Eversource 2010 Annual Report Download - page 22

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and industrial customers. CL&P enters into supply contracts for Supplier of Last Resort service for larger commercial and industrial
customers every three months. Currently, CL&P has contracts in place with various suppliers for all of its Standard Service loads
through 2011, 40 percent of expected load for 2012, and 10 percent of expected load for 2013. CL&P’s contracts for its Supplier of Last
Resort Service loads extend through the second quarter of 2011.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE - DISTRIBUTION
PSNH’s distribution business (which includes its generation business) consists primarily of the generation, purchase, delivery and sale
of electricity to its residential, commercial and industrial customers. As of December 31, 2010, PSNH furnished retail franchise electric
service to approximately 497,000 retail customers in 211 cities and towns in New Hampshire. PSNH also owns and operates
approximately 1,200 MW of primarily fossil-fueled electricity generation assets. Included in those generation assets is its 50 MW wood-
burning Northern Wood Power Project at its Schiller Station in Portsmouth, New Hampshire, and approximately 70 MW of hydroelectric
generation. PSNH also has contracts with 18 IPPs, the output of which it either uses to serve its customer load or sells into the market.
PSNH is constructing its Clean Air Project, a sulfur dioxide and mercury scrubber at its Merrimack coal-fired generation station, which is
currently expected to cost $430 million. The project is scheduled for completion in mid-2012. PSNH will recover all related costs
through its ES rates described below.
The following table shows the sources of 2010 electric franchise retail revenues based on categories of customers:
Sources of
Revenue
% of Total
Revenues
Residential 54%
Commercial 36%
Industrial 9%
Other 1%
Total 100%
Rates
PSNH is subject to regulation by the NHPUC, which has jurisdiction over, among other things, rates, certain dispositions of property
and plant, mergers and consolidations, issuances of securities, standards of service, management efficiency and construction and
operation of facilities.
PSNH’s ES rate recovers its generation and purchased power costs from customers on a current basis and allows for an ROE of 9.81
percent on its generation investment.
Under New Hampshire law, the SCRC allows PSNH to recover its stranded costs, including expenses incurred under mandated power
contracts and other long-term investments and obligations. PSNH has financed a significant portion of its stranded costs through
securitization by issuing RRBs secured by the right to recover these stranded costs from customers over time and recovers the costs of
these bonds through the SCRC rate.
On an annual basis, PSNH files with the NHPUC an ES/SCRC reconciliation filing for the preceding year. The difference between
ES/SCRC revenues and ES/SCRC costs are included in the ES/SCRC rate calculations and refunded to/recovered from customers in
the subsequent period approved by the NHPUC.
The TCAM allows PSNH to recover on a fully reconciling basis its transmission related costs. The TCAM is adjusted July 1 of each
year.
Distribution Rates: On June 28, 2010, the NHPUC approved a joint settlement of PSNH’s rate case that had commenced in 2009,
allowing a net distribution rate increase of $45.5 million on an annualized basis to be effective July 1, 2010, and annualized distribution
rate adjustments projected to be a decrease of $2.9 million and increases of $9.5 million and $11.1 million on July 1 of each of the three
subsequent years, respectively. PSNH agreed not to file a new distribution rate request that would be effective prior to July 1, 2015.
During the term of the settlement, PSNH can only propose changes to its permanent distribution rate level when its 12-month
distribution ROE falls below 7 percent for two consecutive quarters or certain specified external events, such as major storms, occur. If
PSNH’s 12-month ROE rolling average is greater than 10 percent, anything over the 10 percent level will be allocated 75 percent to
customers and 25 percent to PSNH. The settlement also provided that the authorized regulatory ROE on distribution only plant will
continue at the previously allowed level of 9.67 percent. PSNH’s distribution segment regulatory ROE was 10.2 percent (including
generation) in 2010, compared to 7.2 percent in 2009. We expect PSNH’s distribution segment regulatory ROE will be approximately 9
percent in 2011.
PSNH's customers are entitled to choose competitive energy suppliers, with PSNH providing default energy service under its ES rate
for those customers who do not elect to use a third party supplier. Prior to 2009, PSNH experienced only a minimal amount of
customer migration. However, customer migration levels began to increase significantly in 2009 as energy costs decreased from their
historic high levels and competitive energy suppliers with more pricing flexibility were able to offer electricity supply at lower prices than
PSNH. By the end of 2010, approximately 2 percent of all of PSNH’s customers (approximately 32 percent of load), mostly large
commercial and industrial customers, had switched to competitive energy suppliers. The increased level of migration has caused an