Eversource 2006 Annual Report Download - page 25

NU 2006 ANNUAL REPORT 23
On June 21, 2006, PSNH converted $89.3 million variable interest rate
insured tax-exempt pollution control revenue bonds to a fixed interest
rate of 4.75 percent with maturity in 2021.
NU Enterprises: Most of the working capital and LOCs required by NU
Enterprises are currently used to support the wholesale marketing
business. As NU Enterprises’ wholesale marketing contracts expire or
are exited, its liquidity requirements will continue to decline.
Strategic Overview
In 2005, NU announced the decision to exit all of NU Enterprises’
competitive businesses and increase its investment in its regulated
businesses to a significantly higher level. By December 31, 2006, NU
exited substantially all of these businesses and simplified its business
model, reduced its business risk, improved its financial flexibility, and
enhanced earnings visibility.
NU expects the Utility Group to invest up to approximately $4.9 billion in
its electric transmission and distribution and natural gas distribution
businesses from 2007 through 2011. Those amounts include up to $2.5
billion for the high-voltage electric transmission system and $2.4 billion
for the electric and natural gas distribution systems and regulated
generation.
BusinessDevelopment and Capital Expenditures
Consolidated: NU’s capital expenditures including cost of removal,
AFUDC, and the capitalized portion of pension expense or income,
totaled $945.8 million in 2006, compared with $814.3 million in 2005,
and $677 million in 2004. Included in these amounts are$907.6 million,
$767.4 million, and $641.9 million, respectively, related to the
Utility Group.
Utility Group:
Transmission: Most of the increase in transmission capital expenditures
in 2006 when compared to 2005 and 2004 below was due to CL&P’s
construction of transmission projects in southwest Connecticut. A
summary of NU’stransmission capital expenditures including AFUDC
by Utility Group company in 2006, 2005 and 2004 is as follows (millions
of dollars):
Year
2006 2005 2004
CL&P $415.6 $215.3 $132.7
PSNH 36.1 28.5 29.8
WMECO 13.0 12.9 6.5
Other 0.8 0.6 1.5
Totals $465.5 $257.3 $170.5
Under NU’sFERC-approved tariffs, transmission projects enter rate
base once they enter commercial operation. Additionally, 50 percent of
NU’s capital expenditures on its four major transmission projects in
southwestConnecticut enter ratebase during the construction period
with the remainder entering rate base once the projects are complete.
At the end of 2006, NU’sapproximate transmission rate base was $1.1
billion, including approximately$840 million at CL&P, $140 million at
PSNH and $75 million at WMECO. NU’s total transmission rate base was
approximately $600 million at the end of 2005. The company forecasts
that its total transmission ratebase will grow to approximately $1.4
billion at the end of 2007, $1.9 billion at the end of 2008, $2.6 billion at
the end of 2009, $2.8 billion at the end of 2010, and $3 billion at the end
of 2011. This increase in transmission rate base is driven by the need
to improve the capacity and reliability of NU’s regulated transmission
system. A summary of projected year end transmission rate base by
Utility Group company is as follows (millions of dollars):
Year
2007 2008 2009 2010 2011
CL&P $1,173 $1,512 $2,117 $2,218 $2,461
PSNH 175 276 282 335 325
WMECO 80 132 173 208 239
Totals $1,428 $1,920 $2,572 $2,761 $3,025
Several factors may impact the Utility Group transmission rate base
amounts above, including the level and timing of capital expenditures
and plant placed in service, regulatory approvals of various projects,
and other factors.
CL&P worked on a number of major transmission projects in 2006,
most of which were located in southwest Connecticut. Each of these
projects has received approval from the Connecticut Siting Council
(CSC) and the New England Independent System Operator (ISO-NE).
These projects are designed to improve the reliability and capacity for
transmitting electricity. Capital expenditures for these projects, including
AFUDC, totaled $328.1 million in 2006 compared to $155.9 million in
2005. These projects include:
• A newly completed 21-mile, 115 KV/345 KV transmission project
between Bethel, Connecticut and Norwalk, Connecticut, construction
of which began in April of 2005. On October 12, 2006, the line was fully
energized and went into service, approximately two months ahead of
schedule at a cost of $340 million, $10 million below budget;
• A 69-mile, 115 KV/345 KV transmission project from Middletown to
Norwalk, Connecticut on which CL&P has commenced site work.
CL&P has received the Connecticut Department of Environmental
Protection’s (DEP) and the United States Army Corps of Engineers’
permits for the project but still requires CSC review of certain
detailed construction plans. Although this project is currently
expected to be completed by the end of 2009, opportunities to
optimize schedule performance may result in an earlier completion
date. This project is currently 16 percent complete and CL&P’s
portion of this project is estimated to cost approximately $1.05 billion.
At December 31, 2006, CL&P has capitalized $186.4 million associated
with this project;
• A two-cable, 9-mile, 115 KV underground transmission project
between Norwalk and Stamford, Connecticut (Glenbrook Cables),
construction of which began in October of 2006. Glenbrook Cables
is intended to respond to the growing electric demand in the area
and is expected to cost $183 million. This project is currently
approximately 20 percent complete and on schedule for a December
2008 in-service date. At December 31, 2006, CL&P has capitalized
$40.9 million associated with this project; and
• The replacement of the existing 138 KV undersea cable between
Connecticut and Long Island, for which design and engineering work
for the project is complete, and cable manufacturing commenced in
mid-January of 2007. On October 1, 2004, CL&P and the Long Island
Power Authority (LIPA) jointly filed plans with the DEP to replace an
11-mile 138 KV undersea electric transmission line between Norwalk