Eversource 2004 Annual Report Download - page 27

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Yankee Companies’ individual damage claims attributed to the
government's breach totaling $548 million are specific to each plant
and include incremental storage, security, construction and other costs
through 2010, which is the earliest date the DOE projects that it will
begin removing nuclear fuel. The YAEC damage claim is $191 million,
the MYAPC claim is $160 million and the CYAPC claim is $197 million.
The DOE trial ended on August 31, 2004 and a verdict has not been
reached. The current Yankee Companies’ rates do not include an
amount for recovery of damages in this matter. Management can predict
neither the outcome of this matter nor its ultimate impact on NU.
Business Development and Capital Expenditures
Consolidated: In 2004, NU’s capital expenditures totaled $643.8 million,
compared with depreciation of $224.9 million. In 2003 and 2002, capital
expenditures totaled $563.6 million and $510.5 million, respectively,
compared with depreciation of $204.4 million and $205.6 million,
respectively. In 2005, capital expenditures are projected to total
approximately $740 million, compared with projected depreciation of
approximately $240 million. The increasing level of capital expenditures is
driven primarily by a need to improve the capacity and reliability of
NU’s regulated energy delivery system. That increased level of capital
expenditures, compared with depreciation levels, also is increasing the
amount of plant in service and the regulated companies’ earnings base,
provided NU’s Utility Group companies achieve timely recovery of
their investment.
Utility Group:
CL&P: In December 2003, the DPUC approved $900 million of distribution
capital expenditures for CL&P from 2004 through 2007. Those expenditures
are intended to improve the reliability of the distribution system and to
meet growth requirements on the distribution system. In 2004, CL&P’s
distribution capital expenditures totaled $241.8 million, compared with
$258.7 million in 2003 and $219.7 million in 2002. In 2005, CL&P projects
distribution capital expenditures of approximately $230 million.
CL&P’s transmission capital expenditures totaled $128.1 million in
2004, compared with $63.5 million in 2003 and $39.1 million in 2002.
In 2005, CL&P’s transmission capital expenditures are projected to
total approximately $190 million. The primary reason for the increase
projected for 2005 is the expectation that construction will increase
in the spring of 2005 on a new 21-mile, 345 kV transmission project
between Bethel, Connecticut and Norwalk, Connecticut. The CSC
initially approved that project in July 2003.
On August 19, 2004, a Connecticut Superior Court judge dismissed
an appeal by the City of Norwalk of the permit granted to CL&P by
the CSC to construct a 345 kV transmission project from Bethel,
Connecticut to Norwalk, Connecticut. Based upon a recently completed
estimate, the project is currently projected to cost between $300 million
and $350 million. The project is expected to begin to alleviate identified
reliability issues in southwest Connecticut and to help offset rising
customer costs for all of Connecticut. Work on the related substations
has begun, and work on the transmission lines is expected to start in
March 2005 after receiving permits from the towns and the Connecticut
Department of Transportation. The major line construction contracts
were signed in early March 2005. Management estimates a project
completion date of December 2006. At December 31, 2004, CL&P
has capitalized $65 million of costs associated with this project.
On October 9, 2003, CL&P and The United Illuminating Company (UI)
filed for approval at the CSC for a separate 69-mile 345 kV transmission
line from Middletown, Connecticut to Norwalk, Connecticut. Construction
is expected to commence after the final route and configuration are
determined by CSC. CL&P and UI initially estimated a cost of
$620 million for the total project. In June 2004, after the New England
Independent System Operator (ISO-NE) raised concerns over the
amount of underground line that had been proposed, the CSC requested
that a committee comprised of representatives of CL&P, UI and ISO-NE
study various alternatives and reach a consensus on the proposed
project configuration. The report was filed on December 20, 2004
and recommended a maximum of 24 miles of underground line. On
December 28, 2004 CL&P and UI filed updated cost estimates with
the CSC which reflect changes needed to address technical issues
introduced by the extensive amount of underground transmission being
proposed and a two-year delay in the project in-service date from 2007
to 2009. The new estimates place the cost of the project between
$840 million and $990 million. The variation in the cost range is due to
unknown conditions that may be encountered during construction and
a provision for other contingencies. Additional steps being considered
by the CSC to lower magnetic fields along the overhead portion of the
proposed route would add between $70 million and $80 million to the
estimated cost. The CSC completed hearings on the proposal and the
alternatives on February 17, 2005, and a ruling on the proposed project
is expected by April 7, 2005. At December 31, 2004, CL&P has capitalized
$18 million associated with this project.
On October 1, 2004, CL&P and the Long Island Power Authority (LIPA)
jointly filed plans with the Connecticut Department of Environmental
Protection to replace an undersea 13-mile electric transmission line
between Norwalk, Connecticut and Northport - Long Island, New York,
consistent with a comprehensive settlement agreement reached on
June 24, 2004. This project is estimated to cost in the range of $114 million
to $135 million with CL&P and LIPA each owning approximately 50 percent
of the line. The cost range reflects that vendor contracts have not yet
been signed. The project has received CSC approval, and federal and
New York state approvals are expected in 2005. Pending final approval,
construction activities are scheduled to begin in the fall of 2006.
Management expects the line to be in service by the middle of 2008.
At December 31, 2004, CL&P has capitalized $7 million of costs related
to this project.
In May 2004, CL&P applied to the CSC to construct two 115 kV 9-mile
underground transmission lines between Norwalk, Connecticut and
Stamford, Connecticut. The project is expected to cost approximately
$120 million and will help meet the growing electric demands in the
area. Management expects the lines to be in service by 2008. At
December 31, 2004, CL&P has capitalized $3 million of costs related
to this project.
During 2004, NU placed in service $123 million of electric transmission
projects. These projects included CL&P’s $38 million upgrade of a
transmission substation in Stamford, Connecticut that will allow additional
electricity to be imported into southwest Connecticut.