National Grid 2008 Annual Report Download - page 313

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 44091
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: 107
Description: EXH 2(B).6.1
0/2711.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/711/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 44091
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: 107 Description: EXH 2(B).6.1
0/2711.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/711/2*
reduce the decommissionin
g
and other costs collected from their purchasers. The decommissionin
g
costs that are actually
incurred by the Yankees may exceed the estimated amounts, perhaps substantially.
Connecticut Yankee rate filing, prudence challenge and other proceedings
On July 1, 2004, Connecticut Yankee asked FERC for a rate increase to reflect increased costs for decommissionin
g
, pensions
and other employment benefits, increased security and insurance costs and other expenses. In a
gg
re
g
ate, the increase
amounts to approximately $396 million through 2010, NEP’s share of which is included in the future estimated billin
g
s shown in
the table above. The rate case also reflects the impact of the termination of a fixed price contract with Bechtel Power
Corporation to perform decommissionin
g
operations and projects a substantial increase in costs over and delay in completion
compared with those previously projected.
The Connecticut Department of Public Utility Control and the Connecticut Office of Consumer Counsel (to
g
ether, the
Department) intervened at the FERC requesting that the FERC reject Connecticut Yankee’s rate filin
g
, or in the alternative,
disallow a portion of the requested rate increase on the
g
round that $205 million to $235 million of these costs were imprudently
incurred. Bechtel and three New En
g
land states have also intervened, assertin
g
that these costs are imprudent and should be
disallowed. FERC authorized Connecticut Yankee to be
g
in char
g
in
g
the proposed new rates effective February 1, 2005, subject
to refund. On November 22, 2005, the FERC ALJ found that Connecticut Yankee was prudent in its administration of the
decommissionin
g
contract, its termination of Bechtel and its on
g
oin
g
decommissionin
g
of the plant. The parties have filed
exceptions with the FERC.
Prior to Connecticut Yankee’s filing, the Department petitioned the FERC to determine that Connecticut Yankee’s purchasers,
including NEP, were obliged to pay for all of Connecticut Yankee’s decommissionin
g
costs, whether or not prudent, and could
not pass on any imprudent costs to their retail customers. The FERC denied the petition on Au
g
ust 30, 2005, on the
g
round that
it has no jurisdiction over retail rates. The Department and Bechtel requested clarification and rehearin
g
. FERC denied their
requests on October 30, 2005. The Department appealed FERC’s determination in the federal court.
Connecticut Yankee and Bechtel liti
g
ated the termination of the decommissionin
g
contract in Connecticut state court, with each
party seekin
g
substantial dama
g
es. On March 21, 2006, the parties a
g
reed to settle the case for a payment by Bechtel to
Connecticut Yankee of $15 million, and Bechtel withdrew its intervention in Connecticut Yankee’s rate filing.
In July 2006, Connecticut Yankee and the Department reached a settlement in principle to the rate case, which FERC approved
on November 16, 2006. The settlement provides for the resolution of all outstandin
g
issues and objections between the parties,
includin
g
the matters described above. The settlement extends the decommissionin
g
collection period from 2010 to 2015 at a
lower annual collection rate. The settlement also includes a provision from the 2000 FERC settlement which stipulated that if
decommissioning expenses exceeded a spending cap, Connecticut Yankee (through the sponsors’ equity) was to absorb the
overa
g
e up to a maximum of $10 million throu
g
h reduced decommissionin
g
collections. Decommissionin
g
costs exceeded the
cap. Under the terms of the settlement, Connecticut Yankee’s liability is reduced to $5 million if the project receives its NRC
license termination before the end of 2007. If the license termination is delayed, the amount increases over time to the
$10 million maximum. The settlement provides that Connecticut Yankee may resume payment of dividends to return equity to
sponsors. After January 1, 2008, Connecticut Yankee will not earn a return on more than $10 million in equity.
Nuclear Contingencies
As of March 31, 2007 and 2006, the Company has a liability of $158 million and $151 million, respectively, in other non-current
liabilities for the disposal of nuclear fuel irradiated prior to 1983 at Niagara Mohawk’s former nuclear facilities. In January 1983,
the Nuclear Waste Policy Act of 1982 (the Nuclear Waste Act) established a cost of $.001 per kWh of net
g
eneration for current
disposal of nuclear fuel and provides for a determination of the Company’s liability to the DOE for the disposal of nuclear fuel
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