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Wood, Coal and Transportation Contracts: PSNH has entered into various arrangements
for the purchase of wood, coal and the transportation services for fuel supply for
its electric generating assets in 2009. PSNH’s fuel and natural gas costs, excluding
emissions allowances, amounted to approximately $165.4 million in 2008, $183.8 million
in 2007 and $149.1 million in 2006.
PNGTS Pipeline Commitments: PSNH has a contract for capacity on the Portland
Natural Gas Transmission System (PNGTS) pipeline that extends through 2018. The cost
under this contract amounted to $1.5 million in 2008, $3.1 million in 2007 and $1.4 million
in 2006. These costs are not recovered from PSNH’s retail customers.
Hydro-Québec Support Commitments: Along with other New England utilities, CL&P,
PSNH and WMECO have entered into agreements to support transmission and terminal
facilities that were built to import electricity from the Hydro-Québec system in Canada.
CL&P, PSNH and WMECO are obligated to pay, over a 30-year period ending in 2020,
their proportionate shares of the annual O&M expenses and capital costs of those
facilities. The total cost of these agreements amounted to $18.3 million in 2008, $18.8
million in 2007, and $20.5 million in 2006.
Transmission Segment Project Commitments: These amounts primarily represent
commitments for various services and materials associated with the NEEWS 115 kilovolt
(KV) and 345 KV Overhead projects and the final closeout of CL&P’s Middletown to
Norwalk, Glenbrook Cables and Long Island Replacement project. The remaining
amounts are for transmission projects at PSNH and WMECO.
Yankee Companies Billings: NU has significant decommissioning and plant closure
cost obligations to the Yankee Companies. Each Yankee Company has completed the
physical decommissioning of its facility and is now engaged in the long-term storage
of its 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 NU’s electric utility companies. These
companies in turn recover these costs from their customers through state regulatory
commission-approved retail rates. The table of estimated future annual regulated
companies costs includes the estimated decommissioning and closure costs for CYAPC,
YAEC and MYAPC.
See Note 7E, “Commitments and Contingencies - Deferred Contractual Obligations,”
to the consolidated financial statements for information regarding the collection of the
Yankee Companies’ decommissioning costs.
Clean Air Project Commitments: These amounts represent commitments for
engineering, program management services and major component supply and
installation associated with PSNH’s coal-fired 440 MW Merrimack Station clean air
project, which also includes the addition of a wet scrubber to reduce mercury and SO2
emissions at Merrimack Station Units 1 and 2. The total cost under these contracts
amounted to $20.5 million in 2008, $1.9 million in 2007 and $0.9 million in 2006.
Vehicle/Equipment Commitments: The regulated companies have remaining obligations
under master lease agreements that were terminated by the lessor in November 2008.
As a result of the termination, in accordance with the lease agreements, remaining
vehicle/equipment balances of $45 million are required to be paid by January 2011. At
the end of the lease, the lessee company will either purchase the vehicle/equipment or
sell it at auction with the balances paid to the lessor.
NU Enterprises: Estimated Future Annual NU Enterprises Costs: The estimated future
annual costs of NU Enterprises’ significant contractual arrangements are as follows:
(Millions of Dollars) 2009 2010 2011 2012 2013 Thereafter Totals
Select Energy purchase
agreements $40.3 $41.9 $42.9 $38.8 $44.7 $- $208.6
Select Energy Purchase Agreements: Select Energy maintains long-term agreements
to purchase energy as part of its portfolio of resources to meet its actual or expected
sales commitments. Most purchase commitments are recorded at their mark-to-market
value with the exception of one non-derivative contract, which is accounted for on the
accrual basis.
Select Energy’s purchase commitment amounts are reported on a net basis in fuel,
purchased and net interchange power along with certain sales contracts and mark-
to-market amounts. Accordingly, the amount included in fuel, purchased and net
interchange power will be less than the amounts included in the table above. Select
Energy also maintains certain energy commitments whose mark-to-market values have
been recorded on the consolidated balance sheets as derivative assets and liabilities.
These contracts are included in the table above.
The amount and timing of the costs associated with Select Energy’s purchase
agreements could be impacted by the exit from the NU Enterprises’ businesses.
E. Deferred Contractual Obligations
NU has decommissioning and plant closure cost obligations to the 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 NU’s electric utility companies. These companies recover these costs
through state regulatory commission-approved retail rates.
NU’s percentage share of the obligation to support the Yankee Companies under FERC-
approved rate taris is the same as the ownership percentages. For further information
on the ownership percentages, see Note 1J, “Summary of Significant Accounting Policies
- Equity Method Investments,” to the consolidated financial statements.
CYAPC, YAEC and MYAPC are currently collecting amounts that NU believes are
adequate to recover the remaining decommissioning and closure cost estimates for
the respective plants. NU believes 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 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, NU does believe that