Eversource 2005 Annual Report Download - page 61

59
Income Taxes, Net: The tax effect of temporary differences (differences
between the periods in which transactions affect income in the financial
statements and the periods in which they affect the determination of
taxable income) is accounted for in accordance with the rate-making
treatment of the applicable regulatory commissions and SFAS No. 109.
Differences in income taxes between SFAS No. 109 and the rate-making
treatment of the applicable regulatory commissions are recorded as
regulatory assets which totaled $332.5 million and $316.3 million at
December 31, 2005 and 2004, respectively. For further information
regarding income taxes, see Note 1H, “Summary of Significant
Accounting Policies – Income Taxes,” to the consolidated financial
statements.
Unrecovered Contractual Obligations: Under the terms of contracts with the
Yankee Companies, CL&P, PSNH, and WMECO are responsible for
their proportionate share of the remaining costs of the units, including
decommissioning. These amounts which totaled $327.5 million and
$354.7 million at December 31, 2005 and 2004, respectively, are
recorded as unrecovered contractual obligations. A portion of these
obligations for CL&P was securitized in 2001 and is included in securi-
tized regulatory assets. Amounts for PSNH and WMECO are being
recovered along with other stranded costs. As discussed in Note 9E,
“Commitments and Contingencies – Deferred Contractual Obligations,”
substantial portions of the unrecovered contractual obligations regulatory
assets have not yet been approved for recovery. At this time manage-
ment believes that these regulatory assets are probable of recovery.
Recoverable Energy Costs: Under the Energy Policy Act of 1992 (Energy
Act), CL&P, PSNH, WMECO, and NAEC were assessed for their
proportionate shares of the costs of decontaminating and decommis-
sioning uranium enrichment plants owned by the United States
Department of Energy (DOE) (D&D Assessment). The Energy Act
requires that regulators treat D&D Assessments as a reasonable and
necessary current cost of fuel, to be fully recovered in rates like any
other fuel cost. CL&P, PSNH and WMECO no longer own nuclear
generation assets but continue to recover these costs through rates.
At December 31, 2005 and 2004, NU’stotal D&D Assessment deferrals
were $9.8 million and $13.9 million, respectively, and have been
recorded as recoverable energy costs. Also included in recoverable
energy costs at December 31, 2004 is $32.5 million related to federally
mandated congestion charges (FMCC).
In conjunction with the implementation of restructuring under the
Restructuring Settlement on May 1, 2001, PSNH’sfuel and purchased
power adjustment clause (FPPAC) was discontinued. At December 31,
2005 and 2004, PSNH had $127.5 million and $144.8 million, respectively,
of recoverable energy costs deferred under the FPPAC. Under the
Restructuring Settlement, the FPPAC deferrals are recovered as a Part
3stranded cost through a stranded cost recovery charge. Also included
in PSNH’s recoverable energy costs are deferred costs associated with
certain contractual purchases from IPPs. These costs are also treated
as Part 3 stranded costs and amounted to $44 million and $50.1 million
at December 31, 2005 and 2004, respectively.
The regulated rates of Yankee Gas include a purchased gas adjustment
clause under which gas costs above or below base rate levels are
charged to or credited to customers. Differences between the actual
purchased gas costs and the current rate recovery are deferred and
recovered or refunded in future periods. These amounts are recorded
as recoverable energy costs of $11.7 million and $13.7 million at
December 31, 2005 and 2004, respectively.
The majority of the recoverable energy costs are currently recovered in
rates from the customers of CL&P, PSNH, WMECO, and Yankee Gas.
PSNH’s recoverable energy costs are Part 3 stranded costs.
Regulatory Liabilities: The Utility Group had $1.3 billion and $1.1 billion
of regulatory liabilities at December 31, 2005 and 2004, respectively,
including revenues subject to refund. These amounts are comprised
of the following:
At December 31,
(Millions of Dollars) 2005 2004
Cost of removal $305.5 $ 328.8
CL&P CTA, GSC and SBC overcollections 154.0 200.0
PSNH cumulative deferrals – SCRC 303.3 208.6
Regulatory liabilities offsetting
Utility Group derivative assets 391.2 191.4
Other regulatory liabilities 119.5 141.4
Totals $1,273.5 $1,070.2
Cost of Removal: Under SFAS No. 71, regulated utilities, including NU’s
Utility Group companies, currently recover amounts in rates for future
costs of removal of plant assets. These amounts which totaled
$305.5 million and $328.8 million at December 31, 2005 and 2004,
respectively, are classified as regulatory liabilities on the accompanying
consolidated balance sheets.
CL&P CTA, GSC and SBC Overcollections and PSNH Cumulative Deferrals – SCRC:
The Competitive Transition Assessment (CTA) allows CL&P to recover
stranded costs, such as securitization costs associated with the rate
reduction bonds, amortization of regulatoryassets, and IPP over market
costs. The Generation Service Charge (GSC) allows CL&P to recover
the costs of the procurement of energy for standard offer service. The
System Benefits Charge (SBC) allows CL&P to recover certain regula-
tory and energy public policy costs, such as public education outreach
costs, hardship protection costs, transition period property taxes, and
displaced workers protection costs. CL&P CTA, GSC and SBC overcol-
lections totaled $154 million and $200 million at December 31, 2005
and 2004, respectively.The cumulative deferrals accrued under the
Stranded Cost Recovery Charge (SCRC) totaled $303.3 million and
$208.6 million at December 31, 2005 and 2004, respectively, and will
decrease the amount of non-securitized stranded costs to be recovered
from PSNH’scustomers in the future.
RegulatoryLiabilities Offsetting Utility Group Derivative Assets: The regulatory
liabilities offsetting derivative assets relate to the fair value of CL&P
IPP contracts used to purchase power that will benefit ratepayers in
the future. These amounts totaled $391.2 million and $191.4 million
at December 31, 2005 and 2004, respectively.
H. Income Taxes
The tax effect of temporary differences (differences between the periods
in which transactions affect income in the financial statements and the
periods in which they affect the determination of taxable income) is
accounted for in accordance with the rate-making treatment of the
applicable regulatory commissions and SFAS No. 109.