
Preferred
dividends (8.7) - - - (8.7)
- -------------------------------------------------------------------------
Net income/
(loss) $ 121.8 $ 0.4 $ 3.5 $ (38.9) $ 86.8
- -------------------------------------------------------------------------
Total assets $ 8,466.4 $848.2 $ 720.5 $ 727.1 $10,762.2
- -------------------------------------------------------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. Merger-Related Shareholder Lawsuits
An action was brought in the federal court in New York alleging that
NU, Consolidated Edison, Inc. (Con Edison), and NU's Trustees violated
their fiduciary duties and Section 14(a) of the Securities Exchange
Act of 1934 by failing to disclose, in the joint proxy statement
relating to the proposed merger between NU and Con Edison (Merger),
material information about the Indian Point nuclear generating plant.
To avoid a preliminary injunction proceeding in this action, and the
possibility of the cancellation of the April 14, 2000, shareholders'
vote on the Merger, Con Edison and NU sent a supplement to the joint
proxy statement to the companies' shareholders concerning Indian Point
issues. The parties recently reached a final settlement of this
action, subject to court approval, by which a class will be certified,
any counsel fees awarded by the court will be paid by Con Edison, the
Section 14(a) claim will be dismissed with prejudice and the breach of
fiduciary claim will be dismissed without prejudice. The court issued
a preliminary order certifying the class action for settlement
purposes and on July 13, 2001, entered judgment approving the
settlement. Related class actions pending in the New York state
courts have also been dismissed as moot.
2. Property Tax Litigation - City of Meriden, Connecticut
In fiscal year 1996, both Yankee Gas and CL&P received revised
property tax bills from the City of Meriden (City) for tax years 1991
through 1994. The revised tax bills reflected a reassessment of
property using a different methodology than the method previously
accepted by the City. As a result of the City's reassessment, CL&P's
total assessment doubled, while Yankee Gas' nearly tripled. For the
tax years 1995 through 1999, the City continued to assess the personal
property of CL&P and Yankee Gas using the new method.
Yankee Gas and CL&P filed a lawsuit against the City, which included,
among other things, an appeal of the reassessments and a claim of
wrongful assessment. A trial commenced in December 2000.
Throughout the dispute with the City concerning the revaluation of
personal property for the tax years 1991 through 1999, Yankee Gas and
CL&P continued to pay their respective tax obligations to the City,
however withholding 25 percent of that amount as allowed by law.
On April 20, 2001, the Connecticut Superior Court ruled in favor of
Yankee Gas and CL&P and ordered that the City refund a total of
approximately $15.6 million to the two companies. This amount
includes interest at 8 percent plus the payments made under protest.
In total, the City was ordered to pay Yankee Gas $10.4 million and
CL&P $5.2 million.
On May 7, 2001, the City filed its appeal of the April 20, 2001 decision,
raising nine separate issues for the Connecticut Appellate Court to consider.
On May 8, 2001, and as amended on May 25, 2001, the City filed a motion to
stay the execution of the judgment pending the appeal of the decision.
On June 27, 2001, the City was ordered to pay Yankee Gas and CL&P by
July 15, 2001, all interest on the judgment and also make monthly interest
payments. Accordingly, the City's first payment was due July 15, 2001, in
the approximate amount of $0.4 million and, thereafter, payments of
approximately $0.1 million must be made by the 15th of each month.
The July 2001 payment was not made per agreement of the parties, as
settlement discussions are in process covering the lawsuit, all related
appeals and any disputes relating to the companies' October 1, 2000
assessment.
3. Federal Energy Regulatory Commission (FERC) - Installed
Capability (ICAP) Deficiency Charge
On March 30, 2001, the First Circuit U.S. Appeals Court (First
Circuit) granted a request for stay in the ICAP proceeding and, in
response, FERC made effective a $0.17 per kilowatt-month charge for an
indefinite period beginning April 1, 2001. On April 27, 2001, NU
filed a request for a rehearing of FERC's order claiming that it was
unlawful to put into effect a rate that has never been found to be
just and reasonable under the Federal Power Act. On May 4, 2001, FERC
denied the rehearing request.
On June 4, 2001, the Independent System Operator (ISO) filed a
proposed ICAP charge that would range from $2.00 to $4.87, depending
on whether a load-serving entity had been deficient in prior months
and on market conditions. The ISO requested that the proposed rate be
made effective August 1, 2001, until it files a superseding proposal
for implementation beginning in 2002.
On June 8, 2001, the First Circuit issued its decision supporting the
$8.75 charge and lifting its stay. The court permitted the FERC to
reinstate the $8.75 charge "at once" or at a "future date." On June 15,
2001, NU filed a motion with FERC to reinstitute the $8.75 rate
immediately to make it effective as of April 1, 2001 (the date
specified in the order on appeal). A number of parties have filed
pleadings both supporting and opposing immediate reinstatement of the
$8.75 deficiency charge.
On July 2, 2001, NU filed its appeal of the March 30, 2001, and May 4,
2001, FERC orders imposing the $0.17 rate from August 1, 2000 to
April 1, 2001.
4. Yankee Gas Rate Filing
On July 24, 2001, Yankee Gas filed a request with the Connecticut
Department of Public Utility Control to raise the base rate that
Yankee Gas charges for natural gas service by an average of 7.64
percent, or $29.2 million annually. If approved, the new rates would
take effect January 1, 2002. Yankee Gas is also requesting approval
of a special mechanism to recover future capital costs for an
estimated $190 million system expansion effort, which is already under
way, and construction of a new liquefied natural gas facility. In
addition, Yankee Gas is proposing an earnings sharing mechanism under
which all earnings in excess of 100 basis points, above an allowed
return on equity, be shared 50 percent/50 percent between customers
and shareholders. The rate filing also includes a service quality
plan that would either reward or penalize Yankee Gas based on its
performance relative to five service quality measures. The rate case
will be conducted in two phases. The first phase will determine
Yankee Gas' revenue requirements. A decision on Phase 1 is expected
in late 2001. Phase 2 is expected to commence in early 2002.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NU. At the Annual Meeting of Shareholders of NU held on June 28,
2001, the following eleven nominees were elected to serve on the Board
of Trustees by the votes set forth below:
For Withheld Total
1. Cotton M. Cleveland 112,932,772 2,851,595 115,784,367
2. Sanford Cloud, Jr. 112,984,106 2,800,261 115,784,367
3. E. Gail de Planque 113,009,834 2,774,533 115,784,367
4. John H. Forsgren 113,052,343 2,732,024 115,784,367
5. Raymond L. Golden 113,019,643 2,764,724 115,784,367
6. Elizabeth T. Kennan 112,821,779 2,962,588 115,784,367
7. Michael G. Morris 112,886,927 2,897,440 115,784,367
8. William J. Pape II 112,760,975 3,023,392 115,784,367
9. Robert E. Patricelli 112,988,008 2,796,359 115,784,367
10. John F. Swope 112,980,651 2,803,716 115,784,367
11. John F. Turner 113,000,749 2,783,618 115,784,367
NU's shareholders also adopted an employee share purchase plan. The
vote approving such plan was 108,593,824 votes in favor and 5,787,587
votes against, with 1,402,956 abstentions and broker nonvotes.
NU's shareholders also ratified the Board of Trustees' selection of
Arthur Andersen LLP to serve as independent auditors of NU and its
subsidiaries for 2001. The vote ratifying such selection was
112,667,082 votes in favor and 2,244,457 votes against, with 872,828
abstentions and broker nonvotes.
CL&P. In a written Consent in Lieu of an Annual Meeting of
Stockholders of CL&P (Consent) dated May 1, 2001, stockholders voted
to fix the number of directors for the ensuing year at three. The
vote fixing the number of directors at three was 7,584,884 shares in
favor, representing 100 percent of the issued and outstanding shares
of common stock of CL&P. Through the Consent, the following three
directors were elected, each by a vote of 7,584,884 shares in favor,
to serve on the Board of Directors for the ensuing year: David H.
Boguslawski, Cheryl W. Grise, and Rodney O. Powell.
PSNH. At the Annual Meeting of Stockholders of PSNH held on May 14,
2001, stockholders voted to fix the number of directors for the
ensuing year at eight. The vote fixing the number of directors at
eight was 388 shares in favor, representing 100 percent of the issued
and outstanding shares of common stock of PSNH. At the Annual
Meeting, the following eight directors were elected, each by a vote of
388 shares in favor, to serve on the Board of Directors for the
ensuing year: David H. Boguslawski, John C. Collins, John H. Forsgren,
Cheryl W. Grise, Gerald Letendre, Gary A. Long, Michael G. Morris, and
Jane E. Newman.
WMECO. In a written Consent in Lieu of an Annual Meeting of
Stockholders of WMECO (Consent) dated June 7, 2001, stockholders voted
to fix the number of directors for the ensuing year at eight. The vote
fixing the number of directors at eight was 590,093 shares in favor,
representing 100 percent of the issued and outstanding shares of
common stock of WMECO. Through the Consent, the following eight
directors were elected, each by a vote of 590,093 shares in favor, to
serve on the Board of Directors for the ensuing year: David H.
Boguslawski, James E. Byrne, John H. Forsgren, Cheryl W. Grise, Kerry
J. Kuhlman, Paul J. McDonald, Michael G. Morris, and Melinda M.
Phelps.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits
Exhibit No. Description
----------- -----------
15 Arthur Andersen LLP Letter Regarding Unaudited
Financial Information
(b) Reports on Form 8-K:
NU, CL&P and WMECO filed current reports on Form 8-K dated
April 11, 2001, disclosing:
o NU's news release announcing the retirement of $830 million of
public debt and preferred securities.
NU filed a current report on Form 8-K dated April 24, 2001,
disclosing:
o NU's earnings press release for the first quarter ended March 31, 2001.
NU, PSNH and PSNH Funding LLC (PSNH Funding) filed current
reports on Form 8-K dated April 25, 2001, disclosing:
o The closing on the sale of $525 million of rate reduction bonds
through PSNH's subsidiary, PSNH Funding.
NU, WMECO and WMECO Funding LLC (WMECO Funding) filed current
reports on Form 8-K dated May 17, 2001, disclosing:
o The closing on the sale of $155 million of rate reduction
certificates through WMECO's subsidiary, WMECO Funding.
NU filed a current report on Form 8-K dated June 28, 2001,
disclosing:
o The declaration of a dividend of $0.125 per share payable on
September 28, 2001, to shareholders of record as of September 1, 2001,
and the announcement of three proposed strategic transmission projects.
NU filed a current report on Form 8-K dated July 10, 2001,
disclosing:
o The authorization by the NU Board of Trustees of the repurchase
of up to 15 million NU common shares by July 1, 2003, and the election
of two new trustees.
NU filed a current report on Form 8-K dated July 24, 2001,
disclosing:
o NU's earnings press release for the second quarter and six months
ended June 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
NORTHEAST UTILITIES
-------------------
Registrant
Date: August 9, 2001 By /s/ John H. Forsgren
-------------------------------------
John H. Forsgren
Vice Chairman,
Executive Vice President
and Chief Financial Officer
Date: August 9, 2001 By /s/ John J. Roman
-------------------------------------
John J. Roman
Vice President and Controller
- -------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
THE CONNECTICUT LIGHT AND POWER COMPANY
---------------------------------------
Registrant
Date: August 9, 2001 By /s/ Randy A. Shoop
-------------------------------------
Randy A. Shoop
Treasurer
Date: August 9, 2001 By /s/ John P. Stack
-------------------------------------
John P. Stack
Controller
- -------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
---------------------------------------
Registrant
Date: August 9, 2001 By /s/ David R. McHale
-------------------------------------
David R. McHale
Vice President and Treasurer
Date: August 9, 2001 By /s/ John J. Roman
-------------------------------------
John J. Roman
Vice President and Controller
- -------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
--------------------------------------
Registrant
Date: August 9, 2001 By /s/ David R. McHale
-------------------------------------
David R. McHale
Vice President and Treasurer
Date: August 9, 2001 By /s/ John J. Roman
-------------------------------------
John J. Roman
Vice President and Controller
Exhibit 15
To Northeast Utilities:
We are aware that Northeast Utilities has incorporated by reference in
its Registration Statements No. 33-34622, No. 33-40156, No. 33-44814,
No. 33-63023, No. 33-55279, No. 33-56537, No. 333-52413, No. 333-
52415, and No. 333-85613, its Form 10-Q for the quarter ended June 30,
2001, which includes our report dated August 9, 2001, covering the
unaudited interim financial information contained therein. Pursuant
to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified
by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act. It should be noted that we
have not performed any procedures subsequent to August 9, 2001.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Hartford, Connecticut
August 9, 2001