Eversource 2005 Annual Report Download - page 29

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reconsideration by the NHPUC was denied. This decrease in allowed
ROE will lower PSNH’s net income by approximately $1.5 million annually
based on the current level of generation asset investment.
On July 1, 2005, PSNH filed a petition with the NHPUC requesting an
increase in the ES rate from the then current $0.0649 per kWh to
$0.0734 per kWh based on actual costs and underrecoveries incurred
through June 30, 2005 and updated cost projections. The updated cost
projections included an increase in costs as a direct result of higher
fuel and purchased power costs that PSNH expected to incur. The
generation ROE used in the updated cost projections was based upon
the 9.63 percent ROE ordered on June 8, 2005. An order changing the
ES rate to $0.0724 per kWh, effective August 1, 2005, was issued by
the NHPUC on August 1, 2005.
On September 30, 2005, PSNH filed a petition with the NHPUC
requesting a change in ES rates for the period February 1, 2006
through January 31, 2007. On December 14, 2005, PSNH and other
parties, including the NHPUC staff and the OCA, filed a stipulation
and settlement agreement related to the September 30, 2005 filing.
Aprovision of the settlement agreement included an allowance to
implement deferred accounting treatment for asset retirement obligations
(AROs) that PSNH will be required to recognize under generally
accepted accounting principles, including the future amortization of
these ARO deferrals.
On December 19, 2005, PSNH filed updated ES cost information and
requested approval of an ES rate of $0.0913 per kWh for the 11-month
period from February 1, 2006 through December 31, 2006. Hearings
regarding the settlement agreement and the updated ES rate were
held on December 21, 2005 and the NHPUC issued an order on
January 20, 2006 approving the settlement agreement, as filed, and
the ES rate of $0.0913 per kWh for the 11-month period.
SCRC Reconciliation Filing: The 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 and costs and ES revenues
and costs. The NHPUC reviews the filing, including a prudence review
of the operations within PSNH’sgeneration business segment.
The cumulative deferral of SCRC revenues in excess of costs was
$303.3 million at December 31, 2005. This cumulative deferral will
decrease the amount of non-securitized stranded costs to be recovered
from PSNH’s customers in the future from $368 million to $64.7 million.
The 2004 SCRC reconciliation filing was filed with the NHPUC on May 2,
2005. In October of 2005, PSNH, the NHPUC staff and the OCA
reached a settlement agreement in this case. The major provisions
of this settlement agreement include the following: 1) PSNH will be
allowed to recover its 2004 ES costs and stranded costs without
disallowances, 2) PSNH will be allowed to include its cumulative
unbilled revenues in its ES and stranded cost reconciliations and 3)
the NHPUC will defer any action regarding PSNH’s coal supply and
transportation procedures until it completes a review using an outside
expert. The NHPUC issued its order on December 22, 2005, approving
the settlement agreement as filed. While management believes its
coal procurement and transportation policies and procedures are
prudent and consistent with industry practice, it is unable to determine
the impact, if any, of the expected NHPUC review on PSNH’s net
income or financial position.
Litigation with Independent Power Producers (IPPs): Two wood-fired IPPs that
sell their output to PSNH under long-term rate orders issued by the
NHPUC brought suit against PSNH in state superior court. The IPPs
and PSNH dispute the end dates of the above-market long-term rates
set forth in the respective rate orders. Subsequent to the IPP’s court
filing, PSNH petitioned the NHPUC to decide this matter, and requested
that the court stay its proceeding pending the NHPUC’s decision. By
court order dated October 20, 2005, the court granted PSNH’s motion to
stay indicating that the NHPUC had primary jurisdiction over this matter.
On November 11, 2005, the IPPs filed motions with the NHPUC seeking
to disqualify two of the three NHPUC commissioners from participating
in this proceeding. As a result, the NHPUC chair excused himself from
participating in this proceeding. On December 7, 2005, the IPPs then
filed an interlocutory appeal with the New Hampshire Supreme Court
(Supreme Court) on the basis that the forum for resolving this dispute
is in state superior court. On December 27, 2005, PSNH and the New
Hampshire Attorney General’s Office (representing the NHPUC) each
filed motions for summary disposition with the Supreme Court. On
February 7, 2006, the Supreme Court declined to accept the IPP’s
interlocutory appeal. As a result, the matter will return to the NHPUC
for decision. PSNH recovers the over market costs of IPP contracts
through the SCRC.
Massachusetts:
Transition Cost Reconciliation: On March 31, 2005, WMECO filed its 2004
transition cost reconciliation with the DTE. The DTE has combined the
2003 transition cost reconciliation filing, standardoffer service and
default service reconciliation, the transmission cost adjustment filing,
and the 2004 transition cost reconciliation filing into a single proceeding.
The timing of a 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’sOffice, 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 on January 1, 2005 and an additional
$3 million increase in WMECO’s distribution rate effective on January 1,
2006 and for a decrease in WMECO’stransition charge by approximately
$13 million annually. The lower transition charge will delay recovery
of transition costs and will reduce WMECO’s cash flows but not its
earnings as part of the rate case settlement agreement. WMECO
agreed not to file for a distribution rate increase to be effective prior
to January1, 2007.
Annual Rate Change Filing: 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 January1, 2006. On
December 29, 2005, the DTE approved rates reflecting the $3 million
distribution revenue increase as well as increases for new basic
service supply.
Basic Service: WMECO owns no generation and seeks bids at regular
intervals to provide full requirements service for its customers who do
not contract directly with competitive retail suppliers for their energy.
As a result of higher energy prices, the prices for 2006 aresignificantly
higher than 2005.