Eversource 1999 Annual Report Download - page 50

Phase I of the proceeding regarding the Settlement Agreement
allowed proponents to provide sufficient record for the NHPUC
to compare the Settlement Agreement to a range of reasonable
outcomes in the other associated dockets. The NHPUC also
determined within the testimony of Phase I that the Con Edison
merger is relevant to the Settlement Agreement and intervening
parties should have discovery in Phase II to evaluate the impact
of the merger on the Settlement Agreement. Phase II allowed
opponents to file testimony concerning the Settlement Agreement
and then allowed proponents to conduct discovery and file
rebuttal testimony. A decision on the Settlement Agreement is
expected in the first quarter of 2000.
B. NUCLEAR LITIGATION
The non-NU joint owners of Millstone 3 have filed demands for
arbitration with CL&P and WMECO as well as lawsuits in
Massachusetts Superior Court against NU and its current and
former trustees related to the companies’ operation of Millstone
3. During 1999, NU and these subsidiaries agreed in principle to
settle with certain of the joint owners, who own 58 percent of
the non-NU ownership of Millstone 3. The settlements provide
for the payment to the claimants of $36.4 million and certain
contingent payments.
Arbitration and litigation claims remain outstanding for the
remaining joint owners who have not agreed to settle. Management
cannot estimate the potential outcome of the arbitration and
litigation for the nonsettled joint owners, therefore, no liability
has been established as of December 31, 1999.
C. ENVIRONMENTAL MATTERS
The NU system is subject to environmental laws and regula-
tions intended to mitigate or remove the effect of past operations
and improve or maintain the quality of our environment. As
such, the NU system has an active environmental auditing and
training program and believes it is in compliance with the
current laws and regulations.
However, the normal course of operations may necessarily
involve activities and substances that expose the NU system to
potential liabilities of which management cannot determine
the outcome. Additionally, management cannot determine the
outcome for liabilities that may be imposed for past acts, even
though such past acts may have been lawful at the time they
occurred. Management does not believe, however, that this will
have a material impact on the NU system’s financial statements.
Based upon currently available information for the estimated
remediation costs as of December 31, 1999 and 1998, the
liability recorded by the NU system for its estimated environ-
mental remediation costs amounted to $24.8 million and
$21.5 million, respectively.
Nuclear Generation Assets Auction: In September 1999, NU
announced that the Millstone nuclear generation assets of CL&P
and WMECO will be put up for auction as soon as practical. On
November 8, 1999, CL&P filed its divestiture plan for the
Millstone units with the DPUC. The auction is expected to begin
in early 2000, provided all regulatory approvals have been met,
with a successful bidder chosen by mid 2000 and a closing in
2001. No NU system company will participate as a bidder in
the auction process. Management expects to recover all of its
nuclear stranded costs through the net proceeds of generation asset
sales and through billing a transition charge to retail customers.
New Hampshire: In August 1999, NU, PSNH and the state of
New Hampshire signed a Settlement Agreement intended to
settle a number of pending regulatory and court proceedings
related to PSNH. Parties to the agreement included the gov-
ernor of New Hampshire, the Governor’s Office of Energy and
Community Service, the New Hampshire attorney general,
certain members of the staff of the NHPUC, PSNH and NU. The
Settlement Agreement was submitted to the NHPUC on August
2, 1999, and is awaiting approval. If approved by the NHPUC,
the Settlement Agreement would resolve 11 NHPUC dockets
and PSNH’s federal lawsuit which had enjoined the state of New
Hampshire from implementing its restructuring legislation,
would require PSNH to write off $225 million after-tax of its
stranded costs and would allow for the recovery of the remain-
ing amount. Also, implementation of the Settlement Agreement
is contingent upon the issuance of $725 million in rate reduction
bonds (securitization). Issuance of the rate reduction bonds
requires the initial approval of the NHPUC and final approval
from the New Hampshire Legislature via enactment of appropriate
legislation. Other approvals are also required from various
federal and state regulatory agencies and financial lenders. Under
the terms of the Settlement Agreement, on the effective date,
PSNH’s rates will be reduced from current levels by an average
of 18.3 percent. Due to the number of approvals required and
still pending to implement the Settlement Agreement, management
continues to believe the application of SFAS No. 71 is appropriate
for PSNH at this time.
The Settlement Agreement also requires PSNH to sell its
generation assets and certain power contracts, including PSNH’s
current purchased-power contract with NAEC for the output
from Seabrook. The net proceeds from all sales will be used to
recover a portion of PSNH’s stranded costs. The sales would
be accomplished through an auction process subject to approval
by the NHPUC. Following the divestiture, the transmission
and distribution portion of the business will continue to be cost-
of-service based.
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