Eversource 2010 Annual Report Download - page 38

21
2. Connecticut MGP Cost Recovery
In September 2006, CL&P and Yankee Gas (the NU Companies) filed a complaint against UGI Utilities, Inc. (UGI) in the U.S. District
Court for the District of Connecticut seeking past and future remediation costs related to historic MGP operations on thirteen sites
currently or formerly owned by the NU Companies (Yankee Gas is responsible for ten of the sites, CL&P for two of the sites, and both
companies share responsibility for one site) in a number of different locations throughout the State of Connecticut. The NU Companies
allege that UGI controlled operations of the plants at various times throughout the period 1883 to 1941, when UGI was forced to divest
its interests. Investigations and remediation activity and expenditures at the sites are ongoing. A trial was held in April 2009.
On May 22, 2009, the court granted judgment in favor of the NU Companies with respect to the Waterbury-North site, and granted
judgment in favor of UGI with respect to the remaining sites. Judgment was entered on March 31, 2010. On April 23, 2010, the NU
Companies filed a Notice of Appeal with respect to the court’s decision, which has been fully briefed. The Phase II trial, which would
determine what portion of the remediation costs at the Waterbury-North site are attributable to UGI's control, is scheduled for
August 31, 2011. Any recovery resulting from the case (following the appeal and the Waterbury-North complaint) would flow back to
the NU Companies' customers, and the NU Companies would continue to seek recovery as appropriate of remediation and other
associated costs with regard to the sites for which no recovery from UGI will be forthcoming.
3. Litigation Related to the Proposed Merger with NSTAR
In October 2010, NSTAR, the members of the NSTAR board of trustees, NU, and two wholly-owned NU subsidiaries, NU Holding
Energy 1 LLC and NU Holding Energy 2 LLC, were named defendants in eight lawsuits (since consolidated) filed in the Superior Court
for Suffolk County, Massachusetts, and one lawsuit filed in federal court in the district of Massachusetts. The lawsuits, each of which
was brought by a single shareholder, purport to be brought on behalf of classes of NSTAR shareholders opposed to the terms of the
merger agreement. The original complaints made virtually identical allegations that, among other things, NSTAR’s trustees breached
their fiduciary duties by failing to maximize the value to be received by NSTAR’s shareholders, and that the other defendants aided and
abetted the NSTAR trustees’ breaches of fiduciary duties. Both the state and federal complaints sought and continue to seek, among
other things, to enjoin defendants from consummating the merger and either rescission of the merger, to the extent it is completed, or
monetary damages. On December 10, 2010, the state-court plaintiffs filed their consolidated amended complaint, which, in addition to
the already-pending claims, alleged that the disclosures in the preliminary joint proxy statement/prospectus NU filed jointly with NSTAR,
were insufficiently detailed, pointing to various aspects of the section entitled "The Merger." On January 6, 2011, NU and NSTAR each
moved to dismiss the claims asserted against them for failure to state a claim. In addition, NU and NSTAR jointly moved for a
protective order staying the discovery that some of the Plaintiffs had served contemporaneously with their complaints. On January 13,
2011, Plaintiffs moved the Court to expedite proceedings in anticipation of their making a subsequent motion for preliminary injunction
to enjoin the March 4, 2011 shareholder vote. Plaintiffs also filed a purported "emergency" motion to obtain discovery from Lexicon
Partners, NSTAR's financial advisors. NU and NSTAR opposed both motions, which the Court subsequently denied and scheduled a
"litigation control" conference for February 28, 2011 "to address proper scheduling of any and all related motions anticipated by the
parties." On February 11, 2011, Plaintiffs filed a motion for preliminary injunction seeking to enjoin the March 4, 2011 shareholder vote.
NU and NSTAR will file their opposition to the motion on or before February 22, 2011 on the grounds that it lacks any legal or
evidentiary basis. There have been no developments in the federal case, in which the plaintiff has never served NSTAR, NU, or any
other defendant with his complaint. NU and NSTAR believe both the federal and state lawsuits are without merit and are defending the
lawsuits vigorously.
4. Bankruptcy of Independent Power Producer
On February 1, 2011, an independent power producer, AES Thames, L.L.C. (Thames), which is the counterparty to a CL&P electricity
purchase agreement, filed a voluntary petition for bankruptcy in the U.S. Bankruptcy Court in Delaware (Case No. 11-10334). Thames
owns and operates a 181 MW coal fired generation plant in Montville, Connecticut providing electric energy to CL&P and process
steam to a nearby paperboard manufacturer. Citing market conditions and regulatory and legislative uncertainties, Thames had
advised CL&P on January 24, 2011 that it was shutting the plant down for an undetermined period. Under an amendment to the
electricity purchase agreement entered into in 1999, Thames agreed to supply CL&P with energy from the plant for a reduced price in
exchange for a substantial prepayment. The electricity purchase agreement was due to expire in 2015. CL&P has appeared in the
Delaware bankruptcy proceeding and intends to assert all available legal rights to protect its customers’ interests. Management cannot
estimate the effects of this proceeding, but does not believe there will be a material impact on CL&P’s financial position, results or
operations or cash flows.
5. Other Legal Proceedings
For further discussion of legal proceedings see the following sections of Item 1, Business: "- Regulated Electric Distribution,"
"-Regulated Gas Distribution - Yankee Gas Services Company," and "- Electric Transmission," for information about various state
regulatory and rate proceedings, civil lawsuits related thereto, and information about proceedings relating to power, transmission and
pricing issues; "- Nuclear Decommissioning" for information related to high-level nuclear waste; and "- Other Regulatory and
Environmental Matters" for information about proceedings involving surface water and air quality requirements, toxic substances and
hazardous waste, EMF, licensing of hydroelectric projects, and other matters. In addition, see Item 1A, Risk Factors, for general
information about several significant risks.