Eversource 2012 Annual Report Download - page 25

12
YANKEE GAS SERVICES COMPANY
Yankee Gas operates the largest natural gas distribution system in Connecticut as measured by number of customers (approximately
212,000 customers in 71 cities and towns), and size of service territory (2,187 square miles). Total throughput (sales and
transportation) in 2012 was approximately 51 Bcf. Yankee 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 Yankee Gas. Yankee Gas also owns a 1.2
Bcf LNG facility in Waterbury, Connecticut, which is used primarily to assist it in meeting its supplier-of-last-resort obligations and also
enables it to make economic purchases of natural gas, which typically occur during periods of low demand.
Retail natural gas service in Connecticut is partially unbundled: residential customers in Yankee Gas’ service territory buy gas supply
and delivery only from Yankee Gas while commercial and industrial customers may choose their gas suppliers. Yankee Gas offers firm
transportation service to its commercial and industrial customers who purchase gas from sources other than Yankee Gas as well as
interruptible transportation and interruptible gas sales service to those commercial and industrial customers that have the capability to
switch from natural gas to an alternative fuel on short notice, for whom Yankee Gas can interrupt service during peak demand periods
or at any other time to maintain distribution system integrity.
Rates
Yankee Gas is subject to regulation by PURA, which has jurisdiction over, among other things, rates, accounting procedures, certain
dispositions of property and plant, mergers and consolidations, issuances of long-term securities, standards of service, affiliate
transactions, management efficiency and construction and operation of distribution, production and storage facilities.
Retail natural gas delivery and supply rates are established by the PURA 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;
 Purchased Gas Adjustment (PGA) clause, which allows Yankee Gas to recover the costs of the procurement of natural gas for
its firm and seasonal customers. Differences between actual natural gas costs and collection amounts on August 31st of each
year are deferred and then recovered or returned to customers during the following year. Carrying charges on outstanding
balances are calculated using Yankee Gas' weighted average cost of capital in accordance with the directives of the PURA;
and
 Conservation Adjustment Mechanism (CAM), which allows 100 percent recovery of conservation costs through this
mechanism, with a return. The reconciliation process produces deferrals for future recovery or refund in future customer rates
each year.
On June 29, 2011 PURA issued a final decision in Yankee Gas’ rate proceeding, which it amended in September 2011. The final
amended decision approved a regulatory ROE of 8.83 percent, based on a capital structure of 52.2 percent common equity and 47.8
percent debt, approved the inclusion in rates of costs associated with the WWL project, and also allowed for a substantial increase in
annual spending for bare steel and cast iron pipe replacement, as requested by Yankee Gas.
Sources and Availability of Natural Gas Supply
PURA requires that Yankee Gas meet the needs of its firm customers under all weather conditions. Specifically, Yankee Gas must
structure its supply portfolio to meet firm customer needs under a design day scenario (defined as the coldest day in 30 years) and
under a design year scenario (defined as the average of the four coldest years in the last 30 years). Yankee Gas also owns a 1.2 Bcf
LNG facility in Waterbury, Connecticut, which is used primarily to assist Yankee Gas in meeting its supplier-of-last-resort obligations
and also enables Yankee Gas to make economic purchases of natural gas, typically in periods of low demand. Yankee Gas’ on-system
stored LNG and underground storage supplies help to meet consumption needs during the coldest days of winter. Yankee Gas obtains
its interstate capacity from the three interstate pipelines that directly serve Connecticut: the Algonquin, Tennessee and Iroquois
Pipelines. Yankee Gas has long-term firm contracts for capacity on TransCanada Pipelines Limited Pipeline, Vector Pipeline, L.P.,
Tennessee Gas Pipeline, Iroquois Gas Transmission Pipeline, Algonquin Pipeline, Union Gas Limited, Dominion Transmission, Inc.,
National Fuel Gas Supply Corporation, Transcontinental Gas Pipeline Company, and Texas Eastern Transmission, L.P. pipelines.
Based on information currently available regarding projected growth in demand and estimates of availability of future supplies of
pipeline natural gas, Yankee Gas believes that its present sources of natural gas supply are adequate to meet existing load and allow
for future growth in sales.