Eversource 2014 Annual Report Download - page 58

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CL&P and NSTAR Electric recognized lost base revenue (LBR) related to reductions in sales volume as a result of energy efficiency. LBR is
recovered from retail distribution customers. Including the impact from the recognition of LBR, base distribution revenues increased in 2014, as
compared to 2013. We recognized $45.2 million of LBR in 2014,compared to $20.3 million in 2013. Effective December 1, 2014, CL&P no longer
recognizes LBR due to its revenue decoupling mechanism, which, similar to WMECO's revenue decoupling mechanism, provides a base amount of
distribution revenues ($1.041 billion on an annual basis) that effectively breaks the relationship between revenues and customer electricity usage.
The revenue decoupling mechanism is designed to allow each of CL&P and WMECO to encourage energy efficiency for its customers without
negatively impacting its revenues.
Transmission revenues increased $39.5 million in 2014, as compared to 2013, due primarily to the recovery of higher revenue requirements
associated with ongoing investments in our transmission infrastructure. This increase was partially offset by the impact of the $37 million net reserve
recorded in 2014 as a result of the 2014 FERC ROE orders, compared to the $23.7 million reserve recorded in 2013 for the FERC ALJ initial
decision in the FERC base ROE complaints.
Purchased Power, Fuel and Transmission expense includes costs associated with purchasing electricity and natural gas on behalf of our customers.
These energy supply costs are recovered from customers in rates through reconciling cost tracking mechanisms, which have no impact on earnings
(tracked costs). Purchased Power, Fuel and Transmission increased in 2014, as compared to 2013, due primarily to the following:
 Increase/(Decrease)
Electric Distribution $458.2
Natural Gas Distribution
104.1
Transmission (2.8)
Other and Eliminations (20.9)
Total Purchased Power, Fuel and Transmission $538.6
The increase in purchased power, fuel and transmission at the electric and natural gas distribution businesses were driven by the higher costs
associated with the procurement of energy supply. As a result of increases in the New England wholesale energy supply market for both electricity
and natural gas, the costs incurred to purchase energy on behalf of our customers were significantly higher in 2014 compared to 2013. Our energy
supply costs were impacted by higher natural gas delivery costs, which had an adverse impact on the cost of electric energy purchased for our retail
electric customers and the cost of natural gas purchased on behalf of our retail natural gas customers.
Operations and Maintenance expense includes tracked costs and costs that are recovered through base electric and natural gas distribution rates,
which therefore impact earnings (non-tracked costs). Operations and Maintenance decreased in 2014, as compared to 2013, due primarily to the
following:
 Increase/(Decrease)
Base Electric Distribution:
Labor and other employee-related costs, including pension costs $(77.3)
Implementation of a new outage restoration program at CL&P 9.2
Storm restoration costs (11.4)
All other operations and maintenance (29.4)
Total Base Electric Distribution (108.9)
Total Base Natural Gas Distribution (0.9)
Total Tracked costs (Transmission and Electric and Natural Gas Distribution) 16.6
Total Distribution and Transmission (93.2)
Other and eliminations:
Integration and severance costs 13.3
All other (including eliminations) (7.5)
Total Operations and Maintenance $(87.4)
Depreciation increased in 2014, as compared to 2013, due primarily to an increase related to higher utility plant balances resulting from completed
construction projects placed into service ($34.5 million), partially offset by a decrease in the CYAPC and YAEC decommissioning costs, which do
not impact earnings ($30.6 million).
Amortization of Regulatory Assets, Net, which are tracked costs, include certain regulatory-approved tracking mechanisms. Fluctuations in these
costs are recovered from customers in rates and have no impact on earnings. Amortization of Regulatory Assets, Net, decreased in 2014, as
compared to 2013, due primarily to the following:
 Increase/(Decrease)
NSTAR Electric (primarily
recovery of transition costs) $ (236.4)
PSNH (primarily default energy service charge) (9.2)
CL&P (primarily energy supply and energy-related costs) 54.4
WMECO (primarily recovery of transition costs) (3.0)
Other (1.4)
Total Amortization of Regulatory Assets, Net $ (195.6)
Amortization of Rate Reduction Bonds decreased in 2014, as compared to 2013, due to the maturity in 2013 of RRBs of NSTAR Electric, PSNH
and WMECO.