Eversource 2002 Annual Report Download - page 25

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Long Island Power Authority also owning 50 percent. The project still
requires federal and New York state approvals. Given the approval
process and the uncertainty created by the recent damage to the existing
transmission line, the expected in-service date is currently under
evaluation. At December 31, 2002, CL&P has capitalized approximately
$4.8 million related to this project.
In early 2003, the CSC completed hearings on the second project, a $135
million proposal to build a new 345,000 volt transmission line between
Norwalk, Connecticut and Bethel, Connecticut. A decision is expected in
April 2003. The current cost estimate is based on building the entire
transmission line aboveground. Alternative proposals have been made
to build all or part of the line underground, which likely would result in
significantly higher construction costs. CL&P hopes to have the new
transmission line operational by the summer of 2005. At December 31,
2002, CL&P has capitalized approximately $8.8 million related to
this project.
By mid-2003, CL&P expects to apply to the CSC for approval of a third
project, the installation of another 345,000 volt transmission line between
Norwalk, Connecticut and Middletown, Connecticut. Estimated construction
costs of this overhead line are approximately $500 million. CL&P will
jointly construct this project with United Illuminating with CL&P
owning 80 percent or approximately $400 million of the project. At
December 31, 2002, CL&P has capitalized approximately $2.4 million
related to this project.
Construction of these three projects would significantly enhance CL&P’s
ability to provide reliable electric service to the rapidly growing energy
market in southwestern Connecticut. Despite the need for such facilities,
significant opposition has been raised. As a result, management cannot
be certain as to the expected in-service dates or the ultimate cost of these
projects. Should the plans proceed, applicable law provides that CL&P
will be able to recover its operating cost and carrying costs through
federally approved transmission tariffs.
Yankee Gas has also proposed expansion of its gas distribution system
in Connecticut.Yankee Gas’capital expenditures totaled $70.8 million in
2002, compared with $47.8 million in 2001 and $21.6 million in 2000.
Yankee Gas expects capital expenditures to total $72.9 million in 2003
as it continues to expand its distribution system and expects to begin
work on a liquefied natural gas storage facility proposed in
Waterbury, Connecticut.
The expectation that PSNH will retain its generation assets, at least
through 2004, will result in higher near-term capital expenditures at
PSNH. PSNH’s capital expenditures, excluding nuclear fuel, totaled
$109.8 million in 2002, compared with $92.6 million in 2001 and $69.5
million in 2000. Capital expenditures are expected to total $116.3 million
in 2003, as PSNH continues to upgrade and expand its distribution and
transmission system and upgrade its generation plants.
On December 5, 2002, PSNH announced an agreement to acquire the
franchise and electric system of Connecticut Valley Electric Company, Inc.
(CVEC), a subsidiary of Central Vermont Public Service Corporation
(CVPS) that serves approximately 10,000 customers in western New
Hampshire. Under the agreement, PSNH will pay CVPS approximately
$9 million for its assets and an additional $21 million to terminate a
wholesale power contract between CVPS and CVEC. Customers of CVEC
will become customers of PSNH, whose residential rates are now
approximately 20 percent lower than those of CVEC. PSNH will be
allowed to recover the $21 million payment with a return consistent with
Part 3 stranded cost treatment under the “Agreement to Settle PSNH
Restructuring”(Restructuring Settlement). Part 3 stranded costs are
nonsecuritized regulatory assets which must be recovered by a recovery
end date determined in accordance with the Restructuring Settlement or
be written off. The sale agreement is supported by the New Hampshire
Governor’s Office, New Hampshire Public Utilities Commission (NHPUC)
staff, the state Office of Consumer Advocate, the City of Claremont, and
New Hampshire Legal Assistance. The FERC and the NHPUC must
approve the sale, which is expected to become effective on January 1, 2004.
As a result of a lower projected growth rate and an adequately sized
transmission system to meet near term needs, WMECO does not forecast
significant changes in its construction program. WMECO’s capital
expenditures, excluding nuclear fuel, totaled $23.4 million in 2002,
compared with $30.9 million in 2001 and $27.3 million in 2000. WMECO’s
capital expenditures are expected to total $28.1 million in 2003.
Competitive Energy Subsidiaries: Capital expenditures at NU’s competitive
generation subsidiaries, NGC and HWP, are expected to be modest in
2003, with $12.1 million at NGC and $3.8 million at HWP. In 2002,
NGC’s and HWP’s capital expenditures totaled $16.4 million and $1
million, respectively.
In recent years, NU has considered several additional investments in the
competitive energy business. In 2001, NU proposed constructing a
completely new direct current cable between Norwalk, Connecticut and
Long Island, New York to serve the merchant power market. However,
because of growing financial distress in the merchant power industry, NU
concluded that such a project was not feasible at the time and withdrew its
proposal from the FERC in November 2002. NU also has considered
investing in additional peaking or intermediate generation in the New
York and the Mid-Atlantic states. However, NU concluded in 2002 that
potential returns on such investments were not adequate given the likely
purchase prices.
NU continues to examine niche acquisitions in the energy services business.
In 2002, NU acquired Woods Electrical and Woods Network for an aggregate
adjusted purchase price of $16.3 million. In 2001, NU acquired the E.S.
Boulos Company (Boulos), a high-voltage electrical contractor based in
Maine, and Niagara Mohawk Energy Marketing, Inc., an energy marketing
company based in New York that was subsequently renamed SENY. Both
Boulos and SENY were profitable, with Boulos earning $2.7 million and
SENY earning $17.2 million for the year ended December 31, 2002. Since
acquisition on July 1, 2002, Woods earned $0.1 million.
Regional Transmission Organization
The FERC has required all transmission owning utilities to voluntarily
start forming RTOs or to state why this process has not begun.
NU has been discussing with the other transmission owners in New
England the potential to form an Independent Transmission Company
(ITC). If formed, the ITC would be a for-profit entity and would perform
certain transmission functions required by the FERC, including tariff control,
system planning and system operations. The remaining functions required
by the FERC would be performed by the ISO regarding the energy market
and short-term reliability. Together, the ITC, if formed, and ISO would
form the FERC-desired RTO.
In January 2002, the New York and New England ISOs announced their
intention to form an RTO. On November 22, 2002, the two ISOs withdrew
their joint petition to FERC. The New England ISO intends to make an
RTO filing with the transmission owners in New England in 2003.