8-KOther Events

EVERSOURCE ENERGY 8-K Report, Corporate Update (Nov 20, 2008)

Filed November 20, 2008For Securities:ES

Summary

This Form 8-K filing from Northeast Utilities (NU), parent of Eversource Energy, reports on a significant development concerning the New England East-West Solutions (NEEWS) transmission projects. On November 17, 2008, the Federal Energy Regulatory Commission (FERC) issued an order granting key financial incentives for the substantial transmission upgrades proposed by NU's regulated companies and National Grid USA. These incentives aim to reduce project risk and facilitate the development of critical infrastructure across Massachusetts and Connecticut. The FERC decision is a positive step for NU, as it approved crucial components of their request, including the inclusion of 100% of Construction Work in Progress (CWIP) costs in rate base and the recovery of 100% of prudently incurred costs in case of project abandonment due to reasons beyond their control. While the FERC granted a 125 basis point Return on Equity (ROE) adder instead of the requested 150 basis points, this still results in an overall ROE of 12.89% for these projects, which is designed to compensate for the reduced risk.

Key Highlights

  • 1FERC granted key financial incentives for the NEEWS transmission projects.
  • 2Approved incentives include 100% CWIP inclusion in rate base, reducing upfront capital burden.
  • 3Approved incentive for 100% recovery of prudently incurred costs if projects are abandoned.
  • 4FERC granted a 125 basis point ROE adder, resulting in an overall ROE of 12.89% for the projects.
  • 5NEEWS projects involve substantial transmission upgrades across Massachusetts and Connecticut.
  • 6NU Companies have begun the siting application process.
  • 7Expected completion and service for NEEWS projects is by the end of 2013.

Frequently Asked Questions

The New England East-West Solutions (NEEWS) projects are a series of four interrelated transmission projects involving substantial upgrades across Massachusetts and Connecticut, along with National Grid USA. These projects are crucial for enhancing the reliability and capacity of the regional electricity transmission grid.

FERC granted two key incentives: 1) Inclusion of 100% of Construction Work in Progress (CWIP) costs in rate base, meaning NU can recover costs as they are incurred during construction. 2) A provision for 100% recovery of prudently incurred costs if any portion of the projects needs to be abandoned due to reasons beyond the companies' control. FERC also approved a 125 basis point Return on Equity (ROE) adder.

The granted incentives, particularly the CWIP recovery and abandonment protection, reduce financial risk for NU. The approved ROE adder of 125 basis points, leading to an overall ROE of 12.89% for these projects, provides a favorable return on investment, which should positively impact future earnings as these projects are developed and completed.

The NU Companies have initiated the siting application process. The projects are expected to be completed and placed in service by the end of 2013.