Eversource 2008 Annual Report Download - page 29

by the state’s utilities in conjunction with the Energy
Conservation Management Board. Seventy-five percent of
the RGGI auction proceeds directed to conservation and
load management programs will be allocated to CL&P’s
programs. Because CL&P does not own any generating
assets, it is not required to acquire CO2 allowances;
however, CO2 allowance costs will likely be included in
wholesale rates charged to CL&P in standard oer type
contracts.
Massachusetts passed legislation in July 2008 that did not
set an auction clearing price threshold for RGGI auctions.
This law requires 80 percent of RGGI auction proceeds
to be allocated to utility energy eciency and demand
response programs. Because WMECO does not own any
generation assets, it is not required to acquire any CO2
allowances; however, CO2 allowance costs will likely be
included in wholesale rates charged to WMECO in standard
oer type contracts.
New Hampshire passed legislation in June 2008 that set an
auction clearing price threshold of $6 per CO2 allowance in
2009, above which all auction proceeds will be rebated to
customers. Proceeds below the threshold are to be used
for demand response and energy eciency programs.
The first regional auction of RGGI CO2 allowances took
place on September 25, 2008. At the auction, more than
12.5 million CO2 allowances were sold at the clearing price
of $3.07 per CO2 allowance. The second regional auction
was held on December 17, 2008, and more than 31.5 million
allowances were sold at a clearing price of $3.38 per
CO2 allowance. Auctions are scheduled for March, June,
September and December 2009.
PSNH anticipates that its generating units will emit between
4 million and 5 million tons of CO2 per year after taking
into account the operation of PSNH’s Northern Wood
Power wood-burning generating plant, which under the
RGGI formula, decreased PSNH’s responsibility for reducing
fossil-fired CO2 emissions by approximately 425,000 tons
per year, or almost ten percent. New Hampshire legislation
provides up to 2.5 million banked CO2 allowances per year
for PSNH’s fossil fueled generating plants during the 2009
to 2011 compliance period. These banked CO2 allowances
will initially comprise approximately one-half of the yearly
CO2 allowances required for PSNH’s generating plants
to comply with RGGI, and such banked allowances will
decrease over time. PSNH expects to satisfy its remaining
RGGI requirements by purchasing CO2 allowances at
auction or in the market and has purchased allowances in
the first two auctions. The cost of complying with RGGI
requirements is recoverable from PSNH customers.
New Hampshire:
2008 Legislation: In July 2008, New Hampshire passed a
law establishing a transmission commission responsible for
developing a proposal to expand the electric transmission
system in northern New Hampshire to encourage the
development of new renewable generation sources.
On December 1, 2008, the transmission commission
submitted its progress report, which concluded that
New Hampshire should continue to pursue the upgrade
of transmission capacity in its northern region to allow
development of its native renewable energy resources.
Also, the transmission commission should continue to
pursue both local and regional cost allocation issues
related to the transmission expansion. The northern New
Hampshire region has the potential for over 500 MW of new
renewable resources. PSNH has included $130 million in its
2009 to 2013 capital plan for transmission upgrades
in this region, which assumes that these projects are built
and that a cost allocation solution can be agreed to by
relevant parties.
In July 2008, New Hampshire passed a law authorizing rate
recovery by electric public utilities of investments made in
distributed energy resources up to 5 MW, such as renewable
energy generation. The total investment is limited to
resources having a capability equal to 6 percent of a
distribution utility’s peak load. PSNH has not yet included
any distributed energy resource investment opportunities in
its capital expenditure plans.
Massachusetts:
2008 Legislation: As referenced above, in July 2008,
Massachusetts enacted “The Green Communities Act of
2007.” Aimed at increasing energy eciency (EE) and the
use of renewable resources in the state, the Act contains
many provisions important to the state’s utilities. In addi-
tion to adopting RGGI requirements, the Act:
• Removes the cap on utility expenditures for EE and de-
mand response (DR). Requires utilities to file three-year
EE and DR plans with a newly created Energy Eciency
Council;
• Requires utilities to sign long-term contracts for
renewable resources;
• Allows each utility to own and operate up to 50 MW of
solar generation;
• Requires utilities to file a plan with the DPU for a smart
grid pilot; and
• Increases penalties for failure to meet service quality
standards from 2 percent of transmission and distribution
revenues to 2.5 percent.
By April 30, 2009, WMECO is required to prepare a three-
year EE and DR investment plan related to the cost of EE
and DR programs established by the Act for review by the
Energy Eciency Council and, ultimately, the DPU. Under
the Act, utilities are authorized to own up to 50 MW of
solar generating facilities, if part of a DPU approved plan.
WMECO filed a program with the DPU on February12,
2009 providing for a three-phase program with DPU
authorization prior to each phase. The initial phase calls
for 6 MW to be installed at eight host sites in WMECO’s
service territory upon receipt of DPU approval. This phase
of the project is expected to be completed as early as 2010
at a cost of approximately $42 million. The second phase
includes an additional 9MW extending through 2012, and
the third and final phase could increase total capacity to
the 50 MW maximum. The DPU has six months to issue
a decision on WMECO’s plan. WMECO is otherwise
precluded from making new generation investments, but
has not yet included any solar generation investment
opportunities in its capital expenditure plans.
Corporate Excise Tax: On July 3, 2008, Massachusetts
amended its corporate excise tax provisions, which are
eective for tax years beginning on or after January 1,
2009. Companies must account for the impact of income
tax law changes in the period that includes the enactment
date of the law change. As a result, WMECO recorded
an estimate of the impact of the new legislation as a $11.9
million decrease to deferred tax liabilities and a decrease to
regulatory assets on its consolidated balance sheet as
of December 31, 2008.
Regulatory Developments and Rate Matters
Regulated Distribution Companies: We are currently
evaluating the rate case strategies of our distribution
companies. Based on 2008 earnings, cost trends, sales
trends and the impact of the December 11, 2008 ice storm,
it is probable that PSNH will file a distribution rate case in
2009 seeking temporary rates eective by July1, 2009,
and permanent rates eective by July 1, 2010. CL&P has
determined that it will not file a distribution rate case in
mid-2009. CL&P will continue to consider the possibility
of filing a rate case later in 2009 or in 2010, based on the
economic, political and regulatory climate in Connecticut.
In response to the July 2008 rate decoupling decision in
Massachusetts, WMECO notified the DPU in September
2008 that it intends to file a distribution rate case seeking
authority for full decoupling in mid-2010 to be eective
in January 2011. We have no immediate plans to file a
distribution rate case for Yankee Gas.
Regulated Companies’ Transmission Revenues - Retail
Rates: A significant portion of our transmission segment
revenue comes from ISO-NE charges to the distribution
segments of CL&P, PSNH and WMECO, each of which
recovers these costs through rates charged to their
retail customers. Each of these companies has a retail
transmission cost tracking mechanism as part of its rates,
which allows them to charge their retail customers for
transmission costs on a timely basis.
Forward Capacity Market: On December1, 2006, a FERC-
approved settlement agreement providing for an auction-
based forward capacity market (FCM) mechanism was
implemented and the payment of fixed compensation to
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