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7
Distribution Rates: On January 31, 2011, the DPU issued a final decision in WMECO’s July 2010 rate application, granting a $16.8
million annualized rate increase in distribution revenues and an allowed ROE of 9.6 percent effective February 1, 2011. The DPU also
authorized a full decoupling mechanism, whereby actual revenue billed by WMECO would be reconciled with WMECO’s target revenue
on an annual basis, WMECO’s request to recover balances of certain active hardship account balances and the recovery of certain
storm costs over five years. The DPU did not authorize rate recovery of a proposed $20 million average increase in WMECO’s capital
spending plan. WMECO’s distribution segment regulatory ROE was 4.6 percent in 2010 compared to 8.4 percent in 2009. We expect
WMECO’s distribution segment regulatory ROE will be approximately 9 percent in 2011.
WMECO is subject to SQ metrics that measure safety, reliability and customer service, and WMECO pays any charges incurred for
failure to meet such metrics to customers. WMECO will not be required to pay an assessment charge for its 2010 performance results
as WMECO performed at target for all of its SQ metrics in 2010.
On October 16, 2009, WMECO filed its proposal for a dynamic pricing smart meter pilot program with the DPU. However, the Company
does not expect it will conduct a pilot prior to 2012.
Sources and Availability of Electric Power Supply
As noted above, WMECO does not own any generation assets (other than its recently constructed solar generation) and purchases its
energy requirements from a variety of competitive sources through periodic RFPs. For basic service power supply, WMECO issues
RFPs periodically, consistent with DPU regulations.
REGULATED GAS DISTRIBUTION – YANKEE GAS SERVICES COMPANY
Yankee Gas operates the largest natural gas distribution system in Connecticut as measured by number of customers (approximately
206,000 customers in 71 cities and towns), and size of service territory (2,187 square miles). Total throughput (sales and
transportation) in both 2010 and 2009 was approximately 52.5 Bcf. Yankee Gas provides firm natural gas sales service to retail
customers who require a continuous natural gas supply throughout the year, such as residential customers who rely on gas for their
heating, hot water and cooking needs, and commercial and industrial customers who choose to purchase natural gas from Yankee
Gas. Retail natural gas service in Connecticut is partially unbundled: residential customers in Yankee Gas’ service territory buy gas
supply and delivery only from Yankee Gas while commercial and industrial customers have choice in their gas suppliers. Yankee Gas
offers firm transportation service to its commercial and industrial customers who purchase gas from sources other than Yankee Gas as
well as interruptible transportation and interruptible gas sales service to those commercial and industrial customers that have the
capability to switch from natural gas to an alternative fuel on short notice. Yankee Gas can interrupt service to these customers during
peak demand periods or at any other time to maintain distribution system integrity. Yankee Gas also owns a 1.2 Bcf LNG facility in
Waterbury, Connecticut, which enables the company to buy natural gas in periods of low demand, store it and use it during peak
demand periods when prices are typically higher.
The following table shows the sources of 2010 gas operating revenues based on categories of customers:
Sources of
Revenue
% of Total
Revenues
Residential 51%
Commercial 30%
Industrial 16%
Other 3%
Total 100%
A summary of firm natural gas sales in million cubic feet for Yankee Gas for 2010 and 2009 and the percentage changes in 2010 as
compared to 2009 on an actual and weather normalized basis (using a 30-year average) is as follows:
Firm Natural Gas Sales (Mcf)
2010 2009
Percent
Decrease/
Increase
Weather
Normalized
Percentage
(Decrease)
Residential 13,403 13,562 (1.2)% 4.9%
Commercial 14,982 14,063 6.6% 12.1%
Industrial 14,866 14,825 0.3% 1.7%
Total 43,251 42,450 1.9% 6.2%