Delivering strong, sustainable regulatory and long-term contracts with good returns
Returns on investment
Our aim is to meet the base financial returns in our rate plans by delivering on long-term contracts that provide value.
The performance indicator we use to monitor our return on investment is the defined regulatory return on equity under the terms of each rate plan.
A summary of returns under our rate plans is provided below.
| Asset base* | Return on equity* | Allowed return |
||||
|---|---|---|---|---|---|---|
| Regulatory entity | 2008 | 2007 | 2008 | 2007 | current | |
| Niagara Mohawk (Electric) | $4,609m | $4,882m | 6.7% | 9.1% | 10.6% | |
| Massachusetts (Electric) | $1,495m | $1,373m | 7.0% | 9.5% | 11.0% | |
| Narragansett Electric (Dist Only) | $564m | $543m | 2.3% | 6.8% | 10.5% | |
| Long Island Generation | $574m | $621m | 7.1% | 9.5% | 9.5% | |
- *
- Based on regulatory returns for the 12 months ended either 31 October or 31 December
Our US electricity businesses are operating under long-term rate plans which are reaching their conclusion. Current returns for our New York, Massachusetts, and Rhode Island (Narragansett) electricity operations are below allowed returns, primarily due to higher levels of investment and continued cost pressures, particularly bad debts and storm costs. In Massachusetts and Rhode Island, we anticipate filing for rate adjustments to be effective 1 January 2010, the earliest that rates are eligible for adjustment pursuant to the rate plans.
In New York, the regulatory return on equity includes electricity transmission, electricity distribution and stranded cost recoveries. For the rate year ended 31 December 2008, the reported return on equity was 5.2%. When adjusted for the Company’s share of merger savings allocated to electricity and certain one-off costs, the return was 6.7%. The long-term electricity rate plan concludes on 31 December 2011 at which time electricity rate adjustments would become effective. In April 2009, we filed for recovery of incremental investment above the amount included in the electricity rate plan, and plan on filing for this relief in each of the remaining rate plan years.
Our Long Island generation business has filed with the FERC for a rate increase effective 1 February 2009, subject to refund, as described here. Resolution of this case is expected in the latter part of 2009.