National Grid 2012 Annual Report Download - page 27

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billed through this separate factor is deferred to a regulatory asset to be recovered or refunded over the following three
years.
As part of their last general rate case, Massachusetts Electric and Nantucket received approval from the DPU to recover
approximately $65.7 million of incremental costs associated with a December 2008 winter storm (“December 2008
Storm”) subject to further DPU review, reconciliation and demonstration by Massachusetts Electric and Nantucket that
they reasonably and prudently incurred the costs. On April 1, 2011, Massachusetts Electric and Nantucket filed an audit
performed by PricewaterhouseCoopers LLC of costs incurred to restore electric service following the December 2008
Storm. On December 7, 2011 the DPU issued an interlocutory order requiring the companies to file testimony in support
of the reasonableness and prudency of the costs. On March 1, 2012 the companies filed testimony consistent with the
requirements of the interlocutory order and reduced their request for recovery to $64.9 million. On July 3, 2012, the
Attorney General issued rebuttal testimony challenging certain of the Company’ s costs. Hearings will be held at the
DPU in August 2012.
The August 2011 Hurricane Irene and October 2011 Winter Storm caused extensive damage to Massachusetts Electric's
service territory. As of March 31, 2012, Massachusetts Electric incurred $104.8 million on repairs resulting from these
storms, which is expected to be recovered from Massachusetts Electric's customers.
NEP operates the transmission facilities of its New England affiliates as a single integrated system and reimburses
Massachusetts Electric for the cost of its transmission facilities in Massachusetts, including a return on those facilities.
In turn, these costs are allocated among transmission customers in New England in accordance with the ISO New
England Transmission Tariff. In December 2009, NEP filed with the FERC a proposed amendment to Massachusetts
Electric’ s formula rate revenue requirements which decreased Massachusetts Electric’ s compensation for its electric
transmission facilities by approximately $1.7 million. In March 2010, the FERC issued an order establishing hearing and
settlement procedures for this filing and made the new rates effective January 1, 2010. In March 2011, NEP filed an
uncontested settlement agreement with the FERC resolving all issues raised by the Massachusetts Attorney General in
this proceeding. On July 8, 2011, the FERC accepted the settlement without modification.
On September 30, 2011, several state and municipal parties in New England, including the Attorney General, the
Connecticut Public Utilities Regulatory Authority and the DPU, filed with the FERC a complaint under Section 206 of
the Federal Power Act against certain Transmission Owners to lower the base ROE for transmission rates in New
England from the FERC approved rate of 11.14% to 9.2%. On May 3, 2012, the FERC set the matter for hearing and
settlement procedures. The outcome of this proceeding would impact the ROE on certain limited transmission facilities
owned by Massachusetts Electric. At this time Massachusetts Electric cannot predict the outcome of the complaint.
In addition to the rates and tariffs put into effect following the rate case, Massachusetts Electric continues to be
authorized to recover costs associated with the procurement of electricity for its customers, all transmission costs, and
costs charged by Massachusetts Electric’ s affiliate NEP, for stranded costs associated with NEP’ s former electric
generation investments.
Other Regulatory Matters
On November 3, 2011, the FERC commenced an audit of Massachusetts Electric’ s participation in the Forward Capacity
Market and demand response programs within ISO-NE for the period from January 1, 2008 to present and has promised
to perform selective tests of customers that Massachusetts Electric registered into efficiency programs. The audit is
currently ongoing. No formal findings have been communicated by the FERC to date.
In the general rate case involving Massachusetts Electric’ s Massachusetts gas distribution affiliates, the DPU opened an
investigation to address the allocation and assignment of costs to the gas affiliates by the National Grid service
companies. In June 2011, the Attorney General’ s Office requested that the DPU expand the scope of the audit to address
the allocation and assignment of costs to Massachusetts Electric by the NGUSA service companies and to review
NGUSA’ s cost allocation practices. Massachusetts Electric has agreed to expand the scope of the audit to its
Massachusetts electric distribution companies. On March 12, 2012 the DPU issued an order confirming that the scope of
the audit would include the Massachusetts electric distribution companies. The selection of an auditor following a
competitive solicitation process that is currently underway is at the discretion of the DPU. Massachusetts Electric cannot
currently predict the outcome of this proceeding.