 | ||||||||
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 | March 31, 2022 | |||||||
| 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: 001-05324
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: 000-00404
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: 001-02301
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: 001-06392
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.
| Yes | No | |||||||
| ☒ | ☐ | |||||||
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).
| Yes | No | |||||||
| ☒ | ☐ | |||||||
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.
| 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 April 30, 2022 | |||||||
| Eversource Energy Common Shares, $5.00 par value | 344,878,136 | 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 Instruction 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, 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 | ||||
| EGMA | Eversource Gas Company of Massachusetts | ||||
| Yankee Gas | Yankee Gas Services Company | ||||
| Aquarion | Aquarion Company and its subsidiaries | ||||
| HEEC | Harbor Electric Energy Company, a wholly-owned subsidiary of NSTAR Electric | ||||
| Eversource Service | Eversource Energy Service Company | ||||
| North East Offshore | North East Offshore, LLC, an offshore wind business being developed jointly by Eversource and Denmark-based Ørsted | ||||
| 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, NSTAR Gas and EGMA, Aquarion’s water distribution businesses, and the solar power facilities of NSTAR Electric | ||||
| Regulators and Government Agencies: | |||||
| BOEM | U.S. Bureau of Ocean Energy Management | ||||
| 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 | ||||
| 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 | ||||
| CfD | Contract for Differences | ||||
| 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 2021 Form 10-K | The Eversource Energy and Subsidiaries 2021 combined Annual Report on Form 10-K as filed with the SEC | ||||
| Fitch | Fitch Ratings, Inc. | ||||
i
| FMCC | Federally Mandated Congestion Charge | ||||
| GAAP | Accounting principles generally accepted in the United States of America | ||||
| GWh | Gigawatt-Hours | ||||
| 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) | ||||
| 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 | ||||
| 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 | ||||
| Pension Plan | Single uniform noncontributory defined benefit retirement plan | ||||
| PPA | Power 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 | ||||
| ROE | Return on Equity | ||||
| RRBs | Rate Reduction Bonds or Rate Reduction Certificates | ||||
| RSUs | Restricted share units | ||||
| S&P | Standard & Poor's Financial Services LLC | ||||
| SERP | Supplemental Executive Retirement Plans and non-qualified defined benefit retirement plans | ||||
| SS | Standard service | ||||
| UI | The United Illuminating Company | ||||
| VIE | Variable Interest Entity | ||||
ii
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
| Page | ||||||||
PART I – FINANCIAL INFORMATION | ||||||||
ITEM 1. | Financial Statements (Unaudited) | |||||||
Eversource Energy and Subsidiaries (Unaudited) | ||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||
| Condensed Consolidated Statements of Common Shareholders' Equity | ||||||||
The Connecticut Light and Power Company (Unaudited) | ||||||||
Condensed Statements of Comprehensive Income | ||||||||
| Condensed Statements of Common Stockholder's Equity | ||||||||
NSTAR Electric Company and Subsidiary (Unaudited) | ||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||
| Condensed Consolidated Statements of Common Stockholder's Equity | ||||||||
| Public Service Company of New Hampshire and Subsidiaries (Unaudited) | ||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||
| Condensed Consolidated Statements of Common Stockholder's Equity | ||||||||
Eversource Energy and Subsidiaries | ||||||||
The Connecticut Light and Power Company, NSTAR Electric Company and Subsidiary, and Public Service Company of New Hampshire and Subsidiaries | ||||||||
| PART II – OTHER INFORMATION | ||||||||
ITEM 1A. | Risk Factors | |||||||
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
SIGNATURES | ||||||||
iii
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (Thousands of Dollars) | As of March 31, 2022 | As of December 31, 2021 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash | $ | 46,175 | $ | 66,773 | |||||||
Receivables, Net (net of allowance for uncollectible accounts of $432,174 and $417,406 as of March 31, 2022 and December 31, 2021, respectively) | 1,468,558 | 1,226,069 | |||||||||
| Unbilled Revenues | 192,913 | 210,879 | |||||||||
| Fuel, Materials, Supplies and REC Inventory | 287,042 | 267,547 | |||||||||
| Regulatory Assets | 1,128,088 | 1,129,093 | |||||||||
| Prepayments and Other Current Assets | 350,907 | 369,759 | |||||||||
| Total Current Assets | 3,473,683 | 3,270,120 | |||||||||
| Property, Plant and Equipment, Net | 33,852,596 | 33,377,650 | |||||||||
| Deferred Debits and Other Assets: | |||||||||||
| Regulatory Assets | 4,573,309 | 4,586,709 | |||||||||
| Goodwill | 4,477,118 | 4,477,269 | |||||||||
| Investments in Unconsolidated Affiliates | 1,545,433 | 1,436,293 | |||||||||
| Marketable Securities | 423,216 | 460,347 | |||||||||
| Other Long-Term Assets | 943,797 | 883,756 | |||||||||
| Total Deferred Debits and Other Assets | 11,962,873 | 11,844,374 | |||||||||
| Total Assets | $ | 49,289,152 | $ | 48,492,144 | |||||||
| LIABILITIES AND CAPITALIZATION | |||||||||||
| Current Liabilities: | |||||||||||
| Notes Payable | $ | 1,668,800 | $ | 1,505,450 | |||||||
| Long-Term Debt – Current Portion | 817,114 | 1,193,097 | |||||||||
| Rate Reduction Bonds – Current Portion | 43,210 | 43,210 | |||||||||
| Accounts Payable | 1,494,360 | 1,672,230 | |||||||||
| Regulatory Liabilities | 652,358 | 602,432 | |||||||||
| Other Current Liabilities | 925,467 | 830,620 | |||||||||
| Total Current Liabilities | 5,601,309 | 5,847,039 | |||||||||
| Deferred Credits and Other Liabilities: | |||||||||||
| Accumulated Deferred Income Taxes | 4,683,105 | 4,597,120 | |||||||||
| Regulatory Liabilities | 3,894,768 | 3,866,251 | |||||||||
| Derivative Liabilities | 209,548 | 235,387 | |||||||||
| Asset Retirement Obligations | 500,685 | 500,111 | |||||||||
| Accrued Pension, SERP and PBOP | 200,614 | 242,463 | |||||||||
| Other Long-Term Liabilities | 862,304 | 971,080 | |||||||||
| Total Deferred Credits and Other Liabilities | 10,351,024 | 10,412,412 | |||||||||
| Long-Term Debt | 17,912,462 | 17,023,577 | |||||||||
| Rate Reduction Bonds | 432,097 | 453,702 | |||||||||
| Noncontrolling Interest – Preferred Stock of Subsidiaries | 155,570 | 155,570 | |||||||||
| Common Shareholders' Equity: | |||||||||||
| Common Shares | 1,789,092 | 1,789,092 | |||||||||
| Capital Surplus, Paid In | 8,102,618 | 8,098,514 | |||||||||
| Retained Earnings | 5,229,069 | 5,005,391 | |||||||||
| Accumulated Other Comprehensive Loss | (41,571) | (42,275) | |||||||||
| Treasury Stock | (242,518) | (250,878) | |||||||||
| Common Shareholders' Equity | 14,836,690 | 14,599,844 | |||||||||
| Commitments and Contingencies (Note 9) | |||||||||||
| Total Liabilities and Capitalization | $ | 49,289,152 | $ | 48,492,144 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars, Except Share Information) | 2022 | 2021 | |||||||||
| Operating Revenues | $ | 3,471,310 | $ | 2,825,840 | |||||||
| Operating Expenses: | |||||||||||
| Purchased Power, Fuel and Transmission | 1,389,696 | 998,491 | |||||||||
| Operations and Maintenance | 472,433 | 465,542 | |||||||||
| Depreciation | 289,330 | 270,704 | |||||||||
| Amortization | 236,948 | 108,013 | |||||||||
| Energy Efficiency Programs | 199,484 | 188,063 | |||||||||
| Taxes Other Than Income Taxes | 220,364 | 209,459 | |||||||||
| Total Operating Expenses | 2,808,255 | 2,240,272 | |||||||||
| Operating Income | 663,055 | 585,568 | |||||||||
| Interest Expense | 153,245 | 137,766 | |||||||||
| Other Income, Net | 71,561 | 34,201 | |||||||||
| Income Before Income Tax Expense | 581,371 | 482,003 | |||||||||
| Income Tax Expense | 136,045 | 113,980 | |||||||||
| Net Income | 445,326 | 368,023 | |||||||||
| Net Income Attributable to Noncontrolling Interests | 1,880 | 1,880 | |||||||||
| Net Income Attributable to Common Shareholders | $ | 443,446 | $ | 366,143 | |||||||
| Basic Earnings Per Common Share | $ | 1.28 | $ | 1.07 | |||||||
| Diluted Earnings Per Common Share | $ | 1.28 | $ | 1.06 | |||||||
| Weighted Average Common Shares Outstanding: | |||||||||||
| Basic | 345,156,346 | 343,678,243 | |||||||||
| Diluted | 345,661,133 | 344,334,689 | |||||||||
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 March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Net Income | $ | 445,326 | $ | 368,023 | |||||||
| Other Comprehensive Income, Net of Tax: | |||||||||||
| Qualified Cash Flow Hedging Instruments | 5 | 407 | |||||||||
| Changes in Unrealized Losses on Marketable Securities | (817) | (736) | |||||||||
| Changes in Funded Status of Pension, SERP and PBOP Benefit Plans | 1,516 | 1,517 | |||||||||
| Other Comprehensive Income, Net of Tax | 704 | 1,188 | |||||||||
| Comprehensive Income Attributable to Noncontrolling Interests | (1,880) | (1,880) | |||||||||
| Comprehensive Income Attributable to Common Shareholders | $ | 444,150 | $ | 367,331 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(Unaudited)
| For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||
| 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 | |||||||||||||||||||||
| Balance as of January 1, 2022 | 344,403,196 | $ | 1,789,092 | $ | 8,098,514 | $ | 5,005,391 | $ | (42,275) | $ | (250,878) | $ | 14,599,844 | ||||||||||
| Net Income | 445,326 | 445,326 | |||||||||||||||||||||
Dividends on Common Shares - $0.6375 Per Share | (219,768) | (219,768) | |||||||||||||||||||||
| Dividends on Preferred Stock | (1,880) | (1,880) | |||||||||||||||||||||
| Long-Term Incentive Plan Activity | (16,538) | (16,538) | |||||||||||||||||||||
| Issuance of Treasury Shares | 447,076 | 20,642 | 8,360 | 29,002 | |||||||||||||||||||
| Other Comprehensive Income | 704 | 704 | |||||||||||||||||||||
| Balance as of March 31, 2022 | 344,850,272 | $ | 1,789,092 | $ | 8,102,618 | $ | 5,229,069 | $ | (41,571) | $ | (242,518) | $ | 14,836,690 | ||||||||||
| For the Three Months Ended March 31, 2021 | |||||||||||||||||||||||
| 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 | |||||||||||||||||||||
| Balance as of January 1, 2021 | 342,954,023 | $ | 1,789,092 | $ | 8,015,663 | $ | 4,613,201 | $ | (76,411) | $ | (277,979) | $ | 14,063,566 | ||||||||||
| Net Income | 368,023 | 368,023 | |||||||||||||||||||||
Dividends on Common Shares - $0.6025 Per Share | (206,913) | (206,913) | |||||||||||||||||||||
| Dividends on Preferred Stock | (1,880) | (1,880) | |||||||||||||||||||||
| Long-Term Incentive Plan Activity | (15,727) | (15,727) | |||||||||||||||||||||
| Issuance of Treasury Shares | 480,275 | 16,182 | 8,981 | 25,163 | |||||||||||||||||||
| Other Comprehensive Income | 1,188 | 1,188 | |||||||||||||||||||||
| Balance as of March 31, 2021 | 343,434,298 | $ | 1,789,092 | $ | 8,016,118 | $ | 4,772,431 | $ | (75,223) | $ | (268,998) | $ | 14,233,420 | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Operating Activities: | |||||||||||
| Net Income | $ | 445,326 | $ | 368,023 | |||||||
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||||||
| Depreciation | 289,330 | 270,704 | |||||||||
| Deferred Income Taxes | 67,557 | 41,917 | |||||||||
| Uncollectible Expense | 17,135 | 16,295 | |||||||||
| Pension, SERP and PBOP Income, Net | (40,642) | (2,341) | |||||||||
| Pension and PBOP Contributions | (26,100) | (31,100) | |||||||||
| Regulatory (Under)/Over Recoveries, Net | (107,767) | 28,024 | |||||||||
| (Customer Credits)/Reserve at CL&P related to PURA Settlement Agreement and Storm Performance Penalty | (58,412) | 30,000 | |||||||||
| Amortization | 236,948 | 108,013 | |||||||||
| Cost of Removal Expenditures | (61,660) | (39,333) | |||||||||
| Other | (21,409) | (51,913) | |||||||||
| Changes in Current Assets and Liabilities: | |||||||||||
| Receivables and Unbilled Revenues, Net | (291,723) | (124,344) | |||||||||
| Fuel, Materials, Supplies and REC Inventory | (19,495) | (42,494) | |||||||||
| Taxes Receivable/Accrued, Net | 56,519 | 64,076 | |||||||||
| Accounts Payable | (68,909) | (181,725) | |||||||||
| Other Current Assets and Liabilities, Net | (44,758) | (42,386) | |||||||||
| Net Cash Flows Provided by Operating Activities | 371,940 | 411,416 | |||||||||
| Investing Activities: | |||||||||||
| Investments in Property, Plant and Equipment | (764,594) | (688,983) | |||||||||
| Proceeds from Sales of Marketable Securities | 90,409 | 79,818 | |||||||||
| Purchases of Marketable Securities | (76,182) | (68,360) | |||||||||
| Investments in Unconsolidated Affiliates, Net | (113,856) | (34,127) | |||||||||
| Other Investing Activities | 5,976 | 7,135 | |||||||||
| Net Cash Flows Used in Investing Activities | (858,247) | (704,517) | |||||||||
| Financing Activities: | |||||||||||
| Cash Dividends on Common Shares | (213,890) | (201,013) | |||||||||
| Cash Dividends on Preferred Stock | (1,880) | (1,880) | |||||||||
| Increase in Notes Payable | 163,350 | 669,919 | |||||||||
| Repayment of Rate Reduction Bonds | (21,605) | (21,605) | |||||||||
| Issuance of Long-Term Debt | 1,300,000 | 350,000 | |||||||||
| Retirement of Long-Term Debt | (770,000) | (572,000) | |||||||||
| Other Financing Activities | (26,087) | (19,666) | |||||||||
| Net Cash Flows Provided by Financing Activities | 429,888 | 203,755 | |||||||||
| Net Decrease in Cash and Restricted Cash | (56,419) | (89,346) | |||||||||
| Cash and Restricted Cash - Beginning of Period | 221,008 | 264,950 | |||||||||
| Cash and Restricted Cash - End of Period | $ | 164,589 | $ | 175,604 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
| (Thousands of Dollars) | As of March 31, 2022 | As of December 31, 2021 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash | $ | 21,628 | $ | 55,804 | |||||||
Receivables, Net (net of allowance for uncollectible accounts of $180,524 and $181,319 as of March 31, 2022 and December 31, 2021, respectively) | 567,718 | 447,774 | |||||||||
| Accounts Receivable from Affiliated Companies | 46,852 | 43,944 | |||||||||
| Unbilled Revenues | 50,515 | 56,787 | |||||||||
| Materials and Supplies | 65,196 | 60,264 | |||||||||
| Regulatory Assets | 382,112 | 371,609 | |||||||||
| Prepayments and Other Current Assets | 95,710 | 120,257 | |||||||||
| Total Current Assets | 1,229,731 | 1,156,439 | |||||||||
| Property, Plant and Equipment, Net | 10,941,005 | 10,803,543 | |||||||||
| Deferred Debits and Other Assets: | |||||||||||
| Regulatory Assets | 1,681,057 | 1,713,161 | |||||||||
| Other Long-Term Assets | 287,028 | 276,513 | |||||||||
| Total Deferred Debits and Other Assets | 1,968,085 | 1,989,674 | |||||||||
| Total Assets | $ | 14,138,821 | $ | 13,949,656 | |||||||
| LIABILITIES AND CAPITALIZATION | |||||||||||
| Current Liabilities: | |||||||||||
| Long-Term Debt – Current Portion | $ | 400,000 | $ | — | |||||||
| Accounts Payable | 514,385 | 533,454 | |||||||||
| Accounts Payable to Affiliated Companies | 126,363 | 132,578 | |||||||||
| Regulatory Liabilities | 251,555 | 266,489 | |||||||||
| Derivative Liabilities | 74,428 | 73,528 | |||||||||
| Other Current Liabilities | 174,210 | 141,955 | |||||||||
| Total Current Liabilities | 1,540,941 | 1,148,004 | |||||||||
| Deferred Credits and Other Liabilities: | |||||||||||
| Accumulated Deferred Income Taxes | 1,588,370 | 1,562,102 | |||||||||
| Regulatory Liabilities | 1,208,297 | 1,193,259 | |||||||||
| Derivative Liabilities | 209,548 | 235,387 | |||||||||
| Other Long-Term Liabilities | 181,850 | 179,824 | |||||||||
| Total Deferred Credits and Other Liabilities | 3,188,065 | 3,170,572 | |||||||||
| Long-Term Debt | 3,815,662 | 4,215,379 | |||||||||
| Preferred Stock Not Subject to Mandatory Redemption | 116,200 | 116,200 | |||||||||
| Common Stockholder's Equity: | |||||||||||
| Common Stock | 60,352 | 60,352 | |||||||||
| Capital Surplus, Paid In | 3,110,765 | 3,010,765 | |||||||||
| Retained Earnings | 2,306,620 | 2,228,133 | |||||||||
| Accumulated Other Comprehensive Income | 216 | 251 | |||||||||
| Common Stockholder's Equity | 5,477,953 | 5,299,501 | |||||||||
| Commitments and Contingencies (Note 9) | |||||||||||
| Total Liabilities and Capitalization | $ | 14,138,821 | $ | 13,949,656 | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Operating Revenues | $ | 1,285,831 | $ | 987,274 | |||||||
| Operating Expenses: | |||||||||||
| Purchased Power and Transmission | 523,463 | 373,274 | |||||||||
| Operations and Maintenance | 157,061 | 175,420 | |||||||||
| Depreciation | 87,265 | 83,405 | |||||||||
| Amortization of Regulatory Assets, Net | 169,749 | 62,775 | |||||||||
| Energy Efficiency Programs | 35,397 | 35,573 | |||||||||
| Taxes Other Than Income Taxes | 90,373 | 91,392 | |||||||||
| Total Operating Expenses | 1,063,308 | 821,839 | |||||||||
| Operating Income | 222,523 | 165,435 | |||||||||
| Interest Expense | 40,586 | 38,979 | |||||||||
| Other Income, Net | 19,564 | 4,908 | |||||||||
| Income Before Income Tax Expense | 201,501 | 131,364 | |||||||||
| Income Tax Expense | 48,524 | 32,966 | |||||||||
| Net Income | $ | 152,977 | $ | 98,398 | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Net Income | $ | 152,977 | $ | 98,398 | |||||||
| Other Comprehensive Loss, Net of Tax: | |||||||||||
| Qualified Cash Flow Hedging Instruments | (7) | (7) | |||||||||
| Changes in Unrealized Losses on Marketable Securities | (28) | (25) | |||||||||
| Other Comprehensive Loss, Net of Tax | (35) | (32) | |||||||||
| Comprehensive Income | $ | 152,942 | $ | 98,366 | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
6
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
| For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | 6,035,205 | $ | 60,352 | $ | 3,010,765 | $ | 2,228,133 | $ | 251 | $ | 5,299,501 | ||||||||||||||||||||||||
| Net Income | 152,977 | 152,977 | |||||||||||||||||||||||||||||||||
| Dividends on Preferred Stock | (1,390) | (1,390) | |||||||||||||||||||||||||||||||||
| Dividends on Common Stock | (73,100) | (73,100) | |||||||||||||||||||||||||||||||||
| Capital Contributions from Eversource Parent | 100,000 | 100,000 | |||||||||||||||||||||||||||||||||
| Other Comprehensive Loss | (35) | (35) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | 6,035,205 | $ | 60,352 | $ | 3,110,765 | $ | 2,306,620 | $ | 216 | $ | 5,477,953 | ||||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||
| Balance as of January 1, 2021 | 6,035,205 | $ | 60,352 | $ | 2,810,765 | $ | 2,173,367 | $ | 302 | $ | 5,044,786 | ||||||||||||||||||||||||
| Net Income | 98,398 | 98,398 | |||||||||||||||||||||||||||||||||
| Dividends on Preferred Stock | (1,390) | (1,390) | |||||||||||||||||||||||||||||||||
| Dividends on Common Stock | (70,100) | (70,100) | |||||||||||||||||||||||||||||||||
| Other Comprehensive Loss | (32) | (32) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | 6,035,205 | $ | 60,352 | $ | 2,810,765 | $ | 2,200,275 | $ | 270 | $ | 5,071,662 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
7
THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Operating Activities: | |||||||||||
| Net Income | $ | 152,977 | $ | 98,398 | |||||||
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||||||
| Depreciation | 87,265 | 83,405 | |||||||||
| Deferred Income Taxes | 19,627 | 25,354 | |||||||||
| Uncollectible Expense | 3,776 | 3,797 | |||||||||
| Pension, SERP, and PBOP (Income)/Expense, Net | (7,330) | 3,088 | |||||||||
| Pension Contributions | — | (18,940) | |||||||||
| Regulatory Underrecoveries, Net | (162,474) | (59,971) | |||||||||
| (Customer Credits)/Reserve related to PURA Settlement Agreement and Storm Performance Penalty | (58,412) | 30,000 | |||||||||
| Amortization of Regulatory Assets, Net | 169,749 | 62,775 | |||||||||
| Cost of Removal Expenditures | (16,684) | (17,293) | |||||||||
| Other | (9,357) | (12,777) | |||||||||
| Changes in Current Assets and Liabilities: | |||||||||||
| Receivables and Unbilled Revenues, Net | (125,429) | (66,930) | |||||||||
| Taxes Receivable/Accrued, Net | 67,708 | 29,596 | |||||||||
| Accounts Payable | 38,010 | 17,124 | |||||||||
| Other Current Assets and Liabilities, Net | (24,143) | (21,433) | |||||||||
| Net Cash Flows Provided by Operating Activities | 135,283 | 156,193 | |||||||||
| Investing Activities: | |||||||||||
| Investments in Property, Plant and Equipment | (205,343) | (197,954) | |||||||||
| Other Investing Activities | 346 | 80 | |||||||||
| Net Cash Flows Used in Investing Activities | (204,997) | (197,874) | |||||||||
| Financing Activities: | |||||||||||
| Cash Dividends on Common Stock | (73,100) | (70,100) | |||||||||
| Cash Dividends on Preferred Stock | (1,390) | (1,390) | |||||||||
| Capital Contributions from Eversource Parent | 100,000 | — | |||||||||
| Increase in Notes Payable to Eversource Parent | — | 32,100 | |||||||||
| Other Financing Activities | — | (450) | |||||||||
| Net Cash Flows Provided by/(Used in) Financing Activities | 25,510 | (39,840) | |||||||||
| Net Decrease in Cash and Restricted Cash | (44,204) | (81,521) | |||||||||
| Cash and Restricted Cash - Beginning of Period | 74,788 | 99,809 | |||||||||
| Cash and Restricted Cash - End of Period | $ | 30,584 | $ | 18,288 | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
8
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (Thousands of Dollars) | As of March 31, 2022 | As of December 31, 2021 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash | $ | 721 | $ | 745 | |||||||
Receivables, Net (net of allowance for uncollectible accounts of $94,775 and $97,005 as of March 31, 2022 and December 31, 2021, respectively) | 417,048 | 405,674 | |||||||||
| Accounts Receivable from Affiliated Companies | 45,121 | 67,420 | |||||||||
| Unbilled Revenues | 36,618 | 37,497 | |||||||||
| Materials, Supplies and REC Inventory | 148,084 | 116,712 | |||||||||
| Taxes Receivable | 35,318 | 80,617 | |||||||||
| Regulatory Assets | 433,653 | 443,956 | |||||||||
| Prepayments and Other Current Assets | 25,465 | 22,397 | |||||||||
| Total Current Assets | 1,142,028 | 1,175,018 | |||||||||
| Property, Plant and Equipment, Net | 11,008,899 | 10,876,614 | |||||||||
| Deferred Debits and Other Assets: | |||||||||||
| Regulatory Assets | 1,239,773 | 1,135,231 | |||||||||
| Prepaid Pension and PBOP | 475,602 | 441,426 | |||||||||
| Other Long-Term Assets | 171,421 | 171,657 | |||||||||
| Total Deferred Debits and Other Assets | 1,886,796 | 1,748,314 | |||||||||
| Total Assets | $ | 14,037,723 | $ | 13,799,946 | |||||||
| LIABILITIES AND CAPITALIZATION | |||||||||||
| Current Liabilities: | |||||||||||
| Notes Payable | $ | 275,000 | $ | 162,500 | |||||||
| Notes Payable to Eversource Parent | 4,000 | — | |||||||||
| Long-Term Debt – Current Portion | 400,000 | 400,000 | |||||||||
| Accounts Payable | 437,896 | 490,915 | |||||||||
| Accounts Payable to Affiliated Companies | 139,762 | 129,575 | |||||||||
| Obligations to Third Party Suppliers | 127,342 | 116,273 | |||||||||
| Renewable Portfolio Standards Compliance Obligations | 129,759 | 100,200 | |||||||||
| Regulatory Liabilities | 279,299 | 228,248 | |||||||||
| Other Current Liabilities | 157,567 | 84,303 | |||||||||
| Total Current Liabilities | 1,950,625 | 1,712,014 | |||||||||
| Deferred Credits and Other Liabilities: | |||||||||||
| Accumulated Deferred Income Taxes | 1,617,909 | 1,579,508 | |||||||||
| Regulatory Liabilities | 1,570,969 | 1,559,072 | |||||||||
| Other Long-Term Liabilities | 275,573 | 347,934 | |||||||||
| Total Deferred Credits and Other Liabilities | 3,464,451 | 3,486,514 | |||||||||
| Long-Term Debt | 3,586,326 | 3,585,399 | |||||||||
| Preferred Stock Not Subject to Mandatory Redemption | 43,000 | 43,000 | |||||||||
| Common Stockholder's Equity: | |||||||||||
| Common Stock | — | — | |||||||||
| Capital Surplus, Paid In | 2,253,942 | 2,253,942 | |||||||||
| Retained Earnings | 2,738,925 | 2,718,576 | |||||||||
| Accumulated Other Comprehensive Income | 454 | 501 | |||||||||
| Common Stockholder's Equity | 4,993,321 | 4,973,019 | |||||||||
| Commitments and Contingencies (Note 9) | |||||||||||
| Total Liabilities and Capitalization | $ | 14,037,723 | $ | 13,799,946 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Operating Revenues | $ | 863,176 | $ | 737,043 | |||||||
| Operating Expenses: | |||||||||||
| Purchased Power and Transmission | 313,748 | 226,478 | |||||||||
| Operations and Maintenance | 164,862 | 143,219 | |||||||||
| Depreciation | 89,033 | 82,793 | |||||||||
| Amortization of Regulatory Assets, Net | 29,345 | 18,418 | |||||||||
| Energy Efficiency Programs | 80,232 | 75,099 | |||||||||
| Taxes Other Than Income Taxes | 59,774 | 54,652 | |||||||||
| Total Operating Expenses | 736,994 | 600,659 | |||||||||
| Operating Income | 126,182 | 136,384 | |||||||||
| Interest Expense | 38,222 | 32,306 | |||||||||
| Other Income, Net | 29,231 | 16,812 | |||||||||
| Income Before Income Tax Expense | 117,191 | 120,890 | |||||||||
| Income Tax Expense | 24,452 | 26,966 | |||||||||
| Net Income | $ | 92,739 | $ | 93,924 | |||||||
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 March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Net Income | $ | 92,739 | $ | 93,924 | |||||||
| Other Comprehensive (Loss)/Income, Net of Tax: | |||||||||||
| Changes in Funded Status of SERP Benefit Plan | (44) | (41) | |||||||||
| Qualified Cash Flow Hedging Instruments | 5 | 109 | |||||||||
| Changes in Unrealized Losses on Marketable Securities | (8) | (7) | |||||||||
| Other Comprehensive (Loss)/Income, Net of Tax | (47) | 61 | |||||||||
| Comprehensive Income | $ | 92,692 | $ | 93,985 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
| For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | 200 | $ | — | $ | 2,253,942 | $ | 2,718,576 | $ | 501 | $ | 4,973,019 | ||||||||||||||||||||||||
| Net Income | 92,739 | 92,739 | |||||||||||||||||||||||||||||||||
| Dividends on Preferred Stock | (490) | (490) | |||||||||||||||||||||||||||||||||
| Dividends on Common Stock | (71,900) | (71,900) | |||||||||||||||||||||||||||||||||
| Other Comprehensive Loss | (47) | (47) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | 200 | $ | — | $ | 2,253,942 | $ | 2,738,925 | $ | 454 | $ | 4,993,321 | ||||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||
| Balance as of January 1, 2021 | 200 | $ | — | $ | 1,993,942 | $ | 2,527,167 | $ | 309 | $ | 4,521,418 | ||||||||||||||||||||||||
| Net Income | 93,924 | 93,924 | |||||||||||||||||||||||||||||||||
| Dividends on Preferred Stock | (490) | (490) | |||||||||||||||||||||||||||||||||
| Dividends on Common Stock | (206,400) | (206,400) | |||||||||||||||||||||||||||||||||
| Other Comprehensive Income | 61 | 61 | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | 200 | $ | — | $ | 1,993,942 | $ | 2,414,201 | $ | 370 | $ | 4,408,513 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Operating Activities: | |||||||||||
| Net Income | $ | 92,739 | $ | 93,924 | |||||||
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||||||
| Depreciation | 89,033 | 82,793 | |||||||||
| Deferred Income Taxes | 26,857 | 10,309 | |||||||||
| Uncollectible Expense | 4,662 | 3,868 | |||||||||
| Pension, SERP and PBOP Income, Net | (13,742) | (6,335) | |||||||||
| Pension Contributions | (5,000) | — | |||||||||
| Regulatory Underrecoveries, Net | (10,813) | (3,405) | |||||||||
| Amortization of Regulatory Assets, Net | 29,345 | 18,418 | |||||||||
| Cost of Removal Expenditures | (12,852) | (10,224) | |||||||||
| Other | (5,531) | (13,362) | |||||||||
| Changes in Current Assets and Liabilities: | |||||||||||
| Receivables and Unbilled Revenues, Net | 2,051 | (14,587) | |||||||||
| Materials, Supplies and REC Inventory | (31,372) | (52,998) | |||||||||
| Taxes Receivable/Accrued, Net | 45,299 | 58,353 | |||||||||
| Accounts Payable | (55,743) | (45,604) | |||||||||
| Other Current Assets and Liabilities, Net | 34,931 | 51,445 | |||||||||
| Net Cash Flows Provided by Operating Activities | 189,864 | 172,595 | |||||||||
| Investing Activities: | |||||||||||
| Investments in Property, Plant and Equipment | (234,120) | (215,483) | |||||||||
| Other Investing Activities | 96 | 22 | |||||||||
| Net Cash Flows Used in Investing Activities | (234,024) | (215,461) | |||||||||
| Financing Activities: | |||||||||||
| Cash Dividends on Common Stock | (71,900) | (206,400) | |||||||||
| Cash Dividends on Preferred Stock | (490) | (490) | |||||||||
| Increase in Notes Payable to Eversource Parent | 4,000 | 1,200 | |||||||||
| Increase in Notes Payable | 112,500 | 248,500 | |||||||||
| Other Financing Activities | 15 | 19 | |||||||||
| Net Cash Flows Provided by Financing Activities | 44,125 | 42,829 | |||||||||
| Net Decrease in Cash and Restricted Cash | (35) | (37) | |||||||||
| Cash and Restricted Cash - Beginning of Period | 18,179 | 17,410 | |||||||||
| Cash and Restricted Cash - End of Period | $ | 18,144 | $ | 17,373 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (Thousands of Dollars) | As of March 31, 2022 | As of December 31, 2021 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash | $ | 3,827 | $ | 15 | |||||||
Receivables, Net (net of allowance for uncollectible accounts of $26,164 and $24,331 as of March 31, 2022 and December 31, 2021, respectively) | 148,542 | 124,232 | |||||||||
| Accounts Receivable from Affiliated Companies | 17,271 | 17,156 | |||||||||
| Unbilled Revenues | 51,490 | 53,937 | |||||||||
| Materials, Supplies and REC Inventory | 31,963 | 25,930 | |||||||||
| Regulatory Assets | 124,701 | 107,169 | |||||||||
| Special Deposits | 16,557 | 31,390 | |||||||||
| Prepayments and Other Current Assets | 8,387 | 22,109 | |||||||||
| Total Current Assets | 402,738 | 381,938 | |||||||||
| Property, Plant and Equipment, Net | 3,722,618 | 3,656,462 | |||||||||
| Deferred Debits and Other Assets: | |||||||||||
| Regulatory Assets | 654,507 | 679,182 | |||||||||
| Other Long-Term Assets | 22,513 | 23,202 | |||||||||
| Total Deferred Debits and Other Assets | 677,020 | 702,384 | |||||||||
| Total Assets | $ | 4,802,376 | $ | 4,740,784 | |||||||
| LIABILITIES AND CAPITALIZATION | |||||||||||
| Current Liabilities: | |||||||||||
| Notes Payable to Eversource Parent | $ | 196,400 | $ | 110,600 | |||||||
| Rate Reduction Bonds – Current Portion | 43,210 | 43,210 | |||||||||
| Accounts Payable | 157,876 | 166,452 | |||||||||
| Accounts Payable to Affiliated Companies | 41,508 | 43,485 | |||||||||
| Regulatory Liabilities | 106,393 | 120,176 | |||||||||
| Other Current Liabilities | 64,356 | 63,005 | |||||||||
| Total Current Liabilities | 609,743 | 546,928 | |||||||||
| Deferred Credits and Other Liabilities: | |||||||||||
| Accumulated Deferred Income Taxes | 545,593 | 537,978 | |||||||||
| Regulatory Liabilities | 388,838 | 381,366 | |||||||||
| Other Long-Term Liabilities | 49,844 | 64,264 | |||||||||
| Total Deferred Credits and Other Liabilities | 984,275 | 983,608 | |||||||||
| Long-Term Debt | 1,164,010 | 1,163,833 | |||||||||
| Rate Reduction Bonds | 432,097 | 453,702 | |||||||||
| Common Stockholder's Equity: | |||||||||||
| Common Stock | — | — | |||||||||
| Capital Surplus, Paid In | 1,088,134 | 1,088,134 | |||||||||
| Retained Earnings | 524,142 | 504,556 | |||||||||
| Accumulated Other Comprehensive (Loss)/Income | (25) | 23 | |||||||||
| Common Stockholder's Equity | 1,612,251 | 1,592,713 | |||||||||
| Commitments and Contingencies (Note 9) | |||||||||||
| Total Liabilities and Capitalization | $ | 4,802,376 | $ | 4,740,784 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
13
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Operating Revenues | $ | 339,427 | $ | 293,435 | |||||||
| Operating Expenses: | |||||||||||
| Purchased Power and Transmission | 125,844 | 91,609 | |||||||||
| Operations and Maintenance | 59,573 | 54,664 | |||||||||
| Depreciation | 31,253 | 29,468 | |||||||||
| Amortization of Regulatory Assets, Net | 26,834 | 18,547 | |||||||||
| Energy Efficiency Programs | 8,718 | 10,348 | |||||||||
| Taxes Other Than Income Taxes | 22,785 | 22,149 | |||||||||
| Total Operating Expenses | 275,007 | 226,785 | |||||||||
| Operating Income | 64,420 | 66,650 | |||||||||
| Interest Expense | 13,645 | 14,630 | |||||||||
| Other Income, Net | 7,509 | 4,166 | |||||||||
| Income Before Income Tax Expense | 58,284 | 56,186 | |||||||||
| Income Tax Expense | 12,698 | 11,510 | |||||||||
| Net Income | $ | 45,586 | $ | 44,676 | |||||||
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 March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Net Income | $ | 45,586 | $ | 44,676 | |||||||
| Other Comprehensive (Loss)/Income, Net of Tax: | |||||||||||
| Qualified Cash Flow Hedging Instruments | — | 298 | |||||||||
| Changes in Unrealized Losses on Marketable Securities | (48) | (43) | |||||||||
| Other Comprehensive (Loss)/Income, Net of Tax | (48) | 255 | |||||||||
| Comprehensive Income | $ | 45,538 | $ | 44,931 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
14
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
(Unaudited)
| For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||
| Common Stock | Capital Surplus, Paid In | Retained Earnings | Accumulated Other Comprehensive Income/(Loss) | Total Common Stockholder's Equity | |||||||||||||||||||||||||||||||
| (Thousands of Dollars, Except Stock Information) | Stock | Amount | |||||||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | 301 | $ | — | $ | 1,088,134 | $ | 504,556 | $ | 23 | $ | 1,592,713 | ||||||||||||||||||||||||
| Net Income | 45,586 | 45,586 | |||||||||||||||||||||||||||||||||
| Dividends on Common Stock | (26,000) | (26,000) | |||||||||||||||||||||||||||||||||
| Other Comprehensive Loss | (48) | (48) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | 301 | $ | — | $ | 1,088,134 | $ | 524,142 | $ | (25) | $ | 1,612,251 | ||||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||
| 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, 2021 | 301 | $ | — | $ | 928,134 | $ | 615,018 | $ | (613) | $ | 1,542,539 | ||||||||||||||||||||||||
| Net Income | 44,676 | 44,676 | |||||||||||||||||||||||||||||||||
| Dividends on Common Stock | (25,200) | (25,200) | |||||||||||||||||||||||||||||||||
| Other Comprehensive Income | 255 | 255 | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | 301 | $ | — | $ | 928,134 | $ | 634,494 | $ | (358) | $ | 1,562,270 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
15
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (Thousands of Dollars) | 2022 | 2021 | |||||||||
| Operating Activities: | |||||||||||
| Net Income | $ | 45,586 | $ | 44,676 | |||||||
| Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities: | |||||||||||
| Depreciation | 31,253 | 29,468 | |||||||||
| Deferred Income Taxes | 7,480 | (378) | |||||||||
| Uncollectible Expense | 2,496 | 1,221 | |||||||||
| Regulatory Underrecoveries, Net | (32,186) | (14,645) | |||||||||
| Amortization of Regulatory Assets, Net | 26,834 | 18,547 | |||||||||
| Pension, SERP and PBOP Income, Net | (3,997) | (935) | |||||||||
| Cost of Removal Expenditures | (7,131) | (5,154) | |||||||||
| Other | (4,631) | (565) | |||||||||
| Changes in Current Assets and Liabilities: | |||||||||||
| Receivables and Unbilled Revenues, Net | (25,972) | 3,223 | |||||||||
| Materials, Supplies and REC Inventory | (6,033) | (2,296) | |||||||||
| Taxes Receivable/Accrued, Net | 8,067 | 9,867 | |||||||||
| Accounts Payable | 9,389 | (21,025) | |||||||||
| Other Current Assets and Liabilities, Net | 6,928 | 12,897 | |||||||||
| Net Cash Flows Provided by Operating Activities | 58,083 | 74,901 | |||||||||
| Investing Activities: | |||||||||||
| Investments in Property, Plant and Equipment | (107,916) | (68,278) | |||||||||
| Other Investing Activities | 593 | 137 | |||||||||
| Net Cash Flows Used in Investing Activities | (107,323) | (68,141) | |||||||||
| Financing Activities: | |||||||||||
| Cash Dividends on Common Stock | (26,000) | (25,200) | |||||||||
| Retirement of Long-Term Debt | — | (122,000) | |||||||||
| Repayment of Rate Reduction Bonds | (21,605) | (21,605) | |||||||||
| Increase in Notes Payable to Eversource Parent | 85,800 | 150,500 | |||||||||
| Other Financing Activities | (23) | (22) | |||||||||
| Net Cash Flows Provided by/(Used in) Financing Activities | 38,172 | (18,327) | |||||||||
| Net Decrease in Cash and Restricted Cash | (11,068) | (11,567) | |||||||||
| Cash and Restricted Cash - Beginning of Period | 35,126 | 39,555 | |||||||||
| Cash and Restricted Cash - End of Period | $ | 24,058 | $ | 27,988 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
16
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, NSTAR Gas and Eversource Gas Company of Massachusetts (EGMA) (natural gas utilities) and Aquarion (water utilities). Eversource provides energy delivery and/or water service to approximately 4.4 million electric, natural gas and water customers through ten 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 2021 Form 10-K, which was filed with the SEC on February 17, 2022. 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 March 31, 2022 and December 31, 2021, and the results of operations, comprehensive income, common shareholders' equity and cash flows for the three months ended March 31, 2022 and 2021. The results of operations, comprehensive income and cash flows for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results expected for a full year.
CYAPC and YAEC are inactive regional nuclear power companies engaged in the long-term storage of their spent nuclear fuel. Eversource consolidates the operations of 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.
Certain reclassifications of prior period data were made in the accompanying financial statements to conform to the current period presentation.
On May 4, 2022, Eversource announced that it had initiated a strategic review of its offshore wind investment portfolio. As part of that review, Eversource will explore strategic alternatives that could result in a potential sale of all, or part, of its 50 percent interest in its offshore wind partnership with Ørsted. Eversource expects to complete this review during 2022. Eversource’s offshore wind business includes a 50 percent ownership interest in North East Offshore, which holds PPAs and contracts for the Revolution Wind, South Fork Wind and Sunrise Wind projects, as well as undeveloped offshore lease area. As of March 31, 2022 and December 31, 2021, Eversource's total equity investment balance in its offshore wind business was $1.33 billion and $1.21 billion, respectively. Eversource’s initiation of the strategic review of its offshore wind investment does not impact the March 31, 2022 financial statements, and at this time, Eversource cannot predict the ultimate outcome or estimate the potential impact of such review.
17
B. Allowance for Uncollectible Accounts
Receivables, Net on the balance sheets 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 amortized cost, net of a credit loss provision (or allowance for uncollectible accounts).
Receivables are presented net of expected credit losses at estimated net realizable value by maintaining an allowance for uncollectible accounts. The current expected credit loss (CECL) model is applied to receivables for purposes of calculating the allowance for uncollectible accounts. This model 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 an aging-based quantitative assessment that applies an estimated uncollectible percentage to each receivable aging category. Factors in determining credit loss include historical collection, write-off experience, analysis of delinquency statistics, and management's assessment of collectability from customers, including current conditions, customer payment trends, the impact on customer bills because of energy usage trends and changes in rates, flexible payment plans and financial hardship arrearage management programs being offered to customers, reasonable forecasts, and expectations of future collectability and collection efforts. Management continuously assesses the collectability of receivables and adjusts estimates based on actual experience and future expectations based on economic conditions, collection efforts and other factors. 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 allowance for uncollectible accounts when the customer accounts are no longer in service and these balances are deemed to be uncollectible. Management concluded that the reserve balance as of March 31, 2022 adequately reflected the collection risk and net realizable value for its receivables.
As of March 31, 2022 and December 31, 2021, the total amount incurred as a result of COVID-19 included in the allowance for uncollectible accounts was $58.5 million and $55.3 million at Eversource, $20.4 million and $23.9 million at CL&P, and $9.0 million and $9.0 million at NSTAR Electric, respectively. At our Connecticut and Massachusetts utilities, the COVID-19 related uncollectible amounts were deferred either as incremental regulatory costs or deferred through existing regulatory tracking mechanisms that recover uncollectible energy supply costs, as management believes it is probable that these costs will ultimately be recovered from customers in future rates. No COVID-19 related uncollectible amounts were deferred at PSNH as a result of a July 2021 NHPUC order. Based on the status of our COVID-19 regulatory dockets, and policies and practices in the jurisdictions in which we operate, we believe our state regulatory commissions in Connecticut and Massachusetts will allow us to recover our incremental uncollectible customer receivable costs associated with COVID-19.
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, NSTAR Gas and EGMA 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. Management uses a higher credit risk profile for this pool of trade receivables as compared to non-hardship receivables. The allowance for uncollectible hardship accounts is included in the total uncollectible allowance balance.
The total allowance for uncollectible accounts is included in Receivables, Net on the balance sheets. The activity in the allowance for uncollectible accounts by portfolio segment as of March 31st is as follows:
| Eversource | CL&P | NSTAR Electric | PSNH | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Hardship Accounts | Retail (Non-Hardship), Wholesale, and Other | Total Allowance | Hardship Accounts | Retail (Non-Hardship), Wholesale, and Other | Total Allowance | Hardship Accounts | Retail (Non-Hardship), Wholesale, and Other | Total Allowance | Total Allowance | |||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning Balance | $ | 226.1 | $ | 191.3 | $ | 417.4 | $ | 144.6 | $ | 36.7 | $ | 181.3 | $ | 43.3 | $ | 53.7 | $ | 97.0 | $ | 24.3 | |||||||||||||||||||||||||||||||||||||||
| Uncollectible Expense | — | 17.1 | 17.1 | — | 3.8 | 3.8 | — | 4.7 | 4.7 | 2.5 | |||||||||||||||||||||||||||||||||||||||||||||||||
Uncollectible Costs Deferred (1) | 0.9 | 14.8 | 15.7 | (4.0) | (2.1) | (6.1) | (3.3) | 5.4 | 2.1 | 1.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Write-Offs | (2.3) | (22.0) | (24.3) | (1.1) | (0.5) | (1.6) | (0.3) | (10.6) | (10.9) | (1.8) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries Collected | 0.8 | 5.5 | 6.3 | 0.6 | 2.5 | 3.1 | — | 1.9 | 1.9 | 0.2 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Ending Balance | $ | 225.5 | $ | 206.7 | $ | 432.2 | $ | 140.1 | $ | 40.4 | $ | 180.5 | $ | 39.7 | $ | 55.1 | $ | 94.8 | $ | 26.2 | |||||||||||||||||||||||||||||||||||||||
| Three Months Ended 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning Balance | $ | 194.8 | $ | 164.1 | $ | 358.9 | $ | 129.1 | $ | 28.3 | $ | 157.4 | $ | 39.7 | $ | 51.9 | $ | 91.6 | $ | 17.2 | |||||||||||||||||||||||||||||||||||||||
| Uncollectible Expense | — | 16.3 | 16.3 | — | 3.8 | 3.8 | — | 3.9 | 3.9 | 1.2 | |||||||||||||||||||||||||||||||||||||||||||||||||
Uncollectible Costs Deferred (1) | 5.4 | 27.1 | 32.5 | 11.9 | 7.5 | 19.4 | (8.5) | 8.4 | (0.1) | 1.2 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Write-Offs | (3.3) | (16.7) | (20.0) | (2.9) | (4.0) | (6.9) | (0.1) | (7.5) | (7.6) | (2.5) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries Collected | 0.4 | 3.6 | 4.0 | 0.3 | 1.1 | 1.4 | — | 1.5 | 1.5 | 0.2 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Ending Balance | $ | 197.3 | $ | 194.4 | $ | 391.7 | $ | 138.4 | $ | 36.7 | $ | 175.1 | $ | 31.1 | $ | 58.2 | $ | 89.3 | $ | 17.3 | |||||||||||||||||||||||||||||||||||||||
18
(1) These expected credit losses are deferred as regulatory costs on the balance sheets, as these amounts are ultimately recovered in rates. Amounts include uncollectible costs for hardship accounts and other customer receivables, including uncollectible amounts related to uncollectible energy supply costs and COVID-19.
C. Fair Value Measurements
Fair value measurement guidance is applied to derivative contracts that are not elected or designated as "normal purchases" or "normal sales" (normal) and to the marketable securities held in trusts. Fair value measurement guidance is also applied to valuations of the investments used to calculate the funded status of pension and PBOP plans, the nonrecurring fair value measurements of nonfinancial assets such as goodwill, long-lived assets, equity method investments, AROs, and in the valuation of acquisitions. The fair value measurement guidance was also applied in estimating the 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. The 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 10, "Fair Value of Financial Instruments," to the financial statements.
D. Other Income, Net
The components of Other Income, Net on the statements of income were as follows:
| For the Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||||||||
| Pension, SERP and PBOP Non-Service Income Components | $ | 54.3 | $ | 15.9 | $ | 21.0 | $ | 6.6 | $ | 20.1 | $ | 2.7 | $ | 10.1 | $ | 2.7 | |||||||||||||||||||||||||||||||
| AFUDC Equity | 9.9 | 2.8 | 4.9 | 0.4 | 9.2 | 1.7 | 6.2 | 0.6 | |||||||||||||||||||||||||||||||||||||||
| Equity in Earnings of Unconsolidated Affiliates | 0.4 | — | — | — | 3.7 | — | 0.1 | — | |||||||||||||||||||||||||||||||||||||||
| Investment (Loss)/Income | (0.2) | (0.4) | (0.3) | 0.2 | (0.6) | 0.4 | 0.2 | 0.1 | |||||||||||||||||||||||||||||||||||||||
| Interest Income | 6.7 | 1.3 | 3.5 | 0.3 | 1.5 | 0.1 | 0.1 | 0.7 | |||||||||||||||||||||||||||||||||||||||
| Other | 0.5 | — | 0.1 | — | 0.3 | — | 0.1 | 0.1 | |||||||||||||||||||||||||||||||||||||||
| Total Other Income, Net | $ | 71.6 | $ | 19.6 | $ | 29.2 | $ | 7.5 | $ | 34.2 | $ | 4.9 | $ | 16.8 | $ | 4.2 | |||||||||||||||||||||||||||||||
E. 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 | |||||||||||
| (Millions of Dollars) | March 31, 2022 | March 31, 2021 | |||||||||
| Eversource | $ | 48.6 | $ | 48.6 | |||||||
| CL&P | 37.8 | 39.2 | |||||||||
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.
19
F. Supplemental Cash Flow Information
Non-cash investing activities include plant additions included in Accounts Payable as follows:
| (Millions of Dollars) | As of March 31, 2022 | As of March 31, 2021 | |||||||||
| Eversource | $ | 385.6 | $ | 262.9 | |||||||
| CL&P | 102.1 | 70.9 | |||||||||
| NSTAR Electric | 85.8 | 68.2 | |||||||||
| PSNH | 49.5 | 23.5 | |||||||||
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 March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||||||||
| Cash as reported on the Balance Sheets | $ | 46.2 | $ | 21.6 | $ | 0.7 | $ | 3.8 | $ | 66.8 | $ | 55.8 | $ | 0.7 | $ | — | |||||||||||||||||||||||||||||||
| Restricted cash included in: | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Deposits | 73.3 | 8.7 | 17.3 | 16.6 | 78.2 | 18.7 | 17.4 | 31.4 | |||||||||||||||||||||||||||||||||||||||
| Marketable Securities | 26.0 | 0.3 | 0.1 | 0.5 | 31.3 | 0.3 | 0.1 | 0.5 | |||||||||||||||||||||||||||||||||||||||
| Other Long-Term Assets | 19.1 | — | — | 3.2 | 44.7 | — | — | 3.2 | |||||||||||||||||||||||||||||||||||||||
Cash and Restricted Cash as reported on the Statements of Cash Flows | $ | 164.6 | $ | 30.6 | $ | 18.1 | $ | 24.1 | $ | 221.0 | $ | 74.8 | $ | 18.2 | $ | 35.1 | |||||||||||||||||||||||||||||||
Special Deposits represent cash collections related to the PSNH RRB customer charges that are held in trust, required ISO-NE cash deposits, and CYAPC and YAEC cash balances. The December 31, 2021 balance also included a $10 million customer assistance fund to provide bill payment assistance to certain existing non-hardship and hardship customers carrying arrearages at CL&P established under the terms of the PURA-approved October 2021 settlement agreement. Those customers were provided with $10 million of bill forgiveness in the first quarter of 2022, which represented a non-cash transaction. 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 obligations.
Restricted cash also includes an Energy Relief Fund for energy efficiency and clean energy measures in the Merrimack Valley and an additional energy efficiency program established under the terms of the EGMA 2020 settlement agreement. As of March 31, 2022, $20.0 million of this restricted cash was recorded as short-term in Special Deposits and $15.9 million was recorded in Other Long-Term Assets. As of December 31, 2021, this restricted cash totaled $41.5 million and was recorded in Other Long-Term Assets on the balance sheet.
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, plus 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 and the regulatory assets that have been recorded. If management were to determine that it could no longer apply the accounting guidance applicable to rate-regulated enterprises, or if management could not conclude it is probable that costs would be recovered from customers in future rates, the applicable costs would be charged to net income in the period in which the determination is made.
20
Regulatory Assets: The components of regulatory assets were as follows:
| As of March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||||||||
| Benefit Costs | $ | 1,452.5 | $ | 268.0 | $ | 386.9 | $ | 116.5 | $ | 1,481.0 | $ | 272.4 | $ | 395.5 | $ | 118.9 | |||||||||||||||||||||||||||||||
| Storm Costs, Net | 1,249.3 | 735.7 | 449.4 | 64.2 | 1,102.7 | 695.6 | 341.3 | 65.8 | |||||||||||||||||||||||||||||||||||||||
| Regulatory Tracking Mechanisms | 937.7 | 295.2 | 375.0 | 97.0 | 1,050.5 | 333.6 | 376.6 | 85.4 | |||||||||||||||||||||||||||||||||||||||
| Income Taxes, Net | 791.2 | 471.8 | 112.8 | 14.5 | 790.7 | 470.5 | 112.6 | 17.5 | |||||||||||||||||||||||||||||||||||||||
| Securitized Stranded Costs | 468.1 | — | — | 468.1 | 478.9 | — | — | 478.9 | |||||||||||||||||||||||||||||||||||||||
| Goodwill-related | 293.6 | — | 252.1 | — | 297.8 | — | 255.7 | — | |||||||||||||||||||||||||||||||||||||||
| Derivative Liabilities | 229.4 | 229.4 | — | — | 249.2 | 249.2 | — | — | |||||||||||||||||||||||||||||||||||||||
| Asset Retirement Obligations | 117.5 | 34.2 | 61.9 | 4.2 | 115.0 | 33.6 | 59.8 | 4.1 | |||||||||||||||||||||||||||||||||||||||
| Other Regulatory Assets | 162.1 | 28.9 | 35.4 | 14.7 | 150.0 | 29.9 | 37.7 | 15.8 | |||||||||||||||||||||||||||||||||||||||
| Total Regulatory Assets | 5,701.4 | 2,063.2 | 1,673.5 | 779.2 | 5,715.8 | 2,084.8 | 1,579.2 | 786.4 | |||||||||||||||||||||||||||||||||||||||
| Less: Current Portion | 1,128.1 | 382.1 | 433.7 | 124.7 | 1,129.1 | 371.6 | 444.0 | 107.2 | |||||||||||||||||||||||||||||||||||||||
| Total Long-Term Regulatory Assets | $ | 4,573.3 | $ | 1,681.1 | $ | 1,239.8 | $ | 654.5 | $ | 4,586.7 | $ | 1,713.2 | $ | 1,135.2 | $ | 679.2 | |||||||||||||||||||||||||||||||
Regulatory Costs in Long-Term Assets: Eversource's regulated companies had $262.5 million (including $113.4 million for CL&P, $84.2 million for NSTAR Electric and $3.4 million for PSNH) and $252.5 million (including $114.9 million for CL&P, $85.0 million for NSTAR Electric and $3.4 million for PSNH) of additional regulatory costs as of March 31, 2022 and December 31, 2021, 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.
As of March 31, 2022 and December 31, 2021, these regulatory costs included incremental COVID-19 related non-tracked uncollectible expense deferred of $35.0 million and $33.0 million at Eversource, $15.3 million and $18.0 million at CL&P, and $6.1 million and $6.1 million at NSTAR Electric, respectively.
Regulatory Liabilities: The components of regulatory liabilities were as follows:
| As of March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||||||||
| EDIT due to Tax Cuts and Jobs Act of 2017 | $ | 2,665.7 | $ | 992.7 | $ | 973.3 | $ | 356.1 | $ | 2,685.2 | $ | 996.1 | $ | 984.5 | $ | 359.2 | |||||||||||||||||||||||||||||||
| Cost of Removal | 667.2 | 108.6 | 388.2 | 19.1 | 649.6 | 100.1 | 381.0 | 17.2 | |||||||||||||||||||||||||||||||||||||||
| Regulatory Tracking Mechanisms | 571.8 | 226.7 | 237.2 | 94.9 | 448.4 | 182.0 | 185.1 | 107.0 | |||||||||||||||||||||||||||||||||||||||
| Benefit Costs | 128.3 | — | 103.1 | — | 133.5 | — | 107.4 | — | |||||||||||||||||||||||||||||||||||||||
| AFUDC - Transmission | 85.1 | 44.0 | 41.1 | — | 81.0 | 43.2 | 37.8 | — | |||||||||||||||||||||||||||||||||||||||
| CL&P Settlement Agreement and Storm Performance Penalty | 12.9 | 12.9 | — | — | 81.3 | 81.3 | — | — | |||||||||||||||||||||||||||||||||||||||
| Other Regulatory Liabilities | 416.2 | 75.0 | 107.4 | 25.1 | 389.7 | 57.1 | 91.5 | 18.2 | |||||||||||||||||||||||||||||||||||||||
| Total Regulatory Liabilities | 4,547.2 | 1,459.9 | 1,850.3 | 495.2 | 4,468.7 | 1,459.8 | 1,787.3 | 501.6 | |||||||||||||||||||||||||||||||||||||||
| Less: Current Portion | 652.4 | 251.6 | 279.3 | 106.4 | 602.4 | 266.5 | 228.2 | 120.2 | |||||||||||||||||||||||||||||||||||||||
| Total Long-Term Regulatory Liabilities | $ | 3,894.8 | $ | 1,208.3 | $ | 1,571.0 | $ | 388.8 | $ | 3,866.3 | $ | 1,193.3 | $ | 1,559.1 | $ | 381.4 | |||||||||||||||||||||||||||||||
21
3. PROPERTY, PLANT AND EQUIPMENT AND ACCUMULATED DEPRECIATION
The following tables summarize property, plant and equipment by asset category:
| Eversource | As of March 31, 2022 | As of December 31, 2021 | |||||||||
| (Millions of Dollars) | |||||||||||
| Distribution - Electric | $ | 17,809.0 | $ | 17,679.1 | |||||||
| Distribution - Natural Gas | 6,713.7 | 6,694.8 | |||||||||
| Transmission - Electric | 13,011.0 | 12,882.4 | |||||||||
| Distribution - Water | 1,924.9 | 1,900.9 | |||||||||
| Solar | 200.9 | 200.9 | |||||||||
| Utility | 39,659.5 | 39,358.1 | |||||||||
Other (1) | 1,509.6 | 1,469.5 | |||||||||
| Property, Plant and Equipment, Gross | 41,169.1 | 40,827.6 | |||||||||
| Less: Accumulated Depreciation | |||||||||||
| Utility | (8,976.2) | (8,885.2) | |||||||||
| Other | (609.8) | (580.1) | |||||||||
| Total Accumulated Depreciation | (9,586.0) | (9,465.3) | |||||||||
| Property, Plant and Equipment, Net | 31,583.1 | 31,362.3 | |||||||||
| Construction Work in Progress | 2,269.5 | 2,015.4 | |||||||||
| Total Property, Plant and Equipment, Net | $ | 33,852.6 | $ | 33,377.7 | |||||||
| As of March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | CL&P | NSTAR Electric | PSNH | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||
| Distribution - Electric | $ | 7,188.9 | $ | 8,151.1 | $ | 2,509.3 | $ | 7,117.6 | $ | 8,105.5 | $ | 2,496.2 | |||||||||||||||||||||||
| Transmission - Electric | 5,912.5 | 5,137.1 | 1,963.1 | 5,859.0 | 5,090.5 | 1,934.6 | |||||||||||||||||||||||||||||
| Solar | — | 200.9 | — | — | 200.9 | — | |||||||||||||||||||||||||||||
Property, Plant and Equipment, Gross | 13,101.4 | 13,489.1 | 4,472.4 | 12,976.6 | 13,396.9 | 4,430.8 | |||||||||||||||||||||||||||||
Less: Accumulated Depreciation | (2,592.6) | (3,271.8) | (912.8) | (2,572.1) | (3,227.3) | (908.4) | |||||||||||||||||||||||||||||
Property, Plant and Equipment, Net | 10,508.8 | 10,217.3 | 3,559.6 | 10,404.5 | 10,169.6 | 3,522.4 | |||||||||||||||||||||||||||||
Construction Work in Progress | 432.2 | 791.6 | 163.0 | 399.0 | 707.0 | 134.1 | |||||||||||||||||||||||||||||
Total Property, Plant and Equipment, Net | $ | 10,941.0 | $ | 11,008.9 | $ | 3,722.6 | $ | 10,803.5 | $ | 10,876.6 | $ | 3,656.5 | |||||||||||||||||||||||
(1) These assets are primarily comprised of computer software, hardware and equipment at Eversource Service and buildings at The Rocky River Realty Company.
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 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 March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
CL&P (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 | ||||||||||||||||||||||||||||||||||
| Current Derivative Assets | Level 3 | $ | 14.8 | $ | (0.4) | $ | 14.4 | $ | 14.7 | $ | (1.0) | $ | 13.7 | ||||||||||||||||||||||||||||
| Long-Term Derivative Assets | Level 3 | 41.4 | (1.3) | 40.1 | 46.9 | (0.9) | 46.0 | ||||||||||||||||||||||||||||||||||
| Current Derivative Liabilities | Level 3 | (74.4) | — | (74.4) | (73.5) | — | (73.5) | ||||||||||||||||||||||||||||||||||
| Long-Term Derivative Liabilities | Level 3 | (209.5) | — | (209.5) | (235.4) | — | (235.4) | ||||||||||||||||||||||||||||||||||
22
(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.
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 both March 31, 2022 and December 31, 2021 were 675 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.
For the three months ended March 31, 2022 and 2021, there were gains of $6.2 million and losses of $11.1 million, respectively, deferred as regulatory costs, which reflect the change in fair value associated with Eversource's derivative contracts.
Fair Value Measurements of Derivative Instruments
The fair value of derivative contracts classified as Level 3 utilizes both significant observable and unobservable inputs. The fair value is modeled using income techniques, such as discounted cash flow valuations adjusted for assumptions related to exit price. 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. Significant observable inputs for valuations of these contracts include energy-related product prices in future years for which quoted prices in an active market exist. 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. Fair value measurements categorized in Level 3 of the fair value hierarchy are prepared by individuals with expertise in valuation techniques, pricing of energy-related products, and accounting requirements.
The following is a summary of the significant unobservable inputs utilized in the valuations of the derivative contracts classified as Level 3:
| As of March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CL&P | Range | Average | Period Covered | Range | Average | Period Covered | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forward Reserve Prices | $ | 0.50 | — | $1.15 | $ | 0.82 | per kW-Month | 2022 - 2024 | $ | 0.50 | — | $1.15 | $ | 0.82 | per kW-Month | 2022 - 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exit price premiums of 4.5 percent through 8.8 percent, or a weighted average of 7.7 percent, are also Level 3 significant unobservable inputs 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.
As of December 31, 2021, Level 3 unobservable inputs also utilized in the valuation of CL&P’s capacity-related contracts included capacity prices of $2.61 per kW-Month over the period 2025 through 2026. As of March 31, 2022, these capacity price inputs are now observable.
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.
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 March 31, | |||||||||||||
| (Millions of Dollars) | 2022 | 2021 | ||||||||||||
| Derivatives, Net: | ||||||||||||||
| Fair Value as of Beginning of Period | $ | (249.2) | $ | (293.1) | ||||||||||
| Net Realized/Unrealized Gains/(Losses) Included in Regulatory Assets | 6.2 | (12.5) | ||||||||||||
| Settlements | 13.6 | 12.5 | ||||||||||||
| Fair Value as of End of Period | $ | (229.4) | $ | (293.1) | ||||||||||
5. MARKETABLE SECURITIES
Eversource holds marketable securities that are primarily used to fund certain non-qualified executive benefits. The trusts that hold these marketable securities are not subject to regulatory oversight by state or federal agencies. Eversource’s marketable securities also include CYAPC and YAEC legally restricted trusts that each hold equity and available-for-sale debt securities to fund the spent nuclear fuel removal obligations of their nuclear fuel storage facilities. Equity and available-for-sale debt marketable securities are recorded at fair value, with the current portion recorded in Prepayments and Other Current Assets and the long-term portion recorded in Marketable Securities on the balance sheets.
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 March 31, 2022 and December 31, 2021 was $31.5 million and $40.2 million, respectively. For the three months ended March 31, 2022 and 2021, there were unrealized losses of $4.4 million and unrealized gains of $1.1 million recorded in Other Income, Net related to these equity securities, respectively.
23
Eversource's equity securities also include CYAPC's and YAEC's marketable securities held in spent nuclear fuel trusts, which had fair values of $195.5 million and $214.0 million as of March 31, 2022 and December 31, 2021, 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 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:
| As of March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
| Debt Securities | $ | 211.4 | $ | 0.5 | $ | (3.6) | $ | 208.3 | $ | 214.5 | $ | 5.1 | $ | (0.2) | $ | 219.4 | |||||||||||||||||||||||||||||||
Eversource's debt securities include CYAPC's and YAEC's marketable securities held in spent nuclear fuel trusts in the amounts of $183.4 million and $189.9 million as of March 31, 2022 and December 31, 2021, 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, 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 and no credit losses for the three months ended March 31, 2022 and 2021, and no allowance for credit losses as of March 31, 2022. Factors considered in determining whether a credit loss exists include adverse conditions specifically affecting the issuer, the payment history, ratings and rating changes of the 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 March 31, 2022, the contractual maturities of available-for-sale debt securities were as follows:
Eversource (Millions of Dollars) | Amortized Cost | Fair Value | |||||||||
Less than one year (1) | $ | 27.0 | $ | 27.0 | |||||||
| One to five years | 61.9 | 61.6 | |||||||||
| Six to ten years | 36.3 | 35.5 | |||||||||
| Greater than ten years | 86.2 | 84.2 | |||||||||
| Total Debt Securities | $ | 211.4 | $ | 208.3 | |||||||
(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 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 March 31, 2022 | As of December 31, 2021 | |||||||||
| Level 1: | |||||||||||
| Mutual Funds and Equities | $ | 227.0 | $ | 254.2 | |||||||
| Money Market Funds | 26.0 | 31.3 | |||||||||
| Total Level 1 | $ | 253.0 | $ | 285.5 | |||||||
| Level 2: | |||||||||||
| U.S. Government Issued Debt Securities (Agency and Treasury) | $ | 80.0 | $ | 81.3 | |||||||
| Corporate Debt Securities | 62.5 | 65.3 | |||||||||
| Asset-Backed Debt Securities | 11.6 | 12.6 | |||||||||
| Municipal Bonds | 11.7 | 12.3 | |||||||||
| Other Fixed Income Securities | 16.5 | 16.6 | |||||||||
| Total Level 2 | $ | 182.3 | $ | 188.1 | |||||||
| Total Marketable Securities | $ | 435.3 | $ | 473.6 | |||||||
24
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 $2.00 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, Yankee Gas, EGMA and Aquarion Water Company of Connecticut are parties to a five-year $2.00 billion revolving credit facility, which terminates on October 15, 2026. This revolving credit facility serves to backstop Eversource parent's $2.00 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 October 15, 2026. 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 | |||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||
| (Millions of Dollars) | |||||||||||||||||||||||||||||||||||
| Eversource Parent Commercial Paper Program | $ | 1,393.8 | $ | 1,343.0 | $ | 606.2 | $ | 657.0 | 0.93 | % | 0.31 | % | |||||||||||||||||||||||
| NSTAR Electric Commercial Paper Program | 275.0 | 162.5 | 375.0 | 487.5 | 0.43 | % | 0.14 | % | |||||||||||||||||||||||||||
There were no borrowings outstanding on the revolving credit facilities as of March 31, 2022 or December 31, 2021.
CL&P and PSNH have uncommitted line of credit agreements totaling $450 million and $300 million, respectively, which will expire on May 12, 2022. There are no borrowings outstanding on either the CL&P or PSNH uncommitted line of credit agreements as of March 31, 2022.
Amounts outstanding under the commercial paper programs are included in Notes Payable and 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.
The Company expects the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with 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 in meeting their short-term borrowing needs. 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 March 31, 2022, there were intercompany loans from Eversource parent to PSNH of $196.4 million and to a subsidiary of NSTAR Electric of $4.0 million. As of December 31, 2021, there were intercompany loans from Eversource parent to PSNH of $110.6 million. Intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and classified in current liabilities on the respective subsidiary's balance sheets.
Long-Term Debt Issuances and Repayments: 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 | |||||||||||||||||||
Eversource Parent 2.90% Series V Senior Notes | $ | 650.0 | February 2022 | March 2027 | Repaid Series K Senior Notes at maturity and short-term debt | ||||||||||||||||||
Eversource Parent 3.38% Series W Senior Notes | 650.0 | February 2022 | March 2032 | Repaid Series K Senior Notes at maturity and short-term debt | |||||||||||||||||||
Eversource Parent 2.75% Series K Senior Notes | (750.0) | March 2022 | March 2022 | Paid at maturity | |||||||||||||||||||
Yankee Gas 8.48% Series B First Mortgage Bonds | (20.0) | March 2022 | March 2022 | Paid at maturity | |||||||||||||||||||
25
7. RATE REDUCTION BONDS AND VARIABLE INTEREST ENTITIES
Rate Reduction Bonds: In May 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 are paid semi-annually, beginning on February 1, 2019. The RRBs were issued pursuant to a finance order issued by the NHPUC in January 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) PSNH Income Statements: | For the Three Months Ended | |||||||||||||
| March 31, 2022 | March 31, 2021 | |||||||||||||
| Amortization of RRB Principal (included in Amortization of Regulatory Assets, Net) | $ | 10.8 | $ | 10.8 | ||||||||||
| Interest Expense on RRB Principal (included in Interest Expense) | 4.4 | 4.7 | ||||||||||||
8. PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSION
Eversource provides defined benefit retirement plans (Pension Plans) that cover eligible employees. In addition to the Pension Plans, Eversource maintains non-qualified defined benefit retirement 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) 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 plan expense/(income) for the Pension, SERP and PBOP Plans, prior to amounts capitalized as Property, Plant and Equipment or deferred as regulatory assets/(liabilities) for future recovery or refund, are shown below. The service cost component of net periodic benefit plan 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 plan expense/(income), less the deferred portion, are included in Other Income, Net on the statements of income. Pension, SERP and PBOP expense/(income) reflected in the statements of cash flows for CL&P, NSTAR Electric and PSNH does not include intercompany allocations of net periodic benefit plan expense/(income), as these amounts are cash settled on a short-term basis.
| Pension and SERP | PBOP | ||||||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||||||||
| Service Cost | $ | 17.7 | $ | 4.5 | $ | 3.6 | $ | 1.8 | $ | 2.8 | $ | 0.5 | $ | 0.5 | $ | 0.2 | |||||||||||||||||||||||||||||||
| Interest Cost | 38.6 | 7.8 | 8.1 | 4.2 | 5.0 | 0.9 | 1.3 | 0.5 | |||||||||||||||||||||||||||||||||||||||
| Expected Return on Plan Assets | (131.7) | (26.6) | (32.0) | (14.1) | (22.4) | (2.8) | (10.6) | (1.6) | |||||||||||||||||||||||||||||||||||||||
| Actuarial Losses, net | 30.7 | 4.2 | 8.5 | 2.2 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Prior Service Cost/(Credit) | 0.4 | — | 0.1 | — | (5.4) | 0.2 | (4.3) | 0.1 | |||||||||||||||||||||||||||||||||||||||
| Total Net Periodic Benefit Plan Income | $ | (44.3) | $ | (10.1) | $ | (11.7) | $ | (5.9) | $ | (20.0) | $ | (1.2) | $ | (13.1) | $ | (0.8) | |||||||||||||||||||||||||||||||
| Intercompany Income Allocations | N/A | $ | (3.8) | $ | (2.9) | $ | (0.8) | N/A | $ | (0.9) | $ | (0.9) | $ | (0.3) | |||||||||||||||||||||||||||||||||
26
| Pension and SERP | PBOP | ||||||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Eversource | CL&P | NSTAR Electric | PSNH | Eversource | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||||||||
| Service Cost | $ | 21.3 | $ | 6.3 | $ | 4.0 | $ | 2.2 | $ | 3.5 | $ | 0.6 | $ | 0.6 | $ | 0.3 | |||||||||||||||||||||||||||||||
| Interest Cost | 32.6 | 7.3 | 6.7 | 3.6 | 4.4 | 0.8 | 1.1 | 0.5 | |||||||||||||||||||||||||||||||||||||||
| Expected Return on Plan Assets | (108.9) | (21.6) | (26.9) | (11.9) | (19.7) | (2.6) | (9.3) | (1.5) | |||||||||||||||||||||||||||||||||||||||
| Actuarial Loss | 61.6 | 13.0 | 15.5 | 4.9 | 2.6 | 0.4 | 0.6 | 0.3 | |||||||||||||||||||||||||||||||||||||||
| Prior Service Cost/(Credit) | 0.3 | — | 0.1 | — | (5.3) | 0.2 | (4.2) | 0.1 | |||||||||||||||||||||||||||||||||||||||
| Total Net Periodic Benefit Plan Expense/(Income) | $ | 6.9 | $ | 5.0 | $ | (0.6) | $ | (1.2) | $ | (14.5) | $ | (0.6) | $ | (11.2) | $ | (0.3) | |||||||||||||||||||||||||||||||
| Intercompany Expense/(Income) Allocations | N/A | $ | 1.3 | $ | 1.5 | $ | 0.5 | N/A | $ | (0.3) | $ | (0.4) | $ | (0.1) | |||||||||||||||||||||||||||||||||
Eversource Contributions: Based on the current status of the Pension Plans and federal pension funding requirements, there is no minimum funding requirement for our Pension Plans for 2022. Eversource currently expects to make contributions between $100 million to $175 million in 2022, most of which will be contributed by Eversource Service, however the planned contribution is discretionary and subject to change. Eversource currently estimates contributing $2.4 million to the PBOP Plans in 2022.
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 March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||
| Number of Sites | Reserve (in millions) | Number of Sites | Reserve (in millions) | ||||||||||||||||||||
| Eversource | 61 | $ | 117.8 | 61 | $ | 115.4 | |||||||||||||||||
| CL&P | 14 | 14.3 | 14 | 13.9 | |||||||||||||||||||
| NSTAR Electric | 11 | 3.2 | 11 | 3.3 | |||||||||||||||||||
| PSNH | 9 | 6.4 | 9 | 6.3 | |||||||||||||||||||
Included in the number of sites and reserve amounts above are former MGP sites that were operated several decades ago and manufactured natural 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 $108.3 million and $105.6 million as of March 31, 2022 and December 31, 2021, 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
The following is an update to the current status of long-term contractual arrangements set forth in Note 13B of the Eversource 2021 Form 10-K.
Renewable Energy: Renewable energy contracts include non-cancelable commitments under contracts of NSTAR Electric for the purchase of energy and RECs from renewable energy facilities.
| NSTAR Electric | |||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | ||||||||||||||||||||||||||||||||||
| Renewable Energy | $ | 75.6 | $ | 78.3 | $ | 269.4 | $ | 315.8 | $ | 322.1 | $ | 5,812.2 | $ | 6,873.4 | |||||||||||||||||||||||||||
The table has been updated to include long-term commitments of NSTAR Electric pertaining to the Vineyard Wind LLC contract awarded under the Massachusetts Clean Energy 83C procurement solicitation. NSTAR Electric, along with other Massachusetts distribution companies, entered into 20-year contracts for this 800 megawatt offshore wind project. Construction on the Vineyard Wind project commenced in 2022. Estimated costs under this contract are expected to begin in 2024 and range between $240 million and $375 million per year under NSTAR Electric’s 20-year contract, totaling approximately $6.0 billion.
27
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. Management does not anticipate a material impact to net income or cash flows as a result of these various guarantees and indemnifications.
Guarantees issued on behalf of unconsolidated entities, including equity method offshore wind investments, for which Eversource parent is the guarantor, are recorded at fair value as a liability on the balance sheet at the inception of the guarantee. Eversource regularly reviews performance risk under these guarantee arrangements, 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. The fair value of guarantees issued on behalf of unconsolidated entities are recorded within Other Long-Term Liabilities on the balance sheet, and were $7.0 million and $7.3 million as of March 31, 2022 and December 31, 2021, respectively.
The following table summarizes Eversource parent's exposure to guarantees and indemnifications of its subsidiaries and affiliates to external parties:
| As of March 31, 2022 | ||||||||||||||||||||
| Company (Obligor) | Description | Maximum Exposure (in millions) | Expiration Dates | |||||||||||||||||
| North East Offshore LLC | Construction-related purchase agreements with third-party contractors (1) | $ | 936.3 | (1) | ||||||||||||||||
| Sunrise Wind LLC | Construction-related purchase agreements with third-party contractors (2) | 330.6 | 2026 | |||||||||||||||||
| Revolution Wind, LLC | Construction-related purchase agreements with third-party contractors (3) | 254.7 | 2024 - 2027 | |||||||||||||||||
| South Fork Wind, LLC | Construction-related purchase agreements with third-party contractors (4) | 165.3 | 2023 - 2026 | |||||||||||||||||
| Eversource Investment LLC | Funding and indemnification obligations of North East Offshore LLC (5) | 107.8 | (5) | |||||||||||||||||
| South Fork Wind, LLC | Power Purchase Agreement Security (6) | 7.1 | (6) | |||||||||||||||||
| Sunrise Wind LLC | OREC capacity production (7) | 2.2 | (7) | |||||||||||||||||
| Bay State Wind LLC | Real estate purchase | 2.5 | 2022 | |||||||||||||||||
| South Fork Wind, LLC | Transmission interconnection | 1.2 | — | |||||||||||||||||
| Eversource Investment LLC | Letters of Credit (8) | 4.3 | — | |||||||||||||||||
| Various | Surety bonds (9) | 35.0 | 2022 - 2023 | |||||||||||||||||
| Eversource Service | Lease payments for real estate | 0.7 | 2024 | |||||||||||||||||
(1) Eversource parent issued guarantees on behalf of its 50 percent-owned affiliate, North East Offshore LLC (NEO), under which Eversource parent agreed to guarantee 50 percent of NEO’s performance of obligations under certain purchase agreements with third-party contactors, in an aggregate amount not to exceed $1.3 billion with an expiration date in 2025. Eversource parent also issued a separate guarantee to Ørsted on behalf of NEO, under which Eversource parent agreed to guarantee 50 percent of NEO’s payment obligations under certain offshore wind project construction-related agreements with Ørsted in an aggregate amount not to exceed $62.5 million and expiring upon full performance of the guaranteed obligation. Any amounts paid under this guarantee to Ørsted will count toward, but not increase, the maximum amount of the Funding Guarantee described in Note 5, below. The guarantee expires upon the full performance of the guaranteed obligations.
(2) Eversource parent issued a guaranty on behalf of its 50 percent-owned affiliate, Sunrise Wind LLC, whereby Eversource parent will guarantee Sunrise Wind LLC's performance of certain obligations, in an aggregate amount not to exceed $420.6 million, in connection with a construction-related purchase agreement. Eversource parent’s obligations under the guarantee expire upon the earlier of (i) April 2026 and (ii) full performance of the guaranteed obligations.
(3) Eversource parent issued guarantees on behalf of its 50 percent-owned affiliate, Revolution Wind, LLC, whereby Eversource parent will guarantee Revolution Wind, LLC's performance of certain obligations, in an aggregate amount not to exceed $268.5 million, in connection with construction-related purchase agreements. Eversource parent’s obligations under the guarantees expire upon the earlier of (i) dates ranging from November 2024 and November 2027 and (ii) full performance of the guaranteed obligations.
(4) Eversource parent issued guarantees on behalf of its 50 percent-owned affiliate, South Fork Wind, LLC, whereby Eversource parent will guarantee South Fork Wind, LLC's performance of certain obligations in connection with construction-related purchase agreements. Under these guarantees, Eversource parent will guarantee South Fork Wind, LLC's performance of certain obligations, in a total aggregate amount not to exceed $184.0 million. Eversource parent’s obligations under these guarantees expire upon the earlier of (i) dates ranging from June 2023 and August 2026 and (ii) full performance of the guaranteed obligations.
(5) Eversource parent issued a guarantee (Funding Guarantee) on behalf of Eversource Investment LLC (EI), its wholly-owned subsidiary that holds a 50 percent ownership interest in NEO, under which Eversource parent agreed to guarantee certain funding obligations and certain indemnification payments of EI under the operating agreement of NEO, in an amount not to exceed $910 million. The guaranteed obligations include payment of EI's funding obligations during the construction phase of NEO’s underlying offshore wind projects and indemnification obligations associated with third party credit support for its investment in NEO. Eversource parent’s obligations under the Funding Guarantee expire upon the full performance of the guaranteed obligations.
28
(6) Eversource parent issued a guarantee on behalf of its 50 percent-owned affiliate, South Fork Wind, LLC, whereby Eversource parent will guarantee South Fork Wind, LLC's performance of certain obligations, in an amount not to exceed $7.1 million, under a Power Purchase Agreement between the Long Island Power Authority and South Fork Wind, LLC (the Agreement). The guarantee expires upon the later of (i) the end of the Agreement term and (ii) full performance of the guarantee obligations.
(7) Eversource parent issued a guarantee on behalf of its 50 percent-owned affiliate, Sunrise Wind LLC, whereby Eversource parent will guarantee 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 by and between the New York State Energy Research and Development Authority (NYSERDA) and Sunrise Wind LLC. The guarantee expires upon the full performance of the guaranteed obligations.
(8) On September 16, 2020, Eversource parent entered into a guarantee on behalf of EI, which holds Eversource's investments in offshore wind-related equity method investments, under which Eversource parent would guarantee EI's obligations under a letter of credit facility with a financial institution that EI may request in an aggregate amount of up to approximately $25 million. In January 2022, Eversource parent issued two letters of credit on behalf of South Fork Wind, LLC related to future decommissioning obligations of certain onshore transmission assets totaling $4.3 million.
(9) 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.
Second Quarter 2022 Guarantees: In April 2022, Eversource parent issued three additional guarantees, two on behalf of Revolution Wind, LLC and one on behalf of South Fork Wind, LLC, whereby Eversource parent will guarantee performance of construction-related purchase agreements in an aggregate amount not to exceed $160.2 million.
D. 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-level waste disposal contracts between the Yankee Companies and the DOE. The court previously awarded the Yankee Companies damages for Phases I, II, III and IV of litigation resulting from the DOE's failure to meet its contractual obligations. These Phases covered damages incurred in the years 1998 through 2016, and the awarded damages have been received by the Yankee Companies with certain amounts of the damages refunded to their customers.
DOE Phase V Damages - On March 25, 2021, each of the Yankee Companies filed a fifth set of lawsuits against the DOE in the Court of Federal Claims. The Yankee Companies filed claims seeking monetary damages totaling $120.4 million for CYAPC, YAEC and MYAPC, resulting from the DOE's failure to begin accepting spent nuclear fuel for disposal covering the years from 2017 to 2020 (DOE Phase V). The DOE Phase V trial is expected to begin in the third quarter of 2023.
E. FERC ROE Complaints
Four separate complaints were 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). 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) 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).
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.
29
Eversource has recorded a reserve of $39.1 million (pre-tax and excluding interest) for the second complaint period as of both March 31, 2022 and December 31, 2021. 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 both March 31, 2022 and December 31, 2021.
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. 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 illustrative calculations indicated that for the first complaint period, for the NETOs, which FERC concludes are of average financial risk, the preliminary just and reasonable base ROE is 10.41 percent and the preliminary incentive cap on total ROE is 13.08 percent.
If the results of the 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. 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 Opinion No. 569 affecting the two pending transmission ROE complaints against the Midcontinent ISO (MISO) transmission owners, in which FERC adopted a new methodology for determining base ROEs. Various parties sought rehearing. On December 23, 2019, the NETOs filed supplementary materials in the NETOs' four pending cases to respond to this new methodology because of the uncertainty of the applicability to the NETOs' cases.
On May 21, 2020, the FERC issued its order in Opinion No. 569-A on the rehearing of the MISO transmission owners' cases, in which FERC again changed its methodology for determining the MISO transmission owners' base ROEs. On November 19, 2020, the FERC issued Opinion No. 569-B denying rehearing of Opinion No. 569-A and reaffirmed the methodology previously adopted in Opinion No. 569-A. The new methodology differs significantly from the methodology proposed by FERC in its October 16, 2018 order to determine the NETOs' base ROEs in its four pending cases. FERC Opinion Nos. 569-A and 569-B are currently under appeal with the Court.
Given the significant uncertainty regarding the applicability of the FERC opinions in the MISO transmission owners' two complaint cases to the NETOs' pending four complaint cases, Eversource concluded that there is no reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods at this time. As well, Eversource cannot reasonably estimate a range of loss for any of the four complaint proceedings at this time.
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.
A change of 10 basis points 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.
F. Eversource and NSTAR Electric Boston Harbor Civil Action
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 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 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. Construction of the new distribution cable was completed in August 2019, and removal of the portions of the existing cable was completed in January 2020. All issues surrounding the current permit from the United States Army Corps of Engineers are expected to be resolved and remaining restoration efforts completed, at which time such litigation is expected to be dismissed with prejudice.
G. CL&P Regulatory Matters
CL&P Tropical Storm Isaias Response Investigation: In August 2020, PURA opened a docket to investigate the preparation for and response to Tropical Storm Isaias by Connecticut utilities, including CL&P. On April 28, 2021, PURA issued a final decision on CL&P’s compliance with its emergency response plan that concluded CL&P failed to comply with certain storm performance standards and was imprudent in certain instances. Specifically, PURA concluded that CL&P did not satisfy the performance standards for managing its municipal liaison program, timely removing electrical hazards from blocked roads, communicating critical information to its customers, or meeting its obligation to secure adequate external contractor and mutual aid resources in a timely manner. Based on its findings, PURA ordered CL&P to adjust its future rates in a pending or future rate proceeding to reflect a monetary penalty in the form of a downward adjustment of 90 basis points in its allowed rate of return on equity (ROE), which is currently 9.25 percent. In its decision, PURA explained that additional monetary penalties and further enforcement orders pursuant to Connecticut statute would be considered in a separate proceeding that was initiated on May 6, 2021.
30
On May 6, 2021, as part of the penalty proceeding, PURA issued a notice of violation that included an assessment of $30 million, consisting of a $28.4 million civil penalty for non-compliance with storm performance standards to be provided as credits on customer bills and a $1.6 million fine for violations of accident reporting requirements to be paid to the State of Connecticut’s general fund. On July 14, 2021, PURA issued a final decision in this penalty proceeding that included an assessment of $28.6 million, maintaining the $28.4 million performance penalty and reducing the $1.6 million fine for accident reporting to $0.2 million. The $28.4 million performance penalty is currently being credited to customers on electric bills beginning on September 1, 2021 over a one-year period. The $28.4 million is the maximum statutory penalty amount under applicable Connecticut law in effect at the time of Tropical Storm Isaias, which is 2.5 percent of CL&P’s annual distribution revenues. In the first quarter of 2021, the liability for the performance penalty of $30 million was recorded as a current regulatory liability on CL&P’s balance sheet and as a charge to Operations and Maintenance expense on the income statement. The after-tax earnings impact of this charge was $0.07 per share. The penalty was subsequently reclassified from Operations and Maintenance expense to a reduction of Operating Revenues in the third quarter of 2021 in connection with the finalization of an October 1, 2021 settlement agreement that was approved by PURA on October 27, 2021.
10. 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 | ||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||||||||||||||||
| As of March 31, 2022: | |||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock Not Subject to Mandatory Redemption | $ | 155.6 | $ | 158.3 | $ | 116.2 | $ | 115.5 | $ | 43.0 | $ | 42.8 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Long-Term Debt | 18,729.6 | 18,562.3 | 4,215.7 | 4,392.2 | 3,986.3 | 4,094.1 | 1,164.0 | 1,086.3 | |||||||||||||||||||||||||||||||||||||||
| Rate Reduction Bonds | 475.3 | 492.8 | — | — | — | — | 475.3 | 492.8 | |||||||||||||||||||||||||||||||||||||||
| As of December 31, 2021: | |||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock Not Subject to Mandatory Redemption | $ | 155.6 | $ | 166.3 | $ | 116.2 | $ | 122.3 | $ | 43.0 | $ | 44.0 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Long-Term Debt | 18,216.7 | 19,636.3 | 4,215.4 | 4,848.9 | 3,985.4 | 4,453.5 | 1,163.8 | 1,220.6 | |||||||||||||||||||||||||||||||||||||||
| Rate Reduction Bonds | 496.9 | 543.3 | — | — | — | — | 496.9 | 543.3 | |||||||||||||||||||||||||||||||||||||||
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 1C, "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 Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
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 Gains/(Losses) on Marketable Securities | Defined Benefit Plans | Total | |||||||||||||||||||||||||||||||||||||||
| Balance as of Beginning of Period | $ | (0.4) | $ | 0.4 | $ | (42.3) | $ | (42.3) | $ | (1.4) | $ | 1.1 | $ | (76.1) | $ | (76.4) | |||||||||||||||||||||||||||||||
OCI Before Reclassifications | — | (0.8) | — | (0.8) | — | (0.7) | — | (0.7) | |||||||||||||||||||||||||||||||||||||||
Amounts Reclassified from AOCI | — | — | 1.5 | 1.5 | 0.4 | — | 1.5 | 1.9 | |||||||||||||||||||||||||||||||||||||||
| Net OCI | — | (0.8) | 1.5 | 0.7 | 0.4 | (0.7) | 1.5 | 1.2 | |||||||||||||||||||||||||||||||||||||||
| Balance as of End of Period | $ | (0.4) | $ | (0.4) | $ | (40.8) | $ | (41.6) | $ | (1.0) | $ | 0.4 | $ | (74.6) | $ | (75.2) | |||||||||||||||||||||||||||||||
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.
31
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 | |||||||||||||||||||||||
| Authorized as of March 31, 2022 and December 31, 2021 | Issued as of | ||||||||||||||||||||||
| Par Value | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||
| Eversource | $ | 5 | 380,000,000 | 357,818,402 | 357,818,402 | ||||||||||||||||||
| CL&P | $ | 10 | 24,500,000 | 6,035,205 | 6,035,205 | ||||||||||||||||||
| NSTAR Electric | $ | 1 | 100,000,000 | 200 | 200 | ||||||||||||||||||
| PSNH | $ | 1 | 100,000,000 | 301 | 301 | ||||||||||||||||||
Treasury Shares: As of March 31, 2022 and December 31, 2021, there were 12,968,130 and 13,415,206 Eversource common shares held as treasury shares, respectively. As of March 31, 2022 and December 31, 2021, there were 344,850,272 and 344,403,196 Eversource common shares outstanding, respectively.
Eversource issues 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. Eversource also issued treasury shares for its 2021 water business acquisition. 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.
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 March 31, 2022 and 2021. 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 March 31, 2022 and December 31, 2021. 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.
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 as if they were converted into outstanding common shares. The dilutive effect of unvested RSU and performance share awards 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. For the three months ended March 31, 2022 and 2021, there were no antidilutive share awards excluded from the computation of diluted EPS.
The following table sets forth the components of basic and diluted EPS:
Eversource (Millions of Dollars, except share information) | For the Three Months Ended | ||||||||||
| March 31, 2022 | March 31, 2021 | ||||||||||
| Net Income Attributable to Common Shareholders | $ | 443.4 | $ | 366.1 | |||||||
| Weighted Average Common Shares Outstanding: | |||||||||||
| Basic | 345,156,346 | 343,678,243 | |||||||||
| Dilutive Effect | 504,787 | 656,446 | |||||||||
| Diluted | 345,661,133 | 344,334,689 | |||||||||
| Basic EPS | $ | 1.28 | $ | 1.07 | |||||||
| Diluted EPS | $ | 1.28 | $ | 1.06 | |||||||
32
15. REVENUES
The following tables present operating revenues disaggregated by revenue source:
| For the Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
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 | $ | 1,186.2 | $ | 556.8 | $ | — | $ | 28.2 | $ | — | $ | — | $ | 1,771.2 | |||||||||||||||||||||||||||
| Commercial | 661.3 | 257.6 | — | 14.6 | — | (1.1) | 932.4 | ||||||||||||||||||||||||||||||||||
| Industrial | 89.6 | 68.1 | — | 1.1 | — | (4.5) | 154.3 | ||||||||||||||||||||||||||||||||||
| Total Retail Tariff Sales Revenues | 1,937.1 | 882.5 | — | 43.9 | — | (5.6) | 2,857.9 | ||||||||||||||||||||||||||||||||||
| Wholesale Transmission Revenues | — | — | 446.2 | — | 24.4 | (364.7) | 105.9 | ||||||||||||||||||||||||||||||||||
| Wholesale Market Sales Revenues | 365.5 | 33.5 | — | 0.8 | — | — | 399.8 | ||||||||||||||||||||||||||||||||||
| Other Revenues from Contracts with Customers | 17.7 | 1.0 | 3.8 | 1.9 | 359.1 | (353.1) | 30.4 | ||||||||||||||||||||||||||||||||||
Amortization of/(Reserve for) Revenues Subject to Refund (1) | 58.4 | — | — | (0.4) | — | — | 58.0 | ||||||||||||||||||||||||||||||||||
| Total Revenues from Contracts with Customers | 2,378.7 | 917.0 | 450.0 | 46.2 | 383.5 | (723.4) | 3,452.0 | ||||||||||||||||||||||||||||||||||
| Alternative Revenue Programs | 4.8 | 10.2 | (15.0) | 2.2 | — | 13.6 | 15.8 | ||||||||||||||||||||||||||||||||||
Other Revenues (2) | 2.8 | 0.4 | 0.2 | 0.1 | — | — | 3.5 | ||||||||||||||||||||||||||||||||||
| Total Operating Revenues | $ | 2,386.3 | $ | 927.6 | $ | 435.2 | $ | 48.5 | $ | 383.5 | $ | (709.8) | $ | 3,471.3 | |||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
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 | $ | 1,066.0 | $ | 466.3 | $ | — | $ | 27.7 | $ | — | $ | — | $ | 1,560.0 | |||||||||||||||||||||||||||
| Commercial | 559.9 | 207.6 | — | 13.8 | — | (1.4) | 779.9 | ||||||||||||||||||||||||||||||||||
| Industrial | 83.0 | 55.9 | — | 1.0 | — | (3.5) | 136.4 | ||||||||||||||||||||||||||||||||||
| Total Retail Tariff Sales Revenues | 1,708.9 | 729.8 | — | 42.5 | — | (4.9) | 2,476.3 | ||||||||||||||||||||||||||||||||||
| Wholesale Transmission Revenues | — | — | 394.3 | — | 19.2 | (321.0) | 92.5 | ||||||||||||||||||||||||||||||||||
| Wholesale Market Sales Revenues | 149.1 | 26.4 | — | 0.8 | — | — | 176.3 | ||||||||||||||||||||||||||||||||||
| Other Revenues from Contracts with Customers | 18.2 | 1.3 | 3.4 | 1.2 | 323.8 | (321.3) | 26.6 | ||||||||||||||||||||||||||||||||||
| Total Revenues from Contracts with Customers | 1,876.2 | 757.5 | 397.7 | 44.5 | 343.0 | (647.2) | 2,771.7 | ||||||||||||||||||||||||||||||||||
| Alternative Revenue Programs | 23.0 | 22.8 | 2.7 | 1.8 | — | 2.2 | 52.5 | ||||||||||||||||||||||||||||||||||
Other Revenues (2) | 1.1 | 0.2 | 0.2 | 0.1 | — | — | 1.6 | ||||||||||||||||||||||||||||||||||
| Total Operating Revenues | $ | 1,900.3 | $ | 780.5 | $ | 400.6 | $ | 46.4 | $ | 343.0 | $ | (645.0) | $ | 2,825.8 | |||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | CL&P | NSTAR Electric | PSNH | CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||
| Revenues from Contracts with Customers | |||||||||||||||||||||||||||||||||||
| Retail Tariff Sales | |||||||||||||||||||||||||||||||||||
| Residential | $ | 599.1 | $ | 404.6 | $ | 182.5 | $ | 545.8 | $ | 362.4 | $ | 157.8 | |||||||||||||||||||||||
| Commercial | 242.2 | 331.3 | 88.4 | 214.2 | 268.3 | 77.8 | |||||||||||||||||||||||||||||
| Industrial | 33.5 | 34.1 | 22.0 | 36.7 | 24.6 | 21.7 | |||||||||||||||||||||||||||||
| Total Retail Tariff Sales Revenues | 874.8 | 770.0 | 292.9 | 796.7 | 655.3 | 257.3 | |||||||||||||||||||||||||||||
| Wholesale Transmission Revenues | 209.1 | 165.2 | 71.9 | 189.0 | 147.1 | 58.2 | |||||||||||||||||||||||||||||
| Wholesale Market Sales Revenues | 279.9 | 57.9 | 27.7 | 109.7 | 24.4 | 15.0 | |||||||||||||||||||||||||||||
| Other Revenues from Contracts with Customers | 7.9 | 11.6 | 2.6 | 7.3 | 11.7 | 3.2 | |||||||||||||||||||||||||||||
Amortization of Revenues Subject to Refund (1) | 58.4 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Total Revenues from Contracts with Customers | 1,430.1 | 1,004.7 | 395.1 | 1,102.7 | 838.5 | 333.7 | |||||||||||||||||||||||||||||
| Alternative Revenue Programs | 1.3 | (8.2) | (3.3) | 8.9 | 13.8 | 3.0 | |||||||||||||||||||||||||||||
Other Revenues (2) | 0.1 | 2.0 | 0.9 | 0.2 | 1.1 | — | |||||||||||||||||||||||||||||
| Eliminations | (145.7) | (135.3) | (53.3) | (124.5) | (116.4) | (43.3) | |||||||||||||||||||||||||||||
| Total Operating Revenues | $ | 1,285.8 | $ | 863.2 | $ | 339.4 | $ | 987.3 | $ | 737.0 | $ | 293.4 | |||||||||||||||||||||||
33
(1) Amortization of Revenues Subject to Refund within the Electric Distribution segment in the first quarter of 2022 represents customer credits being distributed to CL&P’s customers on retail electric bills as a result of the October 2021 CL&P settlement agreement and the 2021 civil penalty for non-compliance with storm performance standards. Total customer credits as a result of the 2021 settlement and civil penalty were $93.4 million. The settlement amount of $65 million was refunded over a two-month billing period from December 1, 2021 to January 31, 2022 and the civil penalty of $28.4 million is being refunded over a one year billing period, which began September 1, 2021.
(2) Other Revenues include certain fees charged to customers that are not considered revenue from contracts with customers. of $1.0 million (including $0.2 million at CL&P and $0.6 million at NSTAR Electric) and $1.6 million (including $0.2 million at CL&P and $1.1 million at NSTAR Electric) for the three months ended March 31, 2022 and 2021, respectively.
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 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) the results of other unregulated subsidiaries, which are not part of its core business, and 5) Eversource parent's equity ownership interests that are not consolidated, which primarily include the offshore wind business, a natural gas pipeline owned by Enbridge, Inc., and a renewable energy investment fund.
In the ordinary course of business, Yankee Gas, NSTAR Gas and EGMA purchase natural gas transmission services from the Enbridge, Inc. natural gas pipeline project described above. These affiliate transaction costs total $77.7 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 one 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 March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||||||||||||||||
| Operating Revenues | $ | 2,386.3 | $ | 927.6 | $ | 435.2 | $ | 48.5 | $ | 383.5 | $ | (709.8) | $ | 3,471.3 | |||||||||||||||||||||||||||
| Depreciation and Amortization | (351.6) | (51.9) | (81.9) | (12.3) | (30.2) | 1.6 | (526.3) | ||||||||||||||||||||||||||||||||||
| Other Operating Expenses | (1,845.6) | (657.3) | (129.3) | (27.1) | (331.4) | 708.8 | (2,281.9) | ||||||||||||||||||||||||||||||||||
| Operating Income | $ | 189.1 | $ | 218.4 | $ | 224.0 | $ | 9.1 | $ | 21.9 | $ | 0.6 | $ | 663.1 | |||||||||||||||||||||||||||
| Interest Expense | $ | (59.4) | $ | (15.8) | $ | (33.2) | $ | (8.2) | $ | (46.8) | $ | 10.1 | $ | (153.3) | |||||||||||||||||||||||||||
| Other Income, Net | 47.6 | 10.1 | 8.9 | 2.2 | 495.9 | (493.1) | 71.6 | ||||||||||||||||||||||||||||||||||
| Net Income Attributable to Common Shareholders | 140.9 | 164.0 | 148.5 | 3.7 | 468.7 | (482.4) | 443.4 | ||||||||||||||||||||||||||||||||||
| Cash Flows Used for Investments in Plant | 280.5 | 127.3 | 266.9 | 27.8 | 62.1 | — | 764.6 | ||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
Eversource (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | Electric Transmission | Water Distribution | Other | Eliminations | Total | ||||||||||||||||||||||||||||||||||
| Operating Revenues | $ | 1,900.3 | $ | 780.5 | $ | 400.6 | $ | 46.4 | $ | 343.0 | $ | (645.0) | $ | 2,825.8 | |||||||||||||||||||||||||||
| Depreciation and Amortization | (221.9) | (45.7) | (73.5) | (11.3) | (27.3) | 1.0 | (378.7) | ||||||||||||||||||||||||||||||||||
| Other Operating Expenses | (1,530.5) | (535.8) | (115.4) | (25.1) | (299.5) | 644.8 | (1,861.5) | ||||||||||||||||||||||||||||||||||
| Operating Income | $ | 147.9 | $ | 199.0 | $ | 211.7 | $ | 10.0 | $ | 16.2 | $ | 0.8 | $ | 585.6 | |||||||||||||||||||||||||||
| Interest Expense | $ | (53.3) | $ | (13.9) | $ | (32.7) | $ | (7.9) | $ | (41.6) | $ | 11.6 | $ | (137.8) | |||||||||||||||||||||||||||
| Other Income, Net | 20.7 | 3.9 | 5.5 | 1.0 | 424.1 | (421.0) | 34.2 | ||||||||||||||||||||||||||||||||||
| Net Income Attributable to Common Shareholders | 93.2 | 147.6 | 135.4 | 3.6 | 394.9 | (408.6) | 366.1 | ||||||||||||||||||||||||||||||||||
| Cash Flows Used for Investments in Plant | 256.6 | 131.8 | 225.2 | 27.6 | 47.8 | — | 689.0 | ||||||||||||||||||||||||||||||||||
34
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 March 31, 2022 | $ | 25,883.2 | $ | 7,329.7 | $ | 12,757.8 | $ | 2,572.1 | $ | 23,394.3 | $ | (22,647.9) | $ | 49,289.2 | |||||||||||||||||||||||||||
| As of December 31, 2021 | 25,411.2 | 7,215.9 | 12,377.8 | 2,551.1 | 22,674.7 | (21,738.6) | 48,492.1 | ||||||||||||||||||||||||||||||||||
35
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, as well as the Eversource 2021 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 (non-GAAP) that is 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 non-GAAP financial measures referencing our 2022 earnings and EPS excluding certain acquisition and transition costs and our 2021 earnings and EPS excluding charges at CL&P related to an October 2021 settlement agreement that included credits to customers and funding of various customer assistance initiatives and a 2021 storm performance penalty imposed on CL&P by the PURA.
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 2022 and 2021 results without including these items. This information is among the primary indicators we use as a basis for evaluating performance and planning and forecasting of future periods. We believe the impacts of acquisition and transition costs, the CL&P October 2021 settlement agreement, and the 2021 storm performance penalty imposed on CL&P by the PURA are not indicative of our ongoing costs and performance. We view these charges as not directly related to the ongoing operations of the business and therefore not an indicator of baseline operating performance. Due to the nature and significance of the effect of these items on Net Income Attributable to Common Shareholders and EPS, 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 alternatives to reported Net Income Attributable to Common Shareholders or EPS determined in accordance with GAAP as indicators of operating performance.
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 involve risks and uncertainties that may cause actual results or outcomes to differ materially from those included in our forward-looking statements. 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 may cause our actual results or outcomes 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, including any new or emerging variants, 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,
• 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,
• contamination of, or disruption in, our water supplies,
• changes in levels or timing of capital expenditures,
• 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.
36
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 2021 combined Annual Report on Form 10-K. This combined Quarterly Report on Form 10-Q and Eversource's 2021 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
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, NSTAR Gas and Eversource Gas Company of Massachusetts (EGMA) (natural gas utilities) and Aquarion (water utilities). Eversource is organized into the electric distribution, electric transmission, natural gas distribution, and water distribution reportable segments.
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 $443.4 million, or $1.28 per share, in the first quarter of 2022, compared with $366.1 million, or $1.06 per share, in the first quarter of 2021.
•Our first quarter of 2022 results include after-tax acquisition and transition costs of $5.3 million, or $0.02 per share, recorded at Eversource parent. Our first quarter of 2021 results include an after-tax charge at CL&P of $24.1 million, or $0.07 per share, recorded within the electric distribution segment resulting from a PURA assessment as a result of CL&P’s preparation for and response to Tropical Storm Isaias in August 2020. Our first quarter of 2021 results also include after-tax acquisition and transition costs of $6.2 million, or $0.02 per share, recorded at Eversource parent. Excluding those costs, our non-GAAP earnings were $448.7 million, or $1.30 per share, in the first quarter of 2022, compared with $396.4 million, or $1.15 per share, in the first quarter of 2021.
•We reaffirmed our projection of our long-term EPS growth rate through 2026 from our regulated utility businesses in the upper half of the 5 to 7 percent range. We estimate to earn within the 2022 non-GAAP earnings guidance range of between $4.00 per share and $4.17 per share, which excludes the impact of acquisition and transition costs.
Liquidity:
•Cash flows provided by operating activities totaled $371.9 million in the first quarter of 2022, compared with $411.4 million in the first quarter of 2021. Investments in property, plant and equipment totaled $764.6 million in the first quarter of 2022, compared with $689.0 million in the first quarter of 2021.
•Cash totaled $46.2 million as of March 31, 2022, compared with $66.8 million as of December 31, 2021. Our available borrowing capacity under our commercial paper programs totaled $981.2 million as of March 31, 2022. In the first quarter of 2022, we issued $1.30 billion of new long-term debt and we repaid $770 million of long-term debt.
•On May 4, 2022, our Board of Trustees approved a common share dividend payment of $0.6375 per share, payable on June 30, 2022 to shareholders of record as of May 19, 2022. On February 2, 2022, our Board of Trustees approved a common share dividend payment of $0.6375 per share, paid on March 31, 2022 to shareholders of record as of March 3, 2022.
Strategic Items:
•On May 4, 2022, we announced that we have initiated a strategic review of our offshore wind investment portfolio. As part of that review, we will explore strategic alternatives that could result in a potential sale of all, or part, of our 50 percent interest in our offshore wind partnership with Ørsted. We expect to complete this review during 2022. If the recommended path forward following the strategic review is a sale of all, or part, of our interest in the partnership, we expect potential proceeds from such transaction would likely be used to support our regulated investments in strengthening, modernizing and decarbonizing our regulated energy and water delivery systems. As the strategic review proceeds, we remain committed to continue providing oversight of the siting and construction of onshore elements of our South Fork Wind, Revolution Wind and Sunrise Wind offshore wind projects.
37
•South Fork Wind received all required approvals to start construction and the project entered the construction phase in early 2022. Site preparation and onshore activities for the project’s underground onshore transmission line and construction of the onshore interconnection facility located in East Hampton, New York are underway.
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 March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (Millions of Dollars, Except Per Share Amounts) | Amount | Per Share | Amount | Per Share | |||||||||||||||||||
| Net Income Attributable to Common Shareholders (GAAP) | $ | 443.4 | $ | 1.28 | $ | 366.1 | $ | 1.06 | |||||||||||||||
| Regulated Companies (Non-GAAP) | $ | 457.1 | $ | 1.32 | $ | 403.9 | $ | 1.17 | |||||||||||||||
| Eversource Parent and Other Companies (Non-GAAP) | (8.4) | (0.02) | (7.5) | (0.02) | |||||||||||||||||||
| Non-GAAP Earnings | $ | 448.7 | $ | 1.30 | $ | 396.4 | $ | 1.15 | |||||||||||||||
CL&P Storm Performance Penalty (after-tax) (1) | — | — | (24.1) | (0.07) | |||||||||||||||||||
Acquisition and Transition Costs (after-tax) (2) | (5.3) | (0.02) | (6.2) | (0.02) | |||||||||||||||||||
| Net Income Attributable to Common Shareholders (GAAP) | $ | 443.4 | $ | 1.28 | $ | 366.1 | $ | 1.06 | |||||||||||||||
(1) The 2021 after-tax cost relates to a charge recorded at CL&P as a result of the April 28, 2021 PURA decision and May 6, 2021 PURA notice of violation, which included a $28.4 million penalty for storm performance results and is currently being provided as credits to customer bills and a $1.6 million fine to the State of Connecticut’s general fund. The $1.6 million fine was subsequently reduced to $0.2 million in PURA’s July 14, 2021 decision. As a result of the October 1, 2021 CL&P settlement agreement, CL&P agreed to withdraw its pending appeals related to the storm performance penalty imposed in PURA’s April 28, 2021 and July 14, 2021 decisions. Management views the CL&P storm performance penalty and the subsequent October 1, 2021 settlement agreement impacts collectively, and as not directly related to the ongoing operations of the business and therefore not an indicator of baseline operating performance. As a result, beginning in the third quarter of 2021, the storm performance penalty was presented as a non-GAAP adjustment to net income. The first quarter of 2021 non-GAAP reconciliation has been recast to conform to this presentation.
(2) The after-tax costs are for the continuing transition of systems as a result of our purchase of the assets of CMA on October 9, 2020 and integrating the CMA assets onto Eversource’s systems. The after-tax costs also include costs associated with our water business acquisitions.
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 March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (Millions of Dollars, Except Per Share Amounts) | Amount | Per Share | Amount | Per Share | |||||||||||||||||||
| Net Income - Regulated Companies (GAAP) | $ | 457.1 | $ | 1.32 | $ | 379.8 | $ | 1.10 | |||||||||||||||
| Electric Distribution, excluding CL&P Storm Performance Penalty (Non-GAAP) | $ | 140.9 | $ | 0.41 | $ | 117.3 | $ | 0.34 | |||||||||||||||
| Electric Transmission | 148.5 | 0.43 | 135.4 | 0.39 | |||||||||||||||||||
| Natural Gas Distribution | 164.0 | 0.47 | 147.6 | 0.43 | |||||||||||||||||||
| Water Distribution | 3.7 | 0.01 | 3.6 | 0.01 | |||||||||||||||||||
| Net Income - Regulated Companies (Non-GAAP) | $ | 457.1 | $ | 1.32 | $ | 403.9 | $ | 1.17 | |||||||||||||||
| CL&P Storm Performance Penalty (after-tax) | — | — | (24.1) | (0.07) | |||||||||||||||||||
| Net Income - Regulated Companies (GAAP) | $ | 457.1 | $ | 1.32 | $ | 379.8 | $ | 1.10 | |||||||||||||||
Our electric distribution segment earnings increased $47.7 million in the first quarter of 2022, as compared to the first quarter of 2021, due primarily to the absence in 2022 of the $30.0 million pre-tax charge to earnings at CL&P for a storm performance penalty imposed by PURA as a result of CL&P’s preparation for and response to Tropical Storm Isaias in August 2020 that was recorded in 2021. The after-tax impact of the CL&P storm performance penalty was $24.1 million, or $0.07 per share. Excluding that charge, electric distribution segment earnings increased $23.6 million due primarily to base distribution rate increases at NSTAR Electric effective January 1, 2022 and at PSNH effective August 1, 2021, higher earnings from CL&P's capital tracking mechanism due to increased electric system improvements, and lower pension plan expense in Connecticut and New Hampshire. Those earnings increases were partially offset by higher operations and maintenance expense driven primarily by higher storm costs, higher depreciation, higher property tax expense and higher interest expense. Our Massachusetts utilities recover qualified pension and PBOP expenses related to their distribution operations through a rate reconciling mechanism that fully tracks the change in net pension and PBOP expenses each year, therefore the change in their pension expense does not impact earnings.
38
Our electric transmission segment earnings increased $13.1 million in the first quarter of 2022, as compared to the first quarter of 2021, due primarily to a higher transmission rate base as a result of our continued investment in our transmission infrastructure.
Our natural gas distribution segment earnings increased $16.4 million in the first quarter of 2022, as compared to the first quarter of 2021, due primarily to base distribution rate increases at EGMA and NSTAR Gas effective November 1, 2021, higher earnings from capital tracking mechanisms due to continued investments in natural gas infrastructure, and lower pension plan expense at Yankee Gas. Those earnings increases were partially offset by higher operations and maintenance expense, higher property tax expense, higher interest expense, and higher depreciation expense. Our natural gas companies' decoupled rate structure is seasonally structured and provides greater earnings in the winter heating months in correlation to higher customer usage. Therefore, the majority of the impact of the EGMA and NSTAR Gas annual base distribution rate increases have been recognized by the end of the first quarter of 2022.
Our water distribution segment earnings increased $0.1 million in the first quarter of 2022, as compared to the first quarter of 2021.
Eversource Parent and Other Companies: Eversource parent and other companies’ losses were flat in the first quarter of 2022, as compared to the first quarter of 2021. Higher interest expense was offset by a higher return at Eversource Service as a result of increased investments in property, plant and equipment and an after-tax decrease of $0.9 million in acquisition and transition costs of EGMA recorded at Eversource parent.
Impact of COVID-19
The current and expected future financial impacts of COVID-19 as it relates to our businesses primarily relate to collectability of customer receivables and customer payment plans and the outcome of future proceedings before our state regulatory commissions to recover our incremental costs associated with COVID-19.
As of March 31, 2022, our allowance for uncollectible customer receivable balance of $432.2 million, of which $225.5 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. As of March 31, 2022 and December 31, 2021, the total amount incurred as a result of COVID-19 included in the allowance for uncollectible accounts was $58.5 million and $55.3 million at Eversource, $20.4 million and $23.9 million at CL&P, and $9.0 million and $9.0 million at NSTAR Electric, respectively. At our Connecticut and Massachusetts utilities, the COVID-19 related uncollectible amounts were deferred either as incremental regulatory costs or deferred through existing regulatory tracking mechanisms that recover uncollectible energy supply costs, as management believes it is probable that these costs will ultimately be recovered from customers in future rates. No COVID-19 related uncollectible amounts were deferred at PSNH as a result of a July 2021 NHPUC order. Based on the status of our COVID-19 regulatory dockets, and policies and practices in the jurisdictions in which we operate, we believe our state regulatory commissions in Connecticut and Massachusetts will allow us to recover our incremental uncollectible customer receivable costs associated with COVID-19.
As of March 31, 2022 and December 31, 2021, a total of $35.0 million and $33.0 million, respectively, of incremental COVID-19 related non-tracked uncollectible costs were recorded on the balance sheets.
Liquidity
Sources and Uses of Cash: Eversource’s regulated business is capital intensive and requires considerable capital resources. Eversource’s regulated companies’ capital resources are provided by cash flows generated from operations, short-term borrowings, long-term debt issuances, capital contributions from Eversource parent, and existing cash, and are used to fund their liquidity and capital requirements. Eversource’s regulated companies typically maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. Short-term borrowings are also used as a bridge to long-term debt financings. The levels of short-term borrowing may vary significantly over the course of the year due to the impact of fluctuations in cash flows from operations, dividends paid, capital contributions received and the timing of long-term debt financings.
Eversource, CL&P, NSTAR Electric and PSNH each uses its available capital resources to fund its respective construction expenditures, meet debt requirements, pay operating costs, including storm-related costs, pay dividends, and fund other corporate obligations, such as pension contributions. Eversource's regulated companies recover their electric, natural gas and water distribution construction expenditures as the related project costs are depreciated over the life of the assets. This impacts the timing of the revenue stream designed to fully recover the total investment plus a return on the equity and debt used to finance the investments. Eversource's regulated companies spend a significant amount of cash on capital improvements and construction projects that have a long-term return on investment and recovery period. In addition, Eversource uses its capital resources to fund investments in its offshore wind business, which are recognized as long-term assets.
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.
Cash totaled $46.2 million as of March 31, 2022, compared with $66.8 million as of December 31, 2021.
Short-Term Debt - Commercial Paper Programs and Credit Agreements: Eversource parent has a $2.00 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, Yankee Gas, EGMA and Aquarion Water Company of Connecticut are parties to a five-year $2.00 billion revolving credit facility, which terminates on October 15, 2026. This revolving credit facility serves to backstop Eversource parent's $2.00 billion commercial paper program.
39
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 October 15, 2026. 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 | |||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||
| (Millions of Dollars) | |||||||||||||||||||||||||||||||||||
| Eversource Parent Commercial Paper Program | $ | 1,393.8 | $ | 1,343.0 | $ | 606.2 | $ | 657.0 | 0.93 | % | 0.31 | % | |||||||||||||||||||||||
| NSTAR Electric Commercial Paper Program | 275.0 | 162.5 | 375.0 | 487.5 | 0.43 | % | 0.14 | % | |||||||||||||||||||||||||||
There were no borrowings outstanding on the revolving credit facilities as of March 31, 2022 or December 31, 2021.
CL&P and PSNH have uncommitted line of credit agreements totaling $450 million and $300 million, respectively, which will expire on May 12, 2022. There are no borrowings outstanding on either the CL&P or PSNH uncommitted line of credit agreements as of March 31, 2022.
Amounts outstanding under the commercial paper programs are included in Notes Payable and 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.
Intercompany Borrowings: Eversource parent uses its available capital resources to provide loans to its subsidiaries to assist in meeting their short-term borrowing needs. 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 March 31, 2022, there were intercompany loans from Eversource parent to PSNH of $196.4 million and to a subsidiary of NSTAR Electric of $4.0 million. As of December 31, 2021, there were intercompany loans from Eversource parent to PSNH of $110.6 million. Intercompany loans from Eversource parent are included in Notes Payable to Eversource Parent and classified in current liabilities on the respective subsidiary's balance sheets.
Long-Term Debt Issuances and Repayments: 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 | |||||||||||||||||||
| Eversource Parent 2.90% Series V Senior Notes | $ | 650.0 | February 2022 | March 2027 | Repaid Series K Senior Notes at maturity and short-term debt | ||||||||||||||||||
| Eversource Parent 3.38% Series W Senior Notes | 650.0 | February 2022 | March 2032 | Repaid Series K Senior Notes at maturity and short-term debt | |||||||||||||||||||
| Eversource Parent 2.75% Series K Senior Notes | (750.0) | March 2022 | March 2022 | Paid at maturity | |||||||||||||||||||
| Yankee Gas 8.48% Series B First Mortgage Bonds | (20.0) | March 2022 | March 2022 | Paid at maturity | |||||||||||||||||||
Rate Reduction Bonds: PSNH's RRB payments consist of principal and interest and are paid semi-annually. PSNH paid $21.6 million of RRB principal payments and $9.0 million of interest payments in the first quarter of 2022, and paid $21.6 million of RRB principal payments and $9.6 million of interest payments in the first quarter of 2021.
Cash Flows: Cash flows from operating activities primarily result from the transmission and distribution of electricity, and the distribution of natural gas and water. Cash flows provided by operating activities totaled $371.9 million in the first quarter of 2022, compared with $411.4 million in the first quarter of 2021. Changes in Eversource’s cash flows from operations were generally consistent with changes in its results of operations, as adjusted by changes in working capital in the normal course of business and as further discussed. Operating cash flows were unfavorably impacted by the timing of cash collections on our accounts receivable, an increase in regulatory under-recoveries driven by the timing of collections for regulatory tracking mechanisms and an increase in cash payments for storm costs, customer credits being distributed to CL&P’s customers in the first quarter of 2022 as a result of the October 2021 settlement agreement and the 2021 storm performance penalty for its response to Tropical Storm Isaias, a $22.3 million increase in cost of removal expenditures, and an increase in income tax payments of $7.2 million made in 2022, as compared to 2021. These unfavorable impacts were partially offset by the timing of cash payments made on our accounts payable, the timing of other working capital items, and a $5.0 million decrease in pension contributions made in 2022, as compared to 2021.
On May 4, 2022, our Board of Trustees approved a common share dividend payment of $0.6375 per share, payable on June 30, 2022 to shareholders of record as of May 19, 2022. On February 2, 2022, our Board of Trustees approved a common share dividend payment of $0.6375 per share, paid on March 31, 2022 to shareholders of record as of March 3, 2022. In the first quarter of 2022, we paid cash dividends of $213.9 million and issued non-cash dividends of $5.9 million in the form of treasury shares, totaling dividends of $219.8 million. In the first quarter of 2021, we paid cash dividends of $201.0 million and issued non-cash dividends of $5.9 million in the form of treasury shares, totaling dividends of $206.9 million.
Eversource issues 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 2022, CL&P, NSTAR Electric and PSNH paid $73.1 million, $71.9 million, and $26.0 million, respectively, in common stock dividends to Eversource parent.
40
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 income/expense. In the first quarter of 2022, investments for Eversource, CL&P, NSTAR Electric, and PSNH were $764.6 million, $205.3 million, $234.1 million, and $107.9 million, respectively. Capital expenditures were primarily for continuing projects to maintain and improve infrastructure and operations, including enhancing reliability to the transmission and distribution systems.
Contractual Obligations: Our cash requirements from contractual obligations were reported in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of the Eversource 2021 Form 10-K. See Note 9B, "Commitments and Contingencies – Long-Term Contractual Arrangements," to the financial statements for discussion of material changes to our cash requirements from contractual obligations. Other than as described in the footnote, there have been no material changes to our cash requirements from contractual obligations and payment schedules previously disclosed in our 2021 Form 10-K.
Credit Ratings: On April 8, 2022, Fitch changed CL&P’s outlook from negative to 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 income/expense (all of which are non-cash factors), totaled $685.6 million in the first quarter of 2022, compared to $620.7 million in the first quarter of 2021. These amounts included $53.7 million and $47.8 million in the first quarter of 2022 and 2021, 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 increased by $43.3 million in the first quarter of 2022, as compared to the first quarter of 2021. A summary of electric transmission capital expenditures by company is as follows:
| For the Three Months Ended March 31, | |||||||||||
| (Millions of Dollars) | 2022 | 2021 | |||||||||
| CL&P | $ | 93.8 | $ | 81.3 | |||||||
| NSTAR Electric | 83.4 | 82.0 | |||||||||
| PSNH | 53.3 | 23.9 | |||||||||
| Total Electric Transmission Segment | $ | 230.5 | $ | 187.2 | |||||||
Our transmission projects are designed to improve the reliability of the electric grid, meet customer demand for power, strengthen the electric grid's resilience against extreme weather and other safety and security threats, and increase access to clean power generation from renewable sources, such as solar and offshore wind. In Connecticut, Massachusetts and New Hampshire, our transmission projects include transmission line upgrades, the installation of new transmission lines, and substation enhancements.
Our transmission projects in Massachusetts include electric transmission upgrades in the greater Boston metropolitan area. Two of these upgrades, the Mystic-Woburn and the Wakefield-Woburn reliability projects, are under construction and are expected to be placed in service by the second quarter of 2023. Construction on the last remaining upgrade, the Sudbury-Hudson Reliability Project, is expected to commence in the second quarter of 2022. We spent $9.5 million during the first quarter of 2022 and we expect to make additional capital expenditures of approximately $160 million on these remaining transmission upgrades. There are also several transmission projects underway in southeastern Massachusetts, including Cape Cod, required to reinforce the Southeastern Massachusetts transmission system and bring the system into compliance with applicable national and regional reliability standards. We spent $6.5 million during the first quarter of 2022 and we expect to make additional capital expenditures of approximately $130 million on these transmission upgrades.
41
Distribution Business: A summary of distribution capital expenditures is as follows:
| For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | CL&P | NSTAR Electric | PSNH | Total Electric | Natural Gas | Water | Total | ||||||||||||||||||||||||||||||||||
| 2022 | |||||||||||||||||||||||||||||||||||||||||
| Basic Business | $ | 59.3 | $ | 27.3 | $ | 13.5 | $ | 100.1 | $ | 54.9 | $ | 1.8 | $ | 156.8 | |||||||||||||||||||||||||||
| Aging Infrastructure | 34.2 | 48.6 | 12.4 | 95.2 | 61.2 | 23.6 | 180.0 | ||||||||||||||||||||||||||||||||||
| Load Growth and Other | 14.0 | 36.4 | 5.2 | 55.6 | 8.8 | 0.1 | 64.5 | ||||||||||||||||||||||||||||||||||
| Total Distribution | 107.5 | 112.3 | 31.1 | 250.9 | 124.9 | 25.5 | 401.3 | ||||||||||||||||||||||||||||||||||
| Solar | — | 0.1 | — | 0.1 | — | — | 0.1 | ||||||||||||||||||||||||||||||||||
| Total | $ | 107.5 | $ | 112.4 | $ | 31.1 | $ | 251.0 | $ | 124.9 | $ | 25.5 | $ | 401.4 | |||||||||||||||||||||||||||
| 2021 | |||||||||||||||||||||||||||||||||||||||||
| Basic Business | $ | 45.0 | $ | 31.3 | $ | 13.6 | $ | 89.9 | $ | 25.4 | $ | 1.7 | $ | 117.0 | |||||||||||||||||||||||||||
| Aging Infrastructure | 34.1 | 46.1 | 19.5 | 99.7 | 77.2 | 16.7 | 193.6 | ||||||||||||||||||||||||||||||||||
| Load Growth and Other | 20.3 | 35.3 | 7.7 | 63.3 | 12.8 | 0.1 | 76.2 | ||||||||||||||||||||||||||||||||||
| Total Distribution | 99.4 | 112.7 | 40.8 | 252.9 | 115.4 | 18.5 | 386.8 | ||||||||||||||||||||||||||||||||||
| Solar | — | (1.1) | — | (1.1) | — | — | (1.1) | ||||||||||||||||||||||||||||||||||
| Total | $ | 99.4 | $ | 111.6 | $ | 40.8 | $ | 251.8 | $ | 115.4 | $ | 18.5 | $ | 385.7 | |||||||||||||||||||||||||||
For the electric distribution business, basic business includes the purchase of meters, tools, vehicles, information technology, transformer replacements, equipment facilities, and the relocation of plant. Aging infrastructure relates to reliability and the replacement of overhead lines, plant substations, underground cable replacement, and equipment failures. Load growth 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 of acquisitions, installation of new services, and interconnections of systems.
Pending Acquisition of Torrington Water Company: On March 7, 2022, Aquarion and The Torrington Water Company (TWC) entered into a definitive agreement pursuant to which Aquarion would acquire all outstanding shares of TWC. TWC provides regulated water service to approximately 10,100 customers in Connecticut. The acquisition will be structured as a stock-for-stock exchange and Eversource will issue between 885,000 and 925,000 common shares at closing. The transaction requires approval from the PURA and is expected to close by the end of 2022.
Offshore Wind Business:
Strategic Review of Offshore Wind Investments: On May 4, 2022, we announced that we have initiated a strategic review of our offshore wind investment portfolio. As part of that review, we will explore strategic alternatives that could result in a potential sale of all, or part, of our 50 percent interest in our offshore wind partnership with Ørsted. We expect to complete this review during 2022. If the recommended path forward following the strategic review is a sale of all, or part, of our interest in the partnership, we expect potential proceeds from such transaction would likely be used to support our regulated investments in strengthening, modernizing and decarbonizing our regulated energy and water delivery systems. As the strategic review proceeds, we remain committed to continue providing oversight of the siting and construction of onshore elements of our South Fork Wind, Revolution Wind and Sunrise Wind offshore wind projects.
Our offshore wind business includes a 50 percent ownership interest in North East Offshore, which holds PPAs and contracts for the Revolution Wind, South Fork Wind and Sunrise Wind projects, as well as undeveloped offshore lease area. Our offshore wind projects are being developed and constructed through a joint and equal partnership with Ørsted.
The offshore leases include a 257 square-mile ocean lease off the coasts of Massachusetts and Rhode Island and a separate, adjacent 300-square-mile ocean lease located approximately 25 miles south of the coast of Massachusetts. In aggregate, these ocean lease sites jointly-owned by Eversource and Ørsted could eventually develop at least 4,000 MW of clean, renewable offshore wind energy.
As of March 31, 2022 and December 31, 2021, Eversource's total equity investment balance in its offshore wind business was $1.33 billion and $1.21 billion, respectively. This equity investment includes capital expenditures for the three projects, as well as capitalized costs related to future development, acquisition costs of offshore lease areas, and capitalized interest.
42
Contracts, Permitting and Construction of Offshore Wind Projects: 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 | $98.43 - $99.50 | 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 | Approved | ||||||||||||||
| Sunrise Wind | New York (NYSERDA) | 924 | 25 | $110.37 (1) | Fixed price contract; no price escalation | Approved | ||||||||||||||
(1) Index Offshore Wind Renewable Energy Certificate (OREC) strike price.
Our offshore wind projects are subject to receipt of federal, state and local approvals necessary to construct and operate the projects. The federal permitting process is led by BOEM, and state approvals are required from New York, Rhode Island and Massachusetts. Significant delays in the siting and permitting process resulting from the timeline for obtaining approval from BOEM and the state and local agencies could adversely impact the timing of these projects' in-service dates.
Federal Siting and Permitting Process: The federal siting and permitting process for each of our offshore wind projects commence with the filing of a Construction and Operations Plan (COP) application with BOEM. The first major milestone in the BOEM review process is an issuance of a Notice of Intent (NOI) to complete an Environmental Impact Statement (EIS). BOEM then provides a final review schedule for the project’s COP approval. BOEM conducts environmental and technical reviews of the COP. The EIS assesses the environmental, social, and economic impacts of constructing the project and recommends measures to minimize impacts. The Final EIS will inform BOEM in deciding whether to approve the project or to approve with modifications and BOEM will then issue its Record of Decision. BOEM issues its final approval of the COP following the Record of Decision.
Revolution Wind and Sunrise Wind filed their COP applications with BOEM in March 2020 and September 2020, respectively. On April 30, 2021, Revolution Wind received BOEM’s NOI to prepare an EIS for the review of the COP submitted by Revolution Wind. For Revolution Wind, a final EIS is expected in the first quarter of 2023, the Record of Decision in the second quarter of 2023, and final approval is expected in the third quarter of 2023. On August 31, 2021, Sunrise Wind received BOEM’s NOI to prepare an EIS for the review of the COP. For Sunrise Wind, a final EIS and Record of Decision are expected in the third quarter of 2023, and final approval is expected in the fourth quarter of 2023.
South Fork Wind, Revolution Wind and Sunrise Wind are each designated as a “Covered Project” pursuant to Title 41 of the Fixing 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 projects’ permitting timelines.
State and Local Siting and Permitting Process: State permitting applications in Rhode Island for Revolution Wind and in New York for Sunrise Wind were filed in December 2020. The Revolution Wind state siting application was deemed complete on January 22, 2021, and the preliminary hearing was completed on March 22, 2021. On April 26, 2021, the Rhode Island Energy Facilities Siting Board issued a Preliminary Decision and Order on scheduling with Advisory Opinions for local and state agencies. All advisory opinions were received in August, in accordance with the expedited schedule, and evidentiary hearings began in October 2021 and are ongoing. The Sunrise Wind state siting application was deemed complete on July 1, 2021, initiating the formal review process, and Sunrise Wind filed a formal notice of intent to commence settlement negotiations towards a Joint Proposal on August 31, 2021. Settlement negotiations are ongoing.
Construction Process - South Fork Wind: South Fork Wind received all required approvals to start construction and the project entered the construction phase in early 2022. Site preparation and onshore activities for the project’s underground onshore transmission line and construction of the onshore interconnection facility located in East Hampton, New York are underway. Offshore installation, including the project’s monopile foundations, 11-megawatt wind turbines, and offshore substation, is expected to occur in 2023. Construction-related purchase agreements with third-party contractors and materials contracts have largely been secured. South Fork Wind faces several challenges and appeals of New York State and federal agency approvals, however it believes it is probable it will be able to overcome these challenges.
Projected In-Service Dates: We expect the South Fork Wind project to be in-service by the end of 2023. For Revolution Wind and Sunrise Wind, based on the BOEM permit schedule included in each respective NOI outlining when BOEM will complete its review of the COP, we currently expect in-service dates in 2025 for both projects.
Projected Investments: For Revolution Wind and Sunrise Wind, we are preparing our final project designs and advancing the appropriate federal, state, and local siting and permitting processes along with our offshore wind partner, Ørsted. Construction of South Fork Wind is underway. Construction-related purchase agreements with third-party contractors and materials contracts are approximately 80 percent secured. Subject to advancing our final project designs and federal, state and local permitting processes and construction schedules, we currently expect to make investments in our offshore wind business between $0.9 billion and $1.0 billion in 2022 and expect to make investments for our three projects in total between $3.0 billion and $3.6 billion from 2023 through 2026. These estimates assume that the three projects are completed and are in-service by the end of 2025, as planned. These projected investments could be impacted by the strategic review of our offshore wind investment portfolio discussed above.
43
FERC Regulatory Matters
FERC ROE Complaints: Four separate complaints were 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). 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) 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).
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 both March 31, 2022 and December 31, 2021. 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 both March 31, 2022 and December 31, 2021.
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. 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 illustrative calculations indicated that for the first complaint period, for the NETOs, which FERC concludes are of average financial risk, the preliminary just and reasonable base ROE is 10.41 percent and the preliminary incentive cap on total ROE is 13.08 percent.
If the results of the 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. 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 Opinion No. 569 affecting the two pending transmission ROE complaints against the Midcontinent ISO (MISO) transmission owners, in which FERC adopted a new methodology for determining base ROEs. Various parties sought rehearing. On December 23, 2019, the NETOs filed supplementary materials in the NETOs' four pending cases to respond to this new methodology because of the uncertainty of the applicability to the NETOs' cases.
On May 21, 2020, the FERC issued its order in Opinion No. 569-A on the rehearing of the MISO transmission owners' cases, in which FERC again changed its methodology for determining the MISO transmission owners' base ROEs. On November 19, 2020, the FERC issued Opinion No. 569-B denying rehearing of Opinion No. 569-A and reaffirmed the methodology previously adopted in Opinion No. 569-A. The new methodology differs significantly from the methodology proposed by FERC in its October 16, 2018 order to determine the NETOs' base ROEs in its four pending cases. FERC Opinion Nos 569-A and 569-B are currently under appeal with the Court.
Given the significant uncertainty regarding the applicability of the FERC opinions in the MISO transmission owners' two complaint cases to the NETOs' pending four complaint cases, Eversource concluded that there is no reasonable basis for a change to the reserve or recognized ROEs for any of the complaint periods at this time. As well, Eversource cannot reasonably estimate a range of loss for any of the four complaint proceedings at this time.
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.
A change of 10 basis points 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. Prospectively from the date of a final FERC order implementing a new base ROE, based off of estimated 2021 rate base, a change of 10 basis points to the base ROE would impact Eversource’s future annual after-tax earnings by approximately $5 million per year, and will increase slightly over time as we continue to invest in our transmission infrastructure.
FERC Notice of Inquiry on ROE: On March 21, 2019, FERC issued a Notice of Inquiry (NOI) seeking comments from all stakeholders on FERC's policies for evaluating ROEs for electric public utilities, and interstate natural gas and oil pipelines. On June 26, 2019, the NETOs jointly filed comments supporting the methodology established in the FERC’s October 16, 2018 order with minor enhancements going forward. The NETOs jointly filed reply comments in the FERC ROE NOI on July 26, 2019. On May 12, 2020, the NETOs filed supplemental comments in the NOI ROE docket. At this time, Eversource cannot predict how this proceeding will affect its transmission ROEs.
44
FERC Notice of Inquiry and Proposed Rulemaking on Transmission Incentives: On March 21, 2019, FERC issued an NOI seeking comments on FERC's policies for implementing electric transmission incentives. On June 26, 2019, Eversource filed comments 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. Eversource filed reply comments on August 26, 2019. On 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 load patterns. FERC proposes to grant transmission incentives based on measurable project economics and reliability benefits to consumers rather than its current project risks and challenges framework. On July 1, 2020, Eversource filed comments generally supporting the NOPR.
On April 15, 2021, FERC issued a Supplemental NOPR that proposes to eliminate the existing 50 basis point return on equity for utilities that have been participating in a regional transmission organization (RTO ROE incentive) for more than three years. On June 25, 2021, the NETOs jointly filed comments strongly opposing the Commission’s proposal. On July 26, 2021, the NETOs filed Supplemental NOPR reply comments responding to various parties advocating for the elimination of the RTO Adder. If the FERC issues a final order eliminating the RTO ROE incentive as proposed in the Supplemental NOPR, the estimated annual impact (using 2021 estimated rate base) on Eversource's after-tax earnings is approximately $17 million. The Supplemental NOPR contemplates an effective date 30 days from the final order.
At this time, Eversource cannot predict the ultimate outcome of these proceedings, including possible appellate review, and the resulting impact on its transmission incentives.
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 quarter of 2022, 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 2021 Form 10-K.
Connecticut:
CL&P Advanced Metering Infrastructure Filing: On July 31, 2020, CL&P submitted to PURA its proposed $512 million Advanced Metering Infrastructure investment and implementation plan. On August 17, 2021, PURA issued a Notice of Request for Amended EDC Advanced Metering Infrastructure Proposal. CL&P submitted an Amended Proposal in response to this request on November 8, 2021 with an updated schedule for the years 2022 through 2028, which included additional information as required by the PURA. As required, the plan includes a full deployment of advanced metering functionality and a composite business case in support of the Advanced Metering Infrastructure plan. The procedural schedule includes briefs that were filed on April 29, 2022.
Yankee Gas System Expansion Plan Order: In September 2021, PURA undertook a review of Connecticut natural gas companies’ infrastructure system expansion plan (SEP) to determine if the SEP continues to be in the best interest of the state’s comprehensive energy strategy. On April 27, 2022, PURA issued an order for the immediate winding down of the SEP by (1) ending the enrollment of new customers in the SEP program and permitting only a specific group of potential customers who have executed a services agreement with a natural gas company on or before a specified date to qualify for incentives under the current SEP; (2) directing all surplus non-firm margin to be deferred as a regulatory liability and applied to rate base in a future rate proceeding; and (3) directing the natural gas companies to cease all outbound and passive marketing regarding the SEP. Eversource is currently evaluating the prospective impact of this proceeding, however, does not believe the impact will be material to its future financial position, results of operations and cash flows.
Massachusetts:
NSTAR Electric Distribution Rates: As part of an inflation-based mechanism, NSTAR Electric submitted its fourth annual Performance Based Rate Adjustment filing on November 10, 2021 and on December 22, 2021, the DPU approved a $36.8 million increase to base distribution rates effective January 1, 2022.
NSTAR Electric Distribution Rate Case: On January 14, 2022, NSTAR Electric filed an application with the DPU for approval of an $89 million increase in base distribution rates, with new rates anticipated to be effective January 1, 2023. On April 22, 2022, NSTAR Electric updated its requested increase to $88 million. As part of this filing, NSTAR Electric is requesting a renewal of the performance-based ratemaking plan originally authorized in its last rate case for up to a ten-year term, alignment with state electrification policy, storm fund refinements, and Advanced Metering Infrastructure tariff approval. A final decision from the DPU is expected on December 1, 2022.
NSTAR Electric Grid Modernization and Advanced Metering Infrastructure Filing: On July 1, 2021, NSTAR Electric submitted for DPU approval its four-year $198.8 million grid modernization plan for the years 2022 through 2025 and proposed $620 million Advanced Metering Infrastructure investment and implementation plan (including program operating costs) for the years 2022 through 2028. As required, the plan includes a ten-year vision, five-year strategic plan, including a full deployment of advanced metering functionality, separate four-year grid-facing and customer-facing short-term investment plans, and a composite business case in support of the Advanced Metering Infrastructure plan. NSTAR Electric expects DPU guidance for all investments by the fourth quarter of 2022. For Advanced Metering Infrastructure investments, additional review of the cost recovery mechanism will be conducted in NSTAR Electric’s base distribution rate case that was filed on January 14, 2022 with a decision expected on December 1, 2022. Reply briefs are due to be filed by NSTAR Electric on June 27, 2022.
45
New Hampshire:
Energy Efficiency Plan: On November 12, 2021, the NHPUC issued an order rejecting the proposed 2021 through 2023 energy efficiency plan and significantly reduced funding and operational functions of the program. The order eliminated the recovery of performance incentives and made other key changes to the energy efficiency plan beginning in 2022. PSNH sought a rehearing of the order and was denied, which resulted in PSNH filing a formal appeal to the New Hampshire Supreme Court.
On February 10, 2022, the NHPUC issued an order that restored the 2022 energy efficiency rate to be consistent with the 2021 rate, which PSNH implemented effective March 1, 2022. On February 24, 2022, state legislation was signed into law that undid the most impactful effects of the November 12, 2021 NHPUC order. The legislation directed that the joint utility energy efficiency plan and programming framework in effect on January 1, 2021 be utilized going forward, including utility performance incentive payments, lost base revenue calculations, and Evaluation, Measurement, and Verification process. Additionally, the legislation established a process for future plan proposals, including the 2024 through 2026 triennial plan, and includes a mechanism for future rate increases based on the consumer price index. As a result of the new legislation passed specific to this order, PSNH withdrew its appeal to the New Hampshire Supreme Court. PSNH made the required filing for the remainder of the 2022 through 2023 triennial plan on March 1, 2022, which was approved as filed by the NHPUC on April 29, 2022.
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 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 2021 Form 10-K. There have been no material changes with regard to these critical accounting policies.
Other Matters
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 months ended March 31, 2022 and 2021 included in this combined Quarterly Report on Form 10-Q:
| For the Three Months Ended March 31, | |||||||||||||||||
| (Millions of Dollars) | 2022 | 2021 | Increase/ (Decrease) | ||||||||||||||
| Operating Revenues | $ | 3,471.3 | $ | 2,825.8 | $ | 645.5 | |||||||||||
| Operating Expenses: | |||||||||||||||||
| Purchased Power, Fuel and Transmission | 1,389.7 | 998.5 | 391.2 | ||||||||||||||
| Operations and Maintenance | 472.4 | 465.5 | 6.9 | ||||||||||||||
| Depreciation | 289.3 | 270.7 | 18.6 | ||||||||||||||
| Amortization | 236.9 | 108.0 | 128.9 | ||||||||||||||
| Energy Efficiency Programs | 199.5 | 188.1 | 11.4 | ||||||||||||||
| Taxes Other Than Income Taxes | 220.4 | 209.4 | 11.0 | ||||||||||||||
| Total Operating Expenses | 2,808.2 | 2,240.2 | 568.0 | ||||||||||||||
| Operating Income | 663.1 | 585.6 | 77.5 | ||||||||||||||
| Interest Expense | 153.3 | 137.8 | 15.5 | ||||||||||||||
| Other Income, Net | 71.6 | 34.2 | 37.4 | ||||||||||||||
| Income Before Income Tax Expense | 581.4 | 482.0 | 99.4 | ||||||||||||||
| Income Tax Expense | 136.1 | 114.0 | 22.1 | ||||||||||||||
| Net Income | 445.3 | 368.0 | 77.3 | ||||||||||||||
| Net Income Attributable to Noncontrolling Interests | 1.9 | 1.9 | — | ||||||||||||||
| Net Income Attributable to Common Shareholders | $ | 443.4 | $ | 366.1 | $ | 77.3 | |||||||||||
46
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales Volumes (GWh) | Percentage Increase | Sales Volumes (MMcf) | Percentage Increase | Sales Volumes (MG) | Percentage Increase/(Decrease) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31: | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| Traditional | 1,992 | 1,951 | 2.1 | % | — | — | — | % | 324 | 258 | 25.6 | % | |||||||||||||||||||||||||||||||||||||||||
Decoupled and Special Contracts (1) | 10,973 | 10,732 | 2.2 | % | 68,518 | 66,002 | 3.8 | % | 4,342 | 4,478 | (3.0) | % | |||||||||||||||||||||||||||||||||||||||||
| Total Sales Volumes | 12,965 | 12,683 | 2.2 | % | 68,518 | 66,002 | 3.8 | % | 4,666 | 4,736 | (1.5) | % | |||||||||||||||||||||||||||||||||||||||||
(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.
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 above). For CL&P, NSTAR Electric, NSTAR Gas, EGMA, Yankee 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.
Operating Revenues: Operating Revenues by segment increased for the three months ended March 31, 2022, as compared to the same period in 2021, as follows:
| (Millions of Dollars) | Three Months Ended | ||||
| Electric Distribution | $ | 486.0 | |||
| Natural Gas Distribution | 147.1 | ||||
| Electric Transmission | 34.6 | ||||
| Water Distribution | 2.1 | ||||
| Other | 40.5 | ||||
| Eliminations | (64.8) | ||||
| Total Operating Revenues | $ | 645.5 | |||
Electric and Natural Gas (excluding EGMA) Distribution Revenues:
Base Distribution Revenues:
•Base electric distribution revenues increased $9.7 million for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the impact of base distribution rate increases at NSTAR Electric effective January 1, 2022 resulting from its annual Performance Based Rate Adjustment filing, and at PSNH effective August 1, 2021 to reflect plant additions in calendar year 2020 included in its revenue requirement.
•Base natural gas distribution revenues (excluding EGMA) increased $9.7 million for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to a base distribution rate increase at NSTAR Gas effective November 1, 2021.
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 has no impact on earnings. Revenues from certain of these cost tracking mechanisms also include certain incentives earned, return on capital tracking mechanisms, 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), certain capital tracking mechanisms for infrastructure improvements, and additionally for the Massachusetts utilities, pension and PBOP benefits, net metering for distributed generation, and solar-related programs. Tracked revenues also include wholesale market sales transactions, such as sales of energy and energy-related products into the ISO-NE wholesale electricity market, sales of natural gas to third party marketers, and the sale of RECs to various counterparties.
47
Tracked distribution revenues increased/(decreased) for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
| Three Months Ended | |||||||||||
| (Millions of Dollars) | Electric Distribution | Natural Gas Distribution | |||||||||
| Retail Tariff Tracked Revenues: | |||||||||||
| Energy supply procurement | $ | 165.0 | $ | 42.1 | |||||||
| Retail transmission | 97.7 | — | |||||||||
| Other distribution tracking mechanisms | (3.9) | 0.4 | |||||||||
| Wholesale Market Sales Revenue | 216.4 | 2.5 | |||||||||
The increase in energy supply procurement within both electric distribution and natural gas distribution for the three months ended March 31, 2022, as compared to the same period in 2021, was driven primarily by higher average prices and higher average supply-related sales volumes.
Fluctuations in retail transmission revenues are driven by the recovery of the costs of our wholesale transmission business, such as those billed by ISO-NE and Local and Regional Network Service charges. For further information, see "Purchased Power, Fuel and Transmission Expense" below.
The increase in electric distribution wholesale market sales revenue was due primarily to higher average electricity market prices received for wholesale sales at CL&P, NSTAR Electric and PSNH for the three months ended March 31, 2022, as compared to the same period in 2021. ISO-NE average market prices received for CL&P’s wholesale sales increased approximately 117 percent for the three months ended March 31, 2022, as compared to the same period in 2021, driven primarily by higher natural gas prices in New England. The increase was also due to higher wholesale sales at CL&P resulting from the sale of output generated by the Seabrook PPA beginning in the first quarter of 2022. Volumes sold into the market were primarily from the sale of output generated by the Millstone PPA and Seabrook PPA that CL&P entered into in 2019, as required by regulation. CL&P sells the energy purchased from Millstone and Seabrook into the wholesale market and uses the proceeds from the energy sales to offset the contract costs. The net sales or net cost amount is refunded to, or recovered from, customers in the FMCC rate.
The increase in electric distribution wholesale market sales revenues was also driven by higher proceeds from a one-year sale of transmission rights, effective June 2021, under CL&P’s, NSTAR Electric’s and PSNH’s Hydro-Quebec transmission support agreements. Proceeds from these sales are credited back to customers.
EGMA Natural Gas Distribution Revenues: EGMA total operating revenues at the natural gas distribution segment increased by $91.6 million for the three months ended March 31, 2022, as compared to the same period in 2021. Included in the total operating revenues increase was EGMA’s base natural gas distribution revenues increase of $20.9 million due primarily to a base distribution rate increase effective November 1, 2021.
Electric Transmission Revenues: Electric transmission revenues increased $34.6 million for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to a higher transmission rate base as a result of our continued 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 in rates charged to their customers.
Purchased Power, Fuel and Transmission expense includes costs associated with purchasing electricity and natural gas on behalf of our customers and the cost of energy purchase contracts, as required by regulation. These electric and natural gas supply costs and other energy-related 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 for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
| (Millions of Dollars) | Three Months Ended | ||||
| Purchased Power Costs | $ | 221.0 | |||
| Natural Gas Costs | 95.9 | ||||
| Transmission Costs | 100.4 | ||||
| Eliminations | (26.1) | ||||
| Total Purchased Power, Fuel and Transmission | $ | 391.2 | |||
The increase in purchased power expense at the electric distribution business for the three months ended March 31, 2022, as compared to the same period in 2021, was driven primarily by higher expense related to the procurement of energy supply resulting from higher average prices and higher average supply-related sales volumes, higher long-term contractual energy-related costs that are recovered in the non-bypassable component of the FMCC mechanism at CL&P, and higher net metering costs at NSTAR Electric.
The increase in costs at the natural gas distribution segment for the three months ended March 31, 2022, as compared to the same period in 2021, was due primarily to higher average prices and higher average supply-related sales volumes. The increase in transmission costs for the three months ended March 31, 2022, as compared to the same period in 2021, was primarily the result of an increase in costs billed by ISO-NE that
48
support regional grid investments and an increase resulting from the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers. This was partially offset by a decrease in Local Network Service charges, which reflects 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 for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
| (Millions of Dollars) | Three Months Ended | |||||||
| Base Electric Distribution (Non-Tracked Costs): | ||||||||
Absence in 2022 of CL&P charge for Tropical Storm Isaias response in 2021 | $ | (30.0) | ||||||
| Employee-related expenses, including labor and benefits | (6.5) | |||||||
Funding of CL&P storm reserve as part of June 1, 2021 rate change (offset by lower Amortization expense) | 6.0 | |||||||
| Storm costs | 8.0 | |||||||
| Operations-related expenses, including vehicles, vegetation management and outside services | (9.3) | |||||||
| Other non-tracked operations and maintenance | 12.1 | |||||||
| Total Base Electric Distribution (Non-Tracked Costs) | (19.7) | |||||||
| Tracked Electric Costs (Electric Distribution and Electric Transmission) | 19.4 | |||||||
| Natural Gas Distribution | 11.0 | |||||||
| Water Distribution | 1.6 | |||||||
| Parent and Other Companies and eliminations: | ||||||||
| Eversource Parent and Other Companies - other operations and maintenance | 33.2 | |||||||
| Acquisition and Transition Costs | (1.3) | |||||||
| Eliminations | (37.3) | |||||||
| Total Operations and Maintenance | $ | 6.9 | ||||||
Depreciation expense increased for the three months ended March 31, 2022, as compared to the same period in 2021, due to higher utility plant in service balances.
Amortization expense includes the deferral of energy supply, energy-related costs and other costs that are included in certain regulatory commission-approved cost tracking mechanisms. This deferral adjusts expense to match the corresponding revenues compared to the actual costs incurred. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. Amortization expense also includes the amortization of certain costs as those costs are collected in rates.
Amortization increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the deferral adjustment of energy supply, energy-related and other tracked costs that are included in the non-bypassable component of the FMCC mechanism at CL&P, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. The increase was partially offset by a decrease in storm amortization expense at CL&P related to the completion of the amortization period of certain storm costs deferred assets.
Energy Efficiency Programs expense increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the deferral adjustment, which reflects the actual costs of energy efficiency programs compared to the amounts billed to customers, and the timing of the recovery of energy efficiency costs. 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 increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to an increase in property taxes as a result of higher utility plant balances.
Interest Expense increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to an increase in interest on long-term debt as a result of new debt issuances ($11.6 million), an increase in interest expense on regulatory deferrals ($4.4 million), and an increase in interest on notes payable ($0.2 million), partially offset by an increase in AFUDC related to debt funds and other capitalized interest ($1.0 million) and a decrease in RRB interest expense ($0.3 million).
Other Income, Net increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to an increase
related to pension, SERP and PBOP non-service income components ($34.2 million), an increase in interest income primarily from regulatory deferrals ($5.2 million), an increase in AFUDC related to equity funds ($0.7 million), and a decrease in investment losses ($0.4 million), partially offset by a decrease in equity in earnings related to Eversource's equity method investments ($3.3 million).
Income Tax Expense increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to higher pre-tax earnings ($20.9 million), higher state taxes ($7.3 million), and lower share-based payment excess tax benefits ($1.8 million), partially offset by a decrease in items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($3.8 million), the absence in 2022 of a valuation allowance increase in 2021 ($1.7 million), and an increase in amortization of EDIT ($2.4 million).
49
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 three months ended March 31, 2022 and 2021 included in this combined Quarterly Report on Form 10-Q:
| For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| CL&P | NSTAR Electric | PSNH | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (Millions of Dollars) | 2022 | 2021 | Increase/ (Decrease) | 2022 | 2021 | Increase/ (Decrease) | 2022 | 2021 | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| Operating Revenues | $ | 1,285.8 | $ | 987.3 | $ | 298.5 | $ | 863.2 | $ | 737.0 | $ | 126.2 | $ | 339.4 | $ | 293.4 | $ | 46.0 | |||||||||||||||||||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased Power and Transmission | 523.5 | 373.3 | 150.2 | 313.7 | 226.5 | 87.2 | 125.8 | 91.6 | 34.2 | ||||||||||||||||||||||||||||||||||||||||||||
| Operations and Maintenance | 157.1 | 175.4 | (18.3) | 164.9 | 143.2 | 21.7 | 59.6 | 54.7 | 4.9 | ||||||||||||||||||||||||||||||||||||||||||||
| Depreciation | 87.3 | 83.4 | 3.9 | 89.0 | 82.8 | 6.2 | 31.3 | 29.5 | 1.8 | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of Regulatory Assets, Net | 169.7 | 62.8 | 106.9 | 29.3 | 18.4 | 10.9 | 26.8 | 18.5 | 8.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Energy Efficiency Programs | 35.4 | 35.6 | (0.2) | 80.3 | 75.1 | 5.2 | 8.7 | 10.3 | (1.6) | ||||||||||||||||||||||||||||||||||||||||||||
| Taxes Other Than Income Taxes | 90.3 | 91.4 | (1.1) | 59.8 | 54.6 | 5.2 | 22.8 | 22.2 | 0.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Total Operating Expenses | 1,063.3 | 821.9 | 241.4 | 737.0 | 600.6 | 136.4 | 275.0 | 226.8 | 48.2 | ||||||||||||||||||||||||||||||||||||||||||||
| Operating Income | 222.5 | 165.4 | 57.1 | 126.2 | 136.4 | (10.2) | 64.4 | 66.6 | (2.2) | ||||||||||||||||||||||||||||||||||||||||||||
| Interest Expense | 40.6 | 39.0 | 1.6 | 38.2 | 32.3 | 5.9 | 13.6 | 14.6 | (1.0) | ||||||||||||||||||||||||||||||||||||||||||||
| Other Income, Net | 19.6 | 4.9 | 14.7 | 29.2 | 16.8 | 12.4 | 7.5 | 4.2 | 3.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Income Before Income Tax Expense | 201.5 | 131.3 | 70.2 | 117.2 | 120.9 | (3.7) | 58.3 | 56.2 | 2.1 | ||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Expense | 48.5 | 32.9 | 15.6 | 24.5 | 27.0 | (2.5) | 12.7 | 11.5 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||
| Net Income | $ | 153.0 | $ | 98.4 | $ | 54.6 | $ | 92.7 | $ | 93.9 | $ | (1.2) | $ | 45.6 | $ | 44.7 | $ | 0.9 | |||||||||||||||||||||||||||||||||||
Operating Revenues
Sales Volumes: A summary of our retail electric GWh sales volumes is as follows:
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | Increase | Percentage Increase | ||||||||||||||||||||
| CL&P | 5,263 | 5,154 | 109 | 2.1 | % | ||||||||||||||||||
| NSTAR Electric | 5,710 | 5,578 | 132 | 2.4 | % | ||||||||||||||||||
| PSNH | 1,992 | 1,951 | 41 | 2.1 | % | ||||||||||||||||||
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 $298.5 million at CL&P, $126.2 million at NSTAR Electric, and $46.0 million at PSNH, for the three months ended March 31, 2022, as compared to the same period in 2021.
Base Distribution Revenues:
•CL&P's distribution revenues increased $0.3 million.
•NSTAR Electric's distribution revenues increased $6.2 million due primarily to the impact of its base distribution rate increase effective January 1, 2022 resulting from its annual Performance Based Rate Adjustment filing.
•PSNH's distribution revenues increased $3.2 million due primarily to the impact of its base distribution rate increase effective August 1, 2021 to reflect plant additions in calendar year 2020 included in its revenue requirement.
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 has no impact on earnings. Revenues from certain of these cost tracking mechanisms also include certain incentives earned, return on capital tracking mechanisms, 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), certain capital tracking mechanisms for infrastructure improvements, and additionally for NSTAR Electric, pension and PBOP benefits, net metering for distributed generation, and solar-related programs. 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.
50
Tracked revenues increased/(decreased) for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
| (Millions of Dollars) | CL&P | NSTAR Electric | PSNH | ||||||||||||||
| Retail Tariff Tracked Revenues: | |||||||||||||||||
| Energy supply procurement | $ | 104.8 | $ | 16.3 | $ | 43.9 | |||||||||||
| Retail transmission | 28.7 | 66.4 | 2.6 | ||||||||||||||
| Other distribution tracking mechanisms | 2.5 | 7.8 | (14.2) | ||||||||||||||
| Wholesale Market Sales Revenue | 170.2 | 33.5 | 12.7 | ||||||||||||||
The increase in energy supply procurement at CL&P and PSNH was driven primarily by higher average prices and higher average supply-related sales volumes. The increase in energy supply procurement at NSTAR Electric was driven primarily by higher average prices, partially offset by lower average supply-related sales volumes. Fluctuations in retail transmission revenues are driven by the recovery of the costs of our wholesale transmission business, such as those billed by ISO-NE and Local and Regional Network Service charges. For further information, see "Purchased Power and Transmission Expense" below.
The increase in wholesale market sales revenue was due primarily to higher average electricity market prices received for wholesale sales at CL&P, NSTAR Electric and PSNH for the three months ended March 31, 2022, as compared to the same period in 2021. ISO-NE average market prices received for CL&P’s wholesale sales increased approximately 117 percent for the three months ended March 31, 2022, as compared to the same period in 2021, driven primarily by higher natural gas prices in New England. The increase was also due to higher wholesale sales at CL&P resulting from the sale of output generated by the Seabrook PPA beginning in the first quarter of 2022. Volumes sold into the market were primarily from the sale of output generated by the Millstone PPA and Seabrook PPA that CL&P entered into in 2019, as required by regulation. CL&P sells the energy purchased from Millstone and Seabrook into the wholesale market and uses the proceeds from the energy sales to offset the contract costs. The net sales or net cost amount is refunded to, or recovered from, customers in the FMCC rate.
The increase in wholesale market sales revenues at CL&P, NSTAR Electric and PSNH was also driven by higher proceeds from a one-year sale of transmission rights, effective June 2021, under CL&P’s, NSTAR Electric’s and PSNH’s Hydro-Quebec transmission support agreements. Proceeds from these sales are credited back to customers.
Transmission Revenues: Transmission revenues increased $13.4 million at CL&P, $13.8 million at NSTAR Electric, and $7.4 million at PSNH for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to a higher transmission rate base as a result of our continued 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 in rates charged to their customers. The impact of eliminations decreased revenues by $21.2 million at CL&P, $18.9 million at NSTAR Electric and $10.0 million at PSNH for the three months ended March 31, 2022, as compared to the same period in 2021.
Purchased Power and Transmission expense includes costs associated with purchasing electricity on behalf of CL&P, NSTAR Electric and PSNH's customers and the cost of energy purchase contracts, as required by regulation. These energy supply and other energy-related costs are recovered from customers in rates through commission-approved cost tracking mechanisms, which have no impact on earnings (tracked costs). Purchased Power and Transmission expense increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
| (Millions of Dollars) | CL&P | NSTAR Electric | PSNH | ||||||||||||||
| Purchased Power Costs | $ | 141.3 | $ | 39.6 | $ | 40.1 | |||||||||||
| Transmission Costs | 29.8 | 66.5 | 4.1 | ||||||||||||||
| Eliminations | (20.9) | (18.9) | (10.0) | ||||||||||||||
| Total Purchased Power and Transmission | $ | 150.2 | $ | 87.2 | $ | 34.2 | |||||||||||
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 and the cost of energy purchase contracts, as required by regulation.
•The increase at CL&P was due primarily to higher expense related to the procurement of energy supply resulting from higher average prices and higher average supply-related volumes, and higher long-term contractual energy-related costs that are recovered in the non-bypassable component of the FMCC mechanism.
•The increase at NSTAR Electric was due primarily to higher net metering costs and higher expense related to the procurement of energy supply resulting from higher average prices, partially offset by lower average supply-related sales volumes.
•The increase at PSNH was due primarily to higher expense related to the procurement of energy supply resulting from higher average prices and higher average supply-related sales volumes, partially offset by lower stranded costs resulting from higher Regional Greenhouse Gas Initiative (RGGI) proceeds received, which are credited back to customers. The higher RGGI proceeds resulted from an increase in RGGI auction clearing prices for allowances in the three months ended March 31, 2022, as compared to the same period in 2021.
51
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 increase in transmission costs at CL&P and NSTAR Electric was due primarily to an increase in costs billed by ISO-NE that support regional grid investments and an increase resulting from the retail transmission cost deferral, which reflects the actual costs of transmission service compared to estimated amounts billed to customers. This was partially offset by a decrease in Local Network Service charges, which reflect the cost of transmission service provided by Eversource over our local transmission network.
•The increase in transmission costs at PSNH was due primarily to an increase in costs billed by ISO-NE that support regional grid investments, partially offset by a decrease resulting from the retail transmission cost deferral and a decrease in Local Network Service charges.
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 (decreased)/increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
| (Millions of Dollars) | CL&P | NSTAR Electric | PSNH | ||||||||||||||
| Base Electric Distribution (Non-Tracked Costs): | |||||||||||||||||
Absence in 2022 of CL&P charge for Tropical Storm Isaias response in 2021 | $ | (30.0) | $ | — | $ | — | |||||||||||
Funding of CL&P storm reserve as part of June 1, 2021 rate change (offset by lower Amortization expense) | 6.0 | — | — | ||||||||||||||
| Storm costs | 0.9 | 4.2 | 2.9 | ||||||||||||||
| Operations-related expenses, including employee-related costs, vehicles, vegetation management and outside services | (5.1) | (2.7) | 0.6 | ||||||||||||||
| Other non-tracked operations and maintenance | 3.4 | 7.8 | 0.9 | ||||||||||||||
| Total Base Electric Distribution (Non-Tracked Costs) | (24.8) | 9.3 | 4.4 | ||||||||||||||
| Tracked Costs: | |||||||||||||||||
| Transmission expenses | 3.2 | 3.7 | 1.2 | ||||||||||||||
| Other tracked operations and maintenance | 3.3 | 8.7 | (0.7) | ||||||||||||||
| Total Tracked Costs | 6.5 | 12.4 | 0.5 | ||||||||||||||
| Total Operations and Maintenance | $ | (18.3) | $ | 21.7 | $ | 4.9 | |||||||||||
Depreciation increased for the three months ended March 31, 2022, as compared to the same period in 2021, for CL&P, NSTAR Electric and PSNH due to higher net plant in service balances.
Amortization of Regulatory Assets, Net expense includes the deferral of energy supply, energy-related costs and other costs that are included in certain regulatory-approved cost tracking mechanisms. This deferral adjusts expense to match the corresponding revenues compared to the actual costs incurred. Energy supply and energy-related costs are recovered from customers in rates and have no impact on earnings. Amortization expense also includes the amortization of certain costs as those costs are collected in rates. Amortization of Regulatory Assets, Net increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
•The increase at CL&P was due primarily to the deferral adjustment of energy supply, energy-related and other tracked costs that are included in the non-bypassable component of the FMCC mechanism, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs. The increase was partially offset by a decrease in storm amortization expense related to the completion of the amortization period of certain storm cost deferred assets.
•The increase at NSTAR Electric was due to the deferral adjustment of energy supply, energy-related costs and other tracked costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs.
•The increase at PSNH was due to the deferral adjustment of energy-related and other tracked costs, which can fluctuate from period to period based on the timing of costs incurred and related rate changes to recover these costs.
Energy Efficiency Programs expense includes costs of various state energy policy initiatives and expanded energy efficiency programs that are recovered from customers in rates, most of which have no impact on earnings. Energy Efficiency Programs expense increased/decreased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
•The increase at NSTAR Electric was due to the deferral adjustment, which reflects actual costs of energy efficiency programs compared to the estimated amounts billed to customers, and the timing of the recovery of energy efficiency costs.
•The decrease at PSNH was due to the deferral adjustment, which reflects actual costs of energy efficiency programs compared to the estimated amounts billed to customers, and the timing of the recovery of energy efficiency costs.
Taxes Other Than Income Taxes increased/decreased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
•The decrease at CL&P was related to lower gross earnings taxes partially offset by higher property taxes as a result of a higher utility plant balance.
•The increase at NSTAR Electric was due to higher property taxes as a result of higher utility plant balances.
52
Interest Expense increased/decreased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
•The increase at CL&P was due to higher interest on long-term debt ($0.9 million) and higher interest expense on regulatory deferrals ($0.9 million), partially offset by an increase in AFUDC related to debt funds ($0.2 million).
•The increase at NSTAR Electric was due to higher interest expense on regulatory deferrals ($3.3 million), higher interest on long-term debt ($1.6 million), and a decrease in AFUDC related to debt funds ($0.4 million).
•The decrease at PSNH was due to lower amortization of debt discounts and premiums, net ($0.8 million) and a decrease in RRB interest expense ($0.3 million).
Other Income, Net increased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
•The increase at CL&P was due primarily to an increase related to pension, SERP and PBOP non-service income components ($13.2 million), an increase in interest income primarily on regulatory deferrals ($1.2 million), and an increase in AFUDC related to equity funds ($1.1 million), partially offset by investment losses in 2022 compared to investment income in 2021 driven by market volatility ($0.8 million).
•The increase at NSTAR Electric was due primarily to an increase related to pension, SERP and PBOP non-service income components ($10.9 million) and an increase in interest income primarily on regulatory deferrals ($3.4 million), partially offset by a decrease in AFUDC related to equity funds ($1.3 million) and investment losses in 2022 compared to investment income in 2021 driven by market volatility ($0.5 million).
•The increase at PSNH was due primarily to an increase related to pension, SERP and PBOP non-service income components ($3.9 million), partially offset by a decrease in interest income primarily on regulatory deferrals ($0.4 million) and a decrease in AFUDC related to equity funds ($0.2 million).
Income Tax Expense increased/decreased for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the following:
•The increase at CL&P was due primarily to higher pre-tax earnings ($14.7 million) and higher state taxes ($3.8 million), partially offset by an increase in amortization of EDIT ($0.5 million), the absence in 2022 of a valuation allowance increase in 2021 ($1.7 million), and a decrease in items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($0.7 million).
•The decrease at NSTAR Electric was due primarily to a decrease in pre-tax earnings ($0.8 million), lower state taxes ($0.1 million), and an increase in amortization of EDIT ($3.3 million), partially offset by lower share-based payment excess tax benefits ($0.6 million) and an increase in items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($1.1 million).
•The increase at PSNH was due primarily to higher pre-tax earnings ($0.4 million), higher state taxes ($0.6 million), and a decrease in amortization of EDIT ($1.4 million), partially offset by a decrease in items that impact our tax rate as a result of regulatory treatment (flow-through items) and permanent differences ($1.2 million).
EARNINGS SUMMARY
CL&P's earnings increased $54.6 million for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to the absence in 2022 of the $30.0 million pre-tax charge to earnings for the storm performance penalty imposed by PURA as a result of CL&P’s preparation for and response to Tropical Storm Isaias in August 2020 that was recorded in 2021. The after-tax impact of the storm performance penalty was $24.1 million. Earnings were also favorably impacted by higher earnings from its capital tracking mechanism due to increased electric system improvements, an increase in transmission earnings driven by a higher transmission rate base and lower pension plan expense. The earnings increase was partially offset by higher operations and maintenance expense, higher depreciation, higher property tax expense and higher interest expense.
NSTAR Electric's earnings decreased $1.2 million for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to higher operations and maintenance expense driven by higher storm costs, higher depreciation expense, and higher interest expense. The earnings decrease was partially offset by the base distribution rate increase effective January 1, 2022 and an increase in transmission earnings driven by a higher transmission rate base.
PSNH's earnings increased $0.9 million for the three months ended March 31, 2022, as compared to the same period in 2021, due primarily to an increase in transmission earnings driven by a higher transmission rate base, the base distribution rate increase effective August 1, 2021, and lower pension plan expense. The earnings increase was partially offset by the absence in 2022 of a favorable impact of a new tracker mechanism at PSNH approved as part of the 2020 rate settlement agreement that was recorded in 2021, higher operations and maintenance expense driven primarily by higher storm costs, and higher depreciation expense.
53
LIQUIDITY
Cash Flows: CL&P had cash flows provided by operating activities of $135.3 million for the three months ended March 31, 2022, as compared to $156.2 million in the same period of 2021. The decrease in operating cash flows was due primarily to an increase in regulatory under-recoveries driven by the timing of collections for regulatory tracking mechanisms and an increase of $23.9 million in cash payments for storm costs, customer credits being distributed to CL&P’s customers in the first quarter of 2022 as a result of the October 2021 settlement agreement and the 2021 storm performance penalty for its response to Tropical Storm Isaias, the timing of cash collections on our accounts receivable, and the timing of other working capital items. These unfavorable impacts were partially offset by the timing of cash payments made on our accounts payable, the absence in 2022 of pension contributions of $18.9 million made in 2021, and a $14.5 million increase in income tax refunds received in 2022, as compared to 2021.
NSTAR Electric had cash flows provided by operating activities of $189.9 million for the three months ended March 31, 2022, as compared to $172.6 million in the same period of 2021. The increase in operating cash flows was due primarily to the timing of cash collections on our accounts receivable, a $12.4 million increase in income tax refunds received in 2022, as compared to 2021, and the timing of other working capital items. These favorable impacts were partially offset by the timing of cash payments made on our accounts payable, the timing of collections for regulatory tracking mechanisms, and $5.0 million of pension contributions made in 2022.
PSNH had cash flows provided by operating activities of $58.1 million for the three months ended March 31, 2022, as compared to $74.9 million in the same period of 2021. The decrease in operating cash flows was due primarily to the timing of cash collections on our accounts receivable, the timing of collections for regulatory tracking mechanisms, the timing of other working capital items, and a $6.5 million decrease in income tax refunds received in 2022, as compared to 2021. These unfavorable impacts were partially offset by the timing of cash payments made on our accounts 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.
54
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Information
Commodity Price Risk Management: Our regulated companies enter into energy contracts to serve our customers, and the economic impacts of those contracts are passed on to our customers. Accordingly, the regulated companies have no exposure to loss of future earnings or fair values due to these market risk-sensitive instruments. Eversource's Energy Supply Risk Committee, comprised of senior officers, reviews and approves all large-scale energy related transactions entered into by its regulated companies.
Other Risk Management Activities
Interest Rate Risk Management: We manage our interest rate risk exposure in accordance with our written policies and procedures by maintaining a mix of fixed and variable rate long-term debt.
Credit Risk Management: Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties pursuant to the terms of our contractual obligations. We serve a wide variety of customers and transact with suppliers that include IPPs, industrial companies, natural gas and electric utilities, oil and 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 March 31, 2022, our regulated companies held collateral (letters of credit or cash) of $92.7 million from counterparties related to our standard service contracts. As of March 31, 2022, Eversource had $34.6 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 2021 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 2021 Form 10-K.
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 March 31, 2022 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 March 31, 2022 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
55
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are parties to various legal proceedings. We have disclosed certain legal proceedings in Part I, Item 3, "Legal Proceedings," and elsewhere in our 2021 Form 10-K. These disclosures are incorporated herein by reference. There have been no material legal proceedings identified and no material changes with regard to the legal proceedings previously disclosed in our 2021 Form 10-K.
ITEM 1A. RISK FACTORS
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 2021 Form 10-K, which risk factors are incorporated herein by reference. These risk factors should be considered carefully in evaluating our risk profile. There have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed in our 2021 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table discloses purchases of our common shares made by us or on our behalf for the periods shown below. The common shares purchased consist of open market purchases made by the Company or an independent agent. These share transactions related to matching contributions under the Eversource 401k Plan.
| 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, 2022 | — | $ | — | — | — | |||||||||
| February 1 - February 28, 2022 | — | — | — | — | ||||||||||
| March 1 - March 31, 2022 | 2,244 | 88.99 | — | — | ||||||||||
| Total | 2,244 | $ | 88.99 | — | — | |||||||||
56
ITEM 6. EXHIBITS
Each document described below is filed herewith, unless designated with an asterisk (*), which exhibits are incorporated by reference by the registrant under whose name the exhibit appears.
57
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.
| EVERSOURCE ENERGY | |||||||||||
| May 6, 2022 | 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.
| THE CONNECTICUT LIGHT AND POWER COMPANY | |||||||||||
| May 6, 2022 | 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.
| NSTAR ELECTRIC COMPANY | |||||||||||
| May 6, 2022 | 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.
| PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE | |||||||||||
| May 6, 2022 | By: | /s/ Jay S. Buth | |||||||||
| Jay S. Buth | |||||||||||
| Vice President, Controller and Chief Accounting Officer | |||||||||||
58