8-KOther Events

EVERSOURCE ENERGY 8-K Report, Corporate Update (Jan 23, 2008)

Filed January 23, 2008For Securities:ES

Summary

This 8-K filing reports on a Draft Decision from the Connecticut Department of Public Utility Control (DPUC) regarding the electric distribution rate case for The Connecticut Light and Power Company (CL&P), a subsidiary of Northeast Utilities. The DPUC's draft decision is largely unfavorable compared to CL&P's initial requests. While CL&P sought $189 million in increased revenues for 2008, the DPUC's draft proposes an increase of only $70.3 million, representing a significant reduction from the company's request and a modest 1.7% increase on total rates. Furthermore, the DPUC approved a lower return on equity (ROE) of 9.25% compared to CL&P's requested 11%. However, the draft does approve most of CL&P's proposed capital budget for 2008 and 2009. A key aspect is the DPUC's approach to revenue decoupling, which will be implemented through a tiered rate design based on customer amperage, rather than CL&P's proposed "revenue per customer" adjustment mechanism. Investors should note the final decision is expected shortly after this draft.

Key Highlights

  • 1The DPUC issued a Draft Decision on January 18, 2008, for CL&P's electric distribution rate case.
  • 2CL&P requested $189 million (later revised to $182 million) in increased revenues for 2008, but the Draft Decision approves only $70.3 million.
  • 3The approved revenue increase represents a 1.7% rise on total rates for 2008 and 2.9% for 2009.
  • 4The Draft Decision approves an ROE of 9.25%, lower than CL&P's requested 11%.
  • 5Substantially all of CL&P's proposed capital budget for 2008 ($294 million) and 2009 ($288 million) was approved.
  • 6The DPUC will implement revenue decoupling through a tiered rate design based on customer amperage, rejecting CL&P's proposed "revenue per customer" adjustment.
  • 7New 2008 rates are scheduled to take effect on February 1, 2008, with a final DPUC decision expected on January 28, 2008.

Frequently Asked Questions

The DPUC's Draft Decision significantly reduces the revenue increase requested by CL&P (a subsidiary of Northeast Utilities). While CL&P sought an $189 million revenue hike for 2008, the draft only approves $70.3 million, which is a much lower figure than anticipated by the company. Additionally, the approved Return on Equity (ROE) of 9.25% is lower than CL&P's request of 11%, potentially impacting profitability.

The draft decision indicates that the approved revenue increase would result in an incremental increase of 1.7% on total rates for 2008 and 0.5% for 2009. This suggests a relatively modest increase in customer bills, especially compared to the company's original revenue increase request.

Decoupling, as mandated by Connecticut Public Act 07-242, separates utility revenue from the volume of electricity sold. This means CL&P will receive its approved revenue regardless of whether customers use more or less electricity. The DPUC rejected CL&P's proposed "revenue per customer" adjustment and will instead implement decoupling through a tiered rate design based on customer amperage.

The DPUC is expected to issue its final decision on January 28, 2008. The new rates for 2008 are scheduled to take effect on February 1, 2008, with the 2009 rate increase planned for February 1, 2009.