| Contingencies | Contingencies We are party to various legal disputes arising as part of our normal business activities. We assess our exposure to these matters and record estimated loss contingencies when a loss is likely and can be reasonably estimated. We do not provide for accrual of legal costs expected to be incurred in connection with a loss contingency. Transmission - ROE Complaint – CMP and UI On September 30, 2011, the Massachusetts Attorney General, DPU, PURA, New Hampshire Public Utilities Commission, Rhode Island Division of Public Utilities and Carriers, Vermont Department of Public Service, numerous New England consumer advocate agencies and transmission tariff customers collectively filed a joint complaint with the FERC pursuant to sections 206 and 306 of the Federal Power Act, against several New England Transmission Owners (NETOs) claiming that the approved base ROE of 11.14% used by NETOs in calculating formula rates for transmission service under the ISO-New England Open Access Transmission Tariff (OATT) was not just and reasonable and seeking a reduction of the base ROE with refunds to customers for the 15-month refund periods beginning October 1, 2011 (Complaint I), December 27, 2012 (Complaint II), July 31, 2014 (Complaint III) and April 29, 2016 (Complaint IV). On October 16, 2014, the FERC issued its decision in Complaint I setting the base ROE at 10.57% and a maximum total ROE of 11.74% (base plus incentive ROEs) for the October 2011 – December 2012 period as well as prospectively from October 16, 2014. On March 3, 2015, the FERC upheld its decision and further clarified that the 11.74% ROE cap will be applied on a project specific basis and not on a transmission owner’s total average transmission return. The complaints were consolidated and the administrative law judge issued an initial decision on March 22, 2016. The initial decision determined that, (1) for the fifteen month refund period in Complaint II, the base ROE should be 9.59% and that the ROE Cap (base ROE plus incentive ROEs) should be 10.42% and (2) for the fifteen month refund period in Complaint III and prospectively, the base ROE should be 10.90% and that the ROE Cap should be 12.19% . The initial decision in Complaints II and III is the administrative law judge’s recommendation to the FERC Commissioners. CMP and UI reserved for refunds for Complaints I, II and III consistent with the FERC’s March 3, 2015 decision in Complaint I. Refunds were provided to customers for Complaint I. The CMP and UI total reserve associated with Complaints II and III is $24 million and $6 million , respectively, as of June 30, 2019 , which has not changed since December 31, 2018 , except for the accrual of carrying costs. If adopted as final by the FERC, the impact of the initial decision by the FERC administrative law judge would be an additional aggregate reserve for Complaints II and III of $17 million , which is based upon currently available information for these proceedings. Following various intermediate hearings, orders and appellate decisions, on October 16, 2018, the FERC issued an order directing briefs and proposing a new methodology to calculate the NETOs ROE that is contained in NETOs’ transmission formula rate on file at the FERC (the October 2018 Order). The FERC proposes to use this new methodology to resolve Complaints I, II, III and IV filed by the New England state consumer advocates. The new proposed ROE methodology set forth in the October 2018 Order considers more than just the two-step discounted cash flow (DCF) analysis adopted in the FERC order on Complaint I vacated by the Court. The new proposed ROE methodology uses three financial analyses (i.e., DCF, the capital-asset pricing model and the expected earnings analysis) to produce a range of returns to narrow the zone of reasonableness when assessing whether a complainant has met its initial burden of demonstrating that the utility’s existing ROE is unjust and unreasonable. The new proposed ROE methodology establishes a range of just and reasonable ROEs of 9.60% to 10.99% and proposes a just and reasonable base ROE of 10.41% with a new ROE cap of 13.08% . Pursuant to the October 2018 Order, the NETOs filed initial briefs on the proposed methodology in all four Complaints on January 11, 2019 and replies to the initial briefs on March 8, 2019. We cannot predict the outcome of this proceeding. New York State Department of Public Service Investigation of the Preparation for and Response to the March 2017 Windstorm On March 11, 2017, the NYDPS commenced an investigation of NYSEG’s and RG&E’s preparation for and response to the March 2017 windstorm, which affected more than 219,000 NYSEG and RG&E customers. The NYDPS staff issued a report (the Staff Report) of the findings from their investigation on November 16, 2017. The Staff Report made several recommendations for future storm response and also alleged that NYSEG and RG&E had violated their own emergency response plan in a number of respects. Also on November 16, 2017, the NYPSC issued an Order Instituting Proceeding and to Show Cause (the Order) requiring the companies to address whether the NYPSC should mandate, reject or modify, in whole or in part the recommendations made in the Staff Report. The Order also required the companies to show cause why the NYPSC should not commence an administrative penalty proceeding. On May 18, 2018, NYSEG and RG&E filed a settlement joint proposal and investment joint proposal before the NYPSC to settle potential penalties and avoid litigation related to the March 2017 windstorm, pursuant to which, among other things, NYSEG and RG&E have agreed to make $4 million in investments designed to increase resiliency and improve emergency response in the areas impacted by the storm. The investments will not be reflected in rate base or operating expenses in establishing future delivery rates. On April 18, 2019, the NYPSC approved the joint proposals. New York State Department of Public Service Investigation of the Preparation for and Response to the March 2018 Winter Storms In March 2018, following two severe winter storms that impacted more than one million electric utility customers in New York, including 520,000 NYSEG and RG&E customers, the NYPSC initiated a comprehensive investigation of all the New York electric utilities’ preparation and response to those events. The investigation was expanded to include other 2018 New York spring storm events. On April 18, 2019 the NYDPS staff issued a report (the 2018 Staff Report) of the findings from their investigation. The 2018 Staff Report identifies 94 recommendations for corrective actions to be implemented in the utilities Emergency Response Plans (ERP). The report also identified potential violations by several of the utilities, including NYSEG and RG&E. Also on April 18, 2019, the NYPSC issued an Order Instituting Proceeding and to Show Cause directed to all major electric utilities in New York, including NYSEG and RG&E. The order directs the utilities, including NYSEG and RG&E, to show cause why the NYPSC should not pursue civil penalties, and / or administrative penalties for the apparent failure to follow their respective ERPs as approved and mandated by the NYPSC. The NYPSC also directs the utilities, within 30 days, to address whether the NYPSC should mandate, reject or modify in whole or in part, the 94 recommendations contained in the 2018 Staff Report. On May 20, 2019, NYSEG and RG&E responded to the portion of the Order to Show Cause with respect to the recommendations contained in the 2018 Staff Report. The Commission granted the companies an extension until August 2, 2019 to respond to the portion of the Order to Show Cause with respect to why the Commission should not pursue a penalty action. The companies and the Commission’s counsel have commenced settlement discussions. We cannot predict the final outcome of this matter. NYPSC Directs Counsel to Commence Judicial Enforcement Proceeding Against NYSEG On April 18, 2019, the NYPSC issued an Order Directing Counsel to the Commission to commence a special proceeding or an action in New York State Supreme Court to stop and prevent ongoing future violations by NYSEG of NYPSC regulations and orders. As of the date hereof, a special proceeding or an action has not been commenced; however, related to the Winter Storm Order to Show Cause, the companies and the Commission’s counsel have commenced settlement discussions. We cannot predict the final outcome of this matter. California Energy Crisis Litigation Two California agencies brought a complaint in 2001 against a long-term power purchase agreement entered into by Renewables, as seller, to the California Department of Water Resources, as purchaser, alleging that the terms and conditions of the power purchase agreement were unjust and unreasonable. The FERC dismissed Renewables from the proceedings; however, the Ninth Circuit Court of Appeals reversed the FERC's dismissal of Renewables from the proceeding. Joining with two other parties, Renewables filed a petition for certiorari in the United States Supreme Court on May 3, 2007. In an order entered on June 27, 2008, the Supreme Court granted Renewables’ petition for certiorari, vacated the appellate court's judgment, and remanded the case to the appellate court for further consideration in light of the Supreme Court’s decision in a similar case. In light of the Supreme Court's order, on December 4, 2008, the Ninth Circuit Court of Appeals vacated its prior opinion and remanded the complaint proceedings to the FERC for further proceedings consistent with the Supreme Court's rulings. In 2014, the FERC assigned an administrative law judge to conduct evidentiary hearings. Following discovery, the FERC trial staff recommended that the complaint against Renewables be dismissed. A hearing was held before a FERC administrative law judge in November and early December 2015. A preliminary proposed ruling by the administrative law judge was issued on April 12, 2016. The proposed ruling found no evidence that Renewables had engaged in any unlawful market conduct that would justify finding the Renewables power purchase agreements unjust and unreasonable. However, the proposed ruling did conclude that the price of the power purchase agreements imposed an excessive burden on customers in the amount of $259 million . Renewables position, as presented at hearings and agreed by the FERC trial staff, is that Renewables entered into bilateral power purchase contracts appropriately and complied with all applicable legal standards and requirements. The parties have submitted briefs on exceptions to the administrative law judge’s proposed ruling to the FERC. There is not specific timetable for the FERC's ruling. In April 2018, Renewables requested, based on the nearly two years of delay from the preliminary proposed ruling and the Supreme Court precedent, that the FERC issue a final decision expeditiously. We cannot predict the outcome of this proceeding. Class Actions Regarding LDC Gas Transportation Service on Algonquin Gas Transmission Breiding et al. v. Eversource and Avangrid - Class Action . On November 16, 2017, a class action lawsuit was filed in the U.S. District Court for the District of Massachusetts on behalf of customers in New England against the Company and Eversource alleging that certain of their respective subsidiaries that take gas transportation service over the Algonquin Gas Transmission (AGT), which for AVANGRID would be its indirect subsidiaries SCG and CNG, engaged in pipeline capacity scheduling practices on AGT that resulted in artificially increased electricity prices in New England. These allegations were based on the conclusions of a whitepaper issued by the Environmental Defense Fund (EDF), an environmental advocacy organization, on October 10, 2017, purporting to analyze the relationship between the New England electricity market and the New England local gas distribution companies. The plaintiffs assert claims under federal antitrust law, state antitrust, unfair competition and consumer protection laws, and under the common law of unjust enrichment. They seek damages, disgorgement, restitution, injunctive relief, and attorney fees and costs. On February 27, 2018, the FERC released the results of a FERC staff inquiry into the pipeline capacity scheduling practices on the AGT. The inquiry arose out of the allegations made by the EDF in its whitepaper. The FERC announced that, based on an extensive review of public and non-public data, it had determined that the EDF study was flawed and led to incorrect conclusions. FERC also stated that the staff inquiry revealed no evidence of anticompetitive withholding of natural gas pipeline capacity on the AGT and that it would take no further action on the matter. On April 27, 2018, the Company filed a Motion to Dismiss all of the claims based on federal preemption and lack of any evidence of antitrust behavior, citing, among other reasons, the results of the FERC staff inquiry conclusion. The plaintiffs filed opposition to the motion to dismiss on May 25, 2018. On September 11, 2018, the District Court granted the Company’s Motion and dismissed all claims. On January 29, 2019, the plaintiffs filed a brief in support of appeal and on April 26, 2019, the Company and Eversource filed a joint brief in opposition. On May 17, 2019, the plaintiffs filed a reply to the opposition. Oral arguments were held on July 24, 2019. We cannot predict the outcome of this appeal. PNE Energy Supply LLC v. Eversource Energy and Avangrid, Inc. - Class Action . On August 10, 2018, PNE Energy Supply LLC, a competitive energy supplier located in New England that purchases electricity in the day-ahead and real time wholesale electric market, filed a civil antitrust action, on behalf of itself and those similarly situated, against the Company and Eversource alleging that their respective gas subsidiaries illegally manipulated the supply of pipeline capacity in the “secondary capacity market” in order to artificially inflate New England natural gas and electricity prices. These allegations were also based on the conclusions of the whitepaper issued by EDF. The plaintiff claims to represent entities who purchased electricity directly in the wholesale electricity market that it claims was targeted by the alleged anticompetitive conduct of Eversource and the Company. On September 28, 2018, the Company filed a Motion to Dismiss all of the claims based on federal preemption and lack of any evidence of antitrust behavior, citing, among other reasons, the results of the FERC staff inquiry and the dismissal of the related case, "Breiding et al. v. Eversource and Avangrid," by the same court in September. The plaintiffs filed opposition to the motion to dismiss on October 26, 2018 and the Company filed a reply on November 15, 2018. The district court heard oral arguments on the motion to dismiss on January 18, 2019. On April 26, 2019, the Company filed a brief in support of its motion to dismiss, and on June 7, 2019, the district court granted the Company’s Motion to Dismiss and dismissed all claims. On July 3, 2019, the plaintiffs filed notice of appeal in the U.S. Court of Appeals for the First Circuit. We cannot predict the outcome of this class action lawsuit. Yankee Nuclear Spent Fuel Disposal Claim CMP has an ownership interest in Maine Yankee Atomic Power Company, Connecticut Yankee Atomic Power Company and Yankee Atomic Electric Company (the Yankee Companies), three New England single-unit decommissioned nuclear reactor sites, and UI has an ownership interest in Connecticut Yankee Atomic Power Company. Pursuant to the statute of limitations, the Yankee Companies file a lawsuit periodically to recover damages from the Department of Energy (DOE) for breach of the Nuclear Spent Fuel Disposal Contract to remove spent nuclear fuel and greater than class C waste as required by contract. From 2012 to 2016 the Yankee Companies filed three claims against the DOE (Phase I, II and III) for the years from 1995 to 2012 and received damage awards, which flow through the Yankee Companies to shareholders (including CMP and UI based percentage of ownership) to reduce retail customer charges. On May 22, 2017, the Yankee Companies filed their next case (Phase IV) in the Federal Court of Claims (Court), seeking damages for the period from January 1, 2013 through December 31, 2016 and submitted their claimed Phase IV damages to the DOE in late August 2017. The Court issued its decision on the Phase IV trial on February 21, 2019, awarding the Yankee Companies a combined $103 million (Connecticut Yankee $41 million , Maine Yankee $34 million and Yankee Atomic $28 million ). The damage awards are returned to customers either through customer refunds or by reducing future costs. Refunds or reductions in costs are reflected in the Yankee Companies billings to shareholders, including CMP and UI. CMP and UI will receive their proportionate share of the awards that flow through based on percentage of ownership. On April 23, 2019, the notice of appeal period expired and the Phase IV trial award became final. Guarantee Commitments to Third Parties As of June 30, 2019 , we had approximately $513 million of standby letters of credit, surety bonds, guarantees and indemnifications outstanding. These instruments provide financial assurance to the business and trading partners of AVANGRID and its subsidiaries in their normal course of business. The instruments only represent liabilities if AVANGRID or its subsidiaries fail to deliver on contractual obligations. We therefore believe it is unlikely that any material liabilities associated with these instruments will be incurred and, accordingly, as of June 30, 2019 , neither we nor our subsidiaries have any liabilities recorded for these instruments. |
