8-KRegulation FDOther EventsExhibits & Filings

EVERSOURCE ENERGY 8-K Report, Regulation FD Disclosure (Jun 8, 2011)

Filed June 8, 2011For Securities:ES

Summary

This 8-K filing from Northeast Utilities (now Eversource Energy) primarily discloses a draft decision from the Connecticut Department of Public Utility Control (DPUC) regarding its subsidiary Yankee Gas's rate case. The DPUC's draft decision proposes a net decrease in Yankee Gas's annual distribution revenues of approximately $5.6 million effective July 20, 2011, followed by a small increase in July 2012. This outcome is significantly less than the $29.1 million increase Yankee Gas had requested. The decision cites higher-than-projected sales increases and a lower authorized return on equity (ROE) of 8.83% compared to the requested 10.1%. The draft does approve the inclusion of capital costs for the WWL Project and an increase in LNG plant vaporization output in the rate base, as requested. It also allows for significant capital expenditures on pipeline replacement. Notably, the DPUC has imputed merger synergies from the proposed Northeast Utilities-NSTAR merger, reducing revenue requirements. Investors should note that this is a draft decision, with written exceptions due, oral arguments, and a final decision expected by late June 2011. The filing also includes investor presentation slides for meetings held on June 7-8, 2011.

Key Highlights

  • 1DPUC issued a draft decision in Yankee Gas's rate case, proposing a net annual revenue decrease of $5.6 million, substantially below the company's request.
  • 2Yankee Gas requested an increase of $29.1 million in annual distribution revenues for July 2011, but the draft decision implies a decrease.
  • 3The authorized Return on Equity (ROE) in the draft decision is set at 8.83%, lower than the 10.1% requested by Yankee Gas.
  • 4The draft decision approves the inclusion of the WWL Project and LNG plant expansion costs in the rate base ($57.6 million).
  • 5Significant capital spending ($28 million in the first year, $40 million in the second) is permitted for accelerating pipeline replacement.
  • 6The DPUC imputed merger synergies from the proposed Northeast Utilities-NSTAR merger, reducing revenue requirements by approximately $1.0 million in the first year and $2.4 million in the second.
  • 7A final decision from the DPUC is expected by June 29, 2011, after written exceptions and oral arguments.

Frequently Asked Questions

The DPUC's draft decision proposes a net decrease in Yankee Gas's annual distribution revenues of approximately $5.6 million effective July 20, 2011. This is a significantly lower outcome than the $29.1 million increase Yankee Gas had requested.

The proposed revenue decrease for Yankee Gas will negatively impact its financial results. Investors should monitor the final decision, as this draft could lead to lower-than-expected earnings for the subsidiary and, consequently, for Northeast Utilities, though the impact will be partially offset by approved capital investments and merger synergies.

The DPUC has set the allowed ROE at 8.83%, which is lower than the 10.1% requested by Yankee Gas. A lower ROE generally means a lower profit margin for the company on its investments, directly affecting profitability.

Yankee Gas plans to submit written exceptions by June 14, 2011. Oral arguments are scheduled for June 23, 2011, with a final decision from the DPUC expected by June 29, 2011.