Eversource 2008 Annual Report Download - page 75

74
NU has an active environmental auditing and training
program and believes that it is substantially in compliance
with all enacted laws and regulations.
Environmental reserves are accrued when assessments
indicate that it is probable that a liability has been
incurred and an amount can be reasonably estimated. The
approach used estimates the liability based on the most
likely action plan from a variety of available remediation
options, including no action required or several dierent
remedies ranging from establishing institutional controls to
full site remediation and monitoring.
These estimates are subjective in nature as they take into
consideration several dierent remediation options at
each specific site. The reliability and precision of these
estimates can be aected by several factors, including new
information concerning either the level of contamination
at the site, the extent of NU’s responsibility or the extent
of remediation required, recently enacted laws and
regulations or a change in cost estimates due to certain
economic factors.
The amounts recorded as environmental liabilities on the
consolidated balance sheets represent management’s
best estimate of the liability for environmental costs, if
reasonably estimable, and take into consideration site
assessment and remediation costs. Based on currently
available information for estimated site assessment and
remediation costs at December 31, 2008 and 2007, NU
had $27.4 million and $25.8 million, respectively, recorded
as environmental reserves. A table of the activity in these
reserves at December 31, 2008 and 2007 is as follows:
(Millions of Dollars)
Balance at December 31, 2006 $26.8
Additions 1.2
Payments (2.2)
Balance at December 31, 2007 25.8
Additions 4.6
Payments (3.0)
Balance at December 31, 2008 $27.4
Of the 54 sites NU has currently included in the
environmental reserve, 27 sites are in the remediation or
long-term monitoring phase, 22 sites have had some level
of site assessments completed, and the remaining 5 sites
are in the preliminary stages of site assessment.
These liabilities are estimated on an undiscounted basis
and do not assume that any amounts are recoverable from
insurance companies or other third parties. NU has not
recorded any probable recoveries from third parties. The
environmental reserve includes sites at dierent stages
of discovery and remediation and does not include any
unasserted claims.
At December 31, 2008, in addition to the 54 sites, there
were 10 sites for which there are unasserted claims;
however, any related site assessment or remediation
costs are not probable or estimable at this time. NU’s
environmental liability also takes into account recurring
costs of managing hazardous substances and pollutants,
mandated expenditures to remediate previously
contaminated sites and any other infrequent and non-
recurring clean up costs.
HWP remains in the process of evaluating additional
potential remediation requirements at a river site in
Massachusetts containing tar deposits associated with
a manufactured gas plant (MGP) site, which it sold to
Holyoke Gas and Electric (HG&E), a municipal electric
utility, in 1902. HWP is at least partially responsible
for this site, and has already conducted substantial
investigative and remediation activities. HWP first
established a reserve for this site in 1994. A pre-tax
charge of approximately $3 million was recorded in 2008
to reflect the estimated cost of further tar delineation
and site characterization studies, as well as certain
remediation costs that are considered to be probable
and estimable as of December 31, 2008. The cumulative
expense recorded to this reserve through December 31,
2008 was approximately $15.9 million, of which $13.9
million had been spent, leaving approximately $2 million
in the reserve as of December31, 2008.
The Massachusetts Department of Environmental
Protection (MA DEP) issued a letter on April 3, 2008
to HWP and HG&E, which share responsibility for the
site, providing conditional authorization for additional
investigatory and risk characterization activities and
providing detailed comments on HWP’s 2007 reports
and proposals for further investigations. MA DEP also
indicated that further removal of tar in certain areas was
necessary prior to commencing many of the additional
studies and evaluation. This letter represents guidance
from the MA DEP, rather than mandates. HWP has
developed and begun to implement plans for additional
investigations in conformity with MA DEP’s guidance letter,
including estimated costs and schedules. These matters
are subject to ongoing discussions with MA DEP and
HG&E and may change from time to time.
At this time, management believes that the $2 million
remaining in the reserve is at the low end of a range of
probable and estimable costs of approximately $2 million
to $2.7 million and will be sucient for HWP to conduct
the additional tar delineation and site characterization
studies, evaluate its approach to this matter and conduct
certain soft tar remediation. The additional studies are
expected to occur through 2009.
There are many outcomes that could aect management’s
estimates and require an increase to the reserve, or range
of costs, and a reserve increase would be reflected as a
charge to pre-tax earnings. However, management cannot
reasonably estimate the range of additional investigation
and remediation costs because they will depend on,
among other things, the level and extent of the remaining
tar that may be required to be remediated, the extent of
HWP’s responsibility and the related scope and timing,
all of which are dicult to estimate because of a number
of uncertainties at this time. Further developments may
require a material increase to this reserve.
HWP’s share of the remediation costs related to this site is
not recoverable from customers.
MGP Sites: MGP sites comprise the largest portion of the
environmental liabilities. MGPs are sites that manufactured
gas from coal that produced certain byproducts that may
pose a risk to human health and the environment. At
December31, 2008 and 2007, $25.4 million and $23.6
million, respectively, represent amounts for the site
assessment and remediation of MGPs. At December
31, 2008 and 2007, the 5 largest MGP sites comprise
approximately 63 percent and 68 percent, respectively, of
the total MGP environmental liability.
For 7 of the 54 sites that are included in the company’s
liability for environmental costs, the information known
and nature of the remediation options at those sites
allow for the company to estimate the range of losses for
environmental costs. At December31, 2008, $5.1 million
had been accrued as a liability for these sites, which
represent management’s best estimates of the liabilities
for environmental costs. These amounts are the best
estimates within estimated ranges of losses from zero
to $11 million. For the 47 remaining sites included in the
environmental reserve, determining an estimated range of
loss is not possible at this time.
CERCLA Matters: The federal Comprehensive
Environmental Response, Compensation and Liability
Act of 1980 (CERCLA) and its amendments or state
equivalents impose joint and several strict liabilities,
regardless of fault, upon generators of hazardous
substances resulting in removal and remediation costs
and environmental damages. Liabilities under these laws
can be material and in some instances may be imposed
without regard to fault or for past acts that may have been
lawful at the time they occurred. Of the 54 sites, 5 are
superfund sites under CERCLA for which the company
has been notified that it is a potentially responsible party
(PRP) but for which the site assessment and remediation
are not being managed by the company. At December31,
2008, a liability of $0.7 million accrued on these sites
represents management’s best estimate of its potential
remediation costs with respect to these 5 superfund sites.
It is possible that new information or future
developments could require a reassessment of the
potential exposure to related environmental matters. As
this information becomes available, management will
continue to assess the potential exposure and adjust the
reserves accordingly.
Environmental Rate Recovery: PSNH and Yankee Gas
have rate recovery mechanisms for environmental costs.
CL&P recovers a certain level of environmental costs