Eversource 2006 Annual Report Download - page 64

62 NU 2006 ANNUAL REPORT
purchased gas costs and the current rate recovery are deferred and
recovered or refunded in future periods. The amount recorded as
recoverable energy costs was $11.7 million at December 31, 2005.
At December 31, 2006, $0.7 million was over collected and is included
in other regulatory liabilities.
The majority of the recoverable energy costs are currently recovered in
rates from the customers of CL&P, PSNH, WMECO, and Yankee Gas.
CL&P CTA and SBC: The Competitive Transition Assessment (CTA)
allows CL&P to recover stranded costs, such as securitization costs
associated with the rate reduction bonds, amortization of regulatory
assets, and IPP over market costs. The System Benefits Charge (SBC)
allows CL&P to recover certain regulatory and energy public policy
costs, such as public education outreach costs, hardship protection
costs, transition period property taxes, and displaced workers
protection costs. At December 31, 2006, CTA undercollections totaled
$75.5 million whereas at December 31, 2005 CTA collections exceeded
CTA costs by $26 million. The change in the CTA balance is due
primarily to refunds to customers of approximately $100 million as
ordered by the Connecticut Department of Public Utility Control
(DPUC) and the absenceof overcollections in 2006 that were previously
anticipated. At December 31, 2006, SBC undercollections totaled
$25 million and at December 31, 2005, SBC undercollections totaled
$1.8 million. The increase in the undercollections is primarily due
to an acceleration of the recovery of hardship protection costs. At
December 31, 2005, the $1.8 million balancewas included in the CL&P
CTA, GSC and SBC regulatory liability.
Deferred Benefit Costs: At December 31, 2006, the company
implemented SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans.” SFAS No. 158
applies toNU’sPension Plan, Supplemental Executive Retirement Plan
(SERP), and postretirement benefits other than pension (PBOP) Plan
and requires an additional benefit liability tobe recorded with an offset
toaccumulated other comprehensive income in shareholders’ equity.
However, because the Utility Group companies are cost-of-service rate
regulated entities under SFAS No. 71, an offset was recorded as a
regulatory asset totaling $407.4 million, as these amounts have been
and continue to be recoverable in cost-of-service, regulated rates.
Regulatory accounting was also applied to the portions of the NUSCO
costs that support the Utility Group, as these amounts are also
recoverable. The majority of the $407.4 million in regulatory assets
are not in rate base. These regulatory assets will be recovered over
the remaining service lives of employees.
See Note 6A, “Employee Benefits – Pension Benefits and
Postretirement Benefits Other Than Pensions,” for additional
information regarding the implementation of SFAS No. 158.
Other Regulatory Assets: Included in other regulatory assets are
the regulatory assets associated with the implementation of FIN 47,
“Accounting for Conditional Asset Retirement Obligations – an
interpretation of FASB Statement No. 143,” totaling $46.4 million
and $47.3 million at December 31, 2006 and 2005, respectively. Of
these amounts, $13.7 million and $15.1 million, respectively, has
been approved for future recovery. At this time, management believes
that the remaining regulatory assets are probable of recovery.
In addition, at December 31, 2006 and 2005, other regulatory assets
included $31.6 million and $32.6 million, respectively, related to losses
on reacquired debt, $75.3 million and $32.7 million, respectively, which
offset the fair value of derivative contracts related to the procurement
of energy, $32.6 million and $30.3 million, respectively, related to
environmental costs and $18.2 million and $37 million, respectively,
related to the buyout and buydown of IPP contracts, and $64.6 million
and $66 million, respectively, related to various other items.
Regulatory Liabilities: The components of regulatory liabilities are
as follows:
At December 31,
(Millions of Dollars) 2006 2005
Cost of removal $290.8 $305.5
CL&P CTA, GSC and SBC 108.2 154.0
PSNH cumulative deferrals – SCRC —303.3
Regulatory liabilities offsetting
Utility Group derivative assets 294.5 391.2
Other regulatory liabilities 115.8 119.5
Totals $809.3 $1,273.5
Cost of Removal: NU’s Utility Group companies currently recover
amounts in rates for future costs of removal of plant assets.
These amounts, which totaled $290.8 million and $305.5 million at
December 31, 2006 and 2005, respectively, are classified as regulatory
liabilities on the accompanying consolidated balance sheets. This
liability is included in rate base.
CL&P CTA, GSC and SBC: As noted previously, the CTA allows CL&P
to recover stranded costs while the SBC allows CL&P to recover certain
regulatory and energy public policy costs. The generation service
charge (GSC) allows CL&P to recover the costs of the procurement of
energy for standard service. At December 31, 2006, CL&P CTA and
SBC undercollections totaled $100.5 million and were recorded as
regulatory assets while GSC overcollections totaling $108.2 million
were recorded as regulatory liabilities. CL&P CTA, GSC and SBC over-
collections totaled $154 million at December 31, 2005. These liabilities
are included in rate base.
PSNH Cumulative Deferrals – SCRC: The restructuring settlement
agreement between PSNH and the state of New Hampshire, which
was implemented in May of 2001, requires that certain identified non-
securitized stranded costs be recovered from PSNH’s customers prior
to a recovery end date determined in accordance with the restructuring
settlement agreement or be written off. On June 30, 2006, under the
terms of the restructuring settlement agreement, PSNH completed
the recovery of those identified non-securitized stranded costs and
offset the remaining stranded cost regulatory asset balances totaling
$345.8 million against an offsetting regulatory liability, the cumulative
deferral of net Stranded Cost Recovery Charge (SCRC) revenues and
costs. At December 31, 2006, PSNH had $325.6 million of Part 1
securitized stranded costs and $29.9 million of Part 2 non-securitized
stranded costs, including $10.7 million of SCRC costs in excess of
SCRC revenues. The $10.7 million is expected to be recovered in the
2007 SCRC rate and is included in other regulatory assets at
December 31, 2006.
Regulatory Liabilities Offsetting Utility Group Derivative Assets: The
regulatory liabilities offsetting derivative assets relate to the fair value
of contracts used to purchase power that will benefit ratepayers in the
future. These amounts totaled $294.5 million and $391.2 million at
December 31, 2006 and 2005, respectively. See Note 5, “Derivative
Instruments,” for further information. This liability is excluded from
rate base.