Eversource 2015 Annual Report Download - page 107

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E. FERC ROE Complaints
Three separate complaints have been filed at FERC by combinations of New England state attorneys general, state regulatory commissions,
consumer advocates, consumer groups, municipal parties and other parties (the “Complainants”). In the first complaint, filed in 2011, the
Complainants alleged that the NETOs’ base ROE that had been 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. In the second and third complaints, filed in 2012 and 2014, the Complainants challenged
the NETOs’ base ROE and sought refunds for the respective 15-month periods beginning December 27, 2012 and July 31, 2014.
As a result of the actions taken by the FERC and other developments in the first complaint matter, the Company recorded additional reserves at its
electric subsidiaries in 2015 and 2014. In 2015, Eversource recognized a pre-tax charge to earnings (excluding interest) of $20 million, of which
$12.5 million was recorded at CL&P, $2.4 million at NSTAR Electric, $1 million at PSNH, and $4.1 million at WMECO. The pre-tax charge was
recorded as a regulatory liability and as a reduction to Operating Revenues. In 2014, the net aggregate pre-tax charge to earnings (excluding interest)
totaled $37 million, of which $20.7 million was recorded at CL&P, $7.9 million at NSTAR Electric, $2.8 million at PSNH and $5.6 million at
WMECO. In 2013, the net aggregate pre-tax charge to earnings (excluding interest) totaled $23.7 million, of which $12.8 million was recorded at
CL&P, $5.7 million at NSTAR Electric, $2.3 million at PSNH and $2.9 million at WMECO.
The second and third complaint proceedings are ongoing and a final FERC order is expected in late 2016 or early 2017. Although management is
uncertain on the final outcome of the second and third complaints regarding the ROE, management believes the current reserves established are
appropriate to reflect probable and reasonably estimable refunds.
F. NSTAR Electric and NSTAR Gas Comprehensive Settlement Agreement
On March 2, 2015, the DPU approved the comprehensive settlement agreement between NSTAR Electric, NSTAR Gas and the Massachusetts
Attorney General (the “Settlement”) as filed with the DPU on December 31, 2014. The Settlement resolved the outstanding NSTAR Electric CPSL
program filings for 2006 through 2011, the NSTAR Electric and NSTAR Gas PAM and energy efficiency-related customer billing adjustments
reported in 2012, and the recovery of LBR related to NSTAR Electric’s energy efficiency programs for 2009 through 2011 (11 dockets in total). In
the first quarter of 2015, as a result of the DPU order, NSTAR Electric and NSTAR Gas commenced refunding a combined $44.7 million to
customers, which was recorded as a regulatory liability. Refunds to customers will continue through December 2016. As a result of the Settlement,
NSTAR Electric increased its operating revenues and decreased its amortization expense in 2015, resulting in the recognition of a $21.7 million pre-
tax benefit in 2015.
G. NSTAR Electric Basic Service Bad Debt Adder
On January 7, 2015, the DPU issued an order concluding that NSTAR Electric had removed energy-related bad debt costs from base distribution
rates effective January 1, 2006. As a result of the DPU order, in the first quarter of 2015, NSTAR Electric increased its regulatory assets and reduced
its operations and maintenance expense by an under recovered amount of $24.2 million for energy-related bad debt costs through 2014, resulting in a
pre-tax benefit in 2015. NSTAR Electric filed for recovery of the energy-related bad debt costs regulatory asset from customers and on November
20, 2015the DPU approved NSTAR Electric’s proposed rate increase, to recover these costs over a 12-month period, effective January 1, 2016.
H. PSNH Generation Restructuring
On June 10, 2015, Eversource and PSNH entered into the 2015 Public Service Company of New Hampshire Restructuring and Rate Stabilization
Agreement (the Agreement) with the New Hampshire Office of Energy and Planning, certain members of the NHPUC staff, the Office of Consumer
Advocate, two State Senators, and several other parties. The Agreement was filed with the NHPUC on the same day. Under the terms of the
Agreement, PSNH has agreed to divest its generation assets upon NHPUC approval. The Agreement is designed to provide a resolution of issues
pertaining to PSNH’s generation assets in pending regulatory proceedings before the NHPUC. The Agreement provided for the Clean Air Project
prudence proceeding to be resolved and all remaining Clean Air Project costs to be included in rates effective January 1, 2016. As part of the
Agreement, PSNH has agreed to forego recovery of $25 million of the deferred equity return related to the Clean Air Project. In addition, PSNH will
not seek a general distribution rate increase effective before July 1, 2017 and will contribute $5 million to create a clean energy fund, which will not
be recoverable from its customers. In 2015, PSNH recorded the $5 million contribution as a long-term liability and an increase to Operations and
Maintenance expense on the statements of income.
Upon completion of the divestiture process, all remaining stranded costs will be recovered via bonds that will be secured by a non-bypassable charge
or through other recoveries in rates billed to PSNH customers.
On January 26, 2016, Advisory Staff of the NHPUC and the parties to the Agreement filed a stipulation with the NHPUC agreeing that near-term
divestiture of PSNH’s generation was in the public interest and that the Agreement should be approved. Implementation of the Agreement is subject
to NHPUC approval, which is expected in early 2016.
If the NHPUC approves the settlements and the sale of the plants, then management expects to sell the plants in the first half of 2017. The sales price
of the generating assets could be less than the carrying value, but we believe that full recovery of PSNH’s generation assets is probable through a
combination of cash flows during the remaining operating period, sales proceeds upon divestiture, and recovery of stranded costs in future rates.