Eversource 2004 Annual Report Download - page 30

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On April 1, 2004, CL&P filed its 2003 CTA and SBC reconciliation
with the DPUC, which compares CTA and SBC revenues to revenue
requirements. A final decision in the 2003 CTA and SBC docket
was issued on August 4, 2004 and ordered a refund to customers
of $88.5 million over a seven-month period beginning with
October 2004 consumption.
In the 2001 CTA and SBC reconciliation filing, and subsequently in a
September 10, 2002 petition to reopen related proceedings, CL&P
requested that a deferred intercompany tax liability associated with
the intercompany sale of generation assets be excluded from the
calculation of CTA revenue requirements. On September 10, 2003,
the DPUC issued a final decision denying CL&P’s request, and on
October 24, 2003, CL&P appealed the DPUC’s final decision to the
Connecticut Superior Court. The appeal has been fully briefed and
argued. A decision from the court is not expected to be issued until
the second quarter of 2005. If CL&P’s request is granted through these
court proceedings, then there could be additional amounts due to
CL&P from its customers. The 2004 impact of including the deferred
intercompany tax liability in CTA revenue requirements has been a
reduction in revenue of approximately $19 million.
Application for Issuance of Long-Term Debt: On September 9, 2004, CL&P filed
an application with the DPUC requesting approval to issue long-term
debt in the amount of $600 million during the period February 1, 2005
to December 31, 2007. Additionally, CL&P requested approval to enter
into hedging transactions from time to time through December 31,
2007 in connection with any prospective or outstanding long-term
debt in order to reduce the interest rate risk associated with the debt
or debt issuances. A final decision from the DPUC was issued on
January 26, 2005. The final decision approved CL&P’s request to
issue $600 million in long-term debt through December 31, 2007.
Additionally, the final decision approved CL&P’s request to enter into
hedging transactions in connection with any prospective or outstanding
long-term debt in order to reduce the interest rate risk associated
with the debt or debt issuances. CL&P plans to issue up to $200 million
in long-term debt by the middle of 2005.
CL&P TSO Rates: The vast majority of CL&P’s customers buy their energy
through CL&P’s TSO, rather than buying energy directly from competitive
suppliers. On August 1, 2003, CL&P filed with the DPUC to establish
TSO rates equal to December 31, 1996 total rate levels. In October 2003,
CL&P requested bids from wholesale energy marketers to supply its
TSO requirements from 2004 through 2006. Five wholesale marketers
supplied CL&P’s TSO requirements in 2004, including Select Energy.
On December 19, 2003, the DPUC issued a final decision setting the
average TSO rate of $0.1076 per kWh effective January 1, 2004. In
November 2004, CL&P requested bids from wholesale marketers to
supply the TSO requirements in 2005 and 2006 that were not filled in
the 2003 solicitation. Due to higher energy prices, the bids received
and accepted by CL&P were significantly higher than those accepted
in 2003. As a result of the higher supply costs, higher FMCC and a
$25.1 million distribution rate increase approved by the DPUC in CL&P’s
rate case, on November 24, 2004, CL&P requested the DPUC to increase
its TSO rate by 16.7 percent in 2005. On December 22, 2004, the DPUC
approved the increase of 16.2 percent effective January 1, 2005, although
the impact was partially offset by a continuation of the CTA refund. The
DPUC also ordered that projected 2004 and 2005 CTA overrecoveries and
half of projected 2004 distribution overrecoveries be used to moderate
increases for customers that otherwise would occur when the current
CTA refund expires on May 1, 2005. Overall, the final decision approved
an increase to the January 2004 TSO rates of approximately 10.4 percent,
including the effects of existing and new refunds and overrecoveries.
The DPUC denied requests by the Connecticut Attorney General and
OCC to defer the recovery of higher supplier costs into future years. On
February 3, 2005, the OCC filed an appeal with the Connecticut Superior
Court challenging this decision. This appeal is identical to the appeal
filed with the same court in February 2004 challenging the DPUC’s
December 2003 decision. Management believes that this appeal will
not impact the DPUC’s December 22, 2004 order.
Also, pursuant to state law, on December 19, 2003, the DPUC set
CL&P’s TSO rates for January 1, 2004 through December 31, 2004 and
confirmed that state law exempted FMCC, Energy Adjustment Clause
(EAC) charges and certain other charges from the statutorily imposed
rate cap. The OCC filed appeals of this decision with the Connecticut
Superior Court. The OCC claims that the decision improperly implements
an EAC charge under Connecticut law, fails to properly define and
identify the fees that CL&P will be allowed to collect from customers
and improperly calculates base rates for purposes of determining the
rate cap. Management believes that these appeals will not impact the
TSO rates approved by the DPUC.
On February 1, 2005, CL&P filed for a 1.6 percent increase to rates
($29.2 million) to collect additional FMCC from customers effective
May 1, 2005. The increase is necessary to collect costs related to an
additional RMR contract related to two generating plants located in
southwest Connecticut. The RMR contract has preliminary approval
for billing from the FERC and is subject to a future review by the
FERC prior to final approval.
Connecticut — Yankee Gas:
Rate Case Filing: On July 2, 2004, Yankee Gas filed a rate case with the
DPUC to increase retail rates by $26.5 million, or 7.2 percent, effective
January 1, 2005. Yankee Gas also requested an authorized ROE of
10.75 percent in the rate case filing. The requested increase in rates
was based on increased costs of distribution delivery services such as
pension and healthcare, as well as the cost of additional investments
needed to maintain a safe and reliable gas distribution system.
On October 14, 2004, Yankee Gas filed a settlement agreement with the
DPUC. Parties to the settlement agreement included the OCC and the
Prosecutorial Division of the DPUC. The settlement agreement increases
customer rates by $14 million annually, allows a ROE of 9.9 percent
and reduces Yankee Gas’ annual expense for plant taken out of service
by $5.7 million. As part of the settlement agreement, Yankee Gas agreed
not to file a new rate increase application to be effective prior to the
earlier of the in-service date of its new LNG facility or July 1, 2007.
On December 8, 2004, the DPUC issued a final decision approving
the settlement agreement as filed. The rate increase took effect on
January 1, 2005.