8-KOther Events

EVERSOURCE ENERGY 8-K Report, Corporate Update (Feb 1, 2008)

Filed February 1, 2008For Securities:ES

Summary

Eversource Energy (via its subsidiary The Connecticut Light and Power Company - CL&P) announced on January 28, 2008, the final decision from the Connecticut Department of Public Utility Control (DPUC) regarding its electric distribution rate case. The DPUC approved an increase in distribution revenues of $77.8 million for 2008 and $20.1 million for 2009, which is significantly lower than the $189 million (revised to $182 million) requested by CL&P for 2008. This represents an incremental increase of 11.7% on distribution rates for 2008 and 2.6% for 2009. The approved Return on Equity (ROE) was set at 9.4%, below CL&P's request of 11%, and mandates the continuation of an existing earnings sharing mechanism. CL&P's proposed capital budgets for 2008 and 2009 were largely approved. Notably, the DPUC ordered a shift in CL&P's revenue recovery mechanism to align with new energy efficiency legislation, moving towards greater fixed recovery of distribution revenue and less reliance on per-kWh sales, making revenue less susceptible to usage fluctuations.

Key Highlights

  • 1The DPUC approved an increase in CL&P's electric distribution revenues of $77.8 million for 2008 and $20.1 million for 2009.
  • 2The approved revenue increase is substantially less than CL&P's initial request of $182 million for 2008.
  • 3Approved distribution rate increases are 11.7% for 2008 and 2.6% for 2009.
  • 4The allowed Return on Equity (ROE) was set at 9.4%, lower than the requested 11%, with an earnings sharing mechanism to continue.
  • 5CL&P's proposed capital budgets of approximately $294 million for 2008 and $288 million for 2009 were substantially approved.
  • 6A key change is the implementation of a revenue decoupling mechanism, shifting revenue recovery to fixed charges and away from per-kWh sales.
  • 7New rates are scheduled to take effect on February 1, 2008, with the 2009 increase effective February 1, 2009.

Frequently Asked Questions

The DPUC approved an increase in CL&P's electric distribution revenues of $77.8 million for 2008 and $20.1 million for 2009. This is a smaller increase than CL&P had requested, but it will result in higher rates for customers.

CL&P requested an ROE of 11%, but the DPUC approved 9.4%. The decision also requires CL&P to continue an existing earnings sharing mechanism, meaning that any profits above the allowed ROE will be split equally between ratepayers and shareholders. This could limit the upside for shareholders compared to achieving a higher ROE.

The DPUC mandated a revenue decoupling mechanism, as required by new energy efficiency legislation. This means CL&P will recover a larger portion of its revenue through fixed customer charges and a smaller portion through per-kilowatt-hour (kWh) sales. This change is designed to make CL&P's revenue recovery less dependent on electricity usage volumes, providing more stability.

The new rates reflecting the 2008 revenue increase are scheduled to take effect on February 1, 2008. The revenue increase for 2009 will take effect on February 1, 2009.