Eversource 2003 Annual Report Download - page 73

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Disposition of Seabrook Proceeds: CL&P sold its share of the Seabrook
nuclear unit on November 1, 2002. The net proceeds in excess of the
book value of Seabrook of $16 million were recorded as a regulatory
liability and, after being offset by accelerated decommissioning funding
and other adjustments, will be refunded to customers. On May 1, 2003,
CL&P filed its application with the DPUC for approval of the disposition
of the proceeds from the sale. This filing described CL&P’s treatment of
its share of the proceeds from the sale. Hearings in this docket were held
in September 2003, and a draft decision was received on February 3,
2004. Management does not believe that the final decision, which is
expected in March 2004, will have a material effect on CL&P’s net
income or financial position.
CTA and SBC Reconciliation Filing: On April 3, 2003, CL&P filed its annual
CTA and SBC reconciliation with the DPUC. For the year ended December
31, 2002, total CTA revenues and excess GSC revenues exceeded the CTA
revenue requirement by $93.5 million. This amount was recorded as a
regulatory liability. For the same period, SBC revenues exceeded the SBC
revenue requirement by $22.4 million. In compliance with a prior decision
of the DPUC, a portion of the SBC overcollection reduced regulatory
assets, and the remaining overcollection of $18.6 million was applied to
the CTA. The DPUC’s December 19, 2003 transitional standard offer (TSO)
decision addressed $41 million of SBC overcollections and $64 million of
CTA overcollections that had been estimated as of December 31, 2003.
In its decision, the DPUC ordered that $80 million of the overcollections
be used to reduce CTA costs during the 2004 through 2006 TSO period.
The DPUC also ordered that $25 million of the overcollections be used to
offset SBC costs during the TSO period. The DPUC also ordered that $37
million of GSC overcollections be used to pay CL&P’s 0.50 mill/kWh
procurement fee during the TSO period.
New Hampshire:
SCRC Reconciliation Filing: 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 transition energy service (TS) revenues with TS costs.
The NHPUC reviews the filing, including a prudence review of PSNH’s
generation operations.
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.
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 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.
B. NRG Energy, Inc. Exposures
Certain subsidiaries of NU, including CL&P and Yankee Gas, have entered
into transactions with NRG Energy, Inc. (NRG) and certain of its
subsidiaries. On May 14, 2003, NRG and certain of its subsidiaries filed
voluntary bankruptcy petitions. On December 5, 2003, NRG emerged
from bankruptcy. NU’s NRG-related exposures as a result of these
transactions relate to 1) the recovery of congestion charges incurred by
NRG prior to the implementation of SMD on March 1, 2003, 2) the
recovery of CL&P’s station service billings to NRG, and 3) the recovery of
Yankee Gas’ and CL&P’s expenditures that were incurred related to
an NRG subsidiary’s generating plant construction project that is now
abandoned. While it is unable to determine the ultimate outcome of
these issues, management does not expect their resolution will have
a material adverse effect on NU’s consolidated financial condition or
results of operations.
C. Environmental Matters
General: NU is subject to environmental laws and regulations intended
to mitigate or remove the effect of past operations and improve or
maintain the quality of the environment. These laws and regulations
require the removal or the remedy of the effect on the environment of
the disposal or release of certain specified hazardous substances at current
and former operating sites. As such, NU has an active environmental
auditing and training program and believes that it is substantially in
compliance with all enacted laws and regulations.
Environmental reserves are accrued using a probabilistic model approach
when assessments indicate that it is probable that a liability has been
incurred and an amount can be reasonably estimated. The probabilistic
model approach estimates the liability based on the most likely action
plan from a variety of available remediation options, ranging from no
action to several different remedies ranging from establishing institutional
controls to full site remediation and monitoring.
These estimates are subjective in nature as they take into consideration
several different remediation options at each specific site. The reliability
and precision of these estimates can be affected by several factors
including new information concerning either the level of contamination
at the site, recently enacted laws and regulations or a change in cost
estimates due to certain economic factors.
The amounts recorded as environmental liabilities on the consolidated
balance sheets represent management’s best estimate of the liability for
environmental costs and takes into consideration site assessment and
remediation costs. Based on currently available information for estimated
site assessment and remediation costs at December 31, 2003 and 2002,
NU had $40.8 million and $41.9 million, respectively, recorded as
environmental reserves. A reconciliation of the total amount reserved at
December 31, 2003 and 2002 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2003 2002
Balance at beginning of year $ 41.9 $ 46.2
Additions and adjustments 4.1 5.4
Payments (5.2) (9.7)
Balance at end of year $ 40.8 $ 41.9