National Grid 2008 Annual Report Download - page 309

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 12855
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: 103
Description: EXH 2(B).6.1
0/2707.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/707/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 12855
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: 103 Description: EXH 2(B).6.1
0/2707.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/707/2*
enter into non-bindin
g
mediation discussions before an ALJ from the PSC in an attempt to resolve some or all of the amounts
remaining in dispute.
Throu
g
h the mediation process, the Company, the Staff, and Multiple Intervenors (Parties), reached a resolution of the disputed
issues presented in the deferral account case as well as other cases pendin
g
before the Commission re
g
ardin
g
pension costs,
the costs of enhanced inspections of the transmission and distribution system, and the sale of the Nine Mile Point nuclear
g
eneratin
g
facilities. A Stipulation of the Parties (Stipulation) settin
g
forth the resolution of these issues was executed and filed
with the Commission on March 23, 2007. A hearing on the Stipulation of the parties was held before the PSC’s ALJ on May 17,
2007.
Under the Stipulation, the Company has a
g
reed to a net reduction of the deferral account balance of approximately
$127.0 million. This includes reclassifications from the deferral account to other balance sheet accounts of approximately
$64 million. It also includes a reduction to the deferral account balance as of February 28, 2007 and decrease to earnin
g
s
before income taxes of approximately $63 million. The significant issues resolved under the Stipulation include:
Certain deferral account balances as of June 30, 2005 remain subject to audit by the Staff. The Stipulation also clarifies
g
oin
g
forward procedures for recordin
g
, reportin
g
and auditin
g
of certain other deferrals authorized for recovery. The next biannual
deferral account filin
g
will be made by Au
g
ust 1, 2007 for deferral balances as of June 30, 2007 and projected deferrals throu
g
h
December 31, 2009. The Staff will audit future biannual deferral account filin
g
s made pursuant to the MRP, however the Parties
have a
g
reed that the amount of deferral recoveries in calendar year 2008 and 2009 will not exceed the $200 million level
currently being collected in rates. Any deferrals in excess of this recovery level would be subject to recovery after 2009.
Massachusetts Electric Company and Nantucket Electric Company
Rates for services rendered by the Company for the most part are subject to approval by the Massachusetts Department of
Public Utilities (DPU). In March 2000, the DPU approved a long-term rate plan for the Company, which became effective on
May 1, 2000. As part of the rate plan, the Company
F-18
- The Company will cease seekin
g
to recover most disputed station service lost revenues. This resulted in a reduction to the
deferral account and pre-tax earnin
g
s as of February 28, 2007 of $68 million. The impact of the settlement on future
revenues depends on the usa
g
e by
g
enerators and prospective adjustments to delivery rates that are dependent in part
on commodity prices. The Company estimates a reduction in revenues of about $9 million to $12 million per year throu
g
h
December 31, 2011 which is the end of the MRP.
- The Parties a
g
reed to the method of determinin
g
incremental major storm costs related primarily to the treatment of third
party contractor costs and costs incurred by affiliates durin
g
storm restoration efforts. The definition of a major storm was
also clarified under the Stipulation. Storm related adjustments resulted in a reduction of $10 million to the deferral account
and pre-tax earnings.
- The Parties agreed to the method of determining deferrable incremental costs associated with the Company’s on
g
oin
g
stray voltage inspection and testing program resulting in a reduction to the deferral account and pre-tax earnin
g
s of
$4 million.
- The Parties agreed to the method for capitalizing fringe benefit overhead costs associated with the Company’s fixed asset
construction activities. This resulted in a decrease to utility plant of $17 million, an increase to the deferral account of $11
million, and a reduction in
p
re-tax earnin
g
s of $6 million.
- The Company is allowed to reflect 50 percent of pension settlement losses that it incurred in fiscal years 2007 and 2004.
This resulted in an increase to the deferral account and pretax earnin
g
s of $23 million related to fiscal 2007 and 2004
pension settlement losses, respectively.
- Althou
g
h it has no impact on past or future rates, the Company will exclude
g
oodwill from any future earnin
g
s sharin
g
filings and other filings made with the PSC.