Eversource 2014 Annual Report Download - page 22

10
NATURAL GAS DISTRIBUTION SEGMENT
NSTAR Gas distributes natural gas to approximately 282,000 customers in 51 communities in central and eastern Massachusetts covering 1,067
square miles and Yankee Gas distributes natural gas to approximately 222,000 customers in 71 cities and towns in Connecticut covering 2,187 square
miles. Total throughput (sales and transportation) in 2014 was approximately 60.5 Bcf for NSTAR Gas and 55 Bcf for Yankee Gas. Our natural gas
businesses provide 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 natural gas for heating, hot water and cooking needs, and commercial and industrial customers who choose to
purchase natural gas from NU's natural gas distribution companies. A portion of the storage of natural gas supply for NSTAR Gas during the winter
heating season is provided by Hopkinton LNG Corp., an indirect, wholly-owned subsidiary of NU. 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. Yankee Gas 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 it to provide economic supply and make economic refill of natural gas typically during periods
of low demand.
NSTAR Gas and Yankee Gas generate revenues primarily through the sale and/or transportation of natural gas. Predominantly all residential
customers in the NSTAR Gas service territory buy gas supply and delivery from NSTAR Gas while all customers may choose their gas suppliers.
Retail natural gas service in Connecticut is partially unbundled: residential customers in Yankee Gas'service territory buy natural gas supply and
delivery only from Yankee Gas while commercial and industrial customers may choose their natural gas suppliers. NSTAR Gas offers firm
transportation service to all customers who purchase gas from sources other than NSTAR Gas while Yankee Gas offers firm transportation service to
its commercial and industrial customers who purchase natural gas from sources other than Yankee Gas. In addition, both natural gas distribution
companies offer interruptible transportation and interruptible natural gas sales service to those high volume commercial and industrial customers,
generally during the colder months, that have the capability to switch from natural gas to an alternative fuel on short notice, for whom NSTAR Gas
and Yankee Gas can interrupt service during peak demand periods or at any other time to maintain distribution system integrity.
The following table shows the sources of the 2014 total NU natural gas franchise retail revenues based on categories of customers:
 2014 % of Total
Residential
$
520,410 55
Commercial 332,414 35
Industrial 94,861 10
Total Retail Natural Gas Revenues
$
947,685 100%
A summary of our firm natural gas sales volumes in million cubic feet and percentage changes for 2014, as compared to 2013, is as follows:
Percentage
2014 2013 Change
Residential 38,969 36,777 6.0%
Commercial 42,977 40,215 6.9%
Industrial 22,245 21,266 4.6%
Total 104,191 98,258 6.0%
Total, Net of Special Contracts
(1)
99,500 94,083 5.8%
(1) Special contracts are unique to the customers who take service under such an arrangement and generally specify the amount of distribution revenue to be paid to
Yankee Gas regardless of the customers'usage.
Our firm natural gas sales are subject to many of the same influences as our retail electric sales. In addition, they have benefited from favorable
natural gas prices and customer growth across both operating companies. Our 2014 consolidated firm natural gas sales volumes, consisting of the
firm natural gas sales volumes of Yankee Gas and NSTAR Gas, were higher, as compared to 2013, due primarily to colder weather in the first quarter
of 2014, as compared to the same period in 2013, and increased customer growth in 2014, as compared to 2013. Weather-normalized NU
consolidated firm natural gas sales volumes increased 2.9 percent in 2014, as compared to 2013.
Rates
NSTAR Gas and Yankee Gas are subject to regulation by the DPU and PURA, respectively, which, among other things, have jurisdiction over rates,
certain dispositions of property and plant, mergers and consolidations, issuances of long-term securities, standards of service and construction and
operation of facilities. Both of NU's natural gas companies are entitled under their respective state law to charge rates that are sufficient to allow
them an opportunity to recover their reasonable operating and capital costs, in order to attract needed capital and maintain their financial integrity,
while also protecting relevant public interests.
Retail natural gas delivery and supply rates are established by the DPU and 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;
A seasonal cost of gas adjustment clause (CGAC) at NSTAR Gas 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 semi-annually. In addition,