Eversource 2013 Annual Report Download - page 26

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NSTAR Gas is subject to SQ metrics that measure safety, reliability and customer service and could be required to pay to customers a
SQ charge of up to 2.5 percent of annual distribution revenues for failing to meet such metrics. NSTAR Gas will not be required to pay
a SQ charge for its 2013 performance as it achieved results at or above target for all of its SQ metrics in 2013.
Sources and Availability of Natural Gas Supply
NSTAR Gas maintains a flexible resource portfolio consisting of natural gas supply contracts, transportation contracts on interstate
pipelines, market area storage and peaking services. NSTAR Gas purchases transportation, storage, and balancing services from
Tennessee Gas Pipeline Company and Algonquin Gas Transmission Company, as well as other upstream pipelines that transport gas
from major producing regions in the U.S., including the Gulf Coast, Mid-continent region, and Appalachian Shale supplies to the final
delivery points in the NSTAR Gas service area. NSTAR Gas purchases all of its natural gas supply from a firm portfolio management
contract with a term of one year, which has a maximum quantity of approximately 139,500 MMBtu/day.
In addition to the firm transportation and natural gas supplies mentioned above, NSTAR Gas utilizes contracts for underground storage
and LNG facilities to meet its winter peaking demands. The LNG facilities, described below, are located within NSTAR Gas’ distribution
system and are used to liquefy and store pipeline gas during the warmer months for vaporization and use during the heating season.
During the summer injection season, excess pipeline capacity and supplies are used to deliver and store natural gas in market area
underground storage facilities located in the New York and Pennsylvania region. Stored natural gas is withdrawn during the winter
season to supplement flowing pipeline supplies in order to meet firm heating demand. NSTAR Gas has firm underground storage
contracts and total storage capacity entitlements of approximately 6.6 Bcf.
A portion of the storage of natural gas supply for NSTAR Gas during the winter heating season is provided by Hopkinton, a wholly-
owned subsidiary of Yankee Energy Systems, Inc. The facilities consist of an LNG liquefaction and vaporization plant and three above-
ground cryogenic storage tanks in Hopkinton, Massachusetts having an aggregate capacity of 3.0 Bcf of liquefied natural gas. NSTAR
Gas also has access to facilities in Acushnet, Massachusetts that include additional storage capacity of 0.5 Bcf and additional
vaporization capacity.
Based on information currently available regarding projected growth in demand and estimates of availability of future supplies of
pipeline natural gas, NSTAR Gas believes that participation in planned and anticipated pipeline expansion projects will be required in
order for it to meet current and future sales growth opportunities.
YANKEE GAS
Yankee Gas operates the largest natural gas distribution system in Connecticut as measured by number of customers (approximately
218,000 customers in 71 cities and towns), and size of service territory (2,187 square miles). Total throughput (sales and
transportation) in 2013 was approximately 55 Bcf. Yankee Gas provides firm natural gas sales service to retail customers who require
a continuous natural gas supply throughout the year, such as residential customers who rely on natural gas for heating, hot water and
cooking needs, and commercial and industrial customers who choose to purchase natural gas from Yankee Gas. Yankee Gas also
owns a 1.2 Bcf LNG facility in Waterbury, Connecticut, which is used primarily to assist it in meeting its supplier-of-last-resort
obligations and also enables it to make economic purchases of natural gas, which typically occur during periods of low demand.
Retail natural gas service in Connecticut is partially unbundled: residential customers in Yankee Gas’ service territory buy gas supply
and delivery only from Yankee Gas while commercial and industrial customers may choose their gas suppliers. Yankee Gas offers firm
transportation service to its commercial and industrial customers who purchase gas from sources other than Yankee Gas as well as
interruptible transportation and interruptible gas sales service to those commercial and industrial customers that have the capability to
switch from natural gas to an alternative fuel on short notice, for whom Yankee Gas can interrupt service during peak demand periods
or at any other time to maintain distribution system integrity.
Rates
Yankee Gas is subject to regulation by PURA, which has jurisdiction over, among other things, rates, accounting procedures, certain
dispositions of property and plant, mergers and consolidations, issuances of long-term securities, standards of service, affiliate
transactions, management efficiency and construction and operation of distribution, production and storage facilities.
Retail natural gas delivery and supply rates are established by the PURA and are comprised of:
• A distribution charge consisting of a fixed customer charge and a demand and/or energy charge that collects the costs of
building and expanding the natural gas infrastructure to deliver natural gas supply to its customers. This also includes
collection of ongoing operating costs;
• Purchased Gas Adjustment (PGA) clause, which allows Yankee Gas to recover the costs of the procurement of natural gas for
its firm and seasonal customers. Differences between actual natural gas costs and collection amounts on August 31st of each
year are deferred and then recovered or returned to customers during the following year. Carrying charges on outstanding
balances are calculated using Yankee Gas' weighted average cost of capital in accordance with the directives of the PURA;
and