8-KOther Events

EVERSOURCE ENERGY 8-K Report, Corporate Update (Jul 29, 2010)

Filed July 29, 2010For Securities:ES

Summary

This 8-K filing reports a significant regulatory development for Northeast Utilities (NU) and its subsidiary, The Connecticut Light and Power Company (CL&P). On July 28, 2010, the Connecticut Department of Public Utility Control (DPUC) reconsidered and reversed its earlier decision regarding a regulatory asset for CL&P. The DPUC now permits CL&P to establish a regulatory asset related to new healthcare legislation, specifically the loss of tax deductibility for certain post-retirement benefits other than pensions, stemming from the Patient Protection and Affordable Care Act of 2010. This reversal is a positive outcome for NU, as it means the company will not have to take an anticipated after-tax charge of $9.8 million ($0.06 per share) in the second quarter of 2010. The DPUC's revised decision makes the recovery of these costs through future rates probable, allowing NU to maintain these amounts as regulatory assets. Investors should note that this regulatory asset is subject to review in CL&P's next rate case.

Key Highlights

  • 1DPUC granted CL&P's request for reconsideration of its electric distribution rate case decision.
  • 2DPUC reversed its June 30, 2010 decision and allowed CL&P to create a regulatory asset.
  • 3The regulatory asset pertains to lost tax deductibility of certain post-retirement benefits due to the Affordable Care Act of 2010.
  • 4Northeast Utilities will avoid an estimated $9.8 million ($0.06 per share) after-tax charge in Q2 2010.
  • 5The reversal confirms the probable recovery of these costs through future rates.
  • 6The established regulatory asset will be subject to review in CL&P's next rate case.

Frequently Asked Questions

On June 30, 2010, the DPUC initially disallowed CL&P from creating an $8.2 million regulatory asset. This asset was intended to recover the impact of new healthcare legislation (Affordable Care Act) that eliminated the tax deductibility of certain post-retirement benefits other than pensions.

The DPUC granted CL&P's request for reconsideration and reversed its earlier decision. The DPUC now allows CL&P to establish the regulatory asset related to the healthcare legislation, subject to review in its next rate case.

As a result of the DPUC's revised decision, NU will not have to record an anticipated $9.8 million ($0.06 per share) after-tax charge in the second quarter of 2010. The company can maintain these amounts as regulatory assets, indicating the probable recovery of these costs through future rates.

This means that while CL&P can establish the asset now, its ultimate recovery through customer rates is not guaranteed and will be re-evaluated by the DPUC during the company's next formal rate-setting proceeding. This introduces a degree of regulatory risk for the future recovery of these costs.