Eversource 2008 Annual Report Download - page 33

HP&E to WMECO, which occurred on December 31, 2008. After certain routine regulatory
filings, HWP and HP&E will no longer be FERC-regulated entities.
Contingent Matters:
The items summarized below contain contingencies that may have an impact on our net
income, financial position or cash flows. See Note 7A, “Commitments and Contingencies -
Regulatory Developments and Rate Matters,” to the consolidated financial statements for
further information regarding these matters.
• Transition Cost Reconciliation: On July 18, 2008, WMECO filed its 2007 transition
cost (TC) reconciliation with the DPU, which compared TC revenue and revenue
requirements. For the twelve months ended December 31, 2007, total TC revenues
along with carrying charges exceeded TC revenue requirements by $2.6 million, which
has been recorded as a regulatory liability on the accompanying consolidated balance
sheets. A public hearing and procedural conference was held on November20, 2008.
On December 22, 2008, the Massachusetts Attorney General filed testimony on two
topics: the deferred return and carrying charges on the Capital Project Scheduling List;
and the recovery of Northeast Nuclear Company pension/postretirement benefits other
than pension (PBOP) costs. WMECO filed rebuttal testimony on December 30, 2008.
A hearing was held on January 29, 2009. The briefing period ended on February 26,
2009. There is no timeline for a DPU decision. We do not expect the outcome of the
DPU’s review of this filing to have a material adverse eect on WMECO’s net income,
financial position or cash flows.
• C2 Prudency Audit: Pursuant to the decision in CL&P’s 2007 rate case, the DPUC has
hired a consulting firm to perform a prudency audit of certain costs incurred in the
implementation of a new customer service system (C2) at CL&P. The audit began on
December 1, 2008 and will be ongoing through early 2009, with a final report to the
DPUC due March 31, 2009. The DPUC has stated its intentions to open a docket to
review the findings of the audit after completion. We continue to believe that our C2
expenses were prudent and will be recovered in rates.
Deferred Contractual Obligations
We have decommissioning and plant closure cost obligations to Connecticut Yankee
Atomic Power Company (CYAPC), Yankee Atomic Electric Company (YAEC) and Maine
Yankee Atomic Power Company (MYAPC) (Yankee Companies), which have each completed
the physical decommissioning of their respective nuclear facilities and are now engaged in
the long-term storage of their spent fuel. The Yankee Companies collect decommissioning
and closure costs through wholesale, FERC-approved rates charged under power purchase
agreements with several New England utilities, including our electric utility subsidiaries.
These companies recover these costs through state regulatory commission-approved
retail rates. A summary of each of our subsidiary’s ownership percentage in the Yankee
Companies at December 31, 2008 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%
Our percentage share of the obligation to support the Yankee Companies under FERC-
approved rate taris is the same as the ownership percentages above.
CYAPC, YAEC and MYAPC are currently collecting amounts that we believe are adequate
to recover the remaining decommissioning and closure cost estimates for their respective
plants. We believe CL&P and WMECO will recover their shares of these decommissioning
and closure obligations from their customers. PSNH has recovered its share of these costs
from its customers.
Spent Nuclear Fuel Litigation: In 1998, CYAPC, YAEC and MYAPC filed separate
complaints against the United States Department of Energy (DOE) in the Court of Federal
Claims seeking monetary damages resulting from the DOE’s failure to begin accepting
spent nuclear fuel for disposal by January 31, 1998 pursuant to the terms of the 1983 spent
fuel and high level waste disposal contracts between the Yankee Companies and the DOE.
In a ruling released on October 4, 2006, the Court of Federal Claims held that the DOE
was liable for damages to CYAPC for $34.2 million through 2001, YAEC for $32.9 million
through 2001 and MYAPC for $75.8 million through 2002. In December 2007, the Yankee
Companies filed lawsuits against the DOE seeking recovery of actual damages incurred in
the years following 2001/2002.
In December 2006, the DOE appealed the ruling, and the Yankee Companies filed a cross-
appeal. The Court of Appeals issued its decision on August 7, 2008, eectively agreeing
with the trial court’s findings as to the liability of the DOE but disagreeing with the method
that the trial court used to calculate damages. The Court of Appeals vacated the decision
and remanded the case for new findings consistent with its decision.
The refund to CL&P, PSNH and WMECO of any damages that may be recovered from the
DOE will be realized through the Yankee Companies’ FERC-approved rate settlement
agreements, subject to final determination of the FERC. CL&P, PSNH and WMECO
cannot at this time determine the timing or amount of any ultimate recovery from the
DOE, through the Yankee Companies, on this matter. However, we believe that any net
settlement proceeds we receive would be incorporated into FERC-approved recoveries,
which would be passed on to our customers through reduced charges.
NU Enterprises Divestitures
We have exited most of our competitive businesses. NU Enterprises continues to manage
to completion its remaining wholesale marketing contracts and manages its energy
services activities.
Wholesale Marketing: During 2008 Select Energy continued to manage its remaining PJM
power pool wholesale sales contract and its related supply contracts, which expired on May
31, 2008, and its long-term wholesale sales contract with the New York Municipal Power
Agency (NYMPA), an agency comprised of municipalities, and related supply contracts, that
expires in 2013. These contracts are derivatives that have been marked to market through
earnings. In addition to the NYMPA-related contracts, Select Energy’s only other long-term
wholesale obligation is a non-derivative contract to purchase and operate the output of a
certain generating facility in New England through 2012. As a non-derivative contract, the
fair value of the contract has not been reflected on the balance sheet, and the contract has
not been marked to market.
Retail Marketing Business: On June 1, 2006, Select Energy sold its retail marketing business
and paid $24.4 million in 2006 and $14.7 million in 2007 to the purchaser, which completed
our obligation.
Competitive Generation Business: We completed the sale of NU Enterprises’ competitive
generation assets on November 1, 2006.
Energy Services: Most of NU Enterprises’ energy services businesses were sold in 2005 and
2006. Certain other businesses were wound down in 2007 and we continue to wind down
minimal activity at the other energy services businesses. However, we continue to own and
manage one energy services business, E.S. Boulos Company (Boulos), which is an electrical
contractor based in Maine.
In connection with the sale of the retail marketing business, the competitive generation
business and certain of the energy services businesses, we provided various guarantees and
indemnifications to the purchasers of those businesses. See Note 7F, “Commitments and
Contingencies - Guarantees and Indemnifications,” to the consolidated financial statements
for information regarding these items.
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