Company: CNLHP
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0000072741-25-000007
Chunk: 256

Company: CONNECTICUT LIGHT & POWER CO
Filing Date: 2025-02-14
Form: 10-K
Item: Item 8
Chunk 256
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 and Connecticut utility regulatory agencies (the “Commissions”), which have jurisdiction with respect to the rates of the Company’s electric distribution business.  Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America.  Judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates.  As discussed in Note 2, regulatory proceedings in recent years have focused on the recoverability of costs, including storm costs, regulatory tracking mechanisms and benefit costs, amongst others.  In some cases, the Company records regulatory assets before approval for recovery has been received from the applicable regulatory commission.  As a result, assessing the potential outcomes of future regulatory orders requires management judgment.

We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions to support its assertions on the likelihood of future recovery for deferred costs.  Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:

•      We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates of costs deferred as regulatory assets.

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•      We evaluated the Company’s disclosures related to the applicability and impacts of rate regulation, including the balances recorded and regulatory developments disclosed in the financial statements.

•      We read relevant regulatory orders issued by the Commissions for the Company and other public utilities, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances.  We also evaluated the external information and compared it to management’s recorded regulatory asset and liability balances for completeness.

•      For regulatory matters in process, we inspected the Company’s filings with the Commissions and the filings with the Commissions by intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.

•      We performed audit procedures on deferred storm restoration