Eversource 2005 Annual Report Download - page 17

15
Regulatory Items:
• Each of NU’s Utility Group regulated electric companies, CL&P,
PSNH and Western Massachusetts Electric Company (WMECO),
has received regulatory approvals to recover the increased cost of
energy being supplied to their customers in 2006. These increased
costs are primarily the result of new solicitations from the market.
• PSNH’s 2004 stranded cost recovery charge (SCRC) reconciliation
filing was filed with the New Hampshire Public Utilities Commission
(NHPUC) on May 2, 2005. In October of 2005, PSNH, the NHPUC
staff and the New Hampshire Office of Consumer Advocate (OCA)
reached a settlement agreement in this case. This settlement
agreement was approved by the NHPUC on December 22, 2005.
That settlement agreement also recommended that the NHPUC
staff engage a coal procurement expert to analyze PSNH’s coal
procurement and transportation operations. Consistent with the
settlement agreement, the NHPUC deferred action on coal-related
costs until that analysis has been completed.
• On September 9, 2005 the DPUC issued a draft decision regarding
Yankee Gas Services Company (Yankee Gas) Purchased Gas
Adjustment (PGA) clause charges for the period of September 1,
2003 through August 31, 2004. The draft decision disallowed
approximately $9 million in previously recovered PGA revenues
associated with two separate Yankee Gas unbilled sales and revenue
adjustments. At the request of Yankee Gas, the DPUC reopened the
PGA hearings on September 20, 2005 and requested that Yankee
Gas file supplemental information regarding the two adjustments.
Yankee Gas complied with this request. The remaining schedule for
the proceeding has not yet been established.
• On December 1, 2005, NU filed at the FERC a request to include
50 percent of construction work in progress (CWIP) for its four
major southwest Connecticut transmission projects in its formula
rate for transmission service. The FERC approved the filing with
the new rates, including the CWIP,effective on February1, 2006.
The new rates allow NU to collect 50 percent of the construction
financing expenses while these projects are under construction.
• On December 1, 2005, WMECO made its 2006 annual rate change
filing implementing the $3 million distribution revenue increase
allowed under its rate case settlement agreement. WMECO
requested that this change become effective on January 1, 2006.
On December 29, 2005, the Massachusetts Department of
Telecommunications and Energy (DTE) approved rates reflecting
the $3 million distribution revenue increase as well as increases
for new basic service supply.
• On December 2, 2005, the NHPUC issued an order to rehear the
order that lowered the return on equity (ROE) on PSNH’s generating
facilities to 9.62 percent from 11 percent effective August 1, 2005.
On January 3, 2006, PSNH appealed the revised decision to the New
HampshireSupreme Court and simultaneously asked the NHPUC
for reconsideration of its decision. The appeal before the New
Hampshire Supreme Court is pending. On February 10, 2006, PSNH’s
most recent request for reconsideration by the NHPUC was denied.
• On December 23, 2005, the DPUC denied Yankee Gas’ request for
interim rate relief of $12.4 million on the grounds that the prerequisite
circumstances of the settlement agreement had not been met.
Management expects to file a rate case in late 2006 that would be
effective the earlier of July 1, 2007 or the date the Waterbury liquefied
natural gas (LNG) facility enters service. Management expects
Yankee Gas to earn below its allowed ROE until the next rate case
goes into effect. Management has also begun to take steps to
reduce Yankee Gas’ nonfuel operation and maintenance costs by
combining certain operations of Yankee Gas and CL&P.
•Afinal decision in the 2004 Competitive Transition Assessment (CTA)
and System Benefits Charge (SBC) docket was issued on December
19, 2005 by the DPUC. In a subsequent decision in CL&P’s docket
to establish the 2006 transitional standard offer (TSO) rates dated
December 28, 2005, the DPUC ordered CL&P to issue a revised
CTA refund of $108 million over the twelve-month period beginning
with January 2006 consumption and an additional CTA refund of
$40 million for the months of January, February and March of 2006.
• On March 6, 2006, the New England Independent System Operator
(ISO-NE) and a broad cross-section of critical stakeholders from
around the region, including CL&P, PSNH and Select Energy, filed
acomprehensive settlement agreement at the FERC implementing
aForward Capacity Market in place of Locational Installed Capacity
(LICAP). The settlement agreement must be approved by the FERC,
and the parties have asked for a decision by June 30, 2006.
Liquidity:
•Exiting the competitive generation and retail marketing businesses is
expected to benefitNU’sliquidity and reduce debt. The net proceeds
from NU Enterprises’ competitive generation asset sales are expected
to be an important factor in NU’s financing plans.
•On October 28, 2005, the SEC approved NU’sapplication to increase
its authorized borrowing limit from $450 million to $700 million. On
December 9, 2005, NU parent also increased its revolving credit
arrangement from $500 million to $700 million and extended its
termination date by one year to November 6, 2010. A separate
$400 million Utility Group company revolving credit facility was also
extended by one year to November 6, 2010.
•On November 2, 2005, NU arranged a separate $600 million unsecured
credit facility that supplements other sources of liquidity. That facility
was reduced to $310 million in December of 2005 after the issuance
of $425 million of NU common shares and the increase in the NU
parent and Utility Group revolving credit arrangements was completed.
• On December 12, 2005, NU received net proceeds of approximately
$425 million from the sale of 23 million NU common shares. These
proceeds wereused to reduce short-termdebt and will be used in
the futureto continue to contribute common equity to the Utility
Group companies.
• In 2005, NU Enterprises paid approximately $186 million to exit all
of its New England wholesale sales arrangements through cash
on hand and cash provided by borrowings under the NU parent
$500 million revolving credit arrangement.