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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 |
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| For the Quarterly Period Ended March 31, 2015 |
| or |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
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| For the transition period from ____________ to ____________ |
Commission | Registrant; State of Incorporation; | I.R.S. Employer |
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1-5324 | EVERSOURCE ENERGY | 04-2147929 |
0-00404 | THE CONNECTICUT LIGHT AND POWER COMPANY | 06-0303850 |
1-02301 | NSTAR ELECTRIC COMPANY | 04-1278810 |
1-6392 | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE | 02-0181050 |
0-7624 | WESTERN MASSACHUSETTS ELECTRIC COMPANY | 04-1961130 |
|
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
| Yes | No |
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|
| x | ¨ |
Indicate by check mark whether the registrants have submitted electronically and posted on its corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).
| Yes | No |
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|
| x | ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
| Large |
| Accelerated |
| Non-accelerated |
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Eversource Energy | x |
| ¨ |
| ¨ |
The Connecticut Light and Power Company | ¨ |
| ¨ |
| x |
NSTAR Electric Company | ¨ |
| ¨ |
| x |
Public Service Company of New Hampshire | ¨ |
| ¨ |
| x |
Western Massachusetts Electric Company | ¨ |
| ¨ |
| x |
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):
| Yes | No |
|
|
|
Eversource Energy | ¨ | x |
The Connecticut Light and Power Company | ¨ | x |
NSTAR Electric Company | ¨ | x |
Public Service Company of New Hampshire | ¨ | x |
Western Massachusetts Electric Company | ¨ | x |
Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date:
Company - Class of Stock | Outstanding as of April 30, 2015 |
Eversource Energy | 317,647,540 shares |
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The Connecticut Light and Power Company | 6,035,205 shares |
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NSTAR Electric Company | 100 shares |
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Public Service Company of New Hampshire | 301 shares |
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Western Massachusetts Electric Company | 434,653 shares |
Eversource Energy holds all of the 6,035,205 shares, 100 shares, 301 shares, and 434,653 shares of the outstanding common stock of The Connecticut Light and Power Company, NSTAR Electric Company, Public Service Company of New Hampshire and Western Massachusetts Electric Company, respectively.
NSTAR Electric Company, Public Service Company of New Hampshire and Western Massachusetts Electric Company each meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q, and each is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.
Eversource Energy, The Connecticut Light and Power Company, NSTAR Electric Company, Public Service Company of New Hampshire, and Western Massachusetts Electric Company each separately file this combined Form 10-Q. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
GLOSSARY OF TERMS
The following is a glossary of abbreviations or acronyms that are found in this report: | |
| |
| |
Current or former Eversource Energy companies, segments or investments: | |
ES, Eversource or the Company | Eversource Energy and subsidiaries |
ES parent | Eversource Energy, a public utility holding company |
ES parent and other companies | ES parent and other companies is comprised of ES parent, Eversource Service and other subsidiaries, which primarily includes our unregulated businesses, HWP Company, The Rocky River Realty Company (a real estate subsidiary), and the consolidated operations of CYAPC and YAEC |
CL&P | The Connecticut Light and Power Company |
NSTAR Electric | NSTAR Electric Company |
NSTAR Gas | NSTAR Gas Company |
PSNH | Public Service Company of New Hampshire |
WMECO | Western Massachusetts Electric Company |
Yankee Gas | Yankee Gas Services Company |
ESTV | Eversource Energy Transmission Ventures, Inc., the parent company of NPT and Renewable Properties, Inc. |
NPT | Northern Pass Transmission LLC |
Eversource Service | Northeast Utilities Service Company (effective January 1, 2014 includes the operations of NSTAR Electric & Gas) |
NSTAR Electric & Gas | NSTAR Electric & Gas Corporation, a former Eversource Energy service company (effective January 1, 2014 merged into Northeast Utilities Service Company) |
CYAPC | Connecticut Yankee Atomic Power Company |
MYAPC | Maine Yankee Atomic Power Company |
YAEC | Yankee Atomic Electric Company |
Yankee Companies | CYAPC, YAEC and MYAPC |
Regulated companies | The ES Regulated companies, comprised of the electric distribution and transmission businesses of CL&P, NSTAR Electric, PSNH, and WMECO, the natural gas distribution businesses of Yankee Gas and NSTAR Gas, the generation activities of PSNH and WMECO, and NPT |
Regulators: |
|
DEEP | Connecticut Department of Energy and Environmental Protection |
DOE | U.S. Department of Energy |
DOER | Massachusetts Department of Energy Resources |
DPU | Massachusetts Department of Public Utilities |
EPA | U.S. Environmental Protection Agency |
FERC | Federal Energy Regulatory Commission |
ISO-NE | ISO New England, Inc., the New England Independent System Operator |
MA DEP | Massachusetts Department of Environmental Protection |
NHPUC | New Hampshire Public Utilities Commission |
PURA | Connecticut Public Utilities Regulatory Authority |
SEC | U.S. Securities and Exchange Commission |
SJC | Supreme Judicial Court of Massachusetts |
Other Terms and Abbreviations: |
|
AFUDC | Allowance For Funds Used During Construction |
AOCI | Accumulated Other Comprehensive Income/(Loss) |
ARO | Asset Retirement Obligation |
C&LM | Conservation and Load Management |
CfD | Contract for Differences |
Clean Air Project | The construction of a wet flue gas desulphurization system, known as "scrubber technology," to reduce mercury emissions of the Merrimack coal-fired generation station in Bow, New Hampshire |
CO2 | Carbon dioxide |
CPSL | Capital Projects Scheduling List |
CTA | Competitive Transition Assessment |
CWIP | Construction Work in Progress |
EPS | Earnings Per Share |
ERISA | Employee Retirement Income Security Act of 1974 |
ES 2014 Form 10-K | The Eversource Energy and Subsidiaries 2014 combined Annual Report on Form 10-K as filed with the SEC |
ESOP | Employee Stock Ownership Plan |
ESPP | Employee Share Purchase Plan |
FERC ALJ | FERC Administrative Law Judge |
Fitch | Fitch Ratings |
FMCC | Federally Mandated Congestion Charge |
FTR | Financial Transmission Rights |
GAAP | Accounting principles generally accepted in the United States of America |
GSC | Generation Service Charge |
GSRP | Greater Springfield Reliability Project |
GWh | Gigawatt-Hours |
i
HQ | Hydro-Québec, a corporation wholly owned by the Québec government, including its divisions that produce, transmit and distribute electricity in Québec, Canada |
HVDC | High voltage direct current |
Hydro Renewable Energy | Hydro Renewable Energy, Inc., a wholly owned subsidiary of Hydro-Québec |
IPP | Independent Power Producers |
ISO-NE Tariff | ISO-NE FERC Transmission, Markets and Services Tariff |
kV | Kilovolt |
kW | Kilowatt (equal to one thousand watts) |
kWh | Kilowatt-Hours (the basic unit of electricity energy equal to one kilowatt of power supplied for one hour) |
LBR | Lost Base Revenue |
LNG | Liquefied natural gas |
LRS | Supplier of last resort service |
MGP | Manufactured Gas Plant |
MMBtu | One million British thermal units |
Moody's | Moody's Investors Services, Inc. |
MW | Megawatt |
MWh | Megawatt-Hours |
NEEWS | New England East-West Solution |
Northern Pass | The high voltage direct current transmission line project from Canada into New Hampshire |
NOx | Nitrogen oxides |
PAM | Pension and PBOP Rate Adjustment Mechanism |
PBOP | Postretirement Benefits Other Than Pension |
PBOP Plan | Postretirement Benefits Other Than Pension Plan that provides certain retiree health care benefits, primarily medical and dental, and life insurance benefits |
PCRBs | Pollution Control Revenue Bonds |
Pension Plan | Single uniform noncontributory defined benefit retirement plan |
PPA | Pension Protection Act |
RECs | Renewable Energy Certificates |
Regulatory ROE | The average cost of capital method for calculating the return on equity related to the distribution and generation business segment excluding the wholesale transmission segment |
ROE | Return on Equity |
RRB | Rate Reduction Bond or Rate Reduction Certificate |
RSUs | Restricted share units |
S&P | Standard & Poor's Financial Services LLC |
SBC | Systems Benefits Charge |
SCRC | Stranded Cost Recovery Charge |
SERP | Supplemental Executive Retirement Plans and non-qualified defined benefit retirement plans |
SIP | Simplified Incentive Plan |
SO2 | Sulfur dioxide |
SS | Standard service |
TCAM | Transmission Cost Adjustment Mechanism |
TSA | Transmission Service Agreement |
UI | The United Illuminating Company |
ii
EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY
WESTERN MASSACHUSETTS ELECTRIC COMPANY
TABLE OF CONTENTS
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations for the Following Companies: | |
Eversource Energy and Subsidiaries |
|
The Connecticut Light and Power Company | 42 |
NSTAR Electric Company and Subsidiary | 44 |
Public Service Company of New Hampshire and Subsidiary | 46 |
Western Massachusetts Electric Company | 48 |
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ITEM 3 Quantitative and Qualitative Disclosures About Market Risk | 50 |
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ITEM 4 Controls and Procedures | 50 |
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PART II OTHER INFORMATION |
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ITEM 1 Legal Proceedings | 51 |
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ITEM 1A Risk Factors | 51 |
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ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds | 51 |
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ITEM 6 Exhibits | 52 |
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SIGNATURES | 54 |
iii
EVERSOURCE ENERGY AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(Unaudited) |
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| March 31, |
| December 31, | ||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
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ASSETS |
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Current Assets: |
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| Cash and Cash Equivalents | $ | 71,027 |
| $ | 38,703 |
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| Receivables, Net |
| 1,131,434 |
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| 856,346 |
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| Unbilled Revenues |
| 229,760 |
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| 211,758 |
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| Taxes Receivable |
| 99,680 |
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| 337,307 |
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| Fuel, Materials and Supplies |
| 281,492 |
|
| 349,664 |
|
| Regulatory Assets |
| 747,349 |
|
| 672,493 |
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| Prepayments and Other Current Assets |
| 231,949 |
|
| 226,194 |
Total Current Assets |
| 2,792,691 |
|
| 2,692,465 | ||
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Property, Plant and Equipment, Net |
| 18,810,708 |
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| 18,647,041 | ||
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Deferred Debits and Other Assets: |
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| Regulatory Assets |
| 3,981,507 |
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| 4,054,086 |
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| Goodwill |
| 3,519,401 |
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| 3,519,401 |
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| Marketable Securities |
| 518,065 |
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| 515,025 |
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| Other Long-Term Assets |
| 329,393 |
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| 349,957 |
Total Deferred Debits and Other Assets |
| 8,348,366 |
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| 8,438,469 | ||
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Total Assets | $ | 29,951,765 |
| $ | 29,777,975 | ||
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LIABILITIES AND CAPITALIZATION |
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Current Liabilities: |
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| Notes Payable | $ | 1,003,500 |
| $ | 956,825 | |
| Long-Term Debt - Current Portion |
| 245,583 |
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| 245,583 | |
| Accounts Payable |
| 739,324 |
|
| 868,231 | |
| Obligations to Third Party Suppliers |
| 157,143 |
|
| 115,632 | |
| Regulatory Liabilities |
| 201,180 |
|
| 235,022 | |
| Accumulated Deferred Income Taxes |
| 218,582 |
|
| 160,288 | |
| Other Current Liabilities |
| 546,470 |
|
| 552,800 | |
Total Current Liabilities |
| 3,111,782 |
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| 3,134,381 | ||
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Deferred Credits and Other Liabilities: |
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| Accumulated Deferred Income Taxes |
| 4,574,630 |
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| 4,467,473 | |
| Regulatory Liabilities |
| 524,940 |
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| 515,144 | |
| Derivative Liabilities |
| 396,617 |
|
| 409,632 | |
| Accrued Pension, SERP and PBOP |
| 1,605,339 |
|
| 1,638,558 | |
| Other Long-Term Liabilities |
| 870,417 |
|
| 874,387 | |
Total Deferred Credits and Other Liabilities |
| 7,971,943 |
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| 7,905,194 | ||
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Capitalization: |
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| Long-Term Debt |
| 8,602,067 |
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| 8,606,017 | |
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| Noncontrolling Interest - Preferred Stock of Subsidiaries |
| 155,568 |
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| 155,568 | |
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| Equity: |
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| Common Shareholders' Equity: |
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| Common Shares |
| 1,668,039 |
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| 1,666,796 |
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| Capital Surplus, Paid In |
| 6,241,417 |
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| 6,235,834 |
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| Retained Earnings |
| 2,569,482 |
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| 2,448,661 |
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| Accumulated Other Comprehensive Loss |
| (72,414) |
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| (74,009) |
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| Treasury Stock |
| (296,119) |
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| (300,467) |
| Common Shareholders' Equity |
| 10,110,405 |
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| 9,976,815 | |
Total Capitalization |
| 18,868,040 |
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| 18,738,400 | ||
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Total Liabilities and Capitalization | $ | 29,951,765 |
| $ | 29,777,975 | ||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
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1
EVERSOURCE ENERGY AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
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(Unaudited) |
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| For the Three Months Ended March 31, | ||||
(Thousands of Dollars, Except Share Information) | 2015 |
| 2014 | |||||
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Operating Revenues | $ | 2,513,431 |
| $ | 2,290,590 | |||
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Operating Expenses: |
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| Purchased Power, Fuel and Transmission |
| 1,162,049 |
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| 978,150 | ||
| Operations and Maintenance |
| 333,382 |
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| 351,688 | ||
| Depreciation |
| 163,837 |
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| 150,807 | ||
| Amortization of Regulatory Assets, Net |
| 60,604 |
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| 57,898 | ||
| Energy Efficiency Programs |
| 146,603 |
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| 138,825 | ||
| Taxes Other Than Income Taxes |
| 149,481 |
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| 145,533 | ||
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| Total Operating Expenses |
| 2,015,956 |
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| 1,822,901 |
Operating Income |
| 497,475 |
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| 467,689 | |||
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Interest Expense: |
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| Interest on Long-Term Debt |
| 87,714 |
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| 87,377 | ||
| Other Interest |
| 7,129 |
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| 2,598 | ||
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| Interest Expense |
| 94,843 |
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| 89,975 | |
Other Income, Net |
| 5,727 |
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| 1,667 | |||
Income Before Income Tax Expense |
| 408,359 |
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| 379,381 | |||
Income Tax Expense |
| 153,226 |
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| 141,545 | |||
Net Income |
| 255,133 |
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| 237,836 | |||
Net Income Attributable to Noncontrolling Interests |
| 1,879 |
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| 1,879 | |||
Net Income Attributable to Controlling Interest | $ | 253,254 |
| $ | 235,957 | |||
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Basic Earnings Per Common Share | $ | 0.80 |
| $ | 0.75 | |||
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Diluted Earnings Per Common Share | $ | 0.80 |
| $ | 0.74 | |||
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Dividends Declared Per Common Share | $ | 0.42 |
| $ | 0.39 | |||
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Weighted Average Common Shares Outstanding: |
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| Basic |
| 317,090,841 |
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| 315,534,512 | ||
| Diluted |
| 318,491,188 |
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| 316,892,119 | ||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | ||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(Unaudited) |
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Net Income | $ | 255,133 |
| $ | 237,836 | |||
Other Comprehensive Income, Net of Tax: |
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| Qualified Cash Flow Hedging Instruments |
| 509 |
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| 509 | ||
| Changes in Unrealized Gains on Other Securities |
| 132 |
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| 240 | ||
| Changes in Funded Status of Pension, SERP and PBOP Benefit Plans |
| 954 |
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| 961 | ||
Other Comprehensive Income, Net of Tax |
| 1,595 |
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| 1,710 | |||
Comprehensive Income Attributable to Noncontrolling Interests |
| (1,879) |
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| (1,879) | |||
Comprehensive Income Attributable to Controlling Interest | $ | 254,849 |
| $ | 237,667 | |||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
2
EVERSOURCE ENERGY AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) |
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| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
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Operating Activities: |
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| Net Income | $ | 255,133 |
| $ | 237,836 | |
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: |
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| Depreciation |
| 163,837 |
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| 150,807 |
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| Deferred Income Taxes |
| 148,193 |
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| 137,417 |
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| Pension, SERP and PBOP Expense |
| 26,495 |
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| 24,995 |
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| Pension and PBOP Contributions |
| (26,659) |
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| (6,622) |
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| Regulatory Over/(Under) Recoveries, Net |
| (110,748) |
|
| 872 |
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| Amortization of Regulatory Assets, Net |
| 60,604 |
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| 57,898 |
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| Proceeds from DOE Damages Claim, Net |
| - |
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| 163,300 |
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| Deferral of DOE Proceeds |
| - |
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| (163,300) |
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| Other |
| (21,617) |
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| (7,574) |
| Changes in Current Assets and Liabilities: |
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| Receivables and Unbilled Revenues, Net |
| (328,299) |
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| (182,221) |
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| Fuel, Materials and Supplies |
| 68,172 |
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| 75,041 |
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| Taxes Receivable/Accrued, Net |
| 272,021 |
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| (59,840) |
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| Accounts Payable |
| (59,496) |
|
| 53,905 |
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| Other Current Assets and Liabilities, Net |
| 34,179 |
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| 11,282 |
Net Cash Flows Provided by Operating Activities |
| 481,815 |
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| 493,796 | ||
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Investing Activities: |
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| Investments in Property, Plant and Equipment |
| (362,586) |
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| (348,691) | |
| Proceeds from Sales of Marketable Securities |
| 114,730 |
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| 128,505 | |
| Purchases of Marketable Securities |
| (116,735) |
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| (132,605) | |
| Other Investing Activities |
| 66 |
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| 1,637 | |
Net Cash Flows Used in Investing Activities |
| (364,525) |
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| (351,154) | ||
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Financing Activities: |
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| Cash Dividends on Common Shares |
| (132,433) |
|
| (118,460) | |
| Cash Dividends on Preferred Stock |
| (1,879) |
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| (1,879) | |
| Decrease in Notes Payable |
| (399,575) |
|
| (299,500) | |
| Issuance of Long-Term Debt |
| 450,000 |
|
| 400,000 | |
| Retirements of Long-Term Debt |
| - |
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| (75,000) | |
| Other Financing Activities |
| (1,079) |
|
| (2,017) | |
Net Cash Flows Used in Financing Activities |
| (84,966) |
|
| (96,856) | ||
Net Increase in Cash and Cash Equivalents |
| 32,324 |
|
| 45,786 | ||
Cash and Cash Equivalents - Beginning of Period |
| 38,703 |
|
| 43,364 | ||
Cash and Cash Equivalents - End of Period | $ | 71,027 |
| $ | 89,150 | ||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | |||||||
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3
THE CONNECTICUT LIGHT AND POWER COMPANY |
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CONDENSED BALANCE SHEETS |
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(Unaudited) |
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|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
| ||
|
| Cash | $ | 16,818 |
| $ | 2,356 |
|
| Receivables, Net |
| 449,506 |
|
| 355,140 |
|
| Accounts Receivable from Affiliated Companies |
| 27,618 |
|
| 16,757 |
|
| Unbilled Revenues |
| 113,498 |
|
| 102,137 |
|
| Taxes Receivable |
| - |
|
| 116,148 |
|
| Regulatory Assets |
| 209,628 |
|
| 220,344 |
|
| Materials and Supplies |
| 48,135 |
|
| 46,664 |
|
| Prepayments and Other Current Assets |
| 51,074 |
|
| 37,822 |
Total Current Assets |
| 916,277 |
|
| 897,368 | ||
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
| 6,874,891 |
|
| 6,809,664 | ||
|
|
|
|
|
|
|
|
Deferred Debits and Other Assets: |
|
|
|
|
| ||
|
| Regulatory Assets |
| 1,454,150 |
|
| 1,475,508 |
|
| Other Long-Term Assets |
| 171,085 |
|
| 177,568 |
Total Deferred Debits and Other Assets |
| 1,625,235 |
|
| 1,653,076 | ||
|
|
|
|
|
|
|
|
Total Assets | $ | 9,416,403 |
| $ | 9,360,108 | ||
|
|
|
|
|
|
|
|
LIABILITIES AND CAPITALIZATION |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
| ||
| Notes Payable to ES Parent | $ | 190,100 |
| $ | 133,400 | |
| Long-Term Debt - Current Portion |
| 162,000 |
|
| 162,000 | |
| Accounts Payable |
| 230,175 |
|
| 272,971 | |
| Accounts Payable to Affiliated Companies |
| 67,063 |
|
| 65,594 | |
| Obligations to Third Party Suppliers |
| 81,820 |
|
| 73,624 | |
| Regulatory Liabilities |
| 84,127 |
|
| 124,722 | |
| Derivative Liabilities |
| 88,218 |
|
| 88,459 | |
| Other Current Liabilities |
| 207,843 |
|
| 153,420 | |
Total Current Liabilities |
| 1,111,346 |
|
| 1,074,190 | ||
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities: |
|
|
|
|
| ||
| Accumulated Deferred Income Taxes |
| 1,652,415 |
|
| 1,642,805 | |
| Regulatory Liabilities |
| 82,110 |
|
| 81,298 | |
| Derivative Liabilities |
| 395,038 |
|
| 406,199 | |
| Accrued Pension, SERP and PBOP |
| 272,292 |
|
| 273,854 | |
| Other Long-Term Liabilities |
| 150,396 |
|
| 148,844 | |
Total Deferred Credits and Other Liabilities |
| 2,552,251 |
|
| 2,553,000 | ||
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
| ||
| Long-Term Debt |
| 2,680,123 |
|
| 2,679,951 | |
|
|
|
|
|
|
|
|
| Preferred Stock Not Subject to Mandatory Redemption |
| 116,200 |
|
| 116,200 | |
|
|
|
|
|
|
|
|
| Common Stockholder's Equity: |
|
|
|
|
| |
|
| Common Stock |
| 60,352 |
|
| 60,352 |
|
| Capital Surplus, Paid In |
| 1,805,626 |
|
| 1,804,869 |
|
| Retained Earnings |
| 1,091,321 |
|
| 1,072,477 |
|
| Accumulated Other Comprehensive Loss |
| (816) |
|
| (931) |
| Common Stockholder's Equity |
| 2,956,483 |
|
| 2,936,767 | |
Total Capitalization |
| 5,752,806 |
|
| 5,732,918 | ||
|
|
|
|
|
|
|
|
Total Liabilities and Capitalization | $ | 9,416,403 |
| $ | 9,360,108 | ||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
|
|
|
4
THE CONNECTICUT LIGHT AND POWER COMPANY |
|
|
| ||||
CONDENSED STATEMENTS OF INCOME |
|
|
| ||||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Revenues | $ | 804,917 |
| $ | 734,614 | ||
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
| ||
| Purchased Power and Transmission |
| 333,619 |
|
| 281,381 | |
| Operations and Maintenance |
| 117,357 |
|
| 109,514 | |
| Depreciation |
| 52,902 |
|
| 46,130 | |
| Amortization of Regulatory Assets, Net |
| 48,306 |
|
| 29,931 | |
| Energy Efficiency Programs |
| 42,807 |
|
| 42,694 | |
| Taxes Other Than Income Taxes |
| 68,080 |
|
| 66,953 | |
|
| Total Operating Expenses |
| 663,071 |
|
| 576,603 |
Operating Income |
| 141,846 |
|
| 158,011 | ||
|
|
|
|
|
|
|
|
Interest Expense: |
|
|
|
|
| ||
| Interest on Long-Term Debt |
| 33,482 |
|
| 32,908 | |
| Other Interest |
| 3,142 |
|
| 1,335 | |
|
| Interest Expense |
| 36,624 |
|
| 34,243 |
Other Income, Net |
| 2,159 |
|
| 1,072 | ||
Income Before Income Tax Expense |
| 107,381 |
|
| 124,840 | ||
Income Tax Expense |
| 38,147 |
|
| 45,541 | ||
Net Income | $ | 69,234 |
| $ | 79,299 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME |
|
|
| ||||
(Unaudited) |
|
|
| ||||
|
|
|
|
|
|
|
|
Net Income | $ | 69,234 |
| $ | 79,299 | ||
Other Comprehensive Income, Net of Tax: |
|
|
|
|
| ||
| Qualified Cash Flow Hedging Instruments |
| 111 |
|
| 111 | |
| Changes in Unrealized Gains on Other Securities |
| 4 |
|
| 8 | |
Other Comprehensive Income, Net of Tax |
| 115 |
|
| 119 | ||
Comprehensive Income | $ | 69,349 |
| $ | 79,418 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
5
THE CONNECTICUT LIGHT AND POWER COMPANY | |||||||
CONDENSED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Activities: |
|
|
|
|
| ||
| Net Income | $ | 69,234 |
| $ | 79,299 | |
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: |
|
|
|
|
| |
|
| Depreciation |
| 52,902 |
|
| 46,130 |
|
| Deferred Income Taxes |
| 19,340 |
|
| 59,334 |
|
| Pension, SERP and PBOP Expense, Net of PBOP Contributions |
| 3,883 |
|
| 4,086 |
|
| Regulatory Underrecoveries, Net |
| (67,393) |
|
| (40,399) |
|
| Amortization of Regulatory Assets, Net |
| 48,306 |
|
| 29,931 |
|
| Other |
| 2,322 |
|
| 4,536 |
| Changes in Current Assets and Liabilities: |
|
|
|
|
| |
|
| Receivables and Unbilled Revenues, Net |
| (124,969) |
|
| (82,833) |
|
| Taxes Receivable/Accrued, Net |
| 158,163 |
|
| 7,015 |
|
| Accounts Payable |
| (20,194) |
|
| (2,872) |
|
| Other Current Assets and Liabilities, Net |
| (7,727) |
|
| (8,730) |
Net Cash Flows Provided by Operating Activities |
| 133,867 |
|
| 95,497 | ||
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
| ||
| Investments in Property, Plant and Equipment |
| (127,631) |
|
| (107,993) | |
| Other Investing Activities |
| 1,981 |
|
| 1,027 | |
Net Cash Flows Used in Investing Activities |
| (125,650) |
|
| (106,966) | ||
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
| ||
| Cash Dividends on Common Stock |
| (49,000) |
|
| (42,800) | |
| Cash Dividends on Preferred Stock |
| (1,390) |
|
| (1,390) | |
| Increase in Notes Payable to ES Parent |
| 56,700 |
|
| 64,300 | |
| Other Financing Activities |
| (65) |
|
| (203) | |
Net Cash Flows Provided by Financing Activities |
| 6,245 |
|
| 19,907 | ||
Net Increase in Cash |
| 14,462 |
|
| 8,438 | ||
Cash - Beginning of Period |
| 2,356 |
|
| 7,237 | ||
Cash - End of Period | $ | 16,818 |
| $ | 15,675 | ||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
6
NSTAR ELECTRIC COMPANY AND SUBSIDIARY |
|
|
|
|
| ||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
|
| ||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
| ||
|
| Cash and Cash Equivalents | $ | 17,897 |
| $ | 12,773 |
|
| Receivables, Net |
| 317,410 |
|
| 234,481 |
|
| Accounts Receivable from Affiliated Companies |
| 8,372 |
|
| 40,353 |
|
| Unbilled Revenues |
| 29,228 |
|
| 29,741 |
|
| Taxes Receivable |
| 63,652 |
|
| 144,601 |
|
| Materials and Supplies |
| 87,683 |
|
| 74,179 |
|
| Regulatory Assets |
| 309,547 |
|
| 198,710 |
|
| Prepayments and Other Current Assets |
| 7,885 |
|
| 10,815 |
Total Current Assets |
| 841,674 |
|
| 745,653 | ||
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
| 5,364,311 |
|
| 5,335,436 | ||
|
|
|
|
|
|
|
|
Deferred Debits and Other Assets: |
|
|
|
|
| ||
|
| Regulatory Assets |
| 1,178,738 |
|
| 1,179,100 |
|
| Other Long-Term Assets |
| 55,839 |
|
| 73,051 |
Total Deferred Debits and Other Assets |
| 1,234,577 |
|
| 1,252,151 | ||
|
|
|
|
|
|
|
|
Total Assets | $ | 7,440,562 |
| $ | 7,333,240 | ||
|
|
|
|
|
|
|
|
LIABILITIES AND CAPITALIZATION |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
| ||
| Notes Payable | $ | 215,500 |
| $ | 302,000 | |
| Long-Term Debt - Current Portion |
| 4,700 |
|
| 4,700 | |
| Accounts Payable |
| 233,852 |
|
| 217,311 | |
| Accounts Payable to Affiliated Companies |
| 127,904 |
|
| 63,517 | |
| Obligations to Third Party Suppliers |
| 63,336 |
|
| 34,824 | |
| Renewable Portfolio Standards Compliance Obligations |
| 55,853 |
|
| 35,698 | |
| Accumulated Deferred Income Taxes |
| 111,288 |
|
| 55,136 | |
| Regulatory Liabilities |
| 24,605 |
|
| 49,611 | |
| Other Current Liabilities |
| 116,128 |
|
| 115,991 | |
Total Current Liabilities |
| 953,166 |
|
| 878,788 | ||
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities: |
|
|
|
|
| ||
| Accumulated Deferred Income Taxes |
| 1,530,972 |
|
| 1,527,667 | |
| Regulatory Liabilities |
| 268,122 |
|
| 262,738 | |
| Accrued Pension, SERP and PBOP |
| 228,411 |
|
| 235,529 | |
| Other Long-Term Liabilities |
| 126,006 |
|
| 129,279 | |
Total Deferred Credits and Other Liabilities |
| 2,153,511 |
|
| 2,155,213 | ||
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
| ||
| Long-Term Debt |
| 1,792,717 |
|
| 1,792,712 | |
|
|
|
|
|
|
|
|
| Preferred Stock Not Subject to Mandatory Redemption |
| 43,000 |
|
| 43,000 | |
|
|
|
|
|
|
|
|
| Common Stockholder's Equity: |
|
|
|
|
| |
|
| Common Stock |
| - |
|
| - |
|
| Capital Surplus, Paid In |
| 995,378 |
|
| 994,130 |
|
| Retained Earnings |
| 1,502,528 |
|
| 1,468,955 |
|
| Accumulated Other Comprehensive Income |
| 262 |
|
| 442 |
| Common Stockholder's Equity |
| 2,498,168 |
|
| 2,463,527 | |
Total Capitalization |
| 4,333,885 |
|
| 4,299,239 | ||
|
|
|
|
|
|
|
|
Total Liabilities and Capitalization | $ | 7,440,562 |
| $ | 7,333,240 | ||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
|
|
|
7
NSTAR ELECTRIC COMPANY AND SUBSIDIARY |
|
|
|
|
| ||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
|
|
| ||||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Revenues | $ | 766,808 |
| $ | 666,188 | ||
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
| ||
| Purchased Power and Transmission |
| 401,867 |
|
| 319,082 | |
| Operations and Maintenance |
| 75,824 |
|
| 85,924 | |
| Depreciation |
| 48,768 |
|
| 46,626 | |
| Amortization of Regulatory Assets/(Liabilities), Net |
| (5,565) |
|
| 15,664 | |
| Energy Efficiency Programs |
| 55,417 |
|
| 48,329 | |
| Taxes Other Than Income Taxes |
| 30,962 |
|
| 32,151 | |
|
| Total Operating Expenses |
| 607,273 |
|
| 547,776 |
Operating Income |
| 159,535 |
|
| 118,412 | ||
|
|
|
|
|
|
|
|
Interest Expense: |
|
|
|
|
| ||
| Interest on Long-Term Debt |
| 18,645 |
|
| 20,756 | |
| Other Interest |
| 1,801 |
|
| 304 | |
|
| Interest Expense |
| 20,446 |
|
| 21,060 |
Other Income/(Loss), Net |
| 602 |
|
| (31) | ||
Income Before Income Tax Expense |
| 139,691 |
|
| 97,321 | ||
Income Tax Expense |
| 56,130 |
|
| 39,234 | ||
Net Income | $ | 83,561 |
| $ | 58,087 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
|
|
| ||||
(Unaudited) |
|
|
| ||||
|
|
|
|
|
|
|
|
Net Income | $ | 83,561 |
| $ | 58,087 | ||
Other Comprehensive Income/(Loss), Net of Tax: |
|
|
|
|
| ||
| Changes in Funded Status of SERP Benefit Plan |
| (180) |
|
| - | |
Other Comprehensive Income/(Loss), Net of Tax |
| (180) |
|
| - | ||
Comprehensive Income | $ | 83,381 |
| $ | 58,087 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
8
NSTAR ELECTRIC COMPANY AND SUBSIDIARY | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Activities: |
|
|
|
|
| ||
| Net Income | $ | 83,561 |
| $ | 58,087 | |
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: |
|
|
|
|
| |
|
| Depreciation |
| 48,768 |
|
| 46,626 |
|
| Deferred Income Taxes |
| 41,297 |
|
| 1,585 |
|
| Pension, SERP and PBOP Expense, Net of Contributions |
| 1,164 |
|
| (4,908) |
|
| Regulatory Over/(Under) Recoveries, Net |
| (103,142) |
|
| 6,423 |
|
| Amortization of Regulatory Assets/(Liabilities), Net |
| (5,565) |
|
| 15,664 |
|
| Bad Debt Expense |
| 8,049 |
|
| 6,096 |
|
| Other |
| (21,885) |
|
| (15,538) |
| Changes in Current Assets and Liabilities: |
|
|
|
|
| |
|
| Receivables and Unbilled Revenues, Net |
| (90,465) |
|
| (14,348) |
|
| Materials and Supplies |
| (13,504) |
|
| (3,606) |
|
| Taxes Receivable/Accrued, Net |
| 96,319 |
|
| 21,504 |
|
| Accounts Payable |
| 29,210 |
|
| 86,309 |
|
| Accounts Receivable from/Payable to Affiliates, Net |
| 96,368 |
|
| (43,654) |
|
| Other Current Assets and Liabilities, Net |
| 51,157 |
|
| 31,112 |
Net Cash Flows Provided by Operating Activities |
| 221,332 |
|
| 191,352 | ||
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
| ||
| Investments in Property, Plant and Equipment |
| (79,776) |
|
| (94,957) | |
| Other Investing Activities |
| 53 |
|
| (489) | |
Net Cash Flows Used in Investing Activities |
| (79,723) |
|
| (95,446) | ||
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
| ||
| Cash Dividends on Common Stock |
| (49,500) |
|
| (253,000) | |
| Cash Dividends on Preferred Stock |
| (490) |
|
| (490) | |
| Decrease in Notes Payable |
| (86,500) |
|
| (103,500) | |
| Issuance of Long-Term Debt |
| - |
|
| 300,000 | |
| Other Financing Activities |
| 5 |
|
| (4,902) | |
Net Cash Flows Used in Financing Activities |
| (136,485) |
|
| (61,892) | ||
Net Increase in Cash and Cash Equivalents |
| 5,124 |
|
| 34,014 | ||
Cash and Cash Equivalents - Beginning of Period |
| 12,773 |
|
| 8,021 | ||
Cash and Cash Equivalents - End of Period | $ | 17,897 |
| $ | 42,035 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
9
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY |
|
|
|
|
| ||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
|
| ||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
| ||
|
| Cash | $ | 5,149 |
| $ | 489 |
|
| Receivables, Net |
| 99,748 |
|
| 80,151 |
|
| Accounts Receivable from Affiliated Companies |
| 9,917 |
|
| 3,194 |
|
| Unbilled Revenues |
| 43,359 |
|
| 40,181 |
|
| Taxes Receivable |
| 31,147 |
|
| 14,571 |
|
| Fuel, Materials and Supplies |
| 113,566 |
|
| 148,139 |
|
| Regulatory Assets |
| 99,994 |
|
| 111,705 |
|
| Prepayments and Other Current Assets |
| 13,520 |
|
| 27,821 |
Total Current Assets |
| 416,400 |
|
| 426,251 | ||
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
| 2,666,312 |
|
| 2,635,844 | ||
|
|
|
|
|
|
|
|
Deferred Debits and Other Assets: |
|
|
|
|
| ||
|
| Regulatory Assets |
| 287,203 |
|
| 293,115 |
|
| Other Long-Term Assets |
| 33,517 |
|
| 39,228 |
Total Deferred Debits and Other Assets |
| 320,720 |
|
| 332,343 | ||
|
|
|
|
|
|
|
|
Total Assets | $ | 3,403,432 |
| $ | 3,394,438 | ||
|
|
|
|
|
|
|
|
LIABILITIES AND CAPITALIZATION |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
| ||
| Notes Payable to ES Parent | $ | 82,000 |
| $ | 90,500 | |
| Accounts Payable |
| 62,513 |
|
| 93,349 | |
| Accounts Payable to Affiliated Companies |
| 42,670 |
|
| 33,734 | |
| Regulatory Liabilities |
| 16,102 |
|
| 16,044 | |
| Accumulated Deferred Income Taxes |
| 34,217 |
|
| 36,164 | |
| Other Current Liabilities |
| 39,777 |
|
| 38,969 | |
Total Current Liabilities |
| 277,279 |
|
| 308,760 | ||
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities: |
|
|
|
|
| ||
| Accumulated Deferred Income Taxes |
| 627,450 |
|
| 587,292 | |
| Regulatory Liabilities |
| 51,897 |
|
| 51,372 | |
| Accrued Pension, SERP and PBOP |
| 91,847 |
|
| 93,243 | |
| Other Long-Term Liabilities |
| 45,088 |
|
| 50,155 | |
Total Deferred Credits and Other Liabilities |
| 816,282 |
|
| 782,062 | ||
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
| ||
| Long-Term Debt |
| 1,076,303 |
|
| 1,076,286 | |
|
|
|
|
|
|
|
|
| Common Stockholder's Equity: |
|
|
|
|
| |
|
| Common Stock |
| - |
|
| - |
|
| Capital Surplus, Paid In |
| 748,634 |
|
| 748,240 |
|
| Retained Earnings |
| 492,004 |
|
| 486,459 |
|
| Accumulated Other Comprehensive Loss |
| (7,070) |
|
| (7,369) |
| Common Stockholder's Equity |
| 1,233,568 |
|
| 1,227,330 | |
Total Capitalization |
| 2,309,871 |
|
| 2,303,616 | ||
|
|
|
|
|
|
|
|
Total Liabilities and Capitalization | $ | 3,403,432 |
| $ | 3,394,438 | ||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
| ||||||
|
|
|
|
|
|
|
|
10
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
|
|
| ||||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Revenues | $ | 284,847 |
| $ | 299,833 | ||
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
| ||
| Purchased Power, Fuel and Transmission |
| 99,579 |
|
| 115,246 | |
| Operations and Maintenance |
| 58,428 |
|
| 62,212 | |
| Depreciation |
| 25,646 |
|
| 24,215 | |
| Amortization of Regulatory Assets, Net |
| 15,132 |
|
| 12,562 | |
| Energy Efficiency Programs |
| 3,772 |
|
| 3,839 | |
| Taxes Other Than Income Taxes |
| 19,079 |
|
| 17,715 | |
|
| Total Operating Expenses |
| 221,636 |
|
| 235,789 |
Operating Income |
| 63,211 |
|
| 64,044 | ||
|
|
|
|
|
|
|
|
Interest Expense: |
|
|
|
|
| ||
| Interest on Long-Term Debt |
| 11,399 |
|
| 11,526 | |
| Other Interest |
| (127) |
|
| 445 | |
|
| Interest Expense |
| 11,272 |
|
| 11,971 |
Other Income, Net |
| 382 |
|
| 265 | ||
Income Before Income Tax Expense |
| 52,321 |
|
| 52,338 | ||
Income Tax Expense |
| 20,276 |
|
| 19,700 | ||
Net Income | $ | 32,045 |
| $ | 32,638 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||
(Unaudited) |
|
|
| ||||
|
|
|
|
|
|
|
|
Net Income | $ | 32,045 |
| $ | 32,638 | ||
Other Comprehensive Income, Net of Tax: |
|
|
|
|
| ||
| Qualified Cash Flow Hedging Instruments |
| 291 |
|
| 290 | |
| Changes in Unrealized Gains on Other Securities |
| 8 |
|
| 14 | |
Other Comprehensive Income, Net of Tax |
| 299 |
|
| 304 | ||
Comprehensive Income | $ | 32,344 |
| $ | 32,942 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
11
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Activities: |
|
|
|
|
| ||
| Net Income | $ | 32,045 |
| $ | 32,638 | |
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: |
|
|
|
|
| |
|
| Depreciation |
| 25,646 |
|
| 24,215 |
|
| Deferred Income Taxes |
| 38,767 |
|
| 33,667 |
|
| Regulatory Over/(Under) Recoveries, Net |
| (288) |
|
| 6,827 |
|
| Amortization of Regulatory Assets, Net |
| 15,132 |
|
| 12,562 |
|
| Other |
| 2,999 |
|
| 4,660 |
| Changes in Current Assets and Liabilities: |
|
|
|
|
| |
|
| Receivables and Unbilled Revenues, Net |
| (31,556) |
|
| (14,268) |
|
| Fuel, Materials and Supplies |
| 34,572 |
|
| 34,326 |
|
| Taxes Receivable/Accrued, Net |
| (16,576) |
|
| (30,254) |
|
| Accounts Payable |
| (4,285) |
|
| 3,403 |
|
| Other Current Assets and Liabilities, Net |
| 17,468 |
|
| 21,505 |
Net Cash Flows Provided by Operating Activities |
| 113,924 |
|
| 129,281 | ||
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
| ||
| Investments in Property, Plant and Equipment |
| (71,905) |
|
| (61,864) | |
| Other Investing Activities |
| (2,277) |
|
| (76) | |
Net Cash Flows Used in Investing Activities |
| (74,182) |
|
| (61,940) | ||
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
| ||
| Cash Dividends on Common Stock |
| (26,500) |
|
| (16,500) | |
| Decrease in Notes Payable to ES Parent |
| (8,500) |
|
| (46,600) | |
| Other Financing Activities |
| (82) |
|
| (87) | |
Net Cash Flows Used in Financing Activities |
| (35,082) |
|
| (63,187) | ||
Net Increase in Cash |
| 4,660 |
|
| 4,154 | ||
Cash - Beginning of Period |
| 489 |
|
| 130 | ||
Cash - End of Period | $ | 5,149 |
| $ | 4,284 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
12
WESTERN MASSACHUSETTS ELECTRIC COMPANY |
|
|
|
|
| ||
CONDENSED BALANCE SHEETS |
|
|
|
|
| ||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
| ||
|
| Cash | $ | 2,045 |
| $ | - |
|
| Receivables, Net |
| 72,366 |
|
| 51,066 |
|
| Accounts Receivable from Affiliated Companies |
| 8,726 |
|
| 7,851 |
|
| Unbilled Revenues |
| 18,186 |
|
| 15,146 |
|
| Taxes Receivable |
| 18,062 |
|
| 18,126 |
|
| Regulatory Assets |
| 66,706 |
|
| 51,923 |
|
| Marketable Securities |
| 33,183 |
|
| 28,658 |
|
| Prepayments and Other Current Assets |
| 6,431 |
|
| 7,607 |
Total Current Assets |
| 225,705 |
|
| 180,377 | ||
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
| 1,483,895 |
|
| 1,461,321 | ||
|
|
|
|
|
|
|
|
Deferred Debits and Other Assets: |
|
|
|
|
| ||
|
| Regulatory Assets |
| 137,894 |
|
| 146,307 |
|
| Marketable Securities |
| 25,027 |
|
| 29,452 |
|
| Other Long-Term Assets |
| 22,726 |
|
| 22,018 |
Total Deferred Debits and Other Assets |
| 185,647 |
|
| 197,777 | ||
|
|
|
|
|
|
|
|
Total Assets | $ | 1,895,247 |
| $ | 1,839,475 | ||
|
|
|
|
|
|
|
|
LIABILITIES AND CAPITALIZATION |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
| ||
| Notes Payable to ES Parent | $ | 70,500 |
| $ | 21,400 | |
| Long-Term Debt - Current Portion |
| 50,000 |
|
| 50,000 | |
| Accounts Payable |
| 40,665 |
|
| 53,732 | |
| Accounts Payable to Affiliated Companies |
| 21,634 |
|
| 14,328 | |
| Regulatory Liabilities |
| 22,289 |
|
| 22,486 | |
| Accumulated Deferred Income Taxes |
| 24,607 |
|
| 18,089 | |
| Other Current Liabilities |
| 22,958 |
|
| 24,080 | |
Total Current Liabilities |
| 252,653 |
|
| 204,115 | ||
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities: |
|
|
|
|
| ||
| Accumulated Deferred Income Taxes |
| 419,043 |
|
| 416,822 | |
| Regulatory Liabilities |
| 12,673 |
|
| 10,835 | |
| Accrued Pension, SERP and PBOP |
| 16,505 |
|
| 17,705 | |
| Other Long-Term Liabilities |
| 34,182 |
|
| 33,747 | |
Total Deferred Credits and Other Liabilities |
| 482,403 |
|
| 479,109 | ||
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
| ||
| Long-Term Debt |
| 578,239 |
|
| 578,471 | |
|
|
|
|
|
|
|
|
| Common Stockholder's Equity: |
|
|
|
|
| |
|
| Common Stock |
| 10,866 |
|
| 10,866 |
|
| Capital Surplus, Paid In |
| 391,398 |
|
| 391,256 |
|
| Retained Earnings |
| 182,778 |
|
| 178,834 |
|
| Accumulated Other Comprehensive Loss |
| (3,090) |
|
| (3,176) |
| Common Stockholder's Equity |
| 581,952 |
|
| 577,780 | |
Total Capitalization |
| 1,160,191 |
|
| 1,156,251 | ||
|
|
|
|
|
|
|
|
Total Liabilities and Capitalization | $ | 1,895,247 |
| $ | 1,839,475 | ||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
|
|
| ||||
|
13
WESTERN MASSACHUSETTS ELECTRIC COMPANY |
|
|
| ||||
CONDENSED STATEMENTS OF INCOME |
|
|
|
|
| ||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Revenues | $ | 152,864 |
| $ | 137,409 | ||
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
| ||
| Purchased Power and Transmission |
| 69,661 |
|
| 49,431 | |
| Operations and Maintenance |
| 19,784 |
|
| 22,579 | |
| Depreciation |
| 10,375 |
|
| 10,321 | |
| Amortization of Regulatory Assets, Net |
| 3,927 |
|
| 399 | |
| Energy Efficiency Programs |
| 11,075 |
|
| 11,865 | |
| Taxes Other Than Income Taxes |
| 9,437 |
|
| 8,082 | |
|
| Total Operating Expenses |
| 124,259 |
|
| 102,677 |
Operating Income |
| 28,605 |
|
| 34,732 | ||
|
|
|
|
|
|
|
|
Interest Expense: |
|
|
|
|
| ||
| Interest on Long-Term Debt |
| 6,045 |
|
| 6,062 | |
| Other Interest |
| 778 |
|
| (416) | |
|
| Interest Expense |
| 6,823 |
|
| 5,646 |
Other Income, Net |
| 575 |
|
| 574 | ||
Income Before Income Tax Expense |
| 22,357 |
|
| 29,660 | ||
Income Tax Expense |
| 9,113 |
|
| 11,558 | ||
Net Income | $ | 13,244 |
| $ | 18,102 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME |
|
|
| ||||
(Unaudited) |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Net Income | $ | 13,244 |
| $ | 18,102 | ||
Other Comprehensive Income, Net of Tax: |
|
|
|
|
| ||
| Qualified Cash Flow Hedging Instruments |
| 85 |
|
| 85 | |
| Changes in Unrealized Gains on Other Securities |
| 1 |
|
| 2 | |
Other Comprehensive Income, Net of Tax |
| 86 |
|
| 87 | ||
Comprehensive Income | $ | 13,330 |
| $ | 18,189 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
14
WESTERN MASSACHUSETTS ELECTRIC COMPANY | |||||||
CONDENSED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||
(Thousands of Dollars) | 2015 |
| 2014 | ||||
|
|
|
|
|
|
|
|
Operating Activities: |
|
|
|
|
| ||
| Net Income | $ | 13,244 |
| $ | 18,102 | |
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by/(Used in) Operating Activities: |
|
|
|
|
| |
|
| Depreciation |
| 10,375 |
|
| 10,321 |
|
| Deferred Income Taxes |
| 12,759 |
|
| 14,688 |
|
| Regulatory Over/(Under) Recoveries, Net |
| (14,442) |
|
| 5,780 |
|
| Amortization of Regulatory Assets, Net |
| 3,927 |
|
| 399 |
|
| Other |
| (1,197) |
|
| (1,351) |
| Changes in Current Assets and Liabilities: |
|
|
|
|
| |
|
| Receivables and Unbilled Revenues, Net |
| (26,298) |
|
| 34,905 |
|
| Taxes Receivable/Accrued, Net |
| 64 |
|
| (17,126) |
|
| Accounts Payable |
| 85 |
|
| (10,516) |
|
| Other Current Assets and Liabilities, Net |
| 65 |
|
| (8,869) |
Net Cash Flows Provided by/(Used in) Operating Activities |
| (1,418) |
|
| 46,333 | ||
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
| ||
| Investments in Property, Plant and Equipment |
| (35,899) |
|
| (30,347) | |
| Proceeds from Sales of Marketable Securities |
| 23,249 |
|
| 34,656 | |
| Purchases of Marketable Securities |
| (23,442) |
|
| (34,804) | |
Net Cash Flows Used in Investing Activities |
| (36,092) |
|
| (30,495) | ||
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
| ||
| Cash Dividends on Common Stock |
| (9,300) |
|
| (49,000) | |
| Increase in Notes Payable to ES Parent |
| 49,100 |
|
| 37,400 | |
| Other Financing Activities |
| (245) |
|
| (11) | |
Net Cash Flows Provided by/(Used in) Financing Activities |
| 39,555 |
|
| (11,611) | ||
Net Increase in Cash |
| 2,045 |
|
| 4,227 | ||
Cash - Beginning of Period |
| - |
|
| - | ||
Cash - End of Period | $ | 2,045 |
| $ | 4,227 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements. |
15
EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY
WESTERN MASSACHUSETTS ELECTRIC COMPANY
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout the combined notes to the unaudited condensed consolidated financial statements.
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.
Basis of Presentation
Eversource Energy is a public utility holding company primarily engaged through its wholly owned regulated utility subsidiaries in the energy delivery business. Eversource Energy's wholly owned regulated utility subsidiaries consist of CL&P, NSTAR Electric, PSNH, WMECO, Yankee Gas and NSTAR Gas. Eversource provides energy delivery service to approximately 3.6 million electric and natural gas customers through these six regulated utilities in Connecticut, Massachusetts and New Hampshire.
On April 29, 2015, the Company's name was changed from Northeast Utilities to Eversource Energy. CL&P, NSTAR Electric, PSNH and WMECO operate under the brand Eversource Energy.
The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH include the accounts of each of their respective subsidiaries. Intercompany transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P and WMECO are herein collectively referred to as the "financial statements."
The combined notes to the financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. The accompanying financial statements should be read in conjunction with the entirety of this combined Quarterly Report on Form 10-Q and the 2014 combined Annual Report on Form 10-K of Eversource, CL&P, NSTAR Electric, PSNH and WMECO, which was filed with the SEC. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of 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.
The financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly Eversource's, CL&P's, NSTAR Electric's, PSNH's and WMECO's financial position as of March 31, 2015 and December 31, 2014, and the results of operations, comprehensive income and cash flows for the three months ended March 31, 2015 and 2014. The results of operations, comprehensive income and cash flows for the three months ended March 31, 2015 and 2014 are not necessarily indicative of the results expected for a full year.
Eversource consolidates CYAPC and YAEC because CL&P's, NSTAR Electric's, PSNH's and WMECO's combined ownership interest in each of these entities is greater than 50 percent. Intercompany transactions between CL&P, NSTAR Electric, PSNH and WMECO and the CYAPC and YAEC companies have been eliminated in consolidation of the Eversource financial statements.
Eversource's utility subsidiaries' distribution (including generation) and transmission businesses and NPT are subject to rate-regulation that is based on cost recovery and meets the criteria for application of accounting guidance for entities with rate-regulated operations, which considers the effect of regulation on the differences in the timing of the recognition of certain revenues and expenses from those of other businesses and industries. See Note 2, "Regulatory Accounting," for further information.
Certain reclassifications of prior period data were made in the accompanying financial statements to conform to the current period presentation.
B.
Accounting Standards
Accounting Standards Issued but not Yet Adopted: In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, effective January 1, 2017, which amends existing revenue recognition guidance and is required to be applied retrospectively (either to each reporting period presented or cumulatively at the date of initial application). In April 2015, the FASB decided to propose a one-year deferral of the effective date of the ASU. Management is reviewing the requirements of the ASU. The ASU is not expected to have a material impact on the financial statements of Eversource, CL&P, NSTAR Electric, PSNH and WMECO.
C.
Provision for Uncollectible Accounts
Eversource, including CL&P, NSTAR Electric, PSNH and WMECO, presents its receivables at estimated net realizable value by maintaining a provision for uncollectible accounts. This provision is determined based upon a variety of judgments and factors, including the application of an estimated uncollectible percentage to each receivable aging category. The estimate is based upon historical collection and write-off experience and management's assessment of collectability from customers. Management continuously assesses the collectability of receivables and adjusts collectability estimates based on actual experience. Receivable balances are written off against the provision for uncollectible accounts when the accounts are terminated and these balances are deemed to be uncollectible.
The PURA allows CL&P and Yankee Gas to accelerate the recovery of accounts receivable balances attributable to qualified customers under financial or medical duress (uncollectible hardship accounts receivable) outstanding for greater than 90 days. The DPU allows WMECO to also
16
recover in rates amounts associated with certain uncollectible hardship accounts receivable. Uncollectible customer account balances, which are expected to be recovered in rates, are included in Regulatory Assets or Other Long-Term Assets.
The total provision for uncollectible accounts and for uncollectible hardship accounts, which is included in the total provision, are included in Receivables, Net on the balance sheets, and were as follows:
|
|
| Total Provision for Uncollectible Accounts |
| Uncollectible Hardship | ||||||||
(Millions of Dollars) |
| As of March 31, 2015 |
| As of December 31, 2014 |
| As of March 31, 2015 |
| As of December 31, 2014 | |||||
ES |
| $ | 187.4 |
| $ | 175.3 |
| $ | 92.3 |
| $ | 91.5 | |
CL&P |
|
| 86.6 |
|
| 84.3 |
|
| 74.5 |
|
| 74.0 | |
NSTAR Electric |
|
| 43.8 |
|
| 40.7 |
|
| - |
|
| - | |
PSNH |
|
| 8.1 |
|
| 7.7 |
|
| - |
|
| - | |
WMECO |
|
| 10.7 |
|
| 9.9 |
|
| 6.5 |
|
| 6.2 |
D.
Fair Value Measurements
Fair value measurement guidance is applied to derivative contracts that are not elected or designated as "normal purchases or normal sales" (normal) and to the marketable securities held in trusts. Fair value measurement guidance is also applied to valuations of the investments used to calculate the funded status of pension and PBOP plans and nonrecurring fair value measurements of nonfinancial assets such as goodwill and AROs, and is also used to estimate the fair value of preferred stock and long-term debt.
Fair Value Hierarchy: In measuring fair value, Eversource uses observable market data when available and minimizes the use of unobservable inputs. Inputs used in fair value measurements are categorized into three fair value hierarchy levels for disclosure purposes. The entire fair value measurement is categorized based on the lowest level of input that is significant to the fair value measurement. Eversource evaluates the classification of assets and liabilities measured at fair value on a quarterly basis, and Eversource's policy is to recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. The three levels of the fair value hierarchy are described below:
Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Inputs are quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs are observable.
Level 3 - Quoted market prices are not available. Fair value is derived from valuation techniques in which one or more significant inputs or assumptions are unobservable. Where possible, valuation techniques incorporate observable market inputs that can be validated to external sources such as industry exchanges, including prices of energy and energy-related products.
Determination of Fair Value: The valuation techniques and inputs used in Eversource's fair value measurements are described in Note 4, "Derivative Instruments," Note 5, "Marketable Securities," and Note 9, "Fair Value of Financial Instruments," to the financial statements.
E.
Other Income, Net
Items included within Other Income, Net on the statements of income primarily consist of investment income/(loss), interest income, AFUDC related to equity funds, and equity in earnings. Investment income/(loss) primarily relates to debt and equity securities held in trust. For further information, see Note 5, "Marketable Securities," to the financial statements.
F.
Other Taxes
Gross receipts taxes levied by the state of Connecticut are collected by CL&P and Yankee Gas from their respective customers. These gross receipts taxes are shown on a gross basis with collections in Operating Revenues and payments in Taxes Other Than Income Taxes on the statements of income as follows:
| For the Three Months Ended | ||||
(Millions of Dollars) | March 31, 2015 |
| March 31, 2014 | ||
ES | $ | 41.9 |
| $ | 44.4 |
CL&P |
| 33.0 |
|
| 35.6 |
Certain sales taxes are collected by Eversource's companies that serve customers in Connecticut and Massachusetts as agents for state and local governments and are recorded on a net basis with no impact on the statements of income.
G. |
| Supplemental Cash Flow Information | ||||||
Non-cash investing activities include plant additions included in Accounts Payable as follows: | ||||||||
|
|
|
|
|
|
|
|
|
(Millions of Dollars) | As of March 31, 2015 |
| As of March 31, 2014 | |||||
ES | $ | 110.4 |
| $ | 108.5 | |||
CL&P |
| 42.3 |
|
| 36.2 | |||
NSTAR Electric |
| 21.9 |
|
| 28.0 | |||
PSNH |
| 21.7 |
|
| 14.4 | |||
WMECO |
| 8.3 |
|
| 14.4 |
17
H.
Severance Benefits
For the three months ended March 31, 2015 and 2014, Eversource recorded severance benefit expense of $0.4 million and $4.3 million, respectively, in connection with ongoing post-merger integration and, in 2014, the partial outsourcing of information technology functions. As of March 31, 2015 and December 31, 2014, the severance accrual totaled $9 million and $10.4 million, respectively, and was included in Other Current Liabilities on the balance sheets.
2.
REGULATORY ACCOUNTING
Eversource's Regulated companies are subject to rate-regulation that is based on cost recovery and meets the criteria for application of accounting guidance for entities with rate-regulated operations and reflect the effects of the rate-making process. The rates charged to the customers of Eversource's Regulated companies are designed to collect each company's costs to provide service, including a return on investment.
Management believes it is probable that each of the Regulated companies will recover their respective investments in long-lived assets, including regulatory assets. If management were to determine that it could no longer apply the accounting guidance applicable to rate-regulated enterprises to any of the Regulated companies' operations, or that management could not conclude it is probable that costs would be recovered from customers in future rates, the costs would be charged to net income in the period in which the determination is made.
Regulatory Assets: The components of regulatory assets are as follows:
| As of March 31, 2015 |
| As of December 31, 2014 | ||
(Millions of Dollars) | ES |
| ES | ||
Benefit Costs | $ | 1,976.6 |
| $ | 2,016.0 |
Derivative Liabilities |
| 410.2 |
|
| 425.5 |
Income Taxes, Net |
| 632.1 |
|
| 635.3 |
Storm Restoration Costs |
| 504.8 |
|
| 502.8 |
Goodwill-related |
| 500.2 |
|
| 505.4 |
Regulatory Tracker Mechanisms |
| 434.5 |
|
| 350.5 |
Contractual Obligations - Yankee Companies |
| 119.0 |
|
| 123.8 |
Other Regulatory Assets |
| 151.4 |
|
| 167.3 |
Total Regulatory Assets |
| 4,728.8 |
|
| 4,726.6 |
Less: Current Portion |
| 747.3 |
|
| 672.5 |
Total Long-Term Regulatory Assets | $ | 3,981.5 |
| $ | 4,054.1 |
|
| As of March 31, 2015 |
| As of December 31, 2014 | ||||||||||||||||||||
|
|
|
|
| NSTAR |
|
|
|
|
|
|
|
|
|
| NSTAR |
|
|
|
|
|
| ||
(Millions of Dollars) | CL&P |
| Electric |
| PSNH |
| WMECO |
| CL&P |
| Electric |
| PSNH |
| WMECO | |||||||||
Benefit Costs | $ | 436.7 |
| $ | 505.6 |
| $ | 171.2 |
| $ | 83.3 |
| $ | 445.4 |
| $ | 515.9 |
| $ | 174.3 |
| $ | 85.0 | |
Derivative Liabilities |
| 403.3 |
|
| 3.5 |
|
| - |
|
| - |
|
| 410.9 |
|
| 4.5 |
|
| - |
|
| - | |
Income Taxes, Net |
| 438.7 |
|
| 83.7 |
|
| 36.8 |
|
| 31.2 |
|
| 437.7 |
|
| 83.7 |
|
| 38.0 |
|
| 35.5 | |
Storm Restoration Costs |
| 308.5 |
|
| 119.7 |
|
| 46.9 |
|
| 29.7 |
|
| 319.6 |
|
| 103.7 |
|
| 47.7 |
|
| 31.8 | |
Goodwill-related |
| - |
|
| 429.5 |
|
| - |
|
| - |
|
| - |
|
| 433.9 |
|
| - |
|
| - | |
Regulatory Tracker Mechanisms |
| 10.1 |
|
| 261.2 |
|
| 93.4 |
|
| 47.6 |
|
| 16.1 |
|
| 141.4 |
|
| 103.5 |
|
| 33.0 | |
Other Regulatory Assets |
| 66.5 |
|
| 85.0 |
|
| 38.9 |
|
| 12.8 |
|
| 66.1 |
|
| 94.7 |
|
| 41.3 |
|
| 12.9 | |
Total Regulatory Assets |
| 1,663.8 |
|
| 1,488.2 |
|
| 387.2 |
|
| 204.6 |
|
| 1,695.8 |
|
| 1,377.8 |
|
| 404.8 |
|
| 198.2 | |
Less: Current Portion |
| 209.6 |
|
| 309.5 |
|
| 100.0 |
|
| 66.7 |
|
| 220.3 |
|
| 198.7 |
|
| 111.7 |
|
| 51.9 | |
Total Long-Term Regulatory Assets | $ | 1,454.2 |
| $ | 1,178.7 |
| $ | 287.2 |
| $ | 137.9 |
| $ | 1,475.5 |
| $ | 1,179.1 |
| $ | 293.1 |
| $ | 146.3 |
Regulatory Costs in Other Long-Term Assets: The Regulated companies had $49.3 million ($1.6 million for CL&P, $18.3 million for NSTAR Electric, $0.4 million for PSNH and $11.8 million for WMECO) and $60.5 million ($1.3 million for CL&P, $33.2 million for NSTAR Electric, $0.9 million for PSNH, and $11 million for WMECO) of additional regulatory costs as of March 31, 2015 and December 31, 2014, respectively, that were included in Other Long-Term Assets on the balance sheets. These amounts represent incurred costs for which recovery has not yet been specifically approved by the applicable regulatory agency. However, based on regulatory policies or past precedent on similar costs, management believes it is probable that these costs will ultimately be approved and recovered from customers in rates. The NSTAR Electric balance as of March 31, 2015 and December 31, 2014 primarily related to costs deferred in connection with the basic service bad debt adder. See Note 8E, "Commitments and Contingencies Basic Service Bad Debt Adder," for further information.
Regulatory Liabilities: The components of regulatory liabilities are as follows:
| As of March 31, 2015 |
| As of December 31, 2014 | ||
(Millions of Dollars) | ES |
| ES | ||
Cost of Removal | $ | 452.8 |
| $ | 439.9 |
Regulatory Tracker Mechanisms |
| 183.3 |
|
| 192.3 |
AFUDC - Transmission |
| 67.1 |
|
| 67.1 |
Other Regulatory Liabilities |
| 22.9 |
|
| 50.8 |
Total Regulatory Liabilities |
| 726.1 |
|
| 750.1 |
Less: Current Portion |
| 201.2 |
|
| 235.0 |
Total Long-Term Regulatory Liabilities | $ | 524.9 |
| $ | 515.1 |
18
|
| As of March 31, 2015 |
| As of December 31, 2014 | ||||||||||||||||||||
|
|
|
| NSTAR |
|
|
|
|
|
|
| NSTAR |
|
|
|
| ||||||||
(Millions of Dollars) | CL&P |
| Electric |
| PSNH |
| WMECO |
| CL&P |
| Electric |
| PSNH |
| WMECO | |||||||||
Cost of Removal | $ | 23.1 |
| $ | 263.4 |
| $ | 51.3 |
| $ | 2.8 |
| $ | 19.7 |
| $ | 258.3 |
| $ | 50.3 |
| $ | 1.1 | |
Regulatory Tracker Mechanisms |
| 77.5 |
|
| 22.5 |
|
| 13.9 |
|
| 22.2 |
|
| 122.6 |
|
| 20.7 |
|
| 14.2 |
|
| 22.3 | |
AFUDC - Transmission |
| 53.3 |
|
| 4.7 |
|
| - |
|
| 9.1 |
|
| 53.6 |
|
| 4.4 |
|
| - |
|
| 9.1 | |
Other Regulatory Liabilities |
| 12.3 |
|
| 2.1 |
|
| 2.8 |
|
| 0.9 |
|
| 10.1 |
|
| 28.9 |
|
| 2.9 |
|
| 0.8 | |
Total Regulatory Liabilities |
| 166.2 |
|
| 292.7 |
|
| 68.0 |
|
| 35.0 |
|
| 206.0 |
|
| 312.3 |
|
| 67.4 |
|
| 33.3 | |
Less: Current Portion |
| 84.1 |
|
| 24.6 |
|
| 16.1 |
|
| 22.3 |
|
| 124.7 |
|
| 49.6 |
|
| 16.0 |
|
| 22.5 | |
Total Long-Term Regulatory Liabilities | $ | 82.1 |
| $ | 268.1 |
| $ | 51.9 |
| $ | 12.7 |
| $ | 81.3 |
| $ | 262.7 |
| $ | 51.4 |
| $ | 10.8 |
2015 Regulatory Developments: As a result of the March 3, 2015 FERC order in the pending ROE complaint proceedings described in Note 8C, "Commitments and Contingencies FERC ROE Complaints," in the first quarter of 2015, Eversource recognized a pre-tax charge to earnings (excluding interest) of $20 million, of which $12.5 million was recorded at CL&P, $2.4 million at NSTAR Electric, $1 million at PSNH, and $4.1 million at WMECO. The pre-tax charge was recorded as a regulatory liability and as a reduction of Operating Revenues.
On March 2, 2015, the DPU approved the comprehensive settlement agreement between NSTAR Electric, NSTAR Gas and the Massachusetts Attorney General (the "Settlement") as filed with the DPU on December 31, 2014. The Settlement resolved the outstanding NSTAR Electric CPSL program filings for 2006 through 2011, the NSTAR Electric and NSTAR Gas PAM and energy efficiency-related customer billing adjustments reported in 2012, and the recovery of LBR related to NSTAR Electric's energy efficiency programs for 2008 through 2011 (11 dockets in total). As a result, NSTAR Electric and NSTAR Gas will refund a combined $44.7 million to customers. The refund was recorded as a regulatory liability as of March 31, 2015 and NSTAR Electric recognized a $21.7 million pre-tax benefit in the first quarter of 2015. For further information, see Note 8D, "Commitments and Contingencies 2014 Comprehensive Settlement Agreement."
On January 7, 2015, the DPU issued an order concluding that NSTAR Electric had appropriately accounted for the removal of supply-related bad debt costs from base distribution rates effective January 1, 2006. The DPU ordered NSTAR Electric and the Massachusetts Attorney General to collaborate on the reconciliation of energy-related bad debt costs through 2014. During the second quarter of 2015, NSTAR Electric expects to file with the DPU to recover from customers approximately $43 million of supply-related bad debt costs. In the first quarter of 2015, as a result of the DPU order, NSTAR Electric increased its regulatory assets and reduced Operations and Maintenance expense by $24.2 million, resulting in an increase in after-tax earnings of $14.5 million. For further information, see Note 8E, "Commitments and Contingencies Basic Service Bad Debt Adder."
3.
PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION
The following tables summarize the investments in utility property, plant and equipment by asset category:
| As of March 31, 2015 |
| As of December 31, 2014 | |||
(Millions of Dollars) | ES |
| ES | |||
Distribution - Electric | $ | 12,539.3 |
| $ | 12,495.2 | |
Distribution - Natural Gas |
| 2,584.8 |
|
| 2,595.4 | |
Transmission |
| 6,959.4 |
|
| 6,930.7 | |
Generation |
| 1,172.2 |
|
| 1,170.9 | |
Electric and Natural Gas Utility |
| 23,255.7 |
|
| 23,192.2 | |
Other (1) |
| 547.9 |
|
| 551.3 | |
Property, Plant and Equipment, Gross |
| 23,803.6 |
|
| 23,743.5 | |
Less: Accumulated Depreciation |
|
|
|
|
| |
| Electric and Natural Gas Utility |
| (5,842.6) |
|
| (5,777.8) |
| Other |
| (232.3) |
|
| (231.8) |
Total Accumulated Depreciation |
| (6,074.9) |
|
| (6,009.6) | |
Property, Plant and Equipment, Net |
| 17,728.7 |
|
| 17,733.9 | |
Construction Work in Progress |
| 1,082.0 |
|
| 913.1 | |
Total Property, Plant and Equipment, Net | $ | 18,810.7 |
| $ | 18,647.0 |
(1)
These assets are primarily comprised of building improvements, computer software, hardware and equipment and telecommunications assets at Eversource Service and Eversource's unregulated companies.
| As of March 31, 2015 |
| As of December 31, 2014 | ||||||||||||||||||||
|
|
|
| NSTAR |
|
|
|
|
|
|
|
|
|
| NSTAR |
|
|
|
|
|
| ||
(Millions of Dollars) | CL&P |
| Electric |
| PSNH |
| WMECO |
| CL&P |
| Electric |
| PSNH |
| WMECO | ||||||||
Distribution | $ | 5,180.0 |
| $ | 4,907.8 |
| $ | 1,704.1 |
| $ | 787.4 |
| $ | 5,158.8 |
| $ | 4,895.5 |
| $ | 1,696.7 |
| $ | 784.2 |
Transmission |
| 3,274.7 |
|
| 1,950.6 |
|
| 794.6 |
|
| 891.9 |
|
| 3,274.0 |
|
| 1,928.5 |
|
| 789.7 |
|
| 891.0 |
Generation |
| - |
|
| - |
|
| 1,137.8 |
|
| 34.4 |
|
| - |
|
| - |
|
| 1,136.5 |
|
| 34.4 |
Property, Plant and |
| 8,454.7 |
|
| 6,858.4 |
|
| 3,636.5 |
|
| 1,713.7 |
|
| 8,432.8 |
|
| 6,824.0 |
|
| 3,622.9 |
|
| 1,709.6 |
Less: Accumulated Depreciation |
| (1,950.7) |
|
| (1,783.6) |
|
| (1,105.7) |
|
| (303.3) |
|
| (1,928.0) |
|
| (1,761.4) |
|
| (1,090.0) |
|
| (297.4) |
Property, Plant and Equipment, Net |
| 6,504.0 |
|
| 5,074.8 |
|
| 2,530.8 |
|
| 1,410.4 |
|
| 6,504.8 |
|
| 5,062.6 |
|
| 2,532.9 |
|
| 1,412.2 |
Construction Work in Progress |
| 370.9 |
|
| 289.5 |
|
| 135.5 |
|
| 73.5 |
|
| 304.9 |
|
| 272.8 |
|
| 102.9 |
|
| 49.1 |
Total Property, Plant and | $ | 6,874.9 |
| $ | 5,364.3 |
| $ | 2,666.3 |
| $ | 1,483.9 |
| $ | 6,809.7 |
| $ | 5,335.4 |
| $ | 2,635.8 |
| $ | 1,461.3 |
19
As of March 31, 2015, PSNH had $1.1 billion in gross generation assets and Accumulated Depreciation of $497.1 million. These generation assets are the subject of a divestiture agreement in principle in a settlement Term Sheet entered into on March 11, 2015 between PSNH and key New Hampshire officials (Term Sheet) whereby, among other resolutions, PSNH has agreed to sell these assets. Upon completion of the sale, all remaining stranded costs will be recovered via bonds that will be secured by a non-bypassable charge to PSNH's customers. Consummation of the Term Sheet provisions is conditioned upon the enactment of New Hampshire legislation, completion of a final Settlement Agreement reflecting the provisions of the Term Sheet (Settlement Agreement), and NHPUC approval of the Settlement Agreement. See Note 8F, Commitments and Contingencies PSNH Generation Restructuring, for further information.
4.
DERIVATIVE INSTRUMENTS
The Regulated companies purchase and procure energy and energy-related products, which are subject to price volatility, for their customers. The costs associated with supplying energy to customers are recoverable through customer rates. The Regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative and nonderivative contracts.
Many of the derivative contracts meet the definition of, and are designated as, normal and qualify for accrual accounting under the applicable accounting guidance. The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses or Operating Revenues on the statements of income, as applicable, as electricity or natural gas is delivered.
Derivative contracts that are not designated as normal are recorded at fair value as current or long-term Derivative Assets or Derivative Liabilities on the balance sheets. For the Regulated companies, regulatory assets or regulatory liabilities are recorded to offset the fair values of derivatives, as contract settlement amounts are recovered from, or refunded to, customers in their respective energy supply rates.
The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative Assets or Derivative Liabilities, with current and long-term portions, on the balance sheets. The following table presents the gross fair values of contracts categorized by risk type and the net amount recorded as current or long-term derivative asset or liability:
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|
| As of March 31, 2015 |
| As of December 31, 2014 | ||||||||||||||
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| Commodity Supply |
|
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| Net Amount |
| Commodity Supply |
|
|
| Net Amount | ||||||
|
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| and Price Risk |
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| Recorded as |
| and Price Risk |
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| Recorded as | |||
(Millions of Dollars) |
| Management |
| Netting (1) |
| a Derivative |
| Management |
| Netting (1) |
| a Derivative | |||||||
Current Derivative Assets: |
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| |
Level 3: |
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| |
| ES |
| $ | 16.0 |
| $ | (6.6) |
| $ | 9.4 |
| $ | 16.2 |
| $ | (6.6) |
| $ | 9.6 |
| CL&P |
|
| 16.0 |
|
| (6.6) |
|
| 9.4 |
|
| 16.1 |
|
| (6.6) |
|
| 9.5 |
| NSTAR Electric |
|
| - |
|
| - |
|
| - |
|
| 0.1 |
|
| - |
|
| 0.1 |
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Long-Term Derivative Assets: |
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| |
Level 3: |
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| |
| ES, CL&P |
| $ | 88.3 |
| $ | (17.8) |
| $ | 70.5 |
| $ | 93.5 |
| $ | (19.2) |
| $ | 74.3 |
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Current Derivative Liabilities: |
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| |
Level 2: |
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|
|
|
|
|
| |
| ES |
| $ | (3.2) |
| $ | - |
| $ | (3.2) |
| $ | (9.8) |
| $ | - |
| $ | (9.8) |
Level 3: |
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|
|
|
|
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| |
| ES |
|
| (90.3) |
|
| - |
|
| (90.3) |
|
| (90.0) |
|
| - |
|
| (90.0) |
| CL&P |
|
| (88.2) |
|
| - |
|
| (88.2) |
|
| (88.5) |
|
| - |
|
| (88.5) |
| NSTAR Electric |
|
| (2.1) |
|
| - |
|
| (2.1) |
|
| (1.5) |
|
| - |
|
| (1.5) |
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Long-Term Derivative Liabilities: |
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| ||
Level 2: |
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| |
| ES |
| $ | (0.2) |
| $ | - |
| $ | (0.2) |
| $ | (0.3) |
| $ | - |
| $ | (0.3) |
Level 3: |
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| |
| ES |
|
| (396.4) |
|
| - |
|
| (396.4) |
|
| (409.3) |
|
| - |
|
| (409.3) |
| CL&P |
|
| (395.0) |
|
| - |
|
| (395.0) |
|
| (406.2) |
|
| - |
|
| (406.2) |
| NSTAR Electric |
|
| (1.4) |
|
| - |
|
| (1.4) |
|
| (3.1) |
|
| - |
|
| (3.1) |
(1)
Amounts represent derivative assets and liabilities that Eversource elected to record net on the balance sheets. These amounts are subject to master netting agreements or similar agreements for which the right of offset exists.
For further information on the fair value of derivative contracts, see Note 1D, "Summary of Significant Accounting Policies - Fair Value Measurements," to the financial statements.
Derivative Contracts at Fair Value with Offsetting Regulatory Amounts
Commodity Supply and Price Risk Management: As required by regulation, CL&P, along with UI, has capacity-related contracts with generation facilities. CL&P has a sharing agreement with UI, with 80 percent of each contract allocated to CL&P and 20 percent allocated to UI. The combined capacity of these contracts is 787 MW. The capacity contracts extend through 2026 and obligate both CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the capacity market price received in the ISO-NE capacity markets. In addition, CL&P has a contract to purchase 0.1 million MWh of energy per year through 2020.
NSTAR Electric has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2018 and a capacity-related contract to purchase up to 35 MW per year through 2019.
20
As of March 31, 2015 and December 31, 2014, Eversource had NYMEX financial contracts for natural gas futures in order to reduce variability associated with the purchase price of approximately 5.3 million and 8.8 million MMBtu of natural gas, respectively.
For the three months ended March 31, 2015 and 2014, there were losses of $16.6 million and gains of $54.1 million, respectively, recorded as regulatory assets and liabilities, which reflect the current change in fair value associated with Eversource's derivative contracts.
Credit Risk
Certain of Eversource's derivative contracts contain credit risk contingent provisions. These provisions require Eversource to maintain investment grade credit ratings from the major rating agencies and to post collateral for contracts in a net liability position over specified credit limits. As of March 31, 2015, Eversource had approximately $3 million of derivative contracts in a net liability position that were subject to credit risk contingent provisions and would have been required to post additional collateral of approximately $3 million if ES parent's unsecured debt credit ratings had been downgraded to below investment grade. As of December 31, 2014, Eversource had approximately $10 million of derivative contracts in a net liability position that were subject to credit risk contingent provisions and would have been required to post additional collateral of approximately $10 million if ES parent's unsecured debt credit ratings had been downgraded to below investment grade.
Fair Value Measurements of Derivative Instruments
Derivative contracts classified as Level 2 in the fair value hierarchy relate to the financial contracts for natural gas futures. Prices are obtained from broker quotes and are based on actual market activity. The contracts are valued using NYMEX natural gas prices. Valuations of these contracts also incorporate discount rates using the yield curve approach.
The fair value of derivative contracts classified as Level 3 utilizes significant unobservable inputs. The fair value is modeled using income techniques, such as discounted cash flow valuations adjusted for assumptions relating to exit price. Significant observable inputs for valuations of these contracts include energy and energy-related product prices in future years for which quoted prices in an active market exist. Fair value measurements categorized in Level 3 of the fair value hierarchy are prepared by individuals with expertise in valuation techniques, pricing of energy and energy-related products, and accounting requirements. The future power and capacity prices for periods that are not quoted in an active market or established at auction are based on available market data and are escalated based on estimates of inflation to address the full time period of the contract.
Valuations of derivative contracts using a discounted cash flow methodology include assumptions regarding the timing and likelihood of scheduled payments and also reflect non-performance risk, including credit, using the default probability approach based on the counterparty's credit rating for assets and the Company's credit rating for liabilities. Valuations incorporate estimates of premiums or discounts that would be required by a market participant to arrive at an exit price, using historical market transactions adjusted for the terms of the contract.
The following is a summary of Eversource's, including CL&P's and NSTAR Electric's, Level 3 derivative contracts and the range of the significant unobservable inputs utilized in the valuations over the duration of the contracts:
|
| As of March 31, 2015 |
| As of December 31, 2014 | ||||||||||||||
|
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| Range |
| Period Covered |
|
| Range |
| Period Covered | ||||||||
Energy Prices: |
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| |
ES, CL&P | $ | 48 | per MWh |
| 2020 |
| $ | 52 | per MWh |
| 2020 | |||||||
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Capacity Prices: |
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| |
ES | $ | 8.80 | - | 12.98 | per kW-Month |
| 2016 2026 |
| $ | 5.30 | - | 12.98 | per kW-Month |
| 2016 - 2026 | |||
CL&P | $ | 11.13 | - | 12.98 | per kW-Month |
| 2019 2026 |
| $ | 11.08 | - | 12.98 | per kW-Month |
| 2018 - 2026 | |||
NSTAR Electric | $ | 8.80 | - | 11.13 | per kW-Month |
| 2016 2019 |
| $ | 5.30 | - | 11.10 | per kW-Month |
| 2016 - 2019 | |||
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Forward Reserve: |
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| |
ES, CL&P | $ | 5.80 | - | 9.50 | per kW-Month |
| 2015 2024 |
| $ | 5.80 | - | 9.50 | per kW-Month |
| 2015 - 2024 | |||
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REC Prices: |
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| |
ES, NSTAR Electric | $ | 45 | - | 50 | per REC |
| 2015 2018 |
| $ | 38 | - | 56 | per REC |
| 2015 - 2018 |
Exit price premiums of 7 percent through 24 percent are also applied on these contracts and reflect the most recent market activity available for similar type contracts.
Significant increases or decreases in future energy or capacity prices in isolation would decrease or increase, respectively, the fair value of the derivative liability. Any increases in the risk premiums would increase the fair value of the derivative liabilities. Changes in these fair values are recorded as a regulatory asset or liability and would not impact net income.
21
Valuations using significant unobservable inputs: The following table presents changes in the Level 3 category of derivative assets and derivative liabilities measured at fair value on a recurring basis. The derivative assets and liabilities are presented on a net basis.
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| For the Three Months Ended March 31, | ||||||||||||||||
|
| 2015 |
| 2014 | ||||||||||||||
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| NSTAR |
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| NSTAR | ||
(Millions of Dollars) | ES |
| CL&P |
| Electric |
| ES |
| CL&P |
| Electric | |||||||
Derivatives, Net: |
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|
|
|
|
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|
|
|
|
|
|
| |
Fair Value as of Beginning of Period | $ | (415.4) |
| $ | (410.9) |
| $ | (4.5) |
| $ | (635.2) |
| $ | (630.6) |
| $ | (7.3) | |
Net Realized/Unrealized Gains/(Losses) Included in Regulatory Assets and Liabilities |
| (12.1) |
|
| (12.1) |
|
| - |
|
| 49.2 |
|
| 52.0 |
|
| (0.1) | |
Settlements |
| 20.7 |
|
| 19.7 |
|
| 1.0 |
|
| 21.7 |
|
| 21.6 |
|
| 0.1 | |
Fair Value as of End of Period | $ | (406.8) |
| $ | (403.3) |
| $ | (3.5) |
| $ | (564.3) |
| $ | (557.0) |
| $ | (7.3) |
5.
MARKETABLE SECURITIES
Eversource maintains trusts to fund certain non-qualified executive benefits and WMECO maintains a spent nuclear fuel trust to fund WMECO's prior period spent nuclear fuel liability. These trusts hold marketable securities. These trusts are not subject to regulatory oversight by state or federal agencies. In addition, CYAPC and YAEC maintain legally restricted trusts, each of which holds marketable securities, for settling the decommissioning obligations of their nuclear power plants.
The Company elected to record mutual funds at fair value and certain other equity investments as trading securities, with the changes in fair values recorded in Other Income, Net on the statements of income. As of March 31, 2015 and December 31, 2014, the mutual funds and equity investments were classified as Level 1 in the fair value hierarchy and totaled $86.7 million and $85.1 million, respectively. For the three months ended March 31, 2015 and 2014, net gains on these securities of $1.6 million and $0.7 million, respectively, were recorded in Other Income, Net on the statements of income. Dividend income is recorded in Other Income, Net when dividends are declared. All other marketable securities are accounted for as available-for-sale.
Available-for-Sale Securities: The following is a summary of Eversource's and WMECO's available-for-sale securities. These securities are recorded at fair value and are included in current and long-term Marketable Securities on the balance sheets.
|
| As of March 31, 2015 |
| As of December 31, 2014 | ||||||||||||||||||||
|
|
|
|
| Pre-Tax |
| Pre-Tax |
|
|
|
|
|
|
| Pre-Tax |
| Pre-Tax |
|
|
| ||||
|
| Amortized |
| Unrealized |
| Unrealized |
|
|
|
| Amortized |
| Unrealized |
| Unrealized |
|
|
| ||||||
(Millions of Dollars) | Cost |
| Gains |
| Losses |
| Fair Value |
| Cost |
| Gains |
| Losses |
| Fair Value | |||||||||
ES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Debt Securities (1) | $ | 318.2 |
| $ | 8.2 |
| $ | (0.1) |
| $ | 326.3 |
| $ | 313.0 |
| $ | 7.5 |
| $ | (0.3) |
| $ | 320.2 |
| Equity Securities (1) |
| 159.5 |
|
| 77.0 |
|
| - |
|
| 236.5 |
|
| 160.6 |
|
| 73.3 |
|
| - |
|
| 233.9 |
WMECO |
|
|
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|
|
|
|
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|
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|
|
|
|
|
|
|
|
| |
| Debt Securities (2) |
| 58.2 |
|
| - |
|
| - |
|
| 58.2 |
|
| 58.2 |
|
| - |
|
| (0.1) |
|
| 58.1 |
(1)
Eversource's amounts include CYAPC's and YAEC's marketable securities held in nuclear decommissioning trusts of $458.3 million and $450.8 million as of March 31, 2015 and December 31, 2014, respectively, which are legally restricted and can only be used for the costs of decommissioning of the nuclear power plants owned by these companies. Unrealized gains and losses for the nuclear decommissioning trusts are recorded in Marketable Securities with the corresponding offset to Other Long-Term Liabilities on the balance sheets, with no impact on the statements of income. All of the equity securities accounted for as available-for-sale securities are held in the CYAPC and YAEC trusts.
(2)
Unrealized gains and losses on debt securities held by WMECO are recorded in Marketable Securities with the corresponding offset to Other Long-Term Assets on the balance sheets.
Unrealized Losses and Other-than-Temporary Impairment: There have been no significant unrealized losses, other-than-temporary impairments or credit losses for Eversource or WMECO. Factors considered in determining whether a credit loss exists include the duration and severity of the impairment, adverse conditions specifically affecting the issuer, and the payment history, ratings and rating changes of the security. For asset-backed debt securities, underlying collateral and expected future cash flows are also evaluated.
Realized Gains and Losses: Realized gains and losses on available-for-sale securities are recorded in Other Income, Net for Eversource's benefit trust, Other Long-Term Assets for WMECO, and are offset in Other Long-Term Liabilities for CYAPC and YAEC. Eversource utilizes the specific identification basis method for the Eversource benefit trust, and the average cost basis method for the WMECO trust and the CYAPC and YAEC nuclear decommissioning trusts to compute the realized gains and losses on the sale of available-for-sale securities.
Contractual Maturities: As of March 31, 2015, the contractual maturities of available-for-sale debt securities were as follows:
|
| ES |
| WMECO | ||||||||
|
| Amortized |
|
|
| Amortized |
|
| ||||
(Millions of Dollars) | Cost |
| Fair Value |
| Cost |
| Fair Value | |||||
Less than one year (1) | $ | 59.9 |
| $ | 59.9 |
| $ | 33.2 |
| $ | 33.2 | |
One to five years |
| 83.3 |
|
| 83.8 |
|
| 21.3 |
|
| 21.3 | |
Six to ten years |
| 61.6 |
|
| 63.5 |
|
| 0.6 |
|
| 0.6 | |
Greater than ten years |
| 113.4 |
|
| 119.1 |
|
| 3.1 |
|
| 3.1 | |
Total Debt Securities | $ | 318.2 |
| $ | 326.3 |
| $ | 58.2 |
| $ | 58.2 |
22
(1)
Amounts in the Less than one year Eversource category include securities in the CYAPC and YAEC nuclear decommissioning trusts, which are restricted and are classified in long-term Marketable Securities on the balance sheets.
Fair Value Measurements: The following table presents the marketable securities recorded at fair value on a recurring basis by the level in which they are classified within the fair value hierarchy:
|
|
|
| ES |
| WMECO | ||||||||
(Millions of Dollars) | As of March 31, 2015 |
| As of December 31, 2014 |
| As of March 31, 2015 |
| As of December 31, 2014 | |||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
| |||
| Mutual Funds and Equities | $ | 323.2 |
| $ | 319.0 |
| $ | - |
| $ | - | ||
| Money Market Funds |
| 32.9 |
|
| 24.9 |
|
| 10.5 |
|
| 4.3 | ||
Total Level 1 | $ | 356.1 |
| $ | 343.9 |
| $ | 10.5 |
| $ | 4.3 | |||
Level 2: |
|
|
|
|
|
|
|
|
|
|
| |||
| U.S. Government Issued Debt Securities (Agency and Treasury) | $ | 46.0 |
| $ | 51.3 |
| $ | - |
| $ | - | ||
| Corporate Debt Securities |
| 157.3 |
|
| 49.1 |
|
| 14.4 |
|
| 14.7 | ||
| Asset-Backed Debt Securities |
| 36.5 |
|
| 54.1 |
|
| 12.1 |
|
| 14.5 | ||
| Municipal Bonds |
| 31.9 |
|
| 116.3 |
|
| 12.9 |
|
| 13.0 | ||
| Other Fixed Income Securities |
| 21.7 |
|
| 24.5 |
|
| 8.3 |
|
| 11.6 | ||
Total Level 2 | $ | 293.4 |
| $ | 295.3 |
| $ | 47.7 |
| $ | 53.8 | |||
Total Marketable Securities | $ | 649.5 |
| $ | 639.2 |
| $ | 58.2 |
| $ | 58.1 |
U.S. government issued debt securities are valued using market approaches that incorporate transactions for the same or similar bonds and adjustments for yields and maturity dates. Corporate debt securities are valued using a market approach, utilizing recent trades of the same or similar instrument and also incorporating yield curves, credit spreads and specific bond terms and conditions. Asset-backed debt securities include collateralized mortgage obligations, commercial mortgage backed securities, and securities collateralized by auto loans, credit card loans or receivables. Asset-backed debt securities are valued using recent trades of similar instruments, prepayment assumptions, yield curves, issuance and maturity dates, and tranche information. Municipal bonds are valued using a market approach that incorporates reported trades and benchmark yields. Other fixed income securities are valued using pricing models, quoted prices of securities with similar characteristics, and discounted cash flows.
6.
SHORT-TERM AND LONG-TERM DEBT
Credit Agreements and Commercial Paper Programs: ES parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are parties to a five-year $1.45 billion revolving credit facility that expires September 6, 2019. The revolving credit facility is used primarily to backstop ES parent's $1.45 billion commercial paper program. The commercial paper program allows ES parent to issue commercial paper as a form of short-term debt. As of March 31, 2015 and December 31, 2014, ES parent had $788 million and approximately $1.1 billion, respectively, in short-term borrowings outstanding under the ES parent commercial paper program, leaving $662 million and $348.9 million of available borrowing capacity as of March 31, 2015 and December 31, 2014, respectively. The weighted-average interest rate on these borrowings as of March 31, 2015 and December 31, 2014 was 0.53 percent and 0.43 percent, respectively, which is generally based on A2/P2 rated commercial paper. As of March 31, 2015, there were intercompany loans from ES parent of $190.1 million to CL&P, $82 million to PSNH and $70.5 million to WMECO. As of December 31, 2014, there were intercompany loans from ES parent of $133.4 million to CL&P, $90.5 million to PSNH and $21.4 million to WMECO.
NSTAR Electric has a five-year $450 million revolving credit facility that expires September 6, 2019. This facility serves to backstop NSTAR Electric's existing $450 million commercial paper program. As of March 31, 2015 and December 31, 2014, NSTAR Electric had $215.5 million and $302 million, respectively, in short-term borrowings outstanding under its commercial paper program, leaving $234.5 million and $148 million of available borrowing capacity as of March 31, 2015 and December 31, 2014, respectively. The weighted-average interest rate on these borrowings as of March 31, 2015 and December 31, 2014 was 0.35 percent and 0.27 percent, respectively, which is generally based on A2/P1 rated commercial paper.
Except as described below, amounts outstanding under the commercial paper programs are included in Notes Payable for Eversource and NSTAR Electric and classified in current liabilities on the balance sheets as all borrowings are outstanding for no more than 364 days at one time. Intercompany loans from ES parent to CL&P, PSNH and WMECO are included in Notes Payable to ES Parent and classified in current liabilities on the balance sheets. Intercompany loans from ES parent to CL&P, PSNH and WMECO are eliminated in consolidation in Eversource's balance sheets.
Long-Term Debt: On January 15, 2015, ES parent issued $150 million of 1.60 percent Series G Senior Notes, due to mature in 2018 and $300 million of 3.15 percent Series H Senior Notes, due to mature in 2025. The proceeds, net of issuance costs, were used to repay short-term borrowings outstanding under the ES parent commercial paper program. As the debt issuances refinanced short-term debt, the short-term debt was classified as Long-Term Debt as of December 31, 2014.
On April 1, 2015, CL&P repaid at maturity the $100 million 5.00 percent 2005 Series A First and Refunding Mortgage Bonds using short-term borrowings. On April 1, 2015, CL&P also redeemed the $62 million 1996A Series 1.55 percent PCRBs that were subject to mandatory tender, using short term borrowings.
Long-Term Debt Issuance Authorization: On April 3, 2015, the DPU authorized NSTAR Gas to issue up to $100 million in long-term debt for the period through December 31, 2015.
23
7.
PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
As of December 31, 2014, Eversource Service sponsored two defined benefit retirement plans that covered eligible employees, including employees of CL&P, NSTAR Electric, PSNH and WMECO. Effective January 1, 2015, the two pension plans were merged into one plan, sponsored by Eversource Service. As of December 31, 2014, Eversource Service also sponsored defined benefit postretirement plans that provide certain retiree benefits, primarily medical, dental and life insurance, to retiring employees that meet certain age and service eligibility requirements, including employees of CL&P, NSTAR Electric, PSNH and WMECO. Effective January 1, 2015, the postretirement plans were merged into one plan, sponsored by Eversource Service.
The components of net periodic benefit expense for the Pension, SERP and PBOP Plans are shown below. The net periodic benefit expense and the intercompany allocations less the capitalized portion of pension, SERP and PBOP amounts is included in Operations and Maintenance on the statements of income. Capitalized pension and PBOP amounts relate to employees working on capital projects and are included in Property, Plant and Equipment, Net. Intercompany allocations are not included in the CL&P, NSTAR Electric, PSNH and WMECO net periodic benefit expense amounts. Pension, SERP and PBOP expense reflected in the statements of cash flows for CL&P, NSTAR Electric, PSNH and WMECO does not include the intercompany allocations and the corresponding capitalized portion, as these amounts are cash settled on a short-term basis.
|
| Pension and SERP | ||||
|
| For the Three Months Ended | ||||
|
| March 31, 2015 |
| March 31, 2014 | ||
(Millions of Dollars) | ES (1) |
| ES | |||
Service Cost | $ | 23.2 |
| $ | 22.3 | |
Interest Cost |
| 56.6 |
|
| 56.6 | |
Expected Return on Plan Assets |
| (84.3) |
|
| (77.7) | |
Actuarial Loss |
| 38.9 |
|
| 33.0 | |
Prior Service Cost |
| 0.9 |
|
| 1.1 | |
Total Net Periodic Benefit Expense | $ | 35.3 |
| $ | 35.3 | |
Capitalized Pension Expense | $ | 9.6 |
| $ | 9.7 | |
|
|
|
|
|
|
|
|
| PBOP | ||||
|
| For the Three Months Ended | ||||
|
| March 31, 2015 |
| March 31, 2014 | ||
(Millions of Dollars) | ES (1) |
| ES | |||
Service Cost | $ | 4.2 |
| $ | 3.0 | |
Interest Cost |
| 11.9 |
|
| 12.6 | |
Expected Return on Plan Assets |
| (16.8) |
|
| (15.7) | |
Actuarial Loss |
| 1.8 |
|
| 3.0 | |
Prior Service Credit |
| (0.1) |
|
| (0.6) | |
Total Net Periodic Benefit Expense | $ | 1.0 |
| $ | 2.3 | |
Capitalized PBOP Expense | $ | 0.2 |
| $ | 0.4 |
|
| Pension and SERP | ||||||||||||||||||||||
|
| For the Three Months Ended March 31, 2015 |
| For the Three Months Ended March 31, 2014 | ||||||||||||||||||||
|
|
|
|
| NSTAR |
|
|
|
|
|
|
|
|
|
| NSTAR |
|
|
|
|
|
| ||
(Millions of Dollars) | CL&P |
| Electric |
| PSNH (1) |
| WMECO |
| CL&P |
| Electric |
| PSNH |
| WMECO | |||||||||
Service Cost | $ | 6.0 |
| $ | 3.8 |
| $ | 2.9 |
| $ | 1.1 |
| $ | 5.2 |
| $ | 4.6 |
| $ | 2.8 |
| $ | 1.0 | |
Interest Cost |
| 12.7 |
|
| 10.2 |
|
| 5.9 |
|
| 2.5 |
|
| 13.3 |
|
| 10.2 |
|
| 6.5 |
|
| 2.7 | |
Expected Return on Plan Assets |
| (19.7) |
|
| (17.6) |
|
| (10.0) |
|
| (4.7) |
|
| (19.4) |
|
| (15.8) |
|
| (10.2) |
|
| (4.6) | |
Actuarial Loss |
| 8.2 |
|
| 9.6 |
|
| 3.0 |
|
| 1.6 |
|
| 9.1 |
|
| 5.8 |
|
| 3.3 |
|
| 1.9 | |
Prior Service Cost |
| 0.4 |
|
| - |
|
| 0.1 |
|
| 0.1 |
|
| 0.5 |
|
| - |
|
| 0.2 |
|
| 0.1 | |
Total Net Periodic Benefit Expense | $ | 7.6 |
| $ | 6.0 |
| $ | 1.9 |
| $ | 0.6 |
| $ | 8.7 |
| $ | 4.8 |
| $ | 2.6 |
| $ | 1.1 | |
Intercompany Allocations | $ | 6.4 |
| $ | 3.6 |
| $ | 1.7 |
| $ | 1.2 |
| $ | 6.8 |
| $ | 2.4 |
| $ | 1.9 |
| $ | 1.3 | |
Capitalized Pension Expense | $ | 4.3 |
| $ | 2.8 |
| $ | 0.8 |
| $ | 0.5 |
| $ | 4.9 |
| $ | 1.9 |
| $ | 0.9 |
| $ | 0.8 |
|
| PBOP | ||||||||||||||||||||||
|
| For the Three Months Ended March 31, 2015 |
| For the Three Months Ended March 31, 2014 | ||||||||||||||||||||
|
|
|
|
| NSTAR |
|
|
|
|
|
|
|
|
|
| NSTAR |
|
|
|
|
|
| ||
(Millions of Dollars) | CL&P |
| Electric |
|
| PSNH (1) |
|
| WMECO |
| CL&P |
| Electric |
| PSNH |
| WMECO | |||||||
Service Cost | $ | 0.6 |
| $ | 1.3 |
| $ | 0.4 |
| $ | 0.1 |
| $ | 0.6 |
| $ | 0.7 |
| $ | 0.4 |
| $ | 0.1 | |
Interest Cost |
| 1.8 |
|
| 4.8 |
|
| 1.0 |
|
| 0.4 |
|
| 2.1 |
|
| 4.9 |
|
| 1.1 |
|
| 0.5 | |
Expected Return on Plan Assets |
| (2.8) |
|
| (6.8) |
|
| (1.5) |
|
| (0.6) |
|
| (2.7) |
|
| (6.4) |
|
| (1.4) |
|
| (0.6) | |
Actuarial Loss/(Gain) |
| 0.2 |
|
| 0.8 |
|
| 0.1 |
|
| - |
|
| 1.1 |
|
| (0.1) |
|
| 0.5 |
|
| 0.1 | |
Prior Service Credit |
| - |
|
| (0.1) |
|
| - |
|
| - |
|
| - |
|
| (0.5) |
|
| - |
|
| - | |
Total Net Periodic Benefit Expense/(Income) | $ | (0.2) |
| $ | - |
| $ | - |
| $ | (0.1) |
| $ | 1.1 |
| $ | (1.4) |
| $ | 0.6 |
| $ | 0.1 | |
Intercompany Allocations | $ | 0.5 |
| $ | 0.3 |
| $ | 0.1 |
| $ | 0.1 |
| $ | 1.1 |
| $ | 0.1 |
| $ | 0.3 |
| $ | 0.2 | |
Capitalized PBOP Expense/(Income) | $ | - |
| $ | 0.1 |
| $ | - |
| $ | - |
| $ | 0.5 |
| $ | (0.5) |
| $ | 0.2 |
| $ | 0.1 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts exclude approximately $1 million that represented deferred regulatory assets. |
24
8.
COMMITMENTS AND CONTINGENCIES
A.
Environmental Matters
General: Eversource, CL&P, NSTAR Electric, PSNH and WMECO are 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. These laws and regulations require the removal or the remedy of the effect on the environment of the disposal or release of certain specified hazardous substances at current and former operating sites. Eversource, CL&P, NSTAR Electric, PSNH and WMECO have an active environmental auditing and training program and believe that they are substantially in compliance with all enacted laws and regulations.
The number of environmental sites and reserves related to these sites for which remediation or long-term monitoring, preliminary site work or site assessment are being performed are as follows:
| As of March 31, 2015 |
|
| As of December 31, 2014 | ||||||||
|
|
|
| Reserve |
|
|
|
|
| Reserve | ||
| Number of Sites |
| (in millions) |
|
| Number of Sites |
| (in millions) | ||||
ES |
| 65 |
| $ | 43.6 |
|
|
| 65 |
| $ | 43.3 |
CL&P |
| 16 |
|
| 5.0 |
|
|
| 16 |
|
| 3.8 |
NSTAR Electric |
| 14 |
|
| 1.7 |
|
|
| 13 |
|
| 1.1 |
PSNH |
| 12 |
|
| 3.4 |
|
|
| 13 |
|
| 5.2 |
WMECO |
| 4 |
|
| 0.6 |
|
|
| 4 |
|
| 0.5 |
Included in the Eversource number of sites and reserve amounts above are former MGP sites that were operated several decades ago and manufactured gas from coal and other processes, which resulted in certain by-products remaining in the environment that may pose a potential risk to human health and the environment. The reserve balance related to these former MGP sites was $35.4 million and $38.8 million as of March 31, 2015 and December 31, 2014, respectively, and relates primarily to the natural gas business segment.
B.
Guarantees and Indemnifications
ES parent provides credit assurances on behalf of its subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, in the form of guarantees in the normal course of business.
ES parent also issued a guaranty under which, beginning at the time the Northern Pass Transmission line goes into commercial operation, ES parent will guarantee the financial obligations of NPT under the TSA in an amount not to exceed $25 million. ES parent's obligations under the guaranty expire upon the full, final and indefeasible payment of the guaranteed obligations.
ES parent has also guaranteed certain indemnification and other obligations as a result of the sales of former unregulated subsidiaries and the termination of an unregulated business, with maximum exposures either not specified or not material.
Management does not anticipate a material impact to Net Income as a result of these various guarantees and indemnifications.
The following table summarizes ES parent's guarantees of its subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, as of March 31, 2015:
|
|
|
| Maximum Exposure |
|
|
| |
Company |
| Description |
| (in millions) |
| Expiration Dates | ||
Various |
| Surety Bonds (1) |
| $ | 54.6 |
| 2015 - 2016 | |
|
|
|
|
|
|
|
|
|
Eversource Service and Rocky River Realty Company |
| Lease Payments for Vehicles and Real Estate |
| $ | 13.8 |
| 2019 and 2024 |
(1)
Surety bond expiration dates reflect termination dates, the majority of which will be renewed or extended. Certain surety bonds contain credit ratings triggers that would require ES parent to post collateral in the event that the unsecured debt credit ratings of Eversource are downgraded.
C.
FERC ROE Complaints
Beginning in 2011, three separate complaints were filed at FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (the "Complainants"). In the first complaint, filed in 2011, the Complainants alleged that the NETOs' base ROE of 11.14 percent that was utilized since 2006 was unjust and unreasonable, asserted that the rate was excessive due to changes in the capital markets, and sought an order to reduce it prospectively from the date of the final FERC order and for the 15-month period beginning October 1, 2011 to December 31, 2012 (the "first complaint refund period"). In the second and third complaints, filed in 2012 and 2014, the Complainants challenged the NETOs' base ROE and sought refunds for the 15-month periods beginning December 27, 2012 and July 31, 2014.
In 2014, the FERC determined that the base ROE should be set at 10.57 percent for the first complaint refund period and that a utility's total or maximum ROE should not exceed the top of the new zone of reasonableness, which was set at 11.74 percent. The FERC ordered the NETOs to provide refunds to customers for the first complaint refund period and set the new base ROE of 10.57 percent prospectively from October 16, 2014. The NETOs and the Complainants sought rehearing from FERC. In late 2014, the NETOs made a compliance filing, which was challenged by the Complainants, and the Company began refunding amounts from the first complaint period.
On March 3, 2015, FERC issued an order denying all issues raised on rehearing by the NETOs and Complainants in the first base ROE complaint. The FERC order upheld the base ROE of 10.57 percent for the first complaint refund period and prospectively from October 16, 2014, and upheld that the utility's total ROE (the base ROE plus any incentive adders) for the transmission assets to which the adder applies is capped at the top of the zone of reasonableness, which is currently set at 11.74 percent. As a result of clarifying information related to how the ROE cap is applied, which is
25
contained in the order, Eversource adjusted its reserve in the first quarter of 2015 and recognized a pre-tax charge to earnings (excluding interest) of $20 million, of which $12.5 million was recorded at CL&P, $2.4 million at NSTAR Electric, $1 million at PSNH, and $4.1 million at WMECO. The pre-tax charge was recorded as a regulatory liability and as a reduction of Operating Revenues.
D.
2014 Comprehensive Settlement Agreement
On March 2, 2015, the DPU approved the comprehensive settlement agreement between NSTAR Electric, NSTAR Gas and the Massachusetts Attorney General (the "Settlement") as filed with the DPU on December 31, 2014. The Settlement resolved the outstanding NSTAR Electric CPSL program filings for 2006 through 2011, the NSTAR Electric and NSTAR Gas PAM and energy efficiency-related customer billing adjustments reported in 2012, and the recovery of LBR related to NSTAR Electric's energy efficiency programs for 2008 through 2011 (11 dockets in total). As a result, NSTAR Electric and NSTAR Gas will refund $42.5 million and $2.2 million, respectively, to customers. The refund was recorded as a regulatory liability as of March 31, 2015 and NSTAR Electric recognized a $21.7 million pre-tax benefit in the first quarter of 2015.
E.
Basic Service Bad Debt Adder
In accordance with a generic 2005 DPU order, electric utilities in Massachusetts recover the energy-related portion of bad debt costs in their Basic Service rates. In February 2007, NSTAR Electric filed its 2005 through 2006 Basic Service reconciliation with the DPU proposing an adjustment related to the increase of its Basic Service bad debt charge-offs. In June 2007, the DPU approved NSTAR Electric's proposed adjustment to the Basic Service Adder but instructed NSTAR Electric to reduce distribution rates by an equal and offsetting amount. This adjustment to NSTAR Electric's distribution rates would have eliminated the fully reconciling nature of the Basic Service bad debt adder.
In 2010, NSTAR Electric filed an appeal of the DPU's order with the SJC. NSTAR Electric took the position that it had fully removed the collection of energy-related bad debt costs from its base distribution rates effective January 1, 2006; therefore, no further adjustment to distribution rates was warranted. In 2012, the SJC vacated the DPU order and remanded the matter to the DPU for further review.
On January 7, 2015, the DPU issued an order concluding that NSTAR Electric had appropriately accounted for the removal of supply-related bad debt costs from base distribution rates effective January 1, 2006. The DPU ordered NSTAR Electric and the Massachusetts Attorney General to collaborate on the reconciliation of energy-related bad debt costs through 2014. During the second quarter of 2015, NSTAR Electric expects to file with the DPU to recover from customers approximately $43 million of supply-related bad debt costs. In the first quarter of 2015, as a result of the DPU order, NSTAR Electric increased its regulatory assets and reduced Operations and Maintenance expense by $24.2 million, resulting in an increase in after-tax earnings of $14.5 million.
F.
PSNH Generation Restructuring
On March 11, 2015, PSNH and key New Hampshire officials entered into an agreement in principle in a settlement Term Sheet. Under the Term Sheet, PSNH has agreed to pursue the divestiture of its generation assets upon NHPUC approval of a final Settlement Agreement reflecting the provisions of the Term Sheet, and PSNH will not seek a general distribution rate increase that would become effective before July 1, 2017. PSNH will contribute $5 million to create a clean energy fund, which will not be recoverable from its customers, and will record this liability and related charge upon completion of the Settlement Agreement.
9.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each of the following financial instruments:
Preferred Stock and Long-Term Debt: The fair value of CL&P's and NSTAR Electric's preferred stock is based upon pricing models that incorporate interest rates and other market factors, valuations or trades of similar securities and cash flow projections. The fair value of long-term debt securities is based upon pricing models that incorporate quoted market prices for those issues or similar issues adjusted for market conditions, credit ratings of the respective companies and treasury benchmark yields. The fair values provided in the tables below are classified as Level 2 within the fair value hierarchy. Carrying amounts and estimated fair values are as follows:
|
| As of March, 31, 2015 |
| As of December 31, 2014 | ||||||||
|
| ES |
| ES | ||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair | ||||
(Millions of Dollars) | Amount |
| Value |
| Amount |
| Value | |||||
Preferred Stock Not | $ | 155.6 |
| $ | 155.1 |
| $ | 155.6 |
| $ | 153.6 | |
Long-Term Debt |
| 8,847.7 |
|
| 9,553.1 |
|
| 8,851.6 |
|
| 9,451.2 |
|
| As of March 31, 2015 | ||||||||||||||||||||||
|
| CL&P |
| NSTAR Electric |
| PSNH |
| WMECO | ||||||||||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair | ||||||||
(Millions of Dollars) | Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value | |||||||||
Preferred Stock Not | $ | 116.2 |
| $ | 113.0 |
| $ | 43.0 |
| $ | 42.1 |
| $ | - |
| $ | - |
| $ | - |
| $ | - | |
Long-Term Debt |
| 2,842.1 |
|
| 3,260.4 |
|
| 1,797.4 |
|
| 2,022.1 |
|
| 1,076.3 |
|
| 1,156.4 |
|
| 628.2 |
|
| 674.4 |
26
|
| As of December 31, 2014 | ||||||||||||||||||||||
|
| CL&P |
| NSTAR Electric |
| PSNH |
| WMECO | ||||||||||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair |
| Carrying |
| Fair | ||||||||
(Millions of Dollars) | Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value |
| Amount |
| Value | |||||||||
Preferred Stock Not | $ | 116.2 |
| $ | 112.0 |
| $ | 43.0 |
| $ | 41.6 |
| $ | - |
| $ | - |
| $ | - |
| $ | - | |
Long-Term Debt |
| 2,842.0 |
|
| 3,214.5 |
|
| 1,797.4 |
|
| 1,993.5 |
|
| 1,076.3 |
|
| 1,137.9 |
|
| 628.5 |
|
| 689.4 |
Derivative Instruments: Derivative instruments are carried at fair value. For further information, see Note 4, "Derivative Instruments," to the financial statements.
Other Financial Instruments: Investments in marketable securities are carried at fair value. For further information, see Note 5, "Marketable Securities," to the financial statements. The carrying value of other financial instruments included in current assets and current liabilities, including cash and cash equivalents and special deposits, approximates their fair value due to the short-term nature of these instruments.
See Note 1D, "Summary of Significant Accounting Policies - Fair Value Measurements," for the fair value measurement policy and the fair value hierarchy.
10.
ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The changes in accumulated other comprehensive income/(loss) by component, net of tax, is as follows:
|
| For the Three Months Ended March 31, 2015 |
| For the Three Months Ended March 31, 2014 | ||||||||||||||||||||
|
| Qualified |
| Unrealized |
|
|
|
|
| Qualified |
| Unrealized |
|
|
|
| ||||||||
|
| Cash Flow |
| Gains on |
| Defined |
|
|
| Cash Flow |
| Gains on |
| Defined |
|
| ||||||||
|
| Hedging |
| Marketable |
| Benefit |
|
|
| Hedging |
| Marketable |
| Benefit |
|
| ||||||||
(Millions of Dollars) | Instruments |
| Securities |
| Plans |
| Total |
| Instruments |
| Securities |
| Plans |
| Total | |||||||||
Balance as of Beginning of Period | $ | (12.4) |
| $ | 0.7 |
| $ | (62.3) |
| $ | (74.0) |
| $ | (14.4) |
| $ | 0.4 |
| $ | (32.0) |
| $ | (46.0) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OCI Before Reclassifications |
| - |
|
| 0.1 |
|
| - |
|
| 0.1 |
|
| - |
|
| 0.2 |
|
| - |
|
| 0.2 | |
Amounts Reclassified from AOCI |
| 0.5 |
|
| - |
|
| 1.0 |
|
| 1.5 |
|
| 0.5 |
|
| - |
|
| 1.0 |
|
| 1.5 | |
Net OCI |
| 0.5 |
|
| 0.1 |
|
| 1.0 |
|
| 1.6 |
|
| 0.5 |
|
| 0.2 |
|
| 1.0 |
|
| 1.7 | |
Balance as of End of Period | $ | (11.9) |
| $ | 0.8 |
| $ | (61.3) |
| $ | (72.4) |
| $ | (13.9) |
| $ | 0.6 |
| $ | (31.0) |
| $ | (44.3) |
Eversource's qualified cash flow hedging instruments represent interest rate swap agreements on debt issuances that were settled in prior years. The settlement amount was recorded in AOCI and is being amortized into Net Income over the term of the underlying debt instrument. CL&P, PSNH and WMECO continue to amortize interest rate swaps settled in prior years from AOCI into Interest Expense over the remaining life of the associated long-term debt, which are not material to their respective financial statements. The amortization expense of actuarial gains and losses on the defined benefit plans is amortized from AOCI into Operations and Maintenance over the average future employee service period, and are reflected in amounts reclassified from AOCI. The related tax effects of the reclassification adjustments are not material to the financial statements for the three months ended March 31, 2015 and 2014.
11.
COMMON SHARES
The following table sets forth the ES parent common shares and the shares of common stock of CL&P, NSTAR Electric, PSNH and WMECO that were authorized and issued and the respective per share par values:
| Shares | |||||||
|
|
|
| Authorized as of |
|
|
|
|
| Per Share |
| March 31, 2015 and |
| Issued as of | |||
| Par Value |
| December 31, 2014 |
| March 31, 2015 |
| December 31, 2014 | |
ES | $ | 5 |
| 380,000,000 |
| 333,607,844 |
| 333,359,172 |
CL&P | $ | 10 |
| 24,500,000 |
| 6,035,205 |
| 6,035,205 |
NSTAR Electric | $ | 1 |
| 100,000,000 |
| 100 |
| 100 |
PSNH | $ | 1 |
| 100,000,000 |
| 301 |
| 301 |
WMECO | $ | 25 |
| 1,072,471 |
| 434,653 |
| 434,653 |
As of March 31, 2015 and December 31, 2014, there were 16,138,845 and 16,375,835 Eversource common shares held as treasury shares, respectively. As of March 31, 2015 and December 31, 2014, Eversource common shares outstanding were 317,468,999 and 316,983,337, respectively.
12.
COMMON SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
For the three months ended March 31, 2015 and 2014, there were dividends on the preferred stock of CL&P and NSTAR Electric of $1.9 million, which were presented as Net Income Attributable to Noncontrolling Interests on the Eversource statements of income. Common Shareholders' Equity was fully attributable to the parent and Noncontrolling Interest Preferred Stock of Subsidiaries was fully attributable to the noncontrolling interest on the Eversource balance sheets.
27
13.
EARNINGS PER SHARE
Basic EPS is computed based upon the weighted average number of common shares outstanding during each period. Diluted EPS is computed on the basis of the weighted average number of common shares outstanding plus the potential dilutive effect of certain share-based compensation awards as if they were converted into common shares. For the three months ended March 31, 2015 and 2014, there were no antidilutive share awards excluded from the computation.
The following table sets forth the components of basic and diluted EPS:
|
| For the Three Months Ended | ||||
(Millions of Dollars, except share information) | March 31, 2015 |
| March 31, 2014 | |||
Net Income Attributable to Controlling Interest | $ | 253.3 |
| $ | 236.0 | |
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding: |
|
|
|
|
| |
| Basic |
| 317,090,841 |
|
| 315,534,512 |
| Dilutive Effect |
| 1,400,347 |
|
| 1,357,607 |
| Diluted |
| 318,491,188 |
|
| 316,892,119 |
Basic EPS | $ | 0.80 |
| $ | 0.75 | |
Diluted EPS | $ | 0.80 |
| $ | 0.74 |
RSUs and performance shares are included in basic weighted average common shares outstanding as of the date that all necessary vesting conditions have been satisfied. The dilutive effect of unvested RSUs and performance shares is calculated using the treasury stock method. Assumed proceeds of these units under the treasury stock method consist of the remaining compensation cost to be recognized and a theoretical tax benefit. The theoretical tax benefit is calculated as the tax impact of the intrinsic value of the units (the difference between the market value of the average units outstanding for the period, using the average market price during the period, and the grant date market value).
The dilutive effect of stock options to purchase common shares is also calculated using the treasury stock method. Assumed proceeds for stock options consist of cash proceeds that would be received upon exercise, and a theoretical tax benefit. The theoretical tax benefit is calculated as the tax impact of the intrinsic value of the stock options (the difference between the market value of the average stock options outstanding for the period, using the average market price during the period, and the exercise price).
14.
SEGMENT INFORMATION
Presentation: Eversource is organized between the Electric Distribution, Electric Transmission and Natural Gas Distribution reportable segments and Other based on a combination of factors, including the characteristics of each segments' products and services, the sources of operating revenues and expenses and the regulatory environment in which each segment operates. These reportable segments represented substantially all of Eversource's total consolidated revenues for the three months ended March 31, 2015 and 2014. Revenues from the sale of electricity and natural gas primarily are derived from residential, commercial and industrial customers and are not dependent on any single customer. The Electric Distribution reportable segment includes the generation activities of PSNH and WMECO.
The remainder of Eversource's operations is presented as Other in the tables below and primarily consists of 1) the equity in earnings of ES parent from its subsidiaries and intercompany interest income, both of which are eliminated in consolidation, and interest expense related to the debt of ES parent, 2) the revenues and expenses of Eversource Service, most of which are eliminated in consolidation, 3) the operations of CYAPC and YAEC, and 4) the results of other unregulated subsidiaries, which are not part of its core business.
Cash flows used for investments in plant included in the segment information below are cash capital expenditures that do not include amounts incurred but not paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension expense.
Eversource's reportable segments are determined based upon the level at which Eversource's chief operating decision maker assesses performance and makes decisions about the allocation of company resources. Each of Eversource's subsidiaries, including CL&P, NSTAR Electric, PSNH and WMECO, has one reportable segment. Eversource's operating segments and reporting units are consistent with its reportable business segments.
Eversource's segment information is as follows:
|
| For the Three Months Ended March 31, 2015 | ||||||||||||||||
|
| Electric |
| Natural Gas |
|
|
|
|
|
|
|
|
|
|
|
| ||
(Millions of Dollars) | Distribution |
| Distribution |
| Transmission |
| Other |
| Eliminations |
| Total | |||||||
Operating Revenues | $ | 1,760.1 |
| $ | 507.4 |
| $ | 249.0 |
| $ | 240.0 |
| $ | (243.1) |
| $ | 2,513.4 | |
Depreciation and Amortization |
| (159.1) |
|
| (18.2) |
|
| (40.4) |
|
| (7.2) |
|
| 0.5 |
|
| (224.4) | |
Other Operating Expenses |
| (1,342.8) |
|
| (388.5) |
|
| (74.1) |
|
| (229.2) |
|
| 243.1 |
|
| (1,791.5) | |
Operating Income |
| 258.2 |
|
| 100.7 |
|
| 134.5 |
|
| 3.6 |
|
| 0.5 |
|
| 497.5 | |
Interest Expense |
| (47.6) |
|
| (9.0) |
|
| (27.6) |
|
| (11.8) |
|
| 1.2 |
|
| (94.8) | |
Other Income/(Loss), Net |
| 2.2 |
|
| (0.2) |
|
| 2.9 |
|
| 314.9 |
|
| (314.1) |
|
| 5.7 | |
Net Income Attributable to Controlling Interest | $ | 130.6 |
| $ | 55.6 |
| $ | 66.6 |
| $ | 312.9 |
| $ | (312.4) |
| $ | 253.3 | |
Cash Flows Used for Investments in Plant | $ | 172.5 |
| $ | 30.0 |
| $ | 150.0 |
| $ | 10.1 |
| $ | - |
| $ | 362.6 |
28
29
EVERSOURCE ENERGY AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related combined notes included in this combined Quarterly Report on Form 10-Q and the 2014 Annual Report on Form 10-K. References in this Form 10-Q to "Eversource," the "Company," "we," "us," and "our" refer to Eversource and its consolidated subsidiaries. All per share amounts are reported on a diluted basis. The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P and WMECO are herein collectively referred to as the "financial statements."
Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations.
The only common equity securities that are publicly traded are common shares of Eversource. The earnings and EPS of each business discussed below do not represent a direct legal interest in the assets and liabilities of such business but rather represent a direct interest in our assets and liabilities as a whole. EPS by business is a financial measure not recognized under GAAP that is calculated by dividing the Net Income Attributable to Controlling Interest of each business by the weighted average diluted Eversource common shares outstanding for the period. The discussion below also includes non-GAAP financial measures referencing our first quarter 2015 and 2014 earnings and EPS excluding certain integration costs related to our merger with NSTAR. We use these non-GAAP financial measures to evaluate and to provide details of earnings by business and to more fully compare and explain our first quarter 2015 and 2014 results without including the impact of these items. Due to the nature and significance of these items on Net Income Attributable to Controlling Interest, we believe that the non-GAAP presentation is more representative of our financial performance and provides additional and useful information to readers of this report in analyzing historical and future performance by business. These non-GAAP financial measures should not be considered as an alternative to reported Net Income Attributable to Controlling Interest or EPS determined in accordance with GAAP as an indicator of operating performance.
Reconciliations of the above non-GAAP financial measures to the most directly comparable GAAP measures of consolidated diluted EPS and Net Income Attributable to Controlling Interest are included under "Financial Condition and Business Analysis Overview Consolidated" and "Financial Condition and Business Analysis Overview Regulated Companies" in Management's Discussion and Analysis of Financial Condition and Results of Operations, herein.
Forward-Looking Statements: From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify our forward-looking statements through the use of words or phrases such as "estimate," "expect," "anticipate," "intend," "plan," "project," "believe," "forecast," "should," "could," and other similar expressions. Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance. These expectations, estimates, assumptions or projections may vary materially from actual results. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to:
·
cyber breaches, acts of war or terrorism, or grid disturbances,
·
actions or inaction of local, state and federal regulatory, public policy and taxing bodies,
·
changes in business and economic conditions, including their impact on interest rates, bad debt expense, and demand for our products and services, which could include disruptive technology related to our current or future business model,
·
fluctuations in weather patterns,
·
changes in laws, regulations or regulatory policy,
·
changes in levels or timing of capital expenditures,
·
disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly,
·
developments in legal or public policy doctrines,
·
technological developments,
·
changes in accounting standards and financial reporting regulations,
·
actions of rating agencies, and
·
other presently unknown or unforeseen factors.
Other risk factors are detailed in our reports filed with the SEC and updated as necessary, and we encourage you to consult such disclosures.
All such factors are difficult to predict, contain uncertainties that may materially affect our actual results and are beyond our control. You should not place undue reliance on the forward-looking statements, each speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. For more information, see Item 1A, Risk Factors, included in this Quarterly Report on Form 10-Q and in Eversource's 2014 combined Annual Report on Form 10-K. This Quarterly Report on Form 10-Q and Eversource's 2014 combined Annual Report on Form 10-K also describes material contingencies and critical accounting policies in the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations and Combined Notes to Condensed Consolidated Financial Statements (Unaudited). We encourage you to review these items.
30
Financial Condition and Business Analysis
Executive Summary
The following items in this executive summary are explained in more detail in this combined Quarterly Report on Form 10-Q:
Results:
The earnings discussion below compares the first quarter of 2015 with the first quarter of 2014:
·
We earned $253.3 million, or $0.80 per share, compared with $236 million, or $0.74 per share. Excluding integration costs, we earned $257.3 million, or $0.81 per share, compared with $241.8 million, or $0.76 per share.
·
Our electric distribution segment, which includes generation, earned $130.6 million, or $0.41 per share, compared with $112.2 million, or $0.35 per share. Our transmission segment earned $66.6 million, or $0.21 per share, compared with $74.9 million, or $0.24 per share. Our natural gas distribution segment earned $55.6 million, or $0.18 per share, compared with $52.1 million, or $0.16 per share.
·
ES parent and other companies had net earnings of $0.5 million, compared with net losses of $3.2 million, or $0.01 per share. The 2015 and 2014 results reflect $4 million, or $0.01 per share, and $5.8 million, or $0.02 per share, respectively, of integration costs.
Legislative, Regulatory, Policy and Other Items:
·
On January 7, 2015, the DPU issued an order concluding that NSTAR Electric had appropriately accounted for the removal of supply-related bad debt costs from base distribution rates effective January 1, 2006. The DPU ordered NSTAR Electric and the Massachusetts Attorney General to collaborate on the reconciliation of energy-related bad debt costs through 2014. During the second quarter of 2015, NSTAR Electric expects to file with the DPU to recover from customers approximately $43 million of supply-related bad debt costs. In the first quarter of 2015, as a result of the January 7th DPU order, NSTAR Electric increased its regulatory assets by $24.2 million, resulting in an increase in after-tax earnings of $14.5 million.
·
On March 2, 2015, the DPU approved a comprehensive settlement agreement between NSTAR Electric, NSTAR Gas and the Massachusetts Attorney General (the "Settlement") as filed with the DPU on December 31, 2014. The Settlement resolved the outstanding NSTAR Electric CPSL program filings, the NSTAR Electric and NSTAR Gas PAM and energy efficiency-related customer billing adjustments, and the recovery of LBR related to NSTAR Electrics energy efficiency programs (11 dockets in total). As a result, NSTAR Electric and NSTAR Gas will refund a combined $44.7 million to customers, which was recorded as a regulatory liability as of March 31, 2015, and recognized a $13 million after-tax benefit in the first quarter of 2015.
·
On March 3, 2015, FERC issued an order denying all issues raised on rehearing by the NETOs and Complainants in the first base ROE complaint. The FERC order upheld our base ROE of 10.57 percent and upheld that the utilities total ROE is capped at the top of the zone of reasonableness, which is currently set at 11.74 percent. As a result of clarifying information related to how the ROE cap is applied, which is contained in the order, we recognized an after-tax charge to earnings of $12.4 million.
·
On March 11, 2015, PSNH and key New Hampshire officials entered into an agreement in principle in a settlement Term Sheet (Term Sheet) designed to provide a resolution of issues pertaining to PSNHs generation assets in pending regulatory proceedings. PSNH has agreed to pursue the divestiture of its generation assets upon NHPUC approval of a final Settlement Agreement reflecting the provisions of the Term Sheet (Settlement Agreement). As part of the planned Settlement Agreement, PSNH has agreed to forego recovery of $25 million of the deferred equity return related to the Clean Air Project. Upon completion of the divestiture process, all costs not recovered from sales proceeds (stranded costs), will be recovered via bonds that will be secured by a non-bypassable charge to PSNH's customers. Consummation of the Term Sheet provisions is conditioned upon the enactment of New Hampshire legislation, completion of the Settlement Agreement, and NHPUC approval of the Settlement Agreement. We expect legislation to be finalized in the third quarter of 2015 and a NHPUC decision to be issued in late 2015.
Liquidity:
·
Cash flows provided by operating activities totaled $481.8 million in the first quarter of 2015, compared with $493.8 million in the first quarter of 2014. Investments in property, plant and equipment totaled $362.6 million in the first quarter of 2015, compared with $348.7 million in the first quarter of 2014. Cash and cash equivalents totaled $71 million as of March 31, 2015, compared with $38.7 million as of December 31, 2014.
·
On January 15, 2015, ES parent issued $150 million of 1.60 percent Series G Senior Notes, due to mature in 2018 and $300 million of 3.15 percent Series H Senior Notes, due to mature in 2025. Proceeds were used to repay short-term borrowings outstanding under the ES parent commercial paper program.
·
On April 29, 2015, our Board of Trustees approved a common share dividend payment of $0.4175 per share, payable on June 30, 2015 to shareholders of record as of May 29, 2015.
31
Overview
Consolidated: A summary of our earnings by business, which also reconciles the non-GAAP financial measures of consolidated non-GAAP earnings and EPS, as well as EPS by business, to the most directly comparable GAAP measures of consolidated Net Income Attributable to Controlling Interest and diluted EPS, for the first quarters of 2015 and 2014 is as follows:
|
| For the Three Months Ended March 31, | |||||||||||
|
| 2015 |
| 2014 | |||||||||
(Millions of Dollars, Except Per Share Amounts) |
| Amount |
| Per Share |
| Amount |
| Per Share | |||||
Net Income Attributable to Controlling Interest (GAAP) |
| $ | 253.3 |
| $ | 0.80 |
| $ | 236.0 |
| $ | 0.74 | |
|
| $ | 252.8 |
| $ | 0.80 |
| $ | 239.2 |
| $ | 0.75 | |
ES Parent and Other Companies |
|
| 4.5 |
|
| 0.01 |
|
| 2.6 |
|
| 0.01 | |
Non-GAAP Earnings |
|
| 257.3 |
|
| 0.81 |
|
| 241.8 |
|
| 0.76 | |
Integration Costs (after-tax) |
|
| (4.0) |
|
| (0.01) |
|
| (5.8) |
|
| (0.02) | |
Net Income Attributable to Controlling Interest (GAAP) |
| $ | 253.3 |
| $ | 0.80 |
| $ | 236.0 |
| $ | 0.74 |
Excluding the impact of integration costs, our first quarter 2015 earnings increased by $15.5 million, as compared to the first quarter of 2014. The increase was due primarily to the $27.5 million favorable earnings impact related to the resolution of NSTAR Electrics basic service bad debt adder, the CPSL program filings, and the recovery of LBR related to energy efficiency programs, and the impact of the December 1, 2014 CL&P base distribution rate increase. Partially offsetting these favorable earnings impacts were the $12.4 million after-tax reserve related to the March 2015 FERC ROE order, an increase in operations and maintenance costs primarily attributable to an increase in labor and employee benefits expense, as a result of the impact from winter weather and storms, as compared to the first quarter of 2014, higher depreciation expense and higher property taxes.
The first quarter 2015 and 2014 integration costs included costs incurred for employee severance in connection with ongoing integration. In addition, the first quarter 2015 integration costs also included costs associated with our branding efforts.
Regulated Companies: Our Regulated companies consist of the electric distribution, transmission, and natural gas distribution segments. Generation activities of PSNH and WMECO are included in our electric distribution segment. A summary of our segment earnings and EPS for the first quarters of 2015 and 2014 is as follows:
|
| For the Three Months Ended March 31, | |||||||||||
|
| 2015 |
| 2014 | |||||||||
(Millions of Dollars, Except Per Share Amounts) |
| Amount |
| Per Share |
| Amount |
| Per Share | |||||
Electric Distribution |
| $ | 130.6 |
| $ | 0.41 |
| $ | 112.2 |
| $ | 0.35 | |
Transmission |
|
| 66.6 |
|
| 0.21 |
|
| 74.9 |
|
| 0.24 | |
Natural Gas Distribution |
|
| 55.6 |
|
| 0.18 |
|
| 52.1 |
|
| 0.16 | |
Net Income - Regulated Companies |
| $ | 252.8 |
| $ | 0.80 |
| $ | 239.2 |
| $ | 0.75 |
Our electric distribution segment earnings increased $18.4 million in the first quarter of 2015, as compared to the first quarter of 2014, due primarily to the $27.5 million favorable earnings impact related to the resolution of NSTAR Electrics basic service bad debt adder, the CPSL program filings, and the recovery of LBR related to energy efficiency programs, and the impact of the December 1, 2014 CL&P base distribution rate increase. Partially offsetting these favorable earnings impacts were an increase in operations and maintenance costs primarily attributable to an increase in labor and employee benefits expense, as a result of the impact from winter weather and storms, as compared to the first quarter of 2014, higher depreciation expense and higher property taxes.
Our transmission segment earnings decreased $8.3 million in the first quarter of 2015, as compared to the first quarter of 2014, due primarily to the $12.4 million after-tax reserve related to the March 2015 FERC ROE order and the negative earnings impact resulting from the lower allowed ROE in the first quarter of 2015, as compared to the first quarter of 2014, partially offset by a higher transmission rate base as a result of an increased investment in our transmission infrastructure.
Our natural gas distribution segment earnings increased $3.5 million in the first quarter of 2015, as compared to the first quarter of 2014, due primarily to higher firm natural gas sales volumes and peak demand revenues resulting from colder weather in the first quarter of 2015, as compared to the first quarter of 2014, and additional natural gas heating customers, partially offset by higher property taxes, higher depreciation expense and bad debt expense.
A summary of our retail electric GWh sales volumes and percentage changes, as well as percentage changes in CL&P, NSTAR Electric, PSNH and WMECO retail electric GWh sales volumes, is as follows:
| For the Three Months Ended March 31, 2015 Compared to 2014 | ||||||||||||
| ES |
| CL&P |
| NSTAR Electric |
| PSNH |
| WMECO | ||||
|
|
| Percentage |
| Percentage |
| Percentage |
| Percentage |
|
| ||
| Sales Volumes (GWh) |
| Increase/ |
| Increase/ |
| Increase/ |
| Increase/ |
| Percentage | ||
Electric | 2015 |
| 2014 |
| (Decrease) |
| (Decrease) |
| (Decrease) |
| (Decrease) |
| Decrease |
Residential | 6,217 |
| 6,139 |
| 1.3 % |
| 1.2 % |
| 1.6 % |
| 1.6 % |
| (0.6)% |
Commercial | 6,930 |
| 6,866 |
| 0.9 % |
| 0.5 % |
| 1.9 % |
| (1.0)% |
| (0.1)% |
Industrial | 1,301 |
| 1,343 |
| (3.1)% |
| (0.9)% |
| (4.5)% |
| (4.9)% |
| (4.7)% |
Total | 14,448 |
| 14,348 |
| 0.7 % |
| 0.8 % |
| 1.4 % |
| (0.5)% |
| (1.1)% |
32
A summary of our firm natural gas sales volumes in million cubic feet and percentage changes is as follows:
| For the Three Months Ended March 31, 2015 Compared to 2014 | ||||
| ES | ||||
| Sales Volumes (million cubic feet) |
| Percentage | ||
Firm Natural Gas | 2015 |
| 2014 |
| Increase |
Residential | 21,455 |
| 19,812 |
| 8.3% |
Commercial | 21,450 |
| 19,627 |
| 9.3% |
Industrial | 7,667 |
| 7,478 |
| 2.5% |
Total | 50,572 |
| 46,917 |
| 7.8% |
Total, Net of Special Contracts (1) | 49,381 |
| 45,550 |
| 8.4% |
(1)
Special contracts are unique to the customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to Yankee Gas regardless of the customers' usage.
Weather, fluctuations in energy supply costs, conservation measures (including utility-sponsored energy efficiency programs), and economic conditions affect customer energy usage. Industrial sales are less sensitive to temperature variations than residential and commercial sales. In our service territories, weather impacts electric sales during the summer and electric and natural gas sales during the winter (natural gas sales are more sensitive to temperature variations than electric sales). Customer heating or cooling usage may not directly correlate with historical levels or with the level of degree-days that occur.
Our first quarter of 2015 total consolidated retail electric sales volumes were higher, as compared to the first quarter of 2014, due primarily to colder weather. First quarter 2015 heating degree days were 5 percent higher in Connecticut and western Massachusetts, 10 percent higher in the Boston metropolitan area, and 4 percent higher in New Hampshire, as compared to the first quarter of 2014. Weather-normalized Eversource consolidated retail electric sales volumes remained relatively unchanged in the first quarter of 2015, as compared to the first quarter of 2014.
For CL&P (effective December 1, 2014) and WMECO, fluctuations in retail electric sales volumes do not impact earnings due to the regulatory commission approved revenue decoupling mechanisms. Distribution revenues are decoupled from their customer sales volumes. CL&P and WMECO reconcile their annual base distribution rate recovery to pre-established levels of baseline distribution delivery service revenues. Any difference between the allowed level of distribution revenue and the actual amount incurred during a 12-month period is adjusted through rates in the following period. The decoupling mechanism effectively breaks the relationship between sales volumes and revenues recognized. Prior to December 1, 2014, CL&P recognized LBR related to reductions in sales volume as a result of successful energy efficiency programs. LBR was recovered from retail customers through the FMCC. Effective December 1, 2014, CL&P no longer recognizes LBR due to its revenue decoupling mechanism. NSTAR Electric continues to recognize LBR through December 31, 2015 in accordance with the 2012 DPU-approved comprehensive merger settlement agreement with the Massachusetts Attorney General. For the first quarter of 2015 and 2014, NSTAR Electric recognized LBR of $12.5 million and $8.7 million, respectively.
Our firm natural gas sales are subject to many of the same influences as our retail electric sales. In addition, they have benefited from customer growth across both operating companies. Our first quarter 2015 consolidated firm natural gas sales volumes, consisting of the firm natural gas sales volumes of Yankee Gas and NSTAR Gas, were higher, as compared to the first quarter of 2014, due primarily to colder weather in the first quarter of 2015, as compared to the first quarter of 2014. The first quarter 2015 weather-normalized Eversource consolidated firm natural gas sales volumes increased 3.2 percent, as compared to the same period in 2014, due primarily to residential and commercial customer growth.
ES Parent and Other Companies: ES parent and other companies, which include our unregulated businesses, had net earnings of $0.5 million in the first quarter of 2015, compared with net losses of $3.2 million in the first quarter of 2014. Excluding the impact of integration costs, ES parent and other companies earned $4.5 million in the first quarter of 2015, compared with $2.6 million in the first quarter of 2014. The earnings increase in 2015 was due primarily to the absence of a $2.5 million contribution made in March 2014.
Liquidity
Consolidated: Cash and cash equivalents totaled $71 million as of March 31, 2015, compared with $38.7 million as of December 31, 2014.
On April 3, 2015, the DPU authorized NSTAR Gas to issue up to $100 million in long-term debt for the period through December 31, 2015.
On January 15, 2015, ES parent issued $150 million of 1.60 percent Series G Senior Notes, due to mature in 2018 and $300 million of 3.15 percent Series H Senior Notes, due to mature in 2025. The proceeds, net of issuance costs, were used to repay short-term borrowings outstanding under the ES parent commercial paper program.
On April 1, 2015, CL&P repaid at maturity the $100 million 5.00 percent 2005 Series A First and Refunding Mortgage Bonds using short-term borrowings. On April 1, 2015, CL&P also redeemed the $62 million 1996A Series 1.55 percent PCRBs that were subject to mandatory tender, using short term borrowings.
ES parent, CL&P, PSNH, WMECO, NSTAR Gas and Yankee Gas are parties to a five-year $1.45 billion revolving credit facility that expires September 6, 2019. The revolving credit facility is used primarily to backstop ES parent's $1.45 billion commercial paper program. The commercial paper program allows ES parent to issue commercial paper as a form of short-term debt. As of March 31, 2015 and December 31, 2014, ES parent had $788 million and approximately $1.1 billion, respectively, in short-term borrowings outstanding under the ES parent commercial paper program, leaving $662 million and $348.9 million of available borrowing capacity as of March 31, 2015 and December 31, 2014, respectively. The weighted-average interest rate on these borrowings as of March 31, 2015 and December 31, 2014 was 0.53 percent and 0.43 percent, respectively, which is
33
generally based on A2/P2 rated commercial paper. As of March 31, 2015, there were intercompany loans from ES parent of $190.1 million to CL&P, $82 million to PSNH and $70.5 million to WMECO. As of December 31, 2014, there were intercompany loans from ES parent of $133.4 million to CL&P, $90.5 million to PSNH and $21.4 million to WMECO.
NSTAR Electric has a five-year $450 million revolving credit facility that expires September 6, 2019. This facility serves to backstop NSTAR Electric's existing $450 million commercial paper program. As of March 31, 2015 and December 31, 2014, NSTAR Electric had $215.5 million and $302 million, respectively, in short-term borrowings outstanding under its commercial paper program, leaving $234.5 million and $148 million of available borrowing capacity as of March 31, 2015 and December 31, 2014, respectively. The weighted-average interest rate on these borrowings as of March 31, 2015 and December 31, 2014 was 0.35 percent and 0.27 percent, respectively, which is generally based on A2/P1 rated commercial paper.
Cash flows provided by operating activities totaled $481.8 million in the first quarter of 2015, compared with $493.8 million in the first quarter of 2014. The decrease in operating cash flows was due primarily to the timing of regulatory recoveries, resulting from both the increase in purchased power and congestion costs at NSTAR Electric, WMECO and CL&P, along with the timing of collections and payments related to our working capital items, including accounts receivable and accounts payable. Accounts receivable increased due primarily to higher sales volumes in the first quarter of 2015 as a result of colder weather, increases in both CL&Ps and NSTAR Electrics basic service rates effective January 1, 2015, and the increase in CL&P's base distribution rates effective December 1, 2014. In addition, there was an increase of approximately $20 million of Pension and PBOP Plan cash contributions in the first quarter of 2015, compared to the same period in 2014. Partially offsetting these unfavorable cash flow impacts was an income tax refund received in the first quarter of 2015 primarily related to the extension of the accelerated deduction of depreciation in 2014, which resulted in cash receipts of approximately $250 million in 2015, as compared to income tax payments in the first quarter of 2014.
On April 23, 2015, S&P upgraded the corporate credit ratings by one level and outlooks to stable from positive of ES parent, CL&P, NSTAR Electric, PSNH, WMECO, Yankee Gas and NSTAR Gas. A summary of our corporate credit ratings and outlooks by Moody's, S&P and Fitch is as follows:
|
| Moody's |
| S&P |
| Fitch | ||||||
|
| Current |
| Outlook |
| Current |
| Outlook |
| Current |
| Outlook |
ES Parent |
| Baa1 |
| Stable |
| A |
| Stable |
| BBB+ |
| Stable |
CL&P |
| Baa1 |
| Stable |
| A |
| Stable |
| BBB+ |
| Stable |
NSTAR Electric |
| A2 |
| Stable |
| A |
| Stable |
| A |
| Stable |
PSNH |
| Baa1 |
| Stable |
| A |
| Stable |
| BBB+ |
| Stable |
WMECO |
| A3 |
| Stable |
| A |
| Stable |
| BBB+ |
| Stable |
In the first quarter of 2015, we had cash dividends on common shares of $132.5 million, compared with $118.5 million in the first quarter of 2014. On February 3, 2015, our Board of Trustees approved a common share dividend payment of $0.4175 per share, payable on March 31, 2015 to shareholders of record as of March 2, 2015. The dividend represented an increase of 6.4 percent over the dividend paid in December 2014. On April 29, 2015, our Board of Trustees approved a common share dividend payment of $0.4175 per share, payable on June 30, 2015 to shareholders of record as of May 29, 2015.
In the first quarter of 2015, CL&P, NSTAR Electric, PSNH, and WMECO paid $49 million, $49.5 million, $26.5 million, and $9.3 million, respectively, in common stock dividends to ES parent.
Investments in Property, Plant and Equipment on the statements of cash flows do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension expense. In the first quarter of 2015, investments for Eversource, CL&P, NSTAR Electric, PSNH, and WMECO were $362.6 million, $127.6 million, $79.8 million, $71.9 million, and $35.9 million, respectively.
Business Development and Capital Expenditures
Our consolidated capital expenditures, including amounts incurred but not paid, cost of removal, AFUDC, and the capitalized portions of pension expense (all of which are non-cash factors), totaled $310.5 million in the first quarter of 2015, compared with $277.9 million in the first quarter of 2014. These amounts included $8.4 million and $5.9 million in the first quarter of 2015 and 2014, respectively, related to information technology and facilities upgrades and enhancements, primarily at Eversource Service and The Rocky River Realty Company.
Access Northeast: In September 2014, Eversource and Spectra Energy Corp announced Access Northeast, a natural gas pipeline expansion project. Access Northeast will enhance the Algonquin and Maritimes pipeline systems using existing routes and is expected to be capable of delivering approximately one billion cubic feet of natural gas per day to New England. Eversource and Spectra Energy Corp will have equal ownership interest in the project with the option of additional investors in the future. On February 18, 2015, National Grid was added as a co-developer in the project for a total ownership interest of 20 percent, with Eversource and Spectra Energy Corp each owning 40 percent. The total project cost, subject to FERC approval, is expected to be approximately $3 billion and has an anticipated in-service date of November 2018.
In December 2014, Eversource and Spectra Energy Corp announced an alliance with Iroquois Gas Transmission for the Access Northeast project. This alliance will provide New England natural gas distribution companies and generators with additional access to natural gas supplies from multiple, diverse receipt points along the Algonquin pipeline system, including the Iroquois pipeline system.
34
Transmission Business: Overall, transmission business capital expenditures increased by $37.9 million in the first quarter of 2015, as compared to the first quarter of 2014. A summary of transmission capital expenditures by company is as follows:
|
| For the Three Months Ended March 31, | ||||
(Millions of Dollars) |
| 2015 |
| 2014 | ||
CL&P |
| $ | 42.4 |
| $ | 36.2 |
NSTAR Electric |
|
| 21.4 |
|
| 12.4 |
PSNH |
|
| 28.9 |
|
| 16.7 |
WMECO |
|
| 23.8 |
|
| 16.3 |
NPT |
|
| 9.7 |
|
| 6.7 |
Total Transmission Segment |
| $ | 126.2 |
| $ | 88.3 |
NEEWS: The Interstate Reliability Project (IRP) includes CL&P's construction of an approximately 40-mile, 345-kV overhead line from Lebanon, Connecticut to the Connecticut-Rhode Island border in Thompson, Connecticut where it will connect to transmission enhancements being constructed by National Grid in Rhode Island and Massachusetts. Construction has been underway in all three states since March 2014. Eversource's portion of the cost is estimated to be $218 million, and we expect to complete IRP by the end of 2015. As of March 31, 2015, IRP was approximately 90 percent complete, and CL&P had placed $34 million in service.
The Greater Hartford Central Connecticut (GHCC) solutions are comprised of many 115-kV upgrades and are expected to cost approximately $350 million and be placed in service from 2016 through 2018. ISO New England posted the final Solutions Study for GHCC in late February 2015. The Reliability Committee recommended approval of our Proposed Plan Applications to ISO New England at its March 17, 2015 meeting. The first siting filing for these projects was made to the Connecticut Siting Council on February 27, 2015. Additional siting filings are expected to be made throughout 2015 and 2016. We expect to begin work on these projects in mid-2015 and complete GHCC-related work in 2018.
Through March 31, 2015, CL&P and WMECO capitalized $371.4 million and $573.7 million, respectively, in costs associated with NEEWS. Included in the NEEWS amounts are costs for IRP, of which CL&P capitalized $183.8 million in costs through March 31, 2015, and $15 million in the first quarter of 2015.
Northern Pass: Northern Pass is Eversource's planned HVDC transmission line from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire. Northern Pass will interconnect at the Québec-New Hampshire border with a planned HQ HVDC transmission line. NPT received ISO-NE approval under Section I.3.9 of the ISO tariff in 2013. The DOE continues to work on the draft Environmental Impact Statement (draft EIS) for Northern Pass. The issuance of the draft EIS for public comment is anticipated in June 2015. NPT expects to file the New Hampshire Site Evaluation Committee application in the third quarter after receipt of the draft EIS. The $1.4 billion project is subject to federal and state public permitting processes and is now expected to be operational in the first half of 2019.
Greater Boston Reliability Solutions: NSTAR Electric and PSNH expect to implement a series of new transmission projects over the next five years to enhance the region's system reliability. On February 12, 2015, ISO-NE selected Eversource's and National Grid's proposed Greater Boston and New Hampshire Solution (Solution) as its preferred option because it is significantly less expensive than an alternate proposal and has superior performance criteria. The Solution consists of important electric transmission upgrades encompassing the Merrimack Valley area of southern New Hampshire and the metropolitan Boston area. We estimate our investment in the Solution will be $489 million, and we are pursuing the necessary regulatory approvals.
35
Distribution Business: A summary of distribution capital expenditures by company is as follows:
| For the Three Months Ended March 31, | ||||
(Millions of Dollars) | 2015 |
| 2014 | ||
CL&P: |
|
|
|
|
|
Basic Business | $ | 27.2 |
| $ | 10.7 |
Aging Infrastructure |
| 34.2 |
|
| 34.3 |
Load Growth |
| 11.5 |
|
| 17.3 |
Total CL&P |
| 72.9 |
|
| 62.3 |
NSTAR Electric: |
|
|
|
|
|
Basic Business |
| 22.2 |
|
| 29.6 |
Aging Infrastructure |
| 13.5 |
|
| 22.9 |
Load Growth |
| 3.9 |
|
| 6.5 |
Total NSTAR Electric |
| 39.6 |
|
| 59.0 |
PSNH: |
|
|
|
|
|
Basic Business |
| 12.3 |
|
| 5.8 |
Aging Infrastructure |
| 9.2 |
|
| 12.5 |
Load Growth |
| 6.7 |
|
| 6.1 |
Total PSNH |
| 28.2 |
|
| 24.4 |
WMECO: |
|
|
|
|
|
Basic Business |
| 3.1 |
|
| 1.5 |
Aging Infrastructure |
| 4.5 |
|
| 3.3 |
Load Growth |
| 1.8 |
|
| 1.4 |
Total WMECO |
| 9.4 |
|
| 6.2 |
Total - Electric Distribution (excluding Generation) |
| 150.1 |
|
| 151.9 |
PSNH Generation |
| 2.6 |
|
| 2.5 |
WMECO Generation |
| - |
|
| 4.1 |
Total - Natural Gas |
| 23.2 |
|
| 25.2 |
Total Distribution Segment | $ | 175.9 |
| $ | 183.7 |
For the electric distribution business, basic business includes the purchase of meters, tools, vehicles, information technology, transformer replacements, equipment facilities, and the relocation of plant. Aging infrastructure relates to reliability and the replacement of overhead lines, plant substations, underground cable replacement, and equipment failures. Load growth includes requests for new business and capacity additions on distribution lines and substation additions and expansions.
NSTAR Electric's capital spending program decreased by $19.4 million in the first quarter of 2015, as compared to the first quarter of 2014, as a result of the impact from the winter weather and storms in the greater Boston metropolitan area.
Natural Gas Business Expansion and Enhancement: In 2013, in accordance with Connecticut law and regulations, PURA approved a comprehensive joint natural gas infrastructure expansion plan (expansion plan) filed by Yankee Gas and other Connecticut natural gas distribution companies. The expansion plan described how Yankee Gas expects to add approximately 82,000 new natural gas heating customers over a 10-year period. Yankee Gas estimates that its portion of the plan will cost approximately $700 million over 10 years. In January 2015, PURA approved a joint settlement agreement proposed by Yankee Gas and other Connecticut natural gas distribution companies and regulatory agencies that clarified the procedures and oversight criteria applicable to the expansion plan.
In October 2014, pursuant to new legislation, NSTAR Gas filed the Gas System Enhancement Program (GSEP) with the DPU. NSTAR Gas' program accelerates the replacement of certain natural gas distribution facilities in the system within 25 years. The GSEP includes a new tariff that provides NSTAR Gas an opportunity to collect the costs for the program on an annual basis through a newly designed reconciling factor. On April 30, 2015, the DPU approved the GSEP. We have projected capital expenditures of approximately $200 million for the period 2015 through 2018 for the GSEP, which are consistent with our request in the NSTAR Gas rate case application currently before the DPU.
FERC Regulatory Issues
FERC ROE Complaints: Beginning in 2011, three separate complaints were filed at FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (the "Complainants"). In these three separate complaints, the Complainants challenged the NETOs' base ROE of 11.14 percent that was utilized since 2006 and sought an order to reduce it prospectively from the date of the final FERC order and for the 15-month complaint refund periods stipulated in the separate complaints. In 2014, the FERC ordered the base ROE to be set at 10.57 percent for the first complaint refund period and prospectively from October 16, 2014 and that a utility's total or maximum ROE shall not exceed the top of the new zone of reasonableness, which was set at 11.74 percent. The NETOs and the Complainants sought rehearing from FERC. In late 2014, the NETOs made a compliance filing, which was challenged by the Complainants, and in accordance with FERC orders, began issuing refunds to customers from the first complaint period.
On March 3, 2015, FERC issued an order denying all issues raised on rehearing by the NETOs and Complainants in the first base ROE complaint. The FERC order upheld the base ROE of 10.57 percent for the first complaint refund period and prospectively from October 16, 2014, and upheld that the utility's total ROE (the base ROE plus any incentive adders) for the transmission assets to which the adder applies is capped at the top of the zone of reasonableness, which is currently set at 11.74 percent. As a result of clarifying information related to how the ROE cap is applied, which is contained in the order, Eversource adjusted its reserve in the first quarter of 2015 and recognized an after-tax charge to earnings (excluding interest)
36
of $12.4 million, of which $7.9 million was recorded at CL&P, $1.4 million at NSTAR Electric, $0.6 million at PSNH, and $2.5 million at WMECO. The charge was recorded as a regulatory liability.
FERC Order No. 1000: On March 19, 2015, FERC acted on all rehearing requests filed by the NETOs, including CL&P, NSTAR Electric, PSNH and WMECO, and other parties and accepted the November 2013 compliance filing made by ISO-NE and the NETOs, subject to further compliance. FERC accepted our proposal that the new competitive transmission planning process will not apply to certain projects, which have been declared as the preferred solution by ISO-NE, unless ISO-NE later decides the solution must be re-evaluated. FERC determined on rehearing that we can restore provisions that recognize the NETOs rights to retain use and control of their existing rights of ways (ROWs).
FERC affirmed that it can eliminate our right of first refusal to build transmission in New England even though FERC previously approved and granted special protections to these rights. We are currently evaluating this and other parts of the FERC decision with the NETOs and ISO-NE. Implementation of FERC's goals in New England, including within our service territories, may expose us to competition for construction of transmission projects, additional regulatory considerations, and potential delay with respect to future transmission projects. While the FERC Orders may bring new challenges, we believe there are also opportunities for us to compete for transmission reliability projects outside of our service territories.
Regulatory Developments and Rate Matters
The Regulated companies' distribution rates are set by their respective state regulatory commissions, and their tariffs include mechanisms for periodically adjusting their rates for the recovery of specific incurred costs. Other than as described below, for the first quarter of 2015, changes made to the Regulated companies' rates did not have a material impact on their earnings, financial position, or cash flows. For further information, see "Financial Condition and Business Analysis Regulatory Developments and Rate Matters" included in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the Eversource 2014 Annual Report on Form 10-K.
Connecticut:
Yankee Gas - Settlement Agreement: On April 29, 2015, the PURA approved a settlement agreement entered into among Yankee Gas, the Connecticut Office of Consumer Counsel, and the PURA Staff, which eliminates the requirement to file a rate case in 2015. Under the terms of the settlement agreement, Yankee Gas will provide a $1.5 million rate credit to firm customers beginning in December 2015, will establish an earnings sharing mechanism whereby Yankee Gas and its customers will share equally any earnings exceeding a 9.5 percent ROE in a twelve month period commencing with the period from April 1, 2015 through March 31, 2016, and Yankee Gas shall forgo its right to file a rate case for an increase in its base distribution rates prior to January 1, 2017. This does not impact the rates charged under the CES program. In addition, the settlement agreement resolves two pending regulatory proceedings before PURA pertaining to a review of Yankee Gas overearnings. In the first quarter of 2015, Yankee Gas recorded the $1.5 million expected refund to customers as a reduction to operating revenues.
Massachusetts:
2014 Comprehensive Settlement Agreement: On March 2, 2015, the DPU approved the comprehensive settlement agreement between NSTAR Electric, NSTAR Gas and the Massachusetts Attorney General (the "Settlement") as filed with the DPU on December 31, 2014. The Settlement resolved the outstanding NSTAR Electric CPSL program filings for 2006 through 2011, the NSTAR Electric and NSTAR Gas PAM and energy efficiency-related customer billing adjustments reported in 2012, and the recovery of LBR related to NSTAR Electric's energy efficiency programs for 2008 through 2011 (11 dockets in total). As a result, NSTAR Electric and NSTAR Gas will refund a combined $44.7 million to customers. The refund was recorded as a regulatory liability as of March 31, 2015 and NSTAR Electric recognized a $13 million after-tax benefit in the first quarter of 2015.
Basic Service Bad Debt Adder: In accordance with a generic 2005 DPU order, electric utilities in Massachusetts recover the energy-related portion of bad debt costs in their Basic Service rates. In February 2007, NSTAR Electric filed its 2005 through 2006 Basic Service reconciliation with the DPU proposing an adjustment related to the increase of its Basic Service bad debt charge-offs. In June 2007, the DPU approved NSTAR Electric's proposed adjustment to the Basic Service Adder but instructed NSTAR Electric to reduce distribution rates by an equal and offsetting amount. This adjustment to NSTAR Electric's distribution rates would have eliminated the fully reconciling nature of the Basic Service bad debt adder.
In 2010, NSTAR Electric filed an appeal of the DPU's order with the SJC. NSTAR Electric took the position that it had fully removed the collection of energy-related bad debt costs from its base distribution rates effective January 1, 2006; therefore, no further adjustment to distribution rates was warranted. In 2012, the SJC vacated the DPU order and remanded the matter to the DPU for further review.
On January 7, 2015, the DPU issued an order concluding that NSTAR Electric had appropriately accounted for the removal of supply-related bad debt costs from base distribution rates effective January 1, 2006. The DPU ordered NSTAR Electric and the Massachusetts Attorney General to collaborate on the reconciliation of energy-related bad debt costs through 2014. During the second quarter of 2015, NSTAR Electric expects to file with the DPU to recover from customers approximately $43 million of supply-related bad debt costs. In the first quarter of 2015, as a result of the DPU order, NSTAR Electric increased its regulatory assets by $24.2 million, resulting in an increase in after-tax earnings of $14.5 million.
New Hampshire:
PSNH Generation Agreement: On March 11, 2015, PSNH entered into an agreement in principle in a settlement Term Sheet with the New Hampshire Office of Energy and Planning, certain members of the Staff of the NHPUC, the Office of the Consumer Advocate, and two State Senators. The Term Sheet is designed to provide a resolution of issues pertaining to PSNH's generation assets in pending regulatory proceedings before the NHPUC. Under the terms of the Term Sheet, the Clean Air Project prudence proceeding will be resolved and all remaining Clean Air Project costs will be included in rates effective January 1, 2016. PSNH has agreed to pursue the divestiture of its generation assets upon NHPUC
37
approval of a final Settlement Agreement reflecting the provisions of the Term Sheet. As part of the planned Settlement Agreement, PSNH has agreed to forego recovery of $25 million of the deferred equity return related to the Clean Air Project. Upon completion of the divestiture process, all remaining stranded costs, including any remaining deferred equity return in excess of the $25 million that PSNH has agreed to forego, will be recovered via bonds that will be secured by a non-bypassable charge to PSNH's customers. In addition, PSNH will not seek a general distribution rate increase that would become effective before July 1, 2017 and will contribute $5 million to create a clean energy fund, which will not be recoverable from its customers.
Consummation of the Term Sheet provisions is conditioned upon the enactment of authorizing securitization legislation in New Hampshire, completion of the Settlement Agreement, and NHPUC approval of the Settlement Agreement. On March 26, 2015, the New Hampshire Senate passed the legislation, which is currently pending in the New Hampshire House. We expect legislation to be finalized in the third quarter of 2015 and a NHPUC decision to be issued in late 2015.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and, at times, difficult, subjective or complex judgments. Changes in these estimates, assumptions and judgments, in and of themselves, could materially impact our financial position, results of operations or cash flows. Our management communicates to and discusses with the Audit Committee of our Board of Trustees significant matters relating to critical accounting policies. Our critical accounting policies that we believed were the most critical in nature were reported in the Eversource 2014 Form 10-K. There have been no material changes with regard to these critical accounting policies.
Other Matters
Accounting Standards: For information regarding new accounting standards, see Note 1B, "Summary of Significant Accounting Policies Accounting Standards," to the financial statements.
Contractual Obligations and Commercial Commitments: There have been no material contractual obligations identified and no material changes with regard to the contractual obligations and commercial commitments previously disclosed in the Eversource 2014 Form 10-K.
Web Site: Additional financial information is available through our website at www.eversource.com. We make available through our website a link to the SEC's EDGAR website (http://www.sec.gov/edgar/searchedgar/companysearch.html), at which site Eversource's, CL&P's, NSTAR Electric's, PSNH's and WMECO's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports may be reviewed. Information contained on the Company's website or that can be accessed through the website is not incorporated into and does not constitute a part of this Quarterly Report on Form 10-Q.
38
RESULTS OF OPERATIONS EVERSOURCE ENERGY AND SUBSIDIARIES
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for Eversource for the three months ended March 31, 2015 and 2014 included in this Quarterly Report on Form 10-Q:
|
|
| Operating Revenues and Expenses |
|
| |||||||||
|
|
| For the Three Months Ended March 31, |
|
| |||||||||
|
|
|
|
|
|
|
|
| Increase/ |
|
|
|
| |
(Millions of Dollars) | 2015 |
| 2014 |
| (Decrease) |
| Percent |
|
| |||||
Operating Revenues | $ | 2,513.4 |
| $ | 2,290.6 |
| $ | 222.8 |
| 9.7 | % |
| ||
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Purchased Power, Fuel and Transmission |
| 1,162.1 |
|
| 978.2 |
|
| 183.9 |
| 18.8 |
|
| |
| Operations and Maintenance |
| 333.4 |
|
| 351.7 |
|
| (18.3) |
| (5.2) |
|
| |
| Depreciation |
| 163.8 |
|
| 150.8 |
|
| 13.0 |
| 8.6 |
|
| |
| Amortization of Regulatory Assets, Net |
| 60.6 |
|
| 57.9 |
|
| 2.7 |
| 4.7 |
|
| |
| Energy Efficiency Programs |
| 146.6 |
|
| 138.8 |
|
| 7.8 |
| 5.6 |
|
| |
| Taxes Other Than Income Taxes |
| 149.4 |
|
| 145.5 |
|
| 3.9 |
| 2.7 |
|
| |
|
| Total Operating Expenses |
| 2,015.9 |
|
| 1,822.9 |
|
| 193.0 |
| 10.6 |
|
|
Operating Income |
| 497.5 |
|
| 467.7 |
|
| 29.8 |
| 6.4 |
|
| ||
Interest Expense |
| 94.8 |
|
| 90.0 |
|
| 4.8 |
| 5.3 |
|
| ||
Other Income, Net |
| 5.7 |
|
| 1.7 |
|
| 4.0 |
| (a) |
|
| ||
Income Before Income Tax Expense |
| 408.4 |
|
| 379.4 |
|
| 29.0 |
| 7.6 |
|
| ||
Income Tax Expense |
| 153.2 |
|
| 141.5 |
|
| 11.7 |
| 8.3 |
|
| ||
Net Income |
| 255.2 |
|
| 237.9 |
|
| 17.3 |
| 7.3 |
|
| ||
Net Income Attributable to Noncontrolling Interests |
| 1.9 |
|
| 1.9 |
|
| - |
| - |
|
| ||
Net Income Attributable to Controlling Interest | $ | 253.3 |
| $ | 236.0 |
| $ | 17.3 |
| 7.3 | % |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Percent greater than 100 percent not shown as it is not meaningful. |
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues |
|
| ||||||||||||
|
|
| For the Three Months Ended March 31, |
|
| |||||||||
|
|
|
|
|
|
|
|
| Increase/ |
|
|
|
| |
(Millions of Dollars) | 2015 |
| 2014 |
| (Decrease) |
| Percent |
|
| |||||
Electric Distribution | $ | 1,760.1 |
| $ | 1,585.9 |
| $ | 174.2 |
| 11.0 | % |
| ||
Natural Gas Distribution |
| 507.4 |
|
| 432.8 |
|
| 74.6 |
| 17.2 |
|
| ||
| Total Distribution |
| 2,267.5 |
|
| 2,018.7 |
|
| 248.8 |
| 12.3 |
|
| |
Transmission |
| 249.0 |
|
| 252.1 |
|
| (3.1) |
| (1.2) |
|
| ||
| Total Regulated Companies |
| 2,516.5 |
|
| 2,270.8 |
|
| 245.7 |
| 10.8 |
|
| |
Other and Eliminations |
| (3.1) |
|
| 19.8 |
|
| (22.9) |
| (a) |
|
| ||
Total Operating Revenues | $ | 2,513.4 |
| $ | 2,290.6 |
| $ | 222.8 |
| 9.7 | % |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Percent greater than 100 percent not shown as it is not meaningful. |
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of our retail electric sales volumes and firm natural gas sales volumes were as follows: | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, |
|
| |||||||||
|
|
| 2015 |
| 2014 |
| Increase |
| Percent |
|
| |||
Retail Electric Sales Volumes in GWh |
| 14,448 |
|
| 14,348 |
|
| 100 |
| 0.7 | % |
| ||
Firm Natural Gas Sales Volumes in Million Cubic Feet |
| 50,572 |
|
| 46,917 |
|
| 3,655 |
| 7.8 |
|
|
Operating Revenues increased by $222.8 million in the first quarter of 2015, as compared to the same period in 2014.
Electric distribution segment revenues increased by $174.2 million as a result of the impact of both weather and increased rates on our base distribution revenues ($35 million), the 2014 Comprehensive Settlement Agreement at NSTAR Electric ($11 million), and the aggregate impact on revenues of corresponding costs that are recovered through our cost tracking mechanisms, which were the result of increases in energy supply costs ($211 million), offset by decreased costs associated with federally mandated congestion charges and transition costs ($46.6 million).
Energy supply costs were impacted by the overall New England wholesale energy supply market in which natural gas delivery costs are adversely impacting the cost of electric energy purchased for our retail electric customers. Energy supply costs are recovered from customers in rates through cost tracking mechanisms and therefore have no impact on earnings. Electric distribution segment revenues were favorably impacted by an increase in base distribution revenues, which reflected a 0.7 percent increase in retail electric sales volumes driven primarily by the colder winter weather experienced throughout our service territories in the first quarter of 2015, and the impact of CL&P's base distribution rate case effective December 1, 2014. Additionally, in connection with the 2014 Comprehensive Settlement Agreement, NSTAR Electric recognized an $11 million benefit to distribution revenues in the first quarter of 2015. These increases were partially offset by decreases in rates related to the recovery of costs associated with federally mandated congestion charges and transition cost recovery revenues, which are also recovered through cost tracking mechanisms.
Effective December 1, 2014, CL&Ps distribution revenues were decoupled from its sales volumes and CL&P no longer recognized LBR. This is similar to WMECO's revenue decoupling mechanism in that it provides CL&P a base amount of distribution revenues ($1.041 billion on an annual basis) and effectively breaks the relationship between revenues and customer electricity usage. Revenue decoupling mechanisms ensure the recovery of our approved base distribution revenue requirements. Therefore, changes in sales volumes have no impact on the level of base distribution revenue realized. In the first quarter of 2014, which was colder than normal, CL&Ps rates were not decoupled.
39
The natural gas distribution segment revenues increased by $74.6 million due primarily to an increase in rates related to the recovery of costs associated with the procurement of natural gas supply ($56.1 million). Natural gas supply costs were impacted by the overall New England wholesale energy supply market in which natural gas delivery costs are adversely impacting the cost of natural gas purchased on behalf of our retail natural gas customers. Natural gas supply costs are recovered from customers in rates through cost tracking mechanisms and therefore have no impact on earnings. In addition, revenues increased due to the firm natural gas base distribution revenues increase ($12.4 million) due primarily to a 7.8 percent increase in firm natural gas sales volumes, which was driven primarily by the colder winter. The weather conditions experienced were significantly colder than both normal and the same period last year throughout our natural gas service territories in Connecticut and Massachusetts. Weather-normalized firm natural gas sales volumes (based on 30-year average temperatures) increased 3.2 percent in 2015, as compared to 2014, due primarily to residential and commercial customer growth.
The transmission segment revenues decreased by $3.1 million due primarily to the impact of the $20 million reserve related to the March 2015 FERC ROE order, partially offset by the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure.
Purchased Power, Fuel and Transmission expense includes costs associated with purchasing electricity and natural gas on behalf of our customers. These energy supply costs are recovered from customers in rates through cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the following:
(Millions of Dollars) | Increase/(Decrease) | |
Electric Distribution | $ | 138.6 |
Natural Gas Distribution |
| 62.3 |
Transmission |
| 0.9 |
Other and Eliminations |
| (17.9) |
Total Purchased Power, Fuel and Transmission | $ | 183.9 |
The increase in purchased power at the electric and natural gas distribution businesses were driven by the higher costs associated with the procurement of energy supply. Our energy supply costs were impacted by higher natural gas delivery costs which, in addition to its impact on the cost of natural gas purchased on behalf of our retail natural gas customers, had an adverse impact on the cost of electric energy purchased for our retail electric customers.
Operations and Maintenance expense includes tracked costs and costs that are recovered through base electric and natural gas distribution rates; therefore variances impact earnings (non-tracked costs). Operations and Maintenance decreased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the following:
(Millions of Dollars) | Increase/(Decrease) | |
Base Electric Distribution: |
|
|
Resolution of basic service bad debt adder mechanism at NSTAR Electric | $ | (24.2) |
Increase in employee-related costs, including labor and benefits, as a result of the |
| 10.5 |
Implementation of a new outage restoration program at CL&P |
| 3.9 |
All other operations and maintenance |
| 2.6 |
Total Base Electric Distribution |
| (7.2) |
Total Base Natural Gas Distribution |
| 3.6 |
Total Tracked costs (Transmission and Electric and Natural Gas Distribution) |
| (2.7) |
Total Distribution and Transmission |
| (6.3) |
Other and eliminations: |
|
|
Integration costs |
| (2.5) |
All other (including eliminations) |
| (9.5) |
Total Operations and Maintenance | $ | (18.3) |
Depreciation increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher utility plant balances resulting from completed construction projects placed into service and an increase in depreciation rates at CL&P as a result of the distribution rate case effective December 1, 2014.
Amortization of Regulatory Assets, Net, which are tracked costs, include certain regulatory-approved tracking mechanisms. Fluctuations in these costs are recovered from customers in rates and have no impact on earnings. Amortization of Regulatory Assets, Net, increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the following:
(Millions of Dollars) | Increase/(Decrease) | |
NSTAR Electric (primarily 2014 Comprehensive Settlement Agreement and | $ | (21.3) |
CL&P (primarily storm cost recovery and energy supply and energy-related costs) |
| 18.4 |
PSNH (primarily default energy service charge) |
| 2.5 |
WMECO |
| 3.5 |
Other |
| (0.4) |
Total Amortization of Regulatory Assets, Net | $ | 2.7 |
40
In connection with the 2014 Comprehensive Settlement Agreement, NSTAR Electric recognized an $11.7 million benefit in the first quarter of 2015, which was recorded as a reduction to amortization expense. The CL&P amount reflects an increase in storm cost recovery, which was approved and included in distribution rates effective December 1, 2014.
Energy Efficiency Programs, which are tracked costs, increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in energy efficiency costs in accordance with the three-year program guidelines established by the DPU at NSTAR Electric.
Taxes Other Than Income Taxes increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in property taxes as a result of both an increase in utility plant balances and property tax rates.
Interest Expense increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher other interest expense ($4.5 million) due primarily to interest on regulatory deferral mechanisms.
Other Income, Net increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher AFUDC related to equity funds ($1.9 million) and net gains on marketable securities ($1.6 million).
Income Tax Expense increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher pre-tax earnings ($10.1 million) and higher state taxes ($1.4 million).
41
RESULTS OF OPERATIONS THE CONNECTICUT LIGHT AND POWER COMPANY
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for CL&P for the three months ended March 31, 2015 and 2014 included in this Quarterly Report on Form 10-Q:
| For the Three Months Ended March 31, |
| |||||||||||
|
|
|
|
|
|
| Increase/ |
|
|
| |||
(Millions of Dollars) | 2015 |
| 2014 |
| (Decrease) |
| Percent |
| |||||
Operating Revenues | $ | 804.9 |
| $ | 734.6 |
| $ | 70.3 |
| 9.6 | % | ||
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
| ||
| Purchased Power and Transmission |
| 333.6 |
|
| 281.4 |
|
| 52.2 |
| 18.6 |
| |
| Operations and Maintenance |
| 117.4 |
|
| 109.5 |
|
| 7.9 |
| 7.2 |
| |
| Depreciation |
| 52.9 |
|
| 46.1 |
|
| 6.8 |
| 14.8 |
| |
| Amortization of Regulatory Assets, Net |
| 48.3 |
|
| 29.9 |
|
| 18.4 |
| 61.5 |
| |
| Energy Efficiency Programs |
| 42.8 |
|
| 42.7 |
|
| 0.1 |
| 0.2 |
| |
| Taxes Other Than Income Taxes |
| 68.1 |
|
| 67.0 |
|
| 1.1 |
| 1.6 |
| |
|
| Total Operating Expenses |
| 663.1 |
|
| 576.6 |
|
| 86.5 |
| 15.0 |
|
Operating Income |
| 141.8 |
|
| 158.0 |
|
| (16.2) |
| (10.3) |
| ||
Interest Expense |
| 36.6 |
|
| 34.2 |
|
| 2.4 |
| 7.0 |
| ||
Other Income, Net |
| 2.2 |
|
| 1.0 |
|
| 1.2 |
| (a) |
| ||
Income Before Income Tax Expense |
| 107.4 |
|
| 124.8 |
|
| (17.4) |
| (13.9) |
| ||
Income Tax Expense |
| 38.2 |
|
| 45.5 |
|
| (7.3) |
| (16.0) |
| ||
Net Income | $ | 69.2 |
| $ | 79.3 |
| $ | (10.1) |
| (12.7) | % | ||
|
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|
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|
|
(a) Percent greater than 100 percent not shown as it is not meaningful. | |||||||||||||
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|
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
| ||
CL&P's retail sales volumes were as follows: |
|
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| ||||
|
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|
| For the Three Months Ended March 31, |
| |||||||||
|
|
| 2015 |
| 2014 |
| Increase |
| Percent |
| |||
Retail Sales Volumes in GWh |
| 5,994 |
|
| 5,949 |
|
| 45 |
| 0.8 | % |
CL&P's Operating Revenues increased by $70.3 million in the first quarter of 2015, as compared to the same period in 2014.
Distribution revenues increased by $78.8 million as a result of increases in energy supply costs ($101.6 million) and the impact of increased rates on base distribution revenues ($29.2 million), which was primarily attributable to the impact of CL&P's base distribution rate case effective December 1, 2014. The increase in distribution revenues was partially offset by decreased costs associated with federally mandated congestion charges ($30.3 million), and a decrease in retail transmission revenues and competitive transition assessment charges. Energy supply costs were impacted by the overall New England wholesale energy supply market in which natural gas delivery costs are adversely impacting the cost of electric energy purchased for our retail customers. Energy supply costs, federally mandated congestion charges, retail transmission revenues and competitive transition assessment charges are recovered from customers in rates through cost tracking mechanisms and therefore have no impact on earnings.
Effective December 1, 2014, CL&Ps distribution revenues were decoupled from its sales volumes and CL&P no longer recognized LBR. The revenue decoupling mechanism provides a base amount of distribution revenues ($1.041 billion on an annual basis) and effectively breaks the relationship between revenues and customer electricity usage. Revenue decoupling mechanisms ensure the recovery of our approved base distribution revenue requirements. Therefore, changes in sales volumes have no impact on the level of base distribution revenue realized. In the first quarter of 2014, which was colder than normal, CL&Ps rates were not decoupled.
Transmission revenues decreased by $8.5 million due primarily to the impact of the $12.5 million reserve related to the March 2015 FERC ROE order, partially offset by the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure.
Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P's customers. These energy supply costs are recovered from customers in PURA-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power and Transmission increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the following:
(Millions of Dollars) | Increase/(Decrease) | |
Purchased Power Costs | $ | 71.3 |
Transmission Costs |
| (18.2) |
Other |
| (0.9) |
Total Purchased Power and Transmission | $ | 52.2 |
Included in purchased power are the costs associated with CL&P's generation services charge (GSC) and deferred energy costs. The GSC recovers energy-related costs incurred as a result of providing electric generation service supply to all customers that have not migrated to competitive energy suppliers. The increase in purchased power was due primarily to higher costs associated with the procurement of energy supply and increased load as a result of customers returning to standard offer from third party suppliers. The decrease in transmission costs was the result of a decrease in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers.
Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance increased in the first quarter of 2015, as compared to the same period in 2014, driven by a $6.7 million increase in non-tracked costs, which was primarily attributable to an increase in costs for the implementation of a new outage restoration program
42
that began in the second quarter of 2014, higher storm restoration costs and higher vegetation management costs, partially offset by lower employee-related costs, including benefit costs. Additionally, there was a $1.2 million increase in tracked costs, which have no earnings impact, that was primarily attributable to increased transmission expenses.
Depreciation increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in depreciation rates as a result of the distribution rate case decision that was effective December 1, 2014 and higher utility plant balances resulting from completed construction projects placed into service.
Amortization of Regulatory Assets, Net¸ increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in storm cost recovery, which was approved and included in distribution rates effective December 1, 2014, as well as energy supply and energy-related costs that can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. Fluctuations in energy supply and energy-related costs, which are the primary drivers in amortization, are recovered from customers in rates and have no impact on earnings.
Taxes Other Than Income Taxes increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in property taxes as a result of both an increase in utility plant balances and property tax rates.
Interest Expense increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in other interest expense due to interest on regulatory deferral mechanisms ($1.8 million), and an increase in interest on long-term debt ($0.6 million) as a result of a new debt issuance in April 2014.
Other Income, Net increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher AFUDC related to equity funds ($0.8 million).
Income Tax Expense decreased in the first quarter of 2015, as compared to the same period in 2014, due primarily to lower pre-tax earnings ($6.1 million) and lower state taxes ($1.1 million).
EARNINGS SUMMARY
CL&P's earnings decreased $10.1 million in the first quarter of 2015, as compared to the same period in 2014, due primarily to a $7.9 million after-tax reserve related to the March 2015 FERC ROE order, an increase in operations and maintenance costs, which was primarily attributable to an increase in costs for the implementation of a new outage restoration program that began in the second quarter of 2014, higher storm restoration costs and higher vegetation management costs, and higher depreciation and property tax expense. Partially offsetting these unfavorable earnings impacts were higher distribution revenues due primarily to the impact of the December 1, 2014 base distribution rate increase.
LIQUIDITY
CL&P had cash flows provided by operating activities of $133.9 million in the first quarter of 2015, compared with $95.5 million in the first quarter of 2014. The improved operating cash flows were due primarily to income tax refunds of $122.4 million in the first quarter of 2015, compared with income tax refunds of $11.7 million in the first quarter of 2014. Partially offsetting this favorable impact was the timing of regulatory recoveries, resulting from the increase in federally mandated congestion charges, along with timing of collections and payments related to our working capital items, including accounts receivable and accounts payable. Accounts receivable increased due primarily to the basic service rate increase effective January 1, 2015 and the increase in distribution rates effective December 1, 2014.
Investments in Property, Plant and Equipment on the statements of cash flows do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension expense. In the first quarter of 2015, investments for CL&P were $127.6 million.
On April 1, 2015, CL&P repaid at maturity the $100 million 5.00 percent Series A First and Refunding Mortgage Bonds using short-term borrowings. On April 1, 2015, CL&P also redeemed the $62 million 1996A Series 1.55 percent PCRBs that were subject to mandatory tender, using short term borrowings.
ES parent, and certain of its subsidiaries, including CL&P, are parties to a five-year $1.45 billion revolving credit facility that expires September 6, 2019. The revolving credit facility is used primarily to backstop ES parent's $1.45 billion commercial paper program. The commercial paper program allows ES parent to issue commercial paper as a form of short-term debt with intercompany loans to certain subsidiaries, including CL&P. As of March 31, 2015, there were intercompany loans from ES parent of $190.1 million to CL&P. As of December 31, 2014, there were intercompany loans from ES parent of $133.4 million to CL&P.
Financing activities in the first quarter of 2015 included $49 million in common stock dividends paid to ES parent.
43
RESULTS OF OPERATIONS NSTAR ELECTRIC COMPANY AND SUBSIDIARY
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for NSTAR Electric for the three months ended March 31, 2015 and 2014 included in this Quarterly Report on Form 10-Q:
| For the Three Months Ended March 31, |
| |||||||||||
|
|
|
|
| Increase/ |
|
|
| |||||
(Millions of Dollars) | 2015 |
| 2014 |
| (Decrease) |
| Percent |
| |||||
Operating Revenues | $ | 766.8 |
| $ | 666.2 |
| $ | 100.6 |
| 15.1 | % | ||
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
| ||
| Purchased Power and Transmission |
| 401.9 |
|
| 319.1 |
|
| 82.8 |
| 25.9 |
| |
| Operations and Maintenance |
| 75.8 |
|
| 85.9 |
|
| (10.1) |
| (11.8) |
| |
| Depreciation |
| 48.8 |
|
| 46.6 |
|
| 2.2 |
| 4.7 |
| |
| Amortization of Regulatory Assets/(Liabilities), Net |
| (5.6) |
|
| 15.7 |
|
| (21.3) |
| (a) |
| |
| Energy Efficiency Programs |
| 55.4 |
|
| 48.3 |
|
| 7.1 |
| 14.7 |
| |
| Taxes Other Than Income Taxes |
| 31.0 |
|
| 32.2 |
|
| (1.2) |
| (3.7) |
| |
|
| Total Operating Expenses |
| 607.3 |
|
| 547.8 |
|
| 59.5 |
| 10.9 |
|
Operating Income |
| 159.5 |
|
| 118.4 |
|
| 41.1 |
| 34.7 |
| ||
Interest Expense |
| 20.4 |
|
| 21.1 |
|
| (0.7) |
| (3.3) |
| ||
Other Income, Net |
| 0.6 |
|
| - |
|
| 0.6 |
| (a) |
| ||
Income Before Income Tax Expense |
| 139.7 |
|
| 97.3 |
|
| 42.4 |
| 43.6 |
| ||
Income Tax Expense |
| 56.1 |
|
| 39.2 |
|
| 16.9 |
| 43.1 |
| ||
Net Income | $ | 83.6 |
| $ | 58.1 |
| $ | 25.5 |
| 43.9 | % | ||
|
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|
|
|
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|
|
(a) Percent greater than 100 percent not shown as it is not meaningful. |
| ||||||||||||
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|
Operating Revenues |
|
|
|
|
|
|
|
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| ||
NSTAR Electric's retail sales volumes were as follows: |
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|
|
| For the Three Months Ended March 31, |
| |||||||||
|
|
| 2015 |
| 2014 |
| Increase |
| Percent |
| |||
Retail Sales Volumes in GWh |
| 5,433 |
|
| 5,358 |
|
| 75 |
| 1.4 | % |
NSTAR Electric's Operating Revenues increased by $100.6 million in the first quarter of 2015, as compared to the same period in 2014.
Distribution revenues increased due primarily to an increase in rates related to the recovery of costs associated with the procurement of energy supply, which increased $110.5 million, and increased cost recovery related to our energy efficiency programs. The energy supply costs were impacted by the overall wholesale electricity market in New England in which natural gas delivery costs are adversely impacting the cost of electric energy purchased for our retail customers. In addition, base distribution revenues increased as a result of the impact from the recognition of LBR ($3.8 million) and the colder winter weather in 2015 ($2.6 million). These increases were partially offset by decreased retail transmission revenues and transition cost recovery revenues. Energy supply costs, energy efficiency program costs, retail transmission revenues and transition cost recovery revenues are recovered from customers in rates through cost tracking mechanisms and therefore have no impact on earnings.
Transmission revenues increased $7.1 million in the first quarter of 2015, as compared to the same period in 2014, due primarily to the recovery of higher revenue requirements associated with ongoing investments in our transmission infrastructure, partially offset by the impact of a $2.4 million reserve related to the March 2015 FERC ROE order. For further information on the March 2015 FERC ROE order, see "FERC Regulatory Issues FERC ROE Complaints" in this Management's Discussion and Analysis of Financial Conditions and Results of Operations.
Additionally, in connection with the 2014 Comprehensive Settlement Agreement, NSTAR Electric recognized an $11 million benefit in the first quarter of 2015, which was recorded as an increase to operating revenues. For further information, see "Regulatory Developments and Rate Matters Massachusetts 2014 Comprehensive Settlement Agreement" in this Management's Discussion and Analysis of Financial Conditions and Results of Operations.
Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of NSTAR Electric's customers. These energy supply costs are recovered from customers in DPU-approved cost tracking mechanisms which have no impact on earnings (tracked costs). Purchased Power and Transmission increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the following:
(Millions of Dollars) | Increase/(Decrease) | |
Purchased Power Costs | $ | 99.0 |
Transmission Costs |
| (16.1) |
Other |
| (0.1) |
Total Purchased Power and Transmission | $ | 82.8 |
The increase in purchased power was due primarily to higher costs associated with the procurement of energy supply. The decrease in transmission costs was due primarily to lower RNS service expense.
Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance decreased in the first quarter of 2015, as compared to the same period in 2014, driven by an $11.2 million reduction in non-tracked costs, which was primarily attributable to the resolution of the basic service bad debt adder mechanism ($24.2 million), partially offset by an increase in labor and employee benefits expense, as a result of the impact from winter weather and storms, as
44
compared to the first quarter of 2014. Tracked costs, which have no earnings impact, increased $1.1 million, which was primarily attributable to increased transmission expenses.
Depreciation increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher utility plant balances resulting from completed construction projects placed into service.
Amortization of Regulatory Assets/(Liabilities), Net, reflects a decrease in the recovery of previously deferred tracked transition costs for the first quarter of 2015, as compared to the same period in 2014. Fluctuations in these costs are recovered from customers in rates and have no impact on earnings. Additionally, in connection with the 2014 Comprehensive Settlement Agreement, NSTAR Electric recognized an $11.7 million benefit in the first quarter of 2015, which was recorded as a reduction to amortization expense. For further information, see "Regulatory Developments and Rate Matters Massachusetts 2014 Comprehensive Settlement Agreement" in this Management's Discussion and Analysis of Financial Conditions and Results of Operations.
Energy Efficiency Programs, which are tracked costs, increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in energy efficiency costs incurred in accordance with the three-year program guidelines established by the DPU.
Interest Expense decreased in the first quarter of 2015, as compared to the same period in 2014, due primarily to a decrease in interest on long-term debt ($2.1 million), partially offset by an increase in other interest expense in connection with the 2014 Comprehensive Settlement Agreement ($1 million).
Income Tax Expense increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher pre-tax earnings ($14.8 million) and higher state taxes ($2.3 million).
EARNINGS SUMMARY
NSTAR Electric's earnings increased $25.5 million in the first quarter of 2015, as compared to the same period in 2014, due primarily to the resolution of the basic service bad debt adder mechanism ($14.5 million), the favorable impact associated with the 2014 Comprehensive Settlement Agreement ($13 million), higher LBR and higher retail sales volumes. These favorable earnings impacts were partially offset by an increase in operations and maintenance costs due primarily to an increase in labor and employee benefits expense as a result of the impact from winter weather and storms, a $1.4 million after-tax reserve related to the March 2015 FERC ROE order, and higher depreciation expense.
LIQUIDITY
NSTAR Electric had cash flows provided by operating activities of $221.3 million in the first quarter of 2015, compared with $191.4 million in the first quarter of 2014. The improved operating cash flows were due primarily to changes in working capital items, including the timing of accounts receivable from affiliated companies, and income tax refunds of $84.6 million in the first quarter of 2015, compared with income tax payments of $17.3 million in the first quarter of 2014. Partially offsetting these favorable cash flow impacts were the timing of regulatory recoveries, resulting from the increase in purchased power costs, along with the timing of collections related to our accounts receivable. Accounts receivable increased due primarily to higher sales volumes in the first quarter of 2015 as a result of colder weather and an increase in basic service rates effective January 1, 2015.
NSTAR Electric has a five-year $450 million revolving credit facility that expires September 6, 2019. This facility serves to backstop NSTAR Electric's existing $450 million commercial paper program. As of March 31, 2015 and December 31, 2014, NSTAR Electric had $215.5 million and $302 million, respectively, in short-term borrowings outstanding under its commercial paper program, leaving $234.5 million and $148 million of available borrowing capacity as of March 31, 2015 and December 31, 2014, respectively. The weighted-average interest rate on these borrowings as of March 31, 2015 and December 31, 2014 was 0.35 percent and 0.27 percent, respectively, which is generally based on A2/P1 rated commercial paper.
45
RESULTS OF OPERATIONS PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARY
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for PSNH for the three months ended March 31, 2015 and 2014 included in this Quarterly Report on Form 10-Q:
| For the Three Months Ended March 31, |
|
| |||||||||||
|
|
|
|
|
|
| Increase/ |
|
|
|
| |||
(Millions of Dollars) | 2015 |
| 2014 |
| (Decrease) |
| Percent |
|
| |||||
Operating Revenues | $ | 284.8 |
| $ | 299.8 |
| $ | (15.0) |
| (5.0) | % |
| ||
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Purchased Power, Fuel and Transmission |
| 99.6 |
|
| 115.3 |
|
| (15.7) |
| (13.6) |
|
| |
| Operations and Maintenance |
| 58.4 |
|
| 62.2 |
|
| (3.8) |
| (6.1) |
|
| |
| Depreciation |
| 25.6 |
|
| 24.2 |
|
| 1.4 |
| 5.8 |
|
| |
| Amortization of Regulatory Assets, Net |
| 15.1 |
|
| 12.6 |
|
| 2.5 |
| 19.8 |
|
| |
| Energy Efficiency Programs |
| 3.8 |
|
| 3.8 |
|
| - |
| - |
|
| |
| Taxes Other Than Income Taxes |
| 19.1 |
|
| 17.7 |
|
| 1.4 |
| 7.9 |
|
| |
|
| Total Operating Expenses |
| 221.6 |
|
| 235.8 |
|
| (14.2) |
| (6.0) |
|
|
Operating Income |
| 63.2 |
|
| 64.0 |
|
| (0.8) |
| (1.3) |
|
| ||
Interest Expense |
| 11.3 |
|
| 12.0 |
|
| (0.7) |
| (5.8) |
|
| ||
Other Income, Net |
| 0.4 |
|
| 0.3 |
|
| 0.1 |
| 33.3 |
|
| ||
Income Before Income Tax Expense |
| 52.3 |
|
| 52.3 |
|
| - |
| - |
|
| ||
Income Tax Expense |
| 20.3 |
|
| 19.7 |
|
| 0.6 |
| 3.0 |
|
| ||
Net Income | $ | 32.0 |
| $ | 32.6 |
| $ | (0.6) |
| (1.8) | % |
| ||
|
|
|
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|
|
|
|
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|
|
|
|
|
|
Operating Revenues |
|
|
|
|
|
|
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|
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|
| ||
PSNH's retail sales volumes were as follows: |
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| ||
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|
| For the Three Months Ended March 31, |
|
| |||||||||
|
|
| 2015 |
| 2014 |
| Decrease |
| Percent |
|
| |||
Retail Sales Volumes in GWh |
| 2,067 |
|
| 2,076 |
|
| (9) |
| (0.5) | % |
|
PSNH's Operating Revenues decreased $15 million in the first quarter of 2015, as compared to the same period in 2014. The decrease primarily relates to a $6.8 million reduction in wholesale generation revenues, which impact the timing of the recovery of generation and energy supply costs from customers. In addition, stranded costs revenues decreased $5 million in the first quarter of 2015, as compared to the same period in 2014 and there was the impact of a $1 million reserve related to the March 2015 FERC ROE order recorded in the first quarter of 2015. Base distribution revenues increased $1.1 million, as compared to the first quarter of 2014, as a result of the colder winter weather in 2015 and its impacts on residential retail sales.
Purchased Power, Fuel and Transmission expense includes costs associated with PSNH's generation of electricity as well as purchasing electricity on behalf of its customers. These generation and energy supply costs are recovered from customers in NHPUC-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission decreased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the following:
(Millions of Dollars) | Increase/(Decrease) | |
Generation Fuel Costs | $ | (12.7) |
Purchased Power Costs |
| (4.6) |
Other |
| 1.6 |
Total Purchased Power, Fuel and Transmission | $ | (15.7) |
PSNH procures power through its own generation, long-term power supply contracts and short-term purchases and spot purchases in the competitive New England wholesale power market. The decrease in generation fuel costs was due primarily to a decrease in the amount of electricity generated by PSNH facilities and a decrease in fuel prices in the first quarter of 2015, as compared to the same period in 2014. The decrease in purchased power costs was due to lower power prices of short-term and spot purchases made in the wholesale power market in the first quarter of 2015, as compared to the same period in 2014.
Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance decreased in the first quarter of 2015, as compared to the same period in 2014, driven by a $2.1 million reduction in tracked costs, which have no earnings impact, and a $1.7 million reduction in non-tracked costs, both of which were primarily attributable to lower employee-related costs, including benefit costs.
Depreciation increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to higher utility plant balances resulting from completed construction projects placed into service.
Amortization of Regulatory Assets, Net, reflects an increase in the recovery of the default energy service charge and other amortizations for the first quarter of 2015, as compared to the same period in 2014. Fluctuations in these costs are recovered from customers in rates and have no impact on earnings.
Taxes Other Than Income Taxes increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in property taxes as a result of an increase in utility plant balances.
46
Income Tax Expense increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to lower permanent tax impacts ($0.6 million).
EARNINGS SUMMARY
PSNH's earnings decreased $0.6 million in the first quarter of 2015, as compared to the same period in 2014, due primarily to a $0.6 million after-tax reserve related to the March 2015 FERC ROE order, higher depreciation expense and higher property tax expense. Partially offsetting these unfavorable earnings impacts were lower operations and maintenance costs primarily attributable to lower employee-related costs.
LIQUIDITY
PSNH had cash flows provided by operating activities of $113.9 million in the first quarter of 2015, compared with $129.3 million in the first quarter of 2014. The decrease in operating cash flows was due primarily to the timing of collections and payments related to our working capital items, including accounts receivable, and the timing of our regulatory recoveries, which were in a net underrecovery position. Partially offsetting these unfavorable cash flow impacts were income tax refunds of $1.8 million in the first quarter of 2015, compared with income tax payments of $16.1 million in the first quarter of 2014.
47
RESULTS OF OPERATIONS WESTERN MASSACHUSETTS ELECTRIC COMPANY
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for WMECO for the three months ended March 31, 2015 and 2014 included in this Quarterly Report on Form 10-Q:
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| For the Three Months Ended March 31, |
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| Increase/ |
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(Millions of Dollars) | 2015 |
| 2014 |
| (Decrease) |
| Percent |
| |||||
Operating Revenues | $ | 152.9 |
| $ | 137.4 |
| $ | 15.5 |
| 11.3 | % | ||
Operating Expenses: |
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| Purchased Power and Transmission |
| 69.7 |
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| 49.4 |
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| 20.3 |
| 41.1 |
| |
| Operations and Maintenance |
| 19.8 |
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| 22.6 |
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| (2.8) |
| (12.4) |
| |
| Depreciation |
| 10.4 |
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| 10.3 |
|
| 0.1 |
| 1.0 |
| |
| Amortization of Regulatory Assets, Net |
| 3.9 |
|
| 0.4 |
|
| 3.5 |
| (a) |
| |
| Energy Efficiency Programs |
| 11.1 |
|
| 11.9 |
|
| (0.8) |
| (6.7) |
| |
| Taxes Other Than Income Taxes |
| 9.4 |
|
| 8.1 |
|
| 1.3 |
| 16.0 |
| |
|
| Total Operating Expenses |
| 124.3 |
|
| 102.7 |
|
| 21.6 |
| 21.0 |
|
Operating Income |
| 28.6 |
|
| 34.7 |
|
| (6.1) |
| (17.6) |
| ||
Interest Expense |
| 6.8 |
|
| 5.6 |
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| 1.2 |
| 21.4 |
| ||
Other Income, Net |
| 0.5 |
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| 0.6 |
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| (0.1) |
| (16.7) |
| ||
Income Before Income Tax Expense |
| 22.3 |
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| 29.7 |
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| (7.4) |
| (24.9) |
| ||
Income Tax Expense |
| 9.1 |
|
| 11.6 |
|
| (2.5) |
| (21.6) |
| ||
Net Income | $ | 13.2 |
| $ | 18.1 |
| $ | (4.9) |
| (27.1) | % | ||
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(a) Percent greater than 100 percent not shown as it is not meaningful. |
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Operating Revenues |
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WMECO's retail sales volumes were as follows: |
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| For the Three Months Ended March 31, |
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| 2015 |
| 2014 |
| Decrease |
| Percent |
| |||
Retail Sales Volumes in GWh |
| 955 |
|
| 965 |
|
| (10) |
| (1.1) | % |
Fluctuations in WMECO's kWh sales volumes have no impact on total operating revenues or earnings, as WMECOs revenues are decoupled from sales volumes. Fluctuations in the overall level of operating revenues are primarily related to changes in its cost tracking mechanisms, which primarily include the costs associated with the procurement of energy supply, transmission related costs, energy efficiency programs, and restructuring and stranded costs as a result of deregulation.
WMECO's Operating Revenues increased $15.5 million in the first quarter of 2015, as compared to the same period in 2014. The increase primarily reflects an increase in rates related to the recovery of costs associated with the procurement of energy supply, which increased $24.2 million. The energy supply costs were impacted by the overall wholesale electricity market in New England in which natural gas delivery costs are adversely impacting the cost of electric energy purchased for our retail customers. Energy supply costs are recovered from customers in rates through cost tracking mechanisms and therefore have no impact on earnings. Partially offsetting the increase was the impact of the $4.1 million reserve related to the March 2015 FERC ROE order, and a $3.9 million decrease in revenues that impacts earnings due to the absence of a 2014 wholesale billing adjustment.
For further information on the March 2015 FERC ROE order, see "FERC Regulatory Issues FERC ROE Complaints" in this Management's Discussion and Analysis of Financial Conditions and Results of Operations.
Purchased Power and Transmission expense includes costs associated with the procurement of energy supply on behalf of WMECO's customers. These energy supply costs are recovered from customers in DPU-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power and Transmission increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the following:
(Millions of Dollars) | Increase/(Decrease) | |
Purchased Power Costs | $ | 23.2 |
Transmission Costs |
| (2.9) |
Total Purchased Power and Transmission | $ | 20.3 |
Included in purchased power are the costs associated with WMECO's basic service charge and deferred energy supply costs. The basic service charge recovers energy-related costs incurred as a result of providing electric generation service supply to all customers that have not migrated to third party suppliers. The increase in purchased power was due primarily to higher costs associated with the procurement of energy supply and increased load as a result of customers returning to basic service from third party suppliers. The decrease in transmission costs was as a result of a decrease in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers.
Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance decreased in the first quarter of 2015, as compared to the same period in 2014, driven by a $1.7 million reduction in tracked costs, which have no earnings impact, that was primarily attributable to lower employee-related costs, including benefit costs, and a $1.1 million reduction in non-tracked costs, which was primarily attributable to lower uncollectible expense and lower vegetation management costs.
48
Amortization of Regulatory Assets, Net, reflects the absence of the refund of the Phase I DOE proceeds to customers in 2014 as well as other energy and energy related costs and amortizations that can fluctuate period to period based on timing of costs incurred and related rate changes to recover these costs. Fluctuations in energy and energy related costs are recovered from customers in rates and have no impact on earnings.
Taxes Other Than Income Taxes increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to an increase in property taxes as a result of an increase in utility plant balances.
Interest Expense increased in the first quarter of 2015, as compared to the same period in 2014, due primarily to the absence of a 2014 wholesale billing adjustment.
Income Tax Expense decreased in the first quarter of 2015, as compared to the same period in 2014, due primarily to lower pre-tax earnings ($2.6 million).
EARNINGS SUMMARY
WMECO's earnings decreased $4.9 million in the first quarter of 2015, as compared to the same period in 2014, due primarily to the $2.5 million after-tax reserve related to the March 2015 FERC ROE order and a decrease in revenues and increase in interest expense resulting from the absence of a 2014 wholesale billing adjustment. Partially offsetting these unfavorable earnings impacts was a decrease in operations and maintenance expenses primarily attributable to lower uncollectible expense and lower vegetation management costs.
LIQUIDITY
WMECO had cash flows used in operating activities of $1.4 million in the first quarter of 2015, compared with cash flows provided by operating activities of $46.3 million in the first quarter of 2014. The decrease in operating cash flows was due primarily to the timing of collections and payments related to our working capital items, including accounts receivable. Accounts receivable increased due primarily to an increase in basic service rates effective January 1, 2015. In addition, the operating cash flows decrease was due to the timing of regulatory recoveries, resulting from the increase in purchased power costs. Partially offsetting these unfavorable cash flow impacts were income tax refunds of $3.7 million in the first quarter of 2015, compared with income tax payments of $14.1 million in the first quarter of 2014.
49
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Information
Commodity Price Risk Management: Our Regulated companies enter into energy contracts to serve our customers and the economic impacts of those contracts are passed on to our customers. Accordingly, the Regulated companies have no exposure to loss of future earnings or fair values due to these market risk-sensitive instruments. Eversource's Energy Supply Risk Committee, comprised of senior officers, reviews and approves all large scale energy related transactions entered into by its Regulated companies.
Other Risk Management Activities
Interest Rate Risk Management: We manage our interest rate risk exposure in accordance with our written policies and procedures by maintaining a mix of fixed and variable rate long-term debt.
Credit Risk Management: Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties pursuant to the terms of our contractual obligations. We serve a wide variety of customers and transact with suppliers that include IPPs, industrial companies, natural gas and electric utilities, oil and gas producers, financial institutions, and other energy marketers. Margin accounts exist within this diverse group, and we realize interest receipts and payments related to balances outstanding in these margin accounts. This wide customer and supplier mix generates a need for a variety of contractual structures, products and terms that, in turn, require us to manage the portfolio of market risk inherent in those transactions in a manner consistent with the parameters established by our risk management process.
Our Regulated companies are subject to credit risk from certain long-term or high-volume supply contracts with energy marketing companies. Our Regulated companies manage the credit risk with these counterparties in accordance with established credit risk practices and monitor contracting risks, including credit risk. As of March 31, 2015, our Regulated companies held collateral (cash and letters of credit) from counterparties related to our standard service contracts of approximately $9 million. As of March 31, 2015, Eversource had cash posted of approximately $11 million with ISO-NE related to energy purchase transactions.
We have provided additional disclosures regarding interest rate risk management and credit risk management in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," in Eversource's 2014 Form 10-K, which is incorporated herein by reference. There have been no additional risks identified and no material changes with regard to the items previously disclosed in the Eversource 2014 Form 10-K.
ITEM 4.
CONTROLS AND PROCEDURES
Management, on behalf of Eversource, CL&P, NSTAR Electric, PSNH and WMECO, evaluated the design and operation of the disclosure controls and procedures as of March 31, 2015 to determine whether they are effective in ensuring that the disclosure of required information is made timely and in accordance with the Securities Exchange Act of 1934 and the rules and regulations of the SEC. This evaluation was made under management's supervision and with management's participation, including the principal executive officer and principal financial officer as of the end of the period covered by this Quarterly Report on Form 10-Q. There are inherent limitations of disclosure controls and procedures, including the possibility of human error and the circumventing or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. The principal executive officer and principal financial officer have concluded, based on their review, that the disclosure controls and procedures of Eversource, CL&P, NSTAR Electric, PSNH and WMECO are effective to ensure that information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and regulations and (ii) is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
There have been no changes in internal controls over financial reporting for Eversource, CL&P, NSTAR Electric, PSNH and WMECO during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
50
PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We are parties to various legal proceedings. We have identified these legal proceedings in Part I, Item 3, "Legal Proceedings," and elsewhere in our 2014 Form 10-K, which disclosures are incorporated herein by reference. There have been no additional material legal proceedings identified and no material changes with regard to the legal proceedings previously disclosed in our 2014 Form 10-K.
ITEM 1A.
RISK FACTORS
We are subject to a variety of significant risks in addition to the matters set forth under "Forward-Looking Statements," in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Quarterly Report on Form 10-Q. We have identified a number of these risk factors in Part I, Item 1A, "Risk Factors," in our 2014 Form 10-K, which risk factors are incorporated herein by reference. These risk factors should be considered carefully in evaluating our risk profile. There have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed in our 2014 Form 10-K.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table discloses purchases of our common shares made by us or on our behalf for the periods shown below. The common shares purchased consist of open market purchases made by the Company or an independent agent. These share transactions related to the Company's Long-Term Incentive Plans.
Period |
| Total Number |
|
| Average | Total Number of | Approximate Dollar |
January 1 January 31, 2015 |
| - |
| $ | - | - | - |
February 1 February 28, 2015 |
| 51,915 |
|
| 56.45 | - | - |
March 1 March 31, 2015 |
| - |
|
| - | - | - |
Total |
| 51,915 |
| $ | 56.45 | - | - |
51
ITEM 6.
EXHIBITS
Each document described below is filed herewith, unless designated with an asterisk (*), which exhibits are incorporated by reference by the registrant under whose name the exhibit appears.
Exhibit No.
Description
Listing of Exhibits (Eversource)
3.1
Declaration of Trust of Eversource Energy, as amended through April 29, 2015
* 4
Sixth Supplemental Indenture between Northeast Utilities, now known as Eversource Energy, and The Bank of New York Trust Company N.A., as Trustee, dated as of January 1, 2015, relating to $150 million of Senior Notes, Series G, due 2018 and $300 million of Senior Notes, Series H, due 2025 (Exhibit 4.1, NU Current Report on Form 8-K filed January 21, 2015, File No. 001-05324)
12
Ratio of Earnings to Fixed Charges
31
Certification of Thomas J. May, Chairman, President and Chief Executive Officer of Eversource Energy, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
31.1
Certification of James J. Judge, Executive Vice President and Chief Financial Officer of Eversource Energy, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
32
Certification of Thomas J. May, Chairman, President and Chief Executive Officer of Eversource Energy, and James J. Judge, Executive Vice President and Chief Financial Officer of Eversource Energy, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
Listing of Exhibits (CL&P)
12
Ratio of Earnings to Fixed Charges
31
Certification of Thomas J. May, Chairman of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
31.1
Certification of James J. Judge, Executive Vice President and Chief Financial Officer of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
32
Certification of Thomas J. May, Chairman of The Connecticut Light and Power Company, and James J. Judge, Executive Vice President and Chief Financial Officer of The Connecticut Light and Power Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
Listing of Exhibits (NSTAR Electric Company)
12
Ratio of Earnings to Fixed Charges
31
Certification of Thomas J. May, Chairman of NSTAR Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
31.1
Certification of James J. Judge, Executive Vice President and Chief Financial Officer of NSTAR Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
32
Certification of Thomas J. May, Chairman of NSTAR Electric Company, and James J. Judge, Executive Vice President and Chief Financial Officer of NSTAR Electric Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
52
Listing of Exhibits (PSNH)
12
Ratio of Earnings to Fixed Charges
31
Certification of Thomas J. May, Chairman of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
31.1
Certification of James J. Judge, Executive Vice President and Chief Financial Officer of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
32
Certification of Thomas J. May, Chairman of Public Service Company of New Hampshire, and James J. Judge, Executive Vice President and Chief Financial Officer of Public Service Company of New Hampshire, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
Listing of Exhibits (WMECO)
12
Ratio of Earnings to Fixed Charges
31
Certification of Thomas J. May, Chairman of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
31.1
Certification of James J. Judge, Executive Vice President and Chief Financial Officer of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
32
Certification of Thomas J. May, Chairman of Western Massachusetts Electric Company, and James J. Judge, Executive Vice President and Chief Financial Officer of Western Massachusetts Electric Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 6, 2015
Listing of Exhibits (Eversource, CL&P, NSTAR Electric, PSNH, WMECO)
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation
101.DEF
XBRL Taxonomy Extension Definition
101.LAB
XBRL Taxonomy Extension Labels
101.PRE
XBRL Taxonomy Extension Presentation
53
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
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| EVERSOURCE ENERGY | |
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May 6, 2015 |
| By: | /s/ Jay S. Buth |
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| Jay S. Buth |
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| Vice President, Controller and Chief Accounting Officer |
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
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| THE CONNECTICUT LIGHT AND POWER COMPANY | |
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May 6, 2015 |
| By: | /s/ Jay S. Buth |
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| Jay S. Buth |
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| Vice President, Controller and Chief Accounting Officer |
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
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| NSTAR ELECTRIC COMPANY | |
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May 6, 2015 |
| By: | /s/ Jay S. Buth |
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| Jay S. Buth |
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| Vice President, Controller and Chief Accounting Officer |
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54
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
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| PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE | |
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May 6, 2015 |
| By: | /s/ Jay S. Buth |
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| Jay S. Buth |
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| Vice President, Controller and Chief Accounting Officer |
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
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| WESTERN MASSACHUSETTS ELECTRIC COMPANY | |
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May 6, 2015 |
| By: | /s/ Jay S. Buth |
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| Jay S. Buth |
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| Vice President, Controller and Chief Accounting Officer |
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55
Exhibit 3.1
DECLARATION OF TRUST
OF
EVERSOURCE ENERGY
Dated January 15, 1927
AS AMENDED
February 20, 1935
February 21, 1940
February 25, 1955
February 27, 1959
February 28, 1962
March 18, 1964
November 22, 1965
April 22, 1969
April 28, 1970
April 24, 1973
April 25, 1978
May 19, 1987
May 24, 1988
May 13, 2003
May 10, 2005
April 29, 2015
DECLARATION OF TRUST
OF
EVERSOURCE ENERGY
This DECLARATION OF TRUST is made at Boston in the County of Suffolk and Commonwealth of Massachusetts this fifteenth day of January, 1927, by GEORGE W. LAWRENCE of Greenfield, ALVAH CROCKER of Fitchburg, W. RODMAN PEABODY of Milton, ALFRED L. RIPLEY of Andover, CHARLES W. HAZELTON of Montague, ARTHUR W. WOOD of Arlington, CHARLES WALCOTT of Cambridge, MOSES WILLIAMS of Needham, CHARLES STETSON of Boston, J. PRESTON RICE of Newton, all in the Commonwealth of Massachusetts, SAMUEL FERGUSON of Hartford in the State of Connecticut and JONATHAN BULKLEY of New York in the State of New York, who are hereinafter called the Trustees, and said expression shall extend to and include the Trustees for the time being hereunder appointed as hereinafter provided, and the work "Trustee" as hereinafter used shall apply to any one of the said Trustees where the context so admits.
WHEREAS, it is desired to create under and in accordance with the provisions of this instrument a voluntary association for the acquistion of property and the conduct of business as hereinafter set forth, consisting, first, of the Trustees, in whom shall be vested the legal title to all property at any time belonging to said association except as hereinafter provided and who shall manage, control and carry on the affairs of the association as hereinafter set forth, and second, of the persons (hereinafter called the Shareholders) who shall from time to time be the holders of certificates of beneficial interest, known as shares, to be issued as hereinafter provided, in whom shall be vested the entire beneficial interest in all property belonging to the association and all business conducted by it and all profits earned by it,
NOW, THEREFORE, this declaration of trust WITNESSETH that said George W. Lawrence, Alvah Crocker, W. Rodman Peabody, Alfred L. Ripley, Charles W. Hazelton, Arthur W. Wood, Charles Walcott, Moses Williams, Charles Stetson, J. Preston Rice, Samuel Ferguson and Jonathan Bulkley for themselves, their heirs, executors, administrators, successors and assigns, do hereby declare that they and their successors from time to time, as Trustees hereunder, will hold, manage and dispose of the aforesaid property, if and when acquired by them, and all such other property as may be hereafter transferred or conveyed to them as Trustees hereunder, or otherwise acquired and held on behalf of the association as hereinafter provided (all of said property at any time and from time to time so held being hereinafter collectively referred to as the "trust estate"), in trust to hold, manage and control said trust estate and receive the income
thereof and to dispose of the same for the benefit of the Shareholders according to the number and kind of shares held by
-2-
them respectively, and with and subject to the powers and provisions hereinafter contained concerning the same.
BUSINESS NAME OF TRUSTEES
(1) The Trustees in their collective capacity shall be designated "Eversource Energy" and in so far as may be practicable all the business of the association shall be done and all its affairs conducted in and under that name, to the end that legal title to the entire trust estate except as otherwise provided herein and in any event the absolute control thereof shall be at all times vested in the Trustees, and that all obligations incurred by or in behalf of the association shall be the obligations of the Trustees only and not of the Shareholders but enforceable against the Trustees as hereinafter provided, only as such trustees, and only to the extent of the trust estate in their hands and possession and never against them or any of them in their individual capacity or capacities.
NUMBER, ELECTION, QUALIFICATION,
RESIGNATION AND COMPENSATION OF TRUSTEES
(2) The number of the Trustees hereunder for each ensuing year shall be such as may be fixed at each annual meeting of the shareholders by a vote of at least a majority of the number of shares then outstanding hereunder of such class or classes as then have general voting powers, except that if at any annual meeting no such number shall be so fixed then the number for the ensuing year shall be the same as for the year preceding.
(3) Every Trustee shall hold office until the annual meeting of the Shareholders next succeeding his election and thereafter until the succeeding board of Trustees has been elected as hereinafter provided, and until at least a majority of said succeeding board is qualified to act as hereinafter provided.
(4) At each annual meeting of the Shareholders they may elect a new board of Trustees for the ensuing year of such number as may be then fixed as hereinbefore provided, and any one or more or all of the Trustees previously in office may be re-elected to the new board, and at any meeting at which the number of Trustees is increased the Shareholders may elect all or less than all the additional Trustees so provided for, but no Trustee shall be elected unless he receives the affirmative votes of at least a
majority of the number of shares then outstanding hereunder of such class or classes as then have general voting power.
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(5) Every Trustee elected by the Shareholders or by the Trustees to fill a vacancy as provided in Article (7) shall be required, except in case of re-election, to qualify as such Trustee by signing, sealing and acknowledging, and depositing with the Secretary of the association within twenty (20) days after his election a written statement containing a declaration of his acceptance of such election and of the trusts, duties and obligations hereby imposed upon him as such Trustee. If at the expiration of twenty (20) days after any meeting at which Trustees are elected any Trustee other than a re-elected Trustee shall have failed to qualify as such Trustee, the election of that one or those so failing shall become null and void and each such failure shall create a vacancy to be filled as provided in Article (7).
(6) Any Trustee may resign by presenting his written resignation at a meeting of the Trustees or by delivering the same at the principal office of the association addressed to the President or Secretary of the association, but such resignation shall take effect only upon its acceptance by the Trustees or by the election of a new Trustee in the place of the Trustee so resigning, or upon the expiration of twenty (20) days after the presentation or the delivery of such resignation, whichever event shall first occur, and after such resignation, until it takes effect as aforesaid, the resigning Trustee may, but shall not be obliged to, act as Trustee hereunder.
(7) If a vacancy shall exist in the board of Trustees by reason of failure to elect a full board at a meeting of Shareholders, or of the death, resignation, or failure to qualify of any Trustee, a new Trustee to fill such vacancy shall be elected by the remaining Trustees and such vacancy may be so filled even if such remaining Trustees shall be less than a majority of the whole board.
(8) Whenever any change of Trustees shall take place hereunder either by the death or resignation of any Trustee or Trustees or by the election of a new board of Trustees or of any additional Trustee or Trustees, the title to the entire trust estate as previously vested in the former Trustees shall immediately vest in the Trustees holding office as a result of such change without any conveyance from any outgoing Trustee or Trustees or from the heirs, executors or administrators of any deceased Trustee or Trustees or from the continuing Trustees or any of them; but notwithstanding this provision, it shall be the duty of each outgoing Trustee, of the heirs, executors or administrators of each deceased Trustee and of each continuing Trustee, to execute, acknowledge and deliver such instruments of conveyance as shall be deemed by the Trustees advisable and
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appropriate for the purpose of confirming the title vested as aforesaid in the Trustees then holding office.
(9) The Trustees shall receive such reasonable compensation as the Trustees may determine, and if any Trustee shall be called upon to travel or perform other extra services he may be paid his expenses and such special remuneration as the Trustees may determine.
CONVERSION OF TRUST ESTATE INTO CASH
(10) It shall be the duty of the Trustees at or before the termination of the trust hereby created to sell and convert into cash the entire trust estate and no Shareholder shall have or acquire at any time any interest in any specific property, real or personal, at any time forming part of the trust estate, or any right to any division or partition thereof or any other rights with reference thereto, except to have said property dealt with as herein provided, to receive dividends therefrom, as herein provided, and to share in the distribution of the cash proceeds thereof upon the termination of the trust, except that the Trustees in the exercise of their uncontrolled discretion may, if they see fit, at the termination of the trust retain and distribute in kind as hereinafter provided, all or any part of the personal property forming a part of the trust estate.
BUSINESS POWERS OF THE TRUSTEES
(11) Until the termination of the trust hereby created, the Trustees in the control and management of the trust estate and in the conduct of the business of the association shall have power at any time and from time to time, subject however to the limitations and conditions herein contained in this or any other article hereof:
(a) To subscribe for or to acquire by purchase for cash or in exchange for shares of the association or otherwise and for such price and upon such terms as the Trustees may in their uncontrolled discretion determine, stocks, shares, rights, bonds, notes or other securities or obligations of any corporation, trust or association of
whatever nature and wherever situated and of any government or agency or political subdivision thereof, including, without limiting the generality of the foregoing, any corporation, trust or association which is engaged in whole or in part in the business of manufacturing, generating,
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producing, transmitting, selling, distributing, or dealing in, electrical energy, gas, or water power.
(b) To manufacture, generate, produce, transmit, purchase, sell, distribute and deal in electrical energy, gas, or water power, and for the aforesaid purposes or any of them to acquire by purchase for cash or in exchange for shares of the association, or otherwise, and to lease, and to hold, develop, construct, erect, maintain, conduct, operate, manage under contract and otherwise utilize real estate, or any rights or interests therein, water rights, water power or privileges, buildings, plants, systems, machinery or any other things suitable for said purposes or any of them.
(c) To sell at public auction or by private contract, or otherwise, the whole or any part of the trust estate, free and discharged of the trusts hereunder, to any person or persons in such manner and for such price or consideration upon time or otherwise, and subject to such restrictions and agreements as they may in their uncontrolled discretion determine and without the necessity of applying to any court or to the Shareholders hereunder for leave so to do, and to buy in or rescind or vary any contract of sale and to resell without being responsible for loss, and to convert, exchange or refund the whole or any part of the trust estate for or into any shares, bonds, or other securities or obligations, property or effects in which the Trustees might, under the provisions hereof, invest any moneys forming a part of the trust estate, and, without limiting the generality of the foregoing, to sell the whole or any part of the trust estate for any shares, bonds or other securities or obligations of the purchaser, as a step in proceedings looking towards the termination of the trust hereby created, or the carrying out of any plan for the reorganization or rearrangement of the business or properties conducted or held hereunder, provided however that the Trustees shall not so sell, except to effect a transfer to a corporation, trust or association a majority in interest of the shares of which is then held as a part of the trust estate or a transfer upon or in connection with the termination of the trust hereby created, any shares of the stock of any corporation, trust or association if(i) a majority in interest of such shares is then held as a part of the trust estate, and (ii) the book value of the association's investment in the shares and other securities of such corporation, trust or association is 10% or more of the aggregate book value of the assets comprising the trust estate at the time, unless such sale shall have been authorized by the Shareholders at a meeting called for that
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purpose, by a vote of at least a majority in number of all the shares then outstanding hereunder of such class or classes as then have general voting power.
(d) To borrow money and to issue bonds or other obligations therefor and to secure the payment thereof by mortgage, pledge or charge of the whole or any part of the trust estate then owned or thereafter acquired, except that no such mortgage, pledge or charge of the trust estate as a whole or substantially as a whole shall be created unless authorized in each and every such case by a vote of at least two-thirds (2/3) in number of all the shares then outstanding hereunder of such class or classes as then have general voting power, provided, however, that no such authorization shall be required to secure bonds or obligations issued to refund at any time and in any manner any secured bonds or obligations whenever issued.
(e) To furnish assistance, on such terms as they shall think proper, with or without security, to any corporation, trust or association of which any of the stocks, shares, bonds or other securities or obligations shall constitute a part of the trust estate in the financing of the business of such corporation, trust or association or in obtaining, by purchase, lease or otherwise, any facilities or services it may require, either by making funds available to such corporation, trust or association through loans, advances, contributions or otherwise, or by guaranteeing the obligations of such corporation, trust or association, or in any other manner they may deem proper; and to advance or lend money on such terms as they shall think proper, with or without security, to any other person, corporation, trust, firm or association of any description whenever in their opinion such action is necessary or convenient in the business or conducive to the advantage of the association; and to discharge and cancel without payment any indebtedness thus arising, or to convert the same into stocks, shares, bonds or other obligations of such corporation, trust or association or of any other with or into which it may be consolidated or merged or to which its property may be transferred or leased or by which its capital stock may be owned.
(f) To exercise any and all powers and rights belonging to the holder of any stocks, shares, bonds or securities or obligations forming a part of the trust estate whether by voting or by giving any consent, request or notice or otherwise and either in person or by proxy or attorney and
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to give proxies or powers of attorney therefor with or without power of substitution, which proxies and powers of attorney may be for meetings or actions generally or for any particular meeting, meetings or action and may include the exercise of any discretionary powers, and without limiting the generality of the foregoing, to vote in favor of or to consent to the creation of any mortgage, lien or other encumbrances upon all or part of the franchises and property then owned or thereafter acquired of any or all of the corporations, trusts and associations by which said stocks, shares, bonds, securities or obligations were issued, or to vote in favor of or to consent to the merger or consolidation of such corporation, trust or association with any other corporation, trust or association or for the sale, lease, surrender or abandonment of all or any part of the franchises and property of any such corporation, trust or association.
(g) To cause any stocks, shares, bonds or other securities or obligations subject to these trusts to be transferred into the name of Eversource Energy or into the names of the Trustees or any one or more of them or to remain in or be transferred into the name of any other person, firm, association, trust or corporation and in any such case in such manner as not to give notice that the same are affected by the trust hereby created or by any trust, and to be deposited for safe keeping in such place and in such manner and subject to such control or joint control as they may deem proper.
(h) To cause any real estate at any time acquired on behalf of the association to be acquired and held for the association by such special trustee or trustees, and under such form of agreement or declaration of trust, and with such provisions for the resignation or removal of such special trustee or trustees and the appointment of his, its or their successors as the Trustees may determine, but subject in all cases to the absolute right of the Trustees to control and direct the use, management, sale, mortgage, lease or other dealings with or disposition of said real estate.
(i) To collect, sue for, receive and receipt for all sums of money coming due as a part of the trust estate, to consent to the extension of the time for payment, or to the renewal of any bonds or other securities or obligations belonging to the trust estate and to compound, compromise, abandon or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, demands and things relating to the trust estate, and to transfer to and deposit
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with any corporation, committee or other persons any stocks, shares, bonds or other securities or obligations forming part of the trust estate for the purposes of any arrangement for enforcing or protecting the interests of the Trustees as the owners of such stocks, shares, bonds or other securities or obligations, and to pay any assessment levied in connection with such arrangement, and
(j) To purchase, acquire and hold shares, bonds and notes and other obligations and securities issued by the Trustees as herein provided and either to cancel and retire the same in whole or in part or to re-issue them in whole or in part to such person or persons, and for such purposes hereby permitted and in such manner and upon such terms and for such consideration as the Trustees may determine but no such shares while so held by the Trustees shall be entitled to any voting rights or to any dividends or be deemed outstanding for any purpose hereunder.
(k) To perform and do all such further acts and things as may be properly incidental to the exercise of the foregoing powers or any of them to the same extent to which such further acts and things might be performed and done from time to time by a business corporation lawfully organized under the laws of the Commonwealth of Massachusetts.
MEETINGS OF TRUSTEES
(12) An annual meeting of the Trustees shall be held immediately after and at the same place as the annual meeting of the Shareholders. Other regular meetings may be held at such places either within or outside of Massachusetts as the Trustees may by vote from time to time determine. A special meeting of the Trustees may be held at any time and at any place when called by the Chairman of the Board, President, Secretary or two or more Trustees and shall be held at such time and place as the notice of such special meeting shall specify. No notice of said annual meeting shall be required, but notice of each other meeting shall be given either by the Secretary or by the person or persons by whom such meeting is called by giving to each of the Trustees three (3) days' notice of such meeting; and such notice sent by mail, postage prepaid, to any Trustee at his usual address on the third day or any earlier day before such meeting shall be deemed sufficient notice to him whether or not the same be received by him, and in computing such time Sundays and holidays shall be included, but it shall not be necessary to give notice of any such meeting as aforesaid to any Trustee who is present at the meeting
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or who either before or after the meeting waives such notice in writing. A majority of the full board of Trustees present at any meeting shall constitute a quorum for the transaction of business and for the purpose of filling vacancies, as provided in Article (7), a majority of the Trustees continuing in office shall constitute such quorum, but less than a quorum may adjourn any meeting from time to time and such meeting may be held as adjourned without further notice. When a quorum is present at any meeting a majority of the Trustees present and voting shall decide any questions brought before such meeting. Any Trustee may participate in a meeting of the Trustees, or any committee thereof, by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at such meeting.
OFFICERS, AGENTS AND EXECUTIVE COMMITTEE
(13) The Trustees shall from time to time elect a Chairman of the Board, a President, a Treasurer and a Secretary and may elect one or more Vice Presidents and one or more Assistant Treasurers and such other officers as the Trustees may think proper, and may permit any officer so elected to resign and may remove any such officer with or without cause and may fill any vacancy and may elect temporary officers to serve during the absence or disability of the regular officers or for any specified purpose. Every officer so elected unless otherwise determined by the Trustees shall hold his office until the first meeting of the Trustees following the next succeeding annual meeting of the Shareholders and thereafter until his successor has been chosen. Any such officer may be, but no such officer need be, a Shareholder or Trustee, and any two or more offices may be held by the same person, except that no one person shall be both President and Vice President or both Treasurer and Assistant Treasurer. Such officers shall receive such compensation, if any, as may from time to time be fixed by the Trustees and they shall have respectively, in addition to the powers and duties conferred and imposed upon them by the express provisions of this declaration of trust, such further powers and duties as may be conferred and imposed upon them from time to time by the Trustees.
(14) The Chairman of the Board, if present, shall preside at all meetings of the Trustees and of the Shareholders, and in his absence from any such meeting, the President, or if he also be absent, the senior Vice President present, shall so preside, but if neither the Chairman of the Board nor the President nor any Vice President shall be present, a temporary Chairman shall be chosen by the meeting.
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(15) The Treasurer shall have custody of all moneys belonging to the trust estate and shall deposit the same in such one or more banks or trust companies as may be designated from time to time by the Trustees in the name "Eversource Energy" and shall disburse the same in the discharge of obligations incurred by the Trustees or for other purposes authorized by the Trustees by checks drawn by him against such deposit account or accounts and signed on behalf of Eversource Energy by him as Treasurer. He shall also keep accurate books of account of all the financial transactions of the Trustees. If required by the Trustees, the Treasurer shall give bond for the faithful discharge of his duties and the premium on such bond shall be paid out of the trust estate. Such bond, if given, shall be in the custody of the President. All or any part of the duties of the Treasurer may be performed at any time and from time to time by any assistant treasurer designated for that purpose by the Trustees. In addition, the Trustees may from time to time authorize or require other officers, employees, or agents to sign checks drawn against any such deposit account or accounts.
(16) The Secretary shall attend, if possible, all meetings of the Trustees, of the Executive Committee if any and of the Shareholders and shall give notice of all such meetings as required by the provisions hereof and shall keep the minutes of all such meetings, but if he is absent from any meeting a temporary secretary shall be chosen by the meeting to act in his place.
(17) The Trustees may likewise from time to time appoint or employ or authorize the appointment or employment of agents or employees or representatives and the Trustees may fix their compensation, term of employment, duties and powers or authorize the same to be fixed and may remove them or terminate their employment or authorize the same to be done. The Trustees may delegate any or all of the powers and discretions of the Trustees to any of the officers, agents or representatives elected or appointed pursuant to the provisions hereof, and all action taken by any such officer, agent or representative pursuant to such delegation shall be binding upon the Trustees. All promissory notes and other negotiable instruments, except checks, and all bonds and other agreements for the payment of money or evidences of indebtedness and all contracts in writing and other documents issued or entered into by the Trustees including instruments affecting the title to real estate, shall be signed and delivered in their behalf as they may determine either by a majority of the Trustees or by such one or more Trustees or officers, agents, or representatives of the Trustees as they may designate. Any
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instrument affecting the title to real estate signed and delivered by the person or persons authorized so to do by the Trustees as hereinbefore provided shall be effective to convey all the right, title, and interest of all the Trustees which it purports to convey.
(18) The Trustees may appoint from time to time from among their number an Executive Committee of not less than five (5) members and may at any time abolish said committee or remove any member or members thereof with or without cause, and may fill all vacancies therein. Such committee if appointed shall have and exercise such of the powers and discretions of the Trustees and be subject to such supervision and control by the Trustees as the Trustees shall from time to time determine. Meetings of said committee shall be held and notified from time to time as provided herein with reference to meetings of the Trustees and minutes of such meetings shall be kept as provided in Article (16), and the minutes of every such meeting shall be presented to the next meeting of the Trustees.
SHARES AND SHAREHOLDERS
(19) The transferable certificate of beneficial interest known as shares issued or to be issued hereunder may consist either of common shares with or without par value or of preferred shares with or without par value of any class or classes, or of both common and preferred shares. Shares, either common or preferred, may be issued from time to time for cash, property or services, or as a distribution to Shareholders, and may be issued by the Trustees only upon authority so to do granted by the Shareholders. Common shares, in addition to the three million (3,000,000) of such common shares authorized by the Shareholders prior to March 18, 1964, shall be issued only when authorized by the affirmative vote of at least a majority in interest of all shares previously issued and then outstanding of such class or classes as have general voting power. Preferred shares shall be issued only when authorized by the affirmative vote of at least two-thirds (2/3) in interest of shares having general voting power as aforesaid and also by such vote or consent of the holders of each class of preferred shares previously issued and then outstanding as may be required by the rights, privileges and preferences of said outstanding class established as hereinafter provided. All preferred shares issued shall have such par value, if any, such priority as to dividends which may be cumulative, such priority in liquidation, such voting rights and such other rights, privileges, preferences, restrictions and limitations as may be established and authorized by the votes and consents of
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Shareholders pursuant to which they are issued. The holders of common shares shall have preemptive rights as follows: Upon the offering or sale by the Trustees for cash of any common shares or convertible securities each holder of common shares shall have the preemptive right subject to the provisions of this Article to purchase such shares or convertible securities in proportion to the number of common shares held by him, within the time and on the terms fixed by the Trustees. Such preemptive rights, however, shall not be applicable to the issue of common shares, or the grant of rights or options on such shares, to Trustees, Directors, officers, or employees, as such, of the association, or of a subsidiary thereof, if such issue or grant is approved by the holders of common shares, at a meeting duly held for the purpose or is authorized by and consistent with a plan theretofore so approved. Whenever any rights to subscribe to common shares or convertible securities have not been exercised by the holders thereof, and by the terms thereof such subscription rights have ceased to be exercisable, the Trustees may authorize the disposal of the common shares or convertible securities theretofore subject to such unexercised rights in such manner as the Trustees may deem proper. Common shares shall not be subject to preemptive rights if they are issued on the conversion of convertible securities and such securities were offered or issued to holders of common shares in satisfaction of their preemptive rights or were not subject to preemptive rights. Common shares and convertible securities shall not be subject to preemptive rights if they are (1) common shares or convertible securities theretofore offered to holders of common shares in satisfaction of their preemptive rights and not purchased thereby; (2) issued pursuant to a plan adjusting any rights to fractional shares or fractional interests in order to prevent the issue of such fractional shares or fractional interests in such shares; (3) issued in connection with a merger or consolidation, or pursuant to order of a court of competent jurisdiction unless such order otherwise provides; (4) issued in a public offering or to or through underwriters who shall have agreed to make a public offering of such common shares or convertible securities; (5) released from such preemptive rights by the affirmative vote or written consent of the holders of at least two-thirds (2/3) of the common shares then outstanding; or (6) shares or convertible securities held in the treasury. Except as herein specifically provided, no holder of shares of any class shall have any preemptive rights to subscribe to any shares or securities of any class issued at any time. No fractional shares shall be issued and in connection with the issue of shares of any class the Trustees may take such action as they deem desirable in order to avoid or prevent the issue of fractional shares. As used in this Article "convertible securities" means securities which are convertible into, or entitle the holder
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thereof to purchase, common shares.
(20) Every Shareholder shall be entitled to receive a certificate in such form as the Trustees shall from time to time approve, specifying the number and kind of shares held by him with such description, if any, as may be necessary to distinguish shares of one class from shares of any other class or classes. Such certificates shall, unless otherwise determined by the Trustees, be signed on behalf of the Trustees by the President or a Vice President and the Treasurer or an Assistant Treasurer. On evidence satisfactory to the Trustees that any certificate issued hereunder has been worn out, mutilated, lost or destroyed, the Trustees may cause a new certificate to be issued in place thereof on such terms, if any, as to indemnity and otherwise, as the Trustees shall deem proper.
(21) A register or registers shall be kept by or on behalf of the Trustees which shall contain the names and addresses of the Shareholders and the number and kind of shares held by them respectively. Such register or registers may be in such form as the Trustees may from time to time deem proper. No Shareholder shall be entitled to receive payment of any dividend declared or other distribution from the trust estate or to have any notice given to him as herein provided until he has given his address to the Trustees or to a Transfer Agent for the class of shares held by him for entry on such register. The Trustees may appoint one or more Transfer Agents and one or more Registrars for any class of shares. Any Transfer Agent and Registrar so appointed shall have such duties as may be prescribed by the Trustees.
(22) Every transfer of any shares (otherwise than by operation of law) shall be in writing under the hand of the Transferor or of his agent thereunto duly authorized in writing and upon delivery thereof to the Treasurer or to any Transfer Agent accompanied by the existing certificate for such shares together with such evidence of the genuineness of such transfer, authorization and other matters as may reasonably be required shall be registered and thereupon a new certificate for the shares transferred shall be issued to the Transferee, and in case of a transfer of only part of the shares represented by any certificate, a new certificate for the residue thereof shall be issued to the Transferor. Until a transfer shall be registered, the record holder of each and every certificate shall be deemed to be the holder of the share or shares represented thereby for all purposes hereof, and neither the Trustees nor any Transfer Agent nor any Registrar nor any officer or agent of the Trustees shall be affected by any notice of such transfer.
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(23) Any person becoming entitled to any shares in consequence of the death, bankruptcy or insolvency of any Shareholder or otherwise by operation of law, upon production of proper evidence thereof and upon delivery of the existing certificate to the Trustees or to any Transfer Agent for such shares shall be recorded as the holder of said shares and shall receive a new certificate therefor, but until so registered the Shareholder of record shall be deemed to be the holder of such shares for all purposes hereof and neither the Trustees nor any Transfer Agent nor Registrar nor any officer or agent of the Trustees shall be affected by any notice of such death, bankruptcy, insolvency or other involuntary transfer.
(24) Shares issued as herein provided shall be personal property entitling the holders only to the rights against the Trustees and with reference to the trust estate which are herein set forth and upon the death of any Shareholder all shares held by him shall pass as a part of his personal estate.
(25) Two or more persons holding any share shall be joint owners of the entire interest therein, and no entry shall be made in the register or in any certificate that any person is entitled to any future, limited or contingent interest in any share. But any person registered as a holder of any share may, subject to the provisions hereinafter contained, be described in the register or in any certificates as a trustee of any kind, and any words may be added to the description to identify the said trust.
(26) All shares issued hereunder shall be full-paid and non-assessable and no Trustee, officer or agent shall be entitled to look to the Shareholders personally for indemnity against any liability incurred by him in the execution of these presents or to
call upon the Shareholders for the payment of any sum of money or any assessment whatever.
(27) Neither the Trustees nor any officer or agent of the Trustees nor any Transfer Agent shall be bound to take notice or be affected by notice of any trust whether express, implied or constructive or of any charge, pledge or equity to which any of said shares or the interest of any of the Shareholders under the declaration of trust may be subject or to ascertain or to inquire whether any sale or transfer of any such shares or interest by any such Shareholder or by his personal representatives is authorized by any such trust, charge, pledge or equity or to recognize any person whatever as having any interest in such shares except the persons registered as Shareholders and the receipt of the person in whose name any share is registered or if such share is registered in the names of more than one person the receipt of any
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one of such persons or the receipt of the duly authorized agent of any such person shall be a sufficient discharge for all dividends and other money and for all shares, bonds, obligations and other property payable, issuable or deliverable in respect to such share and from all liability to see to the application of such dividends, money, shares, bonds, obligations and other property.
MEETINGS OF SHAREHOLDERS
(28) An annual meeting of the Shareholders shall be held during the month of April, May or June in each year on such day and at such hour as the Trustees may from time to time determine, at such place either within or outside of Massachusetts as may be designated by the Trustees, for the purpose of electing new Trustees in place of and to succeed those whose terms of office expire at that time and for such other purposes as may be specified by the Trustees. If such annual meeting shall not be held as above provided, a special meeting may be held in lieu thereof at any time and any business which might have been transacted at such annual meeting may be transacted at such special meeting and for all purposes hereof such special meeting shall be deemed to be an annual meeting duly held as herein provided. Special meetings of the Shareholders shall be held whenever ordered by the Trustees, the Chairman of the Board or the President or requested by the holders of one-tenth (1/10) in interest of all the shares outstanding of any class or classes having the general right to vote and any business which may be transacted at an annual meeting of Shareholders may be transacted at a special meeting. Special meetings shall be held at such place as may be designated by the Trustees or the Chairman of the Board or the President. Notice of each meeting of the Shareholders, whether annual or special, specifying the time, place and purposes thereof, shall be given to all Shareholders entitled to vote thereat by delivering such notice to such Shareholders at least seven (7) days before such meeting. Notice delivered via electronic transmission shall be considered notice for purposes of the preceding sentence provided that such notice is, (i) if given by facsimile telecommunication, directed to a number furnished by the Shareholder for such purpose, (ii) if given by electronic mail, directed to an electronic mail address furnished by the Shareholder for such purpose, (iii) if delivered by posting on an electronic network accompanied by a separate notice to the Shareholder of such posting, directed to an electronic mail address furnished by the Shareholder for the purpose, and (iv) if by any other form of electronic transmission, directed to the Shareholder in such manner as the Shareholder shall have specified. For purposes of this paragraph electronic
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transmission means any process of communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval and reproduction of information by the recipient. If the Secretary shall refuse or fail to give any such notice of any special meeting such notices may be given by the persons or person by whom such meeting was called or requested. At all meetings of the Shareholders every holder of common shares shall have one (1) vote for every such share held by him, and every holder of preferred shares of any class or classes thereof shall have such voting rights as may be authorized in accordance with the provisions of Article (19). Every Shareholder entitled to vote at any meeting shall have the same right to vote thereat or at any adjournment or adjournments thereof, either in person or by proxy as in the case of a stockholder in a corporation. Any vote, consent, waiver, proxy appointment or other action by a Shareholder or by the proxy or other agent of any Shareholder, shall be considered given in writing, dated and signed if, in lieu of any other means permitted by this Declaration of Trust, it consists of an electronic transmission that sets forth or is delivered with information from which it can be determined (i) that the electronic transmission was transmitted by the Shareholder, proxy or agent or by a person authorized to act for the Shareholder, proxy or agent; and (ii) the date on which such Shareholder, proxy, agent or authorized person transmitted the electronic transmission. The date on which the electronic transmission is transmitted shall be considered to be the date on which it was signed. The electronic transmission shall be considered received if it has been sent to any address specified for the purpose or, if no address has been specified, to the principal office of the association, addressed to the Secretary or other officer or agent having custody of the records of proceedings of Shareholders. At all meetings a majority of all shares issued and outstanding and having the general right to vote shall constitute a quorum for the transaction of business, but less than such majority may adjourn the meeting from time to time and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting all matters properly brought before the meeting shall be decided by the majority vote of the Shareholders present or represented at such meeting and voting upon such questions, except as otherwise provided herein and as may be otherwise provided hereafter as to particular questions in the provisions for the establishment of the rights, privileges and preferences of any class or classes of preferred shares. The Trustees may fix in advance a time not more than sixty (60) days before the date of any meeting of the Shareholders or the date for the payment of any dividend or the making of any distribution of any kind to Shareholders or the last day on which the consent or dissent of Shareholders may be effectively
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expressed for any purpose as the record date for determining the Shareholders having the right to notice of and to vote at such meeting, and any adjournment thereof, or the right to receive such dividend or distribution or the right to give such consent or dissent, and in such case only Shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the association after the record date. In lieu of fixing such record date, the Trustees may for any of such purposes close the transfer books of the association for all or any portion of said sixty (60) day period.
(29) When any share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such share.
(30) If the holder of any share is a minor or a person of unsound mind, or subject to guardianship or to the legal control of any other person as regards the charge or management of such share, he may vote by his guardian or such other person appointed or having such control, and such vote may be given in person or by proxy.
DIVIDENDS
(31) The Trustees may from time to time declare and pay to the Shareholders such dividends as they see fit, and no Shareholders of any class shall be entitled to receive or be paid any dividends from the trust estate except as determined by the Trustees. Whenever any dividend is declared and paid upon any class of shares outstanding the holders of said class shall all receive the same amount per share, but if any class or classes of preferred shares shall be issued the dividends paid from time to time shall be paid to and distributed among the separate classes in accordance with the rights, privileges, preferences, restrictions and limitations established in connection with the creation of said preferred class or classes. The Trustees may appoint a Dividend Agent for any class of shares with such powers and duties as they may prescribe.
RIGHTS OF THIRD PERSONS
(32) No Shareholder shall be held to any liability whatever for the payment of any sum of money, or for damages or otherwise
-18-
under any contract, obligation or undertaking made, entered into or issued by the Trustees or by any officer, agent or representative elected or appointed by the Trustees and no such contract, obligation or undertaking shall be enforceable against the Trustees or any of them in their or his individual capacities or capacity and all such contracts, obligations and undertakings shall be enforceable only against the Trustees as such and every person, firm, association, trust and corporation having any claim or demand arising out of any such contract, obligation or undertaking shall look only to the trust estate for the payment or satisfaction thereof. It shall be the duty of the Trustees and each of them and of every officer, agent or representative elected or appointed by them to include in every written agreement entered into by them or any of them as herein provided, a statement of the immunity provided by this article for the Shareholders and for the Trustees as individuals, and neither the Trustees nor any of them nor any officer, agent or representative appointed or elected by them shall have any power or authority to enter into any agreement or incur any obligation as herein provided except in accordance with the provisions of this Article.
In case any Shareholder shall at any time for any reason be held to or be under any personal liability whatever solely by reason of his being or having been a Shareholder and not by reason of his acts or omissions as a Shareholder, then such Shareholder (or his heirs, executors, administrators, or other legal representatives) shall be held harmless and indemnified out of the trust estate from and of all loss, liability or expense by reason of such liability.
(33) The receipts of the Trustees or any of them for money or other things paid to them or him, and in the case of money paid the receipt of the Treasurer, shall be effectual discharges to the persons, firms, associations, trusts or corporations paying or delivering such money or things and from all liability to see to the application thereof, and the statement or representation of any one or more of the Trustees or of the Secretary to the effect that the person or persons purporting to act as Trustees in connection with the sale of any part of the trust estate or in connection with any other action taken on behalf of the association as herein provided, are in fact the Trustees hereunder at that time, or to the effect that any person purporting to act as an officer, agent or representative of the association is in fact such officer, agent or representative, or to the effect that any sale or other action taken as aforesaid has been duly authorized by the Trustees or by the Shareholders as may be required by the provisions hereof or as to the meetings, votes or other proceedings by which such authority was given, shall be
-19-
conclusive evidence of the facts so stated in favor of every purchaser of any part of the trust estate and of every person, firm, association, trust or corporation dealing with the association through the person or persons so held out as Trustees or as officers, agents or representatives, and in favor of every association, trust or corporation whose shares or other securities are transferred by any such sale, and of every transfer agent transferring such shares.
RESPONSIBILITY OF TRUSTEES AND OTHERS
(34) No Trustee, and no officer, agent or other representative elected or appointed pursuant to any provision hereof, shall be liable for any act or default on the part of any co-Trustee, or other officer or agent, or for having permitted any co-Trustee, or other officer or agent to receive or retain any money or property receivable by the Trustees hereunder, or for errors of judgment in exercising or failing to exercise any of the powers or discretions conferred upon or resting upon him, or for any loss arising out of any investment, or for failure to sue for or to collect any moneys or property belonging to the trust estate, or for any act or omission to act, performed or omitted by him in good faith in the execution of the trusts hereby created, and each Trustee and every such officer, agent or representative shall be answerable and accountable only for his own receipts and for his own wilful acts, neglects and defaults constituting a breach of trust knowingly and intentionally committed by him in bad faith, and not for those of any other, or of any bank, trust company, broker, attorney, auctioneer or other person with whom or into whose hands any property forming part of the trust estate may be deposited or come, or by whom any action relating to the trusts hereof may be taken or omitted to be taken; nor shall any Trustee or any such officer, agent or representative be liable or accountable for any defect in title, or for failing to transfer to or vest in the Trustees title to any property or effects for the time being subject to any of the trusts of these presents, or intended or believed to be so subject, or for failing to take out or maintain any or sufficient insurance or for liens or encumbrances upon any such property or effects, or for lack of genuineness or for invalidity of the shares, bonds, or other obligations or instruments forming part of or relating to the trust estate, or for any loss, or otherwise, unless the same shall happen through his own wilful act, neglect or default constituting a breach of trust knowingly and intentionally committed by him in bad faith; and the Trustees and each of them and each such officer, agent or representative shall be entitled out of the trust estate to reimbursement for their or his reasonable expenses and outlays and
-20-
to be put in funds and exonerated and indemnified to their or his reasonable satisfaction from time to time, against any and all loss, costs, expense and liability incurred or to be incurred by them or him in the execution of the trusts hereby created; and no Trustee, however appointed, shall be obliged to give any bond or surety or other security for the performance of any of his duties in the said trusts.
In addition, and without limiting the protection afforded to them by the preceding paragraph of this Article (34), no Trustee, officer, agent or representative shall be liable for monetary damages for breach of fiduciary duty as a Trustee, officer, agent or representative, notwithstanding any provision of law imposing such liability; provided, however, that the provisions of this paragraph shall not be deemed to eliminate or limit any liability which such Trustee, officer, agent or representative would otherwise have under the provisions of the declaration (1) for any breach of such person's duty of loyalty to the association or its shareholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (3) for any transaction from which such person derived an improper personal benefit.
The association shall indemnify each of its Trustees and officers, as defined in the last paragraph of this Article, against any loss, liability or expense, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, imposed upon or reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he may be involved or with which he may be threatened, while in office or thereafter, by reason of his being or having been such a Trustee or officer, except with respect to any matter as to which he shall have been finally adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the association; provided, however, that as to any matter disposed of by a compromise payment by such Trustee or officer, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless a determination is made that indemnification of the Trustee or
officer is proper under the circumstances because such Trustee or officer acted in good faith in the reasonable belief that his action was in the best interests of the association. Such determination shall be made (1) by the board of Trustees by a majority vote of a quorum consisting of Trustees who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, such a quorum so
-21-
directs, by independent legal counsel in a written opinion, or (3) by the Shareholders.
In performing his duties, any such Trustee or officer who acts in good faith shall be fully protected in relying upon the books of account of the association or of another organization in which he serves as contemplated by this Article, reports, opinions and advice to the association or to such other organization by any of its officers or employees or by counsel, accountants, appraisers or other experts or consultants selected with reasonable care or upon other records of the association or of such other organization.
Expenses incurred by any Trustee or officer with respect to any action, suit or proceeding heretofore referred to in this Article may be paid or advanced by the association prior to the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Trustee or officer to repay such amount if upon final disposition thereof he shall not be entitled to indemnification under this Article.
The rights of indemnification hereby provided shall not be exclusive of or affect any other right to which any Trustee or officer may be entitled and all such rights shall inure to the benefit of his heirs, executors, administrators and other legal representatives. Such other rights shall include the powers, immunities and rights of reimbursement which would be allowable under the laws of the Commonwealth of Massachusetts were the association a business corporation organized under such laws.
As used in this Article, the terms "Trustee" and "officer" include persons elected as Trustees by the Shareholders or by the board of Trustees, persons elected as officers by the board of Trustees, and persons who serve by vote or at the request of the association as directors, officers, or trustees of another organization in which the association has any direct or indirect interest as a shareholder, creditor or otherwise. Nothing contained in this Article shall affect any rights to indemnification to which employees, agents and representatives of the association other than Trustees and officers may be entitled by contract or otherwise under law.
(35) The Trustees may consult with any counsel, lawyer, valuer, surveyor, engineer, broker, auctioneer, accountant or other expert, consultant or person deemed by them competent, to be selected, employed, retained or consulted by them at the expense of the trust estate, whether individuals, firms or corporations, and whether or not disinterested or generally or specially
-22-
employed, retained or consulted, and any action taken by the Trustees in good faith on the opinion or advice of, or information received from, any such counsel, lawyer, valuer, surveyor, engineer, broker, auctioneer, accountant or other expert, consultant or person deemed by them competent, shall be complete and conclusive protection to the Trustees and each of them.
(36) No sale, contract, arrangement or other dealing made or entered into on behalf of the association or in which it is directly or indirectly interested to or with any Trustee or officer hereunder, or to or with any firm, corporation, trust or association in which any such Trustee or officer is interested and no such sale, contract, arrangement or other dealing in which any such Trustee or officer is in any other way directly or indirectly interested shall be voidable either by the Trustees or by the Shareholders, nor shall any such Trustee or officer so interested be liable to account either to the Trustees or to the Shareholders for any profit or benefit arising from any such sale, contract, arrangement or other dealing.
DURATION, TERMINATION AND AMENDMENTS
(37) Unless sooner terminated as provided in Article (39), the trust hereby created shall continue without limitation of time in such manner that the Trustees shall have all the powers and discretions expressed to be given to them by these presents, and that no Shareholder shall be entitled to put an end to the same or to require a division of the trust estate or any part thereof; provided, however, that if any statute or rule of law of the Commonwealth of Massachusetts shall require that lives in being must be used to determine the maximum period for which the trust hereby created may endure, then the trust hereby created shall terminate upon the expiration of twenty (20) years from the death of the last survivor of the following persons: Allen Abercrombie and Alice Abercrombie, children of Fred C. Abercrombie of Turners Falls, Massachusetts, Rachael Brown, Deborah Brown and Letitia Brown, children of Howard W. Brown of Brookline, Massachusetts, Gertrude Peabody, Anne P. Peabody, Katharine Peabody and Cora W. Peabody, children of W. Rodman Peabody of Milton, Massachusetts, Edward D. Rowley, Charles F. Rowley, Jr. and Francis H. Rowley, children of Charles F. Rowley of Brookline, Massachusetts, and Charles M. Storey, Jr., Anderson Storey, Susan J. Storey and Gertrude Storey, children of Charles M. Storey of Boston, Massachusetts. Gertrude Peabody, Anne P. Peabody, Katharine Peabody and Cora W. Peabody, children of W. Rodman Peabody of Milton, Massachusetts, Edward D. Rowley, Charles F. Rowley, Jr. and Francis H. Rowley, children of Charles F. Rowley of Brookline, Massachusetts, and Charles M. Storey, Jr., Anderson Storey, Susan J. Storey and Gertrude Storey, children of Charles M. Storey of Boston, Massachusetts.
(38) The death of a Shareholder or a Trustee or the dissolution of a Shareholder (if a corporation) during the
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continuance of the trust hereby created shall not operate to terminate the same nor shall it entitle the legal representatives of any such Shareholder or Trustee to an accounting or to take any action in the courts or otherwise.
(39) The trust hereby created may be terminated at any time and any of the terms, powers, and provisions herein contained may be altered, amended, added to, or rescinded at any time by the affirmative vote of at least two-thirds (2/3) of the Trustees but any such termination or alteration, amendment, addition or rescission before becoming effective shall be approved either by the affirmative vote or the consent thereto in writing of the holders of two-thirds (2/3) of all shares previously issued and then outstanding of such class or classes as have general voting power; provided however that no alteration, amendment, addition or rescission adversely affecting the preferences or priorities of any preferred shares then outstanding shall become effective without the affirmative vote or the consent in writing, if such consent be provided for, of the holders of at least two-thirds (2/3) of the preferred shares the preferences or priorities of which are so affected.
(40) In case these trusts shall be terminated or any of the terms, powers and provisions herein contained shall be altered, amended, added to or rescinded pursuant to the provisions of Article (39), a certificate in any number of counterparts deemed desirable, setting forth such termination, alteration, amendment, addition or rescission and that the Trustees and the Shareholders have authorized the same in accordance with the provisions of said Article (39), shall be signed by the Trustees or a majority of them, and by the Secretary, and shall be acknowledged by one of the Trustees and the Trustees shall cause counterparts thereof to be recorded or filed in the various registries of deeds, if any, in which this declaration of trust is then recorded and at the principal office of the association and in such other places as may be required by law.
(41) Upon the termination of the trust hereby created either by the aforesaid limitation contained in Article (37) or as provided in Article (39) the Trustees shall forthwith sell and convert into cash in the manner and with the powers hereinbefore set forth, all property belonging to the trust estate except such stocks, bonds or obligations as they may determine to distribute in kind as hereinafter provided and shall thereupon distribute the entire trust estate as it then exists to and among the Shareholders by giving to the holders of preferred shares of any class or classes then outstanding such preferences and priorities and such amounts per share as they may be entitled to respectively
-24-
and by dividing the remaining assets, share for share, among the holders of the common shares and of the shares of any other class or classes which may be entitled to such distribution in such manner that each such holder shall receive the same amount per share as every other such holder, and in making such distribution the Trustees shall have full power to pay and deliver to the Shareholders or any of them either money or such stocks, bonds or obligations as the Trustees may see fit so to distribute, or partly money and partly such stocks, bonds or obligations, and in this connection to place such valuation as they may deem proper upon all stocks, bonds or obligations so distributed.
GENERAL PROVISIONS
(42) Whenever the Trustees see fit, they may authorize that the signature of any Trustee or of any officer, agent, or representative elected or appointed by the Trustees be facsimile and that the seal of the association, if any be adopted by the Trustees, be facsimile.
(43) Except when the context otherwise requires, any expression used herein in the conjunctive or the disjunctive shall include both the conjunctive and the disjunctive, and any expression in the singular or the plural shall include both the singular and the plural.
(44) The headings of different parts of these presents are inserted merely for convenience of reference, and are not to be taken as any part of these presents or to control or affect the meaning, construction or effect of the same.
(45) This instrument is executed by the Trustees and delivered in the Commonwealth of Massachusetts, and with reference to the laws thereof, and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to the laws of said Commonwealth.
(46) Amendments to the trust hereby created shall not be held or construed to invalidate in any manner anything done hereunder pursuant to the terms hereof prior to the effective date of any such amendment.
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IN WITNESS WHEREOF we have hereunto set our hands and seals at Boston in the Commonwealth of Massachusetts, on or as of the fifteenth day of January, in the year nineteen hundred and twenty-seven, which date shall be the formal date hereof and may be used in all references hereto, this being one of six counterparts or original copies hereof, all executed in the same manner and at the same time and constituting together one and the same instrument.
GEORGE W. LAWRENCE (Seal)
CHARLES WALCOTT (Seal)
ALVAH CROCKER (Seal)
MOSES WILLIAMS (Seal)
W. RODMAN PEABODY (Seal)
CHARLES STETSON (Seal)
ALFRED L. RIPLEY (Seal)
J. PRESTON RICE (Seal)
CHARLES W. HAZELTON (Seal)
SAMUEL FERGUSON (Seal)
ARTHUR W. WOOD (Seal)
JONATHAN BULKLEY (Seal)
Eversource Energy and Subsidiaries |
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| Exhibit 12 | |
Ratio of Earnings to Fixed Charges |
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(Unaudited) |
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| Three Months |
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| Ended |
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| March 31, |
| For the Years Ended December 31, | |||||||||||||||
(Thousands of Dollars) | 2015 |
| 2014 |
| 2013 |
| 2012 (a) |
| 2011 |
| 2010 | |||||||
Earnings, as defined: |
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| Net income | $ | 255,133 |
| $ | 827,065 |
| $ | 793,689 |
| $ | 533,077 |
| $ | 400,513 |
| $ | 394,107 |
| Income tax expense |
| 153,226 |
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| 468,297 |
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| 426,941 |
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| 274,926 |
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| 170,953 |
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| 210,409 |
| Equity in earnings of regional nuclear |
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| (1,044) |
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| (1,318) |
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| (1,154) |
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| (671) |
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| (1,429) |
| Dividends received from regional equity investees |
| - |
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| - |
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| 582 |
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| 733 |
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| 940 |
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| 1,488 |
| Fixed charges, as below |
| 100,863 |
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| 386,451 |
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| 362,403 |
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| 353,616 |
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| 275,948 |
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| 263,393 |
| Less: Interest capitalized (including AFUDC) |
| (1,375) |
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| (5,766) |
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| (4,062) |
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| (5,261) |
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| (11,758) |
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| (10,165) |
| Preferred dividend security requirements of |
| (3,133) |
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| (12,532) |
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| (12,803) |
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| (11,715) |
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| (9,265) |
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| (10,170) |
Total earnings, as defined | $ | 504,418 |
| $ | 1,662,471 |
| $ | 1,565,432 |
| $ | 1,144,222 |
| $ | 826,660 |
| $ | 847,633 | |
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Fixed charges, as defined: |
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| Interest on long-term debt (b) | $ | 87,714 |
| $ | 345,001 |
| $ | 340,970 |
| $ | 316,987 |
| $ | 231,630 |
| $ | 231,089 |
| Interest on rate reduction bonds |
| - |
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| - |
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| 422 |
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| 6,168 |
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| 8,611 |
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| 20,573 |
| Other interest (c) |
| 7,129 |
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| 17,105 |
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| (2,693) |
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| 6,790 |
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| 10,184 |
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| (14,371) |
| Rental interest factor |
| 1,512 |
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| 6,047 |
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| 6,839 |
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| 6,695 |
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| 4,500 |
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| 5,767 |
| Preferred dividend security requirements of |
| 3,133 |
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| 12,532 |
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| 12,803 |
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| 11,715 |
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| 9,265 |
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| 10,170 |
| Interest capitalized (including AFUDC) |
| 1,375 |
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| 5,766 |
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| 4,062 |
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| 5,261 |
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| 11,758 |
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| 10,165 |
Total fixed charges, as defined | $ | 100,863 |
| $ | 386,451 |
| $ | 362,403 |
| $ | 353,616 |
| $ | 275,948 |
| $ | 263,393 | |
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Ratio of Earnings to Fixed Charges |
| 5.00 |
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| 4.30 |
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| 4.32 |
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| 3.24 |
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| 3.00 |
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| 3.22 | |
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(a) NSTAR amounts were included in ES beginning April 10, 2012. | ||||||||||||||||||
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(b) Interest on long-term debt includes amortized premiums, discounts and capitalized expenses related to indebtedness. | ||||||||||||||||||
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(c) For all periods presented, other interest includes interest related to accounting for uncertain tax positions. |
Exhibit 31
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas J. May, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Eversource Energy (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman, President and Chief Executive Officer |
| (Principal Executive Officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James J. Judge, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Eversource Energy (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
| (Principal Financial Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Eversource Energy (the registrant) for the period ending March 31, 2015 as filed with the Securities and Exchange Commission (the Report), we, Thomas J. May, Chairman, President and Chief Executive Officer of the registrant, and James J. Judge, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman, President and Chief Executive Officer |
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
Date: May 6, 2015
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
The Connecticut Light and Power Company |
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| Exhibit 12 | |
Ratio of Earnings to Fixed Charges |
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(Unaudited) |
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| Three Months |
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| Ended |
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| March 31, |
| For the Years Ended December 31, | ||||||||||||||
(Thousands of Dollars) | 2015 |
| 2014 |
| 2013 |
| 2012 |
| 2011 |
| 2010 | |||||||
Earnings, as defined: |
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| Net income | $ | 69,234 |
| $ | 287,754 |
| $ | 279,412 |
| $ | 209,725 |
| $ | 250,164 |
| $ | 244,143 |
| Income tax expense |
| 38,147 |
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| 133,451 |
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| 141,663 |
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| 94,437 |
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| 90,033 |
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| 132,438 |
| Equity in earnings of regional nuclear generating companies |
| (6) |
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| (32) |
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| (67) |
|
| (40) |
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| (16) |
|
| (134) |
| Dividends received from regional equity investees |
| - |
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| - |
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| 289 |
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| - |
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| - |
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| 440 |
| Fixed charges, as below |
| 37,881 |
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| 152,513 |
|
| 139,929 |
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| 139,982 |
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| 140,311 |
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| 145,297 |
| Less: Interest capitalized (including AFUDC) |
| (451) |
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| (1,867) |
|
| (2,249) |
|
| (2,456) |
|
| (3,317) |
|
| (2,726) |
Total earnings, as defined | $ | 144,805 |
| $ | 571,819 |
| $ | 558,977 |
| $ | 441,648 |
| $ | 477,175 |
| $ | 519,458 | |
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Fixed charges, as defined: |
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| Interest on long-term debt (a) | $ | 33,482 |
| $ | 135,656 |
| $ | 130,620 |
| $ | 124,894 |
| $ | 131,918 |
| $ | 134,553 |
| Interest on rate reduction bonds |
| - |
|
| - |
|
| - |
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| - |
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| - |
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| 7,542 |
| Other interest (b) |
| 3,142 |
|
| 11,765 |
|
| 3,030 |
|
| 8,233 |
|
| 809 |
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| (4,357) |
| Rental interest factor |
| 806 |
|
| 3,225 |
|
| 4,030 |
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| 4,399 |
|
| 4,267 |
|
| 4,833 |
| Interest capitalized (including AFUDC) |
| 451 |
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| 1,867 |
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| 2,249 |
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| 2,456 |
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| 3,317 |
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| 2,726 |
Total fixed charges, as defined | $ | 37,881 |
| $ | 152,513 |
| $ | 139,929 |
| $ | 139,982 |
| $ | 140,311 |
| $ | 145,297 | |
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Ratio of Earnings to Fixed Charges |
| 3.82 |
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| 3.75 |
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| 3.99 |
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| 3.16 |
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| 3.40 |
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| 3.58 | |
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(a) Interest on long-term debt includes amortized premiums, discounts and capitalized expenses related to indebtedness. | ||||||||||||||||||
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(b) For the years ended December 31, 2013, 2012, 2011 and 2010, other interest includes interest related to accounting for uncertain tax positions. |
Exhibit 31
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas J. May, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of The Connecticut Light and Power Company (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
| (Principal Executive Officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James J. Judge, certify that:
I have reviewed this Quarterly Report on Form 10-Q of The Connecticut Light and Power Company (the registrant);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
| (Principal Financial Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of The Connecticut Light and Power Company (the registrant) for the period ending March 31, 2015 as filed with the Securities and Exchange Commission (the Report), we, Thomas J. May, Chairman of the registrant, and James J. Judge, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
Date: May 6, 2015
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
NSTAR Electric Company and Subsidiary |
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| Exhibit 12 | |
Ratio of Earnings to Fixed Charges |
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(Unaudited) |
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| Three Months |
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| Ended |
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| March 31, |
| For the Years Ended December 31, | ||||||||||||||
(Thousands of Dollars) | 2015 |
| 2014 |
| 2013 |
| 2012 |
| 2011 |
| 2010 | |||||||
Earnings, as defined: |
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|
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|
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|
|
|
|
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|
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| |
| Net income | $ | 83,561 |
| $ | 303,088 |
| $ | 268,546 |
| $ | 190,242 |
| $ | 252,494 |
| $ | 248,575 |
| Income tax expense |
| 56,130 |
|
| 201,981 |
|
| 172,866 |
|
| 123,966 |
|
| 165,686 |
|
| 162,020 |
| Equity in earnings of regional nuclear generating and transmission companies |
| (114) |
|
| (408) |
|
| (550) |
|
| (412) |
|
| (501) |
|
| (836) |
| Dividends received from regional equity investees |
| - |
|
| - |
|
| 344 |
|
| 286 |
|
| 676 |
|
| 669 |
| Fixed charges, as below |
| 21,518 |
|
| 82,503 |
|
| 73,115 |
|
| 72,364 |
|
| 76,219 |
|
| 77,902 |
| Less: Interest capitalized (including AFUDC) |
| (422) |
|
| (2,027) |
|
| (511) |
|
| (259) |
|
| (185) |
|
| (108) |
Total earnings, as defined | $ | 160,673 |
| $ | 585,137 |
| $ | 513,810 |
| $ | 386,187 |
| $ | 494,389 |
| $ | 488,222 | |
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Fixed charges, as defined: |
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|
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| |
| Interest on long-term debt (a) | $ | 18,645 |
| $ | 77,140 |
| $ | 79,088 |
| $ | 87,100 |
| $ | 90,040 |
| $ | 90,630 |
| Interest on rate reduction bonds |
| - |
|
| - |
|
| 399 |
|
| 3,585 |
|
| 7,226 |
|
| 11,235 |
| Other interest (b) |
| 1,801 |
|
| 738 |
|
| (9,104) |
|
| (20,631) |
|
| (27,839) |
|
| (30,475) |
| Rental interest factor |
| 650 |
|
| 2,598 |
|
| 2,221 |
|
| 2,051 |
|
| 6,607 |
|
| 6,404 |
| Interest capitalized (including AFUDC) |
| 422 |
|
| 2,027 |
|
| 511 |
|
| 259 |
|
| 185 |
|
| 108 |
Total fixed charges, as defined | $ | 21,518 |
| $ | 82,503 |
| $ | 73,115 |
| $ | 72,364 |
| $ | 76,219 |
| $ | 77,902 | |
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Ratio of Earnings to Fixed Charges |
| 7.47 |
|
| 7.09 |
|
| 7.03 |
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| 5.34 |
|
| 6.49 |
|
| 6.27 | |
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(a) Interest on long-term debt includes amortized premiums, discounts and capitalized expenses related to indebtedness. | ||||||||||||||||||
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(b) For the years ended December 31, 2011 and 2010, other interest includes interest related to accounting for uncertain tax positions. |
Exhibit 31
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas J. May, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of NSTAR Electric Company (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
| (Principal Executive Officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James J. Judge, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of NSTAR Electric Company (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
| (Principal Financial Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of NSTAR Electric Company (the registrant) for the period ending March 31, 2015 as filed with the Securities and Exchange Commission (the Report), we, Thomas J. May, Chairman of the registrant, and James J. Judge, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
Date: May 6, 2015
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Public Service Company of New Hampshire and Subsidiary |
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| Exhibit 12 | |||
Ratio of Earnings to Fixed Charges |
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(Unaudited) |
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| |
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| Three Months |
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| |
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| Ended |
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| |
|
| March 31, |
| For the Years Ended December 31, | ||||||||||||||
(Thousands of Dollars) | 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
|
| 2011 |
|
| 2010 | ||
Earnings, as defined: |
|
|
|
|
|
|
|
|
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|
|
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|
| |
| Net income | $ | 32,045 |
| $ | 113,944 |
| $ | 111,397 |
| $ | 96,882 |
| $ | 100,267 |
| $ | 90,067 |
| Income tax expense |
| 20,276 |
|
| 72,135 |
|
| 71,101 |
|
| 60,993 |
|
| 49,945 |
|
| 50,801 |
| Equity in earnings of regional nuclear generating companies |
| (1) |
|
| (8) |
|
| (12) |
|
| (8) |
|
| (7) |
|
| (23) |
| Dividends received from regional equity investees |
| - |
|
| - |
|
| 42 |
|
| - |
|
| - |
|
| 80 |
| Fixed charges, as below |
| 11,559 |
|
| 46,530 |
|
| 47,318 |
|
| 52,769 |
|
| 52,111 |
|
| 54,721 |
| Less: Interest capitalized (including AFUDC) |
| (152) |
|
| (640) |
|
| (500) |
|
| (1,579) |
|
| (7,064) |
|
| (6,621) |
Total earnings, as defined | $ | 63,727 |
| $ | 231,961 |
| $ | 229,346 |
| $ | 209,057 |
| $ | 195,252 |
| $ | 189,025 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed charges, as defined: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Interest on long-term debt (a) | $ | 11,399 |
| $ | 45,116 |
| $ | 44,370 |
| $ | 46,228 |
| $ | 36,832 |
| $ | 36,220 |
| Interest on rate reduction bonds |
| - |
|
| - |
|
| (154) |
|
| 2,687 |
|
| 6,276 |
|
| 9,660 |
| Other interest (b) |
| (127) |
|
| 233 |
|
| 1,960 |
|
| 1,313 |
|
| 1,039 |
|
| 1,187 |
| Rental interest factor |
| 135 |
|
| 541 |
|
| 642 |
|
| 962 |
|
| 900 |
|
| 1,033 |
| Interest capitalized (including AFUDC) |
| 152 |
|
| 640 |
|
| 500 |
|
| 1,579 |
|
| 7,064 |
|
| 6,621 |
Total fixed charges, as defined | $ | 11,559 |
| $ | 46,530 |
| $ | 47,318 |
| $ | 52,769 |
| $ | 52,111 |
| $ | 54,721 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Earnings to Fixed Charges |
| 5.51 |
|
| 4.99 |
|
| 4.85 |
|
| 3.96 |
|
| 3.75 |
|
| 3.45 | |
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
(a) Interest on long-term debt includes amortized premiums, discounts and capitalized expenses related to indebtedness. | ||||||||||||||||||
|
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|
|
(b) For the years ended December 31, 2011 and 2010, other interest includes interest related to accounting for uncertain tax positions. |
Exhibit 31
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas J. May, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Public Service Company of New Hampshire (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
| (Principal Executive Officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James J. Judge, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Public Service Company of New Hampshire (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
| (Principal Financial Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Public Service Company of New Hampshire (the registrant) for the period ending March 31, 2015 as filed with the Securities and Exchange Commission (the Report), we, Thomas J. May, Chairman of the registrant, and James J. Judge, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
Date: May 6, 2015
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Western Massachusetts Electric Company |
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| Exhibit 12 | |
Ratio of Earnings to Fixed Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(Unaudited) |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| March 31, |
| For the Years Ended December 31, | ||||||||||||||
(Thousands of Dollars) | 2015 |
| 2014 |
| 2013 |
| 2012 |
| 2011 |
| 2010 | |||||||
Earnings, as defined: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Net income | $ | 13,244 |
| $ | 57,819 |
| $ | 60,438 |
| $ | 54,503 |
| $ | 43,054 |
| $ | 23,090 |
| Income tax expense |
| 9,113 |
|
| 37,268 |
|
| 37,368 |
|
| 32,140 |
|
| 23,186 |
|
| 16,325 |
| Equity in earnings of regional nuclear |
| (2) |
|
| (8) |
|
| (18) |
|
| (11) |
|
| (4) |
|
| (36) |
| Dividends received from regional equity investees |
| - |
|
| - |
|
| 80 |
|
| - |
|
| - |
|
| 120 |
| Fixed charges, as below |
| 7,157 |
|
| 26,202 |
|
| 26,316 |
|
| 28,162 |
|
| 25,079 |
|
| 23,042 |
| Less: Interest capitalized (including AFUDC) |
| (232) |
|
| (864) |
|
| (498) |
|
| (534) |
|
| (534) |
|
| (336) |
Total earnings, as defined | $ | 29,280 |
| $ | 120,417 |
| $ | 123,686 |
| $ | 114,260 |
| $ | 90,781 |
| $ | 62,205 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed charges, as defined: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Interest on long-term debt (a) | $ | 6,045 |
| $ | 24,245 |
| $ | 23,625 |
| $ | 23,462 |
| $ | 20,023 |
| $ | 17,988 |
| Interest on rate reduction bonds |
| - |
|
| - |
|
| 177 |
|
| 1,229 |
|
| 2,335 |
|
| 3,372 |
| Other interest |
| 778 |
|
| 686 |
|
| 1,049 |
|
| 1,943 |
|
| 1,254 |
|
| 479 |
| Rental interest factor |
| 102 |
|
| 407 |
|
| 967 |
|
| 994 |
|
| 933 |
|
| 867 |
| Interest capitalized (including AFUDC) |
| 232 |
|
| 864 |
|
| 498 |
|
| 534 |
|
| 534 |
|
| 336 |
Total fixed charges, as defined | $ | 7,157 |
| $ | 26,202 |
| $ | 26,316 |
| $ | 28,162 |
| $ | 25,079 |
| $ | 23,042 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Earnings to Fixed Charges |
| 4.09 |
|
| 4.60 |
|
| 4.70 |
|
| 4.06 |
|
| 3.62 |
|
| 2.70 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Interest on long-term debt includes amortized premiums, discounts and capitalized expenses related to indebtedness. |
|
|
|
|
Exhibit 31
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas J. May, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Western Massachusetts Electric Company (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
| (Principal Executive Officer) |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James J. Judge, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Western Massachusetts Electric Company (the registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 6, 2015
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
| (Principal Financial Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Western Massachusetts Electric Company (the registrant) for the period ending March 31, 2015 as filed with the Securities and Exchange Commission (the Report), we, Thomas J. May, Chairman of the registrant, and James J. Judge, Executive Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
/s/ | Thomas J. May |
| Thomas J. May |
| Chairman |
/s/ | James J. Judge |
| James J. Judge |
| Executive Vice President and Chief Financial Officer |
Date: May 6, 2015
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Supplemental Cash Flow Information (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2015
|
Mar. 31, 2014
|
|
Capital Expenditures Incurred But Not Yet Paid | $ 110.4 | $ 108.5 |
The Connecticut Light And Power Company [Member] | ||
Capital Expenditures Incurred But Not Yet Paid | 42.3 | 36.2 |
NSTAR Electric Company [Member] | ||
Capital Expenditures Incurred But Not Yet Paid | 21.9 | 28.0 |
Public Service Company Of New Hampshire [Member] | ||
Capital Expenditures Incurred But Not Yet Paid | 21.7 | 14.4 |
Western Massachusetts Electric Company [Member] | ||
Capital Expenditures Incurred But Not Yet Paid | $ 8.3 | $ 14.4 |
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