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Item 7.01.
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Regulation FD Disclosure.
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On October 1, 2021, The Connecticut Light and Power
Company (“CL&P”), a subsidiary of Eversource Energy, announced that it had entered into a comprehensive settlement agreement
with the Connecticut Department of Energy and Environmental Protection (“DEEP”), Office of Consumer Counsel (“OCC”),
Office of the Attorney General (“AG”) and the Connecticut Industrial Energy Consumers (collectively, the “settling parties”),
resolving certain issues that arose in pending regulatory proceedings initiated by the Connecticut Public Utilities Regulatory Authority
(“PURA”). The settlement agreement requires PURA’s approval by November 1, 2021 to become effective.
The material financial terms of the settlement
agreement are as follows:
In the settlement agreement, CL&P agreed to
provide a total of $65 million of customer bill credits to be distributed over two months from December 1, 2021 to January 31, 2022. CL&P
expects to recognize a $65 million pre-tax charge to earnings in the third quarter of 2021 associated with this provision of the settlement
agreement.
CL&P also agreed to irrevocably set aside $10
million to fund various customer assistance initiatives as directed by the DEEP, OCC and AG as of the date of approval of the settlement
agreement for disbursement prior to December 31, 2021. CL&P expects to recognize a $10 million pre-tax charge to earnings in the third
quarter of 2021 associated with this provision of the settlement agreement.
CL&P is currently crediting customers a total
of $28.4 million associated with the payment of a performance penalty for Storm Isaias. As of March 31, 2021, CL&P had recorded this
liability on its balance sheet and a corresponding charge to earnings.
In exchange for this $75 million of customer rate
relief and customer assistance, PURA’s interim rate reduction docket will be resolved without findings. As a result of the settlement
agreement, neither the 90 basis point reduction to CL&P’s return on equity imposed by PURA’s storm-related decision issued
April 28, 2021, nor the 45 basis point reduction to CL&P’s return on equity imposed by PURA’s draft decision issued September
14, 2021, will be implemented.
CL&P has also agreed that its current base
distribution rates shall be frozen, subject to the customer bill credits described above, until no earlier than January 1, 2024. The rate
freeze applies only to base distribution rates and not to other rate mechanisms such as the retail rate components, rate reconciling mechanisms,
formula rates and any other adjustment mechanisms. The rate freeze also does not apply to any cost recovery mechanism outside of the base
distribution rates with regard to grid-modernization initiatives or any other proceedings, either currently pending or that may be initiated
during the rate freeze period, that may place additional obligations on CL&P.
As part of the settlement agreement, CL&P agreed
to withdraw with prejudice its pending appeals of PURA decisions related to Storm Isaias. The settlement agreement assures that CL&P
will have the opportunity to petition for and demonstrate the prudence of the storm costs incurred to respond to customer outages associated
with Storm Isaias in a future ratemaking proceeding.
This summary does not represent all of the terms
of the settlement agreement. The settlement agreement contains additional terms and conditions, related to governance, reporting, hiring
and area work center expansion in Connecticut. A copy of the complete settlement agreement is available at the following link:
http://www.dpuc.state.ct.us/2nddockcurr.nsf/8e6fc37a54110e3e852576190052b64d/e5a95922b7888e6d8525876100747d29/$FILE/Joint%20Motion%20to%20Approve%20Settlement%20%20Cover%20Letter%2010.01.2021%20final.pdf
The cumulative first and expected third quarter
pre-tax non-recurring charges associated with the settlement and Storm Isaias penalty totals $103.4 million at both CL&P and Eversource
Energy. This will result in an expected total after-tax charge to earnings of $83.8 million, or $0.24 per share, for 2021 for Eversource
Energy, $0.07 per share of which was previously recorded in the first quarter of 2021.
The information contained in this Item 7.01 shall
not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement
filed by Eversource Energy or any subsidiary thereof under the Securities Act of 1933, as amended, unless specified otherwise.
