Document



 
eversourcelogo.jpg
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended June 30, 2018
 
or
¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE     
SECURITIES EXCHANGE ACT OF 1934
 

For the transition period from ____________ to ____________


Commission
File Number
Registrant; State of Incorporation;
Address; and Telephone Number
I.R.S. Employer
Identification No.
 
 
 
1-5324
EVERSOURCE ENERGY
(a Massachusetts voluntary association)
300 Cadwell Drive
Springfield, Massachusetts 01104
Telephone:  (800) 286-5000
04-2147929
 
 
 
0-00404
THE CONNECTICUT LIGHT AND POWER COMPANY
(a Connecticut corporation)
107 Selden Street
Berlin, Connecticut 06037-1616
Telephone:  (800) 286-5000
06-0303850
 
 
 
1-02301
NSTAR ELECTRIC COMPANY
(a Massachusetts corporation)
800 Boylston Street
Boston, Massachusetts 02199
Telephone:  (800) 286-5000
04-1278810
 
 
 
1-6392
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
02-0181050
 
 
 


 
 

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
 
x
¨

Indicate by check mark whether the registrants have submitted electronically and posted on its corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).
 
Yes
No
 
x
¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.  (Check one):
 
Large
accelerated filer
 
Accelerated
filer
 
Non-accelerated
filer
 
Smaller reporting company
 
Emerging growth company
 
 
 
 
 
 
 
 
 
 
Eversource Energy
x
 
¨
 
¨
 
¨
 
¨
The Connecticut Light and Power Company
¨
 
¨
 
x
 
¨
 
¨
NSTAR Electric Company
¨
 
¨
 
x
 
¨
 
¨
Public Service Company of New Hampshire
¨
 
¨
 
x
 
¨
 
¨

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
¨
x
The Connecticut Light and Power Company
¨
x
NSTAR Electric Company
¨
x
Public Service Company of New Hampshire
¨
x

Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date:
Company - Class of Stock
Outstanding as of July 31, 2018
 
 
Eversource Energy Common Shares, $5.00 par value
316,885,808 shares
The Connecticut Light and Power Company Common Stock, $10.00 par value
6,035,205 shares
NSTAR Electric Company Common Stock, $1.00 par value
200 shares
Public Service Company of New Hampshire Common Stock, $1.00 par value
301 shares

Eversource Energy holds all of the 6,035,205 shares, 200 shares, and 301 shares of the outstanding common stock of The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire, respectively.

NSTAR Electric Company and Public Service Company of New Hampshire each meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q, and each is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10‑Q.

Eversource Energy, The Connecticut Light and Power Company, NSTAR Electric Company, and Public Service Company of New Hampshire each separately file this combined Form 10-Q.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Each registrant makes no representation as to information relating to the other registrants.  




GLOSSARY OF TERMS

The following is a glossary of abbreviations and acronyms that are found in this report:
Current or former Eversource Energy companies, segments or investments:
Eversource, ES or the Company
Eversource Energy and subsidiaries
Eversource parent or ES parent
Eversource Energy, a public utility holding company
ES parent and other companies
ES parent and other companies are comprised of Eversource parent, Eversource Service and other subsidiaries, which primarily includes our unregulated businesses, HWP Company, The Rocky River Realty Company (a real estate subsidiary), and the consolidated operations of CYAPC and YAEC
CL&P
The Connecticut Light and Power Company
NSTAR Electric
NSTAR Electric Company
PSNH
Public Service Company of New Hampshire
NSTAR Gas
NSTAR Gas Company
Yankee Gas
Yankee Gas Services Company
Aquarion
Eversource Aquarion Holdings, Inc and its subsidiaries (formerly known as Macquarie Utilities Inc)
NPT
Northern Pass Transmission LLC
Northern Pass
The HVDC and associated alternating-current transmission line project from Canada into New Hampshire
Eversource Service
Eversource Energy Service Company
Bay State Wind
A project being developed jointly by Eversource and Denmark-based Ørsted (formerly known as DONG Energy) to construct an offshore wind farm off the coast of Massachusetts
CYAPC
Connecticut Yankee Atomic Power Company
MYAPC
Maine Yankee Atomic Power Company
YAEC
Yankee Atomic Electric Company
Yankee Companies
CYAPC, YAEC and MYAPC
Regulated companies
The Eversource regulated companies are comprised of the electric distribution and transmission businesses of CL&P, NSTAR Electric and PSNH, the natural gas distribution businesses of Yankee Gas and NSTAR Gas, NPT, Aquarion, the generation facilities of PSNH, and the solar power facilities of NSTAR Electric
Regulators:
 
DEEP
Connecticut Department of Energy and Environmental Protection
DOE
U.S. Department of Energy
DOER
Massachusetts Department of Energy Resources
DPU
Massachusetts Department of Public Utilities
EPA
U.S. Environmental Protection Agency
FERC
Federal Energy Regulatory Commission
ISO-NE
ISO New England, Inc., the New England Independent System Operator
MA DEP
Massachusetts Department of Environmental Protection
NHPUC
New Hampshire Public Utilities Commission
PURA
Connecticut Public Utilities Regulatory Authority
SEC
U.S. Securities and Exchange Commission
SJC
Supreme Judicial Court of Massachusetts
Other Terms and Abbreviations:
Access Northeast
A project being developed jointly by Eversource, Enbridge, Inc. ("Enbridge"), and National Grid plc ("National Grid") through Algonquin Gas Transmission, LLC to bring needed additional natural gas pipeline and storage capacity to New England.
ADIT
Accumulated Deferred Income Taxes
AFUDC
Allowance For Funds Used During Construction
AOCI
Accumulated Other Comprehensive Income
ARO
Asset Retirement Obligation
Bcf
Billion cubic feet
C&LM
Conservation and Load Management
CfD
Contract for Differences
Clean Air Project
The construction of a wet flue gas desulphurization system, known as "scrubber technology," to reduce mercury emissions of the Merrimack coal-fired generation station in Bow, New Hampshire
CO2
Carbon dioxide
CTA
Competitive Transition Assessment
CWIP
Construction Work in Progress
EDC
Electric distribution company
EPS
Earnings Per Share
ERISA
Employee Retirement Income Security Act of 1974

i



ESOP
Employee Stock Ownership Plan
Eversource 2017 Form 10-K
The Eversource Energy and Subsidiaries 2017 combined Annual Report on Form 10-K as filed with the SEC
Fitch
Fitch Ratings
FMCC
Federally Mandated Congestion Charge
FTR
Financial Transmission Rights
GAAP
Accounting principles generally accepted in the United States of America
GSC
Generation Service Charge
GSRP
Greater Springfield Reliability Project
GWh
Gigawatt-Hours
HQ
Hydro-Québec, a corporation wholly-owned by the Québec government, including its divisions that produce, transmit and distribute electricity in Québec, Canada
HVDC
High-voltage direct current
Hydro Renewable Energy
Hydro Renewable Energy, Inc., a wholly-owned subsidiary of Hydro-Québec
IPP
Independent Power Producers
ISO-NE Tariff
ISO-NE FERC Transmission, Markets and Services Tariff
kV
Kilovolt
kVa
Kilovolt-ampere
kW
Kilowatt (equal to one thousand watts)
kWh
Kilowatt-Hours (the basic unit of electricity energy equal to one kilowatt of power supplied for one hour)
LBR
Lost Base Revenue
LNG
Liquefied natural gas
LRS
Supplier of last resort service
MG
Million gallons
MGP
Manufactured Gas Plant
MMBtu
One million British thermal units
MMcf
Million cubic feet
Moody's
Moody's Investors Services, Inc.
MW
Megawatt
MWh
Megawatt-Hours
NEEWS
New England East-West Solution
NETOs
New England Transmission Owners (including Eversource, National Grid and Avangrid)
NOx
Nitrogen oxides
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 that provides certain retiree benefits, primarily medical, dental and life insurance
PCRBs
Pollution Control Revenue Bonds
Pension Plan
Single uniform noncontributory defined benefit retirement plan
PPA
Pension Protection Act
RRBs
Rate Reduction Bonds
RECs
Renewable Energy Certificates
Regulatory ROE
The average cost of capital method for calculating the return on equity related to the distribution and generation business segment excluding the wholesale transmission segment
RNS
Regional Network Service
ROE
Return on Equity
RRB
Rate Reduction Bond or Rate Reduction Certificate
RSUs
Restricted share units
S&P
Standard & Poor's Financial Services LLC
SBC
Systems Benefits Charge
SCRC
Stranded Cost Recovery Charge
SERP
Supplemental Executive Retirement Plans and non-qualified defined benefit retirement plans
SO2
Sulfur dioxide
SS
Standard service
TCAM
Transmission Cost Adjustment Mechanism
TSA
Transmission Service Agreement
UI
The United Illuminating Company


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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Public Service Company of New Hampshire and Subsidiaries (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

iii




EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)
As of June 30, 2018

As of December 31, 2017





ASSETS
 


 
Current Assets:
 


 
Cash and Cash Equivalents
$
64,154


$
38,165

Receivables, Net
967,590


925,083

Unbilled Revenues
160,301


201,361

Taxes Receivable
156,236


18,682

Fuel, Materials, Supplies and Inventory
171,601

 
223,063

Regulatory Assets
590,898


741,868

Prepayments and Other Current Assets
107,379


119,327

Assets Held for Sale
59,431

 
219,550

Total Current Assets
2,277,590


2,487,099







Property, Plant and Equipment, Net
24,476,890


23,617,463







Deferred Debits and Other Assets:
 


 

Regulatory Assets
4,805,440


4,497,447

Goodwill
4,427,266


4,427,266

Marketable Securities
576,440


585,419

Other Long-Term Assets
680,718


605,692

Total Deferred Debits and Other Assets
10,489,864


10,115,824







Total Assets
$
37,244,344


$
36,220,386





LIABILITIES AND CAPITALIZATION
 

 
Current Liabilities:
 

 
Notes Payable
$
1,190,810


$
1,088,087

Long-Term Debt – Current Portion
387,296


549,631

Rate Reduction Bonds – Current Portion
30,727

 

Accounts Payable
1,010,389


1,085,034

Regulatory Liabilities
247,369


128,071

Other Current Liabilities
662,964


738,222

Total Current Liabilities
3,529,555


3,589,045





Deferred Credits and Other Liabilities:
 

 
Accumulated Deferred Income Taxes
3,473,870


3,297,518

Regulatory Liabilities
3,689,679


3,637,273

Derivative Liabilities
394,459


377,257

Accrued Pension, SERP and PBOP
1,044,397


1,228,091

Other Long-Term Liabilities
1,069,391


1,073,501

Total Deferred Credits and Other Liabilities
9,671,796


9,613,640







Long-Term Debt
12,009,264


11,775,889

 
 
 
 
Rate Reduction Bonds
604,936

 

 
 
 
 
Noncontrolling Interest – Preferred Stock of Subsidiaries
155,570


155,570







Common Shareholders' Equity:
 

 
Common Shares
1,669,392


1,669,392

Capital Surplus, Paid In
6,229,247


6,239,940

Retained Earnings
3,753,343


3,561,084

Accumulated Other Comprehensive Loss
(60,988
)

(66,403
)
Treasury Stock
(317,771
)

(317,771
)
Common Shareholders' Equity
11,273,223


11,086,242







Total Liabilities and Capitalization
$
37,244,344


$
36,220,386


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 June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars, Except Share Information)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Operating Revenues
$
1,853,856

 
$
1,762,811

 
$
4,141,818

 
$
3,867,946

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Purchased Power, Fuel and Transmission
653,915

 
549,704

 
1,600,662

 
1,303,353

Operations and Maintenance
293,858

 
310,193

 
626,406

 
648,500

Depreciation
199,140

 
189,881

 
403,406

 
376,686

Amortization
36,203

 
(7,807
)
 
81,397

 
16,210

Energy Efficiency Programs
101,955

 
116,398

 
236,196

 
262,556

Taxes Other Than Income Taxes
177,431

 
156,234

 
359,865

 
311,455

Total Operating Expenses
1,462,502

 
1,314,603

 
3,307,932

 
2,918,760

Operating Income
391,354

 
448,208

 
833,886

 
949,186

Interest Expense
126,404

 
107,329

 
247,533

 
210,758

Other Income, Net
50,149

 
29,022

 
83,938

 
50,641

Income Before Income Tax Expense
315,099

 
369,901

 
670,291

 
789,069

Income Tax Expense
70,452

 
137,272

 
154,219

 
295,103

Net Income
244,647

 
232,629

 
516,072

 
493,966

Net Income Attributable to Noncontrolling Interests
1,880

 
1,880

 
3,759

 
3,759

Net Income Attributable to Common Shareholders
$
242,767

 
$
230,749

 
$
512,313

 
$
490,207

 
 
 
 
 
 
 
 
Basic and Diluted Earnings Per Common Share
$
0.76

 
$
0.72

 
$
1.61

 
$
1.54

 
 
 
 
 
 
 
 
Dividends Declared Per Common Share
$
0.51

 
$
0.48

 
$
1.01

 
$
0.95

 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
 
 
 
 
Basic
317,344,596

 
317,391,365

 
317,370,825

 
317,427,258

Diluted
317,885,187

 
317,947,194

 
317,939,094

 
318,035,864


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Net Income
$
244,647

 
$
232,629

 
$
516,072

 
$
493,966

Other Comprehensive Income/(Loss), Net of Tax:
 
 
 
 
 
 
 
Qualified Cash Flow Hedging Instruments
471

 
514

 
1,195

 
1,048

Changes in Unrealized (Losses)/Gains on
  Marketable Securities
(144
)
 
960

 
(588
)
 
2,605

Changes in Funded Status of Pension, SERP and
   PBOP Benefit Plans
1,815

 
(2,268
)
 
4,808

 
(1,306
)
Other Comprehensive Income/(Loss), Net of Tax
2,142

 
(794
)
 
5,415

 
2,347

Comprehensive Income Attributable to
  Noncontrolling Interests
(1,880
)
 
(1,880
)
 
(3,759
)
 
(3,759
)
Comprehensive Income Attributable to
  Common Shareholders
$
244,909

 
$
229,955

 
$
517,728

 
$
492,554


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2



EVERSOURCE ENERGY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017




Operating Activities:
 

 
Net Income
$
516,072


$
493,966

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:
 

 
Depreciation
403,406


376,686

Deferred Income Taxes
161,883


269,505

Pension, SERP and PBOP Expense, Net
3,317


11,242

Pension and PBOP Contributions
(179,002
)

(91,400
)
Regulatory Overrecoveries, Net
36,669


85,792

Amortization
81,397


16,210

Other
(74,006
)

(110,355
)
Changes in Current Assets and Liabilities:
 

 
Receivables and Unbilled Revenues, Net
(52,923
)

(7,660
)
Fuel, Materials, Supplies and Inventory
65,609


42,425

Taxes Receivable/Accrued, Net
(132,999
)

23,980

Accounts Payable
(80,059
)

(168,221
)
Other Current Assets and Liabilities, Net
(51,229
)

(47,220
)
Net Cash Flows Provided by Operating Activities
698,135


894,950





Investing Activities:
 

 
Investments in Property, Plant and Equipment
(1,251,678
)

(1,146,952
)
Proceeds from Sales of Marketable Securities
316,252


373,853

Purchases of Marketable Securities
(314,406
)

(394,379
)
Proceeds from the Sale of PSNH Generation Assets
116,809

 

Other Investing Activities
(14,122
)

(20,439
)
Net Cash Flows Used in Investing Activities
(1,147,145
)

(1,187,917
)




Financing Activities:
 

 
Cash Dividends on Common Shares
(320,055
)

(301,042
)
Cash Dividends on Preferred Stock
(3,759
)

(3,759
)
Decrease in Notes Payable
(98,500
)

(211,000
)
Issuance of Rate Reduction Bonds
635,663

 

Issuance of Long-Term Debt
1,150,000


950,000

Retirements of Long-Term Debt
(860,421
)

(150,000
)
Other Financing Activities
(17,958
)

(19,254
)
Net Cash Flows Provided by Financing Activities
484,970


264,945

Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash
35,960


(28,022
)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period
85,890


106,750

Cash, Cash Equivalents and Restricted Cash - End of Period
$
121,850


$
78,728


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



3




THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)
As of June 30, 2018
 
As of December 31, 2017
 
 
 
 
ASSETS
 
 
 
Current Assets:
 
 
 
Cash
$
1,794

 
$
6,028

Receivables, Net
385,419

 
370,676

Accounts Receivable from Affiliated Companies
34,555

 
28,181

Unbilled Revenues
53,114

 
54,154

Materials, Supplies and Inventory
55,795

 
48,438

Regulatory Assets
198,242

 
200,281

Prepayments and Other Current Assets
20,784

 
46,926

Total Current Assets
749,703

 
754,684

 
 
 
 
Property, Plant and Equipment, Net
8,604,611

 
8,271,030

 
 
 
 
Deferred Debits and Other Assets:
 
 
 
Regulatory Assets
1,556,977

 
1,444,935

Other Long-Term Assets
172,510

 
159,597

Total Deferred Debits and Other Assets
1,729,487

 
1,604,532

 
 
 
 
Total Assets
$
11,083,801

 
$
10,630,246

 
 
 
 
LIABILITIES AND CAPITALIZATION
 
 
 
Current Liabilities:
 
 
 
Notes Payable to Eversource Parent
$
24,000

 
$
69,500

Long-Term Debt – Current Portion
250,000

 
300,000

Accounts Payable
378,862

 
367,605

Accounts Payable to Affiliated Companies
88,138

 
82,201

Obligations to Third Party Suppliers
54,260

 
52,860

Derivative Liabilities
52,214

 
54,392

Regulatory Liabilities
72,183

 
38,967

Other Current Liabilities
119,839

 
127,234

Total Current Liabilities
1,039,496

 
1,092,759

 
 
 
 
Deferred Credits and Other Liabilities:
 
 
 
Accumulated Deferred Income Taxes
1,157,165

 
1,103,367

Regulatory Liabilities
1,124,721

 
1,112,136

Derivative Liabilities
394,270

 
376,918

Accrued Pension, SERP and PBOP
306,469

 
354,469

Other Long-Term Liabilities
119,518

 
128,135

Total Deferred Credits and Other Liabilities
3,102,143

 
3,075,025

 
 
 
 
Long-Term Debt
3,003,286

 
2,759,135

 
 
 
 
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
2,210,765

 
2,110,765

Retained Earnings
1,551,241

 
1,415,741

Accumulated Other Comprehensive Income
318

 
269

Common Stockholder's Equity
3,822,676

 
3,587,127

 
 
 
 
Total Liabilities and Capitalization
$
11,083,801

 
$
10,630,246


The accompanying notes are an integral part of these unaudited condensed financial statements.

4



THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Operating Revenues
$
694,892

 
$
666,558

 
$
1,479,875

 
$
1,398,867

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Purchased Power and Transmission
234,335

 
207,211

 
536,223

 
452,149

Operations and Maintenance
109,685

 
108,918

 
226,977

 
237,655

Depreciation
69,383

 
60,797

 
136,881

 
120,549

Amortization of Regulatory Assets, Net
15,400

 
11,422

 
43,405

 
24,225

Energy Efficiency Programs
18,606

 
32,153

 
41,366

 
68,744

Taxes Other Than Income Taxes
84,375

 
70,437

 
174,676

 
144,414

Total Operating Expenses
531,784

 
490,938

 
1,159,528

 
1,047,736

Operating Income
163,108

 
175,620

 
320,347

 
351,131

Interest Expense
38,674

 
35,299

 
75,498

 
70,264

Other Income, Net
7,063

 
4,221

 
13,623

 
7,489

Income Before Income Tax Expense
131,497

 
144,542

 
258,472

 
288,356

Income Tax Expense
31,785

 
53,249

 
60,192

 
106,855

Net Income
$
99,712

 
$
91,293

 
$
198,280

 
$
181,501


The accompanying notes are an integral part of these unaudited condensed financial statements.


CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Net Income
$
99,712

 
$
91,293

 
$
198,280

 
$
181,501

Other Comprehensive Income, Net of Tax:
 
 
 
 
 
 
 
Qualified Cash Flow Hedging Instruments
13

 
91

 
65

 
202

Changes in Unrealized (Losses)/Gains on
  Marketable Securities
(4
)
 
33

 
(16
)
 
89

Other Comprehensive Income, Net of Tax
9

 
124

 
49

 
291

Comprehensive Income
$
99,721

 
$
91,417

 
$
198,329

 
$
181,792


The accompanying notes are an integral part of these unaudited condensed financial statements.


5



THE CONNECTICUT LIGHT AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
 
 
 
Operating Activities:
 
 
 
Net Income
$
198,280

 
$
181,501

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:
 
 
 
Depreciation
136,881

 
120,549

Deferred Income Taxes
50,915

 
73,277

Pension, SERP, and PBOP Expense
3,861

 
4,321

Pension and PBOP Contributions
(41,150
)
 
(1,250
)
Regulatory (Under)/Over Recoveries, Net
(39,908
)
 
9,762

Amortization of Regulatory Assets, Net
43,405

 
24,225

Other
(33,078
)
 
(27,585
)
Changes in Current Assets and Liabilities:
 
 
 
Receivables and Unbilled Revenues, Net
(34,772
)
 
(22,333
)
Taxes Receivable/Accrued, Net
105

 
41,733

Accounts Payable
(30,805
)
 
(63,813
)
Other Current Assets and Liabilities, Net
14,377

 
15,304

Net Cash Flows Provided by Operating Activities
268,111

 
355,691

 
 
 
 
Investing Activities:
 
 
 
Investments in Property, Plant and Equipment
(457,677
)
 
(419,891
)
Other Investing Activities
110

 
132

Net Cash Flows Used in Investing Activities
(457,567
)
 
(419,759
)
 
 
 
 
Financing Activities:
 
 
 
Cash Dividends on Common Stock
(60,000
)
 
(99,200
)
Cash Dividends on Preferred Stock
(2,779
)
 
(2,779
)
Capital Contributions from Eversource Parent
100,000

 

Issuance of Long-Term Debt
500,000

 
300,000

Retirement of Long-Term Debt
(300,000
)
 
(150,000
)
(Decrease)/Increase in Notes Payable to Eversource Parent
(45,500
)
 
21,000

Other Financing Activities
(6,189
)
 
(3,894
)
Net Cash Flows Provided by Financing Activities
185,532

 
65,127

Net (Decrease)/Increase in Cash and Restricted Cash
(3,924
)
 
1,059

Cash and Restricted Cash - Beginning of Period
9,619

 
8,403

Cash and Restricted Cash - End of Period
$
5,695

 
$
9,462


The accompanying notes are an integral part of these unaudited condensed financial statements.




6




NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)
As of June 30, 2018
 
As of December 31, 2017
 
 
 
 
ASSETS
 

 
 

Current Assets:
 
 
 
Cash and Cash Equivalents
$
67

 
$
1,763

Receivables, Net
382,019

 
341,341

Accounts Receivable from Affiliated Companies
20,406

 
40,723

Unbilled Revenues
48,668

 
49,865

Materials, Supplies and Inventory
50,459

 
95,517

Regulatory Assets
244,542

 
333,882

Prepayments and Other Current Assets
58,105

 
24,499

Total Current Assets
804,266

 
887,590

 
 
 
 
Property, Plant and Equipment, Net
8,450,942

 
8,246,494

 
 
 
 
Deferred Debits and Other Assets:
 
 
 
Regulatory Assets
1,271,158

 
1,190,575

Prepaid PBOP
147,698

 
126,948

Other Long-Term Assets
93,240

 
84,766

Total Deferred Debits and Other Assets
1,512,096

 
1,402,289

 
 
 
 
Total Assets
$
10,767,304

 
$
10,536,373

 
 
 
 
LIABILITIES AND CAPITALIZATION
 
 
 
Current Liabilities:
 
 
 
Notes Payable
$
443,810

 
$
234,000

Notes Payable to Eversource Parent
4,000

 

Accounts Payable
315,875

 
340,115

Accounts Payable to Affiliated Companies
78,305

 
91,260

Obligations to Third Party Suppliers
101,037

 
88,721

Renewable Portfolio Standards Compliance Obligations
65,361

 
111,524

Regulatory Liabilities
90,222

 
79,562

Other Current Liabilities
61,968

 
79,916

Total Current Liabilities
1,160,578

 
1,025,098

 
 
 
 
Deferred Credits and Other Liabilities:
 
 
 
Accumulated Deferred Income Taxes
1,301,309

 
1,275,814

Regulatory Liabilities
1,540,755

 
1,514,451

Accrued Pension and SERP
17,624

 
89,995

Other Long-Term Liabilities
209,886

 
198,176

Total Deferred Credits and Other Liabilities
3,069,574

 
3,078,436

 
 
 
 
Long-Term Debt
2,944,266

 
2,943,759

 
 
 
 
Preferred Stock Not Subject to Mandatory Redemption
43,000

 
43,000

 
 
 
 
Common Stockholder's Equity:
 
 
 
Common Stock

 

Capital Surplus, Paid In
1,603,442

 
1,502,942

Retained Earnings
1,948,052

 
1,944,961

Accumulated Other Comprehensive Loss
(1,608
)
 
(1,823
)
Common Stockholder's Equity
3,549,886

 
3,446,080

 
 
 
 
Total Liabilities and Capitalization
$
10,767,304


$
10,536,373


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7



NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Operating Revenues
$
690,737

 
$
704,702

 
$
1,460,865

 
$
1,438,510

 
 
 
 
 
 
 
 
Operating Expenses:
 

 
 

 
 

 
 

Purchased Power and Transmission
266,108

 
231,039

 
598,687

 
504,891

Operations and Maintenance
102,163

 
111,820

 
220,844

 
227,692

Depreciation
64,051

 
68,477

 
134,593

 
135,695

Amortization of Regulatory Assets, Net
11,954

 
2,623

 
18,318

 
7,112

Energy Efficiency Programs
65,184

 
67,955

 
139,978

 
145,932

Taxes Other Than Income Taxes
47,627

 
44,844

 
95,815

 
82,664

Total Operating Expenses
557,087

 
526,758

 
1,208,235

 
1,103,986

Operating Income
133,650

 
177,944

 
252,630

 
334,524

Interest Expense
27,359

 
29,626

 
53,822

 
57,905

Other Income, Net
14,269

 
7,096

 
26,870

 
15,445

Income Before Income Tax Expense
120,560

 
155,414

 
225,678

 
292,064

Income Tax Expense
32,639

 
60,431

 
60,607

 
113,700

Net Income
$
87,921

 
$
94,983

 
$
165,071

 
$
178,364


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Net Income
$
87,921

 
$
94,983

 
$
165,071

 
$
178,364

Other Comprehensive Income, Net of Tax:
 
 
 
 
 
 
 
  Changes in Funded Status of SERP Benefit Plan
1

 
(4
)
 
2

 
(8
)
  Qualified Cash Flow Hedging Instruments
109

 
110

 
218

 
219

  Changes in Unrealized (Losses)/Gains on
     Marketable Securities
(1
)
 
9

 
(5
)
 
25

Other Comprehensive Income, Net of Tax
109

 
115

 
215

 
236

Comprehensive Income
$
88,030

 
$
95,098

 
$
165,286

 
$
178,600


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


8



NSTAR ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
 
 
 
Operating Activities:
 

 
 

Net Income
$
165,071

 
$
178,364

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:
 

 
 

Depreciation
134,593

 
135,695

Deferred Income Taxes
29,238

 
92,223

Pension, SERP and PBOP Income, Net
(19,785
)
 
(5,125
)
Pension and PBOP Contributions
(59,156
)
 
(15,360
)
Regulatory Overrecoveries, Net
34,090

 
9,428

Amortization of Regulatory Assets, Net
18,318

 
7,112

Other
(3,345
)
 
(18,883
)
Changes in Current Assets and Liabilities:
 

 
 

Receivables and Unbilled Revenues, Net
(40,073
)
 
(28,890
)
Materials, Supplies and Inventory
45,058

 
30,056

Taxes Receivable/Accrued, Net
(37,268
)
 
36,030

Accounts Payable
(17,194
)
 
(148,773
)
Other Current Assets and Liabilities, Net
(46,861
)
 
(56,345
)
Net Cash Flows Provided by Operating Activities
202,686

 
215,532

 
 
 
 
Investing Activities:
 

 
 

Investments in Property, Plant and Equipment
(356,497
)
 
(338,495
)
Other Investing Activities
31

 
(3,580
)
Net Cash Flows Used in Investing Activities
(356,466
)
 
(342,075
)
 
 
 
 
Financing Activities:
 

 
 

Cash Dividends on Common Stock
(161,000
)
 
(112,000
)
Cash Dividends on Preferred Stock
(980
)
 
(980
)
Capital Contributions from Eversource Parent
100,500

 
1,800

Increase/(Decrease) in Notes Payable
213,810

 
(108,800
)
Issuance of Long-Term Debt

 
350,000

Other Financing Activities
(158
)
 
(3,159
)
Net Cash Flows Provided by Financing Activities
152,172

 
126,861

(Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash
(1,608
)
 
318

Cash, Cash Equivalents and Restricted Cash - Beginning of Period
14,708

 
15,506

Cash, Cash Equivalents and Restricted Cash - End of Period
$
13,100

 
$
15,824


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


9




PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars)
As of June 30, 2018
 
As of December 31, 2017
 
 
 
 
ASSETS
 
 
 
Current Assets:
 
 
 
Cash
$
379

 
$
900

Receivables, Net
93,735

 
92,774

Accounts Receivable from Affiliated Companies
20,235

 
5,297

Unbilled Revenues
40,452

 
49,448

Taxes Receivable
31,701

 
5,838

Materials, Supplies and Inventory
32,629

 
40,285

Regulatory Assets
87,504

 
130,134

Prepayments and Other Current Assets
24,335

 
23,093

Assets Held for Sale
59,431

 
219,550

Total Current Assets
390,401

 
567,319

 
 
 
 
Property, Plant and Equipment, Net
2,763,610

 
2,642,274

 
 
 
 
Deferred Debits and Other Assets:
 
 
 
Regulatory Assets
901,718

 
810,677

Other Long-Term Assets
46,448

 
42,391

Total Deferred Debits and Other Assets
948,166

 
853,068

 
 
 
 
Total Assets
$
4,102,177

 
$
4,062,661

 
 
 
 
LIABILITIES AND CAPITALIZATION
 
 
 
Current Liabilities:
 
 
 
Notes Payable to Eversource Parent
$
118,700

 
$
262,900

Long-Term Debt – Current Portion

 
110,000

Rate Reduction Bonds – Current Portion
30,727

 

Accounts Payable
123,717

 
128,685

Accounts Payable to Affiliated Companies
26,583

 
24,676

Dividends Payable to Eversource Parent

 
150,000

Renewable Portfolio Standards Compliance Obligations
22,185

 
27,765

Regulatory Liabilities
30,023

 
6,251

Other Current Liabilities
43,540

 
40,159

Total Current Liabilities
395,475

 
750,436

 
 
 
 
Deferred Credits and Other Liabilities:
 
 
 
Accumulated Deferred Income Taxes
487,441

 
443,468

Regulatory Liabilities
447,896

 
444,397

Accrued Pension, SERP and PBOP
129,870

 
124,639

Other Long-Term Liabilities
35,596

 
56,689

Total Deferred Credits and Other Liabilities
1,100,803

 
1,069,193

 
 
 
 
Long-Term Debt
893,960

 
892,438

 
 
 
 
Rate Reduction Bonds
604,936

 

 
 
 
 
Common Stockholder's Equity:
 
 
 
Common Stock

 

Capital Surplus, Paid In
538,134

 
843,134

Retained Earnings
572,253

 
511,382

Accumulated Other Comprehensive Loss
(3,384
)
 
(3,922
)
Common Stockholder's Equity
1,107,003

 
1,350,594

 
 
 
 
Total Liabilities and Capitalization
$
4,102,177

 
$
4,062,661


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


10



PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Operating Revenues
$
235,146

 
$
230,383

 
$
502,497

 
$
483,541

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Purchased Power, Fuel and Transmission
83,494

 
60,442

 
193,212

 
122,189

Operations and Maintenance
46,487

 
66,569

 
97,867

 
130,533

Depreciation
22,808

 
32,447

 
46,301

 
63,182

Amortization of Regulatory Assets/(Liabilities), Net
8,926

 
(18,937
)
 
13,961

 
(13,492
)
Energy Efficiency Programs
4,674

 
3,287

 
9,831

 
7,032

Taxes Other Than Income Taxes
21,879

 
23,118

 
38,680

 
44,001

Total Operating Expenses
188,268

 
166,926

 
399,852

 
353,445

Operating Income
46,878

 
63,457

 
102,645

 
130,096

Interest Expense
14,612

 
12,970

 
27,386

 
25,780

Other Income, Net
3,409

 
1,891

 
8,159

 
4,703

Income Before Income Tax Expense
35,675

 
52,378

 
83,418

 
109,019

Income Tax Expense
9,896

 
20,787

 
22,547

 
43,116

Net Income
$
25,779

 
$
31,591

 
$
60,871

 
$
65,903


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Net Income
$
25,779

 
$
31,591

 
$
60,871

 
$
65,903

Other Comprehensive Income, Net of Tax:
 
 
 
 
 
 
 
Qualified Cash Flow Hedging Instruments
277

 
290

 
567

 
581

Changes in Unrealized (Losses)/Gains on
   Marketable Securities
(8
)
 
58

 
(29
)
 
155

Other Comprehensive Income, Net of Tax
269

 
348

 
538

 
736

Comprehensive Income
$
26,048

 
$
31,939

 
$
61,409

 
$
66,639


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


11



PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Six Months Ended June 30,
(Thousands of Dollars)
2018
 
2017
 
 
 
 
Operating Activities:
 
 
 
Net Income
$
60,871

 
$
65,903

Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:
 
 
 
Depreciation
46,301

 
63,182

Deferred Income Taxes
41,981

 
37,670

Regulatory Underrecoveries, Net
(29,816
)
 
(1,964
)
Amortization of Regulatory Assets/(Liabilities), Net
13,961

 
(13,492
)
Other
(3,428
)
 
(6,747
)
Changes in Current Assets and Liabilities:
 
 
 
Receivables and Unbilled Revenues, Net
(10,510
)
 
(1,427
)
Fuel, Materials, Supplies and Inventory
21,803

 
12,288

Taxes Receivable/Accrued, Net
(15,475
)
 
(20,945
)
Accounts Payable
(4,843
)
 
2,236

Other Current Assets and Liabilities, Net
(8,050
)
 
5,422

Net Cash Flows Provided by Operating Activities
112,795

 
142,126

 
 
 
 
Investing Activities:
 
 
 
Investments in Property, Plant and Equipment
(149,925
)
 
(155,737
)
Proceeds from the Sale of Generation Assets
116,809

 

Other Investing Activities
243

 
26

Net Cash Flows Used in Investing Activities
(32,873
)
 
(155,711
)
 
 
 
 
Financing Activities:
 
 
 
Cash Dividends on Common Stock
(150,000
)
 
(23,900
)
Capital Contribution from Eversource Parent
225,000

 

Return of Capital
(530,000
)
 

Issuance of Rate Reduction Bonds
635,663

 

Retirements of Long-Term Debt
(110,000
)
 

(Decrease)/Increase in Notes Payable to Eversource Parent
(144,200
)
 
33,200

Other Financing Activities
(75
)
 
(150
)
Net Cash Flows (Used in)/Provided by Financing Activities
(73,612
)
 
9,150

Net Increase/(Decrease) in Cash and Restricted Cash
6,310

 
(4,435
)
Cash and Restricted Cash - Beginning of Period
2,191

 
5,953

Cash and Restricted Cash - End of Period
$
8,501

 
$
1,518


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


12




EVERSOURCE ENERGY AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY
NSTAR ELECTRIC COMPANY AND SUBSIDIARY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

COMBINED NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)

Refer to the Glossary of Terms included in this combined Quarterly Report on Form 10-Q for abbreviations and acronyms used throughout the combined notes to the unaudited condensed financial statements.

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.    Basis of Presentation
Eversource Energy is a public utility holding company primarily engaged, through its wholly-owned regulated utility subsidiaries, in the energy delivery business.  Eversource Energy's wholly-owned regulated utility subsidiaries consist of CL&P, NSTAR Electric and PSNH (electric utilities), Yankee Gas and NSTAR Gas (natural gas utilities) and Aquarion (water utilities).  Eversource provides energy delivery and/or water service to approximately four million electric, natural gas and water customers through eight regulated utilities in Connecticut, Massachusetts and New Hampshire.

On December 31, 2017, Western Massachusetts Electric Company ("WMECO") was merged into NSTAR Electric. In accordance with accounting guidance on combinations between entities under common control, the net assets, results of operations and cash flows of WMECO are reflected in the NSTAR Electric financial statements. NSTAR Electric's financial statements for all prior periods presented in this combined Quarterly Report on Form 10-Q have been retrospectively recast as if the merger occurred on the first day of the earliest reporting period.  

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 2017 Form 10-K, which was filed with the SEC on February 26, 2018. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

The financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly Eversource's, CL&P's, NSTAR Electric's and PSNH's financial position as of June 30, 2018 and December 31, 2017, the results of operations and comprehensive income for the three and six months ended June 30, 2018 and 2017, and the cash flows for the six months ended June 30, 2018 and 2017.  The results of operations and comprehensive income for the three and six months ended June 30, 2018 and 2017 and the cash flows for the six months ended June 30, 2018 and 2017 are not necessarily indicative of the results expected for a full year.  

Eversource consolidates CYAPC and YAEC because CL&P's, NSTAR Electric's and PSNH's combined ownership interest 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's utility subsidiaries' electric and natural gas distribution (including generation assets), transmission, and water distribution 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 December 22, 2017, the Tax Cuts and Jobs Act became law, which amended existing federal tax rules and included numerous provisions that impacted corporations. In particular, this act reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. Our regulated companies have established a reserve to reflect the difference between the 35 percent federal corporate income tax rate included in rates charged to customers and the 21 percent federal income tax rate. Eversource, CL&P, NSTAR Electric and PSNH's effective tax rate has decreased, as compared to the prior period, as a result of incurring a lower federal income tax expense, which is reflected on the statements of income for the three and six months ended June 30, 2018. See Note 16, "Revenues," for further information on the amounts reserved in revenues.


13



B.    Accounting Standards
Accounting Standards Issued but Not Yet Effective:  In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, Leases, which changes existing lease accounting guidance and is required to be applied in the first quarter of 2019, with earlier application permitted. The Company will implement the new leases standard in the first quarter of 2019 and apply the 2016-02 lease criteria to new leases and lease renewals entered into effective January 1, 2019.  The requirements of the new leases standard include balance sheet recognition of leases previously deemed to be operating leases, and additional disclosure requirements.  The Company is in the process of evaluating what impact the new leases standard will have on its financial statements, including reviewing its lease population and determining which of several practical expedients provided in the new guidance it will elect.  As of December 31, 2017, Eversource’s total future undiscounted minimum rental payments, excluding executory costs, under long-term noncancelable operating and capital leases were less than $100 million.

Accounting Standards Recently Adopted: On January 1, 2018, Eversource, CL&P, NSTAR Electric and PSNH adopted ASU 2014-09, Revenue from Contracts with Customers, which amended existing revenue recognition guidance, using the modified retrospective method (cumulatively at the date of initial application) applying it only to contracts that were not complete at January 1, 2018. Under this method of adoption, prior year reported results were not restated. Implementation of the ASU did not have a material effect on the results of operations, financial position or cash flows of Eversource, CL&P, NSTAR Electric or PSNH. See Note 16, "Revenues," for further information.

The Company identified an item that was accounted for differently under the new revenue guidance, as compared to the previously existing guidance. As a result of applying guidance on the unit of account under the new standard, purchases of power from and sales of power to ISO-New England are now accounted for net by the hour, rather than net by the month. This change increased Operating Revenues and Purchased Power, Fuel and Transmission by $3 million and $22 million, respectively, for the three and six months ended June 30, 2018, with no impact on net income.

On January 1, 2018, Eversource adopted ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities.  The ASU removed the available-for-sale designation for equity securities, whereby changes in fair value were previously recorded in accumulated other comprehensive income within shareholders' equity, and required changes in fair value of all equity securities to be recorded in earnings effective January 1, 2018. There was no cumulative effect of adoption. Unrealized gains recorded in Other Income, Net were $0.9 million and $0.2 million for the three and six months ended June 30, 2018, respectively. For further information, see Note 5, "Marketable Securities," to the financial statements.  

On January 1, 2018, Eversource, CL&P, NSTAR Electric and PSNH adopted ASU 2017-07, Compensation – Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU required separate presentation of service cost from other components of net pension and PBOP costs, with the other components presented as non-operating income and not subject to capitalization. The ASU has been applied retrospectively for the separate presentation in the income statement of service costs and other components and prospectively in the balance sheet for the capitalization of only the service cost component. As of June 30, 2018, the non-service cost components of net pension, SERP and PBOP costs that were not capitalized in plant were recorded as an increase to regulatory liabilities of approximately $20 million, as these amounts continue to be included in rates. See Note 1F, "Summary of Significant Accounting Policies - Other Income, Net," to the financial statements for the portion of pension and PBOP costs that are presented as non-operating income for the three and six months ended June 30, 2018 and 2017. For the three months ended June 30, 2017, the amounts which were previously presented within Operations and Maintenance expense on the statements of income, totaled $7.5 million at Eversource, $0.4 million at CL&P, $4.8 million at NSTAR Electric and $1.5 million at PSNH, and have been retrospectively presented to Other Income, Net. For the six months ended June 30, 2017, these amounts were $15.5 million at Eversource, $0.9 million at CL&P, $9.8 million at NSTAR Electric and $3.1 million at PSNH.

On January 1, 2018, Eversource, CL&P, NSTAR Electric and PSNH adopted two accounting standards relating to the statement of cash flows; ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, and ASU 2016-18, Restricted Cash. As a result of implementing ASU 2016-15, dividends from equity method investments of $10.4 million and $9.4 million for the six months ended June 30, 2018 and 2017, respectively, are presented in operating activities at Eversource, for which the 2017 amounts were previously classified in investing activities. ASU 2016-18 required that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Both standards were applied retrospectively, as required, and neither had a material impact on Eversource's, CL&P's, NSTAR Electric's or PSNH's statements of cash flows. See Note 1H, "Summary of Significant Accounting Policies - Supplemental Cash Flow Information," to the financial statements for a reconciliation of cash and cash equivalents as reported on the balance sheet to the statement of cash flows, which includes amounts described as restricted cash and restricted cash equivalents.

C.    Northern Pass
Northern Pass is Eversource's planned 1,090 MW HVDC transmission line that will interconnect from the Québec-New Hampshire border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire.  As of June 30, 2018, our capitalized Northern Pass project costs were approximately $297 million.

In March 2018, the Massachusetts EDCs terminated the selection of, and subsequent contract negotiations with, Northern Pass under the Massachusetts Clean Energy RFP, and the New Hampshire Site Evaluation Committee ("NHSEC") issued a written decision denying Northern Pass’ siting application. The NHSEC denial of Northern Pass' siting application caused us to review the recoverability of our Northern Pass project costs in the first quarter of 2018. In this recoverability review, we estimated undiscounted expected project cash flows and compared the result to our estimated project costs to determine whether the recorded amount was recoverable. Our undiscounted cash flows were substantially in excess of our estimated project costs. We completed this analysis and concluded that our project costs were recoverable as of March 31, 2018, based on our expectation that the Northern Pass project remains probable of being placed in service.

14




On April 27, 2018, NPT filed a motion for rehearing with the NHSEC and on July 12, 2018, the NHSEC issued its written decision denying Northern Pass’ motion for rehearing. These events did not require an additional review of the recoverability of project costs as of June 30, 2018. We are preparing to initiate an appeal to the New Hampshire Supreme Court, based on the NHSEC’s failure to follow applicable law in its review of the project. In parallel, Northern Pass intends to pursue all available options to secure NHSEC approval and to construct the project.

Consistent with Eversource’s and HQ’s long-term relationship to bring clean energy into New England, Eversource and HQ remain committed to Northern Pass and the many benefits this project will bring to our customers and the region.  If as a result of future events and changes in circumstances a new recoverability review were to conclude that our project costs are not recoverable, then we would reduce Northern Pass' project costs to the estimated fair value, which could result in most of our $297 million of capitalized project costs being written off. Such a write off could have a material adverse effect on our financial position and results of operations.

D.    Provision for Uncollectible Accounts
Eversource, including CL&P, NSTAR Electric and PSNH, presents its receivables at estimated net realizable value by maintaining a provision for uncollectible accounts.  This provision is determined based upon a variety of judgments and factors, including the application of an estimated uncollectible percentage to each receivable aging category.  The estimate is based upon historical collection and write-off experience and management's assessment of collectability from customers.  Management continuously assesses the collectability of receivables and adjusts collectability estimates based on actual experience.  Receivable balances are written off against the provision for uncollectible accounts when the customer accounts are terminated and these balances are deemed to be uncollectible.

The PURA allows CL&P and Yankee Gas to accelerate the recovery of accounts receivable balances attributable to qualified customers under financial or medical duress (uncollectible hardship accounts receivable) outstanding for greater than 180 days and 90 days, respectively.  The DPU allows NSTAR Electric and NSTAR Gas to recover in rates, amounts associated with certain uncollectible hardship accounts receivable. These uncollectible hardship customer account balances are included in Regulatory Assets or Other Long-Term Assets on the balance sheets.

The total provision for both uncollectible accounts and for uncollectible hardship accounts (the uncollectible hardship balance is included in the total provision) is included in Receivables, Net on the balance sheets, and is as follows:
 
Total Provision for Uncollectible Accounts
 
Uncollectible Hardship
(Millions of Dollars)
As of June 30, 2018
 
As of December 31, 2017
 
As of June 30, 2018
 
As of December 31, 2017
Eversource
$
211.3

 
$
195.7

 
$
126.8

 
$
122.5

CL&P
80.4

 
78.9

 
64.5

 
65.5

NSTAR Electric
77.2

 
69.7

 
44.0

 
40.3

PSNH
11.5

 
10.5

 

 


In accordance with new revenue accounting guidance, bad debt expense associated with customers' accounts receivable included in Operations and Maintenance expense on the statements of income is presented as follows:
 
For the Three Months Ended
 
For the Six Months Ended
(Millions of Dollars)
June 30, 2018
 
June 30, 2017
 
June 30, 2018
 
June 30, 2017
Eversource
$
9.5

 
$
(0.3
)
 
$
29.3

 
$
15.7

CL&P
3.8

 
(4.7
)
 
7.7

 
(1.9
)
NSTAR Electric
3.8

 
0.4

 
11.3

 
6.9

PSNH
1.5