Eversource 2003 Annual Report Download - page 74

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These liabilities are estimated on an undiscounted basis and do not
assume that any amounts are recoverable from insurance companies or
other third parties. The environmental reserve includes sites at different
stages of discovery and remediation and does not include any unasserted
claims. At December 31, 2003, there are nine sites for which there are
unasserted claims; however, any related remediation costs are not
probable or estimable at this time. NU’s environmental liability also takes
into account recurring costs of managing hazardous substances and
pollutants, mandated expenditures to remediate previously contaminated
sites and any other infrequent and non-recurring clean up costs.
NU currently has 50 sites included in the environmental reserve. Of those
50 sites, 20 sites are in the remediation or long-term monitoring phase,
24 sites have had site assessments completed and the remaining six sites
are in the preliminary stages of site assessment.
In addition, capital expenditures related to environmental matters are
expected to total approximately $106 million in aggregate for the years
2004 through 2008. Of the $106 million, $70 million relates to the
proposed conversion of a 50 megawatt oil and coal burning unit at
Schiller Station to a wood burning unit. The remainder primarily relates
to other environmental remediation programs including programs
associated with NU’s hydroelectric generation assets.
MGP Sites: Manufactured gas plant (MGP) sites comprise the largest
portion of NU’s environmental liability. MGPs are sites that manufactured
gas from coal and produced certain byproducts that may pose risk to
human health and the environment. At December 31, 2003 and 2002,
$36.3 million and $38.3 million, respectively, represent amounts for the
site assessment and remediation of MGPs. At December 31, 2003 and
2002, the five largest MGP sites comprise approximately 57 percent and
55 percent, respectively, of the total MGP environmental liability. NU
currently has 29 MGP sites included in its environmental liability and five
contingent MGP sites of which management is aware and for which
costs are not probable or estimable at this time. Of the 29 MGP sites,
seven are currently undergoing remediation efforts with the remainder in
the site assessment stage.
At December 31, 2003, NU has one site that is held for sale. The site, a
former MGP site, is currently held for sale under a pending purchase and
sale agreement. NU is currently remediating the property and has been
deferring the costs associated with those remediation efforts as allowed
by a regulatory order. At December 31, 2003, NU had $7.8 million related
to remediation efforts at the property and other sale costs recorded in
other deferred debits on the accompanying consolidated balance sheets.
The pending purchase and sale agreement releases NU from all
environmental claims arising out of or in connection with the property.
The purchase price in the pending purchase and sale agreement exceeds
the book value of the land including the aforementioned deferred
environmental remediation costs.
CERCLA Matters: The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA) and its’ amendments
or state equivalents impose joint and several strict liabilities, regardless of
fault, upon generators of hazardous substances resulting in removal and
remediation costs and environmental damages. Liabilities under these
laws can be material and in some instances may be imposed without
regard to fault or for past acts that may have been lawful at the time
they occurred. NU has five superfund sites under CERCLA for which it
has been notified that it is a potentially responsible party (PRP). For sites
where there are other PRPs and NU’s subsidiaries are not managing the
site assessment and remediation, the liability accrued represents NU’s
estimate of what it will need to pay to settle its obligations with respect
to the site.
It is possible that new information or future developments could require a
reassessment of the potential exposure to related environmental matters.
As this information becomes available management will continue to assess
the potential exposure and adjust the reserves as necessary.
Rate Recovery: PSNH and Yankee Gas have rate recovery mechanisms for
environmental costs. CL&P recovers a certain level of environmental costs
currently in rates but does not have an environmental cost recovery
tracking mechanism. Accordingly, changes in CL&P’s environmental
reserves impact CL&P’s earnings. WMECO does not have a regulatory
mechanism to recover environmental costs from its customers, and
changes in WMECO’s environmental reserves impact WMECO’s earnings.
D. Spent Nuclear Fuel Disposal Costs
Under the Nuclear Waste Policy Act of 1982, CL&P, PSNH, WMECO, and
NAEC must pay the DOE for the disposal of spent nuclear fuel and
high-level radioactive waste. The DOE is responsible for the selection and
development of repositories for, and the disposal of, spent nuclear fuel
and high-level radioactive waste. For nuclear fuel used to generate
electricity prior to April 7, 1983 (Prior Period Fuel), an accrual has been
recorded for the full liability, and payment must be made prior to the
first delivery of spent fuel to the DOE. Until such payment is made, the
outstanding balance will continue to accrue interest at the 3-month
treasury bill yield rate. At December 31, 2003 and 2002, fees due to the
DOE for the disposal of Prior Period Fuel were $256.4 million and
$253.6 million, respectively, including interest costs of $174.3 million
and $171.5 million, respectively.
Fees for nuclear fuel burned on or after April 7, 1983, were billed cur-
rently to customers and were paid to the DOE on a quarterly basis. At
December 31, 2003, NU’s ownership shares of Millstone and Seabrook
have been sold, and NU is no longer responsible for fees relating to fuel
burned at these facilities since their sale.
E. Nuclear Insurance Contingencies
In conjunction with the divestiture of Millstone in 2001 and Seabrook in
2002, NU terminated its nuclear insurance related to these plants, and
NU has no further exposure for potential assessments related to
Millstone and Seabrook. However, through its continuing association
with Nuclear Electric Insurance Limited (NEIL) and CYAPC, NU is subject
to potential retrospective assessments totaling $0.8 million under its
respective NEIL insurance policies.
F. Long-Term Contractual Arrangements
VYNPC: Previously, under the terms of their agreements, NU’s companies
paid their ownership (or entitlement) shares of costs, which included
depreciation, O&M expenses, taxes, the estimated cost of decommissioning,
and a return on invested capital to VYNPC and recorded these costs as
purchased-power expenses. On July 31, 2002, VYNPC consummated the
sale of its nuclear generating unit to a subsidiary of Entergy for
approximately $180 million. Under the terms of the sale, CL&P, PSNH
and WMECO will continue to buy approximately 16 percent of the