Eversource 2002 Annual Report Download - page 27

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A schedule has been set in Yankee Gas’ proceeding before the DPUC
to obtain rate approval to build a two billion cubic foot liquefied natural
gas storage and production facility in Waterbury, Connecticut.The schedule
includes hearings in March 2003 with a final decision in the second quarter
of 2003. If approved, construction on the facility, which could cost
approximately $60 million, could begin in the fourth quarter of 2003.
In December 2002, the DPUC opened a new docket concerning Yankee
Gas overearnings. Hearings related to this docket are scheduled to be
held in March 2003 with a final decision scheduled for May 2003, and
management cannot determine the ultimate impact of this docket.
New Hampshire: In July 2001, the NHPUC opened a docket to review the
fuel and purchased-power adjustment clause (FPPAC) costs incurred
between August 2, 1999, and April 30, 2001. Under the Restructuring
Settlement, FPPAC deferrals are recovered as a Part 3 stranded cost
through the stranded cost recovery charge. On December 31, 2002, the
NHPUC issued its final order allowing recovery of virtually all such costs.
On June 28, 2002, PSNH made its first stranded cost recovery charge
reconciliation filing with the NHPUC for the period May 1, 2001, through
December 31, 2001. This filing reconciles stranded cost revenues against
actual stranded cost charges with any difference being credited against
stranded costs or deferred for future recovery. Included in the stranded
cost charges are the generation costs for the filing period. The generation
costs included in this filing were subject to a prudence review by the
NHPUC. In January 2003, PSNH entered into a settlement agreement
with the Office of Consumer Advocate and the staff of the NHPUC that
resolved all outstanding issues. In conjunction with the settlement
agreement, the NHPUC staff recommended no disallowances resulting
from their review of the outages at PSNH’s generating plants. A final
order approving the settlement agreement was issued by the NHPUC in
February 2003. The NHPUC order approved PSNH’s reconciliation of
stranded costs as outlined within the Settlement Agreement and had no
impact on PSNH’s earnings.
On September 12, 2002, the NHPUC issued a final decision approving
the auction results in the sale of Seabrook to FPL. On November 1, 2002,
the sale was consummated. The proceeds received by NAEC, after NAEC
repaid its outstanding debt, were refunded to PSNH through the Seabrook
Power Contracts. PSNH used the proceeds received from NAEC to recover
stranded costs and repay debt with the remaining proceeds to be returned
to NU. As a result of the Seabrook sale, PSNH expects its wholesale electric
sales to decline significantly in 2003. However, PSNH expects to generate
most of the electricity it needs to serve retail customers from its own
generating plants or purchased-power obligations and to purchase the
remainder in the wholesale market.
On February 1, 2003, in accordance with the Restructuring Settlement,
PSNH raised the transition service rate for residential and small commercial
customers to $0.0460 per kWh from $0.0440 per kWh. On the same date,
PSNH also raised its transition service rate for large commercial and
industrial customers to $0.0467 per kWh from $0.0440 per kWh. PSNH
expects these rates to be adequate to recover its generation and purchased-
power costs, including the recovery of carrying costs on PSNH’s generation
investment. If recoveries exceed PSNH’s costs, those overrecoveries will
be credited against PSNH’s Part 3 stranded cost balance. If actual costs
exceed those recoveries, PSNH will defer those costs for future recovery
from customers through its Stranded Cost Recovery Charge.
PSNH’s delivery rates are fixed until February 1, 2004. Under the
Restructuring Settlement, PSNH must file a rate case by December 31,
2003, for the purpose of commencing a review of PSNH’s delivery rates.
Also, under New Hampshire electric industry restructuring statutes,
PSNH cannot divest its nonnuclear generation assets until at least
February 1, 2004. At this time, management does not expect PSNH to
propose selling its 1,200 MW of generation assets.
Massachusetts: In December 2001, the DTE approved approximately a
14 percent reduction in WMECO’s overall rates for standard offer service,
primarily reflecting a reduction in WMECO’s standard offer service supply
costs in 2002 to approximately $0.048 per kWh from approximately $0.073
per kWh. In December 2002, the DTE approved an overall increase of
approximately 1.8 percent in WMECO’s non-contract standard offer rates,
primarily reflecting slightly increased standard offer and default service
costs as well as other inflationary factors. Select Energy won the bid to
supply WMECO with standard offer service in 2003 at an average rate of
approximately $0.050 per kWh. An unaffiliated company won a bid to
serve WMECO with default service for the period of January 1, 2003,
through June 30, 2003, at an average price of $0.051 per kWh.
On June 7, 2002, the DTE issued its decision on WMECO’s 1998 through
1999 stranded cost reconciliation. The decision included, among other
things, a conclusion that investment tax credits associated with generation
assets that have been divested should not be returned to ratepayers.
As a result, WMECO recognized approximately $13 million in tax credits
during the second quarter of 2002.
On March 30, 2001, WMECO filed its second annual stranded cost
reconciliation with the DTE for calendar year 2000. On March 29, 2002,
WMECO filed its 2001 annual transition cost reconciliation with the DTE.
This filing reconciled the recovery of stranded generation costs for calendar
year 2001 and includes sales proceeds from WMECO’s portion of the
Millstone units, the impact of securitization and approximately a $13
million benefit to ratepayers from WMECO’s nuclear performance-based
ratemaking process.
Subsequently, WMECO and the office of the Massachusetts Attorney
General reached a settlement resolving all transition charge issues for the
1998 through 2001 reconciliations.This settlement was filed for DTE review
on December 3, 2002 and approved on December 27, 2002. The settlement
had a positive impact of $9 million on WMECO 2002 pretax earnings.
For further information regarding commitments and contingencies related
to restructuring, see Note 8A, “Commitments and Contingencies –
Restructuring and Rate Matters,” to the consolidated financial statements.
Nuclear Generation Asset Divestitures
Seabrook: On November 1, 2002, CL&P, NAEC, and certain other joint
owners consummated the sale of their ownership interest in Seabrook.
VYNPC: On July 31, 2002,Vermont Yankee Nuclear Power Corporation
(VYNPC) consummated the sale of its nuclear generating unit. NU
subsidiaries CL&P, PSNH, and WMECO combined own 17 percent
of VYNPC.
Millstone: On March 31, 2001, CL&P and WMECO consummated the sale
of Millstone 1 and 2 and CL&P, PSNH and WMECO sold their ownership
interests in Millstone 3.