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 September 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 October 31, 2001
- ------------------------ -------------------------------
Northeast Utilities
Common shares, $5.00 par value 132,037,520 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
NHPUC........................... New Hampshire Public Utilities 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
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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 -
September 30, 2001 and December 31, 2000.............. 2
Consolidated Statements of Income -
Three Months and Nine Months Ended
September 30, 2001 and 2000........................... 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000......... 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 6
Report of Independent Public Accountants.............. 20
The Connecticut Light and Power Company
and Subsidiaries
Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000.............. 22
Consolidated Statements of Income -
Three Months and Nine Months Ended
September 30, 2001 and 2000........................... 24
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000......... 25
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 26
Public Service Company of New Hampshire
and Subsidiaries
Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000.............. 32
Consolidated Statements of Income -
Three Months and Nine Months Ended
September 30, 2001 and 2000........................... 34
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000......... 35
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 36
Western Massachusetts Electric Company and Subsidiary
Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000.............. 42
Consolidated Statements of Income -
Three Months and Nine Months Ended
September 30, 2001 and 2000........................... 44
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000......... 45
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 46
Notes to Financial Statements (unaudited - all companies).. 50
Part II. Other Information
Item 1. Legal Proceedings................................ 63
Item 6. Exhibits and Reports on Form 8-K................. 63
Signatures........................................................... 66
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30,
2001 December 31,
(Unaudited) 2000
---------------- ----------------
(Thousands of Dollars)
ASSETS
- ------
Property, Plant and Equipment, at Cost:
Electric............................................ $ 6,036,587 $ 9,370,176
Gas and other....................................... 870,179 861,727
---------------- ----------------
6,906,766 10,231,903
Less: Accumulated provision for depreciation..... 3,466,409 7,041,279
---------------- ----------------
3,440,357 3,190,624
Construction work in progress....................... 259,024 228,330
Nuclear fuel, net................................... 25,022 128,261
---------------- ----------------
Total net property, plant and equipment.......... 3,724,403 3,547,215
---------------- ----------------
Other Property and Investments:
Nuclear decommissioning trusts, at market........... 59,971 740,058
Other, at cost...................................... 346,028 199,768
---------------- ----------------
405,999 939,826
---------------- ----------------
Current Assets:
Cash and cash equivalents........................... 130,913 200,017
Investments in securitizable assets................. 35,592 98,146
Receivables, net.................................... 699,061 472,863
Unbilled revenues................................... 78,959 121,090
Fuel, materials and supplies, at average cost....... 103,566 163,711
Special deposits.................................... 78,943 2,624
Prepayments and other............................... 138,709 91,904
---------------- ----------------
1,265,743 1,150,355
---------------- ----------------
Deferred Charges:
Regulatory assets .................................. 4,046,608 3,910,801
Goodwill and other purchased intangible assets, net. 323,476 324,389
Prepaid pension..................................... 206,803 139,546
Other .............................................. 319,840 205,017
---------------- ----------------
4,896,727 4,579,753
---------------- ----------------
Total Assets......................................... $ 10,292,872 $ 10,217,149
================ ================
</Table>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 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; 148,890,640 shares issued and
132,971,030 shares outstanding in 2001 and
148,781,861 shares issued and 143,820,405 shares
outstanding in 2000.............................. $ 744,453 $ 693,345
Capital surplus, paid in.......................... 882,819 927,059
Temporary equity from stock forward............... - 215,000
Deferred contribution plan - employee stock
ownership plan.................................. (105,321) (114,463)
Retained earnings................................. 644,886 495,873
Accumulated other comprehensive (loss)/income..... (32,986) 1,769
---------------- ----------------
Total common shareholders' equity.......... 2,133,851 2,218,583
Preferred stock..................................... 116,200 151,200
Long-term debt...................................... 1,930,620 2,029,593
---------------- ----------------
Total capitalization....................... 4,180,671 4,399,376
---------------- ----------------
Rate Reduction Bonds.................................. 2,118,400 -
---------------- ----------------
Minority Interest in Consolidated Subsidiary.......... - 100,000
---------------- ----------------
Obligations Under Capital Leases...................... 16,990 47,234
---------------- ----------------
Current Liabilities:
Notes payable to banks.............................. 436,500 1,309,977
Long-term debt and preferred stock - current portion 24,437 340,041
Obligations under capital leases - current portion.. 838 112,645
Accounts payable.................................... 634,824 538,983
Accrued taxes....................................... 112,659 54,088
Accrued interest.................................... 93,344 41,131
Other............................................... 143,548 144,931
---------------- ----------------
1,446,150 2,541,796
---------------- ----------------
Deferred Credits and Other Long-Term Liabilities:
Accumulated deferred income taxes................... 1,409,294 1,585,494
Accumulated deferred investment tax credits......... 123,246 153,155
Decommissioning obligation - Millstone 1............ - 692,560
Deferred contractual obligations.................... 220,747 244,608
Other............................................... 777,374 452,926
---------------- ----------------
2,530,661 3,128,743
---------------- ----------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities.................. $ 10,292,872 $ 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 Nine Months Ended
September 30, September 30,
------------------------------------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
(Thousands of Dollars, except share information)
Operating Revenues................................... $ 1,723,894 $ 1,581,947 $ 5,107,732 $ 4,379,241
-------------- -------------- -------------- --------------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power....... 1,178,290 928,435 3,319,007 2,491,896
Other........................................... 184,815 223,137 592,757 638,634
Maintenance........................................ 59,733 59,847 208,152 181,337
Depreciation....................................... 43,562 58,153 154,082 177,491
Amortization of regulatory assets, net............. 104,468 75,010 900,459 188,460
Federal and state income taxes..................... 26,853 61,582 118,035 171,452
Taxes other than income taxes...................... 39,648 59,170 170,739 178,857
Loss/(gain) on sale of utility plant............... - 852 (643,909) 852
-------------- -------------- -------------- --------------
Total operating expenses...................... 1,637,369 1,466,186 4,819,322 4,028,979
-------------- -------------- -------------- --------------
Operating Income..................................... 86,525 115,761 288,410 350,262
-------------- -------------- -------------- --------------
Other Income/(Loss):
Gain related to Millstone sale..................... - - 201,856 -
Loss on share repurchase contracts................. - - (35,394) -
Nuclear related costs.............................. - (971) - (19,344)
Other, net......................................... 17,724 14,922 24,182 11,709
Income taxes....................................... 1,668 16,029 (47,929) 44,984
-------------- -------------- -------------- --------------
Other income, net............................. 19,392 29,980 142,715 37,349
-------------- -------------- -------------- --------------
Income before interest charges................ 105,917 145,741 431,125 387,611
-------------- -------------- -------------- --------------
Interest Charges:
Interest on long-term debt......................... 30,995 47,953 109,906 156,137
Interest on rate reduction bonds................... 30,883 - 57,703 -
Other interest..................................... 8,404 29,493 41,413 67,715
-------------- -------------- -------------- --------------
Interest charges, net......................... 70,282 77,446 209,022 223,852
-------------- -------------- -------------- --------------
Income after interest charges................. 35,635 68,295 222,103 163,759
Preferred Dividends of Subsidiaries.................. 1,004 2,752 6,145 11,423
-------------- -------------- -------------- --------------
Income before cumulative effect of
accounting change........................... 34,631 65,543 215,958 152,336
Cumulative effect of accounting change,
net of tax benefit of $14,908...................... - - (22,432) -
-------------- -------------- -------------- --------------
Net Income........................................... $ 34,631 $ 65,543 $ 193,526 $ 152,336
============== ============== ============== ==============
Basic Earnings Per Common Share:
Income before cumulative effect of
accounting change................................ $ 0.26 $ 0.46 $ $1.57 $ $1.08
Cumulative effect of accounting change,
net of tax benefit............................... - - (0.16) -
-------------- -------------- -------------- --------------
Basic Earnings per Common Share...................... $ 0.26 $ 0.46 $ 1.41 $ 1.08
============== ============== ============== ==============
Fully Diluted Earnings Per Common Share:
Income before cumulative effect of
accounting change................................ $ 0.26 $ 0.45 $ $1.57 $ $1.08
Cumulative effect of accounting change,
net of tax benefit............................... - - (0.16) -
-------------- -------------- -------------- --------------
Fully Diluted Earnings Per Common Share.............. $ 0.26 $ 0.45 $ 1.41 $ 1.08
============== ============== ============== ==============
Basic Common Shares Outstanding (average)............ 133,540,631 143,535,147 137,120,689 140,829,337
============== ============== ============== ==============
Fully Diluted Common Shares Outstanding (average).... 133,869,227 144,189,458 137,457,694 141,449,402
============== ============== ============== ==============
</Table>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Nine Months Ended
September 30,
---------------------------------
2001 2000
--------------- --------------
(Thousands of Dollars)
Operating Activities:
Income after interest charges............................... $ 222,103 $ 163,759
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation.............................................. 154,082 177,491
Deferred income taxes and investment tax credits, net..... (141,460) (28,326)
Amortization of regulatory assets, net.................... 900,459 188,460
Net deferral of recoverable energy costs.................. (37,402) (5,457)
(Gain)/loss on sale of utility plant...................... (643,909) 852
Cumulative effect of accounting change.................... (22,432) -
Net other sources of cash................................. 18,269 6,310
Changes in working capital:
Receivables and unbilled revenues, net.................... (184,067) (62,875)
Fuel, materials and supplies.............................. 60,145 4,908
Accounts payable.......................................... 95,841 113,576
Accrued taxes............................................. 58,571 (37,913)
Investments in securitizable assets....................... 62,554 44,985
Other working capital (excludes cash)..................... (72,294) (149,342)
---------------- --------------
Net cash flows provided by operating activities............... 470,460 416,428
---------------- --------------
Investing Activities:
Investments in plant:
Electric, gas and other utility plant..................... (314,543) (218,766)
Nuclear fuel.............................................. (3,502) (38,223)
---------------- --------------
Net cash flows used for investments in plant................ (318,045) (256,989)
Investments in nuclear decommissioning trusts............... (119,272) (28,415)
Net proceeds from the sale of utility plant................. 1,035,185 -
Buyout/buydown of IPP contracts............................. (1,128,502) -
Other investment activities, net............................ (225,203) (46,826)
Payment for the purchase of Yankee, net of cash acquired.... - (260,347)
---------------- --------------
Net cash flows used in investing activities................... (755,837) (592,577)
---------------- --------------
Financing Activities:
Issuance of common shares................................... 1,751 2,699
Repurchase of common shares................................. (241,589) -
Issuance of long-term debt.................................. 263,000 26,477
Issuance of rate reduction bonds............................ 2,118,400 -
Net (decrease)/increase in short-term debt.................. (873,477) 779,338
Reacquisitions and retirements of long-term debt............ (660,385) (469,095)
Reacquisitions and retirements of preferred stock........... (60,768) (126,039)
Retirement of monthly income preferred securities........... (100,000) -
Retirement of capital lease obligation...................... (180,000) -
Cash dividends on preferred stock........................... (6,145) (11,423)
Cash dividends on common shares............................. (44,514) (42,990)
---------------- --------------
Net cash flows provided by financing activities............... 216,273 158,967
---------------- --------------
Net decrease in cash and cash equivalents..................... (69,104) (17,182)
Cash and cash equivalents - beginning of period............... 200,017 255,154
---------------- --------------
Cash and cash equivalents - end of period..................... $ 130,913 $ 237,972
================ ==============
</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 and
Second Quarter 2001 Form 10-Qs, current reports on Form 8-K dated
July 10, 2001, July 24, 2001, October 11, 2001, October 23, 2001, and
October 29, 2001, and the 2000 Form 10-K.
FINANCIAL CONDITION
Overview
Northeast Utilities (NU) reported third quarter 2001 earnings of $34.6
million, or $0.26 per share on a fully diluted basis, compared with
earnings of $65.5 million, or $0.45 per share on a fully diluted
basis, for the same period of 2000. The decline in third quarter 2001
results is attributable to the decline, which had been expected, in
the earnings at NU's regulated businesses as a result of industry
restructuring, rate reductions, the sale of the Millstone nuclear units,
and losses at NU's competitive energy subsidiaries.
Strong third quarter 2000 earnings were significantly impacted by
positive nuclear performance in 2000. The operations of the Millstone
units contributed approximately $13 million of earnings in the third
quarter of 2000, but no earnings during the same period of 2001, as a
result of the aforementioned sale. In addition, third quarter 2001
results for The Connecticut Light and Power Company (CL&P) were
negatively affected by a $21 million noncash reduction in annual rates
that took effect in late June 2001.
Earnings at Public Service Company of New Hampshire (PSNH) and North
Atlantic Energy Corporation (NAEC) totaled $21.8 million in the third
quarter of 2001, compared with $36.1 million in the third quarter of
2000. Lower earnings at PSNH and NAEC resulted primarily from New
Hampshire electric utility restructuring, which included retail rate
decreases of 16 percent since October 1, 2000, and were partially
offset by lower interest and amortization costs.
Partially offsetting the lower level of earnings was a lower average
share count resulting from continuing share repurchases, as well as
higher regulated electric sales. Primarily as a result of more
favorable weather conditions, third quarter 2001 retail sales rose 4.7
percent from the same period of 2000. For the nine months ended
September 30, 2001, regulated retail electric sales were up 3.0
percent over the first nine months of 2000. The higher regulated
retail electric sales added $0.05 per share to earnings in the third
quarter of 2001, compared with the same period of 2000, and $0.10 per
share for the first nine months of 2001. As a result of industry
restructuring, changes in sales have less of an impact on the
regulated companies' net income, as approximately two-thirds of their
rates are fully reconciling.
NU's competitive energy subsidiaries lost $9.7 million, or $0.07 per
share, in the third quarter of 2001, compared with earnings of $4.5
million, or $0.03 per share, in the third quarter of 2000. The
earnings of Select Energy, Inc. (Select Energy), NU's competitive
energy marketing subsidiary, were negatively impacted by high
purchased-power costs during extremely hot weather in the latter part
of July 2001 and in the first half of August 2001.
For the nine months ended September 30, 2001, NU earned $193.5
million, or $1.41 per share on a fully diluted basis, compared with
earnings of $152.3 million, or $1.08 per share on a fully diluted
basis, for the same period of 2000. Improved results for the nine
months ended September 30, 2001, include an after-tax gain of $124.8
million, or $0.91 per share, in the first quarter of 2001 associated
with the sale of the Millstone units to Dominion Resources, Inc.
(Dominion). Excluding significant nonrecurring items, such as the gain
related to the sale of the Millstone units, the adoption of Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, and an
after-tax mark-to-market loss of $35.4 million, or $0.26 per share,
associated with the repurchase of NU shares in the first half of 2001,
NU earned $126.5 million, or $0.92 per share, in the first nine months
of 2001. The primary reasons for the decline in recurring earnings for
the nine months ended September 30, 2001, compared with the same
period in 2000, were the strong operating performance of the Millstone
units in 2000, and retail rate decreases in late 2000 and 2001.
For 2001, NU expects to earn toward the lower end of its previously
announced earnings range of $1.35 to $1.50 per share, excluding
significant nonrecurring items, primarily as a result of a higher than
projected average share count.
NU's future earnings per share will benefit from the ongoing
repurchase of its common shares. The accretive impact of those
repurchases added approximately $0.02 per share to NU's third quarter
earnings in 2001, compared with the same period of 2000. NU estimates
that share repurchases will continue to benefit year-over-year
earnings per share comparisons in the upcoming quarters, assuming NU
continues to repurchase its shares at the same rate at which it bought
back shares in September 2001 and October 2001. During that time
period, NU repurchased nearly 1 million shares per month under the NU
Board of Trustees' July 2001 authorization to repurchase up to 15
million shares by July 2003. NU had approximately 133 million shares
outstanding as of September 30, 2001, and has continued to repurchase
shares in the fourth quarter of 2001. NU expects to continue
repurchasing shares in 2002. The 2002 repurchases may be for several
million shares, depending on other opportunities that may arise for
the use of the cash.
Future Outlook
NU has essentially completed the restructuring of its electric utility
companies. The generation assets of CL&P and Western Massachusetts
Electric Company (WMECO) have been divested, with the divestiture of
CL&P's and NAEC's ownership interests in Seabrook expected in late
2002. As NU enters a more competitive environment, it continues to
look for ways to grow its regulated businesses and its unregulated
business investments. These opportunities could have a significant
impact on NU's future earnings.
NU estimates that it will earn between $1.40 per share and $1.65 per
share in 2002. One of the most significant variables in achieving
projected 2002 earnings is the ability of Select Energy to meet its
anticipated earnings growth. Select Energy's performance in 2002 will
be largely determined by its ability to renew existing energy supply
contracts, to secure new business, and to improve the performance of
its wholesale electric supply contract with CL&P. Select Energy is
contracted to provide 50 percent of the approximately 23 billion
kilowatt-hour annual standard offer load of CL&P through December 31,
2003. That contract, which requires the sale of electricity to CL&P
for approximately $0.045 per kilowatt-hour, has not been profitable
for Select Energy since it took effect on January 1, 2000. Select
Energy has already fully hedged its on-peak estimated energy
requirements and has hedged most of its off-peak energy requirements
to serve the CL&P contract in both 2002 and 2003.
Also in 2002, NU expects to have a reduced benefit as a result of a
lower pension credit. This is due to weaker equity markets, which
have reduced the value of NU's pension investments. NU expects to
record a pretax pension credit of approximately $71 million in 2002,
compared to an estimated $100 million recorded in 2001.
In the future, NU is targeting a return on equity for its regulated
subsidiaries of between 10 percent and 13 percent. Currently, most of
NU's regulated subsidiaries are achieving within that range of rate of
return. NU seeks to achieve a minimum return on equity for its
competitive energy subsidiaries of 15 percent over the life of its
investments. NU has not yet achieved that level of return for those
subsidiaries, taken as a whole.
Liquidity
As a result of the sale of the Millstone units in March 2001, and the
securitization of CL&P, PSNH and WMECO stranded costs in the first
five months of 2001, NU continued to maintain a high degree of
liquidity through the third quarter of 2001. At no point during the
quarter did any NU subsidiary borrow under their credit lines. Cash
held by NU parent and CL&P was more than adequate to fund the short-
term borrowing needs of all NU subsidiaries that required day-to-day
borrowings. As of September 30, 2001, the NU system maintained $130.9
million of cash and cash equivalents.
In part because of the NU system's liquidity, most of the NU system's
credit ratings are currently being reviewed for possible upgrade. NU
expects those reviews to be completed before the end of 2001.
The liquidity of NU parent was further improved on October 18, 2001,
when Northeast Generation Company (NGC) sold $440 million of senior
secured bonds that are nonrecourse to NU. NGC used the proceeds and
cash on hand to repay $346.5 million of bank debt, return $75 million
to NU parent, fund a required debt service reserve, and pay various
transaction costs. In conjunction with the sale of these bonds, NGC
purchased a treasury lock at an average base yield of 5.14 percent to
hedge a portion of the interest rate risk associated with these bonds.
The $440 million includes $120 million of bonds that mature on
October 15, 2005, at an interest rate of 4.998 percent, and $320
million of bonds that mature on October 15, 2026, at an interest rate
of 8.812 percent.
In November 2001, NAEC expects to extend for 364 days, $90 million of
variable-rate bank notes that represent NAEC's sole outstanding debt.
Also, in November, NU expects to renew $650 million in revolving
credit lines, including $300 million to support CL&P, PSNH, WMECO, and
Yankee Gas Services Company (Yankee Gas), and $350 million for the use
of NU parent.
PSNH has applied to the New Hampshire Public Utilities Commission
(NHPUC) to refinance $287.5 million of tax-exempt bonds carrying
interest rates of 7.65 percent and 7.5 percent. PSNH is considering
using a combination of variable-rate and fixed-rate tax-exempt bonds
for the refinancing. As a result of the current low interest rate
environment, PSNH expects to save several million dollars annually in
interest costs as a result of the refinancing.
In mid-December 2001, Holyoke Water Power Company (HWP) is expected to
complete the sale of 45 megawatts (MW) of hydroelectric generation
facilities on and near the Connecticut River in Massachusetts, as well
as certain distribution assets, to the City of Holyoke's Gas &
Electric Department for approximately $17.5 million. In connection
with that sale, HWP will likely repay approximately $38 million of
outstanding debt.
On September 28, 2001, NU paid a quarterly dividend of $0.125 per
share, an increase of 25 percent from a quarterly dividend of $0.10
per share declared during the previous six quarters. On October 9,
2001, the NU Board of Trustees declared a $0.125 per share dividend
for payment on December 31, 2001. NU anticipates increasing its
dividend by approximately 10 percent annually and eventually paying
out approximately 50 percent of the aggregate earnings of its
regulated companies in the form of common dividends.
Over the coming years, management expects PSNH, WMECO and NAEC to pay
out substantially all of their earnings as dividends to the parent
company. Dividends at CL&P and Yankee Gas may be significantly less
should those companies receive regulatory approval for the major
capital projects they have proposed.
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 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 earnings were essentially break
even before the cumulative effect of an accounting change related to
the adoption of SFAS No. 133, as amended, for the nine months ended
September 30, 2001, compared with earnings of $8 million for the nine
months ended September 30, 2000. Unconsolidated revenues for the
competitive energy subsidiaries were $2.1 billion for the nine months
ended September 30, 2001, compared with $1.5 billion for the nine
months ended September 30, 2000. The increased revenues are the
result of sales growth and higher energy prices. CL&P's standard
offer purchases from Select Energy represented $495.3 million of the
total competitive energy subsidiaries' revenues for the nine months
ended September 30, 2001, compared with $485 million for the nine
months ended September 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
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
September 30, 2001, the portfolio had a positive 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. The position has increased in value due to
the decline in energy prices in the region and new transactions
entered into during the first nine months of 2001.
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
The NU system subsidiaries have proposed a number of capital projects
that would significantly increase their investment in the electric
transmission and natural gas distribution systems in Connecticut. CL&P
has announced plans to invest approximately $520 million by the end of
2006 to construct two new 345,000 volt transmission lines from inland
Connecticut into Norwalk, Connecticut and another $40 million to help
rebuild an existing 138,000 volt transmission line beneath Long Island
Sound. The investment in transmission lines and continued upgrading
of the electric distribution system are expected to increase CL&P's
net investment in electric plant by an estimated $231 million in 2001
and between $279 million and $353 million in each of the years 2002
through 2005. Additionally, NU has proposed building a new direct
current transmission line by 2004 from Norwalk, Connecticut to western
Long Island and has sought Federal Energy Regulatory Commission (FERC)
approval to conduct an open season auction and negotiate final
contracts for the scheduling rights on the line. The project's final
size and cost will be determined after an auction process which NU
plans to complete in early 2002.
All of these projects are in the developmental or governmental
approval stage, and management cannot yet determine whether the
projects will be built as proposed. If current plans are implemented
on schedule, NU would likely require additional external financing to
construct these projects. If all of the transmission projects are
built as proposed, the NU system's net investment in electric
transmission would increase to nearly $1.5 billion by the end of 2006.
Yankee Gas has proposed a significant expansion of its natural gas
delivery system in Connecticut, costing up to an estimated $190
million through 2005. Yankee Gas also has proposed construction of a
liquefied natural gas storage terminal in Connecticut at an estimated
cost of between $50 million and $60 million. In July 2001, Yankee Gas
filed an application with the Connecticut Department of Public Utility
Control (DPUC) to increase customers' rates by an average of 7.64
percent, or $29 million, to support the proposed system reliability
projects. A positive decision from the DPUC could result in Yankee
Gas investing nearly $400 million in plant from 2002 through 2005.
Yankee Gas has proposed an infrastructure recovery mechanism to allow
recovery of certain system expansion costs on an annual basis. A
negative decision would likely result in a considerable scaling back
of those plans.
If NU is able to complete the aforementioned capital investments, it
anticipates that its net plant will increase from approximately $3.7
billion as of September 30, 2001, to nearly $6.5 billion at the end of
2006.
Additionally, on October 2, 2001, NU announced that Select Energy
reached an agreement to acquire Niagara Mohawk Energy Marketing (NMEM)
from Niagara Mohawk Holdings, Inc. of Syracuse, New York for
approximately $30 million, subject to adjustment at closing. NMEM,
whose business is similar to that of Select Energy, has a significant
presence in New York. NMEM's revenues are expected to exceed $600
million for the year ended December 31, 2001. In part because of the
NMEM acquisition, NU's competitive energy subsidiaries' revenues are
expected to increase to $3.5 billion in 2002 from $2.8 billion in
2001. The NMEM transaction is awaiting approval from the FERC and is
expected to close before the end of 2001. NU management is seeking
additional investment opportunities in acquiring generation in other
power pools in the Northeast area of the United States, but has not yet
identified any specific projects.
Restructuring and Rate Matters
Connecticut - CL&P: Beginning on August 2, 2001, the DPUC authorized
CL&P to assess a charge of approximately $0.002 per kilowatt-hour on
customer bills to collect deferred fuel costs. The charge will remain
in effect through December 2003 and collect approximately $98.5
million over the 29-month period.
On September 27, 2001, CL&P filed its application with the DPUC for
approval of the disposition of the proceeds from the sale of the
Millstone units to Dominion. This application described and requested
DPUC approval for CL&P's treatment of its share of the proceeds from
the sale. A decision from the DPUC is expected in the first half of
2002.
On September 28, 2001, the DPUC issued a final order in CL&P's 2000
Competitive Transition Assessment (CTA)/System Benefits Charge (SBC)
reconciliation docket. This order adjusted CL&P's 2002 revenue
requirements by reducing the SBC rate by $21.3 million and ordering
CL&P to adjust rates by a total of $42.4 million, inclusive of the
$21.1 million adjustment addressed in CL&P's over-earnings docket,
beginning on January 1, 2002. Any excess CTA/SBC recovery is to be
used to accelerate recovery of stranded costs.
Connecticut - Yankee Gas: In July 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 to fund system
reliability projects and its proposed expansion and asked the DPUC to
implement a mechanism to allow additional increases over the following
three years, depending on the level of additional investment. A DPUC
final decision on the Yankee Gas rate case is due January 2, 2002.
New Hampshire: On July 27, 2001, PSNH filed an application with the
NHPUC seeking the recovery of $209 million of deferred fuel and
purchased power costs. The deferred costs are currently being
collected through PSNH's existing $0.034 per kilowatt-hour Stranded
Cost Recovery Charge. Hearings will begin in the spring of 2002.
On October 22, 2001, the NHPUC approved the restructuring of a high-
cost purchased power rate order for a wood-fired plant in New
Hampshire. On November 1, 2001, the NHPUC orally approved a
settlement providing for the buyout of another rate order for another
wood-fired plant. Together, the two decisions will result in net
present value savings of approximately $30 million over the original life
of the rate orders. Under the state's electric industry restructuring
law, PSNH is entitled to retain 20 percent of those savings, which
could result in a pretax benefit of approximately $6 million.
Massachusetts: During September 2001, WMECO issued a request for
proposal to parties interested in supplying energy for WMECO's
standard offer service beginning on January 1, 2002. In October 2001,
the Massachusetts Department of Telecommunications and Energy approved
a contract to serve approximately 600 MW of WMECO's standard offer
service during calendar 2002. Based on WMECO's solicitation for bids,
the price was fixed at $0.04829 per kilowatt-hour, a significant
reduction from the average rate of approximately $0.07258 per kilowatt-
hour that has been in effect in 2001.
For information regarding commitments and contingencies related to
restructuring and rate matters, see Note 2A, "Commitments and
Contingencies - Restructuring and Rate Matters," to the consolidated
financial statements.
Nuclear Plant Performance and Other Matters
Seabrook: Seabrook operated at a capacity factor of 83 percent through
the first nine months of 2001. Since returning from a scheduled
refueling outage on January 28, 2001, Seabrook operated at a capacity
factor of 93 percent through September 30, 2001. Seabrook's next
refueling outage is scheduled for May 2002. On September 28, 2001,
the NHPUC and the DPUC announced that they had selected J.P. Morgan as
the selling agent for Seabrook. Following due diligence on the part
of prospective bidders and selection of a winning bidder, management
expects a closing around the end of 2002. The NU system companies own
40.04 percent of Seabrook.
Vermont Yankee: In August 2001, the owners of the Vermont Yankee
nuclear power plant announced they would sell the unit to Entergy
Corporation. The price will be $180 million, $145 million for the
plant and $35 million for the nuclear fuel. NU subsidiaries own 16
percent of the unit, and under the terms of the sale, will continue to
buy 16 percent of the plant's output through March 2012 at fixed
prices. The sale requires several regulatory approvals and is
scheduled to close during the first half of 2002.
Millstone: On October 5, 2001, NU issued a report, following an
extensive search, concerning two missing fuel pins at the retired
Millstone 1 nuclear unit, which was sold to Dominion on March 31,
2001. As of September 30, 2001, costs related to this search totaled
$6.2 million. The report concluded that the pins are currently
located in one of four facilities licensed to store low or high-level
nuclear waste and that they are not a threat to public health and
safety. A follow-up review by the Nuclear Regulatory Commission
commenced shortly after the report was filed.
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 third
quarter of 2001 and the first nine months of 2001 are provided in the
table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
--------------------------
Third Nine
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $ 142 9% $728 17%
Operating Expenses:
Fuel, purchased and net
interchange power 250 27 827 33
Other operation (38) (17) (46) (7)
Maintenance - - 27 15
Depreciation (15) (25) (23) (13)
Amortization of regulatory
assets, net 29 39 712 (a)
Federal and state income taxes (35) (56) (54) (31)
Taxes other than income taxes (20) (33) (8) (5)
Gain on sale of utility plant - - (645) (a)
---- ---- ---- ----
Total operating expenses 171 12 790 20
---- ---- ---- ----
Operating income (29) (25) (62) (18)
---- ---- ---- ----
Other Income/(Loss):
Gain related to Millstone sale - - 202 (a)
Loss on share repurchase contracts - - (35) (a)
Nuclear related costs 1 (a) 19 (a)
Other, net 3 19 12 (a)
Income taxes (15) (90) (93) (a)
---- ---- ---- ----
Other income, net (11) (35) 105 (a)
Interest charges, net (7) (9) (15) (7)
Preferred dividends of subsidiaries (2) (64) (5) (46)
---- ---- ---- ----
Income before cumulative effect of
accounting change (31) (47) 63 42
Cumulative effect of accounting
change, net of tax benefit - - (22) (a)
---- ---- ---- ----
Net income $(31) (47)% $ 41 27%
==== ==== ==== ====
(a) Percent greater than 100.
Comparison of the Third Quarter 2001 to the Third Quarter of 2000
- -----------------------------------------------------------------
Operating Revenues
Total revenues increased by $142 million or 9 percent in the third
quarter of 2001, compared with the same period in 2000, primarily due
to higher revenues from the competitive energy companies ($198
million) and higher regulated retail revenues ($33 million), partially
offset by lower wholesale revenues for the regulated subsidiaries ($88
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 revenue increase is primarily due to
higher retail sales ($41 million), the increase in WMECO's standard
offer service rate ($16 million), and the recovery of previously
deferred fuel costs for CL&P ($9 million), partially offset by 5 and
11 percent rate decreases for PSNH that were effective October 1,
2000, and May 1, 2001, respectively ($33 million). Regulated retail
kilowatt-hour sales increased by 4.7 percent in 2001. Wholesale
revenues were lower due to the sale of Millstone at the end of the first
quarter of 2001 and lower energy sales.
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 for Select
Energy ($288 million which is net of purchases from other NU affiliates),
partially offset by lower energy costs for the regulated subsidiaries
($36 million).
Other Operation and Maintenance
Other operation and maintenance (O&M) expenses decreased by $38
million in 2001, primarily due to lower nuclear expenses ($53 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 ($10 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 of the regulated
subsidiaries.
Federal and State Income Taxes
Federal and state income taxes combined decreased in 2001, primarily
due to lower taxable income.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to the
settlement of a property tax appeal with the City of Meriden for CL&P
and Yankee Energy System, Inc. (Yankee).
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 the competitive
businesses and the Yankee merger, partially offset by interest
associated with the issuance of rate reduction bonds in 2001.
Comparison of the First Nine Months of 2001 to the First Nine Months of 2000
- ----------------------------------------------------------------------------
Operating Revenues
Total revenues increased by $728 million or 17 percent in the first
nine months of 2001, compared with the same period in 2000, primarily
due to higher revenues from the competitive energy companies ($645
million), higher Yankee revenues ($141 million) for the nine months
ended September 30, 2001, as compared to the seven months ended
September 30, 2000 (March 1, 2000 merger date), and higher regulated
retail revenues ($60 million), partially offset by lower transmission
revenues ($21 million) and lower wholesale regulated revenues ($91
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 revenue increase is primarily due to
higher retail sales ($76 million), the increase in WMECO's standard
offer service rate ($45 million), and the recovery of previously
deferred fuel costs for CL&P ($9 million), partially offset by the 5
and 11 percent rate decreases for PSNH that were effective October 1,
2000, and May 1, 2001, respectively ($69 million). Wholesale revenues
were lower due to the sale of Millstone at the end of the first quarter
of 2001 and lower energy sales. Regulated retail kilowatt-hour sales
increased by 3.0 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 for Select
Energy ($783 million which is net of purchases from other NU affiliates)
and higher energy costs for the regulated subsidiaries ($44 million).
Other Operation and Maintenance
Other O&M expenses decreased $19 million in 2001, primarily due to
lower nuclear expenses ($69 million) as a result of the sale of the
Millstone units at the end of the first quarter of 2001, partially
offset by higher O&M expenses for the competitive energy companies
($49 million).
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 decreased in 2001, primarily due to the
settlement of a property tax appeal with the City of Meriden for CL&P
and Yankee, ($24 million), partially offset by higher Connecticut
gross earnings taxes ($15 million) resulting from the phase-in of
restructuring in Connecticut in 2000.
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.
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 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.
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).
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.
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, as
amended ($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 September 30, 2001,
and the related consolidated statements of income for the three and nine-
month periods ended September 30, 2001 and 2000, and the consolidated
statements of cash flows for the nine-month periods ended September 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
November 8, 2001
CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30,
2001 December 31,
(Unaudited) 2000
---------------- ----------------
(Thousands of Dollars)
ASSETS
- ------
Property, Plant and Equipment, at Original Cost:
Electric............................................. $ 3,075,164 $ 5,756,098
Less: Accumulated provision for depreciation...... 1,238,381 4,210,429
---------------- ----------------
1,836,783 1,545,669
Construction work in progress........................ 134,755 128,835
Nuclear fuel, net.................................... 2,527 79,672
---------------- ----------------
Total net property, plant and equipment.......... 1,974,065 1,754,176
---------------- ----------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............ 6,060 536,912
Investments in regional nuclear generating
companies, at equity................................ 39,318 41,395
Other, at cost....................................... 133,018 33,708
---------------- ----------------
178,396 612,015
---------------- ----------------
Current Assets:
Cash................................................. 444 5,461
Investments in securitizable assets.................. 35,592 98,146
Notes receivable from affiliated companies........... 161,200 38,000
Receivables, net..................................... 238,153 29,245
Accounts receivable from affiliated companies........ 59,252 103,763
Accrued utility revenues............................. 4,870 -
Fuel, materials and supplies, at average cost........ 33,835 36,332
Prepayments and other................................ 27,585 32,291
---------------- ----------------
560,931 343,238
---------------- ----------------
Deferred Charges:
Regulatory assets.................................... 1,999,176 1,835,967
Prepaid pension...................................... 218,266 170,672
Unamortized debt expense............................. 6,257 14,794
Other ............................................... 46,911 33,336
---------------- ----------------
2,270,610 2,054,769
---------------- ----------------
Total Assets........................................... $ 4,984,002 $ 4,764,198
================ ================
</Table>
The accompanying notes are an integral part of these financial statements.
CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 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.............................. 414,018 413,192
Retained earnings..................................... 269,612 243,197
Accumulated other comprehensive income................ 48 506
---------------- ----------------
Total common stockholder's equity............ 759,527 732,744
Preferred stock....................................... 116,200 116,200
Long-term debt........................................ 823,208 1,072,688
---------------- ----------------
Total capitalization......................... 1,698,935 1,921,632
---------------- ----------------
Rate Reduction Bonds.................................... 1,438,400 -
---------------- ----------------
Minority Interest in Consolidated Subsidiary............ - 100,000
---------------- ----------------
Obligations Under Capital Leases........................ 15,641 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.... 524 89,959
Accounts payable...................................... 163,629 153,944
Accounts payable to affiliated companies.............. 109,969 122,106
Accrued taxes......................................... 93,357 32,901
Accrued interest...................................... 51,535 13,995
Other................................................. 36,964 31,324
---------------- ----------------
455,978 719,229
---------------- ----------------
Deferred Credits and Other Long-Term Liabilities:
Accumulated deferred income taxes..................... 809,425 977,439
Accumulated deferred investment tax credits........... 96,647 99,771
Decommissioning obligation - Millstone 1.............. - 580,320
Deferred contractual obligations...................... 144,790 160,590
Other................................................. 324,186 165,307
---------------- ----------------
1,375,048 1,983,427
---------------- ----------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities.................... $ 4,984,002 $ 4,764,198
================ ================
</Table>
The accompanying notes are an integral part of these financial statements.
CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------
2001 2000 2001 2000
----------------------------------------------------
(Thousands of Dollars)
Operating Revenues.................................. $ 675,578 $ 748,143 $ 2,019,758 $ 2,179,704
--------- --------- ----------- -----------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power....... 395,554 421,155 1,159,520 1,243,865
Other........................................... 74,416 105,753 238,204 306,789
Maintenance........................................ 23,415 35,012 89,168 101,713
Depreciation....................................... 22,431 27,836 73,539 89,232
Amortization of regulatory assets, net............. 65,440 30,505 684,456 56,944
Federal and state income taxes..................... 20,867 41,212 69,806 107,162
Taxes other than income taxes...................... 31,219 34,726 101,445 103,311
Gain on sale of utility plant...................... - - (522,887) -
--------- --------- ----------- -----------
Total operating expenses..................... 633,342 696,199 1,893,251 2,009,016
--------- --------- ----------- -----------
Operating Income..................................... 42,236 51,944 126,507 170,688
--------- --------- ----------- -----------
Other Income/(Loss):
Gain related to Millstone sale..................... - - 27,997 -
Other, net......................................... 7,430 (2,466) 10,654 (18,549)
Income taxes....................................... 1,739 3,246 704 18,968
--------- --------- ----------- -----------
Other income, net............................ 9,169 780 39,355 419
--------- --------- ----------- -----------
Income before interest charges............... 51,405 52,724 165,862 171,107
--------- --------- ----------- -----------
Interest Charges:
Interest on long-term debt......................... 12,357 21,821 48,141 67,950
Interest on rate reduction bonds................... 20,224 - 40,801 -
Other interest..................................... - 2,995 984 6,420
--------- --------- ----------- -----------
Interest charges, net........................ 32,581 24,816 89,926 74,370
--------- --------- ----------- -----------
Net Income........................................... $ 18,824 $ 27,908 $ 75,936 $ 96,737
========= ========= =========== ===========
</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>
Nine Months Ended
September 30,
---------------------------------
2001 2000
-------------- ------------
(Thousands of Dollars)
Operating Activities:
Net income........................................................ $ 75,936 $ 96,737
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation.................................................... 73,539 89,232
Deferred income taxes and investment tax credits, net........... (148,330) 4,824
Amortization of regulatory assets, net.......................... 684,456 56,944
Gain on sale of utility plant................................... (522,887) -
Net other uses of cash.......................................... (101,443) 8,854
Changes in working capital:
Receivables and accrued utility revenues........................ (169,267) (148,983)
Fuel, materials and supplies.................................... 2,497 (2,603)
Accounts payable................................................ (2,452) 174,063
Accrued taxes................................................... 60,456 (99,048)
Investments in securitizable assets............................. 62,554 44,985
Other working capital (excludes cash)........................... 47,886 (48,506)
-------------- ------------
Net cash flows provided by operating activities..................... 62,945 176,499
-------------- ------------
Investing Activities:
Investments in plant:
Electric utility plant.......................................... (167,068) (127,857)
Nuclear fuel.................................................... (895) (18,794)
-------------- ------------
Net cash flows used for investments in plant...................... (167,963) (146,651)
Investment in NU system Money Pool................................ (123,200) (80,400)
Investments in nuclear decommissioning trusts..................... (95,494) (18,615)
Other investment activities, net.................................. (97,233) (1,440)
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........... (680,339) 439,701
-------------- ------------
Financing Activities:
Net (decrease)/increase in short-term debt........................ (115,000) 8,300
Issuance of rate reduction bonds.................................. 1,438,400 -
Retirement of capital lease obligation............................ (145,800) -
Retirement of monthly income preferred securities................. (100,000) -
Reacquisitions and retirements of long-term debt.................. (416,000) (179,071)
Reacquisitions and retirements of preferred stock................. - (99,539)
Repurchase of common shares....................................... - (300,000)
Cash dividends on preferred stock................................. (4,169) (6,012)
Cash dividends on common stock.................................... (45,054) (35,000)
-------------- ------------
Net cash flows provided by/(used in) financing activities........... 612,377 (611,322)
-------------- ------------
Net(decrease)/increase in cash for the period....................... (5,017) 4,878
Cash - beginning of period.......................................... 5,461 364
-------------- ------------
Cash - end of period................................................ $ 444 $ 5,242
============== ============
</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 and Second Quarter 2001 Form 10-Qs
and the NU 2000 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the third
quarter of 2001 and the first nine months of 2001 are provided in the
table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
----------------------
Third Nine
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $(73) (10)% $(160) (7)%
Operating Expenses:
Fuel, purchased and net
interchange power (26) (6) (84) (7)
Other operation (31) (30) (69) (22)
Maintenance (12) (33) (13) (12)
Depreciation (5) (19) (16) (18)
Amortization of regulatory
assets, net 35 (a) 628 (a)
Federal and state income taxes (20) (49) (37) (35)
Taxes other than income taxes (4) (10) (2) (2)
Gain on sale of utility plant - - (523) (a)
---- ---- ----- ----
Total operating expenses (63) (9) (116) (6)
---- ---- ----- ----
Operating income (10) (19) (44) (26)
---- ---- ----- ----
Other Income/(Loss):
Gain related to Millstone sale - - 28 (a)
Other, net 10 (a) 29 (a)
Income taxes (1) (46) (18) (96)
---- ---- ----- ----
Other income, net 9 (a) 39 (a)
Interest charges, net 8 31 16 21
---- ---- ----- ----
Net income $ (9) (33)% $ (21) (22)%
==== ==== ===== ====
(a) Percent greater than 100.
Comparison of the Third Quarter 2001 to the Third Quarter of 2000
- -----------------------------------------------------------------
Operating Revenues
Total revenues decreased by $73 million or 10 percent in the third quarter
of 2001, compared with the same period in 2000, primarily due to lower
wholesale revenues ($101 million), partially offset by higher retail
revenues ($32 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
and lower energy sales. Retail revenues increased primarily due to higher
retail sales ($23 million) and the recovery of previously deferred fuel costs
which began in August 2001 ($9 million). Retail sales increased 4.3 percent
compared to the third 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 cogeneration contracts and lower nuclear fuel expense.
Other Operation and Maintenance
Other O&M expenses decreased by $43 million in 2001, primarily due to lower
nuclear expenses ($47 million) as a result of the sale of the Millstone units
at the end of the first quarter of 2001 and lower administrative and general
costs ($4 million), partially offset by higher distribution maintenance
expenses ($3 million) and higher transmission expenses ($4 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.
Federal and State Income Taxes
Federal and state income taxes combined decreased in 2001, primarily due
to lower taxable income.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to a property
tax settlement with the City of Meriden, partially offset by higher gross
earnings taxes.
Other, Net
Other, net increased in 2001, primarily due to higher miscellaneous income
in 2001 including the allowed return on deferred fuel balances ($10 million).
Interest Charges, Net
Interest charges, net increased in 2001, primarily due to the interest expense
associated with the issuance of rate reduction bonds in 2001, 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 Nine Months of 2001 to the First Nine Months of 2000
- ----------------------------------------------------------------------------
Operating Revenues
Total revenues decreased by $160 million or 7 percent in the first nine months
of 2001, compared with the same period in 2000, primarily due to lower
wholesale revenues ($199 million) and lower transmission revenues ($17
million), partially offset by higher retail revenues ($58 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 and lower energy sales. Retail
revenues increased primarily due to higher retail sales ($53 million) and the
recovery of previously deferred fuel costs ($9 million). Retail sales increased
3.4 percent compared to the first nine months 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 cogeneration contracts and lower nuclear fuel expense.
Other Operation and Maintenance
Other O&M expenses decreased by $82 million in 2001, primarily due to lower
nuclear expenses ($67 million) as a result of the sale of the Millstone
units at the end of the first quarter of 2001, lower transmission expenses
($15 million) and lower administrative and general expenses ($9 million),
partially offset by higher distribution maintenance expenses ($6 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
the amortization related to the gain on sale of the Millstone units ($523
million) and higher amortization related to restructuring.
Federal and State Income Taxes
Federal and state income taxes combined decreased in 2001, primarily due
to lower taxable income.
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 Connecticut Municipal Electric
Energy Cooperative's (CMEEC) 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)
in 2000 and higher interest income in 2001, including the allowed return on
deferred fuel balances ($10 million).
Interest Charges, Net
Interest charges, net increased in 2001, primarily due to the interest
expense associated with the issuance of rate reduction bonds in 2001,
partially offset by lower long-term debt outstanding as a result of
reacquisitions and retirements of long-term debt in 2001.
LIQUIDITY
As a result of the sale of the Millstone units in March 2001, and the
securitization of CL&P stranded costs in March 2001, CL&P continued to
maintain a high degree of liquidity through the third quarter of 2001.
At no point during the quarter did CL&P borrow under its credit line.
Cash held by CL&P was more than adequate to fund its short-term
borrowing needs.
In part because of CL&P's liquidity, its credit rating is currently being
reviewed for possible upgrade. CL&P expects that this review will be
completed before the end of 2001.
In November 2001, NU expects to renew $650 million in revolving credit
lines, including $300 million to support CL&P, PSNH, WMECO, and Yankee
Gas.
Over the coming years, management expects that rather than CL&P paying
out substantially all of its earnings as dividends to the parent
company, that these dividends may be significantly less should CL&P
receive the regulatory approval for the major capital projects that it
has proposed.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30,
2001 December 31,
(Unaudited) 2000
---------------- ----------------
(Thousands of Dollars)
ASSETS
- ------
Property, Plant and Equipment, at Cost:
Electric............................................ $ 1,431,808 $ 1,505,967
Other............................................... 6,221 -
---------------- ----------------
1,438,029 1,505,967
Less: Accumulated provision for depreciation..... 683,686 711,340
---------------- ----------------
754,343 794,627
Construction work in progress....................... 32,278 27,251
Nuclear fuel, net................................... - 1,924
---------------- ----------------
Total net property, plant and equipment.......... 786,621 823,802
---------------- ----------------
Other Property and Investments:
Nuclear decommissioning trusts, at market........... - 7,362
Investments in regional nuclear generating
companies and subsidiary company, at equity........ 9,726 16,293
Other, at cost...................................... 42,453 3,225
---------------- ----------------
52,179 26,880
---------------- ----------------
Current Assets:
Cash and cash equivalents........................... 8,681 115,135
Receivables, net.................................... 71,234 71,992
Accounts receivable from affiliated companies....... 13,391 2,798
Taxes receivable from affiliated companies.......... 187,573 9,983
Accrued utility revenues............................ 30,139 41,844
Fuel, materials and supplies, at average cost....... 36,666 28,760
Prepayments and other............................... 17,208 14,750
---------------- ----------------
364,892 285,262
---------------- ----------------
Deferred Charges:
Regulatory assets................................... 984,334 924,847
Deferred receivable from affiliated company......... - 3,240
Unamortized debt expense............................ 11,132 9,067
Other .............................................. 5,892 9,096
---------------- ----------------
1,001,358 946,250
---------------- ----------------
Total Assets......................................... $ 2,205,050 $ 2,082,194
================ ================
</Table>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 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.................................... 160,250 123,177
Accumulated other comprehensive income............... 373 1,207
---------------- ----------------
Total common shareholder's equity........... 325,623 549,294
Long-term debt....................................... 407,285 407,285
---------------- ----------------
Total capitalization........................ 732,908 956,579
---------------- ----------------
Rate Reduction Bonds................................... 525,000 -
---------------- ----------------
Obligations Under Seabrook Power Contracts
and Other Capital Leases.............................. 79,776 91,702
---------------- ----------------
Current Liabilities:
Notes payable to affiliated company.................. 27,000 -
Preferred stock - current portion.................... - 24,268
Obligations under Seabrook Power Contracts and other
capital leases - current portion.................... 26,710 537,528
Accounts payable..................................... 28,432 45,847
Accounts payable to affiliated companies............. 82,556 54,157
Accrued taxes........................................ 14,467 656
Accrued interest..................................... 29,156 4,962
Other................................................ 18,738 13,112
---------------- ----------------
227,059 680,530
---------------- ----------------
Deferred Credits and Other Long-Term Liabilities:
Accumulated deferred income taxes.................... 381,812 179,723
Accumulated deferred investment tax credits.......... 14,361 27,348
Deferred contractual obligations..................... 37,739 41,499
Deferred pension costs............................... 38,147 41,216
Deferred revenue from affiliated company............. - 3,240
Other................................................ 168,248 60,357
---------------- ----------------
640,307 353,383
---------------- ----------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities................... $ 2,205,050 $ 2,082,194
================ ================
</Table>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
2001 2000 2001 2000
------------------------------------------------
(Thousands of Dollars)
Operating Revenues................................... $ 299,711 $ 337,865 $ 927,345 $ 993,017
--------- --------- --------- ---------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power....... 166,889 232,169 585,652 655,508
Other........................................... 31,102 29,584 95,097 93,126
Maintenance........................................ 12,165 9,913 46,959 34,479
Depreciation....................................... 8,199 10,312 30,009 33,361
Amortization of regulatory assets, net............. 26,676 11,468 39,581 34,407
Federal and state income taxes..................... 10,427 5,275 29,015 31,087
Taxes other than income taxes...................... 9,117 10,964 30,255 33,193
--------- --------- --------- ---------
Total operating expenses..................... 264,575 309,685 856,568 915,161
--------- --------- --------- ---------
Operating Income..................................... 35,136 28,180 70,777 77,856
--------- --------- --------- ---------
Other Income/(Loss):
Gain related to Millstone sale..................... 11 - 25,924 -
Other, net......................................... 527 2,810 13,102 11,175
Income taxes....................................... 1,406 6,507 (8,682) 1,319
--------- --------- --------- ---------
Other income, net............................ 1,944 9,317 30,344 12,494
--------- --------- --------- ---------
Income before interest charges............... 37,080 37,497 101,121 90,350
--------- --------- --------- ---------
Interest Charges:
Interest on long-term debt......................... 7,383 8,793 22,398 29,897
Interest on rate reduction bonds................... 7,932 - 13,266 -
Other interest..................................... 135 (29) (52) 37
--------- --------- --------- ---------
Interest charges, net........................ 15,450 8,764 35,612 29,934
--------- --------- --------- ---------
Net Income.......................................... $ 21,630 $ 28,733 $ 65,509 $ 60,416
========= ========= ========= =========
</Table>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Nine Months Ended
September 30,
-----------------------------
2001 2000
------------ ------------
(Thousands of Dollars)
Operating activities:
Net income........................................................ $ 65,509 $ 60,416
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation.................................................... 30,009 33,361
Deferred income taxes and investment tax credits, net........... 184,001 (10,193)
Net deferral of recoverable energy costs, net................... (32,010) (9,420)
Amortization of regulatory assets, net.......................... 39,581 34,407
Gain on sale of utility plant................................... (25,924) -
Net other sources/(uses) of cash................................ 97,303 (40,462)
Changes in working capital:
Receivables and accrued utility revenues........................ 1,870 21,695
Fuel, materials and supplies.................................... (7,906) 5,832
Accounts payable................................................ 10,984 (4,941)
Accrued taxes................................................... 13,811 21,613
Taxes receivable................................................ (177,590) -
Other working capital (excludes cash)........................... 27,362 53,675
------------ ------------
Net cash flows provided by operating activities..................... 227,000 165,983
------------ ------------
Investing Activities:
Investments in plant:
Electric utility plant.......................................... (65,438) (39,098)
Nuclear fuel.................................................... (37) (254)
------------ ------------
Net cash flows used for investments in plant...................... (65,475) (39,352)
Investment in nuclear decommissioning trusts...................... (1,625) (470)
Other investment activities, net.................................. (32,661) (598)
Net proceeds from sale of utility plant........................... 25,012 -
------------ ------------
Net cash flows used in investing activities......................... (74,749) (40,420)
------------ ------------
Financing Activities:
Net increase in short-term debt................................... 27,000 -
Issuance of rate reduction bonds.................................. 525,000 -
Repurchase of common shares....................................... (260,000) -
Reacquisitions and retirements of long-term debt.................. - (109,200)
Reacquisitions and retirements of preferred stock................. (24,268) (25,000)
Buydown of capital lease obligation............................... (497,508) -
Cash dividends on preferred stock................................. (1,929) (3,313)
Cash dividends on common stock.................................... (27,000) -
------------ ------------
Net cash flows used in financing activities......................... (258,705) (137,513)
------------ ------------
Net decrease in cash and cash equivalents........................... (106,454) (11,950)
Cash and cash equivalents - beginning of period..................... 115,135 182,588
------------ ------------
Cash and cash equivalents - end of period........................... $ 8,681 $ 170,638
============ ============
</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 and Second
Quarter 2001 Form 10-Qs and the NU 2000 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the third
quarter of 2001 and the first nine months of 2001 are provided in the
table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
----------------------
Third Nine
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $(38) (11)% $(66) (7)%
Operating Expenses:
Fuel, purchased and net
interchange power (65) (28) (70) (11)
Other operation 2 5 2 2
Maintenance 2 23 12 36
Depreciation (2) (20) (3) (10)
Amortization of regulatory
assets, net 15 (a) 5 15
Federal and state income taxes 5 98 (2) (7)
Taxes other than income taxes (2) (17) (3) (9)
---- ---- ---- ----
Total operating expenses (45) (15) (59) (6)
---- ---- ---- ----
Operating income 7 25 (7) (9)
---- ---- ---- ----
Other Income/(Loss):
Gain related to Millstone sale - - 26 (a)
Other, net (2) (81) 2 17
Income taxes (5) (78) (10) (a)
---- ---- ---- ----
Other income, net (7) (79) 18 (a)
Interest charges, net 7 76 6 19
---- ---- ---- ----
Net income $ (7) (25)% $ 5 8%
==== ==== ==== ====
(a) Percent greater than 100.
Comparison of the Third Quarter 2001 to the Third Quarter of 2000
- -----------------------------------------------------------------
Operating Revenues
Total operating revenues decreased $38 million or 11 percent in the
third quarter of 2001, compared with the same period of 2000,
primarily due to lower retail revenues ($16 million) and lower wholesale
revenues from lower capacity and energy sales to the market ($23
million). Retail revenues decreased due to 5 and 11 percent rate
decreases that were effective October 1, 2000 and May 1, 2001,
respectively ($33 million), partially offset by higher retail sales.
Retail kilowatt-hour sales increased by 8.3 percent in 2001.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense decreased in 2001,
primarily due to lower purchased power expenses 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 maintenance
costs in 2001 associated with the fossil plants ($2 million) and higher
distribution maintenance costs ($1 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 New Hampshire franchise taxes in 2001.
Other, Net
Other, net decreased in 2001, primarily due to higher interest income
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 Nine Months of 2001 to the First Nine Months of 2000
- ----------------------------------------------------------------------------
Operating Revenues
Total operating revenues decreased $66 million or 7 percent in the
first nine months of 2001, compared to the same period of 2000,
primarily due to lower retail revenues ($45 million), lower wholesale
revenues from lower capacity and energy sales to the market ($17
million) and lower transmission revenues ($4 million). Retail revenues
decreased due to 5 and 11 percent rate decreases that were effective
October 1, 2000 and May 1, 2001, respectively ($67 million), partially
offset by higher retail sales. Retail kilowatt-hour sales increased by
3.6 percent 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.
Other Operation and Maintenance
Other O&M expenses increased in 2001, primarily due to higher
maintenance costs in 2001 associated with the fossil plants ($15
million) and higher distribution maintenance costs ($2 million),
partially offset by lower transmission expense ($4 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.
Federal and State Income Taxes
Federal and state income taxes combined increased in 2001 as compared
to 2000, primarily due to higher book taxable income.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to lower
New Hampshire franchise taxes in 2001.
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 in
2000, partially offset by higher interest income 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.
LIQUIDITY
As a result of the sale of the Millstone units in March 2001, and the
securitization of PSNH stranded costs in April 2001, PSNH continued
to maintain a high degree of liquidity through the third quarter of
2001. At no point during the quarter did PSNH borrow under its credit
line.
In part because of PSNH's liquidity, its credit rating is currently being
reviewed for possible upgrade. PSNH expects that this review will be
completed before the end of 2001.
In November 2001, NU expects to renew $650 million in revolving credit
lines, including $300 million to support CL&P, PSNH, WMECO, and Yankee
Gas.
PSNH has applied to the NHPUC to refinance $287.5 million of tax-
exempt bonds carrying interest rates of 7.65 percent and 7.5 percent.
PSNH is considering using a combination of variable-rate and fixed-
rate tax-exempt bonds for the refinancing. As a result of the current
low interest rate environment, PSNH expects to save several million
dollars annually in interest costs as a result of the refinancing.
Over the coming years, management expects PSNH to pay out substantially
all of its earnings as dividends to the parent company.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30,
2001 December 31,
(Unaudited) 2000
---------------- ----------------
(Thousands of Dollars)
ASSETS
- ------
Property, Plant and Equipment, at Original Cost:
Electric.............................................. $ 556,819 $ 1,112,405
Less: Accumulated provision for depreciation...... 185,663 792,923
---------------- ----------------
371,156 319,482
Construction work in progress......................... 21,151 22,813
Nuclear fuel, net..................................... - 18,296
---------------- ----------------
Total net property, plant and equipment........... 392,307 360,591
---------------- ----------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............. - 144,921
Investments in regional nuclear generating
companies, at equity................................. 10,564 11,117
Other, at cost........................................ 10,359 6,249
---------------- ----------------
20,923 162,287
---------------- ----------------
Current Assets:
Cash.................................................. 6,068 985
Receivables, net...................................... 43,878 36,364
Accounts receivable from affiliated companies......... 8,538 16,146
Taxes receivable...................................... 5,979 -
Accrued utility revenues.............................. 10,769 21,222
Fuel, materials and supplies, at average cost......... 1,526 1,606
Prepayments and other................................. 1,538 4,817
---------------- ----------------
78,296 81,140
---------------- ----------------
Deferred Charges:
Regulatory assets..................................... 338,310 392,247
Prepaid pension....................................... 50,807 45,473
Unamortized debt expense.............................. 683 1,822
Other ................................................ 2,260 4,258
---------------- ----------------
392,060 443,800
---------------- ----------------
Total Assets........................................... $ 883,586 $ 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>
September 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............................. 82,223 94,010
Retained earnings.................................... 61,921 62,952
Accumulated other comprehensive income............... 54 182
---------------- ----------------
Total common stockholder's equity........... 156,940 171,896
Preferred stock...................................... - 35,000
Long-term debt....................................... 100,867 139,425
---------------- ----------------
Total capitalization........................ 257,807 346,321
---------------- ----------------
Rate Reduction Bonds................................... 155,000 -
---------------- ----------------
Obligations Under Capital Leases....................... 93 5,935
---------------- ----------------
Current Liabilities:
Notes payable to banks............................... - 110,000
Notes payable to affiliated company.................. 50,700 600
Long-term debt and preferred stock - current portion. - 61,500
Obligations under capital leases - current portion... 21 20,986
Accounts payable..................................... 50,614 25,298
Accounts payable to affiliated companies............. 6,593 8,611
Accrued taxes........................................ 307 8,471
Accrued interest..................................... 4,092 4,703
Other................................................ 10,014 7,671
---------------- ----------------
122,341 247,840
---------------- ----------------
Deferred Credits and Other Long-Term Liabilities:
Accumulated deferred income taxes.................... 237,303 224,711
Accumulated deferred investment tax credits.......... 4,082 17,580
Decommissioning obligation - Millstone 1............. - 136,130
Deferred contractual obligations..................... 38,217 42,519
Other................................................ 68,743 26,782
---------------- ----------------
348,345 447,722
---------------- ----------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities................... $ 883,586 $ 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 Nine Months Ended
September 30, September 30,
-------------------------------------------------
2001 2000 2001 2000
-------------------------------------------------
(Thousands of Dollars)
Operating Revenues.................................. $ 120,679 $ 130,400 $ 370,845 $ 379,900
--------- --------- ---------- ---------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power...... 75,803 61,245 245,254 185,873
Other.......................................... 20,740 24,651 50,761 55,544
Maintenance....................................... 3,575 7,064 16,124 25,112
Depreciation...................................... 3,124 4,389 10,675 13,334
Amortization of regulatory assets................. 180 8,322 125,590 33,227
Federal and state income taxes.................... 5,051 6,728 10,960 14,923
Taxes other than income taxes..................... 2,436 4,061 10,360 13,191
Gain on sale of utility plant..................... - - (121,022) -
--------- --------- ---------- ---------
Total operating expenses.................... 110,909 116,460 348,702 341,204
--------- --------- ---------- ---------
Operating Income.................................... 9,770 13,940 22,143 38,696
--------- --------- ---------- ---------
Other (Loss)/Income:
Other, net........................................ (3,074) 1,004 (3,764) (620)
Income taxes...................................... 1,324 592 1,758 5,192
--------- --------- ---------- ---------
Other (loss)/income, net.................... (1,750) 1,596 (2,006) 4,572
--------- --------- ---------- ---------
Income before interest charges.............. 8,020 15,536 20,137 43,268
--------- --------- ---------- ---------
Interest Charges:
Interest on long-term debt........................ 814 2,968 4,520 11,076
Interest on rate reduction bonds.................. 2,727 - 3,636 -
Other interest.................................... 599 2,930 3,264 8,545
--------- --------- ---------- ---------
Interest charges, net...................... 4,140 5,898 11,420 19,621
--------- --------- ---------- ---------
Net Income.......................................... $ 3,880 $ 9,638 $ 8,717 $ 23,647
======== ========= ========== =========
</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>
Nine Months Ended
September 30,
------------------------------
2001 2000
------------ -------------
(Thousands of Dollars)
Operating Activities:
Net income........................................................ $ 8,717 $ 23,647
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation.................................................... 10,675 13,334
Deferred income taxes and investment tax credits, net........... 13,626 (10,450)
Net amortization of recoverable energy costs.................... 3,548 9,151
Amortization of regulatory assets, net.......................... 125,590 33,227
Gain on sale of utility plant................................... (121,022) -
Net other uses of cash.......................................... (4,256) (11,820)
Changes in working capital:
Receivables and accrued utility revenues........................ 10,547 (16,014)
Fuel, materials and supplies.................................... 80 1,457
Accounts payable................................................ 23,298 17,606
Accrued taxes................................................... (8,164) 1,116
Other working capital (excludes cash)........................... (968) (23,687)
------------ -------------
Net cash flows provided by operating activities..................... 61,671 37,567
------------ -------------
Investing Activities:
Investments in plant:
Electric utility plant.......................................... (23,957) (15,084)
Nuclear fuel.................................................... (140) (4,005)
------------ -------------
Net cash flows used for investments in plant...................... (24,097) (19,089)
Investments in nuclear decommissioning trusts..................... (21,767) (3,031)
Other investment activities, net.................................. (3,557) (522)
Net proceeds from the sale of utility plant....................... 177,821 185,787
Buyout of IPP contract............................................ (99,700) -
------------ -------------
Net cash flows provided by investing activities..................... 28,700 163,145
------------ -------------
Financing Activities:
Net decrease in short-term debt................................... (59,900) (5,800)
Issuance of rate reduction bonds.................................. 155,000 -
Reacquisitions and retirements of long-term debt.................. (100,000) (94,150)
Reacquisitions and retirements of preferred stock................. (36,500) (1,500)
Retirement of capital lease obligation............................ (34,200) -
Repurchase of common shares....................................... - (90,000)
Cash dividends on preferred stock................................. (690) (2,098)
Cash dividends on common stock.................................... (8,998) (8,002)
------------ -------------
Net cash flows used in financing activities......................... (85,288) (201,550)
------------ -------------
Net increase/(decrease) in cash for the period...................... 5,083 (838)
Cash - beginning of period.......................................... 985 950
------------ -------------
Cash - end of period................................................ $ 6,068 $ 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 and Second Quarter 2001 Form 10-Qs
and the NU 2000 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the third
quarter of 2001 and the first nine months of 2001 are provided in the
table below.
Income Statement Variances
(Millions of Dollars)
2001 over/(under) 2000
----------------------
Third Nine
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $(10) (7)% $ (9) (2)%
Operating Expenses:
Fuel, purchased and net
interchange power 15 24 59 32
Other operation (4) (16) (5) (9)
Maintenance (4) (49) (9) (36)
Depreciation (1) (29) (2) (20)
Amortization of regulatory assets, net (8) (98) 92 (a)
Federal and state income taxes (2) (25) (4) (27)
Taxes other than income taxes (2) (40) (3) (21)
Gain on sale of utility plant - - (121) (a)
---- ---- ----- ----
Total operating expenses (6) (5) 7 2
---- ---- ----- ----
Operating income (4) (30) (16) (43)
---- ---- ----- ----
Other (Loss)/Income:
Other, net (4) (a) (3) (a)
Income taxes 1 (a) (4) (66)
---- ---- ----- ----
Other (loss)/income, net (3) (a) (7) (a)
Interest charges, net (1) (30) (8) (42)
---- ---- ----- ----
Net income $ (6) (60)% $ (15) (63)%
==== ==== ===== ====
(a) Percent greater than 100.
Comparison of the Third Quarter 2001 to the Third Quarter of 2000
- -----------------------------------------------------------------
Operating Revenues
Total revenues decreased by $10 million or 7 percent in the third
quarter of 2001, compared with the same period in 2000, primarily due
to lower wholesale revenues ($28 million), partially offset by higher
retail revenues ($19 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. Retail revenues increased primarily due to an
increase in the standard offer service rate. Retail sales were flat
in 2001 compared to the third 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 in 2001, primarily due to lower nuclear
expenses ($11 million) as a result of the sale of the Millstone units
at the end of the first quarter in 2001, partially offset by higher
administrative and general expenses ($3 million) and higher
transmission expenses ($1 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 decreased in 2001, primarily
due to lower amortization related to restructuring.
Federal and State Income Taxes
Federal and state income taxes combined decreased in 2001, primarily
as a result of lower taxable income.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to
lower local property taxes.
Other, Net
Other, net decreased in 2001, primarily due to higher environmental
reserves in 2001.
Interest Charges, Net
Interest charges, net decreased in 2001, primarily due lower short-
term debt borrowings in 2001.
Comparison of the First Nine Months of 2001 to the First Nine Months of 2000
- ----------------------------------------------------------------------------
Operating Revenues
Total revenues decreased by $9 million or 2 percent in the first nine
months of 2001, compared with the same period in 2000, primarily due
to lower wholesale revenues ($56 million), partially offset by higher
retail revenues ($49 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. Retail revenues increased primarily due to an
increase in the standard offer service rate. Retail sales increased
by 0.7 percent compared to the first nine months 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 in 2001, primarily due to lower nuclear
expenses ($21 million) as a result of the sale of the Millstone units
at the end of the first quarter in 2001, partially offset by higher
administrative and general expenses ($10 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 the amortization in 2001 of the gain on sale of the Millstone
units ($121 million), partially offset by lower amortization related
to restructuring.
Federal and State Income Taxes
Federal and state income taxes combined decreased in 2001, primarily
due to lower taxable income.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to
lower local property taxes.
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 decreased in 2001, primarily due to higher environmental
reserves in 2001, partially offset by 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 as a result of reacquisitions and retirements of
long-term debt in 2001 and lower short-term borrowings in 2001,
partially offset by the interest expense associated with the issuance
in 2001 of rate reduction bonds.
LIQUIDITY
As a result of the sale of the Millstone units in March 2001, and the
securitization of WMECO stranded costs in May 2001, WMECO continued to
maintain a high degree of liquidity through the third quarter of 2001.
At no point during the quarter did WMECO borrow under its credit line.
However, for the nine months ended September 30, 2001, as compared to
the same period in 2000, WMECO's earnings declined as a result of the
delay in the transfer of certain hydroelectric generation assets to an
affiliated company in 2000.
In part because of WMECO's liquidity, its credit rating is currently being
reviewed for possible upgrade. WMECO expects that this review will be
completed before the end of 2001.
In November 2001, NU expects to renew $650 million in revolving credit
lines, including $300 million to support CL&P, PSNH, WMECO, and Yankee Gas.
Over the coming years, management expects WMECO to pay out substantially
all of its earnings as dividends to the parent company.
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 the management's discussion and
analysis of financial condition and results of operations in
this Form 10-Q, the First and Second Quarter 2001 Form 10-Qs
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
July 10, 2001, July 24, 2001, October 11, 2001, October 23,
2001, and October 29, 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 September 30,
2001, the results of operations for the three-month and nine-
month periods ended September 30, 2001 and 2000, and
statements of cash flows for the nine-month periods ended
September 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
nine-month periods ended September 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, 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-of-service rate
regulated, 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:
----------------------------------------------------------------
September 30, December 31,
(Millions of Dollars) 2001 2000
----------------------------------------------------------------
Recoverable nuclear costs $1,473.1 $2,565.8
Securitized assets 1,352.0 -
Income taxes, net 474.0 504.7
Unrecovered contractual obligations 76.8 255.8
Recoverable energy costs, net 371.4 332.5
Other 299.3 252.0
----------------------------------------------------------------
Totals $4,046.6 $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 in 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."
On June 27, 2001, the Financial Accounting Standards Board
(FASB) cleared SFAS No. 133 Implementation Issue No. C15,
"Scope Exceptions: Normal Purchases and Normal Sales
Exception for Option-Type Contracts and Forward Contracts in
Electricity." Under Issue No. C15, power purchase or sales
agreements, including capacity contracts, for the purchase
or sale of electricity would qualify for the normal
purchases and normal sales exception provided that certain
criteria are met. On October 10, 2001, FASB revised Issue
No. C15 by changing one of those criteria. Management is
currently determining if there would be a material effect on
NU's consolidated financial statements by the change made
within the aforementioned FASB guidelines. The current
effective date of implementing the revised guidance under
Issue No. C15 is January 1, 2002.
Goodwill and Other Intangible Assets: In June 2001, FASB
issued SFAS No. 142, "Goodwill and Other Intangible Assets."
This statement requires that goodwill and indefinite-lived
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 $9
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.
Asset Retirement Obligations: Also in June 2001, the FASB
issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting
and reporting for obligations associated with the retirement
of tangible long-lived assets and the associated asset
retirement costs and applies to (a) all entities and (b)
legal obligations associated with the retirement of long-
lived assets that result from the acquisition, construction,
development, and/or the normal operation of a long-lived
asset, except for certain obligations of lessees. SFAS No.
143 is effective for financial statements issued for fiscal
years beginning after June 15, 2002. Upon adoption of SFAS
No. 143, there may be an impact on NU's consolidated
financial statements which management has not estimated at
this time.
Long-Lived Assets: In August 2001, the FASB issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-
Lived Assets." This statement modifies financial accounting
and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001, and interim periods
within those fiscal years. Currently, management has not
evaluated the impact of the adoption of SFAS No. 144 on NU's
consolidated financial statements.
2. COMMITMENTS AND CONTINGENCIES
A. Restructuring and Rate Matters (CL&P, PSNH, WMECO)
Connecticut: On September 27, 2001, CL&P filed its
application with the Connecticut Department of Public
Utility Control (DPUC) for approval of the disposition of
the proceeds from the sale of the Millstone units to
Dominion Resources, Inc. This application described and
requested DPUC approval for CL&P's treatment of its share of
the proceeds from the sale. In accordance with
Connecticut's electric industry restructuring legislation,
CL&P was required to utilize any gains from the Millstone
sale to offset stranded costs. There are certain
contingencies related to this filing regarding the potential
disallowance of what management believes were prudently
incurred costs. Management believes the recoverability of
these costs is probable. A decision from the DPUC is
expected in the first half of 2002.
New Hampshire: PSNH is required to supply transition service
to its residential and small commercial customers until at
least 57 months after customer choice was implemented in New
Hampshire on May 1, 2001 (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. 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.
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 anticipated to be
scheduled for the first half of 2002. 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 $2.8 billion at
September 30, 2001. These contracts extend through 2005 and
thereafter as follows (millions of dollars):
Year
----
2001 $ 659.0
2002 1,382.4
2003 600.8
2004 72.2
2005 57.0
Thereafter 12.5
--------
Total $2,783.9
========
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 Issue 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
September 30, 2001, was a positive $55.4 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 September 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 an $8 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 September 30, 2001, an unfavorable 10
percent change in forward market price would have resulted in a
decrease in fair value of approximately $22 million.
The impact of a change in electricity, natural gas and oil prices
on Select Energy's nontrading contracts on September 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 September 30, 2001, the NYMEX
contracts had a notional value of $102.5 million and a negative
after-tax mark-to-market position of $18.1 million.
Derivative Cash Flow Hedge Accounting: Derivative instruments
recorded which were effective cash flow hedges resulted in an
increase in other comprehensive income of $12.3 million, net of
tax, upon the adoption of SFAS No. 133. During the first nine
months of 2001, a negative $4.9 million, net of tax, was
reclassified from other comprehensive income upon the conclusion
of these hedged transactions and recognized in earnings. An
additional $1.8 million, net of tax, was recognized in earnings
for those derivatives that were determined to be ineffective.
Also, during the third 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 $44.8 million, net of tax. Accumulated other
comprehensive income at September 30, 2001, was a negative $37.4
million, net of tax (decrease to equity), relating to hedged
transactions and it is estimated that $30.1 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.
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 September 30, 2001, Yankee had outstanding
agreements with a total notional value of $48 million and a
positive mark-to-market position of $0.2 million, which is
included within the $37.4 million reported for accumulated other
comprehensive income related to hedging activities.
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 September 30, 2001, the commodity swap
agreement had a notional value of $18.5 million and a negative
mark-to-market position of $1.3 million, net of tax, which is
included within the $37.4 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:
Nine Months Ended September 30,
-------------------------------
2001 2000
---- ----
(Millions of Dollars)
NU Consolidated $158.8 $153.5
CL&P 71.3 91.1
PSNH 63.4 57.8
WMECO 7.9 21.7
Accumulated other comprehensive income mark-to-market adjustments
of NU's qualified cash flow hedging instruments are as follows:
-------------------------------------------------------------------
(Millions of Dollars, Net of Tax) September 30, 2001
-------------------------------------------------------------------
Balance at January 1, 2001 (inception date) $ 12.3
------
Hedged transactions recognized into earnings (4.9)
Change in fair value (22.7)
Cash flow transactions entered into for the period (22.1)
------
Net change associated with the current period
hedging transactions (49.7)
-------------------------------------------------------------------
Total mark-to-market adjustments included in
accumulated other comprehensive loss $(37.4)
Other accumulated other comprehensive
income items 4.4
-------------------------------------------------------------------
Total accumulated other comprehensive loss $(33.0)
-------------------------------------------------------------------
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, Nine Months Ended September 30,
except share information) 2001 2000
---------------------------------------------------------------------
Income after interest charges $222.1 $163.7
Preferred dividends
of subsidiaries 6.2 11.4
---------------------------------------------------------------------
Income before cumulative effect
of accounting change $215.9 $152.3
Cumulative effect
of accounting change,
net of tax benefit (22.4) -
---------------------------------------------------------------------
Net income $193.5 $152.3
---------------------------------------------------------------------
Basic EPS common shares
outstanding (average) 137,120,689 140,829,337
Dilutive effect of employee
stock options 337,005 620,065
---------------------------------------------------------------------
Diluted EPS common shares
outstanding (average) 137,457,694 141,449,402
---------------------------------------------------------------------
Basic and Diluted EPS:
Income before cumulative effect
of accounting change $1.57 $1.08
Cumulative effect
of accounting change,
net of tax benefit (0.16) -
---------------------------------------------------------------------
Net income $1.41 $1.08
---------------------------------------------------------------------
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 70
percent and 84 percent of the NU system's total revenues for the
nine months ended September 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 customers with revenues in excess of
10 percent of its total revenues, one unaffiliated company and
CL&P. The purchases by these customers represented approximately
12 percent and 24 percent, respectively, of total competitive
energy subsidiaries' revenues for the nine months ended
September 30, 2001. The purchases by these customers represented
approximately 17 percent and 33 percent, respectively, of total
competitive energy subsidiaries' revenues for the nine months
ended September 30, 2000.
The competitive energy subsidiaries segment in the following
table includes Select Energy Services, 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.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------
For the Nine Months Ended September 30, 2001
- -----------------------------------------------------------------------------------------
Competitive Eliminations
(Millions of Regulated Utilities Energy and
Dollars) Electric Gas Subsidiaries Other Total
- -----------------------------------------------------------------------------------------
Operating revenues $ 3,311.8 $ 279.9 $ 2,101.5 $(585.5) $ 5,107.7
Operating expenses (3,072.9) (258.0) (2,075.3) 586.9 (4,819.3)
- -----------------------------------------------------------------------------------------
Operating income 238.9 21.9 26.2 1.4 288.4
Other income 70.2 2.5 5.6 64.4 142.7
Interest charges (148.3) (10.6) (32.1) (18.0) (209.0)
Preferred dividends (6.2) - - - (6.2)
- -----------------------------------------------------------------------------------------
Income/(loss) before
cumulative effect
of accounting change 154.6 13.8 (0.3) 47.8 215.9
Cumulative effect of
accounting change,
net of tax benefit - - (22.0) (0.4) (22.4)
- -----------------------------------------------------------------------------------------
Net income/(loss) $ 154.6 $ 13.8 $ (22.3) $ 47.4 $ 193.5
- -----------------------------------------------------------------------------------------
Total assets $ 9,176.9 $ 867.6 $ 863.8 $(615.4) $10,292.9
- -----------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------------------
For the Nine Months Ended September 30, 2000
- -----------------------------------------------------------------------------------------
Competitive Eliminations
(Millions of Regulated Utilities Energy and
Dollars) Electric Gas Subsidiaries Other Total
- -----------------------------------------------------------------------------------------
Operating revenues $ 3,550.3 $ 131.7 $ 1,456.5 $(759.2) $ 4,379.3
Operating expenses (3,229.2) (125.2) (1,414.4) 739.8 (4,029.0)
- -----------------------------------------------------------------------------------------
Operating income/(loss) 321.1 6.5 42.1 (19.4) 350.3
Other income/(loss) 30.8 (2.9) 3.0 6.4 37.3
Interest charges (147.0) (8.7) (37.1) (31.1) (223.9)
Preferred dividends (11.4) - - - (11.4)
- -----------------------------------------------------------------------------------------
Net income/(loss) $ 193.5 $ (5.1) $ 8.0 $ (44.1) $ 152.3
- -----------------------------------------------------------------------------------------
Total assets $ 9,757.1 $ 873.7 $ 700.5 $(765.9) $10,565.4
- -----------------------------------------------------------------------------------------
</Table>
7. SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES (NU)
In conjunction with the Yankee acquisition on March 1, 2000, common
stock was issued and debt was assumed as follows (millions of dollars):
Fair value of assets acquired,
net of liabilities assumed $ 712.5
Cash paid (261.4)
NU common stock issued (217.1)
-------
$ 234.0
=======
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. Property Tax Litigation - City of Meriden, Connecticut
On August 29, 2001, Yankee Gas, CL&P and the City of Meriden (City) settled
the pending lawsuit relating to the revaluation of personal property for the
tax years 1991 through 1999. Pursuant to the terms of the settlement
agreement, (1) the City paid Yankee Gas approximately $10 million and CL&P
approximately $4.9 million (approximately $14.9 million in total), (2) Yankee
Gas and CL&P agreed to file a satisfaction of judgment with the court and
(3) the City agreed to withdraw its appeal. Also included in the settlement
was the City's agreement to set the assessed values of the personal
property of Yankee Gas and CL&P on the City's 2000 grand list at $17.3 million
and $20.6 million, respectively.
2. Federal Energy Regulatory Commission (FERC) - Installed Capability
(ICAP) Deficiency Charge
On August 28, 2001, the FERC accepted in part and rejected in part the
Independent System Operator's (ISO) interim deficiency charge proposal.
Specifically, the FERC approved a $4.87 per kilowatt-month charge and rejected
ISO's proposed adjustments that would have effectively reduced the charge to
$2.00 or less. The FERC also ruled that all entities meeting their ICAP
responsibilities would share in ICAP deficiency charge revenues. The FERC also
directed ISO to file by December 3, 2001, a report on alternatives to the ICAP
requirement, particularly the feasibility of a forward reserves market and
using demand-side management to meet reserve capacity needs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits
Exhibit No. Description
----------- -----------
10.1 Amended and Restated Receivables Purchase and Sale
Agreement dated as of March 30, 2001 (CL&P and CL&P
Receivables Corporation (CRC))
10.1.1 Amendment No. 1 to the Purchase and Contribution
Agreement between CL&P and CRC dated as of March 30, 2001
10.41.2 Amendment to Exhibit 10.41 to the NU Form 10-K for the
year ended December 31, 2000, dated as of June 28, 2001
10.41.3 Amendment to Exhibit 10.41 to the NU Form 10-K for the
year ended December 31, 2000, dated as of September 11,
2001
10.44.5 Supplemental Retirement Benefit with John H. Forsgren,
dated as of August 8, 2001
10.44.6 Supplemental Compensation Arrangement with John H.
Forsgren, dated as of September 5, 2001
10.44.7 Amendment to Exhibit 10.44 to the NU Form 10-K for the
year ended December 31, 2000, dated as of September 19,
2001
10.46.4 Supplemental Compensation Arrangement with Cheryl W. Grise,
dated as of September 17, 2001
10.46.5 Amendment to Exhibit 10.46 to the NU Form 10-K for the
year ended December 31, 2000, dated as of September 19,
2001
15 Arthur Andersen LLP Letter Regarding Unaudited Financial
Information
(b) Reports on Form 8-K:
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.
NU filed current reports on Form 8-K dated October 11, 2001, disclosing:
o Earnings guidance for 2001 and 2002 and related presentation
information.
NU filed a current report on Form 8-K dated October 23, 2001, disclosing:
o NU's earnings press release for the third quarter and nine months
ended September 30, 2001.
NU filed a current report on Form 8-K dated October 29, 2001, disclosing:
o Earnings information for the twelve months ended September 30, 2001,
for certain major businesses.
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: November 8, 2001 By /s/ John H. Forsgren
---------------- ------------------------------
John H. Forsgren
Vice Chairman,
Executive Vice President
and Chief Financial Officer
Date: November 8, 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: November 8, 2001 By /s/ Randy A. Shoop
---------------- ------------------------------
Randy A. Shoop
Treasurer
Date: November 8, 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: November 8, 2001 By /s/ David R. McHale
---------------- ------------------------------
David R. McHale
Vice President and Treasurer
Date: November 8, 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: November 8, 2001 By /s/ David R. McHale
---------------- ------------------------------
David R. McHale
Vice President and Treasurer
Date: November 8, 2001 By /s/ John J. Roman
---------------- ------------------------------
John J. Roman
Vice President and Controller