Eversource 1999 Annual Report Download - page 43

41
The tax effect of temporary differences, including timing
differences accrued under previously approved accounting stan-
dards, that give rise to the accumulated deferred tax obligation
is as follows:
At December 31,
(Millions of Dollars) 1999 1998
Accelerated depreciation and
other plant-related differences $1,388.0 $1,537.9
Net operating loss carryforwards —(33.4)
Regulatory assets —
income tax gross-up 241.2 370.0
Other 58.9 (25.8)
$1,688.1 $1,848.7
As of December 31, 1999, PSNH had an Investment Tax
Credit carryforward of $23 million, which if unused, expires
in 2004.
J. RECOVERABLE ENERGY COSTS
Energy Policy Act of 1992: Under the Energy Policy Act of 1992
(Energy Act), CL&P, PSNH, WMECO, and NAEC are assessed
for their proportionate shares of the costs of decontaminating
and decommissioning uranium enrichment plants owned by
the United States Department of Energy (DOE) (D&D Assessment).
The Energy Act requires that regulators treat D&D Assessments
as a reasonable and necessary current cost of fuel, to be fully
recovered in rates like any other fuel cost. CL&P, PSNH, WMECO,
and NAEC are currently recovering these costs through rates.
As of December 31, 1999 and 1998, the NU system’s total D&D
Assessment deferrals were $38.4 million and $57.5 million,
respectively.
CL&P: Through December 31, 1999, CL&P had an energy
adjustment clause under which fuel prices above or below
base-rate levels were charged to or credited to customers. At
December 31, 1999 and 1998, recoverable energy costs included
$62.6 million and $78.1 million, respectively, of costs pre-
viously deferred. Coincident with the start of restructuring, the
fuel clause was terminated. The balance at December 31,
1999, has been recorded as a generation-related stranded cost
and will be recovered through a transition charge mechanism.
PSNH:The Rate Agreement includes a fuel and purchased-
power adjustment clause (FPPAC) permitting PSNH to pass
through to retail customers, for a 10-year period that began in
May 1991, the retail portion of differences between the fuel
and purchased-power costs assumed in the Rate Agreement and
PSNH’s actual costs, which include the costs related to the
Seabrook Power Contracts and the Clean Air Act Amendment.
The cost components of the FPPAC are subject to a prudence
review by the NHPUC. At December 31, 1999 and 1998, PSNH
had $120.7 million and $156.3 million, respectively, of noncur-
rent recoverable energy costs deferred under the FPPAC. If the
Settlement Agreement is approved, the FPPAC will be recovered
through a transition charge.
Based on a current evaluation of the various factors and
conditions that are expected to impact future cost recovery, man-
agement continues to believe it is probable that the NU system
operating companies will recover their investments in long-lived
assets, including regulatory assets. In addition, all material
regulatory assets are earning a return. The components of the
NU system companies’ regulatory assets are as follows:
At December 31,
(Millions of Dollars) 1999 1998
Recoverable nuclear costs $2,210.8 $ 576.3
Income taxes, net 636.6 762.5
Unrecovered contractual obligations 349.2 408.0
Recoverable energy costs, net 228.2 279.2
Deferred costs — nuclear plants 111.6 187.1
Other 106.0 115.8
$3,642.4 $2,328.9
The restructuring orders in Connecticut and Massachusetts
provide for the transmission and distribution business to con-
tinue to be cost-of-service based and also provide for a transition
charge which recovers stranded costs, including the nuclear
regulatory assets established below.
As a result of discontinuing the application of SFAS No. 71
for CL&P’s and WMECO’s generation businesses, the company
reclassified nuclear plant in excess of its estimated fair market
value from plant to regulatory assets. As of December 31, 1999,
both the CL&P unamortized balance ($1.38 billion) and the
WMECO unamortized balance ($316.1 million) are classified
as recoverable nuclear costs. Also included in that regulatory
asset component for 1999 is $514.7 million, which includes
Millstone 1 recoverable nuclear costs relating to the recoverable
portion of the undepreciated plant and related assets ($145.7
million) and the decommissioning and closure obligation
($369 million).
At this time, management continues to believe that the appli-
cation of SFAS No. 71 for PSNH and NAEC remains appropriate.
If the “Agreement to Settle PSNH Restructuring” (Settlement
Agreement), as filed, is approved by the New Hampshire Public
Utilities Commission (NHPUC) and implemented, then PSNH
will discontinue the application of SFAS No. 71 for the generation
portion of its business and record an after-tax write-off of $225
million. PSNH’s transmission and distribution business will con-
tinue to be rate-regulated on a cost-of-service basis as the
Settlement Agreement allows for the recovery of the remaining
regulatory assets through that portion of the business.
I. INCOME TAXES
The tax effect of temporary differences (differences between
the periods in which transactions affect income in the financial
statements and the periods in which they affect the determination
of taxable income) is accounted for in accordance with the rate-
making treatment of the applicable regulatory commissions.