Eversource 2006 Annual Report Download - page 33

NU 2006 ANNUAL REPORT 31
July 1, 2006 and approved the decrease in the stranded cost and energy
charges. On November 17, 2006, PSNH updated its DS rate filing,
increasing the request to $60 million.
On February 26, 2007, PSNH filed a settlement agreement it reached
with the NHPUC staff and the OCA related to its rate case filing. The
settlement agreement includes, among other things, a transmission
cost tracking mechanism, effective on July 1, 2006, to be reset annually,
and an allowed ROE of 9.67 percent. The allowed generation ROE of
9.62 percent was unaffected. The settlement provides for a $37.7
million estimated annualized increase ($26.5 million for distribution
and $11.2 million estimated for transmission) beginning July 1, 2007 in
addition to the $24.5 million temporary increase that was effective on
July 1, 2006. An additional delivery revenue increase of approximately
$3 million would take effect on January 1, 2008, with a final estimated
rate decrease of approximately $9 million scheduled for July 1, 2008.
The increased revenues will enable PSNH to fund a $10 million annual
Reliability Enhancement Program and more accurately fund its Major
Storm Cost Reserve. The increased revenues also include
approximately $9 million related to additional revenues for the period
July 1, 2006 through June 30, 2007 that will be recovered over one year.
The NHPUC has scheduled hearings on the proposed settlement
beginning in March 2007, with a final decision expected by latespring
of 2007.
Coal Procurement Docket: During 2006, the NHPUC opened a docket
to reviewPSNH’s coal procurement and coal transportation policies
and procedures. PSNH has responded to data requests from the NHPUC’s
outside consultant. While management believes its coal procurement
and transportation policies and procedures areprudent and consistent
with industry practice, it is unable to determine the impact, if any, of
the NHPUC’s review on PSNH’s earnings, financial position or cash flows.
Massachusetts:
2006 Rate Case Settlement: On December 14, 2006, the DTE approved
asettlement agreement among WMECO, the Massachusetts Attorney
General, the Associated Industries of Massachusetts and Low-Income
Energy Affordability Network, that included distribution rate increases
of $1 million beginning on January 1, 2007 and an additional $3 million
increase beginning on January 1, 2008. Also included in the settlement
agreement are costtracking mechanisms for pension and other
postretirement benefit costs, bad debts related to energy costs, and
recovery of certain capital improvements and related expenses needed
for system reliability.These costs will be recovered through rates
charged to customers. The settlement agreement includes an earnings
sharing mechanism that will equallysharewith customers any earnings
in excessof an actual ROE of 12 percent and any shortfall below an
actual ROE of 8 percent during the two-year settlement period. The
determination of any excess or shortfall will be done annually, with any
such excessbeing recorded as a regulatory liability and any such
shortfall being recorded as a regulatory asset. The time period for the
refund of any excess or collection of any shortfall will be determined by
the DTE. Under this settlement agreement, management expects that
an ROE between 9 percent and 10 percent annually is achievable for
WMECO in 2007 and 2008.
Annual Rate Change Filing: On November 30, 2006, WMECO made its
2006 annual rate change filing implementing the $1 million distribution
rate increase and associated cost tracking mechanisms as allowed
under its rate case settlement agreement and reflecting rate increases
for 2007 default service supply. On average, total rates increased by 17.8
percent. On December 29, 2006, the DTE approved the rates effective on
January 1, 2007.
Transition Cost Reconciliation: On October 24, 2006, the DTE issued
its decision in WMECO’s 2003 and 2004 transition cost reconciliation
filing. The DTE decision in this combined docket resolves all outstanding
issues through 2004 for transition, retail transmission, standard offer
and default service costs/revenues and did not have a significant
impact on WMECO’s earnings, financial position or cash flows.
WMECO filed its 2005 transition cost reconciliation with the DTE on
March 31, 2006. The DTE has not yet reviewed this filing or issued
aschedule for review, and the timing of a decision is uncertain.
Management does not expect the outcome of the DTE’s review to have
asignificant adverse impact on WMECO’s earnings, financial position
or cash flows.
Deferred Contractual Obligations
NU has significant decommissioning and plant closure cost obligations
tothe Yankee Companies. The Yankee Companies collect decommis-
sioning and closure costs through wholesale, FERC-approved rates
charged under power purchase agreements with several New England
utilities, including NU’selectric utility companies. A summary of each
of NU’s subsidiaries’ ownership percentages in the Yankee Companies
at December 31, 2006 is as follows:
CYAPC YAEC MYAPC
CL&P 34.5% 24.5% 12.0%
PSNH 5.0% 7.0% 5.0%
WMECO 9.5% 7.0% 3.0%
Totals 49.0% 38.5% 20.0%
CYAPC: On July 1, 2004, CYAPC filed with the FERC seeking to
increase its annual decommissioning collections from $16.7 million to
$93 million for a six-year period of January 1, 2005 to January 1, 2011.
On August 30, 2004, the FERC issued an order accepting the rates, with
collection by CYAPC beginning on February 1, 2005, subject to refund.
On June 10, 2004, the DPUC and the OCC filed a petition with the FERC
seeking a declaratory order that CYAPC be allowed to recover all
decommissioning costs from its wholesale purchasers, including CL&P,
PSNH and WMECO, but that such purchasers may not be allowed to
recover in their retail rates any costs that the FERC might determine
to have been imprudently incurred. The FERC rejected the DPUC’s and
OCC’s petition, whereupon the DPUC filed an appeal of the FERC’s
decision with the Court of Appeals.
On August 15, 2006, CYAPC, the DPUC, the OCC and Maine state
regulators filed a settlement agreement with the FERC. The settlement
agreement was approved by the FERC on November 16, 2006 and
disposes of the pending litigation at the FERC and the Court of
Appeals, among other issues.
Under the terms of the settlement agreement, the parties have agreed
to a revised decommissioning estimate of $642.9 million (in 2006 dollars),