Eversource 2014 Annual Report Download - page 50

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CL&P, NSTAR Electric, PSNH and WMECO experienced several significant storm events, including Tropical Storm Irene in 2011, the October
2011 snowstorm, Storm Sandy in 2012, and the February 2013 blizzard. As a result of these storm events, each company suffered extensive damage
to its distribution and transmission systems resulting in customer outages. Each company incurred significant costs to repair damage and restore
customers' service. In addition, on November 26, 2014, a snowstorm caused damage to the electric delivery systems of PSNH and WMECO. This
snowstorm resulted in estimated deferred storm restoration costs of approximately $23 million at PSNH and approximately $3 million at WMECO.
The magnitude of these storm restoration costs met the criteria for cost deferral in Connecticut, Massachusetts, and New Hampshire. As a result, the
storms had no material impact on the results of operations of CL&P, NSTAR Electric, PSNH and WMECO. We believe the storm restoration costs
were prudent and meet the criteria for specific cost recovery in Connecticut, Massachusetts and New Hampshire, and that recovery from customers is
probable through the applicable regulatory recovery process. Each electric utility has sought, or is seeking, recovery of its deferred storm restoration
costs through its applicable regulatory recovery process. As of December 31, 2014, all CL&P deferred storm costs have been reviewed and approved
for recovery in distribution rates, NSTAR Electric received DPU approval for recovery of $34.2 million of deferred storm costs related to Tropical
Storm Irene in 2011 and the October 2011 snowstorm, PSNH received an NHPUC audit report, which found no exception with storm costs from
2011 through March 2013, and WMECO received DPU approval to begin recovering the October 2011 snowstorm and 2012 Storm Sandy restoration
costs, of which the DPU approved the majority of deferred storm costs through 2011.
DPU Storm Penalties: In December 2012, in separate orders issued by the DPU, the DPU ordered penalties of $4.1 million and $2 million for
NSTAR Electric and WMECO, respectively, related to the electric utilities' responses to Tropical Storm Irene and the October 2011 snowstorm,
which were refunded to their customers. In December 2012, NSTAR Electric and WMECO each filed appeals with the SJC arguing the DPU
penalties should be vacated. On September 4, 2014, the SJC vacated $2 million of NSTAR Electric's $4.1 million penalties, as it did not believe that
substantial evidence existed to support such penalties, while it upheld the WMECO penalties. Subsequently, the DPU reinstated approximately $0.4
million of NSTAR Electric storm penalties pursuant to a December 22, 2014 order.
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Distribution Rates: On June 9, 2014, CL&P filed an application with PURA to amend distribution rates, effective December 1, 2014. The
application included an increase to base distribution rates, as well as increases for the recovery of previously approved 2011 and 2012 deferred storm
restoration costs and previously approved electric system resiliency costs. After the legal briefing process, CL&P updated its requested increase to
reflect a reduction to the storm cost recovery amounts. The reduction primarily related to applying the impact of the $65.4 million DOE Phase II
Damages proceeds received on June 1, 2014 to the total deferred storm restoration costs of $365 million, as ordered by PURA on June 17, 2014.
On December 17, 2014, PURA issued a final order and approved a total distribution rate increase of $134 million, which includes an authorized ROE
of 9.02 percent for the first twelve month period and 9.17 percent thereafter. The 2011 and 2012 storm costs were approved in their entirety, to be
recovered over a six-year period, and adjustments to storm cost recovery and system resiliency cost recovery reflect the lower approved ROE. PURA
granted a re-opener to the rate application for further review of the appropriate treatment of deferred income taxes for rate base purposes. If PURA
concludes that CL&P's treatment of its deferred taxes for rate base purposes is correct, it would result in an additional annual increase to total
distribution rates of $22 million. CL&P is currently responding to information requests and has provided additional information with respect to the
treatment of deferred income taxes for rate base purposes and expects a decision no later than the third quarter of 2015.
The PURA also approved the establishment of a revenue decoupling reconciliation mechanism, effective December 1, 2014, whereby actual base
distribution rate recovery is reconciled with pre-established revenue requirement level on an annual basis. Any difference between the allowed level
of distribution revenue and the actual amount incurred in a calendar year is adjusted through rates in the following year. The baseline allowed
distribution revenue is $1.041 billion, which will remain constant until CL&P's next rate case. With the implementation of the decoupling
mechanism, LBR will no longer be recognized effective December 1, 2014, and CL&P will not experience significant fluctuations to its base
distribution revenues regardless of the impact of weather and energy efficiency by its customers.
The PURA also allowed CL&P recovery of $31.1 million in 2013 storm costs and residual 2012 Storm Sandy costs over a seven-year period
beginning December 1, 2014.
CL&P 2014 Storm Order: On March 12, 2014, PURA approved recovery of $365 million of deferred storm restoration costs (with carrying charges)
associated with five major storms that occurred in 2011 and 2012 and ordered CL&P to capitalize approximately $18 million of the deferred storm
restoration costs as utility plant, which will be recovered through depreciation expense in future rate proceedings. On December 1, 2014, CL&P
began recovering approximately $300 million in its distribution rates over a six-year period, which was net of $65.4 million of DOE Phase II
Damages proceeds. The remaining costs were either disallowed or are probable of recovery from other sources. These costs did not have a material
impact on CL&P's financial position or results of operations.
CL&P Standard Service and Last Resort Service Rates:CL&P's residential and small to intermediate commercial and industrial customers who do
not choose competitive energy suppliers are served under SS rates, and large commercial and industrial customers who do not choose competitive
energy suppliers are served under LRS rates. Effective January 1, 2015, the PURA approved an increase to CL&P's energy supply portion of the
total average SS rate to 12.446 cents per kWh and the energy supply portion of the total average LRS rate to 17.714 cents per kWh. These changes
were due primarily to the market conditions for the procurement of energy. The SS and LRS rates reflect CL&P's costs to procure energy for its
customers. Adjustments to these rates do not impact earnings, as CL&P is fully recovering the costs of its SS and LRS services from customers.