National Grid 2013 Annual Report Download - page 26

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Compliance Filing to Eliminate Competitive Transition Charges from Electric Rates and Petition to Recover Certain
Deferral Balances
On July 29, 2011, Niagara Mohawk made a compliance filing with the NYPSC to remove Competitive Transition
Charges from electric rates and recover certain deferral account balances. In the January 2011 Electric Rate Case Order,
the NYPSC directed Niagara Mohawk to file tariff revisions, to become effective January 1, 2012, to remove the
Competitive Transition Charges from rates and establish a mechanism to recover certain deferral account balances.
Niagara Mohawk has proposed eliminating $544.9 million of Competitive Transition Charges from rates partially offset
by the proposed recovery of $236.2 million of outstanding deferral account balances over a 15-month period. On
December 16, 2011, the NYPSC approved Niagara Mohawk’ s compliance filing with modifications. The NYPSC
authorized Niagara Mohawk to recover $247.6 million in outstanding deferral account balances over a 15-month period,
but conditioned recovery on Staff’ s ability to audit. Included in the $247.6 million was $25.2 million of Hurricane Irene
storm costs that the NYPSC allowed Niagara Mohawk to recover, subject to Staff audit and disposition, which is
pending. In addition, the NYPSC extended the amortization period beyond 15-months for Niagara Mohawk’ s PSC 214
customer classes. The balance of the deferrals not recovered from these classes during the 15-month period will be
recovered from these classes over a subsequent period to be determined in Niagara Mohawk’ s next rate case.
Massachusetts Electric and Nantucket (the “Massachusetts Electric Companies”)
Rates for services rendered by the Massachusetts Electric Companies are subject to approval by the DPU. The DPU
approved a revenue decoupling mechanism (“RDM”) arising from the Massachusetts Electric Companies’ 2009
distribution rate case. In connection with the Massachusetts Electric Companies’ first RDM filing made in November
2010 and supplemented in February 2011, the DPU opened a proceeding in March 2011, as requested by the Attorney
General, for an independent audit of the Massachusetts Electric Companies’ 2009 capital investments which, in part,
formed the basis for the Massachusetts Electric Companies’ RDM rate adjustment. The selection of an auditor, following
a competitive solicitation process that has been completed, is at the discretion of the DPU. The Company cannot
currently predict the outcome of this proceeding.
In November 2012, the Massachusetts Electric Companies made their annual RDM filing in which the Massachusetts
Electric Companies estimated an under recovery of the 2012 annual target revenue. The Massachusetts Electric
Companies made a supplemental filing in February 2013 to present the final under recovery of the 2012 annual target
revenue of approximately $14.6 million and proposed an RDM factor which went into effect on March 1, 2013. The
Massachusetts Electric Companies also filed proposed Net CapEx factors to recover the 2013 revenue requirement of
approximately $18.4 million associated with 2009, 2010, and 2011 incremental capital investment recorded since
December 31, 2008.
The Massachusetts Electric Companies are allowed to recover non-capitalized pension and PBOP costs outside of base
rates through a separate factor. As a result, the Massachusetts Electric Companies are authorized to recover all pension
and PBOP expenses from their customers. The difference in the costs of the Massachusetts Electric Companies’ pension
and PBOP plans from the amounts billed through this separate factor is deferred as a regulatory asset or liability to be
recovered or refunded over the following three years.
As part of their last general rate case, the Massachusetts Electric Companies 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 the Massachusetts Electric Companies that
they reasonably and prudently incurred the costs. On April 1, 2011, the Massachusetts Electric Companies filed an audit
report 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 Massachusetts Electric 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 Massachusetts Electric Companies’ costs. Hearings were held at the
DPU in August 2012. Following the hearings, the Massachusetts Electric Companies reduced their request for recovery
to $64.8 million.
The Massachusetts Electric Companies have deferred net costs of approximately $214 million as of March 31, 2013, net
of customer contributions to the Massachusetts Electric Companies’ Storm Contingency Fund, to restore power
associated with several major weather events occurring since January 2010, pending ultimate approval by the DPU to
charge its deferred costs to the Massachusetts Electric Companies’ Storm Contingency Fund. This amount represents