NSTAR Electric & Gas

NSTAR
Form 10-Q - Quarterly Period Ended September 30, 2005

Table of Contents

Part I. Financial Information:				Page No.
	Item 1.	Financial Statements

			Condensed Consolidated Statements of Income	2

			Condensed Consolidated Statements of Retained Earnings	3

			Condensed Consolidated Balance Sheets	4 - 5

			Condensed Consolidated Statements of Cash Flows	6

			Notes to Condensed Consolidated Financial Statements	7 - 21

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		21 - 38

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		38

	Item 4.	Controls and Procedures		38

Part II. Other Information:

	Item 1.	Legal Proceedings		38 - 39

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39

	Item 6.	Exhibits		40

Signature				41

Important Shareholder Information

NSTAR files its Forms 10-K, 10-Q and 8-K reports, proxy statements and other information with the Securities and Exchange Commission (SEC). You may access materials NSTAR has filed with the SEC on the SEC's website at www.sec.gov. In addition, NSTAR's Board of Trustees has various committees, including an Audit, Finance and Risk Management Committee, an Executive Personnel Committee, and a Board Governance and Nominating Committee. The Board also has a standing Executive Committee. The Board has adopted the NSTAR Board of Trustees Corporate Guidelines on Significant Corporate Governance Issues, a Code of Ethics for the Principal Executive Officer, General Counsel, and Senior Financial Officers, and a Code of Ethics and Business Conduct for Directors, Officers and Employees. NSTAR's SEC filings and Corporate Governance documents, including charters, guidelines and codes, and any amendments to such charters, guidelines and codes that are applicable to NSTAR's executive officers, senior financial officers or trustees can be accessed free of charge on NSTAR's website at www.nstaronline.com. Copies of NSTAR's SEC filings may also be obtained by writing or calling NSTAR's Investor Relations Department at One NSTAR Way, Westwood, MA 02090 or (781) 441-8100.

Table of Contents

Part I. Financial Information
Item 1. Financial Statements

NSTAR
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except earnings and dividends declared per share data)

	Three Months Ended							Nine Months Ended
		September 30,						September 30,
		2005			2004			2005			2004

Operating revenues	$	858,495		$	781,510		$	2,430,545		$	2,241,205

Operating expenses:
Purchased power and cost of gas sold		462,118			430,735			1,341,648			1,248,526
Operations and maintenance		104,780			103,182			336,190			312,833
Depreciation and amortization		85,722			62,052			249,268			192,602
Demand side management and renewable energy programs		18,768			18,165			52,133			51,233
Property and other taxes		23,643			24,904			78,630			78,677
Income taxes		43,986			41,204			90,978			95,152
Total operating expenses		739,017			680,242			2,148,847			1,979,023

Operating income		119,478			101,268			281,698			262,182

Other income (deductions):
Other income, net		3,099			1,668			5,340			5,842
Other deductions, net		(399	)		-			(969	)		(417	)
Total other income, net		2,700			1,668			4,371			5,425

Interest charges:
Long-term debt		30,106			30,332			90,794			88,621
Transition property securitization		12,477			6,845			33,862			21,602
Short-term debt and other		2,134			2,222			5,073			6,250
Allowance for borrowed funds used during
construction (AFUDC)		(1,039	)		(234	)		(2,560	)		(858	)
Total interest charges		43,678			39,165			127,169			115,615

Preferred stock dividends of subsidiary		490			490			1,470			1,470
Net income	$	78,010 ======		$	63,281 =====		$	157,430 ======		$	150,522 ======
Weighted average common shares outstanding:
Basic		106,808 ======			106,336 =====			106,738 ======			106,191 ======
Diluted		107,726 ======			107,396 =====			107,567 ======			107,177 ======
Earnings per common share (Note G):
Basic	$	0.73 =====		$	0.60 =====		$	1.47 =====		$	1.42 =====
Diluted	$	0.72 =====		$	0.59 =====		$	1.46 =====		$	1.40 =====

Dividends declared per common share	$	0.29 =====		$	0.2775 =====		$	0.87 =====		$	0.8325 =====

The accompanying notes are an integral part of the condensed consolidated financial statements.
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NSTAR
Condensed Consolidated Statements of Retained Earnings
(Unaudited)
(in thousands)

	Three Months Ended					Nine Months Ended
		September 30,				September 30,
		2005		2004		2005		2004

Balance at the beginning of the period	$	535,759	$	477,441	$	518,252	$	449,114
Add:
Net income		78,010		63,281		157,430		150,522
Subtotal		613,769		540,722		675,682		599,636
Deduct:
Dividends declared:
Common shares		30,974		29,528		92,887		88,442
Balance at the end of the period	$	582,795 =====	$	511,194 =====	$	582,795 =====	$	511,194 =====

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NSTAR
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)


						September 30,			December 31,
						2005			2004
Assets

Utility plant in service, at original cost				$		4,545,329	$		4,412,073
	Less: accumulated depreciation					1,123,753			1,090,924
						3,421,576			3,321,149
Construction work in progress						185,502			103,866
	Net utility plant					3,607,078			3,425,015

Non-utility property, net						146,079			154,963

Equity and other investments						75,416			72,983

Current assets:
	Cash and cash equivalents					14,764			12,497
	Restricted cash					14,979			10,254
	Accounts receivable, net and accrued unbilled revenues					360,505			355,946
	Regulatory assets					355,845			300,238
	Inventory, at average cost					109,086			86,397
	Income taxes					86,497			21,063
	Other					11,900			11,434
			Total current assets			953,576			797,829

Deferred debits:
		Regulatory assets - power contracts				707,065			1,269,651
		Regulatory asset - goodwill				663,578			678,698
		Regulatory assets - retiree benefit costs				18,145			11,897
		Regulatory assets - other				954,755			595,140
		Prepaid pension				313,321			297,746
		Other				80,540			87,434
		Total deferred debits				2,737,404			2,940,566

Total assets					$	7,519,553 ========		$	7,391,356 ========

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NSTAR
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)


		September 30,			December 31,
		2005			2004
Capitalization and Liabilities

Common equity:
Common shares, par value $1 per share,
200,000,000 shares authorized; 106,808,376 shares in 2005 and
106,550,282 shares in 2004 issued and outstanding (Note G)	$	106,808		$	106,550
Premium on common shares		811,861			819,454
Retained earnings		582,795			518,252
Accumulated other comprehensive loss		(3,374	)		(3,374	)
Total common equity		1,498,090			1,440,882

Cumulative non-mandatory redeemable preferred
stock of subsidiary		43,000			43,000


Long-term debt		1,636,552			1,792,654
Transition property securitization		787,966			308,748
Total long-term debt		2,424,518			2,101,402
Total capitalization		3,965,608			3,585,284

Current liabilities:
Long-term debt		108,803			108,197
Transition property securitization		138,546			41,048
Notes payable		148,500			161,400
Deferred income taxes		11,047			8,072
Accounts payable		277,234			239,613
Power contracts		176,064			171,312
Accrued expenses		253,971			231,490
Total current liabilities		1,114,165			961,132


Deferred credits:
Accumulated deferred income taxes and unamortized
investment tax credits		1,265,163			1,114,588
Power contracts		707,065			1,269,651
Pension liability		32,657			31,296
Regulatory liability - cost of removal		266,331			258,722
Other		168,564			170,683
Total deferred credits		2,439,780			2,844,940

Commitments and contingencies

Total capitalization and liabilities	$	7,519,553 ========		$	7,391,356 ========

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

NSTAR
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

		Nine Months Ended
		September 30,
Operating activities:		2005			2004
Net income	$	157,430		$	150,522
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization		250,180			193,183
Deferred income taxes		164,939			31,795
AFUDC		(2,560	)		(858	)
Gain on sale of steam assets		(2,564	)		-
Net changes in:
Accounts receivable and accrued unbilled revenues		(4,559	)		(10,112	)
Accounts payable		47,217			(37,640	)
Other current assets		(144,171	)		2,903
Other current liabilities		27,975			92,322
Effects of purchase power contract buy-outs		(554,270	)		-
Net change from other operating activities		40,454			(81,989	)
Net cash (used in) provided by operating activities		(19,929	)		340,126

Investing activities:
Plant expenditures (excluding AFUDC)		(280,203	)		(198,600	)
Increase in restricted cash		(4,725	)		(1,369	)
Proceeds from sale of property		5,500			14,252
Investments		(2,537	)		(3,412	)
Net cash used in investing activities		(281,965	)		(189,129	)

Financing activities:
Long-term debt redemptions		(156,408	)		(187,213	)
Transition property securitization redemptions		(97,784	)		(51,166	)
Issuance of transition property securitization		674,500			-
Issuance of long-term debt		-			300,000
Debt issue costs		(6,513	)		(1,851	)
Net change in notes payable		(12,900	)		(118,900	)
Change in disbursement accounts		(9,596	)		(6,464	)
Common stock issuance		7,146			3,965
Dividends paid		(94,284	)		(89,817	)
Net cash provided by (used in) financing activities		304,161			(151,446	)

Net increase (decrease) in cash and cash equivalents		2,267			(449	)
Cash and cash equivalents at the beginning of the year		12,497			16,526
Cash and cash equivalents at the end of the period	$	14,764		$	16,077
Supplemental disclosures of cash flow information:		=======			======
Cash paid during the period for:
Interest, net of amounts capitalized	$	122,344		$	108,361
Income taxes, net of refunds	$	5,144		$	3,680

Noncash financing activity:
Noncash common stock issuance	$	-		$	4,063

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

Notes to Condensed Consolidated Financial Statements
(Unaudited)

The accompanying notes should be read in conjunction with Notes to Consolidated Financial Statements included in NSTAR's 2004 Annual Report on Form 10-K.

Note A. Business Organization and Summary of Significant Accounting Policies

1. About NSTAR

NSTAR (or the Company) is a holding company engaged through its subsidiaries in the energy delivery business. The Company serves approximately 1.4 million customers in Massachusetts, including approximately 1.1 million electric distribution customers in 81 communities and approximately 300,000 natural gas distribution customers in 51 communities. NSTAR's retail utility subsidiaries are Boston Edison Company (Boston Edison), Commonwealth Electric Company (ComElectric), Cambridge Electric Light Company (Cambridge Electric) (collectively operating as "NSTAR Electric") and NSTAR Gas Company (NSTAR Gas). Reference in this report to "NSTAR" shall mean the registrant NSTAR or NSTAR and its subsidiaries as the context requires. NSTAR also has ownership interests in and conducts non-utility, unregulated operations.

2. Basis of Consolidation and Accounting

The financial information presented as of September 30, 2005 and for the three and nine-month periods ended September 30, 2005 and 2004 have been prepared from NSTAR's books and records without audit by an independent registered public accounting firm. However, NSTAR's independent registered public accounting firm has performed a review of these interim financial statements in accordance with standards established by the Public Company Accounting Oversight Board (United States). Financial information as of December 31, 2004 was derived from the audited consolidated financial statements of NSTAR, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). In the opinion of NSTAR's management, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial information for the periods indicated, have been included. Effective September 30, 2005, NSTAR has changed its classification of goodwill to a regulatory asset on the accompanying Condensed Consolidated Balance Sheets. For more information, refer to Note L. Certain other immaterial reclassifications have been made to the prior year amounts to conform with the current presentation.

The utility subsidiaries are subject to the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). The application of SFAS 71 results in differences in the timing of recognition of certain expenses from those of other businesses and industries. The distribution and transmission businesses remain subject to rate-regulation and continue to meet the criteria for application of SFAS 71.

The preparation of financial statements in conformity with GAAP requires management of NSTAR and its subsidiaries to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The results of operations for the three and nine-month periods ended September 30, 2005 and 2004 are not indicative of the results that may be expected for an entire year. Electric energy sales and revenues are typically higher in the winter and summer months than in the spring and fall months, as sales tend to vary with weather conditions. Natural gas energy sales and revenues are typically higher in the winter months than during other periods of the year.

3. Stock Option Accounting

NSTAR applies the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its 1997 Share Incentive Plan. Currently, no stock-based employee compensation expense for option grants is reflected in net income, as all options granted under this plan had an exercise price equal to the market value of the underlying common shares on the date of grant. The following table illustrates the effect on net income and earnings per share if NSTAR had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" to stock-based employee compensation. See Note A.5, "New Accounting Standards," for more information on a revision to SFAS 123.

	Three Months Ended							Nine Months Ended
		September 30,						September 30,
(in thousands, except earnings per common share amounts)		2005			2004			2005			2004

Net income, as reported	$	78,010		$	63,281		$	157,430		$	150,522
Add: Share grant incentive compensation expense included
in reported net income, net of related tax effects		983			696			2,389			1,914

Deduct: Total share grant and stock option compensation
expense determined under fair value method for all
awards, net of related tax effects		(1,208	)		(917	)		(2,975	)		(2,523	)

Pro forma net income	$	77,785 =====		$	63,060 =====		$	156,844 =====		$	149,913 =====

Earnings per common share:
Basic - as reported	$	0.73		$	0.60		$	1.47		$	1.42
Basic - pro forma	$	0.73		$	0.60		$	1.47		$	1.41
Diluted - as reported	$	0.72		$	0.59		$	1.46		$	1.40
Diluted - pro forma	$	0.72		$	0.58		$	1.46		$	1.40

4. Pension and Other Postretirement Benefits

Pension

NSTAR sponsors a defined benefit retirement plan, the NSTAR Pension Plan (the Plan), that covers substantially all employees. During the first nine months of 2005, NSTAR contributed approximately $35 million to the Plan. The Company does not currently anticipate contributing additional amounts to the Plan over the remaining three months of 2005.

SFAS No. 132R, "Employers' Disclosures about Pensions and Other Postretirement Benefits," requires disclosure of the net periodic pension and postretirement benefits cost.

Components of net periodic pension benefit cost were as follows:

	Three Months Ended							Nine Months Ended
		September 30,						September 30,
(in millions)		2005			2004			2005			2004
Service cost	$	5.2		$	4.8		$	15.5		$	14.3
Interest cost		14.4			15.0			43.2			45.1
Expected return on Plan assets		(18.6	)		(17.7	)		(55.8	)		(53.1	)
Amortization of transition obligation		-			0.1			-			0.3
Amortization of prior service cost		-			-			0.1			0.1
Recognized actuarial loss		6.6			6.8			19.7			20.2
Net periodic pension benefit cost	$	7.6 =====		$	9.0 ====		$	22.7 ====		$	26.9 =====

Other Postretirement Benefits

NSTAR also provides health care and other benefits to retired employees who meet certain age and years of service eligibility requirements. Under certain circumstances, eligible retirees are required to contribute for postretirement benefits. During the first nine months of 2005, NSTAR contributed approximately $16 million toward these benefits. The Company anticipates contributing an additional $4 million for these benefits over the remaining three months of 2005.

Components of net periodic postretirement benefits cost were as follows:

	Three Months Ended							Nine Months Ended
		September 30,						September 30,
(in millions)		2005			2004			2005			2004
Service cost	$	1.4		$	1.5		$	4.3		$	4.4
Interest cost		8.3			8.3			25.0			25.0
Expected return on Plan assets		(6.3	)		(5.9	)		(18.8	)		(17.8	)
Amortization of transition obligation		2.9			0.5			8.3			1.3
Amortization of prior service cost		0.1			0.3			0.2			1.0
Recognized actuarial loss		0.3			2.3			1.0			7.2
Net periodic postretirement benefit cost	$	6.7 ====		$	7.0 ====		$	20.0 =====		$	21.1 ====

In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act provides for drug benefits for retirees over the age of 65 under a new Medicare Part D program. For employers like NSTAR, who currently provide retiree medical programs for eligible former employees over the age of 65, there are subsidies available that are contained in the Act. The Act entitles these employers to a direct tax-exempt federal subsidy.

In May 2004, the FASB provided guidance on the accounting for the effects of the Act. The guidance requires that, when an employer initially accounts for the effects of the Act, the impact on the accumulated postretirement benefits obligation (APBO) should be accounted for as an actuarial gain (assuming, no plan amendments are made). In accordance with this provision, NSTAR's APBO was reduced by approximately $51 million in 2004. In addition, since the subsidy affects the employer's share of its plan's costs, the subsidy is included in measuring the costs of benefits attributable to current service. Therefore, the subsidy reduces service cost when it is recognized as a component of net periodic postretirement benefits cost. NSTAR's adoption of the accounting guidance resulted in a reduction to the net periodic postretirement benefit cost of approximately $7 million in 2004 and is reflected as a component of net periodic postretirement benefits costs above. As required, the Company restated its net periodic postretirement benefits cost for the first two quarters of 2004. However, due to the Company's pension and other postretirement benefits rate reconciliation adjustment mechanism that went into effect on September 1, 2003, this reduction in cost does not have an impact on earnings.

5. New Accounting Standards

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." This Standard addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments. This Standard eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and requires that such transactions be accounted for using a fair-value-based method. The Standard is effective for NSTAR beginning January 1, 2006. NSTAR is currently assessing the valuation options allowed in this Standard but, preliminarily, expects this Standard to impact annual earnings by approximately $1.5 million pre-tax.

In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 clarifies when an entity would be required to recognize a liability for the fair value of an asset retirement obligation that is conditional on a future event if the liability's fair value can be reasonably estimated. Uncertainty surrounding the timing and method of settlement that may be conditional on events occurring in the future would be factored into the measurement of the liability rather than the existence of the liability. FIN 47 is effective for NSTAR at December 31, 2005. NSTAR is currently assessing the impact that the interpretation may have on its consolidated financial position and results of operation.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" (SFAS 154). This Standard is effective January 1, 2006 and it changes the requirements for the accounting for and reporting of accounting changes and error corrections. The Standard establishes retrospective application as the required method for reporting a change in accounting principle rather than reporting a cumulative effect of change in accounting principle. Retrospective application requires the application of the new accounting principle to prior periods as if that principle had always been used. NSTAR will adopt this Standard.

Note B. Cost of Removal

For NSTAR's regulated utility businesses, the ultimate cost to remove utility plant from service (cost of removal) is recognized as a component of depreciation expense in accordance with approved regulatory treatment. As of September 30, 2005 and December 31, 2004, the estimated amount of the cost of removal included in regulatory liabilities was approximately $266 million and $259 million, respectively, based on the cost of removal component in current historic depreciation rates.

Note C. Derivative Instruments - Power Contracts

NSTAR accounts for its power contracts in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) and related interpretations. At September 30, 2005, NSTAR does not have any contracts which must be classified as derivative instruments. On March 1, 2005, NSTAR closed on a securitization financing for $674.5 million to finance the buy-out of four contracts that were classified as derivative instruments at December 31, 2004. These four contracts had a fair value of approximately $472 million at December 31, 2004 and were therefore removed as a derivative instrument from Deferred credits - Power contracts, along with the offsetting regulatory asset, on the accompanying Condensed Consolidated Balance Sheets. The securitization debt obligation was recorded along with an offsetting regulatory asset to reflect the future recovery of the debt obligation through its electric distribution companies' transition charge.

Note D. Variable Interest Entities

In 2004, NSTAR created two wholly owned special purpose subsidiaries: BEC Funding II, LLC and CEC Funding, LLC, to undertake the sale of a combined $674.5 million in notes to a special purpose trust. This trust was created by two Massachusetts state agencies. See Note I, Securitization, for more information. As part of NSTAR's assessment of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," as revised in December 2003 (FIN 46R), NSTAR separately reviewed the substance of these entities to determine if it is proper to consolidate these entities. Based on its review, NSTAR concluded that BEC Funding II, LLC and CEC Funding, LLC are variable interest entities and therefore have been consolidated in the accompanying consolidated financial statements.

Note E. Service Quality Indicators

Service quality indicators are established performance benchmarks for certain identified measures of service quality relating to customer service and billing performance, customer satisfaction, and reliability and safety performance for all Massachusetts utilities. NSTAR Electric and NSTAR Gas are required to report annually to the Massachusetts Department of Telecommunications and Energy (MDTE) concerning their performance as to each measure and are subject to maximum penalties of up to two percent of transmission and distribution revenues should performance fail to meet the applicable benchmarks.

NSTAR monitors its service quality continuously to determine its contingent liability, and if it is probable that a liability has been incurred and is estimable, a liability would be accrued. Annually, each NSTAR utility subsidiary makes a service quality performance filing with the MDTE. Any settlement or rate order that would result in a different liability level from what has been accrued would be adjusted in the period that the MDTE issues an order determining the amount of any such liability.

On March 1, 2005, NSTAR Electric and NSTAR Gas filed their 2004 Service Quality Reports with the MDTE that demonstrated the Companies achieved sufficient levels of reliability and performance; the reports indicate that no penalty was assessable for 2004. The MDTE is reviewing this filing and will likely issue an order prior to December 31, 2005.

As of September 30, 2005, NSTAR anticipates that for 2005, two of its electric subsidiaries' are likely to be in a combined penalty position ranging from $0.3 million to $0.4 million relating to their applicable performance benchmarks. This penalty position is primarily caused by the severe winter storms experienced earlier in the year. As a result, NSTAR has recorded a liability of this potential obligation. Since 2001, NSTAR Electric and NSTAR Gas have not been in a penalty position and therefore, the current performance is not indicative of prior years' results.

Recently, the MDTE initiated a proceeding to potentially modify the service quality indicators for all Massachusetts utilities. Until any modification occurs, the current service quality indicators will remain in place. NSTAR currently cannot predict the outcome of this proceeding or its impact.

Note F. Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires the recognition of deferred tax assets and liabilities for the future tax effects of temporary differences between the carrying amounts and the tax basis of assets and liabilities. In accordance with SFAS 71 and SFAS 109, net regulatory assets of $49.6 million and $50.3 million and corresponding net increases in accumulated deferred income taxes were recorded as of September 30, 2005 and December 31, 2004, respectively. The regulatory assets represent the additional future revenues to be collected from customers for deferred income taxes.

On October 20, 2005, NSTAR received its final Internal Revenue Service Agent's Reports for 2001 and 2002. As a result of these Reports, as of September 30, 2005, NSTAR recognized a reduction of $4.2 million in accumulated deferred income tax liability on the accompanying Condensed Consolidated Balance Sheets and a corresponding reduction to income tax expense.

The following table reconciles the statutory federal income tax rate to the annual estimated effective income tax rate for 2005 and the actual effective income tax rate for the year ended December 31, 2004:

	2005		2004
Statutory tax rate	35.0	%	35.0	%
State income tax, net of federal income tax benefit	4.8		3.9
Investment tax credits	(0.5	)	(0.6	)
ESOP dividend deduction	(0.9	)	(0.7	)
Other	(1.1	)	1.1
Effective tax rate	37.3 =====	%	38.7 =====	%

Note G. Capital Stock

At NSTAR's Annual Meeting of Shareholders held on April 28, 2005, shareholders approved an increase in the number of the Company's authorized shares from 100 million to 200 million. Subsequently, the Board of Trustees approved a two-for-one stock split of NSTAR's common shares, in the form of a 100% common share dividend, to shareholders of record on May 16, 2005. The new shares were issued on June 3, 2005. The Company's intent in effecting a stock split in the form of a stock dividend was to increase the number of outstanding common shares and to reduce the per share stock price thereby making it more accessible to investors. Common equity, common shares, and stock option activity for all periods presented have been restated to give retroactive recognition to the stock split. In addition, all references in the financial statements and notes to the financial statements, to weighted average number of basic and diluted shares, and per share amounts of the Company's common shares have been restated to give retroactive recognition to the stock split.

Note H. Earnings Per Common Share

Basic earnings per common share (EPS) is calculated by dividing net income, which includes a deduction for preferred dividends of a subsidiary, by the weighted average common shares outstanding during the year. Diluted EPS is similar to the computation of basic EPS except that the weighted average common shares are increased to include the impact of potential deferred (nonvested) shares and stock options granted, adjusted for forfeitures.

The following table summarizes the reconciling amounts between basic and diluted EPS:

	Three Months Ended					Nine Months Ended
		September 30,				September 30,
(in thousands, except per share amounts)		2005		2004		2005		2004
Net income	$	78,010	$	63,281	$	157,430	$	150,522
Basic EPS	$	0.73	$	0.60	$	1.47	$	1.42
Diluted EPS	$	0.72	$	0.59	$	1.46	$	1.40

Weighted average common shares
outstanding for basic EPS		106,808		106,336		106,738		106,191
Effect of diluted shares:
Weighted average dilutive potential common shares		918		1,060		829		986
Weighted average common shares outstanding for diluted EPS		107,726 =====		107,396 =====		107,567 =====		107,177 =====

Note I. Securitization

On March 1, 2005, two wholly owned special purpose subsidiaries, BEC Funding II, LLC and CEC Funding LLC, issued $265.5 million and $409 million, respectively, in notes to a special purpose trust created by two Massachusetts state agencies. The trust then concurrently issued a total of $674.5 million of rate reduction certificates to the public. These certificates represent fractional, undivided beneficial interests in the notes issued by BEC Funding II, LLC and CEC Funding, LLC and are secured by a portion of the transition charge assessed on Boston Edison's and ComElectric's retail customers as permitted under the 1997 Massachusetts Electric Industry Restructuring Act and authorized by the MDTE. These certificates are non-recourse to Boston Edison and ComElectric, respectively. The assets and revenues of BEC Funding II, LLC and CEC Funding, LLC, including without limitation, the transition property, are owned solely by BEC Funding II, LLC and CEC Funding, LLC, and are not available to creditors of Boston Edison, ComElectric or NSTAR. The certificates, and the related BEC Funding II, LLC and CEC Funding, LLC notes were issued at a weighted average yield of 4.15% in four classes with varying final maturity dates between 2008 and 2015. Scheduled semi-annual principal payments began in September 2005. The net proceeds from this transaction were used to make liquidation payments required in connection with the termination of certain purchase power agreements, and, in the case of ComElectric, to repay $150 million of outstanding long-term debt.

Note J. Segment and Related Information

For the purpose of providing segment information, NSTAR's principal operating segments, or its traditional core businesses, are the electric and natural gas utilities that provide energy delivery services in 107 cities and towns in Massachusetts. The unregulated operating segment engages in business activities that include district energy operations, telecommunications and a liquefied natural gas service. Amounts shown on the following table for the three and nine-month periods ended September 30, 2005 and 2004 include the allocation of costs incurred by NSTAR, which primarily consists of interest charges and are allocated to the subsidiary companies based on NSTAR's investment relating to these various business segments.

Financial data for the operating segments were as follows:

		Utility Operations						Unregulated			Consolidated
(in thousands)		Electric			Gas			Operations			Total
Three months ended September 30,
2005
Operating revenues	$	758,736	$	64,132			$		35,627	$		858,495
Segment net income (loss)	$	78,576	$	(3,480		)	$		2,914	$		78,010
2004
Operating revenues	$	698,072	$	57,753			$		25,685	$		781,510
Segment net income (loss)	$	65,888	$	(3,769		)	$		1,162	$		63,281

Nine months ended September 30,
2005
Operating revenues	$	1,965,651	$	362,217			$		102,677	$		2,430,545
Segment net income	$	136,770	$	13,888			$		6,772	$		157,430
2004
Operating revenues	$	1,818,071	$	339,950			$		83,184	$		2,241,205
Segment net income	$	129,592	$	15,188			$		5,742	$		150,522

Total assets
September 30, 2005	$	6,639,750	$	682,349			$		197,454	$		7,519,553
December 31, 2004	$	6,493,187	$	696,710			$		201,459	$		7,391,356

Note K. Electric Equity Investment

NSTAR Electric collectively has an equity ownership interest of 4% in Maine Yankee Atomic Power Company (MY). On October 3, 2005, MY was notified by the U.S. Nuclear Regulatory Commission (NRC) that its former plant site has been decommissioned in accordance with NRC procedures. The NRC has amended MY's license, reducing the land under the license from approximately 179 acres to the 12 acre Independent Spent Fuel Storage Installation (ISFSI) that includes a dry cask storage facility, and marks the first time a commercial nuclear power plant in the United States has been fully decommissioned with all plant buildings removed. MY's amended license will continue to apply to the ISFSI where spent nuclear fuel from the plant's 23 years of operation is stored. MY remains responsible for the security and protection of the ISFSI and is required to maintain a radiation monitoring program at the site.

During the course of carrying out the decommissioning work, the Yankee Atomic Electric Company (YA) has identified increases in the scope of soil and other remediation required to meet environmental standards, beyond the levels assumed in the 2003 Estimate. YA is continuing to evaluate the impact of the additional requirements on its decommissioning plan. While that evaluation is not complete, as of October 27, 2005, YA has determined that the schedule for the completion of physical work will need to extend until mid-2006 and the costs of completing decommissioning will be approximately $63 million greater than the estimate that formed the basis of the 2003 FERC settlement. Based on this allocation increase, NSTAR Electric is obligated to pay $8.8 million to the decommissioning of YA. Most of the cost increase relates to decommissioning expenditures that will be made during 2006. In order to fund these additional costs, YA is preparing an application to FERC for increased decommissioning charges to go into effect in early 2006, subject to FERC approval. The timing and amount of the FERC application and the ultimate increase in decommissioning costs are under development, but YA expects that it will seek rate recovery of a significant component of this increase in expenditures during 2006.

Note L. Change in Classification of Goodwill

In the third quarter of 2005, NSTAR changed its classification of the amount included as Goodwill in the December 31, 2004 Consolidated Balance Sheet of $415.5 million to a Deferred debit - Regulatory asset -- goodwill. As a result of this change in classification to a regulatory asset and in accordance with the requirements of SFAS 109, "Accounting for Income Taxes," the Company recognized $268.2 million of accumulated deferred income taxes along with an offsetting regulatory asset as of September 30, 2005. The new classification of goodwill was adopted to better align with the Company's recovery of goodwill amortization from customers. For comparative purposes, NSTAR has adopted the new classification retrospectively to the financial statements of prior periods. The regulatory asset, representing the accumulated deferred income taxes, will be amortized over the remaining life of the regulatory asset -- goodwill in accordance with the Company's merger rate order allowing recovery of goodwill amortization and amounts to approximately $7.9 million annually. This additional amortization expense is entirely offset by a corresponding deferred income tax - benefit.

The Company's goodwill arose from the merger that created NSTAR in 1999. As a result of a rate order from the MDTE approving the merger, the Company is recovering goodwill from its customers and, therefore, NSTAR has determined that this rate structure allows for amortization of goodwill over the collection period.

This classification change had no effect on prior year earnings and, therefore, there has been no change to previously reported retained earnings.

A summary of the impact of the classification change as of and for the three and six month periods ended March 31, 2005 and June 30, 2005, respectively, is as follows: (in thousands)

	Three Month Period Ended March 31, 2005

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	74,743	$	76,720	$	1,977
Income taxes			29,799		27,822		(1,977	)

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Statement of Cash Flows
Depreciation and amortization		$	75,047	$	77,024	$	1,977
Deferred income taxes			214,807		212,830		(1,977	)

	March 31, 2005
			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Balance Sheet
Goodwill		$	423,807	$	-	$	(423,807	)
Current regulatory asset			405,144		425,304		20,160
Deferred debit regulatory asset - goodwill			-		673,658		673,658
Accumulated deferred income taxes			1,056,197		1,328,347		272,150

	Three Month Period Ended June 30, 2005

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	84,849	$	86,826	$	1,977
Income taxes			21,147		19,170		(1,977	)

	Six Month Period Ended June 30, 2005

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	159,592	$	163,546	$	3,954
Income taxes			50,946		46,992		(3,954	)

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Statement of Cash Flows
Depreciation and amortization		$	160,200	$	164,154	$	3,954
Deferred income taxes			198,497		194,543		(3,954	)

	June 30, 2005
			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Balance Sheet
Goodwill		$	420,744	$	-	$	(420,744	)
Current regulatory asset			366,945		387,105		20,160
Deferred debit regulatory asset - goodwill			-		668,618		668,618
Accumulated deferred income taxes			1,036,516		1,306,689		270,173

A summary of the impact of the classification change as of and for the three and six month periods ended March 31, 2004 and June 30, 2004, respectively, is as follows: (in thousands)

	Three Month Period Ended March 31, 2004

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	65,539	$	67,516	$	1,977
Income taxes			33,070		31,093		(1,977	)

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Statement of Cash Flows
Depreciation and amortization		$	65,724	$	67,701	$	1,977
Deferred income taxes			37,282		35,305		(1,977	)

	March 31, 2004
			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Balance Sheet
Goodwill		$	436,059	$	-	$	(436,059	)
Deferred debit regulatory asset - goodwill			-		693,818		693,818
Accumulated deferred income taxes			778,313		1,058,371		280,058

	Three Month Period Ended June 30, 2004

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	61,057	$	63,034	$	1,977
Income taxes			24,832		22,855		(1,977	)

	Six Month Period Ended June 30, 2004

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	126,596	$	130,550	$	3,954
Income taxes			57,902		53,948		(3,954	)

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Statement of Cash Flows
Depreciation and amortization		$	126,983	$	130,937	$	3,954
Deferred income taxes			51,829		47,875		(3,954	)

	June 30, 2004
			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Balance Sheet
Goodwill		$	432,996	$	-	$	(432,996	)
Deferred debit regulatory asset - goodwill			-		688,778		688,778
Accumulated deferred income taxes			785,187		1,063,268		278,081

A summary of the impact of the classification change as of and for the three and nine month periods ended September 30, 2004 and for the years ended December 31, 2004, 2003 and 2002 is as follows: (in thousands)

	Three Month Period Ended September 30, 2004

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	60,075	$	62,052	$	1,977
Income taxes			43,181		41,204		(1,977	)

	Nine Month Period Ended September 30, 2004

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Income Statement
Depreciation and amortization		$	186,671	$	192,602	$	5,931
Income taxes			101,083		95,152		(5,931	)

	Nine Month Period Ended September 30, 2004

			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Statement of Cash Flows
Depreciation and amortization		$	187,252	$	193,183	$	5,931
Deferred income taxes			37,726		31,795		(5,931	)

	September 30, 2004
			Previously Reported		As Adjusted		Effect of Change
Condensed Consolidated Balance Sheet
Goodwill		$	429,933	$	-	$	(429,933	)
Deferred debit regulatory asset - goodwill			-		683,738		683,738
Accumulated deferred income taxes			801,409		1,077,513		276,104

	Year Ended December 31, 2004

			Previously Reported		As Adjusted		Effect of Change
Consolidated Income Statement
Depreciation and amortization		$	246,944	$	254,852	$	7,908
Income taxes			116,238		108,330		(7,908	)

			Previously Reported		As Adjusted		Effect of Change
Consolidated Statement of Cash Flows
Depreciation and amortization		$	246,363	$	254,271	$	7,908
Deferred Income taxes			79,570		71,662		(7,908	)

	December 31, 2004
			Previously Reported		As Adjusted		Effect of Change
Consolidated Balance Sheet
Goodwill		$	426,870	$	-	$	(426,870	)
Current regulatory asset			280,078		300,238		20,160
Deferred debit regulatory asset - goodwill			-		678,698		678,698
Accumulated deferred income taxes			840,461		1,114,588		274,127

	Year Ended December 31, 2003

			Previously Reported			As Adjusted			Effect of Change
Consolidated Income Statement
Depreciation and amortization		$	235,516		$	243,424		$	7,908
Income taxes			121,409			113,501			(7,908	)

			Previously Reported			As Adjusted			Effect of Change
Consolidated Statement of Cash Flows
Depreciation and amortization		$	236,336		$	244,244		$	7,908
Deferred income taxes			128,379			120,471			(7,908	)

	December 31, 2003
			Previously Reported			As Adjusted			Effect of Change
Consolidated Balance Sheet
Goodwill		$	439,122		$	-		$	(439,122	)
Current regulatory asset			142,182			162,342			20,160
Deferred debit regulatory asset - goodwill			-			698,858			698,858
Accumulated deferred income taxes			765,507			1,047,542			282,035

	Year Ended December 31, 2002

			Previously Reported			As Adjusted			Effect of Change
Consolidated Income Statement
Depreciation and amortization		$	239,233		$	247,141		$	7,908
Income taxes			107,113			99,205			(7,908	)

			Previously Reported			As Adjusted			Effect of Change
Consolidated Statement of Cash Flows
Depreciation and amortization		$	239,800		$	247,708		$	7,908
Deferred income taxes			(13,311	)		(21,219	)		(7,908	)
	December 31, 2002
			Previously Reported			As Adjusted			Effect of Change
Consolidated Balance Sheet
Goodwill		$	451,374		$	-		$	(451,374	)
Deferred debit regulatory asset - goodwill			-			739,016			739,016
Accumulated deferred income taxes			675,881			965,823			289,942

Note M. Commitments and Contingencies

1. Environmental Matters

NSTAR subsidiaries face possible liabilities as a result of involvement in several multi-party disposal sites, state-regulated sites or third party claims associated with contamination remediation. NSTAR generally expects to have only a small percentage of the total potential liability for the majority of these sites.

During the second quarter of 2005, the Massachusetts Supreme Judicial Court (SJC) issued its decision in one of the environmental contamination matters. In 2004, a Superior Court had issued a decision favorable to Boston Edison that put the burden of proof on the plaintiffs to determine Boston Edison's liability for contamination. The SJC's decision reversed the Superior Court's 2004 ruling and held that the plaintiffs in this matter are allowed to seek joint and several liability against the defendants, including Boston Edison. The case was remanded back to the Superior Court for trial. On October 6, 2005, Boston Edison reached a tentative settlement in principle with the plaintiffs in this matter. It is anticipated that the appropriate settlement documents will be filed with the Superior Court for approval during the fourth quarter of 2005. The Boston Edison settlement payment is within the amount previously reserved for this matter. Boston Edison will vigorously attempt to recover monies from the other responsible third parties, including recovery from its insurance carrier.

Asof September 30, 2005 and December 31, 2004, NSTAR had reserves of $10.9 million and $3.9 million, respectively, for all potential environmental sites, including the site specified in the paragraph above. This estimated recorded liability is based on an evaluation of all currently available facts with respect to all of its sites. In addition, based on a legal opinion from the Company's environmental counsel, it is probable that Boston Edison will recover, at a minimum, approximately $2 million from other parties. As a result, Boston Edison recorded an asset in the second quarter that will ultimately offset the Company's obligation. Management believes that the ultimate disposition of this matter will not have a material adverse impact on NSTAR's results of operation, cash flows or its financial position.

NSTAR Gas is participating in the assessment or remediation of certain former manufactured gas plant (MGP) sites and alleged MGP waste disposal locations to determine if and to what extent such sites have been contaminated and whether NSTAR Gas may be responsible for remedial action. The MDTE has approved recovery of costs associated with MGP sites over a 7-year period, without carrying costs. As of September 30, 2005 and December 31, 2004, NSTAR recorded a liability of approximately $4.9 million and $3.8 million, respectively, as estimates for site cleanup costs for several MGP sites for which NSTAR Gas was previously cited as a potentially responsible party. A corresponding regulatory asset was recorded that reflects the future rate recovery for these costs.

Estimates related to environmental remediation costs are reviewed and adjusted as further investigation and assignment of responsibility occurs and as either additional sites are identified or NSTAR's responsibilities for such sites evolve or are resolved. NSTAR's ultimate liability for future environmental remediation costs may vary from these estimates. Based on NSTAR's current assessment of its environmental responsibilities, existing legal requirements and regulatory policies, NSTAR does not believe that these environmental remediation costs will have a material adverse effect on NSTAR's consolidated financial position, results of operations or cash flows.

2. Capital Spending Commitments

In the second quarter of 2005, NSTAR began construction of a substation in Stoughton, Massachusetts and a 345kV transmission line that will connect the substation to South Boston. As of September 30, 2005, construction that is part of this project is also in progress on two other substations. To date, this project is approximately 40% complete. This transmission line is expected to ensure continued reliability of electric service and improve power import capability in the Northeast Massachusetts area. This project is expected to be placed in service during the summer of 2006. A substantial portion of the cost of this project will be shared by other utilities in New England based on ISO-New England's approval and will be recovered by NSTAR through wholesale and retail transmission rates. As of September 30, 2005, NSTAR has contractual construction cost commitments of approximately $35 million related to this project.

3. Regulatory and Legal Matters

a. Regulatory matters

In December 2004, NSTAR Electric filed proposed transition rate adjustments for 2005, including a preliminary reconciliation of transition, transmission, standard offer and default service costs and revenues through 2004. The MDTE subsequently approved tariffs for each retail electric subsidiary effective January 1, 2005. The filings were updated in February 2005 to reflect final 2004 costs and revenues. The filings are subject to annual review and reconciliation. On October 19, 2005, the MDTE approved a settlement agreement between Cambridge Electric, ComElectric and the Attorney General of the Commonwealth of Massachusetts to resolve issues relating to the reconciliation of transition, standard offer and default service costs for 2003 and 2004. This settlement agreement had no material effect on NSTAR's consolidated results of operations, cash flows and financial condition for a reporting period. The reconciliation of transmission costs and revenues was not resolved by settlement and will be decided by the MDTE after a hearing.

On December 1, 2003, NSTAR Electric and NSTAR Gas filed their annual reconciliation report on their pension and PBOP rate adjustment mechanism. Hearings were held during 2004. On June 29, 2005, the MDTE issued their order approving the reconciliation report. In December 2004, the companies filed their annual reconciliations for 2004 consistent with the rate adjustment mechanism.

Cambridge Electric and ComElectric filed proposed changes to their Open Access Transmission Tariff (OATT) with the Federal Energy Regulatory Commission (FERC) on March 30, 2005 to provide for consistent application of the OATT among all NSTAR Electric companies. The new tariffs became effective on June 1, 2005; however, the FERC set issues raised in the proceeding for hearing. Settlement discussions with an intervener and the Attorney General of the Commonwealth of Massachusetts are ongoing.

As previously disclosed, a joint return on equity (ROE) filing was made by participating New England Transmission Owners, including NSTAR Electric, with the FERC. Among other things, the filing requested an increase in the base ROE component of regional and local transmission rates to a single ROE of 12.8% for all regional and local transmission rates, a 50 basis point adder to reward RTO participation, and a 100 basis point increase in regional rates as an incentive to build new transmission facilities. FERC accepted the 50 basis point adder for regional rates, and set for hearing the base ROE and the 100 basis point incentive adder for new transmission. Settlement negotiations before an administrative law judge were unsuccessful and hearings were held in early 2005. As a result of these hearings, on May 27, 2005, an initial decision was reached. The judge found that the base ROE should be 10.72% and that the 100 basis point adder for new transmission facilities should only apply to projects where innovative and less expensive technology is used. Appeal briefs by all parties, including the Transmission Owners, were filed on June 27, 2005. FERC is reviewing the judge's findings and recommendations and is expected to make a final determination later in November 2005.

b. Locational Installed Capacity (LICAP)

On March 23, 2005, the FERC unanimously approved an ISO-New England plan to implement LICAP, a new market rule designed to compensate wholesale generators for their capacity with an implementation date of January 1, 2006. FERC subsequently revised this date to no earlier than October 2006. The new LICAP rules require electric load serving entities (LSE), like NSTAR Electric, to procure capacity within the zones where load is served. The current market structure allows capacity located anywhere in New England to count towards a LSE's obligation, regardless of load zone. NSTAR Electric's service territory covers two of the five capacity zones in New England: Northeastern Massachusetts (NEMA) and Rest of Pool (ROP). NEMA is import-constrained and could potentially see higher capacity prices than the ROP. The majority of NSTAR's customers are in the NEMA load zone. At this point, it appears likely that NSTAR's new 345kV transmission project will reduce transmission constraints causing capacity prices between NEMA and ROP to converge, which could ultimately render this locational aspect of LICAP a minimal factor for NSTAR customers. However, since the new market rules require that a certain amount of capacity be procured in the NEMA zone, these requirements could impact pricing for capacity in the NEMA zone. Additionally, many of the generators in the NEMA zone have filed with the FERC for cost of service-type agreements called Reliability Must Run agreements for the recovery of their costs prior to the implementation of LICAP. The new LICAP rules are likely to increase overall capacity pricing levels in New England. Since the New England market as a whole is currently in a surplus position, currently capacity trades at a relatively low price. One of the goals of LICAP is to provide a higher level of compensation to generators than what is currently being earned in this surplus market. NSTAR is opposed to LICAP as this will likely increase the price of power to NSTAR's customers without any assurance that new capacity will be built. As a result, NSTAR (and other parties) have appealed the FERC's LICAP decision in federal court. Additionally, while LICAP has been approved by FERC, the specific parameters of the capacity pricing mechanism are still part of a contested hearing at FERC. A final decision on these matters is expected sometime in 2006. On October 21, 2005, FERC issued an Interim Order Regarding Settlement Procedures and Directing Compliance Filing. In this Order, the FERC gives the parties in this proceeding a further opportunity to pursue settlement on an alternative to the LICAP mechanism. FERC further directed that a settlement judge be appointed to manage the process. NSTAR cannot predict the actual impact these changes will have on NSTAR Electric and its customers, but expects all costs incurred to be fully recoverable.

c. Legal Matters

In the normal course of its business, NSTAR and its subsidiaries are involved in certain legal matters, including civil litigation. Management is unable to fully determine a range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs ("legal liabilities") that would be in excess of amounts accrued and amounts covered by insurance, except for the item disclosed in Note M, Part 1, "Environmental Matters." Based on the information currently available, NSTAR does not believe that it is probable that any such legal liabilities will have a material impact on its consolidated financial position. However, it is reasonably possible that additional legal liabilities that may result from changes in circumstances could have a material impact on its results of operations, cash flows and financial condition for a reporting period.

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

The accompanying MD&A focuses on factors that had a material effect on the financial condition, results of operations and cash flows of NSTAR during the periods presented and should be read in conjunction with the accompanying condensed consolidated financial statements and related notes and with the MD&A in NSTAR's 2004 Annual Report on Form 10-K.

Executive Overview

NSTAR (or the Company) is a holding company engaged in the energy delivery business serving approximately 1.4 million customers in Massachusetts, including approximately 1.1 million electric distribution customers in 81 communities and approximately 300,000 natural gas distribution customers in 51 communities. NSTAR's core business is a traditional "pipes and wires" company with a continuing focus on shareholder value and consistent energy delivery to our customers. NSTAR's strategy is to invest in transmission and distribution assets that will align with its core competencies.

Recent Events

Impact from Hurricanes. Hurricanes Katrina and Rita have impacted natural gas production, processing and transportation assets in the Gulf of Mexico (GOM). None of these facilities are owned by NSTAR; however, NSTAR depends on resources in the GOM for supply of natural gas in addition to storage supplies which were not affected by the storms. One of the facilities impacted is the Tennessee Gas Pipeline (TGP) 500 Line, which is currently out of service. TGP's initial assessment is that this pipeline will be out of service for three to six months. NSTAR has approximately 6% of its peak design winter need supplied by the 500 Line. NSTAR is in the process of contracting to replace this supply with Canadian supplies. NSTAR is actively involved with other utilities, pipelines, suppliers and regulators in assessing the GOM supplies and will continue to respond as necessary.

In addition, it is possible that the recent unprecedented rise in energy prices, resulting from these hurricanes, may have a negative impact on NSTAR's future electric and gas sales. NSTAR can not predict the overall impact resulting from these events on its financial positions, results of operations or cash flows.

Regulated rates. On September 15, 2005, NSTAR notified the Massachusetts Department of Telecommunications and Energy (MDTE) of its intention to file new rate schedules that will constitute general changes in rate schedules in the near future for its Boston Edison, Cambridge Electric, Commonwealth Electric and NSTAR Gas subsidiary companies. This required procedural step taken by NSTAR has put the MDTE on notice of a future filing.

Operating Results

Electric utility operations. NSTAR derives 81% of its operating revenues from the transmission and distribution of electric energy through NSTAR Electric. NSTAR Electric is comprised of Boston Edison Company (Boston Edison), Commonwealth Electric Company (ComElectric), and Cambridge Electric Light Company (Cambridge Electric).

Gas utility operations. NSTAR derives 15% of its operating revenues from the distribution of natural gas through NSTAR Gas Company (NSTAR Gas), NSTAR's retail gas subsidiary.

Unregulated operations. NSTAR derives 4% of its operating revenues from several operating subsidiaries in the telecommunications and district energy delivery operations.

Earnings. NSTAR's earnings are impacted by fluctuations in unit sales of electric kWh and gas MMbtu, which directly determine the level of distribution and transmission revenues recognized. In accordance with the regulatory rate structure in which NSTAR operates, its recovery of energy costs are fully reconciled with the level of energy revenues currently recorded and therefore do not have an impact on earnings.

Net income for the quarter and nine-month periods ended September 30, 2005 amounted to $78.0 million and $157.4 million, or $0.72 and $1.46 per diluted earnings per share as compared to $63.3 million and $150.5 million, or $0.59 and $1.40 per diluted earnings per share for the same periods in 2004.

Cautionary Statement

The MD&A, as well as other portions of this report, contain statements that are considered forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements may also be contained in other filings with the Securities and Exchange Commission (SEC), in press releases and oral statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are based on the current expectations, estimates or projections of management and are not guarantees of future performance. Some or all of these forward-looking statements may not turn out to be what NSTAR expected. Actual results could differ materially from these statements. Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

Examples of some important factors that could cause our actual results or outcomes to differ materially from those discussed in the forward-looking statements include, but are not limited to, the following:

-	impact of continued cost control procedures on operating results
-	weather conditions that directly influence the demand for electricity and natural gas and major storms
-	changes in tax laws, regulations and rates
-	financial market conditions including, but not limited to, changes in interest rates and the availability and cost of capital
-	prices and availability of operating supplies
-	prevailing governmental policies and regulatory actions (including those of the MDTE and Federal Energy Regulatory Commission (FERC)) with respect to allowed rates of return, rate structure, continued recovery of regulatory assets, financings, purchased power, acquisition and disposition of assets, operation and construction of facilities, changes in tax laws and policies and changes in, and compliance with, environmental and safety laws and policies
-	changes in financial accounting and reporting standards
-	new governmental regulations or changes to existing regulations that impose additional operating requirements or liabilities
-	changes in specific hazardous waste site conditions and the specific cleanup technology
-	impact of union contract negotiations
-	impact of uninsured losses
-	changes in available information and circumstances regarding legal issues and the resulting impact on our estimated litigation costs
-	future economic conditions in the regional and national markets
-	ability to maintain current credit ratings, and
-	the impact of terrorist acts

Any forward-looking statement speaks only as of the date of this filing and NSTAR undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. You are advised, however, to consult all further disclosures NSTAR makes in its filings to the SEC. Other factors in addition to those listed here could also adversely affect NSTAR. This report also describes material contingencies and critical accounting policies and estimates in this section and in the accompanying Notes to Condensed Consolidated Financial Statements and NSTAR encourages a review of these Notes.

Critical Accounting Policies and Estimates

For a complete discussion of critical accounting policies, refer to "Critical Accounting Policies and Estimates" in Item 7 of NSTAR's 2004 Form 10-K. There have been no substantive changes to those policies and estimates.

Rate Structure

a. Retail Electric Rates

Electric distribution companies in Massachusetts are required to obtain and resell power to retail customers who choose not to buy energy from a competitive energy supplier. Prior to March 2005, this service was provided through either standard offer or default service. Standard offer service ended on February 28, 2005, and default service was renamed basic service. Therefore, all customers who have not chosen to receive service from a competitive supplier are being provided basic service. Basic service rates are reset every six months (every three months for large commercial and industrial customers). The price of basic service is intended to reflect the average competitive market price for power. As of September 30, 2005 and December 31, 2004, customers of NSTAR Electric had approximately 39% and 24%, respectively, of their load requirements provided by competitive suppliers.

On December 21, 2004, the FERC issued an order approving Boston Edison's October 2004 request to modify its Open Access Transmission Tariff. Effective January 1, 2005, Boston Edison is allowed to include 50 percent of construction work in progress in its rate base for transmission projects by including this amount in its local network service transmission rate formula. The order requires Boston Edison to file annual reports of its long-term transmission plan.

On October 19, 2005, the MDTE approved a settlement agreement between Cambridge Electric/ComElectric and the Attorney General of the Commonwealth of Massachusetts to resolve issues relating to the reconciliation of transition, standard offer and default service costs for 2003 and 2004 for Cambridge Electric and ComElectric. This settlement agreement had no material effect on NSTAR's consolidated results of operations, cash flows and financial condition for a reporting period. The reconciliation of transmission costs and revenues was not resolved by settlement and will be decided by the MDTE after a hearing.

b. Natural Gas Rates

NSTAR Gas generates revenues primarily through the sale and/or transportation of natural gas. Gas sales and transportation services are divided into two categories: firm, whereby NSTAR Gas must supply gas and/or transportation services to customers on demand; and interruptible, whereby NSTAR Gas may, generally during colder months, temporarily discontinue service to high volume commercial and industrial customers. Sales and transportation of gas to interruptible customers do not materially affect NSTAR Gas' operating income because substantially the entire margin for such service is returned to its firm customers as rate reductions.

In addition to delivery service rates, NSTAR Gas' tariffs include a seasonal Cost of Gas Adjustment Clause (CGAC) and a Local Distribution Adjustment Clause (LDAC). The CGAC provides for the recovery of all gas supply costs from firm sales customers. The LDAC provides for the recovery of certain costs applicable to both sales and transportation customers. The CGAC is filed semi-annually for approval by the MDTE. The LDAC is filed annually for approval. In addition, NSTAR Gas is required to file interim changes to its CGAC factor when the actual costs of gas supply vary from projections by more than 5%.

The 2004-2005 winter season CGAC factor was revised downward from earlier in 2004 to reflect decreases in the cost of gas caused by varying market conditions. To date, the CGAC factor received MDTE approval of $0.9968 per therm effective November 1, 2004. On February 1, 2005, an approved rate of $0.8500 per therm was established until May 1, 2005 when a rate of $0.7501 per therm was approved. On September 1, 2005 and on November 1, 2005, due to rapid increases in natural gas prices, the MDTE approved CGAC factors of $1.2232 per therm and $1.4570 per therm, respectively.

On February 28, 2005, the MDTE approved a petition by NSTAR Gas to change its gas procurement practices. NSTAR Gas proposed to purchase financial contracts in order to lock in prices for approximately one-third of its projected normal winter gas requirements. NSTAR Gas will not be taking physical delivery of the gas when the financial contracts are executed. Management has yet to commence this practice but is currently negotiating financial contracts with major financial institutions. All costs incurred will continue to be included in the CGAC.

c. Service Quality Indicators

Service quality indicators are established performance benchmarks for certain identified measures of service quality relating to customer service and billing performance, customer satisfaction, and reliability and safety performance for all Massachusetts utilities. NSTAR Electric and NSTAR Gas are required to report annually to the MDTE concerning their performance as to each measure and are subject to maximum penalties of up to two percent of transmission and distribution revenues should performance fail to meet the applicable benchmarks.

Decommissioning

During the course of carrying out the decommissioning work, the Yankee Atomic Electric Company (YA) has identified increases in the scope of soil remediation and certain other remediation required to meet environmental standards, beyond the levels assumed in the 2003 Estimate. YA is continuing to evaluate the impact of the additional requirements on its decommissioning plan. While that evaluation is not complete, as of October 27, 2005, YA has determined that the schedule for the completion of physical work will need to extend until mid-2006 and the costs of completing decommissioning will be approximately $63 million greater than the estimate that formed the basis of the 2003 FERC settlement. Based on this allocation increase, NSTAR Electric is obligated to pay $8.8 million to the decommissioning of YA. Most of the cost increase relates to decommissioning expenditures that will be made during 2006. In order to fund these additional costs, YA is preparing an application to FERC for increased decommissioning charges to go into effect in early 2006, subject to FERC approval. The timing and amount of the FERC application and the ultimate increase in decommissioning costs are under development, but YA expects that it will seek rate recovery of a significant component of this increase in expenditures during 2006.

Union Contract

NSTAR's labor contract with Local 369 of the Utility Workers Union of America, AFL-CIO, expired on May 15, 2005. After a three week strike, on May 29, 2005, NSTAR management and union officials agreed upon a new four year contract expiring June 1, 2009. The union members, which represent approximately 1,900 employees, ratified the contract on May 31, 2005.

Results of Operations

The following section of MD&A compares the results of operations for each of the three-month periods ended September 30, 2005 and 2004 and should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report.

Three Months Ended September 30, 2005 compared to Three Months Ended September 30, 2004

Overview

Earnings per common share were as follows:

	Three Months ended September 30,
		2005		2004	% Change
Basic	$	0.73	$	0.60	21.7
Diluted	$	0.72	$	0.59	22.0

Net income was $78 million for the quarter ended September 30, 2005 compared to $63.3 million for the same period in 2004. Factors that contributed to the $14.7 million, or 23.2%, increase in 2005 earnings include:

-		Increased electric sales of 8.7% which was driven by warmer than normal summer temperatures
-		Increased transmission revenues due to higher plant investment balances
-		Decreased income tax expense of approximately $4.2 million as a result of successful resolution of uncertain tax positions

These increases were partially offset by:

Higher depreciation and amortization expense, excluding amortization expense related to securitization of transition property, that also reflects higher distribution and transmission property ($1.2 million) primarily resulting from higher capital additions

Significant cash flow events during the quarter include the following: NSTAR invested approximately $111 million in capital projects to improve reliability (including $35.7 million for the 345 kv project), paid approximately $31.5 million in preferred and common share dividends and retired approximately $49.2 million in long-term debt.

Energy sales

The following is a summary of retail electric and firm gas energy sales for the periods indicated:

Retail Electric Sales - MWH	Three Months ended September 30,
		2005	2004	% Change

Residential		1,948,254	1,715,035	13.6
Commercial		3,687,611	3,428,032	7.6
Industrial		435,650	441,705	(1.4)
Other		36,809	37,073	(0.7)
Total retail sales		6,108,324 =======	5,621,845 =======	8.7 ===

Firm Gas Sales - BBTU	Three Months ended September 30,
		2005	2004	% Change

Residential		1,427	1,462	(2.4)
Commercial and other		1,721	1,667	3.2
Industrial		859	965	(11.0)
Total firm sales		4,007 =======	4,094 =======	(2.1) ===

The 2.1% decrease in firm gas sales in the third quarter of 2005 primarily reflects warmer overall temperatures than in 2004.

Weather Conditions

In terms of customer sector characteristics, industrial sales are less sensitive to weather than residential and commercial sales, which are influenced by temperature extremes. The warmer weather in the third quarter of 2005 (by 26.2% over 2004) had the most favorable impact on the electric residential sector. Commercial sales were strong also due to the warmer weather primarily due to higher air conditioning use. For each of the three months in the quarter, NSTAR's electric demand peak exceeded the prior year's demand for the same periods. NSTAR's electric system experienced new all-time demand peaks on two occasions in July 2005, exceeding the previous peak that occurred in 2002 by nearly 6%. Significant investments NSTAR has made in recent years to maintain reliability and upgrade the distribution infrastructure are crucial to maintaining system demands. Electric residential and commercial customers represented approximately 31.9% and 60.4%, respectively, of NSTAR's total retail sales mix for the third quarter of 2005 and provided 36.4% and 56.7% of distribution and transmission revenues, respectively. Refer to the "Electric revenues" section below for a more detailed discussion. Industrial sales are primarily influenced by national and local economic conditions and sales to these customers reflect a sluggish economic environment and decreased manufacturing production.

			Normal
			30-Year
	2005	2004	Average

Heating degree-days	93	126	126
Percentage colder (warmer) than prior year	(26.2)%	38.5%
Percentage colder (warmer) than 30-year average	(26.2)%	-

Cooling degree-days	698	501	593
Percentage warmer (cooler) than prior year	39.3%	(23.5)%
Percentage warmer (cooler) than 30-year average	17.7%	(15.5)%

Weather conditions impact electric and, to a greater extent during the winter, gas sales in NSTAR's service area. The comparative information above relates to degree-days for the third quarter of 2005 and 2004 and the number of degree-days in a "normal" third quarter as represented by a 30-year average. A "degree-day" is a unit measuring how much the outdoor mean temperature falls below (heating degree-day) or rises above (cooling degree-day) a base of 65 degrees. Each degree below or above the base temperature is measured as one degree-day.

Operating revenues

Operating revenues for the third quarter of 2005 increased 9.9% from the same period in 2004 as follows:

(in millions)	Three Months Ended September 30,						Increase/(Decrease)
			2005		2004	Amount			Percent
Electric revenues
Retail distribution and transmission		$	284.5	$	266.3	$	18.2			6.8
Energy, transition and other			471.3		427.2		44.1			10.3
Total retail			755.8		693.5		62.3			9.0
Wholesale			3.0		4.6		(1.6	)		(34.8	)
Total electric revenues			758.8		698.1		60.7			8.7
Gas revenues
Firm gas and transportation			16.0		15.8		0.2			1.3
Energy supply and other			48.1		41.9		6.2			14.8
Total gas revenues			64.1		57.7		6.4			11.1

Unregulated operations revenues			35.6		25.7		9.9			38.5

Total operating revenues		$	858.5 ====	$	781.5 =====	$	77.0 ===			9.9 ====

Electric revenues

The increase in retail distribution and transmission revenues primarily reflects higher retail mWh sales, primarily in residential and commercial sectors as well as higher demand revenues.

NSTAR's largest earnings sources are the revenues derived from transmission and distribution rates approved by the MDTE. The level of distribution revenues is affected by weather and economic conditions. Weather conditions affect sales to NSTAR's residential and small commercial customers. Economic conditions affect NSTAR's large commercial and industrial customers.

Energy revenues are received from customers for the procurement of energy on their behalf. These revenues are fully reconciled with the cost currently recognized by the Company and, as a result, do not have an effect on the Company's earnings. Other revenues primarily relate to the Company's ability to effectively reduce stranded costs (mitigation incentive) and rental revenue from electric property. The $44.1 million increase in energy, transition and other revenues is primarily attributable to higher rates for procuring energy for our customers as a result of the increased cost of energy.

The decrease in 2005 wholesale revenues reflects the expiration of a municipal wholesale power supply contract in the fourth quarter of 2004 that was not renewed. On September 1, 2005, NSTAR executed a new Wholesale and Distribution Service Agreement with a regional airport, to take effect upon the expiration of the current agreement between the parties, which expires October 31, 2005. Amounts collected from wholesale customers are credited to retail customers through the transition charge. Therefore, the expiration of the municipal wholesale supply contract has no impact on results of operations or cash flows.

Gas revenues

The $0.2 million increase in firm gas and transportation revenues is attributable to the improved economy and a new large customer.

The energy supply and other revenue increase of $6.2 million primarily reflects the impact of the higher cost of gas sold due to the higher gas costs from the Company's gas suppliers. These revenues are fully reconciled with the cost currently recognized by the Company and, as a result, do not have an effect on the Company's earnings.

Unregulated operating revenues

Unregulated operating revenues are derived from NSTAR's unregulated businesses that include district energy operations and telecommunications. Unregulated revenues were $35.6 million in the third quarter of 2005 compared to $25.7 million in the same period of 2004, an increase of $9.9 million, or 39%. The increase in unregulated revenues is primarily the result of higher steam sales volume, combined with electric and chilled water having higher revenues as a result of increased sales and fuel that increased pricing to customers.

Operating expenses

Purchased power costswere $420.7 million in the third quarter of 2005 compared to $396.1 million in the same period of 2004, an increase of $24.6 million, or 6%. The increase is primarily the result of increased electric sales, and to a lesser extent, the higher costs of fuels at our unregulated companies. NSTAR Electric adjusts its rates to collect the costs related to energy supply from customers on a fully reconciling basis.

Cost of gas sold, representing NSTAR Gas' supply expense, was $41.4 million in the third quarter of 2005 compared to $34.6 million in 2004, an increase of $6.8 million, or 20%. The expense increase reflects the higher costs of gas supply, offset by the lower volume of firm gas sales of 2.1%. NSTAR Gas maintains a flexible resource portfolio consisting of gas supply contracts, transportation contracts on interstate pipelines, market area storage and peaking services. NSTAR Gas adjusts its rates to collect costs related to gas supply from customers on a fully reconciling basis.

Operations and maintenance expense was $104.8 million in the third quarter of 2005 compared to $103.2 million in the same period of 2004, an increase of $1.6 million, or 2%. This increase primarily reflects an increase of $2 million relating to potential litigation matters.

Depreciation and amortization expense was $85.7 million in the third quarter of 2005 compared to $62.1 million in the same period of 2004, an increase of $23.6 million or 38%. The increase primarily reflects amortization costs related to transition property securitization regulatory assets ($22.3 million) and higher depreciable distribution and transmission plant in service.

DSM and renewable energy programs expense was $18.8 million in the third quarter of 2005 compared to $18.2 million in the same period of 2004, an increase of $0.6 million, or 3%, which are consistent with the collection of conservation and renewable energy revenues. These costs are in accordance with program guidelines established by the MDTE and are collected from customers on a fully reconciling basis plus a small incentive return.

Property and other taxes were $23.6 million in the third quarter of 2005 compared to $24.9 million in the same period of 2004, a decrease of $1.3 million, or 5%. This decrease was primarily due to a reconciliation of property tax accrued expenses based on actual bills.

Income taxes attributable to operations were $44 million in the third quarter of 2005 compared to $41.2 million in the same period of 2004, an increase of $2.8 million, or 7%. Higher pre-tax operating income in 2005 increased tax expense by approximately $7 million. This increase was offset by the favorable resolution of uncertain tax positions that decreased tax expense by $4.2 million.

Other income, net

Other income, net was approximately $2.7 million in the third quarter of 2005 compared to $1.7 million in the same period of 2004, an increase of $1.0 million. The increase is primarily due to the sale of a portion of NSTAR's district energy steam assets that resulted in an after tax gain of $1.6 million.

Interest charges

Interest on long-term debt and transition property securitization certificates was $42.6 million in the third quarter of 2005 compared to $37.2 million in the same period of 2004, an increase of $5.4 million, or 15%. The increase in interest expense primarily reflects:

-		Additional interest costs associated with transition property securitization. Securitization interest represents interest on securitization notes of BEC Funding, BEC Funding II and CEC Funding collateralized by the future income stream associated primarily with NSTAR's stranded costs associated with certain terminated purchase power agreements. The future income stream was sold to these companies by Boston Edison and ComElectric.
-		Higher rates on variable rate debt

These increases were partially offset by:

The absence in 2005 of interest expense of $0.8 million related to the March 1, 2005 retirement of $150 million variable rate Note, due in May 2006, at ComElectric with a portion of the proceeds from the sale of CEC Funding LLC's securitization notes.

Short-term and other interest expense was $2.1 million in the third quarter of 2005 compared to $2.2 million in the same period of 2004, a decrease of $0.1 million, or 4.5%. The decrease is primarily due to interest income on regulatory deferrals ($1.3 million) offset by higher short-term debt borrowing costs ($1.2 million) primarily reflective of a 198 basis point increase in the weighted average borrowing rates during the third quarter 2005 compared to the same period in 2004.

Results of Operations

The following section of MD&A compares the results of operations for each of the nine-month periods ended September 30, 2005 and 2004 and should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report.

Nine Months Ended September 30, 2005 compared to Nine Months Ended September 30, 2004

Overview

Earnings per common share were as follows:

	Nine Months ended September 30,
		2005		2004	% Change
Basic	$	1.47	$	1.42	3.5
Diluted	$	1.46	$	1.40	4.3

Net income was $157.4 million for the nine-month period ended September 30, 2005 compared to $150.5 million for the same period in 2004. Factors that contributed to the $6.9 million, or 4.6%, increase in 2005 earnings include:

-		Recognition of MDTE-approved incentive entitlements for NSTAR successfully lowering transition charges (approximately $13.8 million) and incentives related to NSTAR's demand-side management programs (approximately $0.9 million)
-		Higher electric transmission rates due to FERC approval of the inclusion of 50% CWIP in rate base and additional transmission plant in service ($10.6 million)
-		Decreased income tax expense of approximately $4.2 million derived from successful resolution of uncertain tax positions.

These increases were partially offset by:

-	Higher operations and maintenance expense due to costs associated with:
		-	severe winter storms (approximately $5.4 million)
		-	costs associated with facilities consolidation (approximately $3.3 million)
		-	incremental costs associated with a strike by union employees ($2.3 million)
		-	a net increase of approximately $5 million related to an environmental reserve
-	Lower firm gas revenues due to lower firm gas sales caused by warmer weather through September (heating degree-days declined 2.3%)
-	Higher interest costs due to more debt outstanding ($14 million)

In the first nine-months of 2005, NSTAR closed on a securitization financing transaction in which NSTAR received approximately $674.5 million in proceeds. The net proceeds were used primarily to make liquidation payments required in connection with the termination of obligations under certain purchase power contracts (approximately $554 million) and to repay $150 million of outstanding debt at ComElectric.

Significant cash flow events during the first nine-months of 2005 include the following: NSTAR invested approximately $280 million in capital projects to improve capacity reliability, paid approximately $94.3 million in preferred and common share dividends and retired approximately $254.2 million in long-term debt.

Energy sales

The following is a summary of retail electric and firm gas energy sales for the periods indicated:

Retail Electric Sales - MWH	Nine Months ended September 30,
		2005	2004	% Change

Residential		5,160,700	4,960,834	4.0
Commercial		9,978,657	9,662,124	3.3
Industrial		1,237,677	1,255,561	(1.4)
Other		117,516	119,996	(2.1)
Total retail sales		16,494,550 =======	15,998,515 =======	3.1 ===

Firm Gas Sales - BBTU	Nine Months ended September 30,
		2005	2004	% Change

Residential		15,353	16,057	(4.4)
Commercial and other		13,044	13,033	-
Industrial		3,890	3,978	(2.2)
Total firm sales		32,287 =======	33,068 =======	(2.4) ===

The 3.1% increase in retail mWh sales in the first nine-months of 2005 reflects, by customer sectors, an improvement of 4% and 3.3% residential and commercial sales offset somewhat by the sales decline in January and February due to the warmer temperatures that resulted in lower heating equipment use, partially offset in the month of June and the entire third quarter of 2005 when warmer temperatures resulted in greater air conditioning use when compared to the same periods in 2004. The 2.4% decrease in firm gas sales in the first nine-months of 2005 primarily reflects warmer overall temperatures than in 2004.

Weather conditions

In terms of customer sector characteristics, industrial sales are less sensitive to weather than residential and commercial sales, which are influenced by temperature extremes. The overall warmer weather in the first nine-months of 2005, the increase in electric sales is attributable in part to the commercial sector where building and expansions created the additional energy use. Electric residential and commercial customers represented approximately 31% and 61%, respectively, of NSTAR's total retail sales mix for the first nine months of 2005 and provided 41.5% and 52.6% of distribution and transmission revenues, respectively. Refer to the "Electric revenues" section below for a more detailed discussion. Industrial sales are primarily influenced by national and local economic conditions and sales to these customers reflect an improving economic environment and increased manufacturing production.

			Normal
			30-Year
	2005	2004	Average

Heating degree-days	3,961	4,055	3,948
Percentage warmer than prior year	(2.3)%	(6.5)%
Percentage colder than 30-year average	0.3%	1.8%

Cooling degree-days	880	632	769
Percentage warmer (cooler) than prior year	39.2%	(16.0)%
Percentage warmer (cooler) than 30-year average	14.4%	(17.8)%

Weather conditions impact electric and, to a greater extent during the winter, gas sales in NSTAR's service area. The comparative information above relates to heating degree-days for the first nine-months of 2005 and 2004 and the number of degree-days in a "normal" first nine-month period as represented by a 30-year average. A "degree-day" is a unit measuring how much the outdoor mean temperature falls below (heating degree-day) or rises above (cooling degree-day) a base of 65 degrees. Each degree below or above the base temperature is measured as one degree-day.

Operating revenues

Operating revenues for the first half of 2005 increased 8.5% from the same period in 2004 as follows:

(in millions)	Nine Months Ended September 30,						Increase/(Decrease)
			2005		2004	Amount			Percent
Electric revenues
Retail distribution and transmission		$	677.3	$	666.5	$	10.8			1.6
Energy, transition and other			1,279.8		1,138.0		141.8			12.5
Total retail			1,957.1		1,804.5		152.6			8.5
Wholesale			8.6		13.6		(5.0	)		(36.8	)
Total electric revenues			1,965.7		1,818.1		147.6			8.1
Gas revenues
Firm gas and transportation			105.0		104.8		0.2			0.2
Energy supply and other			257.2		235.2		22.0			9.4
Total gas revenues			362.2		340.0		22.2			6.5

Unregulated operations revenues			102.7		83.1		19.6			23.6
Total operating revenues		$	2,430.6 =====	$	2,241.2 =====	$	189.4 ===			8.5 ===

Electric revenues

The increase in retail distribution and transmission revenues reflects a 3.1% increase in retail mWh sales substantially all in the residential and commercial sector and includes an increase in demand revenues from our commercial customers.

NSTAR's largest earnings sources are the revenues derived from transmission and distribution rates approved by the MDTE. The level of distribution revenues is affected by weather and economical conditions. Weather conditions affect sales to NSTAR's residential and small commercial customers. Economic conditions affect NSTAR's large commercial and industrial customers.

Energy revenues are received from customers for the procurement of energy on their behalf. These revenues are fully reconciled with the cost currently recognized by the Company and, as a result, do not have an effect on the Company's earnings. Other revenues primarily relate to the Company's ability to effectively reduce stranded costs (mitigation incentive) and rental revenue from electric property. The $141.8 million increase in energy, transition and other revenues is primarily attributable to higher rates for procuring energy for our customers and approximately $13.8 million of MDTE-approved incentive revenue entitlements for successfully lowering transition charges resulting from the securitization financing that closed on March 1, 2005.

Gas revenues

Despite the impact of warmer weather conditions, conservation efforts and the decrease in sales volumes of 2.4% during the first nine months of 2005, firm gas and transportation revenues increased primarily due to the recovery of pension and other postretirement expense through a reconciling rate mechanism.

NSTAR Gas' sales are positively impacted by colder weather because a substantial portion of its customer base uses natural gas for space heating purposes.

The energy supply and other revenue increase of $22 million primarily reflects the impact of the higher cost of gas sold from the Company's suppliers. These revenues are fully reconciled with the cost currently recognized by the Company and, as a result, do not have an effect on the Company's earnings.

Unregulated operating revenues

Unregulated operating revenues are derived from NSTAR's unregulated businesses that include district energy operations and telecommunications. Unregulated revenues were $102.7 million in the first nine months of 2005 compared to $83.1 million in the same period of 2004, an increase of $19.6 million, or 24%. The increase in unregulated revenues is primarily the result of higher steam sales volume, combined with electric and chilled water revenues being higher as a result of higher sales and pricing to customers.

Operating expenses

Purchased power costs were $1,108.1 million in the first nine months of 2005 compared to $1,034.0 million in the same period of 2004, an increase of $74.1 million, or 7%. The increase is primarily the result of the higher costs of procuring energy for our customers from both our regulated and unregulated companies and increased sales. NSTAR Electric adjusts its rates to collect the costs related to energy supply from customers on a fully reconciling basis.

Cost of gas sold, representing NSTAR Gas' supply expense, was $233.6 million in the first nine months of 2005 compared to $214.5 million in 2004, an increase of $19.1 million, or 9%. Despite the lower volume of firm gas sales of 2.4%, the expense increase reflects the higher costs of gas supply. NSTAR Gas maintains a flexible resource portfolio consisting of gas supply contracts, transportation contracts on interstate pipelines, market area storage and peaking services. NSTAR Gas adjusts its rates to collect costs related to gas supply from customers on a fully reconciling basis.

Operations and maintenance expense was $336.2 million in the first nine months of 2005 compared to $312.8 million in the same period of 2004, an increase of $23.4 million, or 7%. This increase primarily reflects costs associated with winter storms (approximately $5.4 million), facilities consolidation (approximately $3.3 million), incremental costs associated with a strike by union employees (approximately $2.3 million), a net increase to an environmental reserve and other litigation reserves (approximately $5 million and $2 million, respectively), higher bad debt expense (approximately $2.3 million) and higher employee expenses.

Depreciation and amortization expense was $249.3 million in the first nine months of 2005 compared to $192.6 million in the same period of 2004, an increase of $56.7 million or 29%. The increase primarily reflects amortization costs related to transition property regulatory asset ($52.2 million) and higher depreciable distribution and transmission plant in service.

DSM and renewable energy programs expense was $52.1 million in the first nine months of 2005 compared to $51.2 million in the same period of 2004, an increase of $0.9 million, or 2%, which are consistent with the collection of conservation and renewable energy revenues. These costs are in accordance with program guidelines established by the MDTE and are collected from customers on a fully reconciling basis plus a small incentive return.

Property and other taxes were $78.6 million in the first nine months of 2005 compared to $78.7 million in the same period of 2004, a decrease of $0.1 million, or less than 1%. This slight decrease is primarily due to a true-up of property tax accrued based on estimates to the actual payments made.

Income taxes attributable to operations were $91 million in the first nine months of 2005 compared to $95.2 million in the same period of 2004, a decrease of $4.2 million, or 4%, reflecting the favorable resolution of uncertain tax positions which decreased tax expense by $4.2 million.

Other income, net

Other income, net was approximately $4.4 million in the first nine months of 2005 compared to $5.4 million in the same period of 2004, a decrease of $1.0 million. The decrease is primarily due to the absence in 2005 of proceeds from an executive life insurance policy of $1.2 million and $1 million in employee-related contract fees as a result of the Blackstone Station sale, offset by a $1.6 million gain recognized in 2005 from the sale of a portion of NSTAR's district energy steam assets.

Interest charges

Interest on long-term debt and transition property securitization certificates was $124.7 million in the first nine months of 2005 compared to $110.2 million in the same period of 2004, an increase of $14.5 million, or 13%. The increase in interest expense primarily reflects:

-		Higher interest costs in 2005 of $4.3 million on Boston Edison's $300 million ten-year fixed rate 4.875% Debentures issued on April 16, 2004
-		Additional interest costs associated with transition property securitization. Securitization interest represents interest on securitization certificates of BEC Funding, BEC Funding II and CEC Funding collateralized by the future income stream associated primarily with NSTAR's stranded costs. The future income stream was sold to these companies by Boston Edison and ComElectric.
-		Higher rates on variable rate debt

These increases were partially offset by:

-		The absence in 2005 of expense of nearly $3 million related to the retirement of Boston Edison's $181 million 7.80% Debentures on March 15, 2004
-		The impact of the March 1, 2005 retirement of $150 million variable rate Note, due in May 2006, at ComElectric with a portion of the proceeds from the sale of CEC Funding LLC's securitization certificates

Short-term and other interest expense was $5.1 million in the first nine months of 2005 compared to $6.3 million in the same period of 2004, a decrease of $1.2 million, or 19%. The decrease is primarily due to lower interest costs on regulatory deferrals offset by higher short-term debt borrowing costs primarily reflective of a 196 basis point increase in the year to date weighted average borrowing rates as compared to the same period during 2004.

Liquidity and Capital Resources

Current Cash Flow Activity

NSTAR's primary uses of cash in the first nine months of 2005 include capital expenditures, dividend payments, debt reductions, and liquidation payments under certain purchase power contract buy-out agreements.

Operating cash flow activities, including the contract buy-outs in the first nine months of 2005, required $17.8 million of cash. The Company used $282 million in its investing activities, primarily to fund $280.2 million of plant expenditures, which included system reliability and infrastructure improvement projects incurred by NSTAR Electric and NSTAR Gas operations. Additionally, the Company provided $304.2 million (net) from financing activities primarily from the issuance of $674.5 million of transition property securitization certificates.

Operating Activities

The net cash required in the first nine months of 2005 for operating activities primarily relates to the contract termination payments on certain purchase power contracts in 2005. Deferred income tax expense and income tax asset both increased due to the contract termination payments made on March 1, 2005 on certain purchase power contracts. The payments of approximately $554 million create a current tax deduction. The payments also create a timing difference since the payment, for book purposes, will be amortized to expense over approximately eight years, the period of the collection from customers.

Other changes to NSTAR's working capital primarily reflect the timing of ordinary receipts and disbursements. For the nine months ended September 30, 2005 and 2004, NSTAR contributed approximately $51 million and $52 million, respectively, to its benefit plans. NSTAR currently anticipates that it will contribute approximately $4 million to its benefit plans in the remainder of 2005.

Investing Activities

The net cash used in investing activities in the first nine months of 2005 of $282 million consists primarily of capital expenditures related to infrastructure investments in transmission and distribution systems. Capital expenditures increased $81.6 million from the prior year primarily due to Boston Edison's 345 kV project. Boston Edison has spent nearly $75 million on this project in 2005.

Financing Activities

The net cash provided by financing activities in the first nine months of 2005 of $304.2 million primarily reflects the issuance of $674.5 million of transition property securitization certificates on March 1, 2005. Offsetting the receipt of cash from the securitization financing, NSTAR used cash to make long-term debt redemptions and sinking funds payments of $254.2 million, paid down its short-term debt by $12.9 million and to pay dividends of $94.3 million.

On March 1, 2005, two wholly owned special purpose subsidiaries, BEC Funding II, LLC and CEC Funding LLC, issued $265.5 million and $409 million, respectively, in notes to a special purpose trust created by two Massachusetts state agencies. The trust then concurrently issued a total of $674.5 million of rate reduction certificates to the public. These certificates represent fractional, undivided beneficial interests in the notes issued by BEC Funding II, LLC and CEC Funding, LLC and are secured by a portion of the transition charge assessed on Boston Edison's and ComElectric's retail customers as permitted under the 1997 Massachusetts Electric Industry Restructuring Act and authorized by the MDTE. These certificates are non-recourse to Boston Edison and ComElectric, respectively. The assets and revenues of BEC Funding II, LLC and CEC Funding, LLC, including without limitation, the transition property, are owned solely by BEC Funding II, LLC and CEC Funding, LLC, and are not available to creditors of Boston Edison, ComElectric or NSTAR. The certificates and the related BEC Funding II, LLC and CEC Funding, LLC notes were issued at a weighted average yield of 4.15% in four classes with varying final maturity dates between 2008 and 2015. Scheduled semi-annual principal payments began in September 2005. The net proceeds from this transaction were used to make liquidation payments required in connection with the termination of certain purchase power agreements, and, in the case of ComElectric, to repay outstanding debt.

NSTAR's banking arrangements provide for daily cash transfers to the Company's disbursement accounts as vendor checks are presented for payment and where the right of offset does not exist among accounts. Changes in the balances of the disbursement accounts are reflected in financing activities in the accompanying Condensed Consolidated Statement of Cash Flows.

In connection with the NSTAR Dividend Reinvestment and Direct Common Shares Purchase Plan, NSTAR has issued approximately 129,000 shares under this registration and received approximately $7.1 million for the nine months ended September 30, 2005.

Sources of Additional Capital and Financial Covenant Requirements

NSTAR and Boston Edison have no financial covenant requirements under their respective long-term debt arrangements. ComElectric, Cambridge Electric and NSTAR Gas have financial covenant requirements under their long-term debt arrangements and were in compliance at September 30, 2005 and December 31, 2004. NSTAR's long-term debt other than the Mortgage Bonds, Notes of NSTAR Gas and Medical Area Total Energy Plant, Inc., a wholly owned indirect subsidiary of NSTAR, is unsecured.

NSTAR has executed a five-year, $175 million revolving credit agreement that expires in November 2009. At September 30, 2005 and December 31, 2004, there were no amounts outstanding under the revolving credit agreement. This credit facility serves as a backup to NSTAR's $175 million commercial paper program that, at September 30, 2005 and December 31, 2004, had $39 million and $5 million outstanding, respectively. Under the terms of the credit agreement, NSTAR is required to maintain a maximum total consolidated debt to total capitalization ratio of not greater than 65% at all times, excluding Transition Property Securitization Certificates, and excluding Accumulated other comprehensive income (loss) from common equity. Commitment fees must be paid on the total agreement amount. At September 30, 2005 and December 31, 2004, NSTAR was in full compliance with the aforementioned covenant as the ratios were 55.4% and 58.3% respectively.

Boston Edison has approval from the FERC to issue short-term debt securities from time to time on or before December 31, 2006, with maturity dates no later than December 31, 2007, in amounts such that the aggregate principal does not exceed $450 million at any one time. Boston Edison has a five-year, $350 million revolving credit agreement that expires in November 2009. However, unless Boston Edison receives necessary approvals from the MDTE, the credit agreement will expire 364 days from the date of the first draw under the agreement. At September 30, 2005 and December 31, 2004, there were no amounts outstanding under the revolving credit agreement. This credit facility serves as backup to Boston Edison's $350 million commercial paper program that had a $18 million and $46.5 million balance at September 30, 2005 and December 31, 2004, respectively. Under the terms of the revolving credit agreement, Boston Edison is required to maintain a consolidated maximum total debt to capitalization ratio of not greater than 65% at all times, excluding Transition Property Securitization Certificates, and excluding Accumulated other comprehensive income (loss) from common equity. At September 30, 2005 and December 31, 2004, Boston Edison was in full compliance with its covenants in connection with its short-term credit facilities as the ratios were 44% and 53.1%, respectively.

As of September 30, 2005, ComElectric, Cambridge Electric and NSTAR Gas, collectively, have $145 million available under several lines of credit and had $91.5 million and $109.9 million outstanding under these lines of credit at September 30, 2005 and December 31, 2004, respectively. As of September 28, 2004, ComElectric and Cambridge Electric have FERC authorization to issue short-term debt securities from time-to-time on or before November 30, 2006 and June 27, 2006, with maturity dates no later than November 30, 2007 and June 27, 2007, respectively, in amounts such that the aggregate principal does not exceed $125 million and $60 million, respectively, at any one time. NSTAR Gas is not required to seek approval from FERC to issue short-term debt.

During May 2005, Boston Edison issued a $7.5 million standby letter of credit to the general contractor of Boston Edison's 345kV project. The amount of the standby letter of credit reduces to $4.5 million on February 1, 2006. The contractor will be able to draw upon the letter of credit if Boston Edison does not comply with the payment terms of the respective executed construction agreement, signed by both parties. NSTAR believes that it is very unlikely that a draw will be made on the standby letter of credit.

Historically, NSTAR and its subsidiaries have had a variety of external sources of financing available, as indicated above, at favorable rates and terms to finance its external cash requirements. However, the availability of such financing at favorable rates and terms depends heavily upon prevailing market conditions and NSTAR's or its subsidiaries' financial condition and credit ratings.

NSTAR's goal is to maintain a capital structure that preserves an appropriate balance between debt and equity. Based on NSTAR's key cash resources available as discussed above, management believes its liquidity and capital resources are sufficient to meet its current and projected requirements.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

NSTAR's exposure to financial market risk results primarily from fluctuations in interest rates. There have been no material changes to NSTAR's market risks as disclosed in NSTAR's Annual Report on Form 10-K for the year ended December 31, 2004.

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Item 4. Controls and Procedures

NSTAR's disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

NSTAR carried out an evaluation, under the supervision and with the participation of NSTAR's management, including NSTAR's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of NSTAR's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that NSTAR's disclosure controls and procedures were effective (1) to timely alert them to material information relating to NSTAR's information required to be disclosed by NSTAR in the reports that it files or submits under the Securities Exchange Act of 1934 and (2) to ensure that appropriate information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

During the most recent fiscal quarter, there have been no changes in NSTAR's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

In the normal course of its business, NSTAR and its subsidiaries are involved in certain legal matters, including civil litigation. Management is unable to fully determine a range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs ("legal liabilities") that would be in excess of amounts accrued and amounts covered by insurance, except for the item disclosed in the Condensed Consolidated Financial Statements, Note M, Part 1, "Environmental Matters". Based on the information currently available, NSTAR does not believe that it is probable that any such legal liability will have a material impact on its consolidated financial position. However, it is reasonably possible that additional legal liabilities that may result from changes in estimates could have a material impact on its results of operations, cash flows and financial condition for a reporting period.

Item 2(c). Unregistered Sales of Equity Securities and Use of Proceeds

Common shares of NSTAR issued under the NSTAR Dividend Reinvestment and Direct Common Shares Purchase Plan, the 1997 Share Incentive Plan and the NSTAR Savings Plan may consist of newly issued shares from the Company or shares purchased in the open market by the Company or an independent agent. During the three-month period ended September 30, 2005, the shares listed below were acquired in the open market primarily in connection with the NSTAR Savings Plan.

	Total Number of Common Shares Purchased	Average Price Paid Per Share

July	114,196	$30.56
August	610,399	$29.98
September	5,815	$29.57

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Item 6. Exhibits

Exhibit filed herewith:
Exhibit	4	-	Instruments Defining the Rights of Security Holders, Including Indentures

		-	Management agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any agreement or instrument defining the rights of holders of any long-term debt whose authorization does not exceed 10% of total assets.

Exhibits filed herewith:
Exhibit	15	-	Letter Re Unaudited Interim Financial Information

	15.1		PricewaterhouseCoopers LLP Awareness Letter

Exhibit	31	-	Rule 13a - 15/15d-15(e) Certifications

	31.1		Certification Statement of Chief Executive Officer of NSTAR pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2		Certification Statement of Chief Financial Officer of NSTAR pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit	32	-	Section 1350 Certifications

	32.1		Certification Statement of Chief Executive Officer of NSTAR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2		Certification Statement of Chief Financial Officer of NSTAR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit	99	-	Additional Exhibits

	99.1		Report of Independent Registered Public Accounting Firm

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		NSTAR
		(Registrant)





Date: November 7, 2005		By: /s/ R.J. WEAFER, JR.
		Robert J. Weafer, Jr. Vice President, Controller and Chief Accounting Officer

[X]		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended September 30, 2005
		or
[ ]		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to


Massachusetts		04-3466300
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
800 Boylston Street, Boston, Massachusetts		02199
(Address of principal executive offices)		(Zip code)

I, Thomas J. May, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of NSTAR;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of NSTAR as of, and for, the periods presented in this quarterly report;
4.	NSTAR's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for NSTAR and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to NSTAR, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of NSTAR's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report, based on such evaluation; and
	d)	disclosed in this quarterly report any change in NSTAR’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NSTAR’s internal control over financial reporting.
5.	NSTAR's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to NSTAR's auditors and the audit committee of NSTAR's board of trustees:
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect NSTAR's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in NSTAR's internal control over financial reporting.

I, James J. Judge, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of NSTAR;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of NSTAR as of, and for, the periods presented in this quarterly report;
4.	NSTAR's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for NSTAR and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to NSTAR, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of NSTAR's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report, based on such evaluation; and
	d)	disclosed in this quarterly report any change in NSTAR’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NSTAR’s internal control over financial reporting.
5.	NSTAR's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to NSTAR's auditors and the audit committee of NSTAR's board of trustees:
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect NSTAR's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in NSTAR's internal control over financial reporting.

Date: November 7, 2005	By:	/s/ JAMES J. JUDGE
		James J. Judge
		Senior Vice President,
		Treasurer and Chief Financial Officer

Date: November 7, 2005	By:	/s/ THOMAS J. MAY
		Thomas J. May
		Chairman, President and
		Chief Executive Officer

The undersigned hereby certifies, in my capacity as an officer of NSTAR, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i)	the enclosed Quarterly Report of NSTAR on Form 10-Q for the period ended September 30, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii)	the information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operation of NSTAR.

Dated: November 7, 2005	By:	/s/ THOMAS J. MAY
		Thomas J. May
		Chairman, President and
		Chief Executive Officer