Eversource 2015 Annual Report Download - page 49

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Regulatory Developments and Rate Matters
General:
Clean Energy RFP: In February 2015, pursuant to clean energy goals established in three New England states (Connecticut, Massachusetts and
Rhode Island), CL&P, NSTAR Electric, WMECO, other EDCs, and state agencies in the three states jointly developed and issued a draft request for
proposal (RFP) for clean energy resources (including Class I renewable generation and large hydroelectric generation). The draft RFP solicits offers
for clean energy and the transmission to deliver that energy to the three states. The procurement will allow the states to identify large-scale projects
that may offer the potential to meet their clean energy goals in a cost-effective manner when entered into jointly, while complying with the clean
energy statutes within the three states.
The DPU and the Rhode Island Public Utilities Commission (PUC) approved the draft RFP that was jointly submitted by certain EDCs. The draft
RFP encompassed the timetable and method for the solicitation and execution of any associated long-term contracts. On August 31, 2015, the DEEP
issued a notice of proceeding on the Connecticut portion of the draft RFP and accepted public comment through September 30, 2015. On
November 12, 2015, the DEEP and the Massachusetts and Rhode Island EDCs issued the RFP to a wide range of potentially interested bidders. In
late January 2016, bidders submitted project proposals, among which were the Northern Pass and Clean Energy Connect projects, selection of which
will take place between April and July 2016. The expected timeframe within which EDCs will execute contracts and submit them for regulatory
commission approval from the respective state regulators is from June through October 2016 with approval expected in late 2016.
New England Natural Gas Pipeline Capacity: In 2014, the six New England states began to explore ways to address and mitigate winter natural gas
price volatility and the associated impact on electric power supply costs attributable to winter pipeline capacity constraints. Five states are currently
pursuing natural gas capacity expansion efforts. In 2014, Rhode Island approved legislation authorizing the Rhode Island Division of Public Utilities
and Carriers and the Office of Energy Resources to participate in the RFP process and file proposals with the PUC. In late 2015, Access Northeast
bid on the natural gas pipeline and storage RFP issued by the Rhode Island EDC. We expect the EDC will file their selected contracts with the PUC
in the first half of 2016. The Massachusetts DPU determined that it has the authority to allow EDCs to contract for natural gas pipeline capacity and
in late 2015, certain Massachusetts EDCs, including NSTAR Electric and WMECO, issued a natural gas pipeline capacity RFP. In December 2015
and January 2016, those Massachusetts EDCs filed with the DPU seeking approval of the contracts for pipeline and storage capacity, including
Access Northeast. On January 19, 2016, the NHPUC issued an order accepting a staff report that concluded that the NHPUC could approve contracts
between pipelines and EDCs if they were shown to reduce electricity costs and be in the public interest. In February 2016, PSNH filed for approval
with the NHPUC, its proposed contract for natural gas pipeline capacity and storage with Access Northeast.
The Connecticut DEEP expects to
provide an opportunity for public comment on a natural gas pipeline capacity RFP in the first quarter of 2016.
Electric and Natural Gas Base Distribution Rates:
Each Eversource utility subsidiary is subject to the regulatory jurisdiction of the state in which it operates: CL&P and Yankee Gas operate in
Connecticut and are subject to PURA regulation; NSTAR Electric, WMECO and NSTAR Gas operate in Massachusetts and are subject to DPU
regulation; and PSNH operates in New Hampshire and is subject to NHPUC regulation. The Regulated companies’ distribution rates are set by their
respective state regulatory commissions, and their tariffs include mechanisms for periodically adjusting their rates for the recovery of specific
incurred costs.
In Connecticut, CL&P distribution rates were established in a 2014 PURA approved rate case. Yankee Gas distribution rates were established in a
2011 PURA approved rate case. In Massachusetts, electric utility companies are required to file at least one distribution rate case every five years,
and natural gas companies to file at least one distribution rate case every 10 years, and those companies are limited to one settlement agreement in
any 10-year period. NSTAR Electric and WMECO were subject to a base distribution rate freeze through December 31, 2015. NSTAR Gas
distribution rates effective January 1, 2016 were established in an October 30, 2015 DPU distribution rate order. See Massachusetts – NSTAR Gas
Distribution Rates in this Regulatory Developments and Rate Matters section for further information. In New Hampshire, PSNH distribution rates
were established in a settlement approved by the NHPUC in 2010. Prior to the expiration of that settlement, the NHPUC approved the continuation,
and increased funding via rates, of PSNH’s reliability enhancement program. See New Hampshire - Distribution Rates in this Regulatory
Developments and Rate Matters section for further information.
Electric and Natural Gas Retail Rates:
The Eversource EDCs obtain and resell power to retail customers who choose not to buy energy from a competitive energy supplier. The natural gas
distribution companies procure natural gas for firm and seasonal customers. These energy supply procurement costs are recovered from customers in
energy supply rates that are approved by the respective state regulatory commission. The rates are reset periodically and are fully reconciled to their
costs. Each electric and natural gas distribution company fully recovers its energy supply costs through approved regulatory rate mechanisms and,
therefore, such costs have no impact on earnings.
The electric and natural gas distribution companies also recover certain costs on a fully reconciling basis through regulatory commission-approved
cost tracking mechanisms and, therefore, such costs have no impact on earnings. Costs recovered through costs tracking mechanisms include energy
efficiency program costs, electric transmission charges, electric federally mandated congestion charges, system resiliency costs, certain uncollectible
hardship bad debt expenses, and restructuring and stranded costs resulting from deregulation. The reconciliation filings compare the total actual costs
allowed to revenue requirements related to these services and the difference between the costs incurred (or the rate recovery allowed) and the actual
costs allowed is deferred and included, to be either recovered or refunded, in future customer rates.