Eversource 2014 Annual Report Download - page 21

9
FERC Base ROE Complaints
Beginning in 2011, several New England state attorneys general, state regulatory commissions, consumer advocates, consumer groups, municipal
parties and other parties (the "Complainants") jointly filed three separate complaints at FERC. In the first complaint, filed in 2011, the Complainants
alleged that the NETOs'base ROE of 11.14 percent that was utilized since 2006 was unjust and unreasonable, asserted that the rate was excessive due
to changes in the capital markets, and sought an order to reduce it prospectively from the date of the final FERC order and for the 15-month period
beginning October 1, 2011 to December 31, 2012 (the "first complaint refund period"). In the pursuant second and third complaints, filed in 2012
and 2014, respectively, the Complainants challenged the NETOs'base ROE and sought refunds for the 15-month periods beginning December 27,
2012 and July 31, 2014, respectively.
In 2014, the FERC determined that the base ROE should be set at 10.57 percent for the first complaint refund period and that a utility's total or
maximum ROE should not exceed the top of the new zone of reasonableness (7.03 percent to 11.74 percent). The FERC ordered the NETOs to
provide refunds to customers for the first complaint refund period and set the new base ROE of 10.57 percent prospectively from October 16, 2014.
In late 2014, the NETOs made a compliance filing, and began refunding amounts from the first complaint period, inclusive of incentive ROE adders
that exceeded the 11.74 percent as compared to the total company transmission ROE. Complainants have challenged the compliance filing.
As a result of the actions taken by the FERC and other developments in this matter, NU recorded reserves in 2013 and 2014 to recognize the potential
financial impacts of the first and second complaints. The Company is unable to determine any amount related to the third complaint. The aggregate
after-tax net charge to 2014 earnings resulting from the 2014 FERC orders totaled $22.4 million at NU. In 2013, the aggregate after-tax charge to
earnings totaled $14.3 million at NU.
Although management is uncertain on the final outcome on the second and third complaints regarding the base ROE and the incentive ROE adder,
management believes the current reserves established are appropriate to reflect probable and reasonably estimable refunds. For further information,
see "FERC Regulatory Issues –FERC Base ROE Complaints" in the accompanying Item 7, '
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FERC Order No. 1000
On August 15, 2014, the D.C. Circuit Court of Appeals upheld FERC's authority to order major changes to transmission planning and cost allocation
in FERC Order No. 1000 and Order No. 1000-A, including transmission planning for public policy needs, and the requirement that utilities remove
from their transmission tariffs their rights of first refusal to build transmission. FERC has not yet ruled on the comprehensive compliance filings
made in November 2013 by the NETOs, including CL&P, NSTAR Electric, PSNH and WMECO. We cannot predict the final outcome or impact on
us; however, implementation of FERC's goals in New England, including within our service territories, may expose us to competition for
construction of transmission projects, additional regulatory considerations, and potential delay with respect to future transmission projects. While the
FERC Orders may bring new challenges, we believe there are also opportunities for us to compete for transmission reliability projects outside of our
service territories.
Transmission Projects
During 2014, we were involved in the planning, development and construction of a series of transmission projects, including the NEEWS family of
projects, Northern Pass, which is NU's planned HVDC transmission line from the Québec-New Hampshire border to Franklin, New Hampshire and
an associated alternating current radial transmission line between Franklin and Deerfield, New Hampshire, and Greater Boston Reliability Solutions,
which are a series of new transmission projects over the next five years that will enhance system reliability and improve capacity. For further
information, see "Business Development and Capital Expenditures –Transmission Business" in the accompanying Item 7, '
.
Transmission Rate Base
Under our FERC-approved tariff, and with the exception of transmission projects that received specific FERC approval to include CWIP in rate base,
transmission projects generally enter rate base after they are placed in commercial operation. At the end of 2014, our estimated transmission rate
base was approximately $4.9 billion, including approximately $2.4 billion at CL&P, $1.3 billion at NSTAR Electric, $535 million at PSNH, and
$611 million at WMECO.