Eversource 2009 Annual Report Download - page 120

FS-35
As of December 31,
2009 2008
(Millions of Dollars) CL&P PSNH WMECO CL&P PSNH WMECO
Deferred benefit costs $ 502.4 $ 154.2 $ 104.9 $ 537.7 $ 142.9 $ 113.5
Regulatory assets offsetting derivative liabilities 828.6 26.4 - 751.9 92.1 -
Securitized assets 195.4 180.1 57.4 377.8 227.6 72.0
Income taxes, net 304.1 21.9 16.9 306.8 16.1 20.7
Unrecovered contractual obligations 118.0 - 31.5 132.6 - 36.5
Regulatory tracker deferrals 70.3 19.0 11.3 113.8 13.3 0.2
Storm cost deferral - 50.8 9.2 - 8.2 11.1
Conditional asset retirement obligations (Note 1M) 23.8 14.0 2.8 23.1 13.9 2.8
Losses on reacquired debt 12.7 9.2 0.4 14.0 10.1 0.5
Other regulatory assets 13.5 18.5 6.4 16.4 25.7 11.1
Totals $ 2,068.8 $ 494.1 $ 240.8 $2,274.1 $ 549.9 $268.4
Additionally, the regulated companies had $27.1 million ($9.9 million for CL&P, zero for PSNH, and $9.1 million for WMECO) and $68.3
million ($5.6 million for CL&P and $62.7 million for PSNH) of regulatory costs as of December 31, 2009 and 2008, respectively, which
were included in Deferred debits and other assets - other on the accompanying consolidated balance sheets (refer to Storm Cost
Deferral below for further information on balances of PSNH). The $9.1 million for WMECO relates to a reserve established in 2009 for
uncollectible hardship accounts receivable. These amounts represent incurred costs that have not yet been approved for recovery by
the applicable regulatory agency. Management believes these costs are probable of recovery in future cost-of-service regulated rates.
Deferred Benefit Costs: NU's Pension, SERP, and PBOP Plans are accounted for in accordance with accounting guidance on defined
benefit pension and other postretirement plans. Under this accounting guidance, the funded status of its pension and PBOP plans is
recorded with an offset to Accumulated other comprehensive income/(loss) and is remeasured annually. However, because the
regulated companies are cost-of-service rate-regulated entities, offsets were recorded as regulatory assets as of December 31, 2009
and 2008 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 Northeast Utilities Service Company (NUSCO) costs that support the regulated companies, as these
amounts are also recoverable. The deferred benefit costs of CL&P and PSNH are not in rate base and are expected to be amortized
into expense over a period of up to 12 years. WMECO's deferred benefit costs are earning an equity return at the same rate as the
assets included in rate base.
Regulatory Assets Offsetting Derivative Liabilities: The regulatory assets offsetting derivative liabilities relate to the fair value of
contracts used to purchase power and other related contracts that will be collected from customers in the future. Included in these
amounts are $768.7 million and $677.8 million as of December 31, 2009 and 2008, respectively, of derivative liabilities relating to
CL&P's capacity contracts, referred to as CfDs. See Note 3, "Derivative Instruments," to the consolidated financial statements for
further information. This asset is excluded from rate base and is being recovered as the actual contract costs settle over the duration of
the contracts.
Securitized Assets: In March 2001, CL&P issued $1.4 billion in rate reduction bonds (RRBs). CL&P used $1.1 billion of the proceeds
from that issuance to buyout or buydown certain contracts with IPPs. The unamortized CL&P securitized asset balance was $167
million and $322.9 million as of December 31, 2009 and 2008, respectively, which includes $23.2 million and $44.9 million, respectively,
related to unrecovered contractual obligations. CL&P also used the proceeds from the issuance of the RRBs to securitize a portion of
its regulatory assets associated with income taxes. The securitized income tax regulatory asset had an unamortized balance of $28.4
million and $54.9 million as of December 31, 2009 and 2008, respectively.
In April 2001, PSNH issued RRBs in the amount of $525 million. PSNH used the majority of the proceeds from that issuance to
buydown its power contracts with an affiliate, North Atlantic Energy Corporation. In May 2001, WMECO issued $155 million in RRBs
and used the majority of the proceeds from that issuance to buyout an IPP contract.
Securitized regulatory assets, which are not earning an equity return, are being recovered over the amortization period of their
associated RRBs. All outstanding CL&P RRBs are scheduled to fully amortize by December 30, 2010, while PSNH RRBs are
scheduled to fully amortize by May 1, 2013, and WMECO RRBs are scheduled to fully amortize by June 1, 2013.
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, including those differences relating to
uncertain tax positions) is accounted for in accordance with the rate-making treatment of the applicable regulatory commissions and
accounting guidance for income taxes. Differences in income taxes between the accounting guidance and the rate-making treatment of
the applicable regulatory commissions are recorded as regulatory assets. For further information regarding income taxes, see Note 1I,
"Summary of Significant Accounting Policies - Income Taxes," to the consolidated financial statements.
Unrecovered Contractual Obligations: Under the terms of contracts with the Connecticut Yankee Atomic Power Company (CYAPC),
Yankee Atomic Electric Company (YAEC), and Maine Yankee Atomic Power Company (MYAPC) (Yankee Companies), CL&P, PSNH,
and WMECO are responsible for their proportionate share of the remaining costs of the nuclear facilities, including decommissioning. A
portion of these amounts was recorded as unrecovered contractual obligations regulatory assets as of December 31, 2009 and 2008. A
portion of these obligations for CL&P was securitized in 2001 and was included in securitized regulatory assets. Amounts for CL&P are
earning a return and are being recovered through the Competitive Transition Assessment (CTA). Amounts for WMECO are being