Eversource 2013 Annual Report Download - page 54

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Regulatory Developments and Rate Matters
Electric and Natural Gas Base Distribution Rates:
Each NU utility subsidiary is subject to the regulatory jurisdiction of the state in which it operates: CL&P and Yankee Gas operate in
Connecticut and are subject to PURA regulation; NSTAR Electric, WMECO and NSTAR Gas operate in Massachusetts and are subject
to DPU regulation; and PSNH operates in New Hampshire and is subject to NHPUC regulation.
In Connecticut, pursuant to the April 2012 PURA-approved Connecticut merger settlement agreement, CL&P is subject to a base
distribution rate freeze until December 1, 2014. Yankee Gas distribution rates were established in a 2011 PURA approved rate case.
See Connecticut - Yankee Gas Distribution Rate Case in this Regulatory Developments and Rate Matters section for further
information.
In Massachusetts, "An Act Relative to Competitively Priced Electricity in the Commonwealth" (Energy Act), which was enacted in 2012,
requires electric utility companies to file at least one distribution rate case every five years and natural gas companies to file at least
one distribution rate case every 10 years, and limits those companies to one settlement agreement in any 10-year period. Pursuant to
the April 2012 DPU-approved Massachusetts comprehensive merger settlement agreements, NSTAR Electric, WMECO and NSTAR
Gas are subject to a base distribution rate freeze through December 31, 2015.
In New Hampshire, PSNH is currently operating under the 2010 NHPUC approved distribution rate case settlement, which is effective
through June 30, 2015. Under the settlement, PSNH is permitted to file a request to collect certain exogenous costs and step increases
on an annual basis. See New Hampshire - Distribution Rates in this Regulatory Developments and Rate Matters section for further
information.
As a result of the PURA-approved Connecticut merger settlement agreement, we expect to file a CL&P base distribution rate
proceeding in mid-2014 with base distribution rates effective December 1, 2014. The exact timing of the base distribution rate
proceedings for our other utility subsidiaries has not yet been determined.
Major Storms:
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.
CL&P 2013 Storm Filing: In March 2013, CL&P filed a request with PURA for approval to recover storm restoration costs associated
with five major storms, all of which occurred in 2011 and 2012. CL&P's deferred storm restoration costs associated with these major
storms totaled $462 million. Of that amount, approximately $414 million is subject to recovery in rates after giving effect to CL&P’s
agreement to forego the recovery of $40 million of previously deferred storm restoration costs as well as an existing storm reserve fund
balance of approximately $8 million. During the second half of 2013, the PURA proceeded with the storm recovery review issuing
discovery, holding hearings and ultimately on February 3, 2014, issuing a draft decision on the level of storm costs recovery.
In its draft decision, the PURA approved recovery of $365 million of deferred storm restoration costs and ordered CL&P to capitalize
approximately $18 million of the deferred storm restoration costs as utility plant, which will be included in depreciation expense in future
rate proceedings. PURA will allow recovery of the $365 million with carrying charges in CL&P’s distribution rates over a six-year period
beginning December 1, 2014. The remaining costs were either disallowed or are probable of recovery in future rates and did not have
a material impact on CL&P’s financial position, results of operations or cash flows. The final decision is expected from PURA in the first
quarter of 2014.
NSTAR Electric 2013 Storm Filing: On December 30, 2013, the DPU approved NSTAR Electric’s request to recover storm restoration
costs, plus carrying costs, related to Tropical Storm Irene and the October 2011 snowstorm. The DPU approved recovery of $34.2
million of the $38 million requested costs. NSTAR Electric will recover these costs, plus carrying costs, in its distribution rates over a
five-year period that commenced on January 1, 2014.
PSNH Major Storm Cost Reserve: On June 27, 2013, the NHPUC approved an increase to PSNH’s distribution rates effective July 1,
2013 that included a $5 million increase to the current level of funding for the major storm cost reserve.
WMECO SRRCA Mechanism: WMECO has an established Storm Reserve Recovery Cost Adjustment (SRRCA) mechanism to
recover the restoration costs associated with its major storms. Effective January 1, 2012, WMECO began recovering the restoration
costs of Tropical Storm Irene and other storms that took place prior to August 2011. On August 30, 2013, WMECO submitted its 2013
Annual SRRCA filing to begin recovering the restoration costs associated with the October 2011 snowstorm and Storm Sandy. On