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 December 30, 2003
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
there under.
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.
-------------------------------------------------------------------------------
4th quarter not required.
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. $23,500,000
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.
Select Energy
ERI/HEC Services,
EFA-Med, LLC N/A N/A N/A N/A N/A N/A N/A Inc. $500
E.S. Boulos
Company No transactions this quarter.
NGS Mechanical,
Inc. No transactions this quarter.
HEC/CJTS
Energy
Center LLC No transactions this quarter.
Select Energy
New York, Inc. No transactions this quarter.
Woods Electrical
Co., Inc. No transactions this quarter.
Northeast
Utilities 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 December 31, 2003
----------------------- ------------------------ -------------- -------------------
(Thousands
of Dollars)
Northeast Northeast
Generation Generation Electrical and
Services Company Company Mechanical Services $ 6,739
========
Northeast
Generation Northeast Utilities
Services Company Service Company Miscellaneous $ 25
========
Northeast The Connecticut
Generation Light and Power Electrical and
Services Company Company Mechanical Services $ 52
========
Northeast
Generation Holyoke Water Electrical and
Services Company Power Company Mechanical Services $ 4,195
========
Northeast
Generation Select Energy Electrical and
Services Company Services, Inc. Mechanical Services $ 2,470
========
Northeast Public Service
Generation Company of Electrical and
Services Company New Hampshire Mechanical Services $ 153
========
Northeast
Generation Electrical and
Services Company Select Energy, Inc. Mechanical Services $ 6
========
Northeast
Generation Wholesale Purchasing
Services Company E.S. Boulos Company Services $ 20
========
Reeds Ferry Select Energy Wholesale Purchasing
Supply Co., Inc. Contracting, Inc. Services $ 235
========
Northeast
Generation Wholesale Purchasing
E.S. Boulos Company Services Company Services $ 247
========
Select Energy Wholesale Purchasing
Select Energy, Inc. New York, Inc. Services $ 5
========
Northeast
Generation
Select Energy, Inc. Services Company Miscellaneous $ 1
========
Northeast Utilities
Select Energy, Inc. Service Company Miscellaneous $ 388
========
Select Energy
New York, Inc. Select Energy, Inc. Miscellaneous $ 65
========
* Total Amount Billed is for direct costs only.
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 December 31, 2003
----------------------- ------------------------ -------------- -------------------
(Thousands
of Dollars)
Northeast Generation Northeast Generation
Company Services Company Miscellaneous $ 570
========
Northeast Utilities Select Energy, Inc. Miscellaneous $ 64
========
Public Service
Company of Northeast Generation
New Hampshire Services Company Miscellaneous $ 1
========
Public Service
Company of
New Hampshire Select Energy, Inc. Miscellaneous $ 4
========
The Connecticut
Light and Power Northeast Generation
Company Services Company Miscellaneous $ 13
========
Holyoke Water Northeast Generation
Power Company Services Company Miscellaneous $ 107
========
Western
Massachusetts Northeast Generation
Electric Company Services Company Miscellaneous $ 15
========
Western
Massachusetts
Electric Company Select Energy, Inc. Miscellaneous $ 1
========
Northeast Utilities Select Energy
Service Company New York, Inc. Miscellaneous $ 122
========
Northeast Utilities Northeast Generation
Service Company Services Company Miscellaneous $ 1,532
========
Northeast Utilities
Service Company Select Energy, Inc. Miscellaneous $ 4,294
========
* Total Amount Billed is for direct costs only.
ITEM 4 - SUMMARY OF AGGREGATE INVESTMENT
Investments in energy-related companies:
----------------------------------------
(Thousands of Dollars)
Total consolidated capitalization as of 12/31/03 $6,761,547 line 1
Total capitalization multiplied by 15%
(line 1 multiplied by .15) 1,014,232 line 2
Greater of $50 million or line 2 $1,014,232 line 3
Total current aggregate investment:
Select Energy, Inc. 762,860
Northeast Generation Services Company 32,756
Select Energy Contracting, Inc. 24,929
Select Energy New York, Inc. 60,192
Woods Electrical Co., Inc. 15,585
Reeds Ferry Supply Co., Inc. 7
HEC/Tobyhanna Energy Project, Inc. -
Yankee Energy Services Company 7,882
E.S. Boulos Company 9,880
R.M. Services, Inc. 15,125
NGS Mechanical, Inc. 10
Acumentrics Corporation 7,500
Greenport, LLC 501
ERI/HEC EFA-Med, LLC 9
HEC/CJTS Energy Center LLC 12
------------
Current aggregate investment 937,248
------------
Elimination * 22,505
------------
Total current aggregate investment 914,743 line 4
------------
Difference between the greater of $50 million or 15% of
capitalization and the total aggregate investment of the
registered holding company system $99,489 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 December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Northeast Generation Services Company:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Select Energy Contracting, Inc.:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Reeds Ferry Supply Co., Inc.:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
HEC/Tobyhanna Energy Project, Inc.:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Yankee Energy Services Company:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
ERI/HEC EFA-Med, LLC:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
E. S. Boulos Company:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
NGS Mechanical, Inc.:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Select Energy New York, Inc.:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
HEC/CJTS Energy Center LLC:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Woods Electrical Co., Inc.:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Greenport Power, LLC:
Balance Sheet - As of December 31, 2003
Income Statement - Three and twelve months ended December 31, 2003
Acumentrics Corporation:
Not available
R. M. Services, Inc.:
Not available
Northeast Utilities (Parent):
4th quarter not required.
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.1.2 Copy of contract required by Item 3 - filed under confidential
treatment pursuant to Rule 104(b).
6.B.1.3 Copy of contract required by Item 3 - filed under confidential
treatment pursuant to Rule 104(b).
6.B.1.4 Copy of contract required by Item 3 - filed under confidential
treatment pursuant to Rule 104(b).
6.B.1.5a Copy of contract required by Item 3 - filed under confidential
treatment pursuant to Rule 104(b).
6.B.1.5b Copy of contract required by Item 3 - filed under confidential
treatment pursuant to Rule 104(b).
6.B.1.6 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.1.8 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)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Unrestricted cash from counterparties $ 39,455
Receivables, net 330,758
Accounts receivable from affiliated companies 173,878
Taxes receivable 30,944
Unbilled revenues 48,703
Special deposits 12,994
Derivative assets 168,987
Prepaid option premiums 12,469
Prepayments and other 13,820
-------------
832,008
-------------
Property, Plant and Equipment:
Competitive Energy 14,192
Less: Accumulated depreciation and amortization 11,779
-------------
2,413
Construction work in progress 6,167
-------------
8,580
-------------
Deferred Debits and Other Assets:
Purchased intangible assets, net 14,426
Prepaid pension 1,421
Long-term accounts receivable 6,194
Long-term contracts asset 39,339
Other 38,099
-------------
99,479
-------------
Total Assets $ 940,067
=============
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)
December 31,
2003
-------------
(Thousands of
Dollars)
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Notes payable to affiliated companies $ 63,200
Accounts payable 449,494
Accounts payable to affiliated companies 24,538
Derivative liabilities 103,161
Unearned option premiums 12,244
Counterparty deposits 39,454
Other 36,762
-------------
728,853
-------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 10,653
Other 8,359
-------------
19,012
-------------
Capitalization:
Long-Term Debt from NU Parent 150,000
-------------
Common Stockholder's Equity:
Common stock, $1 par value - Authorized
20,000 shares; 100 shares outstanding -
Capital surplus, paid in 286,224
Accumulated deficit (269,386)
Accumulated other comprehensive income 25,364
-------------
Common Stockholder's Equity 42,202
-------------
Total Capitalization 192,202
-------------
Total Liabilities and Capitalization $ 940,067
=============
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.
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------- -------------
(Thousands of Dollars)
Operating Revenues $ 555,429 $ 2,149,828
------------- ------------
Operating Expenses:
Operation -
Purchased power, net interchange
power and capacity 586,584 2,124,909
Other 23,456 71,806
Depreciation and amortization 3,049 11,722
Taxes other than income taxes 1,700 5,089
------------- ------------
Total operating expenses 614,789 2,213,526
------------- ------------
Operating Loss (59,360) (63,698)
Interest Expense, Net 2,919 8,417
Other Income, Net 951 1,428
------------- ------------
Loss Before Income Tax Benefit (61,328) (70,687)
Income Tax Benefit (22,782) (27,082)
------------- ------------
Net Loss $ (38,546) $ (43,605)
============= ============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
NORTHEAST GENERATION SERVICES COMPANY
BALANCE SHEET
(Unaudited)
December 31,
2003
------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 527
Receivables, net 5,833
Accounts receivable from affiliated companies 3,869
Taxes receivable 557
Unbilled revenues 1,353
Materials and supplies 3
Prepayments and other 961
-------------
13,103
-------------
Property, Plant and Equipment:
Competitive energy 2,997
Less: Accumulated depreciation 1,055
-------------
1,942
Construction work in progress 668
-------------
2,610
-------------
Deferred Debits and Other Assets:
Accumulated deferred income taxes 156
Prepaid pension 975
Other 22,314
-------------
23,445
-------------
Total Assets $ 39,158
=============
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)
December 31,
2003
-------------
(Thousands of
Dollars)
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Notes payable to affiliated companies $ 10,500
Accounts payable 4,934
Accounts payable to affiliated companies 2,701
Other 1,532
--------------
19,667
--------------
Deferred Credits and Other Liabilities 1,192
--------------
Capitalization:
Long-Term Debt from NU Parent 5,000
--------------
Common Stockholder's Equity:
Common stock, $1 par value - 20,000 authorized
and 100 shares outstanding -
Capital surplus, paid in 15,455
Accumulated deficit (2,143)
Accumulated comprehensive loss (13)
--------------
Common Stockholder's Equity 13,299
--------------
Total Capitalization 18,299
--------------
Total Liabilities and Capitalization $ 39,158
==============
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
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------- -------------
(Thousands of Dollars)
Operating Revenues $ 15,304 $ 58,538
------------- -------------
Operating Expenses:
Operation -
Other 11,978 46,116
Maintenance 3,689 12,188
Depreciation and amortization 68 268
Taxes other than income taxes 414 1,761
------------- -------------
Total operating expenses 16,149 60,333
------------- -------------
Operating Loss (845) (1,795)
Interest Expense, Net 134 591
Other Expense, Net (376) (298)
------------- -------------
Loss Before Income Tax Benefit (1,355) (2,684)
Income Tax Benefit (765) (532)
------------- -------------
Net Loss $ (590) $ (2,152)
============= =============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
SELECT ENERGY CONTRACTING, INC.
BALANCE SHEET
(Unaudited)
December 31,
2003
------------
(Thousands
of Dollars)
ASSETS
------
Current Assets:
Cash $ 475
Receivables, net 17,502
Materials and supplies 330
Prepayments and other 1,240
-------------
19,547
-------------
Property, Plant and Equipment:
Competitive energy 4,674
Less: Accumulated depreciation 2,669
-------------
2,005
-------------
Deferred Debits and Other Assets:
Goodwill, net 17,220
-------------
Total Assets $ 38,772
=============
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)
December 31,
2003
------------
(Thousands
of Dollars)
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Notes payable to affiliated companies $ 3,790
Accounts payable 4,029
Accounts payable to affiliated companies 9,172
Accrued taxes 238
Other 981
-------------
18,210
-------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,276
Other 1,704
-------------
2,980
-------------
Capitalization:
Common Stockholder's Equity:
Common stock, $1 par value - 100,000 shares
authorized and 100 shares outstanding -
Capital surplus, paid in 15,080
Retained earnings 2,502
-------------
Common Stockholder's Equity 17,582
-------------
Total Capitalization 17,582
-------------
Total Liabilities and Capitalization $ 38,772
=============
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.
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ 16,373 $ 71,293
------------ -------------
Operating Expenses:
Operation 15,882 65,874
Maintenance 153 606
Depreciation 159 1,039
Taxes other than income taxes 542 2,152
------------ -------------
Total operating expenses 16,736 69,671
------------ -------------
Operating (Loss)/Income (363) 1,622
Interest Expense, Net 41 180
Other Loss, Net (36) (39)
------------ -------------
(Loss)/Income Before Income Tax
(Benefit)/Expense (440) 1,403
Income Tax (Benefit)/Expense (235) 558
------------ -------------
Net (Loss)/Income $ (205) $ 845
============ =============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
REEDS FERRY SUPPLY CO., INC.
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands
of Dollars)
ASSETS
------
Current Assets:
Cash $ 5
Receivables, net 1
Accounts receivable from affiliated companies 109
-------------
115
-------------
Deferred Debits and Other Assets:
Goodwill, net 247
-------------
Total Assets $ 362
=============
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Accounts payable to affiliated companies $ 404
-------------
404
Capitalization: -------------
Common Stockholder's Equity:
Common stock, no 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 $ 362
=============
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.
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ 235 $ 1,177
Operating Expenses 235 1,177
------------- ------------
Net Income $ - $ -
============= ============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
HEC/TOBYHANNA ENERGY PROJECT, INC.
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands
of Dollars)
ASSETS
------
Current Assets:
Special deposits $ 4,314
Receivables, net 766
-------------
5,080
-------------
Deferred Debits and Other Assets:
Contracts receivable 27,340
Unamortized debt expense 576
-------------
27,916
-------------
Total Assets $ 32,996
=============
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Long-term debt - current portion $ 577
Accounts payable to affiliated companies 7,109
Accrued taxes 25
Accrued interest 693
Other 318
-------------
8,722
-------------
Capitalization:
Long-Term Debt 23,372
-------------
Common Stockholder's Equity:
Common stock, $1 par value - 100 shares
authorized and outstanding -
Retained earnings 902
-------------
Total Common Stockholder's Equity 902
-------------
Total Capitalization 24,274
-------------
Total Liabilities and Capitalization $ 32,996
=============
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.
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------- --------------
(Thousands of Dollars)
Interest Expense, Net $ 465 $ 1,892
Other Income, Net 569 2,280
------------- --------------
Income Before Income Tax Expense 104 388
Income Tax Expense 12 193
------------- --------------
Net Income $ 92 $ 195
============= ==============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
YANKEE ENERGY SERVICES COMPANY
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 444
Taxes receivable 301
Notes receivable from affiliated companies 100
-------------
845
-------------
Deferred Debits and Other Assets:
Accumulated deferred income taxes 266
Investments and other 4,042
-------------
4,308
-------------
Total Assets $ 5,153
=============
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)
December 31,
2003
-------------
(Thousands of
Dollars)
LIABILITIES AND CAPITALIZATION
-------------------------------
Current Liabilities:
Accounts payable to affiliated companies $ 454
Other 3
-------------
457
-------------
Deferred Credits and Other Liabilities 5
-------------
Capitalization:
Common Stockholder's Equity:
Common stock, $0 par value - 10,000 shares
authorized, 200 shares outstanding 1
Capital surplus, paid in 7,881
Accumulated deficit (3,191)
-------------
Common Stockholder's Equity 4,691
-------------
Total Capitalization 4,691
-------------
Total Liabilities and Capitalization $ 5,153
=============
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
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ - $ 9
Operating Expenses 443 455
------------ -------------
Operating Loss (443) (446)
Interest Expense, Net - 4
Other Income, Net - 3
------------ -------------
Loss Before Income Tax Benefit (443) (447)
Income Tax Benefit (181) (178)
------------ -------------
Net Loss $ (262) $ (269)
============ =============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
E.S. BOULOS COMPANY
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 691
Receivables, net 8,599
Accounts receivable from affiliated companies 294
Unbilled revenues 3,014
Materials and supplies 203
------------
12,801
------------
Property, Plant and Equipment:
Competitive energy 1,131
Less: Accumulated depreciation 382
------------
749
------------
Deferred Debits and Other Assets:
Goodwill 6,963
Purchased intangible assets, net 30
Other 45
------------
7,038
------------
Total Assets $ 20,588
============
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)
December 31,
2003
-------------
(Thousands of
Dollars)
LIABILITIES AND CAPITALIZATION
-------------------------------
Current Liabilities:
Advance from parent, non-interest bearing $ 2,948
Accounts payable 1,943
Accounts payable to affiliated companies 855
Accrued taxes 424
Other 198
-------------
6,368
-------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 348
Other 850
-------------
1,198
-------------
Capitalization:
Common Stockholder's Equity:
Common stock, $0 par value - 20,000 shares
authorized and 100 shares outstanding -
Capital surplus, paid in 7,539
Retained earnings 5,483
-------------
Common Stockholder's Equity 13,022
-------------
Total Capitalization 13,022
-------------
Total Liabilities and Capitalization $ 20,588
=============
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
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------- ------------
(Thousands of Dollars)
Operating Revenues $ 9,255 $ 34,773
------------- ------------
Operating Expenses:
Operation -
Other 362 1,255
Maintenance 8,469 34,215
Depreciation 53 178
Taxes other than income taxes 56 55
------------- ------------
Total operating expenses 8,940 35,703
------------- ------------
Operating Income/(Loss) 315 (930)
Other (Loss)/Income, Net (138) 68
------------- ------------
Income/(Loss) Before Income Tax Benefit 177 (862)
Income Tax Benefit (65) (224)
------------- ------------
Net Income/(Loss) $ 242 $ (638)
============= ============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
NGS MECHANICAL, INC.
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 10
-------------
Total Assets $ 10
=============
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Accounts payable to affiliated companies $ 2
-------------
Capitalization:
Common Stockholder's Equity:
Common stock, $0 par value - authorized
20,000 shares; outstanding 100 shares -
Capital surplus, paid in 10
Retained deficit (2)
-------------
Common Stockholder's Equity 8
-------------
Total Capitalization 8
-------------
Total Liabilities and Capitalization $ 10
=============
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, INC.
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ - $ -
Operating Expenses - -
------------ ------------
Net Income $ - $ -
============ ============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
SELECT ENERGY NEW YORK, INC.
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 906
Unrestricted cash from counterparties 7,041
Receivables, net 58,102
Accounts receivable from affiliated companies 4,024
Notes receivable from affiliated companies 11,000
Special deposits 4,011
Derivative assets 12,365
Prepaid option premiums 4,273
Prepayments and other 13,414
-------------
115,136
-------------
Property, Plant and Equipment:
Competitive energy 654
Less: Accumulated depreciation 369
-------------
285
-------------
Deferred Debits and Other Assets:
Goodwill 3,200
-------------
Total Assets $ 118,621
=============
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)
December 31,
2003
-------------
(Thousands of
Dollars)
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Accounts payable $ 29,547
Accounts payable to affiliated companies 12,487
Accrued taxes 4,969
Derivative liabilities 1,800
Counterparty deposits 7,042
Other 2,485
-------------
58,330
-------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 6,116
Accrued pension 1,026
Other 451
-------------
7,593
-------------
Capitalization:
Long-Term Debt from NU Parent 14,699
-------------
Common Stockholder's Equity:
Common stock, $1 par value - authorized
and outstanding 10,000 shares 10
Capital surplus, paid in 9,957
Retained earnings 22,753
Accumulated other comprehensive income 5,279
-------------
Common Stockholder's Equity 37,999
-------------
Total Capitalization 52,698
-------------
Total Liabilities and Capitalization $ 118,621
=============
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.
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ 98,116 $ 380,628
----------- -----------
Operating Expenses:
Purchased power, net interchange
power and capacity 93,835 369,126
Other 2,710 9,341
Taxes other than income taxes (409) (1,645)
------------- -----------
Total operating expenses 96,136 376,822
------------- -----------
Operating Income 1,980 3,806
Interest Expense, Net 87 494
Other Income, Net 37 248
------------- -----------
Income Before Income Tax Expense 1,930 3,560
Income Tax Expense 44 710
------------- -----------
Net Income $ 1,886 $ 2,850
============= ============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
HEC/CJTS ENERGY CENTER LLC
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 1
-------------
Total Assets $ 1
=============
LIABILITIES AND CAPITALIZATION
------------------------------
Capitalization:
Common Stockholder's Equity:
Capital surplus, paid in $ 12
Accumulated deficit (11)
-------------
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
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------- --------------
(Thousands of Dollars)
Operating Revenues $ - $ -
------------- --------------
Operating Expenses - -
------------- --------------
Net Income $ - $ -
============== ==============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
WOODS ELECTRICAL CO., INC.
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Receivables, net $ 3,774
Unbilled revenues 280
Materials and supplies 62
Prepayments and other 5
-------------
4,121
-------------
Property Plant and Equipment:
Competitive energy 254
Less: Accumulated depreciation and amortization 56
-------------
198
-------------
Deferred Debits and Other Assets:
Purchased intangible assets, net 3,218
Goodwill 4,450
-------------
7,668
-------------
Total Assets $ 11,987
=============
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.
WOODS ELECTRICAL CO., INC.
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Notes payable to affiliated companies $ 800
Advance from parent, non-interest bearing 250
Accounts payable 1,200
Accounts payable to affiliated companies 55
Accrued taxes 156
Other 51
-------------
2,512
-------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 223
Other 319
-------------
542
-------------
Capitalization:
Long-Term Debt from NU Parent 4,450
-------------
Common Stockholder's Equity:
Common stock, $0 par value - 20,000 shares
authorized and 100 shares outstanding -
Capital surplus, paid in 5,000
Accumulated deficit (517)
-------------
Common Stockholder's Equity 4,483
-------------
Total Capitalization 8,933
-------------
Total Liabilities and Capitalization $ 11,987
=============
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.
WOODS ELECTRICAL CO., INC.
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ 4,003 $ 9,459
------------ -----------
Operating Expenses:
Other 283 1,490
Maintenance 3,561 8,185
Depreciation 63 144
Taxes other than income taxes (2) -
------------ -----------
Total operating expenses 3,905 9,819
------------ -----------
Operating Income/(Loss) 98 (360)
Interest Expense, Net 83 326
Other Income, Net - 3
------------ -----------
Income/(Loss) Before Income Tax Benefit 15 (683)
Income Tax Benefit (30) (274)
------------ -----------
Net Income/(Loss) $ 45 $ (409)
============ ===========
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
Greenport Power, LLC
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 2,295
-------------
Total Assets $ 2,295
=============
LIABILITIES AND CAPITALIZATION
------------------------------
Current Liabilities:
Accounts payable $ 432
Other 235
-------------
667
-------------
Capitalization:
Common Stockholder's Equity:
Members equity 1,628
-------------
Common Stockholder's Equity 1,628
-------------
Total Capitalization 1,628
-------------
Total Liabilities and Capitalization $ 2,295
=============
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 has a 50 percent ownership interest
in Greenport Power, LLC.
Greenport Power, LLC
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ - $ 41,147
Operating Expenses 835 38,520
------------ -------------
Net (Loss)/Income $ (835) $ 2,627
============ =============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
Northeast Generation Services Company has a 50 percent ownership interest in
Greenport Power, LLC.
ERI/HEC EFA-Med, LLC
BALANCE SHEET
(Unaudited)
December 31,
2003
-------------
(Thousands of
Dollars)
ASSETS
------
Current Assets:
Cash $ 2
-------------
Total Assets $ 2
=============
LIABILITIES AND CAPITALIZATION
------------------------------
Capitalization:
Common Stockholder's Equity:
Capital surplus, paid in $ 18
Accumulated deficit (16)
-------------
Common Stockholder's Equity 2
-------------
Total Capitalization 2
-------------
Total Liabilities and Capitalization $ 2
=============
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 Services, Inc. has a 50 percent ownership interest in ERI/HEC
EFA-Med, LLC.
ERI/HEC EFA-Med, LLC
STATEMENTS OF INCOME
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2003 2003
------------ -------------
(Thousands of Dollars)
Operating Revenues $ - $ -
Operating Expenses - -
------------ -------------
Net Income $ - $ -
============ =============
Note: In the opinion of the Company, all adjustments necessary for a fair
presentation of financial position for the periods shown have been made.
See accompanying notes to financial statements.
Select Energy Services, Inc. has a 50 percent ownership interest in ERI/HEC
EFA-Med, LLC.
Northeast Utilities (Parent)
Select Energy, Inc.
Select Energy New York, Inc.
Northeast Generation Services Company
E.S. Boulos Company
NGS Mechanical, Inc.
Woods Electrical Co., Inc.
Greenport Power, LLC
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
Notes to Financial Statements (Unaudited)
1. About Northeast Utilities (NU)
Northeast Utilities Parent is the parent company of NU's subsidiaries. NU's
regulated utilities furnish franchised retail electric service in Connecticut,
New Hampshire and Massachusetts through three wholly owned subsidiaries: The
Connecticut Light and Power Company, Public Service Company of New Hampshire
and Western Massachusetts Electric Company. Another wholly owned subsidiary,
North Atlantic Energy Corporation, previously sold all of its entitlement to
the capacity and output of the Seabrook nuclear unit (Seabrook) to PSNH under
the terms of two life-of-unit, full cost recovery contracts. Seabrook was
sold on November 1, 2002. Other subsidiaries include Holyoke Water Power
Company, a company engaged in the production of electric power, and Yankee
Energy System, Inc. (Yankee), 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 NU's
companies. Northeast Utilities Service Company provides centralized
accounting, administrative, engineering, financial, information technology,
legal, operational, planning, purchasing, and other services to NU's
companies. Prior to the sale of Seabrook, North Atlantic Energy Service
Corporation had operational responsibility for Seabrook. Three other
subsidiaries construct, acquire or lease some of the property and facilities
used by NU's companies.
NU Enterprises, Inc. (NU Enterprises) is a wholly owned subsidiary of NU and
acts as the holding company for certain of NU's subsidiaries. Select Energy,
Inc. (Select Energy) and its subsidiary Select Energy New York, Inc. (SENY),
Northeast Generation Services Company and its subsidiaries (NGS), Select
Energy Services, Inc. and its subsidiaries (SESI), Mode 1 Communications,
Inc. and Woods Network Services, Inc., engage in a variety of energy-related
and telecommunications activities, primarily in the competitive energy retail
and wholesale commodity, marketing and services fields. Northeast Generation
Company acquires generation facilities. E.S. Boulos Company (Boulos), NGS
Mechanical, Inc. (NGS Mechanical) and Woods Electrical Co., Inc. (Woods
Electrical) are wholly owned subsidiaries of NGS. Greenport Power, LLC
(Greenport) is a joint venture that is 50 percent owned by 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.
Yankee maintains certain wholly owned subsidiaries, including Yankee Energy
Services Company (YESCO).
NU Enterprises aligns its activities into two business lines, the merchant
energy business line and the energy services business line. The merchant
energy business line includes Select Energy's wholesale and retail marketing
activities. The energy services business line includes the operations of
SESI, NGS, and Woods Network.
Select Energy, SENY, NGS, Boulos, NGS Mechanical, Woods Electrical,
Greenport, Select Energy Contracting, Reeds Ferry, HEC/Tobyhanna, HEC/CJTS,
ERI/HEC and YESCO are "energy-related companies" under rule 58. These
footnotes are applicable to the rule 58 companies with financial statements
filed in this report on Form U-9C-3 under Item 6 Section A.
2. About Select Energy
Select Energy's merchant energy business line includes wholesale marketing
and retail marketing activities. Wholesale marketing activities include
wholesale origination, portfolio management and the operation of more than
1,400 megawatts of pumped storage, hydroelectric and coal-fired generation
assets. Select Energy is an integrated energy business that buys, markets
and sells 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 is a licensed retail
electricity supplier and is registered with local electric distribution
companies and 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 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.
4. About NGS
NGS provides 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.
5. About Boulos
Boulos is an electrical contracting company which specializes in high-voltage
electrical construction and maintenance in Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, and Vermont. Boulos is wholly owned by NGS.
6. About NGS Mechanical
NGS Mechanical provides mechanical services in certain New England states and
New York. NGS Mechanical is wholly owned by NGS.
7. About Woods Electrical
Woods Electrical is in the electrical contracting business in Connecticut and
is a wholly owned subsidiary of NGS. Woods Electrical is also registered in
the electrical contracting business in Maine, Massachusetts and New
Hampshire. NGS acquired Woods Electrical on July 31, 2002, and the results
of Woods Electrical's operations since July 1, 2002, are included in this
report.
8. About Greenport
Greenport is a limited liability company that was established to enter into
an engineering, procurement and construction agreement with Global Common LLC
for the performance of design, engineering, procurement, construction and
other services in connection with an electrical generation facility
construction project in Greenport, Long Island, New York. Greenport is 50
percent owned by NGS.
9. About Select Energy Contracting
Select Energy Contracting designs, manages and directs the construction of,
and/or installation of mechanical, water and electrical systems and other
resource consuming equipment.
10. About Reeds Ferry
Reeds Ferry is an equipment wholesaler which purchases equipment on behalf of
Select Energy Contracting.
11. About HEC/Tobyhanna
HEC/Tobyhanna is a special purpose entity established to manage the assets of
an Energy Savings Performance Contract at the Tobyhanna Army Depot.
12. 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.
13. About ERI/HEC
ERI/HEC was established on September 30, 2000, by SESI and ERI Services, Inc.
to enter into an indefinite delivery/indefinite quantity contract with the
United States Navy. ERI/HEC is 50 percent owned by SESI.
14. About YESCO
YESCO has disposed of most of its assets and has wound down its energy-
related services for its customers.
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 is subject to the provisions of the 1935 Act. Arrangements among
NU's 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. NU's 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 Standards
Derivative Accounting: Effective January 1, 2001, NU adopted Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended. In April 2003, the
Financial Accounting Standards Board (FASB) issued SFAS No. 149, "Amendment
of Statement 133 on Derivative Instruments and Hedging Activities," which
amends SFAS No. 133. This new statement incorporates interpretations that
were included in previous Derivative Implementation Group (DIG) guidance,
clarifies certain conditions, and amends other existing pronouncements. It
is effective for contracts entered into or modified after June 30, 2003.
Management has determined that the adoption of SFAS No. 149 did not change
Select Energy's or SENY's accounting for wholesale and retail marketing
contracts, or their ability to elect the normal purchases and sales
exception.
In August of 2003, the FASB ratified the consensus reached by its Emerging
Issues Task Force (EITF) in July 2003 on EITF Issue No. 03-11, "Reporting
Realized Gains and Losses on Derivative Instruments That Are Subject to FASB
Statement No. 133 and Not 'Held for Trading Purposes' as Defined in Issue No.
02-3." Prior to Issue No. 03-11, no specific guidance existed to address the
classification in the income statement of derivative contracts that are not
held for trading purposes. The consensus states that determining whether
realized gains and losses on contracts that physically deliver and are not
held for trading purposes should be reported on a net or gross basis is a
matter of judgment that depends on the relevant facts and circumstances.
Select Energy and SENY have derivative sales contracts, and though these
contracts may result in physical delivery, management has determined, based
on the relevant facts and circumstances, that because these transactions are
part of the respective companies' procurement activities, inclusion in
operating expenses better depicts these sales activities. At December 31,
2003, settlements of these derivative contracts that are not held for trading
purposes, though previously reported on a gross basis, are reported on a net
basis in expenses. Sales amounting to $595.7 million for the first nine
months of 2003 were reflected as revenues in quarterly reporting but are now
included in expenses.
On June 25, 2003, the DIG cleared Issue No. C-20, which addressed the meaning
of "not clearly and closely related regarding contracts with a price
adjustment feature" as it relates to the election of the normal purchase and
sales exception to derivative accounting. The implementation of this
guidance was required to be adopted in the fourth quarter of 2003 for Select
Energy and SENY. The adoption of Issue No. C-20 did not have an impact on
Select Energy's or SENY's financial statements.
18. Derivative Instruments, Market Risk and Risk Management
A. Derivative Instruments
Effective January 1, 2001, NU adopted SFAS No. 133, as amended. Derivatives
that are utilized for trading purposes are recorded at fair value with
changes in fair value included in earnings. Other contracts that are
derivatives but do not meet the definition of a cash flow hedge and cannot be
designated as being used for normal purchases or normal sales are also
recorded at fair value with changes in fair value included in earnings. For
those contracts that meet the definition of a derivative and meet the cash
flow hedge requirements, the changes in the fair value of the effective
portion of those contracts are generally recognized in accumulated other
comprehensive income until the underlying transactions occur. For contracts
that meet the definition of a derivative but do not meet the hedging
requirements, and for the ineffective portion of contracts that meet the cash
flow hedge requirements, the changes in fair value of those contracts are
recognized currently in earnings. Derivative contracts designated as fair
value hedges and the item they are hedging are both recorded at fair value on
the balance sheets. Derivative contracts that are entered into as a normal
purchase or sale and will result in physical delivery, and are documented as
such, are recorded under accrual accounting. For information regarding
accounting changes related to derivative instruments, see Note 17, "New
Accounting Standards," to the financial statements.
In 2003, there were changes to interpretations of as well as an amendment to
SFAS No. 133, and the FASB continues to consider changes that could affect
the way Select Energy and SENY record and disclose derivative and hedging
activities.
The tables below summarize Select Energy's and SENY's derivative assets and
liabilities at December 31, 2003. These amounts do not include option
premiums paid, which are recorded as prepayments and amounted to $16.7
million at December 31, 2003 ($12.4 million for Select Energy and $4.3
million for SENY). These amounts also do not include option premiums
received by Select Energy, which are recorded as other current liabilities
and amounted to $12.2 million at December 31, 2003. The premium amounts
relate primarily to energy trading activities.
-------------------------------------------------------------------------------
(Millions of Dollars) Assets Liabilities Total
-------------------------------------------------------------------------------
Select Energy:
Trading $121.8 $ (90.3) $31.5
Non-trading 0.5 (0.1) 0.4
Hedging 46.7 (12.7) 34.0
-------------------------------------------------------------------------------
Total $169.0 $(103.1) $65.9
===============================================================================
-------------------------------------------------------------------------------
(Millions of Dollars) Assets Liabilities Total
-------------------------------------------------------------------------------
SENY:
Trading $ 2.1 $ (1.1) $ 1.0
Non-trading 1.1 (0.7) 0.4
Hedging 9.1 - 9.1
-------------------------------------------------------------------------------
Total $ 12.3 $ (1.8) $10.5
===============================================================================
Trading: To gather market intelligence and utilize this information in risk
management activities for the wholesale marketing activities, Select Energy
conducts limited energy trading activities in electricity, natural gas and
oil, and therefore experiences net open positions. Select Energy and SENY
manage these open positions with strict policies that limit its exposure to
market risk and require daily reporting to management of potential financial
exposures.
Derivatives used in trading activities are recorded at fair value and
included in the balance sheets as derivative assets or liabilities. Changes
in fair value are recognized in operating revenues in the statements of
income in the period of change. The net fair value positions of the trading
portfolio at December 31, 2003 were assets of $31.5 million for Select Energy
and $1 million for SENY.
Select Energy's and SENY's trading portfolio includes New York Mercantile
Exchange (NYMEX) futures and options, the fair value of which is based on
closing exchange prices; over-the-counter forwards and options, the fair
value of which is based on the mid-point of bid and ask market prices; and
bilateral contracts for the purchase or sale of electricity or natural gas,
the fair value of which is determined using available information from
external sources. SENY's trading portfolio also includes transmission
congestion contracts (TCCs). The fair value of certain TCCs is based on
published market data.
Non-trading: Non-trading derivative contracts are used for delivery of
energy related to Select Energy's and SENY's wholesale and retail marketing
activities. These contracts are subject to fair value accounting because
these contracts are derivatives that cannot be designated as normal purchases
or sales, as defined. These contracts cannot be designated as normal
purchases or sales either because they are included in the New York energy
market that settles financially or because management did not elect the
normal purchase and sale designation. Changes in fair value of a negative
$2.1 million of non-trading derivative contracts were recorded in revenues in
2003.
Market information for certain TCCs is not available, and those contracts
cannot be reliably valued. Management believes the amounts paid for these
contracts, which total $4.3 million and are included in premiums paid, are
equal to their fair value.
Hedging: Select Energy and SENY utilize derivative financial and commodity
instruments, including futures and forward contracts, to reduce market risk
associated with fluctuations in the price of electricity and natural gas
purchased to meet firm sales commitments to certain customers. Select Energy
and SENY also utilize 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 and delivery
requirements. These derivatives have been designated as cash flow hedging
instruments and are used to reduce the market risk associated with
fluctuations in the price of electricity, natural gas, or oil. A derivative
that hedges exposure to the variable cash flows of a forecasted transaction
(a cash flow hedge) is initially recorded at fair value with changes in fair
value recorded in accumulated other comprehensive income. Hedges impact net
income when the forecasted transaction being hedged occurs, when hedge
ineffectiveness is measured and recorded, when the forecasted transaction
being hedged is no longer probable of occurring, or when there is accumulated
other comprehensive loss and the hedge and the forecasted transaction being
hedged are in a loss position on a combined basis.
Select Energy and SENY maintain natural gas service agreements with certain
customers to supply gas at fixed prices for terms extending through 2006.
Select Energy and SENY have hedged its gas supply risk under these agreements
through NYMEX futures contracts. Under these contracts, which also extend
through 2006, the purchase price of a specified quantity of gas is
effectively fixed over the term of the gas service agreements. At December 31,
2003, the NYMEX futures contracts had notional values of $104.5 million
and were recorded at fair value as derivative assets of $11.6 million.
Select Energy maintains power swaps to hedge purchases in New England as well
as financial gas contracts and gas futures to hedge electricity purchase
contracts that are indexed to gas prices. These hedging contracts, which are
valued at the mid-point of bid and ask market prices, were recorded as
derivative assets of $27.3 million and derivative liabilities of $5.1 million
at December 31, 2003. To hedge the congestion price differences associated
with locational marginal pricing in the New England and the Pennsylvania, New
Jersey, Maryland and Delaware (PJM) regions, Select Energy holds FTR
contracts recorded as a derivative asset at a fair value of $3.8 million at
December 31, 2003.
Other hedging derivative liabilities, which are valued at the mid-point of
bid and ask market prices, include forwards, options and swaps to hedge
Select Energy's basic generation service contracts in the PJM region and were
recorded at fair value as derivative liabilities of $5.8 million at
December 31, 2003.
SENY maintains financial power swaps to hedge its retail sales portfolio
through 2004, which were also valued at the mid-point of bid and ask market
prices. These contracts were recorded at fair value as derivative assets of
$6.9 million at December 31, 2003.
B. Market Risk Information
Select Energy and SENY utilize the sensitivity analysis methodology to
disclose 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. 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, fair 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 fair value based on closing exchange prices.
Wholesale and Retail Marketing Portfolio: When conducting sensitivity
analyses of the change in the fair value of Select Energy's and SENY's
electricity, natural gas and oil on the wholesale and retail marketing
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 that take into consideration 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 and SENY have determined a hypothetical change in the fair
value for its wholesale and retail marketing portfolio, which includes cash
flow hedges and electricity, natural gas and oil contracts, assuming a 10
percent change in forward market prices. At December 31, 2003, a 10 percent
change in market price would have resulted in an increase or decrease in fair
value of $3.7 million.
The impact of a change in electricity, natural gas and oil prices on Select
Energy's and SENY's wholesale and retail marketing portfolio at December 31,
2003, is not necessarily representative of the results that will be realized
when these contracts are physically delivered.
Trading Contracts: At December 31, 2003, Select Energy and SENY have
calculated the market price resulting from a 10 percent change in forward
market prices. That 10 percent change would result in a $0.4 million
increase or decrease in the fair value of the Select Energy and SENY trading
portfolio. In the normal course of business, Select Energy and SENY also
face risks that are either non-financial or non-quantifiable. These risks
principally include credit risk, which is not reflected in this sensitivity
analysis.
C. Other Risk Management Activities
Credit Risk Management: Credit risk relates to the risk of loss that NU would
incur as a result of non-performance by counterparties pursuant to the terms
of their contractual obligations. NU serves a wide variety of customers and
suppliers that include independent power producers, industrial companies, gas
and electric utilities, oil and gas producers, financial institutions, and
other energy marketers. Margin accounts exist within this diverse group, and
NU realizes 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 which, in turn,
requires NU to manage the portfolio of market risk inherent in those
transactions in a manner consistent with the parameters established by NU's
risk management process.
Credit risks and market risks at NU Enterprises are monitored regularly by a
Risk Oversight Council operating outside of the business lines that create or
actively manage these risk exposures to ensure compliance with NU's stated
risk management policies.
NU tracks and re-balances the risk in its portfolio in accordance with fair
value and other risk management methodologies that utilize forward price
curves in the energy markets to estimate the size and probability of future
potential exposure.
NYMEX traded futures and option contracts are guaranteed by the NYMEX and
have a lower credit risk. Select Energy and SENY have established written
credit policies with regard to its counterparties to minimize overall credit
risk on all types of transactions. These policies require an evaluation of
potential counterparties' financial conditions (including credit ratings),
collateral requirements under certain circumstances (including cash in
advance, letters of credit, and parent guarantees), and the use of
standardized agreements, which allow for the netting of positive and negative
exposures associated with a single counterparty. This evaluation results in
establishing credit limits prior to Select Energy and SENY entering into
energy contracts. The appropriateness of these limits is subject to
continuing review. Concentrations among these counterparties may impact
Select Energy's and SENY's overall exposure to credit risk, either positively
or negatively, in that the counterparties may be similarly affected by
changes to economic, regulatory or other conditions.
At December 31, 2003, Select Energy and SENY maintained collateral balances
from counterparties of $46.5 million. These amounts are included in both
unrestricted cash from counterparties and other current liabilities on the
accompanying balance sheets.
19. Special Deposits
Special deposits represents amounts Select Energy and SENY have on deposit
with brokerage firms in the amount of $17 million.
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 there under, the undersigned company has duly caused this report to be
signed on its behalf by the undersigned officer thereunto duly authorized.
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NORTHEAST UTILITIES
(Registered Holding Company)
By: /s/ John P. Stack
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(Signature of Signing Officer)
John P. Stack
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Vice President-Accounting and Controller
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Date: March 24, 2004
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