Eversource 2006 Annual Report Download - page 31

NU 2006 ANNUAL REPORT 29
Streetlighting Decision: On June 30, 2005, the DPUC issued a final
decision that required CL&P to recalculate all previously issued refunds
(except for the towns of Stamford and Middletown) utilizing applicable
approved pre-tax cost of capital rates. The net impact in 2005 was an
additional $4.1 million of pre-tax reserve. On August 11, 2005, CL&P
filed an appeal of this decision to the Connecticut Superior Court. On
August 29, 2006, the court issued its final decision on CL&P’s appeal,
which resulted in a 2006 after-tax reduction of $0.6 million to the
streetlighting refund reserve.
In December of 2006, the DPUC ruled that CL&P’s refund methodology
was acceptable and ordered CL&P to issue refund checks to eligible
municipalities by January 5, 2007. In compliance with that order, CL&P
refunded approximately $7.4 million to eligible towns in January of
2007.
Distribution Rates: For CL&P, a $25 million distribution rate increase
took effect on January 1, 2005 with an additional $11.9 million distribution
rate increase which took effect on January 1, 2006 and another $7 million
distribution rate increase which took effect on January 1, 2007.
On August4, 2006, CL&P notified Connecticut Governor Rell and the
DPUC that it intends to postpone filing a distribution rate case until
mid-2007 for rates effective in early 2008.
FMCC Filings: On February 1, 2006, CL&P filed with the DPUC a semi-
annual reconciliation of FMCC charges for the year ended December
31, 2005. On October 25, 2006, the DPUC issued a final decision that
approved the reconciliation and required no adjustment to FMCC rates
for 2006.
On August1, 2006, CL&P filed with the DPUC a semi-annual reconciliation
of FMCC charges for the period January 1, 2006 through June 30, 2006.
Concurrent with the proceeding that had begun related to this filing,
the DPUC re-opened other dockets for the purpose of establishing all
of CL&P’s unbundled retail rates for 2007. As part of these re-opened
dockets, CL&P requested and was granted changes in its FMCC rates
tobegin January 1, 2007 that would collect 2007 FMCC net of projected
overcollections related to FMCC for the period January 1, 2006 through
December 31, 2006. As a result, no further change in FMCC rates is
anticipated from the completion of the proceeding related to the semi-
annual reconciliation period of January 1, 2006 through June 30, 2006.
StandardServiceProcurement and Rates: On June 21, 2006, the
DPUC approved a proposal by CL&P to issue RFPs periodically for
periods from three months to three years to layer the standard service
full requirements supply contracts to mitigate market volatility for its
residential and lower-use commercial and industrial customers.
Additionally, the DPUC approved the issuance of RFPs for supplier of
last resort service for larger commercial and industrial customers
every six months. Previously, all of CL&P’s residential, commercial and
industrial requirements, regardless of customer size, were bid together
on an annual basis.
In September of 2006, CL&P received bids and awarded contracts for a
portion of standard service for 2007 and 2008. In October of 2006, bids
were received and contracts awarded for an additional portion of the
standardservicefor 2007 through 2009. CL&P expects to receive bids
during the first quarter of 2007 for standard service for the remaining
2007 requirements and for a portion of the requirements for 2008 and
2009. CL&P also received bids and awarded contracts in September
2006 for its supplier of last resort service for its larger commercial and
industrial customers for January 2007 through June 2007.
On December 8, 2006, the DPUC approved CL&P’s standard service
rates effective on January 1, 2007. The new standard service rates
reflect an increase of approximately 7.8 percent and are expected to
remain in effect until July 1, 2007 when these rates will likely be
adjusted to reflect additional supplier bids received for 2007 and
updated wholesale transmission costs. Supplier of last resort rates
will vary, and total bills for those customers increased by 19 percent
on January 1, 2007. CL&P is fully recovering the cost of its standard
service supply.
CTA and SBC Reconciliation: The Competitive Transition Assessment
(CTA) allows CL&P to recover stranded costs, such as securitization costs
associated with its rate reduction bonds, amortization of regulatory
assets, and independent power producer over-market costs, while
the System Benefits Charge (SBC) allows CL&P to recover certain
regulatory and energy public policy costs, such as public education
outreach costs, hardship protection costs, transition period property
taxes, and displaced worker protection costs.
On March 31, 2006, CL&P filed its 2005 CTA and SBC reconciliation,
which compared CTAand SBC revenues to revenue requirements, with
the DPUC. For the year ended December 31, 2005, total CTA revenues
exceeded the CTA costof service by $60.1 million. This amount was
recorded as a regulatory liability on the accompanying consolidated
balance sheets. For the same period, the SBC cost of service exceeded
SBC revenues by $1.3 million. On July24, 2006, the DPUC issued a
final decision that approved the reconciliation of the CTA and SBC
rates for the year 2005.
In CL&P’s 2001 CTA and SBC reconciliation, and subsequently in a
September 10, 2002 petition to reopen related proceedings, CL&P
requested that a deferred intercompany tax liability associated with
the intercompany sale of generation assets be excluded from the
calculation of CTA cost of service. This liability was included as a
reduction in the calculation of CTA cost of service. On September 10,
2003, the DPUC issued a final decision denying CL&P’s request and
on October 24, 2003, CL&P appealed the DPUC’s final decision to the
Connecticut Superior Court. On June 20, 2006, the Connecticut Superior
Court denied CL&P’sappeal. On November 1, 2006, the aforementioned
generation assets were sold by NGC. As a result of this sale, the inter-
company liability and its related decrease to revenue requirements will
no longer be reflected as a component of the CTA effective with the
November 1, 2006 sale date.
Transmission Tracking Mechanism: On July 6, 2005, Connecticut
adopted legislation creating a mechanism to allow the DPUC to true-up,
at least annually, the retail transmission charge in local electric distribution
company rates based on changes in FERC-approved charges. This
mechanism allows CL&P to include short-term forward-looking
transmission charges in its retail transmission rate and promptly
recover its transmission expenditures. On December 20, 2005, the
DPUC approved CL&P’s August 1, 2005 proposal to implement the
mechanism effective on July 1, 2005, which includes two adjustments
annually, on January 1stand July1st. On January 1, 2006, consistent
with that approval, CL&P raised its retail transmission rate to collect
$21 million of additional revenues over the first six months of 2006. On