Eversource 2004 Annual Report Download - page 31

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New Hampshire:
Delivery Rate Case: PSNH’s delivery rates were fixed, effective May 1, 2001,
by the “Agreement to Settle PSNH Restructuring” (Restructuring
Settlement) until February 1, 2004. Consistent with the requirements
of the Restructuring Settlement and state law, PSNH filed a delivery
service rate case and tariffs with the NHPUC on December 29, 2003
to increase electricity delivery rates by approximately $21 million, or
2.6 percent, effective February 1, 2004.
On July 14, 2004, PSNH filed with the NHPUC a revenue requirements
settlement agreement among several parties, including the NHPUC
staff and the Office of Consumer Advocate (OCA). The terms of the
proposed settlement agreement allowed for increases in PSNH’s
delivery rates totaling $3.5 million annually, effective prospectively
beginning October 1, 2004, and an incremental $10 million annual
increase effective prospectively on June 1, 2005, for a total rate
increase of $13.5 million. On July 29, 2004, PSNH filed with the NHPUC
a rate design settlement agreement among several parties, including
the NHPUC staff. These proposed revenue requirements and rate
design settlement agreements together resolved all delivery service
rate case issues. On September 2, 2004, the NHPUC issued an order
approving both settlement agreements, and new delivery service rates
went into effect on October 1, 2004.
Transition Energy Service and Default Energy Service: In accordance with the
Restructuring Settlement and state law, PSNH files for updated TS/DS
rates periodically to ensure timely recovery of its costs. The TS/DS rate
recovers PSNH’s generation and purchased power costs, including a
return on PSNH’s generation investment. PSNH defers for future
recovery or refund any difference between its TS/DS revenues and the
actual costs incurred.
On September 24, 2004, PSNH filed a petition with the NHPUC requesting
a change in the TS/DS rate for the period February 1, 2005 through
January 31, 2006. In December 2004, PSNH petitioned for a TS/DS rate
of $0.0649 per kWh based on updated market information. The NHPUC
issued its order approving a TS/DS rate of $0.0649 per kWh on January 28,
2005. This TS/DS rate includes an 11 percent ROE on PSNH’s
generation assets, which is subject to further review by the NHPUC.
SCRC Reconciliation Filings: The Stranded Cost Recovery Charge (SCRC)
allows PSNH to recover its stranded costs. On an annual basis, PSNH
files with the NHPUC a SCRC reconciliation filing for the preceding
calendar year. This filing includes the reconciliation of stranded cost
revenues billed with stranded costs, and TS/DS revenues billed with
TS/DS costs. The NHPUC reviews the filing, including a prudence
review of PSNH’s generation operations. The cumulative deferral of
SCRC revenues in excess of costs was $208.6 million at December 31,
2004. This cumulative deferral will decrease the amount of non-
securitized stranded costs that will have to be recovered from PSNH’s
customers in the future from $411.3 million to $202.7 million.
The 2003 SCRC reconciliation filing was filed with the NHPUC on April 30,
2004, and a stipulation and settlement agreement between PSNH, the
OCA and NHPUC staff was filed with the NHPUC on October 4, 2004.
Under the terms of the settlement agreement, no costs related to the
recovery of stranded costs or the cost of providing transition energy
service were disallowed, and the NHPUC staff agreed to accept the 2003
SCRC filing without change. On October 29, 2004, the NHPUC issued an
order accepting the settlement agreement as filed.
The 2004 SCRC reconciliation filing is expected to be filed with the
NHPUC by May 2, 2005. Management does not expect the NHPUC’s
review of the 2004 SCRC filing to have a material impact on PSNH’s
net income or financial position.
The SCRC and TS/DS rate mechanisms currently reconcile accrued
expenses with billed revenues on a monthly basis. On May 2, 2005,
PSNH expects to file its annual 2004 SCRC and TS/DS reconciliation
that will include a request to include unbilled revenues as part of the
reconciliation process. This request will allow for the reconciliation
of revenues on an accrual basis with the current accrued expenses
recovered through the SCRC and TS/DS rate mechanisms, consistent
with accrual accounting. At December 31, 2004, the PSNH unbilled
revenue balance related to SCRC and TS/DS was $11.7 million and
$16.7 million, respectively. If approved, this change will allow for the
inclusion of accrued unbilled revenue balances in the recovery of SCRC
and TS/DS costs. Management believes that the unbilled revenue
balance related to SCRC and TS/DS is probable of being recovered
from PSNH’s customers.
Wholesale Distribution Rate Case: PSNH is planning to file a wholesale
distribution rate case with the FERC in late March 2005. This FERC
filing is necessary due to the reclassification of certain assets from
PSNH’s transmission business to distribution business. PSNH plans to
file a revenue requirements analysis in order to recover certain delivery
costs arising from the provision of wholesale delivery service to another
New Hampshire utility.
Massachusetts:
Transition Cost Reconciliation: On March 31, 2004, WMECO filed its 2003
transition cost reconciliation with the DTE. This filing reconciled the
recovery of generation-related stranded costs for calendar year 2003.
The DTE has not initiated its investigation into this filing. WMECO expects
to file its 2004 transition cost reconciliation with the DTE on March 31,
2005. The DTE combined the 2003 transition cost reconciliation filing
and the 2004 transition cost reconciliation filing into a single proceeding.
The timing of this decision in the combined proceeding is uncertain,
but management does not expect the outcome to have a material
adverse impact on WMECO’s net income or financial position.
Distribution Rate Case Settlement Agreement: On December 29, 2004, the DTE
approved a rate case settlement agreement submitted by WMECO, the
Massachusetts Attorney General’s Office, the Associated Industries of
Massachusetts, and the Low-Income Energy Affordability Network.
The settlement agreement provides for a $6 million increase in WMECO’s
distribution rate effective January 1, 2005 and an additional $3 million
increase in WMECO’s distribution rate effective January 1, 2006 and for
a decrease in WMECO’s transition charge by approximately $13 million
annually. The lower transition charge will delay recovery of transition
costs and will reduce WMECO’s cash flow but not its earnings as part
of the rate case settlement. WMECO agreed not to file a full rate case
with rates effective prior to January 1, 2007.