Eversource 2001 Annual Report Download - page 23

overall reduction of 10 percent, in addition to the 5 percent
reduction they received on October 1, 2000.
On May 22, 2001, the Governor of New Hampshire signed a
bill modifying the state’s 1996 and 2000 electric utility industry
restructuring laws. The revisions delay the sale of PSNH’s fossil
and hydroelectric generation assets to no sooner than 33 months
after restructuring takes effect, or February 1, 2004. The revisions
also fixed the charges retail customers will pay PSNH for electric
supply, or transition service.
PSNH and NAEC have entered into two contracts where
PSNH is obligated to purchase NAEC’s 35.98 percent ownership
of the capacity and output of Seabrook. The 2001 amended
restructuring bill requires the NHPUC to complete the sale of
NAEC’s share of Seabrook in an expeditious manner. In late
2001, the NHPUC and the DPUC named J. P. Morgan as the
selling agent for all owners seeking to sell their Seabrook shares.
Those owners, which include CL&P with its 4.06 percent share,
collectively own approximately 88 percent of Seabrook. J. P. Mor-
gan expects to consummate the sale in late 2002. NAEC’s pro-
ceeds will be used to repay all $90 million of NAEC’s outstanding
debt and return all NAEC’s equity, which totaled $35 million as
of December 31, 2001, to NU. Following the sale of NAEC’s
share of Seabrook, the Seabrook Power Contracts will be termi-
nated. PSNH will use these proceeds to more quickly amortize
stranded costs.
On October 10, 2000, NU reached an agreement with an
unaffiliated joint owner of Seabrook under which that joint owner
would include its aggregate 15 percent ownership share of
Seabrook in the upcoming sale. Under the terms of the agree-
ment, in the event that the sale yields proceeds for that joint
owner of more than $87.2 million, NU and that joint owner
would share the excess proceeds. Should those sales proceeds be
less than $87.2 million, NU would make up the difference below
that amount up to a maximum of $17.4 million. The agreement
also limits any top-off amount required to be funded by that joint
owner for decommissioning as part of the sale process at the
amount required by the Nuclear Regulatory Commission (NRC)
regulations.
Massachusetts: Unlike Connecticut, Massachusetts has experi-
enced a continued expansion in the number of customers securing
their electric supply through competitive suppliers. In January
2001, WMECO instituted approximately a 17 percent overall
rate increase for its customers taking standard offer service. The
increase reflected a sharp increase, from approximately $0.045 per
kWh to approximately $0.073 per kWh, in prices paid to third-
party suppliers during 2001. In December 2001, however, the
Massachusetts Department of Telecommunications and Energy
approved approximately a 14 percent reduction in WMECO’s
overall rates for standard offer service customers, primarily reflect-
ing a reduction in WMECO’s standard offer service supply costs
in 2002 to approximately $0.048 per kWh. The significant reduc-
tion in supply costs in 2002 will result in a material reduction in
WMECO’s operating revenues and purchased power costs in
2002, but should not have a significant impact on financial per-
formance since electric supply costs are passed through to cus-
tomers.
For further information regarding commitments and contin-
gencies related to restructuring, see Note 7A, “Commitments and
Contingencies - Restructuring,” to the consolidated financial
statements.
Regional Transmission Organization
The Federal Energy Regulatory Commission (FERC) has
required all transmission owning utilities to voluntarily start
forming regional transmission organizations (RTO) or to state
why this process has not begun. In July 2001, the FERC stated
that the three existing Northeastern Independent System Opera-
tors (ISO) (PJM, New York and New England) should work
together to form one RTO. The FERC initiated a mediation
effort between all interested parties to begin the process of form-
ing such an entity.
NU has been discussing with the other transmission owners in
the three pool area the potential to form an Independent Trans-
mission Company (ITC). The ITC would be a for-profit entity
and would perform certain transmission functions required by the
FERC including tariff control, system planning and system opera-
tions. The remaining functions required by the FERC would be
performed by the ISO and deal with the energy market and short-
term reliability. Together, the ITC and ISO form the FERC
desired RTO.
In January 2002, the New York and New England ISOs
announced their intention to form an RTO. NU is working with
the other transmission owners in these two power pools to create
an ITC. The agreements needed to create the ITC and to define
the working relationships among the ISO, the ITC and the trans-
mission owners should be created in 2002 and will allow the ITC
to begin operation shortly thereafter. The ITC and/or ISO will
have the responsibility to collect the revenue requirements of each
transmission owning entity from the market place through FERC
approved tariffs. The creation of the ITC and/or RTO will require
a FERC rate case and the impact on NU’s return on equity as a
result of this rate case cannot be estimated at this time.
Nuclear Plant Performance and Other Matters
Seabrook: Seabrook operated at a capacity factor of 85.9 percent
in 2001. After returning from a scheduled refueling outage in Jan-
uary 2001, Seabrook operated at a capacity factor of 93.4 percent.
Seabrook is scheduled to undergo a refueling outage in the spring
of 2002. The NU system companies own 40.04 percent of
Seabrook.
Yankee Companies: In August 2001, Vermont Yankee Nuclear
Power Corporation announced it would sell the unit to an unaffil-
iated company for $180 million, including $145 million for the
plant and materials and supplies and $35 million for the nuclear
fuel. NU subsidiaries own 16 percent of the unit, and under the
terms of the sale, will continue to buy 16 percent of the plant’s
output through March 2012 at a range of fixed prices. The sale
requires several regulatory approvals and is scheduled to close dur-
ing the first half of 2002.
Millstone: On March 31, 2001, CL&P and WMECO con-
summated the sale of Millstone 1 and 2 to DNCI. Additionally,
CL&P, PSNH and WMECO sold their ownership interests in
Millstone 3 to DNCI. On October 5, 2001, NU issued a report,
following an extensive search, concerning two missing fuel pins at
the retired Millstone 1 nuclear unit, which was sold to DNCI on
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