Eversource 2010 Annual Report Download - page 56

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natural gas distribution companies are cost-of-service and rate-regulated, a portion of the $18 million was able to be deferred and
recovered through future rates. For the year ended December 31, 2010, NU deferred approximately $15 million of recoverable write-
offs related to these businesses and reduced 2010 earnings on a net basis by approximately $3 million of non-recoverable costs. In
addition, as a result of the elimination of the tax deduction in 2010, NU was not able to recognize approximately $2 million of net annual
benefits.
On September 27, 2010, President Obama signed into law the Small Business Jobs and Credit Act of 2010, which extends the bonus
depreciation provisions of the American Recovery and Reinvestment Act of 2009 to small and large businesses through 2010. This
extended stimulus provided NU with cash flow benefits of approximately $100 million.
On December 17, 2010, President Obama signed into law the 2010 Tax Act, which, among other things, provides 100 percent bonus
depreciation for tangible personal property placed in service after September 8, 2010, and through December 31, 2011. For tangible
personal property placed in service after December 31, 2011, and through December 31, 2012, the 2010 Tax Act provides for 50
percent bonus depreciation. We expect the 2010 Tax Act to provide NU with cash flow benefits of approximately $250 million in 2011
and approximately $450 million to $550 million over the period 2011 through 2013.
2010 Connecticut Legislation: In May 2010, the Connecticut Legislature approved a state budget for the 2010-2011 fiscal year, which
calls for the issuance by the state of Connecticut of up to $760 million of economic recovery revenue bonds that would be amortized
over eight years. These bonds will be repaid through a charge on the bills of customers of CL&P and other Connecticut electric
distribution companies. For CL&P, the revenue to pay interest and principal on the bonds would come from a continuation of a portion
of its CTA, which would have otherwise ended by December 31, 2010 with the final principal and interest payment on its RRBs, and the
diversion of about one-third of the annual funding for C&LM programs beginning in April 2012. On September 29, 2010, the DPUC
approved a financing order for the bonds. A lawsuit filed by a state senator against the DPUC could delay the issuance. By order
dated December 21, 2010, the trial court dismissed the state senator’s suit on jurisdictional grounds, and the state senator promptly
appealed that order to the Connecticut Appellate Court. The DPUC has requested that the case be transferred to the Connecticut
Supreme Court and decided on an expedited schedule. In addition, several bills have been introduced by the state senator and other
state lawmakers to rescind the law authorizing these bonds. Unlike the RRBs issued in 2001, the revenues, interest expense and
amortization expense associated with these bonds, should they be issued, will not be reflected on CL&P’s financial statements.
Regulatory Developments and Rate Matters
Connecticut - CL&P:
Distribution Rates: On January 8, 2010, CL&P filed an application with the DPUC to raise distribution rates by $133.4 million (later
revised to $129 million) to be effective July 1, 2010 and by an additional $44.2 million (later revised to $41.4 million) to be effective
July 1, 2011. On June 30, 2010, the DPUC issued a final order in the distribution rate case, which approved annualized rate increases
of $63.4 million effective July 1, 2010 and an additional $38.5 million effective July 1, 2011. The 2010 increase was deferred from
customer bills until January 1, 2011 to coincide with the decline in revenue requirements associated with the amortization of the
aforementioned CL&P RRBs, which more than offset the revenue requirements associated with the January 1, 2011 distribution rate
increase. While CL&P’s earnings benefitted in the second half of 2010 from the rate decision as a result of declines in depreciation and
maintenance expense, cash flow benefits will not begin until early 2011 when customer bills begin to reflect an approximately $110
million increase in distribution rates. That $110 million increase reflects the two distribution rate increases and the recovery of
approximately $32 million in maintenance expense that was deferred for recovery from the second half of 2010 to 2011 and the first half
of 2012. In its decision, the DPUC also maintained CL&P’s authorized distribution segment regulatory ROE of 9.4 percent.
Standard Service and Last Resort Service Rates: CL&P's residential and small commercial customers who do not choose competitive
suppliers are served under SS rates, and large commercial and industrial customers who do not choose competitive suppliers are
served under LRS rates. CL&P is fully recovering from customers the costs of its SS and LRS services. Effective January 1, 2011, the
DPUC approved a decrease to CL&P’s total average SS rate of approximately 7.8 percent and a slight increase to CL&P’s total
average LRS rate of approximately 0.8 percent. The energy supply portion of the total average SS rate decreased from 11.282 cents
per KWh to 9.732 cents per KWh while the energy supply portion of the total average LRS rate increased from 7.062 cents per KWh to
7.193 cents per KWh.
CTA and SBC Reconciliation: On March 31, 2010, CL&P filed with the DPUC its 2009 CTA and SBC reconciliation, which compared
CTA and SBC revenues charged to customers to revenue requirements and allows for full recovery of revenue requirements. For the
12 months ended December 31, 2009, total CTA revenue requirements exceeded CTA revenues by $46.9 million. For the 12 months
ended December 31, 2009, the SBC revenues exceeded SBC revenue requirements by $23.7 million.
On November 10, 2010, a decision in the 2009 CTA and SBC docket was issued approving the 2009 CTA and SBC reconciliations as
filed. The decision stated that the CTA and SBC rates would need to be reset effective January 1, 2011 based on current projections.
On December 22, 2010, the DPUC approved new CTA and SBC rates, effective January 1, 2011, using updated information provided
by CL&P. Based on that updated information, the CTA rate decreased from 1.054 cents per KWh to 0.332 cents per KWh and the SBC
rate decreased from 0.207 cents per KWh to 0.037 cents per KWh.
FMCC Filing: On February 5, 2010, CL&P filed with the DPUC its semi-annual filing, which reconciled actual FMCC revenues and
charges and GSC revenues and expenses, for the period July 1, 2009 through December 31, 2009, and also included the previously
filed revenues and expenses for the January 1, 2009 through June 30, 2009 period. The filing identified a total net underrecovery of