National Grid 2008 Annual Report Download - page 315

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 64623
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: 109
Description: EXH 2(B).6.1
0/3713.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/713/3*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 64623
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: 109 Description: EXH 2(B).6.1
0/3713.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/713/3*
With respect to firm
g
as supply commitments, the amounts are based upon volumes specified in the contracts
g
ivin
g
consideration to the minimum take provisions. Commodity prices are based on New York Mercantile Exchan
g
e
(NYMEX) quotes and reservation char
g
es, when applicable. Stora
g
e and pipeline capacity commitment amounts are based
upon volumes specified in the contracts, and represent demand char
g
es priced at currently filed tariffs. At March 31, 2007, the
Company’s firm
g
as supply commitments have varyin
g
expiration dates, the latest of which is March 2009. The majority of the
g
as stora
g
e and transportation commitments have varyin
g
expiration dates between 2010 and 2012 with the latest bein
g
October 2022.
Plant Expenditures
The Company’s utility plant expenditures are estimated to be approximately $749 million in fiscal 2008. At March 31, 2007,
substantial commitments had been made relative to future planned expenditures. Generally construction expenditure levels are
consistent from year to year, however, the Company is currently in the second year of a five-year Reliability Enhancement
Program, to improve performance and reliability, which will result in increased capital expenditures.
Legal Matters by Entity
Niagara Mohawk
Station Service Cases: A number of generators complained or withheld payments associated with the Company’s delivery of
station service to their
g
eneration facilities, ar
g
uin
g
that they were permitted to bypass its retail char
g
es. The FERC issued two
orders on complaints filed by the Company’s station service customers in December 2003, allowin
g
two
g
enerators to net their
station service electricity over a 30-day period and to avoid state-authorized char
g
es for deliveries made over distribution
facilities. Subsequent to December 2003, FERC issued a third order that involved affiliates of NRG Ener
g
y, Inc. These orders
directly conflict with the Company’s state-approved tariffs and the orders of the PSC on station service rates. The effect of
these orders is to permit these generators to bypass the Company’s state-jurisdictional station service char
g
es for electricity,
including those set forth in the filing that was approved by the PSC on November 25, 2003. Under those state-approved tariffs,
the Company was owed in a
gg
re
g
ate approximately $62 million as of December 31, 2006. The Company appealed the FERC
orders to the U.S. Court of Appeals for the District of Columbia Circuit, and the matters were consolidated for appeal. On
June 23, 2006, the Court issued a decision upholding the FERC’s orders, and on October 23, 2006, the Court denied the
Company’s request for rehearin
g
. On January 22, 2007, the Company filed a joint petition for certiorari to the United States
Supreme Court requestin
g
the Court to review and reverse the decision of the Court of Appeals. The Supreme Court denied
certiorari and thus the FERC orders have become final.
Under those orders, FERC allows
g
enerators to bypass local distribution company char
g
es (includin
g
stranded cost recovery
charges) when receiving service through the NYISO if the amount of power produced by a generator over a 30-day period
exceeds the amount of power taken over the power
g
rid. As discussed under the deferral audit section of Note B, the Company
is not recoverin
g
the lost revenues associated with the FERC orders throu
g
h its deferral account and recorded a char
g
e to
expense of $68 million in the fourth quarter of fiscal year 2007 related to this matter.
New England Power
Town of Norwood Dispute: From 1983 until 1998, NEP was the wholesale power supplier for Norwood, Massachusetts. In
April 1998, Norwood be
g
an takin
g
power from another supplier, althou
g
h its contract term with NEP ran to 2008. Pursuant to a
tariff amendment approved by the FERC in May 1998, NEP has been assessin
g
Norwood a monthly CTC of $0.6 million, plus
interest on unpaid balances at 18 percent per year. As of March 31, 2007, the char
g
es assessed Norwood but not paid amount
to $68 million. NEP and Norwood are engaged in litigation at the FERC and in state court, as follows.
FERC 206 Proceeding: In December 2002, Norwood challen
g
ed the CTC rate with the FERC under Section 206 of the Federal
Power Act, which permits the FERC to make prospective adjustments to filed rates. On June 9, 2004, the FERC ALJ issued an
initial decision recommending that FERC revise the
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