Eversource 2005 Annual Report Download - page 82

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On July 1, 2004, CYAPC filed with the FERC for recovery seeking
to increase its annual decommissioning collections from $16.7 million
to $93 million for a six-year period beginning on January 1, 2005. On
August 30, 2004, the FERC issued an order accepting the rates,
with collection beginning on February 1, 2005, subject to refund.
Both the DPUC and Bechtel filed testimony in the FERC proceeding
claiming that CYAPC was imprudent in its management of the
decommissioning project. In its testimony, the DPUC recommended a
disallowance of $225 million to $234 million out of CYAPC’s requested
rate increase of approximately $395 million. NU’s share of the DPUC’s
recommended disallowance would be between $110 million to $115
million. The FERC staff also filed testimony that recommended a $38
million decrease in the requested rate increase claiming that CYAPC
should have used a different gross domestic product (GDP) escalator.
NU’s share of this recommended decrease is $18.6 million.
On November 22, 2005, a FERC administrative law judge issued an
initial decision finding no imprudence on CYAPC’s part. However, the
administrative law judge did agree with the FERC staff’s position that
alower GDP escalator should be used for calculating the rate increase
and found that CYAPC should recalculate its decommissioning charges
to reflect the lower escalator. Briefs to the full FERC addressing these
issues were filed in January and February of 2006, and a final order is
expected later in 2006. Management expects that if the FERC staff’s
position on the decommissioning GDP cost escalator is found by the
FERC to be more appropriate than that used by CYAPC to develop its
proposed rates, then CYAPC would review whether to reduce its
estimated decommissioning obligation and reduce the customers’
obligation, including CL&P, PSNH and WMECO.
The company cannot at this time predict the timing or outcome of the
FERC proceeding required for the collection of the increased CYAPC
decommissioning costs. The company believes that the costs have
been prudently incurred and will ultimately be recovered from the
customers of CL&P, PSNH and WMECO. However, there is a risk that
some portion of these increased costs may not be recovered, or will
have to be refunded if recovered, as a result of the FERC proceedings.
On June 10, 2004, the DPUC and the Connecticut Office of Consumer
Counsel (OCC) filed a petition seeking a declaratory order that CYAPC
be allowed to recover all decommissioning costs from its wholesale
purchasers, including CL&P,PSNH and WMECO, but that such
purchasers may not be allowed to recover in their retail rates any costs
that the FERC might determine to have been imprudently incurred.
On August 30, 2004, the FERC denied this petition. On September 29,
2004, the DPUC and OCC asked the FERC to reconsider the petition
and on October 20, 2005, the FERC denied the reconsideration,
holding that the sponsor companies areonly obligated to pay CYAPC
for prudently incurred decommissioning costs and the FERC has no
jurisdiction over the sponsors’ rates to their retail customers. On
December 12, 2005, the DPUC sought review of these orders by the
United States Court of Appeals for the D.C. Circuit. The FERC and
CYAPC have asked the court to dismiss the case and the DPUC has
objected to a dismissal. NU cannot predict the timing or the outcome
of these proceedings.
Bechtel Litigation: CYAPC and Bechtel commenced litigation in
Connecticut Superior Court over CYAPC’s termination of Bechtel’s
contract for the decommissioning of CYAPC’s nuclear generating
plant. After CYAPC terminated the contract, responsibility for
decommissioning was transitioned to CYAPC, which recommenced
the decommissioning process.
On March 7, 2006, CYAPC and Bechtel executed a settlement agreement
terminating this litigation. Bechtel has agreed to pay CYAPC $15 million,
and CYAPC will withdraw its termination of the contract for default and
deem it terminated by agreement.
Spent Nuclear Fuel Litigation: CYAPC, YAEC and MYAPC also commenced
litigation in 1998 charging that the federal government breached
contracts it entered into with each company in 1983 under the Act.
Under the Act, the DOE was to begin removing spent nuclear fuel from
the nuclear plants of the Yankee Companies no later than January 31,
1998 in return for payments by each company into the nuclear waste
fund. No fuel has been collected by the DOE, and spent nuclear fuel
is stored on the sites of the Yankee Companies’ plants. The Yankee
Companies collected the funds for payments into the nuclear waste
fund from wholesale utility customers under FERC-approved contract
rates. The wholesale utility customers in turn collect these payments
from their retail electric customers. The Yankee Companies’ individual
damage claims attributed to the government’s breach ranging from
$523 million to $543 million are specific to each plant and include
incremental storage, security, construction and other costs through
2010. The CYAPC damage claim ranges from $186 million to $198 million,
the YAEC damage claim ranges from $177 million to $185 million and
the MYAPC damage claim is $160 million. The DOE trial ended on
August 31, 2004 and a verdict has not been reached. Post-trial findings
of facts and final briefs were filed by the parties in January of 2005.
The Yankee Companies’ current rates do not include an amount for
recovery of damages in this matter. Management can predict neither
the outcome of this matter nor its ultimate impact on NU.
YAEC: In November of 2005, YAEC established an updated estimate of
the cost of completing the decommissioning of its plant resulting in an
increase of approximately $85 million. NU’s share of the increase in
estimated costs is $32.7 million. This estimate reflects the cost of
completing site closureactivities from October of 2005 forwardand
storing spent nuclear fuel and other high level waste on site until 2020.
This estimate projects a total cost of $192.1 million for the completion
of decommissioning and long-termfuel storage. Tofund these costs,
on November 23, 2005, YAEC submitted an application to the FERC to
increase YAEC’s wholesale decommissioning charges. The DPUC and
the Massachusetts attorney general protested these increases. On
January 31, 2006, the FERC issued an order accepting the rate increase,
effective February 1, 2006, subject to refund after hearings and
settlement judge proceedings. The hearings have been suspended
pending settlement discussions between YAEC, the FERC and other
intervenors in the case. NU has a 38.5 percent ownership interest
in YAEC and can predict neither the outcome of this matter nor its
ultimate impact on NU.