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111
NSTAR Electric cannot predict the timing of a final DPU order related to its CPSL filings for the period 2006 through 2011. While
management does not believe that any subsequent DPU order would result in revenues that are materially different than the amounts
already recognized, it is reasonably possible that an order could have a material impact on NSTAR Electric’s results of operations,
financial position and cash flows.
The April 4, 2012 DPU-approved comprehensive merger settlement agreement with the Massachusetts Attorney General stipulates that
NSTAR Electric must incur a revenue requirement of at least $15 million per year for 2012 through 2015 related to these programs.
CPSL revenues will end once NSTAR Electric has recovered its 2015-related CPSL costs. Realization of these revenues is subject to
maintaining certain performance metrics over the four-year period and DPU approval. As of December 31, 2013, NSTAR Electric was
in compliance with the performance metrics and has recognized the entire $15 million revenue requirement during 2013 and 2012.
G. Basic Service Bad Debt Adder
In accordance with a generic DPU order, electric utilities in Massachusetts recover the energy-related portion of bad debt costs in their
Basic Service rates. In 2007, NSTAR Electric filed its 2006 Basic Service reconciliation with the DPU proposing an adjustment related
to the increase of its Basic Service bad debt charge-offs. The DPU issued an order approving the implementation of a revised Basic
Service rate but instructed NSTAR Electric to reduce distribution rates by an amount equal to the increase in its Basic Service bad debt
charge-offs. This adjustment to NSTAR Electric’s distribution rates would eliminate the fully reconciling nature of the Basic Service bad
debt adder.
In 2010, NSTAR Electric filed an appeal of the DPU’s order with the SJC. In 2012, the SJC vacated the DPU order and remanded the
matter to the DPU for further review. The DPU has not taken any action on the remand.
NSTAR Electric deferred approximately $34 million of costs associated with energy-related bad debt as a regulatory asset through 2011
as NSTAR Electric had concluded that it was probable that these costs would ultimately be recovered from customers. Due to the
delays and the duration of the proceedings, NSTAR Electric concluded that while an ultimate outcome on the matter in its favor
remained "more likely than not," it could no longer be deemed "probable." As a result, NSTAR Electric recognized a reserve related to
the regulatory asset in 2012. NSTAR Electric will continue to maintain the reserve until the proceeding has been concluded with the
DPU.
H. Litigation and Legal Proceedings
NU, including CL&P, NSTAR Electric, PSNH and WMECO, are involved in legal, tax and regulatory proceedings regarding matters
arising in the ordinary course of business, which involve management's assessment to determine the probability of whether a loss will
occur and, if probable, its best estimate of probable loss. The Company records and discloses losses when these losses are probable
and reasonably estimable, discloses matters when losses are probable but not estimable or reasonably possible, and expenses legal
costs related to the defense of loss contingencies as incurred.
13. LEASES
NU, including CL&P, NSTAR Electric, PSNH and WMECO, has entered into lease agreements, some of which are capital leases, for
the use of data processing and office equipment, vehicles, service centers, and office space. In addition, CL&P, PSNH and WMECO
incur costs associated with leases entered into by NUSCO and RRR, which are included below in their respective operating lease rental
expenses and future minimum rental payments. These intercompany lease amounts are eliminated on an NU consolidated basis. The
provisions of the NU, CL&P, NSTAR Electric, PSNH, and WMECO lease agreements generally contain renewal options. Certain lease
agreements contain payments impacted by the commercial paper rate plus a credit spread or the consumer price index.
Operating lease rental payments charged to expense are as follows:
NSTAR
(Millions of Dollars)
NU (1)
CL&P
Electric
PSNH
WMECO
2013
$
16.3
$
8.1
$
6.7
$
1.7
$
2.9
2012
14.8
8.2
6.2
2.5
3.0
2011
8.4
8.3
19.8
2.1
2.8
(1) NSTAR amounts were included in NU beginning April 10, 2012.