Eversource 2008 Annual Report Download - page 31

$11.7 million in 2009, which should enable CL&P to fully
recover 2009 SBC expenses plus expenses that were
underrecovered in prior periods.
Transmission Adjustment Clause: On June 16, 2008, CL&P
filed a transmission adjustment clause (TAC) with the
DPUC requesting an increase in its retail transmission rate
eective July 1, 2008 to collect $67.9 million of additional
revenues over the second half of the year. The increase in
the TAC was attributable to the additional investment in
regional transmission reliability projects. The DPUC
approved CL&P’s filing on June 25, 2008. On December
8, 2008, CL&P filed a TAC with the DPUC requesting no
change to the retail transmission rate to be eective
January 1, 2009, which covers the period January 1 through
June 30, 2009. The DPUC approved CL&P’s filing on
December 23, 2008.
Procurement Fee Rate Proceedings: In prior years, CL&P
submitted to the DPUC its proposed methodology to
calculate the variable incentive portion of its transition
service procurement fee, which was eective through
2006, and requested approval of the pre-tax $5.8
million 2004 incentive fee. CL&P has not recorded
amounts related to the 2005 or 2006 procurement fee in
earnings. CL&P recovered the $5.8 million pre-tax amount,
which was recorded in 2005 earnings through the CTA
reconciliation process. On January15, 2009, the DPUC
issued a final decision in this docket reversing its December
2005 draft decision and stated that CL&P was not eligible
for the procurement incentive compensation for 2004. 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 has been
established as of December 31, 2008. CL&P filed an appeal
of this decision on February26, 2009.
Customer Service and Metering Dockets: In 2008, the
DPUC issued final decisions in a docket examining the
manner of operation and accuracy of CL&P’s electric
meters and in a docket investigating CL&P billing errors
involving approximately 2,000 customers on time of use
rates. In the metering docket the DPUC did not fine CL&P,
but the metering decision held that possibility open if
CL&P fails to meet benchmarks to be established in the
docket. The decision in the time of use docket disallowed
recovery from customers of the incremental costs
associated either directly or indirectly with the billing
errors. These incremental costs are not material and have
been expensed as incurred.
2008 Management Audit: On August 18, 2008, a
consulting firm hired by the DPUC began an on-site
management audit of CL&P, which is required to be
conducted every six years by statute and requires a
diagnostic review of all functions of the company. The
audit has been completed, and a final audit report is sched-
uled to be filed with the DPUC in the first quarter of 2009.
We do not expect a material impact to CL&P’s financial
position or results of operations from results of this audit.
Connecticut-Yankee Gas:
Purchased Gas Adjustment: In 2005 and 2006, the DPUC
issued decisions regarding Yankee Gas’ PGA clause charges
and required an audit of previously recovered PGA
revenues of approximately $11 million associated with
unbilled sales and revenue adjustments for the period of
September 1, 2003 through August 31, 2005. On June 11,
2008, the DPUC issued a final order requiring Yankee Gas
to refund approximately $5.8 million in previous recoveries
to its customers. The $5.8 million pre-tax charge
(approximately $3.5 million net of tax) was recorded
in the 2008 earnings of Yankee Gas.
New Hampshire:
Merrimack Clean Air Project: In 2006, the New Hampshire
legislature enacted legislation requiring PSNH to reduce
the mercury emissions from its coal-fired stations by at
least 80 percent through the installation of wet scrubber
technology at its Merrimack Station in Bow, New Hampshire
no later than July 1, 2013. Following an August 2008
announcement by PSNH that the cost of this installation
would be increasing from the original estimate of $250
million to $457 million, the New Hampshire Public Utilities
Commission (NHPUC) opened an inquiry to determine
its authority to find whether the project is in the public
interest. On September 19, 2008, the NHPUC ruled that
its authority is limited to determining at a later time the
prudence of the costs of complying with the requirements
of the scrubber legislation. In October 2008, several
parties filed motions with the NHPUC requesting a
reconsideration of its ruling. On November 12, 2008, the
NHPUC issued an order denying the motions for rehearing.
On December 11, 2008, several parties involved in the filing
of the October 2008 motion for rehearing filed an appeal
with the New Hampshire Supreme Court requesting that
the Court overturn the NHPUC’s finding that it lacked
present authority over this matter. The Supreme Court has
indicated that it will hear this appeal, but has not yet issued
a schedule for oral arguments. PSNH has begun site work
for this project and has capitalized approximately $27.5
million as of December31, 2008. While PSNH does not
expect the outcome of this appeal to adversely impact its
ability to recover incurred costs from customers, should
the Clean Air Act project be canceled for any reason,
resulting contract cancellation payments and termination
costs would likely amount to a substantial portion of the
approximately $250 million of contractual commitments
expected to be entered into by March 31, 2009. The actual
total would depend on the timing of a cancellation, if it
were to occur, and related negotiations with vendors.
Delivery Service Rates: On January 1, 2008, PSNH’s
distribution rates increased by approximately $3 million
annually, pursuant to the NHPUC’s May 2007 approval of
PSNH’s distribution and transmission rate case settlement
agreement with NHPUC sta and the New Hampshire
Oce of Consumer Advocate. On July 1, 2008, PSNH’s
distribution rates decreased by $0.4 million annually. This
amount consisted of a $3.4 million rate reduction related
to the full recovery of a rate dierential recoupment, oset
by an annual increase of $3 million for additional funding
of the Major Storm Costs Reserve (MSCR) for a two-
year period eective July1, 2008 to eliminate a negative
balance in the MSCR and restore the intended reserve level
of $1 million.
ES and SCRC Reconciliation and Rates: On May1, 2008,
PSNH filed its 2007 default energy service (ES) and
stranded cost recovery charge (SCRC) reconciliation
with the NHPUC, whose evaluation includes a prudence
review of PSNH’s generation activities. During 2007, ES
and SCRC revenues exceeded ES and SCRC costs by $1.4
million and $6.8 million, respectively, and were deferred
as a regulatory liability to be refunded to customers. On
November 19, 2008, PSNH and the NHPUC Sta submitted
a settlement agreement that resolved all outstanding
issues. The NHPUC issued an order dated January16, 2009
that accepted the settlement as filed. The settlement
agreement and subsequent order did not have a material
adverse impact on PSNH’s financial position or results of
operations. PSNH expects to file its 2008 ES and SCRC
reconciliation with the NHPUC by May1, 2009.
We do not expect the outcome of the NHPUC review to
have a material adverse impact on PSNH’s financial position
or results of operations.
On June27, 2008, the NHPUC issued orders increasing
the ES rate from 8.82 cents per KWH to 9.57 cents per
KWH and lowering the SCRC rate from 0.72 cents per
KWH to 0.65 cents per KWH, eective from July 1, 2008
through December31, 2008. In December2008, the
NHPUC issued orders that increased the ES rate to 9.92
cents per KWH and the SCRC rate to 0.98 cents per KWH.
These rates will be eective from January 1, 2009 through
December31, 2009.
TCAM Reconciliation and Rates: On May 13, 2008, PSNH
filed a July 1, 2007 through June 30, 2008 transmission
cost adjustment mechanism (TCAM) reconciliation and a
projected TCAM rate to be billed eective July 1, 2008 and
continuing through June 30, 2009. Under the terms of an
NHPUC rate order issued on June 27, 2008, PSNH’s TCAM
rate was increased from 0.752 cents per KWH to 0.935
cents per KWH, eective July 1, 2008.
Major Storm Costs Reserve: On December 11, 2008, a
major ice storm struck portions of New England, severely
damaging PSNH’s distribution system. This was the most
severe ice storm in PSNH’s history. Of the 440,000 New
Hampshire homes and businesses that lost power, 322,000
were served by PSNH. Restoration operations commenced
on December 11, 2008 and were substantially completed
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