Eversource 2003 Annual Report Download - page 34

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Connecticut — Yankee Gas:
Infrastructure Expansion Rate Mechanism (IERM): On June 25, 2003,
the DPUC issued a final decision in the 2002 IERM docket. The DPUC
concluded that the basic concept of IERM is valid, appropriate and
beneficial. The DPUC ordered Yankee Gas to provide a credit to customers
for 2002 and 2003 overcollections. That credit was recorded as a regulatory
liability and refunded to Yankee Gas customers from December 2003
through February 2004.
On October 1, 2003, Yankee Gas filed with the DPUC its IERM
compliance filing. This filing is required annually on October 1 of each
year to provide a reconciliation of the system expansion program and
the earnings sharing mechanism projection.
Rate Case: In 2003, Yankee Gas earned a ROE below the DPUC-authorized
level of 11 percent. As a result of higher pension costs and other factors,
management expects that the financial performance will continue to
underearn the DPUC-authorized ROE. Yankee Gas is evaluating the filing
of a rate case before the end of 2004 for a rate increase to take effect
in 2005.
New Hampshire:
Transition Energy Service: In accordance with the “Agreement to Settle
PSNH Restructuring” (Restructuring Settlement) and state law, PSNH
must file for updated transition energy service (TS) rates annually. The TS
rate recovers PSNH’s generation and purchased power costs, including a
return on PSNH’s generation investment. During the February 1, 2004
through January 31, 2005 time period when current rates will be effective,
PSNH will defer any difference between its TS revenues and the actual
costs incurred. On December 19, 2003, the NHPUC approved a $0.0536
per kWh TS rate effective February 1, 2004.
Delivery Rate Case: PSNH’s delivery rates were fixed by the Restructuring
Settlement until February 1, 2004. Consistent with the requirements of
the Restructuring Settlement and state law, PSNH filed a delivery service
rate case and tariffs with the NHPUC on December 29, 2003 to increase
electricity delivery rates by approximately $21 million, or approximately
2.6 percent, effective February 1, 2004. In addition, PSNH is requesting
that recovery of FERC-regulated transmission costs be adjusted annually
through a tracking mechanism. The NHPUC suspended the proposed
rate increase until the conclusion of the delivery rate case. Hearings are
expected in August 2004, and a decision is expected in the third quarter
of 2004 with rates retroactively applied to February 1, 2004.
SCRC Reconciliation Filings: On an annual basis, PSNH files with the
NHPUC an SCRC reconciliation filing for the preceding calendar year.
This filing includes the reconciliation of stranded cost revenues with
stranded costs, and TS revenues with TS costs. The NHPUC reviews the
filing, including a prudence review of PSNH’s generation operations.
On May 1, 2003, PSNH filed with the NHPUC an SCRC reconciliation filing
for the period January 1, 2002, through December 31, 2002. This filing
included the reconciliation of stranded cost revenues with stranded costs
and a net proceeds calculation related to the sale of NAEC’s share of
Seabrook and the subsequent transfer of those net proceeds to PSNH.
Upon the completion of discovery and technical sessions with the
NHPUC staff and the New Hampshire Office of the Consumer Advocate
(OCA), PSNH, the NHPUC Staff and the OCA entered into a stipulation
and settlement agreement that was filed with the NHPUC on August 15,
2003. An order from the NHPUC approving the settlement agreement on
October 24, 2003 did not have a material impact on PSNH’s net income
or financial position.
The 2003 SCRC filing is expected to be filed on May 1, 2004.
Management does not expect the review of the 2003 SCRC filing
to have a material effect on PSNH’s net income or financial position.
The recovery of stranded costs is expected to be a significant source of
cash flow for PSNH through 2007. On May 22, 2003, the NHPUC issued
an order approving a settlement between PSNH, owners of 14 small
hydroelectric power producers, the NHPUC staff and the OCA calling for
the termination of PSNH’s obligations to purchase power from the hydro-
electric units at above market prices. On May 30, 2003, under the terms
of this settlement, PSNH made lump sum payments to those owners
amounting to $20.4 million. The buyout payments were recorded as
regulatory assets and will be recovered, including a return, over the initial
term of the obligations as Part 2 stranded costs. PSNH is entitled to
retain 20 percent of the estimated savings from the buyouts. PSNH is
expected to recover $21 million of the purchase price of CVEC over the
next three to four years.
Massachusetts:
Transition Cost Reconciliations: On March 31, 2003, WMECO filed its
2002 transition cost reconciliation with the Massachusetts Department
of Telecommunications and Energy (DTE). This filing reconciled the recovery
of generation-related stranded costs for calendar year 2002 and included
the renegotiated purchased power contract related to the Vermont
Yankee nuclear unit.
On July 15, 2003, the DTE issued a final order on WMECO’s 2001 transition
cost reconciliation, which addressed WMECO’s cost tracking mechanisms.
As part of that order, the DTE directed WMECO to revise its 2002 annual
transition cost reconciliation filing. The revised filing was submitted to
the DTE on September 22, 2003. Hearings have been held, and the timing
of a final decision from the DTE is uncertain. Management does not
expect the outcome of this docket to have a material adverse impact on
WMECO’s net income or financial position.
Standard Offer and Default Service: In December 2003, the DTE
approved WMECO’s standard offer service rate of $0.05607 per kWh for
the period of January 1, 2004 through February 28, 2005. The DTE also
approved a default service rate of $0.05829 for the period of January 1,
2004 through June 30, 2004 for residential customers and a rate of
$0.0616 for the period January 1, 2004 through March 31, 2004 for
commercial and industrial customers.
For information regarding commitments and contingencies related to
restructuring and rate matters, see Note 7A, “Commitments and
Contingencies — Restructuring and Rate Matters,” to the consolidated
financial statements.
Consolidated Edison, Inc. Merger Litigation
On March 5, 2001, Consolidated Edison, Inc. (Con Edison) advised NU
that it was unwilling to close its merger with NU on the terms set forth
in the parties’ 1999 merger agreement. On March 12, 2001, NU filed
suit against Con Edison seeking damages in excess of $1 billion.