Eversource 2013 Annual Report Download - page 21

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Utility Restructuring (Oversight Committee) requested that the NHPUC conduct an analysis to determine whether it is now in the
economic interest of PSNH’s retail customers for PSNH to divest its interest in generation plants. On November 1, 2013, the Oversight
Committee asked for a preliminary report on the findings by April 1, 2014 that would include at a minimum the NHPUC Staff’s position,
the analysis of the valuation expert, and any recommendations for legislation that may be needed concerning divestiture or otherwise
related to this issue. A valuation expert has been hired and the investigation is currently ongoing. At this time, we cannot predict the
outcome of this review. Our current PSNH generation rate base totals approximately $760 million. We continue to believe all costs and
generation investments are probable of recovery.
On June 28, 2010, the NHPUC approved a joint settlement of PSNH's distribution rate case. Under the approved settlement, if PSNH's
12-month rolling average ROE for distribution exceeds 10 percent, amounts over the 10 percent level are to be allocated 75 percent to
customers and 25 percent to PSNH. Additionally, the settlement provided that the authorized regulatory ROE on distribution plant
would continue at the previously allowed level of 9.67 percent, and also permitted PSNH to file a request to collect certain exogenous
costs and a defined series of step increases. In 2013, PSNH filed for a distribution rate step increase. On June 27, 2013, the NHPUC
approved an increase to rates of $12.6 million, effective July 1, 2013. The increase consists primarily of $7.7 million related to net plant
additions and a $5 million increase to the current level of funding for the Major Storm Cost reserve.
The rates established by the NHPUC for PSNH include the following:
• An energy charge for customers who are not taking power from competitive energy suppliers. The default energy service
charge, or ES rate, is charged to customers who have never chosen competitive energy supply. This charge recovers the
costs of PSNH’s generation as well as purchased power and includes the NHPUC allowed ROE of 9.81 percent on PSNH’s
generation investment. Rate ADE is charged to certain customers who have returned to PSNH from competitive energy
supply. This rate allows PSNH to recover the forecast marginal cost of energy plus an adder for fixed costs.
• A distribution charge, which includes an energy and/or demand-based charge to recover costs related to the maintenance and
operation of PSNH’s infrastructure to deliver power to its destination, as well as power restoration and service costs. This
includes a customer charge to collect the cost of providing service to a customer; such as the installation, maintenance,
reading and replacement of meters and maintaining accounts and records.
• A transmission charge that recovers the cost of transporting electricity over high voltage lines from generating plans to
substations, including costs allocated by ISO-NE to maintain the wholesale electric market.
• A stranded cost recovery charge (SCRC), which allows PSNH to recover its stranded costs, including above-market expenses
incurred under mandated power purchase obligations and other long-term investments and obligations. PSNH had financed a
significant portion of its stranded costs through securitization by issuing RRBs secured by the right to recover these stranded
costs from customers over the life of the RRBs. The costs of the RRBs, which were retired on May 1, 2013, were recovered
through the SCRC rate.
• A system benefits charge which funds energy efficiency programs for all customers as well as assistance programs for
residential customers within certain income guidelines.
• An electricity consumption tax which is a state mandated tax on energy consumption.
The energy charge and SCRC rates change semi-annually and are reconciled annually. Expense/revenue reconciliation amounts for
the energy charge and SCRC are recovered in subsequent rates. The Rate ADE reconciliation amount is incorporated into the ES
reconciliation.
Sources and Availability of Electric Power Supply
During 2013, approximately 68 percent of PSNH’s load was met through its own generation, long-term power supply provided pursuant
to orders of the NHPUC, and contracts with third parties. The remaining 32 percent of PSNH's load was met by short-term (less than
one year) purchases and spot purchases in the competitive New England wholesale power market. PSNH expects to meet its load
requirements in 2014 in a similar manner. Included in the 68 percent above are PSNH’s obligations to purchase power from
approximately two dozen IPPs, the output of which it either uses to serve its customer load or sells into the ISO-NE market.
2013, 2012 and 2011 Major Storms
Over the past three years, CL&P, NSTAR Electric, PSNH and WMECO each experienced significant storms, including Tropical Storm
Irene, the October 2011 snowstorm, Storm Sandy, and the February 2013 blizzard. As a result of these storms, each electric utility
company suffered damage to its distribution and transmission systems, which caused customer outages and required the incurrence of
costs to repair significant damage and restore customer service.
The magnitude of these storm restoration costs met the criteria for cost deferral in Connecticut, Massachusetts, and New Hampshire.
As a result, the storms had no material impact on the results of operations of CL&P, NSTAR Electric, PSNH and WMECO. We believe
our response to each of these storms was prudent and therefore we believe it is probable that CL&P, NSTAR Electric, PSNH and
WMECO will be allowed to recover the deferred storm restoration costs. Each electric utility company is seeking recovery of its
deferred storm restoration costs through its applicable regulatory recovery process.