National Grid 2008 Annual Report Download - page 307

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 16444
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: 101
Description: EXH 2(B).6.1
0/2705.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/705/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 16444
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: 101 Description: EXH 2(B).6.1
0/2705.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/705/2*
F-16
At March 31
2007 2006
(In thousands
)
Regulatory liabilities:
Cost of removal reserve
(
642,198
)
(
537,526
)
Stranded costs and CTC related (125,113) (123,105)
Pension and
p
ost-retirement
p
lans fair value deferred
g
ain
(
Note F
)
(
266,485
)
(
234,754
)
Interest savings deferral (92,534) (92,534)
Environmental res
p
onse fund and insurance recoveries
(
Note C
)
(
91,287
)
(
81,673
)
Storm costs reserve (45,551) (39,391)
Other (227,950) (246,612)
Total net regulatory assets non-current 3,610,252 3,909,194
Net re
g
ulator
y
assets $ 3,797,604 $ 4,288,263
Stranded costs
Certain re
g
ulatory assets, referred to as stranded costs, resulted from major fundamental chan
g
es occurrin
g
in the public
utility industry, most notably the divestiture of
g
eneration assets pursuant to dere
g
ulation. Under dere
g
ulation, the
g
eneration
se
g
ment of the utility business was opened to competition in that consumers could choose their
g
eneration supplier. Public
utilities continued to control the transmission and distribution of electricity and were encoura
g
ed to dispose of
g
eneration
assets such as power plants. The net unrecovered costs from the sale of these
g
eneration assets, alon
g
with the costs to
terminate, restate or amend existin
g
purchase power contracts were deferred for recovery in rates over future periods. A lar
g
e
portion of these stranded costs are bein
g
recovered throu
g
h a special rate bein
g
char
g
ed to customers. Similarly, the recovery
of costs outside of customer rate recovery, but that nevertheless relate to the former
g
eneration business, are credited back to
customers as well to offset stranded costs. For the New En
g
land re
g
ulated subsidiaries, this mechanism is called the Contract
Termination Char
g
e and for Nia
g
ara Mohawk in New York, it is called the Competitive Transition Char
g
e (in both cases, these
char
g
es are called the CTC
)
.
Mana
g
ement believes that future cash flows from char
g
es for electric service under existin
g
rate plans, includin
g
the CTC, will
be sufficient to recover the Company’s re
g
ulatory assets over the planned amortization period. This assumes that there will be
no unforeseen reduction in demand and no bypass of the CTC or exit fees. In the event of revenues that are lower than
expected and (or) costs that are hi
g
her than expected, if the Company determines that its net re
g
ulatory assets are not
probable of recovery, it can no longer apply the principles of SFAS No. 71 and would be required to record an after-tax, non-
cash charge against income for any remaining unamortized regulatory assets and liabilities. If the Company’s subsidiaries
could no longer apply SFAS No. 71, the resulting charge would be material to the Company’s reported financial condition and
results of operations.
Rate A
g
reements
NEP
New England Regional Transmission Organization (RTO) and Rate Filing: NEP is a participatin
g
transmission owner (PTO) in
New England’s RTO which commenced operations effective February 1, 2005. ISO New En
g
land, Inc. has been authorized by
FERC to exercise the operations and system plannin
g
functions required of RTOs and will be the independent re
g
ional
transmission provider under the ISO Open Access Transmission Tariff (ISO-OATT). The ISOOATT is desi
g
ned to provide
non-discriminator
y
o
p
en access transmission services over the transmission facilities of the PTOs and