Eversource 2015 Annual Report Download - page 51

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ROE of 9.8 percent, the establishment of a revenue decoupling mechanism, the recovery of certain bad debt expenses, and a 52.1 percent equity
component of its capital structure. On November 19, 2015, NSTAR Gas filed a motion for reconsideration of the order with the DPU seeking the
correction of mathematical errors and other plant and cost of service items.
As a result of this order, Eversource recorded regulatory deferrals for costs that have been approved for recovery or are expected to be approved for
recovery in future rate proceedings, which resulted in the recognition of a $10.3 million after-tax benefit in 2015. Included in this amount is a $6.3
million after-tax benefit recorded at NSTAR Electric for certain uncollectible hardship accounts receivable that are expected to be recovered in future
rates given the allowed recoveries of uncollectible hardship accounts receivable by WMECO and NSTAR Gas.
NSTAR Gas - Gas Service Agreement: On April 29, 2015, the DPU approved the GSA, subject to DPU modifications, between NSTAR Gas and
Hopkinton LNG Corp. (HOPCO), an indirect, wholly-owned subsidiary of Eversource. On October 30, 2015, the DPU issued its order in the
NSTAR Gas distribution rate case that required minor changes to the GSA. On May 22, 2015 and November 17, 2015, we filed revised GSAs with
the DPU reflecting these modifications. The GSA effectively replaces the former gas services agreement in place between NSTAR Gas and
HOPCO, maintains NSTAR Gas Company’s entitlement to 100 percent of the current capacity of the HOPCO facilities, and provides for the
recovery of costs associated with planned capital expenditures at the HOPCO facilities. We currently estimate the HOPCO facilities’ capital
expenditures to be approximately $200 million, most of which will be invested and placed into service in the first five years of the GSA. The GSA
has a 30-year term commencing on January 1, 2016.
New Hampshire:
Distribution Rates: PSNH distribution rates were established in a settlement approved by the NHPUC in 2010. Rates established therein will
continue until changed by the NHPUC in a subsequent distribution rate proceeding. In June 2015, PSNH sought and obtained approval for a
distribution rate increase to fund continuation of the reliability enhancement program beyond the end of the PSNH’s 2010 distribution rate
settlement.
Generation Divestiture:
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’s customers. For further information on the securitization legislation that was signed into law on
July 9, 2015, see “Legislative and Policy Matters – New Hampshire” in this Management’s Discussion and Analysis of Financial Conditions and
Results of Operations.
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.
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.
Clean Air Project Prudence Proceeding: The Clean Air Project, which involved the installation of wet scrubber technology at PSNH’s Merrimack
coal-fired generation station in Bow, New Hampshire, pursuant to state law, was placed in service in September 2011. In April 2012, the NHPUC
issued an order authorizing temporary rates to recover a significant portion of the Clean Air Project costs.
Pursuant to the Agreement, on December 22, 2015, the NHPUC approved PSNH’s request to increase its default energy service rate for full recovery
of costs (including a return) related to the Clean Air Project, as well as a deferred equity return, effective January 1, 2016. The approved energy
supply portion of the 2016 rate is 9.99 cents per kWh (including all Clean Energy Project-related costs), and the SCRC rate for 2016 is a credit to
customers of 0.017 cents per kWh.
Legislative and Policy Matters
Federal: On December 18, 2015, the “Protecting Americans from Tax Hikes” Act became law, which extended the accelerated deduction of
depreciation to businesses from 2015 through 2019. This extended stimulus provides us with cash flow benefits of approximately $275 million
(including approximately $105 million for CL&P) due to a refund of taxes paid in 2015 and lower expected tax payments in 2016 of approximately
$300 million.