National Grid 2008 Annual Report Download - page 268

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 3445
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 62
Description: EXH 2(B).6.1
0/2666.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/666/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 3445
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 62 Description: EXH 2(B).6.1
0/2666.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/666/2*
of such price difference. Conversely, if such price difference is
g
reater than zero (for example, if the demand is less than the
Issuer’s estimates, additional resources enter the market, or costs are less than forecast) KeySpan will pay Mor
g
an Stanley Inc.
an amount equal to the product of (i) the Notional Quantity and (ii) the absolute value of such price difference.
The NYPSC, Consolidated Edison and other load serving entities (“LSEs”) complained to the NYISO that In-City capacity
market clearin
g
prices durin
g
the summer of 2006 did not decline as they had expected with the introduction of additional
supply in the New York City market. The NYISO issued a letter to FERC indicatin
g
that no tariff violations occurred and that
prices were as it expected. Nevertheless, the NYISO stated that if chan
g
es to the market are warranted, the NYISO would
consider makin
g
revisions as necessary. In connection with this proceedin
g
, in July 2007, KeySpan received notice that the
FERC Office of Enforcement is conductin
g
a formal investi
g
ation into matters re
g
ardin
g
the offerin
g
practices of
g
eneratin
g
units serving New York City’s In-City capacity market. The Department of Justice is also conductin
g
its own investi
g
ation of the
competitive issues in the New York City electric ener
g
y capacity market. At this time, we are unable to predict the outcome of
these proceedin
g
s and what effect, if any, they may have on the potential revenue that could be realized from physical sales of
In-City capacity or on the Capacity Swap Agreement.
Massachusetts
Under the Issuer’s long-term rate plan in Massachusetts there is no cap on earnin
g
s and no earnin
g
s sharin
g
rates mechanism
until 2010. In addition, the Issuer will be allowed to include its share of earned savings, if any, in demonstrating the Issuer’s
costs of providin
g
service to customers from January 2010 until May 2020. From May 2000 until February 2005 rates were
frozen. In March 2005, a settlement credit in the company’s rates expired, resultin
g
in an increase of $10 million in income
throu
g
h to February 2006. From March 2006, rates are adjusted each 1 March until 2009 by the annual percenta
g
e chan
g
e in
avera
g
e electricity distribution rates in the northeast of the U.S. Re
g
ulators approved annual increases in the amount of
U.S.$20 million, effective 1 March 2006 and U.S.$9.4 million effective 1 March 2007. In 2009, actual earned savin
g
s will be
determined and the Issuer will be allowed to retain 100 per cent. of annual earned savin
g
s up to U.S.$71 million and 50 per
cent. of annual earned savin
g
s between U.S.$71 million and U.S.$109 million before tax. Earned savin
g
s represent the
difference between a test year’s distribution revenue and the Issuer’s cost of providin
g
service durin
g
the same test year,
including a regional average authorised return.
Effective 1 November 2003, the Massachusetts Department of Telecommunications and Energy (“MDTE”), predecessor to the
MDPU, approved a U.S.$25.9 million increase in base revenues for one of the Issuer’s KeySpan Massachusetts
g
as utility
companies with an allowed return on equity of 10.2 per cent., reflectin
g
an equal balance of debt and equity. On 27
January 2004, the MDTE issued its order on this entity’s Motion for Recalculation, Reconsideration and Clarification that
g
ranted an additional U.S.$1.1 million in base revenues, for a total of U.S.$27 million. The MDTE also approved a Performance
Based Rate Plan (the “Plan”) for up to ten years. On 1 November 2006, the MDTE approved a base rate increase of
U.S.$8.6 million under the Plan. In addition, an increase of U.S.$2.7 million in the local distribution adjustment clause was
approved to recover pension and other postretirement costs. The MDTE also approved a true-up mechanism for pension and
other postretirement benefit costs under which variations between actual pension and other postretirement benefit costs and
amounts used to establish rates are deferred and collected from, or refunded to, customers in subsequent periods. This true-up
mechanism allows for carrying charges on deferred assets and liabilities at this entity’s weighted-average cost of capital.
62