8-K/AOther Events

EVERSOURCE ENERGY 8-K/A Report, Corporate Update (Feb 4, 2008)

Filed February 4, 2008For Securities:ES

Summary

This amended 8-K filing from Eversource Energy (formerly Northeast Utilities) provides crucial updates regarding the final decision from the Connecticut Department of Public Utility Control (DPUC) in the electric distribution rate case for its subsidiary, The Connecticut Light and Power Company (CL&P). The DPUC decision, issued on January 28, 2008, approved a lower increase in distribution revenues than CL&P had requested. Specifically, approved increases are $77.8 million for 2008 and $20.1 million for 2009, representing a significantly smaller incremental rise in distribution rates compared to CL&P's initial application. This moderated rate increase could impact the company's revenue growth trajectory. Furthermore, the approved return on equity (ROE) was set at 9.4%, lower than the 11% requested by CL&P, while maintaining an earnings sharing mechanism. However, the decision largely approved CL&P's proposed capital budget for the next two years, indicating continued investment in infrastructure. A notable change is the DPUC's mandate for CL&P to comply with energy efficiency act provisions by adjusting its rate design to recover a greater proportion of revenue through fixed customer and demand charges rather than per-kilowatt-hour (kWh) charges. This decoupling mechanism aims to make revenue recovery less sensitive to fluctuations in electricity sales volume.

Key Highlights

  • 1DPUC approved lower than requested distribution revenue increases for CL&P: $77.8 million for 2008 (11.7% incremental) and $20.1 million for 2009 (2.6% incremental).
  • 2Approved Return on Equity (ROE) of 9.4%, below CL&P's request of 11%, with an existing earnings sharing mechanism retained.
  • 3DPUC largely approved CL&P's proposed capital budgets of approximately $294 million for 2008 and $288 million for 2009.
  • 4CL&P's rate design will be modified to recover more revenue through fixed customer/demand charges and less through per-kWh charges, decoupling revenue from sales volume as mandated by the Energy Efficiency Act.
  • 5New rates are scheduled to take effect on February 1, 2008, for 2008 increases and February 1, 2009, for 2009 increases.
  • 6This filing is an amendment to a previous 8-K, correcting minor percentage figures in the original report.
  • 7Northeast Utilities (parent company) expects to release year-end financial results the week of February 18, 2008.

Frequently Asked Questions

This is an amended 8-K filing to correct minor percentage errors in a previous report. The core of the filing details the final decision by the Connecticut Department of Public Utility Control (DPUC) on The Connecticut Light and Power Company's (CL&P) electric distribution rate case.

The DPUC approved a lower revenue increase than CL&P requested. CL&P will see approved increases of $77.8 million for 2008 and $20.1 million for 2009, which is significantly less than the $182 million requested for 2008 and $21.9 million for 2009. This means CL&P's revenue growth from distribution rates will be more constrained than initially sought.

The DPUC mandated a shift in rate design to recover a greater portion of distribution revenue through fixed customer and demand charges, and less through per-kilowatt-hour (kWh) usage charges. This aims to decouple CL&P's revenue from actual electricity sales volume, making revenue recovery more stable and less dependent on customer consumption patterns, in compliance with the Energy Efficiency Act.

The DPUC approved an ROE of 9.4%, which is lower than CL&P's requested 11%. While this may limit the maximum potential profit margin from equity, the existing earnings sharing mechanism means that any earnings above the allowed ROE will still be split equally between shareholders and ratepayers, providing some upside participation.