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 March 31, 2004 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. ------------------------------------------------------------------------------- Percentage of Activities Voting Reported Name of Energy or Date of State of Securities Nature of During the Reporting Company Gas Related Organization Organization Held Business Period ----------------- ----------- ------------ ------------ -------------- ---------- ---------- NU Enterprises, Holding 01/04/99 Connecticut 100% by Unregulated (A) Inc. Northeast businesses Utilities holding company Select Energy, Energy 09/26/96 Connecticut 100% by NU Energy- (B) Inc. Enterprises, related Inc. activities Northeast Energy 01/04/99 Connecticut 100% by NU Energy- (C) Generation Enterprises, related Services Company Inc. activities Select Energy Energy 06/19/90 Massachusetts 100% by NU Energy- (D) Services, Inc. Enterprises, related Inc. activities Reeds Ferry Supply Energy 07/15/64 New Hampshire 100% by Energy- (E) Co., Inc. Select Energy related Services, activities Inc. HEC/Tobyhanna Energy 09/28/99 Massachusetts 100% by Energy- (F) Energy Project, Select Energy related Inc. Services, activities Inc. Select Energy Energy 10/12/94 Massachusetts 100% by Energy- (G) Contracting, Inc. Select Energy related Services, activities Inc. Yankee Energy Holding 02/15/00 Connecticut 100% by Public (H) System, Inc. Northeast Utility Utilities Holding Company Yankee Energy Energy 07/02/93 Connecticut 100% by Energy- (I) Services Company Yankee Energy related System, Inc. activities R. M. Services, Energy 11/22/94 Connecticut 10% by Yankee Energy- (J) Inc. Energy related System, Inc. activities Acumentrics Energy 09/13/00 Massachusetts 5% by NU Energy- (K) Corporation Enterprises, related Inc. activities ERI/HEC EFA-Med, Energy 09/30/00 Delaware 50% by Select Energy- (L) LLC Energy related Services, activities Inc. E. S. Boulos Energy 01/10/01 Connecticut 100% by Energy- (M) Company Northeast related Generation activities Services Company NGS Mechanical, Energy 01/24/01 Connecticut 100% by Provide (N) Inc. Northeast mechanical Generation construction Services and Company maintenance services HEC/CJTS Energy Energy 03/02/01 Delaware 100% by Facilitate (O) Center LLC Select Energy construction Services, financing Inc. Select Energy Energy 02/13/96 Delaware 100% by Energy- (P) New York, Inc. Select related Energy, Inc. activities Woods Electrical Energy 07/18/02 Connecticut 100% by Provide (Q) Co., Inc. Northeast electrical Generation contracting Services services Company Greenport Power, Energy 02/13/03 Delaware 50% by Energy (R) LLC Northeast related Generation construction Services activities Company (A) NU Enterprises, Inc. is not a "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (B) Select Energy, Inc. (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, collectively with its affiliated businesses, provides a wide range of energy products and energy services. 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. (C) Northeast Generation Services Company (NGS) provides a full range of energy-related operation and maintenance services for larger industrial, institutional and power generation customers throughout the 11-state northeast area. NGS' current business segments focus on providing turnkey Manage and Operate Services (MOS), a variety of Specialty Services (SS) and full-scope mechanical, Construction and Maintenance Services (CMS). MOS is a service that is designed for generation asset owners. Within the SS platform, its offerings include electrical maintenance and laboratory analysis. Within the CMS platform, the product and service offerings include mechanical maintenance services and engineering and environmental consulting services, with an emphasis on power plant systems. (D) Select Energy Services, Inc. (formerly HEC Inc.) is not a "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (E) Reed's Ferry Supply Co., Inc. is an equipment wholesaler which purchases equipment on behalf of Select Energy Contracting, Inc. (F) HEC/Tobyhanna Energy Project, Inc. was established as a special purpose entity to manage the assets of an Energy Savings Performance Contract project at the Tobyhanna Army Depot. (G) Select Energy Contracting, Inc. designs, manages and directs the construction of, and/or installation of mechanical, water, and electrical systems, energy and other resource consuming equipment. (H) Yankee Energy System, Inc. is not a "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (I) Yankee Energy Services Company has disposed of most of its assets and is winding down its energy-related business. (J) R. M. Services, Inc. provides consumer collection services for companies throughout the United States. (K) Acumentrics Corporation develops, manufactures, and distributes advanced power generation, power quality and power protection devices including a high-speed flywheel and advanced technology fuel cells. (L) ERI/HEC EFA-Med, LLC (ERI/HEC) is a Delaware limited liability company that was formed by Select Energy Services, Inc., and ERI Services, Inc. to enter into an indefinite delivery/indefinite quantity contract with the U.S. Navy. Under the contract, the Navy will issue Delivery Orders for energy services work at U.S. Government facilities located in Bahrain, Greece, Egypt, Italy, Spain, Turkey, and the United Kingdom. ERI/HEC will designate either ERI or Select Energy Services, Inc. to perform each of the Delivery Orders. ERI/HEC will also act as the conduit for any project-related financing. ERI Services, Inc. and Select Energy Services, Inc. each own 50% of the LLC. (M) E. S. Boulos Company (Boulos) is in the electrical contracting business primarily in Maine, New Hampshire and Massachusetts. Boulos is registered to do business in Connecticut, Rhode Island, Maine, Massachusetts, New Hampshire, New York, and Vermont. (N) NGS Mechanical, Inc. (NGSM) performs power plant operations, maintenance and capital project support. NGSM is registered to do business in Massachusetts, New Hampshire, Maine, Vermont, Rhode Island, and New York. (O) HEC/CJTS Energy Center LLC (HEC/CTJS) facilitated the construction of an energy center at the Connecticut Juvenile Training School in Middletown, Connecticut. HEC/CJTS does not have any employees nor does it conduct any activities other than those related to the lease related to such project. (P) Select Energy New York, Inc. is engaged in the brokering, marketing, transportation, storage, and sale of energy commodities. (Q) Woods Electrical Co., Inc. is in the electrical contracting business mainly in Connecticut. Woods is registered to do business in Connecticut, Massachusetts, Maine and New Hampshire. (R) Greenport Power LLC (Greenport) is a Delaware limited liability company that was formed by NGS and Hawkeye Electric LLC (Hawkeye Electric) to enter into an Engineering, Procurement and Construction Agreement with Global Commons LLC for the performance of design, engineering, procurement, construction and other services in connection with an electrical facility construction project in Greenport, Long Island, New York. Hawkeye Electric, which is not an affiliate of NU, and NGS each own 50% of Greenport. 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. R. M. Services, Inc. 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. Northeast Utilities No transactions this quarter. 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 of associate companies. Total Amount Billed* Reporting Associate Company Company Types of Three Months Rendering Receiving Services Ended Services Services Rendered March 31, 2004 ----------------------- ------------------------ -------------- -------------- (Thousands of Dollars) Northeast Northeast Generation Generation Services Company Company Power Plant $ 9,024 ========= Northeast NGS Generation Mechanical, Services Company Inc. Miscellaneous $ 2 ========= Northeast Generation Woods Network Services Company Services, Inc. Miscellaneous $ 9 ========= Northeast The Connecticut Generation Light and Power Services Company Company Electrical Services $ 101 ========= Northeast Generation Holyoke Water Services Company Power Company Power Plant $ 3,080 ========= Northeast Generation Select Energy Services Company Services, Inc. Power Plant $ 920 ========= Northeast Public Service Generation Company of Electrical and Services Company New Hampshire Mechanical Services $ 102 ========= Northeast Generation Yankee Energy Services Company Services Inc. Miscellaneous $ 1 ========= Northeast Generation Wholesale Purchasing Services Company E.S. Boulos Company Services $ 14 ========= Northeast Generation Woods Electrical Services Company Co., Inc. Miscellaneous $ 4 ========= Northeast Generation Woods Network Services Company Servies, Inc. Miscellaneous $ 4 ========= Reeds Ferry Select Energy Wholesale Purchasing Supply Co., Inc. Contracting, Inc. Services $ 295 ========= Northeast Generation E.S. Boulos Company Services Company Electrical Services $ 126 ========= Select Energy Wholesale Purchasing Select Energy, Inc. New York, Inc. Services $ 314 ========= Northeast Generation Select Energy, Inc. Services Company Miscellaneous $ 1 ========= Northeast Utilities Select Energy, Inc. Service Company Miscellaneous $ 519 ========= * Total Amount Billed is for direct costs only. Part II - Transactions performed by associate companies on behalf of reporting companies. Total Amount Billed* Associate Reporting Company Company Types of Three Months Rendering Receiving Services Ended Services Services Rendered March 31, 2004 ----------------------- ------------------------ -------------- -------------- (Thousands of Dollars) Northeast Generation Northeast Generation Company Services Company Miscellaneous $ 368 ========= Public Service Company of Northeast Generation New Hampshire Services Company Miscellaneous $ 4 ========= Public Service Company of New Hampshire Select Energy, Inc. Miscellaneous $ 17 ========= The Connecticut Light and Power Northeast Generation Company Services Company Miscellaneous $ 9 ========= Holyoke Water Northeast Generation Power Company Services Company Miscellaneous $ 227 ========= Western Massachusetts Northeast Generation Electric Company Services Company Miscellaneous $ 30 ========= Northeast Utilities Select Energy Service Company New York, Inc. Miscellaneous $ 211 ========= Northeast Utilities Northeast Generation Service Company Services Company Miscellaneous $ 942 ========= Northeast Utilities Service Company Select Energy, Inc. Miscellaneous $ 4,526 ========= * Total Amount Billed is for direct costs only. ITEM 4 - SUMMARY OF AGGREGATE INVESTMENT Investments in energy-related companies: ---------------------------------------- (Thousands of Dollars) Total consolidated capitalization as of 03/31/04 $6,774,469 line 1 Total capitalization multiplied by 15% (line 1 multiplied by .15) 1,016,170 line 2 Greater of $50 million or line 2 $1,016,170 line 3 Total current aggregate investment: Select Energy, Inc. 769,649 Northeast Generation Services Company 28,946 Select Energy Contracting, Inc. 15,379 Select Energy New York, Inc. 71,017 Woods Electrical Co., Inc. 14,815 Reeds Ferry Supply Co., Inc. 7 HEC/Tobyhanna Energy Project, Inc. - Yankee Energy Services Company 7,882 E.S. Boulos Company 11,505 R.M. Services, Inc. 16,033 NGS Mechanical, Inc. 10 Acumentrics Corporation 7,500 Greenport, LLC 501 ERI/HEC EFA-Med, LLC 9 HEC/CJTS Energy Center LLC 12 ------------ Current aggregate investment 943,265 ------------ Elimination * 22,506 ------------ Total current aggregate investment 920,759 line 4 ------------ Difference between the greater of $50 million or 15% of capitalization and the total aggregate investment of the registered holding company system $95,411 line 5 ============ *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 ------------- ------------- ------------- ------------------------ NONE 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.: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Northeast Generation Services Company: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Select Energy Contracting, Inc.: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Reeds Ferry Supply Co., Inc.: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 HEC/Tobyhanna Energy Project, Inc.: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Yankee Energy Services Company: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 ERI/HEC EFA-Med, LLC: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 E. S. Boulos Company: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 NGS Mechanical, Inc.: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Select Energy New York, Inc.: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 HEC/CJTS Energy Center LLC: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Woods Electrical Co., Inc.: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Greenport Power, LLC: Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 Acumentrics Corporation: Not available R. M. Services, Inc.: Not available Northeast Utilities (Parent): Balance Sheet - As of March 31, 2004 Income Statement - Three months ended March 31, 2004 B. Exhibits Exhibit No. Description ----------- ----------- 6.B.1.1 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.2 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.3 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.4a Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.4b Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.4c 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. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Unrestricted cash from counterparties $ 65,614 Special deposits 1,637 Receivables, net 351,579 Accounts receivable from affiliated companies 130,928 Unbilled revenues 40,198 Taxes receivable 8,862 Derivative assets 260,438 Prepaid option premiums 13,061 Prepayments and other 9,051 ------------- 881,368 ------------- Property, Plant and Equipment: Competitive Energy 14,233 Less: Accumulated depreciation and amortization 12,019 ------------- 2,214 Construction work in progress 6,848 ------------- 9,062 ------------- Deferred Debits and Other Assets: Purchased intangible assets, net 13,524 Prepaid pension 1,146 Long-term accounts receivable 6,067 Long-term contracts asset 38,006 Other 41,771 ------------- 100,514 ------------- Total Assets $ 990,944 ============= 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. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Notes payable to affiliated companies $ 23,100 Accounts payable 409,319 Accounts payable to affiliated companies 22,242 Derivative liabilities 170,064 Unearned option premiums 8,395 Counterparty deposits 65,614 Other 32,594 ------------- 731,328 ------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 33,548 Other 8,370 ------------- 41,918 ------------- 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 286,210 Accumulated deficit (260,277) Accumulated other comprehensive income 41,765 ------------- Common Stockholder's Equity 67,698 ------------- Total Capitalization 217,698 ------------- Total Liabilities and Capitalization $ 990,944 ============= 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. STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ 657,691 ------------- Operating Expenses: Operation - Purchased power, net interchange power and capacity 623,195 Other 17,744 Depreciation and amortization 1,769 Taxes other than income taxes 3,563 ------------- Total operating expenses 646,271 ------------- Operating Income 11,420 Interest Expense, Net 2,701 Other Income, Net 3,671 ------------- Income Before Income Tax Expense 12,390 Income Tax Expense 3,281 ------------- Net Income $ 9,109 ============= 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 BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash and cash equivalents $ 678 Receivables, net 3,516 Accounts receivable from affiliated companies 4,611 Unbilled revenues 35 Materials and supplies 4 Prepayments and other 646 ------------- 9,490 ------------- Property, Plant and Equipment: Competitive energy 3,642 Less: Accumulated depreciation 1,112 ------------- 2,530 Construction work in progress 53 ------------- 2,583 ------------- Deferred Debits and Other Assets: Accumulated deferred income taxes 226 Prepaid pension 350 Other 21,673 ------------- 22,249 ------------- Total Assets $ 34,322 ============= 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 BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Notes payable to affiliated companies $ 6,700 Accounts payable 3,209 Accounts payable to affiliated companies 3,509 Accrued taxes 347 Other 997 ------------- 14,762 ------------- Deferred Credits and Other Liabilities 1,150 ------------- 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 15,445 Accumulated deficit (2,022) Accumulated comprehensive loss (13) ------------- Common Stockholder's Equity 13,410 ------------- Total Capitalization 18,410 ------------- Total Liabilities and Capitalization $ 34,322 ============= 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 STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ 12,749 ------------- Operating Expenses: Operation - Other 8,215 Maintenance 3,562 Depreciation and amortization 68 Taxes other than income taxes 613 ------------- Total operating expenses 12,458 ------------- Operating Income 291 Interest Expense, Net 133 Other Income, Net 14 ------------- Income Before Income Tax Expense 172 Income Tax Expense 51 ------------- Net Income $ 121 ============= 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) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Receivables, net $ 18,935 Materials and supplies 625 Prepayments and other 693 ------------- 20,253 ------------- Property, Plant and Equipment: Competitive energy 5,549 Less: Accumulated depreciation 2,955 ------------- 2,594 ------------- Deferred Debits and Other Assets: Goodwill, net 17,220 Other 1,545 ------------- 18,765 ------------- Total Assets $ 41,612 ============= 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) March 31, 2004 ------------ (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable $ 5,182 Accounts payable to affiliated companies 12,572 Accrued taxes 436 Other 4,464 ------------- 22,654 ------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,477 ------------- Capitalization: Common Stockholder's Equity: Common stock, $1 par value - 100,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 15,075 Retained earnings 2,406 ------------- Common Stockholder's Equity 17,481 ------------- Total Capitalization 17,481 ------------- Total Liabilities and Capitalization $ 41,612 ============= 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 Months Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ 16,174 ------------- Operating Expenses: Operation 15,882 Maintenance 108 Depreciation 286 ------------- Total operating expenses 16,276 ------------- Operating Loss (102) Interest Expense, Net 33 Other Income, Net 1 ------------- Loss Before Income Tax Benefit (134) Income Tax Benefit (38) ------------- Net Loss $ (96) ============= 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. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 5 Receivables, net 79 ------------- 84 ------------- Deferred Debits and Other Assets: Goodwill, net 247 ------------- Total Assets $ 331 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable $ 78 Accounts payable to affiliated companies 295 ------------- 373 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 $ 331 ============= 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 Months Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ 208 Operating Expenses 208 ------------- Net Income $ - ============= 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. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Special deposits $ 4,441 Receivables, net 383 ------------- 4,824 ------------- Deferred Debits and Other Assets: Contracts receivable 27,173 Unamortized debt expense 567 ------------- 27,740 ------------- Total Assets $ 32,564 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Long-term debt - current portion $ 599 Accounts payable to affiliated companies 7,365 Accrued taxes 74 Accrued interest 234 Other 293 ------------- 8,565 ------------- Capitalization: Long-Term Debt 23,067 ------------- Common Stockholder's Equity: Common stock, $1 par value - 100 shares authorized and outstanding - Retained earnings 932 ------------- Total Common Stockholder's Equity 932 ------------- Total Capitalization 23,999 ------------- Total Liabilities and Capitalization $ 32,564 ============= 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 Months Ended March 31, 2004 ------------- (Thousands of Dollars) Interest Expense, Net $ 463 Other Income, Net 568 ------------- Income Before Income Tax Expense 105 Income Tax Expense 75 ------------- Net Income $ 30 ============= 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) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 803 Notes receivable from affiliated companies 100 Receivables, net 5 Taxes receivable 2 ------------- 910 ------------- Deferred Debits and Other Assets: Accumulated deferred income taxes 1,287 Investments and other 1,491 ------------- 2,778 ------------- Total Assets $ 3,688 ============= 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) March 31, 2004 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------- Current Liabilities: Accounts payable to affiliated companies $ 455 Other 3 ------------- 458 ------------- Deferred Credits and Other Liabilities 5 ------------- Capitalization: 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 (4,657) ------------- Common Stockholder's Equity 3,225 ------------- Total Capitalization 3,225 ------------- Total Liabilities and Capitalization $ 3,688 ============= 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 Ended March 31, 2004 -------------- (Thousands of Dollars) Operating Revenues $ - Operating Expenses 2 ------------- Operating Loss (2) Other Loss, Net (2,484) ------------- Loss Before Income Tax Benefit (2,486) Income Tax Benefit (1,020) ------------- Net Loss $ (1,466) ============= 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) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 87 Receivables, net 9,202 Accounts receivable from affiliated companies 81 Unbilled revenues 3,787 Materials and supplies 203 ------------- 13,360 ------------- Property, Plant and Equipment: Competitive energy 1,204 Less: Accumulated depreciation 442 ------------- 762 ------------- Deferred Debits and Other Assets: Goodwill 6,963 Purchased intangible assets, net 30 Other 45 ------------- 7,038 ------------- Total Assets $ 21,160 ============= 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) March 31, 2004 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------- Current Liabilities: Advance from parent, non-interest bearing $ 2,948 Accounts payable 2,641 Accounts payable to affiliated companies 353 Accrued taxes 307 Other 396 ------------- 6,645 ------------- Deferred Credits and Other Liabilities Accumulated deferred income taxes 519 Other 730 ------------- 1,249 ------------- 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 5,727 ------------- Common Stockholder's Equity 13,266 ------------- Total Capitalization 13,266 ------------- Total Liabilities and Capitalization $ 21,160 ============= 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 Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ 9,650 ------------- Operating Expenses: Operation - Other 347 Maintenance 8,854 Depreciation 60 ------------- Total operating expenses 9,261 ------------- Income Before Income Tax Expense 389 Income Tax Expense 145 ------------- Net Income $ 244 ============= 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. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 10 Receivables, net 2 ------------- Total Assets $ 12 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable to affiliated companies $ 5 ------------- Capitalization: Common Stockholder's Equity: Common stock, $0 par value - authorized 20,000 shares; outstanding 100 shares - Capital surplus, paid in 10 Retained deficit (3) ------------- Common Stockholder's Equity 7 ------------- Total Capitalization 7 ------------- Total Liabilities and Capitalization $ 12 ============= 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 Months Ended March 31, 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 period shown have been made. See accompanying notes to financial statements. NORTHEAST UTILITIES (PARENT) BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 897 Notes receivable from affiliated companies 191,300 Notes and accounts receivable 4,847 Accounts receivable from affiliated companies 2,422 Taxes receivable 1,590 Derivative assets 5,688 Prepayments 205 ------------- 206,949 ------------- Deferred Debits and Other Assets: Investments in subsidiary companies, at equity 2,615,153 Other 14,781 ------------- 2,629,934 ------------- Total Assets $ 2,836,883 ============= 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 UTILITIES (PARENT) BALANCE SHEET (Unaudited) March 31, 2004 ------------ (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Long-term debt - current portion $ 25,000 Accounts payable 72 Accounts payable to affiliated companies 87 Accrued interest 12,942 Other 327 ------------- 38,428 ------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,286 Other 1,416 ------------- 5,702 ------------- Capitalization: Long-Term Debt 459,397 ------------- Common Stockholder's Equity: Common shares, $5 par value - authorized 225,000,000 shares; 150,562,489 shares issued and 127,942,036 shares outstanding 752,812 Capital surplus, paid in 1,110,094 Deferred contribution plan - employee stock ownership plan (70,665) Retained earnings 857,197 Accumulated other comprehensive loss 42,857 Treasury stock (358,939) ------------- Common Stockholder's Equity 2,333,356 ------------- Total Capitalization 2,792,753 ------------- Total Liabilities and Capitalization $ 2,836,883 ============= 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 UTILITIES (PARENT) STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ - ------------- Operating Expenses: Other 2,605 ------------- Operating Loss (2,605) ------------- Interest Expense 5,524 ------------- Other Income, Net: Equity in earnings of subsidiaries 69,776 Other 4,250 ------------- Other income, net 74,026 ------------- Income Before Income Tax Benefit 65,897 Income Tax Benefit 1,545 ------------- Net Income $ 67,442 ============= 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 NEW YORK, INC. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 1,602 Unrestricted cash from counterparties 5,292 Receivables, net 55,014 Accounts receivable from affiliated companies 3,029 Notes receivable from affiliated companies 26,000 Special deposits 3,152 Derivative assets 10,158 Prepaid option premiums 2,815 Prepayments and other 5,314 ------------- 112,376 ------------- Property, Plant and Equipment: Competitive energy 689 Less: Accumulated depreciation 403 ------------- 286 ------------- Construction work in progress 21 ------------- 307 ------------- Deferred Debits and Other Assets: Goodwill 3,200 ------------- Total Assets $ 115,883 ============= 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 NEW YORK, INC. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------- Current Liabilities: Accounts payable $ 28,803 Accounts payable to affiliated companies 9,586 Accrued taxes 5,110 Derivative liabilities 3,025 Counterparty deposits 5,292 Other 1,149 ------------- 52,965 ------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,757 Accrued pension 1,201 Other 493 ------------- 6,451 ------------- Capitalization: Long-Term Debt from NU Parent 14,699 ------------- Common Stockholder's Equity: Common stock, $1 par value - authorized and outstanding 10,000 shares 10 Capital surplus, paid in 9,957 Retained earnings 26,502 Accumulated other comprehensive income 5,299 ------------- Common Stockholder's Equity 41,768 ------------- Total Capitalization 56,467 ------------- Total Liabilities and Capitalization $ 115,883 ============= 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 NEW YORK, INC. STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ 129,886 ------------- Operating Expenses: Purchased power, net interchange power and capacity 122,996 Other 969 Taxes other than income taxes (343) ------------- Total operating expenses 123,622 ------------- Operating Income 6,264 Interest Expense, Net 86 Other Income, Net 61 ------------- Income Before Income Tax Expense 6,239 Income Tax Expense 2,490 ------------- Net Income $ 3,749 ============= 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 BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Total Assets $ - ============= LIABILITIES AND CAPITALIZATION ------------------------------ Capitalization: Common Stockholder's Equity: Capital surplus, paid in $ 12 Accumulated deficit (12) ------------- Common Stockholder's Equity - - Total Capitalization - ------------- Total Liabilities and Capitalization $ - ============= 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 Months Ended March 31, 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 period shown have been made. See accompanying notes to financial statements. WOODS ELECTRICAL CO., INC. BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 11 Receivables, net 4,381 Unbilled revenues 416 Materials and supplies 71 Prepayments and other 4 ------------- 4,883 ------------- Property Plant and Equipment: Competitive energy 255 Less: Accumulated depreciation and amortization 67 -------------- 188 -------------- Deferred Debits and Other Assets: Goodwill 3,218 Purchased intangible assets, net 4,450 -------------- 7,668 -------------- Total Assets $ 12,739 ============== 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) March 31, 2004 ------------- (Thousands of Dollars) LIABILITIES AND CAPITALIZATION ------------------------------- Current Liabilities: Notes payable to affiliated companies $ 950 Advance from parent, non-interest bearing 250 Accounts payable 1,624 Accounts payable to affiliated companies 57 Accrued taxes 38 Other 144 ------------- 3,063 ------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 276 Other 609 ------------- 885 ------------- 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 Accumulated deficit (659) ------------- Common Stockholder's Equity 4,341 ------------- Total Capitalization 8,791 ------------- Total Liabilities and Capitalization $ 12,739 ============= 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 Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ 3,732 ------------- Operating Expenses: Other 390 Maintenance 3,487 Depreciation 13 ------------- Total operating expenses 3,890 ------------- Operating Loss (158) Interest Expense, Net 83 Other Income, Net 1 ------------- Loss Before Income Tax Benefit (240) Income Tax Benefit (98) ------------- Net Loss $ (142) ============= 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. Greenport Power, LLC BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 533 ------------- Total Assets $ 533 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Current Liabilities: Accounts payable $ 154 Other 202 ------------- 356 ------------- Capitalization: Common Stockholder's Equity: Members equity 177 ------------- Common Stockholder's Equity 177 ------------- Total Capitalization 177 ------------- Total Liabilities and Capitalization $ 533 ============= 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 Months Ended March 31, 2004 ------------- (Thousands of Dollars) Operating Revenues $ - Operating Expenses 80 ------------- Net Loss $ (80) ============= 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. ERI/HEC EFA-Med, LLC BALANCE SHEET (Unaudited) March 31, 2004 ------------- (Thousands of Dollars) ASSETS ------ Current Assets: Cash $ 2 ------------- Total Assets $ 2 ============= LIABILITIES AND CAPITALIZATION ------------------------------ Capitalization: Common Stockholder's Equity: Capital surplus, paid in $ 18 Accumulated deficit (16) ------------- Common Stockholder's Equity 2 ------------- Total Capitalization 2 ------------- Total Liabilities and Capitalization $ 2 ============= 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 Months Ended March 31, 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 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. Northeast Utilities (Parent) 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, 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 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 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 is comprised of Select Energy's wholesale and retail businesses. The energy services business segment consists of the operations of NGS, SESI and Woods Network. 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 Select Energy's merchant energy business segment includes 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. 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. 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. NGS also provides consulting services which include engineering services, construction management, permitting, and compliance management. 5. About Boulos Boulos is an electrical contracting company which specializes in high-voltage electrical construction and maintenance in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. Boulos is wholly owned by NGS. 6. About NGS Mechanical NGS Mechanical provides mechanical 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 and New Hampshire. NGS acquired Woods Electrical on July 31, 2002. 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 for its customers. 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. New Accounting Standards Consolidation of Variable Interest Entities: In December 2003, the Financial Accounting Standards Board (FASB) issued a revised version of FASB Interpretation No. (FIN) 46, "Consolidation of Variable Interest Entities," (FIN 46R). FIN 46R was effective for NU for the first quarter of 2004 and did not have an impact on any of NU's previously identified variable interest entities (VIE). Based on management's review of NU's independent power producer (IPP) contracts, no new VIEs have been identified. 18. Derivative Instruments, Market Risk and Risk Management 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 balance sheets. Derivative contracts that are entered into as a normal purchase or sale and are probable of resulting in physical delivery, and are documented as such, are recorded under accrual accounting. Through the first quarter of 2004 there were no changes to interpretations of SFAS No. 133, but the FASB continues to consider changes that could affect the way Select Energy and SENY record and disclose derivative and hedging activities. The tables below summarize Select Energy's and SENY's derivative assets and liabilities at March 31, 2004. These amounts do not include option premiums paid, which are recorded as prepayments and amounted to $6.5 million for Select Energy related to energy trading activities and $9.4 million ($6.6 million for Select Energy and $2.8 million for SENY) related to marketing activities at March 31, 2004. These amounts also do not include option premiums received by Select Energy, which are recorded as other current liabilities and amounted to $8.4 million related to energy trading activities at March 31, 2004. ------------------------------------------------------------------------------- (Millions of Dollars) Assets Liabilities Total ------------------------------------------------------------------------------- Select Energy: Trading $ 187.4 $ (158.0) $ 29.4 Non-trading 0.3 - 0.3 Hedging 72.7 (12.1) 60.6 ------------------------------------------------------------------------------- Total $ 260.4 $ (170.1) $ 90.3 =============================================================================== ------------------------------------------------------------------------------- (Millions of Dollars) Assets Liabilities Total ------------------------------------------------------------------------------- SENY: Trading $ 0.9 $ (2.9) $ (2.0) Non-trading 0.3 (0.1) 0.2 Hedging 9.0 - 9.0 ------------------------------------------------------------------------------- Total $ 10.2 $ (3.0) $ 7.2 =============================================================================== 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 and SENY manage 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 balance sheets as derivative assets or liabilities. Changes in fair value are recognized in operating revenues in the statements of income in the period of change. The net fair value positions of the trading portfolio at March 31, 2004 were assets of $29.4 million for Select Energy and liabilities of $2.0 million for SENY. Select Energy's and SENY's trading portfolio includes New York Mercantile Exchange (NYMEX) futures and options, the fair value of which is based on closing exchange prices; over-the-counter forwards 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. SENY's trading portfolio also includes transmission congestion contracts (TCCs). The fair value of TCCs included in the trading portfolio is based on published market data. Non-trading: Non-trading derivative contracts are used for delivery of energy related to Select Energy's and SENY's wholesale and retail marketing activities. These contracts are subject to fair value accounting because these contracts are derivatives that cannot be designated as normal purchases or sales, as defined. These contracts cannot be designated as normal purchases or sales either because they are included in the New York energy market that settles financially or because management did not elect the normal purchases and sales designation. Changes in fair value of a negative $0.3 million of non-trading derivative contracts were recorded in revenues in the first quarter of 2004. Market information for TCCs included in non-trading is not available, and those contracts cannot be reliably valued. Management believes the amounts paid for these contracts, which total $2.8 million and are included in premiums paid, are equal to their fair value. Hedging: Select Energy and SENY utilize 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 commitments to certain customers. Select Energy and SENY also utilize 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, natural gas or oil. 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 and SENY maintain natural gas service agreements with certain customers to supply gas at fixed prices for terms extending through 2006. Select Energy and SENY have 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 March 31, 2004 the NYMEX futures contracts had notional values of $53.5 million and were recorded at fair value as derivative assets of $13.5 million. Select Energy maintains power swaps to hedge purchases in New England as well as financial gas contracts and gas futures to hedge electricity purchase contracts that are indexed to gas prices. These hedging contracts, which are valued at the mid-point of bid and ask market prices, were recorded as derivative assets of $45.4 million and derivative liabilities of $12.7 million at March 31, 2004. To hedge the congestion price differences associated with locational marginal pricing in the New England and the Pennsylvania, New Jersey, Maryland and Delaware (PJM) regions, Select Energy holds Financial Transmission Rights (FTR) contracts recorded as a derivative asset at a fair value of $1.1 million at March 31, 2004. Other hedging derivative assets, which are valued at the mid-point of bid and ask market prices, include forwards, futures, options and swaps to hedge Select Energy's basic generation service (BGS) contracts in the PJM region and were recorded at fair value as derivative assets of $10.9 million at March 31, 2004. SENY maintains financial power swaps to hedge its retail sales portfolio through 2004, which were also valued at the mid-point of bid and ask market prices. These contracts were recorded at fair value as derivative assets of $7.1 million at March 31, 2004. In the first quarter of 2004, Select Energy began hedging natural gas inventory with gas futures that qualify as fair value hedges. The changes in fair value of the futures and the hedged inventory are recorded on the balance sheets. B. Market Risk Information Select Energy and SENY utilize 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 and SENY'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 and SENY have 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 March 31, 2004, a 10 percent change in market price would have resulted in an increase or decrease in fair value of between $14.3 million and $16.6 million. The impact of a change in electricity, natural gas and oil prices on Select Energy's and SENY's wholesale and retail marketing portfolio at March 31, 2004, is not necessarily representative of the results that will be realized when these contracts are physically delivered. Trading Contracts: At March 31, 2004, Select Energy and SENY have calculated the market price resulting from a 10 percent change in forward market prices. That 10 percent change would result in a $0.8 million increase or decrease in the fair value of the Select Energy trading portfolio. In the normal course of business, Select Energy and SENY also face 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 their contractual obligations. NU serves a wide variety of customers and suppliers that include IPPs, 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 and SENY. Select Energy and SENY have 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, LOCs, 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 and SENY entering into energy contracts. The appropriateness of these limits is subject to continuing review. Concentrations among these counterparties may impact Select Energy's and SENY'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 March 31, 2004, Select Energy and SENY maintained collateral balances from counterparties of $70.9 million ($65.6 million for Select Energy and $5.3 million for SENY). These amounts are included in both unrestricted cash from counterparties and other current liabilities on the accompanying balance sheets. 19. Unrestricted Cash from Counterparties Unrestricted cash on deposit from counterparties represents balances collected from counterparties resulting from Select Energy's and SENY's credit management activities. An offsetting liability has been recorded in other current liabilities for the amounts collected. To the extent Select Energy or SENY requires collateral from counterparties, cash is held as a part of the total collateral required. The right to hold such cash collateral in an unrestricted manner is determined by the terms of Select Energy's and SENY's agreements. Key factors affecting the unrestricted status of a portion of this cash collateral include the financial standing of Select Energy or SENY and their credit support provider. 20. Special Deposits Special deposits represents amounts Select Energy and SENY have on deposit with counterparties and brokerage firms in the amount of $4.8 million. 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 ------------------------------ (Signature of Signing Officer) John P. Stack ------------- Vice President-Accounting and Controller ---------------------------------------- Date: May 27, 2004 -------------------