10-KPeriod: FY2001

EVERSOURCE ENERGY Annual Report, Year Ended Dec 31, 2001

Filed March 22, 2002For Securities:ES

Summary

Eversource Energy (formerly Northeast Utilities) operates as a major utility provider across New England, serving electric and gas customers in Connecticut, Massachusetts, and New Hampshire. The company's 2001 fiscal year was marked by significant industry restructuring, including the divestiture of generation assets by some subsidiaries and the ongoing adaptation to competitive energy markets. Despite the complexities of deregulation, Eversource successfully managed its core regulated utility operations while expanding its competitive energy services segment. Financially, the company undertook substantial debt retirements and refinancings in 2001, including the issuance of rate reduction bonds and certificates to securitize stranded costs, leading to a decrease in overall debt. Management focused on navigating regulatory changes, managing power supply contracts for standard offer service, and addressing environmental compliance. The company also faced challenges related to the terminated merger with Con Edison, which resulted in ongoing litigation. Looking ahead, Eversource is investing in infrastructure improvements and transmission expansion, while continuing to explore opportunities in the competitive energy market. The company's strategic focus remains on maintaining reliable service to its regulated customers and prudently managing its diversified portfolio of energy businesses in a dynamic regulatory and market environment.

Key Highlights

  • 1The company is actively engaged in the restructuring of the electric utility industry across Connecticut, Massachusetts, and New Hampshire, involving the divestiture of generation assets and the transition to a competitive energy market.
  • 2Eversource Energy (formerly Northeast Utilities) successfully securitized a significant portion of its stranded costs through the issuance of rate reduction bonds and certificates in 2001, leading to a reduction in total debt.
  • 3The company's competitive energy services segment, primarily through Select Energy, Inc., saw substantial revenue growth in 2001, though facing challenges related to volatile energy markets and certain fixed-price contracts.
  • 4Significant litigation remains ongoing with Consolidated Edison following the termination of their proposed merger agreement, with both parties seeking substantial damages.
  • 5Eversource is making substantial capital investments in its transmission and distribution infrastructure to maintain and upgrade its regulated utility operations.
  • 6The company is navigating complex regulatory environments, including ongoing proceedings related to electric industry restructuring, rate adjustments, and environmental compliance.
  • 7Nuclear generation assets, including interests in Seabrook and Millstone, have undergone significant changes with sales and ongoing decommissioning processes contributing to the company's operational adjustments.

Frequently Asked Questions

Electric industry restructuring has led to significant changes, including the divestiture of generation assets by some subsidiaries (CL&P and WMECO), with PSNH's divestiture postponed. Utilities are now primarily transmission and distribution providers, and customers have the choice to select their energy suppliers. Eversource's subsidiaries are adapting by entering into standard offer and default service contracts to supply power to customers who do not choose alternative suppliers, while also focusing on recovering stranded costs through securitization and rate mechanisms.

Eversource actively managed its financial position by issuing significant amounts of rate reduction bonds and certificates in 2001 to securitize stranded costs. These issuances, along with proceeds from asset sales like the Millstone nuclear units, allowed the company to retire substantial amounts of debt and preferred stock, leading to a decrease in total system debt from $3.8 billion in 2000 to $2.7 billion in 2001. The company also secured new revolving credit facilities to support working capital needs.

The competitive energy business, primarily through Select Energy, Inc., experienced substantial revenue growth in 2001, driven by expanded wholesale and retail sales of electricity and gas. However, it faced challenges from volatile energy markets, particularly high prices in early 2001 and subsequent decreases, impacting fixed-price contracts like the one with CL&P. Opportunities lie in expanding its market reach, developing new energy products and services, and leveraging trading capabilities, although these activities carry significant risks. The company is also working to diversify its generation portfolio through its subsidiary NGC.

The merger between Eversource (then Northeast Utilities) and Consolidated Edison (Con Edison) was terminated in March 2001 when Con Edison refused to close the deal. Both companies subsequently filed lawsuits against each other in the U.S. District Court for the Southern District of New York. Con Edison is seeking damages related to expected synergy savings and costs incurred, while Eversource is seeking damages exceeding $1 billion for breach of the merger agreement. Fact discovery was substantially completed by December 2001, with expert discovery ongoing. A trial date has not yet been set, but the schedule suggests readiness for trial in mid-2002.