Eversource 2014 Annual Report Download - page 23

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NSTAR Gas files interim changes to its CGAC factor when the actual costs of natural gas supply vary from projections by more than five
percent; and
A local distribution adjustment clause (LDAC) at NSTAR Gas that collects energy efficiency program costs, environmental costs, pension
and PBOP related costs, energy efficiency costs, attorney general consultant costs, and costs associated with low income customers. The
LDAC is reset annually and provides for the recovery of certain costs applicable to both sales and transportation customers.
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 from or refunded 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) at Yankee Gas, which allows 100 percent recovery of conservation costs through this
mechanism including program incentives to promote energy efficiency, as well as recovery of any lost revenues associated with
implementation of energy conservation measures. A reconciliation of CAM revenues to expenses is performed annually with any
difference being recovered from or refunded to customers, with carrying charges, during the following year.
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 DPU in 2006. This
practice attempts to minimize the impact of fluctuations in natural gas prices to NSTAR Gas'firm natural gas customers. These financial contracts
do not procure natural gas supply. All costs incurred or benefits realized when these contracts are settled are included in the CGAC.
NSTAR Gas is subject to SQ metrics that measure safety, reliability and customer service and could be required to pay to customers a SQ charge of
up to 2.5 percent of annual distribution revenues for failing to meet such metrics. NSTAR Gas will not be required to pay a SQ charge for its 2014
performance as it achieved results at or above target for all of its SQ metrics in 2014.
On December 17, 2014, NSTAR Gas filed an application with the DPU requesting an increase in rates, effective January 1, 2016. NSTAR Gas
requested an increase in base distribution rates of $33.9 million. Based on the current schedule, we expect a final decision in the fourth quarter of
2015.
In 2011, PURA approved Yankee Gas'rate proceeding. The final decision approved a regulatory ROE of 8.83 percent and allowed for a substantial
increase in annual spending for bare steel and cast iron pipeline replacement.
Massachusetts Natural Gas Replacement and Expansion
On July 7, 2014, Massachusetts enacted "An Act Relative to Natural Gas Leaks" (the Act). The Act establishes a uniform natural gas leak
classification standard for all Massachusetts natural gas utilities and a program that accelerates the replacement of aging natural gas infrastructure.
The program will enable companies, including NSTAR Gas, to better manage the scheduling and costs of replacement. The Act also calls for the
DPU to authorize natural gas utilities to design and offer programs to customers that will increase the availability, affordability and feasibility of
natural gas service for new customers.
NSTAR Gas filed the Gas System Enhancement Program (GSEP) with the DPU on October 31, 2014. NSTAR Gas'program accelerates the
replacement of certain natural gas distribution facilities in the system within 25 years. The GSEP includes a new tariff that provides NSTAR Gas an
opportunity to collect the costs for the program on an annual basis through a newly designed reconciling factor to be approved by the DPU. We
expect a decision on the program in April 2015.
Connecticut Natural Gas Expansion Plan
In 2013, in accordance with Connecticut law and regulation, PURA approved a comprehensive joint natural gas infrastructure expansion plan
(expansion plan) filed by Yankee Gas and other Connecticut natural gas distribution companies. The expansion plan described how Yankee Gas
expects to add approximately 82,000 new natural gas heating customers over the next 10 years. Yankee Gas estimates that its portion of the plan will
cost approximately $700 million over 10 years. In January 2015, PURA approved a joint settlement agreement proposed by Yankee Gas and other
Connecticut natural gas distribution companies and regulatory agencies that clarified the procedures and oversight criteria applicable to the expansion
plan.
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
the Gulf Coast, Mid-continent region, and Appalachian Shale supplies to the final delivery points in the NSTAR Gas service area. NSTAR Gas
purchases all of its natural gas supply under a firm portfolio management contract with a term of one year, which has a maximum quantity of
approximately 154,700 MMBtu/day of firm flowing natural gas supplies and 76,700 MMBtu/day of firm natural gas storage supplies.
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 natural gas during the warmer months for vaporization and use during the heating season. During the summer injection