National Grid 2008 Annual Report Download - page 316

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 20479
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: 110
Description: EXH 2(B).6.1
0/2714.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/714/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 20479
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: 110 Description: EXH 2(B).6.1
0/2714.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/714/2*
CTC formula to reduce the CTC amount that was previously calculated under the formula which the FERC accepted and
approved in 1998. NEP challen
g
ed this initial decision, ar
g
uin
g
that no reduction is appropriate. Norwood and the FERC staff
challenged the initial decision, arguing that the reduction is insufficient.
On July 22, 2005, the FERC ruled that NEP correctly calculated the CTC payable by Norwood at approximately $0.6 million per
month from April 1998 throu
g
h October 2008. FERC also reduced the late payment interest rate applicable to the unpaid CTC
from 18 percent to 8 percent. In response to requests for rehearin
g
filed by both sides, on February 22, 2006, FERC reaffirmed
the validity of the CTC, and ruled that the late payment interest rate should be a simple interest rate of 18 percent. The FERC
calculated the amount owed by Norwood for past and future CTC payments to be $89 million throu
g
h December 2005. On
March 14, 2006, Norwood asked FERC to reconsider the interest portion of its decision, and on March 17, moved to stay the
effectiveness of the decision pending FERC’s consideration of its rehearing request. On June 30, FERC denied Norwood’s
motion for rehearing and its motion for a stay.
On April 18, 2006, Norwood petitioned the US Court of Appeals for the First Circuit to review the FERC’s orders. On July 14,
2006, Norwood petitioned the First Circuit for a stay. On Au
g
ust 21, 2006, the Court entered a limited stay, holdin
g
that
Norwood need not pay its past debt until after the Court rules on the merits but that Norwood must pay monthly CTC amounts
when due in the meantime.
On February 2, 2007, the First Circuit affirmed the FERC’s denial of Norwood’s challen
g
e to the principal CTC amount, affirmed
the FERC’s order insofar as it required late payment interest char
g
es at least at the prime rate, and remanded to FERC only as
to whether more than the prime rate is properly due. The First Circuit ruled further that issuance of the Court’s mandate would
lift its stay order of Au
g
ust 21, 2006. The mandate was issued on March 26, 2007. On May 3, 2007, Norwood filed a petition for
certiorari with the US Supreme Court seeking review of the First Circuit’s February, 2007 Order. NEP’s response to that petition
is currently due to be filed in July 2007.
On May 17, 2007, the FERC ruled that the interest rate should be at prime, but did not address the effective date of the reduced
late payment interest rate. On June 14, 2007, NEP filed a motion for clarification and alternative request for rehearin
g
, askin
g
FERC to clarify this issue, ar
g
uin
g
that the rate should apply only to bills rendered after June 30, 2006. NEP also made a
compliance filin
g
indicatin
g
that throu
g
h May 2007, Norwood owes NEP approximately $68.4 million. Norwood filed a protest on
June 29, 2007.
State Collection Action: NEP filed a collection action in Massachusetts Superior Court (Worcester County) to collect the CTC. In
March 2001, the Superior Court ruled that Norwood has breached the a
g
reement by not payin
g
the CTC char
g
e, and ordered
Norwood to make re
g
ular and substantial payments to an escrow account. Followin
g
unsuccessful appeals by Norwood, the
Superior Court entered jud
g
ment for NEP on June 9, 2004 in the amount of approximately $43 million, based on amounts owed
throu
g
h January 31, 2001. Norwood appealed a
g
ain to the Massachusetts Appeals Court, ar
g
uin
g
that the CTC did not bind
Norwood until the FERC’s July 22, 2005 order confirmed the calculation for Norwood that NEP made in 1998, and that the
Appeals Court should, in any event, await final resolution of the CTC by FERC and any subsequent judicial review. On May 17,
2006, the Appeals Court denied Norwood’s appeal. The court remanded the case back to the trial court to increase its
January 2001 judgment consistent with the amount in FERC’s February 2006 order. Norwood filed an appeal with the
Massachusetts Supreme Judicial Court, and on June 28, 2006, the appeal was denied. On July 24, 2006, NEP moved the
Superior Court to bring the judgment current as of the date that it is entered. The motion was continued in light of the FERC’s
August 21 grant of a limited stay, which was lifted when the First Circuit’s mandate was issued, as discussed above. Throu
g
h
March 31, 2007, Norwood has paid NEP approximately $39 million, includin
g
its last payment of approximately $15 million
made in March 2007. On March 14, 2007 the Norwood Town Meetin
g
voted to bond the remainder of its obli
g
ations to NEP,
and has informed the Company that the process could take a year to complete.
F-25