UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2002
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-14768
NSTAR
(Exact name of registrant as specified in its charter)
Massachusetts 04-3466300
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Boylston Street, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(617)424-2000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that theregistrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 8, 2002
Common Shares, $1 par value 53,032,546 shares
Part I - Financial Information
Item 1. Financial Statements
NSTAR
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except earnings (loss) per share)
Three Months Ended March 31,
2002 2001
Operating revenues $ 722,865 $ 864,822
Operating expenses:
Purchased power and cost of gas sold 413,331 530,761
Operations and maintenance 106,253 108,296
Depreciation and amortization 60,625 59,073
Demand side management and renewable energy
programs 16,425 19,632
Property and other taxes 27,049 27,112
Income taxes 22,467 30,680
Total operating expenses 646,150 775,554
Operating income 76,715 89,268
Other income (deductions):
Write-down of RCN investment, net - (173,944)
Other income (deductions), net 1,524 (1,581)
Total other income (deductions), net 1,524 (175,525)
Operating and other income (deductions) 78,239 (86,257)
Interest charges:
Long-term debt 28,022 29,621
Transition property securitization certificates 9,805 10,798
Short-term and other 5,897 7,395
Allowance for borrowed funds used during
construction (279) (1,815)
Total interest charges 43,445 45,999
Net income (loss) 34,794 (132,256)
Preferred stock dividends of subsidiary 490 1,490
Earnings (loss) available for common shareholders $ 34,304 $(133,746)
========= =========
Weighted average common shares outstanding:
Basic 53,033 53,033
====== ======
Diluted 53,256 53,139
====== ======
Earnings (loss) per common share:
Basic $ 0.65 $ (2.52)
========= =========
Diluted $ 0.64 $ (2.52)
========= =========
Dividends declared per common share $ 0.53 $ .515
========= =========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
NSTAR
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended March 31,
2002 2001
Net income (loss) $ 34,794 $ (132,256)
Other comprehensive income, net:
Unrealized (loss) gain on investments (5,399) 33,140
Comprehensive income (loss) $ 29,395 $ (99,116)
========= ==========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
NSTAR
Condensed Consolidated Statements of Retained Earnings
(Unaudited)
(in thousands)
Three Months Ended March 31,
2002 2001
Balance at the beginning of the period $ 334,138 $ 446,587
Add (Deduct):
Net income (loss) 34,794 (132,256)
Subtotal 368,932 314,331
Deduct:
Dividends declared:
Common shares 28,107 27,311
Preferred stock 490 1,490
Subtotal 28,597 28,801
Provision for preferred stock redemption
and other - 60
Balance at the end of the period $ 340,335 $ 285,470
========== ==========
The accompanying notes are an integral part of the condensed consolidated financial
statements.
NSTAR
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
March 31, December 31,
2002 2001
Assets
Utility plant in service, at original cost $ 3,929,909 $ 3,853,295
Less: accumulated depreciation 1,328,458 1,300,868
2,601,451 2,552,427
Construction work in progress 76,416 72,957
Net utility plant 2,677,867 2,625,384
Non-utility property, net 106,058 106,007
Goodwill 460,563 463,626
Equity investments 22,403 22,560
Other investments 66,282 73,104
Current assets:
Cash and cash equivalents 6,188 11,655
Restricted cash 23,016 22,966
Accounts receivable, net 396,504 485,687
Accrued unbilled revenues 34,075 51,061
Fuel, materials and supplies, at average cost 45,645 53,276
Other 41,031 33,599
Total current assets 546,459 658,244
Deferred debits:
Regulatory assets 968,131 1,026,241
Prepaid pension expense 240,963 218,713
Other 126,725 134,312
Total assets $ 5,215,451 $ 5,328,191
=========== ===========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
NSTAR
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
March 31, December 31,
2002 2001
Capitalization and Liabilities
Common equity:
Common shares, par value $1 per share
(53,032,546 shares issued and outstanding) $ 53,033 $ 53,033
Premium on common shares 873,680 873,664
Retained earnings 340,335 334,138
Total common equity 1,267,048 1,260,835
Accumulated other comprehensive (loss) income (3,638) 1,761
Cumulative non-mandatory redeemable
preferred stock of subsidiary 43,000 43,000
Long-term debt 1,212,060 1,377,899
Transition property securitization
certificates 479,500 513,904
Total long-term debt 1,691,560 1,891,803
Total capitalization 2,997,970 3,197,399
Current liabilities:
Long-term debt 172,276 37,676
Transition property securitization
certificates 59,337 40,972
Notes payable 591,300 624,847
Accounts payable 172,759 209,821
Deferred taxes 41,872 41,985
Accrued interest 19,652 29,224
Dividends payable 28,434 28,434
Other 261,086 250,540
Total current liabilities 1,346,716 1,263,499
Deferred credits:
Accumulated deferred income taxes 631,434 616,743
Accumulated deferred investment tax credits 37,383 37,877
Power contracts 50,316 53,041
Other 151,632 159,632
870,765 867,293
Commitments and contingencies
Total capitalization and liabilities $ 5,215,451 $ 5,328,191
=========== ===========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
NSTAR
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended March 31,
2002 2001
Operating activities:
Net income (loss) $ 34,794 $(132,256)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 60,496 59,073
Deferred income taxes and investment
tax credits 17,885 (10,192)
Loss on write-down of RCN investment - 168,376
Allowance for borrowed funds used during
construction (279) (1,815)
Net changes in working capital 72,822 (57,690)
Other, net 792 (17,950)
Net cash provided by operating activities 186,510 7,546
Investing activities:
Plant expenditures (excluding AFUDC) (85,490) (41,660)
Other investments 2,936 (27)
Net cash used in investing activities (82,554) (41,687)
Financing activities:
Long-term debt redemptions (31,239) (984)
Transition property securitization
certificates redemptions (16,040) (15,573)
Net change in notes payable (33,547) 79,500
Dividends paid (28,597) (28,802)
Net cash (used in) provided by financing
activities (109,423) 34,141
Net decrease in cash and cash equivalents (5,467) -
Cash and cash equivalents at beginning of year 11,655 21,873
Cash and cash equivalents at end of period $ 6,188 $ 21,873
========= =========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 55,446 $ 59,028
========= =========
Income taxes $ 21,719 $ 44,759
========= =========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Notes to Unaudited Condensed Consolidated Financial Statements
The accompanying Notes should be read in conjunction with Notes
to the Consolidated Financial Statements incorporated in NSTAR's
2001 Annual Report on Form 10-K.
A) About NSTAR
NSTAR is an energy delivery company serving approximately 1.3
million customers in Massachusetts, including approximately 1.1
million electric customers in 81 communities and 246,000 gas
customers in 51 communities. NSTAR is an exempt public utility
holding company. NSTAR's retail utility subsidiaries are Boston
Edison Company (Boston Edison), Commonwealth Electric Company
(ComElectric), Cambridge Electric Light Company (Cambridge
Electric) and NSTAR Gas Company (NSTAR Gas). Its wholesale
electric subsidiary is Canal Electric Company (Canal). NSTAR's
three retail electric companies operate under the brand name
"NSTAR Electric." Reference in this report to "NSTAR Electric"
shall mean each of Boston Edison, ComElectric and Cambridge
Electric. NSTAR's non-utility operations include
telecommunications - NSTAR Communications, Inc. (NSTAR Com),
district heating and cooling operations (Advanced Energy Systems,
Inc. and NSTAR Steam Corporation) and a liquefied natural gas
service company (Hopkinton LNG Corp.).
NSTAR Electric has committed resources to implement a System
Improvement Program to improve customer service and system
reliability. This comprehensive, non-recurring System
Improvement Program is being implemented to upgrade NSTAR
Electric's distribution system and is expected to be completed
during 2002. The cost of this program is expected to be $65
million. Approximately $11 million will be included in
operations and maintenance expense in 2002 and $54 million will
be invested in delivery assets (utility plant) during the year.
Through March 31, 2002, NSTAR Electric has expended approximately
$3.7 million on the System Improvement Program that is included
as a component of Operations and maintenance expense on the
accompanying Condensed Consolidated Statements of Income. In
addition, NSTAR Electric has expended approximately $9 million
that is included as a component of Utility plant on the
accompanying Condensed Consolidated Balance Sheets. A
combination of unusually severe storms, record heat and extreme
customer load in the Boston area led to prolonged and wide-spread
outages in the summer of 2001 that underscored the need to
address electric system upgrades and improve maintenance.
B) Basis of Presentation
The financial information presented as of March 31, 2002 and for
the periods ended March 31, 2002 and 2001 have been prepared from
NSTAR's books and records without audit by independent
accountants. Financial information as of December 31, 2001 was
derived from the audited consolidated financial statements of
NSTAR, but does not include all disclosures required by generally
accepted accounting principles (GAAP). In the opinion of NSTAR's
management, all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial
information for the periods indicated have been included.
Certain reclassifications have been made to the prior year data
to conform with the current presentation.
The preparation of financial statements in conformity with GAAP
requires management of NSTAR and its subsidiaries to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
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 these estimates.
The results of operations for the three months ended March 31,
2002 and 2001 are not indicative of the results that may be
expected for an entire year. Kilowatt-hour sales and revenues
are typically higher in the winter and summer than in the spring
and fall, as sales tend to vary with weather conditions. Gas
sales and revenues are typically higher in the winter months than
during other periods of the year.
C) Amortization of Merger Related Costs
The merger creating NSTAR was accounted for using the purchase
method of accounting. The premium (Goodwill) associated with
this acquisition amounted to approximately $490 million, while
the original estimate of transaction and integration costs to
achieve the merger was $111 million. This premium will continue
to be amortized over 40 years and amounts to approximately $12.2
million annually, while the costs to achieve (CTA) are being
amortized over 10 years and will initially be approximately $11.1
million annually. The merger premium is reflected on the
accompanying Condensed Consolidated Balance Sheets as Goodwill.
CTA are the costs incurred to execute the merger including the
employee costs for a voluntary severance program, legal costs,
transaction costs and systems integration costs. The ultimate
amortization of the CTA will reflect the total actual costs.
In June 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets" (SFAS 142). This
Statement, which is effective for NSTAR in the first quarter of
2002, establishes accounting and reporting standards for acquired
goodwill and other indefinite lived intangible assets. It
prohibits entities from continuing amortization of these assets.
Instead, goodwill and other intangible assets will be subject to
review for impairment. However, in accordance with the
provisions of SFAS 142 and a revised amendment to SFAS No. 71,
"Accounting for the Effects of Certain Types of Regulation,"
NSTAR will continue amortizing this asset over its estimated
regulatory recovery period. NSTAR has determined that its unique
regulatory rate structure, resulting from the merger and approved
by the Massachusetts Department of Telecommunications and Energy
(MDTE), allows for continued amortization of goodwill over the
period it is collected from its customers. A significant element
of this rate plan includes recovery of the acquisition premium
over 40 years.
D) Investments - Available for Sale Securities
NSTAR classifies its investment in marketable securities as
available for sale. These investments include 4.1 million common
shares of RCN Corporation, John Hancock Financial Services, Inc.
(John Hancock) and MetLife, Inc. During the first quarter of
2002, NSTAR sold 75,000 shares of John Hancock for approximately
$2.8 million and recognized a gain of approximately $1.5 million.
NSTAR includes any unrealized gains or losses on these securities
in Accumulated other comprehensive income (loss), net on the
accompanying Condensed Consolidated Balance Sheets.
E) RCN Joint Venture and Investment Conversion
NSTAR Com is a participant in a telecommunications venture with
RCN Telecom Services, Inc. of Massachusetts, a subsidiary of RCN
Corporation (RCN). NSTAR Com has accounted for its equity
investment in the joint venture using the equity method of
accounting. As part of the Joint Venture Agreement, NSTAR Com
has the option to exchange portions of its joint venture interest
for common shares of RCN at specified periods. To date, NSTAR
Com has received approximately 4.1 million shares of RCN common
shares from two prior exchanges of its joint venture interest.
On April 6, 2000, NSTAR Com issued its third and final notice to
exchange substantially all of its remaining interest in the joint
venture into common shares of RCN. Effective with the third
notice, NSTAR Com's profit and loss sharing ratio was reduced to
zero.
On October 18, 2000, NSTAR Com and RCN signed an agreement in
principle to amend the Joint Venture Agreement. Among other
items, this proposal settled the number of shares to be received
for the third conversion of NSTAR Com's remaining equity
investment at 7.5 million shares.
NSTAR continues to evaluate the carrying value of its entire
investment in RCN, as well as its investment in other
telecommunication activities. Consistent with the performance of
the telecommunications sector as a whole, the market value of
RCN's common shares decreased significantly during the later part
of 2000 and continued in 2001. As a result, in the first quarter
of 2001, management determined that this decline in market value
was "other-than-temporary" in accordance with the SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities."
Also, during the first quarter of 2001, the status of the
amendment to the Joint Venture Agreement with RCN regarding the
7.5 million shares led management to determine that its
investment in the joint venture was also impaired based on future
market expectations for RCN common shares related to this
investment.
As a result, NSTAR Com recognized an impairment of its entire
investment in RCN in the first quarter of 2001. This write-down
resulted in a non-cash, after-tax charge of $173.9 million that
is reported on the accompanying Condensed Consolidated Statements
of Income as "Write-down of RCN investment, net."
After continual discussions and negotiations, NSTAR Com expects
to finalize revisions to the October 2000 agreement and
management anticipates having a definitive amended Joint Venture
Agreement prior to June 30, 2002. Upon finalization of the
amended Joint Venture Agreement and receipt of the remaining 7.5
million shares, NSTAR will be required to adjust its carrying
value to the market value of the RCN shares received as of that
date. The market value of RCN common shares has continued to
decline during 2002 and has not closed above NSTAR's carrying
value of $3.75 per share since November 27, 2001. Should this
trend continue for a period of six months or longer, NSTAR may be
required to recognize an additional impairment charge in the
second quarter of 2002. Management cannot determine whether this
trend will continue or if or when this sector or RCN's common
share value will recover. The current carrying value associated
with its entire investment is $43.5 million and is the equivalent
of $3.75 per share. In accordance with NSTAR's accounting
policy, if the above trend continues during the second quarter,
it is probable that NSTAR will write down the combined 11.6
million shares in the second quarter of 2002. Should an
impairment charge be necessary, it is probable that this could
have a material adverse effect on NSTAR's result of operations
for that period.
The RCN shares received, as well as the remaining interest in the
joint venture related to the pending 7.5 million shares, are
included in Other investments on the accompanying Condensed
Consolidated Balance Sheets at their estimated fair value of
approximately $33.9 million at March 31, 2002. The fair value of
the 4.1 million shares currently held may increase or decrease as
a result of changes in the market value of RCN common shares. As
of March 31, 2002 and December 31, 2001, the market value per
share of RCN was $1.41 and $2.93, respectively. The unrealized
gain or loss associated with shares currently held will fluctuate
due to the changes in fair value of these shares during each
period and is reflected, net of associated income taxes, as a
component of Other comprehensive income (loss), net on the
accompanying Condensed Consolidated Statements of Comprehensive
Income (Loss). The cumulative increase or decrease in fair value
of these shares as of March 31, 2002 reflects the change since
the write-down of these shares as a component of Accumulated
other comprehensive income (loss) on the accompanying Condensed
Consolidated Balance Sheets.
At March 31, 2002 and December 31, 2001, NSTAR Com had $2.7
million and $2.6 million, respectively, in accounts receivable
due from the joint venture. Amounts due are primarily the result
of construction performed by NSTAR Com on behalf of the joint
venture. The joint venture is current on its receivables to
NSTAR Com.
F) Service Quality Index
On October 29, 2001, and as subsequently updated, NSTAR Electric
and NSTAR Gas filed proposed service quality plans for each
company with the MDTE, which included guidelines that had been
established by the MDTE as a result of its generic investigation
of service quality issues. The service quality plans established
performance benchmarks effective January 1, 2002 for certain
identified measures of service quality relating to customer
service and billing performance, customer satisfaction, and
reliability and safety performance. The companies are required
to report annually concerning their performance as to each
measure and are subject to maximum penalties of up to two percent
of transmission and distribution revenues should performance fail
to meet the applicable benchmarks. Concurrently, NSTAR Electric
and NSTAR Gas also filed with the MDTE a report concerning their
performance on the identified service quality measures for the
two twelve-month periods ended August 31, 2000 and 2001. This
report included a calculation of penalties in accordance with
MDTE guidelines. On March 22, 2002, following hearings on the
matter, the MDTE issued an order imposing a service quality
penalty of approximately $3.25 million on NSTAR Electric to be
refunded to customers as a credit to their bills during the month
of May 2002. This refund will not have a material effect on
NSTAR's consolidated financial position or results of operations.
Through March 31, 2002, NSTAR Electric's performance has met or
exceeded the applicable established benchmarks; however, these
results may not be indicative of the results that may be expected
for the remainder of the year, including the peak-demand period
anticipated during the summer period.
Also on October 29, 2001, NSTAR Electric filed with the MDTE a
comprehensive report regarding electric system performance issues
encountered during the summer of 2001. The filing included
detailed analyses of factors affecting performance as well as the
companies' plans to address issues that were identified. On
March 22, 2002, following a number of public hearings throughout
the NSTAR Electric service area, the MDTE issued an order finding
that NSTAR Electric had made progress in addressing the issues
which initiated the investigation and requiring that NSTAR
Electric submit further updated reports on specific issues on a
quarterly and annual basis. NSTAR is unable to estimate its
ultimate liability for future costs or penalties as a result of
any further filings relating to this investigation. However, in
view of NSTAR's current assessment of its electric distribution
system performance responsibilities, existing legal requirements
and regulatory policies, management believes it would not have a
material effect on NSTAR's consolidated financial position, cash
flows or results of operations for a reporting period.
G) Contingencies
1. Environmental Matters
NSTAR's subsidiaries are involved in 24 state-regulated
properties ("Massachusetts Contingency Plan, or "MCP" sites")
where oil or other hazardous materials were previously spilled or
released. The NSTAR subsidiaries are required to clean up or
otherwise remediate these properties in accordance with specific
state regulations. There are uncertainties associated with the
remediation costs due to the final selection of the specific
cleanup technology and the particular characteristics of the
different sites. In addition to the MCP sites, NSTAR
subsidiaries also face possible liability as a potentially
responsible party (PRP) in the cleanup of eight multi-party
hazardous waste sites in Massachusetts and other states where one
or more NSTAR subsidiaries are alleged to have generated,
transported or disposed of hazardous waste at the sites. NSTAR
generally expects to have only a small percentage of the total
potential liability for these sites. Approximately $5.7 million
and $5.8 million are included as liabilities in the accompanying
Condensed Consolidated Balance Sheets at March 31, 2002 and
December 31, 2001, respectively, related to the non-recoverable
portion of these cleanup liabilities. Based on its assessments
of the specific site circumstances, management does not believe
that it is probable that any such additional costs will have a
material impact on NSTAR's consolidated financial position.
However, it is possible that additional provisions for cleanup
costs that may result from a change in estimates could have an
impact on the results of operations for a reporting period in the
near term.
NSTAR Gas is participating in the assessment of a number of
former manufactured gas plant (MGP) sites and alleged MGP waste
disposal locations to determine if and to what extent such sites
have been contaminated and whether NSTAR Gas may be responsible
for remedial action. The MDTE has approved recovery of costs
associated with MGP sites over a 7-year period without carrying
costs. As of March 31, 2002 and December 31, 2001, NSTAR Gas has
a liability of $6.7 million as an estimate for site cleanup costs
for several MGP sites for which NSTAR Gas was previously cited as
a PRP.
Estimates related to environmental remediation costs are reviewed
and adjusted periodically as further investigation and assignment
of responsibility occurs and as either additional sites are
identified or NSTAR's responsibilities for such sites are
resolved. NSTAR is unable to estimate its ultimate liability for
future environmental remediation costs. However, in view of
NSTAR's current assessment of its environmental responsibilities,
existing legal requirements and regulatory policies, management
does not believe that these matters will have a material adverse
effect on NSTAR's consolidated financial position or results of
operations for a reporting period.
2. Legal Proceedings
In the normal course of its business, NSTAR and its subsidiaries
are also involved in certain legal matters. Management is unable
to fully determine a range of reasonably possible legal costs in
excess of amounts accrued. Based on the information currently
available, it does not believe that it is probable that any such
additional costs will have a material impact on its consolidated
financial position. However, it is reasonably possible that
additional legal costs that may result from a change in estimates
could have a material impact on the results of a reporting period
in the near term.
H) Income Taxes
The following table reconciles the statutory federal income tax
rate to the annual estimated effective income tax rate for 2002
and the actual effective income tax rate for the year ended
December 31, 2001:
2002 2001
Statutory tax rate 35.0% 35.0%
State income tax, net of federal income tax benefit 5.3 5.3
Investment tax credits (0.7) (0.7)
Other 1.5 0.6
Effective tax rate before write-down and tax
valuation allowance adjustment 41.1 40.2
Adjustment to tax valuation allowance and write-
down of RCN investment (Federal and State) (0.6) 57.3
Effective tax rate 40.5% 97.5%
==== ====
Income taxes are accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes" (SFAS 109). SFAS 109 requires the
recognition of deferred tax assets and liabilities for the future
tax effects of temporary differences between the carrying amounts
and the tax basis of assets and liabilities. In accordance with
SFAS 109, net regulatory assets include $53.2 million and $53.4
million of deferred tax assets and corresponding amounts in
accumulated deferred income taxes that were recorded as of March
31, 2002 and December 31, 2001, respectively. The regulatory
assets represent the additional future revenues to be collected
from customers for deferred income taxes.
NSTAR had determined that it was reasonable to conclude that no
current or future income tax benefit would be realized relating
to the write-down of its investment in the RCN joint venture in
the first quarter of 2001. As a result, NSTAR recorded in 2001 a
$64.5 million tax valuation allowance for the entire tax benefit
associated with this charge. In the first quarter of 2002, as a
result of certain unanticipated capital gains transactions, NSTAR
recognized $1.6 million of this tax benefit. As a result, the
tax valuation allowance balance as of March 31, 2002 was $62.9
million. If all or a portion of this tax benefit is ultimately
realized, NSTAR will reflect a corresponding reduction in income
tax expense.
I) Earnings Per Common Share
Basic earnings per common share (EPS) is calculated by dividing
net income, after deductions for preferred dividends, by the
weighted average common shares outstanding during the year. SFAS
No. 128, "Earnings per Share," requires the disclosure of diluted
EPS. Diluted EPS is similar to the computation of basic EPS
except that the weighted average common shares is increased to
include the number of dilutive potential common shares. Diluted
EPS reflects the impact on shares outstanding of the deferred
(nonvested) shares and stock options granted under the NSTAR 1997
Share Incentive Plan.
The following table summarizes the reconciling amounts between
basic and diluted EPS:
Three Months Ended March 31,
(in thousands, except per share amounts) 2002 2001
Earnings (loss) available for common shareholders $ 34,304 $ (133,746)
Basic EPS $ 0.65 $ (2.52)
Diluted EPS $ 0.64 $ (2.52)
Weighted average common shares outstanding for
basic EPS 53,033 53,033
Effect of dilutive shares:
Weighted average dilutive potential common shares 223 106
Weighted average common shares outstanding for
diluted EPS 53,256 53,139
======== ========
J) Segment and Related Information
For the purpose of providing segment information, NSTAR's
principal operating segments, or its traditional core businesses,
are the electric and natural gas utilities that provide energy
delivery services in over 100 cities and towns in Massachusetts.
NSTAR subsidiaries also supply electricity at wholesale to
municipalities. The non-utility operating segments engage in
business activities that include telecommunications, district
heating and cooling operations and a liquefied natural gas
service.
Financial data for the operating segments were as follows:
(in thousands) Utility Operations Non-utility Consolidated
Electric Gas Operations Total
Three months ended March 31, 2002
Operating revenues $ 573,631 $ 113,806 $ 35,428 $ 722,865
Segment net income $ 18,958 $ 12,657 $ 3,179 $ 34,794
Three months ended March 31, 2001
Operating revenues $ 635,797 $ 197,174 $ 31,851 $ 864,822
Segment net income (loss) $ 24,796 $ 16,170 $ (173,222) $ (132,256)
Total assets
March 31, 2002 $4,450,842 $ 508,642 $ 255,967 $5,215,451
December 31, 2001 $4,509,982 $ 517,659 $ 300,550 $5,328,191
Item 2. Management's Discussion and Analysis
The accompanying Management's Discussion and Analysis (MD&A)
should be read in conjunction with the MD&A in NSTAR's Annual
Report on Form 10-K.
Overview
NSTAR (or "the Company") is an energy delivery company serving
approximately 1.3 million customers in Massachusetts, including
approximately 1.1 million electric customers in 81 communities
and 246,000 gas customers in 51 communities. NSTAR is an exempt
public utility holding company. NSTAR's retail utility
subsidiaries are Boston Edison Company (Boston Edison),
Commonwealth Electric Company (ComElectric), Cambridge Electric
Light Company (Cambridge Electric) and NSTAR Gas Company (NSTAR
Gas). Its wholesale electric subsidiary is Canal Electric
Company (Canal). NSTAR's three retail electric companies operate
under the brand name "NSTAR Electric." Reference in this report
to "NSTAR Electric" shall mean each of Boston Edison, ComElectric
and Cambridge Electric. NSTAR's non-utility operations include
telecommunications - NSTAR Communications, Inc. (NSTAR Com),
district heating and cooling operations (Advanced Energy Systems,
Inc. and NSTAR Steam Corporation) and a liquefied natural gas
service company (Hopkinton LNG Corp.).
The electric and natural gas industries have continued to change
in response to legislative, regulatory and marketplace demands
for improved customer service at lower prices. These demands
have encouraged the utility industry to seek efficiencies and
other benefits through business combinations. NSTAR is prepared
to operate in this changing marketplace by combining the
resources of its utility subsidiaries and concentrating its
activities in the transmission and distribution of energy.
NSTAR Electric has committed resources to implement a System
Improvement Program to improve customer service and system
reliability. This comprehensive, non-recurring System
Improvement Program is being implemented to upgrade NSTAR
Electric's distribution system and is expected to be completed
during 2002. The cost of this program is expected to be $65
million. Approximately $11 million will be included in
operations and maintenance expense in 2002 and $54 million will
be invested in delivery assets during the year. Through March
31, 2002, NSTAR Electric has expended approximately $3.7 million
on this Program that is included in operations and maintenance
expense and an additional $9 million that is included in utility
plant. A combination of unusually severe storms, record heat and
extreme customer load in the Boston area led to prolonged and
wide-spread outages in the summer of 2001 that underscored the
need to address electric system upgrades and improve maintenance.
Cautionary Statement
This Management's Discussion and Analysis contains certain
forward-looking statements such as forecasts and projections of
expected future performance or statements of management's plans
and objectives. These forward-looking statements may be
contained in filings with the Securities and Exchange Commission
(SEC) and in press releases and oral statements. You can
identify these statements by the fact that they do not relate
strictly to historical or current facts. They use words such as
"anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe" and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance. These statements are based on the current
expectations, estimates or projections of management and are not
guarantees of future performance. Some or all of these forward-
looking statements may not turn out to be what the Company
expected. Actual results could potentially differ materially
from these statements. Therefore, no assurance can be given that
the outcomes stated in such forward-looking statements and
estimates will be achieved.
The impact of continued cost control procedures on operating
results could differ from current expectations. NSTAR's revenues
from its electric and gas sales are weather-sensitive,
particularly sales to residential and commercial customers.
Accordingly, NSTAR's sales in any given period reflect, in
addition to other factors, the impact of weather, with colder
temperatures generally resulting in increased gas sales and
warmer temperatures generally resulting in increased electric
sales. NSTAR anticipates that these sensitivities to seasonal
and other weather conditions will continue to impact its sales
forecasts in future periods. The effects of changes in weather,
economic conditions, tax rates, interest rates, technology,
prices and availability of operating supplies could materially
affect the projected operating results.
NSTAR undertakes no obligation to publicly update forward-looking
statements, whether as a result of new information, future
events, or otherwise. You are advised, however, to consult any
further disclosures NSTAR makes in its filings to the SEC. Also
note that NSTAR provides in the next paragraph a cautionary
discussion of risks and other uncertainties relative to its
business. These are factors that could cause its actual results
to differ materially from expected and historical performance.
Other factors in addition to those listed here could also
adversely affect NSTAR.
NSTAR's forward-looking information depends in large measure on
prevailing governmental policies and regulatory actions,
including those of the Massachusetts Department of
Telecommunications and Energy (MDTE) and the Federal Energy
Regulatory Commission (FERC), with respect to allowed rates of
return, rate structure, financings, purchased power and cost of
gas recovery, acquisition and disposition of assets, operation
and construction of facilities, changes in tax laws and policies
and changes in and compliance with environmental and safety laws
and policies.
The impacts of various environmental, legal issues, and
regulatory matters could differ from current expectations. New
regulations or changes to existing regulations could impose
additional operating requirements or liabilities other than
expected. The effects of changes in specific hazardous waste
site conditions and the specific cleanup technology could affect
the estimated cleanup liabilities. The impacts of changes in
available information and circumstances regarding legal issues
could affect any estimated litigation costs.
Significant Accounting Policies
The accompanying consolidated financial statements for each
period presented include the activities of NSTAR's wholly owned
subsidiaries. All significant intercompany transactions have
been eliminated. Certain reclassifications have been made to the
prior year data to conform to the current presentation.
a. Regulatory - Accounting
NSTAR follows accounting policies prescribed by the FERC and the
MDTE. In addition, NSTAR is subject to the accounting and
reporting requirements of the SEC. The accompanying condensed
consolidated financial statements conform to generally accepted
accounting principles (GAAP). As a rate-regulated company, NSTAR
is subject to the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS
71). The application of SFAS 71 results in differences in the
timing of recognition of certain expenses from that of other
businesses and industries. The distribution business remains
subject to rate-regulation and continues to meet the criteria for
application of SFAS 71. This rate making process results in the
recording of regulatory assets based on current and future cash
inflows. As of March 31, 2002 and December 31, 2001, NSTAR has
recorded regulatory assets of $968 million and $1,026 million,
respectively. NSTAR continuously reviews these assets to assess
its ultimate recoverability within the approved regulatory
guidelines. Impairment risk associated with these assets relates
to potentially adverse legislative, judicial or regulatory
actions in the future.
b. New Accounting Principles
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142). This Statement, which is
effective for NSTAR in the first quarter of 2002, establishes
accounting and reporting standards for acquired goodwill and
other indefinite lived intangible assets. It prohibits entities
from continuing amortization of these assets. Instead, goodwill
and other intangible assets will be subject to review for
impairment. However, in accordance with provisions of SFAS 142
and a revised amendment to SFAS 71, NSTAR will continue
amortizing this asset over its estimated regulatory recovery
period. NSTAR has determined that its unique regulatory rate
structure, resulting from the merger and approved by the MDTE,
allows for continued amortization of goodwill over the period it
is collected from its customers. A significant element of this
rate plan includes recovery of the acquisition premium over 40
years.
On July 5, 2001, the FASB issued SFAS No. 143, "Accounting for
Asset Retirement Obligations" (SFAS 143). This Statement, which
is effective for fiscal years beginning after June 15, 2002,
establishes accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to 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. This standard requires entities
to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes the cost
by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value
each period, and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement.
Management is currently assessing the impact of SFAS 143 in light
of its regulatory and accounting requirements. However, based on
NSTAR's assessment to date, the adoption of SFAS 143 is not
expected to have a material effect on its results of operations,
cash flows, or financial position.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets," (SFAS 144) was effective January 1, 2002, and
addresses accounting and reporting for the impairment or disposal
of long-lived assets. SFAS 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and the Long-
Lived Assets to Be Disposed Of" (SFAS 121) and APB Opinion No.
30, "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business." SFAS 144 retains the
fundamental provisions of SFAS 121 and expands the reporting of
discontinued operations to include all components of an entity
with operations that can be distinguished from the rest of the
entity and that will be eliminated from the ongoing operations of
the entity in a disposal transaction. As of March 31, 2002, the
implementation of this Statement had no effect on NSTAR's results
of operations and financial position.
As of January 1, 2001, NSTAR adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133), as
amended by SFAS Nos. 137 and 138, and collectively referred to as
SFAS 133. SFAS 133 established accounting and reporting
standards requiring that every derivative instrument (including
certain derivative instruments embedded in contracts possibly
including fixed-price fuel supply and power contracts) be
recorded on the Consolidated Balance Sheets as either an asset or
liability measured at its fair value.
NSTAR continues its assessment on any impact that potentially may
result from FASB revisions and clarifications, including, but not
limited to, FASB Derivative Implementation Group Issue C15, to
SFAS 133. Based on NSTAR's assessment, the adoption of SFAS 133
has not had a material effect on its results of operations, cash
flows, or financial position.
c. Revenue Recognition
Utility revenues are based on authorized rates approved by the
FERC and the MDTE. Estimates of transmission, distribution and
transition revenues for electricity and natural gas delivered to
customers but not yet billed are accrued at the end of each
accounting period. The determination of unbilled revenues
requires management to estimate the volume and pricing of gas and
electricity delivered to customers prior to actual meter
readings.
Revenues for NSTAR's non-utility subsidiaries are recognized when
services are rendered or when the energy is delivered.
d. Available for Sale Equity Securities
NSTAR records its investment in marketable equity securities in
accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Pursuant to this standard, NSTAR
continuously reviews the carrying value of its investments in
marketable equity securities to assess whether any decline in the
market value below its carrying value is deemed to be other-than-
temporary. Unless there is evidence to the contrary, NSTAR's
policy is to record an impairment charge for the decline in
market value below its carrying value in situations where the
decline has continued for a period of six months or more.
e. Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions which
requires a consideration of all pertinent facts and circumstances
and the use of professional judgment. These factors affect the
carrying values of assets and liabilities and disclosures of
contingent assets and 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
these estimates.
Generating Assets Divestiture
On April 15, 2002, Florida Light and Power (FLP) Group, Inc.
agreed to buy an 88% majority ownership interest in the Seabrook
Nuclear Power Station for $836.6 million, including NSTAR's 3.52%
ownership interest. The purchase agreement was reached through
an auction process launched in late 2001. FPL Group will assume
responsibility for the ultimate decommissioning of the facility
and will receive the Seabrook decommissioning funds, expected to
be approximately $233 million, at closing that is expected to
occur in late 2002. This sale will complete the final
divestiture of NSTAR's remaining regulated generating assets.
NSTAR expects to receive less than its net investment in Seabrook
as a result of this sale. Its remaining investment will be
recovered from customers through the transition charge.
Rate and Regulatory Proceedings
An integral part of the merger creating NSTAR is the rate plan of
the retail utility subsidiaries that was approved by the MDTE on
July 27, 1999. Significant elements of the rate plan include a
four-year distribution rate freeze, recovery of the acquisition
premium (goodwill) over 40 years and recovery of transaction and
integration costs (costs to achieve) over 10 years. Refer to the
"Retail Electric Rates" section of this Management's Discussion
and Analysis for more information.
Goodwill relating to the merger amounted to approximately $490
million, resulting in annual amortization of goodwill of
approximately $12.2 million. Costs to achieve are being
amortized based on the filed estimate of $111 million over 10
years. NSTAR's retail utility subsidiaries will reconcile the
ultimate costs to achieve with that estimate, and any difference
is expected to be recovered over the remainder of the
amortization period commencing in 2003. A majority of costs to
achieve the merger were severance costs associated with a
voluntary separation program (VSP) in which approximately 700
employees elected to participate. The VSP was completed by the
end of August 2000. These amounts are offset by ongoing cost
savings from streamlined operations and avoidance of costs that
would have otherwise been prior to the merger. Refer to the "New
Accounting Principles" section of this Management's Discussion
and Analysis for further information.
On October 29, 2001, and as subsequently updated, NSTAR Electric
and NSTAR Gas filed proposed service quality plans for each
company with the MDTE, which included guidelines that had been
established by the MDTE as a result of its generic investigation
of service quality issues. The service quality plans established
performance benchmarks effective January 1, 2002 for certain
identified measures of service quality relating to customer
service and billing performance, customer satisfaction, and
reliability and safety performance. The companies are required
to report annually concerning their performance as to each
measure and are subject to maximum penalties of up to two percent
of transmission and distribution revenues should performance fail
to meet the applicable benchmarks. Concurrently, NSTAR Electric
and NSTAR Gas also filed with the MDTE a report concerning their
performance on the identified service quality measures for the
two twelve-month periods ended August 31, 2000 and 2001. This
report included a calculation of penalties in accordance with
MDTE guidelines. On March 22, 2002, following hearings on the
matter, the MDTE issued an order imposing a service quality
penalty of approximately $3.25 million on NSTAR Electric to be
refunded to customers as a credit to their bills during the month
of May 2002. This refund will not have a material effect on
NSTAR's consolidated financial position or results of operations.
Through March 31, 2002 NSTAR Electric's performance has met or
exceeded the applicable established benchmarks; however, these
results may not be indicative of the results that may be expected
for the remainder of the year, including the peak-demand period
anticipated during the summer period.
Also on October 29, 2001, NSTAR Electric filed with the MDTE a
comprehensive report regarding electric system performance issues
encountered during the summer of 2001. The filing included
detailed analyses of factors affecting performance as well as the
companies' plans to address issues that were identified. On
March 22, 2002, following a number of public hearings throughout
the NSTAR Electric service area, the MDTE issued an order finding
that NSTAR Electric had made progress in addressing the issues
which initiated the investigation and requiring that NSTAR
Electric submit further updated reports on specific issues on a
quarterly and annual basis. NSTAR is unable to estimate its
ultimate liability for future costs or penalties as a result of
any further filings relating to this investigation. However, in
view of NSTAR's current assessment of its electric distribution
system performance responsibilities, existing legal requirements
and regulatory policies, management believes it would not have a
material effect on NSTAR's consolidated financial position, cash
flows or results of operations for a reporting period.
Retail Electric Rates
The 1997 Restructuring Act requires electric distribution
companies to obtain and resell power to retail customers who
choose not to buy energy from a competitive energy supplier
through either standard offer service or default service.
Standard offer service will be available to eligible customers
through 2004 at prices approved by the MDTE, set at levels so as
to guarantee mandatory overall rate reductions provided by the
Restructuring Act. New retail customers in the NSTAR Electric
service territories and other customers who are no longer
eligible for standard offer service and have not chosen to
receive service from a competitive supplier are provided default
service. The price of default service is intended to reflect the
average competitive market price for power. As of March 31, 2002
and December 31, 2001, NSTAR Electric had approximately 21% and
16%, respectively, of its load requirements provided by
competitive suppliers.
During 2000, NSTAR Electric's accumulated cost to provide default
and standard offer service was in excess of the revenues it was
allowed to bill by approximately $242.7 million. On January 1
and July 1, 2001, NSTAR Electric was permitted by the MDTE to
increase its rates to customers for standard offer and default
service to collect this shortfall. Furthermore, when combined
with the reduction in power supply costs experienced in 2001 and
into the first quarter of 2002, rates were reduced on January 1,
2002 in anticipation of further reduced costs and resulted in a
corresponding reduction in regulatory assets to $45.4 million and
$2.1 million as of December 31, 2001 and March 31, 2002,
respectively.
In December 2000, the MDTE approved a standard offer fuel index
of 1.321 cents per kilowatt-hour (kWh) that was added to each
NSTAR Electric company's standard offer service rates for the
first half of 2001. In June 2001, the MDTE approved an
additional increase of 1.23 cents per kWh effective July 1, 2001
based on a fuel adjustment formula contained in its standard
offer tariffs to reflect the prices of natural gas and oil. In
December 2001, the MDTE approved a decrease in this fuel index of
1.125 cents to 1.426 cents per kWh for the first quarter of 2002
based on a decrease in the cost of fuel. Effective April 1,
2002, each NSTAR Electric company's fuel index was set to zero.
The MDTE has ruled that these fuel index adjustments are excluded
from the 15% rate reduction requirement under the Restructuring
Act.
In December 2001, NSTAR Electric filed proposed rate adjustments
for 2002, including a preliminary reconciliation of costs and
revenues through 2001. The MDTE subsequently approved tariffs
for each retail electric subsidiary effective January 1, 2002.
The filings were updated in February 2002 to include final costs
for 2001. The MDTE approved the reconciliation of costs and
revenues for Boston Edison through 2000 in its approval on
November 16, 2001 of a Settlement Agreement between Boston Edison
and the Massachusetts Attorney General (AG) resolving all
outstanding issues in Boston Edison's prior reconciliation
filings. As a part of this settlement, Boston Edison agreed to
reduce the costs sought to be collected through the transition
charge by approximately $2.9 million as compared to the amounts
that were originally sought. This settlement did not have a
material adverse effect on NSTAR's consolidated financial
position or results of operations.
On June 1, 2001, the MDTE issued its final orders on the
reconciliation of ComElectric and Cambridge Electric's
transition, standard offer service, default service and
transmission costs and revenues for 1998. ComElectric and
Cambridge Electric have reached a settlement with the AG
regarding the 1999 and 2000 reconciliation proceedings. Under
this settlement, the companies' future recovery of transition
costs would be reduced by approximately $7.8 million. This
settlement is not expected to have a material adverse effect on
NSTAR's consolidated financial position or results of operations
for a future period. This settlement is pending approval by the
MDTE.
In addition to the annual rate filings referenced above, NSTAR
Electric has also made interim filings with the MDTE concerning
charges for a standard offer fuel adjustment and for (market-
based) default service rates, as discussed above.
Natural Gas Industry Restructuring and Rates
NSTAR Gas generates revenues primarily through the sale and/or
transportation of natural gas. Gas sales and transportation
services are divided into two categories: firm, whereby NSTAR Gas
must supply gas and/or transportation services to customers on
demand; and interruptible, whereby NSTAR Gas may, generally
during colder months, temporarily discontinue service to high
volume commercial and industrial customers. Sales and
transportation of gas to interruptible customers do not
materially affect NSTAR Gas' operating income because
substantially all of the margin on such service is returned to
its firm customers as cost reductions.
In addition to delivery service rates, NSTAR Gas' tariffs include
a seasonal Cost of Gas Adjustment Clause (CGAC) and a Local
Distribution Adjustment Clause (LDAC). The CGAC provides for the
recovery of all gas supply costs from firm sales customers or
default service customers. The LDAC provides for the recovery of
certain costs applicable to both sales and transportation
customers. The CGAC is filed semi-annually for approval by the
MDTE. The LDAC is filed annually for approval.
In October 2001, due to the significant decline in wholesale
natural gas prices, NSTAR Gas received approval from the MDTE to
reduce the CGAC factor for the period from November 1, 2001
through April 30, 2002 to $0.5261 per therm. In December 2001,
NSTAR Gas received approval to further reduce its CGAC factor by
17% to $0.4350 per therm effective January 1, 2002. In January
2002, NSTAR Gas again filed and the MDTE approved a reduction of
the NSTAR Gas CGAC factor that became effective February 1, 2002
to $0.3834 per therm as a result of the continuing decline in its
supply costs. This represented a 59% decrease from the weighted
average factor in effect during the prior winter season. NSTAR
Gas received approval from the MDTE to decrease the CGAC to
$0.3828 per therm effective May 1, 2002, an approximate 50%
decline in rates from May 1, 2001. This filing represents the
sixth time in the prior twelve-month period that NSTAR Gas has
decreased the CGAC and passed those savings on to customers.
Other Legal Matters
In the normal course of its business, NSTAR and its subsidiaries
are also involved in certain other legal matters. Management is
unable to fully determine a range of reasonably possible legal
costs in excess of amounts accrued. Based on the information
currently available, it does not believe that it is probable that
any such additional costs will have a material impact on its
consolidated financial position. However, it is reasonably
possible that additional legal costs that may result from changes
in estimates could have a material impact on the results for a
reporting period.
Results of Operations - Three Months Ended March 31, 2002 vs.
Three Months Ended March 31, 2001
The following section of Management's Discussion and Analysis
compares the results of operations for each of the quarters ended
March 31, 2002 and 2001, respectively, and should be read in
conjunction with the condensed consolidated financial statements
and the accompanying notes included elsewhere in this report.
Earnings (loss) per common share were as follows:
Three Months Ended March 31,
2002 2001 % Change
Basic -
After RCN charge $ 0.65 $(2.52) 125.8
Before RCN charge $ 0.65 $ 0.76 (14.5)
Diluted -
After RCN charge $ 0.64 $(2.52) 125.4
Before RCN charge $ 0.64 $ 0.76 (15.8)
Earnings were $34.3 million, or $0.65 and $0.64 per basic and
diluted common share, respectively, for the first three months of
2002. For the same period in 2001, NSTAR reported a loss of
$133.7 million or $2.52 per basic and diluted common share.
Results for 2001 were $40.2 million, or $0.76 per basic and
diluted common share, before a non-cash, after-tax charge of
$173.9 million, or $3.28 per basic share, related to NSTAR's
investment in RCN Corporation (RCN) discussed below. Factors
that contributed to the $5.9 million, or 14.7%, decline in the
current quarter's earnings before last year's non-cash, after-tax
charge include the unseasonably warm winter weather conditions
during 2002 and the impact on the region of the economic slowdown
particularly in the commercial and industrial sectors. These
negative factors contributed significantly to a 3.8% decrease in
retail kWh sales and a 14.7% decrease in firm gas sales. In
addition, there were lower available earned mitigation incentive
revenues of $2.2 million. Positive factors during the current
quarter included a decrease of approximately $2 million in
operations and maintenance expense, a $1.6 million deferred tax
benefit resulting from an adjustment to NSTAR's tax valuation
allowance, lower long and short-term borrowing costs of $4.1
million, net of regulatory interest and a $1 million decrease in
preferred dividends as a result of the redemption of Boston
Edison's Cumulative Preferred Stock, 8% Series in December 2001.
Operations and maintenance expense during the quarter ended March
31, 2002 includes approximately $3.7 million expended in
connection with the implementation of the System Improvement
Program, as discussed in this section, and resulted in a $0.04
reduction in earnings per share for the current quarter.
Consistent with the performance of the telecommunications sector
as a whole, the market value of RCN's common shares decreased
significantly during the latter part of 2000 and continued in
2001. As a result, in the first quarter of 2001, management
determined that this decline in market value was "other-than-
temporary" in accordance with the SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" and recorded a
non-cash, after-tax charge of $173.9 million. The market value
of RCN common shares has continued to decline during 2002.
Should this trend continue for a period of six months or longer,
NSTAR may be required to recognize an additional impairment
charge in the second quarter of 2002. Management cannot
determine whether this trend will continue or if or when this
sector or RCN's common share value will recover. Should an
impairment charge be necessary, it is probable that this could
have a material adverse effect on NSTAR's result of operations
for that period.
The results of operations for the three-month period ended March
31, 2002 are not indicative of the results that may be expected
for the entire year due to the seasonality of electric and gas
sales and revenues. Refer to Note B to the accompanying
Unaudited Condensed Consolidated Financial Statements.
Operating revenues
Operating revenues for the first three months of 2002 decreased
16% from the same period in 2001 as follows:
(in thousands)
Retail electric revenues $ (44,019)
Wholesale electric revenues (6,488)
Gas sales revenues (85,456)
Other revenues (5,994)
Decrease in operating revenues $(141,957)
==========
The decrease in operating revenues was significantly impacted by
the decline in standard offer and default rates charged to
customers, above-normal temperatures during the current period as
shown by the decline in heating degree days in the table below
and the downturn in the economy.
Retail electric revenues were $540.6 million in the first quarter
of 2002 compared to $584.6 million in the same period of 2001, a
decrease of $44 million, or 8%. The change in retail revenues
includes a 3.8% decline in retail kilowatt-hour (kWh) sales,
lower rates implemented in January 2002 for standard offer and
default services which, when combined with lower kWh sales,
resulted in a decrease in retail revenues of $21.2 million.
Transition revenues were $15.4 million lower due to a decline in
rates and revenue related to demand-side management programs were
$3.6 million lower due to the timing of program expenditures.
The decline in transition revenues includes a $2.2 million
decline in earned mitigation incentive revenues that were allowed
for successfully lowering transition charges. Transmission
revenues increased by $6.6 million but were nearly offset by
lower distribution revenues of $6.1 million. The change in
NSTAR's retail revenues related to standard offer, default
services and demand-side management are fully reconciled to the
costs incurred and have no impact on net income.
The 3.8% decrease in the current quarter's retail kWh sales
primarily reflects declines in the residential and commercial
sectors. NSTAR Electric's sales to residential and commercial
customers were approximately 32% and 58%, respectively, of its
total retail sales mix for the current quarter and provided 51%
and 41% of distribution revenue, respectively. In 2002, the
Boston hotel occupancy rate was down 11.5% when compared to 2001.
The office vacancy rate remains comparably high. The
unemployment rate in Boston was approximately 4% during the first
quarter of this year as compared to approximately 2% in the same
period in 2001. Industrial sector sales declined 3.5% due
primarily to a slowdown in economic conditions that resulted from
reduced production or facility closings. The industrial sector
comprises approximately 9% of NSTAR's energy sales and 5% of
distribution revenue.
Weather conditions greatly impact the change in electric and, to
a larger extent, gas sales and revenues in NSTAR's service area.
The first quarter period of 2002 was significantly warmer than
the same period in 2001 and was the warmest December through
February period on record, with March being above last year and
normal. Below is comparative information on heating degree days
for the three-month periods ending March 31, 2002 and 2001 and
the number of degree days in a "normal" first quarter period as
represented by a 30-year average.
Normal
30-Year
2002 2001 Average
Heating degree days 3,362 4,009 3,967
Percentage change from prior year (16.1)% 7.7%
Percentage change from 30-year average (15.3)% 1.1%
Wholesale electric revenues were $19.3 million in the first
quarter of 2002 compared to $25.8 million in the same period of
2001, a decrease of $6.5 million, or 25%. This increase in
wholesale revenues reflects a 8.7% decrease in kWh sales and a
decline in rates. Amounts collected from wholesale customers have
no impact on net income.
Gas sales revenues were $111.8 million in the first quarter of
2002 compared to $197.3 million in the same period of 2001, a
decrease of $85.5 million, or 43%. The decrease in revenues is
attributable to the 14.7% decline in Billions of British Thermal
Unit (BBTU) sales due to the warmer weather, the economic
slowdown particularly evident in the commercial and industrial
sectors and an approximate 50% decline in the cost of gas since
the same period in 2001. NSTAR Gas' firm sales to residential,
commercial and industrial customers were approximately 53%, 35%
and 7%, respectively, of total firm sales for the current three-
month period.
Other revenues were $51.2 million in the first quarter of 2002
compared to $57.2 million in the same period of 2001, a decrease
of $6 million, or 10%. This decrease primarily reflects lower
revenues from NSTAR Communications and lower steam revenues due
to a milder winter period.
Operating expenses
Purchased power costs were $358 million in the first quarter of
2002 compared to $398.2 million in the same period of 2001, a
decrease of $40.2 million, or 10%. The decrease in expense
reflects lower purchased power requirements due to a 3.8%
decrease in retail sales, an 8.7% decrease in wholesale sales and
lower costs that reflect the prices of natural gas and oil.
Included in the current and prior period was $45.8 million and
$36.1 million, respectively, that reflects the recognition of
previously deferred standard offer and default service supply
cost resulting from the current period collection of these costs.
NSTAR adjusts its electric rates to collect the costs related to
energy supply from customers on a fully reconciling basis. Due
to the rate adjustment mechanisms, changes in the amount of
energy supply expense have no impact on earnings. The cost of
gas sold, representing NSTAR Gas' supply expense, was $55.3
million for the first quarter of 2002 compared to $132.5 million
in the same period of 2001, a decrease of $77.2 million, or 58%,
due to the recognition of the lower cost of gas supply and the
significant reduction in sales due to milder weather conditions.
These expenses are also fully reconciled to the current level of
revenues collected.
Operations and maintenance expense was $106.3 million in the
first quarter of 2002 compared to $108.3 million in the same
period of 2001, a decrease of $2 million, or 2%. This decrease
reflects reduced expensed labor and overhead costs, the absence
of $3.7 million in storm costs incurred in the first quarter of
2001 and a decline in bad debt expense of $1 million. These
reductions were partially offset by increased benefit costs of
$6.5 million and corrective electric systems maintenance of $3.7
million in connection with the non-recurring System Improvement
Program.
Depreciation and amortization expense was $60.6 million in the
first quarter of 2002 compared to $59.1 million in the same
period of 2001, an increase of $1.5 million, or 3%. The increase
primarily reflects higher depreciable plant in service.
Demand side management (DSM) and renewable energy programs
expense was $16.4 million in the first quarter of 2002 compared
to $19.6 million in the same period of 2001, a decrease of $3.2
million, or 16%, primarily due to timing of DSM expense which is
consistent with the collection of conservation and renewable
energy revenues. These costs are collected from customers on a
fully reconciling basis and therefore, fluctuations in program
costs have no impact on earnings. In addition, NSTAR earns
incentive amounts in return for increased customer participation.
Property and other taxes were $27 million in the first quarter of
2002 compared to $27.1 million in the same period of 2001, a
decrease of $0.1 million, or 0.4%. This slight decrease was due
to lower payroll taxes that were partially offset by higher
overall municipal property taxes, particularly for the City of
Boston.
Income taxes from operations were $22.5 million in the first
quarter of 2002 compared to $30.7 million in the same period of
2001, a decrease of $8.2 million, or 27%, reflecting lower pre-
tax operating income.
Other income (deductions)
Other income was $1.5 million in the first quarter of 2002
compared to other deductions of $175.5 million in the same period
of 2001, a net increase in income of $177 million due to the
absence in the current period of the aforementioned non-cash,
after-tax charge of $173.9 million related to the carrying value
of the RCN investment that is discussed more fully below.
In 2002, the increase in other income was due primarily to a
deferred tax valuation allowance reserve account adjustment for
$1.6 million and the recognition of a gain of $1.5 million
resulting from the partial sale of equity securities. Partially
offsetting these gains was lower earnings from merchandising and
jobbing of heating products.
Interest charges
Interest on long-term debt and transition property securitization
certificates was $37.8 million in the first quarter of 2002
compared to $40.4 million in the same period of 2001, a decrease
of $2.6 million, or 6%. The decrease in interest expense
reflects the retirement of $24.3 million in Boston Edison 9.375%
Debentures in August 2001, NSTAR Gas' of 8.99% Bonds in December
2001, ComElectric's 9.3%, $30 million Term Loan in January 2002,
additional sinking fund payments and the reduction in transition
property securitization certificates outstanding resulting in
reduced interest expense of nearly $1 million.
Short-term and other interest expense was $5.4 million in the
first quarter of 2002 compared to $10.1 million in the same
period of 2001, a decrease of $4.7 million, or 47%. Despite a
higher average level of debt outstanding, this decrease was
partly due to a significant reduction in short-term borrowing
rates. The reduction in short-term and other interest costs was
partially offset by a $3.1 million increase in regulatory
interest due to a reduction in the under-collection of regulatory
deferrals. The increase in borrowing is primarily the result of
increased working capital requirements.
Liquidity
NSTAR's short-term debt decreased by $34 million to $591 million
at March 31, 2002 as compared to $625 million at December 31,
2001. The decrease resulted primarily from $187 million of cash
flows provided by operating activities, offset by $83 million of
cash flows used in investing activities and $75 million of cash
flows used in financing activities excluding the change in short-
term debt.
Period to period fluctuations in the levels of net cash provided
by operating activities for the three-month periods ended March
31, 2002 and 2001 are not indicative of the results that may be
expected for an entire year.
The net cash provided by operating activities of $187 million was
partially attributable to net earnings of $35 million which, when
adjusted for depreciation and amortization and deferred income
taxes and investment tax credits, provided $113 million of
operating cash. Also contributing to operating cash was a
decrease in receivables of $89 million, which was partially
offset by an increase in fuel inventories and a decrease in
payables of $11 million and $37 million, respectively. Included
in the decrease in receivables was the receipt of $64 million
associated with the non-recurring construction financing of the
Summit, NSTAR's corporate office building. The net cash used in
investing activities of $83 million was utilized primarily for
capital expenditures and included $27 million expended on the
Summit and $9 million associated with the non-recurring System
Improvement Program. The net cash used in financing activities
of $109 million was primarily the result of short-term borrowings
of $34 million, long-term redemptions of $31 million, dividends
paid of $29 million and sinking fund payments of $16 million.
Net working capital, excluding short-term borrowings and the
current portion of long-term debt, increased by $131 million to
$73 million for the three months ended March 31, 2002 as compared
to $(58) million for the same period in 2001. This increase is
mainly attributable to lower accounts receivable balances and
receipt of funds due NSTAR in connection with the Summit.
Further contributing to this increase in working capital was a
reduction of $23 million in the level of estimated income tax
payments.
The Company's primary estimated future uses of cash for 2002
include dividend payments, capital expenditures and debt
reductions.
NSTAR's internally generated funds consist of cash flows from
operating activities, adjusted to exclude changes in working
capital and the payment of dividends. NSTAR companies supplement
internally generated funds as needed, primarily through the
issuance of short-term commercial paper and bank borrowings.
The capital spending level forecasted for 2002 is $315 million,
which includes approximately $271 million for electric and gas
operations and the balance for other capital requirements of non-
utility ventures. Also, included in this level of spending are
$54 million of costs associated with NSTAR's System Improvement
Program. For the three-month period ended March 31, 2002,
capital spending was $85.5 million and includes approximately $9
million related to the System Improvement Program and $27 million
made in connection with a new corporate office building.
Management continuously reviews its capital expenditure and
financing programs. These programs and, therefore, the estimates
included in this Form 10-Q are subject to revision due to changes
in regulatory requirements, environmental standards, availability
and cost of capital, interest rates and other assumptions.
In the three-month period ended March 31, 2002, debt financing
activities included the net pay-down of $33.5 million in short-
term debt, the retirement of $16 million in securitization
certificates and the retirement of Com/Electric's 9.3%, $30
million Term Loan in January. In 2001, financing activities
included redemptions of securitization certificates of $62
million, redemption of all 500,000 shares outstanding of Boston
Edison's Cumulative Preferred Stock, 8% Series, at the mandatory
redemption price of $100 per share, the early redemption of $24.3
million 9.375% debentures, and other scheduled sinking fund
payments. There were no new long-term debt issuances in the
three-month period ended March 31, 2002 or in 2001.
NSTAR and Boston Edison have no covenant requirements under their
long-term debt arrangements. ComElectric, Cambridge Electric and
NSTAR Gas have covenant requirements under their long-term debt
arrangements and were in compliance at March 31, 2002 and
December 31, 2001.
NSTAR has a $450 million revolving credit agreement with a group
of banks effective through November 2002. At March 31, 2002 and
December 31, 2001, there were no amounts outstanding under this
revolving credit agreement. This arrangement serves as back-up
to NSTAR's $450 million commercial paper program that, at March
31, 2002 and December 31, 2001, had $309.5 million and $315.5
million outstanding, respectively. NSTAR anticipates renewing
its revolving credit agreement under similar terms.
Boston Edison has approval from the FERC to issue up to $350
million of short-term debt until December 31, 2002. On April 30,
2002, Boston Edison filed with the FERC for authorization to
issue short-term debt securities from time to time on or before
December 31, 2004, with maturity dates no later than December 31,
2005, in amounts such that the aggregate principal does not
exceed $350 million at any one time. Boston Edison has a $300
million revolving credit agreement with a group of banks
effective through December 2002. At March 31, 2002 and December
31, 2001, there were no amounts outstanding under this revolving
credit agreement. This arrangement serves as back-up to Boston
Edison's $300 million commercial paper program that, at March 31,
2002 and December 31, 2001, had outstanding balances of $187
million and $191.5 million, respectively. Separately, Boston
Edison, effective in July 2001, has an additional $50 million
line of credit and had $15 million outstanding at March 31, 2002
and $0 at December 31, 2001.
Boston Edison has approval from the MDTE to issue from time to
time up to $500 million of long-term debt securities through
2002. In connection with this, on February 20, 2001, Boston
Edison filed a registration statement on Form S-3 with the SEC,
using a shelf registration process, to issue up to $500 million
in debt securities. The SEC declared the registration statement
effective on February 28, 2001. When issued, Boston Edison will
use the proceeds to pay at maturity long-term debt and equity
securities, refinance short-term debt and for other corporate
purposes. No issuance of debt securities was made during 2001 or
thus far in 2002 under this authorization.
In addition, ComElectric, Cambridge Electric and NSTAR Gas,
collectively, have $190 million available under several lines of
credit. Approximately $79.8 million and $118 million was
outstanding under these lines of credit at March 31, 2002 and
December 31, 2001, respectively. ComElectric, Cambridge Electric
and Canal have approval from FERC to issue short-term debt with
amounts ranging from $60 million to $100 million until November
30, 2002, June 28, 2002 and June 15, 2002, respectively. On
April 30, 2002, ComElectric and Cambridge Electric each filed
with the FERC for authorization to issue short-term debt
securities from time to time on or before November 30, 2004 and
June 28, 2004, with maturity dates no later than November 30,
2005 and June 28, 2005, respectively, in amounts such that the
aggregate principal does not exceed $125 million and $60 million,
respectively, at any one time. NSTAR Gas is not required to seek
approval from FERC to issue short-term debt.
NSTAR's goal is to maintain a capital structure that preserves an
appropriate balance between debt and equity. Management believes
its liquidity and capital resources are sufficient to meet its
current and projected requirements.
RCN Joint Venture and Investment Conversion
NSTAR Com is a participant in a telecommunications venture with
RCN Telecom Services, Inc. of Massachusetts, a subsidiary of RCN
Corporation (RCN). NSTAR Com has accounted for its equity
investment in the joint venture using the equity method of
accounting. As part of the Joint Venture Agreement, NSTAR Com
has the option to exchange portions of its joint venture interest
for common shares of RCN at specified periods. To date, NSTAR
Com has received approximately 4.1 million shares of RCN common
shares from two prior exchanges of its joint venture interest.
On April 6, 2000, NSTAR Com issued its third and final notice to
exchange substantially all of its remaining interest in the joint
venture into common shares of RCN. Effective with the third
notice, NSTAR Com's profit and loss sharing ratio was reduced to
zero.
On October 18, 2000, NSTAR Com and RCN signed an agreement in
principle to amend the Joint Venture Agreement. Among other
items, this proposal settled the number of shares to be received
for the third conversion of NSTAR Com's remaining equity
investment at 7.5 million shares.
NSTAR continues to evaluate the carrying value of its entire
investment in RCN, as well as its investment in other
telecommunication activities. Consistent with the performance of
the telecommunications sector as a whole, the market value of
RCN's common shares decreased significantly during the later part
of 2000 and continued in 2001. As a result, in the first quarter
of 2001, management determined that this decline in market value
was "other-than-temporary" in accordance with the SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities."
Also, during the first quarter of 2001, the status of the
amendment to the Joint Venture Agreement with RCN regarding the
7.5 million shares led management to determine that its
investment in the joint venture was also impaired based on future
market expectations for RCN common shares related to this
investment.
As a result, NSTAR Com recognized an impairment of its entire
investment in RCN in the first quarter of 2001. This write-down
resulted in a non-cash, after-tax charge of $173.9 million that
is reported on the accompanying Condensed Consolidated Statements
of Income as "Write-down of RCN investment, net."
After continual discussions and negotiations, NSTAR Com expects
to finalize revisions to the October 2000 agreement and
management anticipates having a definitive amended Joint Venture
Agreement prior to June 30, 2002. Upon finalization of the
amended Joint Venture Agreement and receipt of the remaining 7.5
million shares, NSTAR will be required to adjust its carrying
value to the market value of the RCN shares received as of that
date. The market value of RCN common shares has continued to
decline during 2002 and has not closed above NSTAR's carrying
value of $3.75 per share since November 27, 2001. Should this
trend continue for a period of six months or longer, NSTAR may be
required to recognize an additional impairment charge in the
second quarter of 2002. Management cannot determine whether this
trend will continue or if or when this sector or RCN's common
share value will recover. The current carrying value associated
with its entire investment is $43.5 million and is the equivalent
of $3.75 per share. In accordance with NSTAR's accounting
policy, if the above trend continues during the second quarter,
it is probable that NSTAR will write down the combined 11.6
million shares in the second quarter of 2002. Should an
impairment charge be necessary, it is probable that this could
have a material adverse effect on NSTAR's result of operations
for that period.
The RCN shares received, as well as the remaining interest in the
joint venture related to the pending 7.5 million shares, are
included in Other investments on the accompanying Condensed
Consolidated Balance Sheets at their estimated fair value of
approximately $33.9 million at March 31, 2002. The fair value of
the 4.1 million shares currently held may increase or decrease as
a result of changes in the market value of RCN common shares. As
of March 31, 2002 and December 31, 2001, the market value per
share of RCN was $1.41 and $2.93, respectively. The unrealized
gain or loss associated with shares currently held will fluctuate
due to the changes in fair value of these shares during each
period and is reflected, net of associated income taxes, as a
component of Other comprehensive income (loss), net on the
accompanying Condensed Consolidated Statements of Comprehensive
Income (Loss). The cumulative increase or decrease in fair value
of these shares as of March 31, 2002 reflects the change since
the write-down of these shares as a component of Accumulated
other comprehensive income (loss) on the accompanying Condensed
Consolidated Balance Sheets.
At March 31, 2002 and December 31, 2001, NSTAR Com had $2.7
million and $2.6 million, respectively, in accounts receivable
due from the joint venture. Amounts due are primarily the result
of construction performed by NSTAR Com on behalf of the joint
venture. The joint venture is current on its receivables to
NSTAR Com.
Performance Assurances and Financial Guarantees
NSTAR Electric has entered into a series of purchased power
agreements to meet its default service supply obligations and its
remaining unmet standard offer supply obligations through
December 31, 2002. NSTAR Electric is recovering all of the
payments it is making to suppliers and has financial and
performance assurances and financial guarantees in place with
those suppliers to protect NSTAR Electric from risk in the
unlikely event any of its suppliers encounter financial
difficulties or fail to maintain an investment grade credit
rating. In connection with certain of these agreements, should,
in the unlikely event, an individual NSTAR Electric distribution
company receive a credit rating below investment grade, that
company potentially could be required to obtain certain financial
commitments, including but not limited to, letters of credit.
Other Investments
NSTAR has investments in John Hancock Financial Services, Inc.
and MetLife, Inc. These securities are currently available for
sale and are included in Other investments on the accompanying
Condensed Consolidated Balance Sheets. The value of these common
shares was adjusted to reflect market values as of March 31, 2002
and December 31, 2001. The unrealized gain or loss associated
with these shares will fluctuate due to changes in current market
values and is reflected, net of applicable income taxes, as a
component of Comprehensive income (loss) on the accompanying
Condensed Consolidated Statements of Comprehensive Income (Loss).
The cumulative increase or decrease in fair value of these shares
as of March 31, 2002 and December 31, 2001 is reflected as a
component of Accumulated other comprehensive income (loss) on the
accompanying Condensed Consolidated Balance Sheets. During the
first quarter of 2002, NSTAR sold 75,000 shares of John Hancock
for approximately $2.8 million and recognized a gain of
approximately $1.5 million.
Part II - Other Information
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
There have been no material changes since year-end.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of NSTAR was held on April 25,
2002. The holders of NSTAR's Common Shares elected three Class
III trustees to serve until the Annual Meeting to be held in the
year 2005 and until the election and qualification of their
respective successors. In addition, the holders of NSTAR's
Common Shares approved an amendment to the NSTAR 1997 Share
Incentive Plan to authorize the issuance of an additional two
million shares under the Plan. Proxies for 45,268,521 shares of
the 53,032,546 shares entitled to vote were present at the Annual
Meeting, constituting a quorum.
Proposal 1 - Election of Trustees
The following table sets forth the names of the three persons
elected at the Annual Meeting to serve as trustees until 2005 and
the number of votes cast for or withheld with respect to each
person. Trustees are elected by a plurality of votes present and
entitled to vote at the Annual Meeting.
Class III Trustee Votes For Votes Withheld
Charles K. Gifford 44,009,523 1,258,998
Paul A. LaCamera 44,033,389 1,235,132
Sherry H. Penney 44,012,067 1,256,454
Proposal 2 - Amendment to the NSTAR 1997 Share Incentive Plan
In the matter of the number of votes cast for, against or
withheld with respect to approval of an Amendment to the NSTAR
1997 Share Incentive Plan to authorize the issuance of an
additional two million shares under the Plan, 35,928,122 votes
were cast for this proposal, 8,339,812 votes were against and
1,000,587 votes abstained. Approval of the Amendment received
the required majority of the Common Shares represented and
entitled to vote at the Annual Meeting. Following such approval,
a Registration Statement on Form S-8 was filed with the
Securities and Exchange Commission covering both these additional
two million shares and one million shares authorized by the Board
of Trustees in January, 2002 to fund the NSTAR Savings Plan.
Item 5. Other Information
At the time of the Annual Meeting of Shareholders on April 25,
2002, Sheldon A. Buckler retired from the Board of Trustees. In
addition, Daniel Dennis, a Managing Partner and founder of Daniel
Dennis & Company LLP, CPA, was appointed a Trustee in March,
2002.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed herewith and incorporated by reference:
Exhibit 4 - Instruments defining the rights of security
holders, including indentures
Management agrees to furnish to the Securities
and Exchange Commission, upon request, a copy
of any agreements or instruments defining the
rights of holders of any long-term debt whose
authorization does not exceed 10% of total
assets.
Exhibit 15 - Letter re unaudited interim financial
information
15.1 - Report of Independent Accountants
Exhibit 99 - Additional exhibits
99.1 - Letter of Independent Accountants
Form S-8 Registration Statement filed by NSTAR
on April 30, 2002 (File No. 333-87272); Post-
effective Amendment to Form S-4 on form S-3
filed by NSTAR on August 19, 1999 (File No.
333-78285); Post-effective Amendment to form S-
4 on Form S-8 filed by NSTAR on August 19,
1999 (File No. 333-78285); Form S-8
Registration Statement filed by NSTAR on
August 19, 1999 (File No. 333-85559); Form S-4
Registration Statement filed by NSTAR on May
12, 1999 (File No. 333-78285).
b) No Form 8-K was filed with the Securities and Exchange
Commission during the first quarter of 2002.
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NSTAR
(Registrant)
Date: May 9, 2002 /s/ R. J. WEAFER, JR.
Robert J. Weafer, Jr.
Vice President, Controller
and Chief Accounting Officer