Eversource 2010 Annual Report Download - page 92

75
also allowed WMECO the creation of a regulatory asset as a result of the 2010 Healthcare Act. NU has concluded that these costs are
probable of recovery and has recorded regulatory assets of $22 million ($15.5 million for CL&P, $3.9 million for WMECO and $2.6
million for Yankee Gas) as of December 31, 2010, which are reflected in Other Regulatory Assets in the table above. These assets are
not earning a return. For further information regarding the 2010 Healthcare Act, see Note 11, "Income Taxes," to the consolidated
financial statements. The December 31, 2010 balance at PSNH also includes $19.9 million of costs incurred for the February 2010
winter storm restorations that met the NHPUC specified criteria for deferral to a major storm cost reserve. PSNH expects to request
recovery of both the Medicare asset and the 2010 winter storm costs in 2011.
Deferred Benefit Costs: NU's Pension, SERP, and PBOP Plans are accounted for in accordance with accounting guidance on defined
benefit pension and other postretirement plans. Under this accounting guidance, the funded status of its pension and PBOP plans is
recorded with an offset to Accumulated Other Comprehensive Income/(Loss) and is remeasured annually. However, because the
Regulated companies are rate-regulated on a cost-of-service basis, offsets were recorded as regulatory assets as of December 31,
2010 and 2009 as these amounts have been and continue to be recoverable in cost-of-service regulated rates. Regulatory accounting
was also applied to the portions of the NUSCO costs that support the Regulated companies, as these amounts are also recoverable.
The deferred benefit costs of CL&P and PSNH are not in rate base and are expected to be amortized into expense over a period of up
to 12 years. WMECO's deferred benefit costs are earning an equity return at the same rate as the assets included in rate base.
Regulatory Assets Offsetting Derivative Liabilities: The regulatory assets offsetting derivative liabilities relate to the fair value of
contracts used to purchase power and other related contracts that will be collected from customers in the future. Included in these
amounts are $779 million and $768.7 million as of December 31, 2010 and 2009, respectively, of derivative liabilities relating to CL&P's
capacity contracts, referred to as CfDs. See Note 4, "Derivative Instruments," to the consolidated financial statements for further
information. These assets are excluded from rate base and are being recovered as the actual settlement occurs over the duration of
the contracts.
Securitized Assets: In March 2001, CL&P issued approximately $1.4 billion in RRBs. CL&P used $1.1 billion of the proceeds from that
issuance to buyout or buydown certain contracts with IPPs. The CL&P securitized asset balance was fully amortized as of
December 31, 2010. As of December 31, 2009, the unamortized CL&P securitized asset balance was $167 million, which included
$23.2 million related to unrecovered contractual obligations. CL&P also used the proceeds from the issuance of the RRBs to securitize
a portion of its regulatory assets associated with income taxes. The securitized income tax regulatory asset was fully amortized as of
December 31, 2010 and had an unamortized balance of $28.4 million as of December 31, 2009.
In April 2001, PSNH issued RRBs in the amount of $525 million. PSNH used the majority of the proceeds from that issuance to
buydown its power contracts with an affiliate, North Atlantic Energy Corporation. In May 2001, WMECO issued $155 million in RRBs
and used the majority of the proceeds from that issuance to buyout an IPP contract.
Securitized regulatory assets are not earning an equity return and are being recovered over the amortization period of their associated
RRBs. PSNH RRBs are scheduled to fully amortize by May 1, 2013 and WMECO RRBs are scheduled to fully amortize by June 1,
2013.
Income Taxes, Net: The tax effect of temporary differences (differences between the periods in which transactions affect income in the
financial statements and the periods in which they affect the determination of taxable income, including those differences relating to
uncertain tax positions) is accounted for in accordance with the rate-making treatment of the applicable regulatory commissions and
accounting guidance for income taxes. Differences in income taxes between the accounting guidance and the rate-making treatment of
the applicable regulatory commissions are recorded as regulatory assets. For further information regarding income taxes, see Note 11,
"Income Taxes," to the consolidated financial statements.
Unrecovered Contractual Obligations: Under the terms of contracts with CYAPC, YAEC, and MYAPC, CL&P, PSNH, and WMECO are
responsible for their proportionate share of the remaining costs of the nuclear facilities, including decommissioning. A portion of these
amounts was recorded as unrecovered contractual obligations regulatory assets as of December 31, 2010 and 2009. A portion of
these obligations for CL&P was securitized in 2001 and was included in securitized regulatory assets. The securitized portion of these
regulatory assets for CL&P was fully recovered as of December 31, 2010. Remaining amounts for CL&P are earning a return and are
being recovered through the CTA. Amounts for WMECO are being recovered without a return along with other stranded costs and are
anticipated to be recovered by 2013, the scheduled completion date of stranded cost recovery. Amounts for PSNH were fully
recovered by 2006.
Regulatory Tracker Deferrals: Regulatory tracker deferrals are approved rate mechanisms that allow utilities to recover costs in specific
business segments through reconcilable tracking mechanisms that are reviewed at least annually by the applicable regulatory
commission. Regulatory tracker deferrals are recorded as regulatory assets if unrecovered costs are in excess of collections and are
recorded as regulatory liabilities if collections are in excess of costs. The majority of regulatory tracker deferrals are earning a return.
The following regulatory tracker deferrals were recorded as either regulatory assets or liabilities as of December 31, 2010 and 2009:
CL&P Tracker Deferrals: The CTA allows CL&P to recover stranded costs, such as securitization costs associated with the RRBs,
amortization of regulatory assets, and IPP over market costs. As of December 31, 2010 and 2009, CL&P's CTA was a $35.5 million
and $32.2 million regulatory asset, respectively, as CTA unrecovered costs were in excess of CTA collections. As part of the CTA
reconciliation process, CL&P has also established an obligation to potentially refund the variable incentive portion of its transition
service procurement fee, which totaled $24.7 million and $23.2 million as of December 31, 2010 and 2009, respectively, and was
recorded as a regulatory liability.