EXHIBIT K-2
Montaup Electric Company Original Sheet No. 14
FERC Electric Tariff Effective: January 26, 1995
First Revised Volume No. 1
(Supersedes Original Volume No. 1)
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Montaup Electric Company ) Docket Nos. ER94-1 062-000
Newport Electric Corporation ) and EL94-68-000
SETTLEMENT AGREEMENT
This Settlement Agreement is made and entered into by and among
(1) Montaup Electric Company ("the Company"), (2) Newport Electric
Corporation ("Newport"), (3) the Attorney General of Massachusetts
("the Massachusetts Attorney General"), and (4) the Attorney General
of Rhode Island and Rhode Island Division of Public Utilities and
Carriers ("Rhode Island"). The Massachusetts Department of Public
Utilities and the Companies' non-affiliated contract demand customers,
the Town of Middleborough, Massachusetts and the Pascoag, Rhode
Island, Fire District did not join in the settlement. Neither of
these non-joining intervenors has indicated any opposition to the
settlement. The settlement does not resolve any issues in on-going
litigation in these dockets between Montaup and the non-affiliated
customers.
INTRODUCTION
The essential facts are as follows:
The Company provides all requirements wholesale service under
the M-series rate to its retail affiliates, Eastern Edison Company
("Eastern Edison") in Massachusetts and Blackstone Valley Electric
Company ("Blackstone") in Rhode Island. It also provides contract
demand service at the same rate to another affiliate, Newport, and to
each of the non-affiliated contract demand customers.
On March 21, 1994 (completed March 31, 1994) the Company filed a
rate decrease of $10.1 million based on a 1994 test year and requested
that the decrease be allowed to become effective on May 21, 1994. The
Company also proposed to convert Newport from contract demand to all
requirements service and included with the filing an agreement for
rental of generation and transmission facilities by Newport to
Montaup. In addition, the Company proposed to recover nuclear buyout
costs beginning when Seabrook resumed service after the August 1994
refueling.
The Massachusetts Attorney General, the Massachusetts Department
of Public Utilities, Rhode Island and the non-affiliated customers
moved for leave to intervene. The Massachusetts Attorney General,
Rhode Island and the non-affiliated customers also protested the
filing and requested an investigation.
On May 26, 1994 the Commission accepted the filing to be
effective subject to refund on May 21, 1994, ordered a hearing and set
a refund effective date (August 9, 1994). The Commission allowed
fuel clause recovery of buyout costs subject to refund.
A prehearing conference was held on June 21, 1994 at which a
procedural schedule was set. Three settlement conferences followed.
At the last conference, held on September 8, 1994, all parties other
than the non-affiliated customers achieved the settlement in principle
which is here reduced to writing. Under the terms of the settlement,
as set out herein, (1) the filed decrease in the Company's cost of
service is increased from $10,133,000 to $13,992,000 net of an off-
system sales credit in the Company's purchased capacity adjustment
clause ("PCAC") and including an effective date of January 1, 1994
for Montaup's off-system sales credit, (2) Montaup will eliminate from
the M-14 rate the depreciation, return and income taxes associated
with its cold storage of the Somerset No. 5 unit, per Exhibit B, (3)
the PCAC is extended through December 31, 1999, (4) the AFUDC rate is
to be based on an 11.1% return on equity, (5) a provision for recovery
of nuclear buyout costs is to be included in the M-14 rate, and (6)
the M-14 rate is presumed to recover decommissioning expenses as
actually incurred.
Subject in every particular to the conditions set forth in this
Settlement Agreement, including acceptance of this Settlement
Agreement in its entirety and without change or conditions by the
Commission, and with the understanding that each term of the
Settlement Agreement is in consideration and support of every other
term, the Company, Newport, the Massachusetts Attorney General and
Rhode Island have agreed as follows:
ARTICLE I
SCOPE OF SETTLEMENT
This Settlement Agreement resolves all issues concerning the
Company's filing among the parties to this Settlement Agreement. It
resolves no issues as to the non-affiliated customers.
ARTICLE II
SETTLEMENT RATE SCHEDULES
The Settlement Rate Schedules included in Appendix A shall
represent an integral part of this Settlement Agreement. Those rate
schedules shall be effective as of August 9, 1994, except for the
Sales Credit in the PCAC, set forth below in Article IV, which shall
be effective as of January 1, 1994. The rate schedules shall be
effective for service to Blackstone, Eastern Edison and Newport and
will not apply to service to the non-affiliated customers. The
Company shall begin applying the settlement rate schedules in bills
for service in the first billing month following the month in which
the Commission approves this settlement agreement.
ARTICLE III
CREDITS
The Company shall implement a credit in the bills rendered under
the settlement rate schedules, which credit shall be the difference
between the amount collected under the filed M-14 rate since the
refund effective date of August 9, 1994 and what would have been
collected under the settlement rate schedules appended as Exhibit A.
Interest shall apply and shall be determined according to Section
35.19a of the Commission's regulations as to all amounts collected in
excess of those that would have been collected under the settlement
rate schedules. The company shall file reports of amounts returned to
Blackstone, Eastern Edison and Newport through the credit with the
Commission within 30 days after implementing the credit. Copies of
the report shall be served on all customers and counsel for all
parties to this proceeding.
ARTICLE IV
PCAC EXTENSION AND OFF-SYSTEM SALES CREDIT
Article 4.1: The PCAC shall be extended an additional five
years, through December 31, 1999.
Article 4.2: The PCAC shall include an off-system sales credit
effective January 1, 1994.
ARTICLE V
SOMERSET No. 5
The ratemaking and accounting treatment of Somerset No. 5 shall
be determined according to the principles appended hereto as Appendix
B.
ARTICLE VI
AFUDC RATE
The Company's return on common equity used for calculating its
AFUDC rate shall be 11.1% beginning on January 1, 1995, and ending on
the last day of the calendar year following the Commission's approval
of a settlement resolving the rate of return issue in any subsequent
proceeding involving a rate decrease or increase or the Commission's
decision in such a proceeding resolving that issue on the merits.
ARTICLE VII
NUCLEAR BUYOUT COSTS
The Company shall be allowed to recover nuclear buyout costs in
accordance with the net benefits test contained in the Settlement Rate
Schedules.
ARTICLE VIII
DECOMMISSIONING COSTS
The rates contained in the Settlement Rate Schedules shall be
presumed conclusively to provide for recovery of all Seabrook and
Millstone No. 3 decommissioning funding requirements. The purpose of
this provision is to allow the Company to receive a tax deduction for
its contributions to the decommissioning funds for these units. This
provision will not affect revenue requirements in future rate filings
made by Montaup.
ARTICLE IX
CONDITIONS
Article 9.1: The making of this Settlement Agreement shall not
be deemed in any respect to constitute an admission of any party that
any allegation or contention in this proceeding is true or valid.
Article 9.2: The making of this Settlement Agreement
establishes no principles and shall not be deemed to foreclose any
party from making any contention in any proceeding or investigation
except that the parties are foreclosed from raising issues resolved by
this Settlement Agreement under Article I hereof and the settlement
rates provided for herein shall not be subject to challenge before any
administrative agency or court.
Article 9.3: The acceptance of this Settlement Agreement by the
Commission shall not in any respect constitute a determination by the
Commission as to the merits of any allegation or contention made in
this rate proceeding.
Article 9.4: This Settlement Agreement is expressly conditioned
upon the Commission's acceptance of all the provisions thereof,
without change or condition.
Article 9.5: The discussions between the parties which have
produced this Settlement Agreement have been conducted on the explicit
understanding, pursuant to Section 385.602 of the Commission's Rule of
Practice and Procedure, that all offers of settlement and discussions
relating thereto shall be privileged, shall be without prejudice to
the position of any party or participant presenting any such offer or
participating in any such discussion, and are not to be used in any
manner in connection with this proceeding or otherwise.
Article 9.6: This Settlement Agreement is submitted on the
condition that, in the event the Commission does not by order accept
it in its entirety, this Settlement Agreement shall be deemed
withdrawn and shall not constitute any part of the record in this
proceeding or be used for any other purpose. In the event the
Settlement Agreement is not approved, the M-14 rates as filed will
remain subject to refund pending the Commission's final order in this
docket.
THIS SETTLEMENT AGREEMENT is entered into this 26th day of
January, 1995 by and between the undersigned parties.
MONTAUP ELECTRIC COMPANY
Date: January 26, 1995 By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
(Its Attorney)
NEWPORT ELECTRIC CORPORATION
Date: January 26, 1995 By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
(Its Attorney)
THE ATTORNEY GENERAL OF THE
STATE OF RHODE ISLAND AND THE
RHODE ISLAND DIVISION OF PUBLIC
UTILITIES AND COMMON CARRIERS
Date: January 26, 1995 By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Attorney General
THE MASSACHUSETTS DEPARTMENT
OF THE ATTORNEY GENERAL
Date: January 26, 1995 By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Assistant Attorney General