Eversource 1999 Annual Report Download - page 44

The estimated cost of decommissioning Millstone 2, in year
end 1999 dollars is $413.4 million. The NU system’s ownership
share of the estimated cost of decommissioning Millstone 3 and
Seabrook in year end 1999 dollars, is $421.3 million and $226.2
million, respectively. Nuclear decommissioning costs are accrued
over the expected service lives of the units and are included in
depreciation expense. Nuclear decommissioning expenses for these
units amounted to $30.6 million in 1999, $27.9 million in
1998 and $28.6 million in 1997. Nuclear decommissioning, as
a cost of removal, is included in the accumulated provision for
depreciation. Through December 31, 1999 and 1998, total decom-
missioning expenses of $260.6 million and $229.7 million,
respectively, have been collected from customers and are reflected
in the accumulated provision for depreciation.
A Post-Shutdown Decommissioning Activities Report for
Millstone 1 was filed with the Nuclear Regulatory Commission
(NRC) in June 1999 which outlines decommissioning activities,
and costs, and supports the obligation recorded by the company.
Nuclear decommissioning expenses for Millstone 1 were $25.7
million in 1999, $19.8 million in 1998 and $20.2 million in 1997.
External decommissioning trusts have been established for
the costs of decommissioning the Millstone units. Payments
for the NU system’s ownership share of the cost of decommission-
ing Seabrook are paid to an independent decommissioning
financing fund managed by the state of New Hampshire. Funding
of the estimated decommissioning costs assumes levelized collec-
tions for the Millstone units and escalated collections for Seabrook
and after-tax earnings on the Millstone and Seabrook decommis-
sioning funds of 5.5 percent and 6.5 percent, respectively.
As of December 31, 1999 and 1998, CL&P, PSNH and
WMECO collected a total of $260.6 million and $229.7 million,
respectively, through rates toward the future decommissioning
costs of their shares of Millstone 2 and 3 and Seabrook, of
which $239.7 million in 1999 and $209.9 million in 1998 have
been transferred to external decommissioning trusts. Earnings
on the decommissioning trusts increase the decommissioning
trust balances and the accumulated reserves for depreciation.
Unrealized gains and losses associated with the decommissioning
trusts and financing funds also impact the balance of the trusts
and the accumulated reserve for depreciation. The fair values
of the amounts in the external decommissioning trusts were
$410.2 million and $349.9 million at December 31, 1999 and
1998, respectively.
Yankee Companies: VYNPC owns and operates a nuclear
generating unit with a service life that is expected to end in
2012. The NU system’s ownership share of estimated costs, in
year end 1999 dollars, of decommissioning this unit is $68.6
million. On October 15, 1999, VYNPC agreed to sell the unit
for $22 million to an unaffiliated company. Among other
commitments, the acquiring company agreed to assume the decom-
missioning cost of the unit after it is taken out of service, and
the VYNPC owners have agreed to fund the uncollected
decommissioning cost to a negotiated amount at the time of
the closing of the sale.
As of December 31, 1999 and 1998, NU’s remaining estimated
obligation, including decommissioning for the units owned by
CYAPC, YAEC and MYAPC, which have been shut down was
$358.4 million and $418.8 million, respectively.
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K. DEFERRED COSTS — NUCLEAR PLANTS
Under the Rate Agreement, the plant costs of Seabrook were
phased into rates over a 7-year period beginning May 15,
1991. Total costs deferred under the phase-in plan were $288
million. This plan is accounted for in compliance with SFAS
No. 92, “Regulated Enterprises — Accounting for Phase-In
Plans.” The costs will be fully recovered from PSNH’s customers
by May 2001.
L. UNRECOVERED CONTRACTUAL OBLIGATIONS
Under the terms of contracts with the Yankee Companies, the
shareholder-sponsored companies are responsible for their
proportionate share of the remaining costs of the units, including
decommissioning. As management expects that the NU system
companies will be allowed to recover these costs from their cus-
tomers, the NU system companies have recorded regulatory assets,
with corresponding obligations, on their respective balance sheets.
M. INTEREST RATE RISK MANAGEMENT INSTRUMENTS
The NU system utilizes market risk management instruments to
hedge well-defined risks associated with variable interest rates.
To qualify for hedge treatment, the underlying hedged item
must expose the company to risks associated with market fluc-
tuations and the market risk management instrument used
must be designated as a hedge and must reduce the NU system’s
exposure to market fluctuations throughout the period. Amounts
receivable or payable under interest rate risk management instru-
ments are accrued and offset against interest expense.
N. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and short-
term cash investments which are highly liquid in nature and
have original maturities of three months or less.
2. NUCLEAR DECOMMISSIONING AND
PLANT CLOSURE COSTS
Millstone and Seabrook: The NU system operating nuclear power
plants, Millstone 2 and 3 and Seabrook, have service lives that
are expected to end during the years 2015 through 2026, and
upon retirement, must be decommissioned. Millstone 1’s expected
service life was to end in 2010, however, in July 1998, restart
activities were discontinued and preparations for decommission-
ing the unit began. Current decommissioning studies conclude
that complete and immediate dismantlement as soon as practical
after retirement continues to be the most viable and economic
method of decommissioning a unit. These studies are reviewed
and updated periodically to reflect changes in decommissioning
requirements, costs, technology, and inflation. Changes in require-
ments or technology, the timing of funding or dismantling or
adoption of a decommissioning method other than immediate
dismantlement would change decommissioning cost estimates
and the amounts required to be recovered. CL&P, PSNH and
WMECO attempt to recover sufficient amounts through their
allowed rates to cover their expected decommissioning costs.