EXHIBIT 10.16.2
SECOND AMENDMENT TO RATE AGREEMENT
THIS SECOND AMENDATORY AGREEMENT dated as of December 12, 1989 is
between the parties to the agreement dated as of November 22, 1989, as
amended by the First Amendatory Agreement dated as of December 5, 1989 (the
"Rate Agreement") between Northeast Utilities Service Company, acting on
behalf of its parent Northeast Utilities, and the Governor and Attorney
General of the State of New Hampshire, acting on behalf of the State of New
Hampshire (the "State").
WHEREAS, the parties desire to amend the Rate Agreement in the respects
specified below, and the Attorney General is authorized to act for the State
in agreeing to such amendments.
NOW, THEREFORE, in consideration of the mutual agreements below, the
Parties agree as follows:
1. Amendment of Paragraph A and B of Exhibit B. The provisions of
paragraphs A and B of the Return on Equity Collar on pages 1 through 3 of
Exhibit B of the Rate Agreement are hereby amended to read as follows:
A. In the event the cumulative average net income ROE ("NI ROE") for
the entire fixed rate period, as defined below, for Stand-Alone PSNH, and/or
Stand-Alone PSNH and NUNH exceeds 13.25% or more on a net present value basis
("NPV"), 100% of any excess above 13.25% will be applied first as a credit to
reduce the amount of any unamortized SPP or NHEC deferrals or Seabrook
cancellation cost deferrals and, in the event any amount remains after such
application, the remainder will be credited to customer bills. The
determination of such excess shall be made on an annual basis beginning
twelve months after the Termination Date or the Acquisition Effective Date;
or
B. A prompt general rate increase or a surcharge of base rates will be
implemented if the cumulative NPV average NI ROE for Stand-Alone PSNH and/or
for Stand-Alone PSNH and NUNH is forecasted to fall below 8% in the third
12-month period after the rate increase described in paragraph 5(a)(ii) of
the Agreement, 9% in the fourth, 9-3/4% in the fifth and 10-1/2% in the sixth
12-month period (whether or not any portion thereof falls within or outside
of the fixed rate period) after the rate increase described in paragraph
5(a)(ii) of the Agreement which will permit the NI ROE to at least attain the
specified minimum level for the period. No floor amount will be applicable
from the First Effective Date through the second 12-month period after the
effective date of the rate increase described in paragraph 5(a)(ii) of the
Agreement.
2. Amendment of Paragraph B.D. of Exhibit C. The provisions of paragraph
B.D) on pages 3 through 5 of Exhibit C. to the Rate Agreement are hereby
amended to read as follows:
D. The entire payment made to qualifying facilities ("QF") and other
small power producers facilities (which includes both capacity and energy
expenses). The FPPAC base amounts listed in Schedule 1 include costs based
on the rates presently in effect for these facilities for the fixed rate
period. The following rules shall be applicable to costs with respect to the
eight specific small power producers (SPP's) listed in Schedule 2 hereto:
For the period from the First Effective Date to 1/1/92, the difference
between the actual costs paid to these SPP's and the assumed avoided cost
will be deferred.
The balance at 1/1/92 will be amortized in ten equal annual installments
beginning in 1992. For each of the calendar years beginning 1992 through
the end of the fixed rate period, the difference between the actual costs
paid to these SPP's and the assumed avoided cost will be deferred and will be
amortized in ten equal annual installments. In order to provide for a
sharing of benefits resulting from a reduction in SPP costs, 90% of the above
amortization will be included in the FPPAC during the fixed rate period and
90% of the total projected amortization based on the assumption that no
reductions in SPP costs are achieved has been included in the FPPAC BA base
during the fixed rate period. Commencing with the first year after the end
of the fixed rate period, the amortization of any remainder of any such
deferral as may exist will be included in this FPPAC and in each of the years
in which there is an unamortized balance, such balance will be included in
the rate base of NUNH for the purpose of determining revenue requirements.
The assumed avoided cost for each year is as follows:
Year Avoided Cost (cents/kWh)
1990 5.8
1991 6.0
1992 6.6
1993 6.8
1994 6.9
1995 7.2
1996 7.5
After FPPAC ceases to exist, any unrecovered balance will continue to be
amortized through rates over the balance of the applicable amortization
periods specified above. The FPPAC base amounts listed in Schedule 1 for the
fixed rate period include estimates of the effects of the above deferrals,
exclusions and amortization assuming there is no success in reducing the
payments to the eight SPPs identified in Exhibit C - Schedule 2.
3 Amendment of Schedule 1 to Exhibit C. Schedule 1 to Exhibit C is
amended to read as shown in the attachment hereto.
IN WITNESS WHEREOF, each of the parties has duly executed this Second
Amendatory Agreement.
NORTHEAST UTILITIES SERVICE COMPANY
By: /s/ Robert E. Busch
Senior Vice President-Finance
THE STATE OF NEW HAMPSHIRE
By: /s/ John P. Arnold
New Hampshire Attorney General
ATTACHMENT
EXHIBIT C - SCHEDULE 1
ANNUAL BASE RATE LEVEL OF THE FUEL CHARGE ("BA")
IN THE FUEL AND PURCHASED POWER ADJUSTMENT CLAUSE ("FPPAC")
Fuel and Purchased Power "BA"
Seabrook Seabrook
Pre-Commercial Post-Commercial
Year Operation (cents/kWh) Operation (cents/kWh)
1990 3.291 3.444
1991 3.154 3.427
1992 3.263 3.760
1993 3.457 4.104
1994 3.609 4.429
1995 3.985 4.857
1996 4.213 5.054
Note: This base rate level of fuel and purchased power assumes an initial
capital structure and cost for NEWCO as follows:
Structure Cost
Debt 80% 11.5 and 15.0%
Equity 20% 13.75%
At the Second Effective Date the base rate level fuel charges will be updated
using the actual NEWCO capital structure and cost and to reflect the results
of any renegotiation with the New Hampshire Electric Cooperative, Inc. It is
intended that such updates will have no impact on total rates if the
reference assumptions, as updated, are achieved
ADOPTION
WHEREAS, on November 22, 1989, Northeast Utilities Service Company
("NUSCO"), acting on behalf of its parent Northeast Utilities ("NU"), and the
Governor and Attorney General of the State of New Hampshire, acting on behalf
of the State of New Hampshire (the "State") entered into an agreement that
expressed the obligations of NU and the State with respect to NU's proposed
acquisition of Public Service Company of New Hampshire ("PSNH") and the
consummation of NUSCO's plan of reorganization for PSNH (the "Plan"); and
WHEREAS, said agreement between NUSCO and the State was amended on
December 5, 1989, and December 12, 1989 (the November 22, 1989 agreement and
the two subsequent amendments are referred to herein as the "Rate
Agreement"); and
WHEREAS, on April 20, 1990, the United States Bankruptcy Court for the
District of New Hampshire confirmed NUSCO's Plan; and
WHEREAS, the new Board of Directors for PSNH has authorized PSNH to
adopt the Rate Agreement.
NOW THEREFORE, pursuant to Paragraph 20 of the Rate Agreement, effective
as of the date set forth below PSNH hereby adopts the Rate Agreement, and
hereby agrees to be bound by all of the terms, conditions representations and
obligations set forth therein as if PSNH were an original party to the Rate
Agreement.
IN WITNESS WHEREOF, PSNH has duly executed this Adoption as of the 10th
day of July, 1990.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
By: /s/ Leon E. Maglathlin Jr.
Its: President
ACCEPTED
THE STATE OF NEW HAMPSHIRE
By: /s/ John P. Arnold
New Hampshire Attorney General
ACCEPTED
NORTHEAST UTILITIES SERVICE COMPANY
By: /s/ William B. Ellis