false--12-31--12-31--12-31--12-31Q1202000000727410000013372000031525600000234266760.00122482100075406000104970009734800026207800071111000111540001308760000.5350.5675380000000100000000100000000245000000.03950.0510.04460.03450.02330.03150.0487P5YP5Y1900000466000000001460000031000002140000039100000114660000046600000155600000 0000072741 us-gaap:OperatingSegmentsMember es:ResidentialMember us-gaap:WaterDistributionMember 2018-01-01 2018-06-30WholesaleTransmissionRevenueMember es:EversourceElectricTransmissionMember 2020-01-01 2020-03-31
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 |
| FORM | 10-Q |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Quarterly Period Ended | June 30, 2019March 31, 2020
|
| or |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from ____________ to ____________ |
Registrant; State of Incorporation; Address; Telephone Number;
Commission File Number; and I.R.S. Employer Identification No.
EVERSOURCE ENERGY
(a Massachusetts voluntary association)
300 Cadwell Drive, Springfield, Massachusetts 01104
Telephone: (800) 286-5000
Commission File Number: 1-5324
I.R.S. Employer Identification No. 04-2147929
THE CONNECTICUT LIGHT AND POWER COMPANY
(a Connecticut corporation)
107 Selden Street, Berlin, Connecticut 06037-1616
Telephone: (800) 286-5000
Commission File Number: 0-00404
I.R.S. Employer Identification No. 06-0303850
NSTAR ELECTRIC COMPANY
(a Massachusetts corporation)
800 Boylston Street, Boston, Massachusetts 02199
Telephone: (800) 286-5000
Commission File Number: 1-02301
I.R.S. Employer Identification No. 04-1278810
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
(a New Hampshire corporation)
Energy Park
780 North Commercial Street, Manchester, New Hampshire 03101-1134
Telephone: (800) 286-5000
Commission File Number: 1-6392
I.R.S. Employer Identification No. 02-0181050
|
| | | | |
Securities registered pursuant to Section 12(b) of the Act: |
| | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Shares, $5.00 par value per share | | ES | | New York Stock Exchange |
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| | | | | | | | | | |
Eversource Energy | Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
The Connecticut Light and Power Company | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
NSTAR Electric Company | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Public Service Company of New Hampshire | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):
|
| | |
| Yes | No |
| | |
Eversource Energy | ☐ | ☒ |
The Connecticut Light and Power Company | ☐ | ☒ |
NSTAR Electric Company | ☐ | ☒ |
Public Service Company of New Hampshire | ☐ | ☒ |
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
|
| | | |
Company - Class of Stock | Outstanding as of July 31, 2019April 30, 2020 |
| | |
Eversource Energy Common Shares, $5.00 par value | 323,602,045336,442,541 |
| shares |
The Connecticut Light and Power Company Common Stock, $10.00 par value | 6,035,205 |
| shares |
NSTAR Electric Company Common Stock, $1.00 par value | 200 |
| shares |
Public Service Company of New Hampshire Common Stock, $1.00 par value | 301 |
| shares |
Eversource Energy holds all of the 6,035,205 shares, 200 shares, and 301 shares of the outstanding common stock of The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire, respectively.
NSTAR Electric Company and Public Service Company of New Hampshire each meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q, and each is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10‑Q.
Eversource Energy, The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire each separately file this combined Form 10-Q. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
GLOSSARY OF TERMS
The following is a glossary of abbreviations and acronyms that are found in this report:
|
| |
Current or former Eversource Energy companies, segments or investments: |
Eversource, ES or the Company | Eversource Energy and subsidiaries |
Eversource parent or ES parent | Eversource Energy, a public utility holding company |
ES parent and other companies | ES parent and other companies are comprised of Eversource parent, Eversource Service, Eversource Water Ventures, Inc. (parent company of Aquarion), and other subsidiaries, which primarily includes our unregulated businesses, HWP Company, The Rocky River Realty Company (a real estate subsidiary), the consolidated operations of CYAPC and YAEC, and Eversource parent's equity ownership interests that are not consolidated |
CL&P | The Connecticut Light and Power Company |
NSTAR Electric | NSTAR Electric Company |
PSNH | Public Service Company of New Hampshire |
PSNH Funding | PSNH Funding LLC 3, a bankruptcy remote, special purpose, wholly-owned subsidiary of PSNH |
NSTAR Gas | NSTAR Gas Company |
Yankee Gas | Yankee Gas Services Company |
Aquarion | Eversource Aquarion Holdings, Inc. and its subsidiaries |
NPT | Northern Pass Transmission LLC |
Northern Pass | The HVDC and associated alternating-current transmission line project from Canada into New Hampshire |
HEEC | Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric |
Eversource Service | Eversource Energy Service Company |
Bay State Wind | Bay State Wind LLC, an offshore wind business being developed jointly by Eversource and Denmark-based Ørsted, which holds the Sunrise Wind project |
North East Offshore | North East Offshore, LLC, an offshore wind business holding company being developed jointly by Eversource and Denmark-based Ørsted, which holds the Revolution Wind and South Fork Wind projects |
CYAPC | Connecticut Yankee Atomic Power Company |
MYAPC | Maine Yankee Atomic Power Company |
YAEC | Yankee Atomic Electric Company |
Yankee Companies | CYAPC, YAEC and MYAPC |
Regulated companies | The Eversource regulated companies are comprised of the electric distribution and transmission businesses of CL&P, NSTAR Electric and PSNH, the natural gas distribution businesses of Yankee Gas and NSTAR Gas, NPT, Aquarion, and the solar power facilities of NSTAR Electric |
Regulators: | |
DEEP | Connecticut Department of Energy and Environmental Protection |
DOE | U.S. Department of Energy |
DOER | Massachusetts Department of Energy Resources |
DPU | Massachusetts Department of Public Utilities |
EPA | U.S. Environmental Protection Agency |
FERC | Federal Energy Regulatory Commission |
ISO-NE | ISO New England, Inc., the New England Independent System Operator |
MA DEP | Massachusetts Department of Environmental Protection |
NHPUC | New Hampshire Public Utilities Commission |
PURA | Connecticut Public Utilities Regulatory Authority |
SEC | U.S. Securities and Exchange Commission |
SJC | Supreme Judicial Court of Massachusetts |
Other Terms and Abbreviations: |
ADIT | Accumulated Deferred Income Taxes |
AFUDC | Allowance For Funds Used During Construction |
AOCI | Accumulated Other Comprehensive Income |
ARO | Asset Retirement Obligation |
Bcf | Billion cubic feet |
C&LM | Conservation and Load Management |
CfD | Contract for Differences |
CTA | Competitive Transition Assessment |
CWIP | Construction Work in Progress |
EDC | Electric distribution company |
EDIT | Excess Deferred Income Taxes |
EPS | Earnings Per Share |
ERISA | Employee Retirement Income Security Act of 1974 |
|
| |
ESOP | Employee Stock Ownership Plan |
Eversource 20182019 Form 10-K | The Eversource Energy and Subsidiaries 20182019 combined Annual Report on Form 10-K as filed with the SEC |
Fitch | Fitch Ratings |
FMCC | Federally Mandated Congestion Charge |
FTR | Financial Transmission Rights |
GAAP | Accounting principles generally accepted in the United States of America |
GSC | Generation Service Charge |
GSRP | Greater Springfield Reliability Project |
GWh | Gigawatt-Hours |
HQ | Hydro-Québec, a corporation wholly-owned by the Québec government, including its divisions that produce, transmit and distribute electricity in Québec, Canada |
HVDC | High-voltage direct current |
Hydro Renewable Energy | Hydro Renewable Energy, Inc., a wholly-owned subsidiary of Hydro-Québec |
IPP | Independent Power Producers |
ISO-NE Tariff | ISO-NE FERC Transmission, Markets and Services Tariff |
kV | Kilovolt |
kVa | Kilovolt-ampere |
kW | Kilowatt (equal to one thousand watts) |
kWh | Kilowatt-Hours (the basic unit of electricity energy equal to one kilowatt of power supplied for one hour) |
LBR | Lost Base Revenue |
LNG | Liquefied natural gas |
LRS | Supplier of last resort service |
MG | Million gallons |
MGP | Manufactured Gas Plant |
MMBtu | One million British thermal units |
MMcf | Million cubic feet |
Moody's | Moody's Investors Services, Inc. |
MW | Megawatt |
MWh | Megawatt-Hours |
NEEWS | New England East-West Solution |
NETOs | New England Transmission Owners (including Eversource, National Grid and Avangrid) |
OCI | Other Comprehensive Income/(Loss) |
PAM | Pension and PBOP Rate Adjustment Mechanism |
PBOP | Postretirement Benefits Other Than Pension |
PBOP Plan | Postretirement Benefits Other Than Pension Plan |
PCRBs | Pollution Control Revenue Bonds |
Pension Plan | Single uniform noncontributory defined benefit retirement plan |
PPA | Pension Protection ActPower purchase agreement |
RECs | Renewable Energy Certificates |
Regulatory ROE | The average cost of capital method for calculating the return on equity related to the distribution business segment excluding the wholesale transmission segment |
RNS | Regional Network Service |
ROE | Return on Equity |
RRBs | Rate Reduction Bonds or Rate Reduction Certificates |
RSUs | Restricted share units |
S&P | Standard & Poor's Financial Services LLC |
SBC | Systems Benefits Charge |
SCRC | Stranded Cost Recovery Charge |
SERP | Supplemental Executive Retirement Plans and non-qualified defined benefit retirement plans |
SS | Standard service |
TCAM | Transmission Cost Adjustment Mechanism |
TSA | Transmission Service Agreement |
UI | The United Illuminating Company |
VIE | Variable Interest Entity |
EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION |
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| Condensed Consolidated Statements of Common Shareholders' Equity | |
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| Condensed Statements of Common Stockholder's Equity | |
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| Condensed Consolidated Statements of Common Stockholder's Equity | |
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| Public Service Company of New Hampshire and Subsidiaries (Unaudited) | |
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| Condensed Consolidated Statements of Common Stockholder's Equity | |
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PART II – OTHER INFORMATION |
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EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| | (Thousands of Dollars) | As of June 30, 2019 |
| As of December 31, 2018 | As of March 31, 2020 |
| As of December 31, 2019 |
| ASSETS | |
|
| | |
|
| |
Current Assets: | |
|
| | |
|
| |
Cash | $ | 20,578 |
|
| $ | 108,068 |
| $ | 47,425 |
|
| $ | 15,432 |
|
Receivables, Net | 964,314 |
|
| 994,055 |
| |
Receivables, Net (net of allowance for uncollectible accounts of $262,078 and $224,821 as of March 31, 2020 and December 31, 2019, respectively) | | 1,018,941 |
|
| 989,383 |
|
Unbilled Revenues | 154,920 |
|
| 176,285 |
| 155,224 |
|
| 181,006 |
|
Fuel, Materials, Supplies and Inventory | 174,124 |
| | 238,042 |
| |
Fuel, Materials, Supplies and REC Inventory | | 286,498 |
| | 235,471 |
|
Regulatory Assets | 515,265 |
|
| 514,779 |
| 785,125 |
|
| 651,112 |
|
Prepayments and Other Current Assets | 302,496 |
|
| 260,995 |
| 269,457 |
|
| 342,135 |
|
Total Current Assets | 2,131,697 |
|
| 2,292,224 |
| 2,562,670 |
|
| 2,414,539 |
|
|
|
|
|
|
| |
Property, Plant and Equipment, Net | 26,304,446 |
|
| 25,610,428 |
| 28,041,356 |
|
| 27,585,470 |
|
|
|
|
|
|
| |
Deferred Debits and Other Assets: | |
|
| |
| |
|
| |
|
Regulatory Assets | 4,404,176 |
|
| 4,631,137 |
| 4,778,321 |
|
| 4,863,639 |
|
Goodwill | 4,427,266 |
|
| 4,427,266 |
| 4,427,266 |
|
| 4,427,266 |
|
Investments in Unconsolidated Affiliates | 748,705 |
| | 464,286 |
| 876,328 |
| | 871,633 |
|
Marketable Securities | 401,231 |
|
| 417,508 |
| 418,715 |
|
| 449,130 |
|
Other Long-Term Assets | 578,385 |
|
| 398,407 |
| 544,330 |
|
| 512,238 |
|
Total Deferred Debits and Other Assets | 10,559,763 |
|
| 10,338,604 |
| 11,044,960 |
|
| 11,123,906 |
|
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|
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|
| |
Total Assets | $ | 38,995,906 |
|
| $ | 38,241,256 |
| $ | 41,648,986 |
|
| $ | 41,123,915 |
|
| LIABILITIES AND CAPITALIZATION | |
| | |
| |
Current Liabilities: | |
| | |
| |
Notes Payable | $ | 729,000 |
|
| $ | 910,000 |
| $ | 661,420 |
|
| $ | 889,084 |
|
Long-Term Debt – Current Portion | 779,289 |
|
| 837,319 |
| 532,440 |
|
| 327,411 |
|
Rate Reduction Bonds – Current Portion | 43,210 |
| | 52,332 |
| 43,210 |
| | 43,210 |
|
Accounts Payable | 903,431 |
|
| 1,119,995 |
| 914,333 |
|
| 1,147,872 |
|
Renewable Portfolio Standards Compliance Obligations | | 192,660 |
| | 160,149 |
|
Regulatory Liabilities | 379,850 |
|
| 370,230 |
| 439,859 |
|
| 361,152 |
|
Other Current Liabilities | 677,341 |
|
| 823,006 |
| 611,706 |
|
| 676,685 |
|
Total Current Liabilities | 3,512,121 |
|
| 4,112,882 |
| 3,395,628 |
|
| 3,605,563 |
|
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Deferred Credits and Other Liabilities: | |
| | |
| |
Accumulated Deferred Income Taxes | 3,549,922 |
|
| 3,506,030 |
| 3,816,988 |
|
| 3,755,777 |
|
Regulatory Liabilities | 3,639,792 |
|
| 3,609,475 |
| 3,668,158 |
|
| 3,658,042 |
|
Derivative Liabilities | 363,848 |
|
| 379,562 |
| 342,990 |
|
| 338,710 |
|
Asset Retirement Obligations | | 489,519 |
| | 488,511 |
|
Accrued Pension, SERP and PBOP | 955,092 |
|
| 962,510 |
| 1,331,884 |
|
| 1,370,245 |
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Other Long-Term Liabilities | 1,264,061 |
|
| 1,196,336 |
| 821,195 |
|
| 810,553 |
|
Total Deferred Credits and Other Liabilities | 9,772,715 |
|
| 9,653,913 |
| 10,470,734 |
|
| 10,421,838 |
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Long-Term Debt | 13,039,180 |
|
| 12,248,743 |
| 13,898,581 |
|
| 13,770,828 |
|
| | | | |
Rate Reduction Bonds | 561,727 |
| | 583,331 |
| 518,517 |
| | 540,122 |
|
| | | | |
Noncontrolling Interest – Preferred Stock of Subsidiaries | 155,570 |
|
| 155,570 |
| 155,570 |
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| 155,570 |
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Common Shareholders' Equity: |
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| |
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Common Shares | 1,699,292 |
|
| 1,669,392 |
| 1,759,092 |
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| 1,729,292 |
|
Capital Surplus, Paid In | 6,659,009 |
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| 6,241,222 |
| 7,479,689 |
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| 7,087,768 |
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Retained Earnings | 3,954,492 |
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| 3,953,974 |
| 4,322,825 |
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| 4,177,048 |
|
Accumulated Other Comprehensive Loss | (53,641 | ) |
| (60,000 | ) | (63,111 | ) |
| (65,059 | ) |
Treasury Stock | (304,559 | ) |
| (317,771 | ) | (288,539 | ) |
| (299,055 | ) |
Common Shareholders' Equity | 11,954,593 |
|
| 11,486,817 |
| 13,209,956 |
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| 12,629,994 |
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Commitments and Contingencies (Note 9) |
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Total Liabilities and Capitalization | $ | 38,995,906 |
|
| $ | 38,241,256 |
| $ | 41,648,986 |
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| $ | 41,123,915 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars, Except Share Information) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Operating Revenues | $ | 1,884,495 |
| | $ | 1,853,856 |
| | $ | 4,300,287 |
| | $ | 4,141,818 |
| $ | 2,373,726 |
| | $ | 2,415,792 |
|
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Operating Expenses: | | | | | | | | | | |
Purchased Power, Fuel and Transmission | 620,904 |
| | 653,915 |
| | 1,595,786 |
| | 1,600,662 |
| 876,570 |
| | 974,882 |
|
Operations and Maintenance | 328,010 |
| | 293,858 |
| | 663,606 |
| | 626,406 |
| 342,062 |
| | 335,597 |
|
Depreciation | 219,084 |
| | 199,140 |
| | 434,032 |
| | 403,406 |
| 236,211 |
| | 214,948 |
|
Amortization | 38,945 |
| | 36,203 |
| | 109,906 |
| | 81,397 |
| 49,776 |
| | 70,961 |
|
Energy Efficiency Programs | 105,837 |
| | 101,955 |
| | 245,953 |
| | 236,196 |
| 148,393 |
| | 140,116 |
|
Taxes Other Than Income Taxes | 181,083 |
| | 177,431 |
| | 365,672 |
| | 359,865 |
| 181,594 |
| | 184,588 |
|
Impairment of Northern Pass Transmission | 239,644 |
| | — |
| | 239,644 |
| | — |
| |
Total Operating Expenses | 1,733,507 |
| | 1,462,502 |
| | 3,654,599 |
| | 3,307,932 |
| 1,834,606 |
| | 1,921,092 |
|
Operating Income | 150,988 |
| | 391,354 |
| | 645,688 |
| | 833,886 |
| 539,120 |
| | 494,700 |
|
Interest Expense | 132,705 |
| | 126,404 |
| | 264,438 |
| | 247,533 |
| 134,715 |
| | 131,734 |
|
Other Income, Net | 45,866 |
| | 50,149 |
| | 76,850 |
| | 83,938 |
| 24,104 |
| | 30,985 |
|
Income Before Income Tax Expense | 64,149 |
| | 315,099 |
| | 458,100 |
| | 670,291 |
| 428,509 |
| | 393,951 |
|
Income Tax Expense | 30,815 |
| | 70,452 |
| | 114,209 |
| | 154,219 |
| 91,876 |
| | 83,393 |
|
Net Income | 33,334 |
| | 244,647 |
| | 343,891 |
| | 516,072 |
| 336,633 |
| | 310,558 |
|
Net Income Attributable to Noncontrolling Interests | 1,880 |
| | 1,880 |
| | 3,759 |
| | 3,759 |
| 1,880 |
| | 1,880 |
|
Net Income Attributable to Common Shareholders | $ | 31,454 |
| | $ | 242,767 |
| | $ | 340,132 |
| | $ | 512,313 |
| $ | 334,753 |
| | $ | 308,678 |
|
| | | | | | | | | | |
Basic and Diluted Earnings Per Common Share | $ | 0.10 |
| | $ | 0.76 |
| | $ | 1.07 |
| | $ | 1.61 |
| $ | 1.01 |
| | $ | 0.97 |
|
| | | | | | | | | | |
Weighted Average Common Shares Outstanding: | | | | | | | | | | |
Basic | 319,664,998 |
| | 317,344,596 |
| | 318,644,796 |
| | 317,370,825 |
| 331,102,237 |
| | 317,624,593 |
|
Diluted | 320,388,490 |
| | 317,885,187 |
| | 319,352,287 |
| | 317,939,094 |
| 332,937,153 |
| | 318,316,082 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Net Income | $ | 33,334 |
| | $ | 244,647 |
| | $ | 343,891 |
| | $ | 516,072 |
| $ | 336,633 |
| | $ | 310,558 |
|
Other Comprehensive Income, Net of Tax: | | | | | | | | | | |
Qualified Cash Flow Hedging Instruments | 262 |
| | 471 |
| | 578 |
| | 1,195 |
| 229 |
| | 316 |
|
Changes in Unrealized Gains/(Losses) on Marketable Securities | 444 |
| | (144 | ) | | 1,099 |
| | (588 | ) | |
Changes in Unrealized Gains on Marketable Securities | | 160 |
| | 655 |
|
Changes in Funded Status of Pension, SERP and PBOP Benefit Plans | 3,457 |
| | 1,815 |
| | 4,682 |
| | 4,808 |
| 1,559 |
| | 1,225 |
|
Other Comprehensive Income, Net of Tax | 4,163 |
| | 2,142 |
| | 6,359 |
| | 5,415 |
| 1,948 |
| | 2,196 |
|
Comprehensive Income Attributable to Noncontrolling Interests | (1,880 | ) | | (1,880 | ) | | (3,759 | ) | | (3,759 | ) | (1,880 | ) | | (1,880 | ) |
Comprehensive Income Attributable to Common Shareholders | $ | 35,617 |
| | $ | 244,909 |
| | $ | 346,491 |
| | $ | 517,728 |
| $ | 336,701 |
| | $ | 310,874 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(Unaudited)
| | | For the Six Months Ended June 30, 2019 | For the Three Months Ended March 31, 2020 |
| Common Shares | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Common Shareholders' Equity | Common Shares | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Common Shareholders' Equity |
(Thousands of Dollars, Except Share Information) | Shares | | Amount | Shares | | Amount |
Balance as of January 1, 2019 | 316,885,808 |
| | $ | 1,669,392 |
| | $ | 6,241,222 |
| | $ | 3,953,974 |
| | $ | (60,000 | ) | | $ | (317,771 | ) | | $ | 11,486,817 |
| |
Balance as of January 1, 2020 | | 329,880,645 |
| | $ | 1,729,292 |
| | $ | 7,087,768 |
| | $ | 4,177,048 |
| | $ | (65,059 | ) | | $ | (299,055 | ) | | $ | 12,629,994 |
|
Net Income | |
| | |
| | | | 310,558 |
| | | | | | 310,558 |
| |
| | |
| | | | 336,633 |
| | | | | | 336,633 |
|
Dividends on Common Shares - $0.535 Per Share | |
| | |
| | | | (169,757 | ) | | | | | | (169,757 | ) | |
Dividends on Preferred Stock | |
| | |
| | | | (1,880 | ) | | | | | | (1,880 | ) | |
Long-Term Incentive Plan Activity | |
| | |
| | (16,609 | ) | | |
| | | | | | (16,609 | ) | |
Issuance of Treasury Shares | 461,662 |
| | |
| | 17,476 |
| | |
| | | | 8,633 |
| | 26,109 |
| |
Other Comprehensive Income | |
| | |
| | | | |
| | 2,196 |
| | | | 2,196 |
| |
Balance as of March 31, 2019 | 317,347,470 |
|
| 1,669,392 |
|
| 6,242,089 |
|
| 4,092,895 |
|
| (57,804 | ) |
| (309,138 | ) |
| 11,637,434 |
| |
Net Income | |
| | |
| | | | 33,334 |
| | | | | | 33,334 |
| |
Dividends on Common Shares - $0.535 Per Share | |
| | |
| | | | (169,857 | ) | | | | | | (169,857 | ) | |
Dividends on Common Shares - $0.5675 Per Share | | |
| | |
| | | | (187,462 | ) | | | | | | (187,462 | ) |
Dividends on Preferred Stock | |
| | |
| | | | (1,880 | ) | | | | | | (1,880 | ) | |
| | |
| | | | (1,880 | ) | | | | | | (1,880 | ) |
Issuance of Common Shares - $5 par value | 5,980,000 |
| | 29,900 |
| | 403,650 |
| | | | | | | | 433,550 |
| 5,960,000 |
| | 29,800 |
| | 402,300 |
| | | | | | | | 432,100 |
|
Long-Term Incentive Plan Activity | |
| | |
| | 6,470 |
| | | | | | | | 6,470 |
| |
| | |
| | (15,295 | ) | | |
| | | | | | (15,295 | ) |
Issuance of Treasury Shares | 246,969 |
| | |
| | 13,448 |
| | | | | | 4,579 |
| | 18,027 |
| 570,542 |
| | | | 17,230 |
| | | | | | 10,516 |
| | 27,746 |
|
Capital Stock Expense | | | | | (6,648 | ) | | | | | | | | (6,648 | ) | | | | | (12,314 | ) | | | | | | | | (12,314 | ) |
Adoption of New Accounting Standard (See Note 1B) | | | | | | | | (1,514 | ) | | | | | | (1,514 | ) |
Other Comprehensive Income | |
| | |
| | | | | | 4,163 |
| | | | 4,163 |
| |
| | |
| | | | | | 1,948 |
| | | | 1,948 |
|
Balance as of June 30, 2019 | 323,574,439 |
| | $ | 1,699,292 |
|
| $ | 6,659,009 |
|
| $ | 3,954,492 |
|
| $ | (53,641 | ) |
| $ | (304,559 | ) |
| $ | 11,954,593 |
| |
Balance as of March 31, 2020 | | 336,411,187 |
|
| $ | 1,759,092 |
|
| $ | 7,479,689 |
|
| $ | 4,322,825 |
|
| $ | (63,111 | ) |
| $ | (288,539 | ) |
| $ | 13,209,956 |
|
| | | For the Six Months Ended June 30, 2018 | For the Three Months Ended March 31, 2019 |
| Common Shares | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Common Shareholders' Equity | Common Shares | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Common Shareholders' Equity |
(Thousands of Dollars, Except Share Information) | Shares | | Amount | Shares | | Amount |
Balance as of January 1, 2018 | 316,885,808 |
| | $ | 1,669,392 |
| | $ | 6,239,940 |
| | $ | 3,561,084 |
| | $ | (66,403 | ) | | $ | (317,771 | ) | | $ | 11,086,242 |
| |
Balance as of January 1, 2019 | | 316,885,808 |
| | $ | 1,669,392 |
| | $ | 6,241,222 |
| | $ | 3,953,974 |
| | $ | (60,000 | ) | | $ | (317,771 | ) | | $ | 11,486,817 |
|
Net Income | | | |
| | | | 271,426 |
| | | | | | 271,426 |
| | | |
| | | | 310,558 |
| | | | | | 310,558 |
|
Dividends on Common Shares - $0.505 Per Share | | | |
| | | | (160,027 | ) | | | | | | (160,027 | ) | |
Dividends on Common Shares - $0.535 Per Share | | | | |
| | | | (169,757 | ) | | | | | | (169,757 | ) |
Dividends on Preferred Stock | | | |
| | | | (1,880 | ) | | | | | | (1,880 | ) | | | |
| | | | (1,880 | ) | | | | | | (1,880 | ) |
Long-Term Incentive Plan Activity | | | |
| | (15,320 | ) | | |
| | | | | | (15,320 | ) | | | |
| | (16,609 | ) | | |
| | | | | | (16,609 | ) |
Issuance of Treasury Shares | | 461,662 |
| | | | 17,476 |
| | | | | | 8,633 |
| | 26,109 |
|
Other Comprehensive Income | | | |
| | | | |
| | 3,273 |
| | | | 3,273 |
| | | |
| | | | |
| | 2,196 |
| | | | 2,196 |
|
Balance as of March 31, 2018 | 316,885,808 |
| | 1,669,392 |
| | 6,224,620 |
| | 3,670,603 |
| | (63,130 | ) | | (317,771 | ) | | 11,183,714 |
| |
Net Income | |
| | |
| | | | 244,647 |
| | | | | | 244,647 |
| |
Dividends on Common Shares - $0.505 Per Share | |
| | |
| | | | (160,027 | ) | | | | | | (160,027 | ) | |
Dividends on Preferred Stock | |
| | |
| | | | (1,880 | ) | | | | | | (1,880 | ) | |
Long-Term Incentive Plan Activity | |
| | |
| | 4,627 |
| | | | | | | | 4,627 |
| |
Other Comprehensive Income | |
| | |
| | | | | | 2,142 |
| | | | 2,142 |
| |
Balance as of June 30, 2018 | 316,885,808 |
| | $ | 1,669,392 |
| | $ | 6,229,247 |
| | $ | 3,753,343 |
| | $ | (60,988 | ) | | $ | (317,771 | ) | | $ | 11,273,223 |
| |
Balance as of March 31, 2019 | | 317,347,470 |
| | $ | 1,669,392 |
| | $ | 6,242,089 |
| | $ | 4,092,895 |
| | $ | (57,804 | ) | | $ | (309,138 | ) | | $ | 11,637,434 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | 2020 | | 2019 |
| Operating Activities: | |
| | |
| |
Net Income | $ | 343,891 |
|
| $ | 516,072 |
| $ | 336,633 |
|
| $ | 310,558 |
|
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |
| | |
| |
Depreciation | 434,032 |
|
| 403,406 |
| 236,211 |
|
| 214,948 |
|
Deferred Income Taxes | 36,535 |
|
| 161,883 |
| 44,201 |
|
| 18,085 |
|
Uncollectible Expense | 31,546 |
| | 29,250 |
| 11,353 |
| | 18,565 |
|
Pension, SERP and PBOP Expense, Net | 13,227 |
|
| 3,317 |
| 1,953 |
|
| 8,428 |
|
Pension and PBOP Contributions | (6,648 | ) |
| (179,002 | ) | (723 | ) |
| (4,700 | ) |
Regulatory Overrecoveries, Net | 23,830 |
|
| 36,669 |
| |
Regulatory Underrecoveries, Net | | (22,288 | ) |
| (19,232 | ) |
Amortization | 109,906 |
|
| 81,397 |
| 49,776 |
|
| 70,961 |
|
Proceeds from DOE Spent Nuclear Fuel Litigation | 68,840 |
| | — |
| |
Impairment of Northern Pass Transmission | 239,644 |
| | — |
| |
Other | (137,428 | ) |
| (103,256 | ) | (33,317 | ) |
| (37,310 | ) |
Changes in Current Assets and Liabilities: | |
| | |
| |
Receivables and Unbilled Revenues, Net | 6,357 |
|
| (52,923 | ) | (55,290 | ) |
| (155,823 | ) |
Fuel, Materials, Supplies and Inventory | 63,918 |
|
| 65,609 |
| |
Fuel, Materials, Supplies and REC Inventory | | (51,027 | ) |
| (39,063 | ) |
Taxes Receivable/Accrued, Net | (6,883 | ) |
| (132,999 | ) | 92,140 |
|
| 126,381 |
|
Accounts Payable | (156,077 | ) |
| (80,059 | ) | (127,366 | ) |
| (60,121 | ) |
Other Current Assets and Liabilities, Net | (140,103 | ) |
| (51,229 | ) | (61,950 | ) |
| (70,242 | ) |
Net Cash Flows Provided by Operating Activities | 924,587 |
|
| 698,135 |
| 420,306 |
|
| 381,435 |
|
| Investing Activities: | |
| | |
| |
Investments in Property, Plant and Equipment | (1,377,753 | ) |
| (1,251,678 | ) | (725,520 | ) |
| (628,129 | ) |
Proceeds from Sales of Marketable Securities | 348,904 |
|
| 316,252 |
| 58,627 |
|
| 234,497 |
|
Purchases of Marketable Securities | (302,950 | ) |
| (314,406 | ) | (50,723 | ) |
| (237,794 | ) |
Proceeds from the Sale of PSNH Generation Assets | — |
| | 116,809 |
| |
Investments in Unconsolidated Affiliates | (265,955 | ) | | (13,220 | ) | |
Investments in Unconsolidated Affiliates, Net | | (6,113 | ) | | (249,138 | ) |
Other Investing Activities | 4,055 |
|
| (902 | ) | 6,119 |
|
| 4,893 |
|
Net Cash Flows Used in Investing Activities | (1,593,699 | ) |
| (1,147,145 | ) | (717,610 | ) |
| (875,671 | ) |
| Financing Activities: | |
| | |
| |
Issuance of Common Shares, Net of Issuance Costs | 426,902 |
| | — |
| 419,786 |
| | — |
|
Cash Dividends on Common Shares | (323,346 | ) |
| (320,055 | ) | (181,608 | ) |
| (169,757 | ) |
Cash Dividends on Preferred Stock | (3,759 | ) |
| (3,759 | ) | (1,880 | ) |
| (1,880 | ) |
Decrease in Notes Payable | (181,000 | ) |
| (98,500 | ) | |
Issuance of Rate Reduction Bonds | — |
| | 635,663 |
| |
(Decrease)/Increase in Notes Payable | | (408,950 | ) |
| 829,430 |
|
Repayment of Rate Reduction Bonds | (30,727 | ) | | — |
| (21,605 | ) | | (30,727 | ) |
Issuance of Long-Term Debt | 1,000,000 |
|
| 1,150,000 |
| 750,000 |
|
| — |
|
Retirement of Long-Term Debt | (250,437 | ) |
| (860,421 | ) | (220,253 | ) |
| (250,215 | ) |
Other Financing Activities | (10,682 | ) |
| (17,958 | ) | (21,560 | ) |
| 16,433 |
|
Net Cash Flows Provided by Financing Activities | 626,951 |
|
| 484,970 |
| 313,930 |
|
| 393,284 |
|
Net (Decrease)/Increase in Cash and Restricted Cash | (42,161 | ) |
| 35,960 |
| |
Net Increase/(Decrease) in Cash and Restricted Cash | | 16,626 |
|
| (100,952 | ) |
Cash and Restricted Cash - Beginning of Period | 209,324 |
|
| 85,890 |
| 117,063 |
|
| 209,324 |
|
Cash and Restricted Cash - End of Period | $ | 167,163 |
|
| $ | 121,850 |
| $ | 133,689 |
|
| $ | 108,372 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
| | (Thousands of Dollars) | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
| | | | | | |
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash | $ | 2,191 |
| | $ | 87,721 |
| $ | 3,785 |
| | $ | — |
|
Receivables, Net | 415,542 |
| | 397,026 |
| |
Receivables, Net (net of allowance for uncollectible accounts of $130,876 and $97,348 as of March 31, 2020 and December 31, 2019, respectively) | | 389,102 |
| | 400,927 |
|
Accounts Receivable from Affiliated Companies | 33,519 |
| | 23,082 |
| 33,701 |
| | 24,577 |
|
Unbilled Revenues | 53,670 |
| | 56,971 |
| 49,982 |
| | 56,465 |
|
Materials and Supplies | 55,243 |
| | 44,529 |
| 49,962 |
| | 50,700 |
|
Regulatory Assets | 175,706 |
| | 125,155 |
| 290,630 |
| | 178,607 |
|
Prepayments and Other Current Assets | 23,390 |
| | 60,279 |
| 69,767 |
| | 73,184 |
|
Total Current Assets | 759,261 |
| | 794,763 |
| 886,929 |
| | 784,460 |
|
| | | | |
Property, Plant and Equipment, Net | 9,285,633 |
| | 8,909,701 |
| 9,760,890 |
| | 9,625,765 |
|
| | | | |
Deferred Debits and Other Assets: | | | | | | |
Regulatory Assets | 1,432,827 |
| | 1,505,488 |
| 1,529,003 |
| | 1,557,261 |
|
Other Long-Term Assets | 221,860 |
| | 199,767 |
| 250,243 |
| | 217,705 |
|
Total Deferred Debits and Other Assets | 1,654,687 |
| | 1,705,255 |
| 1,779,246 |
| | 1,774,966 |
|
| | | | |
Total Assets | $ | 11,699,581 |
| | $ | 11,409,719 |
| $ | 12,427,065 |
| | $ | 12,185,191 |
|
| | | | | | |
LIABILITIES AND CAPITALIZATION | | | | | | |
Current Liabilities: | | | | | | |
Notes Payable to Eversource Parent | $ | 259,400 |
| | $ | — |
| $ | 219,000 |
| | $ | 63,800 |
|
Long-Term Debt – Current Portion | — |
| | 250,000 |
| |
Accounts Payable | 287,984 |
| | 324,983 |
| 331,491 |
| | 374,698 |
|
Accounts Payable to Affiliated Companies | 76,792 |
| | 26,452 |
| 88,553 |
| | 97,793 |
|
Obligations to Third Party Suppliers | 52,100 |
| | 56,248 |
| 50,335 |
| | 56,952 |
|
Regulatory Liabilities | 112,414 |
| | 109,614 |
| 119,283 |
| | 82,763 |
|
Derivative Liabilities | 62,075 |
| | 55,058 |
| 69,631 |
| | 67,804 |
|
Other Current Liabilities | 147,764 |
| | 161,088 |
| 152,138 |
| | 132,339 |
|
Total Current Liabilities | 998,529 |
| | 983,443 |
| 1,030,431 |
| | 876,149 |
|
| | | | |
Deferred Credits and Other Liabilities: | | | | | | |
Accumulated Deferred Income Taxes | 1,192,646 |
| | 1,166,784 |
| 1,270,025 |
| | 1,244,551 |
|
Regulatory Liabilities | 1,153,360 |
| | 1,122,157 |
| 1,179,663 |
| | 1,164,991 |
|
Derivative Liabilities | 363,717 |
| | 379,536 |
| 342,701 |
| | 338,594 |
|
Accrued Pension, SERP and PBOP | 275,358 |
| | 282,771 |
| 385,451 |
| | 391,159 |
|
Other Long-Term Liabilities | 153,878 |
| | 155,495 |
| 149,693 |
| | 147,586 |
|
Total Deferred Credits and Other Liabilities | 3,138,959 |
| | 3,106,743 |
| 3,327,533 |
| | 3,286,881 |
|
| | | | |
Long-Term Debt | 3,309,455 |
| | 3,004,016 |
| 3,518,129 |
| | 3,518,136 |
|
| | | | |
Preferred Stock Not Subject to Mandatory Redemption | 116,200 |
| | 116,200 |
| 116,200 |
| | 116,200 |
|
| | | | |
Common Stockholder's Equity: | | | | | | |
Common Stock | 60,352 |
| | 60,352 |
| 60,352 |
| | 60,352 |
|
Capital Surplus, Paid In | 2,410,765 |
| | 2,410,765 |
| 2,535,765 |
| | 2,535,765 |
|
Retained Earnings | 1,664,995 |
| | 1,727,899 |
| 1,838,340 |
| | 1,791,392 |
|
Accumulated Other Comprehensive Income | 326 |
| | 301 |
| 315 |
| | 316 |
|
Common Stockholder's Equity | 4,136,438 |
| | 4,199,317 |
| 4,434,772 |
| | 4,387,825 |
|
| | | | |
Commitments and Contingencies (Note 9) |
|
| |
|
|
|
| |
|
|
| | | | |
Total Liabilities and Capitalization | $ | 11,699,581 |
| | $ | 11,409,719 |
| $ | 12,427,065 |
| | $ | 12,185,191 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Operating Revenues | $ | 740,846 |
| | $ | 694,892 |
| | $ | 1,590,092 |
| | $ | 1,479,875 |
| $ | 899,703 |
| | $ | 849,246 |
|
| | | | | | | | | | |
Operating Expenses: | | | | | | | | | | |
Purchased Power and Transmission | 246,540 |
| | 234,335 |
| | 566,373 |
| | 536,223 |
| 374,717 |
| | 319,833 |
|
Operations and Maintenance | 133,351 |
| | 109,685 |
| | 263,989 |
| | 226,977 |
| 135,597 |
| | 130,637 |
|
Depreciation | 74,555 |
| | 69,383 |
| | 147,844 |
| | 136,881 |
| 78,435 |
| | 73,289 |
|
Amortization of Regulatory Assets, Net | 12,376 |
| | 15,400 |
| | 48,047 |
| | 43,405 |
| 6,548 |
| | 35,671 |
|
Energy Efficiency Programs | 20,780 |
| | 18,606 |
| | 46,768 |
| | 41,366 |
| 35,479 |
| | 25,988 |
|
Taxes Other Than Income Taxes | 86,465 |
| | 84,375 |
| | 178,463 |
| | 174,676 |
| 82,987 |
| | 92,000 |
|
Total Operating Expenses | 574,067 |
| | 531,784 |
| | 1,251,484 |
| | 1,159,528 |
| 713,763 |
| | 677,418 |
|
Operating Income | 166,779 |
| | 163,108 |
| | 338,608 |
| | 320,347 |
| 185,940 |
| | 171,828 |
|
Interest Expense | 36,972 |
| | 38,674 |
| | 72,754 |
| | 75,498 |
| 37,883 |
| | 35,781 |
|
Other Income, Net | 2,853 |
| | 7,063 |
| | 6,733 |
| | 13,623 |
| 1,898 |
| | 3,880 |
|
Income Before Income Tax Expense | 132,660 |
| | 131,497 |
| | 272,587 |
| | 258,472 |
| 149,955 |
| | 139,927 |
|
Income Tax Expense | 27,856 |
| | 31,785 |
| | 57,312 |
| | 60,192 |
| 31,217 |
| | 29,456 |
|
Net Income | $ | 104,804 |
| | $ | 99,712 |
| | $ | 215,275 |
| | $ | 198,280 |
| $ | 118,738 |
| | $ | 110,471 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Net Income | $ | 104,804 |
| | $ | 99,712 |
| | $ | 215,275 |
| | $ | 198,280 |
| $ | 118,738 |
| | $ | 110,471 |
|
Other Comprehensive Income, Net of Tax: | | | | | | | | |
Other Comprehensive (Loss)/Income, Net of Tax: | | | | |
Qualified Cash Flow Hedging Instruments | (7 | ) | | 13 |
| | (13 | ) | | 65 |
| (7 | ) | | (6 | ) |
Changes in Unrealized Gains/(Losses) on Marketable Securities | 15 |
| | (4 | ) | | 38 |
| | (16 | ) | |
Other Comprehensive Income, Net of Tax | 8 |
| | 9 |
| | 25 |
| | 49 |
| |
Changes in Unrealized Gains on Marketable Securities | | 6 |
| | 23 |
|
Other Comprehensive (Loss)/Income, Net of Tax | | (1 | ) | | 17 |
|
Comprehensive Income | $ | 104,812 |
| | $ | 99,721 |
| | $ | 215,300 |
| | $ | 198,329 |
| $ | 118,737 |
| | $ | 110,488 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
| | | For the Six Months Ended June 30, 2019 | For the Three Months Ended March 31, 2020 |
| Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Common Stockholder's Equity | Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Common Stockholder's Equity |
(Thousands of Dollars, Except Stock Information) | Stock | | Amount | | Stock | | Amount | |
Balance as of January 1, 2019 | 6,035,205 |
| | $ | 60,352 |
| | $ | 2,410,765 |
| | $ | 1,727,899 |
| | $ | 301 |
| | $ | 4,199,317 |
| |
Balance as of January 1, 2020 | | 6,035,205 |
| | $ | 60,352 |
| | $ | 2,535,765 |
| | $ | 1,791,392 |
| | $ | 316 |
| | $ | 4,387,825 |
|
Net Income | |
| | |
| | | | 110,471 |
| | | | 110,471 |
| |
| | |
| | | | 118,738 |
| | | | 118,738 |
|
Dividends on Preferred Stock | |
| | |
| | | | (1,390 | ) | | | | (1,390 | ) | |
| | |
| | | | (1,390 | ) | | | | (1,390 | ) |
Dividends on Common Stock | |
| | |
| | | | (99,000 | ) | | | | (99,000 | ) | |
| | |
| | | | (69,500 | ) | | | | (69,500 | ) |
Other Comprehensive Income | |
| | |
| | | | |
| | 17 |
| | 17 |
| |
Balance as of March 31, 2019 | 6,035,205 |
| | 60,352 |
| | 2,410,765 |
| | 1,737,980 |
| | 318 |
| | 4,209,415 |
| |
Net Income | |
| | |
| | | | 104,804 |
| | | | 104,804 |
| |
Dividends on Preferred Stock | |
| | |
| | | | (1,390 | ) | | | | (1,390 | ) | |
Dividends on Common Stock | |
| | |
| | | | (176,400 | ) | | | | (176,400 | ) | |
Other | | | | | | | 1 |
| | | | 1 |
| |
Other Comprehensive Income | |
| | |
| | | | | | 8 |
| | 8 |
| |
Balance as of June 30, 2019 | 6,035,205 |
| | $ | 60,352 |
| | $ | 2,410,765 |
| | $ | 1,664,995 |
| | $ | 326 |
| | $ | 4,136,438 |
| |
Adoption of New Accounting Standard (See Note 1B) | | | | | | | | (900 | ) | | | | (900 | ) |
Other Comprehensive Loss | | |
| | |
| | | | |
| | (1 | ) | | (1 | ) |
Balance as of March 31, 2020 | | 6,035,205 |
| | $ | 60,352 |
| | $ | 2,535,765 |
| | $ | 1,838,340 |
| | $ | 315 |
| | $ | 4,434,772 |
|
| | | For the Six Months Ended June 30, 2018 | For the Three Months Ended March 31, 2019 |
| Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Common Stockholder's Equity | Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Common Stockholder's Equity |
(Thousands of Dollars, Except Stock Information) | Stock | | Amount | | Stock | | Amount | |
Balance as of January 1, 2018 | 6,035,205 |
| | $ | 60,352 |
| | $ | 2,110,765 |
| | $ | 1,415,741 |
| | $ | 269 |
| | $ | 3,587,127 |
| |
Balance as of January 1, 2019 | | 6,035,205 |
| | $ | 60,352 |
| | $ | 2,410,765 |
| | $ | 1,727,899 |
| | $ | 301 |
| | $ | 4,199,317 |
|
Net Income | |
| | |
| | | | 98,568 |
| | | | 98,568 |
| |
| | |
| | | | 110,471 |
| | | | 110,471 |
|
Dividends on Preferred Stock | |
| | |
| | | | (1,390 | ) | | | | (1,390 | ) | |
| | |
| | | | (1,390 | ) | | | | (1,390 | ) |
Dividends on Common Stock | |
| | |
| | | | (60,000 | ) | | | | (60,000 | ) | |
| | |
| | | | (99,000 | ) | | | | (99,000 | ) |
Capital Contributions from Eversource Parent | |
| | |
| | 9,000 |
| | |
| | | | 9,000 |
| |
Other Comprehensive Income | |
| | |
| | | | |
| | 40 |
| | 40 |
| |
| | |
| | | | |
| | 17 |
| | 17 |
|
Balance as of March 31, 2018 | 6,035,205 |
| | 60,352 |
| | 2,119,765 |
| | 1,452,919 |
| | 309 |
| | 3,633,345 |
| |
Net Income | |
| | |
| | | | 99,712 |
| | | | 99,712 |
| |
Dividends on Preferred Stock | |
| | |
| | | | (1,390 | ) | | | | (1,390 | ) | |
Capital Contributions from Eversource Parent | |
| | |
| | 91,000 |
| | | | | | 91,000 |
| |
Other Comprehensive Income | |
| | |
| | | | | | 9 |
| | 9 |
| |
Balance as of June 30, 2018 | 6,035,205 |
| | $ | 60,352 |
|
| $ | 2,210,765 |
|
| $ | 1,551,241 |
|
| $ | 318 |
|
| $ | 3,822,676 |
| |
Balance as of March 31, 2019 | | 6,035,205 |
| | $ | 60,352 |
| | $ | 2,410,765 |
| | $ | 1,737,980 |
| | $ | 318 |
| | $ | 4,209,415 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | |
Operating Activities: | | | | | | |
Net Income | $ | 215,275 |
| | $ | 198,280 |
| $ | 118,738 |
| | $ | 110,471 |
|
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | | | | | | |
Depreciation | 147,844 |
| | 136,881 |
| 78,435 |
| | 73,289 |
|
Deferred Income Taxes | 16,513 |
| | 50,915 |
| 19,910 |
| | 15,188 |
|
Uncollectible Expense | 7,627 |
| | 7,747 |
| 3,230 |
| | 4,116 |
|
Pension, SERP, and PBOP Expense, Net | 6,926 |
| | 3,861 |
| 3,315 |
| | 4,063 |
|
Pension Contributions | — |
| | (41,150 | ) | |
Regulatory Underrecoveries, Net | (40,460 | ) | | (39,908 | ) | (34,198 | ) | | (54,671 | ) |
Amortization of Regulatory Assets, Net | 48,047 |
| | 43,405 |
| 6,548 |
| | 35,671 |
|
Other | (40,290 | ) | | (40,825 | ) | (27,239 | ) | | (5,848 | ) |
Changes in Current Assets and Liabilities: | | | | | | |
Receivables and Unbilled Revenues, Net | (37,101 | ) | | (34,772 | ) | (27,969 | ) | | (60,506 | ) |
Taxes Receivable/Accrued, Net | 19,701 |
| | 105 |
| 40,505 |
| | 41,399 |
|
Accounts Payable | 5,443 |
| | (30,805 | ) | (27,298 | ) | | 75,373 |
|
Other Current Assets and Liabilities, Net | (3,941 | ) | | 14,377 |
| (21,801 | ) | | (40,274 | ) |
Net Cash Flows Provided by Operating Activities | 345,584 |
| | 268,111 |
| 132,176 |
| | 198,271 |
|
| | | | | | |
Investing Activities: | | | | | | |
Investments in Property, Plant and Equipment | (466,112 | ) | | (457,677 | ) | (212,374 | ) | | (189,423 | ) |
Other Investing Activities | 551 |
| | 110 |
| 74 |
| | 59 |
|
Net Cash Flows Used in Investing Activities | (465,561 | ) | | (457,567 | ) | (212,300 | ) | | (189,364 | ) |
| | | | | | |
Financing Activities: | | | | | | |
Cash Dividends on Common Stock | (275,400 | ) | | (60,000 | ) | (69,500 | ) | | (99,000 | ) |
Cash Dividends on Preferred Stock | (2,779 | ) | | (2,779 | ) | (1,390 | ) | | (1,390 | ) |
Capital Contributions from Eversource Parent | — |
| | 100,000 |
| |
Issuance of Long-Term Debt | 300,000 |
| | 500,000 |
| |
Retirement of Long-Term Debt | (250,000 | ) | | (300,000 | ) | — |
| | (250,000 | ) |
Increase/(Decrease) in Notes Payable to Eversource Parent | 259,400 |
| | (45,500 | ) | |
Increase in Notes Payable to Eversource Parent | | 155,200 |
| | 261,600 |
|
Other Financing Activities | 4,237 |
| | (6,189 | ) | (390 | ) | | (326 | ) |
Net Cash Flows Provided by Financing Activities | 35,458 |
| | 185,532 |
| |
Net Decrease in Cash and Restricted Cash | (84,519 | ) | | (3,924 | ) | |
Net Cash Flows Provided by/(Used in) Financing Activities | | 83,920 |
| | (89,116 | ) |
Net Increase/(Decrease) in Cash and Restricted Cash | | 3,796 |
| | (80,209 | ) |
Cash and Restricted Cash - Beginning of Period | 91,613 |
| | 9,619 |
| 4,971 |
| | 91,613 |
|
Cash and Restricted Cash - End of Period | $ | 7,094 |
| | $ | 5,695 |
| $ | 8,767 |
| | $ | 11,404 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | (Thousands of Dollars) | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
| | | | | | |
ASSETS | |
| | |
| |
| | |
|
Current Assets: | | | | | | |
Cash | $ | 177 |
| | $ | 1,606 |
| $ | 2,844 |
| | $ | 52 |
|
Receivables, Net | 346,428 |
| | 361,296 |
| |
Receivables, Net (net of allowance for uncollectible accounts of $71,111 and $75,406 as of March 31, 2020 and December 31, 2019, respectively) | | 375,587 |
| | 346,785 |
|
Accounts Receivable from Affiliated Companies | 25,071 |
| | 31,344 |
| 66,838 |
| | 29,914 |
|
Unbilled Revenues | 42,144 |
| | 34,518 |
| 32,629 |
| | 37,482 |
|
Materials, Supplies and Inventory | 64,513 |
| | 114,202 |
| |
Materials, Supplies and REC Inventory | | 178,510 |
| | 124,060 |
|
Regulatory Assets | 210,032 |
| | 241,747 |
| 304,007 |
| | 285,591 |
|
Prepayments and Other Current Assets | 21,289 |
| | 51,960 |
| 16,305 |
| | 31,150 |
|
Total Current Assets | 709,654 |
| | 836,673 |
| 976,720 |
| | 855,034 |
|
| | | | |
Property, Plant and Equipment, Net | 9,075,789 |
| | 8,794,700 |
| 9,614,555 |
| | 9,472,770 |
|
| | | | |
Deferred Debits and Other Assets: | | | | | | |
Regulatory Assets | 1,178,974 |
| | 1,196,512 |
| 1,225,314 |
| | 1,250,029 |
|
Prepaid PBOP | 146,717 |
| | 132,810 |
| 172,244 |
| | 166,058 |
|
Other Long-Term Assets | 142,573 |
| | 109,764 |
| 139,304 |
| | 144,368 |
|
Total Deferred Debits and Other Assets | 1,468,264 |
| | 1,439,086 |
| 1,536,862 |
| | 1,560,455 |
|
| | | | |
Total Assets | $ | 11,253,707 |
| | $ | 11,070,459 |
| $ | 12,128,137 |
| | $ | 11,888,259 |
|
| | | | | | |
LIABILITIES AND CAPITALIZATION | | | | | | |
Current Liabilities: | | | | | | |
Notes Payable | $ | 163,000 |
| | $ | 278,500 |
| $ | 88,000 |
| | $ | 10,500 |
|
Notes Payable to Eversource Parent | 40,300 |
| | — |
| 38,400 |
| | 30,300 |
|
Long-Term Debt – Current Portion | 95,000 |
| | — |
| — |
| | 95,000 |
|
Accounts Payable | 288,153 |
| | 384,398 |
| 264,148 |
| | 363,691 |
|
Accounts Payable to Affiliated Companies | 72,174 |
| | 89,636 |
| 93,344 |
| | 96,307 |
|
Obligations to Third Party Suppliers | 95,360 |
| | 109,547 |
| 107,341 |
| | 108,827 |
|
Renewable Portfolio Standards Compliance Obligations | 66,370 |
| | 139,898 |
| 179,075 |
| | 150,429 |
|
Regulatory Liabilities | 170,970 |
| | 190,620 |
| 219,872 |
| | 209,180 |
|
Other Current Liabilities | 61,710 |
| | 74,872 |
| 68,463 |
| | 71,333 |
|
Total Current Liabilities | 1,053,037 |
| | 1,267,471 |
| 1,058,643 |
| | 1,135,567 |
|
| | | | |
Deferred Credits and Other Liabilities: | | | | | | |
Accumulated Deferred Income Taxes | 1,318,267 |
| | 1,294,467 |
| 1,374,963 |
| | 1,357,265 |
|
Regulatory Liabilities | 1,514,845 |
| | 1,513,279 |
| 1,515,732 |
| | 1,516,585 |
|
Accrued Pension and SERP | 29,323 |
| | 14,145 |
| 95,746 |
| | 108,243 |
|
Other Long-Term Liabilities | 297,346 |
| | 263,096 |
| 334,538 |
| | 320,629 |
|
Total Deferred Credits and Other Liabilities | 3,159,781 |
| | 3,084,987 |
| 3,320,979 |
| | 3,302,722 |
|
| | | | |
Long-Term Debt | 3,246,535 |
| | 2,944,846 |
| 3,642,325 |
| | 3,247,086 |
|
| | | | |
Preferred Stock Not Subject to Mandatory Redemption | 43,000 |
| | 43,000 |
| 43,000 |
| | 43,000 |
|
| | | | |
Common Stockholder's Equity: | | | | | | |
Common Stock | — |
| | — |
| — |
| | — |
|
Capital Surplus, Paid In | 1,653,442 |
| | 1,633,442 |
| 1,813,442 |
| | 1,813,442 |
|
Retained Earnings | 2,099,059 |
| | 2,098,091 |
| 2,249,526 |
| | 2,346,287 |
|
Accumulated Other Comprehensive Loss | (1,147 | ) | | (1,378 | ) | |
Accumulated Other Comprehensive Income | | 222 |
| | 155 |
|
Common Stockholder's Equity | 3,751,354 |
| | 3,730,155 |
| 4,063,190 |
| | 4,159,884 |
|
| | | | |
Commitments and Contingencies (Note 9) |
|
| |
|
|
|
| |
|
|
| | | | |
Total Liabilities and Capitalization | $ | 11,253,707 |
|
| $ | 11,070,459 |
| $ | 12,128,137 |
|
| $ | 11,888,259 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Operating Revenues | $ | 681,893 |
| | $ | 690,737 |
| | $ | 1,479,505 |
| | $ | 1,460,865 |
| $ | 733,833 |
| | $ | 797,612 |
|
| | | | | | | | | | |
Operating Expenses: | |
| | |
| | |
| | |
| |
| | |
|
Purchased Power and Transmission | 228,397 |
| | 266,108 |
| | 558,501 |
| | 598,687 |
| 242,439 |
| | 330,104 |
|
Operations and Maintenance | 108,924 |
| | 102,163 |
| | 221,887 |
| | 220,844 |
| 122,318 |
| | 112,963 |
|
Depreciation | 73,055 |
| | 64,051 |
| | 145,639 |
| | 134,593 |
| 78,345 |
| | 72,584 |
|
Amortization of Regulatory Assets, Net | 23,184 |
| | 11,954 |
| | 45,768 |
| | 18,318 |
| 27,008 |
| | 22,584 |
|
Energy Efficiency Programs | 65,904 |
| | 65,184 |
| | 142,633 |
| | 139,978 |
| 68,667 |
| | 76,729 |
|
Taxes Other Than Income Taxes | 48,226 |
| | 47,627 |
| | 93,047 |
| | 95,815 |
| 48,722 |
| | 44,822 |
|
Total Operating Expenses | 547,690 |
| | 557,087 |
| | 1,207,475 |
| | 1,208,235 |
| 587,499 |
| | 659,786 |
|
Operating Income | 134,203 |
| | 133,650 |
| | 272,030 |
| | 252,630 |
| 146,334 |
| | 137,826 |
|
Interest Expense | 28,238 |
| | 27,359 |
| | 56,120 |
| | 53,822 |
| 31,017 |
| | 27,881 |
|
Other Income, Net | 10,657 |
| | 14,269 |
| | 21,743 |
| | 26,870 |
| 12,238 |
| | 11,086 |
|
Income Before Income Tax Expense | 116,622 |
| | 120,560 |
| | 237,653 |
| | 225,678 |
| 127,555 |
| | 121,031 |
|
Income Tax Expense | 26,888 |
| | 32,639 |
| | 53,906 |
| | 60,607 |
| 27,165 |
| | 27,017 |
|
Net Income | $ | 89,734 |
| | $ | 87,921 |
| | $ | 183,747 |
| | $ | 165,071 |
| $ | 100,390 |
| | $ | 94,014 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Net Income | $ | 89,734 |
| | $ | 87,921 |
| | $ | 183,747 |
| | $ | 165,071 |
| $ | 100,390 |
| | $ | 94,014 |
|
Other Comprehensive Income, Net of Tax: | | | | | | | | | | |
Changes in Funded Status of SERP Benefit Plan | 1 |
| | 1 |
| | 2 |
| | 2 |
| (43 | ) | | 1 |
|
Qualified Cash Flow Hedging Instruments | 109 |
| | 109 |
| | 219 |
| | 218 |
| 109 |
| | 110 |
|
Changes in Unrealized Gains/(Losses) on Marketable Securities | 4 |
| | (1 | ) | | 10 |
| | (5 | ) | |
Changes in Unrealized Gains on Marketable Securities | | 1 |
| | 6 |
|
Other Comprehensive Income, Net of Tax | 114 |
| | 109 |
| | 231 |
| | 215 |
| 67 |
| | 117 |
|
Comprehensive Income | $ | 89,848 |
| | $ | 88,030 |
| | $ | 183,978 |
| | $ | 165,286 |
| $ | 100,457 |
| | $ | 94,131 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
| | | For the Six Months Ended June 30, 2019 | For the Three Months Ended March 31, 2020 |
| Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholder's Equity | Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Common Stockholder's Equity |
(Thousands of Dollars, Except Stock Information) | Stock | | Amount | | Stock | | Amount | |
Balance as of January 1, 2019 | 200 |
| | $ | — |
| | $ | 1,633,442 |
| | $ | 2,098,091 |
| | $ | (1,378 | ) | | $ | 3,730,155 |
| |
Balance as of January 1, 2020 | | 200 |
| | $ | — |
| | $ | 1,813,442 |
| | $ | 2,346,287 |
| | $ | 155 |
| | $ | 4,159,884 |
|
Net Income | |
| | |
| | | | 94,014 |
| | | | 94,014 |
| |
| | |
| | | | 100,390 |
| | | | 100,390 |
|
Dividends on Preferred Stock | |
| | |
| | | | (490 | ) | | | | (490 | ) | |
| | |
| | | | (490 | ) | | | | (490 | ) |
Dividends on Common Stock | |
| | |
| | | | (60,600 | ) | | | | (60,600 | ) | |
| | |
| | | | (196,500 | ) | | | | (196,500 | ) |
Capital Contributions from Eversource Parent | |
| | |
| | 20,000 |
| | | | | | 20,000 |
| |
Adoption of New Accounting Standard (See Note 1B) | | | | | | | | (161 | ) | | | | (161 | ) |
Other Comprehensive Income | |
| | |
| | | | | | 117 |
| | 117 |
| |
| | |
| | | | | | 67 |
| | 67 |
|
Balance as of March 31, 2019 | 200 |
|
| — |
|
| 1,653,442 |
|
| 2,131,015 |
|
| (1,261 | ) |
| 3,783,196 |
| |
Net Income | |
| | |
| | |
| | 89,734 |
| | |
| | 89,734 |
| |
Dividends on Preferred Stock | |
| | |
| | |
| | (490 | ) | | |
| | (490 | ) | |
Dividends on Common Stock | |
| | |
| | |
| | (121,200 | ) | | |
| | (121,200 | ) | |
Other Comprehensive Income | |
| | |
| | |
| | |
| | 114 |
| | 114 |
| |
Balance as of June 30, 2019 | 200 |
| | $ | — |
| | $ | 1,653,442 |
| | $ | 2,099,059 |
| | $ | (1,147 | ) | | $ | 3,751,354 |
| |
Balance as of March 31, 2020 | | 200 |
|
| $ | — |
|
| $ | 1,813,442 |
|
| $ | 2,249,526 |
|
| $ | 222 |
|
| $ | 4,063,190 |
|
| | | For the Six Months Ended June 30, 2018 | For the Three Months Ended March 31, 2019 |
| Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholder's Equity | Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholder's Equity |
(Thousands of Dollars, Except Stock Information) | Stock | | Amount | | Stock | | Amount | |
Balance as of January 1, 2018 | 200 |
| | $ | — |
| | $ | 1,502,942 |
| | $ | 1,944,961 |
| | $ | (1,823 | ) | | $ | 3,446,080 |
| |
Balance as of January 1, 2019 | | 200 |
| | $ | — |
| | $ | 1,633,442 |
| | $ | 2,098,091 |
| | $ | (1,378 | ) | | $ | 3,730,155 |
|
Net Income | |
| | |
| | | | 77,149 |
| | | | 77,149 |
| |
| | |
| | | | 94,014 |
| | | | 94,014 |
|
Dividends on Preferred Stock | |
| | |
| | | | (490 | ) | | | | (490 | ) | |
| | |
| | | | (490 | ) | | | | (490 | ) |
Dividends on Common Stock | |
| | |
| | | | (161,000 | ) | | | | (161,000 | ) | |
| | |
| | | | (60,600 | ) | | | | (60,600 | ) |
Capital Contributions from Eversource Parent | |
| | |
| | 92,500 |
| |
| | | | 92,500 |
| |
| | |
| | 20,000 |
| |
| | | | 20,000 |
|
Other | |
| | |
| |
|
| | 1 |
| | | | 1 |
| |
Other Comprehensive Income | |
| | |
| | | | | | 106 |
| | 106 |
| |
| | |
| | | | | | 117 |
| | 117 |
|
Balance as of March 31, 2018 | 200 |
| | — |
| | 1,595,442 |
| | 1,860,621 |
| | (1,717 | ) | | 3,454,346 |
| |
Net Income | |
| | |
| | | | 87,921 |
| | |
| | 87,921 |
| |
Dividends on Preferred Stock | |
| | |
| | | | (490 | ) | | |
| | (490 | ) | |
Capital Contributions from Eversource Parent | |
| | |
| | 8,000 |
| | | | |
| | 8,000 |
| |
Other Comprehensive Income | |
| | |
| | | | | | 109 |
| | 109 |
| |
Balance as of June 30, 2018 | 200 |
| | $ | — |
|
| $ | 1,603,442 |
|
| $ | 1,948,052 |
|
| $ | (1,608 | ) |
| $ | 3,549,886 |
| |
Balance as of March 31, 2019 | | 200 |
| | $ | — |
| | $ | 1,653,442 |
| | $ | 2,131,015 |
| | $ | (1,261 | ) | | $ | 3,783,196 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | |
Operating Activities: | |
| | |
| |
| | |
|
Net Income | $ | 183,747 |
| | $ | 165,071 |
| $ | 100,390 |
| | $ | 94,014 |
|
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |
| | |
| |
| | |
|
Depreciation | 145,639 |
| | 134,593 |
| 78,345 |
| | 72,584 |
|
Deferred Income Taxes | 11,603 |
| | 29,238 |
| 9,775 |
| | 3,722 |
|
Uncollectible Expense | 11,605 |
| | 11,301 |
| 3,704 |
| | 5,953 |
|
Pension, SERP and PBOP Income, Net | (7,052 | ) | | (19,785 | ) | (4,754 | ) | | (4,279 | ) |
Pension and PBOP Contributions | (3,007 | ) | | (59,156 | ) | — |
| | (1,503 | ) |
Regulatory Overrecoveries, Net | 17,063 |
| | 34,090 |
| |
Regulatory (Under)/Over Recoveries, Net | | (17,434 | ) | | 4,329 |
|
Amortization of Regulatory Assets, Net | 45,768 |
| | 18,318 |
| 27,008 |
| | 22,584 |
|
Other | (36,973 | ) | | (14,646 | ) | (1,643 | ) | | (8,043 | ) |
Changes in Current Assets and Liabilities: | |
| | |
| |
| | |
|
Receivables and Unbilled Revenues, Net | (6,769 | ) | | (40,073 | ) | (64,951 | ) | | (29,220 | ) |
Materials, Supplies and Inventory | 49,688 |
| | 45,058 |
| |
Materials, Supplies and REC Inventory | | (54,450 | ) | | (46,020 | ) |
Taxes Receivable/Accrued, Net | 25,572 |
| | (37,268 | ) | 32,135 |
| | 29,483 |
|
Accounts Payable | (82,326 | ) | | (17,194 | ) | (53,462 | ) | | (18,109 | ) |
Other Current Assets and Liabilities, Net | (103,054 | ) | | (46,861 | ) | 7,033 |
| | 11,466 |
|
Net Cash Flows Provided by Operating Activities | 251,504 |
| | 202,686 |
| 61,696 |
| | 136,961 |
|
| | | | | | |
Investing Activities: | |
| | |
| |
| | |
|
Investments in Property, Plant and Equipment | (418,571 | ) | | (356,497 | ) | (247,549 | ) | | (208,540 | ) |
Other Investing Activities | 41 |
| | 31 |
| 21 |
| | 17 |
|
Net Cash Flows Used in Investing Activities | (418,530 | ) | | (356,466 | ) | (247,528 | ) | | (208,523 | ) |
| | | | | | |
Financing Activities: | |
| | |
| |
| | |
|
Cash Dividends on Common Stock | (181,800 | ) | | (161,000 | ) | (196,500 | ) | | (60,600 | ) |
Cash Dividends on Preferred Stock | (980 | ) | | (980 | ) | (490 | ) | | (490 | ) |
Issuance of Long-Term Debt | 400,000 |
| | — |
| 400,000 |
| | — |
|
Retirement of Long-Term Debt | | (95,000 | ) | | — |
|
Capital Contributions from Eversource Parent | 20,000 |
| | 100,500 |
| — |
| | 20,000 |
|
Increase in Notes Payable to Eversource Parent | 40,300 |
| | — |
| 8,100 |
| | 22,300 |
|
(Decrease)/Increase in Notes Payable | (115,500 | ) | | 213,810 |
| |
Increase in Notes Payable | | 77,500 |
| | 89,930 |
|
Other Financing Activities | (3,287 | ) | | (158 | ) | (4,961 | ) | | 668 |
|
Net Cash Flows Provided by Financing Activities | 158,733 |
| | 152,172 |
| 188,649 |
| | 71,808 |
|
Net Decrease in Cash and Restricted Cash | (8,293 | ) | | (1,608 | ) | |
Net Increase in Cash and Restricted Cash | | 2,817 |
| | 246 |
|
Cash and Restricted Cash - Beginning of Period | 14,659 |
| | 14,708 |
| 6,312 |
| | 14,659 |
|
Cash and Restricted Cash - End of Period | $ | 6,366 |
| | $ | 13,100 |
| $ | 9,129 |
| | $ | 14,905 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| | (Thousands of Dollars) | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
| | | | | | |
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash | $ | 343 |
| | $ | 1,439 |
| $ | 19 |
| | $ | 413 |
|
Receivables, Net | 99,416 |
| | 104,854 |
| |
Receivables, Net (net of allowance for uncollectible accounts of $11,154 and $10,497 as of March 31, 2020 and December 31, 2019, respectively) | | 99,792 |
| | 99,934 |
|
Accounts Receivable from Affiliated Companies | 11,476 |
| | 8,444 |
| 10,176 |
| | 6,763 |
|
Unbilled Revenues | 39,665 |
| | 47,145 |
| 42,344 |
| | 48,146 |
|
Taxes Receivable | 6,985 |
| | 25,913 |
| |
Materials, Supplies and Inventory | 23,280 |
| | 37,504 |
| |
Materials, Supplies and REC Inventory | | 28,483 |
| | 24,957 |
|
Regulatory Assets | 77,854 |
| | 67,228 |
| 102,438 |
| | 84,053 |
|
Special Deposits | 35,017 |
| | 47,498 |
| 16,627 |
| | 32,513 |
|
Prepayments and Other Current Assets | 17,293 |
| | 17,564 |
| 6,268 |
| | 19,431 |
|
Total Current Assets | 311,329 |
| | 357,589 |
| 306,147 |
| | 316,210 |
|
| | | | |
Property, Plant and Equipment, Net | 2,969,347 |
| | 2,880,073 |
| 3,187,282 |
| | 3,129,506 |
|
| | | | |
Deferred Debits and Other Assets: | | | | | | |
Regulatory Assets | 827,898 |
| | 862,288 |
| 843,904 |
| | 861,672 |
|
Other Long-Term Assets | 32,428 |
| | 27,406 |
| 41,564 |
| | 43,270 |
|
Total Deferred Debits and Other Assets | 860,326 |
| | 889,694 |
| 885,468 |
| | 904,942 |
|
| | | | |
Total Assets | $ | 4,141,002 |
| | $ | 4,127,356 |
| $ | 4,378,897 |
| | $ | 4,350,658 |
|
| | | | | | |
LIABILITIES AND CAPITALIZATION | | | | | | |
Current Liabilities: | | | | | | |
Notes Payable to Eversource Parent | $ | 20,100 |
| | $ | 57,000 |
| $ | 84,700 |
| | $ | 27,000 |
|
Long-Term Debt – Current Portion | 150,000 |
| | 150,000 |
| |
Rate Reduction Bonds – Current Portion | 43,210 |
| | 52,332 |
| 43,210 |
| | 43,210 |
|
Accounts Payable | 103,749 |
| | 111,292 |
| 103,551 |
| | 127,081 |
|
Accounts Payable to Affiliated Companies | 27,195 |
| | 26,029 |
| 32,707 |
| | 37,946 |
|
Regulatory Liabilities | 54,183 |
| | 55,526 |
| 69,042 |
| | 65,766 |
|
Accrued Interest | | 14,323 |
| | 19,138 |
|
Other Current Liabilities | 45,414 |
| | 64,046 |
| 39,636 |
| | 32,736 |
|
Total Current Liabilities | 443,851 |
| | 516,225 |
| 387,169 |
| | 352,877 |
|
| | | | |
Deferred Credits and Other Liabilities: | | | | | | |
Accumulated Deferred Income Taxes | 496,223 |
| | 481,221 |
| 511,822 |
| | 506,212 |
|
Regulatory Liabilities | 416,999 |
| | 428,069 |
| 411,959 |
| | 413,381 |
|
Accrued Pension, SERP and PBOP | 107,007 |
| | 124,457 |
| 152,649 |
| | 157,638 |
|
Other Long-Term Liabilities | 33,584 |
| | 36,339 |
| 36,022 |
| | 37,075 |
|
Total Deferred Credits and Other Liabilities | 1,053,813 |
| | 1,070,086 |
| 1,112,452 |
| | 1,114,306 |
|
| | | | |
Long-Term Debt | 951,834 |
| | 655,173 |
| 951,747 |
| | 951,620 |
|
| | | | |
Rate Reduction Bonds | 561,727 |
| | 583,331 |
| 518,517 |
| | 540,122 |
|
| | | | |
Common Stockholder's Equity: | | | | | | |
Common Stock | — |
| | — |
| — |
| | — |
|
Capital Surplus, Paid In | 678,134 |
| | 678,134 |
| 903,134 |
| | 903,134 |
|
Retained Earnings | 453,891 |
| | 627,258 |
| 507,307 |
| | 490,306 |
|
Accumulated Other Comprehensive Loss | (2,248 | ) | | (2,851 | ) | (1,429 | ) | | (1,707 | ) |
Common Stockholder's Equity | 1,129,777 |
| | 1,302,541 |
| 1,409,012 |
| | 1,391,733 |
|
| | | | |
Commitments and Contingencies (Note 9) |
|
| |
|
|
|
| |
|
|
| | | | |
Total Liabilities and Capitalization | $ | 4,141,002 |
| | $ | 4,127,356 |
| $ | 4,378,897 |
| | $ | 4,350,658 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Operating Revenues | $ | 240,900 |
| | $ | 235,146 |
| | $ | 517,335 |
| | $ | 502,497 |
| $ | 276,368 |
| | $ | 276,435 |
|
| | | | | | | | | | |
Operating Expenses: | | | | | | | | | | |
Purchased Power, Fuel and Transmission | 85,768 |
| | 83,494 |
| | 199,299 |
| | 193,212 |
| |
Purchased Power and Transmission | | 94,138 |
| | 113,531 |
|
Operations and Maintenance | 52,729 |
| | 46,487 |
| | 105,359 |
| | 97,867 |
| 47,128 |
| | 52,630 |
|
Depreciation | 23,261 |
| | 22,808 |
| | 46,180 |
| | 46,301 |
| 24,334 |
| | 22,919 |
|
Amortization of Regulatory Assets, Net | 5,857 |
| | 8,926 |
| | 19,523 |
| | 13,961 |
| 20,110 |
| | 13,667 |
|
Energy Efficiency Programs | 6,215 |
| | 4,674 |
| | 12,929 |
| | 9,831 |
| 9,364 |
| | 6,714 |
|
Taxes Other Than Income Taxes | 20,725 |
| | 21,879 |
| | 38,037 |
| | 38,680 |
| 19,701 |
| | 17,311 |
|
Total Operating Expenses | 194,555 |
| | 188,268 |
| | 421,327 |
| | 399,852 |
| 214,775 |
| | 226,772 |
|
Operating Income | 46,345 |
| | 46,878 |
| | 96,008 |
| | 102,645 |
| 61,593 |
| | 49,663 |
|
Interest Expense | 13,909 |
| | 14,612 |
| | 28,276 |
| | 27,386 |
| 14,479 |
| | 14,367 |
|
Other Income, Net | 2,984 |
| | 3,409 |
| | 10,006 |
| | 8,159 |
| 3,190 |
| | 7,022 |
|
Income Before Income Tax Expense | 35,420 |
| | 35,675 |
| | 77,738 |
| | 83,418 |
| 50,304 |
| | 42,318 |
|
Income Tax Expense | 8,568 |
| | 9,896 |
| | 18,104 |
| | 22,547 |
| 10,703 |
| | 9,537 |
|
Net Income | $ | 26,852 |
| | $ | 25,779 |
| | $ | 59,634 |
| | $ | 60,871 |
| $ | 39,601 |
| | $ | 32,781 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | | | | | |
Net Income | $ | 26,852 |
| | $ | 25,779 |
| | $ | 59,634 |
| | $ | 60,871 |
| $ | 39,601 |
| | $ | 32,781 |
|
Other Comprehensive Income, Net of Tax: | | | | | | | | | | |
Qualified Cash Flow Hedging Instruments | 269 |
| | 277 |
| | 538 |
| | 567 |
| 269 |
| | 269 |
|
Changes in Unrealized Gains/(Losses) on Marketable Securities | 27 |
| | (8 | ) | | 65 |
| | (29 | ) | |
Changes in Unrealized Gains on Marketable Securities | | 9 |
| | 38 |
|
Other Comprehensive Income, Net of Tax | 296 |
| | 269 |
| | 603 |
| | 538 |
| 278 |
| | 307 |
|
Comprehensive Income | $ | 27,148 |
| | $ | 26,048 |
| | $ | 60,237 |
| | $ | 61,409 |
| $ | 39,879 |
| | $ | 33,088 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
| | | For the Six Months Ended June 30, 2019 | For the Three Months Ended March 31, 2020 |
| Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholder's Equity | Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholder's Equity |
(Thousands of Dollars, Except Stock Information) | Stock | | Amount | | Stock | | Amount | |
Balance as of January 1, 2019 | 301 |
| | $ | — |
| | $ | 678,134 |
| | $ | 627,258 |
| | $ | (2,851 | ) | | $ | 1,302,541 |
| |
Balance as of January 1, 2020 | | 301 |
| | $ | — |
| | $ | 903,134 |
| | $ | 490,306 |
| | $ | (1,707 | ) | | $ | 1,391,733 |
|
Net Income | |
| | |
| | | | 32,781 |
| | | | 32,781 |
| |
| | |
| | | | 39,601 |
| | | | 39,601 |
|
Dividends on Common Stock | |
| | |
| | | | (19,000 | ) | | | | (19,000 | ) | |
| | |
| | | | (22,300 | ) | | | | (22,300 | ) |
Adoption of New Accounting Standard (See Note 1B) | | | | | | | | (300 | ) | | | | (300 | ) |
Other Comprehensive Income | |
| | |
| | | | |
| | 307 |
| | 307 |
| |
| | |
| | | | |
| | 278 |
| | 278 |
|
Balance as of March 31, 2019 | 301 |
|
| — |
|
| 678,134 |
|
| 641,039 |
|
| (2,544 | ) |
| 1,316,629 |
| |
Net Income | |
| | |
| | | | 26,852 |
| | | | 26,852 |
| |
Dividends on Common Stock | |
| | |
| | | | (214,000 | ) | | | | (214,000 | ) | |
Other Comprehensive Income | |
| | |
| | | | | | 296 |
| | 296 |
| |
Balance as of June 30, 2019 | 301 |
| | $ | — |
|
| $ | 678,134 |
|
| $ | 453,891 |
|
| $ | (2,248 | ) |
| $ | 1,129,777 |
| |
Balance as of March 31, 2020 | | 301 |
|
| $ | — |
|
| $ | 903,134 |
|
| $ | 507,307 |
|
| $ | (1,429 | ) |
| $ | 1,409,012 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2018 |
| Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholder's Equity |
(Thousands of Dollars, Except Stock Information) | Stock | | Amount | | | | |
Balance as of January 1, 2018 | 301 |
| | $ | — |
| | $ | 843,134 |
| | $ | 511,382 |
| | $ | (3,922 | ) | | $ | 1,350,594 |
|
Net Income | |
| | |
| | | | 35,093 |
| | | | 35,093 |
|
Other Comprehensive Income | |
| | |
| | | | |
| | 269 |
| | 269 |
|
Balance as of March 31, 2018 | 301 |
|
| — |
|
| 843,134 |
|
| 546,475 |
|
| (3,653 | ) |
| 1,385,956 |
|
Net Income | |
| | |
| | | | 25,779 |
| | | | 25,779 |
|
Capital Contributions from Eversource Parent | | | | | 225,000 |
| | | | | | 225,000 |
|
Return of Capital | | | | | (530,000 | ) | | | | | | (530,000 | ) |
Other | | | | | | | (1 | ) | | | | (1 | ) |
Other Comprehensive Income | |
| | |
| | | | | | 269 |
| | 269 |
|
Balance as of June 30, 2018 | 301 |
| | $ | — |
|
| $ | 538,134 |
|
| $ | 572,253 |
|
| $ | (3,384 | ) |
| $ | 1,107,003 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2019 |
| Common Stock | | Capital Surplus, Paid In | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholder's Equity |
(Thousands of Dollars, Except Stock Information) | Stock | | Amount | | | | |
Balance as of January 1, 2019 | 301 |
| | $ | — |
| | $ | 678,134 |
| | $ | 627,258 |
| | $ | (2,851 | ) | | $ | 1,302,541 |
|
Net Income | |
| | |
| | | | 32,781 |
| | | | 32,781 |
|
Dividends on Common Stock | | | | | | | (19,000 | ) | | | | (19,000 | ) |
Other Comprehensive Income | |
| | |
| | | | |
| | 307 |
| | 307 |
|
Balance as of March 31, 2019 | 301 |
|
| $ | — |
|
| $ | 678,134 |
|
| $ | 641,039 |
|
| $ | (2,544 | ) |
| $ | 1,316,629 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Thousands of Dollars) | 2019 | | 2018 | 2020 | | 2019 |
| | | | | | |
Operating Activities: | | | | | | |
Net Income | $ | 59,634 |
| | $ | 60,871 |
| $ | 39,601 |
| | $ | 32,781 |
|
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | | | | | | |
Depreciation | 46,180 |
| | 46,301 |
| 24,334 |
| | 22,919 |
|
Deferred Income Taxes | 12,030 |
| | 41,981 |
| 4,167 |
| | 6,541 |
|
Uncollectible Expense | | 666 |
| | 1,725 |
|
Regulatory Underrecoveries, Net | (29,377 | ) | | (29,816 | ) | (22,977 | ) | | (26,986 | ) |
Amortization of Regulatory Assets, Net | 19,523 |
| | 13,961 |
| 20,110 |
| | 13,667 |
|
Other | (7,381 | ) | | (3,428 | ) | (3,885 | ) | | (1,621 | ) |
Changes in Current Assets and Liabilities: | | | | | | |
Receivables and Unbilled Revenues, Net | 7,658 |
| | (10,510 | ) | 2,843 |
| | 1,103 |
|
Materials, Supplies and Inventory | 14,225 |
| | 21,803 |
| |
Materials, Supplies and REC Inventory | | (3,526 | ) | | 144 |
|
Taxes Receivable/Accrued, Net | 18,029 |
| | (15,475 | ) | 6,110 |
| | 17,572 |
|
Accounts Payable | (1,159 | ) | | (4,843 | ) | (18,064 | ) | | 11,762 |
|
Other Current Assets and Liabilities, Net | (17,620 | ) | | (8,050 | ) | 9,118 |
| | 6,472 |
|
Net Cash Flows Provided by Operating Activities | 121,742 |
| | 112,795 |
| 58,497 |
| | 86,079 |
|
| | | | | | |
Investing Activities: | | | | | | |
Investments in Property, Plant and Equipment | (132,791 | ) | | (149,925 | ) | (88,694 | ) | | (64,361 | ) |
Proceeds from the Sale of Generation Assets | — |
| | 116,809 |
| |
Other Investing Activities | 743 |
| | 243 |
| 126 |
| | 102 |
|
Net Cash Flows Used in Investing Activities | (132,048 | ) | | (32,873 | ) | (88,568 | ) | | (64,259 | ) |
| | | | | | |
Financing Activities: | | | | | | |
Cash Dividends on Common Stock | (233,000 | ) | | (150,000 | ) | (22,300 | ) | | (19,000 | ) |
Capital Contributions from Eversource Parent | — |
| | 225,000 |
| |
Return of Capital | — |
| | (530,000 | ) | |
Issuance of Long-Term Debt | 300,000 |
| | — |
| |
Retirement of Long-Term Debt | — |
| | (110,000 | ) | |
Issuance of Rate Reduction Bonds | — |
| | 635,663 |
| |
Repayment of Rate Reduction Bonds | (30,727 | ) | | — |
| (21,605 | ) | | (30,727 | ) |
Decrease in Notes Payable to Eversource Parent | (36,900 | ) | | (144,200 | ) | |
Increase in Notes Payable to Eversource Parent | | 57,700 |
| | 4,000 |
|
Other Financing Activities | (2,703 | ) | | (75 | ) | (22 | ) | | (20 | ) |
Net Cash Flows Used in Financing Activities | (3,330 | ) | | (73,612 | ) | |
Net (Decrease)/Increase in Cash and Restricted Cash | (13,636 | ) | | 6,310 |
| |
Net Cash Flows Provided by/(Used in) Financing Activities | | 13,773 |
| | (45,747 | ) |
Net Decrease in Cash and Restricted Cash | | (16,298 | ) | | (23,927 | ) |
Cash and Restricted Cash - Beginning of Period | 52,723 |
| | 2,191 |
| 36,688 |
| | 52,723 |
|
Cash and Restricted Cash - End of Period | $ | 39,087 |
| | $ | 8,501 |
| $ | 20,390 |
| | $ | 28,796 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
COMBINED NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout the combined notes to the unaudited condensed financial statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
Eversource Energy is a public utility holding company primarily engaged, through its wholly-owned regulated utility subsidiaries, in the energy delivery business. Eversource Energy's wholly-owned regulated utility subsidiaries consist of CL&P, NSTAR Electric and PSNH (electric utilities), Yankee Gas and NSTAR Gas (natural gas utilities) and Aquarion (water utilities). Eversource provides energy delivery and/or water service to approximately four million4000000 electric, natural gas and water customers through eight8 regulated utilities in Connecticut, Massachusetts and New Hampshire.
The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH include the accounts of each of their respective subsidiaries. Intercompany transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P are herein collectively referred to as the "financial statements."
The combined notes to the financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. The accompanying financial statements should be read in conjunction with the Combined Notes to Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of the Eversource 20182019 Form 10-K, which was filed with the SEC on February 26, 2019.27, 2020. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly Eversource's, CL&P's, NSTAR Electric's and PSNH's financial position as of June 30, 2019March 31, 2020 and December 31, 2018,2019, and the results of operations, comprehensive income, and common shareholders' equity, for the three and six months ended June 30, 2019 and 2018, and the cash flows for the sixthree months ended June 30, 2019March 31, 2020 and 2018.2019. The results of operations, and comprehensive income, for the three and six months ended June 30, 2019 and 2018 and the cash flows for the sixthree months ended June 30,March 31, 2020 and 2019 and 2018 are not necessarily indicative of the results expected for a full year.
Eversource consolidates the operations of CYAPC and YAEC, both of which are inactive regional nuclear power companies engaged in the long-term storage of their spent nuclear fuel. Eversource consolidates CYAPC and YAEC because CL&P's, NSTAR Electric's and PSNH's combined ownership and voting interests in each of these entities is greater than 50 percent. Intercompany transactions between CL&P, NSTAR Electric, PSNH and the CYAPC and YAEC companies have been eliminated in consolidation of the Eversource financial statements.
Eversource holds several equity ownership interests that are not consolidated and are accounted for under the equity method.
Eversource's utility subsidiaries' electric, natural gas and water distribution and transmission businesses are subject to rate-regulation that is based on cost recovery and meets the criteria for application of accounting guidance for entities with rate-regulated operations, which considers the effect of regulation on the differences in the timing of the recognition of certain revenues and expenses from those of other businesses and industries. See Note 2, "Regulatory Accounting," for further information.
In March 2020, the World Health Organization declared the outbreak of the 2019 novel coronavirus (COVID-19) a pandemic and President Trump declared a national emergency affecting the entire United States where each state qualifies as being part of a national disaster. The spread of COVID-19 has adversely affected workforces, the overall economy and caused significant volatility in the financial markets. To date, Eversource has not experienced significant operational or financial impacts directly related to the pandemic. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, management will continue to closely monitor how COVID-19 related developments affect Eversource. As of the date of our filing and based on information available, management is unable to predict the impacts that the COVID-19 pandemic will have on future operations, financial position, results of operations, and cash flows. The extent of the impact in the future will vary and depend in large part on the duration, scope and severity of a national and global economic slowdown, risk of inflation, governmental and regulatory actions, the maintenance of a strong regional and national healthcare system, and the continued spread of the virus, which is mitigated through social distancing measures.
Our customer receivable balances and uncollectible accounts have not been materially impacted by COVID-19. We believe that we will be able to develop a successful structure with our respective state regulatory commissions to recover our costs associated with COVID-19, while balancing the impact on our customers’ bills. See Note 1C, "Summary of Significant Accounting Policies - Allowance for Uncollectible Accounts," for further discussion of our evaluation of the allowance for doubtful accounts as of March 31, 2020 in light of the COVID-19 pandemic.
An extended economic slowdown could result in lower demand for electricity, natural gas and/or water by our commercial and industrial customers. However, fluctuations in retail sales volumes for CL&P, NSTAR Electric, Yankee Gas, NSTAR Gas and our Connecticut water distribution business are not expected to materially impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms. The revenue decoupling mechanisms mitigate the impact of lower demand and resulting lost sales revenues by allowing for a true-up to occur as part of each company’s annual decoupling filing. These revenue decoupling mechanisms qualify as alternative revenue programs in accordance with accounting guidance for rate-regulated operations.
As of March 31, 2020, we did not have indicators of triggering events for impairments to our goodwill, long-lived assets, available-for-sale debt securities, or equity method investment carrying values.
Certain reclassifications of prior period data were made in the accompanying financial statements to conform to the current period presentation.
The Eversource and PSNH 2019 statements of cash flows and the 2019 segment footnote were revised to correct an error in the presentation of non-cash capital additions. The impact of this revision on the statement of cash flows is a decrease to operating cash inflows in Accounts Payable of $46.6 million and a corresponding decrease to investing cash outflows in Investments in Property, Plant and Equipment for the quarter ended March 31, 2019. This revision is not deemed material, individually or in the aggregate, to the previously issued financial statements.
B. Accounting Standards
Accounting Standards Issued but Not Yet Effective: In June 2016,December 2019, the FASB issued Accounting Standards Update (“ASU”)(ASU) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which eliminates certain exceptions to the general principles of current income tax guidance in ASC 740 and simplifies and improves consistency in application of that income tax guidance through clarifications of and amendments to ASC 740. The guidance is effective in the first quarter of 2021. The ASU is not expected to have a material impact on the financial statements of Eversource, CL&P, NSTAR Electric and PSNH.
Accounting Standards Recently Adopted: On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Under the new guidance,losses, requiring immediate recognition of all credit losses expected over the life of a financial instrument is required. The new standard also revises the other-than-temporary impairment model for available-for-sale debt securities. The standard is effective January 1, 2020, and requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings.instrument. The Company is assessingdetermined the impacts of this standard on the accountingallowance for credit losses on its financial instruments, includingprimarily accounts receivable. As of January 1, 2020, the Company recorded increases to the allowance for uncollectible accounts for late fees and other receivable amounts of $1.6 million, $0.9 million, $0.2 million and $0.3 million at Eversource, CL&P, NSTAR Electric and PSNH, respectively. The impact to retained earnings, net of tax, was $1.5 million, $0.9 million, $0.2 million and $0.3 million at Eversource, CL&P, NSTAR Electric and PSNH, respectively.
The Company also adjusted the allowance for uncollectible amounts of hardship receivables and other low-income assistance programs, which are ultimately collectible in rates at specified points in time under approved regulatory mechanisms. The impact on the allowance, which was offset in other long-term assets on the balance sheets, was an increase of $22.2 million and $21.3 million at Eversource and CL&P, respectively, and a decrease of $1.5 million at NSTAR Electric. See Note 1C, “Summary of Significant Accounting Policies - Allowance for Uncollectible Accounts,” for further information.
The Company adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment as of January 1, 2020. The ASU simplified the accounting for goodwill impairment by removing a complex step in the goodwill impairment test. Under the guidance, goodwill impairment is measured as the amount by which its carrying value exceeds its fair value. The ASU is not expected to have an impact on the financial statements of Eversource.
Accounting Standards Recently Adopted: On January 1, 2019,2020, the Company adopted ASU 2016-02,2018-15, Leases (Topic 842), which amended existing lease accounting guidance. The Company applied the Topic 842 lease criteria to new leasesIntangibles - Goodwill and lease renewals entered into effective on or after January 1, 2019. Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU required balance sheet recognitionaligned the requirements for capitalizing costs incurred to implement a cloud computing arrangement with existing internal-use software guidance. The prospective implementation of leases deemedthis standard did not have any impact on the financial statements of Eversource, CL&P, NSTAR Electric or PSNH for the period ending March 31, 2020.
On January 1, 2020, the Company prospectively adopted ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to be operating leases as well as additionalthe Disclosure Requirements for Fair Value Measurement. The ASU modified fair value disclosure requirements. requirements. The recognition, measurementstandard includes new disclosure requirements for Level 3 unobservable inputs and presentationeliminated the requirement to disclose certain information relating to transfers between levels. The modified disclosures are included in Note 1D, “Summary of expensesSignificant Accounting Policies - Fair Value Measurements,” and cash flows were not significantly changed.Note 4, “Derivative Instruments.”
The Company also adopted the modified retrospective transition method allowed in ASU 2018-11, Leases (Topic 842) - Targeted Improvements, which allowed the Company to adopt the new leases standard as of January 1, 2019, with prior periods presented in the financial statements continuing to follow existing lease accounting guidance under Topic 840 (Leases) in the accounting literature. Implementation of ASU 2018-11 had no effect on retained earnings, and the requirements of the new lease standard (Topic 842) are reflected in the 2019 financial statements and footnotes.C. Allowance for Uncollectible Accounts
The Company elected the practical expedient package whereby it did not need to reassess whether or not an existing contract is or contains a lease or whether a lease is an operating or capital lease, and it did not need to reassess initial direct costs for leases. Election of this practical expedient allowed us to carry forward our historical lease classifications. The Company elected the practical expedient to not reevaluate land easements existing at adoption if they were not previously accounted for as leases. The Company also elected to use the discount rate as of the January 1, 2019 implementation date to discount its operating lease liabilities. The Company did not elect the hindsight practical expedient to determine the lease term for existing leases.
The Company determined the impact the ASUs had on its financial statements by reviewing its lease population and identifying lease data needed for the disclosure requirements. The Company implemented a new lease accounting system in 2019 to ensure ongoing compliance with the ASU’s requirements. Adoption of the new standard resulted in the recording of operating lease liabilities and right-of-use assetsReceivables, Net on the balance sheet upon transitionsheets primarily includes trade receivables from retail customers and customers related to wholesale transmission contracts, wholesale market sales, sales of RECs and property rentals. Receivables, Net also includes customer receivables for the purchase of electricity from a competitive third party supplier, the current portion of customer energy efficiency loans, property damage receivables and other miscellaneous receivables. There is no material concentration of receivables. Receivables are recorded at January 1, 2019amortized cost, net of $58.0 million at Eversource, $25.3 million at NSTAR Electric, $0.6 million at CL&P, and $0.6 million at PSNH. Implementation of the new guidance did not have an impact on each company’s results of operations or cash flows.a credit loss provision (or allowance for uncollectible accounts).
C. Impairment of Northern Pass Transmission
Northern Pass is Eversource's planned 1,090 MW HVDC transmission line that would interconnect from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire.
On March 30, 2018, the New Hampshire Site Evaluation Committee (“NHSEC”), one of the state regulatory agencies from which Northern Pass was required to obtain a siting permit, issued a written decision denying Northern Pass’ siting application. In the first quarter of 2018, Eversource conducted an impairment review of the Northern Pass project and concluded, at that time, that the recorded amount of project costs was recoverable. On July 12, 2018, the NHSEC issued a written decision denying Northern Pass’ April 2018 motion for rehearing, and on October 12, 2018, the New Hampshire Supreme Court accepted an appeal filed by Northern Pass that alleged that the NHSEC failed to follow applicable law in its review of the project. On July 19, 2019, the New Hampshire Supreme Court issued a decision denying Northern Pass’ appeal and affirming the NHSEC’s evaluation and decision that denied Northern Pass’ siting application.
Eversource evaluated the impact of the New Hampshire Supreme Court decision on the probability of construction and operation of Northern Pass. Eversource concluded that construction of the project was no longer probable and that substantially all of the capitalized project costs, which totaled $318 million, certain of whichReceivables are subject to cost reimbursement agreements, were impaired. Eversource concluded that the New Hampshire Supreme Court decision is a subsequent event that required recognition in the financial statements as of and for the three and six months ended June 30, 2019.
Based on the conclusion that the construction of Northern Pass was not probable, Eversource recorded an impairment charge for all of the project costs associated with Northern Pass, which were primarily engineering design, siting, permitting and legal costs, along with appropriate allowances for funds used during construction, and recognized a receivable for certain cost reimbursement agreements. Additionally, Eversource recorded an impairment charge associated with the land acquired to construct Northern Pass in order to recognize the land at its estimated fair value based on assessed values and transaction costs. In total, this resulted in a pre-tax impairment charge of $239.6 million within Operating Income on the statement of income for the three and six months ended June 30, 2019, and was reflected in the Electric Transmission segment. The after-tax impact of the impairment charge was $204.4 million, or $0.64 per share, after giving effect to the estimated fair value of the related land, reimbursement agreements, and the impactpresented net of expected income tax benefits associated with the impairment charge. Eversource does not expect any significant estimated future cash expenditures associated with this impairment charge.
D. Provision for Uncollectible Accounts
Eversource, including CL&P, NSTAR Electric and PSNH, presents its receivablescredit losses at estimated net realizable value by maintaining a provisionan allowance for uncollectible accounts. Effective January 1, 2020, the current expected credit loss (CECL) model was applied to receivables for purposes of calculating the allowance for uncollectible accounts. This provisionmodel is based on expected losses and results in the recognition of estimated expected credit losses, including uncollectible amounts for both billed and unbilled revenues, over the life of the receivable at the time a receivable is recorded.
The allowance for uncollectible accounts is determined based upon a variety of judgments and factors, including the application of an estimated uncollectible percentage to each receivable aging category. The estimate is based uponFactors in determining credit loss include historical collection, and write-off experience, and management's assessment of collectabilitycollectibility from customers.customers, including current conditions, reasonable forecasts, and expectations of future collectibility and collection efforts. Management continuously assesses the collectabilitycollectibility of receivables and adjusts collectability estimates based on actual experience.experience and future expectations based on economic indicators. Management also monitors the aging analysis of receivables to determine if there are changes in the collections of accounts receivable. Receivable balances are written off against the provisionallowance for uncollectible accounts when the customer accounts are terminatedno longer in service and these balances are deemed to be uncollectible.
As of March 31, 2020, management evaluated the adequacy of the allowance for uncollectible accounts in light of the COVID-19 pandemic and the economic downturn to date. This evaluation included an analysis of collection and customer payment trends in 2020, economic conditions, flexible payment plans and financial hardship arrearage management programs being offered to customers, and the impacts of federal governmental pandemic relief programs for our customers and the expansion of unemployment benefits initiatives, which help to mitigate the potential for increasing customer account delinquencies. Additionally, management considered past economic declines and corresponding uncollectible reserves as part of the current assessment. Based upon the evaluation performed, management concluded that the reserve balance as of March 31, 2020 adequately reflected the collection risk and net realizable value for Eversource’s receivables. Management will continue to evaluate the adequacy of the uncollectible allowance in future reporting periods based on an ongoing assessment of accounts receivable collections, delinquency statistics, and analysis of aging-based quantitative assessments.
The PURA allows CL&P and Yankee Gas to accelerate the recovery of accounts receivable balances attributable to qualified customers under financial or medical duress (uncollectible hardship accounts receivable) outstanding for greater than 180 days and 90 days, respectively. The DPU allows NSTAR Electric and NSTAR Gas to recover in rates amounts associated with certain uncollectible hardship accounts receivable. These uncollectible hardship customer account balances are included in Regulatory Assets or Other Long-Term Assets on the balance sheets.
Hardship customers are protected from shut-off in certain circumstances, and historical collection experience has reflected a higher default risk as compared to the rest of the receivable population. As a result of the adoption of ASU 2016-13, management aligned the allowance for uncollectible hardship accounts across all regulatory jurisdictions, using a higher credit risk profile for this pool of trade receivables as compared to non-hardship receivables. Implementation impacts of the accounting standard on the allowance for uncollectible hardship accounts are reflected in the rollforward of the uncollectible allowance in the table below. The allowance for uncollectible hardship accounts is included in the total uncollectible allowance balance.
The total provisionallowance for uncollectible accounts is included in Receivables, Net on the balance sheets. The provisionactivity in the allowance for uncollectible hardship accounts by portfolio segment is included in the total uncollectible provision balance. The provision balances are as follows:
|
| | | | | | | | | | | | | | | |
| Total Provision for Uncollectible Accounts | | Provision for Uncollectible Hardship Accounts |
(Millions of Dollars) | As of June 30, 2019 | | As of December 31, 2018 | | As of June 30, 2019 | | As of December 31, 2018 |
Eversource | $ | 226.4 |
| | $ | 212.7 |
| | $ | 137.9 |
| | $ | 131.5 |
|
CL&P | 88.7 |
| | 88.0 |
| | 70.9 |
| | 71.9 |
|
NSTAR Electric | 81.8 |
| | 74.5 |
| | 47.7 |
| | 42.5 |
|
PSNH | 11.2 |
| | 11.1 |
| | — |
| | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2020 |
| Eversource | | CL&P | | NSTAR Electric | | PSNH |
(Millions of Dollars) | Hardship Accounts | | Retail (Non-Hardship), Wholesale, and Other Receivables | | Total Allowance | | Hardship Accounts | | Retail (Non-Hardship), Wholesale and Other Receivables | | Total Allowance | | Hardship Accounts | | Retail (Non-Hardship), Wholesale, and Other Receivables | | Total Allowance | | Total Allowance |
Beginning Balance | $ | 143.3 |
| | $ | 81.5 |
| | $ | 224.8 |
| | $ | 80.1 |
| | $ | 17.2 |
| | $ | 97.3 |
| | $ | 43.9 |
| | $ | 31.5 |
| | $ | 75.4 |
| | $ | 10.5 |
|
ASU 2016-13 Implementation Impact on January 1, 2020 | 21.6 |
| | 2.2 |
| | 23.8 |
| | 21.3 |
| | 0.9 |
| | 22.2 |
| | (1.6 | ) | | 0.3 |
| | (1.3 | ) | | 0.3 |
|
Uncollectible Expense (1) | — |
| | 11.4 |
| | 11.4 |
| | — |
| | 3.2 |
| | 3.2 |
| | — |
| | 3.7 |
| | 3.7 |
| | 0.7 |
|
Uncollectible Costs Deferred (2) | 11.8 |
| | 8.5 |
| | 20.3 |
| | 12.9 |
| | 1.8 |
| | 14.7 |
| | (3.4 | ) | | 3.4 |
| | — |
| | 1.3 |
|
Write-Offs | (4.7 | ) | | (16.8 | ) | | (21.5 | ) | | (3.8 | ) | | (3.5 | ) | | (7.3 | ) | | (0.4 | ) | | (8.0 | ) | | (8.4 | ) | | (1.7 | ) |
Recoveries Collected | 0.2 |
| | 3.1 |
| | 3.3 |
| | 0.2 |
| | 0.6 |
| | 0.8 |
| | — |
| | 1.7 |
| | 1.7 |
| | 0.1 |
|
Ending Balance | $ | 172.2 |
| | $ | 89.9 |
| | $ | 262.1 |
| | $ | 110.7 |
| | $ | 20.2 |
| | $ | 130.9 |
| | $ | 38.5 |
| | $ | 32.6 |
| | $ | 71.1 |
| | $ | 11.2 |
|
(1) Uncollectible expense associated with customers'customer and other accounts receivable is included in Operations and Maintenance expense on the statements of income is as follows:
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended |
(Millions of Dollars) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
Eversource | $ | 13.0 |
| | $ | 9.5 |
| | $ | 31.5 |
| | $ | 29.3 |
|
CL&P | 3.5 |
| | 3.8 |
| | 7.6 |
| | 7.7 |
|
NSTAR Electric | 5.7 |
| | 3.8 |
| | 11.6 |
| | 11.3 |
|
PSNH | 1.4 |
| | 1.5 |
| | 3.1 |
| | 3.2 |
|
income. For the three months ended March 31, 2019, uncollectible expense included in Operations and Maintenance Expense was $18.6 million, $4.1 million, $6.0 million and $1.7 million for Eversource, CL&P, NSTAR Electric and PSNH, respectively.
E.(2) The current period provision for expected credit losses for hardship accounts and other customer receivables that are ultimately recovered in rates is deferred as a regulatory cost on the balance sheets.
D. Fair Value Measurements
Fair value measurement guidance is applied to derivative contracts that are not elected or designated as "normal purchases" or "normal sales" ("normal")(normal) and to the marketable securities held in trusts. Fair value measurement guidance is also applied to valuations of the investments used to calculate the funded status of pension and PBOP plans, the nonrecurring fair value measurements of nonfinancial assets such as goodwill, long-lived assets and AROs, and the estimated fair value of preferred stock, long-term debt and RRBs.
Fair Value Hierarchy: In measuring fair value, Eversource uses observable market data when available in order to minimize the use of unobservable inputs. Inputs used in fair value measurements are categorized into three fair value hierarchy levels for disclosure purposes. The entire fair value measurement is categorized based on the lowest level of input that is significant to the fair value measurement. Eversource evaluates the classification of assets and liabilities measured at fair value on a quarterly basis, and Eversource's policy is to recognize transfers between levels of the fair value hierarchy as of the end of the reporting period.basis. The three levels of the fair value hierarchy are described below:
Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Inputs are quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs are observable.
Level 3 - Quoted market prices are not available. Fair value is derived from valuation techniques in which one or more significant inputs or assumptions are unobservable. Where possible, valuation techniques incorporate observable market inputs that can be validated to external sources such as industry exchanges, including prices of energy and energy-related products.
Uncategorized - Investments that are measured at net asset value are not categorized within the fair value hierarchy.
Determination of Fair Value: The valuation techniques and inputs used in Eversource's fair value measurements are described in Note 4, "Derivative Instruments," Note 5, "Marketable Securities," and Note 11,10, "Fair Value of Financial Instruments," to the financial statements.
F. Investments in Unconsolidated Affiliates
Investments in Offshore Wind Business: Eversource's offshore wind business includes ownership interests in North East Offshore and Bay State Wind, which collectively hold power purchase agreements for the Revolution Wind and South Fork Wind projects and are in process of negotiating a power purchase agreement for the Sunrise Wind project. Eversource's offshore wind projects are being developed in partnership with Ørsted.
On February 8, 2019, Eversource and Ørsted entered into a 50-50 partnership for key offshore wind assets in the Northeast. Eversource's initial payment and contribution under the terms of the partnership agreements totaled approximately $225 million for a 50 percent interest in North East Offshore, which holds the Revolution Wind and South Fork Wind power projects, as well as a 257 square-mile lease off the coasts of Massachusetts and Rhode Island. Eversource also has a 50 percent ownership in Bay State Wind, which holds the Sunrise Wind power project. These equity investments are included in long-term assets on the balance sheet and earnings impacts are included in Other Income, Net on the statement of income. As of June 30, 2019, Eversource's total equity investment balance in its offshore wind business was $499.5 million. In July 2019, Eversource made an additional capital contribution of $54.9 million.
G.E. Other Income, Net
The components of Other Income, Net on the statements of income were as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Pension, SERP and PBOP Non-Service Income/(Expense) Components | $ | 12.7 |
| | $ | 1.1 |
| | $ | 7.9 |
| | $ | 1.9 |
| | $ | 7.4 |
| | $ | (0.6 | ) | | $ | 7.0 |
| | $ | 0.5 |
|
AFUDC Equity | 10.6 |
| | 3.9 |
| | 5.0 |
| | 1.5 |
| | 10.9 |
| | 2.6 |
| | 4.0 |
| | 0.2 |
|
Equity in Earnings of Unconsolidated Affiliates | 4.0 |
| | — |
| | 0.1 |
| | — |
| | 5.0 |
| | — |
| | 0.2 |
| | — |
|
Investment Income/(Loss) | (4.3 | ) | | (3.4 | ) | | (1.3 | ) | | (0.5 | ) | | 1.2 |
| | 1.7 |
| | (0.3 | ) | | 0.4 |
|
Interest Income | 0.7 |
| | 0.3 |
| | 0.1 |
| | 0.3 |
| | 6.5 |
| | 0.4 |
| | 0.2 |
| | 5.9 |
|
Other | 0.4 |
| | — |
| | 0.4 |
| | — |
| | — |
| | (0.2 | ) | | — |
| | — |
|
Total Other Income, Net | $ | 24.1 |
| | $ | 1.9 |
| | $ | 12.2 |
| | $ | 3.2 |
| | $ | 31.0 |
| | $ | 3.9 |
| | $ | 11.1 |
| | $ | 7.0 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended |
| June 30, 2019 | | June 30, 2018 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Pension, SERP and PBOP Non-Service Income/(Expense) Components | $ | 5.8 |
| | $ | (0.9 | ) | | $ | 5.4 |
| | $ | 1.5 |
| | $ | 14.6 |
| | $ | 2.4 |
| | $ | 9.5 |
| | $ | 2.1 |
|
AFUDC Equity | 13.1 |
| | 3.2 |
| | 5.1 |
| | 0.9 |
| | 10.9 |
| | 3.3 |
| | 3.9 |
| | — |
|
Equity in Earnings (1) | 25.9 |
| | 0.1 |
| | 0.2 |
| | — |
| | 22.9 |
| | — |
| | 0.4 |
| | — |
|
Investment Income/(Loss) | (0.6 | ) | | (0.1 | ) | | (0.3 | ) | | (0.1 | ) | | (0.3 | ) | | 0.4 |
| | 0.3 |
| | — |
|
Interest Income | 1.3 |
| | 0.5 |
| | 0.2 |
| | 0.7 |
| | 1.9 |
| | 1.0 |
| | 0.2 |
| | 1.3 |
|
Other | 0.4 |
| | 0.1 |
| | 0.1 |
| | — |
| | 0.1 |
| | — |
| | — |
| | — |
|
Total Other Income, Net | $ | 45.9 |
| | $ | 2.9 |
| | $ | 10.7 |
| | $ | 3.0 |
| | $ | 50.1 |
| | $ | 7.1 |
| | $ | 14.3 |
| | $ | 3.4 |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| For the Six Months Ended |
| June 30, 2019 | | June 30, 2018 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Pension, SERP and PBOP Non-Service Income/(Expense) Components | $ | 13.1 |
| | $ | (1.6 | ) | | $ | 12.4 |
| | $ | 2.0 |
| | $ | 29.8 |
| | $ | 5.3 |
| | $ | 17.9 |
| | $ | 4.4 |
|
AFUDC Equity | 24.1 |
| | 5.8 |
| | 9.1 |
| | 1.1 |
| | 20.6 |
| | 6.1 |
| | 7.3 |
| | — |
|
Equity in Earnings (1) | 30.9 |
| | 0.1 |
| | 0.4 |
| | — |
| | 27.5 |
| | — |
| | 0.4 |
| | — |
|
Investment Income/(Loss) | 0.6 |
| | 1.7 |
| | (0.6 | ) | | 0.2 |
| | 0.4 |
| | 0.2 |
| | 0.9 |
| | 0.1 |
|
Interest Income (2) | 7.8 |
| | 0.8 |
| | 0.4 |
| | 6.6 |
| | 5.4 |
| | 2.0 |
| | 0.4 |
| | 3.7 |
|
Other | 0.4 |
| | (0.1 | ) | | — |
| | 0.1 |
| | 0.2 |
| | — |
| | — |
| | — |
|
Total Other Income, Net | $ | 76.9 |
| | $ | 6.7 |
| | $ | 21.7 |
| | $ | 10.0 |
| | $ | 83.9 |
| | $ | 13.6 |
| | $ | 26.9 |
| | $ | 8.2 |
|
(1) Equity in earnings includes $20.4 million of unrealized gains associated with an investment in a renewable energy fund for both the three and six months ended June 30, 2019. For both the three and six months ended June 30, 2018, unrealized gains on this investment totaled $17.6 million.
(2) See Note 2, "Regulatory Accounting" for interest income recognized in 2019 for the equity return component of carrying charges on storm costs at PSNH.
H.F. Other Taxes
Eversource's companies that serve customers in Connecticut collect gross receipts taxes levied by the state of Connecticut from their customers. These gross receipts taxes are recorded separately with collections in Operating Revenues and with payments in Taxes Other Than Income Taxes on the statements of income as follows:
| | | For the Three Months Ended | | For the Six Months Ended | For the Three Months Ended |
(Millions of Dollars) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 | March 31, 2020 | | March 31, 2019 |
Eversource | $ | 36.4 |
| | $ | 35.6 |
| | $ | 81.4 |
| | $ | 79.0 |
| $ | 43.1 |
| | $ | 45.0 |
|
CL&P | 31.8 |
| | 31.5 |
| | 68.0 |
| | 67.1 |
| 35.5 |
| | 36.2 |
|
Separate from above were amounts recorded as Taxes Other Than Income Taxes at CL&P related to the remittance to the State of Connecticut of energy efficiency funds collected from customers of $10.7 million for the three months ended March 31, 2019. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. These amounts were recorded separately, with collections in Operating Revenues and with payments in Taxes Other Than Income Taxes on the Eversource and CL&P statements of income.
As agents for state and local governments, Eversource's companies that serve customers in Connecticut and Massachusetts collect certain sales taxes that are recorded on a net basis with no impact on the statements of income.
Separate from above are amounts recorded as Taxes Other than Income Taxes related to the future remittance to the State of Connecticut of energy efficiency funds collected from customers in Operating Revenues. These amounts are $10.7 million and $21.4 million for the three and six months ended June 30, 2019, respectively, and $12.7 million and $25.4 million for the three and six months ended June 30, 2018, respectively. These amounts are recorded separately, with collections in Operating Revenues and with payments in Taxes Other than Income Taxes on the Eversource and CL&P statements of income.
I.G. Supplemental Cash Flow Information
Non-cash investing activities include plant additions included in Accounts Payable as follows:
| | (Millions of Dollars) | As of June 30, 2019 | | As of June 30, 2018 | As of March 31, 2020 | | As of March 31, 2019 |
Eversource | $ | 323.7 |
| | $ | 305.7 |
| $ | 273.7 |
| | $ | 336.3 |
|
CL&P | 114.0 |
| | 110.9 |
| 85.0 |
| | 121.9 |
|
NSTAR Electric | 85.2 |
| | 71.1 |
| 70.2 |
| | 83.2 |
|
PSNH | 29.9 |
| | 46.6 |
| 37.9 |
| | 30.4 |
|
Beginning in 2019, Eversource began issuing treasury shares to satisfy awards under the Company's incentive plans, shares issued under the dividend reinvestment plan, and matching contributions under the Eversource 401k Plan. The issuance of treasury shares represents a non-cash transaction, as the treasury shares were used to fulfill Eversource's obligations that require the issuance of common shares.
The following table reconciles cash as reported on the balance sheets to the cash and restricted cash balance as reported on the statements of cash flows:
| | | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Cash as reported on the Balance Sheets | $ | 20.6 |
| | $ | 2.2 |
| | $ | 0.2 |
| | $ | 0.3 |
| | $ | 108.1 |
| | $ | 87.7 |
| | $ | 1.6 |
| | $ | 1.4 |
| $ | 47.4 |
| | $ | 3.8 |
| | $ | 2.8 |
| | $ | — |
| | $ | 15.4 |
| | $ | — |
| | $ | 0.1 |
| | $ | 0.4 |
|
Restricted cash included in: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prepayments and Other Current Assets | 54.1 |
| | 4.6 |
| | 6.1 |
| | 35.0 |
| | 72.1 |
| | 3.5 |
| | 13.0 |
| | 47.5 |
| |
Special Deposits | | 39.0 |
| | 4.7 |
| | 6.2 |
| | 16.6 |
| | 52.5 |
| | 4.6 |
| | 6.2 |
| | 32.5 |
|
Marketable Securities | 20.5 |
| | 0.3 |
| | 0.1 |
| | 0.6 |
| | 25.9 |
| | 0.4 |
| | 0.1 |
| | 0.6 |
| 44.1 |
| | 0.3 |
| | 0.1 |
| | 0.6 |
| | 46.0 |
| | 0.4 |
| | — |
| | 0.6 |
|
Other Long-Term Assets | 72.0 |
| | — |
| | — |
| | 3.2 |
| | 3.2 |
| | — |
| | — |
| | 3.2 |
| 3.2 |
| | — |
| | — |
| | 3.2 |
| | 3.2 |
| | — |
| | — |
| | 3.2 |
|
Cash and Restricted Cash reported on the Statements of Cash Flows | $ | 167.2 |
| | $ | 7.1 |
| | $ | 6.4 |
| | $ | 39.1 |
| | $ | 209.3 |
| | $ | 91.6 |
| | $ | 14.7 |
| | $ | 52.7 |
| $ | 133.7 |
| | $ | 8.8 |
| | $ | 9.1 |
| | $ | 20.4 |
| | $ | 117.1 |
| | $ | 5.0 |
| | $ | 6.3 |
| | $ | 36.7 |
|
Restricted cash included in Prepayments and Other Current Assets primarily representsSpecial Deposits represent cash collections related to the PSNH RRB customer charges that are held in trust, and required ISO-NE cash deposits.deposits, and CYAPC and YAEC cash balances. Special Deposits are included in Current Assets on the balance sheets. Restricted cash included in Marketable Securities represents money market funds held in trusts to fund certain non-qualified executive benefits and restricted trusts to fund CYAPC and YAEC's spent nuclear fuel storage facilities obligations. Restricted cash included
H. Pending Acquisition of Assets of Columbia Gas of Massachusetts
On February 26, 2020, Eversource and NiSource Inc. entered into an asset purchase agreement (the Agreement) pursuant to which Eversource would acquire certain assets that comprise NiSource’s local natural gas distribution business in Other Long-Term Assets atMassachusetts, which is doing business as Columbia Gas of Massachusetts (CMA). The purchase price of $1.1 billion includes a target working capital amount that is subject to adjustment to reflect actual working capital as of the closing date.
The liabilities to be assumed by Eversource primarily relatesunder the Agreement specifically exclude any liabilities (past or future) arising out of, or related to, DOE Phase IV damages proceeds received at CYAPCthe fires and YAECexplosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by CMA, including certain subsequent events, all as described and in the secondDPU's Order on Scope dated December 23, 2019 (D.P.U. 19-141) (the Greater Lawrence Incident or GLI). The liabilities to be assumed also exclude any further emergency events prior to the closing of the acquisition related to the restoration and reconstruction with respect to the GLI, including any losses arising out of, or related to, any litigation, demand, cause of action, claim, suit, investigation, proceeding, indemnification agreements or rights. Eversource is not assuming any of CMA's or NiSource Inc.'s debt.
The transaction requires approval from the DPU, the Maine Public Utilities Commission, the FERC, and the Federal Communications Commission, and it is subject to review under the Hart-Scott-Rodino Act, for which the relevant review period has expired. The resulting rate plan also requires DPU approval. Eversource expects to finance the asset acquisition through a combination of debt and equity issuances in a ratio that is consistent with our current consolidated capital structure. The transaction is expected to close by the end of the third quarter of 2019. See Note 9D, "Commitments and Contingencies - Spent Nuclear Fuel Obligations - Yankee Companies," for further information.2020.
2. REGULATORY ACCOUNTING
Eversource's utility companies are subject to rate regulation that is based on cost recovery and meets the criteria for application of accounting guidance for rate-regulated operations, which considers the effect of regulation on the timing of the recognition of certain revenues and expenses. The regulated companies' financial statements reflect the effects of the rate-making process. The rates charged to the customers of Eversource's regulated companies are designed to collect each company's costs to provide service, includingplus a return on investment.
The application of accounting guidance for rate-regulated enterprises results in recording regulatory assets and liabilities. Regulatory assets represent the deferral of incurred costs that are probable of future recovery in customer rates. Regulatory assets are amortized as the incurred costs are recovered through customer rates. Regulatory liabilities represent either revenues received from customers to fund expected costs that have not yet been incurred or probable future refunds to customers.
Management believes it is probable that each of the regulated companies will recover its respective investments in long-lived assets, including regulatory assets. If management were to determine that it could no longer apply the accounting guidance applicable to rate-regulated enterprises to any of the regulated companies' operations, or if management could not conclude it is probable that costs would be recovered from customers in future rates, the costs would be charged to net income in the period in which the determination is made.
Regulatory Assets: The components of regulatory assets were as follows:
| | | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Benefit Costs | $ | 1,870.5 |
| | $ | 407.4 |
| | $ | 554.8 |
| | $ | 151.1 |
| | $ | 1,914.8 |
| | $ | 424.7 |
| | $ | 544.4 |
| | $ | 169.6 |
| $ | 2,334.3 |
| | $ | 528.3 |
| | $ | 616.3 |
| | $ | 213.9 |
| | $ | 2,382.9 |
| | $ | 539.0 |
| | $ | 629.8 |
| | $ | 218.2 |
|
Income Taxes, Net | 702.6 |
| | 456.5 |
| | 104.1 |
| | 10.1 |
| | 728.6 |
| | 454.4 |
| | 105.9 |
| | 8.3 |
| 727.2 |
| | 458.9 |
| | 108.5 |
| | 12.8 |
| | 725.8 |
| | 458.8 |
| | 108.0 |
| | 12.8 |
|
Securitized Stranded Costs | 586.9 |
| | — |
| | — |
| | 586.9 |
| | 608.4 |
| | — |
| | — |
| | 608.4 |
| 554.5 |
| | — |
| | — |
| | 554.5 |
| | 565.3 |
| | — |
| | — |
| | 565.3 |
|
Storm Restoration Costs, Net | 536.7 |
| | 279.6 |
| | 191.2 |
| | 65.9 |
| | 576.0 |
| | 302.6 |
| | 212.9 |
| | 60.5 |
| 497.6 |
| | 251.6 |
| | 183.0 |
| | 63.0 |
| | 540.6 |
| | 274.6 |
| | 200.6 |
| | 65.4 |
|
Regulatory Tracker Mechanisms | 289.0 |
| | 60.3 |
| | 138.2 |
| | 70.6 |
| | 316.0 |
| | 33.2 |
| | 169.1 |
| | 67.3 |
| 551.5 |
| | 191.0 |
| | 227.4 |
| | 84.6 |
| | 411.5 |
| | 78.3 |
| | 207.1 |
| | 65.8 |
|
Derivative Liabilities | 347.9 |
| | 345.4 |
| | — |
| | — |
| | 356.5 |
| | 356.5 |
| | — |
| | — |
| 335.2 |
| | 333.8 |
| | — |
| | — |
| | 334.5 |
| | 329.2 |
| | — |
| | — |
|
Goodwill-related | 340.0 |
| | — |
| | 291.9 |
| | — |
| | 348.4 |
| | — |
| | 299.1 |
| | — |
| 327.3 |
| | — |
| | 281.0 |
| | — |
| | 331.5 |
| | — |
| | 284.6 |
| | — |
|
Asset Retirement Obligations | 97.1 |
| | 33.3 |
| | 48.3 |
| | 3.5 |
| | 89.2 |
| | 32.3 |
| | 42.2 |
| | 3.3 |
| 99.3 |
| | 31.2 |
| | 51.5 |
| | 3.7 |
| | 97.2 |
| | 30.8 |
| | 50.3 |
| | 3.6 |
|
Other Regulatory Assets | 148.8 |
| | 26.0 |
| | 60.5 |
| | 17.7 |
| | 208.0 |
| | 27.0 |
| | 64.6 |
| | 12.1 |
| 136.5 |
| | 24.8 |
| | 61.6 |
| | 13.8 |
| | 125.4 |
| | 25.2 |
| | 55.2 |
| | 14.7 |
|
Total Regulatory Assets | 4,919.5 |
| | 1,608.5 |
|
| 1,389.0 |
|
| 905.8 |
|
| 5,145.9 |
| | 1,630.7 |
|
| 1,438.2 |
|
| 929.5 |
| 5,563.4 |
| | 1,819.6 |
|
| 1,529.3 |
|
| 946.3 |
|
| 5,514.7 |
| | 1,735.9 |
|
| 1,535.6 |
|
| 945.8 |
|
Less: Current Portion | 515.3 |
| | 175.7 |
| | 210.0 |
| | 77.9 |
| | 514.8 |
| | 125.2 |
| | 241.7 |
| | 67.2 |
| 785.1 |
| | 290.6 |
| | 304.0 |
| | 102.4 |
| | 651.1 |
| | 178.6 |
| | 285.6 |
| | 84.1 |
|
Total Long-Term Regulatory Assets | $ | 4,404.2 |
| | $ | 1,432.8 |
|
| $ | 1,179.0 |
|
| $ | 827.9 |
|
| $ | 4,631.1 |
| | $ | 1,505.5 |
|
| $ | 1,196.5 |
|
| $ | 862.3 |
| $ | 4,778.3 |
| | $ | 1,529.0 |
|
| $ | 1,225.3 |
|
| $ | 843.9 |
|
| $ | 4,863.6 |
| | $ | 1,557.3 |
|
| $ | 1,250.0 |
|
| $ | 861.7 |
|
Storm Filings: On November 16, 2018, CL&P filed for recovery of $153 million of storm costs incurred from October 2017 through May 2018, with recovery over six years to begin May 1, 2019. Through the course of the proceeding, CL&P updated its request to $145.5 million to reflect final invoicing and capitalization amounts. On April 17, 2019, PURA authorized recovery of $141.0 million as part of storm cost recovery and the remainder to be recorded to plant or other balance sheet accounts. All approved amounts will be fully recoverable through specific mechanisms or through future rate cases.
On March 26, 2019, the NHPUC approved the recovery of $38.1 million, plus carrying charges, of storm costs incurred from December 2013 through April 2016 and the transfer of funding from PSNH’s major storm reserve to recover those costs. The costs of these storms (excluding the equity return component of the carrying charges) were deferred as regulatory assets, and the funding reserve collected from customers was accrued as a regulatory liability. As a result of the duration of time between incurring storm costs in December 2013 through April 2016 and final approval from the NHPUC in 2019, PSNH recognized $5.2 million (pre-tax) for the equity return component of the carrying charges within Other Income, Net on the statement of income in the first quarter of 2019, which has been collected from customers. Also included in the March 26, 2019 NHPUC approval is a prospective requirement for PSNH to annually net its storm funding reserve collected from customers against deferred storm costs.
In addition, on June 27, 2019, the NHPUC approved a temporary rate settlement that permits PSNH to recover approximately $68.5 million in unrecovered storm costs over a five-year period beginning August 1, 2019, with debt carrying charges.
Regulatory Costs in Long-Term Assets: Eversource's regulated companies had $142.0$171.3 million (including $43.6$82.6 million for CL&P, $61.4$50.3 million for NSTAR Electric and $15.3$16.9 million for PSNH) and $122.9$146.0 million (including $42.1$51.8 million for CL&P, $49.3$55.7 million for NSTAR Electric and $12.2$18.0 million for PSNH) of additional regulatory costs as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, that were included in long-term assets on the balance sheets. These amounts represent incurred costs for which recovery has not yet been specifically approved by the applicable regulatory agency. However, based on regulatory policies or past precedent on similar costs, management believes it is probable that these costs will ultimately be approved and recovered from customers in rates.
Regulatory Liabilities: The components of regulatory liabilities were as follows:
| | | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
EDIT due to Tax Cuts and Jobs Act | $ | 2,860.7 |
| | $ | 1,028.7 |
| | $ | 1,090.0 |
| | $ | 395.4 |
| | $ | 2,883.0 |
| | $ | 1,031.0 |
| | $ | 1,103.7 |
| | $ | 396.4 |
| $ | 2,831.2 |
| | $ | 1,019.8 |
| | $ | 1,063.9 |
| | $ | 391.4 |
| | $ | 2,844.6 |
| | $ | 1,022.8 |
| | $ | 1,071.2 |
| | $ | 392.8 |
|
Cost of Removal | 544.9 |
| | 51.0 |
| | 319.4 |
| | 21.4 |
| | 521.0 |
| | 39.9 |
| | 307.1 |
| | 22.1 |
| 579.3 |
| | 77.4 |
| | 337.2 |
| | 14.8 |
| | 559.8 |
| | 64.6 |
| | 330.6 |
| | 16.3 |
|
Benefit Costs | 83.8 |
| | — |
| | 70.9 |
| | — |
| | 91.2 |
| | — |
| | 76.9 |
| | — |
| 80.1 |
| | — |
| | 68.6 |
| | — |
| | 84.5 |
| | — |
| | 72.2 |
| | — |
|
Regulatory Tracker Mechanisms | 333.3 |
| | 110.0 |
| | 141.9 |
| | 31.2 |
| | 309.0 |
| | 89.5 |
| | 163.7 |
| | 48.3 |
| 412.5 |
| | 121.7 |
| | 189.8 |
| | 64.1 |
| | 325.1 |
| | 94.8 |
| | 165.6 |
| | 57.0 |
|
AFUDC - Transmission | 71.7 |
| | 46.7 |
| | 25.0 |
| | — |
| | 70.7 |
| | 47.4 |
| | 23.3 |
| | — |
| 74.4 |
| | 45.7 |
| | 28.7 |
| | — |
| | 73.2 |
| | 46.0 |
| | 27.2 |
| | — |
|
Revenue Subject to Refund due to Tax Cuts and Jobs Act | 29.2 |
| | — |
| | — |
| | 19.1 |
| | 24.6 |
| | — |
| | — |
| | 12.6 |
| |
Other Regulatory Liabilities | 96.1 |
| | 29.4 |
| | 38.6 |
| | 4.1 |
| | 80.2 |
| | 24.0 |
| | 29.2 |
| | 4.2 |
| 130.6 |
| | 34.4 |
| | 47.4 |
| | 10.7 |
| | 132.0 |
| | 19.6 |
| | 59.0 |
| | 13.1 |
|
Total Regulatory Liabilities | 4,019.7 |
| | 1,265.8 |
|
| 1,685.8 |
|
| 471.2 |
|
| 3,979.7 |
| | 1,231.8 |
|
| 1,703.9 |
|
| 483.6 |
| 4,108.1 |
| | 1,299.0 |
|
| 1,735.6 |
|
| 481.0 |
|
| 4,019.2 |
| | 1,247.8 |
|
| 1,725.8 |
|
| 479.2 |
|
Less: Current Portion | 379.9 |
| | 112.4 |
| | 171.0 |
| | 54.2 |
| | 370.2 |
| | 109.6 |
| | 190.6 |
| | 55.5 |
| 439.9 |
| | 119.3 |
| | 219.9 |
| | 69.0 |
| | 361.2 |
| | 82.8 |
| | 209.2 |
| | 65.8 |
|
Total Long-Term Regulatory Liabilities | $ | 3,639.8 |
| | $ | 1,153.4 |
|
| $ | 1,514.8 |
|
| $ | 417.0 |
|
| $ | 3,609.5 |
| | $ | 1,122.2 |
|
| $ | 1,513.3 |
|
| $ | 428.1 |
| $ | 3,668.2 |
| | $ | 1,179.7 |
|
| $ | 1,515.7 |
|
| $ | 412.0 |
|
| $ | 3,658.0 |
| | $ | 1,165.0 |
|
| $ | 1,516.6 |
|
| $ | 413.4 |
|
3. PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION
The following tables summarize property, plant and equipment by asset category:
| | Eversource | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
(Millions of Dollars) | | |
Distribution - Electric | $ | 15,472.1 |
| | $ | 15,071.1 |
| $ | 16,117.4 |
| | $ | 15,880.0 |
|
Distribution - Natural Gas | 3,632.9 |
| | 3,546.2 |
| 3,984.2 |
| | 3,931.1 |
|
Transmission - Electric | 10,449.5 |
| | 10,153.9 |
| 11,059.4 |
| | 10,958.4 |
|
Distribution - Water | 1,664.1 |
| | 1,639.8 |
| 1,730.2 |
| | 1,726.5 |
|
Solar | 196.9 |
| | 164.1 |
| 200.5 |
| | 200.2 |
|
Utility | 31,415.5 |
| | 30,575.1 |
| 33,091.7 |
| | 32,696.2 |
|
Other (1) | 882.4 |
| | 778.6 |
| 1,073.2 |
| | 1,025.6 |
|
Property, Plant and Equipment, Gross | 32,297.9 |
| | 31,353.7 |
| 34,164.9 |
| | 33,721.8 |
|
Less: Accumulated Depreciation | | | | | | |
Utility | (7,357.9 | ) | | (7,126.2 | ) | (7,572.4 | ) | | (7,483.5 | ) |
Other | (363.1 | ) | | (336.7 | ) | (408.0 | ) | | (387.4 | ) |
Total Accumulated Depreciation | (7,721.0 | ) | | (7,462.9 | ) | (7,980.4 | ) | | (7,870.9 | ) |
Property, Plant and Equipment, Net | 24,576.9 |
| | 23,890.8 |
| 26,184.5 |
| | 25,850.9 |
|
Construction Work in Progress | 1,727.5 |
| | 1,719.6 |
| 1,856.9 |
| | 1,734.6 |
|
Total Property, Plant and Equipment, Net | $ | 26,304.4 |
| | $ | 25,610.4 |
| $ | 28,041.4 |
| | $ | 27,585.5 |
|
| | | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
(Millions of Dollars) | CL&P | | NSTAR Electric | | PSNH | | CL&P | | NSTAR Electric | | PSNH | CL&P | | NSTAR Electric | | PSNH | | CL&P | | NSTAR Electric | | PSNH |
Distribution - Electric | $ | 6,352.8 |
| | $ | 6,921.3 |
| | $ | 2,238.3 |
| | $ | 6,176.4 |
| | $ | 6,756.4 |
| | $ | 2,178.6 |
| $ | 6,607.8 |
| | $ | 7,250.8 |
| | $ | 2,299.1 |
| | $ | 6,485.5 |
| | $ | 7,163.7 |
| | $ | 2,271.1 |
|
Transmission - Electric | 4,880.6 |
| | 4,148.8 |
| | 1,415.2 |
| | 4,700.5 |
| | 4,065.9 |
| | 1,338.7 |
| 5,094.1 |
| | 4,444.7 |
| | 1,515.8 |
| | 5,043.0 |
| | 4,411.9 |
| | 1,498.7 |
|
Solar | — |
| | 196.9 |
| | — |
| | — |
| | 164.1 |
| | — |
| — |
| | 200.5 |
| | — |
| | — |
| | 200.2 |
| | — |
|
Property, Plant and Equipment, Gross | 11,233.4 |
| | 11,267.0 |
| | 3,653.5 |
| | 10,876.9 |
| | 10,986.4 |
| | 3,517.3 |
| 11,701.9 |
| | 11,896.0 |
| | 3,814.9 |
| | 11,528.5 |
| | 11,775.8 |
| | 3,769.8 |
|
Less: Accumulated Depreciation | (2,352.2 | ) | | (2,814.9 | ) | | (806.4 | ) | | (2,302.6 | ) | | (2,702.0 | ) | | (772.9 | ) | (2,413.6 | ) | | (2,925.2 | ) | | (810.1 | ) | | (2,385.7 | ) | | (2,895.3 | ) | | (799.9 | ) |
Property, Plant and Equipment, Net | 8,881.2 |
| | 8,452.1 |
| | 2,847.1 |
| | 8,574.3 |
| | 8,284.4 |
| | 2,744.4 |
| 9,288.3 |
| | 8,970.8 |
| | 3,004.8 |
| | 9,142.8 |
| | 8,880.5 |
| | 2,969.9 |
|
Construction Work in Progress | 404.4 |
| | 623.7 |
| | 122.2 |
| | 335.4 |
| | 510.3 |
| | 135.7 |
| 472.6 |
| | 643.8 |
| | 182.5 |
| | 483.0 |
| | 592.3 |
| | 159.6 |
|
Total Property, Plant and Equipment, Net | $ | 9,285.6 |
| | $ | 9,075.8 |
| | $ | 2,969.3 |
| | $ | 8,909.7 |
| | $ | 8,794.7 |
| | $ | 2,880.1 |
| $ | 9,760.9 |
| | $ | 9,614.6 |
| | $ | 3,187.3 |
| | $ | 9,625.8 |
| | $ | 9,472.8 |
| | $ | 3,129.5 |
|
| |
(1) | These assets are primarily comprised of building improvements, computer software, hardware and equipment at Eversource Service.Service and buildings at The Rocky River Realty Company. |
In the second quarter of 2019, Eversource recorded an impairment charge for the NPT project costs, which had been recorded within Construction Work in Progress and also the Transmission - Electric asset category. For further information regarding the impairment of NPT, see Note 1C, "Summary of Significant Accounting Policies - Impairment of Northern Pass Transmission," to the financial statements.
4. DERIVATIVE INSTRUMENTS
The electric and natural gas companies purchase and procure energy and energy-related products, which are subject to price volatility, for their customers. The costs associated with supplying energy to customers are recoverable from customers in future rates. These regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative and non-derivative contracts.
Many of the derivative contracts meet the definition of, and are designated as, normal and qualify for accrual accounting under the applicable accounting guidance. The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses on the statements of income, as applicable, as electricity or natural gas is delivered.
Derivative contracts that are not designated as normal are recorded at fair value as current or long-term Derivative Assets or Derivative Liabilities on the balance sheets. For the electric and natural gas companies, regulatory assets or regulatory liabilities are recorded to offset the fair values of derivatives, as contract settlement amounts are recovered from, or refunded to, customers in their respective energy supply rates.
The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative Assets or Derivative Liabilities, with current and long-term portions, on the balance sheets. The following table presents the gross fair values of contracts, categorized by risk type, and the net amounts recorded as current or long-term derivative assets or liabilities:
| | | | As of June 30, 2019 | | As of December 31, 2018 | | As of March 31, 2020 | | As of December 31, 2019 |
(Millions of Dollars) | Fair Value Hierarchy | | Commodity Supply and Price Risk Management | | Netting (1) | | Net Amount Recorded as a Derivative | | Commodity Supply and Price Risk Management | | Netting (1) | | Net Amount Recorded as a Derivative | Fair Value Hierarchy | | Commodity Supply and Price Risk Management | | Netting (1) | | Net Amount Recorded as a Derivative | | Commodity Supply and Price Risk Management | | Netting (1) | | Net Amount Recorded as a Derivative |
Current Derivative Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
CL&P | Level 3 | | $ | 11.1 |
| | $ | (0.3 | ) | | $ | 10.8 |
| | $ | 9.6 |
| | $ | (3.4 | ) | | $ | 6.2 |
| Level 3 | | $ | 12.8 |
| | $ | (0.4 | ) | | $ | 12.4 |
| | $ | 12.2 |
| | $ | (0.4 | ) | | $ | 11.8 |
|
Other | Level 2 | | — |
| | — |
| | — |
| | 1.5 |
| | (0.9 | ) | | 0.6 |
| |
Long-Term Derivative Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
CL&P | Level 3 | | 71.8 |
| | (2.2 | ) | | 69.6 |
| | 74.2 |
| | (2.3 | ) | | 71.9 |
| Level 3 | | 68.2 |
| | (2.1 | ) | | 66.1 |
| | 67.5 |
| | (2.1 | ) | | 65.4 |
|
Current Derivative Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
CL&P | Level 3 | | (62.1 | ) | | — |
| | (62.1 | ) | | (55.1 | ) | | — |
| | (55.1 | ) | Level 3 | | (69.6 | ) | | — |
| | (69.6 | ) | | (67.8 | ) | | — |
| | (67.8 | ) |
Other | Level 2 | | (2.4 | ) | | — |
| | (2.4 | ) | | — |
| | — |
| | — |
| Level 2 | | (1.4 | ) | | 0.3 |
| | (1.1 | ) | | (5.2 | ) | | — |
| | (5.2 | ) |
Long-Term Derivative Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
CL&P | Level 3 | | (363.7 | ) | | — |
| | (363.7 | ) | | (379.5 | ) | | — |
| | (379.5 | ) | Level 3 | | (342.7 | ) | | — |
| | (342.7 | ) | | (338.6 | ) | | — |
| | (338.6 | ) |
Other | Level 2 | | (0.1 | ) | | — |
| | (0.1 | ) | | — |
| | — |
| | — |
| Level 2 | | (0.3 | ) | | — |
| | (0.3 | ) | | (0.1 | ) | | — |
| | (0.1 | ) |
| |
(1) | Amounts represent derivative assets and liabilities that Eversource elected to record net on the balance sheets. These amounts are subject to master netting agreements or similar agreements for which the right of offset exists. |
For further information on the fair value of derivative contracts, see Note 1E,1D, "Summary of Significant Accounting Policies - Fair Value Measurements," to the financial statements.
Derivative Contracts at Fair Value with Offsetting Regulatory Amounts
Commodity Supply and Price Risk Management: As required by regulation, CL&P, along with UI, has capacity-related contracts with generation facilities. CL&P has a sharing agreement with UI, with 80 percent of the costs or benefits of each contract borne by or allocated to CL&P and 20 percent borne by or allocated to UI. The combined capacities of these contracts as of June 30, 2019both March 31, 2020 and December 31, 2018 are2019, were 679 MW and 787 MW, respectively.676 MW. The capacity contracts extend through 2026 and obligate both CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the capacity market price received in the ISO-NE capacity markets. In addition, CL&P has a contract to purchase 0.1 million MWh of energy per year through 2020.
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, Eversource had New York Mercantile Exchange ("NYMEX")(NYMEX) financial contracts for natural gas futures in order to reduce variability associated with the price of 7.13.5 million and 12.59.6 million MMBtu of natural gas, respectively.
For the three months ended June 30,March 31, 2020 and 2019, and 2018, there were losses of $5.1$18.0 million and gains of $8.6$5.2 million, respectively, deferred as regulatory costs, which reflect the change in fair value associated with Eversource's derivative contracts. For the six months ended June 30, 2019 and 2018, there were losses of $10.3 million and $27.5 million, respectively.
Fair Value Measurements of Derivative Instruments
Derivative contracts classified as Level 2 in the fair value hierarchy relate to the financial contracts for natural gas futures. Prices are obtained from broker quotes and are based on actual market activity. The contracts are valued using NYMEX natural gas prices. Valuations of these contracts also incorporate discount rates using the yield curve approach.
The fair value of derivative contracts classified as Level 3 utilizes significant unobservable inputs. The fair value is modeled using income techniques, such as discounted cash flow valuations adjusted for assumptions related to exit price. Significant observable inputs for valuations of these contracts include energy and energy-related product prices in future years for which quoted prices in an active market exist. Fair value measurements categorized in Level 3 of the fair value hierarchy are prepared by individuals with expertise in valuation techniques, pricing of energy and energy-related products, and accounting requirements. The future power and capacity prices for periods that are not quoted in an active market or established at auction are based on available market data and are escalated based on estimates of inflation in order to address the full term of the contract.
Valuations of derivative contracts using a discounted cash flow methodology include assumptions regarding the timing and likelihood of scheduled payments and also reflect non-performance risk, including credit, using the default probability approach based on the counterparty's credit rating for assets and the Company's credit rating for liabilities. Valuations incorporate estimates of premiums or discounts that would be required by a market participant to arrive at an exit price, using historical market transactions adjusted for the terms of the contract.
The following is a summary of Level 3 derivative contracts and the range of the significant unobservable inputs utilized in the valuations over the duration of the contracts:
| | | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
CL&P | Range | | Period Covered | | Range | | Period Covered | Range | | Weighted Average (1) | | | Period Covered | | Range | | Period Covered |
Capacity Prices | $ | 4.30 |
| | — | | 7.34 |
| | per kW-Month | | 2023 - 2026 | | $ | 4.30 |
| | — | | 7.44 |
| | per kW-Month | | 2022 - 2026 | $ | 4.30 |
| | — | | $5.82 | | $ | 4.81 |
| | per kW-Month | | 2024 - 2026 | | $ | 3.01 |
| | — | | $7.34 | | per kW-Month | | 2023 - 2026 |
Forward Reserve | 0.75 |
| | — | | 1.78 |
| | per kW-Month | | 2019 - 2024 | | 0.75 |
| | — | | 1.78 |
| | per kW-Month | | 2019 - 2024 | |
Forward Reserve Prices | | 0.80 |
| | — | | 1.90 | | 1.35 |
| | per kW-Month | | 2020 - 2024 | | 0.80 |
| | — | | 1.90 | | per kW-Month | | 2020 - 2024 |
| |
(1) | Unobservable inputs were weighted by the relative future capacity and forward reserve prices and contractual MWs over the periods covered. |
Exit price premiums of 3.11.5 percent through 14.613 percent, or a weighted average of 11.9 percent, are also applied to these contracts and reflect the uncertainty and illiquidity premiums that would be required based on the most recent market activity available for similar type contracts. The risk premium was weighted by the relative fair value of the net derivative instruments.
Significant increases or decreases in future capacity or forward reserve prices in isolation would decrease or increase, respectively, the fair value of the derivative liability. Any increases in risk premiums would increase the fair value of the derivative liability. Changes in these fair values are recorded as a regulatory asset or liability and do not impact net income.
Valuations using significant unobservable inputs: The following table presents changes in the Level 3 category of derivative assets and derivative liabilities measured at fair value on a recurring basis. The derivative assets and liabilities are presented on a net basis. | | CL&P | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Millions of Dollars) | 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
Derivatives, Net: | | | | | | | | | | |
Fair Value as of Beginning of Period | $ | (353.1 | ) | | $ | (386.5 | ) | | $ | (356.5 | ) | | $ | (362.3 | ) | $ | (329.2 | ) | | $ | (356.5 | ) |
Net Realized/Unrealized (Losses)/Gains Included in Regulatory Assets | (2.5 | ) | | 8.6 |
| | (7.8 | ) | | (28.2 | ) | |
Net Realized/Unrealized Losses Included in Regulatory Assets | | (16.4 | ) | | (5.3 | ) |
Settlements | 10.2 |
| | 8.6 |
| | 18.9 |
| | 21.2 |
| 11.8 |
| | 8.7 |
|
Fair Value as of End of Period | $ | (345.4 | ) | | $ | (369.3 | ) | | $ | (345.4 | ) | | $ | (369.3 | ) | $ | (333.8 | ) | | $ | (353.1 | ) |
5. MARKETABLE SECURITIES
Eversource holds marketable securities that are primarily used to fund certain non-qualified executive benefits. The trusts that hold marketable securities are not subject to regulatory oversight by state or federal agencies. CYAPC and YAEC maintain legally restricted trusts, each of which holds marketable securities, to fund the spent nuclear fuel removal obligations of their nuclear fuel storage facilities.
Equity Securities: Unrealized gains and losses on equity securities held in Eversource's non-qualified executive benefit trust are recorded in Other Income, Net on the statements of income. The fair value of these equity securities as of June 30, 2019March 31, 2020 and December 31, 20182019 was $45.2$34.8 million and $44.0$45.7 million, respectively. For the three months ended June 30,March 31, 2020 and 2019, and 2018, there were unrealized losses of $9.1 million and unrealized gains of $2.3 million and $0.9$1.0 million, respectively, recorded in Other Income, Net related to these equity securities. For the six months ended June 30, 2019 and 2018, there were unrealized gains of $3.3 million and $0.2 million, respectively.
Eversource's equity securities also include CYAPC's and YAEC's marketable securities held in spent nuclear fuel trusts, which had fair values of $158.5$162.0 million and $200.0$182.8 million as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. Unrealized gains and losses for these spent nuclear fuel trusts are subject to regulatory accounting treatment and are recorded in Marketable Securities with the corresponding offset to Other Long-Term Liabilities on the balance sheets, with no impact on the statements of income.
Available-for-Sale Debt Securities: The following is a summary of the available-for-sale debt securities, which are recorded at fair value and are included in current and long-term Marketable Securities on the balance sheets.
| | | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
Eversource (Millions of Dollars) | Amortized Cost | | Pre-Tax Unrealized Gains | | Pre-Tax Unrealized Losses | | Fair Value | | Amortized Cost | | Pre-Tax Unrealized Gains | | Pre-Tax Unrealized Losses | | Fair Value | Amortized Cost | | Pre-Tax Unrealized Gains | | Pre-Tax Unrealized Losses | | Fair Value | | Amortized Cost | | Pre-Tax Unrealized Gains | | Pre-Tax Unrealized Losses | | Fair Value |
Debt Securities | $ | 204.3 |
| | $ | 5.4 |
| | $ | (0.1 | ) | | $ | 209.6 |
| | $ | 190.0 |
| | $ | 0.4 |
| | $ | (4.0 | ) | | $ | 186.4 |
| $ | 224.2 |
| | $ | 10.9 |
| | $ | (0.6 | ) | | $ | 234.5 |
| | $ | 228.4 |
| | $ | 5.8 |
| | $ | (0.1 | ) | | $ | 234.1 |
|
Eversource's debt securities include CYAPC's and YAEC's marketable securities held in spent nuclear fuel trusts in the amounts of $172.4$198.7 million and $143.9$198.1 million as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.
Unrealized gains and losses on available-for-sale debt securities held in Eversource's non-qualified benefit trust are recorded in Accumulated Other Comprehensive Income.Income, excluding amounts related to credit losses or losses on securities intended to be sold, which are recorded in Other Income, Net. There have been no significant unrealized losses other-than-temporary impairments, orand no credit losses for the three and six months ended June 30,March 31, 2020 and 2019, and 2018.no allowance for credit losses as of March 31, 2020. Factors considered in determining whether a credit loss exists include the duration and severity of the impairment, adverse conditions specifically affecting the issuer, and the payment history, ratings and rating changes of the security.security, and the severity of the impairment. For asset-backed debt securities, underlying collateral and expected future cash flows are also evaluated. Debt securities included in Eversource's non-qualified benefit trust portfolio are investment-grade bonds with a lower default risk based on their credit quality.
As of June 30, 2019,March 31, 2020, the contractual maturities of available-for-sale debt securities were as follows:
| | Eversource (Millions of Dollars) | Amortized Cost | | Fair Value | Amortized Cost | | Fair Value |
Less than one year (1) | $ | 26.9 |
| | $ | 26.9 |
| $ | 56.5 |
| | $ | 56.6 |
|
One to five years | 48.8 |
| | 49.6 |
| 40.1 |
| | 41.7 |
|
Six to ten years | 38.4 |
| | 40.0 |
| 38.6 |
| | 41.4 |
|
Greater than ten years | 90.2 |
| | 93.1 |
| 89.0 |
| | 94.8 |
|
Total Debt Securities | $ | 204.3 |
| | $ | 209.6 |
| $ | 224.2 |
| | $ | 234.5 |
|
| |
(1) | Amounts in the Less than one year category include securities in the CYAPC and YAEC spent nuclear fuel trusts, which are restricted and are classified in long-term Marketable Securities on the balance sheets. |
Realized Gains and Losses: Realized gains and losses are recorded in Other Income, Net for Eversource's benefit trust and are offset in Other Long-Term Liabilities for CYAPC and YAEC. Eversource utilizes the specific identification basis method for the Eversource non-qualified benefit trust, and the average cost basis method for the CYAPC and YAEC spent nuclear fuel trusts to compute the realized gains and losses on the sale of marketable securities.
Fair Value Measurements: The following table presents the marketable securities recorded at fair value on a recurring basis by the level in which they are classified within the fair value hierarchy:
| | Eversource (Millions of Dollars) | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
Level 1: | | | | | | |
Mutual Funds and Equities | $ | 203.7 |
| | $ | 244.0 |
| $ | 196.8 |
| | $ | 228.5 |
|
Money Market Funds | 20.5 |
| | 25.9 |
| 44.1 |
| | 46.0 |
|
Total Level 1 | $ | 224.2 |
| | $ | 269.9 |
| $ | 240.9 |
| | $ | 274.5 |
|
Level 2: | | | | | | |
U.S. Government Issued Debt Securities (Agency and Treasury) | $ | 107.0 |
| | $ | 79.6 |
| $ | 100.9 |
| | $ | 96.8 |
|
Corporate Debt Securities | 46.1 |
| | 39.5 |
| 45.9 |
| | 44.0 |
|
Asset-Backed Debt Securities | 13.4 |
| | 14.0 |
| 13.7 |
| | 12.9 |
|
Municipal Bonds | 12.8 |
| | 19.2 |
| 22.2 |
| | 26.7 |
|
Other Fixed Income Securities | 9.8 |
| | 8.2 |
| 7.7 |
| | 7.7 |
|
Total Level 2 | $ | 189.1 |
| | $ | 160.5 |
| $ | 190.4 |
| | $ | 188.1 |
|
Total Marketable Securities | $ | 413.3 |
| | $ | 430.4 |
| $ | 431.3 |
| | $ | 462.6 |
|
U.S. government issued debt securities are valued using market approaches that incorporate transactions for the same or similar bonds and adjustments for yields and maturity dates. Corporate debt securities are valued using a market approach, utilizing recent trades of the same or similar instruments and also incorporating yield curves, credit spreads and specific bond terms and conditions. Asset-backed debt securities include collateralized mortgage obligations, commercial mortgage backed securities, and securities collateralized by auto loans, credit card loans or receivables. Asset-backed debt securities are valued using recent trades of similar instruments, prepayment assumptions, yield curves, issuance and maturity dates, and tranche information. Municipal bonds are valued using a market approach that incorporates reported trades and benchmark yields. Other fixed income securities are valued using pricing models, quoted prices of securities with similar characteristics, and discounted cash flows.
6. SHORT-TERM AND LONG-TERM DEBT
Short-Term Debt - Commercial Paper Programs and Credit Agreements: Eversource parent has a $1.45 billion commercial paper program allowing Eversource parent to issue commercial paper as a form of short-term debt. Eversource parent, CL&P, PSNH, NSTAR Gas, and Yankee Gas and Aquarion Water Company of Connecticut are also parties to a five-year $1.45 billion revolving credit facility, which terminates on December 8, 2023.6, 2024. The revolving credit facility serves to backstop Eversource parent's $1.45 billion commercial paper program.
NSTAR Electric has a $650 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. NSTAR Electric is also a party to a five-year $650 million revolving credit facility, which terminates on December 8, 2023.6, 2024. The revolving credit facility serves to backstop NSTAR Electric's $650 million commercial paper program.
The amount of borrowings outstanding and available under the commercial paper programs were as follows:
| | | Borrowings Outstanding as of | | Available Borrowing Capacity as of | | Weighted-Average Interest Rate as of | Borrowings Outstanding as of | | Available Borrowing Capacity as of | | Weighted-Average Interest Rate as of |
| June 30, 2019 | | December 31, 2018 | | June 30, 2019 | | December 31, 2018 | | June 30, 2019 | | December 31, 2018 | March 31, 2020 | | December 31, 2019 | | March 31, 2020 | | December 31, 2019 | | March 31, 2020 | | December 31, 2019 |
(Millions of Dollars) | | |
Eversource Parent Commercial Paper Program | $ | 566.0 |
| | $ | 631.5 |
| | $ | 884.0 |
| | $ | 818.5 |
| | 2.55 | % | | 2.77 | % | $ | 738.4 |
| | $ | 1,224.9 |
| | $ | 711.6 |
| | $ | 225.1 |
| | 3.38 | % | | 1.98 | % |
NSTAR Electric Commercial Paper Program | 163.0 |
| | 278.5 |
| | 487.0 |
| | 371.5 |
| | 2.42 | % | | 2.50 | % | 88.0 |
| | 10.5 |
| | 562.0 |
| | 639.5 |
| | 1.25 | % | | 1.63 | % |
There were no0 borrowings outstanding on either the Eversource parent or NSTAR Electric revolving credit facilities as of June 30, 2019March 31, 2020 or December 31, 2018. Eversource's water distribution segment has a $100 million revolving credit facility, which expires on August 19, 2019, and there were no borrowings outstanding as of June 30, 2019 or December 31, 2018.2019.
Amounts outstanding under the commercial paper programs and revolving credit facilityfacilities are included in Notes Payable and are classified in current liabilities on the Eversource and NSTAR Electric balance sheets, as all borrowings are outstanding for no more than 364 days at one time. As a result of the NSTAR Gas long-term debt issuances in May 2020, $25.0 million of the current portion of long-term debt and $165.0 million of commercial paper borrowings under the Eversource parent commercial paper program were classified as Long-Term Debt as of March 31, 2020.
We expectThe Company expects the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with our existing borrowing availability and access to both debt and equity markets, will be sufficient to meet any working capital and future operating requirements, and capital investment forecasted opportunities.
Intercompany Borrowings: Eversource parent uses its available capital resources to provide loans to its subsidiaries to assist them in meeting their short-term borrowing needs. In addition, growth in Eversource's key business initiatives requires cash infusion to those subsidiaries. Eversource parent records intercompany interest income from its loans to subsidiaries, which is eliminated in consolidation. Intercompany loans from Eversource parent to its subsidiaries are eliminated in consolidation on Eversource's balance sheets. As of June 30,March 31, 2020, there were intercompany loans from Eversource parent to CL&P of $219.0 million, to PSNH of $84.7 million, and to a subsidiary of NSTAR Electric of $38.4 million. As of December 31, 2019, there were intercompany loans from Eversource parent to CL&P of $259.4$63.8 million, to PSNH of $20.1$27.0 million, and to Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric ("HEEC"), of $40.3 million. As of December 31, 2018, there were intercompany loans from Eversource parent to PSNH of $57.0$30.3 million. Intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and are classified in current liabilities on the respective subsidiary's balance sheets.
Long-Term Debt Issuance Authorization: On April 26, 2019,January 27, 2020, the NHPUCDPU approved PSNH’sNSTAR Gas' request for authorization to issue up to $300$270 million in long-term debt through December 31, 2019.2021.
Long-Term Debt: The following table summarizes long-term debt issuances and repayments:
|
| | | | | | | | | |
(Millions of Dollars) | Issuance/(Repayment) | | Issue Date or Repayment Date | | Maturity Date | | Use of Proceeds for Issuance/ Repayment Information |
NSTAR Electric: | | | | | | | |
3.95% 2020 Debentures | $ | 400.0 |
| | March 2020 | | April 2030 | | Refinanced investments in eligible green expenditures, which were previously financed in 2018 and 2019 |
5.10% Series E Senior Notes | (95.0 | ) | | March 2020 | | March 2020 | | Paid at maturity |
Other: | | | | | | | |
Eversource Parent 3.45% Series P Senior Notes | 350.0 |
| | January 2020 | | January 2050 | | Paid short-term borrowings |
NSTAR Gas 4.46% Series N First Mortgage Bonds | (125.0 | ) | | January 2020 | | January 2020 | | Paid at maturity |
Yankee Gas 4.87% Series K First Mortgage Bonds | (50.0 | ) | | April 2020 | | April 2020 | | Paid at maturity |
NSTAR Gas 2.33% Series R First Mortgage Bonds | 75.0 |
| | May 2020 | | May 2025 | | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes |
NSTAR Gas 3.15% Series S First Mortgage Bonds | 115.0 |
| | May 2020 | | May 2050 | | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes |
|
| | | | | | | | | |
(Millions of Dollars) | Issue Date | | Issuance/(Repayment) | | Maturity Date | | Use of Proceeds for Issuance/ Repayment Information |
CL&P: | | | | | | | |
4.00% 2018 Series A First Mortgage Bonds (1) | April 2019 | | $ | 300.0 |
| | April 2048 | | Repaid short-term borrowings that were used to repay long-term debt that matured on February 1, 2019 and fund capital expenditures and working capital |
5.50% 2009 Series A First Mortgage Bonds | February 2009 | | (250.0 | ) | | February 2019 | | Repaid at maturity on February 1, 2019 |
NSTAR Electric: | | | | | | | |
3.25% 2019 Debentures | May 2019 | | 400.0 |
| | May 2029 | | Repaid short-term borrowings that were used to fund investments in eligible green expenditures |
PSNH: | | | | | | | |
3.60% 2019 Series T First Mortgage Bonds | June 2019 | | 300.0 |
| | July 2049 | | Repay long-term debt due to mature in December 2019, repaid short-term borrowings and fund capital expenditures and working capital |
Other: | | | | | | | |
NSTAR Gas 3.74% Series Q First Mortgage Bonds | July 2019 | | 75.0 |
| | August 2049 | | Repaid short-term borrowings and fund capital expenditures and working capital |
| |
(1)
| These bonds are part of the same series issued by CL&P in March 2018. The aggregate outstanding principal amount of these bonds is now $800 million. |
As a result of the NSTAR Gas debt issuance in July 2019, $75 million of current portion of long-term debt was reclassified to Long-Term Debt on Eversource's consolidated balance sheet as of June 30, 2019.
7. RATE REDUCTION BONDS AND VARIABLE INTEREST ENTITIES
Rate Reduction Bonds: On May 8, 2018, PSNH Funding, a wholly-owned subsidiary of PSNH, issued $635.7 million of securitized RRBs in multiple tranches with a weighted average interest rate of 3.66 percent, and final maturity dates ranging from 2026 to 2035. The RRBs are expected to be repaid by February 1, 2033. RRB payments consist of principal and interest and will beare paid semi-annually, beginning on February 1, 2019. The RRBs were issued pursuant to a finance order issued by the NHPUC on January 30, 2018 to recover remaining costs resulting from the divestiture of PSNH’s generation assets.
PSNH Funding was formed solely to issue RRBs to finance PSNH's unrecovered remaining costs associated with the divestiture of its generation assets. PSNH Funding is considered a VIE primarily because the equity capitalization is insufficient to support its operations. PSNH has the power to direct the significant activities of the VIE and is most closely associated with the VIE as compared to other interest holders. Therefore, PSNH is considered the primary beneficiary and consolidates PSNH Funding in its consolidated financial statements. The following tables summarize the impact of PSNH Funding on PSNH's balance sheets and income statements: | | (Millions of Dollars) | | | | | | |
Balance Sheet: | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
Restricted Cash - Current Portion (included in Prepayments and Other Current Assets) | $ | 35.0 |
| | $ | 47.5 |
| |
Restricted Cash - Current Portion (included in Current Assets) | | $ | 16.6 |
| | $ | 32.5 |
|
Restricted Cash - Long-Term Portion (included in Other Long-Term Assets) | 3.2 |
| | 3.2 |
| 3.2 |
| | 3.2 |
|
Securitized Stranded Costs (included in Regulatory Assets) | 586.9 |
| | 608.4 |
| |
Securitized Stranded Cost (included in Regulatory Assets) | | 554.5 |
| | 565.3 |
|
Other Regulatory Liabilities (included in Regulatory Liabilities) | 7.9 |
| | 5.8 |
| 6.0 |
| | 5.6 |
|
Accrued Interest (included in Other Current Liabilities) | 8.9 |
| | 14.4 |
| 3.3 |
| | 8.6 |
|
Rate Reduction Bonds - Current Portion | 43.2 |
| | 52.3 |
| 43.2 |
| | 43.2 |
|
Rate Reduction Bonds - Long-Term Portion | 561.7 |
| | 583.3 |
| 518.5 |
| | 540.1 |
|
| | (Millions of Dollars) | For the Three Months Ended | | For the Six Months Ended | For the Three Months Ended |
Income Statement: | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 | March 31, 2020 | | March 31, 2019 |
Amortization of RRB Principal (included in Amortization of Regulatory Assets, Net) | $ | 10.8 |
| | $ | 6.8 |
| | $ | 21.5 |
| | $ | 6.8 |
| $ | 10.8 |
| | $ | 10.6 |
|
Interest Expense on RRB Principal (included in Interest Expense) | 5.3 |
| | 2.8 |
| | 10.7 |
| | 2.8 |
| 5.0 |
| | 5.4 |
|
8. PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSION
Eversource provides defined benefit retirement plans ("Pension Plans")(Pension Plans) that cover eligible employees. In addition to the Pension Plans, Eversource maintains non-qualified defined benefit retirement plans ("SERP Plans")(SERP Plans), which provide benefits in excess of Internal Revenue Code limitations to eligible participants consisting of current and retired employees. Eversource also provides defined benefit postretirement plans ("PBOP Plans")(PBOP Plans) that provide life insurance and a health reimbursement arrangement created for the purpose of reimbursing retirees and dependents for health insurance premiums and certain medical expenses to eligible employees that meet certain age and service eligibility requirements.
The components of net periodic benefit expense/(income) for the Pension, SERP and PBOP Plans, prior to amounts capitalized as Property, Plant and Equipment or deferred as regulatory assets for future recovery, are shown below. The service cost component of net periodic benefit expense,expense/(income), less the capitalized portion, is included in Operations and Maintenance expense on the statements of income. The remaining components of net periodic benefit expense/(income), less the deferred portion, are included in Other Income, Net on the statements of income. Pension, SERP and PBOP expense reflected in the statements of cash flows for CL&P, NSTAR Electric and PSNH does not include the intercompany allocations or the corresponding capitalized and deferred portion, as these amounts are cash settled on a short-term basis.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension and SERP |
| For the Three Months Ended June 30, 2019 | | For the Three Months Ended June 30, 2018 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Service Cost | $ | 16.1 |
| | $ | 4.4 |
| | $ | 3.6 |
| | $ | 1.5 |
| | $ | 20.7 |
| | $ | 5.2 |
| | $ | 4.3 |
| | $ | 2.7 |
|
Interest Cost | 54.8 |
| | 11.4 |
| | 12.3 |
| | 6.0 |
| | 49.1 |
| | 10.5 |
| | 10.9 |
| | 5.5 |
|
Expected Return on Pension Plan Assets | (91.7 | ) | | (18.1 | ) | | (24.2 | ) | | (10.1 | ) | | (97.9 | ) | | (19.4 | ) | | (26.6 | ) | | (10.8 | ) |
Actuarial Loss | 35.6 |
| | 6.3 |
| | 11.8 |
| | 2.3 |
| | 35.7 |
| | 7.1 |
| | 10.1 |
| | 3.3 |
|
Prior Service Cost | 0.3 |
| | — |
| | — |
| | — |
| | 2.1 |
| | 0.2 |
| | 0.1 |
| | 0.1 |
|
Total Net Periodic Benefit Expense/(Income) | $ | 15.1 |
| | $ | 4.0 |
| | $ | 3.5 |
| | $ | (0.3 | ) | | $ | 9.7 |
| | $ | 3.6 |
| | $ | (1.2 | ) | | $ | 0.8 |
|
Intercompany Allocations | N/A |
| | $ | 5.8 |
| | $ | 5.3 |
| | $ | — |
| | N/A |
| | $ | 1.5 |
| | $ | 1.6 |
| | $ | 0.5 |
|
| | | | | | | | | | | | | | | |
| Pension and SERP |
| For the Six Months Ended June 30, 2019 | | For the Six Months Ended June 30, 2018 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Service Cost | $ | 35.4 |
| | $ | 9.2 |
| | $ | 7.5 |
| | $ | 4.1 |
| | $ | 43.1 |
| | $ | 11.0 |
| | $ | 9.0 |
| | $ | 5.7 |
|
Interest Cost | 109.1 |
| | 23.0 |
| | 24.2 |
| | 12.2 |
| | 97.8 |
| | 20.9 |
| | 21.7 |
| | 10.9 |
|
Expected Return on Pension Plan Assets | (183.8 | ) | | (36.9 | ) | | (48.6 | ) | | (20.4 | ) | | (195.8 | ) | | (40.2 | ) | | (51.8 | ) | | (21.8 | ) |
Actuarial Loss | 72.1 |
| | 14.3 |
| | 21.2 |
| | 5.9 |
| | 71.8 |
| | 14.8 |
| | 20.7 |
| | 6.5 |
|
Prior Service Cost | 0.6 |
| | — |
| | 0.1 |
| | — |
| | 4.1 |
| | 0.6 |
| | 0.1 |
| | 0.2 |
|
Total Net Periodic Benefit Expense/(Income) | $ | 33.4 |
| | $ | 9.6 |
| | $ | 4.4 |
| | $ | 1.8 |
| | $ | 21.0 |
| | $ | 7.1 |
| | $ | (0.3 | ) | | $ | 1.5 |
|
Intercompany Allocations | N/A |
| | $ | 13.6 |
| | $ | 8.4 |
| | $ | 2.5 |
| | N/A |
| | $ | 3.0 |
| | $ | 3.2 |
| | $ | 1.0 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension and SERP | | PBOP |
| For the Three Months Ended March 31, 2020 | | For the Three Months Ended March 31, 2020 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Service Cost | $ | 19.6 |
| | $ | 5.7 |
| | $ | 3.8 |
| | $ | 2.2 |
| | $ | 2.6 |
| | $ | 0.5 |
| | $ | 0.6 |
| | $ | 0.2 |
|
Interest Cost | 44.3 |
| | 9.5 |
| | 9.6 |
| | 4.9 |
| | 6.1 |
| | 1.2 |
| | 1.7 |
| | 0.6 |
|
Expected Return on Plan Assets | (100.3 | ) | | (20.0 | ) | | (25.8 | ) | | (11.3 | ) | | (18.1 | ) | | (2.4 | ) | | (8.5 | ) | | (1.4 | ) |
Actuarial Loss | 49.3 |
| | 10.0 |
| | 13.3 |
| | 4.1 |
| | 2.1 |
| | 0.4 |
| | 0.7 |
| | 0.1 |
|
Prior Service Cost/(Credit) | 0.3 |
| | — |
| | 0.1 |
| | — |
| | (5.4 | ) | | 0.2 |
| | (4.2 | ) | | 0.1 |
|
Total Net Periodic Benefit Expense/(Income) | $ | 13.2 |
| | $ | 5.2 |
| | $ | 1.0 |
| | $ | (0.1 | ) | | $ | (12.7 | ) | | $ | (0.1 | ) | | $ | (9.7 | ) | | $ | (0.4 | ) |
Intercompany Allocations | N/A |
| | $ | 1.9 |
| | $ | 1.9 |
| | $ | 0.6 |
| | N/A |
| | $ | (0.4 | ) | | $ | (0.4 | ) | | $ | (0.2 | ) |
| | | PBOP | Pension and SERP | | PBOP |
| For the Three Months Ended June 30, 2019 | | For the Three Months Ended June 30, 2018 | For the Three Months Ended March 31, 2019 | | For the Three Months Ended March 31, 2019 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Service Cost | $ | 1.8 |
| | $ | 0.3 |
| | $ | 0.4 |
| | $ | 0.1 |
| | $ | 2.5 |
| | $ | 0.4 |
| | $ | 0.5 |
| | $ | 0.3 |
| $ | 19.3 |
| | $ | 4.8 |
| | $ | 3.9 |
| | $ | 2.6 |
| | $ | 2.1 |
| | $ | 0.4 |
| | $ | 0.4 |
| | $ | 0.2 |
|
Interest Cost | 8.2 |
| | 1.6 |
| | 2.4 |
| | 0.8 |
| | 6.8 |
| | 1.5 |
| | 2.2 |
| | 0.9 |
| 54.2 |
| | 11.5 |
| | 11.9 |
| | 6.2 |
| | 8.1 |
| | 1.5 |
| | 2.3 |
| | 0.9 |
|
Expected Return on Plan Assets | (16.8 | ) | | (2.3 | ) | | (7.5 | ) | | (1.3 | ) | | (16.7 | ) | | (2.6 | ) | | (8.1 | ) | | (1.5 | ) | (92.3 | ) | | (18.8 | ) | | (24.4 | ) | | (10.3 | ) | | (16.6 | ) | | (2.3 | ) | | (7.5 | ) | | (1.3 | ) |
Actuarial Loss | 1.6 |
| | 0.3 |
| | 0.7 |
| | — |
| | 1.6 |
| | 0.4 |
| | 0.4 |
| | 0.2 |
| 35.8 |
| | 8.1 |
| | 9.4 |
| | 3.5 |
| | 2.5 |
| | 0.4 |
| | 0.9 |
| | 0.2 |
|
Prior Service Cost/(Credit) | (5.8 | ) | | 0.3 |
| | (4.2 | ) | | 0.1 |
| | (5.7 | ) | | 0.3 |
| | (4.3 | ) | | 0.1 |
| 1.1 |
| | — |
| | 0.1 |
| | — |
| | (5.8 | ) | | 0.3 |
| | (4.2 | ) | | 0.1 |
|
Total Net Periodic Benefit Expense/(Income) | $ | (11.0 | ) | | $ | 0.2 |
| | $ | (8.2 | ) | | $ | (0.3 | ) | | $ | (11.5 | ) | | $ | — |
| | $ | (9.3 | ) | | $ | — |
| $ | 18.1 |
| | $ | 5.6 |
| | $ | 0.9 |
| | $ | 2.0 |
| | $ | (9.7 | ) | | $ | 0.3 |
| | $ | (8.1 | ) | | $ | 0.1 |
|
Intercompany Allocations | N/A |
| | $ | (0.3 | ) | | $ | (0.4 | ) | | $ | (0.1 | ) | | N/A |
| | $ | (0.2 | ) | | $ | (0.3 | ) | | $ | (0.1 | ) | N/A |
| | $ | 7.8 |
| | $ | 3.0 |
| | $ | 2.4 |
| | N/A |
| | $ | (0.1 | ) | | $ | (0.2 | ) | | $ | (0.1 | ) |
| | | | | | | | | | | | | | | | |
| PBOP | |
| For the Six Months Ended June 30, 2019 | | For the Six Months Ended June 30, 2018 | |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH | |
Service Cost | $ | 3.9 |
| | $ | 0.7 |
| | $ | 0.9 |
| | $ | 0.4 |
| | $ | 5.0 |
| | $ | 0.9 |
| | $ | 1.0 |
| | $ | 0.6 |
| |
Interest Cost | 16.3 |
| | 3.1 |
| | 4.7 |
| | 1.7 |
| | 14.4 |
| | 2.9 |
| | 4.4 |
| | 1.6 |
| |
Expected Return on Plan Assets | (33.4 | ) | | (4.5 | ) | | (15.1 | ) | | (2.8 | ) | | (34.8 | ) | | (5.2 | ) | | (16.2 | ) | | (3.0 | ) | |
Actuarial Loss | 4.1 |
| | 0.7 |
| | 1.7 |
| | 0.2 |
| | 4.4 |
| | 0.8 |
| | 1.1 |
| | 0.4 |
| |
Prior Service Cost/(Credit) | (11.6 | ) | | 0.5 |
| | (8.5 | ) | | 0.2 |
| | (11.5 | ) | | 0.5 |
| | (8.5 | ) | | 0.3 |
| |
Total Net Periodic Benefit Expense/(Income) | $ | (20.7 | ) | | $ | 0.5 |
| | $ | (16.3 | ) | | $ | (0.3 | ) | | $ | (22.5 | ) | | $ | (0.1 | ) | | $ | (18.2 | ) | | $ | (0.1 | ) | |
Intercompany Allocations | N/A |
| | $ | (0.4 | ) | | $ | (0.6 | ) | | $ | (0.2 | ) | | N/A |
| | $ | (0.5 | ) | | $ | (0.7 | ) | | $ | (0.2 | ) | |
9. COMMITMENTS AND CONTINGENCIES
A. Environmental Matters
Eversource, CL&P, NSTAR Electric and PSNH are subject to environmental laws and regulations intended to mitigate or remove the effect of past operations and improve or maintain the quality of the environment. These laws and regulations require the removal or the remedy of the effect on the environment of the disposal or release of certain specified hazardous substances at current and former operating sites. Eversource, CL&P, NSTAR Electric and PSNH have an active environmental auditing and training program and each believes it is substantially in compliance with all enacted laws and regulations.
The number of environmental sites and related reserves for which remediation or long-term monitoring, preliminary site work or site assessment is being performed are as follows:
| | | As of June 30, 2019 | | As of December 31, 2018 | As of March 31, 2020 | | As of December 31, 2019 |
| Number of Sites | | Reserve (in millions) | | Number of Sites | | Reserve (in millions) | Number of Sites | | Reserve (in millions) | | Number of Sites | | Reserve (in millions) |
Eversource | 58 |
| | $ | 71.6 |
| | 60 |
| | $ | 64.7 |
| 55 |
| | $ | 79.1 |
| | 57 |
| | $ | 81.0 |
|
CL&P | 15 |
| | 5.8 |
| | 15 |
| | 5.4 |
| 15 |
| | 11.8 |
| | 15 |
| | 11.4 |
|
NSTAR Electric | 15 |
| | 10.5 |
| | 16 |
| | 10.9 |
| 13 |
| | 6.2 |
| | 15 |
| | 8.0 |
|
PSNH | 9 |
| | 5.4 |
| | 9 |
| | 5.4 |
| 9 |
| | 7.4 |
| | 9 |
| | 7.5 |
|
Included in the number of sites and reserve amounts above are former MGP sites that were operated several decades ago and manufactured gas from coal and other processes, which resulted in certain by-products remaining in the environment that may pose a potential risk to human health and the environment, for which Eversource may have potential liability. The reserve balances related to these former MGP sites were $57.1$67.4 million and $50.1$67.9 million as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, and related primarily to the natural gas business segment.
These reserve estimates are subjective in nature as they take into consideration several different remediation options at each specific site. The reliability and precision of these estimates can be affected by several factors, including new information concerning either the level of contamination at the site, the extent of Eversource's, CL&P's, NSTAR Electric's and PSNH's responsibility for remediation or the extent of remediation required, recently enacted laws and regulations or changes in cost estimates due to certain economic factors. It is possible that new information or future developments could require a reassessment of the potential exposure to required environmental remediation. As this information becomes available, management will continue to assess the potential exposure and adjust the reserves accordingly.
B. Long-Term Contractual Arrangements
On December 28, 2018, under Public Act 17-3, "An Act Concerning Zero Carbon Procurement," DEEP selected the Millstone Nuclear Power Station generation facility, along with smaller generation facilities, in DEEP’s zero-carbon request for proposal. CL&P and UI were directed by DEEP to enter into ten-year contracts to purchase a combined total of approximately 9 million MWh annually from the Millstone generation facility. On March 15, 2019, CL&P and UI each signed a ten-year contract with the owner of Millstone Nuclear Power Station in order to purchase a combined amount of approximately 50 percent of the facility's output (approximately 40 percent by CL&P). The Millstone Nuclear Power Station has a 2,112 MW nameplate capacity. The parties filed the contract with PURA on March 29, 2019 for review and approval. A decision from PURA is expected in the third quarter of 2019.
The significant output of the generation facility, the contract period, and the pricing will result in a significant multi-billion dollar contractual commitment. We plan to sell the energy purchased under this contract into the market and use the proceeds from these energy sales to offset the contract costs. As the net costs under this contract will be recovered from customers in future rates, the contract will not have an impact on the net income of CL&P.
C. Guarantees and Indemnifications
In the normal course of business, Eversource parent provides credit assurances on behalf of its subsidiaries, including CL&P, NSTAR Electric and PSNH, in the form of guarantees.
Eversource parent issued a guaranty on behalf of its subsidiary, NPT, under which, beginning at the time the Northern Pass Transmission line would go into commercial operation, Eversource parent would guarantee the financial obligations of NPT under the TSA with HQ in an amount not to exceed $25 million. Eversource parent's obligations under the guaranty expire upon the full, final and indefeasible payment of the guaranteed obligations. Eversource parent also entered into a guaranty on behalf of NPT under which Eversource parent would guarantee NPT's obligations under a facility with a financial institution pursuant to which NPT may request letters of credit in an aggregate amount of up to approximately $14 million. In the second quarter of 2019, Eversource concluded that construction of the NPT project was no longer probable. For further information regarding the impairment of NPT, see Note 1C, "Summary of Significant Accounting Policies - Impairment of Northern Pass Transmission," to the financial statements. While these guarantees are currently outstanding, it is expected that they will be extinguished pending the final dissolution of NPT.
Management does not anticipate a material impact to net income or cash flows as a result of these various guarantees and indemnifications. The following table summarizes Eversource parent's exposure to guarantees and indemnifications of its subsidiaries and affiliates to external parties as of June 30, 2019:March 31, 2020:
| | Company | | Description | | Maximum Exposure (in millions) | | Expiration Dates | | Description | | Maximum Exposure (in millions) | | Expiration Dates |
On behalf of subsidiaries: | | | | | | | |
Eversource Investment LLC | | North East Offshore (1) | | $ | 113.9 |
| | - | |
Various | | Surety Bonds (2) | | 34.0 |
| | 2019 - 2021 | | Surety Bonds (1) | | $ | 30.0 |
| | 2020 - 2023 |
Rocky River Realty Company and Eversource Service | | Lease Payments for Real Estate | | 7.1 |
| | 2024 | | Lease Payments for Real Estate | | 6.1 |
| | 2024 |
Bay State Wind | | Real Estate Purchase | | 2.5 |
| | 2020 | |
Bay State Wind LLC | | | Real Estate Purchase | | 2.5 |
| | 2020 |
Sunrise Wind LLC | | | Offshore Wind (2) | | 2.2 |
| | - |
| |
(1) | Eversource parent issued a declining balance guaranty on behalf of its subsidiary, Eversource Investment LLC, which holds an ownership interest in North East Offshore. Eversource parent will guarantee, as a primary obligor, the financial obligations, primarily all post-closing payment obligations of Eversource Investment LLC, under the Sale and Purchase Agreement and an Irrevocable Equity Commitment Letter with Ørsted. Eversource parent's obligations under the guaranty expire upon the full, final and indefeasible payment of the guaranteed obligations. |
| |
(2)
| Surety bond expiration dates reflect termination dates, the majority of which will be renewed or extended. Certain surety bonds contain credit ratings triggers that would require Eversource parent to post collateral in the event that the unsecured debt credit ratings of Eversource parent are downgraded. |
| |
(2) | On October 25, 2019, Eversource parent issued a guaranty on behalf of its 50 percent-owned affiliate, Sunrise Wind LLC, whereby Eversource parent will guaranty Sunrise Wind LLC’s performance of certain obligations, in an amount not to exceed $15.4 million, under the Offshore Wind Renewable Energy Certificate Purchase and Sale Agreement (the Agreement). The Agreement was executed on October 23, 2019, by and between the New York State Energy Research and Development Authority (NYSERDA) and Sunrise Wind LLC. The Company regularly reviews performance risk under this arrangement, and in the event it becomes probable that Eversource parent will be required to perform under the guarantee, the amount of probable payment will be recorded. As of March 31, 2020, the fair value of the guarantee was immaterial. |
D.
C. Spent Nuclear Fuel Obligations - Yankee Companies
CL&P, NSTAR Electric and PSNH have plant closure and fuel storage cost obligations to the Yankee Companies, which have each completed the physical decommissioning of their respective nuclear power facilities and are now engaged in the long-term storage of their spent fuel. The Yankee Companies fund these costs through litigation proceeds received from the DOE and, to the extent necessary, through wholesale, FERC-approved rates charged under power purchase agreements with several New England utilities, including CL&P, NSTAR Electric and PSNH. CL&P, NSTAR Electric and PSNH, in turn recover these costs from their customers through state regulatory commission-approved retail rates.
The Yankee Companies collect amounts that management believes are adequate to recover the remaining plant closure and fuel storage cost estimates for the respective plants. Management believes CL&P and NSTAR Electric will recover their shares of these obligations from their customers. PSNH has recovered its total share of these costs from its customers.
Spent Nuclear Fuel Litigation:
The Yankee Companies have filed complaints against the DOE in the Court of Federal Claims seeking monetary damages resulting from the DOE's failure to accept delivery of, and provide for a permanent facility to store, spent nuclear fuel pursuant to the terms of the 1983 spent fuel and high levelhigh-level waste disposal contracts between the Yankee Companies and the DOE. The court had previously awarded the Yankee Companies damages for PhasePhases I, II and III of litigation resulting from the DOE's failure to meet its contractual obligations. These Phases covered damages incurred in the years 1998 through 2012, and the awarded damages have been received by the Yankee Companies with certain amounts of the damages refunded to their customers.
DOE Phase IV Damages - On May 22, 2017, each of the Yankee Companies filed subsequenta fourth set of lawsuits against the DOE in the Court of Federal
Claims. The Yankee Companies sought monetary damages totaling $104.4 million for CYAPC, YAEC and MYAPC, resulting from the DOE's failure to begin accepting spent nuclear fuel for disposal covering the years from 2013 to 2016 (“DOE(DOE Phase IV”)IV). On February 21, 2019, the Yankee Companies received a partial summary judgment and partial final judgment in their favor for the undisputed amount of monetary damages of $103.2 million. The court awarded CYAPC, YAEC and MYAPC damages of $40.7 million, $28.1 million and $34.4 million, respectively. The DOE did not appeal the court's judgment and the decision became final on April 23, 2019. On June 12, 2019, CYAPC and YAEC received damageseach of $40.7 million and $28.1 million, respectively, which were recorded as restricted cash within Other Long-Term Assets on the Eversource consolidated balance sheet as of June 30, 2019.
The Yankee Companies are in the process of preparing a required informational filing with FERC as to the use of proceeds. At this time, the damages are primarily expected to be used by the Yankee Companies to fund remaining fuel storage obligations, and management does not expect significant amounts to be refunded to Eversource utilities (CL&P, NSTAR Electric and PSNH). The utilities would then ultimately refund any amounts received to utility customers.
the damages proceeds. On June 12, 2019, the court accepted an offer of judgment in the amount of $0.5 million to settle the disputed amount of approximately $1 million in Phase IV contested damages. The Yankee Companies received the $0.5 million payment in July 2019.
E.In September 2019, the Yankee Companies made a required informational filing with FERC as to the use of proceeds, for which approval was received in the fourth quarter of 2019. In December 2019, YAEC and MYAPC returned proceeds of $5.4 million and $21.0 million, respectively, to its member companies, of which the Eversource utilities (CL&P, NSTAR Electric and PSNH) received a total of $2.8 million from YAEC and $5.0 million from MYAPC. The Eversource utilities refund these amounts received to their utility customers. Also, in December 2019, CYAPC paid $29.0 million to the DOE to partially settle its pre-1983 spent nuclear fuel obligation.
D. FERC ROE Complaints
Four separate complaints have beenwere filed at the FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (collectively, the "Complainants")Complainants). In each of the first three complaints, filed on October 1, 2011, December 27, 2012, and July 31, 2014, respectively, the Complainants challenged the NETOs' base ROE of 11.14 percent that had been utilized since 2005 and sought an order to reduce it prospectively from the date of the final FERC order and for the separate 15-month complaint periods. In the fourth complaint, filed April 29, 2016, the Complainants challenged the NETOs' base ROE billed of 10.57 percent and the maximum ROE for transmission incentive ("incentive cap")(incentive cap) of 11.74 percent, asserting that these ROEs were unjust and unreasonable.
The ROE originally billed during the period October 1, 2011 (beginning of the first complaint period) through October 15, 2014 consisted of a base ROE of 11.14 percent and incentives up to 13.1 percent. On October 16, 2014, the FERC set the base ROE at 10.57 percent and the incentive cap at 11.74 percent for the first complaint period. This was also effective for all prospective billings to customers beginning October 16, 2014. This FERC order was vacated on April 14, 2017 by the U.S. Court of Appeals for the D.C. Circuit (the "Court")Court).
All amounts associated with the first complaint period have been refunded, which totaled $38.9 million (pre-tax and excluding interest) at Eversource and reflected both the base ROE and incentive cap prescribed by the FERC order. The refund consisted of $22.4 million for CL&P, $13.7 million for NSTAR Electric and $2.8 million for PSNH.
Eversource has recorded a reserve of $39.1 million (pre-tax and excluding interest) for the second complaint period as of June 30,March 31, 2020 and December 31, 2019. This reserve represents the difference between the billed rates during the second complaint period and a 10.57 percent base ROE and 11.74 percent incentive cap. The reserve consisted of $21.4 million for CL&P, $14.6 million for NSTAR Electric and $3.1 million for PSNH as of June 30,March 31, 2020 and December 31, 2019.
On October 16, 2018, FERC issued an order on all four complaints describing how it intends to address the issues that were remanded by the Court. FERC proposed a new framework to determine (1) whether an existing ROE is unjust and unreasonable and, if so, (2) how to calculate a replacement ROE. The parties to these proceedings were directed to submit briefs on this new proposed framework and how they would apply the proposed framework in each of the four complaint proceedings. Initial briefs were filed by the NETOs, Complainants and FERC Trial Staff on January 11, 2019 and reply briefs were filed on March 8, 2019. The NETOs' brief was supportive of the overall ROE methodology determined in the October 16, 2018 order provided the FERC does not change the proposed methodology or alter its implementation in a manner that has a material impact on the results.
The FERC order included illustrative calculations for the first complaint using FERC's proposed frameworks with financial data from that complaint. Those preliminaryillustrative calculations indicated that for the first complaint period, for the NETOs, thatwhich FERC concludes are of average financial risk, (1) a preliminary range of presumptively just and reasonable base ROEs is 9.60 percent to 10.99 percent; (2) the pre-existing base ROE of 11.14 percent is therefore unjust and unreasonable; (3) the preliminary just and reasonable base ROE is 10.41 percent;percent and (4) the preliminary incentive cap on total ROE is 13.08 percent.
If the results of thesethe illustrative calculations were included in a final FERC order for each of the complaint periods, then a 10.41 percent base ROE and a 13.08 percent incentive cap would not have a significant impact on our financial statements for all of the complaint periods.
Although the order provided illustrative calculations, FERC stated that these calculations are merely preliminary. The FERC’s These preliminary calculations are not binding and do not represent what we believe to be the most likely outcome of a final FERC order.
On November 21, 2019, FERC issued an order concerning the transmission ROEs for the Midcontinent ISO transmission owners (MISO). In that order, FERC adopted another new methodology for determining base ROEs for MISO, which differed significantly from the methodology and framework set forth in its October 16, 2018 FERC order on the NETOs’ ROE dockets. On December 23, 2019, the NETOs filed a Supplemental Paper Hearing Brief and a Motion to supplement the record in the NETO ROE dockets to respond to the new methodology proposed in the MISO order, as there is uncertainty to whether it may be applied to the NETOs’ cases. On January 21, 2020, the FERC issued an order granting rehearing for further consideration to give the FERC more time to act on the substantive issues of the MISO ROE proceedings. Further changes to the methodology by FERC are possible as a result of the parties’ arguments in both the MISO and calculations inNETO proceedings.
Given the briefing process. Untilsignificant uncertainty relating to the October 2018 FERC issues a final decisionorder, the November 2019 FERC order to MISO, and the FERC's rehearing of the MISO order, the Company is unable to predict the potential effect of the MISO order on eachthe NETO complaints or the outcome of thesethe four complaints and concluded that there is significant uncertainty, andno reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods at this time,time. Further, the Company cannot reasonably estimate a range of gain or loss for any of the four complaint proceedings. The October 16, 2018 FERC order or the 2019 briefs did not provide a reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods.
Eversource, CL&P, NSTAR Electric and PSNH currently record revenues at the 10.57 percent base ROE and incentive cap at 11.74 percent established in the October 16, 2014 FERC order.
The average impactA change of a 10 basis point changepoints to the base ROE used to establish the reserves would impact Eversource's after-tax earnings by an average of approximately $3 million for each of the four 15-month complaint periods would affect Eversource's after-tax earnings by approximately $3 million.periods.
F.E. Eversource and NSTAR Electric Boston Harbor Civil Action
On July 15,In 2016, the United States Attorney on behalf of the United States Army Corps of Engineers filed a civil action in the United States District Court for the District of Massachusetts under provisions of the Rivers and Harbors Act of 1899 and the Clean Water Act against NSTAR Electric, HEEC, and the Massachusetts Water Resources Authority (together with NSTAR Electric and HEEC, the "Defendants"). The action alleged that the Defendants failed to comply with certain permitting requirements related to the placement of the HEEC-owned electric distribution cable beneath Boston Harbor. The action sought an order to compel HEEC to comply with cable depth requirements in the United States Army Corps of Engineers' permit or alternatively to remove the electric distribution cable and cease unauthorized work in U.S. waterways. The action also sought civil penalties and other costs.
The parties reached a settlement pursuant to which HEEC agreed to install a new 115kV distribution cable across Boston Harbor to Deer Island, utilizing a different route, and remove portions of the existing cable. Upon the installation and completionConstruction of the new distribution cable was completed in August 2019 and the removal of the portions of the existing cable allwas completed in January 2020. All issues surrounding the current permit from the United States Army Corps of Engineers are expected to be resolved, and such litigation is expected to be dismissed with prejudice.
NSTAR Electric agreed to provide a rate base credit of $17.5 million to the Massachusetts Water Resources Authority for the new cable. This negotiated credit resulted in the initial $17.5 million of construction costs on the new cable being expensed as incurred, all of which was fully expensed in 2018. Construction of the new cable is underway and is expected to be completed in 2019.
10. LEASES
Eversource, including CL&P, NSTAR Electric and PSNH, has entered into lease agreements as a lessee for the use of land, office space, service centers, vehicles, information technology, and equipment. These lease agreements are classified as either finance or operating leases and the liability and right-of-use asset are recognized on the balance sheet at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term.
Eversource determines whether or not a contract contains a lease based on whether or not it provides Eversource with the use of a specifically identified asset for a period of time, as well as both the right to direct the use of that asset and receive the significant economic benefits of the asset. Eversource has elected the practical expedient to not separate non-lease components from lease components and instead to account for both as a single lease component, with the exception of the information technology asset class where the lease and non-lease components are separated.
The provisions of Eversource, CL&P, NSTAR Electric and PSNH lease agreements contain renewal options. The renewal options range from one year to twenty years. The renewal period is included in the measurement of the lease liability if it is reasonably certain that Eversource will exercise these renewal options.
For leases entered into or modified after the January 1, 2019 implementation date, the discount rate utilized for classification and measurement purposes as of the inception date of the lease is based on each company's collateralized incremental interest rate to borrow over a comparable term for an individual lease, as the rate implicit in the lease is not determinable.
CL&P and PSNH entered into certain contracts for the purchase of energy that qualify as leases. These contracts do not have minimum lease payments and therefore are not recognized as a lease liability on the balance sheet and are not reflected in the future minimum lease payments table below. Expense related to these contracts are included as variable lease cost in the table below. The expense and long-term obligation for these contracts are included in the annually reported contractual obligations table in Note 12B, "Commitments and Contingencies - Long-Term Contractual Arrangements," of the Eversource 2018 Form 10-K.
The components of lease cost, prior to amounts capitalized, are as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, 2019 | | For the Six Months Ended June 30, 2019 |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Financing Lease Cost: | | | | | | | | | | | | | | | |
Amortization of Right-of-use-Assets | $ | 0.4 |
| | $ | 0.2 |
| | $ | — |
| | $ | — |
| | $ | 0.7 |
| | $ | 0.4 |
| | $ | 0.1 |
| | $ | — |
|
Interest on Lease Liabilities | 0.3 |
| | 0.1 |
| | 0.2 |
| | — |
| | 0.7 |
| | 0.3 |
| | 0.3 |
| | — |
|
Total Finance Lease Cost | 0.7 |
| | 0.3 |
| | 0.2 |
| | — |
| | 1.4 |
| | 0.7 |
| | 0.4 |
| | — |
|
Operating Lease Cost | 2.9 |
| | 0.1 |
| | 0.5 |
| | — |
| | 5.9 |
| | 0.1 |
| | 0.9 |
| | — |
|
Variable Lease Cost | 15.7 |
| | 3.1 |
| | — |
| | 12.6 |
| | 31.1 |
| | 6.5 |
| | — |
| | 24.6 |
|
Total Lease Cost | $ | 19.3 |
| | $ | 3.5 |
| | $ | 0.7 |
| | $ | 12.6 |
| | $ | 38.4 |
| | $ | 7.3 |
| | $ | 1.3 |
| | $ | 24.6 |
|
Operating lease cost, less the capitalized portion, is included in Operations and Maintenance (or Purchased Power, Fuel and Transmission expense for transmission segment leases) on the statements of income. Amortization of finance lease assets is included in Depreciation on the statements of income. Interest expense on finance leases is included in Interest Expense, Net on the statements of income.
Supplemental balance sheet information related to leases is as follows:
|
| | | | | | | | | | | | | | | | | |
| | | As of June 30, 2019 |
(Millions of Dollars) | Balance Sheet Classification | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
Operating Leases: | | | | | | | | | |
Operating Lease Right-of-use-Assets, Net | Other Long-Term Assets | | $ | 54.6 |
| | $ | 0.6 |
| | $ | 24.4 |
| | $ | 0.8 |
|
Operating Lease Liabilities | | | | | | | | | |
Operating Lease Liabilities - Current Portion | Other Current Liabilities | | $ | 8.8 |
| | $ | 0.2 |
| | $ | 0.5 |
| | $ | 0.2 |
|
Operating Lease Liabilities - Long-Term | Other Long-Term Liabilities | | 45.8 |
| | 0.4 |
| | 23.9 |
| | 0.6 |
|
Total Operating Lease Liabilities | | | $ | 54.6 |
| | $ | 0.6 |
| | $ | 24.4 |
| | $ | 0.8 |
|
Finance Leases: | | | | | | | | | |
Finance Lease Right-of-use-Assets, Net | Property, Plant and Equipment, Net | | $ | 9.4 |
| | $ | 2.6 |
| | $ | 3.4 |
| | $ | 0.9 |
|
Finance Lease Liabilities | | | | | | | | | |
Finance Lease Liabilities - Current Portion | Other Current Liabilities | | $ | 2.3 |
| | $ | 1.5 |
| | $ | — |
| | $ | 0.1 |
|
Finance Lease Liabilities - Long-Term | Other Long-Term Liabilities | | 9.3 |
| | 2.3 |
| | 4.4 |
| | 0.8 |
|
Total Finance Lease Liabilities | | | $ | 11.6 |
| | $ | 3.8 |
| | $ | 4.4 |
| | $ | 0.9 |
|
The finance lease payments that NSTAR Electric will make over the next twelve months are entirely interest-related, due to escalating payments. As such, none of the finance lease payments over the next twelve months will reduce the finance lease liability.
Other information related to leases is as follows (in millions of dollars, unless otherwise noted): |
| | | | | | | | | | | | | | | |
| Eversource | | CL&P | | NSTAR Electric | | PSNH |
As of June 30, 2019 | | | | | | | |
Weighted-Average Remaining Lease Term (Years): | | | | | | | |
Operating Leases | 12 |
| | 4 |
| | 21 |
| | 8 |
|
Financing Leases | 11 |
| | 2 |
| | 23 |
| | 9 |
|
Weighted-Average Discount Rate (Percentage): | | | | | | | |
Operating Leases | 3.9 | % | | 2.7 | % | | 4.1 | % | | 3.6 | % |
Financing Leases | 4.3 | % | | 10.5 | % | | 2.9 | % | | 3.5 | % |
| | | | | | | |
For the Three Months Ended June 30, 2019 | | | | | | | |
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: | | | | | | | |
Operating Cash Flows from Operating Leases | $ | 3.0 |
| | $ | 0.1 |
| | $ | 0.5 |
| | $ | — |
|
Operating Cash Flows from Finance Leases | 0.3 |
| | 0.1 |
| | 0.1 |
| | — |
|
Financing Cash Flows from Finance Leases | 0.5 |
| | 0.4 |
| | — |
| | — |
|
Supplemental Non-Cash Information on Lease Liabilities: | | | | | | | |
Right-of-use-Assets Obtained in Exchange for New Operating Lease Liabilities | 0.4 |
| | 0.2 |
| | — |
| | 0.2 |
|
Right-of-use-Assets Obtained in Exchange for New Finance Lease Liabilities | 1.3 |
| | — |
| | — |
| | — |
|
|
| | | | | | | | | | | | | | | |
| Eversource | | CL&P | | NSTAR Electric | | PSNH |
For the Six Months Ended June 30, 2019 | | | | | | | |
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: | | | | | | | |
Operating Cash Flows from Operating Leases | $ | 5.9 |
| | $ | 0.1 |
| | $ | 0.8 |
| | $ | — |
|
Operating Cash Flows from Finance Leases | 0.6 |
| | 0.3 |
| | 0.3 |
| | — |
|
Financing Cash Flows from Finance Leases | 0.9 |
| | 0.7 |
| | — |
| | — |
|
Supplemental Non-Cash Information on Lease Liabilities: | | | | | | | |
Right-of-use-Assets Obtained in Exchange for New Operating Lease Liabilities | 1.7 |
| | 0.2 |
| | — |
| | 0.2 |
|
Right-of-use-Assets Obtained in Exchange for New Finance Lease Liabilities | 1.3 |
| | — |
| | — |
| | — |
|
Future minimum lease payments, excluding variable costs, under long-term leases, as of June 30, 2019 are as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Leases | | Finance Leases |
(Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH | | Eversource | | CL&P | | NSTAR Electric | | PSNH |
July 1, 2019 through December 31, 2019 | $ | 5.7 |
| | $ | 0.3 |
| | $ | 0.8 |
| | $ | 0.2 |
| | $ | 1.7 |
| | $ | 1.0 |
| | $ | 0.3 |
| | $ | 0.1 |
|
Year Ending December 31, | | | | | | | | | | | | | | | |
2020 | 10.3 |
| | 0.2 |
| | 1.6 |
| | 0.2 |
| | 3.4 |
| | 2.0 |
| | 0.5 |
| | 0.1 |
|
2021 | 9.2 |
| | 0.1 |
| | 1.6 |
| | 0.2 |
| | 2.9 |
| | 1.5 |
| | 0.5 |
| | 0.1 |
|
2022 | 7.5 |
| | — |
| | 1.6 |
| | 0.1 |
| | 1.5 |
| | — |
| | 0.6 |
| | 0.1 |
|
2023 | 4.9 |
| | — |
| | 1.6 |
| | 0.1 |
| | 0.7 |
| | — |
| | 0.6 |
| | 0.1 |
|
2024 | 2.9 |
| | — |
| | 1.7 |
| | — |
| | 0.7 |
| | — |
| | 0.6 |
| | 0.1 |
|
Thereafter | 29.2 |
| | 0.1 |
| | 28.9 |
| | 0.2 |
| | 13.2 |
| | — |
| | 12.8 |
| | 0.4 |
|
Future lease payments | 69.7 |
| | 0.7 |
| | 37.8 |
| | 1.0 |
| | 24.1 |
| | 4.5 |
| | 15.9 |
| | 1.0 |
|
Less amount representing interest | 15.1 |
| | 0.1 |
| | 13.4 |
| | 0.2 |
| | 12.5 |
| | 0.7 |
| | 11.5 |
| | 0.1 |
|
Present value of future minimum lease payments | $ | 54.6 |
| | $ | 0.6 |
| | $ | 24.4 |
| | $ | 0.8 |
| | $ | 11.6 |
| | $ | 3.8 |
| | $ | 4.4 |
| | $ | 0.9 |
|
At December 31, 2018, future minimum rental payments, excluding executory costs, such as property taxes, state use taxes, insurance, and maintenance were as follows:
|
| | | | | | | | | | | | | | | |
Operating Leases (Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH |
2019 | $ | 11.5 |
| | $ | 1.5 |
| | $ | 7.2 |
| | $ | 0.5 |
|
2020 | 9.8 |
| | 1.4 |
| | 6.0 |
| | 0.4 |
|
2021 | 8.7 |
| | 1.2 |
| | 5.3 |
| | 0.4 |
|
2022 | 7.2 |
| | 1.1 |
| | 4.4 |
| | 0.4 |
|
2023 | 4.7 |
| | 0.5 |
| | 3.1 |
| | 0.2 |
|
Thereafter | 32.7 |
| | 0.2 |
| | 29.5 |
| | 0.3 |
|
Future minimum lease payments | $ | 74.6 |
| | $ | 5.9 |
| | $ | 55.5 |
| | $ | 2.2 |
|
|
| | | | | | | | | | | | | | | |
Capital Leases (Millions of Dollars) | Eversource | | CL&P | | NSTAR Electric | | PSNH |
2019 | $ | 3.4 |
| | $ | 2.0 |
| | $ | 0.5 |
| | $ | 0.1 |
|
2020 | 3.4 |
| | 2.0 |
| | 0.5 |
| | 0.1 |
|
2021 | 2.9 |
| | 1.5 |
| | 0.5 |
| | 0.1 |
|
2022 | 1.5 |
| | — |
| | 0.6 |
| | 0.1 |
|
2023 | 0.7 |
| | — |
| | 0.6 |
| | 0.1 |
|
Thereafter | 13.9 |
| | — |
| | 13.4 |
| | 0.5 |
|
Future minimum lease payments | 25.8 |
| | 5.5 |
| | 16.1 |
| | 1.0 |
|
Less amount representing interest | 13.8 |
| | 1.0 |
| | 12.4 |
| | 0.1 |
|
Present value of future minimum lease payments | $ | 12.0 |
| | $ | 4.5 |
| | $ | 3.7 |
| | $ | 0.9 |
|
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each of the following financial instruments:
Preferred Stock, Long-Term Debt and Rate Reduction Bonds: The fair value of CL&P's and NSTAR Electric's preferred stock is based upon pricing models that incorporate interest rates and other market factors, valuations or trades of similar securities and cash flow projections. The fair value of long-term debt and RRB debt securities is based upon pricing models that incorporate quoted market prices for those issues or similar issues adjusted for market conditions, credit ratings of the respective companies and treasury benchmark yields. The fair values provided in the table below are classified as Level 2 within the fair value hierarchy. Carrying amounts and estimated fair values are as follows:
| | | Eversource | | CL&P | | NSTAR Electric | | PSNH | Eversource | | CL&P | | NSTAR Electric | | PSNH |
(Millions of Dollars) | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
As of June 30, 2019: | | | | | | | | | | | | | | | | |
As of March 31, 2020: | | | | | | | | | | | | | | | | |
Preferred Stock Not Subject to Mandatory Redemption | $ | 155.6 |
| | $ | 161.0 |
| | $ | 116.2 |
| | $ | 117.4 |
| | $ | 43.0 |
| | $ | 43.6 |
| | $ | — |
| | $ | — |
| $ | 155.6 |
| | $ | 156.0 |
| | $ | 116.2 |
| | $ | 113.8 |
| | $ | 43.0 |
| | $ | 42.2 |
| | $ | — |
| | $ | — |
|
Long-Term Debt | 13,818.5 |
| | 14,639.4 |
| | 3,309.5 |
| | 3,724.9 |
| | 3,341.5 |
| | 3,599.6 |
| | 1,101.8 |
| | 1,145.3 |
| 14,431.0 |
| | 15,177.1 |
| | 3,518.1 |
| | 3,949.4 |
| | 3,642.3 |
| | 3,901.2 |
| | 951.7 |
| | 995.8 |
|
Rate Reduction Bonds | 604.9 |
| | 642.2 |
| | — |
| | — |
| | — |
| | — |
| | 604.9 |
| | 642.2 |
| 561.7 |
| | 596.0 |
| | — |
| | — |
| | — |
| | — |
| | 561.7 |
| | 596.0 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2018: | | | | | | | | | | | | | | | | |
As of December 31, 2019: | | | | | | | | | | | | | | | | |
Preferred Stock Not Subject to Mandatory Redemption | $ | 155.6 |
| | $ | 156.8 |
| | $ | 116.2 |
| | $ | 113.8 |
| | $ | 43.0 |
| | $ | 43.0 |
| | $ | — |
| | $ | — |
| $ | 155.6 |
| | $ | 162.0 |
| | $ | 116.2 |
| | $ | 117.8 |
| | $ | 43.0 |
| | $ | 44.2 |
| | $ | — |
| | $ | — |
|
Long-Term Debt | 13,086.1 |
| | 13,154.9 |
| | 3,254.0 |
| | 3,429.2 |
| | 2,944.8 |
| | 3,024.1 |
| | 805.2 |
| | 819.5 |
| 14,098.2 |
| | 15,170.2 |
| | 3,518.1 |
| | 4,058.0 |
| | 3,342.1 |
| | 3,659.9 |
| | 951.6 |
| | 1,005.7 |
|
Rate Reduction Bonds | 635.7 |
| | 645.8 |
| | — |
| | — |
| | — |
| | — |
| | 635.7 |
| | 645.8 |
| 583.3 |
| | 625.9 |
| | — |
| | — |
| | — |
| | — |
| | 583.3 |
| | 625.9 |
|
Derivative Instruments and Marketable Securities: Derivative instruments and investments in marketable securities are carried at fair value. For further information, see Note 4, "Derivative Instruments," and Note 5, "Marketable Securities," to the financial statements.
See Note 1E,1D, "Summary of Significant Accounting Policies - Fair Value Measurements," for the fair value measurement policy and the fair value hierarchy.
11. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The changes in accumulated other comprehensive income/(loss) by component, net of tax, are as follows:
| | | For the Six Months Ended June 30, 2019 | | For the Six Months Ended June 30, 2018 | For the Three Months Ended March 31, 2020 | | For the Three Months Ended March 31, 2019 |
Eversource (Millions of Dollars) | Qualified Cash Flow Hedging Instruments | | Unrealized Gains/(Losses) on Marketable Securities | | Defined Benefit Plans | | Total | | Qualified Cash Flow Hedging Instruments | | Unrealized Losses on Marketable Securities | | Defined Benefit Plans | | Total | Qualified Cash Flow Hedging Instruments | | Unrealized Gains on Marketable Securities | | Defined Benefit Plans | | Total | | Qualified Cash Flow Hedging Instruments | | Unrealized Gains/(Losses) on Marketable Securities | | Defined Benefit Plans | | Total |
Balance as of January 1st | $ | (4.4 | ) | | $ | (0.5 | ) | | $ | (55.1 | ) | | $ | (60.0 | ) | | $ | (6.2 | ) | | $ | — |
| | $ | (60.2 | ) | | $ | (66.4 | ) | $ | (3.0 | ) | | $ | 0.7 |
| | $ | (62.8 | ) | | $ | (65.1 | ) | | $ | (4.4 | ) | | $ | (0.5 | ) | | $ | (55.1 | ) | | $ | (60.0 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OCI Before Reclassifications | — |
| | 1.1 |
| | 2.6 |
| | 3.7 |
| | — |
| | (0.6 | ) | | 2.6 |
| | 2.0 |
| — |
| | 0.2 |
| | — |
| | 0.2 |
| | — |
| | 0.7 |
| | — |
| | 0.7 |
|
Amounts Reclassified from AOCI | 0.6 |
| | — |
| | 2.1 |
| | 2.7 |
| | 1.2 |
| | — |
| | 2.2 |
| | 3.4 |
| 0.2 |
| | — |
| | 1.6 |
| | 1.8 |
| | 0.3 |
| | — |
| | 1.2 |
| | 1.5 |
|
Net OCI | 0.6 |
| | 1.1 |
| | 4.7 |
| | 6.4 |
| | 1.2 |
| | (0.6 | ) | | 4.8 |
| | 5.4 |
| 0.2 |
| | 0.2 |
| | 1.6 |
| | 2.0 |
| | 0.3 |
| | 0.7 |
| | 1.2 |
| | 2.2 |
|
Balance as of June 30th | $ | (3.8 | ) | | $ | 0.6 |
| | $ | (50.4 | ) | | $ | (53.6 | ) | | $ | (5.0 | ) | | $ | (0.6 | ) | | $ | (55.4 | ) | | $ | (61.0 | ) | |
Balance as of March 31st | | $ | (2.8 | ) | | $ | 0.9 |
| | $ | (61.2 | ) | | $ | (63.1 | ) | | $ | (4.1 | ) | | $ | 0.2 |
| | $ | (53.9 | ) | | $ | (57.8 | ) |
Eversource's qualified cash flow hedging instruments represent interest rate swap agreements on debt issuances that were settled in prior years. The settlement amount was recorded in AOCI and is being amortized into Net Income over the term of the underlying debt instrument. CL&P, NSTAR Electric and PSNH continue to amortize interest rate swaps settled in prior years from AOCI into Interest Expense over the remaining life of the associated long-term debt. Such interest rate swaps are not material to their respective financial statements.
Defined benefit plan OCI amounts before reclassifications relate to actuarial gains and losses that arose during the year and were recognized in AOCI. The unamortized actuarial gains and losses and prior service costs on the defined benefit plans are amortized from AOCI into Other Income, Net over the average future employee service period, and are reflected in amounts reclassified from AOCI.
Eversource did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from AOCI to Retained Earnings as permitted by ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220).
13.12. COMMON SHARES
The following table sets forth the Eversource parent common shares and the shares of common stock of CL&P, NSTAR Electric and PSNH that were authorized and issued, as well as the respective per share par values:
| | | Shares | Shares |
| | | Authorized as of June 30, 2019 and December 31, 2018 | | Issued as of | | | Authorized as of March 31, 2020 and December 31, 2019 | | Issued as of |
| Par Value | | June 30, 2019 | | December 31, 2018 | Par Value | | March 31, 2020 | | December 31, 2019 |
Eversource | $ | 5 |
| | 380,000,000 |
| | 339,858,402 |
| | 333,878,402 |
| $ | 5 |
| | 380,000,000 |
| | 351,818,402 |
| | 345,858,402 |
|
CL&P | $ | 10 |
| | 24,500,000 |
| | 6,035,205 |
| | 6,035,205 |
| $ | 10 |
| | 24,500,000 |
| | 6,035,205 |
| | 6,035,205 |
|
NSTAR Electric | $ | 1 |
| | 100,000,000 |
| | 200 |
| | 200 |
| $ | 1 |
| | 100,000,000 |
| | 200 |
| | 200 |
|
PSNH | $ | 1 |
| | 100,000,000 |
| | 301 |
| | 301 |
| $ | 1 |
| | 100,000,000 |
| | 301 |
| | 301 |
|
Common Share Issuance and Forward Sale Agreement: OnIn June 4, 2019, Eversource completed an equity offering of 17,940,000 common shares, consisting of 5,980,000 common shares issued directly by the Company and 11,960,000 common shares issuable pursuant to a forward sale agreement with an investment bank. The issuance of 5,980,000 common shares resulted in proceeds of $426.9 million, net of issuance costs, and was reflected in shareholders’ equity and as a financing activity on the statement of cash flows.
Under the forward sale agreement, a total of 11,960,000 common shares were borrowed from third parties and sold toby the underwriters. The forward sale agreement allowsallowed Eversource, at its election and prior to May 29, 2020, to physically settle the forward sale agreement by issuing common shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially, $71.48 per share) or, alternatively, to settle the forward sale agreement in whole or in part through the delivery or receipt of shares or cash. The forward sale price iswas subject to adjustment daily based on a floating interest rate factor and willwould decrease in respect of certain fixed amounts specified in the agreement, such as dividends.
Eversource’s intent is toEversource previously issued 6,000,000 common shares under the forward sale agreement in December 2019. On March 23, 2020, Eversource physically settlesettled a portion of the forward sale agreement by issuingdelivering 1,500,000 common shares. Asshares in exchange for net proceeds of June 30, 2019, if$105.7 million. Subsequently, on March 26, 2020, Eversource had elected to net settlephysically settled the remaining portion of the forward sale agreement Eversource would have been required to pay $50.2 million under a cash settlement or would have been required to deliver 662,694by delivering 4,460,000 common shares under ain exchange for net proceeds of $314.1 million. The forward sale price used to determine the cash proceeds received by Eversource was calculated based on the initial forward sale price of $71.48 per share, settlement.as adjusted in accordance with the forward sale agreement.
The 2020 issuances of 5,960,000 common shares resulted in proceeds of $419.8 million, net of issuance costs, and were reflected in shareholders' equity and as financing activities on the statement of cash flows.
Issuances of shares under the forward sale agreement are classified as equity transactions. Accordingly, no amounts relating to the forward sale agreement have or will bewere recorded in the financial statements until settlements taketook place. Prior to any settlements, the only impact to the financial statements iswas the inclusion of incremental shares within the calculation of diluted EPS using the treasury stock method. See Note 15,14, "Earnings Per Share," to the financial statements for information on the forward sale agreement’s impact on the calculation of diluted EPS.
Eversource used the net proceeds received upon the direct issuance of common shares and the net proceeds received upon settlement of the forward sale agreement to repay short-term debt under the commercial paper program, to fund capital spending and clean energy initiatives, and for general corporate purposes.
Treasury Shares: As of June 30, 2019March 31, 2020 and December 31, 2018,2019, there were 16,283,96315,407,215 and 16,992,59415,977,757 Eversource common shares held as treasury shares, respectively. As of June 30, 2019March 31, 2020 and December 31, 2018,2019, Eversource common shares outstanding were 323,574,439336,411,187 and 316,885,808,329,880,645, respectively.
Beginning in 2019,
Eversource began issuingissues treasury shares to satisfy awards under the Company's incentive plans, shares issued under the dividend reinvestment and share purchase plan, and matching contributions under the Eversource 401k Plan. The issuance of treasury shares represents a non-cash transaction, as the treasury shares were used to fulfill Eversource's obligations that require the issuance of common shares.
14.13. COMMON SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
Dividends on the preferred stock of CL&P and NSTAR Electric totaled $1.9 million for each of the three months ended June 30, 2019March 31, 2020 and 2018 and $3.8 million for each of the six months ended June 30, 2019 and 2018.2019. These dividends were presented as Net Income Attributable to Noncontrolling Interests on the Eversource statements of income. Noncontrolling Interest – Preferred Stock of Subsidiaries on the Eversource balance sheets totaled $155.6 million as of June 30, 2019March 31, 2020 and December 31, 2018.2019. On the Eversource balance sheets, Common Shareholders' Equity was fully attributable to Eversource parent and Noncontrolling Interest – Preferred Stock of Subsidiaries was fully attributable to the noncontrolling interest.
15.14. EARNINGS PER SHARE
Basic EPS is computed based upon the weighted average number of common shares outstanding during each period. Diluted EPS is computed on the basis of the weighted average number of common shares outstanding plus the potential dilutive effect of certain share-based compensation awards and the equity forward sale agreement, as if they were converted into outstanding common shares. The dilutive effect of unvested RSU and performance share awards, as well as the equity forward sale agreement, is calculated using the treasury stock method. RSU and performance share awards are included in basic weighted average common shares outstanding as of the date that all necessary vesting conditions have been satisfied.
As described in Note 13,12, "Common Shares," earnings per share dilution, if any, related to the forward sale agreement will beis determined under the treasury stock method until settlement of the forward sale agreement. Under this method, the number of Eversource common shares used in calculating diluted EPS is deemed to be increased by the excess, if any, of the number of shares that would be issued upon physical settlement of the forward sale agreement less the number of shares that would be purchased by Eversource in the market (based on the average market price during the same reporting period) using the proceeds receivable upon settlement (based on the adjusted forward sale price at the end of that reporting period). Share dilution occurs when the average market price of Eversource's common shares is higher than the adjusted forward sale price.
The following table sets forth the components of basic and diluted EPS:
| | Eversource (Millions of Dollars, except share information) | For the Three Months Ended | | For the Six Months Ended | For the Three Months Ended |
June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 | March 31, 2020 | | March 31, 2019 |
Net Income Attributable to Common Shareholders | $ | 31.5 |
| | $ | 242.8 |
| | $ | 340.1 |
| | $ | 512.3 |
| $ | 334.8 |
| | $ | 308.7 |
|
Weighted Average Common Shares Outstanding: | | | | | | | | | | |
Basic | 319,664,998 |
| | 317,344,596 |
| | 318,644,796 |
| | 317,370,825 |
| 331,102,237 |
| | 317,624,593 |
|
Dilutive Effect of: | | | | | | | | | | |
Share-Based Compensation Awards and Other | 645,450 |
| | 540,591 |
| | 668,470 |
| | 568,269 |
| 747,233 |
| | 691,489 |
|
Equity Forward Sale Agreement | 78,042 |
| | — |
| | 39,021 |
| | — |
| 1,087,683 |
| | — |
|
Total Dilutive Effect | 723,492 |
| | 540,591 |
| | 707,491 |
| | 568,269 |
| 1,834,916 |
| | 691,489 |
|
Diluted | 320,388,490 |
| | 317,885,187 |
| | 319,352,287 |
| | 317,939,094 |
| 332,937,153 |
| | 318,316,082 |
|
Basic and Diluted EPS | $ | 0.10 |
| | $ | 0.76 |
| | $ | 1.07 |
| | $ | 1.61 |
| $ | 1.01 |
| | $ | 0.97 |
|
15. REVENUES
The following tables present operating revenues disaggregated by revenue source:
| | | For the Three Months Ended June 30, 2019 | For the Three Months Ended March 31, 2020 |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total |
Revenues from Contracts with Customers | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail Tariff Sales | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | $ | 805.0 |
| | $ | 100.2 |
| | $ | — |
| | $ | 33.6 |
| | $ | — |
| | $ | — |
| | $ | 938.8 |
| $ | 963.8 |
| | $ | 238.0 |
| | $ | — |
| | $ | 27.8 |
| | $ | — |
| | $ | — |
| | $ | 1,229.6 |
|
Commercial | 612.8 |
| | 69.5 |
| | — |
| | 16.0 |
| | — |
| | (0.9 | ) | | 697.4 |
| 607.0 |
| | 134.6 |
| | — |
| | 14.8 |
| | — |
| | (1.0 | ) | | 755.4 |
|
Industrial | 81.3 |
| | 23.5 |
| | — |
| | 1.1 |
| | — |
| | (2.8 | ) | | 103.1 |
| 79.8 |
| | 28.3 |
| | — |
| | 1.1 |
| | — |
| | (3.2 | ) | | 106.0 |
|
Total Retail Tariff Sales Revenues | 1,499.1 |
|
| 193.2 |
| | — |
| | 50.7 |
|
| — |
| | (3.7 | ) | | 1,739.3 |
| 1,650.6 |
| | 400.9 |
| | — |
| | 43.7 |
| | — |
| | (4.2 | ) | | 2,091.0 |
|
Wholesale Transmission Revenues | — |
| | — |
| | 281.2 |
| | — |
| | 14.7 |
| | (239.8 | ) | | 56.1 |
| — |
| | — |
| | 336.3 |
| | — |
| | 17.3 |
| | (283.6 | ) | | 70.0 |
|
Wholesale Market Sales Revenues | 39.4 |
| | 14.4 |
| | — |
| | 0.9 |
| | — |
| | — |
| | 54.7 |
| 91.0 |
| | 13.2 |
| | — |
| | 0.8 |
| | — |
| | — |
| | 105.0 |
|
Other Revenues from Contracts with Customers | 15.1 |
| | 0.4 |
| | 3.7 |
| | 1.8 |
| | 236.1 |
| | (236.8 | ) | | 20.3 |
| 19.1 |
| | 0.9 |
| | 3.4 |
| | 1.9 |
| | 277.3 |
| | (276.2 | ) | | 26.4 |
|
Reserve for Revenues Subject to Refund | (3.1 | ) | | 1.5 |
| | — |
| | (0.6 | ) | | — |
| | — |
| | (2.2 | ) | |
Amortization/(Reserve) for Revenues Subject to Refund | | 2.3 |
| | 0.5 |
| | — |
| | (0.8 | ) | | — |
| | — |
| | 2.0 |
|
Total Revenues from Contracts with Customers | 1,550.5 |
|
| 209.5 |
| | 284.9 |
| | 52.8 |
|
| 250.8 |
| | (480.3 | ) | | 1,868.2 |
| 1,763.0 |
| | 415.5 |
| | 339.7 |
| | 45.6 |
| | 294.6 |
| | (564.0 | ) | | 2,294.4 |
|
Alternative Revenue Programs | 6.3 |
| | (2.7 | ) | | 64.6 |
| | 0.7 |
| | — |
| | (58.8 | ) | | 10.1 |
| |
Other Revenues (1) | 5.0 |
| | 0.9 |
| | 0.1 |
| | 0.2 |
| | — |
| | — |
| | 6.2 |
| |
Alternative Revenue Programs (1) | | 38.8 |
| | 32.2 |
| | 29.8 |
| | 1.1 |
| | — |
| | (27.4 | ) | | 74.5 |
|
Other Revenues (2) | | 3.5 |
| | 0.9 |
| | 0.2 |
| | 0.2 |
| | — |
| | — |
| | 4.8 |
|
Total Operating Revenues | $ | 1,561.8 |
|
| $ | 207.7 |
| | $ | 349.6 |
| | $ | 53.7 |
|
| $ | 250.8 |
| | $ | (539.1 | ) | | $ | 1,884.5 |
| $ | 1,805.3 |
| | $ | 448.6 |
| | $ | 369.7 |
| | $ | 46.9 |
| | $ | 294.6 |
| | $ | (591.4 | ) | | $ | 2,373.7 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2019 | |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | |
Revenues from Contracts with Customers | | | | | | | | | | | | | | |
Retail Tariff Sales | | | | | | | | | | | | | | |
Residential | $ | 1,838.3 |
| | $ | 359.1 |
| | $ | — |
| | $ | 60.5 |
| | $ | — |
| | $ | — |
| | $ | 2,257.9 |
| |
Commercial | 1,265.3 |
| | 213.3 |
| | — |
| | 30.3 |
| | — |
| | (2.0 | ) | | 1,506.9 |
| |
Industrial | 163.4 |
| | 54.4 |
| | — |
| | 2.2 |
| | — |
| | (5.5 | ) | | 214.5 |
| |
Total Retail Tariff Sales Revenues | 3,267.0 |
| | 626.8 |
| | — |
| | 93.0 |
| | — |
| | (7.5 | ) | | 3,979.3 |
| |
Wholesale Transmission Revenues | — |
| | — |
| | 606.1 |
| | — |
| | 28.3 |
| | (510.7 | ) | | 123.7 |
| |
Wholesale Market Sales Revenues | 90.8 |
| | 36.1 |
| | — |
| | 1.9 |
| | — |
| | — |
| | 128.8 |
| |
Other Revenues from Contracts with Customers | 27.7 |
| | 1.4 |
| | 6.9 |
| | 3.5 |
| | 480.7 |
| | (482.2 | ) | | 38.0 |
| |
Reserve for Revenues Subject to Refund | (6.1 | ) | | 3.1 |
| | — |
| | (1.2 | ) | | — |
| | — |
| | (4.2 | ) | |
Total Revenues from Contracts with Customers | 3,379.4 |
| | 667.4 |
| | 613.0 |
| | 97.2 |
| | 509.0 |
| | (1,000.4 | ) | | 4,265.6 |
| |
Alternative Revenue Programs | 8.4 |
| | 7.7 |
| | 77.0 |
| | 1.5 |
| | — |
| | (69.8 | ) | | 24.8 |
| |
Other Revenues (1) | 7.8 |
| | 1.5 |
| | 0.1 |
| | 0.5 |
| | — |
| | — |
| | 9.9 |
| |
Total Operating Revenues | $ | 3,395.6 |
| | $ | 676.6 |
| | $ | 690.1 |
| | $ | 99.2 |
| | $ | 509.0 |
| | $ | (1,070.2 | ) | | $ | 4,300.3 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2019 |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total |
Revenues from Contracts with Customers | | | | | | | | | | | | | |
Retail Tariff Sales | | | | | | | | | | | | | |
Residential | $ | 1,033.3 |
| | $ | 258.9 |
| | $ | — |
| | $ | 27.0 |
| | $ | — |
| | $ | — |
| | $ | 1,319.2 |
|
Commercial | 652.6 |
| | 143.8 |
| | — |
| | 14.3 |
| | — |
| | (1.1 | ) | | 809.6 |
|
Industrial | 82.1 |
| | 30.9 |
| | — |
| | 1.1 |
| | — |
| | (2.7 | ) | | 111.4 |
|
Total Retail Tariff Sales Revenues | 1,768.0 |
| | 433.6 |
| | — |
| | 42.4 |
| | — |
| | (3.8 | ) | | 2,240.2 |
|
Wholesale Transmission Revenues | — |
| | — |
| | 324.9 |
| | — |
| | 13.5 |
| | (270.8 | ) | | 67.6 |
|
Wholesale Market Sales Revenues | 51.5 |
| | 21.7 |
| | — |
| | 1.0 |
| | — |
| | — |
| | 74.2 |
|
Other Revenues from Contracts with Customers | 12.6 |
| | 0.9 |
| | 3.2 |
| | 1.7 |
| | 244.6 |
| | (245.4 | ) | | 17.6 |
|
Amortization/(Reserve) for Revenues Subject to Refund | (3.1 | ) | | 1.6 |
| | — |
| | (0.8 | ) | | — |
| | — |
| | (2.3 | ) |
Total Revenues from Contracts with Customers | 1,829.0 |
| | 457.8 |
| | 328.1 |
| | 44.3 |
| | 258.1 |
| | (520.0 | ) | | 2,397.3 |
|
Alternative Revenue Programs (1) | 2.1 |
| | 10.4 |
| | 12.4 |
| | 0.9 |
| | — |
| | (11.1 | ) | | 14.7 |
|
Other Revenues (2) | 2.8 |
| | 0.7 |
| | — |
| | 0.3 |
| | — |
| | — |
| | 3.8 |
|
Total Operating Revenues | $ | 1,833.9 |
| | $ | 468.9 |
| | $ | 340.5 |
| | $ | 45.5 |
| | $ | 258.1 |
| | $ | (531.1 | ) | | $ | 2,415.8 |
|
| | | For the Three Months Ended June 30, 2018 | For the Three Months Ended March 31, 2020 | | For the Three Months Ended March 31, 2019 |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | |
(Millions of Dollars) | | CL&P | | NSTAR Electric | | PSNH | | CL&P | | NSTAR Electric | | PSNH |
Revenues from Contracts with Customers | | | | | | | | | | | | | | | | | | | | | | | | |
Retail Tariff Sales | | | | | | | | | | | | | | | | | | | | | | | | |
Residential | $ | 794.4 |
| | $ | 104.1 |
| | $ | — |
| | $ | 32.3 |
| | $ | — |
| | $ | — |
| | $ | 930.8 |
| $ | 489.9 |
| | $ | 331.0 |
| | $ | 142.9 |
| | $ | 510.5 |
| | $ | 371.0 |
| | $ | 151.8 |
|
Commercial | 622.0 |
| | 70.0 |
| | — |
| | 15.7 |
| | — |
| | (2.0 | ) | | 705.7 |
| 226.4 |
| | 301.9 |
| | 79.1 |
| | 236.7 |
| | 336.5 |
| | 79.8 |
|
Industrial | 88.4 |
| | 23.5 |
| | — |
| | 1.1 |
| | — |
| | (2.4 | ) | | 110.6 |
| 34.0 |
| | 26.8 |
| | 19.0 |
| | 34.6 |
| | 28.8 |
| | 18.7 |
|
Total Retail Tariff Sales Revenues | 1,504.8 |
| | 197.6 |
| | — |
| | 49.1 |
| | — |
| | (4.4 | ) | | 1,747.1 |
| 750.3 |
| | 659.7 |
| | 241.0 |
| | 781.8 |
| | 736.3 |
| | 250.3 |
|
Wholesale Transmission Revenues | — |
| | — |
| | 310.8 |
| | — |
| | 12.6 |
| | (268.0 | ) | | 55.4 |
| 151.8 |
| | 134.8 |
| | 49.7 |
| | 154.8 |
| | 122.6 |
| | 47.5 |
|
Wholesale Market Sales Revenues | 34.2 |
| | 12.1 |
| | — |
| | 0.9 |
| | — |
| | — |
| | 47.2 |
| 64.7 |
| | 14.4 |
| | 11.9 |
| | 13.7 |
| | 24.4 |
| | 13.4 |
|
Other Revenues from Contracts with Customers | 18.4 |
| | (0.6 | ) | | 3.2 |
| | 1.9 |
| | 224.4 |
| | (225.1 | ) | | 22.2 |
| 8.8 |
| | 10.7 |
| | 3.7 |
| | 8.9 |
| | 4.0 |
| | 3.6 |
|
Reserve for Revenues Subject to Refund | (7.3 | ) | | (3.5 | ) | | — |
| | (0.5 | ) | | — |
| | — |
| | (11.3 | ) | |
Amortization/(Reserve) for Revenues Subject to Refund | | — |
| | — |
| | 2.3 |
| | — |
| | — |
| | (3.1 | ) |
Total Revenues from Contracts with Customers | 1,550.1 |
| | 205.6 |
| | 314.0 |
| | 51.4 |
| | 237.0 |
| | (497.5 | ) | | 1,860.6 |
| 975.6 |
| | 819.6 |
| | 308.6 |
| | 959.2 |
| | 887.3 |
| | 311.7 |
|
Alternative Revenue Programs | (14.4 | ) | | 0.1 |
| | 3.4 |
| | 1.9 |
| | — |
| | (2.9 | ) | | (11.9 | ) | |
Other Revenues | 4.2 |
| | 0.8 |
| | — |
| | 0.2 |
| | — |
| | — |
| | 5.2 |
| |
Alternative Revenue Programs (1) | | 44.6 |
| | 19.3 |
| | 4.7 |
| | 5.7 |
| | 7.3 |
| | 1.5 |
|
Other Revenues (2) | | 1.7 |
| | 1.4 |
| | 0.6 |
| | 1.0 |
| | 1.5 |
| | 0.3 |
|
Eliminations | | (122.2 | ) | | (106.5 | ) | | (37.5 | ) | | (116.7 | ) | | (98.5 | ) | | (37.1 | ) |
Total Operating Revenues | $ | 1,539.9 |
| | $ | 206.5 |
| | $ | 317.4 |
| | $ | 53.5 |
| | $ | 237.0 |
| | $ | (500.4 | ) | | $ | 1,853.9 |
| $ | 899.7 |
| | $ | 733.8 |
| | $ | 276.4 |
| | $ | 849.2 |
| | $ | 797.6 |
| | $ | 276.4 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2018 | |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | |
Revenues from Contracts with Customers | | | | | | | | | | | | | | |
Retail Tariff Sales | | | | | | | | | | | | | | |
Residential | $ | 1,788.7 |
| | $ | 352.9 |
| | $ | — |
| | $ | 59.7 |
| | $ | — |
| | $ | — |
| | $ | 2,201.3 |
| |
Commercial | 1,233.4 |
| | 204.7 |
| | — |
| | 30.0 |
| | — |
| | (2.1 | ) | | 1,466.0 |
| |
Industrial | 169.9 |
| | 53.1 |
| | — |
| | 2.1 |
| | — |
| | (5.0 | ) | | 220.1 |
| |
Total Retail Tariff Sales Revenues | 3,192.0 |
| | 610.7 |
| | — |
| | 91.8 |
| | — |
| | (7.1 | ) | | 3,887.4 |
| |
Wholesale Transmission Revenues | — |
| | — |
| | 624.5 |
| | — |
| | 22.7 |
| | (526.7 | ) | | 120.5 |
| |
Wholesale Market Sales Revenues | 92.7 |
| | 29.9 |
| | — |
| | 1.7 |
| | — |
| | — |
| | 124.3 |
| |
Other Revenues from Contracts with Customers | 35.3 |
| | (0.9 | ) | | 6.2 |
| | 3.7 |
| | 445.2 |
| | (446.3 | ) | | 43.2 |
| |
Reserve for Revenues Subject to Refund | (26.5 | ) | | (8.0 | ) | | — |
| | (2.0 | ) | | — |
| | — |
| | (36.5 | ) | |
Total Revenues from Contracts with Customers | 3,293.5 |
| | 631.7 |
| | 630.7 |
| | 95.2 |
| | 467.9 |
| | (980.1 | ) | | 4,138.9 |
| |
Alternative Revenue Programs | (5.7 | ) | | (1.7 | ) | | (8.3 | ) | | 2.6 |
| | — |
| | 7.7 |
| | (5.4 | ) | |
Other Revenues | 6.7 |
| | 1.4 |
| | — |
| | 0.2 |
| | — |
| | — |
| | 8.3 |
| |
Total Operating Revenues | $ | 3,294.5 |
| | $ | 631.4 |
| | $ | 622.4 |
| | $ | 98.0 |
| | $ | 467.9 |
| | $ | (972.4 | ) | | $ | 4,141.8 |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, 2019 | | For the Three Months Ended June 30, 2018 |
(Millions of Dollars) | CL&P | | NSTAR Electric | | PSNH | | CL&P | | NSTAR Electric | | PSNH |
Revenues from Contracts with Customers | | | | | | | | | | | |
Retail Tariff Sales | | | | | | | | | | | �� |
Residential | $ | 402.8 |
| | $ | 282.3 |
| | $ | 119.9 |
| | $ | 387.1 |
| | $ | 292.5 |
| | $ | 114.8 |
|
Commercial | 224.7 |
| | 315.8 |
| | 72.7 |
| | 220.7 |
| | 325.5 |
| | 76.2 |
|
Industrial | 33.8 |
| | 28.9 |
| | 18.6 |
| | 36.5 |
| | 30.9 |
| | 21.0 |
|
Total Retail Tariff Sales Revenues | 661.3 |
| | 627.0 |
| | 211.2 |
| | 644.3 |
| | 648.9 |
| | 212.0 |
|
Wholesale Transmission Revenues | 115.9 |
| | 127.5 |
| | 37.8 |
| | 139.9 |
| | 120.9 |
| | 50.1 |
|
Wholesale Market Sales Revenues | 12.1 |
| | 17.2 |
| | 10.1 |
| | 10.6 |
| | 13.4 |
| | 10.9 |
|
Other Revenues from Contracts with Customers | 9.1 |
| | 6.1 |
| | 4.2 |
| | 8.3 |
| | 9.3 |
| | 3.9 |
|
Reserve for Revenues Subject to Refund | — |
| | — |
| | (3.1 | ) | | (4.2 | ) | | — |
| | (3.1 | ) |
Total Revenues from Contracts with Customers | 798.4 |
| | 777.8 |
| | 260.2 |
| | 798.9 |
| | 792.5 |
| | 273.8 |
|
Alternative Revenue Programs | 55.1 |
| | 2.1 |
| | 13.7 |
| | 1.0 |
| | (6.9 | ) | | (5.0 | ) |
Other Revenues (1) | 2.7 |
| | 1.9 |
| | 0.5 |
| | 2.4 |
| | 1.6 |
| | 0.2 |
|
Eliminations | (115.4 | ) | | (99.9 | ) | | (33.5 | ) | | (107.4 | ) | | (96.5 | ) | | (33.9 | ) |
Total Operating Revenues | $ | 740.8 |
| | $ | 681.9 |
| | $ | 240.9 |
| | $ | 694.9 |
| | $ | 690.7 |
| | $ | 235.1 |
|
| | | | | | | | | | | |
| For the Six Months Ended June 30, 2019 | | For the Six Months Ended June 30, 2018 |
(Millions of Dollars) | CL&P | | NSTAR Electric | | PSNH | | CL&P | | NSTAR Electric | | PSNH |
Revenues from Contracts with Customers | | | | | | | | | | | |
Retail Tariff Sales | | | | | | | | | | | |
Residential | $ | 913.4 |
| | $ | 653.2 |
| | $ | 271.7 |
| | $ | 870.4 |
| | $ | 656.7 |
| | $ | 261.6 |
|
Commercial | 461.3 |
| | 652.3 |
| | 152.6 |
| | 443.2 |
| | 640.0 |
| | 151.1 |
|
Industrial | 68.4 |
| | 57.8 |
| | 37.2 |
| | 72.3 |
| | 59.0 |
| | 38.6 |
|
Total Retail Tariff Sales Revenues | 1,443.1 |
| | 1,363.3 |
| | 461.5 |
| | 1,385.9 |
| | 1,355.7 |
| | 451.3 |
|
Wholesale Transmission Revenues | 270.7 |
| | 250.1 |
| | 85.3 |
| | 290.6 |
| | 239.5 |
| | 94.3 |
|
Wholesale Market Sales Revenues | 25.8 |
| | 41.6 |
| | 23.4 |
| | 21.0 |
| | 38.2 |
| | 34.9 |
|
Other Revenues from Contracts with Customers | 18.0 |
| | 10.1 |
| | 7.8 |
| | 16.2 |
| | 18.3 |
| | 7.5 |
|
Reserve for Revenues Subject to Refund | — |
| | — |
| | (6.1 | ) | | (16.6 | ) | | (3.7 | ) | | (6.2 | ) |
Total Revenues from Contracts with Customers | 1,757.6 |
| | 1,665.1 |
| | 571.9 |
| | 1,697.1 |
| | 1,648.0 |
| | 581.8 |
|
Alternative Revenue Programs | 60.9 |
| | 9.3 |
| | 15.2 |
| | (4.1 | ) | | (0.2 | ) | | (9.6 | ) |
Other Revenues (1) | 3.7 |
| | 3.4 |
| | 0.8 |
| | 3.3 |
| | 2.7 |
| | 0.6 |
|
Eliminations | (232.1 | ) | | (198.3 | ) | | (70.6 | ) | | (216.4 | ) | | (189.6 | ) | | (70.3 | ) |
Total Operating Revenues | $ | 1,590.1 |
| | $ | 1,479.5 |
| | $ | 517.3 |
| | $ | 1,479.9 |
| | $ | 1,460.9 |
| | $ | 502.5 |
|
| |
(1) | CL&P, NSTAR Electric, Yankee Gas, NSTAR Gas and the Connecticut water distribution business each have a revenue decoupling mechanism approved by a regulatory commission. The revenue decoupling mechanisms mitigate the impact of lower demand and resulting lost sales revenues by allowing for a true-up to occur as part of each company’s annual decoupling filing. These revenue decoupling mechanisms qualify as alternative revenue programs in accordance with accounting guidance for rate-regulated operations. The increase in revenues from Alternative Revenue Programs for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, was primarily the result of a higher decoupling deferral adjustment driven by lower distribution sales volumes in the first quarter of 2020. The decoupling deferral adjustment to revenues is recorded as a regulatory tracker mechanism within Regulatory Assets on the balance sheets. |
| |
(2) | Other Revenues include certain fees charged to customers whichthat are not considered revenue from contracts with customers. Other revenues also includes lease revenues under lessor accounting guidance of $1.1 million at Eversource, $0.3(including $0.2 million at CL&P, and $0.7 million at NSTAR ElectricElectric) and $1.0 million (including $0.2 million at CL&P, and $0.6 million at NSTAR Electric) for the three months ended June 30, 2019,March 31, 2020 and $2.2 million at Eversource, $0.5 million at CL&P, and $1.3 million at NSTAR Electric for the six months ended June 30,March 31, 2019, respectively. |
17.16. SEGMENT INFORMATION
Eversource is organized into the Electric Distribution, Electric Transmission, Natural Gas Distribution and Water Distribution reportable segments and Other based on a combination of factors, including the characteristics of each segments' services, the sources of operating revenues and expenses and the regulatory environment in which each segment operates. These reportable segments represent substantially all of Eversource's total consolidated revenues. Revenues from the sale of electricity, natural gas and water primarily are derived from residential, commercial and industrial customers and are not dependent on any single customer. The Electric Distribution reportable segment includes the results of PSNH's generation facilities prior to sales in January and August 2018, and NSTAR Electric's solar power facilities. Eversource's reportable segments are determined based upon the level at which Eversource's chief operating decision maker assesses performance and makes decisions about the allocation of company resources.
The remainder of Eversource's operations is presented as Other in the tables below and primarily consists of 1) the equity in earnings of Eversource parent from its subsidiaries and intercompany interest income, both of which are eliminated in consolidation, and interest expense related to the debt of Eversource parent, 2) the revenues and expenses of Eversource Service, most of which are eliminated in consolidation, 3) the operations of CYAPC and YAEC, 4) Eversource Water Ventures, Inc., parent company of Aquarion, and 5) the results of other unregulated subsidiaries, which are not part of its core business. In addition, Other in the tables below includesbusiness, and 6) Eversource parent's equity ownership interests that are not consolidated, which primarily include the offshore wind business, a natural gas pipeline project owned by Enbridge, Inc., the offshore wind business,and a renewable energy investment fund, and two companies that transmit hydroelectricity imported from the Hydro-Quebec system in Canada. fund.
In the ordinary course of business, Yankee Gas and NSTAR Gas purchase natural gas transmission services from the Enbridge, Inc. natural gas pipeline project described above. These affiliate transaction costs total approximately $62.5 million annually and are classified as Purchased Power, Fuel and Transmission on the Eversource statements of income.
Each of Eversource's subsidiaries, including CL&P, NSTAR Electric and PSNH, has one1 reportable segment.
Cash flows used for investments in plant included in the segment information below are cash capital expenditures that do not include amounts incurred but not paid, cost of removal, AFUDC related to equity funds, and the capitalized portions of pension and PBOP expense.
Eversource's segment information is as follows:
| | | For the Three Months Ended June 30, 2019 | For the Three Months Ended March 31, 2020 |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total |
Operating Revenues | $ | 1,561.8 |
| | $ | 207.7 |
| | $ | 349.6 |
| | $ | 53.7 |
| | $ | 250.8 |
| | $ | (539.1 | ) | | $ | 1,884.5 |
| $ | 1,805.3 |
| | $ | 448.6 |
| | $ | 369.7 |
| | $ | 46.9 |
| | $ | 294.6 |
| | $ | (591.4 | ) | | $ | 2,373.7 |
|
Depreciation and Amortization | (150.1 | ) | | (19.5 | ) | | (62.3 | ) | | (12.0 | ) | | (14.7 | ) | | 0.6 |
| | (258.0 | ) | (167.3 | ) | | (19.1 | ) | | (67.5 | ) | | (11.4 | ) | | (21.3 | ) | | 0.6 |
| | (286.0 | ) |
Impairment of Northern Pass Transmission | — |
| | — |
| | (239.6 | ) | | — |
| | — |
| | — |
| | (239.6 | ) | |
Other Operating Expenses | (1,243.0 | ) | | (179.8 | ) | | (108.4 | ) | | (25.0 | ) | | (218.4 | ) | | 538.7 |
| | (1,235.9 | ) | |
Operating Income/(Loss) | $ | 168.7 |
| | $ | 8.4 |
| | $ | (60.7 | ) | | $ | 16.7 |
| | $ | 17.7 |
| | $ | 0.2 |
| | $ | 151.0 |
| |
Interest Expense | $ | (50.8 | ) | | $ | (11.9 | ) | | $ | (30.5 | ) | | $ | (8.6 | ) | | $ | (44.5 | ) | | $ | 13.6 |
| | $ | (132.7 | ) | |
Other Income/(Loss), Net | 12.2 |
| | 0.7 |
| | 8.7 |
| | 0.1 |
| | (114.9 | ) | | 139.1 |
| | 45.9 |
| |
Net Income/(Loss) Attributable to Common Shareholders | 105.4 |
| | (1.8 | ) | | (87.4 | ) | | 8.0 |
| | (145.6 | ) | | 152.9 |
| | 31.5 |
| |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2019 | |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | |
Operating Revenues | $ | 3,395.6 |
| | $ | 676.6 |
| | $ | 690.1 |
| | $ | 99.2 |
| | $ | 509.0 |
| | $ | (1,070.2 | ) | | $ | 4,300.3 |
| |
Depreciation and Amortization | (329.3 | ) | | (39.9 | ) | | (123.7 | ) | | (23.9 | ) | | (28.3 | ) | | 1.1 |
| | (544.0 | ) | |
Impairment of Northern Pass Transmission | — |
| | — |
| | (239.6 | ) | | — |
| | — |
| | — |
| | (239.6 | ) | |
Other Operating Expenses | (2,718.6 | ) | | (521.1 | ) | | (207.2 | ) | | (49.9 | ) | | (444.0 | ) | | 1,069.8 |
| | (2,871.0 | ) | (1,439.6 | ) | | (311.6 | ) | | (106.8 | ) | | (25.0 | ) | | (257.0 | ) | | 591.4 |
| | (1,548.6 | ) |
Operating Income | $ | 347.7 |
| | $ | 115.6 |
| | $ | 119.6 |
| | $ | 25.4 |
| | $ | 36.7 |
| | $ | 0.7 |
| | $ | 645.7 |
| $ | 198.4 |
| | $ | 117.9 |
| | $ | 195.4 |
| | $ | 10.5 |
| | $ | 16.3 |
| | $ | 0.6 |
| | $ | 539.1 |
|
Interest Expense | $ | (100.0 | ) | | $ | (23.7 | ) | | $ | (61.0 | ) | | $ | (17.2 | ) | | $ | (88.6 | ) | | $ | 26.1 |
| | $ | (264.4 | ) | $ | (53.1 | ) | | $ | (11.4 | ) | | $ | (30.6 | ) | | $ | (8.7 | ) | | $ | (42.7 | ) | | $ | 11.8 |
| | $ | (134.7 | ) |
Other Income, Net | 30.4 |
| | 1.0 |
| | 16.8 |
| | 0.4 |
| | 316.8 |
| | (288.5 | ) | | 76.9 |
| 12.5 |
| | 1.4 |
| | 5.2 |
| | 0.1 |
| | 468.1 |
| | (463.2 | ) | | 24.1 |
|
Net Income Attributable to Common Shareholders | 225.4 |
| | 74.7 |
| | 30.9 |
| | 8.8 |
| | 262.0 |
| | (261.7 | ) | | 340.1 |
| 130.1 |
| | 84.4 |
| | 126.8 |
| | 2.1 |
| | 442.2 |
| | (450.8 | ) | | 334.8 |
|
Cash Flows Used for Investments in Plant | 571.3 |
| | 202.7 |
| | 449.2 |
| | 51.4 |
| | 103.2 |
| | — |
| | 1,377.8 |
| 315.8 |
| | 99.1 |
| | 232.8 |
| | 18.5 |
| | 59.3 |
| | — |
| | 725.5 |
|
| | | For the Three Months Ended June 30, 2018 | For the Three Months Ended March 31, 2019 |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total |
Operating Revenues | $ | 1,539.9 |
| | $ | 206.5 |
| | $ | 317.4 |
| | $ | 53.5 |
| | $ | 237.0 |
| | $ | (500.4 | ) | | $ | 1,853.9 |
| $ | 1,833.9 |
| | $ | 468.9 |
| | $ | 340.5 |
| | $ | 45.5 |
| | $ | 258.1 |
| | $ | (531.1 | ) | | $ | 2,415.8 |
|
Depreciation and Amortization | (135.5 | ) | | (19.3 | ) | | (57.0 | ) | | (12.2 | ) | | (11.9 | ) | | 0.6 |
| | (235.3 | ) | (179.2 | ) | | (20.4 | ) | | (61.5 | ) | | (11.8 | ) | | (13.6 | ) | | 0.6 |
| | (285.9 | ) |
Other Operating Expenses | (1,233.0 | ) | | (170.6 | ) | | (88.8 | ) | | (24.5 | ) | | (211.7 | ) | | 501.4 |
| | (1,227.2 | ) | (1,475.6 | ) | | (341.3 | ) | | (98.8 | ) | | (25.0 | ) | | (225.5 | ) | | 531.0 |
| | (1,635.2 | ) |
Operating Income | $ | 171.4 |
| | $ | 16.6 |
| | $ | 171.6 |
| | $ | 16.8 |
| | $ | 13.4 |
| | $ | 1.6 |
| | $ | 391.4 |
| $ | 179.1 |
| | $ | 107.2 |
| | $ | 180.2 |
| | $ | 8.7 |
| | $ | 19.0 |
| | $ | 0.5 |
| | $ | 494.7 |
|
Interest Expense | $ | (52.1 | ) | | $ | (11.4 | ) | | $ | (30.0 | ) | | $ | (8.6 | ) | | $ | (32.3 | ) | | $ | 8.0 |
| | $ | (126.4 | ) | $ | (49.2 | ) | | $ | (11.7 | ) | | $ | (30.6 | ) | | $ | (8.6 | ) | | $ | (44.2 | ) | | $ | 12.6 |
| | $ | (131.7 | ) |
Other Income/(Loss), Net | 19.0 |
| | 1.6 |
| | 9.9 |
| | (0.6 | ) | | 302.0 |
| | (281.8 | ) | | 50.1 |
| |
Other Income, Net | | 18.2 |
| | 0.2 |
| | 8.1 |
| | 0.4 |
| | 431.7 |
| | (427.6 | ) | | 31.0 |
|
Net Income Attributable to Common Shareholders | 101.3 |
| | 5.0 |
| | 112.7 |
| | 7.2 |
| | 288.8 |
| | (272.2 | ) | | 242.8 |
| 120.1 |
| | 76.5 |
| | 118.2 |
| | 0.9 |
| | 407.5 |
| | (414.5 | ) | | 308.7 |
|
| | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2018 | |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total | |
Operating Revenues | $ | 3,294.5 |
| | $ | 631.4 |
| | $ | 622.4 |
| | $ | 98.0 |
| | $ | 467.9 |
| | $ | (972.4 | ) | | $ | 4,141.8 |
| |
Depreciation and Amortization | (279.9 | ) | | (45.7 | ) | | (113.5 | ) | | (22.9 | ) | | (23.9 | ) | | 1.1 |
| | (484.8 | ) | |
Other Operating Expenses | (2,676.5 | ) | | (483.2 | ) | | (172.0 | ) | | (48.4 | ) | | (416.3 | ) | | 973.3 |
| | (2,823.1 | ) | |
Operating Income | $ | 338.1 |
| | $ | 102.5 |
| | $ | 336.9 |
| | $ | 26.7 |
| | $ | 27.7 |
| | $ | 2.0 |
| | $ | 833.9 |
| |
Interest Expense | $ | (99.5 | ) | | $ | (22.5 | ) | | $ | (59.7 | ) | | $ | (16.9 | ) | | $ | (64.3 | ) | | $ | 15.4 |
| | $ | (247.5 | ) | |
Other Income/(Loss), Net | 38.6 |
| | 3.5 |
| | 17.8 |
| | (1.1 | ) | | 662.1 |
| | (637.0 | ) | | 83.9 |
| |
Net Income Attributable to Common Shareholders | 205.5 |
| | 62.8 |
| | 220.1 |
| | 8.7 |
| | 634.8 |
| | (619.6 | ) | | 512.3 |
| |
Cash Flows Used for Investments in Plant | 475.6 |
| | 150.3 |
| | 508.5 |
| | 40.2 |
| | 77.1 |
| | — |
| | 1,251.7 |
| |
Cash Flows Used for Investments in Plant (1) | | 279.3 |
| | 87.4 |
| | 184.8 |
| | 20.7 |
| | 55.9 |
| | — |
| | 628.1 |
|
The following table summarizes Eversource's segmented total assets:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total |
As of June 30, 2019 | $ | 21,628.8 |
| | $ | 4,031.3 |
| | $ | 10,499.7 |
| | $ | 2,290.5 |
| | $ | 18,550.4 |
| | $ | (18,004.8 | ) | | $ | 38,995.9 |
|
As of December 31, 2018 | 21,389.1 |
| | 3,904.9 |
| | 10,285.0 |
| | 2,253.0 |
| | 17,874.2 |
| | (17,464.9 | ) | | 38,241.3 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Eversource (Millions of Dollars) | Electric Distribution | | Natural Gas Distribution | | Electric Transmission | | Water Distribution | | Other | | Eliminations | | Total |
As of March 31, 2020 | $ | 23,135.9 |
| | $ | 4,430.4 |
| | $ | 11,137.5 |
| | $ | 2,368.7 |
| | $ | 20,860.8 |
| | $ | (20,284.3 | ) | | $ | 41,649.0 |
|
As of December 31, 2019 | 22,541.9 |
| | 4,345.5 |
| | 10,904.0 |
| | 2,351.7 |
| | 20,469.6 |
| | (19,488.8 | ) | | 41,123.9 |
|
| |
(1) | See Note 1A, "Summary of Significant Accounting Policies - Basis of Presentation," for information regarding the correction of cash investments in plant reported in 2019. |
For further information regarding the 2019 impairment of NPT, see Note 1C, "Summary of Significant Accounting Policies - Impairment of Northern Pass Transmission," to the financial statements.
EVERSOURCE ENERGY AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related combined notes included in this combined Quarterly Report on Form 10-Q, the combined Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, as well as the Eversource 20182019 combined Annual Report on Form 10-K. References in this combined Quarterly Report on Form 10-Q to "Eversource," the "Company," "we," "us," and "our" refer to Eversource Energy and its consolidated subsidiaries. All per-share amounts are reported on a diluted basis. The unaudited condensed consolidated financial statements of Eversource, NSTAR Electric and PSNH and the unaudited condensed financial statements of CL&P are herein collectively referred to as the "financial statements."
Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations.
The only common equity securities that are publicly traded are common shares of Eversource. The earnings and EPS of each business discussed below do not represent a direct legal interest in the assets and liabilities of such business but rather represent a direct interest in our assets and liabilities as a whole. EPS by business is a financial measure not recognized under GAAP, calculated by dividing the Net Income Attributable to Common Shareholders of each business by the weighted average diluted Eversource common shares outstanding for the period. Our earnings discussion also includes a non-GAAP financial measuremeasures referencing our 2020 earnings and EPS excluding certain acquisition costs and our Q2 2019 earnings and EPS excluding the impairment charge for the NPT project.
We use these non-GAAP financial measures to evaluate and provide details of earnings results by business and to more fully compare and explain our 2020 and 2019 results without including the impact of the NPT impairment charge.these items. We believe the acquisition costs and the NPT impairment charge isare not indicative of our ongoing costs and performance. Due to the nature and significance of the impairment chargethese items on Net Income Attributable to Common Shareholders, we believe that the non-GAAP presentation is a more meaningful representation of our financial performance and provides additional and useful information to readers of this report in analyzing historical and future performance of our business. These non-GAAP financial measures should not be considered as an alternative to reported Net Income Attributable to Common Shareholders or EPS determined in accordance with GAAP as an indicator of operating performance.
From time to time, we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify our forward-looking statements through the use of words or phrases such as "estimate," "expect," "anticipate," "intend," "plan," "project," "believe," "forecast," "should," "could," and other similar expressions. Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance. These expectations, estimates, assumptions or projections may vary materially from actual results. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to:
cyberattacks or breaches, including those resulting in the compromise of the confidentiality of our proprietary information and the personal information of our customers,
disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly,
the negative impacts of the novel coronavirus (COVID-19) pandemic on our customers, vendors, employees, regulators, and operations,
changes in economic conditions, including impact on interest rates, tax policies, and customer demand and payment ability,
ability or inability to commence and complete our major strategic development projects and opportunities,
acts of war or terrorism, physical attacks or grid disturbances that may damage and disrupt our electric transmission and electric, natural gas, and water distribution systems,
ability or inability to commence and complete our major strategic development projects and opportunities,
actions or inaction of local, state and federal regulatory, public policy and taxing bodies,
substandard performance of third-party suppliers and service providers,
fluctuations in weather patterns, including extreme weather due to climate change,
changes in business conditions, which could include disruptive technology or development of alternative energy sources related to our current or future business model,
increased conservation measures of customers and development of alternative energy sources,
contamination of, or disruption in, our water supplies,
changes in economic conditions, including impact on interest rates, tax policies, and customer demand and payment ability,
changes in levels or timing of capital expenditures,
disruptions in including the capital markets or other events that make our access to necessary capital more difficult or costly,Columbia Gas of Massachusetts asset acquisition;
changes in laws, regulations or regulatory policy, including compliance with environmental laws and regulations,
changes in accounting standards and financial reporting regulations,
actions of rating agencies, and
other presently unknown or unforeseen factors.
Other risk factors are detailed in our reports filed with the SEC and updated as necessary, and we encourage you to consult such disclosures.
All such factors are difficult to predict and contain uncertainties that may materially affect our actual results, many of which are beyond our control. You should not place undue reliance on the forward-looking statements, as each speaks only as of the date on which such statement is made, and, except as required by federal securities laws, we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor on the business
or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. For more information, see Item 1A, Risk Factors, included in this combined Quarterly Report on Form 10-Q and in Eversource's 20182019 combined Annual Report on Form 10-K. This combined Quarterly Report on Form 10-Q and Eversource's 20182019 combined
Annual Report on Form 10-K also describe material contingencies and critical accounting policies in the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations and Combined Notes to Financial Statements. We encourage you to review these items.
Financial Condition and Business Analysis
Executive Summary
The following items in this executive summary are explained in more detail in this combined Quarterly Report on Form 10-Q:
Earnings Overview and Future Outlook:
| |
• | We earned $31.5 million, or $0.10 per share, in the second quarter of 2019, and $340.1 million, or $1.07 per share, in the first half of 2019, compared with $242.8 million, or $0.76 per share, in the second quarter of 2018, and $512.3 million, or $1.61 per share, in the first half of 2018. Results for the second quarter and first half of 2019 include an after-tax impairment charge of $204.4 million, or $0.64 per share, related to our investment in the NPT project. Excluding that impairment charge, we earned $235.9 million, or $0.74 per share, in the second quarter of 2019, and $544.5 million, or $1.71 per share, in the first half of 2019.We earned $334.8 million, or $1.01 per share, in the first quarter of 2020, compared with $308.7 million, or $0.97 per share, in the first quarter of 2019. Results for the first quarter of 2020 include after-tax acquisition costs related to our planned purchase of the assets of Columbia Gas of Massachusetts (CMA) of $3.5 million, or $0.01 per share. Excluding those acquisition costs, we earned $338.3 million, or $1.02 per share, in the first quarter of 2020. |
Our electric distribution segment earned $105.4$130.1 million, or $0.33 per share, in the second quarter of 2019, and $225.4 million, or $0.71$0.39 per share, in the first halfquarter of 2019,2020, compared with $101.3$120.1 million, or $0.32 per share, in the second quarter of 2018, and $205.5 million, or $0.65$0.38 per share, in the first halfquarter of 2018.2019. Our electric transmission segment earned $126.8 million, or $0.38 per share, in the first quarter of 2020, compared with $118.2 million, or $0.37 per share, in the first quarter of 2019. Our natural gas distribution segment earned $84.4 million, or $0.25 per share, in the first quarter of 2020, compared with $76.5 million, or $0.24 per share, in the first quarter of 2019. Our water distribution segment earned $2.1 million in the first quarter of 2020, compared with $0.9 million in the first quarter of 2019.
Eversource parent and other companies had a net loss of $(1.8) million in the second quarter of 2019, and earnings of $74.7 million, or $0.23 per share, in the first half of 2019, compared with earnings of $5.0$8.6 million, or $0.02 per share, in the secondfirst quarter of 2018, and $62.8 million, or $0.20 per share, in the first half2020, compared with a net loss of 2018. Our water distribution segment earned $8.0$7.0 million, or $0.02 per share, in the secondfirst quarter of 2019,2019. Excluding acquisition costs, Eversource parent and $8.8other companies had a net loss of $5.1 million, or $0.03$0.01 per share, in the first half of 2019, compared with $7.2 million, or $0.02 per share, in the second quarter of 2018, and $8.7 million, or $0.03 per share, in the first half of 2018.
| |
• | Our electric transmission segment had a net loss of $(87.4) million, or $(0.27) per share, in the second quarter of 2019, and earnings of $30.9 million, or $0.10 per share, in the first half of 2019, compared with earnings of $112.7 million, or $0.35 per share, in the second quarter of 2018, and $220.1 million, or $0.69 per share, in the first half of 2018. Excluding the after-tax NPT impairment charge of $204.4 million, or $0.64 per share, our electric transmission segment earned $117.0 million, or $0.37 per share, in the second quarter of 2019, and $235.3 million, or $0.74 per share, in the first half of 2019.
|
Eversource parent and other companies earned $7.3 million, or $0.02 per share, in the second quarter of 2019, and $0.3 million in the first half of 2019, compared with $16.6 million, or $0.05 per share, in the second quarter of 2018, and $15.2 million, or $0.04 per share, in the first half of 2018. 2020.
Excluding the NPT impairment charge, we continue to project non-GAAP 2019We reaffirmed 2020 earnings of between $3.40$3.60 per share and $3.50$3.70 per share.
In March 2020, the World Health Organization declared the outbreak of the 2019 novel coronavirus (COVID-19) a pandemic. As of the date of our filing, the outbreak of COVID-19 has not resulted in a significant financial or operational impact. We are continuing to closely monitor for COVID-19 pandemic related changes, as well as operate under our pandemic response plan; however, we cannot at this time predict the impact that the COVID-19 pandemic will have on our future financial condition and operations.
Liquidity:
Cash flows provided by operating activities totaled $924.6$420.3 million in the first halfquarter of 2019,2020, compared with $698.1$381.4 million in the first halfquarter of 2018.2019. Investments in property, plant and equipment totaled $1.38 billion$725.5 million in the first halfquarter of 2019,2020, compared with $1.25 billion$628.1 million in the first halfquarter of 2018.2019. Cash totaled $20.6$47.4 million as of June 30, 2019,March 31, 2020, compared with $108.1$15.4 million as of December 31, 2018.2019. Our available borrowing capacity under our commercial paper programs totaled $1.27 billion as of March 31, 2020.
On June 4, 2019,In the first quarter of 2020, we completed an equity offering of 17,940,000issued 5,960,000 common shares, consisting of 5,980,000 common shares issued directly by us and 11,960,000 common shares issuable pursuant to a forward sale agreement with an investment bank. The issuance of 5,980,000 common shareswhich resulted in proceeds of $426.9$419.8 million, net of issuance costs, and was reflected in shareholders’ equity and as a financing activity on the statement of cash flows.costs.
In the secondfirst quarter of 2019,2020, we issued $1.0 billion$750 million of new long-term debt, consisting of $300 million by CL&P, $400 million by NSTAR Electric and $300$350 million by PSNH.Eversource parent. Proceeds from these new issuances were used primarily to repayrefinance investments in eligible green expenditures at NSTAR Electric and to pay short-term borrowings and to repay long-term debt at maturity.Eversource parent.
On May 1, 2019,6, 2020, our Board of Trustees approved a common share dividend payment of $0.535$0.5675 per share, which was paidpayable on June 28, 201930, 2020 to shareholders of record as of May 23, 2019.20, 2020. On February 5, 2020, our Board of Trustees approved a common share dividend payment of $0.5675 per share, which was paid on March 31, 2020 to shareholders of record as of March 4, 2020.
Strategic:
On July 19, 2019,February 26, 2020, Eversource and NiSource Inc. entered into an asset purchase agreement where Eversource would acquire certain assets that comprise NiSource’s local natural gas distribution business in Massachusetts for a purchase price of $1.1 billion. The liabilities to be assumed by Eversource specifically exclude any liabilities (past or future) arising out of, or related to, the fires and explosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts. The acquisition and resulting rate plan both require DPU and other approvals. The transaction is expected to close by the end of the third quarter of 2020.
Impact of COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic and President Trump declared a national emergency affecting the entire United States where each state qualifies as being part of a national disaster. The spread of COVID-19 has adversely affected workforces, the overall economy and caused significant volatility in the financial markets. To date, we have not experienced significant operational or financial impacts directly related to the pandemic. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we will continue to closely monitor how COVID-19 related developments affect Eversource. As of the date of our filing and based on information we have available, we are unable to predict the impacts that the COVID-19 pandemic will have on our future operations, financial position, results of operations, and cash flows. The extent of the impact to us in the future will vary and depend in large part on the duration, scope and severity of a national and global economic slowdown, risk of inflation, governmental and regulatory actions, the maintenance of a strong regional and national healthcare system, and the continued spread of the virus, which is mitigated through social distancing measures.
Operational: We provide a critical service to our customers and have taken extensive measures to maintain its reliability. We have implemented our company-wide pandemic plan, which guides our emergency response, business continuity, and the precautionary measures we are taking to ensure the safety, health, and well-being of our employees, our customers, and our communities. We continue to adjust our company-wide pandemic plan to assume various scenarios, including reduced workforce levels and limited mutual aid in the event of a significant storm event, and have implemented protective measures to mitigate the impact of COVID-19 on our workforce. We have implemented work from home policies where appropriate, resulting in nearly half of our employees working remotely. For our employees performing essential functions that are required onsite, such as field crews and system operations, we have taken significant safety measures, including establishing social distancing measures, enabling critical operations to be shifted to different control center locations if necessary, and increasing facility sanitization efforts and promoting both the availability and use of personal protective equipment. We have suspended non-critical work inside customer premises, which includes energy audits inside our customers’ homes and businesses; however, as of the date of our filing, we do not expect a significant impact on our 2020 energy efficiency program spending and efforts. At this time, our workforce staffing levels continue to enable us to safely and reliably deliver our critical services to customers. As of May 7, 2020, we had 31 confirmed employee cases of COVID-19. We had a total of 547 quarantined employees, of which 442 employees have returned to the workforce.
Financial: Overall, our future financial position, results of operations, and cash flows could be negatively impacted by COVID-19 as it relates to the valuation of customer receivables, collectibility estimates and customer payment plans, elimination of late payment revenues, lower sales volumes primarily from PSNH's commercial and industrial customers, market volatility on our equity and debt securities, access to, as well as cost of, capital resources, and the ability of various third-party vendors and suppliers to fulfill their obligations.
As of March 31, 2020, our allowance for uncollectible customer receivable balance of $262.1 million, of which $172.2 million relates to hardship accounts that are specifically recovered in rates charged to customers, adequately reflected the collection risk and net realizable value for our receivables and has not been materially impacted by COVID-19. We will continue to evaluate the adequacy of the uncollectible allowance in future reporting periods based on an ongoing assessment of accounts receivable collections, delinquency statistics, COVID-19 developments, and analysis of aging-based quantitative assessments. We are working closely with our state regulatory commissions and consumer advocates to develop several customer assistance measures, including more flexible and new payment plan options in order to mitigate the impact on customer rates in the future, as well as financial hardship and arrearage management programs for those customers who are unable to pay their utility bills. We are developing these long-term solutions for customers in order to help minimize the extent of the impact of COVID-19 on customer receivable balances and customers’ affordability in light of the current financial impact they may experience. In Connecticut, Massachusetts and New Hampshire, Supreme Court issued a decision denying Northern Pass’ appeal and affirming the NHSEC’s evaluation and decisionbeginning in March, 2018 that denied Northern Pass’ siting application.there is presently a moratorium on disconnections of residential and commercial customers for non-payment. As a result of the New Hampshire Supreme Court decision, Eversource concluded that constructiondate of our filing, although our operating companies are beginning to experience some lower cash collections from customers because of the project was no longer probablemoratorium on disconnections and the economic slowdown, it is not a significant reduction in customer payments. The ultimate amount and duration cannot be estimated at this time; however we anticipate that substantially allany potential reduction in operating cash flows will be mitigated by the use of our short-term borrowing facilities. We believe that we will be able to develop a successful structure with our state regulatory commissions to recover our costs associated with COVID-19, while balancing the impact on our customers’ bills and our operating cash flows. As such, as of the capitalized project costs, which totaled $318 million, certaindate of whichour filing, our uncollectible accounts have not been materially impacted.
An extended economic slowdown could result in lower demand for electricity, natural gas and/or water by our commercial and industrial customers. However, fluctuations in retail sales volumes for CL&P, NSTAR Electric, Yankee Gas, NSTAR Gas and our Connecticut water distribution business are subjectnot expected to cost reimbursement agreements, were impaired. Eversource recordedmaterially impact earnings due to their respective state regulatory commission-approved distribution revenue decoupling mechanisms. Overall, we believe our risk of exposure to lower demand and resulting lost sales revenues is limited as our regulated utilities, with the exception of PSNH, are under cost-of-service rates with revenue decoupling mechanisms, allowing for a pre-taxtrue-up to occur as part of each company’s annual decoupling filing, and a significant portion of uncollectible expenses are tracked for ultimate recovery.
As of March 31, 2020, we did not have indicators of triggering events for impairments to our goodwill, long-lived assets, available-for-sale debt securities, or equity method investment carrying values. As of the date of our filing, based on information we have available and the current market trends, we do not expect an impairment charge of $239.6 million (after-tax charge of $204.4 million, or $0.64 per share)to these assets for the threeremainder of 2020.
We continue to monitor Eversource’s and six months ended June 30, 2019, which was reflectedour operating companies’ ability to access the global capital and credit markets. At the onset of the pandemic in the Electric Transmission segment.United States, liquidity in the commercial paper credit market began to deteriorate rapidly. However, federal legislative actions, including actions taken by the Federal Reserve, have provided sufficient liquidity and stabilization of the credit markets. An extended economic slowdown could result in Eversource and our operating companies finding difficulty in accessing necessary capital resources and incurring higher costs for those capital resources. As of the date of our filing, based on information we have available and the current market trends, we believe we will continue to have access to liquidity and capital resources to successfully execute our projected 2020 capital expenditures and strategies. In addition, the successful execution of our timeline for developing our offshore wind projects is based on several factors, including state and federal
siting and permitting approvals. Currently, we are developing mitigation plans to address permitting delays due to COVID-19 restrictions on our offshore wind projects. For further information, see "Business Development and Capital Expenditures - Offshore Wind Business" included in this Management’s Discussion and Analysis.
On July 18, 2019, NYSERDA announcedPension and PBOP plan assets and obligations are remeasured annually using a December 31st measurement date. Our future pension and PBOP obligations are highly dependent on benefit plan asset returns, interest rates, and discount rates, all of which could be materially impacted by the extended economic slowdown. Should these financial metrics be negatively impacted by COVID-19 as of December 31, 2020, it could result in the underperformance of our pension and PBOP plan investments, an increase in pension and PBOP obligations and employee benefit plan costs, and in a minimum pension funding requirement due by March 31, 2022 for the 2021 Plan year. We continue to monitor federal legislative pension developments that Sunrise Wind,could provide additional pension funding relief. As of the date of our filing, it is difficult to determine whether the pandemic will have a joint project between Eversourcematerial impact to our future pension and Ørsted, was selected to negotiatePBOP obligations and plan costs and minimum funding requirements. NSTAR Electric and NSTAR Gas recover qualified pension and PBOP expenses through a 25-year power purchase agreementrate reconciling mechanism that fully tracks the change in net pension and PBOP expenses each year. Our electric transmission companies' rates provide for an 880 MW offshore wind facility. Sunrise Wind will be developed 30 miles eastannual true-up of Montauk Point, Long Island. Subjectestimated to contract signingactual costs, which include pension and Eversource’s and Ørsted's final investment decisions, the project is expected to be operational in 2024.PBOP expenses.
Earnings Overview
Consolidated: Below is a summary of our earnings by business, which also reconciles the non-GAAP financial measures of consolidated non-GAAP earnings and EPS, as well as EPS by business, to the most directly comparable GAAP measures of consolidated Net Income Attributable to Common Shareholders and diluted EPS.
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
| 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 |
(Millions of Dollars, Except Per Share Amounts) | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share | Amount | | Per Share | | Amount | | Per Share |
Net Income Attributable to Common Shareholders (GAAP) | $ | 31.5 |
| | $ | 0.10 |
| | $ | 242.8 |
| | $ | 0.76 |
| | $ | 340.1 |
| | $ | 1.07 |
| | $ | 512.3 |
| | $ | 1.61 |
| $ | 334.8 |
| | $ | 1.01 |
| | $ | 308.7 |
| | $ | 0.97 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Regulated Companies | $ | 228.6 |
| | $ | 0.72 |
| | $ | 226.2 |
| | $ | 0.71 |
| | $ | 544.2 |
| | $ | 1.71 |
| | $ | 497.1 |
| | $ | 1.57 |
| $ | 343.4 |
| | $ | 1.03 |
| | $ | 315.7 |
| | $ | 0.99 |
|
Eversource Parent and Other Companies | 7.3 |
| | 0.02 |
| | 16.6 |
| | 0.05 |
| | 0.3 |
| | — |
| | 15.2 |
| | 0.04 |
| (5.1 | ) | | (0.01 | ) | | (7.0 | ) | | (0.02 | ) |
Non-GAAP Earnings | $ | 235.9 |
| | $ | 0.74 |
| | $ | 242.8 |
| | $ | 0.76 |
| | $ | 544.5 |
| | $ | 1.71 |
| | $ | 512.3 |
| | $ | 1.61 |
| $ | 338.3 |
| | $ | 1.02 |
| | $ | 308.7 |
| | $ | 0.97 |
|
Impairment of Northern Pass Transmission (after-tax) | (204.4 | ) | | (0.64 | ) | | — |
| | — |
| | (204.4 | ) | | (0.64 | ) | | — |
| | — |
| |
Acquisition-Related Costs (after-tax) (1) | | (3.5 | ) | | (0.01 | ) | | — |
| | — |
|
Net Income Attributable to Common Shareholders (GAAP) | $ | 31.5 |
| | $ | 0.10 |
| | $ | 242.8 |
|
| $ | 0.76 |
| | $ | 340.1 |
| | $ | 1.07 |
| | $ | 512.3 |
| | $ | 1.61 |
| $ | 334.8 |
| | $ | 1.01 |
| | $ | 308.7 |
| | $ | 0.97 |
|
(1) These costs are associated with our pending acquisition of the assets of Columbia Gas of Massachusetts.
Our consolidated earnings also include pre-tax COVID-19 related-charges of $2.1 million incurred in the first quarter of 2020.
Regulated Companies: Our regulated companies comprise the electric distribution, electric transmission, natural gas distribution and water distribution segments. A summary of our segment earnings and EPS is as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
(Millions of Dollars, Except Per Share Amounts) | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share |
Net Income - Regulated Companies (GAAP) | $ | 24.2 |
| | $ | 0.08 |
| | $ | 226.2 |
| | $ | 0.71 |
| | $ | 339.8 |
| | $ | 1.07 |
| | $ | 497.1 |
| | $ | 1.57 |
|
| | | | | | | | | | | | | | | |
Electric Distribution | $ | 105.4 |
| | $ | 0.33 |
| | $ | 101.3 |
| | $ | 0.32 |
| | $ | 225.4 |
| | $ | 0.71 |
| | $ | 205.5 |
| | $ | 0.65 |
|
Electric Transmission, excluding Northern Pass Transmission impairment (Non-GAAP) | 117.0 |
| | 0.37 |
| | 112.7 |
| | 0.35 |
| | 235.3 |
| | 0.74 |
| | 220.1 |
| | 0.69 |
|
Natural Gas Distribution | (1.8 | ) | | — |
| | 5.0 |
| | 0.02 |
| | 74.7 |
| | 0.23 |
| | 62.8 |
| | 0.20 |
|
Water Distribution | 8.0 |
| | 0.02 |
| | 7.2 |
| | 0.02 |
| | 8.8 |
| | 0.03 |
| | 8.7 |
| | 0.03 |
|
Net Income - Regulated Companies (Non-GAAP) | $ | 228.6 |
| | $ | 0.72 |
| | $ | 226.2 |
| | $ | 0.71 |
| | $ | 544.2 |
| | $ | 1.71 |
| | $ | 497.1 |
| | $ | 1.57 |
|
Impairment of Northern Pass Transmission (after-tax) | (204.4 | ) | | (0.64 | ) | | — |
| | — |
| | (204.4 | ) | | (0.64 | ) | | — |
| | — |
|
Net Income - Regulated Companies (GAAP) | $ | 24.2 |
| | $ | 0.08 |
| | $ | 226.2 |
| | $ | 0.71 |
| | $ | 339.8 |
| | $ | 1.07 |
| | $ | 497.1 |
| | $ | 1.57 |
|
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2020 | | 2019 |
(Millions of Dollars, Except Per Share Amounts) | Amount | | Per Share | | Amount | | Per Share |
Net Income - Regulated Companies | $ | 343.4 |
| | $ | 1.03 |
| | $ | 315.7 |
| | $ | 0.99 |
|
| | | | | | | |
Electric Distribution | $ | 130.1 |
| | $ | 0.39 |
| | $ | 120.1 |
| | $ | 0.38 |
|
Electric Transmission | 126.8 |
| | 0.38 |
| | 118.2 |
| | 0.37 |
|
Natural Gas Distribution | 84.4 |
| | 0.25 |
| | 76.5 |
| | 0.24 |
|
Water Distribution | 2.1 |
| | 0.01 |
| | 0.9 |
| | — |
|
Net Income - Regulated Companies | $ | 343.4 |
| | $ | 1.03 |
| | $ | 315.7 |
| | $ | 0.99 |
|
Our electric distribution segment earnings increased $4.1$10.0 million in the secondfirst quarter of 2019,2020, as compared to the secondfirst quarter of 2018,2019, due primarily to CL&P base distribution rate increases at CL&P effective May 1, 2019, and May 1, 2018, anat NSTAR Electric base distribution rate increase effective January 1, 2020, and at PSNH effective July 1, 2019, and higher earnings from CL&P's capital tracker mechanism effective July 1, 2018 due to increased electric system improvements, partially offset by higher operations and maintenance expense, higher depreciation expense, lower non-service income from our benefit plans and the absence in 2019 of generation earnings at PSNH due to the sale of its generation assets in 2018.
Our electric distribution segment earnings increased $19.9 million in the first half of 2019, as compared to the first half of 2018, due primarily to CL&P and NSTAR Electric base distribution rate increases, higher earnings from CL&P's capital tracker mechanism effective July 1, 2018 due to increased electric system improvements, and the recognition in the first quarter of 2019 of carrying charges on PSNH storm costs approved for recovery.lower operations and maintenance expense. The earnings increase was partially offset by higher depreciation expense, higher operations and maintenanceinterest expense, lower non-service income from our benefit plans, and the absence of the first quarter 2019 recognition of carrying charges on PSNH's 2013 through 2016 storm costs approved for recovery, investment loss in 2020, as compared to investment income in 2019 of generation earnings at PSNH due to the sale of its generation assets in 2018.driven by market volatility, and higher property tax expense.
Our electric transmission segment earnings decreased $200.1 million and $189.2increased $8.6 million in the secondfirst quarter and first half of 2019, respectively,2020, as compared to the secondfirst quarter and first half of 2018, due primarily to the impairment of NPT, which resulted in an after-tax charge of $204.4 million, or $0.64 per share. Excluding the NPT impairment charge, earnings increased $4.3 million and $15.2 million in the second quarter and first half of 2019, respectively, as compared to the second quarter and first half of 2018, due primarily to a higher transmission rate base as a result of our continued investment in our transmission infrastructure, partially offset by a lower benefit from the annual billing and cost reconciliation filing with FERC. For further information on the impairment of NPT, see "Business Development and Capital Expenditures - Electric Transmission Business - Northern Pass" in this Management's Discussion and Analysis of Financial Condition and Results of Operations.infrastructure.
Our natural gas distribution segment earnings decreased $6.8 million in the second quarter of 2019, as compared to the second quarter of 2018, due primarily to higher operations and maintenance expense, lower revenues due to the seasonality of the decoupled rate structure arising from the Yankee Gas base distribution rate case, which provides lower earnings in non-heating months, and higher depreciation and property tax expense.
Our natural gas distribution segment earnings increased $11.9$7.9 million in the first halfquarter of 2019,2020, as compared to the first halfquarter of 2018,2019, due primarily to the impact of the Yankee Gasa base distribution rate increase at Yankee Gas effective November 15, 2018January 1, 2020 and higher earnings from capital tracker mechanisms due to continued investmentinvestments in natural gas infrastructure. Yankee Gas' decoupled rate structure is seasonally structured and provides greater earnings in the winter heating months. The earnings increase was partially offset by higher operations and maintenance expense, higher property and other taxes expense and higher depreciation expense.
Our water distribution segment earnings increased $0.8 million and $0.1$1.2 million in the secondfirst quarter and first half of 2019, respectively, as2020, compared to the secondfirst quarter of 2019 due primarily to higher revenues from Connecticut's capital tracker mechanism due to increased infrastructure improvements and first half of 2018. Our water distribution business is seasonal, with lower earnings occurring during the winter months and higher earnings occurring during the summer months.depreciation expense.
Eversource Parent and Other Companies: Eversource parent and other companies had earningsa net loss of $7.3$8.6 million, in the second quarter of 2019 and $0.3 millionor $0.02 per share, in the first halfquarter of 2019,2020, compared with $16.6a net loss of $7.0 million, in the second quarter of 2018 and $15.2 millionor $0.02 per share, in the first halfquarter of 2018.2019. The decrease in earnings in both periodsincreased loss was due primarily to acquisition costs related to the absence in 2019pending acquisition of an income tax benefit associated with our investments in the second quarterassets of 2018, higher interest expense, and a higher effective tax rate,Columbia Gas of Massachusetts of $3.5 million, or $0.01 per share, partially offset by a higher return at Eversource Service as a result of increased investments in property, plant and equipment.
Electric, Natural Gasequipment and Water Sales Volumes: Weather, fluctuations in energy supply costs, conservation measures (including utility-sponsored energy efficiency programs), and economic conditions affect customer energy usage and water consumption. Industrial sales volumes are less sensitive to temperature variations than residential and commercial sales volumes. In our service territories, weather impacts both electric and water sales volumes during the summer and both electric and natural gas sales volumes during the winter; however, natural gas sales volumes are more sensitive to temperature variations than electric sales volumes. Customer heating or cooling usage may not directly correlate with historical levels or with the level of degree-days that occur.
Fluctuations in retail electric sales volumes at PSNH impact earnings ("Traditional" in the table below). For CL&P, NSTAR Electric, Yankee Gas, and NSTAR Gas, fluctuations in retail sales volumes do not impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms ("Decoupled" in the table below). These distribution revenues are decoupled from their customer sales volumes, which breaks the relationship between sales volumes and revenues recognized. Fluctuations in water sales volumes largely do not impact earnings as our Connecticut water distribution business is also decoupled.
A summary of our retail electric GWh sales volumes, our firm natural gas MMcf sales volumes, and our water MG sales volumes, and percentage changes, is as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Electric | | Firm Natural Gas | | Water |
| Sales Volumes (GWh) | | Percentage Decrease | | Sales Volumes (MMcf) | | Percentage Increase/ (Decrease) | | Sales Volumes (MG) | | Percentage Decrease |
Three Months Ended June 30: | 2019 | | 2018 (1) | | | 2019 | | 2018 (2) | | | 2019 | | 2018 | |
Traditional | 1,757 |
| | 1,803 |
| | (2.6 | )% | | — |
| | — |
| | — | % | | 459 |
| | 485 |
| | (5.4 | )% |
Decoupled and Special Contracts (3) | 9,853 |
| | 10,330 |
| | (4.6 | )% | | 18,191 |
| | 18,932 |
| | (3.9 | )% | | 4,834 |
| | 5,016 |
| | (3.6 | )% |
Total Sales Volumes | 11,610 |
| | 12,133 |
| | (4.3 | )% | | 18,191 |
| | 18,932 |
| | (3.9 | )% | | 5,293 |
| | 5,501 |
| | (3.8 | )% |
| | | | | | | | | | | | | | | | | |
Six Months Ended June 30: | | | | | | | | | | | | | | | | | |
Traditional | 3,724 |
| | 3,775 |
| | (1.4 | )% | | — |
| | — |
| | — | % | | 910 |
| | 953 |
| | (4.5 | )% |
Decoupled and Special Contracts (3) | 21,037 |
| | 21,579 |
| | (2.5 | )% | | 63,358 |
| | 61,983 |
| | 2.2 | % | | 9,212 |
| | 9,373 |
| | (1.7 | )% |
Total Sales Volumes | 24,761 |
| | 25,354 |
| | (2.3 | )% | | 63,358 |
| | 61,983 |
| | 2.2 | % | | 10,122 |
| | 10,326 |
| | (2.0 | )% |
(1) Effective February 1, 2018, NSTAR Electric operated entirely under a decoupled rate structure. The 2018 sales volumes for NSTAR Electric have been recast to present January 2018 as decoupled to conform to the current year presentation.
(2) Effective November 15, 2018, Yankee Gas operated under a decoupled rate structure. The 2018 sales volumes for Yankee Gas have been recast to present 2018 as decoupled to conform to the current year presentation.
(3) Special contracts are unique to Yankee Gas natural gas distribution customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to Yankee Gas regardless of the customers' usage.lower interest expense.
Liquidity
Cash totaled $20.6$47.4 million as of June 30, 2019,March 31, 2020, compared with $108.1$15.4 million as of December 31, 2018.2019.
Short-Term Debt - Commercial Paper Programs and Credit Agreements: Eversource parent has a $1.45 billion commercial paper program allowing Eversource parent to issue commercial paper as a form of short-term debt. Eversource parent, CL&P, PSNH, NSTAR Gas, and Yankee Gas and Aquarion Water Company of Connecticut are also parties to a five-year $1.45 billion revolving credit facility, which terminates on December 8, 2023.6, 2024. The revolving credit facility serves to backstop Eversource parent's $1.45 billion commercial paper program.
NSTAR Electric has a $650 million commercial paper program allowing NSTAR Electric to issue commercial paper as a form of short-term debt. NSTAR Electric is also a party to a five-year $650 million revolving credit facility, which terminates on December 8, 2023.6, 2024. The revolving credit facility serves to backstop NSTAR Electric's $650 million commercial paper program.
The amount of borrowings outstanding and available under the commercial paper programs were as follows:
| | | Borrowings Outstanding as of | | Available Borrowing Capacity as of | | Weighted-Average Interest Rate as of | Borrowings Outstanding as of | | Available Borrowing Capacity as of | | Weighted-Average Interest Rate as of |
| June 30, 2019 | | December 31, 2018 | | June 30, 2019 | | December 31, 2018 | | June 30, 2019 | | December 31, 2018 | March 31, 2020 | | December 31, 2019 | | March 31, 2020 | | December 31, 2019 | | March 31, 2020 | | December 31, 2019 |
(Millions of Dollars) | | |
Eversource Parent Commercial Paper Program | $ | 566.0 |
| | $ | 631.5 |
| | $ | 884.0 |
| | $ | 818.5 |
| | 2.55 | % | | 2.77 | % | $ | 738.4 |
| | $ | 1,224.9 |
| | $ | 711.6 |
| | $ | 225.1 |
| | 3.38 | % | | 1.98 | % |
NSTAR Electric Commercial Paper Program | 163.0 |
| | 278.5 |
| | 487.0 |
| | 371.5 |
| | 2.42 | % | | 2.50 | % | 88.0 |
| | 10.5 |
| | 562.0 |
| | 639.5 |
| | 1.25 | % | | 1.63 | % |
There were no borrowings outstanding on either the Eversource parent or NSTAR Electric revolving credit facilities as of June 30, 2019March 31, 2020 or December 31, 2018. Eversource's water distribution segment has a $100 million revolving credit facility, which expires on August 19, 2019, and there were no borrowings outstanding as of June 30, 2019 or December 31, 2018.2019.
Amounts outstanding under the commercial paper programs and revolving credit facilityfacilities are included in Notes Payable and are classified in current liabilities on the Eversource and NSTAR Electric balance sheets, as all borrowings are outstanding for no more than 364 days at one time. As a result of the NSTAR Gas long-term debt issuances in May 2020, $25.0 million of the current portion of long-term debt and $165.0 million of commercial paper borrowings under the Eversource parent commercial paper program were classified as Long-Term Debt as of March 31, 2020.
Intercompany Borrowings: Eversource parent uses its available capital resources to provide loans to its subsidiaries to assist them in meeting their short-term borrowing needs. In addition, growth in Eversource's key business initiatives requires cash infusion to those subsidiaries. Eversource parent records intercompany interest income from its loans to subsidiaries, which is eliminated in consolidation. Intercompany loans from Eversource parent to its subsidiaries are eliminated in consolidation on Eversource's balance sheets. As of June 30,March 31, 2020, there were intercompany loans from Eversource parent to CL&P of $219.0 million, to PSNH of $84.7 million, and to a subsidiary of NSTAR Electric of $38.4 million. As of December 31, 2019, there were intercompany loans from Eversource parent to CL&P of $259.4$63.8 million, to PSNH of $20.1$27.0 million, and to Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric ("HEEC"), of $40.3 million. As of December 31, 2018, there were intercompany loans from Eversource parent to PSNH of $57.0$30.3 million. Intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and are classified in current liabilities on the respective subsidiary's balance sheets.
Long-Term Debt: The following table summarizes long-term debt issuances and repayments:
|
| | | | | | | | | |
(Millions of Dollars) | Issue Date | | Issuance/(Repayment) | | Maturity Date | | Use of Proceeds for Issuance/ Repayment Information |
CL&P: | | | | | | | |
4.00% 2018 Series A First Mortgage Bonds (1) | April 2019 | | $ | 300.0 |
| | April 2048 | | Repaid short-term borrowings that were used to repay long-term debt that matured on February 1, 2019 and fund capital expenditures and working capital |
5.50% 2009 Series A First Mortgage Bonds | February 2009 | | (250.0 | ) | | February 2019 | | Repaid at maturity on February 1, 2019 |
NSTAR Electric: | | | | | | | |
3.25% 2019 Debentures | May 2019 | | 400.0 |
| | May 2029 | | Repaid short-term borrowings that were used to fund investments in eligible green expenditures |
PSNH: | | | | | | | |
3.60% 2019 Series T First Mortgage Bonds | June 2019 | | 300.0 |
| | July 2049 | | Repay long-term debt due to mature in December 2019, repaid short-term borrowings and fund capital expenditures and working capital |
Other: | | | | | | | |
NSTAR Gas 3.74% Series Q First Mortgage Bonds | July 2019 | | 75.0 |
| | August 2049 | | Repaid short-term borrowings and fund capital expenditures and working capital |
| |
(1)
| These bonds are part of the same series issued by CL&P in March 2018. The aggregate outstanding principal amount of these bonds is now $800 million. |
As a result of the NSTAR Gas debt issuance in July 2019, $75 million of current portion of long-term debt was reclassified to Long-Term Debt on Eversource's consolidated balance sheet as of June 30, 2019. |
| | | | | | | | | |
(Millions of Dollars) | Issuance/(Repayment) | | Issue Date or Repayment Date | | Maturity Date | | Use of Proceeds for Issuance/ Repayment Information |
NSTAR Electric: | | | | | | | |
3.95% 2020 Debentures | $ | 400.0 |
| | March 2020 | | April 2030 | | Refinanced investments in eligible green expenditures, which were previously financed in 2018 and 2019 |
5.10% Series E Senior Notes | (95.0 | ) | | March 2020 | | March 2020 | | Paid at maturity |
Other: | | | | | | | |
Eversource Parent 3.45% Series P Senior Notes | 350.0 |
| | January 2020 | | January 2050 | | Paid short-term borrowings |
NSTAR Gas 4.46% Series N First Mortgage Bonds | (125.0 | ) | | January 2020 | | January 2020 | | Paid at maturity |
Yankee Gas 4.87% Series K First Mortgage Bonds | (50.0 | ) | | April 2020 | | April 2020 | | Paid at maturity |
NSTAR Gas 2.33% Series R First Mortgage Bonds | 75.0 |
| | May 2020 | | May 2025 | | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes |
NSTAR Gas 3.15% Series S First Mortgage Bonds | 115.0 |
| | May 2020 | | May 2050 | | Refinanced existing indebtedness, funded capital expenditures and for general corporate purposes |
Long-Term Debt Issuance Authorization: On January 27, 2020, the DPU approved NSTAR Gas' request for authorization to issue up to $270 million in long-term debt through December 31, 2021.
Rate Reduction Bonds: PSNH's RRB payments consist of principal and interest and are paid semi-annually, beginning on February 1, 2019.semi-annually. PSNH paid $21.6 million of RRB principal payments and $10.3 million of interest payments in the first quarter of 2020 and paid $30.7 million of RRB principal payments and $16.2 million of interest payments in the first halfquarter of 2019.
Common Share Issuance and Forward Sale Agreement: OnIn June 4, 2019, Eversource completed an equity offering of 17,940,000 common shares, consisting of 5,980,000 common shares issued directly by usthe Company and 11,960,000 common shares issuable pursuant to a forward sale agreement with an investment bank. The issuance of 5,980,000 common shares resulted in proceeds of $426.9 million, net of issuance costs, and was reflected in shareholders’ equity and as a financing activity on the statement of cash flows.
Under the forward sale agreement, a total of 11,960,000 common shares were borrowed from third parties and sold toby the underwriters. The forward sale agreement allowsallowed Eversource, at its election and prior to May 29, 2020, to physically settle the forward sale agreement by issuing common shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially, $71.48 per share) or, alternatively, to settle the forward sale agreement in whole or in part through the delivery or receipt of shares or cash. The forward sale price iswas subject to adjustment daily based on a floating interest rate factor and willwould decrease in respect of certain fixed amounts specified in the agreement, such as dividends.
Eversource’s intent is toEversource previously issued 6,000,000 common shares under the forward sale agreement in December 2019. On March 23, 2020, Eversource physically settlesettled a portion of the forward sale agreement by issuingdelivering 1,500,000 common shares. Asshares in exchange for net proceeds of June 30, 2019, if$105.7 million. Subsequently, on March 26, 2020, Eversource had elected to net settlephysically settled the remaining portion of the forward sale agreement Eversource would have been required to pay $50.2 million under a cash settlement or would have been required to deliver 662,694by delivering 4,460,000 common shares under ain exchange for net proceeds of $314.1 million. The forward sale price used to determine the cash proceeds received by Eversource was calculated based on the initial forward sale price of $71.48 per share, settlement.as adjusted in accordance with the forward sale agreement.
The 2020 issuances of 5,960,000 common shares resulted in proceeds of $419.8 million, net of issuance costs and were reflected in shareholders' equity and as financing activities on the statement of cash flows.
Issuances of shares under the forward sale agreement are classified as equity transactions. Accordingly, no amounts relating to the forward sale agreement have or will bewere recorded in the financial statements until settlements taketook place. Prior to any settlements, the only impact to the financial statements iswas the inclusion of incremental shares within the calculation of diluted EPS using the treasury stock method. See Note 15,14, "Earnings Per Share," to the financial statements for information on the forward sale agreement’s impact on the calculation of diluted EPS.
Eversource intends to useused the net proceeds received upon the direct issuance of common shares and the net proceeds expected to be received upon settlement of the forward sale agreement to repay short-term debt under the commercial paper program, to fund capital spending to enhance reliability and fund clean energy initiatives, and for general corporate purposes.
Cash Flows: Cash flows provided by operating activities totaled $924.6$420.3 million in the first halfquarter of 2019,2020, compared with $698.1$381.4 million in the first halfquarter of 2018.2019. The increase in operating cash flows was due primarily to a $172.4 million decrease in pension and PBOP cash contributions made in the first half of 2019 compared to the first half of 2018, approximately $172 million of storm restoration cost payments made in the first half of 2018, and the timing of cash collections on our accounts receivable. Also contributing to the increase were lower income tax payments made in the first half of 2019 of $59.2 million and $68.8 million in DOE Phase IV proceeds receivedreceivables, partially offset by CYAPC and YAEC in the second quarter of 2019. Partially offsetting these favorable impacts were the timing of collections for regulatory tracking mechanisms, and the timing of accounts payable cash payments and other working capital items.lower income tax refunds received in 2020 of $12.2 million.
On May 1, 2019,6, 2020, our Board of Trustees approved a common share dividend payment of $0.535$0.5675 per share, which was paidpayable on June 28, 201930, 2020 to shareholders of record as of May 23, 2019.20, 2020. On February 5, 2020, our Board of Trustees approved a common share dividend payment of $0.5675 per share, which was paid on March 31, 2020 to shareholders of record as of March 4, 2020. In the first halfquarter of 2019,2020, we paid cash dividends of $323.3$181.6 million and issued non-cash dividends of $5.9 million in the form of treasury shares, totaling dividends of $187.5 million, compared with $320.1cash dividends paid of $169.8 million paid in the first halfquarter of 2018.2019.
In the first half of 2019, CL&P, NSTAR Electric and PSNH paid $275.4 million, $181.8 million, and $233.0 million, respectively, in common stock dividends to Eversource parent.
Beginning in 2019, Eversource began issuingissues treasury shares to satisfy awards under the Company's incentive plans, shares issued under the dividend reinvestment and share purchase plan, and matching contributions under the Eversource 401k Plan.
In the first quarter of 2020, CL&P, NSTAR Electric and PSNH paid $69.5 million, $196.5 million, and $22.3 million, respectively, in common stock dividends to Eversource parent.
Investments in Property, Plant and Equipment on the statements of cash flows do not include amounts incurred on capital projects but not yet paid, cost of removal, AFUDC related to equity funds, and the capitalized and deferred portions of pension and PBOP expense. In the first halfquarter of 2019,2020, investments for Eversource, CL&P, NSTAR Electric, and PSNH were $1.38 billion, $466.1$725.5 million, $418.6$212.4 million, $247.5 million, and $132.8$88.7 million, respectively.
We expect the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with our existing borrowing availability and access to both debt and equity markets, will be sufficient to meet any working capital and future operating requirements, and capital investment forecasted opportunities.
Credit Ratings: On June 5, 2019, Moody’s raised the credit ratings of NSTAR Electric from A2 positive to A1 stable. On July 25, 2019, S&P downgraded the ratings on Eversource and all of it's subsidiaries and revised the outlooks from negative to stable.
A summary of our corporate credit ratings and outlooks by Moody's, S&P and Fitch is as follows:
|
| | | | | | | | | | | |
| Moody's | | S&P | | Fitch |
| Current | | Outlook | | Current | | Outlook | | Current | | Outlook |
Eversource Parent | Baa1 | | Stable | | A- | | Stable | | BBB+ | | Stable |
CL&P | A3 | | Stable | | A | | Stable | | A- | | Stable |
NSTAR Electric | A1 | | Stable | | A | | Stable | | A | | Stable |
PSNH | A3 | | Stable | | A | | Stable | | A- | | Stable |
A summary of the current credit ratings and outlooks by Moody's, S&P and Fitch for senior unsecured debt of Eversource parent and NSTAR Electric, and senior secured debt of CL&P and PSNH is as follows:
|
| | | | | | | | | | | |
| Moody's | | S&P | | Fitch |
| Current | | Outlook | | Current | | Outlook | | Current | | Outlook |
Eversource Parent | Baa1 | | Stable | | BBB+ | | Stable | | BBB+ | | Stable |
CL&P | A1 | | Stable | | A+ | | Stable | | A+ | | Stable |
NSTAR Electric | A1 | | Stable | | A | | Stable | | A+ | | Stable |
PSNH | A1 | | Stable | | A+ | | Stable | | A+ | | Stable |
Business Development and Capital Expenditures
Our consolidated capital expenditures, including amounts incurred but not paid, cost of removal, AFUDC, and the capitalized and deferred portions of pension and PBOP expense (all of which are non-cash factors), totaled $1.41 billion in the first half of 2019, compared to $1.18 billion in the first half of 2018. These amounts included $97.6 million and $69.8$655.7 million in the first halfquarter of 20192020, compared to $603.1 million in the first quarter of 2019. These amounts included $55.4 million and 2018,$49.3 million in the first quarter of 2020 and 2019, respectively, related to information technology and facilities upgrades and enhancements, primarily at Eversource Service and The Rocky River Realty Company.
Electric Transmission Business: Our consolidated electric transmission business capital expenditures decreasedincreased by $30.8$3.6 million in the first halfquarter of 2019,2020, as compared to the first halfquarter of 2018.2019. A summary of electric transmission capital expenditures by company is as follows:
| | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Millions of Dollars) | 2019 | | 2018 | 2020 | | 2019 |
CL&P | $ | 220.6 |
| | $ | 240.4 |
| $ | 84.8 |
| | $ | 112.2 |
|
NSTAR Electric | 166.4 |
| | 138.6 |
| 76.7 |
| | 59.3 |
|
PSNH | 59.6 |
| | 88.7 |
| 46.3 |
| | 27.7 |
|
NPT | 9.7 |
| | 19.4 |
| — |
| | 5.0 |
|
Total Electric Transmission Segment | $ | 456.3 |
| | $ | 487.1 |
| $ | 207.8 |
| | $ | 204.2 |
|
Northern Pass: Northern Pass is Eversource's planned 1,090 MW HVDC transmission line that would interconnect from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire.
On March 30, 2018, the New Hampshire Site Evaluation Committee (“NHSEC”), one of the state regulatory agencies from which Northern Pass was required to obtain a siting permit, issued a written decision denying Northern Pass’ siting application. In the first quarter of 2018, Eversource conducted an impairment review of the Northern Pass project and concluded, at that time, that the recorded amount of project costs was recoverable. On July 12, 2018, the NHSEC issued a written decision denying Northern Pass’ April 2018 motion for rehearing, and on October 12, 2018, the New Hampshire Supreme Court accepted an appeal filed by Northern Pass that alleged that the NHSEC failed to follow applicable law in its review of the project. On July 19, 2019, the New Hampshire Supreme Court issued a decision denying Northern Pass’ appeal and affirming the NHSEC’s evaluation and decision that denied Northern Pass’ siting application.
Eversource evaluated the impact of the New Hampshire Supreme Court decision on the probability of construction and operation of Northern Pass. Eversource concluded that construction of the project was no longer probable and that substantially all of the capitalized project costs, which totaled $318 million, certain of which are subject to cost reimbursement agreements, were impaired. Eversource concluded that the New Hampshire Supreme Court decision is a subsequent event that required recognition in the financial statements as of and for the three and six months ended June 30, 2019.
Based on the conclusion that the construction of Northern Pass was not probable, Eversource recorded an impairment charge for all of the project costs associated with Northern Pass, which were primarily engineering design, siting, permitting and legal costs, along with appropriate allowances for funds used during construction, and recognized a receivable for certain cost reimbursement agreements. Additionally, Eversource recorded an impairment charge associated with the land acquired to construct Northern Pass in order to recognize the land at its estimated fair value based on assessed values and transaction costs. In total, this resulted in a pre-tax impairment charge of $239.6 million within Operating Income on the statement of income for the three and six months ended June 30, 2019, and was reflected in the ElectricEastern Massachusetts Transmission segment. The after-tax impact of the impairment charge was $204.4 million, or $0.64 per share, after giving effect to the estimated fair value of the related land, reimbursement agreements, and the impact of expected income tax benefits associated with the impairment charge. Eversource does not expect any significant estimated future cash expenditures associated with this impairment charge.
Greater Boston Reliability Solution:Projects: The Greater Boston and New Hampshire Solution consistsThese projects consist of a portfolio of electric transmission upgrades in southern New Hampshire, and northern Massachusetts and continuing into the greater Boston metropolitan area, of which 28 upgrades are in Eversource's service territory (two in New Hampshire and 26 in Massachusetts). The two New Hampshire upgrades, including the Merrimack Valley Reliability Project, have been placed in service, and 1720 Massachusetts upgrades have been placed in service. SevenOn December 17, 2019, the Massachusetts Siting Board issued a favorable decision on the Sudbury-Hudson Reliability Project, the last project requiring such approval. On January 17, 2020, the Town of Sudbury and Protect Sudbury, a community group, appealed the decision to the Massachusetts Supreme Judicial Court and oral arguments were conducted on March 17, 2020. The majority of the remaining upgrades are under construction and one upgrade is expected to enter construction in the fourth quarter of 2019. We anticipate approval from the Massachusetts Energy Facilities Siting Board on the remaining project in 2019. Most upgrades are expected to be completed by the end of 2019. Four projects are expected to beplaced in service by the end of 2020 and another project by mid-2021.in 2021. We estimate our portion of the investment in the Solution will be approximately $560$750 million, of which $396.7$449.9 million has been spent and capitalized through June 30, 2019.March 31, 2020.
GHCCHartford-Area Transmission Projects: The Greater Hartford Central Connecticut ("GHCC")These projects which have been approved by ISO-NE, consist of 27 projects in the Hartford, Connecticut area with an expected investment of approximately $350 million. As of June 30, 2019, 24March 31, 2020, 25 projects have been placed in service, and threetwo projects are in active construction and are expected to be placed in service through 2019.in the fourth quarter of 2020. As of June 30, 2019,March 31, 2020, CL&P had spent and capitalized $253.1$281.9 million in costs associated with GHCC.these projects.
Seacoast Reliability Project: The Seacoast Reliability Project consists of a 13-mile, 115kV transmission line within several New Hampshire communities, using a combination of overhead, underground and underwater line designs to help meet the growing demand for electricity in the Seacoast region. On December 10, 2018, the NHSEC indicated its unanimous approval of the project, and subsequently issued its written decision on January 31, 2019. On April 11, 2019, the NHSEC issued its written decision denying motions for rehearing submitted by three entities that intervened in the proceeding. On May 13, 2019, two appeals of the NHSEC's approval orders were filed with the New Hampshire Supreme Court. The court has not yet determined whether it will hear those appeals. On July 3,December 17, 2019, the U.S. Army CorpsConservation Law Foundation requested the Court to withdraw its appeal, and the Court granted the request on December 20, 2019. For the pending appeal by a small group of Engineers issued its permit allowingproperty owners located adjacent to the project, oral arguments were conducted on March 10, 2020. This project is under construction in wetlands to proceed. This projectand is scheduled to be completed byin the endsecond quarter of 2019.2020. We estimate the investment in this project towill be approximately $84$125 million, of which PSNH had spent and capitalized $38.5$103.7 million in costs through June 30, 2019.March 31, 2020.
All project costs are anticipated to be fully recoverable through transmission rates.
Distribution Business: A summary of distribution capital expenditures is as follows: | | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Millions of Dollars) | CL&P | | NSTAR Electric | | PSNH | | Total Electric | | Natural Gas | | Water | | Total | CL&P | | NSTAR Electric | | PSNH | | Total Electric | | Natural Gas | | Water | | Total |
2020 | | | | | | | | | | | | | | |
Basic Business | | $ | 43.7 |
| | $ | 59.6 |
| | $ | 9.8 |
| | $ | 113.1 |
| | $ | 20.0 |
| | $ | 1.9 |
| | $ | 135.0 |
|
Aging Infrastructure | | 44.1 |
| | 54.4 |
| | 22.5 |
| | 121.0 |
| | 67.3 |
| | 15.8 |
| | 204.1 |
|
Load Growth and Other | | 15.0 |
| | 24.0 |
| | 3.1 |
| | 42.1 |
| | 10.8 |
| | 0.1 |
| | 53.0 |
|
Total Distribution | | 102.8 |
| | 138.0 |
| | 35.4 |
| | 276.2 |
| | 98.1 |
| | 17.8 |
| | 392.1 |
|
Solar | | — |
| | 0.4 |
| | — |
| | 0.4 |
| | — |
| | — |
| | 0.4 |
|
Total | | $ | 102.8 |
| | $ | 138.4 |
| | $ | 35.4 |
| | $ | 276.6 |
| | $ | 98.1 |
| | $ | 17.8 |
| | $ | 392.5 |
|
2019 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic Business | $ | 142.9 |
| | $ | 142.4 |
| | $ | 19.1 |
| | $ | 304.4 |
| | $ | 29.4 |
| | $ | 5.6 |
| | $ | 339.4 |
| $ | 33.3 |
| | $ | 66.8 |
| | $ | 8.1 |
| | $ | 108.2 |
| | $ | 11.2 |
| | $ | 2.1 |
| | $ | 121.5 |
|
Aging Infrastructure | 96.0 |
| | 96.6 |
| | 52.7 |
| | 245.3 |
| | 125.8 |
| | 42.9 |
| | 414.0 |
| 45.2 |
| | 43.0 |
| | 25.4 |
| | 113.6 |
| | 53.2 |
| | 13.0 |
| | 179.8 |
|
Load Growth and Other | 32.0 |
| | 28.6 |
| | 7.1 |
| | 67.7 |
| | 26.3 |
| | 0.9 |
| | 94.9 |
| 14.3 |
| | 17.4 |
| | 3.9 |
| | 35.6 |
| | 10.0 |
| | 0.4 |
| | 46.0 |
|
Total Distribution | 270.9 |
| | 267.6 |
| | 78.9 |
| | 617.4 |
| | 181.5 |
| | 49.4 |
| | 848.3 |
| 92.8 |
| | 127.2 |
| | 37.4 |
| | 257.4 |
| | 74.4 |
| | 15.5 |
| | 347.3 |
|
Solar | — |
| | 4.8 |
| | — |
| | 4.8 |
| | — |
| | — |
| | 4.8 |
| — |
| | 2.3 |
| | — |
| | 2.3 |
| | — |
| | — |
| | 2.3 |
|
Total | $ | 270.9 |
| | $ | 272.4 |
| | $ | 78.9 |
| | $ | 622.2 |
| | $ | 181.5 |
| | $ | 49.4 |
| | $ | 853.1 |
| $ | 92.8 |
| | $ | 129.5 |
| | $ | 37.4 |
| | $ | 259.7 |
| | $ | 74.4 |
| | $ | 15.5 |
| | $ | 349.6 |
|
2018 | | | | | | | | | | | | | | |
Basic Business | $ | 87.2 |
| | $ | 92.6 |
| | $ | 37.5 |
| | $ | 217.3 |
| | $ | 29.0 |
| | $ | 7.5 |
| | $ | 253.8 |
| |
Aging Infrastructure | 54.2 |
| | 45.3 |
| | 41.0 |
| | 140.5 |
| | 87.6 |
| | 27.8 |
| | 255.9 |
| |
Load Growth and Other | 34.9 |
| | 14.1 |
| | 5.9 |
| | 54.9 |
| | 19.1 |
| | 1.1 |
| | 75.1 |
| |
Total Distribution | 176.3 |
| | 152.0 |
| | 84.4 |
| | 412.7 |
| | 135.7 |
| | 36.4 |
| | 584.8 |
| |
Solar and Generation | — |
| | 38.5 |
| | 0.8 |
| | 39.3 |
| | — |
| | — |
| | 39.3 |
| |
Total | $ | 176.3 |
| | $ | 190.5 |
| | $ | 85.2 |
| | $ | 452.0 |
| | $ | 135.7 |
| | $ | 36.4 |
| | $ | 624.1 |
| |
For the electric distribution business, basic business includes the purchase of meters, tools, vehicles, information technology, transformer replacements, equipment facilities, and the relocation of plant. Aging infrastructure relates to reliability and the replacement of overhead lines, plant substations, underground cable replacement, and equipment failures. Load growth and other includes requests for new business and capacity additions on distribution lines and substation additions and expansions.
For the natural gas distribution business, basic business addresses daily operational needs including meters, pipe relocations due to public works projects, vehicles, and tools. Aging infrastructure projects seek to improve the reliability of the system through enhancements related to cast iron and bare steel replacement of main and services, corrosion mediation, and station upgrades. Load growth and other reflects growth in existing service territories including new developments, installation of services, and expansion.
For the water distribution business, basic business addresses daily operational needs including periodic meter replacement, water main relocation, facility maintenance, and tools. Aging infrastructure relates to reliability and the replacement of water mains, regulators, storage tanks, pumping stations, wellfields, reservoirs, and treatment facilities. Load growth and other reflects growth in our service territory, including improvements toof acquisitions, installation of new services, and interconnections of systems.
Pending Acquisition of Assets of Columbia Gas of Massachusetts: On February 26, 2020, Eversource and NiSource Inc. entered into an asset purchase agreement (the Agreement) pursuant to which Eversource would acquire certain assets that comprise NiSource’s local natural gas distribution business in Massachusetts, which is doing business as Columbia Gas of Massachusetts (CMA). The purchase price of $1.1 billion includes a target working capital amount that is subject to adjustment to reflect actual working capital as of the closing date. Eversource would acquire approximately 330,000 residential, commercial, and industrial natural gas customers, as well as over 5,000 miles of natural gas distribution pipeline across more than 60 communities in Massachusetts.
The liabilities to be assumed by Eversource under the Agreement specifically exclude any liabilities (past or future) arising out of, or related to, the fires and explosions that occurred on September 13, 2018 in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by CMA, including certain subsequent events, all as described and in the DPU's Order on Scope dated December 23, 2019 (D.P.U. 19-141) (the Greater Lawrence Incident or GLI). The liabilities to be assumed also exclude any further emergency events prior to the closing of the acquisition related to the restoration and reconstruction with respect to the GLI, including any losses arising out of, or related to, any litigation, demand, cause of action, claim, suit, investigation, proceeding, indemnification agreements or rights. Eversource is not assuming any of CMA's or NiSource Inc.'s debt.
The transaction requires approval from the DPU, the Maine Public Utilities Commission, the FERC, and the Federal Communications Commission, and it is subject to review under the Hart-Scott-Rodino Act, for which the relevant review period has expired. The resulting rate plan also requires DPU approval. Eversource expects to finance the asset acquisition through a combination of debt and equity issuances in a ratio that is consistent with our current consolidated capital structure. The transaction is expected to close by the end of the third quarter of 2020.
Offshore Wind Business: Our offshore wind business includes ownership interests in North East Offshore and Bay State Wind, which collectivelytogether hold power purchase agreementsPPAs and contracts for the Revolution Wind, and South Fork Wind projects and are in process of negotiating a power purchase agreement for the Sunrise Wind project.projects, as well as offshore leases through BOEM. Our offshore wind projects are being developed inand constructed through a joint and equal partnership with Ørsted. This businesspartnership also participates in new procurement opportunities for future solicitations for offshore wind energy in the Northeast U.S.
On February 8, 2019, Eversource and Ørsted entered into a 50-50 partnership for key offshore wind assets in the Northeast. Eversource's initial payment and contribution under the terms of the partnership agreements totaled approximately $225 million forhas a 50 percent ownership interest in North East Offshore, which holds the Revolution Wind and South Fork Wind power projects, as well as a 257 square-mile lease off the coasts of Massachusetts and Rhode Island. Eversource also has a 50 percent ownership interest in Bay State Wind, which holds the Sunrise Wind power project. Bay State WindWind's separate 300-square-mile ocean lease is located approximately 25 miles south of the coast of Massachusetts on a separate 300-square-mile ocean lease adjacent to the North East Offshore area and has the ultimate potential to generate at least 2,000 MW of clean, renewable energy. Together,area. In aggregate, the Bay State Wind and the North East Offshore lease sites jointly-owned by Eversource and Ørsted could eventually develop at least 4,000 MW of clean, renewable offshore wind generation.energy. As of June 30, 2019,March 31, 2020, Eversource's total equity investment balance in its offshore wind business was $499.5 million. In July 2019, Eversource made an additional capital contribution of $54.9$655.0 million.
Revolution WindCurrently we are concluding on final offshore and onshore project designs and advancing the appropriate federal, state and local siting and permitting processes, all of which is competitively sensitive. Subject to finalization of these designs and processes, all of which are subject to change and modification as a result of our investment decisions, permit approval timelines and final design decisions, we currently expect to make investments in our offshore wind business of approximately $300 million to $400 million during 2020.
The following table provides a summary of the Eversource and Ørsted major projects with announced contracts:
|
| | | | | | |
Wind Project | State Servicing | Size (MW) | Term (Years) | Price per MWh | Pricing Terms | Contract Status |
Revolution Wind | Rhode Island | 400 | 20 | $98.43 | Fixed price contract; no price escalation | Approved |
Revolution Wind | Connecticut | 304 | 20 | (1) | Fixed price contracts; no price escalation | Approved |
South Fork Wind | New York (LIPA) | 90 | 20 | $160.33 | 2 percent average price escalation | Approved |
South Fork Wind | New York (LIPA) | 40 | 20 | $86.25 | 2 percent average price escalation | (3) |
Sunrise Wind | New York (NYSERDA) | 880 | 25 | $110.37 (2) | Fixed price contract; no price escalation | Approved |
| |
(1) | The pricing for the Revolution Wind contracts in Connecticut has not been publicly disclosed. |
| |
(2) | Index Offshore Wind Renewable Energy Certificate (OREC) strike price. |
| |
(3) | The Long Island Power Authority (LIPA) agreed to expand the original 20-year PPA from 90 MW to 130 MW through an amendment to the original agreement. Negotiations are currently underway, and a final amendment is expected in the second quarter of 2020. |
The completion dates for these projects are subject to federal permitting through BOEM, engineering, state siting and permitting in New York and Rhode Island, and finalizing a PPA amendment in New York. Significant delays in the siting and permitting process, including the timing of obtaining BOEM approval and the impact of COVID-19, could adversely impact the timing of these projects' in-service dates. At this time, we are unable to predict the impact of delays on the projects' in-service dates.
Currently, BOEM has indicated it will complete its Cumulative Impact Study as part of the Draft Supplemental Environmental Impact Statement (EIS) for a non-affiliated offshore wind project during the second quarter of 2020. The study is designed to assess the overall environmental impact of all offshore wind projects that are planned to be located in waters off of Rhode Island and Massachusetts.
Federal siting and permitting have commenced for the South Fork Wind Projects: Revolution Wind is a 704 MW offshore wind power project, that will deliver power to Rhode Island (400 MW) and Connecticut (304 MW). The Revolution Wind project was selected under separate respective Connecticut and Rhode Island competitive RFPs based on each state's clean energy requirements. In Connecticut, two 20-year power purchase agreements for a total of 200 MW were executed and have been approved by the PURA, and two 20-year power purchase agreements for a total of 104 MW were executed and are currently awaiting regulatory approval. In Rhode Island, a 20-year power purchase agreement for 400 MW was executed andas it has been approved by the Rhode Island Public Utilities Commission.
filed its Construction Operations Plan (COP) application with BOEM. South Fork Wind is designated as a 130 MW offshore wind power project that will interconnect into eastern Long Island where it will deliver power“Covered Project” pursuant to Title 41 of the Long Island Power Authority. TheFixing America’s Surface Transportation Act (“FAST41”) and a Major Infrastructure Project under Section 3(e) of Executive Order 13807, which provides greater federal attention on meeting the project’s permitting timelines. South Fork Wind previously filed federal and state applications in 2018. Although we have received BOEM's Notice of Intent for the South Fork Wind project was selected by(the first important milestone towards receiving the Long Island Power Authority, andfinal permit), we have not received a 20-year power purchase agreement for 90 MW was executed. Subsequently,confirmed permit schedule from BOEM outlining when the Long Island Power Authority agreed to expandCOP will be received.
On April 8, 2020, the original power purchase agreement to 130 MW through an amendmentstate of New York Administrative Law Judge granted a 10-week delay to the original agreement. Negotiations are currently underway to finalize this amendment.
South Fork Wind is expectedevidentiary hearing schedule, until September 30, 2020, due to ongoing COVID-19 work and travel restrictions. In addition, field work for South Fork Wind and Sunrise Wind in New York has been suspended due to COVID-19 restrictions. Currently, we are developing mitigation plans to address permitting delays due to COVID-19 restrictions on our offshore wind projects, which include delays in New York state for performing offshore site investigations, and onshore environmental and geotechnical surveys, in order to limit the impact and risk to our project siting and permit filing timelines.
Given that we have not received a confirmed permit schedule from BOEM outlining when the South Fork Wind COP will be commissionedreceived and that BOEM has not completed its Cumulative Impact Study, combined with impacts from the COVID-19 related shut-downs in New York, these impacts will very likely delay the in-service date of the South Fork Wind project to beyond the projected end of 2022 in-service date.
Revolution Wind filed its COP application with BOEM in March 2020 and will seek FAST41 designation by the end of 2022, and2020. Sunrise Wind's COP filing is planned in 2020. State agencies also will review siting applications for Revolution Wind is expected to be commissioned in 2023. The completion dates are subject to permitting, engineering, siting and finalizing power purchase agreements, where applicable.
Sunrise Wind Project: On February 14, 2019, Eversource and Ørsted submitted joint proposals under the project name Sunrise Wind in response to a New York State Energy Research and Development Authority ("NYSERDA") RFP that was issuedRhode Island, with application filings planned in November 2018. NYSERDA had2020. For Revolution Wind, we are awaiting BOEM to issue its Notice of Intent, which will outline the authority to award more than 800 MW in the first solicitation if sufficient attractive offers were received. On July 18, 2019, NYSERDA announced thattimeline for COP approval. For Sunrise Wind, was selectedwe are currently unable to negotiate a 25-year power purchase agreementprogress our offshore site surveys due to COVID-19 restrictions, which adversely impacts our COP application process. At this time, for an 880 MW offshore wind facility.the Revolution Wind and Sunrise Wind will be developed 30 miles eastprojects, we are unable to predict the impact of Montauk Point, Long Island. Subject to contract signing and Eversource’s and Ørsted's final investment decisions, the project is expected to be operational in 2024.
Future Solicitations for OffShore Wind: Eversource and Ørsted are considering participation in the following opportunities for future solicitations for offshore wind baseddelays on each state's clean energy requirements:
Massachusetts’ second offshore wind RFP for 400 MW to 800 MW was issued on May 23, 2019. Bids are due in August 2019 and contracts are expected to be awarded to selected bidders by thetheir projected in-service dates of end of 2019. Eversource2023 and Ørsted are evaluating participation in the RFP.
Connecticut’s offshore wind RFP for 400 MW (and up to 2,000 MW) is expected to be issued in August 2019, with bids due in September 2019 and contracts awarded to selected bidders by the end of 2019. Eversource and Ørsted are evaluating participation in the RFP.2024, respectively.
FERC Regulatory Matters
FERC ROE Complaints: Four separate complaints have beenwere filed at the FERC by combinations of New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal parties and other parties (collectively, the "Complainants")Complainants). In each of the first three complaints, filed on October 1, 2011, December 27, 2012, and July 31, 2014, respectively, the Complainants challenged the NETOs' base ROE of 11.14 percent that had been utilized since 2005 and sought an order to reduce it prospectively from the date of the final FERC order and for the separate 15-month complaint periods. In the fourth complaint, filed April 29, 2016, the Complainants challenged the NETOs' base ROE billed of 10.57 percent and the maximum ROE for transmission incentive ("incentive cap")(incentive cap) of 11.74 percent, asserting that these ROEs were unjust and unreasonable.
The ROE originally billed during the period October 1, 2011 (beginning of the first complaint period) through October 15, 2014 consisted of a base ROE of 11.14 percent and incentives up to 13.1 percent. On October 16, 2014, the FERC set the base ROE at 10.57 percent and the incentive cap at 11.74 percent for the first complaint period. This was also effective for all prospective billings to customers beginning October 16, 2014. This FERC order was vacated on April 14, 2017 by the U.S. Court of Appeals for the D.C. Circuit (the "Court")Court).
All amounts associated with the first complaint period have been refunded. Eversource has recorded a reserve of $39.1 million (pre-tax and excluding interest) for the second complaint period as of June 30,March 31, 2020 and December 31, 2019. This reserve represents the difference between the billed rates during the second complaint period and a 10.57 percent base ROE and 11.74 percent incentive cap. The reserve consisted of $21.4 million for CL&P, $14.6 million for NSTAR Electric and $3.1 million for PSNH as of June 30,March 31, 2020 and December 31, 2019.
On October 16, 2018, FERC issued an order on all four complaints describing how it intends to address the issues that were remanded by the Court. FERC proposed a new framework to determine (1) whether an existing ROE is unjust and unreasonable and, if so, (2) how to calculate a replacement ROE. The parties to these proceedings were directed to submit briefs on this new proposed framework and how they would apply the proposed framework in each of the four complaint proceedings. Initial briefs were filed by the NETOs, Complainants and FERC Trial Staff on January 11, 2019 and reply briefs were filed on March 8, 2019. The NETOs' brief was supportive of the overall ROE methodology determined in the October 16, 2018 order provided the FERC does not change the proposed methodology or alter its implementation in a manner that has a material impact on the results.
The FERC order included illustrative calculations for the first complaint using FERC's proposed frameworks with financial data from that complaint. Those preliminaryillustrative calculations indicated that for the first complaint period, for the NETOs, thatwhich FERC concludes are of average financial risk, (1) a preliminary range of presumptively just and reasonable base ROEs is 9.60 percent to 10.99 percent; (2) the pre-existing base ROE of 11.14 percent is therefore unjust and unreasonable; (3) the preliminary just and reasonable base ROE is 10.41 percent;percent and (4) the preliminary incentive cap on total ROE is 13.08 percent.
If the results of thesethe illustrative calculations were included in a final FERC order for each of the complaint periods, then a 10.41 percent base ROE and a 13.08 percent incentive cap would not have a significant impact on our financial statements for all of the complaint periods.
Although the order provided illustrative calculations, FERC stated that these calculations are merely preliminary. The FERC’s These preliminary calculations are not binding and do not represent what we believe to be the most likely outcome of a final FERC order.
On November 21, 2019, FERC issued an order concerning the transmission ROEs for the Midcontinent ISO transmission owners (MISO). In that order, FERC adopted another new methodology for determining base ROEs for MISO, which differed significantly from the methodology and framework set forth in its October 16, 2018 FERC order on the NETOs’ ROE dockets. On December 23, 2019, the NETOs filed a Supplemental Paper Hearing Brief and a Motion to supplement the record in the NETO ROE dockets to respond to the new methodology proposed in the MISO order, as there is uncertainty to whether it may be applied to the NETOs’ cases. On January 21, 2020, the FERC issued an order granting rehearing for further consideration to give the FERC more time to act on the substantive issues of the MISO ROE proceedings. Further changes to the methodology by FERC are possible as a result of the parties’ arguments in both the MISO and calculations inNETO proceedings.
Given the briefing process. Untilsignificant uncertainty relating to the October 2018 FERC issues a final decisionorder, the November 2019 FERC order to MISO, and the FERC's rehearing of the MISO order, the Company is unable to predict the potential effect of the MISO order on eachthe NETO complaints or the outcome of thesethe four complaints and concluded that there is significant uncertainty, andno reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods at this time,time. Further, the Company cannot reasonably estimate a range of gain or loss for any of the four complaint proceedings. The October 16, 2018 FERC order or the 2019 briefs did not provide a reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods.
Eversource, CL&P, NSTAR Electric and PSNH currently record revenues at the 10.57 percent base ROE and incentive cap at 11.74 percent established in the October 16, 2014 FERC order.
The average impactA change of a 10 basis point changepoints to the base ROE used to establish the reserves would impact Eversource's after-tax earnings by an average of approximately $3 million for each of the four 15-month complaint periods would affect Eversource's after-tax earnings by approximately $3 million.periods.
FERC NoticesNotice of Inquiry:Inquiry on ROE: On March 21, 2019, FERC issued two Noticesa Notice of Inquiry ("NOI") that may affect Eversource transmission ROEs and incentives. One NOI (the "FERC ROE NOI") seeks(NOI) seeking comments from all stakeholders on FERC's policies for evaluating ROEs for electric public utilities, and interstate natural gas and oil pipelines. The other NOI (the "FERC transmission incentives NOI") seeks comments on FERC's policies for implementing electric transmission incentives. On June 26, 2019, the NETOs jointly filed comments in the FERC ROE NOI, supporting the methodology established in the FERC’s October 16, 2018 order with minor enhancements going forward. AlsoThe NETOs jointly filed reply comments in the FERC ROE NOI on July 26, 2019. At this time, Eversource cannot predict how this proceeding will affect its transmission ROEs.
FERC Notice of Inquiry and Proposed Rulemaking on Transmission Incentives: On March 21, 2019, FERC issued a NOI seeking comments on FERC's policies for implementing electric transmission incentives. On June 26, 2019, Eversource filed comments in the FERC transmission incentives NOI, requesting that FERC retain policies that have been effective in encouraging new transmission investment and remain flexible enough to attract investment in new and emerging transmission technologies. The NETOs jointlyEversource filed reply comments in the FERC ROE NOI on JulyAugust 26, 2019. Reply commentsOn March 20, 2020, FERC issued a Notice of Proposed Rulemaking (NOPR) on transmission incentives. The NOPR intends to revise FERC’s electric transmission incentive policies to reflect competing uses of transmission due to generation resource mix, technological innovation and shifts in theload patterns. FERC proposes to grant transmission incentives NOIbased on measurable project economics and reliability benefits to consumers rather than its current project risks and
challenges framework. Comments from interested parties on the NOPR are due August 26, 2019.July 1, 2020. At this time, Eversource cannot predict how these NOIsproceedings will affect its ROEs ortransmission incentives.
FERC Transmission Rate Settlement: On December 28, 2015, FERC initiated a proceeding to review the NETOs' regional and local transmission formula rates due to a lack of transparency, finding that the formula rates appeared to lack sufficient details to determine how costs are derived and recovered in rates. This proceeding was set for hearing but held in abeyance to provide time for settlement judge procedures. On August 17, 2018, a signed Settlement Agreement between twenty-eight parties, including all six New England state regulatory commissions, the NETOs (including CL&P, NSTAR Electric and PSNH) and other settling parties, was filed at the FERC. The Settlement Agreement included, among other things, a new formula rate template to be effective on January 1, 2020, in which all regional and local transmission revenue requirements will be determined through a single formula rate. The Settlement Agreement was contested by a group of municipal entities and the FERC Trial Staff. On May 22, 2019, FERC rejected the Settlement Agreement and remanded the proceeding for hearings. On July 29, 2019,The parties have been engaged in response to a request byfurther settlement negotiations and reached an agreement in principle on October 22, 2019. The FERC Chief Administrative Law Judge has approved three suspensions of the schedule for the NETOs to continue settlement discussions,review the FERC Chief Judge suspendedterms with other active parties and finalize the settlement. The procedural schedule for 45 days and sethas been suspended to June 8, 2020.
U.S. Federal Corporate Income Taxes: Effective January 1, 2018, the date for hearingslocal transmission service rates were updated to begin on April 27, 2020, withreflect the initial decisionlower U.S. federal corporate income tax rate that resulted from the trial judgeTax Cuts and Jobs Act. On June 28, 2018, FERC granted a one-time waiver of tariff provisions related to bethe federal corporate income tax rate so that, effective June 1, 2018, the regional transmission service rates also reflected the reduced federal corporate income tax rate of 21 percent. The local and regional transmission service rates do not currently reflect amortization of excess ADIT (EDIT) balances that resulted from the Act. On November 15, 2018, FERC issued Septembera Policy Statement and a separate Notice of Proposed Rulemaking addressing accounting and rate issues related to ADIT changes resulting from the Act. On November 21, 2020.2019, FERC issued its final rule requiring public utilities with transmission formula rates to make adjustments to ADIT and EDIT. On February 24, 2020, FERC granted Eversource’s motion for extension to July 31, 2020 to submit compliance filings.
Regulatory Developments and Rate Matters
Electric, Natural Gas and Water Utility Base Distribution Rates: The regulated companies’ distribution rates are set by their respective state regulatory commissions, and their tariffs include mechanisms for periodically adjusting their rates for the recovery of specific incurred costs. Other than as described below, for the first halfquarter of 2019,2020, changes made to the regulated companies’ rates did not have a material impact on their earnings, financial position, or cash flows. For further information, see "Financial Condition and Business Analysis – Regulatory Developments and Rate Matters" included in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of the Eversource 20182019 Form 10-K.
U.S. Federal Corporate Income Taxes: COVID-19 Regulatory Dockets:On December 22, 2017, Beginning in March 2020, in Connecticut, Massachusetts and New Hampshire, there is presently a moratorium on disconnections of residential and commercial customers for non-payment of utility service. Our operating companies have also eliminated late payment charges. In general, these moratoriums will remain in place until the Tax Cutsdeclared COVID-19 state of emergency is lifted by each respective state Governor or further direction is provided by the respective state regulatory commissions.
In Connecticut, PURA opened a docket to address COVID-19 developments, including issuing an order on March 18, 2020 and Jobs Act became law, which amended existing federal tax rulesApril 29, 2020 that authorized electric, natural gas and water utilities to reduceestablish a regulatory asset for COVID-19 uncollectible customer receivable expenses and related costs. PURA’s order on April 29, 2020 also allowed the U.S. federal corporate income tax rate from 35 percentinclusion of working capital costs in the regulatory asset, and authorized electric, natural gas and water utilities to 21 percent effective January 1, 2018. For our regulated companies,establish a payment plan program designed to assist any customer who requests financial assistance during the most significant changesCOVID-19 pandemic. Additionally, on April 17, 2020, PURA issued a letter to Connecticut’s Congressional delegation explaining that reliable utility services are (1)critical services paramount to the benefit of incurring a lower federal income tax expense and (2) the reduction in ADIT liabilities (now excess ADIT or EDIT), which are estimated to be approximately $2.9 billion and included in regulatory liabilities as of June 30, 2019. The refund of these EDIT regulatory liabilities to customers will generally be made over the same period as the remaining useful liveseconomic performance of the underlying assetsstate and advocated in favor of directing stimulus funds to regulated public service companies that gave risewould be used to the ADIT liabilities. The refund of EDIT has begun at several of our distribution companies and is reflected in rates. The refund to customers and resulting amortization of the EDIT regulatory liabilities results in lower Revenues on the statements of income and lower current tax expense. This isdirectly offset by the reduction to Income Tax Expense due to the amortization of the EDIT. The refund of EDIT results in a lower effective tax rate and no impact on net income.
Connecticut:uncollectible customer receivable expenses.
CL&P Storm Filing: CL&P's approved rate case settlement in 2018 incorporated $18.6 million of rate base recoveryIn Massachusetts, on March 31, 2020, the DPU issued a request for catastrophic storms occurring after December 31, 2016, subject to a future storm filing. On November 16, 2018, CL&P filed for recovery of $153 million of storm costs incurred from October 2017 through May 2018, with recovery over six years to begin May 1, 2019. Through the course of the proceeding, CL&P updated its request to $145.5 million to reflect final invoicing and capitalization amounts.comments on, among other things, best practices that regulated utilities should utilize when customer shut-off activities resume. On April 17, 2019, PURA authorized recovery2020, a coalition of $141.0 million as part of storm cost recoveryelectric, natural gas and water utilities submitted a comprehensive response to the DPU that would enable the state’s utilities to provide flexible payment arrangements to those customers who need financial assistance, while simultaneously maintaining the financial integrity necessary to continue to conduct and finance utility operations through appropriate ratemaking treatment and the remainderestablishment of a regulatory asset for COVID-19 related expenses, including uncollectible customer receivable expenses, among other proposals.
Consistent with the above-described developments in Connecticut and Massachusetts, Eversource is working closely with the NHPUC on COVID-19 developments impacting our New Hampshire electric and water utilities, including the proposed establishment of flexible payment plan options for those customers who need financial assistance in order to mitigate the size of the uncollectible customer receivable balances that would be recorded to plant or other balance sheet accounts. All approved amounts will be fully recoverable through specific mechanisms or through future rate cases.borne by all customers in the future.
Massachusetts:
Hingham Condemnation:NSTAR Electric Distribution Rates: As part of an inflation-based mechanism, NSTAR Electric submitted its second annual Performance Based Rate Adjustment filing on September 16, 2019 and the DPU approved a $33.6 million increase to base distribution rates on December 19, 2019 for effect on January 1, 2020.
NSTAR Gas Rate Case: On April 22,November 8, 2019, NSTAR Gas filed its application with the townDPU, which sought a distribution rate increase of Hingham, Massachusetts voted$38.0 million. As part of this filing, NSTAR Gas also proposed to acquirecontinue its ongoing Gas System Enhancement Program (GSEP), include the water systemGSEP investments since 2015 into base rates, and treatment plant that supplyimplement a performance-based ratemaking plan. A final decision from the towns of Hingham, Hull and North Cohasset with water. The acquisition price is currently estimated to be more than $100 million, subject to adjustment based on actual capital investments as legally required and other future closing adjustments. Aquarion will continue to operate the water system during the transition period until the sale occurs. The Company is evaluating the impact of the sale on its financial statements, which will be recorded when the sale transaction occurs. No loss is expected. The transactionDPU is expected to close by the first quarter ofOctober 30, 2020, with rates effective November 1, 2020. As of June 30, 2019, these water distribution assets were included within Property, Plant and Equipment, Net and goodwill on the balance sheet and were also reflected in the Water Distribution segment and reporting unit.
New Hampshire:
Distribution Rates: On April 26, 2019, PSNH filed an application with the NHPUC for approval of a temporary annual base distribution rate increase, of approximately $33 million, effective July 1, 2019. On June 27, 2019, the NHPUC approved a settlement agreement that was reached by PSNH, the NHPUC Staff, the Office of the Consumer Advocate, and another settling party, to implement a temporary annual base distribution rate increase of $28.3 million. Although new rates were implemented on August 1, 2019 to customers, the provisions of the temporary base distribution rate increase were effective July 1, 2019. The settlement agreement also permits PSNH to recover approximately $68.5 million in unrecovered storm costs over a five-year period beginning August 1, 2019, with debt carrying charges, which is included in the temporary rate increase.
On May 28, 2019, PSNH filed an application with the NHPUC for a permanent increase in base distribution rates of approximately $70 million, effective July 1, 2020, which includes the temporary rate increase request. The temporary rates are subject to reconciliation based on the outcome of the permanent rate case now before the NHPUC. The NHPUC is permitted up to twelve months to adjudicate the permanent rate application from the date of filing. On April 24, 2020, Governor Sununu issued an emergency order, which extends the maximum adjudication period by six months, for a maximum of 18 months. A decision by the NHPUC is now expected in the fourth quarter of 2020. Temporary rates will remain in effect with a reconciliation of permanent rates retroactive to July 1, 2019 once permanent rates are set.
Draft Audit Report of Generation Asset Divestiture-Related Costs: On May 4, 2020, the NHPUC Audit Staff issued a draft report on the audit of PSNH’s generation asset divestiture-related costs and resulting securitized and stranded costs. Responses are due no later than May 12, 2020, with a final NHPUC audit report expected on May 15, 2020. We are currently evaluating the NHPUC audit findings and continue to believe the amounts deferred are probable of recovery.
Legislative and Policy Matters
New HampshireFederal:: On July 8, 2019,March 27, 2020, President Trump signed the New Hampshire Superior Court approved$2.2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act. Among other provisions, the CARES Act provides for loans and other benefits to small and large businesses, expanded unemployment insurance, direct payments to those with wages middle-income and below, new appropriations funding for health care and other priorities, and tax changes like deferrals of employer payroll tax liabilities coupled with an employee retention tax credit and rollbacks of Tax Cuts and Jobs Act limitations on net operating losses and certain business interest limitation. For the year ended December 31, 2020, we expect an estimated cash flow benefit of about $35 million related to the deferral of employer payroll tax liability provision. We will continue to evaluate the CARES Act impact; however, other than the cash flow benefit described, we do not expect the CARES Act to have a settlement between PSNH and the Town of Bow, New Hampshire, where the town had over-assessed the value of the property owned by PSNH for the 2014 through 2018 property tax years. The result of this settlement was $10.0 million in over-paid property taxes that will be refundable to PSNH, with $4.3 million payable in 2019, and the remainder to be received over the following 4 years.material impact.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and, at times, difficult, subjective or complex judgments. Changes in these estimates, assumptions and judgments, in and of themselves, could materially impact our financial position, results of operations or cash flows. Our management communicates to and discusses with the Audit Committee of our Board of Trustees significant matters relating to critical accounting policies. Our critical accounting policies that we believed were the most critical in nature were reported in the Eversource 20182019 Form 10-K. There have been no material changes with regard to these critical accounting policies.
Refer to Note 1C, "Summary of Significant Accounting Policies - Impairment of Northern Pass Transmission," to the financial statements for further discussion of critical accounting estimates surrounding impairment analysis.
Other Matters
Accounting Standards: For information regarding new accounting standards, see Note 1B, "Summary of Significant Accounting Policies – Accounting Standards," to the financial statements.
Contractual Obligations and Commercial Commitments: ReferThere have been no material contractual obligations identified and no material changes
with regard to Note 9B, "Commitmentsthe contractual obligations and Contingencies – Long-Term Contractual
Arrangements," for discussion of material changes to contractual obligations.commercial commitments previously disclosed in the Eversource 2019 Form 10-K.
Web Site: Additional financial information is available through our website at www.eversource.com. We make available through our website a link to the SEC's EDGAR website (http://www.sec.gov/edgar/searchedgar/companysearch.html), at which site Eversource's, CL&P's, NSTAR Electric's and PSNH's combined Annual Reports on Form 10-K, combined Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports may be reviewed. Information contained on the Company's website or that can be accessed through the website is not incorporated into and does not constitute a part of this combined Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS – EVERSOURCE ENERGY AND SUBSIDIARIES
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for Eversource for the three and six months ended June 30,March 31, 2020 and 2019 and 2018 included in this combined Quarterly Report on Form 10-Q:
| | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
(Millions of Dollars) | 2019 | | 2018 | | Increase/ (Decrease) | | 2019 | | 2018 | | Increase/ (Decrease) | 2020 | | 2019 | | Increase/ (Decrease) |
Operating Revenues | $ | 1,884.5 |
| | $ | 1,853.9 |
| | $ | 30.6 |
| | $ | 4,300.3 |
| | $ | 4,141.8 |
| | $ | 158.5 |
| $ | 2,373.7 |
| | $ | 2,415.8 |
| | $ | (42.1 | ) |
Operating Expenses: | |
| | |
| | |
| | | | |
| | |
| | | |
| | |
|
Purchased Power, Fuel and Transmission | 620.9 |
| | 653.9 |
| | (33.0 | ) | | 1,595.8 |
| | 1,600.7 |
| | (4.9 | ) | 876.5 |
| | 974.9 |
| | (98.4 | ) |
Operations and Maintenance | 328.0 |
| | 293.9 |
| | 34.1 |
| | 663.6 |
| | 626.4 |
| | 37.2 |
| 342.1 |
| | 335.6 |
| | 6.5 |
|
Depreciation | 219.1 |
| | 199.1 |
| | 20.0 |
| | 434.0 |
| | 403.4 |
| | 30.6 |
| 236.2 |
| | 214.9 |
| | 21.3 |
|
Amortization | 38.9 |
| | 36.2 |
| | 2.7 |
| | 109.9 |
| | 81.4 |
| | 28.5 |
| 49.8 |
| | 71.0 |
| | (21.2 | ) |
Energy Efficiency Programs | 105.8 |
| | 102.0 |
| | 3.8 |
| | 246.0 |
| | 236.2 |
| | 9.8 |
| 148.4 |
| | 140.1 |
| | 8.3 |
|
Taxes Other Than Income Taxes | 181.2 |
| | 177.5 |
| | 3.7 |
| | 365.7 |
| | 359.8 |
| | 5.9 |
| 181.5 |
| | 184.6 |
| | (3.1 | ) |
Impairment of Northern Pass Transmission | 239.6 |
| | — |
| | 239.6 |
| | 239.6 |
| | — |
| | 239.6 |
| |
Total Operating Expenses | 1,733.5 |
| | 1,462.6 |
| | 270.9 |
| | 3,654.6 |
| | 3,307.9 |
| | 346.7 |
| 1,834.5 |
| | 1,921.1 |
| | (86.6 | ) |
Operating Income | 151.0 |
| | 391.3 |
| | (240.3 | ) | | 645.7 |
| | 833.9 |
| | (188.2 | ) | 539.2 |
| | 494.7 |
| | 44.5 |
|
Interest Expense | 132.7 |
| | 126.4 |
| | 6.3 |
| | 264.5 |
| | 247.5 |
| | 17.0 |
| 134.7 |
| | 131.7 |
| | 3.0 |
|
Other Income, Net | 45.9 |
| | 50.1 |
| | (4.2 | ) | | 76.9 |
| | 83.9 |
| | (7.0 | ) | 24.1 |
| | 31.0 |
| | (6.9 | ) |
Income Before Income Tax Expense | 64.2 |
| | 315.0 |
| | (250.8 | ) | | 458.1 |
| | 670.3 |
| | (212.2 | ) | 428.6 |
| | 394.0 |
| | 34.6 |
|
Income Tax Expense | 30.8 |
| | 70.4 |
| | (39.6 | ) | | 114.2 |
| | 154.2 |
| | (40.0 | ) | 91.9 |
| | 83.4 |
| | 8.5 |
|
Net Income | 33.4 |
| | 244.6 |
| | (211.2 | ) | | 343.9 |
| | 516.1 |
| | (172.2 | ) | 336.7 |
| | 310.6 |
| | 26.1 |
|
Net Income Attributable to Noncontrolling Interests | 1.9 |
| | 1.9 |
| | — |
| | 3.8 |
| | 3.8 |
| | — |
| 1.9 |
| | 1.9 |
| | — |
|
Net Income Attributable to Common Shareholders | $ | 31.5 |
| | $ | 242.7 |
| | $ | (211.2 | ) | | $ | 340.1 |
| | $ | 512.3 |
| | $ | (172.2 | ) | $ | 334.8 |
| | $ | 308.7 |
| | $ | 26.1 |
|
Operating Revenues
Sales Volumes: A summary of our retail electric GWh sales volumes, our firm natural gas MMcf sales volumes, and our water MG sales volumes, and percentage changes, is as follows:
| | | Electric | | Firm Natural Gas | | Water | Electric | | Firm Natural Gas | | Water |
| Sales Volumes (GWh) | | Percentage Decrease | | Sales Volumes (MMcf) | | Percentage Increase/ (Decrease) | | Sales Volumes (MG) | | Percentage Decrease | Sales Volumes (GWh) | | Percentage Decrease | | Sales Volumes (MMcf) | | Percentage Decrease | | Sales Volumes (MG) | | Percentage Decrease |
Three Months Ended June 30: | 2019 | | 2018 (1) | | 2019 | | 2018 (2) | | 2019 | | 2018 | | |
Three Months Ended March 31: | | 2020 | | 2019 | | Percentage Decrease | | 2020 | | 2019 | | Percentage Decrease | | 2020 | | 2019 | | Percentage Decrease |
Traditional | 1,757 |
| | 1,803 |
| | (2.6 | )% | | — |
| | — |
| | — | % | | 459 |
| | 485 |
| | (5.4 | )% | 1,906 |
| | 1,968 |
| | — |
| | — |
| | 434 |
| | 451 |
| |
Decoupled and Special Contracts (3)(1) | 9,853 |
| | 10,330 |
| | (4.6 | )% | | 18,191 |
| | 18,932 |
| | (3.9 | )% | | 4,834 |
| | 5,016 |
| | (3.6 | )% | 10,465 |
| | 11,183 |
| | (6.4 | )% | | 39,062 |
| | 45,376 |
| | (13.9 | )% | | 4,372 |
| | 4,378 |
| | (0.1 | )% |
Total Sales Volumes | 11,610 |
| | 12,133 |
| | (4.3 | )% | | 18,191 |
| | 18,932 |
| | (3.9 | )% | | 5,293 |
| | 5,501 |
| | (3.8 | )% | 12,371 |
| | 13,151 |
| | (5.9 | )% | | 39,062 |
| | 45,376 |
| | (13.9 | )% | | 4,806 |
| | 4,829 |
| | (0.5 | )% |
| | | | | | | | | | | | | | | | | | |
Six Months Ended June 30: | | | | | | | | | | | | | | | | | | |
Traditional | 3,724 |
| | 3,775 |
| | (1.4 | )% | | — |
| | — |
| | — | % | | 910 |
| | 953 |
| | (4.5 | )% | |
Decoupled and Special Contracts (3) | 21,037 |
| | 21,579 |
| | (2.5 | )% | | 63,358 |
| | 61,983 |
| | 2.2 | % | | 9,212 |
| | 9,373 |
| | (1.7 | )% | |
Total Sales Volumes | 24,761 |
| | 25,354 |
| | (2.3 | )% | | 63,358 |
| | 61,983 |
| | 2.2 | % | | 10,122 |
| | 10,326 |
| | (2.0 | )% | |
| |
(1) | Special contracts are unique to Yankee Gas natural gas distribution customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to Yankee Gas regardless of the customers' usage. |
(1) Effective February 1, 2018, NSTAR Electric operated entirely under a decoupled rate structure. The 2018
Weather, fluctuations in energy supply costs, conservation measures (including utility-sponsored energy efficiency programs), and economic conditions affect customer energy usage and water consumption. Industrial sales volumes for NSTAR Electric have been recastare less sensitive to present January 2018 as decoupled to conform to the current year presentation.
(2) Effective November 15, 2018, Yankee Gas operated under a decoupled rate structure. The 2018temperature variations than residential and commercial sales volumes. In our service territories, weather impacts both electric and water sales volumes for Yankee Gas have been recast to present 2018 as decoupled to conform toduring the current year presentation.
(3) Special contracts are unique to Yankee Gassummer and both electric and natural gas distribution customers who take service under such an arrangement and generally specifysales volumes during the amountwinter; however, natural gas sales volumes are more sensitive to temperature variations than electric sales volumes. Customer heating or cooling usage may not directly correlate with historical levels or with the level of distribution revenue to be paid to Yankee Gas regardless of the customers' usage.degree-days that occur.
Fluctuations in retail electric sales volumes at PSNH impact earnings ("Traditional" in the table above). For CL&P, NSTAR Electric, Yankee Gas, and NSTAR Gas and our Connecticut water distribution business, fluctuations in retail sales volumes do not materially impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms ("Decoupled" in the table above). These distribution revenues are decoupled from their customer sales volumes, which breaks the relationship between sales volumes and revenues recognized. Fluctuations in water sales volumes largely do not impact earnings as our Connecticut water distribution business is also decoupled.
Operating Revenues: Operating Revenues by segment increasedincreased/(decreased) for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, as follows:
| | (Millions of Dollars) | Three Months Ended | | Six Months Ended | Three Months Ended |
Electric Distribution | $ | 21.9 |
| | $ | 101.1 |
| $ | (28.6 | ) |
Natural Gas Distribution | 1.2 |
| | 45.2 |
| (20.3 | ) |
Electric Transmission | 32.2 |
| | 67.7 |
| 29.2 |
|
Water Distribution | 0.2 |
| | 1.2 |
| 1.4 |
|
Other | 13.8 |
| | 41.1 |
| 36.5 |
|
Eliminations | (38.7 | ) | | (97.8 | ) | (60.3 | ) |
Total Operating Revenues | $ | 30.6 |
| | $ | 158.5 |
| $ | (42.1 | ) |
Three Months Ended:Electric and Natural Gas Distribution Revenues:
ElectricBase Distribution Revenues:
Base electric distribution revenues increased $20.9$31.8 million for the three months ended March 31, 2020, as compared to the same period in 2019, due primarily to the impact of CL&P&P's base distribution rate increasesincrease effective May 1, 2019, and May 1, 2018, which includes recovery of storm costs and certain other items that do not impact earnings, and an NSTAR Electric base distribution rate increase effective January 1, 2019.2020, and a PSNH temporary base distribution rate increase effective July 1, 2019, which includes recovery of storm costs and certain other items that do not impact earnings.
Base natural gas distribution revenues increased $8.6 million for the three months ended March 31, 2020, as compared to the same period in 2019, due primarily to a base distribution rate increase at Yankee Gas effective January 1, 2020.
Tracked Distribution Revenues: Tracked distribution revenues consist of certain costs that are recovered from customers in retail rates through regulatory commission-approved cost tracking mechanisms and therefore, recovery of these costs havehas no impact on earnings. However, tracked revenues do include certain incentives earned, return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings. Costs recovered through cost tracking mechanisms include, among others, energy supply and natural gas supply procurement and other energy-related costs, electric retail transmission charges, energy efficiency program costs, electric restructuring and stranded cost recovery revenues (including securitized RRB charges), and additionally for NSTAR Electric, pension and PBOP benefits and net metering for distributed generation. In addition, tracked revenues include certain incentives earned, certain return on rate base, and carrying charges that are billed in rates to customers. Tracked retail electric distribution revenues decreased as a result of a decrease in retail electric transmission charges ($41.4 million) and a decrease in other distribution tracking mechanisms ($1.1 million), partially offset by an increase in electric energy supply costs ($37.5 million). Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market and the sale of RECs to various counterparties, which increased $5.2 million.counterparties.
Natural Gas Distribution Revenues:
Base natural gasTracked distribution revenues decreased $3.5 millionincreased/(decreased) for the three months ended March 31, 2020, as compared to the same period in 2019, due primarily to the seasonality of the decoupled rate structure arising from the Yankee Gas base distribution rate case, which provides lower revenues in non-heating months.following:
|
| | | | | | | |
| Electric Distribution | | Natural Gas Distribution |
(Millions of Dollars) | Three Months Ended | | Three Months Ended |
Retail Tariff Tracked Revenues: | | | |
Energy supply procurement | $ | (111.0 | ) | | $ | (27.9 | ) |
Retail transmission | (13.3 | ) | | N/A |
|
Other distribution tracking mechanisms | 12.4 |
| | 10.8 |
|
Wholesale Market Sales Revenue | 39.5 |
| | (8.5 | ) |
Tracked natural gasThe decrease in energy supply procurement within electric distribution revenues increased as a result of anwas driven primarily by lower average sales volumes and lower average prices. The increase in wholesale market sales revenue within electric distribution was due primarily to a new zero-carbon PPA entered into by CL&P in 2019, as required by regulation, from which the energy purchased from Millstone Nuclear Power Station (Millstone) was sold into the market beginning in the fourth quarter of natural gas to third party suppliers ($2.3 million), an increase in capital tracker and other distribution tracking mechanisms ($1.2 million), and an increase in natural gas supply costs ($0.9 million).2019.
Electric Transmission Revenues: Electric transmission revenues increased $32.2$29.2 million for the three months ended March 31, 2020, as compared to the same period in 2019, due primarily to ongoing investmentscontinued investment in our transmission infrastructure.
Other Revenues and Eliminations: Other revenues primarily include the revenues of Eversource's service company, most of which are eliminated in consolidation. Eliminations are also primarily related to the Eversource electric transmission revenues that are derived
from ISO-NE regional transmission charges to the distribution businesses of CL&P, NSTAR Electric and PSNH that recover the costs of the
wholesale transmission business, and revenues from Eversource's service company.
Six Months Ended:
Electric Distribution Revenues:
Base electric distribution revenues increased $39.2 million due primarily to the impact of CL&P base distribution rate increases effective May 1, 2019 and May 1, 2018, which includes recovery of storm costs and certain other items that do not impact earnings, and an NSTAR Electric base distribution rate increase effective January 1, 2019.
Tracked retail electric distribution revenues increased as a result of an increase in electric energy supply costs ($93.6 million), an increase in stranded cost recovery revenues ($13.9 million), and an increase in other distribution tracking mechanisms ($26.8 million), partially offset by a decrease in retail electric transmission charges ($73.2 million). Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market and the sale of RECs to various counterparties, which decreased $1.9 million.
Natural Gas Distribution Revenues:
Base natural gas distribution revenues increased $16.7 million due primarily to the seasonality of the decoupled rate structure arising from the Yankee Gas base distribution rate case, which provides higher revenues in the winter heating months.
Tracked natural gas distribution revenues increased as a result of an increase in natural gas supply costs ($22.1 million), an increase in wholesale sales of natural gas to third party suppliers ($6.2 million) and an increase in capital tracker and other distribution tracking mechanisms ($3.9 million).
Electric Transmission Revenues: Electric transmission revenues increased $67.7 million due primarily to ongoing investments in our transmission infrastructure.business.
Other Revenues and Eliminations: Other revenues primarily include the revenues of Eversource's service company, most of which are eliminated in consolidation. Eliminations are primarily related to the Eversource electric transmission revenues that are derived
from ISO-NE regional transmission charges to the distribution businesses of CL&P, NSTAR Electric and PSNH that recover the costs of the
wholesale transmission business, and revenues from Eversource's service company.
Purchased Power, Fuel and Transmission expense includes costs associated with purchasing electricity and natural gas on behalf of our customers. These electric and natural gas supply costs are recovered from customers in rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power, Fuel and Transmission expense increased/(decreased)decreased for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, due primarily to the following:
| | (Millions of Dollars) | Three Months Ended | | Six Months Ended | Three Months Ended |
Electric Distribution | $ | 23.9 |
| | $ | 84.3 |
| $ | (23.9 | ) |
Natural Gas Distribution | 3.6 |
| | 29.1 |
| (34.6 | ) |
Transmission | (37.1 | ) | | (64.5 | ) | (14.3 | ) |
Eliminations | (23.4 | ) | | (53.8 | ) | (25.6 | ) |
Total Purchased Power, Fuel and Transmission | $ | (33.0 | ) | | $ | (4.9 | ) | $ | (98.4 | ) |
The increasedecrease in purchased power expense at the electric distribution business for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, was driven primarily by higherlower average sales volumes and lower average prices associated with the procurement of energy supply.supply, partially offset by the impact of energy purchases from the new Millstone PPA. The increasedecrease in natural gas supply costs at our natural gas distribution business for the three months ended March 31, 2020, as compared to the same period in 2019, was due primarily to higherlower average sales volumes.volumes and prices.
The decrease in transmission costs for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, was primarily the result of a decrease in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers, and a decrease in costs billed by ISO-NE that support regional grid investments and a decreaseinvestments. This was partially offset by an increase in Local Network Service charges, which reflectreflects the cost of transmission service provided by Eversource over our local transmission network.
Operations and Maintenance expense includes tracked costs and costs that are part of base electric, natural gas and water distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance expense increased/(decreased) for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, due primarily to the following: | | (Millions of Dollars) | Three Months Ended | | Six Months Ended | Three Months Ended |
Base Electric Distribution (Non-Tracked Costs): | | | | |
Storm Restoration Costs | | $ | (8.6 | ) |
Employee-related expenses, including labor and benefits | $ | 0.4 |
| | $ | (12.0 | ) | (2.4 | ) |
Operations-related expenses, including vegetation management, vehicles, and outside services | 7.8 |
| | 17.9 |
| 0.5 |
|
Storm Restoration Costs | 5.1 |
| | 4.0 |
| |
Shared corporate costs (including computer software depreciation at Eversource Service) | | 5.2 |
|
Other non-tracked operations and maintenance | 1.0 |
|
| 2.4 |
| 3.4 |
|
Total Base Electric Distribution (Non-Tracked Costs) | 14.3 |
|
| 12.3 |
| (1.9 | ) |
Base Natural Gas Distribution (Non-Tracked Costs) | 4.8 |
| | 7.9 |
| 1.2 |
|
Water Distribution | 0.4 |
| | 1.1 |
| (0.3 | ) |
Tracked Costs (Electric Distribution, Electric Transmission and Natural Gas Distribution) - Increase due primarily to higher electric transmission expenses, partially offset by the absence in 2019 of PSNH generation operations expenses due to the 2018 sales of thermal and hydroelectric generation assets | 21.5 |
|
| 30.9 |
| |
Tracked Costs (Electric Distribution, Electric Transmission and Natural Gas Distribution) - Increase due primarily to higher electric transmission expenses and employee-related costs | | 10.7 |
|
Other and eliminations: | | | | |
Eversource Parent and Other Companies - other operations and maintenance | 6.6 |
| | 27.3 |
| 26.5 |
|
Acquisition costs related to our planned purchase of the assets of CMA | | 4.9 |
|
Eliminations | (13.5 | ) | | (42.3 | ) | (34.6 | ) |
Total Operations and Maintenance | $ | 34.1 |
|
| $ | 37.2 |
| $ | 6.5 |
|
Depreciation expense increased for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, due primarily to higher utility plant in service balances and new depreciation rates effective with the CL&P distribution rate case settlement agreement.balances.
Amortization expense includes the deferral of energy supply, and energy-related costs and other costs that are included in certain regulatory commission-approved cost tracking mechanisms, and the amortization of certain costs.costs as those costs are collected in rates. This deferral adjusts expense to match the corresponding revenues. Amortization increased for the three and six months ended June 30, 2019, as compared to the same periods in 2018, due primarily to the deferral of energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and the related rate changes to recover these costs. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. The increaseAmortization decreased for the three and six month periods is also due to higher amortization of PSNH's securitized regulatory asset relatedmonths ended March 31, 2020, as compared to the 2018 RRB issuancesame period in 2019, due primarily to the deferral of $4.0 millionenergy supply and $14.7 million, respectively.energy-related costs and an increase in the recovery of PSNH storm costs.
Energy Efficiency Programs expense increased for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, due primarily to higher spending for CL&P's NSTAR Electric's and PSNH's energy efficiency programs.programs, partially offset by a decrease in spending on certain large energy efficiency projects in 2020 compared to 2019 at NSTAR Electric due to timing. The costs for the majority of the state energy policy initiatives and expanded energy efficiency programs are recovered from customers in rates and have no impact on earnings.
Taxes Other Than Income Taxes expense increaseddecreased for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, due primarily to higher property taxes as a result of higher utility plant in service balances and higher gross earnings taxes (the costs of which are tracked), partially offset by a decrease of $10.7 million related to CL&P's remittance of energy efficiency funds to the State of ConnecticutConnecticut. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of $2.0 million and $4.0 million for the three and six month periods, respectively, and aConnecticut. The decrease is partially offset by an increase in NSTAR Electric's property taxes due to a decrease in tax rates.
Impairment of Northern Pass Transmission reflects an impairment charge of $239.6 million that was recorded in the second quarter of 2019 as a result of the July 19, 2019 New Hampshire Supreme Court decision. The after-tax impact of this impairment charge was $204.4 million. For further information on the impairment of NPT, see "Business Development and Capital Expenditures - Electric Transmission Business - Northern Pass" in this Management's Discussion and Analysis of Financial Condition and Results of Operations.higher utility plant balances.
Interest Expense increased for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, due primarily to an increase in interest on long-term debt ($7.1 million and $11.3 million, respectively) as a result of new debt issuances an increase in interest on the 2018 PSNH RRB issuance ($2.5 million and $7.9 million, respectively) and an increase in interest on notes payable ($2.9 million and $7.1 million, respectively)6.8 million). Partially offsetting these increasesthis increase was an increase in AFUDC related to debt funds and other capitalized interest ($5.4 million3.1 million) and $10.9 million, respectively)a decrease in interest on notes payable ($2.2 million).
Other Income, Net decreased for the three and six months ended June 30, 2019,March 31, 2020, as compared to the same periodsperiod in 2018,2019, due primarily to a decreasethe absence in 2020 of the recognition of the equity component of the carrying charges related to PSNH storm costs recorded in interest income in 2019 ($5.2 million), and investment losses in 2020, as compared to investment income in 2019 driven by market volatility ($5.5 million). Partially offsetting these decreases was an increase related to pension, SERP and PBOP non-service income components ($8.8 million and $16.7 million, respectively)5.3 million), partially offset by an increase in equity in earnings related to Eversource's equity method investments ($3.0 million and $3.4 million, respectively), an increase in AFUDC related to equity funds ($2.2 million and $3.5 million, respectively) and the recognition in the first quarter of 2019 of $5.2 million of the equity return component of the carrying charges related to storm costs incurred from December 2013 through April 2016 recorded in interest income at PSNH.
Income Tax Expense decreasedincreased for the three months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the impairment of NPT ($35.2 million), the amortization of EDIT ($8.8 million), and lowerhigher pre-tax earnings ($2.47.3 million), partially offset byhigher state taxes ($4.5 million), and items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($6.8 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue is $12.1 million offset by current tax benefit of $3.4 million and amortization of EDIT of $8.8 million, for the three months ended June 30, 2019, which results in no impact on net income.
Income Tax Expense decreased for the six months ended June 30, 2019, as compared to the same period in 2018, due primarily to the impairment of NPT ($35.2 million), and the amortization of EDIT ($173.1 million), partially offset by higher pre-tax earningsan increase in share-based payment excess tax benefits ($5.84.8 million), higher state taxes ($1.3 million), and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($5.1 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue is $23.3 million offset by current tax benefit of $6.3 million andan increase in amortization of EDIT of $17 million, for the six months ended June 30, 2019, which results in no impact on net income.
($1.6 million).
RESULTS OF OPERATIONS –
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for CL&P, NSTAR Electric and PSNH for the sixthree months ended June 30,March 31, 2020 and 2019 and 2018 included in this combined Quarterly Report on Form 10-Q:
| | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
| CL&P | | NSTAR Electric | | PSNH | CL&P | | NSTAR Electric | | PSNH |
(Millions of Dollars) | 2019 | | 2018 | | Increase/ (Decrease) | | 2019 | | 2018 | | Increase/ (Decrease) | | 2019 | | 2018 | | Increase/ (Decrease) | 2020 | | 2019 | | Increase/ (Decrease) | | 2020 | | 2019 | | Increase/ (Decrease) | | 2020 | | 2019 | | Increase/ (Decrease) |
Operating Revenues | $ | 1,590.1 |
| | $ | 1,479.9 |
| | $ | 110.2 |
| | $ | 1,479.5 |
| | $ | 1,460.9 |
| | $ | 18.6 |
| | $ | 517.3 |
| | $ | 502.5 |
| | $ | 14.8 |
| $ | 899.7 |
| | $ | 849.2 |
| | $ | 50.5 |
| | $ | 733.8 |
| | $ | 797.6 |
| | $ | (63.8 | ) | | $ | 276.4 |
| | $ | 276.4 |
| | $ | — |
|
Operating Expenses: | |
| | |
| | |
| | | | | | |
| | | | | | |
| |
| | |
| | |
| | | | | | |
| | | | | | |
|
Purchased Power, Fuel and Transmission | 566.4 |
| | 536.2 |
| | 30.2 |
| | 558.5 |
| | 598.7 |
| | (40.2 | ) | | 199.3 |
| | 193.2 |
| | 6.1 |
| |
Purchased Power and Transmission | | 374.7 |
| | 319.8 |
| | 54.9 |
| | 242.4 |
| | 330.1 |
| | (87.7 | ) | | 94.1 |
| | 113.5 |
| | (19.4 | ) |
Operations and Maintenance | 264.0 |
| | 227.0 |
| | 37.0 |
| | 221.9 |
| | 220.8 |
| | 1.1 |
| | 105.4 |
| | 97.9 |
| | 7.5 |
| 135.6 |
| | 130.6 |
| | 5.0 |
| | 122.3 |
| | 113.0 |
| | 9.3 |
| | 47.1 |
| | 52.6 |
| | (5.5 | ) |
Depreciation | 147.8 |
| | 136.9 |
| | 10.9 |
| | 145.6 |
| | 134.6 |
| | 11.0 |
| | 46.2 |
| | 46.3 |
| | (0.1 | ) | 78.4 |
| | 73.3 |
| | 5.1 |
| | 78.3 |
| | 72.6 |
| | 5.7 |
| | 24.3 |
| | 22.9 |
| | 1.4 |
|
Amortization of Regulatory Assets, Net | 48.0 |
| | 43.4 |
| | 4.6 |
| | 45.8 |
| | 18.3 |
| | 27.5 |
| | 19.5 |
| | 14.0 |
| | 5.5 |
| 6.6 |
| | 35.7 |
| | (29.1 | ) | | 27.0 |
| | 22.6 |
| | 4.4 |
| | 20.1 |
| | 13.7 |
| | 6.4 |
|
Energy Efficiency Programs | 46.8 |
| | 41.4 |
| | 5.4 |
| | 142.6 |
| | 140.0 |
| | 2.6 |
| | 12.9 |
| | 9.8 |
| | 3.1 |
| 35.5 |
| | 26.0 |
| | 9.5 |
| | 68.7 |
| | 76.7 |
| | (8.0 | ) | | 9.4 |
| | 6.7 |
| | 2.7 |
|
Taxes Other Than Income Taxes | 178.5 |
| | 174.7 |
| | 3.8 |
| | 93.1 |
| | 95.9 |
| | (2.8 | ) | | 38.0 |
| | 38.7 |
| | (0.7 | ) | 83.0 |
| | 92.0 |
| | (9.0 | ) | | 48.8 |
| | 44.8 |
| | 4.0 |
| | 19.8 |
| | 17.3 |
| | 2.5 |
|
Total Operating Expenses | 1,251.5 |
| | 1,159.6 |
| | 91.9 |
| | 1,207.5 |
| | 1,208.3 |
| | (0.8 | ) | | 421.3 |
| | 399.9 |
| | 21.4 |
| 713.8 |
| | 677.4 |
| | 36.4 |
| | 587.5 |
| | 659.8 |
| | (72.3 | ) | | 214.8 |
| | 226.7 |
| | (11.9 | ) |
Operating Income | 338.6 |
| | 320.3 |
| | 18.3 |
| | 272.0 |
| | 252.6 |
| | 19.4 |
| | 96.0 |
| | 102.6 |
| | (6.6 | ) | 185.9 |
| | 171.8 |
| | 14.1 |
| | 146.3 |
| | 137.8 |
| | 8.5 |
| | 61.6 |
| | 49.7 |
| | 11.9 |
|
Interest Expense | 72.7 |
| | 75.5 |
| | (2.8 | ) | | 56.1 |
| | 53.8 |
| | 2.3 |
| | 28.3 |
| | 27.4 |
| | 0.9 |
| 37.8 |
| | 35.8 |
| | 2.0 |
| | 30.9 |
| | 27.9 |
| | 3.0 |
| | 14.5 |
| | 14.4 |
| | 0.1 |
|
Other Income, Net | 6.7 |
| | 13.7 |
| | (7.0 | ) | | 21.7 |
| | 26.9 |
| | (5.2 | ) | | 10.0 |
| | 8.2 |
| | 1.8 |
| 1.9 |
| | 3.9 |
| | (2.0 | ) | | 12.2 |
| | 11.1 |
| | 1.1 |
| | 3.2 |
| | 7.0 |
| | (3.8 | ) |
Income Before Income Tax Expense | 272.6 |
| | 258.5 |
| | 14.1 |
| | 237.6 |
| | 225.7 |
| | 11.9 |
| | 77.7 |
| | 83.4 |
| | (5.7 | ) | 150.0 |
| | 139.9 |
| | 10.1 |
| | 127.6 |
| | 121.0 |
| | 6.6 |
| | 50.3 |
| | 42.3 |
| | 8.0 |
|
Income Tax Expense | 57.3 |
| | 60.2 |
| | (2.9 | ) | | 53.9 |
| | 60.6 |
| | (6.7 | ) | | 18.1 |
| | 22.5 |
| | (4.4 | ) | 31.3 |
| | 29.4 |
| | 1.9 |
| | 27.2 |
| | 27.0 |
| | 0.2 |
| | 10.7 |
| | 9.5 |
| | 1.2 |
|
Net Income | $ | 215.3 |
| | $ | 198.3 |
| | $ | 17.0 |
| | $ | 183.7 |
| | $ | 165.1 |
| | $ | 18.6 |
| | $ | 59.6 |
| | $ | 60.9 |
| | $ | (1.3 | ) | $ | 118.7 |
| | $ | 110.5 |
| | $ | 8.2 |
| | $ | 100.4 |
| | $ | 94.0 |
| | $ | 6.4 |
| | $ | 39.6 |
| | $ | 32.8 |
| | $ | 6.8 |
|
Operating Revenues
Sales Volumes: A summary of our retail electric GWh sales volumes wasis as follows:
| | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
| 2019 | | 2018 | | Decrease | | Percentage Decrease | 2020 | | 2019 | | Decrease | | Percentage Decrease |
CL&P | 9,953 |
| | 10,222 |
| | (269 | ) | | (2.6 | )% | 4,941 |
| | 5,350 |
| | (409 | ) | | (7.6 | )% |
NSTAR Electric | 11,084 |
| | 11,357 |
| | (273 | ) | | (2.4 | )% | 5,524 |
| | 5,833 |
| | (309 | ) | | (5.3 | )% |
PSNH | 3,724 |
| | 3,775 |
| | (51 | ) | | (1.4 | )% | 1,906 |
| | 1,968 |
| | (62 | ) | | (3.2 | )% |
Fluctuations in retail electric sales volumes at PSNH impact earnings. For CL&P and NSTAR Electric, fluctuations in retail electric sales volumes do not impact earnings due to their respective regulatory commission-approved distribution revenue decoupling mechanisms.
Operating Revenues: Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased $110.2$50.5 million at CL&P, $18.6decreased $63.8 million at NSTAR Electric and $14.8 millionwas unchanged at PSNH, for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018.2019.
Base Distribution Revenues:
CL&P's distribution revenues increased $34.1$13.4 million due primarily to the impact of its base distribution rate increasesincrease effective May 1, 2019, which includes recovery of storm costs and Maycertain other items that do not impact earnings.
NSTAR Electric's distribution revenues increased $7.6 million due primarily to the impact of its base distribution rate increase effective January 1, 2018 as a result2020.
PSNH's distribution revenues increased $10.8 million due primarily to the impact of the PURA-approvedits temporary base distribution rate case settlement agreement,increase effective July 1, 2019, which includes recovery of storm costs and certain other items that do not impact earnings.
NSTAR Electric's distribution revenues increased $7.0 million due primarily to the impact of its base distribution rate increase effective January 1, 2019.
PSNH's distribution revenues decreased $1.9 million due primarily to lower demand revenues in the first half of 2019, as compared to the same period in 2018.
Tracked Revenues: Tracked distribution revenues consist of certain costs that are recovered from customers in retail rates through regulatory commission-approved cost tracking mechanisms and therefore, recovery of these costs havehas no impact on earnings. However, tracked revenues do include certain incentives earned, return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings. Costs recovered through cost tracking mechanisms include, among others, energy supply procurement and other energy-related costs, retail transmission charges, energy efficiency program costs, electric restructuring and stranded cost recovery revenues (including securitized RRB charges), and additionally for NSTAR Electric, pension and PBOP benefits and net metering for distributed generation. Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market and the sale of RECs to various counterparties. In addition, tracked revenues include certain incentives earned, certain return on rate base, and carrying charges that are billed in rates to customers, which do impact earnings.
Tracked revenues increased/(decreased) for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the following:
| | (Millions of Dollars) | CL&P | | NSTAR Electric | | PSNH | CL&P | | NSTAR Electric | | PSNH |
Retail Tariff Tracked Revenues | | | | | | |
Retail Tariff Tracked Revenues: | | | | | | |
Energy supply procurement | $ | 60.2 |
| | $ | 25.3 |
| | $ | 8.1 |
| $ | (40.4 | ) | | $ | (57.1 | ) | | $ | (13.5 | ) |
Retail transmission | (17.5 | ) | | (37.7 | ) | | (18.0 | ) | (10.5 | ) | | (4.9 | ) | | 2.1 |
|
Stranded cost recovery | (6.3 | ) | | 2.4 |
| | 17.8 |
| |
Other distribution tracking mechanisms | 8.5 |
| | 14.0 |
| | 4.3 |
| 30.4 |
| | (14.7 | ) | | (3.3 | ) |
Wholesale Market Sales Revenue | 4.8 |
| | 3.4 |
| | (11.5 | ) | 51.0 |
| | (10.0 | ) | | (1.5 | ) |
PSNH'sThe decrease in energy supply procurement revenues includesreflects both lower average sales volumes and lower average prices for the absence in 2019 of the recovery of generation rate base return duethree months ended March 31, 2020, as compared to the sales of its thermal and hydroelectric generation assetssame period in 2018. 2019.
Revenues from CL&P's other distribution tracking mechanisms include higher earnings in 2019 from its capital tracker mechanism effective July 1, 2018 due to increased electric system improvements. CL&P's wholesale market sales revenue increased due primarily to energy sold in the wholesale market resulting from energy purchased from the new Millstone PPA.
Transmission Revenues: Transmission revenues increased $38.6$11.4 million at CL&P, $13.4$12.3 million at NSTAR Electric, and $15.7$5.5 million at PSNH for the three months ended March 31, 2020, as compared to the same period in 2019, due primarily to ongoing investmentscontinued investment in our transmission infrastructure.
Eliminations: Eliminations are primarily related to the Eversource electric transmission revenues that are derived from ISO-NE regional transmission charges to the distribution businesses of CL&P, NSTAR Electric and PSNH that recover the costs of the wholesale transmission business. The impact of eliminations decreased revenues by $15.7$5.5 million at CL&P, $8.7$8.0 million at NSTAR Electric and $0.3$0.4 million at PSNH.PSNH for the three months ended March 31, 2020, as compared to the same period in 2019.
Purchased Power Fuel and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P, NSTAR Electric and PSNH's customers. These energy supply costs are recovered from customers in rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power Fuel and Transmission expense increased/(decreased) for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the following:
| | (Millions of Dollars) | CL&P | | NSTAR Electric | | PSNH | CL&P | | NSTAR Electric | | PSNH |
Purchased Power Costs | $ | 60.5 |
| | $ | 5.3 |
| | $ | 18.5 |
| $ | 71.2 |
| | $ | (74.7 | ) | | $ | (20.4 | ) |
Transmission Costs | (15.3 | ) | | (37.0 | ) | | (12.2 | ) | (10.8 | ) | | (4.9 | ) | | 1.4 |
|
Eliminations | (15.0 | ) | | (8.5 | ) | | (0.2 | ) | (5.5 | ) | | (8.1 | ) | | (0.4 | ) |
Total Purchased Power, Fuel and Transmission | $ | 30.2 |
| | $ | (40.2 | ) | | $ | 6.1 |
| |
Total Purchased Power and Transmission | | $ | 54.9 |
| | $ | (87.7 | ) | | $ | (19.4 | ) |
Purchased Power Costs: Included in purchased power costs are the costs associated with providing electric generation service supply to all customers who have not migrated to third party suppliers.suppliers and the cost of energy purchase contracts, as required by regulation.
The increase at CL&P was due primarily to an increase in the pricenew Millstone PPA energy purchases, partially offset by lower average sales volumes and volumelower average prices associated with the procurement of energy supply.
The decrease at both NSTAR Electric and PSNH was due primarily to lower average sales volumes of power procured on behalf of our customers.
The increase at NSTAR Electric was due primarily to an increase incustomers, as well as lower average prices associated with the priceprocurement of power procured on behalf of our customers.
The increase at PSNH was due primarily to higher purchased power energy expenses that are recovered as a component of the Energy Service tracking mechanism.supply.
Transmission Costs: Included in transmission costs are charges that recover the cost of transporting electricity over high-voltage lines from generation facilities to substations, including costs allocated by ISO-NE to maintain the wholesale electric market.
The decrease in transmission costs at CL&P was primarily a result of a decrease in costs billed by ISO-NE that support regional grid investments, and a decrease in Local Network Service charges, which reflect the cost of transmission service provided by Eversource over our local transmission network. This was partially offset by an increase in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers.
The decrease in transmission costs at NSTAR Electric was due primarily to a result of a decrease inreduction to the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers and a decrease in costs billed by ISO-NE that support regional grid investments. This was partially offset by an increase in Local Network Service charges, which reflectreflects the cost of transmission service provided by Eversource over our local transmission network.
The decreaseincrease in transmission costs at PSNH was primarily athe result of a decreasean increase in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers,Local Network Service charges. This was partially offset by a decrease in costs billed by ISO-NE that support regional grid investments and a decrease in Local Network Service charges, which reflect the cost of transmission service provided by Eversource over our local transmission network.investments.
Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance expense increased/(decreased) for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the following:
| | (Millions of Dollars) | CL&P | | NSTAR Electric | | PSNH | CL&P | | NSTAR Electric | | PSNH |
Base Electric Distribution (Non-Tracked Costs): | | | | | | | | | | |
Storm restoration costs | | $ | (2.4 | ) | | $ | (4.4 | ) | | $ | (1.8 | ) |
Employee-related expenses, including labor and benefits | $ | (4.2 | ) | | $ | (7.1 | ) | | $ | (0.7 | ) | 0.2 |
| | (3.0 | ) | | 0.4 |
|
Operations-related expenses, including vegetation management, vehicles, and outside services | 11.0 |
| | 2.1 |
| | 4.8 |
| 3.7 |
| | 0.8 |
| | (4.0 | ) |
Storm restoration costs | (3.3 | ) | | 5.9 |
| | 1.4 |
| |
Shared corporate costs (including computer software depreciation at Eversource Service) | | 2.1 |
| | 2.4 |
| | 0.7 |
|
Other non-tracked operations and maintenance | 6.8 |
| | (5.2 | ) | | 0.8 |
| (2.1 | ) | | 4.3 |
| | 1.2 |
|
Total Base Electric Distribution (Non-Tracked Costs) | 10.3 |
| | (4.3 | ) | | 6.3 |
| 1.5 |
| | 0.1 |
| | (3.5 | ) |
Tracked Costs: | | | | | | | | | | |
Absence in 2019 of PSNH generation operations expenses due to the 2018 sales of thermal and hydroelectric generation assets | — |
| | — |
| | (7.0 | ) | |
Transmission expenses | 24.6 |
| | 0.4 |
| | 3.0 |
| (0.1 | ) | | 4.2 |
| | (0.9 | ) |
Other tracked operations and maintenance | 2.1 |
| | 5.0 |
| | 5.2 |
| 3.6 |
| | 5.0 |
| | (1.1 | ) |
Total Tracked Costs | 26.7 |
| | 5.4 |
| | 1.2 |
| 3.5 |
| | 9.2 |
| | (2.0 | ) |
Total Operations and Maintenance | $ | 37.0 |
| | $ | 1.1 |
| | $ | 7.5 |
| $ | 5.0 |
| | $ | 9.3 |
| | $ | (5.5 | ) |
Depreciation increased for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018, due primarily to the following:
The increase at2019, for CL&P, was due primarily to higher net plant in service balances and the implementation of new depreciation rates effective with the CL&P distribution rate case settlement agreement.
The increase at NSTAR Electric wasand PSNH due to higher net plant in service balances.
Amortization of Regulatory Assets, Net expense includes the deferral of energy supply, and energy-related costs and other costs that are included in certain regulatory-approved cost tracking mechanisms, and the amortization of certain costs.costs as those costs are collected in rates. This deferral adjusts expense to match the corresponding revenues. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. Amortization of Regulatory Assets, Net increased at CL&Pincreased/decreased for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018, due primarily to higher recovery of deferred storm restoration costs approved in distribution rates, and at NSTAR Electric and PSNH2019, due primarily to the following:
The decrease at CL&P was driven primarily by the deferral adjustment of energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. Energy
| |
• | The increase at NSTAR Electric was driven primarily by the deferral of energy supply and energy-related costs, and an increase in the recovery of costs associated with low-income customer programs. |
The increase at PSNH was due primarily to the deferral of energy supply and energy-related costs, are recovered from customersand an increase in rates and have no impact on earnings. The increase at PSNH is also due to higher amortization of its securitized regulatory asset related to the 2018 RRB issuance of $14.7 million.storm cost recovery.
Energy Efficiency Programs expense includes costs forof various state energy policy initiatives and expanded energy efficiency programs the majority of whichthat are recovered from customers in rates, andmost of which have no impact on earnings. Energy Efficiency Programs expense increasedincreased/decreased for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the following:
The increase at CL&P and PSNH was due to higher spending for CL&P's, NSTAR Electric's and PSNH's energy efficiency programs.
The decrease at NSTAR Electric was due to the timing of spending on certain large energy efficiency projects in 2020, as compared to 2019.
Taxes Other Than Income Taxes increased/(decreased)increased/decreased for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the following:
The decrease at CL&P was related to a $10.7 million decrease in the remittance of energy efficiency funds to the State of Connecticut. Energy efficiency funds collected from customers after July 1, 2019 are no longer subject to remittance to the State of Connecticut. The decrease was partially offset by higher property taxes as a result of higher utility plant balances.
The increases at NSTAR Electric and PSNH were due to higher property taxes as a result of higher utility plant balances.
Interest Expense increased for the three months ended March 31, 2020, as compared to the same period in 2019, due primarily to the following:
The increase at CL&P was due primarily to higher property taxes as a result of higher utility plant balances and higher gross earnings taxes (the costs of which are tracked)interest on long-term debt ($3.5 million), partially offset by a decrease related to CL&P's remittance of energy efficiency funds to the State of Connecticut of $4.0 million.
The decrease at NSTAR Electric was due primarily to lower property taxes as a result of a decrease in tax rates.
Interest Expense (decreased)/increased for the six months ended June 30, 2019, as compared to the same period in 2018, due primarily to the following:
The decrease at CL&P was due primarily to lower interest expense on long-term debtregulatory deferrals ($3.50.3 million) and an increase in AFUDC related to debt funds ($0.4 million), partially offset by an increase in interest expense on regulatory deferrals ($1.4 million).
| |
• | The increase at NSTAR Electric was due primarily to higher interest on long-term debt ($1.63.1 million). |
The increase at PSNH was due primarily to an increase in interest on the 2018 PSNH RRB issuance ($7.9 million), partially offset by lower interest on long-term debt ($3.3 million), a decrease in interest on notes payable ($1.5 million) and an increase in AFUDC related to debt funds ($0.9 million).
Other Income, Net (decreased)/increasedincreased/decreased for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the following:
The decrease at CL&P was due primarily to a decreaseinvestment losses in 2020, as compared to investment income in 2019 driven by market volatility ($5.1 million), partially offset by an increase related to pension, SERP and PBOP non-service income components ($6.91.7 million) and an increase in AFUDC related to equity funds ($1.3 million).
The decreaseincrease at NSTAR Electric was due primarily to a decreasean increase in AFUDC related to equity funds ($1.0 million) and an increase related to pension, SERP and PBOP non-service income components ($5.50.9 million), partially offset by investment losses in 2020, as compared to investment income in 2019 driven by market volatility ($1.0 million).
The increasedecrease at PSNH was due primarily to the recognitionabsence in 2020 of the first quarter of 2019 of $5.2 millionrecognition of the equity return component of the carrying charges related to storm costs incurred from December 2013 through April 2016 recorded in interest income in 2019 ($5.2 million) and investment losses in 2020, as compared to investment income in 2019 driven by market volatility ($0.9 million). Partially offsetting these decreases were an increase related to pension, SERP and PBOP non-service income components ($1.4 million) and an increase in AFUDC related to equity funds ($1.1 million), partially offset by a decrease related to pension, SERP and PBOP non-service income components ($2.41.3 million).
Income Tax Expense decreasedincreased for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the following:
The decreaseincrease at CL&P was due primarily to amortization of EDIT ($1.5 million), lower state taxes ($1.2 million), and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($3.2 million) offset by higher pre-tax earnings ($3 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue is $2.0 million offset by a current tax benefit of $0.5 million and amortization of EDIT of $1.5 million, for the six months ended June 30, 2019, which results in no impact on net income.
The decrease at NSTAR Electric was due primarily to amortization of EDIT ($9.62.0 million), partially offset by higher pre-tax earningsstate taxes ($2.51.0 million), and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.4 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue is $13.3 million offset by a current tax benefit of $3.7 million and amortization of EDIT of $9.6 million, for the six months ended June 30, 2019, which results in no impact on net income.
The decrease at PSNH was due primarily to lower pre-tax earnings ($1.2 million), amortization of EDIT ($2.1 million), and items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($1.10.5 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue is $2.8 million, partially offset by a currentan increase in share-based payment excess tax benefit of $0.7 millionbenefits ($1.6 million).
The increase at NSTAR Electric was due to higher pre-tax earnings ($1.2 million), higher state taxes ($0.5 million) and amortization of EDIT of $2.1 million, for the six months ended June 30, 2019,which resultsflow-through items and permanent differences ($0.2 million), partially offset by an increase in no impact on net income.share-based payment excess tax benefits ($1.7 million).
The increase at PSNH was due to higher pre-tax earnings ($1.9 million) and higher state taxes ($0.5 million), partially offset by an increase in share-based payment excess tax benefits ($0.6 million) and flow-through items and permanent differences ($0.6 million).
EARNINGS SUMMARY
CL&P's earnings increased $17.0$8.2 million for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the base distribution rate increasesincrease effective May 1, 2019, and May 1, 2018, higher earnings from its capital tracker mechanism, and an increase in transmission earnings driven by a higher transmission rate base. The earnings increase was partially offset by investment loss in 2020 compared to investment income in 2019 driven by market volatility, higher depreciation expense, higher operations and maintenance expense, lower non-service income from our benefit plans, higher depreciation expense and higher property and other taxinterest expense.
NSTAR Electric's earnings increased $18.6$6.4 million for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the base distribution rate increase effective January 1, 2020 and an increase in transmission earnings driven by a higher transmission rate base, the NSTAR Electric base distribution rate increase effective January 1, 2019, lower operations and maintenance expense, and lower property and other tax expense.base. The earnings increase was partially offset by higher interest expense, higher depreciation expense, and higher property tax expense.
PSNH's earnings decreased $1.3increased $6.8 million for the sixthree months ended June 30, 2019,March 31, 2020, as compared to the same period in 2018,2019, due primarily to the absence intemporary base distribution rate increase effective July 1, 2019, of generation earnings as a result of the sale of its generation assets in 2018, higher operations and maintenance expense and lower demand revenues. The earnings decrease was partially offset by an increase in transmission earnings driven by a higher transmission rate base, and lower operations and maintenance expense. The earnings increase was partially offset by the absence of the first quarter 2019 recognition in 2019 of carrying charges on its 2013 through 2016 storm costs approved for recovery.
LIQUIDITY
Cash Flows: CL&P had cash flows provided by operating activities of $345.6$132.2 million for the sixthree months ended June 30, 2019,March 31, 2020, as compared to $268.1$198.3 million in the same period of 2018.2019. The increasedecrease in operating cash flows was due primarily to the absence in 2019timing of approximately $71 million of storm restoration costcash payments and $41.2 million in pension contributions made in the first half of 2018, andon our accounts payable. Partially offsetting this unfavorable impact was the timing of accounts payable cash payments. Partially offsetting these favorable impacts were the timing of collections for regulatory tracking mechanisms, andthe timing of collections on our accounts receivable, the timing of other working capital items.items and lower income tax refunds received of $5.2 million in 2020.
NSTAR Electric had cash flows provided by operating activities of $251.5$61.7 million for the sixthree months ended June 30, 2019,March 31, 2020, as compared to $202.7$137.0 million in the same period of 2018.2019. The increasedecrease in operating cash flows was due primarily to the absence in 2019 of approximately $85 million of storm restoration cost payments made in the first half of 2018, a decrease of $56.1 million in pension and PBOP cash contributions, lower income tax payments made in the first half of 2019 of $47 million, and the timing of cash collections on our accounts receivables. Partially offsetting these favorable impacts werereceivable, the timing of cash payments made on our accounts payable cash payments,and other working capital items, and the timing of collections for regulatory tracking mechanisms, and the timingmechanisms. In addition, there were lower income tax refunds received of other working capital items.
$13.2 million in 2020.
PSNH had cash flows provided by operating activities of $121.7$58.5 million for the sixthree months ended June 30, 2019,March 31, 2020, as compared to $112.8$86.1 million in the same period of 2018.2019. The increasedecrease in operating cash flows was due primarily to income tax refundspayments of $11.8$1.2 million in the first halfquarter of 2019,2020, as compared to income tax paymentsrefunds received of $9.0$20.3 million in the same period in 2018,2019, and the timing of cash collectionspayments made on our accounts receivable, and the timing of accounts payable cash payments. Partially offsetting these favorable impacts was the timing of collections and payments of our other working capital items.payable.
For further information on CL&P's, NSTAR Electric's and PSNH's liquidity and capital resources, see "Liquidity" and "Business Development and Capital Expenditures" included in this Management's Discussion and Analysis of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS – THE CONNECTICUT LIGHT AND POWER COMPANY
The following provides the amounts and variances in operating revenues and expense line items in the statements of income for CL&P for the three months ended June 30, 2019 and 2018 included in this combined Quarterly Report on Form 10-Q:
|
| | | | | | | | | | | |
| For the Three Months Ended June 30, |
(Millions of Dollars) | 2019 | | 2018 | | Increase/(Decrease) |
Operating Revenues | $ | 740.8 |
| | $ | 694.9 |
| | $ | 45.9 |
|
Operating Expenses: | |
| | |
| | |
|
Purchased Power and Transmission | 246.5 |
| | 234.3 |
| | 12.2 |
|
Operations and Maintenance | 133.4 |
| | 109.7 |
| | 23.7 |
|
Depreciation | 74.6 |
| | 69.4 |
| | 5.2 |
|
Amortization of Regulatory Assets, Net | 12.4 |
| | 15.4 |
| | (3.0 | ) |
Energy Efficiency Programs | 20.8 |
| | 18.6 |
| | 2.2 |
|
Taxes Other Than Income Taxes | 86.4 |
| | 84.4 |
| | 2.0 |
|
Total Operating Expenses | 574.1 |
| | 531.8 |
| | 42.3 |
|
Operating Income | 166.7 |
| | 163.1 |
| | 3.6 |
|
Interest Expense | 36.9 |
| | 38.7 |
| | (1.8 | ) |
Other Income, Net | 2.9 |
| | 7.1 |
| | (4.2 | ) |
Income Before Income Tax Expense | 132.7 |
| | 131.5 |
| | 1.2 |
|
Income Tax Expense | 27.9 |
| | 31.8 |
| | (3.9 | ) |
Net Income | $ | 104.8 |
| | $ | 99.7 |
| | $ | 5.1 |
|
Operating Revenues
Sales Volumes: CL&P's retail electric GWh sales volumes were 4,602 and 4,846 for the three months ended June 30, 2019 and 2018, respectively, resulting in a decrease of 5.0 percent. Fluctuations in retail electric sales volumes do not impact earnings due to its PURA-approved distribution revenue decoupling mechanism.
Operating Revenues: Operating Revenues, which consist of base distribution revenues and tracked revenues further described below, increased $45.9 million for the three months ended June 30, 2019, as compared to the same period in 2018.
Base Distribution Revenues: CL&P's distribution revenues increased $14.5 million due primarily to the impact of its base distribution rate increases effective May 1, 2019 and May 1, 2018 as a result of the PURA-approved rate case settlement agreement, which includes recovery of storm costs and certain other items that do not impact earnings.
Tracked Revenues: Tracked revenues increased/(decreased) for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to the following:
|
| | | |
(Millions of Dollars) | |
Retail Tariff Tracked Revenues | |
Energy supply procurement | $ | 23.9 |
|
Retail transmission | (8.1 | ) |
Other distribution tracking mechanisms | 0.2 |
|
Wholesale Market Sales Revenue | 1.5 |
|
Revenues from CL&P's other distribution tracking mechanisms include higher earnings from its capital tracker mechanism effective July 1, 2018 due to increased electric system improvements.
Transmission Revenues: Transmission revenues increased $21.2 million due primarily to ongoing investments in our transmission infrastructure.
Eliminations: Eliminations are primarily related to transmission revenues derived from ISO-NE regional transmission charges to the distribution business that recovers the costs of the wholesale transmission business. The impact of eliminations decreased revenues by $8.0 million.
Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P's customers. These energy supply costs are recovered from customers in PURA-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power and Transmission expense increased/(decreased) for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to the following:
|
| | | |
(Millions of Dollars) | |
Purchased Power Costs | $ | 26.3 |
|
Transmission Costs | (6.8 | ) |
Eliminations | (7.3 | ) |
Total Purchased Power and Transmission | $ | 12.2 |
|
The increase in purchased power costs was due primarily to an increase in both the price and volume of power procured on behalf of our customers. The decrease in transmission costs was primarily a result of a decrease in Local Network Service charges, which reflect the cost of transmission service provided over the local transmission network, and a decrease in costs billed by ISO-NE that support regional grid investments. This was partially offset by an increase in the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers network.
Operations and Maintenance expense includes tracked costs and costs that are part of base distribution rates with changes impacting earnings (non-tracked costs). Operations and Maintenance expense increased/(decreased) for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to the following:
|
| | | |
(Millions of Dollars) | |
Base Electric Distribution (Non-Tracked Costs): | |
Employee-related expenses, including labor and benefits | $ | (2.0 | ) |
Operations-related expenses, including vegetation management, vehicles, and outside services | 5.8 |
|
Other non-tracked operations and maintenance | 4.1 |
|
Total Base Electric Distribution (Non-Tracked Costs) | 7.9 |
|
Total Tracked Costs | 15.8 |
|
Total Operations and Maintenance | $ | 23.7 |
|
Depreciation expense increased for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to higher net plant in service balances and the implementation of new depreciation rates effective with the CL&P distribution rate case settlement agreement.
Amortization of Regulatory Assets, Net expense includes the deferral of energy supply and energy-related costs included in certain regulatory-approved cost tracking mechanisms, and the amortization of certain costs. This deferral adjusts expenses to match the corresponding revenues. Amortization of Regulatory Assets, Net decreased at CL&P for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to the deferral adjustment of energy supply and energy-related costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. Energy supply and energy-related costs, which are the primary drivers of amortization, are recovered from customers in rates and have no impact on earnings.
Energy Efficiency Programs expenseincludes costs for various state energy policy initiatives and expanded energy efficiency programs, the majority of which are recovered from customers in rates and have no impact on earnings. Energy Efficiency Programs expenseincreased for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to higher spending for energy efficiency programs.
Taxes Other Than Income Taxes increasedfor the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to higher property taxes as a result of higher utility plant balances and higher gross earnings taxes (the costs of which are tracked), partially offset by a decrease related to CL&P's remittance of energy efficiency funds to the State of Connecticut of $2.0 million.
Interest Expense decreased at CL&P for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to lower interest on long-term debt ($1.9 million) and an increase in AFUDC related to debt funds ($0.3 million), partially offset by an increase in interest expense on regulatory deferrals ($0.4 million).
Other Income, Net decreased for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to a decrease related to pension, SERP and PBOP non-service income components ($3.3 million).
Income Tax Expense decreased for the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to amortization of EDIT ($1.5 million), lower state taxes ($1.9 million) and by items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.5 million). The impact of the amortization of the EDIT regulatory liability, including the tax gross up portion, that reduced revenue is $2.0 million offset by a current tax benefit of $0.5 million and amortization of EDIT of $1.5 million, for the three months ended June 30, 2019, which results in no impact on net income.
EARNINGS SUMMARY
CL&P's earnings increased $5.1 millionfor the three months ended June 30, 2019, as compared to the same period in 2018, due primarily to base distribution rate increases effective May 1, 2019 and May 1, 2018 and higher earnings from its capital tracker mechanism. The earnings increase was partially offset by higher operations and maintenance expense, lower non-service income from our benefit plans, higher depreciation expense and higher property and other tax expense.
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Market Risk Information
Commodity Price Risk Management: Our regulated companies enter into energy contracts to serve our customers, and the economic impacts of those contracts are passed on to our customers. Accordingly, the regulated companies have no exposure to loss of future earnings or fair values due to these market risk-sensitive instruments. Eversource's Energy Supply Risk Committee, comprised of senior officers, reviews and approves all large-scale energy related transactions entered into by its regulated companies.
Other Risk Management Activities
Interest Rate Risk Management: We manage our interest rate risk exposure in accordance with our written policies and procedures.
Credit Risk Management: Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties pursuant to the terms of our contractual obligations. We serve a wide variety of customers and transact with suppliers that include IPPs, industrial companies, natural gas and electric utilities, oil and natural gas producers, financial institutions, and other energy marketers. Margin accounts exist within this diverse group, and we realize interest receipts and payments related to balances outstanding in these margin accounts. This wide customer and supplier mix generates a need for a variety of contractual structures, products and terms that, in turn, require us to manage the portfolio of market risk inherent in those transactions in a manner consistent with the parameters established by our risk management process.
Our regulated companies are subject to credit risk from certain long-term or high-volume supply contracts with energy marketing companies. Our regulated companies manage the credit risk with these counterparties in accordance with established credit risk practices and monitor contracting risks, including credit risk. As of June 30, 2019,March 31, 2020, our regulated companies held collateral in the form of letters(letters of credit or cash) of $8.0$15.0 million from counterparties related to our standard service contracts. As of June 30, 2019,March 31, 2020, Eversource had $19.1$19.3 million of cash posted with ISO-NE related to energy transactions.
We have provided additional disclosures regarding interest rate risk management and credit risk management in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," in Eversource's 20182019 Form 10-K, which is incorporated herein by reference. There have been no additional risks identified and no material changes with regard to the items previously disclosed in the Eversource 20182019 Form 10-K.
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ITEM 4. | CONTROLS AND PROCEDURES |
Management, on behalf of Eversource, CL&P, NSTAR Electric and PSNH, evaluated the design and operation of the disclosure controls and procedures as of June 30, 2019March 31, 2020 to determine whether they are effective in ensuring that the disclosure of required information is made timely and in accordance with the Securities Exchange Act of 1934 and the rules and regulations of the SEC. This evaluation was made under management's supervision and with management's participation, including the principal executive officer and principal financial officer as of the end of the period covered by this Quarterly Report on Form 10-Q. There are inherent limitations of disclosure controls and procedures, including the possibility of human error and the circumventing or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. The principal executive officer and principal financial officer have concluded, based on their review, that the disclosure controls and procedures of Eversource, CL&P, NSTAR Electric and PSNH are effective to ensure that information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and regulations and (ii) is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
There have been no changes in internal controls over financial reporting for Eversource, CL&P, NSTAR Electric and PSNH during the quarter ended June 30, 2019March 31, 2020 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
PART II. OTHER INFORMATION
We are parties to various legal proceedings. We have disclosed thesecertain legal proceedings in Part I, Item 3, "Legal Proceedings," and elsewhere in our 20182019 Form 10-K. These disclosures are incorporated herein by reference.
As previously disclosed, on May 22, 2017, each of the Yankee Companies filed subsequent lawsuits against the DOE in the Court of Federal Claims. The Yankee Companies sought monetary damages totaling $104.4 million for CYAPC, YAEC and MYAPC, resulting from the DOE's failure to begin accepting spent nuclear fuel for disposal covering the years from 2013 to 2016 (“DOE Phase IV”). On February 21, 2019, the Yankee Companies received a partial summary judgment and partial final judgment in their favor for the undisputed amount of monetary damages of $103.2 million. The court awarded CYAPC, YAEC and MYAPC damages of $40.7 million, $28.1 million and $34.4 million, respectively. The DOE did not appeal the court's judgment and the decision became final on April 23, 2019. On June 12, 2019, the court accepted an offer of judgment in the amount of $0.5 million to settle the disputed amount of approximately $1 million in Phase IV contested damages. The Yankee Companies received the $0.5 million payment in July 2019. For a further discussion of the Yankee Companies v. U.S. Department of Energy, see Part I, Item 3, “Legal Proceedings” of our 2018 Form 10-K.
Other than as set forth above, thereThere have been no additional material legal proceedings identified and no further material changes with regard to the legal proceedings previously disclosed in our 20182019 Form 10-K.
We are subject to a variety of significant risks in addition to the matters set forth under our forward-looking statements section in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Quarterly Report on Form 10-Q. We have identified a number of these risk factors in Part I, Item 1A, "Risk Factors," in our 20182019 Form 10-K, which risk factors are incorporated herein by reference. These risk factors should be considered carefully in evaluating our risk profile. ThereThe following risk factor should be read in conjunction with the risk factors described in the 2019 Form 10-K.
The global pandemic of the 2019 novel coronavirus (COVID-19) has resulted in widespread disruption to the many systems and processes of daily life, as well as the overall economic market and outlook, which could cause various unfavorable impacts to our customers, vendors, employees, regulators, and operations and could adversely affect our financial position, results of operations and cash flows.
We are responding to COVID-19 by taking steps to mitigate the potential risks to Eversource posed by its spread. We provide a critical service to our customers, which means it is paramount that we keep our employees who operate our businesses safe and minimize unnecessary risk of exposure to COVID-19. We have updated and implemented our company-wide pandemic plan to address specific aspects of the COVID-19 pandemic. This plan guides our emergency response, business continuity, and the precautionary measures we are taking on behalf of employees and the public. As part of our pandemic plan, we are taking extra precautions to mitigate an adverse material impact to the following risk factors that we believe could continue to be impacted by COVID-19:
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• | Cybersecurity attacks: We have seen an increase in perimeter scanning for vulnerabilities, which can be leveraged to compromise a system, as well as phishing attempts targeted at our employees by outside parties to gain control of our systems and network. We continue to implement strong cybersecurity measures and educate our employees to ensure that our systems remain functional in order to both serve our operational needs with a remote workforce and keep them running to ensure uninterrupted service to our customers. |
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• | Access to, or cost of, capital resources: We utilize the commercial paper market extensively for our short-term borrowing needs. At the onset of the pandemic in the United States, there had been reduced liquidity in the commercial paper credit market. However, federal legislative actions, as well as increased liquidity and the reduction in the federal funds rate by the Federal Reserve, have enabled the credit markets to function. We continue to monitor the ability for us to access the global capital and credit markets; however, we may find it difficult in the future should the economic slowdown continue. |
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• | Actions of regulators: In Connecticut, Massachusetts and New Hampshire, there is presently a moratorium on disconnections of residential and commercial customers for non-payment. We also eliminated late payment charges across all our operating companies. We are working closely with our state regulatory commissions and consumer advocates to develop several customer assistance measures, including more flexible and new payment plan options in order to mitigate the impact on customer rates in the future, as well as financial hardship and arrearage management programs for those customers who are unable to pay their utility bills. We are developing these long-term solutions for customers in order to help minimize the extent of the impact of COVID-19 on customer receivable balances and customers’ affordability in light of the current financial impact they may experience. We believe that we will be able to develop a successful structure with our state regulatory commissions to recover our costs associated with COVID-19, while balancing the impact on our customers’ bills. |
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• | Timing of strategic development opportunities: The successful execution of our timeline for developing our offshore wind projects is based on several factors, including state and federal siting and permitting approvals. Currently, there are delays in New York state for performing offshore site investigations, and onshore environmental and geotechnical surveys, which could have an impact on our project siting and permit filing timelines. On April 8, 2020, the state of New York Administrative Law Judge granted a ten-week delay until September 30, 2020 to the start of the South Fork Wind evidentiary hearing schedule due to ongoing COVID-19 work and travel restrictions. At this time, although we are unable to predict the impact of delays on our offshore wind projects, we are currently developing mitigation plans to address permitting delays due to COVID-19 restrictions on our offshore wind projects. |
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• | Suppliers and Vendors: We have instituted measures to ensure our supply chain remains open to us; however, there could be global shortages that will impact our maintenance, capital programs, and storm response that we currently cannot anticipate. |
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• | Loss of key personnel: We continue to adjust our pandemic plan to assume various scenarios including reduced workforce levels and limited mutual aid in the event of a significant storm event. We have implemented remote work arrangements for our workforce by enabling nearly half of our employees to work from home and taking extra precautions for our field-based employees. We have taken significant safety measures to ensure adequate social distancing for our field crews to safely provide essential services to our customers. We have also adopted protocols to ensure the safety and health of those employees who work onsite in critical facilities. We continue to monitor COVID-19 developments affecting our workforce and will take additional precautions that we determine are necessary in order to mitigate the impacts. |
Although to date our workforce continues to be able to safely and reliably deliver our critical services to customers, we are unable to predict the extent of the impact of COVID-19 on our employees.
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• | Impact to Benefit Plans: As of March 31, 2020, under the Pension Protection Act, the funded status of our pension plan was approximately 100 percent, as compared to 111 percent as of December 31, 2019. The pension and PBOP plans' funded status is highly dependent on benefit plan asset returns, interest rates, and discount rates, all of which could be materially impacted by the extended economic slowdown. Should these financial metrics be negatively impacted by COVID-19 as of December 31, 2020, it could result in the underperformance of our pension and PBOP plan investments, an increase in pension and PBOP obligations and employee benefit plan costs, and in a minimum pension funding requirement due by March 31, 2022 for the 2021 Plan year. We continue to monitor federal legislative pension developments that could provide additional pension funding relief. |
We currently cannot estimate the potential impact of COVID-19 to our financial position, results of operations and cash flows.
Other than as set forth above, there have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed in our 20182019 Form 10-K.
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ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The following table discloses purchases of our common shares made by us or on our behalf for the periods shown below. The common shares purchased consist of open market purchases made by the Company or an independent agent. These share transactions related to matching contributions under the Eversource 401k Plan.
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| | | | | | | | | |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans and Programs (at month end) |
April 1 - April 30, 2019 | — |
| $ | — |
| — |
| — |
|
May 1 - May 31, 2019 | — |
| — |
| — |
| — |
|
June 1 - June 30, 2019 | 2,709 |
| 75.76 |
| — |
| — |
|
Total | 2,709 |
| $ | 75.76 |
| — |
| — |
|
|
| | | | | | | | | |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans and Programs (at month end) |
January 1 - January 31, 2020 | — |
| $ | — |
| — |
| — |
|
February 1 - February 29, 2020 | — |
| — |
| — |
| — |
|
March 1 - March 31, 2020 | 2,428 |
| 79.71 |
| — |
| — |
|
Total | 2,428 |
| $ | 79.71 |
| — |
| — |
|
Each document described below is filed herewith, unless designated with an asterisk (*), which exhibits are incorporated by reference by the registrant under whose name the exhibit appears.
|
| | | |
| Exhibit No. | | Description |
| | | |
| Listing of Exhibits (Eversource) |
* | 10.14 | | Forward Sale AgreementTwelfth Supplemental Indenture between Eversource Energy and Goldman Sachs & Co. LLC,The Bank of New York Trust Company N.A., as Trustee, dated as of May 30, 2019 (Exhibit 10.1,January 1, 2020, relating to $350 million of Senior Notes, Series P, Due 2050 (Exhibit 4.1, Eversource Energy Current Report on Form 8-K filed on June 5, 2019,January 16, 2020, File No. 001-05324001-05324)) |
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| 31 | | |
| | | |
| 31.1 | | |
| | | |
| 32 | | |
| | | |
| Listing of Exhibits (CL&P) |
| 31 | | |
| | | |
| 31.1 | | |
| | | |
| 32 | | |
| | | |
| Listing of Exhibits (NSTAR Electric Company) |
* | 4.14 | | |
| | | |
| 31 | | |
| | | |
| 31.1 | | |
| | | |
| 32 | | |
| | | |
| Listing of Exhibits (PSNH) |
* | 4.1 | | |
| | | |
| 31 | | |
| | | |
| 31.1 | | |
| | | |
| 32 | | |
| | | |
| Listing of Exhibits (Eversource, CL&P, NSTAR Electric, PSNH) |
| 101.INS | | Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document |
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| 101.SCH | | Inline XBRL Taxonomy Extension Schema |
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| 101.CAL | | Inline XBRL Taxonomy Extension Calculation |
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| 101.DEF | | Inline XBRL Taxonomy Extension Definition |
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| 101.LAB | | Inline XBRL Taxonomy Extension Labels |
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| 101.PRE | | Inline XBRL Taxonomy Extension Presentation |
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| 104 | | The cover page from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2019,March 31, 2020, formatted in Inline XBRL
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | EVERSOURCE ENERGY |
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August 6, 2019May 8, 2020 | | By: | /s/ Jay S. Buth |
| | | Jay S. Buth |
| | | Vice President, Controller and Chief Accounting Officer |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | THE CONNECTICUT LIGHT AND POWER COMPANY |
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August 6, 2019May 8, 2020 | | By: | /s/ Jay S. Buth |
| | | Jay S. Buth |
| | | Vice President, Controller and Chief Accounting Officer |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | NSTAR ELECTRIC COMPANY |
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August 6, 2019May 8, 2020 | | By: | /s/ Jay S. Buth |
| | | Jay S. Buth |
| | | Vice President, Controller and Chief Accounting Officer |
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE |
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August 6, 2019May 8, 2020 | | By: | /s/ Jay S. Buth |
| | | Jay S. Buth |
| | | Vice President, Controller and Chief Accounting Officer |