Eversource 2010 Annual Report Download - page 58

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Merrimack Clean Air Project: On July 7, 2009, the New Hampshire Site Evaluation Committee determined that PSNH's Clean Air
Project to install wet scrubber technology at its Merrimack Station was not subject to the Committee's review as a "sizeable" addition to
a power plant under state law. That Committee upheld its decision in an order dated January 15, 2010, denying requests for rehearing.
This order was appealed on February 23, 2010. On April 15, 2010, the New Hampshire Supreme Court determined that it would accept
the appeal. Briefs have been filed and the Court has scheduled oral arguments for March 10, 2011. We do not believe that the appeal
will have a material impact on the timing or costs of the project. PSNH is continuing with construction of this project and has capitalized
$296.5 million since inception of the project through December 31, 2010.
Massachusetts:
Distribution Rates: On July 16, 2010, WMECO filed an application with the DPU, requesting approval of a $28.4 million increase in
distribution rates and a decoupling plan to be effective February 1, 2011. Among other items, WMECO sought a distribution segment
regulatory ROE of 10.5 percent, recovery over five years of its remaining deferred December 2008 and 2010 major storm costs and
recovery of its hardship receivable costs. On January 31, 2011, the DPU issued a final decision approving an annualized rate increase
of $16.8 million effective February 1, 2011, an authorized distribution segment regulatory ROE of 9.6 percent, a decoupling plan with no
inflation adjustment, recovery of certain 2008 and 2010 major storm costs over five years, and recovery of certain hardship receivable
costs.
Basic Service Rates: In 2010, fixed basic service rates ranged from 7.647 cents per KWh to 8.237 cents per KWh for residential
customers, 8.44 cents per KWh to 8.972 cents per KWh for small commercial and industrial customers, and 7.052 cents per KWh to
8.893 cents per KWh for medium and large commercial and industrial customers. Effective January 1, 2011, the rates for all basic
service customers changed to reflect the basic service solicitations conducted by WMECO in November 2010. Fixed basic service
rates for residential customers decreased to 6.993 cents per KWh, rates for small commercial and industrial customers decreased to
8.006 cents per KWh and rates for large commercial and industrial customers decreased to 7.405 cents per KWh. The fixed price
increased by 0.063 cents per KWh for street lighting customers to 5.822 cents per KWh.
Transition Cost Reconciliation: On May 12, 2010, WMECO filed its 2009 cost reconciliation for transition, transmission, basic/default
service, basic/default service adder, and capital projects scheduling list. A public hearing was held on July 12, 2010. An evidentiary
hearing was held on November 12, 2010. The briefing period ended on December 17, 2010. We do not expect the outcome of the
DPU's review of this filing to have a material adverse impact on WMECO's financial position, results of operations or cash flows.
Pension Factor Reconciliation Filing: On July 2, 2009, WMECO filed the 2008 reconciliation for its pension factor revenues and expenses.
An evidentiary hearing was held on March 26, 2010 and the briefing period ended on May 20, 2010. On August 31, 2010, the DPU
issued an approval order. The order did not have a material adverse impact on WMECO's financial position, results of operations or
cash flows.
Deferred Contractual Obligations
Refer to Note 12D, "Commitments and Contingencies – Deferred Contractual Obligations," to the consolidated financial statements and
also Part I, Item 3, "Legal Proceedings," for discussion of recent changes with regard to the CYAPC, YAEC, and MYAPC litigation
against the DOE.
Enterprise Risk Management
We have implemented an Enterprise Risk Management methodology for identifying the principal risks of the Company. Enterprise Risk
Management involves the application of a well-defined, enterprise-wide methodology that enables our Risk and Capital Committee,
comprised of our senior officers, to oversee the identification, management and reporting of the principal risks of the business.
However, there can be no assurances that the Enterprise Risk Management process will identify or manage every risk or event that
could impact our financial condition, results of operations or cash flows. The findings of this process are periodically discussed with our
Board of Trustees.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and, at times,
difficult, subjective or complex judgments. Changes in these estimates, assumptions and judgments, in and of themselves, could
materially impact our financial position, results of operations or cash flows. Our management communicates to and discusses with our
Audit Committee of the Board of Trustees significant matters relating to critical accounting policies and estimates. Our critical
accounting policies and estimates are discussed below. See the combined notes to our consolidated financial statements for further
information concerning the accounting policies, estimates and assumptions used in the preparation of our consolidated financial
statements.
Regulatory Accounting: The accounting policies of the Regulated companies conform to GAAP applicable to rate-regulated enterprises
and historically reflect the effects of the rate-making process.
The application of accounting guidance applicable to rate-regulated enterprises results in recording regulatory assets and liabilities.
Regulatory assets represent the deferral of incurred costs that are probable of future recovery in customer rates. In some cases, we
record regulatory assets before approval for recovery has been received from the applicable regulatory commission. We must use