8-KOther Events

EVERSOURCE ENERGY 8-K Report, Corporate Update (Apr 2, 2008)

Filed April 2, 2008For Securities:ES

Summary

Eversource Energy (formerly Northeast Utilities) filed an 8-K on April 2, 2008, reporting on a March 24, 2008, Federal Energy Regulatory Commission (FERC) order regarding rehearing of returns on equity (ROE) and incentives for regional transmission projects. The FERC order increased the base ROE for transmission owners, including Eversource's subsidiaries, from 10.2% to 10.4%. It also modified the incentive structure for new transmission investments, requiring projects to be 'completed and on line' by December 31, 2008, to receive a 100-basis-point adder, with subsequent projects requiring project-specific filings. The company anticipates a modestly positive net effect on earnings from this order, maintaining its previous 2008 consolidated earnings guidance and transmission segment ROE projections.

Key Highlights

  • 1FERC issued a rehearing order on March 24, 2008, impacting transmission owner ROEs and incentives.
  • 2The base Return on Equity (ROE) for regional transmission owners was increased from 10.2% to 10.4%.
  • 3An additional 74 basis points were added to the ROE for the period beginning October 31, 2006, due to higher bond yields.
  • 4The incentive for new transmission facilities under the Regional System Plan (RSP) requires projects to be completed and online by December 31, 2008, to receive the 100 additional basis points.
  • 5Projects completed after December 31, 2008, will require specific FERC filings for additional incentives.
  • 6Eversource Energy (NU) expects a modestly positive net effect on earnings from the rehearing order.
  • 7The company reaffirmed its 2008 consolidated earnings guidance and projected blended ROEs for its transmission segment.

Frequently Asked Questions

The FERC rehearing order primarily impacts Eversource Energy's electric utility subsidiaries (The Connecticut Light and Power Company, Public Service Company of New Hampshire, and Western Massachusetts Electric Company) by increasing their allowed base return on equity (ROE) from 10.2% to 10.4% and adjusting the criteria for receiving additional incentives on new transmission projects.

The FERC order modified the initial order's incentive for new transmission facilities built as part of the ISO-New England Regional System Plan (RSP). Now, only projects that are 'completed and on line' by December 31, 2008, will receive the additional 100 basis points incentive. Projects completed after this date will need to undergo a project-specific filing process with FERC to qualify for incentives.

Eversource Energy management expects the rehearing order to have a 'modestly positive net effect on earnings.' The company also reaffirmed its projected overall blended returns on equity for its transmission segment and its previously announced 2008 consolidated earnings guidance.

No, the company stated that the rehearing order is not expected to impact its previously announced 2008 consolidated earnings guidance, which was between $1.65 per share and $1.90 per share (or $1.45 to $1.70 per share including a litigation settlement impact).