Eversource 2005 Annual Report Download - page 78

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Afinal decision in the 2004 CTA and SBC docket was issued on
December 19, 2005 by the DPUC. That decision ordered a refund to
customers of $100.8 million over the twelve-month period beginning
with January 2006 consumption. 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.
In the 2001 CTA and SBC reconciliation filing, and subsequently in a
September 10, 2002 petition to reopen related proceedings, CL&P
requested that a deferred intercompany tax liability associated with the
intercompany sale of generation assets be excluded from the calculation
of CTA revenue requirements. This liability is currently included as a
reduction in the calculation of CTA revenue requirements. On
September 10, 2003, the DPUC issued a final decision denying
CL&P’s request, and on October 24, 2003, CL&P appealed the DPUC’s
final decision to the Connecticut Superior Court. The appeal has been
fully briefed and argued. If CL&P’s request is granted and upheld
through these court proceedings, there would be additional amounts
due to CL&P from its customers. The amount due is contingent upon
the findings of the court. However, management believes that CL&P’s
pre-tax earnings would increase by a minimum of $15 million in 2006
if CL&P’s position is adopted by the court.
Purchased Gas Adjustment: On September 9, 2005 the DPUC issued a
draft decision regarding 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. 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.
New Hampshire:
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 Transition
Energy Service Rate and Default Energy Service Rate, collectively
referred to as Energy Service Rate (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’scustomers 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 New
Hampshire Office of Consumer Advocate (OCA) reached a settlement
agreement in this case. The major provisions of this settlement agree-
ment 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 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
interlocutoryappeal. As a result, the matter will return to the NHPUC
for decision. PSNH recovers the over market costs of IPP contracts
through the SCRC.
Environmental Legislation: The New Hampshirelegislatureis considering a
bill in its 2006 legislative session that would place strict limitations on
the level of mercury that PSNH’s existing generation plants can emit.
Legislation was first proposed in the 2005 session and passed by the
New Hampshire senate in 2005 which would require PSNH to achieve
fixed annual caps as early as 2009. The bill was subsequently defeated
by the New HampshireHouse of Representatives early in 2006. The
legislature will now take up a new bill that requires PSNH to reduce
power plant mercury emissions by at least 80 percent by 2013 while
providing incentives for early reductions. Management has been
reviewing the proposed legislation. PSNH’s primary long-term alternative
is to install wet scrubber equipment at its Merrimack Station at a cost
of approximately $250 million. PSNH’sother alternatives include the
use of carbon injection pollution control equipment, reducing operating
capacity of its plants and possible retirement or repowering of one or
moreof its generating units. While state law and PSNH’srestructuring
agreement provide for the recovery of its generation costs, including
the cost to comply with state environmental regulations, at this time
management is unable to determine the impact of any potential new
legislation on PSNH’s net income or financial position.