Eversource 2005 Annual Report Download - page 28

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On December 22, 2004, the DPUC approved an increase of 16.2 percent
in TSO rates 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
expired 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 Office of
Consumer Counsel (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, which was
dismissed by the court on October 20, 2005.
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 charges, 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 claimed 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.
On May 16, 2005, the DPUC approved a 4.8 percent increase to
customer rates related to $79.8 million of additional RMR contract
costs, which have been approved by the FERC. This additional amount
was recovered over the period June through December of 2005
through an increase to the FMCC rates effective June 1, 2005. On
August 24, 2005, the DPUC issued a final decision supporting the
interim rate increase approved in May of 2005. On February 1, 2006,
CL&P filed with the DPUC its annual FMCC reconciliation filing for the
year ended 2005. No change in the current rates was proposed. The
DPUC has not set a schedule for review of this filing.
Application for Issuance of Long-TermDebt: On January26, 2005, the DPUC
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. On April 7,
2005, CL&P closed on the sale of $200 million of first mortgage bonds
with maturities ranging from 10 years to 30 years. Proceeds were
used to repay short-term borrowings.
Distribution Rates: In its December 2003 rate case decision, the DPUC
allowed CL&P to increase distribution rates annually from 2004 through
2007. A $25 million distribution rate increase effective January 1, 2005,
combined with strong hot weather driven third quarter sales, offset by
after-tax employee termination and benefitplan curtailment charges
totaling $8.5 million, resulted in CL&P earning a cost of capital ROE of
7.51 percent on its average distribution equity in 2005, compared with
an allowed ROE of 9.85 percent. An additional $11.9 million distribution
rate increase took effect on January 1, 2006 and another $7 million
distribution rate increase is due to take effect on January 1, 2007.
While these increases will help CL&P’s performance, they may be
inadequate to offset a possible combination of lower retail sales,
higher employee-related expenses and higher costs related to the
distribution capital investment program.
Connecticut – Yankee Gas:
Purchased Gas Adjustment: On September 9, 2005 the DPUC issued a
draft decision regarding Yankee Gas 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. If upheld, this disallowance would result
in a $9 million pre-tax write-off. Management believes the unbilled sales
and revenue adjustments and resultant charges to customers through
the PGA clause were appropriate. Based on the facts of the case and
the supplemental information provided to the DPUC, management
believes the appropriateness of the PGA charges to customers for the
time period under review will be approved.
Yankee Gas Rate Relief: As a result of a settlement agreement reached with
various parties in 2004 and approved by the DPUC, Yankee Gas instituted
a$14 million increase in base rates on January 1, 2005. That rate
increase improved Yankee Gas’ cost of capital ROE from 7.8 percent
in 2004 to 8.42 percent in 2005 compared with an allowed ROE of
9.9 percent. On December 23, 2005, the DPUC denied Yankee Gas’
request for interim rate relief on the grounds that the prerequisite
circumstances of the settlement agreement had not been met. As
prescribed in the settlement agreement, management expects to file a
rate case in late 2006 that would be effective the earlier of July 1, 2007
or the date the WaterburyLNG 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.
New Hampshire:
ES Rates: In accordance with the “Agreement to Settle PSNH
Restructuring” and state law, PSNH files for updated Transition Energy
Service Rate and Default Energy Service Rate, collectively referred to
as Energy Service Rate (ES), periodically to ensure timely recovery of
its costs. The ES rate recovers PSNH’s generation and purchased
power costs, including a returnon PSNH’sgeneration assets. PSNH
defers for future recovery or refund any difference between its ES
revenues and the actual costs incurred.
On January 28, 2005, the NHPUC issued an order approving an ES
rate of $0.0649 per kWh for the period February 1, 2005 through
January 31, 2006 which included an 11 percent ROE on PSNH’s generation
assets. This generation ROE was the subject of a second set of
proceedings. On June 8, 2005, the NHPUC issued an order requiring
PSNH to use a generation ROE of 9.63 percent, effective July 1, 2005.
On July 7, 2005, PSNH filed a motion for reconsideration in the ROE
portion of above docket. On December 2, 2005 the NHPUC issued a
revised decision, lowering PSNH’s allowed ROE to 9.62 percent that
was retroactive to an effective date of August 1, 2005. On January 3,
2006, PSNH appealed the revised decision to the New Hampshire
Supreme Courtand simultaneously asked the NHPUC for reconsideration
of its decision. The appeal before the New Hampshire Supreme Court
is pending. On February10, 2006, PSNH’smost recent request for