Eversource 2015 Annual Report Download - page 21

9
the rules by which they acquire transmission services. Under these arrangements, ISO-NE, a non-profit corporation whose board of directors and
staff are independent of all market participants, serves as the regional transmission organization of the New England transmission system.
Wholesale Transmission Revenues
A summary of Eversource Energy’s wholesale transmission revenues is as follows:
(Thousands of Dollars) 2015
CL&P
$
513,025
NSTAR Electric 299,241
PSNH 127,509
WMECO 129,502
Total Wholesale Transmission Revenues
$
1,069,277
Wholesale Transmission Rates
Wholesale transmission revenues are recovered through FERC approved formula rates. Transmission revenues are collected from New England
customers, the majority of which are distribution customers of CL&P, NSTAR Electric, PSNH and WMECO. The transmission rates provide for the
annual reconciliation of estimated to actual costs. The financial impacts of differences between actual and estimated costs are deferred for future
recovery from, or refunded to, transmission customers.
FERC Base ROE Complaints
Three separate complaints have been filed at the FERC by combinations of New England state attorneys general, state regulatory commissions,
consumer advocates, consumer groups, municipal parties and other parties (the “Complainants”). In these three separate complaints, the
Complainants challenged the NETOs’ base ROE of 11.14 percent that had been utilized since 2006 and sought an order to reduce it prospectively
from the date of the final FERC order and for the 15-month complaint refund periods stipulated in the separate complaints. In 2014, the FERC
ordered a 10.57 percent base ROE for the first complaint refund period and prospectively from October 16, 2014 and that a utility’s total or
maximum ROE shall not exceed the top of the new zone of reasonableness, which was set at 11.74 percent. The NETOs and the Complainants
sought rehearing from the FERC. In late 2014, the NETOs made a compliance filing and the Company began issuing refunds to customers from the
first complaint period.
On March 3, 2015, FERC issued an order denying all issues raised on rehearing by the NETOs and Complainants in the first complaint. The FERC
order upheld the base ROE of 10.57 percent for the first complaint refund period and prospectively from October 16, 2014, and upheld that the
utility’s total ROE (the base ROE plus any incentive adders) for the transmission assets to which the adder applies is capped at the top of the zone of
reasonableness, which is currently set at 11.74 percent. The NETOs and Complainants have filed appeals to the D.C. Circuit Court of Appeals,
which have been consolidated, and briefing is scheduled to be concluded in the second quarter of 2016. A court decision is expected in late 2016.
For the second and third complaint proceedings, hearings were held in late June and early July 2015 and briefs were filed in July and August 2015.
The state parties, municipal utilities and FERC trial staff each believe that the base ROE should be reduced to an amount lower than 10.57 percent.
The NETOs believe that the Complainants’ positions are without merit, and the existing base ROE of 10.57 is just and reasonable and should be
maintained. On December 18, 2015, the FERC ALJ reopened the record to have the NETOs and FERC trial staff review certain calculations. The
FERC ALJ’s initial recommendation is expected by March 31, 2016. A final FERC order is expected in late 2016 or early 2017.
Although Eversource is uncertain on the final outcome of the second and third complaints regarding the ROE, we believe the current reserves
established are appropriate to reflect probable and reasonably estimable refunds. For further information, see “FERC Regulatory Issues – FERC ROE
Complaints” in the accompanying Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FERC Order No. 1000
On August 15, 2014, the D.C. Circuit Court of Appeals upheld the FERC’s authority to order major changes to transmission planning and cost
allocation in FERC Order No. 1000 and Order No. 1000-A, including transmission planning for public policy needs, and the requirement that utilities
remove from their transmission tariffs their rights of first refusal to build transmission. On March 19, 2015, the FERC acted on all rehearing requests
filed by the NETOs, including CL&P, NSTAR Electric, PSNH and WMECO, and other parties and accepted the November 2013 compliance filing
made by ISO-NE and the NETOs, subject to further compliance. The FERC accepted our proposal that the new competitive transmission planning
process will not apply to certain projects, which have been declared as the preferred solution by ISO-NE, unless ISO-NE later decides a solution must
be re-evaluated. The FERC determined on rehearing that we can restore provisions that recognize the NETOs’ rights to retain use and control of
their existing rights of ways. Final compliance was filed by the NETOs in November 2015 and was accepted by the FERC on December 14, 2015.
Additionally, the FERC affirmed that it can eliminate our right of first refusal to build transmission in New England even though the FERC
previously approved and granted special protections to these rights. The NETOs filed an appeal to the D.C. Circuit Court of Appeals, challenging
this FERC ruling. State regulators also filed an appeal, challenging FERC’s determination that ISO-NE should select public policy transmission
projects after a competitive process. The Court is expected to resolve the appeals in 2016.