December 2004 Form U-9C-3

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004







FORM U-9C-3




QUARTERLY REPORT PURSUANT TO RULE 58



For the quarterly period ended December 31, 2004



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Northeast Utilities

(Name of registered holding company)






107 Selden Street, Berlin, CT 06037

(Address of Principal Executive Officers)






Name and telephone number of officer to whom inquiries concerning this report should be directed:


John P. Stack, Vice President-Accounting and Controller

Telephone Number:  860-665-2333



GENERAL INSTRUCTIONS




A.

Use of Form


1.

A reporting company, as defined herein, shall file a report on this form within 60 days after the end of each of the first three quarters, and within 90 days after the end of the fourth quarter, of the fiscal year of the registered holding company.  The period beginning on the date of effectiveness of rule 58 and ending at the end of the quarter following the quarter in which the rule becomes effective shall constitute the initial period for which any report shall be filed, if applicable.


2.

The requirement to provide specific information by means of this form supersedes any requirement by order of the Commission to provide identical information by means of periodic certificates under rule 24; but does not so supersede and replace any requirement by order to provide information by means of an annual report on Form U-13-60.  


3.

Information with respect to reporting companies that is required by Form U-13-60 shall be provided exclusively on that form.


4.

Notwithstanding the specific requirements of this form, this Commission may informally request such further information as, in its opinion, may be necessary or appropriate.  


B.

Statements of Monetary Amounts and Deficits


1.

Amounts included in this form and in related financial statements may be expressed in whole dollars, thousands of dollars or hundred thousands of dollars.


2.

Deficits and other similar entries shall be indicated by either brackets or parentheses.  An explanation should be provided by footnote.


C.

Formal Requirements


This form, including exhibits, shall be filed with Commission electronically pursuant to Regulation S-T (17 CFR 232.10 et seq.).  A conformed copy of each such report shall be filed with each state commission having jurisdiction over the retail rates of a public utility company that is an associate company of a reporting company.  Each report shall provide the name and telephone number of the person to whom inquiries concerning this report should be directed.  


D.

Definitions


As used in this form, the word "reporting company" means an energy-related company or gas-related company, as defined in rule 58(b).  All other words and terms have the same meaning as in the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations there under.  








ITEM 1 - ORGANIZATIONAL CHART


Instructions


1.

Complete Item 1 only for the first three calendar quarters of the fiscal year of the registered holding company.


2.

Under the caption "Name of Reporting Company," list each energy-related and gas-related company and each system company that directly or indirectly holds securities thereof.  Add the designation "(new)" for each reporting company of which securities were acquired during the period, and the designation "(*)" for each inactive company.  


3.

Under the caption "Percentage of Voting Securities Held," state the aggregate percentage of the outstanding voting securities of the reporting company held directly or indirectly by the registered holding company at the end of the quarter.  


4.

Provide a narrative description of each reporting company's activities during the reporting period.  




4th quarter not required.




ITEM 2 - ISSUANCES AND RENEWALS OF SECURITIES AND CAPITAL CONTRIBUTIONS

 

 

 

      
                   

Instruction

                  

With respect to a transaction with an associate company, report

             

only the type and principal amount of securities involved.

 

 

 

 

 

 

 

 

      
                   
          

Person

        

Company

 

Type of

 

Principal

     

to Whom

 

Collateral

 

Consideration

 

Company

 

Amount of

Issuing

 

Security

 

Amount of

 

Issue or

 

Cost of

 

Security

 

Given With

 

Received for

 

Contributing

 

Capital

Security

 

Issued

 

Security

 

Renewal

 

Capital

 

Was Issued

 

Security

 

Each Security

 

Capital

 

Contribution

                   

Select

                  

Energy, Inc.

 

No transactions this quarter.

              
                   

Northeast

                  

Generation

                  

Services

                  

Company

 

No transactions this quarter.

              
                   

Select Energy

                  

Contracting,

                  

Inc.

 

No transactions this quarter.

              
                   

Reeds Ferry

                  

Supply Co.,

                  

Inc.

 

No transactions this quarter.

              
                   

HEC/Tobyhanna

                  

Energy

                  

Project, Inc.

 

No transactions this quarter.

              
                   

Yankee Energy

                  

Services

                  

Company

 

No transactions this quarter.

              
                   

ERI/HEC

                  

EFA-Med, LLC

 

No transactions this quarter.

              
                   

E.S. Boulos

                  

Company

 

No transactions this quarter.

              
                   

NGS Mechanical,

                  

Inc.

 

No transactions this quarter.

              
                   

HEC/CJTS

                  

Energy

                  

Center LLC

 

No transactions this quarter.

              
                

   

  

Select Energy

                  

New York, Inc.

 

No transactions this quarter.

              
                   

Woods Electrical

                  








Co., Inc.

 

No transactions this quarter.

              
                   
                   
                   

Does not include securities issued through the NU System Money Pool which issuances are reported pursuant to a Rule 24

      

Certificate in File 70-9755.

                 
                   





ITEM 3 - ASSOCIATE TRANSACTIONS

 

 

 

 

 
        

Instructions

       

1. This item is used to report the performance during the quarter

     

of contracts among reporting companies and their associate

     

companies, including other reporting companies, for service,

     

sales and construction. A copy of any such contract not filed

     

previously should be provided as an exhibit pursuant to Item 6.B.

     
        

2. Parts I and II concern transactions performed by reporting

     

companies on behalf of associate companies, and transactions

     

performed by associate companies on behalf of reporting

     

companies, respectively.

 

 

 

 

 

 

 
        

Part I - Transactions performed by reporting companies on behalf

   

Total Amount

 

         of associate companies.

     

Billed*

 
        
      

Three Months

 

Reporting Company

 

Associate Company

 

Types of

 

Ended

 

Rendering Services

 

Receiving Services

 

Services Rendered

 

December 31, 2004

 
      

(Thousands of Dollars)

 

Northeast

 

Northeast

     

Generation

 

Generation

 

 

   

Services Company

 

Company

 

Power Plant

 

$                              7,127 

1

        

Northeast

       

Generation

 

Northeast Utilities

 

Engineering and

   

Services Company

 

Service Company

 

Miscellaneous Services

$                                   41 

 
        

Northeast

 

The Connecticut

     

Generation

 

Light and Power

 

Engineering and

   

Services Company

 

Company

 

Miscellaneous Services

$                                   12 

 
        

Northeast

 

 

     

Generation

 

Holyoke Water

 

 

   

Services Company

 

Power Company

 

Power Plant

 

$                              5,389 

2

        

Northeast

       

Generation

 

Select Energy

 

 

   

Services Company

 

Services, Inc.

 

Power Plant

 

$                                 382 

 
        

Northeast

       

Generation

 

 

 

Electrical and

   

Services Company

 

E.S. Boulos Company

 

Construction Services

$                                   76 

 
        

Northeast

       

Generation

 

Woods Electrical

 

Electrical and

   

Services Company

 

Co., Inc.

 

Construction Services

$                                   21 

 
        

Northeast

       

Generation

 

Woods Network

 

Electrical and

   

Services Company

 

Services, Inc.

 

Construction Services

$                                   10 

 
        

Northeast

 

Public Service

     

Generation

 

Company of

 

Electrical, Engineering and

  

Services Company

 

New Hampshire

 

Miscellaneous Services

$                                   20 

 






        

Northeast

 

 

 

Power Plant,

   

Generation

 

 

 

Mechanical and

   

Services Company

 

Select Energy, Inc.

 

Miscellaneous Services

$                                     2 

 
        





        
      

Three Months

 

Reporting Company

 

Associate Company

 

Types of

 

Ended

 

Rendering Services

 

Receiving Services

 

Services Rendered

 

December 31, 2004

 
      

(Thousands of Dollars)

 

Northeast

 

 

 

 

 

 

 

Generation

 

 

 

 

   

Services Company

 

Greenport

 

Engineering Services

 

$                                   12 

 
        
  

The Connecticut

     

Woods Electrical

 

Light and Power

 

Electrical and

   

Co., Inc.

 

Company

 

Construction Services

$                                   19 

 
        

Woods Electrical

 

Woods Network

 

Electrical and

   

Co., Inc.

 

Services, Inc.

 

Construction Services

$                                     1 

 
        
  

The Connecticut

 

 

   
  

Light and Power

 

Electrical and

   

E.S. Boulos Company

 

Company

 

Construction Services

$                                 938 

3

        
  

Western

     
  

Massachusetts

 

Electrical and

   

E.S. Boulos Company

 

Electric Company

 

Construction Services

$                                   13 

 
        
  

Public Service

     
  

Company of

 

Electrical and

   

E.S. Boulos Company

 

New Hampshire

 

Construction Services

$                                 123 

4

        

 

 

Select Energy

 

Electrical and

   

E.S. Boulos Company

 

Services, Inc.

 

Construction Services

$                                 896 

5

        

 

 

Select Energy

 

 

   

E.S. Boulos Company

 

Contracting, Inc.

 

Electrical Services

 

$                                     3 

 
        
  

Northeast Generation

 

Electrical and

   

E.S. Boulos Company

 

Services Company

 

Construction Services

$                                   46 

6

        
  

Woods Electrical

 

Electrical and

   

E.S. Boulos Company

 

Co., Inc.

 

Construction Services

$                                   14 

 
        

Reeds Ferry

 

Select Energy

 

Wholesale Purchasing

  

Supply Co., Inc.

 

Contracting, Inc.

 

Services

 

$                                 185 

 
        

Select Energy

 

Select Energy

 

Electrical and

   

Contracting, Inc.

 

Services, Inc.

 

Mechanical Services

 

$                              1,602 

7

        
  

Select Energy

     

Select Energy, Inc.

 

New York, Inc.

 

Miscellaneous Services

$                                   34 

 
        
  

Northeast Generation

 

Engineering and

   

Select Energy, Inc.

 

Services Company

 

Construction Services

$                                     1 

 
        
  

Northeast Utilities

     

Select Energy, Inc.

 

Services Company

 

Miscellaneous Services

$                                 426 

 
        






Select Energy

       

New York, Inc.

 

Select Energy, Inc.

 

Miscellaneous Services

$                                     6 

 
        
        

1 Includes cost of capital of $74.

       

2 Includes cost of capital of $68.

       

3 Includes cost of capital of $53.

       

4 Includes cost of capital of $5.

       

5 Includes cost of capital of $69.

       

6 Includes cost of capital of $4.

       

7 Includes cost of capital of $70.

       

* Total amount billed includes direct costs, overheads and a return.

     





Part II - Transactions performed by associate companies on behalf of reporting companies.  

 

Total Amount

 
      

Billed*

 

 

 

 

     
      

Three Months

 

Associate Company

 

Reporting Company

 

Types of

 

Ended

 

Rendering Services

 

Receiving Services

 

Services Rendered

 

December 31, 2004

 
      

(Thousands of Dollars)

 

Northeast Generation

 

Northeast Generation

     

Company

 

Services Company

 

Miscellaneous Services

$                                 264 

 
        
        

Northeast Utilities

 

Select Energy, Inc.

 

Miscellaneous Services

$                              1,587 

 
        

The Connecticut

       

Light and Power

 

Northeast Generation

     

Company

 

Services Company

 

Miscellaneous Services

$                                   41 

 
        

The Connecticut

       

Light and Power

 

 

     

Company

 

Select Energy, Inc.

 

Miscellaneous Services

$                                     1 

 
        

Holyoke Water

 

Northeast Generation

     

Power Company

 

Services Company

 

Miscellaneous Services

$                                   96 

 
        

Western

       

Massachusetts

 

Northeast Generation

     

Electric Company

 

Services Company

 

Miscellaneous Services

$                                   43 

 

 

       

Western

       

Massachusetts

 

 

     

Electric Company

 

Select Energy, Inc.

 

Miscellaneous Services

$                                     1 

 
        

Northeast Utilities

 

Select Energy

     

Service Company

 

New York, Inc.

 

Miscellaneous Services

$                                 160 

 
        

Northeast Utilities

 

Northeast Generation

     

Service Company

 

Services Company

 

Miscellaneous Services

$                              1,200 

 
        

Northeast Utilities

       

Service Company

 

Select Energy, Inc.

 

Miscellaneous Services

$                              5,890 

 
        

Select Energy

 

HEC/Tobyhana Energy

     

Services, Inc.

 

Project, Inc.

 

Engineering Services

 

$                                 458 

 
        

Select Energy

 

Northeast Generation

     

Services, Inc.

 

Services Company

 

Engineering Services

 

$                            19,057 

1

        

 

 

Select Energy

     

Select Energy, Inc.

 

Services, Inc.

 

Miscellaneous Services

$                                     2 

 
        

1 Includes cost of capital of $430.

       

* Total amount billed includes direct costs, overheads and a return.

     




ITEM 4 - SUMMARY OF AGGREGATE INVESTMENT

    
        

Investments in energy-related companies:

     
     

(Thousands of Dollars)

 
        

Total consolidated capitalization as of

 

12/31/04

$7,020,134 

 

line 1

Total capitalization multiplied by 15%

     

 (line 1 multiplied by 0.15)

   

1,053,020 

 

 

        

Additional investment allowed through 6/30/07 *

 

500,000 

 

 

     

1,553,020 

 

line 2

Total Allowed (greater of $50 million or line 2)

   

 $1,553,020 

line 3

        

Total current aggregate investment:

     

   Select Energy, Inc. and Subsidiary

  

               925,303 

  

   Northeast Generation Services Company

  

21,083 

  

   Select Energy Contracting, Inc.

  

15,641 

  

   Woods Electrical Co., Inc.

   

15,527 

  

   Reeds Ferry Supply Co., Inc.

   

7 

  

   HEC/Tobyhanna Energy Project, Inc.

  

- 

  

   Yankee Energy Services Company

  

7,882 

  

   E.S. Boulos Company

   

7,546 

  

   R.M. Services, Inc.

   

- 

  

   NGS Mechanical, Inc.

   

10 

  

   Acumentrics Corporation

   

  - 

  

   Greenport, LLC

   

501 

  

   ERI/HEC EFA-Med, LLC

   

9 

  

   HEC/CJTS Energy Center LLC

  

12 

  

   Current aggregate investment

   

993,521 

 

     Elimination **

    

12,539 

 

        Total current aggregate investment

   

980,982 

line 4

Difference between the total allowed and the total

    

current aggregate investment of the

     

registered holding company system (line 3 less line 4)

  

$572,038 

line 5

        

 *Per SEC Order dated July 2, 2004 (Rel. No. 35-27868A).

    
        

**

Elimination is for capital contributions made from a parent company who is a

   

reporting company to a subsidiary who is also a reporting company.

   
        





ITEM 5 - OTHER INVESTMENTS

 

 

 

 

 

        

Instruction

       

This item concerns investments in energy-related and gas-related

   

companies that are excluded from the calculation of aggregate

   

investment under rule 58.

 

 

 

 

 

        

Major Line

 

Other

 

Other

   

of Energy-

 

Investment

 

Investment

   

Related

 

in Last

 

in This

 

Reason for Difference

Business

 

U-9C-3 Report

 

U-9C-3 Report

 

in Other Investment

  

(Thousands of Dollars)

   
        

Energy-Related

 

 $                           - 

 *

$                  38,176 

 

Equity earnings and ESOP

        

* The amount was $33,907 in the prior quarter.

   
        



ITEM 6 - FINANCIAL STATEMENTS AND EXHIBITS


Instructions


A.

Financial Statements


1.

Financial statements are required for reporting companies in which the registered holding company system has at least 50% equity or other ownership interest.  For all other rule 58 companies, the registered holding company shall make available to the Commission such financial statements as are available to it.  


2.

For each reporting company, provide a balance sheet as of the end of the quarter and income statements for the three-month and year-to-date periods ending as of the end of the quarter, together with any notes thereto.  Financial statements shall be for the first three quarters of the fiscal year of the registered holding company.  


3.

If a reporting company and each of its subsidiaries engage exclusively in single category of energy-related or gas-related activity, consolidated financial statements may be filed.  


4.

Separate financial statements need not be filed for inactive companies or for companies engaged solely in the ownership of interests in energy-related or gas-related companies.  


B.

Exhibits


1.

Copies of contracts required to be provided by Item 3 shall be filed as exhibits.


2.

A certificate stating that a copy of the report for the previous quarter has been filed with interested state commissions shall be filed as an exhibit.  The certificate shall provide the names and addresses of the state commissions.  



A.

Financial Statements


Select Energy, Inc. and Subsidiary:

 Consolidated Balance Sheet - As of December 31, 2004

 Consolidated Statements of Operations - Three and twelve months ended December 31, 2004


Northeast Generation Services Company (Parent):

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


Select Energy Contracting, Inc.:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


Reeds Ferry Supply Co., Inc.:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


HEC/Tobyhanna Energy Project, Inc.:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004





Yankee Energy Services Company:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


ERI/HEC EFA-Med, LLC:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


E.S. Boulos Company:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


NGS Mechanical, Inc.:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


HEC/CJTS Energy Center LLC:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


Woods Electrical Co., Inc.:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


Greenport Power, LLC:

 Balance Sheet - As of December 31, 2004

 Statements of Income - Three and twelve months ended December 31, 2004


Acumentrics Corporation:

 Not available


R. M. Services, Inc.:

 Inactive as of June 30, 2004


Northeast Utilities (Parent):

 4th quarter not required.



B.                                                                                                                        

Exhibits


Exhibit No.

Description


6.B.1.1a

Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b).


6.B.1.1b

Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b).


6.B.1.1c

Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b).


6.B.1.1d

Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b).




6.B.2.1

The company certifies that a conformed copy of Form U-9C-3 for the previous quarter was filed with the following state commissions:


Ms. Louise E. Rickard

Acting Executive Secretary

Department of Public Utility Control

10 Franklin Square

New Britain, CT 06051


Ms. Mary L. Cottrell, Secretary

Massachusetts Department of Telecommunications and Energy

100 Cambridge Street

Boston, MA 02202


Mr. Thomas B. Getz

Executive Director and Secretary

State of New Hampshire

Public Utilities Commission

8 Old Suncook Road, Building One

Concord, NH 03301-7319




SELECT ENERGY, INC. AND SUBSIDIARY

  
   

CONSOLIDATED BALANCE SHEET

  

(Unaudited)

  
  

   

  

 December 31,

  

2004

  

(Thousands

  

 of dollars)

ASSETS

  
   

Current Assets:

  

  Cash

 

 $               4,137 

  Special deposits

 

46,266 

  Receivables, less provision for uncollectible

  

    accounts of $8,748

 

448,114 

  Accounts receivable from affiliated companies

 

84,770 

  Unbilled revenues

 

57,333 

  Taxes receivable

 

32,884 

  Derivative assets - current

 

55,801 

  Prepaid option premiums

 

29,406 

  Prepayments and other

 

136,687 

  

895,398 

   

Property, Plant and Equipment:

  

  Competitive energy

 

21,529 

     Less: Accumulated depreciation

 

13,312 

  

8,217 

  Construction work in progress

 

1,212 

  

9,429 

   

Deferred Debits and Other Assets:

  

  Goodwill

 

3,200 

  Purchased intangible assets, net

 

10,819 

  Accumulated deferred income taxes

 

3,476 

  Derivative assets - long-term

 

31,647 

  Long-term accounts receivable

 

5,684 

  Long-term contracts asset

 

33,274 

  Other

 

969 

  

89,069 

   

Total Assets

 

$           993,896 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





SELECT ENERGY, INC. AND SUBSIDIARY

  
   

CONSOLIDATED BALANCE SHEET

  

(Unaudited)

  
   
  

 December 31,

  

2004

  

(Thousands

  

 of dollars)

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Notes payable to affiliated companies

 

 $                   99,100 

  Accounts payable

 

480,262 

  Accounts payable to affiliated companies

 

35,366 

  Derivative liabilities - current

 

125,817 

  Unearned option premiums

 

27,165 

  Counterparty deposits

 

57,650 

  Other

 

37,880 

  

863,240 

   

Deferred Credits and Other Liabilities:

  

  Accrued pension

 

1,577 

  Derivative liabilities - long-term

 

15,929 

  Other

 

6,356 

  

23,862 

   

Capitalization:

  

  Long-Term Debt from NU Parent

 

150,000 

   

  Common Stockholder's Equity:

  

    Common stock, $1 par value - authorized

  

      20,000 shares; 100 shares outstanding

 

- 

    Capital surplus, paid in

 

286,197 

    Accumulated deficit

 

 (326,120)

    Accumulated other comprehensive loss

 

 (3,283)

  Common Stockholder's Equity

 

(43,206)

Total Capitalization

 

106,794 

 

  

Total Liabilities and Capitalization

 

 $                 993,896 

  

 

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

          

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





SELECT ENERGY, INC. AND SUBSIDIARY

    
     

CONSOLIDATED STATEMENTS OF OPERATIONS

    

(Unaudited)

    
  

Three Months

 

Twelve Months

  

Ended

 

Ended

  

 December 31,

 

 December 31,

  

2004

 

2004

  

(Thousands of Dollars)

     

Operating Revenues

  

 $                 631,406 

 

 $              2,579,959 

     

Operating Expenses:

  

   

  Operation -

    

    Purchased power, net interchange power

    

     and capacity

 

612,860 

 

2,552,663 

    Other

 

19,895 

 

89,342 

  Depreciation and amortization

 

2,088 

 

7,923 

  Taxes other than income taxes

  

2,408 

 

10,468 

        Total operating expenses

  

637,251 

 

2,660,396 

Operating Loss

  

(5,845)

 

(80,437)

Interest Expense, Net

 

2,912 

 

10,869 

Other Income, Net

 

227 

 

399 

Loss Before Income Tax Benefit

  

(8,530)

 

(90,907)

Income Tax Benefit

  

(2,572)

 

(34,173)

Net Loss

  

 $                   (5,958)

 

$                  (56,734)

     

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the periods shown have been made.

     

See accompanying notes to financial statements.

    





NORTHEAST GENERATION SERVICES COMPANY (PARENT)

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

 December 31,

  

2004

  

(Thousands of

  

Dollars)

   

ASSETS

  
   

Current Assets:

  

  Cash and cash equivalents

 

$                       959 

  Receivables, less provision for uncollectible

  

      accounts of $16

 

1,197 

  Accounts receivable from affiliated companies

 

2,533 

  Taxes receivable

 

3,707 

  Unbilled revenues

 

659 

  Prepayments and other

 

557 

 

 

9,612 

   

Property, Plant and Equipment:

  

  Competitive energy

 

3,682 

     Less: Accumulated depreciation

 

1,381 

  

2,301 

  Construction work in progress

 

55 

 

 

2,356 

   

Deferred Debits and Other Assets:

  

  Accumulated deferred income taxes

 

450 

  Investment in subsidiary companies

 

20,754 

  Other

 

698 

  

21,902 

   

Total Assets

 

$                  33,870 

   
   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





NORTHEAST GENERATION SERVICES COMPANY (PARENT)

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

December 31,

  

2004

  

(Thousands of

  

Dollars)

   

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Notes payable to affiliated companies

 

$                            650 

  Accounts payable

 

5,341 

  Accounts payable to affiliated companies

 

10,206 

  Other

 

1,728 

  

17,925 

   

Deferred Credits and Other Liabilities

  

  Accrued pension

 

1,505 

  Other

 

1,371 

  

2,876 

   

Capitalization:

  

  Long-Term Debt from NU Parent

 

5,000 

   

  Common Stockholder's Equity:

  

    Common stock, $1 par value - 20,000 authorized

  

     and 100 shares outstanding

 

        - 

    Capital surplus, paid in

 

15,428 

    Accumulated deficit

 

 (7,343)

    Accumulated comprehensive loss

 

 (16)

  Common Stockholder's Equity

 

8,069 

Total Capitalization

 

13,069 

   

Total Liabilities and Capitalization

 

$                       33,870 

   
   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  




NORTHEAST GENERATION SERVICES COMPANY (PARENT)

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three Months

 

Twelve Months

  

Ended

 

Ended

  

 December 31,

 

 December 31,

  

2004

 

2004

  

(Thousands of Dollars)

     

Operating Revenues

  

$              21,624 

 

$            62,104 

     

Operating Expenses:

  

   

  Operation -

    

    Other

  

27,061 

 

51,070 

  Maintenance

  

3,576 

 

16,852 

  Depreciation and amortization

  

101 

 

369 

  Taxes other than income taxes

  

362 

 

1,753 

        Total operating expenses

  

31,100 

 

70,044 

Operating Income

  

(9,476)

 

(7,940)

Interest Expense, Net

  

136 

 

494 

Other Loss, Net

 

(161)

 

(347)

Loss Before Income Tax Benefit

 

(9,773)

 

(8,781)

Income Tax Benefit

 

 (3,807)

 

 (3,581)

     

Net Loss

  

$              (5,966)

 

$            (5,200)

     

Note:

 In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the periods shown have been made.

  
  
     

See accompanying notes to financial statements.

    





SELECT ENERGY CONTRACTING, INC.

  
   

BALANCE SHEET

  

(Unaudited)

  
  

December 31,

  

2004

  

(Thousands

  

  of Dollars)

   

ASSETS

  
   

Current Assets:

  

  Cash

 

$               457 

  Receivables, less provision for uncollectible accounts of $983

 

24,254 

  Materials and supplies

 

451 

  Prepayments and other

 

1,297 

 

 

26,459 

   
   

Property, Plant and Equipment:

  

  Competitive energy

 

6,089 

    Less: Accumulated depreciation

 

3,616 

 

 

2,473 

   

Deferred Debits and Other Assets:

  

  Goodwill, net

 

17,220 

  Other

 

3,224 

  

20,444 

   

Total Assets

 

$          49,376 

   
   
   

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the period shown have been made.

  
  
   

See accompanying notes to financial statements.

  
   





SELECT ENERGY CONTRACTING, INC.

  
   

BALANCE SHEET

  

(Unaudited)

  
   
   
  

December 31,

  

2004

  

(Thousands

  

  of Dollars)

   

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Accounts payable

 

$                     6,890 

  Accounts payable to affiliated companies

 

16,920 

  Accrued taxes

 

295 

  Other

 

5,144 

  

29,249 

 

 

 

Deferred Credits and Other Liabilities:

  

  Accumulated deferred income taxes

 

1,654 

  

1,654 

Capitalization:

  

  Common Stockholder's Equity:

  

   Common stock, $1 par value - 100,000 shares

  

    authorized and 100 shares outstanding

 

- 

   Capital surplus, paid in

 

15,389 

   Retained earnings

 

3,084 

  Common Stockholder's Equity

 

18,473 

Total Capitalization

 

18,473 

   

Total Liabilities and Capitalization

 

$                   49,376 

   
  

   

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





SELECT ENERGY CONTRACTING, INC.

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three

 

Twelve

  

Months Ended

 

Months Ended

  

December 31,

 

December 31,

  

2004

 

2004

  

(Thousands of Dollars)

     

Operating Revenues

  

$                        24,314 

 

$                      87,402 

     

Operating Expenses:

  

   

  Operation

 

23,904 

 

86,088 

  Maintenance

 

92 

 

400 

  Depreciation

 

171 

 

962 

        Total operating expenses

  

24,167 

 

87,450 

Operating Income/(Loss)

  

147 

 

(48)

Interest Expense, Net

 

76 

 

187 

Other Income, Net

 

7 

 

55 

Income/(Loss) Before Income Tax Benefit

 

78 

 

 (180)

Income Tax Benefit

  

(723)

 

(762)

Net Income

  

$                             801 

 

$                           582 

     

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the periods shown have been made.

  
  
     

See accompanying notes to financial statements.

    




REEDS FERRY SUPPLY CO., INC.

  
   

BALANCE SHEET

  

(Unaudited)

  
   
   
  

December 31,

  

2004

  

(Thousands

  

of Dollars)

ASSETS

  
   

Current Assets:

  

  Cash

 

$                       5 

  Receivables, net

 

37 

 

 

42 

   

Deferred Debits and Other Assets:

  

  Goodwill, net

 

247 

Total Assets

 

$                   289 

   

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Accounts payable

 

$                     36 

  Accounts payable to affiliated companies

 

295 

  

331 

   

Capitalization:

  

  Common Stockholder's Equity:

  

   Common stock, no par value - 200 shares

  

    authorized and 100 shares outstanding

 

4 

   Capital surplus, paid in

 

3 

   Accumulated deficit

 

 (49)

  Common Stockholder's Equity

 

 (42)

Total Capitalization

 

 (42)

   

Total Liabilities and Capitalization

 

$                   289 

 

  

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  
   





REEDS FERRY SUPPLY CO., INC.

    
     

STATEMENTS OF INCOME

    

(Unaudited)

 

Three

 

Twelve

  

Months Ended

 

Months Ended

  

December 31,

 

December 31,

  

2004

 

2004

     
    

 

     

Operating Revenues

  

$                        185 

 

$                         952 

Operating Expenses

 

185 

 

952 

Net Income

  

$                             - 

 

$                             - 

     

Note:

In the opinion of the Company, all adjustments necessary for a fair

 presentation of financial position for the periods shown have been made.

  
  
     

See accompanying notes to financial statements.

    
     





HEC/TOBYHANNA ENERGY PROJECT, INC.

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

December 31,

  

2004

 

 

(Thousands

  

of Dollars)

ASSETS

  
   

Current Assets:

  

  Special deposits

 

 $              5,575 

  Receivables, net

 

388 

 

 

5,963 

   

Deferred Debits and Other Assets:

  

  Contracts receivable

 

26,650 

  Unamortized debt expense

 

543 

  

27,193 

   

Total Assets

 

$             33,156 

   

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Long-term debt - current portion

 

$                  621 

  Accounts payable to affiliated companies

 

7,616 

  Accrued taxes

 

131 

  Accrued interest

 

668 

  Other

 

280 

 

 

9,316 

   

Capitalization:

  

   Long-Term Debt

 

22,751 

   

  Common Stockholder's Equity:

  

    Common stock, $1 par value - 100 shares authorized and outstanding

 

- 

    Retained earnings

 

1,089 

  Total Common Stockholder's Equity

 

1,089 

   

Total Capitalization

 

23,840 

   

Total Liabilities and Capitalization

 

$             33,156 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  




HEC/TOBYHANNA ENERGY PROJECT, INC.

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

 Three

 

Twelve

  

Months Ended

 

Months Ended

  

December 31,

 

December 31,

  

2004

 

2004

  

   (Thousands of Dollars)

     

Interest Expense, Net

 

$                 454 

 

$              1,824 

Other Income

 

542 

 

2,186 

Income Before Income Tax Expense

  

88 

 

362 

Income Tax Expense

  

40 

 

175 

Net Income

  

$                   48 

 

$                 187 

     

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the periods shown have been made.

 
 
     

See accompanying notes to financial statements.

    





YANKEE ENERGY SERVICES COMPANY

  
   

BALANCE SHEET

  

(Unaudited)

  
   
   
  

December 31,

  

2004

  

(Thousands of

  

Dollars)

ASSETS

  
   

Current Assets:

  

  Cash

 

$                      80 

  Accounts receivable from affiliated companies

 

316 

  Notes receivable from affiliated companies

 

700 

  

1,096 

Deferred Debits and Other Assets:

  

  Accumulated deferred income taxes

 

1,287 

  Investments and other

 

1,302 

  

2,589 

   

Total Assets

 

$                 3,685 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  

 




YANKEE ENERGY SERVICES COMPANY

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

 December 31,

  

 2004

  

(Thousands of

  

Dollars)

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Accounts payable to affiliated companies

 

 $                            448 

  Accrued taxes

 

1 

  Other

 

3 

  

452 

   

Deferred Credits and Other Liabilities:

  

  Other

 

    5 

  

    5 

   

  Common Stockholder's Equity:

  

    Common stock, $0 par value - 10,000 shares

  

     authorized, 200 shares outstanding

 

    1 

    Capital surplus, paid in

 

7,881 

    Accumulated deficit

 

 (4,654)

  Common Stockholder's Equity

 

  3,228 

Total Capitalization

 

  3,228 

 

 

 

Total Liabilities and Capitalization

 

 $                         3,685 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   
   

See accompanying notes to financial statements.

  

 




YANKEE ENERGY SERVICES COMPANY

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three Months

 

Twelve Months

  

Ended

 

Ended

  

 December 31,

 

 December 31,

  

 2004

 

 2004

  

(Thousands of Dollars)

     

Operating Revenues

  

$                          - 

 

$                          - 

Operating Expenses

  

1 

 

2 

Operating Loss

  

 (1)

 

 (2)

Other Income/(Loss), Net

 

3 

 

 (2,479)

Income/(Loss) Before Income Tax Expense/(Benefit)

  

2 

 

 (2,481)

Income Tax Expense/(Benefit)

 

2 

 

 (1,018)

Net Loss

  

$                          - 

 

$                 (1,463)

     

Note:

In the opinion of the Company, all adjustments necessary for a fair

    

presentation of financial position for the periods shown have been made.

    
     

See accompanying notes to financial statements.

    

 




ERI/HEC EFA-Med, LLC

  
   

BALANCE SHEET

  

(Unaudited)

  

 

  
   
  

December 31,

  

2004

  

(Thousands

  

  of Dollars)

  

 

ASSETS

  
   

Current Assets:

  

  Cash

 

 $                      1

 

  

Total Assets

 

 $                      1

   

LIABILITIES AND CAPITALIZATION

  
   

Capitalization:

  

  Common Stockholder's Equity:

  

   Capital surplus, paid in

 

 $                    18

   Accumulated deficit

 

 (17)

  Common Stockholder's Equity

 

  1 

Total Capitalization

 

1 

   
   

Total Liabilities and Capitalization

 

 $                      1

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  
   

Select Energy Services, Inc. has a 50 percent ownership interest in ERI/HEC EFA-Med, LLC.





ERI/HEC EFA-Med, LLC

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

 Three

 

Twelve

  

Months Ended

 

Months Ended

  

December 31,

 

December 31,

  

2004

 

2004

  

   (Thousands of Dollars)

  

 

  
     

Operating Revenues

 

$                            - 

 

$                            - 

Operating Expenses

  

- 

 

- 

     

Net Income

  

$                            - 

 

$                            - 

     

Note:

In the opinion of the Company, all adjustments necessary for a fair

    

presentation of financial position for the periods shown have been made.

    
     

See accompanying notes to financial statements.

    

 




E.S. BOULOS COMPANY

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

December 31,

  

2004

  

(Thousands

  

  of Dollars)

ASSETS

  
   

Current Assets:

  

  Cash

 

$                            759 

  Receivables, less provision for uncollectible

  

       accounts of $10

 

7,787 

  Accounts receivable from affiliated companies

 

1,195 

  Unbilled revenue

 

3,436 

  Materials and supplies

 

204 

 

 

13,381 

   

Property, Plant and Equipment:

  

  Competitive energy

 

1,357 

     Less: Accumulated depreciation

 

638 

  

719 

 

  

Deferred Debits and Other Assets:

  

  Goodwill

 

6,963 

  Purchased intangible assets, net

 

42 

  Other

 

45 

  

7,050 

   

Total Assets

 

$                       21,150 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





E.S. BOULOS COMPANY

  
   

BALANCE SHEET

  

(Unaudited)

  
   
   
  

December 31,

  

2004

  

(Thousands

  

  of Dollars)

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Advance from parent, non-interest bearing

 

$                    2,948 

  Accounts payable

 

2,172 

  Accounts payable to affiliated companies

 

591 

  Accrued taxes

 

286 

  Other

 

186 

  

6,183 

   

Deferred Credits and Other Liabilities:

  

  Accumulated deferred income taxes

 

669 

  Other

 

473 

  

1,142 

Capitalization:

  

  Common Stockholder's Equity:

  

    Common stock, $0 par value 20,000 shares

  

     authorized and 100 shares outstanding

 

        - 

    Capital surplus, paid in

 

7,539 

    Retained earnings

 

6,286 

  Common Stockholder's Equity

 

13,825 

Total Capitalization

 

13,825 

   
   

Total Liabilities and Capitalization

 

$                  21,150 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





E.S. BOULOS COMPANY

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three Months

 

Twelve Months

  

Ended

 

Ended

  

 December 31,

 

 December 31,

  

2004

 

2004

  

(Thousands of Dollars)

     

Operating Revenues

  

$               10,096 

 

$               42,917 

     

Operating Expenses:

  

   

  Operation -

    

    Other

  

9,498 

 

41,408 

  Depreciation

  

67 

 

257 

  Taxes other than income taxes

 

47 

 

47 

        Total operating expenses

  

9,612 

 

41,712 

Operating Income

  

484 

 

1,205 

Other Loss, Net

 

 (2)

 

 (17)

Income Before Income Tax Expense

 

482 

 

1,188 

Income Tax Expense

  

137 

 

385 

Net Income

 

$                   345 

 

$                   803 

     
     

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the periods shown have been made.

 
 
     

See accompanying notes to financial statements.

    





NGS MECHANICAL, INC.

  
   

BALANCE SHEET

  

(Unaudited)

  
  

 December 31,

  

2004

  

(Thousands

  

  of Dollars)

   
   

ASSETS

  
   

Current Assets:

  

  Cash

 

$                      10 

   

Total Assets

 

$                      10 

   
   

LIABILITIES AND CAPITALIZATION

  
   

Current Liabilities:

  

  Accounts payable to affiliated companies

 

$                        3 

  

3 

   

  Common Stockholder's Equity:

  

    Common stock, $0 par value - authorized

  

     20,000 shares; outstanding 100 shares

 

- 

     Capital surplus, paid in

 

10 

     Accumulated deficit

 

 (3)

  Common Stockholder's Equity

 

7 

Total Capitalization

 

7 

   

Total Liabilities and Capitalization

 

$                      10 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  




NGS MECHANICAL, INC.

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three

 

Twelve

  

Months Ended

 

Months Ended

  

December 31,

 

December 31,

  

2004

 

2004

  

(Thousands of Dollars)

     

Operating Revenues

  

$                            - 

 

$                          - 

Operating Expenses

 

                              - 

 

                            - 

 

  

   

Net Income

  

$                            - 

 

$                          - 

     
     

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the periods shown have been made.

  
  
     

See accompanying notes to financial statements.

    





HEC/CJTS ENERGY CENTER LLC

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

December 31,

  

2004

  

(Thousands

  

  of Dollars)

   

ASSETS

  
   

Current Assets:

  

  Cash

 

 $                     1 

Total Assets

 

 $                     1 

   

LIABILITIES AND CAPITALIZATION

  
   

Capitalization:

  

  Common Stockholder's Equity:

  

   Capital surplus, paid in

 

$                    12 

   Accumulated deficit

 

 (11)

  Common Stockholder's Equity

 

1 

Total Capitalization

 

1 

   

Total Liabilities and Capitalization

 

$                      1 

   
  

   

   

Note:  In the opinion of the Company, all adjustments necessary for a fair

  

       presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





HEC/CJTS ENERGY CENTER LLC

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three

 

Twelve

  

Months Ended

 

Months Ended

  

December 31,

 

December 31,

  

2004

 

2004

  

(Thousands of Dollars)

     

Operating Revenues

  

$                              - 

 

$                          - 

Operating Expenses

 

- 

 

                              - 

Net Income

  

$                              - 

 

$                          - 

 

  

   
     
     

Note:

In the opinion of the Company, all adjustments necessary for a fair

    

presentation of financial position for the periods shown have been made.

    
     

See accompanying notes to financial statements.

    





WOODS ELECTRICAL CO., INC.

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

 December 31,

  

2004

  

(Thousands of

  

Dollars)

ASSETS

  
   

Current Assets:

  

  Cash

 

$              1,116 

  Receivables, net

 

5,053 

  Accounts receivable to affiliated companies

 

3 

  Unbilled revenues

 

2,516 

  Taxes receivable

 

326 

  Materials and supplies

 

113 

  

9,127 

   

Property, Plant and Equipment:

  

  Competitive energy

 

339 

     Less: Accumulated depreciation and amortization

 

110 

  

229 

   

Deferred Debits and Other Assets:

  

  Goodwill

 

3,218 

  Purchased intangible assets, net

 

4,450 

  

7,668 

   

Total Assets

 

$            17,024 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

 
   

See accompanying notes to financial statements.

  





WOODS ELECTRICAL CO., INC.

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

December 31,

  

2004

  

(Thousands of

LIABILITIES AND CAPITALIZATION

 

Dollars)

   
   

Current Liabilities:

  

  Notes payable to affiliated companies

 

$                            6,000 

  Advance from parent, non-interest bearing

 

                               250 

  Accounts payable

 

                            1,318 

  Accounts payable to affiliated companies

 

504 

  Other

 

80 

  

8,152 

Deferred Credits and Other Liabilities:

 

 

  Accumulated deferred income taxes

 

422 

  Other

 

275 

  

697 

Capitalization:

  

  Long-Term Debt from NU Parent

 

4,450 

   

  Common Stockholder's Equity:

  

    Common stock, $0 par value - 20,000 shares

  

     authorized and 100 shares outstanding

 

                                 - 

    Capital surplus, paid in

 

5,000 

    Retained deficit

 

                          (1,275)

  Common Stockholder's Equity

 

3,725 

Total Capitalization

 

8,175 

   

Total Liabilities and Capitalization

 

$                          17,024 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  





WOODS ELECTRICAL CO., INC.

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three Months

 

Twelve Months

  

Ended

 

Ended

  

 December 31,

 

 December 31,

  

2004

 

2004

  

(Thousands of Dollars)

     

Operating Revenues

  

$                  4,917 

 

$                18,000 

     

Operating Expenses:

  

   

  Other

  

5,671 

 

18,904 

  Depreciation

 

14 

 

53 

    Total operating expenses

  

5,685 

 

18,957 

Operating Loss

  

 (768)

 

 (957)

Interest Expense, Net

  

105 

 

360 

Other (Loss)/Income, Net

 

 (1)

 

1 

Loss Before Income Tax Benefit

 

 (874)

 

 (1,316)

Income Tax Benefit

  

 (377)

 

 (558)

Net Loss

  

$                    (497)

 

 $                   (758)

     
     

Note:

In the opinion of the Company, all adjustments necessary for a fair

presentation of financial position for the periods shown have been made.

  
  
     

See accompanying notes to financial statements.

    





GREENPORT POWER, LLC

  
   

BALANCE SHEET

  

(Unaudited)

  
   
  

December 31,

  

2004

  

(Thousands

  

   of Dollars)

  

 

ASSETS

  
   

Current Assets:

  

  Cash

 

$                 78 

 

  

Total Assets

 

$                 78 

   

LIABILITIES AND MEMBER'S EQUITY

  
   

Current Liabilities:

  

  Accounts payable

 

$                 11 

  Other

 

64 

 

 

75 

   

Member's equity

 

3 

   

Total Liabilities and Member's Equity

 

$                 78 

   

Note:

In the opinion of the Company, all adjustments necessary for a fair

  

presentation of financial position for the period shown have been made.

  
   

See accompanying notes to financial statements.

  
   

Northeast Generation Services Company has a 50 percent ownership  interest in Greenport Power, LLC

   

 




GREENPORT POWER, LLC

    
     

STATEMENTS OF INCOME

    

(Unaudited)

    
  

Three

 

Twelve

  

Months Ended

 

Months Ended

  

December 31,

 

December 31,

  

2004

 

2004

  

   (Thousands of Dollars)

  

 

  
     

Operating Revenues

 

$                              - 

 

$                              - 

Operating Expenses

  

43 

 

223 

     

Net Loss

  

$                          (43)

 

$                 (223)

 

  

   
     

Note:

In the opinion of the Company, all adjustments necessary for a fair

    

presentation of financial position for the periods shown have been made.

    
     

See accompanying notes to financial statements.

    

 

    

Northeast Generation Services Company has a 50 percent ownership  interest in Greenport Power, LLC



Select Energy, Inc.
Select Energy New York, Inc.
Northeast Generation Services Company
E.S. Boulos Company
NGS Mechanical, Inc.
Woods Electrical Co., Inc.
Greenport Power, LLC
Select Energy Contracting, Inc.
Reeds Ferry Supply Co., Inc.
HEC/Tobyhanna Energy Project, Inc.
HEC/CJTS Energy Center LLC
ERI/HEC EFA-Med, LLC
Yankee Energy Services Company


Notes to Financial Statements (Unaudited)


1.

About Northeast Utilities (NU)


Northeast Utilities Parent is the parent company of NU's subsidiaries.  NU's regulated utilities furnish franchised retail electric service in Connecticut, New Hampshire and Massachusetts through three wholly owned subsidiaries: The Connecticut Light and Power Company, Public Service Company of New Hampshire and Western Massachusetts Electric Company.  Other subsidiaries include Holyoke Water Power Company (HWP), a company engaged in the production of electric power, and Yankee Energy System, Inc. (Yankee), the parent company of Yankee Gas Services Company, Connecticut's largest natural gas distribution system.


Several wholly owned subsidiaries of NU provide support services for NU's companies.  Northeast Utilities Service Company provides centralized accounting, administrative, engineering, financial, information technology, legal, operational, planning, purchasing, and other services to NU's companies.  Three other subsidiaries construct, acquire or lease some of the property and facilities used by NU's companies.


NU Enterprises, Inc. (NU Enterprises) is a wholly owned subsidiary of NU and acts as the holding company for certain of NU's subsidiaries.  Select Energy, Inc. (Select Energy) and its consolidated subsidiary Select Energy New York, Inc. (SENY), Northeast Generation Services Company and its subsidiaries (NGS), Select Energy Services, Inc. and its subsidiaries (SESI), Mode 1 Communications, Inc. and Woods Network Services, Inc., engage in a variety of energy-related and telecommunications activities, primarily in the competitive energy retail and wholesale commodity, marketing and services fields.  Northeast Generation Company (NGC) acquires generation facilities.  E.S. Boulos Company (Boulos), NGS Mechanical, Inc. (NGS Mechanical) and Woods Electrical Co., Inc. (Woods Electrical) are wholly owned subsidiaries of NGS.  Greenport Power, LLC (Greenport) is a joint venture that is 50 percent owned by NGS.  Select Energy Contracting, Inc. (Select Energy Contracting), Reeds Ferry Supply Co., Inc. (Reeds Ferry), HEC/Tobyhanna Energy Project, Inc., (HEC/Tobyhanna), and HEC/CJTS Energy Center LLC (HEC/CJTS) are wholly owned subsidiaries of SESI.  Another company, ERI/HEC EFA-Med, LLC (ERI/HEC), is 50 percent owned by SESI.  Yankee maintains certain wholly owned subsidiaries, including Yankee Energy Services Company (YESCO).


NU Enterprises is grouped into two business segments: the merchant energy business segment and the energy services business segment.  The merchant energy business segment includes Select Energy's wholesale and retail businesses.  The energy services business segment consists of the operations of NGS, SESI and Woods Network.


NU Enterprises Business Review:  On March 9, 2005, NU completed its previously announced comprehensive review of each of NU Enterprises' businesses, in which a full range of alternative strategies was considered.  


As a result of the comprehensive review, NU has decided that NU Enterprises will exit Select Energy’s wholesale marketing business.  NU also concluded that NU Enterprises' energy services businesses are not central to NU's long-term strategy and do not meet the company's expectations of profitability.  As a result, the company will explore ways to divest those businesses in a manner that maximizes their value.  NU will retain NGC’s competitive generation assets and Select Energy’s retail energy marketing businesses, because it believes that the generation assets and retail business are competitively positioned to create significant opportunities for those businesses over the next several years.  


Select Energy, SENY, NGS, Boulos, NGS Mechanical, Woods Electrical, Greenport, Select Energy Contracting, Reeds Ferry, HEC/Tobyhanna, HEC/CJTS, ERI/HEC and YESCO are "energy-related companies" under rule 58.  These footnotes are applicable to the rule 58 companies with financial statements filed in this report on Form U-9C-3 under Item 6, Section A.





2.

About Select Energy


NU Enterprises’ merchant energy business segment includes Select Energy’s wholesale marketing and retail marketing businesses.  The wholesale marketing business includes wholesale origination, portfolio management and the operation of more than 1,400 megawatts of pumped storage, hydroelectric and coal-fired generation assets.  The wholesale business primarily services firm requirements sales to local distribution companies and bilateral sales to other counterparties.  Select Energy is an integrated energy business that buys, markets and sells electricity, gas, oil and energy-related products and services to both wholesale and retail customers in the Northeastern United States.  Select Energy procures and delivers energy and capacity required to serve its electric, gas and oil customers.  Select Energy is a licensed retail electricity supplier and is registered with local electric distribution companies and is a registered gas marketer with local gas distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia.  Additionally, Select Energy is a licensed retail electricity supplier and is registered with the local electric distribution company in the District of Columbia, and is a licensed retail electricity supplier in the state of Ohio.


3.

About SENY


SENY is a wholly owned subsidiary of Select Energy and engages in the brokering, marketing, transportation, storage, and sale of energy commodities in the state of New York.


4.

About NGS


NGS provides management, operation and maintenance services to the electric generation market, as well as to large industrial customers, in the Northeastern United States.  


5.

About Boulos


Boulos is an electrical contracting company which specializes in high-voltage electrical construction and maintenance in Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.  Boulos is wholly owned by NGS.


6.

About NGS Mechanical


NGS Mechanical provides power plant operations, maintenance and capital project support services in certain New England states and New York.  NGS Mechanical is wholly owned by NGS.


7.

About Woods Electrical


Woods Electrical is in the electrical contracting business in Connecticut, and is a wholly owned subsidiary of NGS.  Woods Electrical is also registered in the electrical contracting business in Maine, Massachusetts, New Hampshire and New York.


8.

About Greenport


Greenport is a limited liability company that was established to enter into an engineering, procurement and construction agreement with Global Common LLC for the performance of design, engineering, procurement, construction, and other services in connection with an electrical generation facility construction project in Greenport - Long Island, New York.  Greenport is 50 percent owned by NGS.


9.

About Select Energy Contracting


Select Energy Contracting designs, manages and directs the construction of, and/or installation of mechanical, water and electrical systems and other resource consuming equipment.


10.

About Reeds Ferry


Reeds Ferry is an equipment wholesaler which purchases equipment on behalf of Select Energy Contracting.


11.

About HEC/Tobyhanna


HEC/Tobyhanna is a special purpose entity established to manage the assets of an Energy Savings Performance Contract at the Tobyhanna Army Depot.





12.

About HEC/CJTS


HEC/CJTS is a special purpose entity formed to facilitate the financing of SESI's construction of an energy center at the Connecticut Juvenile Training School in Middletown, Connecticut.


13.

About ERI/HEC


ERI/HEC was established on September 30, 2000, by SESI and ERI Services, Inc. to enter into an indefinite delivery/indefinite quantity contract with the United States Navy.  ERI/HEC is 50 percent owned by SESI.


14.

About YESCO


YESCO has disposed of most of its assets and has wound down its energy-related services.


15.

Public Utility Regulation


NU is registered with the Securities and Exchange Commission (SEC) as a holding company under the Public Utility Holding Company Act of 1935 (1935 Act), and is subject to the provisions of the 1935 Act.  Arrangements among NU's companies, outside agencies and other utilities covering interconnections, interchange of electric power and sales of utility property are subject to regulation by the Federal Energy Regulatory Commission (FERC) and/or the SEC.  NU's operating subsidiaries are subject to further regulation for rates, accounting and other matters by the FERC and/or applicable state regulatory commissions.


16.

Presentation


The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


17.

Derivative Instruments, Market Risk Information and Other Risk Management Activities


A.

Derivative Instruments


Derivatives that are utilized for trading purposes are recorded at fair value with changes in fair value included in earnings.  Other contracts that are derivatives but do not meet the definition of a cash flow hedge and cannot be designated as being used for normal purchases or normal sales are also recorded at fair value with changes in fair value included in earnings.  For those contracts that meet the definition of a derivative and meet the cash flow hedge requirements, the changes in the fair value of the effective portion of those contracts are generally recognized in accumulated other comprehensive income until the underlying transactions occur.  For contracts that meet the definition of a derivative but do not meet the hedging requirements, and for the ineffective portion of contracts that meet the cash flow hedge requirements, the changes in fair value of those contracts are recognized currently in earnings.  Derivative contracts designated as fair value hedges and the item they are hedging are both recorded at fair value on the consolidated balance sheets.  Derivative contracts that are entered into as a normal purchase or sale and will result in physical delivery, and are documented as such, are recognized in revenue and expense when such deliveries occur.  


There was a negative pre-tax impact of $0.5 million recognized in earnings for the ineffective portion of cash flow hedges.  A negative pre-tax $0.6 million was recognized in 2004 earnings for the ineffective portion of fair value hedges.  The changes in the fair value of both the fair value hedges and the natural gas inventory being hedged are recorded in fuel, purchased, and net interchange power on the accompanying consolidated statements of income.  


The table below summarizes current and long-term derivative assets and liabilities at December 31, 2004.  The business activities of NU Enterprises that result in the recognition of derivative assets include concentrations of credit risk to energy marketing and trading counterparties.  At December 31, 2004, Select Energy has $87.5 million of derivative assets from trading, non-trading, and hedging activities.  These assets are exposed to counterparty credit risk.  However, a significant portion of these assets is contracted with investment grade rated counterparties or collateralized with cash.  The amounts below do not include option premiums paid, which are recorded as prepayments and amounted to $5.4 million related to energy trading activities and $5.2 million related to marketing activities at December 31, 2004.  These amounts also do not include option premiums paid of $18.7 million related to non-trading gas options at December 31, 2004.


The amounts below also do not include option premiums received, which are recorded as other current liabilities and amounted to $7 million related to energy trading activities at December 31, 2004, and $1.1 million related to marketing activities at December 31, 2004.  Also not included at December 31, 2004, are option premiums received of $19 million related to non-trading gas options.







(Millions of Dollars)

Assets

Liabilities

 
 


Current 

Long-

Term 


Current 

Long-

Term 

Net 
Total 

  Trading

$49.6 

$31.7 

$    (46.2)

$  (5.5)

$   29.6 

  Non-trading

1.7 

- 

 (70.5)

(9.6)

(78.4)

  Hedging

4.5 

- 

 (9.1)

 (0.8)

 (5.4)

Total

$55.8 

$31.7 

$  (125.8)

$(15.9)

$ (54.2)


Trading:  To gather market intelligence and utilize this information in risk management activities for the wholesale marketing activities, Select Energy conducts limited energy trading activities in electricity, natural gas, and oil, and therefore, experiences net open positions.  Select Energy manages these open positions with strict policies that limit its exposure to market risk and require daily reporting to management of potential financial exposures.  


Derivatives used in trading activities are recorded at fair value and included in the consolidated balance sheets as derivative assets or liabilities.  Changes in fair value are recognized in operating revenues in the consolidated statements of income in the period of change.  The net fair value position of the trading portfolio at December 31, 2004 was assets of $29.6 million.  


Select Energy's trading portfolio includes New York Mercantile Exchange (NYMEX) futures, financial swaps, and options, the fair value of which is based on closing exchange prices; over-the-counter forwards, financial swaps, and options, the fair value of which is based on the mid-point of bid and ask market prices; and bilateral contracts for the purchase or sale of electricity or natural gas, the fair value of which is determined using available information from external sources.  Select Energy's trading portfolio also includes transmission congestion contracts (TCC).  The fair value of the TCCs included in the trading portfolio is based on published market data.  


Non-Trading:  Certain non-trading derivative contracts are used for delivery of energy related to Select Energy's wholesale and retail marketing activities.  Changes in fair value of a negative $79.4 million of non-trading derivative contracts were recorded primarily in expenses in 2004.  Of the $79.4 million change in fair value, $77.7 million relates to natural gas hedges at December 31, 2004.  These hedges are used to mitigate the risk of electricity price changes on Select Energy’s fixed-price electricity purchase contracts.  These hedges do not meet criteria to be accounted for as cash flow hedges nor do they meet the normal purchase and sales exception and are accordingly accounted for at fair value as non-trading contracts.  The contracts are natural gas contracts with fair values determined by prices provided by external sources and actively quoted markets.  


Market information for the TCCs classified as non-trading is not available, and those contracts cannot be reliably valued.  Management believes the amounts paid for these contracts, which total $3.2 million at December 31, 2004, and are included in premiums paid, are equal to their fair value.  


Hedging:  Select Energy utilizes derivative financial and commodity instruments, including futures and forward contracts, to reduce market risk associated with fluctuations in the price of electricity and natural gas purchased to meet firm sales and purchase commitments to certain customers.  Select Energy also utilizes derivatives, including price swap agreements, call and put option contracts, and futures and forward contracts to manage the market risk associated with a portion of its anticipated supply and delivery requirements.  These derivatives have been designated as cash flow hedging instruments and are used to reduce the market risk associated with fluctuations in the price of electricity or natural gas.  A derivative that hedges exposure to the variable cash flows of a forecasted transaction (a cash flow hedge) is initially recorded at fair value with changes in fair value recorded in accumulated other comprehensive income.  Cash flow hedges impact net income when the forecasted transaction being hedged occurs, when hedge ineffectiveness is measured and recorded, when the forecasted transaction being hedged is no longer probable of occurring, or when there is accumulated other comprehensive loss and the hedge and the forecasted transaction being hedged are in a loss position on a combined basis.  


Select Energy maintains natural gas service agreements with certain customers to supply gas at fixed prices for terms extending through 2006.  Select Energy has hedged its gas supply risk under these agreements through NYMEX futures contracts.  Under these contracts, which also extend through 2006, the purchase price of a specified quantity of gas is effectively fixed over the term of the gas service agreements.  At December 31, 2004 the NYMEX futures contracts had notional values of $90.7 million and were recorded at fair value as derivative liabilities of $3.2 million.  


Select Energy also maintains various physical and financial instruments to hedge its electric and gas purchases and sales through 2006.  These instruments include forwards, futures, options, financial collars and swaps.  These hedging contracts, which are valued at the mid-point of bid and ask market prices, were recorded as derivative assets of $3.7 million and derivative liabilities of $6.7 million at December 31, 2004.  


Select Energy hedges certain amounts of natural gas inventory with gas futures, options and swaps, some of which are accounted for as fair value hedges.  Changes in the fair value of hedging instruments and natural gas inventory are recorded in earnings.  The fair value



of the futures, options and swaps were recorded as derivative assets of $0.8 million at December 31, 2004.  The fair value of the hedged natural gas inventory was recorded as a reduction to fuel, materials and supplies of $1.5 million at December 31, 2004.  For the year ended December 31, 2004, Select Energy recorded a negative pre-tax of $0.6 million in earnings related to its hedging instruments and natural gas inventory.  In 2004, certain of these fair value hedges were redesignated as cash flow hedges, and future changes in fair value during the hedge designation will be included in other comprehensive income (equity), unless ineffective.


B.

Market Risk Information


Select Energy utilizes the sensitivity analysis methodology to disclose quantitative information for its commodity price risks.  Sensitivity analysis provides a presentation of the potential loss of future earnings, fair values or cash flows from market risk-sensitive instruments over a selected time period due to one or more hypothetical changes in commodity prices, or other similar price changes.  Under sensitivity analysis, the fair value of the portfolio is a function of the underlying commodity, contract prices and market prices represented by each derivative commodity contract.  For swaps, forward contracts and options, fair value reflects management's best estimates considering over-the-counter quotations, time value and volatility factors of the underlying commitments.  Exchange- traded futures and options are recorded at fair value based on closing exchange prices.


Wholesale and Retail Marketing Portfolio: When conducting sensitivity analyses of the change in the fair value of Select Energy's electricity, natural gas and oil on the wholesale and retail marketing portfolio, which would result from a hypothetical change in the future market price of electricity, natural gas and oil, the fair values of the contracts are determined from models that take into consideration estimated future market prices of electricity, natural gas and oil, the volatility of the market prices in each period, as well as the time value factors of the underlying commitments. In most instances, market prices and volatility are determined from quoted prices on the futures exchange.


Select Energy has determined a hypothetical change in the fair value for its wholesale and retail marketing portfolio, which includes cash flow hedges and electricity, natural gas and oil contracts, assuming a 10 percent change in forward market prices.  At December 31, 2004, a 10 percent change in market price would have resulted in an increase in fair value of $25.6 million or a decrease in fair value of $23.6 million.


The impact of a change in electricity, natural gas and oil prices on Select Energy's wholesale and retail marketing portfolio at December 31, 2004, is not necessarily representative of the results that will be realized when these contracts are physically delivered.


Trading Contracts:  At December 31, 2004, Select Energy has calculated the market price resulting from a 10 percent change in forward market prices.  That 10 percent change would result in approximately a $1 million increase or decrease in the fair value of the Select Energy trading portfolio.  In the normal course of business, Select Energy also faces risks that are either non-financial or non-quantifiable.  These risks principally include credit risk, which is not reflected in this sensitivity analysis


C.

Other Risk Management Activities


Credit Risk Management:  Credit risk relates to the risk of loss that NU would incur as a result of non-performance by counterparties pursuant to the terms of its contractual obligations.  NU serves a wide variety of customers and suppliers that include independent power producers, industrial companies, gas and electric utilities, oil and gas producers, financial institutions, and other energy marketers.  Margin accounts exist within this diverse group, and NU realizes interest receipts and payments related to balances outstanding in these margin accounts.  This wide customer and supplier mix generates a need for a variety of contractual structures, products and terms which, in turn, requires NU to manage the portfolio of market risk inherent in those transactions in a manner consistent with the parameters established by NU’s risk management process.


Credit risks and market risks at NU Enterprises are monitored regularly by a Risk Oversight Council operating outside of the business lines that create or actively manage these risk exposures to ensure compliance with NU’s stated risk management policies.  


NU tracks and re-balances the risk in its portfolio in accordance with fair value and other risk management methodologies that utilize forward price curves in the energy markets to estimate the size and probability of future potential exposure.


NYMEX traded futures and option contracts cleared off the NYMEX exchange are ultimately guaranteed by NYMEX to Select Energy.  Select Energy has established written credit policies with regard to its counterparties to minimize overall credit risk on all types of transactions.  These policies require an evaluation of potential counterparties’ financial condition (including credit ratings), collateral requirements under certain circumstances (including cash in advance, letters of credit, and parent guarantees), and the use of standardized agreements, which allow for the netting of positive and negative exposures associated with a single counterparty.  This evaluation results in establishing credit limits prior to Select Energy entering into energy contracts.  The appropriateness of these limits is subject to continuing review.  Concentrations among these counterparties may impact Select Energy’s overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes to economic, regulatory or other conditions.




At December 31, 2004 Select Energy maintained collateral balances from counterparties of $57.7 million.  This amount is included in both cash and cash equivalents and other current liabilities on the accompanying consolidated balance sheets.  Select Energy also has collateral balances deposited with counterparties of $46.3 million at December 31, 2004.



QUARTERLY REPORT OF NORTHEAST UTILITIES


SIGNATURE CLAUSE



Pursuant to the requirements of the Public Utility Holding Company Act of 1935 and the rules and regulations of the Securities and Exchange Commission issued there under, the undersigned company has duly caused this report to be signed on its behalf by the undersigned officer thereunto duly authorized.  




 

NORTHEAST UTILITIES

 

(Registered Holding Company)




By:

/s/

John P. Stack

 

John P. Stack

 

(Signature of Signing Officer)


  
 

John P. Stack

  
 

Vice President - Accounting and Controller

  
 

Date:  March 28, 2005