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33
Our natural gas distribution segment earned $30.8 million, or $0.11 per share, in 2012, compared with $31.7 million, or $0.18 per
share, in 2011. The 2012 results include $2.1 million, or $0.01 per share, of after-tax merger settlement agreement costs.
NU parent and other companies recorded net losses of $46.9 million, or $0.16 per share, in 2012, compared with net losses of
$25.7 million, or $0.14 per share, in 2011. The 2012 and 2011 results include $54.4 million, or $0.19 per share, and $11.3 million,
or $0.06 per share, respectively, of after-tax merger costs.
We project capital expenditures of approximately $5 billion from 2013 through 2015. Of the $5 billion, we expect to invest
approximately $2.5 billion in our electric and natural gas distribution segments, and $2.3 billion in our electric transmission
segment. In addition, we project capital expenditures of approximately $1.6 billion from 2016 through 2017 in our electric
transmission segment.
Legislative, Regulatory, Policy and Other Items:
On June 15, 2012, Connecticut enacted the "Enhancing Emergency Preparedness and Response Act," which is intended to
enhance the state’s emergency preparedness and response in the event of natural disasters. Among numerous provisions, the bill
required the PURA to establish emergency performance standards for utilities and allows the PURA to levy penalties for failure to
meet those standards.
On August 1, 2012, efforts to settle a complaint filed at FERC by various New England parties concerning the base ROE earned by
New England transmission owners ended without a settlement. Soon thereafter, litigation began before a FERC trial judge. In the
fourth quarter of 2012, additional testimony and complaints were filed. On January 18, 2013, the FERC trial staff filed testimony
and analysis recommending a base ROE of 9.66 percent based on the midpoint of their analysis with a range of reasonableness of
6.82 percent to 12.51 percent. Hearings are scheduled for May 2013, a trial judge’s ruling is due in September 2013, and a FERC
decision is expected in 2014.
On August 1, 2012, PURA issued a final decision in the investigation of CL&P’s performance related to both Tropical Storm Irene
and the October 2011 snowstorm. The decision concluded that CL&P was deficient and inadequate in its preparation, response,
and communication to both storms, and identified certain penalties that could be imposed on CL&P during its next rate case.
However, PURA will consider and weigh the extent to which CL&P has taken steps to improve current practices in future storm
response in determining any potential penalties. We believe such steps to improve current storm preparation and response
practices have been successfully executed in recent storms, and that CL&P's response to these 2011 storms was prudent and
consistent with industry standards, and that it is probable that it will be able to recover its deferred costs.
On August 3, 2012, Massachusetts Governor Patrick signed into law "An Act Relative to Competitively Priced Electricity in the
Commonwealth." The Act establishes distribution rate case requirements for both electric and natural gas utility companies, as
well as limiting settlement agreements, establishes new timing on rate case proceedings, and establishes requirements for all
distribution companies to enter into additional long-term renewable energy distribution contracts.
On August 6, 2012, Massachusetts Governor Patrick signed into law "An Act relative to emergency service response of public
utility companies" to help improve utility companies’ emergency response and communication, as well as indicate how any
assessed penalties will be provided to customers.
On October 29, 2012, Hurricane Sandy caused extensive damage to our electric distribution system across all three states
resulting in deferred storm restoration costs of $204 million. Approximately 1.5 million of our 3.1 million electric distribution
customers were without power during or following the storm. We believe the storm restoration costs meet the criteria for specific
cost recovery in each state in which we operate and, as a result, we do not expect the storm to have a material impact on our
results of operations.
On December 11, 2012, in separate orders issued by the DPU, NSTAR Electric and WMECO received penalties of $4.1 million and
$2 million, respectively, related to the investigation into the electric utilities’ responses to Tropical Storm Irene and the October
2011 snowstorm. The DPU stated that NSTAR Electric failed to communicate and prioritize restoration efforts in both storms and
WMECO failed to prioritize restoration efforts in the October snowstorm. On December 28, 2012, NSTAR Electric and WMECO
each filed appeals arguing the DPU penalties should be vacated. While we believe NSTAR Electric and WMECO should ultimately
prevail upon appeal, we are unable to conclusively state that a favorable outcome is probable.
On January 16, 2013, PURA approved the $300 million plan CL&P filed on July 9, 2012 to improve the resiliency of the CL&P
electric distribution system. The plan is consistent with the terms of the Connecticut settlement agreement among NU, NSTAR,
and various Connecticut state agencies.
On February 8, 2013, a blizzard caused damage to the electric delivery systems of CL&P and NSTAR Electric. We have estimated
that approximately 71,000 and 350,000 of CL&P and NSTAR Electric's distribution customers, respectively, were without power
during or following the storm. We believe that this storm will cost between $100 million to $120 million, with approximately 90
percent of those costs relating to NSTAR Electric. We expect the storm restoration costs to meet the criteria for specific cost
recovery in each state in which we operate and, as a result, we do not expect the storm to have a material impact on our results of
operations.