Eversource 2005 Annual Report Download - page 80

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It is possible that new information or future developments could
require a reassessment of the potential exposure to related
environmental matters. As this information becomes available
management will continue to assess the potential exposure and
adjust the reserves accordingly.
Rate Recovery: PSNH and Yankee Gas have rate recovery mechanisms
for environmental costs. CL&P recovers a certain level of environmental
costs currently in rates but does not have an environmental cost recovery
tracking mechanism. Accordingly, changes in CL&P’s environmental
reserves impact CL&P’s earnings. WMECO does not have a regulatory
mechanism to recover environmental costs from its customers, and
changes in WMECO’s environmental reserves also impact
WMECO’s earnings.
C. Spent Nuclear Fuel Disposal Costs
Under the Nuclear Waste Policy Act of 1982 (the Act), CL&P, PSNH,
WMECO, and NAEC must pay the DOE for the disposal of spent
nuclear fuel and high-level radioactive waste. The DOE is responsible
for the selection and development of repositories for, and the disposal
of, spent nuclear fuel and high-level radioactive waste. For nuclear fuel
used to generate electricity prior to April 7, 1983 (Prior Period Fuel) for
CL&P and WMECO, an accrual has been recorded for the full liability,
and payment must be made prior to the first delivery of spent fuel to
the DOE. Until such payment is made, the outstanding balance will
continue to accrue interest at the 3-month treasury bill yield rate. At
December 31, 2005 and 2004, fees due to the DOE for the disposal of
Prior Period Fuel were $267.8 million and $259.7 million, respectively,
including interest costs of $185.7 million and $177.6 million, respectively.
During 2004, WMECO established a trust, which holds marketable
securities to fund amounts due to the DOE for the disposal of WMECO’s
Prior Period Fuel. For further information on this trust, see Note 11,
“Marketable Securities,” to the consolidated financial statements.
D. Long-TermContractual Arrangements
Utility Group:
Vermont Yankee Nuclear Power Corporation (VYNPC): Previously under the
terms of their agreements, NU’s companies paid their ownership (or
entitlement) shares of costs, which included depreciation, O&M
expenses, taxes, the estimated cost of decommissioning, and a return
on invested capital to VYNPC and recorded these costs as purchased-
power expenses. On July 31, 2002, VYNPC consummated the sale of
its nuclear generating unit to a subsidiary of Entergy Corporation for
approximately $180 million. CL&P,PSNH and WMECO have commitments
to buy approximately 16 percent of the VYNPC plant’soutput through
March of 2012 at a range of fixed prices. The total cost of purchases
under contracts with VYNPC amounted to $25.7 million in 2005,
$26.8 million in 2004 and $29.9 million in 2003.
Electricity Procurement Contracts: CL&P,PSNH and WMECO have entered
into various arrangements for the purchase of electricity. The total cost
of purchases under these arrangements amounted to $275.3 million in
2005, $323.3 million in 2004 and $283.4 million in 2003. These amounts
relate to IPP contracts and do not include contractual commitments
related to CL&P’stransitional standardoffer or standard offer, PSNH’s
short-termpower supply management or WMECO’sbasic and
default service.
Natural Gas Procurement Contracts: Yankee Gas has entered into long-term
contracts for the purchase of a specified quantity of natural gas in the
normal course of business as part of its portfolio to meet its actual
sales commitments. The majority of these contracts have expiration
dates in 2006 and 2007. The total cost of Yankee Gas’ procurement
portfolio, including these contracts, amounted to $321.2 million in
2005, $250.5 million in 2004 and $218.6 million in 2003.
Portland Natural Gas Transmission System (PNGTS) Pipeline Commitments: PSNH
has a contract for capacity on the PNGTS pipeline which extends
through 2018. The total cost under this contract amounted to
$1.6 million in 2005, $2 million in 2004 and $1.9 million in 2003.
These costs are not recovered from PSNH’s retail customers.
Hydro-Quebec: Along with other New England utilities, CL&P, PSNH,
WMECO, and HWP have entered into agreements to support transmission
and terminal facilities to import electricity from the Hydro-Quebec
system in Canada. CL&P, PSNH, WMECO, and HWP are obligated to
pay, over a 30-year period ending in 2020, their proportionate shares
of the annual O&M expenses and capital costs of those facilities.
The total cost of these agreements amounted to $21.2 million in 2005,
$23.7 million in 2004 and $25.3 million in 2003.
Transmission Business Project Commitments: These amounts represent
commitments for various services and materials associated with CL&P’s
Bethel, Connecticut to Norwalk, Connecticut and the Middletown,
Connecticut to Norwalk, Connecticut projects and other projects.
Yankee Gas Liquefied Natural Gas (LNG) Storage Facility: In 2004, Yankee Gas
signed a contract for the design and building of the LNG facility. Yankee
Gas anticipates that the facility will become operational in time for the
2007/2008 heating season. Certain future estimated construction
expenditures totaling $16 million are not included in the contract signed
to build the LNG facility and are not included in the table of estimated
future annual Utility Group costs below.
Northern Wood Power Project: In October of 2004, PSNH received the
approvals necessary to begin construction related to the conversion
of one of three 50 MW units at the coal-fired Schiller Station to burn
wood (Northern Wood Power Project). Construction of the $75 million
Northern Wood Power Project began in 2004 and significant construction
has been completed. Certain other estimated construction expenditures
totaling $3.8 million are not included in the contracts signed for the
Northern Wood Power Project and are not included in the table of
estimated futureannual Utility Group costs below.
Yankee Companies FERC-Approved Billings, Subject to Refund: NU has significant
decommissioning and plant closure cost obligations to the Yankee
Companies. Each plant has been shut down and is undergoing
decommissioning. The Yankee Companies collect decommissioning
and closure costs through wholesale, FERC-approved rates charged
under power purchase agreements with several New England utilities,
including NU’selectric utility companies. These companies in turnpass
these costs on to their customers through state regulatory commission-
approved retail rates. YAEC and MYAPC received FERC approval to
collect all presently estimated decommissioning and closurecosts.
On November 23, 2005, YAEC submitted an application to the FERC to
increase YAEC’s wholesale decommissioning charges. On January 31,
2006, the FERC issued an order accepting the rate increase, effective
February 1, 2006, subject to refund after hearings and settlement