Eversource 2012 Annual Report Download - page 24

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NSTAR GAS COMPANY
NSTAR Gas distributes natural gas to approximately 272,000 customers in 51 communities in central and eastern Massachusetts
covering 1,067 square miles. Total throughput (sales and transportation) in 2012 was approximately 60.5 Bcf. NSTAR 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 heating, hot water and cooking needs, and commercial and industrial customers who choose to
purchase natural gas from NSTAR Gas.
Rates
NSTAR Gas generates revenues primarily through the sale and/or transportation of natural gas. Gas sales and transportation services
are divided into two categories: firm, whereby NSTAR Gas must supply gas and/or transportation services to customers on demand;
and interruptible, whereby NSTAR Gas may, generally during colder months, temporarily discontinue service to high volume
commercial and industrial customers. Sales and transportation of gas to interruptible customers have no impact on NSTAR Gas’
operating income because a substantial portion of the margin for such service is returned to its firm customers as rate reductions.
The Attorney General settlement agreement that approved the Merger provided for a rate freeze through 2015 and a rate credit of $3
million to NSTAR Gas customers.
Retail natural gas delivery and supply rates are established by the DPU and are comprised of:
 A distribution charge consisting of a fixed customer charge and a demand and/or energy charge that collects the costs of
building and expanding the natural gas infrastructure to deliver natural gas supply to its customers. This also includes
collection of ongoing operating costs;
 A seasonal cost of gas adjustment clause (CGAC) that collects natural gas supply costs, pipeline and storage capacity costs,
costs related to charge-offs of uncollected energy costs and working capital related costs. The CGAC is reset every six
months. In addition, NSTAR Gas files interim changes to its CGAC factor when the actual costs of natural gas supply vary
from projections by more than 5 percent; and
 A local distribution adjustment clause (LDAC) that collects energy efficiency program costs, environmental costs, PAM related
costs, and costs associated with the residential assistance adjustment clause. The LDAC is reset annually and provides for
the recovery of certain costs applicable to both sales and transportation customers.
NSTAR Gas purchases financial contracts based on NYMEX natural gas futures in order to reduce cash flow variability associated with
the purchase price for approximately one-third of its natural gas purchases. These purchases are made under a program approved by
the Massachusetts Department of Public Utilities in 2006. This practice attempts to minimize the impact of fluctuations in prices to
NSTAR Gas’ firm gas customers. These financial contracts do not procure gas supply. All costs incurred or benefits realized when
these contracts are settled are included in the CGAC.
Sources and Availability of Natural Gas Supply
NSTAR Gas maintains a flexible resource portfolio consisting of natural gas supply contracts, transportation contracts on interstate
pipelines, market area storage and peaking services. NSTAR Gas purchases transportation, storage, and balancing services from
Tennessee Gas Pipeline Company and Algonquin Gas Transmission Company, as well as other upstream pipelines that transport gas
from major producing regions in the U.S., including Gulf Coast, Mid-continent, and Appalachian Shale supplies to the final delivery
points in the NSTAR Gas service area. NSTAR Gas purchases all of its natural gas supply from a firm portfolio management contract
with a term of one year, which has a maximum quantity of approximately 139,500 MMBtu/day.
In addition to the firm transportation and natural gas supplies mentioned above, NSTAR Gas utilizes contracts for underground storage
and LNG facilities to meet its winter peaking demands. The LNG facilities, described below, are located within NSTAR Gas’ distribution
system and are used to liquefy and store pipeline gas during the warmer months for vaporization and use during the heating season.
During the summer injection season, excess pipeline capacity and supplies are used to deliver and store natural gas in market area
underground storage facilities located in the New York and Pennsylvania region. Stored natural gas is withdrawn during the winter
season to supplement flowing pipeline supplies in order to meet firm heating demand. NSTAR Gas has firm underground storage
contracts and total storage capacity entitlements of approximately 6.6 Bcf.
A portion of the storage of natural gas supply for NSTAR Gas during the winter heating season is provided by Hopkinton, a wholly-
owned subsidiary of NSTAR LLC. The facilities consist of an LNG liquefaction and vaporization plant and three above-ground
cryogenic storage tanks in Hopkinton, Massachusetts having an aggregate capacity of 3.0 Bcf of liquefied natural gas. NSTAR Gas
also has access to facilities in Acushnet, Massachusetts that include additional storage capacity of 0.5 Bcf and additional vaporization
capacity.
Based on information currently available regarding projected growth in demand and estimates of availability of future supplies of
pipeline natural gas, NSTAR Gas believes that participation in planned and anticipated pipeline expansion projects will be required in
order for it to meet current and future sales growth opportunities.