U-9C-3 1 juneu9c.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM U-9C-3 QUARTERLY REPORT PURSUANT TO RULE 58 For the quarterly period ended June 30, 2002 Northeast Utilities ------------------- (Name of registered holding company) 107 Selden Street, Berlin, CT 06037 ----------------------------------- (Address of Principal Executive Officers) Name and telephone number of officer to whom inquiries concerning this report should be directed: John P. Stack, Vice President-Accounting and Controller Telephone Number: 860-665-2333 GENERAL INSTRUCTIONS A. Use of Form 1. A reporting company, as defined herein, shall file a report on this form within 60 days after the end of each of the first three quarters, and within 90 days after the end of the fourth quarter, of the fiscal year of the registered holding company. The period beginning on the date of effectiveness of rule 58 and ending at the end of the quarter following the quarter in which the rule becomes effective shall constitute the initial period for which any report shall be filed, if applicable. 2. The requirement to provide specific information by means of this form supersedes any requirement by order of the Commission to provide identical information by means of periodic certificates under rule 24; but does not so supersede and replace any requirement by order to provide information by means of an annual report on Form U-13-60. 3. Information with respect to reporting companies that is required by Form U-13-60 shall be provided exclusively on that form. 4. Notwithstanding the specific requirements of this form, this Commission may informally request such further information as, in its opinion, may be necessary or appropriate. B. Statements of Monetary Amounts and Deficits 1. Amounts included in this form and in related financial statements may be expressed in whole dollars, thousands of dollars or hundred thousands of dollars. 2. Deficits and other similar entries shall be indicated by either brackets or parentheses. An explanation should be provided by footnote. C. Formal Requirements This form, including exhibits, shall be filed with Commission electronically pursuant to Regulation S-T (17 CFR 232.10 et seq.). A conformed copy of each such report shall be filed with each state commission having jurisdiction over the retail rates of a public utility company that is an associate company of a reporting company. Each report shall provide the name and telephone number of the person to whom inquiries concerning this report should be directed. D. Definitions As used in this form, the word "reporting company" means an energy-related company or gas-related company, as defined in rule 58(b). All other words and terms have the same meaning as in the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder. ITEM 1 - ORGANIZATIONAL CHART ------------------------------------------------------------------------------- Instructions ------------------------------------------------------------------------------- 1. Complete Item 1 only for the first three calendar quarters of the fiscal year of the registered holding company. 2. Under the caption "Name of Reporting Company," list each energy-related and gas-related company and each system company that directly or indirectly holds securities thereof. Add the designation "(new)" for each reporting company of which securities were acquired during the period, and the designation "(*)" for each inactive company. 3. Under the caption "Percentage of Voting Securities Held," state the aggregate percentage of the outstanding voting securities of the reporting company held directly or indirectly by the registered holding company at the end of the quarter. 4. Provide a narrative description of each reporting company's activities during the reporting period. -------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------ Percentage Activities Energy of Voting reported Name of or Gas Date of State of Securities Nature of during the Reporting Co. Related Organization Organization Held Business period ----------------- ------- ------------ ------------- ----------------- -------------- ---------- NU Holding 1/4/99 Connecticut 100% by Unregulated (A) Enterprises, Inc. Northeast businesses Utilities holding company Select Energy 9/26/96 Connecticut 100% by Invest in (B) Energy, Inc. NU energy-related Enterprises, Inc. activities Select Energy 3/17/99 Connecticut 100% by Invest in (C) Energy NU energy-related Portland Enterprises, Inc. activities Pipeline, Inc.* Northeast Energy 1/4/99 Connecticut 100% by Invest in (D) Generation NU energy-related Services Enterprises, Inc. activities Company Select Energy Energy 6/19/90 Massachusetts 100% by Invest in (E) Services, Inc. NU energy-related Enterprises, Inc. activities Reeds Ferry Energy 7/15/64 New 100% by Invest in (F) Supply Co., Inc. Hampshire Select Energy energy-related Services, Inc. activities HEC/Tobyhanna Energy 9/28/99 Massachusetts 100% by Invest in (G) Energy Project, Select Energy energy-related Inc. Services, Inc. activities Select Energy Energy 10/12/94 Massachusetts 100% by Invest in (H) Contracting, Inc. Select Energy energy-related Services, Inc. activities Yankee Energy Holding 2/15/00 Connecticut 100% by Public (I) System, Inc. Northeast Utility Utilities Holding Company Yankee Energy Energy 7/2/93 Connecticut 100% by Invest in (J) Services Company* Yankee Energy energy-related System, Inc. activities R.M. Energy 11/22/94 Connecticut 10% by Invest in (K) Services, Inc. Yankee Energy energy-related System, Inc. activities Acumentrics Energy 09/13/00 Massachusetts 5% by Invest in (L) Corporation NU energy-related Enterprises, Inc. activities ERI/HEC Energy 09/30/00 Delaware 50% by Invest in (M) EFA-Med, LLC Select Energy energy-related Services, Inc. activities E.S. Boulos Energy 01/19/01 Connecticut 100% by Invest in (N) Company Northeast energy-related Generation activities Services Company NGS Mechanical Energy 01/24/01 Connecticut 100% by Provide (O) Company Northeast mechanical Generation construction Services Company and maintenance services HEC/CJTS Energy Energy 03/02/01 Delaware 100% by Facilitate (P) Center LLC Select Energy construction Services, Inc. financing Select Energy Energy 02/13/96 Delaware 100% by Select Invest in (Q) New York Energy, Inc. energy-related activities
(A) NU Enterprises, Inc. is not the "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (B) Select Energy, Inc. (Select Energy) is an integrated energy business that buys, sells, markets and trades electricity, gas and oil and energy-related products and services to both wholesale and retail customers in the northeastern United States. Select Energy procures and delivers energy and capacity required to serve its electric, gas and oil customers. Under the umbrella of the Select Energy brand, Select Energy, collectively with its affiliated competitive energy businesses, provides a wide range of energy products and energy services. Select Energy is a licensed retail electricity supplier and is registered with local electric distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Virginia. Select Energy is a registered gas marketer with local gas distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Virginia. (C) Select Energy Portland Pipeline, Inc. (SEPPI) acquired a 5% interest in Portland Natural Gas Transmission System partnership in March 1999 and sold this interest in June 2001. (D) Northeast Generation Services Company (NGS) was established to provide a full range of energy-related operation and maintenance services for larger industrial, institutional and power generation customers throughout the 11-state Northeast area. NGS' current business segments focus on providing turnkey Manage and Operate Services (MOS) and also a full range of Industrial Services (IS) and Consulting Services (CS). MOS is a service that is designed for generation asset owners. NGS has the ability to offer station management and operation services with a focus on optimizing the value of that specific asset with the owner. Within the IS platform, its offerings include mechanical and electrical construction and maintenance services, as well as environmental maintenance/compliance services. Within the CS platform, the product and service offerings include engineering and environmental consulting services, with an emphasis on power plant system design. (E) Select Energy Services, Inc. (formerly HEC Inc.) is not the "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (F) Reed's Ferry Supply Corporation is an equipment wholesaler which purchases equipment on behalf of Select Energy Contracting, Inc. (G) HEC/Tobyhanna Energy Project, Inc. was established as a special purpose entity to manage the assets of an Energy Savings Performance Contract (ESPC) project at the Tobyhanna Army Depot. (H) Select Energy Contracting, Inc. designs, manages and directs the construction of, and/or installing of mechanical, water, and electrical systems, energy and other resource consuming equipment. (I) Yankee Energy System, Inc. is not the "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (J) Yankee Energy Services Company (YESCO) is winding down its energy-related services for its customers. YESCO has disposed of most of its assets and is in the process of liquidating the remainder of its assets. (K) R. M. Services, Inc. provides consumer collection services for companies throughout the United States. (L) Acumentrics Corporation develops, manufactures, and distributes advanced power generation, power quality and power protection devices including a high-speed flywheel and advanced technology fuel cells. (M) ERI/HEC EFA-Med, LLC is a Delaware limited liability company that was formed by Select Energy Services, Inc., and ERI Services, Inc. to enter into an indefinite delivery/indefinite quantity contract with the U.S. Navy. Under the contract, the Navy will issue Delivery Orders for energy services work at U.S. Government facilities located in Bahrain, Greece, Egypt, Italy, Spain, Turkey, and the United Kingdom. The LLC will designate either ERI or Select Energy Services, Inc. to perform each of the Delivery Orders. The LLC will also act as the conduit for any project-related financing. ERI Services, Inc. and Select Energy Services, Inc. each own 50% of the LLC. (N) E. S. Boulos Company (Boulos) is in the electrical construction business in Maine. Boulos is registered to do business in Maine, Massachusetts, New Hampshire, and Vermont. (O) NGS Mechanical Company (NGSM) performs mechanical construction and maintenance services. NGSM is registered to do business in Massachusetts, New Hampshire, Maine, Vermont, Rhode Island, and New York. (P) HEC/CJTS Energy Center LLC (HEC/CTJS) facilitated the construction of an energy center at of the Connecticut Juvenile Training School in Middletown, Connecticut. HEC/CJTS does not have any employees nor does it conduct any other activities. (Q) Select Energy New York, Inc. (SENY) is engaged in the brokering, marketing, transportation, storage, and sale of energy commodities in the state of New York. ITEM 2 - ISSUANCES AND RENEWALS OF SECURITIES AND CAPITAL CONTRIBUTIONS ------------------------------------------------------------------------------- Instruction ----------- With respect to a transaction with an associate company, report only the type and principal amount of securities involved. -------------------------------------------------------------------------------
Person Company Type of Principal to Whom Collateral Consideration Company Amount of Issuing Security Amount of Issue or Cost of Security Given With Received for Contributing Capital Security Issued Security Renewal Capital Was Issued Security Each Security Capital Contribution -------------- ------------ ------------- -------- ------- ---------- ---------- ------------- ------------ ------------ NU Select Enterprises, Energy, Inc. N/A N/A N/A N/A N/A N/A N/A Inc. $50,000,000 Northeast Generation Services Company No transactions this quarter. Select Energy Contracting, Inc. No transactions this quarter. Reeds Ferry Supply Co., Inc. No transactions this quarter. HEC/Tobyhanna Energy Project, Inc. No transactions this quarter. Yankee Energy Services Company No transactions this quarter. R.M. Services, Inc. No transactions this quarter. Acumentrics Corporation No transactions this quarter. ERI/HEC EFA-Med, LLC No transactions this quarter. E.S. Boulos Company No transactions this quarter. NGS Mechanical Company No transactions this quarter. HEC/CJTS Energy Center LLC No transactions this quarter. Northeast Utilities No transactions this quarter. Select Energy New York, Inc. No transactions this quarter.
ITEM 3 - ASSOCIATE TRANSACTIONS ------------------------------------------------------------------------------- Instructions ------------ 1. This item is used to report the performance during the quarter of contracts among reporting companies and their associate companies, including other reporting companies, for service, sales and construction. A copy of any such contract not filed previously should be provided as an exhibit pursuant to Item 6.B. 2. Parts I and II concern transactions performed by reporting companies on behalf of associate companies, and transactions performed by associate companies on behalf of reporting companies, respectively. ------------------------------------------------------------------------------- Part I - Transactions performed by reporting companies on behalf of associate companies.
Total Amount Billed* Reporting Associate Company Company Types of Three Months Rendering Receiving Services Ended Services Services Rendered June 30, 2002 ----------------------- ------------------- -------------- ------------------ (Thousands of Dollars) Northeast Select Generation Energy, Inc. Electrical and Services Mechanical services $ 18 Company ================== Northeast The Generation Connecticut Services Light & Power Electrical and Company Company Mechanical services $ 13 ================== Northeast Western Generation Massachusetts Electrical and Services Electric Company Mechanical services $ 3 Company ================== Northeast Public Service Generation Company of Electrical and Services New Hampshire Mechanical services $ 209 Company ================== Northeast Holyoke Water Generation Power Company Electrical and Services Mechanical services $ 2,753 Company ================== Northeast Northeast Generation Generation Electrical and Services Company Mechanical services $ 6,696 Company ================== Wholesale Reeds Ferry Select Energy Purchasing Supply Co., Inc. Contracting, Inc. Services $ 251 ================== Northeast North Atlantic Generation Energy Service Electrical and Services Corporation Mechanical services $ (29) Company ================== Northeast Generation Yankee Energy Electrical and Services Services Company Mechanical services $ 23 Company ================== Northeast Northeast Generation Utilities Services Service Electrical and Company Company Mechanical services $ 94 ==================
Part II - Transactions performed by associate companies on behalf of reporting companies.
Total Amount Billed* Associate Reporting Company Company Types of Three Months Rendering Receiving Services Ended Services Services Rendered June 30, 2002 ----------------------- ------------------- -------------- ------------------ (Thousands of Dollars) Public Service Company Select of New Hampshire Energy, Inc. Miscellaneous $ 4 ==================
* 'Total Amount Billed' is direct costs only. ITEM 4 - SUMMARY OF AGGREGATE INVESTMENT Investments in energy-related companies: --------------------------------------- (Thousands of Dollars) Total consolidated capitalization as of 06/30/02 $6,877,034 line 1 Total capitalization multiplied by 15% (line 1 multiplied by .15) 1,031,555 line 2 Greater of $50 million or line 2 $1,031,555 line 3 Total current aggregate investment: (categorized by major line of energy-related business): Select Energy, Inc. $692,342 Northeast Generation Services Company 28,548 Select Energy Contracting, Inc. 33,509 Select Energy New York, Inc. 36,699 Reeds Ferry Supply Co., Inc. 7 HEC/Tobyhanna Energy Project, Inc. - Yankee Energy Services Company 8,382 E.S. Boulos Company 7,539 R.M. Services, Inc. 13,799 NGS Mechanical Company 10 Acumentrics Corporation 10,000 ERI/HEC EFA-Med, LLC 6 HEC/CJTS Energy Center LLC 10 ----------- Current aggregate investment 830,851 ----------- Elimination * 17,759 ----------- Total current aggregate investment 813,092 line 4 ----------- Difference between the greater of $50 million or 15% of capitalization and the total aggregate investment of the registered holding company system $218,463 line 5 =========== *Elimination is for capital contributions made from a parent company who is a reporting company to a subsidiary who is also a reporting company. ITEM 5 - OTHER INVESTMENTS ------------------------------------------------------------------------------- Instruction ----------- This item concerns investments in energy-related and gas-related companies that are excluded from the calculation of aggregate investment under rule 58. ------------------------------------------------------------------------------- Major Line Other Other of Energy- Investment Investment Related in Last in This Reason for Difference Business U-9C-3 Report U-9C-3 Report in Other Investment ------------- ------------- ------------- ------------------------ NONE ITEM 6 - FINANCIAL STATEMENTS AND EXHIBITS ------------------------------------------------------------------------------- Instructions ------------------------------------------------------------------------------- A. Financial Statements 1. Financial statements are required for reporting companies in which the registered holding company system has at least 50% equity or other ownership interest. For all other rule 58 companies, the registered holding company shall make available to the Commission such financial statements as are available to it. 2. For each reporting company, provide a balance sheet as of the end of the quarter and income statements for the three-month and year-to-date periods ending as of the end of the quarter, together with any notes thereto. Financial statements shall be for the first three quarters of the fiscal year of the registered holding company. 3. If a reporting company and each of its subsidiaries engage exclusively in single category of energy-related or gas-related activity, consolidated financial statements may be filed. 4. Separate financial statements need not be filed for inactive companies or for companies engaged solely in the ownership of interests in energy-related or gas-related companies. B. Exhibits 1. Copies of contracts required to be provided by Item 3 shall be filed as exhibits. 2. A certificate stating that a copy of the report for the previous quarter has been filed with interested state commissions shall be filed as an exhibit. The certificate shall provide the names and addresses of the state commissions. ------------------------------------------------------------------------------- A. Financial Statements Select Energy, Inc.: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 Northeast Generation Services Company: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 Select Energy Contracting, Inc.: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 Reeds Ferry Supply Co., Inc.: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 HEC/Tobyhanna Energy Project, Inc.: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 Yankee Energy Services Company: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 ERI/HEC EFA-Med, LLC: Not available as of June 30, 2002 E. S. Boulos Company: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 NGS Mechanical Company: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 Northeast Utilities (Parent): Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 HEC/CJTS Energy Center LLC: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 Select Energy New York: Balance Sheet - As of June 30, 2002 Income Statement - Three months and six months ended June 30, 2002 B. Exhibits Exhibit No. Description ----------- ----------- 6.B.1.1a Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1b Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1c Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1d Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1e Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1f Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1g Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1h Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.2 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.3a Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.3b Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.3c Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.4a Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.4b Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.5 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.6a Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.6b Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.7 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.2.1 The company certifies that a conformed copy of Form U-9C-3 for the previous quarter was filed with the following state commissions: Ms. Louise E. Rickard Acting Executive Secretary Department of Public Utility Control 10 Franklin Square New Britain, CT 06051 Ms. Mary L. Cottrell, Secretary Massachusetts Department of Telecommunications and Energy 100 Cambridge Street Boston, MA 02202 Mr. Thomas B. Getz Executive Director and Secretary State of New Hampshire Public Utilities Commission 8 Old Suncook Road, Building One Concord, NH 03301-7319 SELECT ENERGY, INC. BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Receivables, net $ 315,329 Accounts receivable from affiliated companies 102,005 Special deposits 11,756 Unrealized net gains on mark-to-market transactions 85,808 Prepaid wholesale power purchases 39,658 Prepayments and other 5,819 ------------- 560,375 ------------- Property, Plant and Equipment: Competitive energy 12,555 Less: Accumulated provision for depreciation and amortization 5,329 ------------- 7,226 Construction work in progress 1,343 ------------- 8,569 ------------- Deferred Debits and Other Assets: Intangibles, net 19,340 Accumulated deferred income taxes 6,516 Prepaid pensions 2,516 Other 39,280 ------------- 67,652 ------------- Total Assets $ 636,596 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY, INC. BALANCE SHEET (Unaudited) June 30, 2002 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------- Current Liabilities: Notes payable to affiliated companies $ 103,400 Accounts payable 323,199 Accounts payable to affiliated companies 8,814 Accrued taxes 7,914 Other 34,440 ------------- 477,767 ------------- Deferred Credits and Other Liabilities 98,779 ------------- Capitalization: Common Stockholder's Equity: Common stock, $1 par value - 20,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 249,400 Accumulated deficit (188,354) Accumulated other comprehensive loss (996) ------------- Common Stockholder's Equity 60,050 ------------- Total Capitalization 60,050 ------------- Total Liabilities and Capitalization $ 636,596 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY, INC. INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------- ------------- (Thousands of Dollars) Operating Revenues $ 748,267 $ 1,667,002 ------------- ------------- Operating Expenses: Purchased power, net interchange power and capacity 756,610 1,692,746 Other 18,249 46,851 Depreciation and amortization 2,233 3,965 Taxes other than income taxes 1,968 3,706 ------------- ------------- Total operating expenses 779,060 1,747,268 ------------- ------------- Operating Loss (30,793) (80,266) Other Income, Net 138 5,867 ------------- ------------- Loss Before Interest Expense and Income Tax Benefit (30,655) (74,399) Interest Expense, Net 1,146 2,501 ------------- ------------- Loss Before Income Tax Benefit (31,801) (76,900) Income Tax Benefit (12,503) (32,448) ------------- ------------- Net Loss $ (19,298) $ (44,452) ============= ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST GENERATION SERVICES COMPANY BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 1 Receivables, net 4,091 Accounts receivable from affiliated companies 1,975 Unbilled revenues 6,079 Fuel, materials and supplies, at average cost 496 Prepayments and other 2,251 ------------- 14,893 ------------- Property, Plant and Equipment: Competitive Energy 1,594 Less: Accumulated provision for depreciation 785 ------------- 809 Construction work in progress 1,528 ------------- 2,337 ------------- Deferred Debits and Other Assets: Accumulated deferred income taxes 433 Other 16,155 ------------- 16,588 ------------- Total Assets $ 33,818 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST GENERATION SERVICES COMPANY BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Notes payable to affiliated companies $ 15,800 Accounts payable 1,088 Accounts payable to affiliated companies 2,612 Accrued taxes 1,116 Other 69 ------------- 20,685 ------------- Deferred Credits and Other Liabilities 406 ------------- Capitalization: Common Stockholder's Equity: Common stock, $1 par value - 20,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 10,348 Retained earnings 2,379 ------------- Common Stockholder's Equity 12,727 ------------- Total Capitalization 12,727 ------------- Total Liabilities and Capitalization $ 33,818 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST GENERATION SERVICES COMPANY INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------- ------------- (Thousands of Dollars) Operating Revenues $ 14,881 $ 28,465 ------------- ------------- Operating Expenses: Operating 528 864 Other 11,896 22,383 Maintenance 3,438 6,865 Depreciation 63 46 Taxes other than income taxes 422 996 ------------- ------------- Total operating expenses 16,347 31,154 ------------- ------------- Operating Loss (1,466) (2,689) Other Income, Net 688 990 ------------- ------------- Loss Before Interest Expense and Income Tax Benefit (778) (1,699) Interest Expense, Net 28 144 ------------- ------------- Loss Before Income Tax Benefit (806) (1,843) Income Tax Benefit (418) (989) ------------- ------------- Net Loss $ (388) $ (854) ============= ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY CONTRACTING, INC. BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 165 Receivables, net 14,532 Accounts receivable from affiliated companies 11 Materials and supplies, at average cost 322 Prepayments and other 340 ------------- 15,370 ------------- Property, Plant and Equipment: Competitive Energy 5,851 Less: Accumulated provision for depreciation 3,416 ------------- 2,435 ------------- Deferred Debits and Other Assets: Goodwill 17,260 Other 54 ------------- 17,314 ------------- Total Assets $ 35,119 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY CONTRACTING, INC. BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable $ 4,361 Accounts payable to affiliated companies 10,382 Accrued taxes 1,328 Other 1,670 ------------- 17,741 ------------- Deferred Credits and Other Liabilities: Deferred taxes 418 Other 907 ------------- 1,325 ------------- Capitalization: Common Stockholder's Equity: Common stock, $1 par value - 100,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 14,910 Retained earnings 1,143 ------------- Common Stockholder's Equity 16,053 ------------- Total Capitalization 16,053 ------------- Total Liabilities and Capitalization $ 35,119 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY CONTRACTING, INC. INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------- ------------- (Thousands of Dollars) Operating Revenues $ 16,086 $ 29,992 ------------- ------------- Operating Expenses: Operation 14,844 28,184 Maintenance 125 230 Depreciation and amortization 283 566 Taxes other than income taxes 76 189 Loss on disposition of property 15 16 ------------- ------------- Total operating expenses 15,343 29,185 ------------- ------------- Operating Income 743 807 Other Income, Net 2 5 ------------- ------------- Income Before Interest and Income Tax Expense 745 812 Interest Expense, Net 63 127 ------------- ------------- Income Before Income Tax Expense 682 685 Income Tax Expense 271 284 ------------- ------------- Net Income $ 411 $ 401 ============= ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. REEDS FERRY SUPPLY CO., INC. BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 6 Receivables, net 92 ------------- 98 ------------- Property, Plant and Equipment: Organization costs, net 247 ------------- Total Assets $ 345 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable $ 92 Accounts payable to affiliated companies 295 ------------- 387 Capitalization: ------------- Common Stockholder's Equity: Common stock, $0 par value - 200 shares authorized and 100 shares outstanding 4 Capital surplus, paid in 3 Accumulated deficit (49) ------------- Common Stockholder's Equity (42) ------------- Total Capitalization (42) ------------- Total Liabilities and Capitalization $ 345 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. REEDS FERRY SUPPLY CO., INC. INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------- ------------- (Thousands of Dollars) Operating Revenues $ 251 $ 473 Operating Expenses 251 473 ------------- ------------- Net Income $ - $ - ============= ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/TOBYHANNA ENERGY PROJECT, INC. BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 2,892 Receivables, net 876 ------------- 3,768 ------------- Property, Plant and Equipment: Contracts receivable 25,782 Other, net 625 ------------- 26,407 ------------- Total Assets $ 30,175 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable to affiliated companies $ 3,422 Accrued interest 732 Other 378 ------------- Total current liabilities 4,532 ------------- Capitalization: Long-Term Debt 25,494 ------------- Common Stockholder's Equity: Common stock, $1 par value - 100 shares authorized and outstanding - Retained earnings 149 ------------- Common Stockholder's Equity 149 ------------- Total Capitalization 25,643 ------------- Total Liabilities and Capitalization $ 30,175 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/TOBYHANNA ENERGY PROJECT, INC. INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------- ------------- (Thousands of Dollars) Other Income, Net $ 492 $ 993 Interest Expense, Net 494 994 ------------- ------------- Loss Before Income Tax Expense (2) (1) Income Tax Expense 35 75 ------------- ------------- Net Loss $ (37) $ (76) ============= ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. YANKEE ENERGY SERVICES COMPANY BALANCE SHEET (Unaudited) June 30, 2002 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 102 Taxes receivable 516 ------------- 618 ------------- Deferred Debits and Other Assets: Accumulated deferred income taxes 1,399 Other 5,549 ------------- 6,948 ------------- Total Assets $ 7,566 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. YANKEE ENERGY SERVICES COMPANY BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Notes payable to affiliated companies $ 1,362 Accounts payable 100 Accounts payable to affiliated companies 6 ------------- 1,468 ------------- Capitalization: Common Stockholder's Equity: Common stock, $0 par value - 10,000 shares authorized and 200 shares outstanding 1 Capital surplus, paid in 7,881 Accumulated deficit (1,784) ------------- Common Stockholder's Equity 6,098 ------------- Total Capitalization 6,098 ------------- Total Liabilities and Capitalization $ 7,566 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. YANKEE ENERGY SERVICES COMPANY INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 -------------- ------------ (Thousands of Dollars) Operating Revenues $ (121) $ 546 Operating Expenses (53) 734 ------------- ------------ Operating Loss (68) (188) Interest Expense, Net 5 54 ------------- ------------ Loss Before Income Tax Benefit (73) (242) Income Tax Benefit (42) (109) ------------- ------------ Net Loss $ (31) $ (133) ============= ============ Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. E.S. BOULOS COMPANY BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Receivables, net $ 10,594 Accounts receivable from affiliated companies 649 Unbilled revenues 2,413 Materials and supplies, at average cost 103 ------------- 13,759 ------------- Property, Plant and Equipment: Competitive Energy 671 Less: Accumulated provision for depreciation 140 ------------- 531 ------------- Deferred Debits and Other Assets: Goodwill 6,963 Other 37 ------------- 7,000 ------------- Total Assets $ 21,290 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. E.S. BOULOS COMPANY BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Advance from NGS, non-interest bearing $ 2,948 Accounts payable 2,798 Accounts payable to affiliated companies 8 Accrued taxes 1,641 Other 1,024 ------------- 8,419 ------------- Deferred Credits and Other Liabilities 711 ------------- Capitalization: Common Stockholder's Equity: Common stock, $1 par value - 20,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 7,539 Retained earnings 4,621 ------------- Common Stockholder's Equity 12,160 ------------- Total Capitalization 12,160 ------------- Total Liabilities and Capitalization $ 21,290 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. E.S. BOULOS COMPANY INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------- ------------ (Thousands of Dollars) Operating Revenues $ 16,433 $ 30,228 ------------- ------------ Operating Expenses: Operating 374 656 Maintenance 15,018 28,001 Depreciation 31 59 ------------- ------------ Total operating expenses 15,423 28,716 ------------- ------------ Operating Income 1,010 1,512 Other Income, Net 125 296 ------------- ------------ Income Before Income Tax Expense 1,135 1,808 Income Tax Expense 358 593 ------------- ------------ Net Income $ 777 $ 1,215 ============= ============ Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NGS MECHANICAL COMPANY BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 10 Taxes Receivable 1 ------------- Total Assets $ 11 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable to affiliated companies $ 3 ------------- Capitalization: Common Stockholder's Equity: Common stock, $0 par value - 20,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 10 Accumulated deficit (2) ------------- Common Stockholder's Equity 8 ------------- Total Capitalization 8 ------------- Total Liabilities and Capitalization $ 11 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NGS MECHANICAL COMPANY INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 -------------- ------------ (Thousands of Dollars) Operating Revenues $ - $ - Operating Expenses 1 1 ------------- ------------- Operating Loss (1) (1) Income Tax Benefit (1) - ------------- ------------- Net Loss $ - $ (1) ============= ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST UTILITIES (PARENT) BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 1,102 Notes receivable from affiliated companies 222,100 Receivables, net 532 Accounts receivable from affiliated companies 2,324 Prepayments and other 1,070 ------------- 227,128 ------------- Other Property and Investment: Investments in subsidiary companies, at equity 2,386,552 Investments in transmission companies, at equity 11,779 Other 14 ------------- 2,398,345 ------------- Deferred Debits and Other Assets 6,081 ------------- Total Assets $ 2,631,554 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST UTILITIES (PARENT) BALANCE SHEET (Unaudited) June 30, 2002 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Notes payable to bank $ 80,000 Long-term debt - current portion 23,000 Accounts payable to affiliated companies 1,507 Accrued taxes 1,966 Accrued interest 5,889 Other 18,773 ------------- 131,135 ------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 5,533 Other 167 ------------- 5,700 ------------- Capitalization: Long-Term Debt 351,000 ------------- Common Stockholder's Equity: Common shares, $5 par value - authorized 225,000,000 shares; 149,271,168 shares issued and 129,773,079 shares outstanding 746,356 Capital surplus, paid in 1,109,741 Deferred contribution plan - employee stock ownership plan (95,501) Retained earnings 678,593 Accumulated other comprehensive income 1,383 Treasury stock (296,853) ------------- Common Stockholder's Equity 2,143,719 ------------- Total Capitalization 2,494,719 ------------- Total Liabilities and Capitalization $ 2,631,554 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST UTILITIES (PARENT) STATEMENT OF INCOME (Unaudited)
Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------ ----------- (Thousands of Dollars) Operating Revenues $ - $ - ------------- ------------- Operating Expenses: Operation expense 3,557 9,156 Taxes other than income taxes 7 26 ------------- ------------- Total operating expenses 3,564 9,182 ------------- ------------- Operating Loss (3,564) (9,182) ------------- ------------- Other Income: Equity in earnings of subsidiaries 34,448 56,974 Equity in earnings of transmission companies 486 1,220 Other, net 2,703 5,121 ------------- ------------- Other Income, Net 37,637 63,315 ------------- ------------- Income Before Interest and Income Tax Benefit 34,073 54,133 ------------- ------------- Interest Expense: Interest on long-term debt 8,892 13,900 Other interest 858 1,107 ------------- ------------- Interest expense, net 9,750 15,007 ------------- ------------- Income Before Income Tax Benefit 24,323 39,126 Income Tax Benefit (4,534) (8,373) ------------- ------------- Net Income for Common Shares $ 28,857 $ 47,499 ============= ============= Basic and Fully Diluted Earnings Per Common Share $ 0.22 $ 0.37 ============= ============= Basic Common Shares Outstanding (average) 129,504,005 129,590,899 ============= ============= Fully Diluted Common Shares Outstanding (average) 129,754,946 129,871,495 ============= =============
Note: In the opinion of the Company, all adjustments necessary for a fair presentation of the results of operations for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY NEW YORK, INC. BALANCE SHEET (Unaudited) June 30, 2002 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 19,411 Receivables, net 36,267 Accounts receivable from affiliated companies 377 Special deposits 2,363 Unrealized net gains on mark-to-market transactions 2,629 Prepayments and other 13,995 ------------- 75,042 ------------- Property Plant and Equipment: Competitive energy 2,255 Less: Accumulated provision for depreciation and amortization 2,104 ------------- 151 ------------- Deferred Debits and Other Assets 3,515 ------------- Total Assets $ 78,708 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY NEW YORK, INC. BALANCE SHEET (Unaudited) June 30, 2002 -------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------- Current Liabilities: Accounts payable $ 26,957 Accounts payable to affiliated companies 486 Accrued taxes 2,122 Other 2,976 ------------- 32,541 ------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 600 Other 14 ------------- 614 ------------- Capitalization: Long-Term Debt 26,699 ------------- Common Stockholder's Equity: Common stock, $1 par value - authorized and outstanding 10,000 shares 10 Capital surplus, paid in 10,210 Retained earnings 8,634 ------------- Common Stockholder's Equity 18,854 ------------- Total Capitalization 45,553 ------------- Total Liabilities and Capitalization $ 78,708 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY NEW YORK, INC. INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 -------------- ------------- (Thousands of Dollars) Operating Revenues $ 64,844 $ 135,127 ------------- ------------- Operating Expenses: Purchased power, net interchange power and capacity 62,398 120,180 Other 2,030 4,388 ------------- ------------- Total operating expenses 64,428 124,568 ------------- ------------- Operating Income 416 10,559 Other Income, Net 86 81 ------------- ------------- Income Before Interest and Income Tax Expense 502 10,640 Interest Expense, Net 191 388 ------------- ------------- Income Before Income Tax Expense 311 10,252 Income Tax Expense 125 4,312 ------------- ------------- Net Income $ 186 $ 5,940 ============= ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/CJTS ENERGY CENTER LLC BALANCE SHEET (Unaudited) June 30, 2002 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 1 ------------- 1 ------------- Total Assets $ 1 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Capitalization: Common Stockholder's Equity: Capital surplus, paid in $ 10 Accumulated deficit (9) ------------- Common Stockholder's Equity 1 ------------- Total Capitalization 1 ------------- Total Liabilities and Capitalization $ 1 ============= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/CJTS ENERGY CENTER LLC INCOME STATEMENT (Unaudited) Three Months Six Months Ended Ended June 30, June 30, 2002 2002 ------------- ------------ (Thousands of Dollars) Operating Revenues $ - $ - ------------ ------------ Operating Expenses: Other - - ------------ ------------ Total operating expenses - - ------------ ------------ Net Income $ - $ - ============ ============ Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. Northeast Utilities Select Energy, Inc. Northeast Generation Services Company E.S. Boulos Company NGS Mechanical, Inc. Select Energy Contracting, Inc. Reeds Ferry Supply Co., Inc. HEC/Tobyhanna Energy Project, Inc. HEC/CJTS Energy Center, LLC ERI/HEC EFA-Med, LLC Yankee Energy Services Company R.M. Services, Inc. Acumentrics Corporation Select Energy New York, Inc. Notes to Financial Statements (Unaudited) 1. About Northeast Utilities Northeast Utilities (NU) is the parent company of the Northeast Utilities system (NU system). The NU system's regulated utilities furnish franchised retail electric service in Connecticut, New Hampshire and western Massachusetts through three wholly owned subsidiaries: The Connecticut Light and Power Company, Public Service Company of New Hampshire (PSNH) and Western Massachusetts Electric Company. Another wholly owned subsidiary, North Atlantic Energy Corporation, sells all of its entitlement to the capacity and output of the Seabrook Station nuclear unit (Seabrook) to PSNH under the terms of two life-of-unit, full cost recovery contracts. A fifth wholly owned subsidiary, Holyoke Water Power Company, also is engaged in the production of electric power. A sixth wholly owned subsidiary, Yankee Energy System, Inc. (Yankee) is the parent company of Yankee Gas Services Company, Connecticut's largest natural gas distribution system. Several wholly owned subsidiaries of NU provide support services for the NU system companies and, in some cases, for other New England utilities. Northeast Utilities Service Company provides centralized accounting, administrative, engineering, financial, information resources, legal, operational, planning, purchasing, and other services to the NU system companies. North Atlantic Energy Service Corporation has operational responsibility for Seabrook. Three other subsidiaries construct, acquire or lease some of the property and facilities used by the NU system companies. NU Enterprises, Inc. (NUEI) is a wholly owned subsidiary of NU and acts as the holding company for certain of NU's competitive energy subsidiaries. Northeast Generation Company was formed to acquire and manage generation facilities. Select Energy, Inc. (Select Energy), and its subsidiary Select Energy New York, (SENY), Northeast Generation Services Company and its subsidiaries (NGS), Select Energy Services, Inc., and its subsidiaries (SESI), and Mode 1 Communications, Inc., engage in a variety of energy-related and telecommunications activities, as applicable, primarily in the competitive energy retail and wholesale commodity, marketing and services fields. E.S. Boulos Company (Boulos) and NGS Mechanical, Inc. (NGS Mechanical) are wholly owned subsidiaries of NGS. Select Energy Contracting, Inc. (Select Energy Contracting), Reeds Ferry Supply Co., Inc. (Reeds Ferry), HEC/Tobyhanna Energy Project, Inc., (HEC/Tobyhanna), and HEC/CJTS Energy Center, LLC (HEC/CJTS) are wholly owned subsidiaries of SESI. Another company, ERI/HEC EFA-Med, LLC (ERI/HEC), is 50 percent owned by SESI. On September 26, 2000, NUEI invested $10 million in Acumentrics Corporation (Acumentrics) in return for a 5 percent ownership share of that company. Yankee maintains certain wholly owned subsidiaries including Yankee Energy Services Company (YESCO) and owns 10 percent of the voting securities of R.M. Services, Inc. (R.M. Services). Select Energy, SENY, NGS, Boulos, NGS Mechanical, Select Energy Contracting, Reeds Ferry, HEC/Tobyhanna, HEC/CJTS, ERI/HEC, YESCO, R.M. Services and Acumentrics, are "energy-related companies" under Rule 58. 2. About Select Energy Select Energy is an integrated energy business that buys, markets, sells, and trades electricity, gas, oil and energy-related products and services to both wholesale and retail customers in the Northeastern United States. Select Energy procures and delivers energy and capacity required to serve its electric, gas and oil customers. Select Energy, collectively with its affiliated competitive energy businesses, provides a wide range of energy products and energy services. Select Energy is a licensed retail electricity supplier and is registered with local electric distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia. Select Energy is a registered gas marketer with local gas distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia. 3. About NGS NGS was formed to provide management, operation and maintenance services to the electric generation market, as well as to large industrial customers, in the Northeastern United States. NGS also provides consulting services which include engineering services, construction management, permitting, and compliance management. 4. About Boulos Boulos is an electrical construction company which specializes in high voltage electrical construction and maintenance in Maine, Massachusetts, New Hampshire, and Vermont. Boulos is wholly owned by NGS. 5. About NGS Mechanical NGS Mechanical was formed to provide mechanical services initially in certain New England states and New York. NGS Mechanical is wholly owned by NGS. 6. About Select Energy Contracting Select Energy Contracting designs, manages, and directs the construction of, and/or installation of mechanical, water and electrical systems, energy and other resource consuming equipment. 7. About Reeds Ferry Reeds Ferry is an equipment wholesaler which purchases equipment on behalf of Select Energy Contracting. 8. About HEC/Tobyhanna HEC/Tobyhanna was established as a special purpose entity to manage the assets of an Energy Savings Performance Contract at the Tobyhanna Army Depot. 9. About HEC/CJTS HEC/CJTS is a special purpose entity formed to facilitate the financing of SESI's construction of an energy center at the Connecticut Juvenile Training School in Middletown, Connecticut. HEC/CJTS is wholly owned by SESI. 10. About ERI/HEC ERI/HEC has an indefinite delivery/indefinite quantity contract with the United States Navy. ERI/HEC is 50 percent owned by SESI. 11. About YESCO YESCO is winding down its energy-related services for its customers. YESCO has disposed of most of its assets and is in the process of liquidating the remainder of its assets. 12. About R.M. Services R.M. Services provides consumer collection services for companies throughout the United States. Yankee owns 10 percent of the voting securities of R.M. Services. 13. About Acumentrics NUEI owns 5 percent of the voting securities of Acumentrics. Acumentrics is a privately owned producer of advanced power generation and power protection technologies applicable to homes, telecommunications, commercial businesses, industrial facilities, and the auto industry. 14. About SENY SENY is a wholly owned subsidiary of Select Energy and engages in the brokering, marketing, transportation, storage, and sale of energy commodities in the state of New York. 15. Public Utility Regulation NU is registered with the Securities and Exchange Commission (SEC) as a holding company under the Public Utility Holding Company Act of 1935 (1935 Act), and the NU system is subject to the provisions of the 1935 Act. Arrangements among the NU system companies, outside agencies and other utilities covering interconnections, interchange of electric power and sales of utility property are subject to regulation by the Federal Energy Regulatory Commission (FERC) and/or the SEC. The operating subsidiaries are subject to further regulation for rates, accounting and other matters by the FERC and/or applicable state regulatory commissions. 16. Presentation The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 17. New Accounting Standard In June 2002, the Emerging Issues Task Force (EITF) of the FASB reached a consensus on EITF Issue No. 02-3, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities," requiring energy trading companies to classify revenues and expenses associated with certain energy trading contracts on a net basis within revenues, rather than recording the gross revenues and expenses. The application of this consensus will be retroactive to all periods presented but will have no effect on net income. NU will adopt EITF Issue No. 02-3 in the third quarter of 2002. As a result, NU now estimates that Select Energy's and SENY's revenues and expenses will be reduced significantly from the amounts reflected in the accompanying Select Energy and SENY income statements. 18. Market Risk and Risk Management Instruments Select Energy provides both firm requirement energy services to its customers and engages in energy trading and marketing activities. Select Energy manages its exposure to risk from its contractual commitments and provides risk management services to its customers through forward contracts, futures, over- the-counter swap agreements, and options (commodity derivatives). Select Energy has utilized the sensitivity analysis methodology to disclose the quantitative information for its commodity price risks. Sensitivity analysis provides a presentation of the potential loss of future earnings, fair values or cash flows from market risk-sensitive instruments over a selected time period due to one or more hypothetical changes in commodity prices, or other similar price changes. Commodity Price Risk - Trading Activities: As a market participant in the Northeastern United States, Select Energy and SENY conduct commodity-trading activities in electricity and its related products, natural gas and oil, and therefore, experiences net open positions. Select Energy and SENY manage these open positions with strict policies which limit their exposure to market risk and require daily reporting to management of potential financial exposure. Under Emerging Issues Task Force Issue No. 98-10, these instruments are adjusted to market value, and the unrealized gains and losses are recognized in income in the current period in the consolidated income statements as purchased power, net interchange power and capacity and in the consolidated balance sheet as unrealized net gains on mark-to-market transactions. The net mark-to-market position at June 30, 2002 had asset values of $85.8 million for Select Energy and $2.6 million for SENY. These amounts include intercompany transactions of $12.9 million. Under sensitivity analysis, the fair value of the portfolio is a function of the underlying commodity, contract prices and market prices represented by each derivative commodity contract. For swaps, forward contracts and options, market value reflects management's best estimates considering over-the- counter quotations, time value and volatility factors of the underlying commitments. Exchange-traded futures and options are recorded at market based on closing exchange prices. As of June 30, 2002, Select Energy has calculated the market price resulting from a 10 percent unfavorable change in forward market prices. That 10 percent change would result in approximately a $2.4 million decline in the fair value of the Select Energy trading portfolio. In the normal course of business, Select Energy also faces risks that are either nonfinancial or nonquantifiable. Such risks principally include credit risk, which is not reflected in the aforementioned sensitivity analysis. Commodity Price Risk - Nontrading Derivative Activities: Select Energy utilizes derivative financial and commodity instruments (derivatives), including futures and forward contracts, to reduce market risk associated with fluctuations in the price of electricity and natural gas sold under firm commitments with certain customers. Select Energy also utilizes derivatives, including price swap agreements, call and put option contracts, and futures and forward contracts, to manage the market risk associated with a portion of its anticipated supply requirements. These derivative instruments have been designated as cash flow hedging instruments. When conducting sensitivity analyses of the change in the fair value of Select Energy's electricity, natural gas and oil nontrading derivatives portfolio, which would result from a hypothetical change in the future market price of electricity, natural gas and oil, the fair values of the contracts are determined from models which take into account estimated future market prices of electricity, natural gas and oil, the volatility of the market prices in each period, as well as the time value factors of the underlying commitments. In most instances, market prices and volatility are determined from quoted prices on the futures exchange. Select Energy has determined a hypothetical change in the fair value for its nontrading derivatives and electricity, natural gas and oil contracts, assuming a 10 percent unfavorable change in forward market prices. As of June 30, 2002, an unfavorable 10 percent change in market price would have resulted in a decline in fair value of approximately $18 million. The impact of a change in electricity, natural gas and oil prices on Select Energy's nontrading derivatives contracts on June 30, 2002, is not necessarily representative of the results that will be realized when these contracts are physically delivered. Select Energy also maintains natural gas service agreements with certain customers to supply gas at fixed prices for terms extending through 2004. Select Energy has hedged its gas supply risk under these agreements through New York Mercantile Exchange (NYMEX) contracts. Under these contracts, the purchase price of a specified quantity of gas is effectively fixed over the term of the gas service agreements, which also extend through 2004. As of June 30, 2002, the NYMEX contracts had a notional value of $58.2 million and a mark-to-market asset value of $1.4 million. 19. Special Deposits Special deposits include cash collateral posted in connection with various power purchase and sales agreements. QUARTERLY REPORT OF NORTHEAST UTILITIES SIGNATURE CLAUSE Pursuant to the requirements of the Public Utility Holding Company Act of 1935 and the rules and regulations of the Securities and Exchange Commission issued thereunder, the undersigned company has duly caused this report to be signed on its behalf by the undersigned officer thereunto duly authorized. NORTHEAST UTILITIES ------------------- (Registered Holding Company) By: /s/ John P. Stack ------------------------------ (Signature of Signing Officer) John P. Stack ---------------------------------------- Vice President-Accounting and Controller ---------------------------------------- Date: August 27, 2002 ----------------------------------------