Eversource 2015 Annual Report Download - page 74

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Infrastructure and Other Investments: As of December 31, 2015 and 2014, Eversource had an equity ownership interest in an energy investment
fund of $30.3 million and $17.8 million, respectively. Eversource had a 40 percent equity ownership interest in the Algonquin Gas Transmission,
LLC (legal entity that owns Access Northeast assets) of $10.7 million as of December 31, 2015.
K. Revenues
Regulated Companies’ Retail Revenues: The Regulated companies’ retail revenues are based on rates approved by their respective state regulatory
commissions. In general, rates can only be changed through formal proceedings with the state regulatory commissions. The Regulated companies’
rates are designed to recover the costs to provide service to their customers, and include a return on investment. The Regulated companies also
utilize regulatory commission-approved tracking mechanisms to recover certain costs on a fully-reconciling basis. These tracking mechanisms
require rates to be changed periodically to ensure recovery of actual costs incurred.
CL&P (effective December 1, 2014), WMECO, and NSTAR Gas (effective January 1, 2016), each have a regulatory commission approved revenue
decoupling mechanism. Distribution revenues are decoupled from customer sales volumes, which breaks the relationship between sales volumes and
revenues recognized. CL&P and WMECO reconcile their annual base distribution rate recovery to pre-established levels of baseline distribution
delivery service revenues. Any difference between the allowed level of distribution revenue and the actual amount incurred during a 12-month
period is adjusted through rates in the following period.
A significant portion of the Regulated companies’ retail revenues relate to the recovery of costs incurred for the sale of electricity and natural gas
purchased on behalf of customers. These energy supply costs are recovered from customers in rates through cost tracking mechanisms. Energy
purchases are recorded in Purchased Power, Fuel and Transmission, and the sales of energy associated with these purchases are recorded in
Operating Revenues
.
Regulated Companies’ Unbilled Revenues: Because customers are billed throughout the month based on pre-determined cycles rather than on a
calendar month basis, an estimate of electricity or natural gas delivered to customers for which the customers have not yet been billed is calculated as
of the balance sheet date. Unbilled revenues are included in Operating Revenues on the statements of income and in Current Assets on the balance
sheets. Actual amounts billed to customers when meter readings become available may vary from the estimated amount.
The Regulated companies estimate unbilled sales monthly using the daily load cycle method. The daily load cycle method allocates billed sales to
the current calendar month based on the daily load for each billing cycle. The billed sales are subtracted from total month load, net of delivery
losses, to estimate unbilled sales. Unbilled revenues are estimated by first allocating unbilled sales to the respective customer classes, then applying
an estimated rate by customer class to those sales. The estimate of unbilled revenues can significantly impact the amount of revenues recorded at
NSTAR Electric and PSNH because they do not have a revenue decoupling mechanism. CL&P and WMECO record a regulatory deferral to reflect
the actual allowed amount of revenue for decoupling.
Regulated Companies’ Transmission Revenues - Wholesale Rates: Wholesale transmission revenues are recovered through FERC approved formula
rates. Wholesale transmission revenues for CL&P, NSTAR Electric, PSNH, and WMECO are collected through a combination of regional and local
rates, both of which are under the ISO New England Transmission, Markets and Services Tariff (ISO-NE Tariff). The ISO-NE Tariff includes
Regional Network Service (RNS), Schedule 21 – ES rate schedules, which recover the costs of transmission and other transmission-related services
for CL&P, PSNH and WMECO, and Schedule 21 - NSTAR rate schedules, which recover costs of transmission and other transmission-related
services for NSTAR Electric. The RNS rate, administered by ISO-NE and billed to all New England transmission load, including CL&P, NSTAR
Electric, PSNH and WMECO’s distribution businesses, is reset on June 1
st
of each year and recovers the revenue requirements associated with Pool
Transmission Facilities (PTF) that benefit the entire New England region. The Schedule 21 – ES rate and Schedule 21 - NSTAR rate are
administered by Eversource and recover any PTF costs not recovered under RNS rates, as well as the cost of transmission facilities associated with
the respective utility’s local system. The Schedule 21 - ES rate is reset on January 1st and June 1st of each year, while the Schedule 21 - NSTAR rate
is reset on June 1st of each year. The Schedule 21 – ES rate and Schedule 21 - NSTAR rate calculations recover total transmission revenue
requirements net of revenues received from other sources (i.e., RNS, rentals, etc.), thereby ensuring that Eversource recovers all of CL&P’s, NSTAR
Electric’s, PSNH’s and WMECO’s regional and local transmission revenue requirements in accordance with the ISO-NE Tariff. The RNS, Schedule
21 – ES rate and Schedule 21 - NSTAR rate provide for the annual reconciliation and recovery or refund of estimated costs to actual costs. The
financial impacts of differences between actual and estimated costs are deferred for future recovery from, or refunded to, transmission customers.
See Note 11E, “Commitments and Contingencies – FERC ROE Complaints,” for complaints filed at the FERC relating to Eversource’s ROE.
Regulated Companies’ Transmission Revenues - Retail Rates: A significant portion of the Eversource transmission segment revenue comes from
ISO-NE charges to the distribution businesses of CL&P, NSTAR Electric, PSNH and WMECO, each of which recovers these costs through rates
charged to their retail customers. CL&P, NSTAR Electric, PSNH and WMECO each have a retail transmission cost tracking mechanism as part of
their rates, which allows the electric distribution companies to charge their retail customers for transmission costs on a timely basis.
L. Operating Expenses
Costs related to fuel and natural gas included in Purchased Power, Fuel and Transmission on the statements of income were as follows:
For the Years Ended December 31,
(Millions of Dollars)
2015 2014 2013
Eversource - Natural Gas and Fuel $ 516.7 $ 599.4 $ 466.5
PSNH - Fuel 85.4 113.4 104.8