Eversource 2008 Annual Report Download - page 57

Securitized Assets: In March 2001, CL&P issued $1.4 billion
in rate reduction bonds (RRBs). CL&P used $1.1 billion of the
proceeds from that issuance to buyout or buydown certain
contracts with IPPs. The unamortized CL&P securitized
asset balance was $322.9 million and $468.6 million at
December 31, 2008 and 2007, respectively, which includes
$44.9 million and $65.1 million, respectively, related to
unrecovered contractual obligations. CL&P also used the
proceeds from the issuance of the RRBs to securitize a
portion of its SFAS No. 109, “Accounting for Income Taxes,”
regulatory asset. The securitized SFAS No. 109 regulatory
asset had an unamortized balance of $54.9 million and
$79.6 million at December 31, 2008 and 2007, respectively.
In April 2001, PSNH issued RRBs in the amount of $525
million. PSNH used the majority of the proceeds from that
issuance to buydown its aliated power contracts with
North Atlantic Energy Corporation. The unamortized PSNH
securitized asset balance was $227.6 million and $272.4
million at December 31, 2008 and 2007, respectively. In
January 2002, PSNH issued an additional $50 million in
RRBs and used the proceeds from that issuance to repay
short-term debt that was incurred to buyout a purchased-
power contract in December 2001. The unamortized PSNH
securitized asset balance for the January 2002 issuance was
$0.8 million at December31, 2007. The January 2002 RRBs
were paid in full in the first quarter of 2008.
In May 2001, WMECO issued $155 million in RRBs and used
the majority of the proceeds from that issuance to buyout
an IPP contract. The unamortized WMECO securitized asset
balance was $72 million and $85.6 million at December 31,
2008 and 2007, respectively.
Securitized regulatory assets, which are not earning an
equity return, are being recovered over the amortization
period of their associated RRBs. All outstanding CL&P
RRBs are scheduled to fully amortize by December 30,
2010, while PSNH RRBs are scheduled to fully amortize
by May 1, 2013, and WMECO RRBs are scheduled to fully
amortize by June 1, 2013.
Income Taxes, Net: The tax eect of temporary dierences
(dierences between the periods in which transactions
aect income in the financial statements and the periods
in which they aect the determination of taxable income,
including those dierences relating to uncertain tax
positions) is accounted for in accordance with the rate-
making treatment of the applicable regulatory commissions,
SFAS No. 109 and FIN 48, “Accounting for Uncertainty
in Income Taxes - an Interpretation of FASB Statement
No.109.” Dierences in income taxes between SFAS No.
109, FIN 48 and the rate-making treatment of the applicable
regulatory commissions are recorded as regulatory assets.
For further information regarding income taxes, see Note
1H, “Summary of Significant Accounting Policies - Income
Taxes,” to the consolidated financial statements.
Deferred Benefit Costs: On December 31, 2006, the
company implemented SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other
Postretirement Plans.” SFAS No. 158 applies to NU’s
Pension Plan, SERP, and postretirement benefits other than
pension (PBOP) Plan and requires an additional benefit
liability to be recorded with an oset to accumulated other
comprehensive income in shareholders’ equity, which is
remeasured annually. However, because the regulated
companies are cost-of-service rate regulated entities under
SFAS No. 71, osets were recorded as a regulatory asset
at December 31, 2008 and 2007 as these amounts have
been and continue to be recoverable in cost-of-service
regulated rates. Regulatory accounting was also applied
to the portions of the Northeast Utilities Service Company
(NUSCO) costs that support the regulated companies, as
these amounts are also recoverable. The deferred benefit
costs of CL&P and PSNH are not in rate base and are
being recovered over a period of up to 12 years. WMECO’s
deferred benefit costs are in rate base.
Unrecovered Contractual Obligations: Under the terms
of contracts with the Connecticut Yankee Atomic Power
Company (CYAPC), Yankee Atomic Electric Company
(YAEC), and Maine Yankee Atomic Power Company
(MYAPC) (Yankee Companies), CL&P, PSNH, and WMECO
are responsible for their proportionate share of the
remaining costs of the units, including decommissioning.
A portion of these amounts was recorded as unrecovered
contractual obligations regulatory assets at December 31,
2008 and 2007. A portion of these obligations for CL&P
was securitized in 2001 and was included in securitized
regulatory assets. Amounts for CL&P are being recovered
through the Competitive Transition Assessment (CTA).
Amounts for WMECO are being recovered along with other
stranded costs. Amounts for PSNH were fully recovered by
December31, 2006.
Regulatory Assets Osetting Regulated Company
Derivative Liabilities: The regulatory assets osetting
derivative liabilities relate to the fair value of contracts used
to purchase power and other related contracts that will be
collected from customers in the future. Included in these
amounts are $677.8 million and $86.7 million at December
31, 2008 and 2007, respectively, of derivative liabilities
relating to CL&P’s capacity contracts, referred to as CfDs.
See Note3, “Derivative Instruments,” to the consolidated
financial statements for further information. This asset is
excluded from rate base.
CL&P Undercollections: The System Benefits Charge (SBC)
allows CL&P to recover certain regulatory and energy public
policy costs, such as public education outreach costs,
hardship protection costs, transition period property taxes
and displaced workers protection costs. At December 31,
2008 and 2007, SBC undercollections totaled $43.3 million
and $36.6 million, respectively.
The Generation Service Charge (GSC) allows CL&P to
recover the costs of the procurement of energy for standard
service, which includes forward capacity market charges.
The Federally Mandated Congestion Charges (FMCC)
mechanism allows CL&P to recover the costs of power
market rules by the FERC, including Reliability Must Run
(RMR) costs. At December 31, 2008, CL&P’s GSC and
FMCC was recorded as a $31.9 million regulatory asset
as GSC and FMCC unrecovered costs were in excess of
GSC and FMCC collections. At December 31, 2007, GSC
and FMCC collections were in excess of GSC and FMCC
costs, and a $119.2 million regulatory liability was recorded.
The CTA allows CL&P to recover stranded costs, such as
securitization costs associated with the RRBs, amortization
of regulatory assets, and IPP over market costs. At
December31, 2007, CL&P’s CTA was recorded as a $54
million regulatory asset as CTA unrecovered costs were
in excess of CTA collections. At December31, 2008, CTA
collections were in excess of CTA costs, and a $69.5 million
regulatory liability was recorded.
Other Regulatory Assets: Other regulatory assets at
December 31, 2008 and 2007 consisted of the following:
At December 31,
(Millions of Dollars) 2008 2007
Asset retirement obligations $ 42.3 $ 40.6
Losses on reacquired debt 26.4 28.8
Environmental costs 27.2 29.3
Storm reserves 19.3 6.8
Buyout/buydown of other
IPP contracts 14.2 16.1
Write-off of uncollectible
hardship receivables 16.0 26.8
Conservation & load management
deferral 19.1 13.3
Recoverable nuclear costs 5.0 9.3
Recoverable energy costs 0.7 1.3
Other 70.2 38.1
Total other regulatory assets $ 240.4 $ 210.4
The regulatory assets above associated with the
implementation of FIN 47, “Accounting for Conditional
Asset Retirement Obligations - an interpretation of FASB
Statement No. 143,” included $12 million and $11.6 million
at December 31, 2008 and 2007, respectively, related to
PSNH that have been approved for future recovery. As
part of WMECO’s rate case settlement, the Massachusetts
Department of Public Utilities (DPU) approved accounting
requirements setting forth the recognition of its AROs
and a corresponding regulatory asset. Management
believes that recovery of the remaining FIN 47 regulatory
assets is probable.
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