Eversource 2015 Annual Report Download - page 24

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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.
In October 2014, pursuant to the Act, NSTAR Gas filed the Gas System Enhancement Program (GSEP) with the DPU. NSTAR Gas’ program
accelerates the replacement of certain natural gas distribution facilities in the system to within 25 years. The GSEP includes a new tariff effective
January 1, 2016 that provides NSTAR Gas an opportunity to collect the costs for the program on an annual basis through a newly designed
reconciling factor. On April 30, 2015, the DPU approved the GSEP. We expect capital expenditures of approximately $255 million for the period
2016 through 2019 for the GSEP.
Connecticut Natural Gas Expansion Plan
In 2013, in accordance with Connecticut law and regulations, the 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 a 10-year period. Yankee Gas estimates that its portion of the plan will
cost approximately $700 million over 10 years. In January 2015, the 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. On March 20, 2015, Yankee Gas filed its initial System Expansion (SE) Rate reconciliation for 2014. The proposed SE rate was
approved by the PURA for implementation as of April 1, 2015, pending final PURA approval following a contested hearing.
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
season, excess pipeline capacity and supplies are used to deliver and store natural gas in market area underground storage facilities located in the
New York and Pennsylvania regions. Stored natural gas is withdrawn during the winter season to supplement flowing pipeline supplies in order to
meet firm heating demand. NSTAR Gas has firm underground storage contracts and total storage capacity entitlements of approximately 6.6 Bcf.
A portion of the storage of natural gas supply for NSTAR Gas during the winter heating season is provided by Hopkinton LNG Corp., which owns an
LNG liquefaction and vaporization plant and three above-ground cryogenic storage tanks having an aggregate capacity of 3.0 Bcf of liquefied natural
gas. NSTAR Gas also has access to Hopkinton LNG Corp. facilities that include additional storage capacity of 0.5 Bcf and additional vaporization
capacity.
The PURA requires that Yankee Gas meet the needs of its firm customers under all weather conditions. Specifically, Yankee Gas must structure its
supply portfolio to meet firm customer needs under a design day scenario (defined as the coldest day in 30 years) and under a design year scenario
(defined as the average of the four coldest years in the last 30 years). Yankee Gas’ on-system stored LNG and underground storage supplies help to
meet consumption needs during the coldest days of winter. Yankee Gas obtains its interstate capacity from the three interstate pipelines that directly
serve Connecticut: the Algonquin, Tennessee and Iroquois Pipelines. Yankee Gas has long-term firm contracts for capacity on TransCanada
Pipelines Limited Pipeline, Vector Pipeline, L.P., Tennessee Gas Pipeline, Iroquois Gas Transmission Pipeline, Algonquin Pipeline, Union Gas
Limited, Dominion Transmission, Inc., National Fuel Gas Supply Corporation, Transcontinental Gas Pipeline Company, and Texas Eastern
Transmission, L.P. pipelines.
Based on information currently available regarding projected growth in demand and estimates of availability of future supplies of pipeline natural
gas, NSTAR Gas and Yankee Gas each believes that participation in planned and anticipated pipeline and storage expansion projects will be required
in order for it to meet current and future sales growth opportunities.
NATURAL GAS PIPELINE EXPANSION
Access Northeast is a natural gas pipeline and storage project (the “Project”) being developed jointly by Eversource, Spectra Energy Corp and
National Grid. Access Northeast will enhance the Algonquin and Maritimes & Northeast pipeline systems using existing routes and will include two
new LNG storage tanks and liquefaction and vaporization facilities in Acushnet, Massachusetts that will be connected to the Algonquin gas pipeline.
The Project is expected to be capable of delivering approximately 900 million cubic feet of additional natural gas per day to New England on peak
demand days. Eversource and Spectra Energy Corp each own a 40 percent interest in the Project, with the remaining 20 percent interest owned by
National Grid. The total projected cost for both the pipeline and the LNG storage is expected to be approximately $3 billion with anticipated in-
service dates commencing in November 2018. The Project is subject to FERC and other federal and state regulatory approvals. On November 17,