Eversource 2008 Annual Report Download - page 19

of between $1.00 per share and $1.10 per share at our
distribution segment, between $0.85 per share and
$0.90 per share at our transmission segment and
between $0.00 per share and $0.05 per share at our
remaining competitive businesses, and net expenses
of $0.05 per share at NU parent and other companies.
This projection assumes the issuance of between $250
million and $300 million of additional equity in mid-
2009. Our 2009 forecast reflects our expectations
of lower electric sales and higher pension and
uncollectible expense than what we experienced in
2008, due to current economic conditions.
• During 2008, we announced that our corporate
headquarters will be relocated from its current location
in Berlin, Connecticut to a recently purchased oce
building in downtown Hartford, Connecticut. We
expect to move approximately 175 corporate employees
into Hartford by the summer of 2009.
Legal, Regulatory and Other Items:
• On January 28, 2008, the Connecticut Department of
Public Utility Control (DPUC) approved an increase
in CL&P’s annual distribution rates of $77.8 million,
eective February 1, 2008, and an incremental $20.1
million annual increase, eective February1, 2009.
• On March 13, 2008, we entered into a settlement
agreement with Con Edison that settled all claims in
the civil lawsuit between Con Edison and us relating to
our proposed but unconsummated merger. Under the
terms of the settlement agreement, we paid Con Edison
$49.5 million on March 26, 2008, which resulted in an
after-tax charge of $29.8 million. This amount is not
recoverable from ratepayers.
• On March24, 2008, the Federal Energy Regulatory
Commission (FERC) issued a rehearing order
confirming its initial decision setting the base return
on equity (ROE) for transmission projects for the
New England transmission owners. Including a final
adjustment, the order provides a base ROE of 11.14
percent for the period beginning November1, 2006.
The order also armed FERC’s earlier decision granting
a 100 basis point adder for transmission projects that
are part of the New England Independent System
Operator (ISO-NE) Regional System Plan and are
completed and on line by December 31, 2008. In 2008,
we added $6 million in transmission segment earnings
related to this order.
• On June 11, 2008, the DPUC issued a final order requiring
Yankee Gas to refund to customers approximately
$5.8 million in previous recoveries through Yankee Gas’
Purchased Gas Adjustment (PGA) clause. Yankee Gas
results for 2008 reflect an after-tax charge of $3.5 million
associated with that decision.
• On July 16, 2008, the Massachusetts Department of
Public Utilities (DPU) issued a decision requiring all gas
and electric utilities to file full decoupling proposals with
their next general rate case. On September 2, 2008,
WMECO notified the DPU that it expects to file its next
distribution rate case in mid-2010 to be eective January
1, 2011. The distribution rate case will include a proposal
to fully decouple distribution revenues from kilowatt-
hour (KWH) sales.
• On July 17, 2008, the FERC confirmed the 100 basis
point incentive ROE for the Middletown-Norwalk
transmission project and approved an additional 50 basis
points, capped at the overall ROE limit, to the ROE CL&P
will earn on the advanced technology aspects of its 24-
mile underground portion of the 69-mile project, which
entered service in December 2008. This decision adds
approximately $0.9 million to CL&P’s annual transmission
segment earnings beginning in 2009.
• In October 2008, CL&P had entered into contracts for
dierences (CfDs) with developers of three peaking
generation units approved by the DPUC. These units
will have a total of approximately 500 megawatts (MW)
of peaking capacity. As directed by the DPUC, CL&P
and The United Illuminating Company (UI) entered into
a sharing agreement, whereby CL&P is responsible for
80 percent and UI for 20 percent of the net costs or
benefits of these CfDs. CL&P’s portion of the costs and
benefits will be paid by or refunded to its customers.
• On November 17, 2008, the FERC issued an order
granting incentives and rate amendments to National
Grid USA and us for NEEWS transmission upgrade
components. Our portion of these components is
currently estimated to comprise about $1.41 billion
of the total $1.49 billion cost estimate for our portion
of NEEWS. The approved incentives included cash
recovery through rates for 100 percent construction work
in progress (CWIP), an incentive ROE of 12.89 percent
and recovery of prudently incurred costs associated
with project elements that may be cancelled for reasons
outside of our control or National Grid USA’s control.
• On December 11, 2008, a major ice storm struck portions
of New England causing approximately $100 million of
damage to PSNH’s, WMECO’s and CL&P’s distribution
systems. This was the most severe ice storm in PSNH’s
history, and most of the $100 million in damages was
to its system. CL&P’s system suered the least amount
of damage from the storm. Some of these costs are
covered by insurance, a small portion was expensed in
2008 and the balance should be recoverable in future
rates and has been deferred or capitalized. None of the
companies experienced a material impact to their results
of operations from this storm.
• On December 12, 2008, NU and NSTAR submitted
a joint petition for a declaratory order to the FERC
to allow NU and NSTAR to enter into a bilateral
transmission services agreement with H.Q. Energy
Services (U.S.) Inc. (HQUS), a wholly-owned subsidiary
of Hydro-Québec. Under such an agreement, NU
and NSTAR would sell 1,200 MW of firm electric
transmission service over a newly constructed,
participant-funded transmission tie line connecting
New England with the Hydro-Québec system in order
for HQUS to sell and deliver into New England this
same amount of firm electric power from Canadian
low-carbon energy resources. NU, NSTAR and HQUS
have signed memoranda of understanding to develop
this transmission project on an exclusive basis. Our
portion of this project is currently estimated to cost
approximately $525 million. Refer to “Business
Development and Capital Expenditures” in this
Management’s Discussion and Analysis for
further discussion.
• On January 15, 2009, the DPUC issued a final decision
reversing its December 2005 draft decision regarding
CL&P’s proposed methodology to calculate the variable
incentive portion of its transition service procurement
fee in 2004. The final decision concluded that CL&P
was not eligible for this procurement incentive. CL&P
recovered the $5.8 million pre-tax amount, which
was recorded in 2005 earnings. A $5.8 million pre-
tax charge (approximately $3.5 million net of tax)
was recorded in the 2008 earnings of CL&P, and an
obligation to refund the $5.8 million to customers was
established as of December 31, 2008. CL&P filed an
appeal of this decision on February26, 2009.
Liquidity:
• While the impact of continued market volatility and
the extent and impacts of any economic downturn
cannot be predicted, we currently believe that we have
sucient operating flexibility and access to funding
sources to maintain adequate liquidity (as evidenced
by CL&P’s issuance of $250 million of 10-year bonds in
February 2009 at 5.5 percent). The credit outlooks for
NU parent and our regulated companies are all stable.
Our companies have modest risk of calls for collateral.
We also have only one series of bonds maturing before
2012 ($50 million in the second quarter of 2009),
and capital expenditures projected for 2009 are
significantly less than 2008. No cash contributions to
our pension plan are required during 2009; however,
due to the substantial decrease in our pension plan
assets in 2008 and unless there is a change in current
funding requirements, we will be required to make an
estimated $150 million contribution in 2010. Refer to
“Liquidity - Impact of Financial Market Conditions”
in this Management’s Discussion and Analysis for
further discussion.
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