National Grid 2012 Annual Report Download - page 28

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In January 2011, the DPU opened an investigation into Massachusetts Electric and Nantucket’ s preparation and response
to a December 2010 winter storm. The DPU has the authority to issue fines not to exceed approximately $0.3 million for
each violation for each day that the violation persists. On September 22, 2011, the DPU approved a settlement between
Massachusetts Electric and the Attorney General that included a $1.2 million refund to customers. The Department is
currently investigating Massachusetts Electric and Nantucket’ s response to Tropical Storm Irene and the October 29,
2011 snow storm in a consolidated proceeding. The maximum fine may not exceed $20 million for any related series of
violations for each storm. On July 26, 2012, the Attorney General recommended that the DPU levy fines of
approximately $16 million against Massachusetts Electric related to the Massachusetts Electric’ s response to these two
storm events. The docket associated with Massachusetts Electric’ s storm response is ongoing at the DPU.
Energy Efficiency
Pursuant to the 2008 Green Communities Act, the Massachusetts Legislature mandated large scale and innovative ideas
for implementing renewable and alternative energy sources, as well as increased energy efficiency spending.
Massachusetts Electric’ s first three-year energy efficiency plan, offered as a single combined program with Nantucket,
covers calendar years 2010 through 2012 and significantly expands energy efficiency programs for customers with a
concomitant increase in spending. The approved budget for the two electric companies in Massachusetts for calendar
years 2010 through 2012 is $578 million. In addition to cost recovery, Massachusetts Electric has the opportunity to
earn performance incentives. Massachusetts Electric also has requested recovery of lost base revenues for calendar year
2009.
In October 2009 the DPU approved Massachusetts Electric and Nantucket’ s proposal to construct, own, and operate
approximately 5 MW of solar generation on five separate properties owned by Massachusetts Electric and/or its affiliates
in Dorchester, Everett, Haverhill, Revere, and a location on the Sutton/Northbridge border. The estimated total capital
cost of the projects is approximately $31 million. As each unit goes into service, Massachusetts Electric and Nantucket
are allowed to recover the costs of each site with a return equal to the weighted average cost of capital approved by the
DPU in Massachusetts Electric’ s most recent rate proceeding. Massachusetts Electric and Nantucket requested rate
adjustments under this mechanism for the Sutton/Northbridge facility in August 2010 for recovery of approximately $1.0
million, and for the Revere, Everett and Haverhill facilities in February 2011 for recovery of approximately $2.5 million.
In February 2012, Massachusetts Electric and Nantucket filed for recovery of approximately $1.4 million associated with
the Dorchester facility. In each instance, the DPU issued an order approving recovery subject to its ongoing review and
further investigation and reconciliation of Massachusetts Electric’ s costs for the sites. The DPU has not yet issued a final
order approving recovery for any of the sites.
In May 2010, Massachusetts Electric and Nantucket Electric announced that they entered into a 15-year PPA with Cape
Wind Associates, LLC to purchase half of the energy, capacity and renewable energy credits generated by a proposed
offshore wind project with capacity of up to 468 MW. The base price is specified at 18.7 cents per kilowatt hour
beginning in 2014 and is subject to escalation by 3.5% in each annual period thereafter. The base price can be adjusted
based on several factors, including eligibility for tax credits, the size of the facility, financing and construction costs, and
performance. In November 2010, the DPU approved the PPA including Massachusetts Electric’ s proposed cost recovery
mechanism with a 4% remuneration on the contract cost, as provided for by the Green Communities Act. The Supreme
Judicial Court of Massachusetts affirmed the DPU Order approving the PPA on December 28, 2011. On March 30, 2012,
NStar filed with the DPU for approval of a PPA with Cape Wind for the purchase 129 MW of the energy, capacity and
renewable energy credits. Cape Wind expects the Project to achieve initial commercial operation in 2014. Construction
of the project has not yet begun.
Narragansett
In June 2009, Narragansett filed an application to increase electric base distribution rates. In February 2010, the RIPUC
approved an increase in base distribution revenue of approximately $23.5 million based upon a 9.8% rate of ROE and a
42.75% equity ratio. Narragansett’ s new rates went into effect on March 1, 2010 retroactive to January 1, 2010. The
RIPUC approved recovery of the increase in revenue generated by the new rates for January and February 2010 over a
13-month period. On April 21, 2010 Narragansett filed a petition for writ of certiorari with the Rhode Island Supreme
Court appealing certain elements of the RIPUC’ s decision. On January 23, 2012, the Rhode Island Supreme Court
vacated and remanded the RIPUC’ s determination of Narragansett’ s rate-making capital structure for further hearings.
On March 2, 2012, Narragansett and the Rhode Island Division of Public Utilities and Carriers (“Division”) filed a
settlement agreement with the RIPUC recommending a capital structure that would result in an increase in