Eversource 2003 Annual Report Download - page 58

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In May 2001, WMECO issued $155 million in rate reduction certificates
and used $80 million of those proceeds to buy out an IPP contract. The
remaining balance is $132 million and $142 million at December 31,
2003 and 2002, respectively.
In January 2002, PSNH issued an additional $50 million in rate reduction
certificates and used the proceeds from this issuance to repay short-term
debt that was incurred to buy out a purchased-power contract in
December 2001. The remaining balance is $38 million and $46 million at
December 31, 2003 and 2002, respectively.
Securitized assets are being recovered over the amortization period of their
associated rate reduction bonds. All outstanding rate reduction bonds of
CL&P are scheduled to amortize by December 30, 2010, while PSNH rate
reduction bonds are scheduled to fully amortize by May 1, 2013, and
those of WMECO are scheduled to fully amortize by June 1, 2013.
Income Taxes, Net: The tax effect of temporary differences (differences
between the periods in which transactions affect income in the financial
statements and the periods in which they affect the determination of
taxable income) is accounted for in accordance with the rate-making
treatment of the applicable regulatory commissions and SFAS No. 109.
Differences in income taxes between SFAS No. 109 and the rate-making
treatment of the applicable regulatory commissions are recorded as regu-
latory assets. For further information regarding income taxes, see Note
1I, “Summary of Significant Accounting Policies — Income Taxes,” to the
consolidated financial statements.
Unrecovered Contractual Obligations: CL&P, WMECO and PSNH, under
the terms of contracts with the Yankee Companies, are responsible for
their proportionate share of the remaining costs of the units, including
decommissioning. These amounts are recorded as unrecovered contractual
obligations. A portion of these obligations for CL&P and WMECO was
securitized in 2001 and is included in securitized regulatory assets. The
remaining amounts for PSNH are recovered as stranded costs. During
2002, NU was notified by the Yankee Companies that the estimated cost
of decommissioning their units had increased by approximately $380 million
over prior estimates due to higher anticipated costs for spent fuel storage,
security and liability and property insurance. In December 2002, NU
recorded an additional $171.6 million in deferred contractual obligations
and a corresponding increase in the unrecovered contractual obligations
regulatory asset as a result of these increased costs.
In November 2003, the Connecticut Yankee Atomic Power Company
(CYAPC) prepared an updated estimate of the cost of decommissioning
its nuclear unit. NU’s aggregate share of the estimated increased cost is
approximately $167.7 million. NU subsidiaries’ respective shares of the
estimated increased costs are as follows: CL&P, $118.1 million; PSNH,
$17.1 million; and WMECO, $32.5 million. NU recorded an additional
$167.7 million in deferred contractual obligations and a corresponding
increase in the unrecovered contractual obligations regulatory asset as a
result of these increased costs.
Recoverable Energy Costs: Under the Energy Policy Act of 1992 (Energy
Act), CL&P, PSNH, WMECO, and NAEC were assessed for their proportionate
shares of the costs of decontaminating and decommissioning uranium
enrichment plants owned by the United States Department of Energy
(DOE) (D&D Assessment). The Energy Act requires that regulators treat
D&D Assessments as a reasonable and necessary current cost of fuel, to
be fully recovered in rates like any other fuel cost. CL&P, PSNH and
WMECO no longer own nuclear generation but continue to recover
these costs through rates. At December 31, 2003 and 2002, NU’s total
D&D Assessment deferrals were $18 million and $21.9 million, respectively,
and have been recorded as recoverable energy costs.
In conjunction with the implementation of restructuring under the
Restructuring Settlement on May 1, 2001, PSNH’s fuel and purchased-
power adjustment clause (FPPAC) was discontinued. At December 31,
2003 and 2002, PSNH had $162.2 million and $179.6 million, respectively,
of recoverable energy costs deferred under the FPPAC, including previous
deferrals of purchases from IPPs. Under the Restructuring Settlement, the
FPPAC deferrals are recovered as a Part 3 stranded cost through a
stranded cost recovery charge. Also included in PSNH’s recoverable energy
costs are costs associated with certain contractual purchases from IPPs
that had previously been included in the FPPAC. These costs are treated
as Part 3 stranded costs and amounted to $56.1 million and $62.1 million
at December 31, 2003 and 2002, respectively.
The regulated rates of Yankee Gas include a purchased gas adjustment
clause under which gas costs above or below base rate levels are
charged to or credited to customers. Differences between the actual
purchased gas costs and the current rate recovery are deferred and
recovered or refunded in future periods. These amounts are recorded as
recoverable energy costs of $2.9 million and $3.3 million at December
31, 2003 and 2002, respectively.
Through December 31, 1999, CL&P had an energy adjustment clause
under which fuel prices above or below base-rate levels were charged to
or credited to customers. CL&P’s energy costs deferred and not yet
collected under the energy adjustment clause amounted to $31.7 million
at December 31, 2002, which were recorded as recoverable energy
costs. On July 26, 2001, the DPUC authorized CL&P to assess a charge
of approximately $0.002 per kilowatt-hour (kWh) to collect these costs
from August 2001 through December 31, 2003, at which time no
unrecovered costs remained.
The majority of the recoverable energy costs are recovered in rates
currently from the customers of CL&P, PSNH, WMECO, and Yankee Gas.
PSNH’s recoverable energy costs are Part 3 stranded costs which are
nonsecuritized regulatory assets which must be recovered by a recovery
end date to be determined in accordance with the Restructuring
Settlement or which will be written off. Based on current projections,
PSNH expects to fully recover all of its Part 3 stranded costs by the recovery
end date.
Regulatory Liabilities: The Utility Group maintained $1.2 billion and
$740.2 million of regulatory liabilities at December 31, 2003 and 2002,
respectively. These amounts are comprised of the following:
At December 31,
(Millions of Dollars) 2003 2002
Cost of removal $ 334.0 $321.0
CL&P CTA, GSC, and SBC overcollections 333.7 133.6
PSNH SCRC overcollections 160.4 166.2
Regulatory liabilities offsetting
Utility Group derivative assets 117.0 —
CL&P LMP overcollections 79.8 —
Yankee Gas IERM overcollections 5.3 2.9
Other regulatory liabilities 134.1 116.5
Totals $1,164.3 $740.2