8-KOther Events

EVERSOURCE ENERGY 8-K Report, Corporate Update (Feb 3, 2011)

Filed February 3, 2011For Securities:ES

Summary

This 8-K filing by Northeast Utilities reports on a decision by the Massachusetts Department of Public Utilities (DPU) regarding a rate increase request for its subsidiary, Western Massachusetts Electric Company (WMECO). The DPU approved an annual distribution revenue increase of $16.8 million, effective February 1, 2011, which is less than the $28.4 million WMECO had requested. The decision also sets an allowed return on equity (ROE) of 9.6 percent and introduces a decoupling mechanism without an inflation adjustment, along with an inclining block rate structure for residential customers using over 600 kWh per month. While the DPU approved some recovery for hardship accounts and storm costs, it did not grant WMECO's request to recover approximately $20 million annually for reliability infrastructure investments. Investors should note that the approved revenue increase is lower than initially sought, which could impact future earnings. However, the inclusion of a decoupling mechanism and recovery of certain costs may provide some stability. The full decision details and further context can be found on Northeast Utilities' website.

Key Highlights

  • 1Massachusetts DPU approved an annual distribution revenue increase of $16.8 million for Western Massachusetts Electric Company (WMECO), effective February 1, 2011.
  • 2The approved revenue increase is lower than WMECO's request of $28.4 million.
  • 3The DPU set an allowed Return on Equity (ROE) at 9.6 percent.
  • 4A decoupling mechanism for WMECO's rates was approved, without an inflation adjustment.
  • 5An inclining block rate structure will be implemented for residential customers consuming over 600 kWh per month.
  • 6WMECO's request for rate recovery of approximately $20 million per year for reliability infrastructure investment was not approved.
  • 7The decision allows for recovery of certain active hardship account balances and storm costs over five years.

Frequently Asked Questions

The Massachusetts DPU approved an annual distribution revenue increase of $16.8 million for Western Massachusetts Electric Company (WMECO), a subsidiary of Northeast Utilities. This is lower than the $28.4 million the company had requested.

The Massachusetts DPU approved an allowed return on equity (ROE) of 9.6 percent for WMECO.

The DPU did not approve WMECO's request for rate recovery of increased reliability infrastructure investment, which averaged approximately $20 million per year.

A decoupling mechanism adjusts rates to reconcile the difference between the revenue that would be generated if the utility sold a certain number of kilowatt-hours (kWh) and the revenue that is actually generated due to variations in customer usage. In this case, the DPU approved it without an inflation adjustment, which could potentially limit future revenue adjustments based on inflation.