Exhibit 13.4

2001 Annual Report

Public Service Company of New Hampshire and Subsidiaries

Index

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

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

Report of Independent Public Accountants.................... 11

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

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

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

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

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

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

Selected Consolidated Financial Data........................ 38

Consolidated Quarterly Financial Data (Unaudited)........... 38

Consolidated Statistics (Unaudited)......................... 39

Bondholder Information...................................... Back Cover

Public Service Company of New Hampshire and Subsidiaries

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

Financial Condition
- -------------------

Overview
- --------

Public Service Company of New Hampshire (PSNH or the company), is a wholly
owned subsidiary of Northeast Utilities (NU) and is part of the Northeast
Utilities system (NU system). PSNH's earnings before preferred dividends
totaled $81.8 million in 2001, compared with a loss of $146.7 million in 2000
and earnings of $84.2 million in 1999. The PSNH results included an after-tax
gain of $15.5 million associated with the Millstone sale in 2001 and an after-
tax $214.2 million extraordinary charge associated with electric industry
restructuring in 2000. Management expects operating results at PSNH to
continue to decline in 2002, reflecting the effects of a full year of
electric utility restructuring.

Future Outlook
- --------------

During 2000, PSNH and the state of New Hampshire were able to reach a
settlement regarding restructuring, which was subsequently approved by the
New Hampshire Public Utilities Commission (NHPUC). The "Agreement to Settle
PSNH Restructuring," (Settlement Agreement) ended several years of
uncertainty related to restructuring and the recovery of stranded costs for
PSNH and the state of New Hampshire. On May 1, 2001, PSNH implemented
industry restructuring allowing its customers to begin choosing their
electric suppliers (competition day). On that date, PSNH's customers
received an overall rate reduction of more than 10 percent, in addition to
the 5 percent reduction they received on October 1, 2000.

In April 2001, legislation was passed in the state of New Hampshire, related
to transition and default service and the sale of generation assets by PSNH
that effectively amended the previously approved Settlement Agreement. The
legislation requires PSNH to supply transition service to its residential and
small commercial customers until at least February 1, 2006, and requires that
transition service be provided at fixed rates for certain classes of
customers until February 1, 2004. The legislation also requires PSNH to delay
the sale of its fossil and hydroelectric generation assets until no sooner
then February 1, 2004.

PSNH will initially supply transition and default service from its generation
assets, and when necessary, through supplemental power purchases. PSNH will
use the net revenues from the sale of transition and default service to
recover non-securitized stranded costs when those revenues exceed service
costs. PSNH will be permitted, subject to NHPUC review, to defer and recover
as non-securitized stranded costs, generation service costs in excess of
transition and default service revenues. As a result of the Settlement
Agreement and the legislation passed in April 2001, PSNH expects that its
financial performance will be relatively stable and predictable in 2002,
absent any unexpected significant adverse events.

Liquidity
- ---------

The year 2001 was marked by tremendous inflows of cash into the NU system and
PSNH as a result of the securitization of stranded costs and the sale of the
Millstone units. PSNH's liquidity benefited from the issuance of $525 million
in rate reduction bonds and the receipt of approximately $25 million from the
sale of the Millstone units. The largest share of the proceeds was used for
buydown of the Seabrook Power Contracts. Capital lease obligations declined
to $110.3 million at the end of 2001 from $629.2 million at the end of 2000.
PSNH's long-term debt other than rate reduction bonds decreased to $407.3
million at the end of 2001 from $431.6 million at the end of 2000. PSNH also
repaid all of its preferred stock in 2001.

PSNH paid approximately another $50 million in December 2001 to buyout other
purchased-power contracts and issued an equivalent amount of rate reduction
bonds in January 2002, to pay for those costs. PSNH continues to negotiate
buyout or buydown arrangements with other plant operators and may require
additional funds if successfully renegotiated agreements are approved by the
NHPUC and result in upfront payments.

The remaining proceeds were used primarily to return equity capital to NU
parent. Including both return of capital and common dividends, PSNH paid
$287 million to NU parent in 2001.

On December 19, 2001, PSNH refinanced $287.5 million of tax-exempt pollution
control revenue bonds by issuing $109 million of insured lower fixed-rate
bonds and $178.5 million of insured variable-rate bonds. At current rates,
that refinancing is expected to save PSNH in excess of $10 million annually.

Including capital lease obligations, but excluding rate reduction bonds, as
these bonds are nonrecourse to PSNH, PSNH's capitalization ratio was 63.7
percent debt and 36.3 percent common equity at the end of 2001, compared with
64.4 percent debt, 1.5 percent preferred securities and 34.1 percent common
equity at the end of 2000. The improved capitalization ratio and lowered
overall risk profile resulted in a series of upgrades of the NU system
securities through 2001. At the end of 2001, senior debt ratings on PSNH's
securities were A3, BBB+ and BBB. Overall, these ratings were the highest for
PSNH securities in decades and those ratings are expected to continue to
enhance PSNH's access to low-cost capital.

PSNH's net cash flows provided by operating activities increased to $251.2
million in 2001, compared with $190.9 million in 2000 and $199.2 million in
1999. In 2001, cash flows provided by operating activities, increased
primarily due to the tax impact of the buydown of the Seabrook Power
Contracts. The level of common dividends totaled $27 million in 2001, as
compared to $50 million in 2000 and no common dividends in 1999. The level
of preferred dividends decreased to $1.3 million in 2001, compared with $4
million in 2000 and $6.6 million in 1999, reflecting PSNH's reduced preferred
stock outstanding. PSNH currently forecasts construction expenditures of up
to $110 million for the year 2002.

Over the coming years, PSNH is expected to pay out most of its earnings in
the form of dividends to the parent company. There may also be an additional
dividend to NU near the end of 2002, depending on the amount of cash received
as a result of the sale of Seabrook.

Beyond 2001, management expects that current debt levels at PSNH may decline,
contingent upon the results of the sale of North Atlantic Energy
Corporation's (NAEC) share of Seabrook.

Capital investments in electric utility plant at PSNH totaled $92.6 million
in 2001, as compared to $69.5 million in 2000. The company anticipates no
material increase in capital expenditures in the next several years.

Restructuring and Rate Matters
- ------------------------------

On May 1, 2001, PSNH implemented industry restructuring allowing its
customers to begin choosing their electric suppliers (competition day). They
also received an overall reduction of more than 10 percent, in addition to
the 5 percent reduction they received on October 1, 2000.

On May 22, 2001, the Governor of New Hampshire signed a bill modifying the
state's 1996 and 2000 electric utility industry restructuring laws. The
revisions delay the sale of PSNH's fossil and hydroelectric generation assets
to no sooner than 33 months after restructuring takes effect, or February 1,
2004. The revisions also fixed the charges retail customers will pay PSNH
for electric supply, or transition service.

PSNH and NAEC have entered into two contracts where PSNH is obligated to
purchase NAEC's 35.98 percent ownership of the capacity and output of
Seabrook. The 2001 amended restructuring bill requires the NHPUC to complete
the sale of NAEC's share of Seabrook in an expeditious manner. In late 2001,
the NHPUC and the Connecticut Department of Public Utility Control named J.P.
Morgan as the selling agent for all owners seeking to sell their Seabrook
shares. Those owners, which include NAEC with its 35.98 percent share,
collectively own approximately 88 percent of Seabrook. J.P. Morgan expects
to consummate the sale in late 2002. NAEC's proceeds will be used to repay
all $90 million of NAEC's outstanding debt and return all NAEC's equity,
which totaled $35 million as of December 31, 2001, to NU. Following the sale
of NAEC's share of Seabrook, the Seabrook Power Contracts will be terminated.
PSNH will use these proceeds to more quickly amortize stranded costs.

On October 10, 2000, NU reached an agreement with an unaffiliated joint owner
of Seabrook under which that joint owner would include its aggregate 15
percent ownership share of Seabrook in the upcoming sale. Under the terms of
the agreement, in the event that the sale yields proceeds for that joint
owner of more than $87.2 million, NU and that joint owner would share the
excess proceeds. Should those sales proceeds be less than $87.2 million, NU
would make up the difference below that amount up to a maximum of $17.4
million. The agreement also limits any top-off amount required to be funded
by that joint owner for decommissioning as part of the sale process at the
amount required by the Nuclear Regulatory Commission regulations.

For further information regarding commitments and contingencies related to
restructuring, see Note 10A, "Commitments and Contingencies - Restructuring,"
to the consolidated financial statements.

Regional Transmission Organization
- ----------------------------------

The Federal Energy Regulatory Commission (FERC) has required all transmission
owning utilities, including PSNH, to voluntarily start forming regional
transmission organizations (RTO) or to state why this process has not begun.
In July 2001, the FERC stated that the three existing Northeastern
Independent System Operators (ISO) (PJM, New York and New England) should
work together to form one RTO. The FERC initiated a mediation effort between
all interested parties to begin the process of forming such an entity.

NU has been discussing with the other transmission owners in the three pool
area the potential to form an Independent Transmission Company (ITC). The
ITC would be a for-profit entity and would perform certain transmission
functions required by the FERC including tariff control, system planning and
system operations. The remaining functions required by the FERC would be
performed by the ISO and deal with the energy market and short-term
reliability. Together, the ITC and ISO form the FERC desired RTO.

In January 2002, the New York and New England ISOs announced their intention
to form an RTO. NU is working with the other transmission owners in these
two power pools to create an ITC. The agreements needed to create the ITC
and to define the working relationships among the ISO, the ITC and the
transmission owners should be created in 2002 and will allow the ITC to begin
operation shortly thereafter. The ITC and/or ISO will have the responsibility
to collect the revenue requirements of each transmission owning entity from
the market place through FERC approved tariffs. The creation of the ITC
and/or RTO will require a FERC rate case and the impact on NU's return on
equity as a result of this rate case cannot be estimated at this time.

Nuclear Plant Performance and Other Matters
- -------------------------------------------

Seabrook: Seabrook operated at a capacity factor of 85.9 percent in 2001.
After returning from a scheduled refueling outage in January 2001, Seabrook
operated at a capacity factor of 93.4 percent. Seabrook is scheduled to
undergo a refueling outage in the spring of 2002. PSNH is obligated to
purchase the capacity and output from NAEC's 35.98 percent joint ownership
in Seabrook under the Seabrook Power Contracts.

Vermont Yankee: In August 2001, the owners of Vermont Yankee announced they
would sell the unit to an unaffiliated company for $180 million, including
$145 million for the plant and materials and supplies and $35 million for the
nuclear fuel. PSNH owns 4 percent of the unit, and under the terms of the
sale, will continue to buy 4 percent of the plant's output through March 2012
at a range of fixed prices. The sale requires several regulatory approvals
and is scheduled to close during the first half of 2002.

Millstone: On March 31, 2001, PSNH, The Connecticut Light and Power Company
and Western Massachusetts Electric Company sold their ownership interests in
Millstone 3 to a subsidiary of Dominion Resources, Inc., Dominion Nuclear
Connecticut, Inc. (DNCI).

Nuclear Decommissioning
- -----------------------

In connection with the aforementioned sale of the Millstone units, DNCI has
agreed to assume responsibility for decommissioning those units.

For further information regarding nuclear decommissioning, see Note 11,
"Nuclear Decommissioning and Plant Closure Costs," to the consolidated
financial statements.

Spent Nuclear Fuel Disposal Costs
- ---------------------------------

The United States Department of Energy (DOE) originally was scheduled to
begin accepting delivery of spent nuclear fuel on January 31, 1998. However,
delays in confirming the suitability of a permanent storage site continually
have postponed plans for the DOE's long-term storage and disposal site.
Extended delays or a default by the DOE could lead to consideration of costly
alternatives. PSNH has the primary responsibility for the interim storage of
its spent nuclear fuel prior to divestiture of its remaining operating
nuclear units, Seabrook and Vermont Yankee, as well as the three nuclear
units currently undergoing decommissioning, Connecticut Yankee, Maine Yankee
and Yankee Rowe.

For further information regarding spent nuclear fuel disposal costs, see Note
10C, "Commitments and Contingencies - Spent Nuclear Fuel Disposal Costs," to
the consolidated financial statements.

Other Matters
- -------------

Critical Accounting Policies: The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates, assumptions and at times difficult,
subjective or complex judgments. Accounting policies related to the
recoverability of certain regulatory assets and the assumptions used in
developing the pension and postretirement benefit obligations are the
accounting principles that management believes are critical and could have a
significant impact on PSNH's consolidated financial statements.

Regulatory Assets: The accounting policies of the NU system's regulated
operating companies historically reflect the effects of the rate-making
process in accordance with Statement of Financial Accounting and
Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation." Through its cost-of-service rate regulated transmission and
distribution business, PSNH is currently recovering its investments in
long-lived assets, including regulatory assets, and management believes
that the application of SFAS No. 71 to that portion of their business
continues to be appropriate. Management must reaffirm this conclusion at
each balance sheet date. If, as a result of a change in circumstances,
it is determined that any portion of these investments is no longer
recoverable under SFAS No. 71, that portion would be written off. Such a
write-off could have a material impact on PSNH's consolidated financial
statements. Management currently believes that all long-lived assets,
including regulatory assets, are recoverable.

Pension and Postretirement Benefit Obligations: PSNH participates in a
uniform noncontributory defined benefit retirement plan covering
substantially all regular NU system employees and also provides certain
health care benefits, primarily medical and dental, and life insurance
benefits through a benefit plan to retired employees. For each of these
plans, the development of the benefit obligation, fair value of plan
assets, funded status, and net periodic benefit credit or cost is based
on several significant assumptions. These assumptions primarily relate
to the application of a discount rate, expected long-term rate of return
and other trend rates. If these assumptions were changed, the resultant
change in benefit obligations, fair values of plan assets, funded
status, and net periodic benefit credits or costs could have a material
impact on PSNH's consolidated financial statements.

For further information regarding these types of activities, see Note 1G,
"Regulatory Accounting and Assets," and Note 8, "Pension Benefits and
Postretirement Benefits Other Than Pensions," to the consolidated financial
statements.

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

Other Commitments and Contingencies: For further information regarding other
commitments and contingencies, see Note 10, "Commitments and Contingencies,"
to the consolidated financial statements.

Contractual Obligations and Commercial Commitments: Aggregated information
regarding PSNH's contractual obligations and commercial commitments as of
December 31, 2001, is summarized as follows:

- -------------------------------------------------------------------------------
(Millions of Dollars) 2002 2003 2004 2005 2006 Totals
- -------------------------------------------------------------------------------
Notes payable to banks $ 60.5 $ - $ - $ - $ - $ 60.5
Capital leases 0.4 0.4 0.4 0.4 0.3 1.9
Operating leases 5.9 4.3 3.8 3.2 2.8 20.0
Long-term contractual
obligations 151.6 154.7 159.0 160.3 154.8 780.4
- -------------------------------------------------------------------------------
Totals $218.4 $159.4 $163.2 $163.9 $157.9 $862.8
- -------------------------------------------------------------------------------

For further information regarding PSNH's contractual obligations and
commercial commitments, see Note 3, "Short-Term Debt," Note 4, "Leases," and
Note 10E, "Long-Term Contractual Arrangements," 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 past two
years are provided in the table below.

Income Statement Variances
(Millions of Dollars)

2001 over/(under) 2000 2000 over/(under) 1999
---------------------- ----------------------
Amount Percent Amount Percent
------ ------- ------ -------
Operating Revenues ($120) (9)% $ 131 11%
----- --- ----- ---
Operating Expenses:
Fuel, purchased and
net interchange power (140) (16) 162 23
Other operation 1 1 (5) (4)
Maintenance 9 19 (5) (10)
Depreciation (4) (9) (4) (8)
Amortization of regulatory
assets, net 20 43 11 31
Taxes other than
income taxes (4) (9) (1) (3)
----- --- ----- ---
Total operating expenses (118) (10) (158) 16
----- --- ----- ---
Operating Income (2) (1) (27) (16)
Other income/(loss), net 22 (a) 9 (a)
Interest expense, net 13 36 (5) (13)
----- --- ----- ---
Income before income
tax expense 7 7 (13) (10)
Income tax expense (7) (15) 4 10
----- --- ----- ---
Income before
extraordinary loss 14 21 (17) (20)
Extraordinary loss 214 (a) (214) -
----- --- ----- ---
Net income/(loss) $ 228 (a) $(231) (a)
===== === ===== ===
(a) percent greater than 100.

Operating Revenues
Operating revenue decreased $120 million or 9 percent in 2001, primarily due
to lower retail and wholesale revenues. Retail revenues decreased $75
million, primarily due to 5 and 11 percent rate decreases that were effective
October 1, 2000 and May 1, 2001, respectively ($89 million), partially offset
by higher retail sales ($14 million). Retail kilowatt-hour (kWh) sales
increased 1.2 percent. Wholesale revenues decreased $43 million due to lower
sales of capacity and energy.

Operating revenues increased by $131 million or 11 percent in 2000, primarily
due to higher wholesale and retail revenues. Wholesale revenues increased by
$128 million primarily due to higher wholesale energy and capacity sales.
Retail revenues were higher primarily due to higher retail sales ($12
million), partially offset by a rate decrease as part of PSNH restructuring
($8 million). Retail kWh sales increased by 2.1 percent.

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.

Fuel, purchased and net interchange power expense increased in 2000,
primarily due to higher wholesale energy sales.

Other Operation and Maintenance
Other operation and maintenance (O&M) expenses increased $10 million in 2001,
primarily due to higher fossil and hydro expenses ($12 million) and higher
transmission and distribution expenses ($2 million), partially offset by
lower nuclear expenses ($2 million) and lower administrative and general
expenses ($1 million).

Other O&M expenses decreased in 2000, primarily due to lower transmission and
distribution expenses ($6 million) and lower fossil maintenance expenses ($5
million).

Depreciation
Depreciation expense decreased in 2001, primarily due to lower fixed assets
resulting from the sale of Millstone unit three at the end of the first
quarter 2001.

Depreciation expense decreased in 2000, primarily due to an increase in
Distribution Plant depreciable lives.

Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2001, primarily due to
higher amortizations related to restructuring.

Amortization of regulatory assets, net increased in 2000, primarily due to the
completion of the amortization of regulatory obligations related to net
operating loss carryforwards in 1999 as a result of the Global Settlement.

Taxes Other Than Income Taxes
Taxes other than income taxes decreased in 2001, primarily due to lower New
Hampshire franchise taxes in 2001.

There were no significant changes to taxes other than income taxes in 2000.

Other Income/(Loss), Net
Other Income/(loss), net increased in 2001 as a result of PSNH's sale of its
ownership in Millstone 3.

Other income/(loss), net increased in 2000, primarily due to the 1999
settlement with the New Hampshire Electric Cooperative which resulted in a
$6.2 million write-off in 1999.

Interest Expense, Net
Interest expense, net increased in 2001, primarily due to interest associated
with the issuance of rate reduction bonds in 2001, partially offset by lower
interest on long-term debt resulting from the retirement and refinancing of
long-term debt.

Interest on long-term debt decreased in 2000, primarily due to refinancing of
long-term debt to lower interest rates.

Income Tax Expense
Income tax expense decreased in 2001, primarily due to the additional
investment tax credits amortization associated with Seabrook.

Income tax expense increased in 2000, primarily due to 1999 utilization of
net operating loss carryforwards.

Extraordinary Loss
The extraordinary loss in 2000 is due to an after-tax write-off by PSNH of
approximately $225 million of stranded costs under an industry restructuring
settlement with the state of New Hampshire, combined with other positive
effects relating to the discontinuation of SFAS No. 71 ($11 million).

- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------

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

We have audited the accompanying consolidated balance sheets of Public
Service Company of New Hampshire and subsidiaries (a New Hampshire
corporation and a wholly owned subsidiary of Northeast Utilities) as of
December 31, 2001 and 2000, and the related consolidated statements of
income, comprehensive income, common stockholder's equity and cash flows for
each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Public Service Company of
New Hampshire and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

Hartford, Connecticut
January 22, 2002

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues.......................................$ 1,171,686 $ 1,291,332 $ 1,160,589
-------------- -------------- --------------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power............ 713,668 853,563 691,743
Other................................................ 123,533 122,268 127,635
Maintenance............................................. 56,276 47,429 52,481
Depreciation............................................ 39,741 43,873 47,695
Amortization of regulatory assets, net.................. 65,445 45,874 34,915
Taxes other than income taxes........................... 38,375 42,321 43,409
-------------- -------------- --------------
Total operating expenses.............................. 1,037,038 1,155,328 997,878
-------------- -------------- --------------
Operating Income.......................................... 134,648 136,004 162,711
Other Income, Net......................................... 36,643 14,360 5,837
-------------- -------------- --------------
Income Before Interest and Income Tax Expense............. 171,291 150,364 168,548
-------------- -------------- --------------

Interest Expense:
Interest on long-term debt.............................. 30,201 37,510 42,728
Interest on rate reduction bonds........................ 20,721 - -
Other interest.......................................... 22 47 547
-------------- -------------- --------------
Interest expense, net................................. 50,944 37,557 43,275
-------------- -------------- --------------
Income Before Income Tax Expense.......................... 120,347 112,807 125,273
Income Tax Expense........................................ 38,571 45,256 41,064
-------------- -------------- --------------
Income Before Extraordinary Loss........................ 81,776 67,551 84,209
Extraordinary loss, net of tax benefit
of $155,783............................................. - (214,217) -
-------------- -------------- --------------
Net Income/(Loss)........................................$ 81,776 $ (146,666) $ 84,209
============== ============== ==============

STATEMENTS OF COMPREHENSIVE INCOME

Net Income/(Loss)........................................$ 81,776 $ (146,666) $ 84,209
-------------- -------------- --------------
Other comprehensive (loss)/income, net of tax:
Unrealized (losses)/gains on securities................. (801) 133 70
-------------- -------------- --------------
Comprehensive Income/(Loss)..............................$ 80,975 $ (146,533) $ 84,279
============== ============== ==============
</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>
- --------------------------------------------------------------------------------------------
At December 31, 2001 2000
- --------------------------------------------------------------------------------------------
(Thousands of Dollars)

ASSETS
- ------

Current Assets:
Cash........................................................ $ 1,479 $ 116,482
Receivables, less accumulated provision for
uncollectible accounts of $1,737 in 2001
and $1,869 in 2000......................................... 70,540 71,992
Accounts receivable from affiliated companies............... 13,055 2,239
Taxes receivable............................................ - 10,005
Unbilled revenues........................................... 29,268 41,844
Fuel, materials and supplies, at average cost............... 42,047 28,760
Prepayments and other....................................... 10,211 14,783
---------- ----------
166,600 286,105
---------- ----------
Property, Plant and Equipment:
Electric utility............................................ 1,447,955 1,506,168
Other....................................................... 6,221 8,588
---------- ----------
1,454,176 1,514,756
Less: Accumulated provision for depreciation.............. 689,397 714,792
---------- ----------
764,779 799,964
Construction work in progress................................ 44,961 27,251
Nuclear fuel, net............................................ - 1,924
---------- ----------
809,740 829,139
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets............................................ 1,046,760 924,847
Nuclear decommissioning trusts, at market.................... - 7,362
Other ....................................................... 71,414 34,843
---------- ----------
1,118,174 967,052
---------- ----------
Total Assets................................................... $2,094,514 $2,082,296
========== ==========

</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>
- ------------------------------------------------------------------------------------------
At December 31, 2001 2000
- ------------------------------------------------------------------------------------------
(Thousands of Dollars)

LIABILITIES AND CAPITALIZATION
- ------------------------------

Current Liabilities:
Notes payable to banks................................ $ 60,500 $ -
Notes payable to affiliated company................... 23,000 -
Preferred stock - current portion..................... - 24,268
Obligations under Seabrook Power Contracts
and other capital leases - current portion.......... 24,164 537,528
Accounts payable...................................... 32,285 45,892
Accounts payable to affiliated companies.............. 18,727 54,008
Accrued taxes......................................... 2,281 657
Accrued interest...................................... 9,428 4,962
Other................................................. 25,164 13,112
---------- ----------
195,549 680,427
---------- ----------

Rate Reduction Bonds.................................... 507,381 -
---------- ----------

Obligations under Seabrook Power Contracts
and Other Capital Leases.............................. 86,111 91,702
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes..................... 423,050 179,928
Accumulated deferred investment tax credits........... 12,015 27,348
Deferred contractual obligations...................... 37,712 41,499
Accrued pension....................................... 37,326 41,216
Other................................................. 46,260 63,597
---------- ----------
556,363 353,588
---------- ----------
Capitalization:
Long-Term Debt........................................ 407,285 407,285
---------- ----------

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................................... 176,419 123,177
Accumulated other comprehensive income.............. 406 1,207
---------- ----------
Common Stockholder's Equity........................... 341,825 549,294
---------- ----------
Total Capitalization.................................... 749,110 956,579
---------- ----------
Commitments and Contingencies (Note 10)

Total Liabilities and Capitalization..................... $2,094,514 $2,082,296
========== ==========
</Table>
The accompanying notes are an integral part of these financial statements.

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY

<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
Accumulated
Capital Other
Common Surplus, Retained Comprehensive Total
Stock Paid In Earnings Income/(Loss) (a)
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Balance at January 1, 1999............. $ 1 $ 424,250 $ 252,912 $1,004 $ 678,167

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

Net loss for 2000.................... (146,666) (146,666)
Cash dividends on preferred stock.... (3,962) (3,962)
Cash dividends on common stock....... (50,000) (50,000)
Capital stock expenses, net.......... 255 255
Allocation of benefits - ESOP (b).... 3,867 3,867
Other comprehensive income........... 133 133
--- --------- --------- ------ ---------
Balance at December 31, 2000........... 1 424,909 123,177 1,207 549,294

Net income for 2001.................. 81,776 81,776
Cash dividends on preferred stock.... (1,286) (1,286)
Cash dividends on common stock....... (27,000) (27,000)
Repurchase of common stock........... (1) (259,999) (260,000)
Capital stock expenses, net.......... 90 90
Allocation of benefits - ESOP (b).... (248) (248)
Other comprehensive loss............. (801) (801)
--- --------- --------- ------ ---------
Balance at December 31, 2001........... $ - $ 165,000 $ 176,419 $ 406 $ 341,825
=== ========= ========= ======= =========
</Table>

(a) The company has no dividend restrictions. However, the company has two
tests it must meet before it can pay out any dividends. The most
restrictive of which limits the company to paying out no greater than
$99.6 million of equity at December 31, 2001.

(b) In June 1999, PSNH paid NU parent $10.6 million for NU shares issued
from 1992 through 1998 on behalf of its employees in accordance with NU's
401(k) plan. This transaction resulted in a reduction of the NU parent
loss and a tax benefit to PSNH. The amount in 2000 represents the
remaining previously allocated 1993 through 1999 NU parent losses.

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

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating activities:
Income before extraordinary loss ................................. $ 81,776 $ 67,551 $ 84,209
Adjustments to reconcile to net cash flows
provided by operating activities:
Depreciation.................................................... 39,741 43,873 47,695
Deferred income taxes and investment tax credits, net........... 195,422 (521) (5,304)
Net (deferral)/amortization of recoverable energy costs, net.... (21,234) (35,886) 27,065
Amortization of regulatory assets, net.......................... 65,445 45,874 34,915
Net other (uses)/sources of cash................................ (83,746) 43,412 38,601
Changes in working capital:
Receivables and unbilled revenues, net ......................... 3,212 20,597 5,987
Fuel, materials and supplies.................................... (13,287) 9,316 (1,434)
Accounts payable................................................ (48,888) 23,110 22,307
Accrued taxes................................................... 1,624 (33,048) (49,385)
Other working capital (excludes cash)........................... 31,095 6,646 (5,496)
---------- --------- ---------
Net cash flows provided by operating activities..................... 251,160 190,924 199,160
---------- --------- ---------
Investing Activities:
Investments in regulated plant:
Electric utility plant.......................................... (92,626) (69,500) (46,096)
Nuclear fuel.................................................... (37) (1,153) (1,168)
---------- --------- ---------
Net cash flows used for investments in regulated plant............ (92,663) (70,653) (47,264)
Investments in nuclear decommissioning trusts..................... (137) (686) (678)
Other investment activities, net.................................. (30,906) 2,268 2,214
Net proceeds from the sale of utility plant....................... 24,888 - -
Buyout of IPP contract............................................ (48,164) - -
---------- --------- ---------
Net cash flows used in investing activities......................... (146,982) (69,071) (45,728)
---------- --------- ---------

Financing Activities:
Repurchase of common stock........................................ (260,000) - -
Issuance of long-term debt........................................ 287,485 - -
Issuance of rate reduction bonds.................................. 525,000 - -
Retirement of rate reduction bonds................................ (17,619) - -
Net increase in short-term debt................................... 83,500 - -
Reacquisitions and retirements of long-term debt.................. (287,485) (109,200)
Reacquisitions and retirements of preferred stock................. (24,268) (25,732) (25,000)
Buydown of capital lease obligation............................... (497,508) - -
Cash dividends on preferred stock................................. (1,286) (3,962) (6,625)
Cash dividends on common stock.................................... (27,000) (50,000) -
---------- --------- ---------
Net cash flows used in financing activities......................... (219,181) (188,894) (31,625)
---------- --------- ---------
Net (decrease)/increase in cash .................................... (115,003) (67,041) 121,807
Cash - beginning of year............................................ 116,482 183,523 61,716
---------- --------- ---------
Cash - end of year.................................................. $ 1,479 $ 116,482 $ 183,523
========== ========= =========

Supplemental Cash Flow Information:
Cash paid during the year for:
Interest, net of amounts capitalized............................. $ 47,369 $ 38,819 $ 39,895
========== ========== =========

Income taxes...................................................... $ 168,021 $ 22,575 $ 38,942
========== ========== =========
Decrease in obligations:
Seabrook Power Contracts.......................................... $ (517,998) $ (96,208) $(115,065)
========== ========== =========
</Table>
The accompanying notes are an integral part of these financial statements.

- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. About Public Service Company of New Hampshire
Public Service Company of New Hampshire (PSNH or the company) along
with The Connecticut Light and Power Company (CL&P), Western
Massachusetts Electric Company (WMECO), North Atlantic Energy
Corporation (NAEC), Holyoke Water Power Company (HWP), and Yankee
Energy System, Inc. (Yankee) are the operating companies comprising
the Northeast Utilities system (NU system) and are wholly owned by
Northeast Utilities (NU). The NU system furnishes franchised retail
electric service in New Hampshire, Connecticut, and western
Massachusetts through PSNH, CL&P and WMECO. NAEC sells all of its
entitlement to the capacity and output of Seabrook Station nuclear
unit (Seabrook) to PSNH under the terms of two life-of-unit, full
cost recovery contracts (Seabrook Power Contacts). HWP also is
engaged in the production of electric power. Yankee, the parent
company of Yankee Gas Services Company (Yankee Gas), is Connecticut's
largest natural gas distribution system.

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

Several wholly owned subsidiaries of NU provide support services for
the NU system companies, including PSNH, and, in some cases, for
other New England utilities. Northeast Utilities Service Company
(NUSCO) provides centralized accounting, administrative, engineering,
financial, information resources, legal, operational, planning,
purchasing, and other services to the NU system companies, including
PSNH. North Atlantic Energy Service Corporation has operational
responsibility for Seabrook. In addition, PSNH has established two
special purpose subsidiaries whose operations are solely related to
the issuance of rate reduction bonds.

B. Presentation
The consolidated financial statements of PSNH include the accounts of
all 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 years' data have been made to
conform with the current year's presentation.

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

C. New Accounting Standards
Asset Retirement Obligations: In June 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards (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 PSNH's 2003 calendar year. Upon adoption of SFAS
No. 143, there may be an impact on PSNH'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 PSNH's 2002 calendar year. Currently, management does
not expect the adoption of SFAS No. 144 to have a material impact on
PSNH's consolidated financial statements.

D. Investments and Jointly Owned Electric Utility Plant
Regional Nuclear Generating Companies: PSNH owns common stock
in four regional nuclear companies (Yankee Companies). PSNH's
ownership interests in the Yankee Companies at December 31, 2001 and
2000, which are accounted for on the equity method due to PSNH's
ability to exercise significant influence over their operating and
financial policies are 5 percent of the Connecticut Yankee Atomic
Power Company (CYAPC), 7 percent of the Yankee Atomic Electric
Company (YAEC), 5 percent of Maine Yankee Atomic Power Company
(MYAPC), and 4 percent of Vermont Yankee Nuclear Power Corporation
(VYNPC). PSNH's total equity investment in the Yankee Companies at
December 31, 2001 and 2000 is $8.5 million and $10 million,
respectively. Each Yankee Company owns a single nuclear generating
unit. However, VYNPC was the only unit still in operation at
December 31, 2001.

Wyman Unit 4: PSNH has a 3.14 percent ownership interest in
Wyman Unit 4, a 632 megawatt oil-fired generating unit. At
December 31, 2001 and 2000, plant-in-service included $6.1 million
and the accumulated provision for depreciation included $4.5 million
and $4.3 million, respectively, related to Wyman Unit 4.

E. Depreciation
The provision for depreciation is calculated using the straight-line
method based on the estimated remaining useful lives of depreciable
utility plant-in-service, adjusted for salvage value and removal
costs, as approved by the appropriate regulatory agency where
applicable. Depreciation rates are applied to plant-in-service from
the time they are placed in service. When plant is retired from
service, the original cost of the plant, including costs of removal
less salvage, is charged to the accumulated provision for
depreciation. The depreciation rates for the several classes of
electric plant-in-service are equivalent to a composite rate of 3
percent in 2001, 3.2 percent in 2000 and 3.7 percent in 1999.

F. Revenues
Revenues are based on authorized rates applied to each customer's
use of energy. In general, rates can be changed only through a
formal proceeding before the NHPUC. Regulatory commissions
also have authority over the terms and conditions of nontraditional
rate-making arrangements.

At the end of each accounting period, PSNH accrues a revenue
estimate for the amount of energy delivered but unbilled.

G. Regulatory Accounting and Assets
The accounting policies of PSNH 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 SFAS No. 71, "Accounting for the Effects
of Certain Types of Regulation."

PSNH's transmission and distribution business continues to be cost-of-
service rate regulated, and management believes the application of
SFAS No. 71 continues to be appropriate. Management also believes it
is probable that PSNH will recover its investments in long-lived
assets, including regulatory assets. 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 PSNH's regulatory assets are as follows:

-----------------------------------------------------------------------
At December 31, 2001 2000
-----------------------------------------------------------------------
(Millions of Dollars)

Recoverable nuclear costs.................. $ 29.0 $484.7
Securitized regulatory assets.............. 498.2 -
Income taxes, net.......................... 99.4 68.1
Unrecovered contractual obligations........ 38.8 41.5
Recoverable energy costs, net.............. 251.6 230.3
Other...................................... 129.8 100.2
-----------------------------------------------------------------------
Totals..................................... $1,046.8 $924.8
-----------------------------------------------------------------------

In March 2001, PSNH recorded a regulatory asset in the amount of
$46.5 million in conjunction with the sale of the Millstone units. A
portion of the Millstone regulatory asset has been securitized and
the remaining unamortized balance of $29 million as of December 31,
2001, is included in recoverable nuclear costs.

In 2000, PSNH discontinued the application of SFAS No. 71 for its
generation business, and created a regulatory asset for Seabrook over
market generation, which was classified as recoverable nuclear costs.
The unamortized balance of the regulatory asset created was $484.7
million as of December 31, 2000. In April 2001, PSNH issued rate
reduction bonds in the amount of $525 million. PSNH used the
majority of this amount to buydown its power contracts with NAEC.
The Seabrook over market generation was securitized at that time and
was reclassified as a securitized regulatory asset as of December 31,
2001.

PSNH, under the terms of contracts with the Yankee Companies, is
responsible for its proportionate share of the remaining costs of the
units, including decommissioning. These amounts are recorded as
unrecovered contractual obligations. A portion of these obligations
was securitized in 2001 and is included in securitized regulatory
assets.

PSNH, under the Energy Policy Act of 1992 (Energy Act), is assessed
for its proportionate share of the costs of decontaminating and
decommissioning uranium enrichment plants owned by the United States
Department of Energy (DOE) (D&D Assessment). The Energy Act requires
that regulators treat D&D Assessments as a reasonable and necessary
current cost of fuel, to be fully recovered in rates like any other
fuel cost. PSNH is currently recovering these costs through rates.
As of December 31, 2001 and 2000, the PSNH's total D&D Assessment
deferrals were $0.2 million, and have been recorded as recoverable
energy costs, net.

In conjunction with the implementation of restructuring under the
Settlement Agreement on May 1, 2001, the fuel and purchased-power
adjustment clause (FPPAC) was discontinued. At December 31, 2001 and
2000, PSNH had $251.4 million and $230.1 million, respectively, of
recoverable energy costs deferred under the FPPAC, including previous
deferrals of purchases from independent power producers. Under the
Settlement Agreement, the FPPAC deferrals are recovered as a Part 3
regulatory asset through a transition charge, subject to a prudence
determination by the NHPUC.

H. Income Taxes
The tax effect of temporary differences (differences between the
periods in which transactions affect income in the financial
statements and the periods in which they affect the determination of
taxable income) is accounted for in accordance with the rate-making
treatment of the applicable regulatory commissions. The tax effect
of temporary differences, including timing differences accrued under
previously approved accounting standards, that give rise to the
accumulated deferred tax obligation including the impacts of the
buydown of the Seabrook Power Contracts and the sale of the Millstone
units, is as follows:

-----------------------------------------------------------------------
At December 31, 2001 2000
-----------------------------------------------------------------------
(Millions of Dollars)
Accelerated depreciation and other
plant-related differences............... $ 85.8 $ 93.8
Regulatory assets:
Securitized contract termination
costs and other....................... 177.9 -
Income tax gross-up..................... 37.8 25.1
Other..................................... 121.6 61.0
-----------------------------------------------------------------------
Totals.................................... $423.1 $179.9
-----------------------------------------------------------------------

I. Other Income, Net
The components of PSNH's other income, net items are as follows:

-----------------------------------------------------------------------
For the Years Ended December 31,
-----------------------------------------------------------------------
2001 2000 1999
-----------------------------------------------------------------------
(Millions of Dollars)
Gain related to Millstone sale..... $25.9 $ - $ -
Other, net......................... 10.7 14.4 5.8
-----------------------------------------------------------------------
Totals............................. $36.6 $14.4 $5.8
-----------------------------------------------------------------------

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

With the implementation of the Settlement Agreement, PSNH and NAEC
restructured the power contracts and bought down the value of the
Seabrook plant asset, as defined within the Settlement Agreement, to $100
million. The Settlement Agreement also requires NAEC to sell via public
auction its share of Seabrook, with the sale to occur no later than
December 31, 2003. NAEC expects to sell its investment in Seabrook around
the end of 2002 through a public auction. Upon a successful sale of
NAEC's share of Seabrook, the existing Seabrook Power Contracts between
PSNH and NAEC will be terminated.

PSNH has included its right to buy power from NAEC on its balance sheet
as part of utility plant with a corresponding obligation. Under the
current Seabrook Power Contracts which will be terminated following the
sale of Seabrook, if Seabrook is shut down prior to the expiration of its
operating license, PSNH will be unconditionally required to pay NAEC
termination costs for 39 years, less the period during which Seabrook has
operated. These termination costs will reimburse NAEC for its share of
Seabrook shut-down and decommissioning costs, and will pay NAEC a return
of and on any undepreciated balance of its initial investment over the
remaining term of the power contracts, and the return of and on any
capital additions to the plant made after the acquisition date over a
period of five years after shut down (net of any tax benefits to NAEC
attributable to the cancellation).

Contract payments, excluding the buydown of the Seabrook plant asset in
2001, charged to operating expenses in 2001, 2000 and 1999 were $158.6
million, $268 million and $280 million, respectively. Interest included
in the contract payments in 2001, 2000 and 1999 was $21.8 million, $44
million and $49 million, respectively.

3. SHORT-TERM DEBT
Limits: The amount of short-term borrowings that may be incurred by PSNH
is subject to periodic approval by either the SEC under the 1935 Act or
by the respective state regulators. PSNH is authorized by the NHPUC to
incur short-term borrowings up to a maximum of $100 million.

Credit Agreement: On November 16, 2001, PSNH, CL&P, WMECO, and Yankee
Gas entered into a 364-day unsecured revolving credit facility for $350
million. PSNH may draw up to $100 million under the facility, subject to
the maximum facility limit of $350 million. Unless extended, the credit
facility will expire on November 15, 2002. At December 31, 2001 and
2000, there were $60.5 million and no borrowings, respectively, in
borrowings under these facilities.

Under the aforementioned credit agreement, PSNH may borrow at fixed or
variable rates plus an applicable margin based upon certain debt ratings,
as rated by the lower of Standard and Poor's or Moody's Investors
Service. The weighted average interest rate on PSNH's notes payable to
banks outstanding on December 31, 2001 was 2.9 percent.

This credit agreement provides that PSNH must comply with certain
financial and nonfinancial covenants as are customarily included in such
agreements, including, but not limited to, consolidated debt ratios and
interest coverage ratios. PSNH currently is and expects to remain in
compliance with these covenants.

Money Pool: Certain subsidiaries of NU, including PSNH, are members of
the Northeast Utilities System Money Pool (Pool). The Pool provides a
more efficient use of the cash resources of the NU system and reduces
outside short-term borrowings. NUSCO administers the Pool as agent for
the member companies. Short-term borrowing needs of the member companies
are first met with available funds of other member companies, including
funds borrowed by NU parent. NU parent may lend to the Pool but may not
borrow. Funds may be withdrawn from or repaid to the Pool at any time
without prior notice. Investing and borrowing subsidiaries receive or pay
interest based on the average daily federal funds rate. Borrowings based
on loans from NU parent, however, bear interest at NU parent's cost and
must be repaid based upon the terms of NU parent's original borrowing. At
December 31, 2001 and 2000, PSNH had $23 million in borrowings from and
no borrowings from/lendings to the Pool, respectively. The interest rate
on borrowings from the Pool at December 31, 2001 was 1.5 percent.

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

Capital lease rental payments charged to operating expense were $0.7
million in 2001, $1 million in 2000, and $1.5 million in 1999. Interest
included in capital lease rental payments was $0.3 million in 2001 and
2000, and $0.4 million in 1999. Operating lease rental payments charged
to expense were $3.9 million in 2001, $3.5 million in 2000, and $3.1
million in 1999.

Future minimum rental payments, excluding executory costs, such as
property taxes, state use taxes, insurance, and maintenance, under long-
term noncancelable leases, as of December 31, 2001, are as follows:

---------------------------------------------------------------------------
Year Capital Leases Operating Leases
---------------------------------------------------------------------------
(Millions of Dollars)
2002............................. $0.4 $ 5.9
2003............................. 0.4 4.3
2004............................. 0.4 3.8
2005............................. 0.4 3.2
2006............................. 0.3 2.8
After 2006....................... 0.4 4.6
---------------------------------------------------------------------------
Future minimum lease payments.... 2.3 $24.6
Less amount
representing interest.......... 0.9
---------------------------------------------------------------------------
Present value of future
minimum lease payments......... $1.4
---------------------------------------------------------------------------

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

---------------------------------------------------------------------------
Shares December 31,
Outstanding --------------------
Description December 31, 2001 2001 2000
---------------------------------------------------------------------------
(Millions of Dollars)

10.60% Series A of 1991 - $ - $24.3

Less preferred stock
to be redeemed
within one year - - 24.3
---------------------------------------------------------------------------
Totals - $ - $ -
---------------------------------------------------------------------------

6. LONG-TERM DEBT
Details of long-term debt outstanding are as follows:

---------------------------------------------------------------------------
At December 31, 2001 2000
---------------------------------------------------------------------------
(Millions of Dollars)
Pollution Control Revenue Bonds:
7.65% Tax-Exempt Series A, due 2021.............. $ - $ 66.0
7.50% Tax-Exempt Series B, due 2021.............. - 109.0
7.65% Tax-Exempt Series C, due 2021.............. - 112.5
6.00% Tax-Exempt Series D, due 2021.............. 75.0 75.0
6.00% Tax-Exempt Series E, due 2021.............. 44.8 44.8
Adjustable Rate, Series A, due 2021.............. 89.3 -
Adjustable Rate, Series B, due 2021.............. 89.3 -
5.45% Tax-Exempt Series C, due 2021.............. 108.9 -
---------------------------------------------------------------------------
Long-term debt................................... $407.3 $407.3
---------------------------------------------------------------------------

There are no cash sinking fund requirements or debt maturities for the
years 2002 through 2006. There are annual renewal and replacement fund
requirements equal to 2.25 percent of the average of net depreciable
utility property owned by PSNH at the reorganization date, plus
cumulative gross property additions thereafter. PSNH expects to meet
these future fund requirements by certifying property additions. Any
deficiency would need to be satisfied by the deposit of cash or bonds.

Essentially, all utility plant of PSNH is subject to the liens of the
company's first mortgage bond indenture.

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

The average effective interest rates on the variable-rate pollution
control notes was 1.6 percent in 2001 and ranged from 5.9 percent to 6.8
percent in 2000.

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

---------------------------------------------------------------------------
For the Years Ended December 31, 2001 2000 1999
---------------------------------------------------------------------------
(Millions of Dollars)
Current income taxes:
Federal.............................. $(143.5) $41.8 $41.4
State................................ (13.4) 4.0 5.0
------- ----- -----
Total current...................... (156.9) 45.8 46.4
------- ----- -----
Deferred income taxes, net:
Federal.............................. 197.3 6.7 4.6
State................................ 13.5 0.8 (2.2)
------- ----- -----
Total deferred..................... 210.8 7.5 2.4
------- ----- -----
Investment tax credits, net............ (15.3) (8.0) (7.7)
---------------------------------------------------------------------------
Total income tax expense............... $ 38.6 $45.3 $41.1
---------------------------------------------------------------------------

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

Depreciation............................ $ 1.9 $(1.0) $ (6.5)
Regulatory deferral..................... 13.3 6.9 (12.6)
State net operating loss carryforward... - - 29.5
Regulatory disallowance................. 2.3 - (2.3)
Contractual settlements................. 6.7 - (6.7)
Securitized contract costs and other.... 177.9 - -
Other................................... 8.7 1.6 1.0
---------------------------------------------------------------------------
Deferred income taxes, net.............. $210.8 $ 7.5 $ 2.4
---------------------------------------------------------------------------

A reconciliation between income tax expense and the expected tax expense
at the statutory rate is as follows:

Expected federal income tax............. $42.1 $39.4 $43.7
Tax effect of differences:
Depreciation.......................... 0.7 0.3 0.9
Amortization of regulatory assets..... 6.3 9.9 9.9
Investment tax credit amortization.... (15.3) (8.0) (7.7)
State income taxes, net of
federal benefit..................... 0.1 2.9 1.6
Adjustment to tax asset
valuation allowance................. - - (7.4)
Seabrook intercompany gains
and losses.......................... - 5.0 0.8
Allocation of parent company loss..... - (4.2) -
Other, net............................ 4.7 - (0.7)
---------------------------------------------------------------------------
Total income tax expense................ $38.6 $45.3 $41.1
---------------------------------------------------------------------------

8. PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The NU system companies, including PSNH, participate in a uniform
noncontributory defined benefit retirement plan covering substantially
all regular NU system employees. Benefits are based on years of service
and the employees' highest eligible compensation during 60 consecutive
months of employment. PSNH's portion of the NU system's pension credit,
part of which was credited to utility plant, was $4.7 million in 2001,
$4.3 million in 2000 and $0.5 million in 1999.

Currently, PSNH's policy is to annually fund an amount at least equal to
that which will satisfy the requirements of the Employee Retirement
Income Security Act and Internal Revenue Code.

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

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

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

<Table>
<Caption>
-------------------------------------------------------------------------------
At December 31,
-------------------------------------------------------------------------------
Postretirement
Pension Benefits Benefits
-------------------------------------------------------------------------------
(Millions of Dollars) 2001 2000 2001 2000
-------------------------------------------------------------------------------

Change in benefit obligation
Benefit obligation
at beginning of year........... $(211.1) $ (201.5) $(52.9) $(51.2)
Service cost..................... (5.0) (4.8) (1.1) (0.9)
Interest cost.................... (15.8) (15.0) (4.3) (3.9)
Transfers........................ 0.1 0.1 - -
Actuarial loss................... (9.5) (1.0) (12.4) (1.1)
Benefits paid.................... 15.1 11.1 5.3 4.2
Settlements and other............ (1.7) - (0.1) -
-------------------------------------------------------------------------------
Benefit obligation
at end of year................. $(227.9) $(211.1) $(65.5) $(52.9)
-------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets
at beginning of year........... $ 221.8 $ 233.8 $ 32.4 $ 30.6
Actual return on plan assets..... (10.0) (0.8) (2.9) 1.5
Employer contribution............ - - 4.3 4.5
Benefits paid.................... (15.1) (11.1) (5.3) (4.2)
Transfers........................ (0.1) (0.1) - -
-------------------------------------------------------------------------------
Fair value of plan assets
at end of year................. $ 196.6 $ 221.8 $ 28.5 $ 32.4
-------------------------------------------------------------------------------
Funded status at December 31..... $ (31.3) $ 10.7 $(37.0) $(20.5)
Unrecognized transition
obligation..................... 2.7 3.0 32.2 35.3
Unrecognized prior service cost.. 14.1 15.5 - -
Unrecognized net (gain)/loss..... (22.8) (70.4) 4.6 (14.8)
-------------------------------------------------------------------------------
Accrued benefit cost............. $ (37.3) $ (41.2) $ (0.2) $ -
-------------------------------------------------------------------------------
</Table>

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

--------------------------------------------------------------------------
At December 31,
--------------------------------------------------------------------------
Postretirement
Pension Benefits Benefits
--------------------------------------------------------------------------
2001 2000 2001 2000
--------------------------------------------------------------------------
Discount rate.................. 7.25% 7.50% 7.25% 7.50%
Compensation/progression rate.. 4.25 4.50 4.25 4.50
Health care cost
trend rate (a)............... N/A N/A 11.00 5.26
--------------------------------------------------------------------------

(a) The annual per capita cost of covered health care benefits was
assumed to decrease to 5.00 percent by 2007.

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

<Table>
<Caption>
----------------------------------------------------------------------------------------
For the Years Ended December 31,
----------------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
----------------------------------------------------------------------------------------
(Millions of Dollars) 2001 2000 1999 2001 2000 1999
----------------------------------------------------------------------------------------

Service cost................ $ 5.0 $ 4.8 $ 4.9 $ 1.1 $ 0.9 $ 1.0
Interest cost............... 15.8 15.0 14.3 4.3 3.9 3.6
Expected return
on plan assets............ (20.9) (19.7) (17.7) (2.9) (2.6) (2.1)
Amortization of
unrecognized net
transition
obligation................ 0.3 0.3 0.3 2.9 2.9 2.9
Amortization of
prior service cost........ 1.3 1.3 1.3 - - -
Amortization of
actuarial gain............ (5.4) (6.0) (3.6) - - -
Other amortization, net..... - - - (1.1) (0.6) (0.5)
Settlements and other....... (0.8) - - - - -
----------------------------------------------------------------------------------------
Net periodic benefit
(credit)/cost............. $(4.7) $ (4.3) $ (0.5) $ 4.3 $ 4.5 $ 4.9
----------------------------------------------------------------------------------------
</Table>

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

--------------------------------------------------------------------------
For the Years Ended December 31,
--------------------------------------------------------------------------
Postretirement
Pension Benefits Benefits
2001 2000 1999 2001 2000 1999
--------------------------------------------------------------------------
Discount rate............. 7.50% 7.75% 7.00% 7.50% 7.75% 7.00%
Expected long-term
rate of return.......... 9.50 9.50 9.50 N/A N/A N/A
Compensation/
progression rate........ 4.50 4.75 4.25 4.50 4.75 4.25
Long-term rate
of return -
Health assets,
net of tax.......... N/A N/A N/A 7.50 7.50 7.50
Life assets........... N/A N/A N/A 9.50 9.50 9.50
--------------------------------------------------------------------------

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

--------------------------------------------------------------------------
One Percentage One Percentage
(Millions of Dollars) Point Increase Point Decrease
--------------------------------------------------------------------------
Effect on total service and
interest cost components......... $0.2 $(0.2)
Effect on postretirement
benefit obligation............... $3.0 $(2.7)
--------------------------------------------------------------------------

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

9. NUCLEAR GENERATION ASSETS DIVESTITURE
On March 31, 2001, PSNH, CL&P and WMECO sold their ownership interests in
Millstone 3 to a subsidiary of Dominion Resources, Inc., Dominion Nuclear
Connecticut, Inc. (DNCI). This sale included all of the respective joint
ownership interests of PSNH, CL&P and WMECO in Millstone 3. PSNH
received approximately $25 million of cash proceeds from the sale and
applied the proceeds to taxes and reductions of debt and equity. As part
of the sale, DNCI assumed responsibility for decommissioning the three
Millstone units.

10. COMMITMENTS AND CONTINGENCIES

A. Restructuring
In July 2001, the NHPUC opened a docket to review the FPPAC cost
accruals between August 2, 1999, and April 30, 2001. Hearings at the
NHPUC are expected to be held during the spring of 2002. Under the
Settlement Agreement, the FPPAC deferrals are recovered as a Part 3
regulatory asset through a stranded cost recovery charge. At
December 31, 2001 and 2000, PSNH had $183.3 million and $145.9
million, respectively, of recoverable deferred energy costs deferred
under the FPPAC, excluding previous deferrals of purchases from
independent power producers. Management does not expect the outcome
of these hearings to have a material impact on its earnings.

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

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

Based upon currently available information for the estimated
remediation costs as of December 31, 2001 and 2000, the liability
recorded by PSNH for its estimated environmental remediation costs
amounted to $11.4 million and $9.7 million, respectively.

C. Spent Nuclear Fuel Disposal Costs
Under the Nuclear Waste Policy Act of 1982, PSNH must pay the DOE for
the disposal of spent nuclear fuel and high-level radioactive waste.
The DOE is responsible for the selection and development of
repositories for, and the disposal of, spent nuclear fuel and high-
level radioactive waste. Fees for nuclear fuel burned on or after
April 7, 1983, are billed currently to customers and paid to the DOE
on a quarterly basis. PSNH remains responsible for fees to be paid
for fuel burned until the divestiture of the Millstone and Seabrook
nuclear units.

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

PSNH is subject to retroactive assessments if losses under those
policies exceed the accumulated funds available to the insurer. The
maximum potential assessments with respect to losses arising during
the current policy year for the primary property insurance program,
the replacement power policies and the excess property damage
policies are $0.2 million, $1.3 million and $0.5 million,
respectively. In addition, insurance has been purchased in the
aggregate amount of $200 million on an industry basis by the NU
system for coverage of worker claims.

Under certain circumstances, in the event of a nuclear incident at
one of the nuclear facilities covered by the federal government's
third-party liability indemnification program, the NU system,
including PSNH, could be assessed liabilities in proportion to its
ownership interest in each of its nuclear units up to $83.9 million.
The NU system's payment of this assessment would be limited to, in
proportion to its ownership interest in each of its nuclear units,
$10 million in any one year per nuclear unit. In addition, if the
sum of all claims and costs from any one nuclear incident exceeds the
maximum amount of financial protection, the NU system, including PSNH
would be subject to an additional 5 percent or $4.2 million
liability, in proportion to its ownership interests in each of its
nuclear units. Under the terms of the Seabrook Power Contracts, PSNH
could be obligated to pay for any assessment charged to NAEC as a
cost of service. Based upon NAEC's ownership interest in Seabrook,
PSNH's maximum liability, including any additional assessments, would
be $31.3 million per incident, of which payments would be limited to
$3.6 million per year. In addition, through purchased-power
contracts with VYNPC, PSNH would be responsible for up to an
additional assessment of $3.5 million per incident, of which payments
would be limited to $0.3 million per year.

PSNH expects to terminate its nuclear insurance upon the divestiture
of its remaining nuclear units.

E. Long-Term Contractual Arrangements
Yankee Companies: Under the terms of its agreement, PSNH paid its
ownership (or entitlement) shares of costs, which included
depreciation, O&M expenses, taxes, the estimated cost of
decommissioning, and a return on invested capital. These costs were
recorded as purchased-power expenses. PSNH's cost of purchases under
contracts with VYNPC amounted to $6.5 million in 2001, $6.4 million
in 2000 and $7.5 million in 1999. VYNPC is in the process of selling
its nuclear unit. Upon completion of the sale, it is expected that
these long-term contracts will be replaced with different contracts
with the new buyer.

Energy Procurement Contracts: PSNH has entered into various
arrangements for the purchase of capacity and energy. PSNH's total
cost of purchases under these arrangements amounted to $144.4 million
in 2001, $144.9 million in 2000 and $139.8 million in 1999.

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

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

---------------------------------------------------------------------
2002 2003 2004 2005 2006 Totals
---------------------------------------------------------------------
(Millions of Dollars)

VYNPC........... $ 7.7 $ 7.3 $ 8.4 $ 8.5 $ 7.7 $ 39.6
Energy
Procurement
Contracts..... 135.5 139.3 142.8 144.3 140.4 702.3
Hydro-Quebec.... 8.4 8.1 7.8 7.5 6.7 38.5
---------------------------------------------------------------------
Totals.......... $151.6 $154.7 $159.0 $160.3 $154.8 $780.4
---------------------------------------------------------------------

11. NUCLEAR DECOMMISSIONING AND PLANT CLOSURE COSTS
Seabrook: PSNH is obligated to pay NAEC's share of Seabrook's
decommissioning costs, even if the unit is shut down prior to the
expiration of its operating license. Accordingly, NAEC bills PSNH
directly for its share of the costs of decommissioning Seabrook. PSNH
records its Seabrook decommissioning costs as a component of purchased-
power expense. These costs are recovered through a stranded cost recovery
charge. The Seabrook decommissioning costs will continue to be increased
annually by its respective escalation rates until the unit is sold.
Under New Hampshire law, Seabrook's decommissioning funding requirements
are set by the New Hampshire Nuclear Decommissioning Financing Committee
(NDFC). During November 2001, the NDFC issued an order that decreased the
decommissioning funding requirements from previously approved levels as a
result of revisions in the decommissioning standard required by state
statutes and an increase in the NDFC's estimate of the energy producing
life of Seabrook to 2026. As a result, nuclear decommissioning costs are
being accrued over the expected service life of the unit.

PSNH's estimated cost of decommissioning NAEC's ownership share of
Seabrook, in year end 2001 dollars, is $199.9 million. PSNH payments for
NAEC's ownership share of the cost of decommissioning Seabrook are paid
by NAEC to an independent decommissioning financing fund managed by the
state of New Hampshire.

As of December 31, 2001 and 2000, NAEC has paid approximately $46.6
million and $39.6 million, respectively, (including payments made prior
to the acquisition date by PSNH) into Seabrook's decommissioning fund.
Earnings on the decommissioning trust increase the decommissioning trust
balance and the accumulated provision for depreciation. Unrealized gains
and losses associated with the decommissioning trust also impact the
balance of the trust and the accumulated provision for depreciation. The
fair values of the amounts in the Seabrook external decommissioning trust
were $55.5 million and $50.8 million at December 31, 2001 and 2000,
respectively. Upon divestiture, the balance in the Seabrook
decommissioning trust will be transferred to the buyer.

Yankee Companies: VYNPC owns and operates a nuclear generating unit with
a service life that is expected to end in 2012. PSNH's ownership share
of estimated costs, in year end 2001 dollars, of decommissioning this
unit is $18.9 million. In August 2001, VYNPC agreed to sell its nuclear
generating unit for $180 million, including $35 million for nuclear fuel,
to an unaffiliated company. Among other commitments, the acquiring
company agreed to assume the obligation to decommission the unit after it
is taken out of service and provide the current level of output from the
unit through 2012. The sale is subject to the approval of the Vermont
Public Service Board, the Nuclear Regulatory Commission, the FERC, and
other regulatory authorities. The closing on the sale is expected to be
in the first half of 2002.

As of December 31, 2001 and 2000, PSNH's remaining estimated obligation,
including decommissioning for the units owned by CYAPC, YAEC and MYAPC,
which have been shut down was $37.7 million and $41.5 million,
respectively.

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

Nuclear Decommissioning Trusts: PSNH's portion of the investments held in
the NU system companies' nuclear decommissioning trusts were transferred
to DNCI in 2001 in conjunction with the sale of the Millstone units.
These investments were marked-to-market by a positive $2.3 million as of
December 31, 2000, with corresponding offsets to the accumulated
provision for depreciation.

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

--------------------------------------------------------------------------
At December 31, 2001
--------------------------------------------------------------------------
Carrying Fair
(Millions of Dollars) Amount Value
--------------------------------------------------------------------------
Long-term debt -
Other long-term debt..................... $407.3 $410.0
Rate reduction bonds....................... 507.4 519.4
--------------------------------------------------------------------------

--------------------------------------------------------------------------
At December 31, 2000
--------------------------------------------------------------------------
Carrying Fair
(Millions of Dollars) Amount Value
--------------------------------------------------------------------------
Preferred stock subject to
mandatory redemption..................... $ 24.3 $ 25.5
Long-term debt -
Other long-term debt..................... 407.3 401.9
--------------------------------------------------------------------------

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

--------------------------------------------------------------------------
Current
December 31, Period December 31,
(Millions of Dollars) 2000 Change 2001
--------------------------------------------------------------------------
Unrealized gains
on securities................ $1.4 $(0.8) $0.6
Minimum pension
liability adjustments........ (0.2) - (0.2)
--------------------------------------------------------------------------
Accumulated other
comprehensive income/(loss).. $1.2 $(0.8) $0.4
--------------------------------------------------------------------------

--------------------------------------------------------------------------
Current
December 31, Period December 31,
(Millions of Dollars) 1999 Change 2000
--------------------------------------------------------------------------
Unrealized gains
on securities............... $1.3 $0.1 $1.4
Minimum pension
liability adjustments....... (0.2) - (0.2)
--------------------------------------------------------------------------
Accumulated other
comprehensive income........ $1.1 $0.1 $1.2
--------------------------------------------------------------------------

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

--------------------------------------------------------------------------
(Millions of Dollars) 2001 2000 1999
--------------------------------------------------------------------------
Unrealized gains
on securities............... $0.4 $ - $ -
Minimum pension
liability adjustments....... - - -
--------------------------------------------------------------------------
Other comprehensive
income/(loss)............... $0.4 $ - $ -
--------------------------------------------------------------------------

14. SEGMENT INFORMATION
The NU system is organized between regulated utilities (electric and gas
since March 1, 2000) and competitive energy subsidiaries. PSNH is
included in the regulated utilities segment of the NU system and has no
other reportable segments.

Public Service Company of New Hampshire and Subsidiaries

<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues.................... $1,171,686 $1,291,332 $1,160,589 $1,087,247 $1,108,459

Net Income/(Loss)..................... 81,776 (146,666) 84,209 91,686 92,172

Cash Dividends on Common Stock........ 27,000 50,000 - - 85,000

Total Assets.......................... 2,094,514 2,082,296 2,622,433 2,681,595 2,837,159

Rate Reduction Bonds.................. 507,381 - - - -

Long-Term Debt (a).................... 407,285 407,285 516,485 516,485 686,485

Preferred Stock Subject to
Mandatory Redemption (a)............ - 24,268 50,000 75,000 100,000

Obligations Under Seabrook Power
Contracts and Other Capital
Leases (a).......................... 110,275 629,230 726,153 842,223 921,813

</Table>

<Table>
<Caption>
- ---------------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA (Unaudited)
- ---------------------------------------------------------------------------------------
Quarter Ended
- ---------------------------------------------------------------------------------------
2001 March 31 June 30 September 30 December 31
- ---------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues $340,835 $286,799 $299,711 $ 244,341
======== ======== ======== =========

Operating Income $ 23,222 $ 31,008 $ 45,564 $ 34,854
======== ======== ======== =========

Net Income $ 28,362 $ 15,517 $ 21,630 $ 16,267
======== ======== ======== =========
- ---------------------------------------------------------------------------------------
2000
- ---------------------------------------------------------------------------------------

Operating Revenues $328,707 $326,471 $337,878 $ 298,276
======== ======== ======== =========

Operating Income $ 38,577 $ 37,407 $ 33,724 $ 26,296
======== ======== ======== =========

Net Income/(Loss) $ 17,431 $ 14,252 $ 28,733 $(207,082)
======== ======== ======== =========
</Table>

(a) Includes portions due within one year.

Public Service Company of New Hampshire and Subsidiaries

- -------------------------------------------------------------------------------
CONSOLIDATED STATISTICS (Unaudited)
- -------------------------------------------------------------------------------
Average
Gross Electric Annual
Utility Plant Use Per
December 31, kWh Residential Electric
(Thousands of Sales Customer Customers Employees
Dollars) (Millions) (kWh) (Average) December 31,
- -------------------------------------------------------------------------------
2001 $1,492,916 14,953 6,868 439,750 1,241
2000 1,535,343 17,143 6,644 433,937 1,227
1999 2,283,187 12,832 6,665 427,694 1,258
1998 2,302,254 12,579 6,347 421,602 1,265
1997 2,312,628 13,340 6,528 407,642 1,254