NSTAR Form 10-Q for quarter ended September 30, 2009

0001035675-09-000028.txt : 20091030 0001035675-09-000028.hdr.sgml : 20091030 20091029182842 ACCESSION NUMBER: 0001035675-09-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20090930 FILED AS OF DATE: 20091030 DATE AS OF CHANGE: 20091029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NSTAR/MA CENTRAL INDEX KEY: 0001035675 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 043466300 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14768 FILM NUMBER: 091145697 BUSINESS ADDRESS: STREET 1: 800 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6174242000 MAIL ADDRESS: STREET 1: 800 BOYLSTON STREET CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: B E C ENERGY DATE OF NAME CHANGE: 19980421 FORMER COMPANY: FORMER CONFORMED NAME: BOSTON EDISON HOLDINGS DATE OF NAME CHANGE: 19970313 10-Q 1 nstar10q093009.htm NSTAR FORM 10-Q DTD SEPTEMBER 30, 2009 NSTAR Form 10-Q for quarter ended September 30, 2009

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


[X]		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended September 30, 2009
		Or
[ ]		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to


Commission File Number:	001-14768

NSTAR

(Exact name of registrant as specified in its charter)


Massachusetts		04-3466300
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
800 Boylston Street, Boston, Massachusetts		02199
(Address of principal executive offices)		(Zip Code)

(617) 424-2000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


	[X]	Yes		[ ]	No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


	[ ]	Yes		[ ]	No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).


Large accelerated filer	[ X ]	Accelerated filer	[ ]

Non-accelerated filer	[ ]	Smaller reporting company	[ ]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


	[ ]	Yes		[ X ]	No

The number of shares outstanding of the registrant's class of common stock was 106,808,376 Common Shares, par value $1 per share, as of October 29, 2009.

NSTAR

Form 10-Q

Quarterly Period Ended September 30, 2009

Table of Contents


				Page No.
Glossary of Terms				2

Cautionary Statement Regarding Forward-Looking Information				3

Part I. Financial Information:
	Item 1.	Financial Statements (unaudited)
			Consolidated Statements of Income	4
			Consolidated Statements of Retained Earnings	5
			Consolidated Statements of Comprehensive Income	5
			Consolidated Balance Sheets	6 - 7
			Consolidated Statements of Cash Flows	8
			Notes to Consolidated Financial Statements	9 - 20
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		20 - 38
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38 - 39
	Item 4.	Controls and Procedures		39

Part II. Other Information:
	Item 1.	Legal Proceedings		39
	Item 1A.	Risk Factors		39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40
	Item 6.	Exhibits		41

	Signature			42

	Exhibit 31.1	Section 302 CEO Certification
	Exhibit 31.2	Section 302 CFO Certification
	Exhibit 32.1	Section 906 CEO Certification
	Exhibit 32.2	Section 906 CFO Certification


Important Shareholder Information

NSTAR files its Forms 10-K, 10-Q, and 8-K reports, proxy statements, and other information with the SEC. You may access materials free of charge NSTAR has filed with the SEC on NSTAR’s website at: www.nstar.com: Select "Investor Relations" and "Financial Information" or on the SEC’s website at www.sec.gov. Copies of NSTAR’s SEC filings may also be obtained free of charge by writing to NSTAR’s Investor Relations Department at the address on the cover of this Form 10-Q or by calling 781-441-8338. In addition, NSTAR’s Board of Trustees has several committees, including an Audit, Finance and Risk Management Committee, an Executive Personnel Committee and a Board Governance and Nominating Committee. The Board of Trustees also has a standing Executive Committee. The Board of Trustees has adopted the NSTAR Board of Trustees Guidelines on Significant Corporate Governance Issues, a Code of Ethics for the Principal Executive Officer, General Counsel, and Senior Financial Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, and a Code of Ethics and Business Conduct for Trustees, Officers and Employees ("Code of Conduct"). NSTAR intends to disclose any amendment to, and any waiver from, a provision of the Code of Ethics that applies to the Chief Executive Office or Chief Financial Officer or any other executive officer and that relates to any element of the Code of Ethics definition enumera ted in Item 406(b) of Regulation S-K, on Form 8-K, within four business days following the date of such amendment or waiver. NSTAR’s 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.nstar.com: Select "Investor Relations" and “Company Information." The certifications of NSTAR's Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached to this Quarterly Report on Form 10-Q as Exhibits 31.1, 31.2, 32.1, and 32.2.

Glossary of Terms

The following is a glossary of abbreviated names or acronyms frequently used throughout this report.


NSTAR Companies
NSTAR		NSTAR (Parent company), Company or NSTAR and its subsidiaries (as the context requires)
NSTAR Electric		NSTAR Electric Company
NSTAR Gas		NSTAR Gas Company
NSTAR Electric & Gas		NSTAR Electric & Gas Corporation
MATEP		Medical Area Total Energy Plant, Inc.
AES		Advanced Energy Systems, Inc. (Parent company of MATEP)
NSTAR Com		NSTAR Communications, Inc.
Hopkinton		Hopkinton LNG Corp.
Unregulated operations		Represents non rate-regulated operations of AES, NSTAR Com, and Hopkinton
Regulatory and Other Authorities
DOE		U. S. Department of Energy
DPU		Massachusetts Department of Public Utilities
FERC		Federal Energy Regulatory Commission
IRS		U. S. Internal Revenue Service
ISO-NE		ISO (Independent System Operator) - New England Inc.
NYMEX		New York Mercantile Exchange
PCAOB		Public Company Accounting Oversight Board (United States)
SEC		U. S. Securities and Exchange Commission
Other
AFUDC		Allowance for Funds Used During Construction
ARRA		American Recovery and Reinvestment Act of 2009
BBtu		Billions of British thermal units
CGAC		Cost of Gas Adjustment Clause
CPSL		Capital Projects Scheduling List
CY		Connecticut Yankee Atomic Power Company
DSM		Demand-Side Management
EPS		Earnings Per Common Share
GAAP		Generally Accepted Accounting Principles in the United States of America
GCA		Massachusetts Green Communities Act
LDAC		Local Distribution Adjustment Clause
MD&A		Management's Discussion and Analysis of Financial Condition and Results of Operations
MGP		Manufactured Gas Plant
MWh		Megawatthour (equal to one million watthours)
MY		Maine Yankee Atomic Power Company
PAM		Pension and PBOP Rate Adjustment Mechanism
PBOP		Postretirement Benefits Other than Pensions
RMR		Reliability Must Run
ROE		Return on Equity
SIP		Simplified Incentive Plan
SSCM		Simplified Service Cost Method
YA		Yankee Atomic Electric Company

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains 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 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 expect ed. 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:


·	adverse financial market conditions including changes in interest rates and the availability and cost of capital
·	adverse economic conditions
·	changes to prevailing local, state, and federal governmental policies and regulatory actions (including those of the DPU and the FERC) with respect to allowed rates of return, rate structure, continued recovery of regulatory assets and energy costs, financings, municipalization, 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
·	new governmental regulations or changes to existing regulations that impose additional operating requirements or liabilities
·	changes in available information and circumstances regarding legal issues and the resulting impact on our estimated litigation costs
·	weather conditions that directly influence the demand for electricity and natural gas
·	impact of continued cost control processes on operating results
·	ability to maintain current credit ratings
·	impact of uninsured losses
·	impact of adverse union contract negotiations
·	damage from major storms
·	impact of conservation measures and self-generation by our customers
·	changes in financial accounting and reporting standards
·	changes in hazardous waste site conditions and the cleanup technology
·	prices and availability of operating supplies
·	impact of terrorist acts and cyber-attacks, and
·	impact of service quality performance measures

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 Quarterly Report also describes material contingencies and critical accounting policies and estimates in the accompanying Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) and in the accompanying Notes to Consolidated Financial Statements and NSTAR encourages a review of these items.

Part I. Financial Information

Item 1. Financial Statements

NSTAR

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended							Nine Months Ended
		September 30,						September 30,
		2009			2008			2009			2008

Operating revenues	$	771,475		$	892,208		$	2,426,789		$	2,531,504

Operating expenses:
Purchased power and transmission		329,852			434,690			1,037,612			1,089,579
Cost of gas sold		19,783			38,697			219,865			271,023
Operations and maintenance		102,984			106,618			311,089			332,874
Depreciation and amortization		91,623			91,738			286,285			284,200
DSM and renewable energy programs		26,357			19,767			64,725			54,762
Property and other taxes		26,346			23,711			81,666			73,808
Income taxes		53,700			53,699			123,127			118,446
Total operating expenses		650,645			768,920			2,124,369			2,224,692

Operating income		120,830			123,288			302,420			306,812

Other income (deductions):
Other income, net		1,831			1,931			4,674			7,236
Other deductions, net		(180	)		(1,699	)		(839	)		(2,346	)
Total other income, net		1,651			232			3,835			4,890

Interest charges (income):
Long-term debt		34,512			33,329			102,983			100,061
Transition property securitization		4,792			6,982			15,595			22,090
Short-term debt and other, net		(4,837	)		(2,852	)		(19,025	)		(6,026	)
AFUDC		(114	)		(249	)		(376	)		(1,318	)
Total interest charges		34,353			37,210			99,177			114,807

Net income		88,128			86,310			207,078			196,895
Less: Preferred stock dividends of subsidiary to the noncontrolling interest		490			490			1,470			1,470
Net income attributable to common shareholders	$	87,638		$	85,820		$	205,608		$	195,425

Weighted average common shares outstanding:
Basic		106,808			106,808			106,808			106,808
Diluted		106,981			107,038			106,987			107,030

Earnings per common share:
Basic	$	0.82		$	0.80		$	1.93		$	1.83
Diluted	$	0.82		$	0.80		$	1.92		$	1.83

Dividends declared per common share	$	0.375		$	0.35		$	1.125		$	1.05

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

NSTAR

Consolidated Statements of Retained Earnings

(Unaudited)

(in thousands)


	Three Months Ended					Nine Months Ended
		September 30,				September 30,
		2009		2008		2009		2008

Balance at the beginning of the period	$	914,135	$	825,765	$	876,271	$	790,926
Add:
Net income		88,128		86,310		207,078		196,895
		1,002,263		912,075		1,083,349		987,821
Deduct:
Dividends declared:
Common shares		40,053		37,383		120,159		112,149
Preferred stock dividends of subsidiary to the noncontrolling interest		490		490		1,470		1,470
		40,543		37,873		121,629		113,619

Balance at the end of the period	$	961,720	$	874,202	$	961,720	$	874,202

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

NSTAR

Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2009			2008			2009			2008

Net income	$	88,128		$	86,310		$	207,078		$	196,895
Other comprehensive income, net:
Pension and postretirement benefits costs		400			537			1,199			1,496
Deferred income tax expense		(165	)		(243	)		(494	)		(616	)
Total other comprehensive income, net		235			294			705			880

Comprehensive income		88,363			86,604			207,783			197,775
Less: Preferred stock dividends of subsidiary to the noncontrolling interest		490			490			1,470			1,470

Comprehensive income attributable to NSTAR	$	87,873		$	86,114		$	206,313		$	196,305

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

NSTAR

Consolidated Balance Sheets

(Unaudited)

(in thousands)


		September 30,		December 31,
		2009		2008

Assets
Utility plant:
Electric and gas plant in service, at original cost	$	5,936,784	$	5,694,537
Less: accumulated depreciation		1,495,039		1,418,429
		4,441,745		4,276,108
Construction work in progress		70,371		122,294
Net utility plant		4,512,116		4,398,402

Other property and investments:
Nonutility property, net		136,726		139,764
Electric equity investments		5,558		6,701
Other investments		73,091		72,475
		215,375		218,940

Current assets:
Cash and cash equivalents		23,434		21,984
Restricted cash		8,309		9,581
Accounts receivable, net of allowance of $31,457 and $32,859, respectively		275,260		332,465
Accrued unbilled revenues		58,797		61,892
Regulatory assets		285,737		439,914
Inventory, at average cost		73,834		93,684
Refundable income taxes		129,120		129,120
Other		41,370		32,721
		895,861		1,121,361

Deferred debits:
Regulatory assets		2,326,212		2,466,018
Other		64,446		64,768
		2,390,658		2,530,786

Total assets	$	8,014,010	$	8,269,489

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

NSTAR

Consolidated Balance Sheets

(Unaudited)

(in thousands)


		September 30,			December 31,
		2009			2008

Capitalization and Liabilities

Common equity:
Common shares, par value $1 per share, 200,000,000
shares authorized, 106,808,376 issued and outstanding	$	106,808		$	106,808
Premium on common shares		815,061			818,601
Retained earnings		961,720			876,271
Accumulated other comprehensive loss		(12,820	)		(13,525	)
Total common equity		1,870,769			1,788,155

Noncontrolling interest – preferred stock of subsidiary		43,000			43,000

Long-term debt:
Long-term debt		1,487,280			2,012,467
Transition property securitization		212,202			331,209
		1,699,482			2,343,676

Current liabilities:
Long-term debt		631,111			5,444
Transition property securitization		98,600			92,580
Notes payable		414,800			582,883
Income taxes		108,005			87,880
Accounts payable		206,904			291,012
Power contract obligations		132,330			155,815
Accrued interest		34,922			31,073
Dividends payable		40,380			40,380
Accrued expenses		15,099			19,251
Other		72,154			88,664
		1,754,305			1,394,982

Deferred credits:
Accumulated deferred income taxes		1,165,082			1,130,437
Power contract obligations		245,843			345,993
Pension and other postretirement liability		766,310			749,774
Regulatory liability - cost of removal		272,874			264,959
Other		196,345			208,513
		2,646,454			2,699,676

Commitments and contingencies

Total capitalization and liabilities	$	8,014,010		$	8,269,489

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

NSTAR

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


		Nine Months Ended
		September 30,
		2009			2008
Operating activities:
Net income	$	207,078		$	196,895
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		290,845			289,379
Deferred income taxes		10,640			(11,527	)
Noncash stock-based compensation		6,616			7,591
Net changes in:
Accounts receivable and accrued unbilled revenues		60,300			18,139
Inventory, at average cost		19,850			(28,182	)
Other current assets		(8,649	)		(109	)
Accounts payable		(42,907	)		(15,278	)
Accrued expenses		(4,152	)		(720	)
Other current liabilities		7,464			55,719
Regulatory assets		121,418			57,193
Long-term power contract obligations		(91,722	)		(88,816	)
Net change from other miscellaneous operating activities		20,035			(26,378	)
Net cash provided by operating activities		596,816			453,906
Investing activities:
Plant expenditures (including AFUDC)		(283,535	)		(312,125	)
Proceeds from sale of utility property		2,074			1,750
Decrease (increase) in restricted cash		1,272			(9,083	)
Net change in other investment activities		(2,405	)		7,014
Net cash used in investing activities		(282,594	)		(312,444	)
Financing activities:
Long-term debt redemptions		(4,753	)		(4,463	)
Transition property securitization redemptions		(112,987	)		(115,886	)
Issuance of long-term debt		100,000			-
Premium on issuance of long-term debt		4,553			-
Debt issuance costs		(875	)		-
Net change in notes payable		(168,083	)		98,787
Change in disbursement accounts		(929	)		(3,085	)
Common share dividends paid		(120,159	)		(112,149	)
Preferred stock dividends of subsidiary to the noncontrolling interest		(1,470	)		(1,470	)
Cash received for exercise of equity compensation		4,235			3,254
Cash used to settle equity compensation		(12,736	)		(9,076	)
Windfall tax effect of settlement of equity compensation		432			522
Net cash used in financing activities		(312,772	)		(143,566	)

Net increase (decrease) in cash and cash equivalents		1,450			(2,104	)
Cash and cash equivalents at the beginning of the year		21,984			34,121
Cash and cash equivalents at the end of the period	$	23,434		$	32,017
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	113,562		$	123,199
Income taxes	$	69,717		$	108,260

Non-cash investing activity:
Plant expenditures included in accounts payable	$	12,087		$	22,004

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

Notes to Consolidated Financial Statements

(Unaudited)

The accompanying notes should be read in conjunction with Notes to Consolidated Financial Statements included in NSTAR's 2008 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 customers in 51 communities. NSTAR's retail electric distribution and transmission and retail natural gas distribution subsidiaries are NSTAR Electric and NSTAR Gas, respectively. Reference in this report to "NSTAR" shall mean the registrant NSTAR or NSTAR and its subsidiaries as the context requires. NSTAR also has ownership and is engaged in unregulated business operations.

2. Basis of Consolidation and Accounting

The accompanying consolidated financial information presented as of September 30, 2009 and for the three and nine-month periods ended September 30, 2009 and 2008 has 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 PCAOB. The review report is filed as Exhibit 99.1 to this Form 10-Q. Financial information as of December 31, 2008 was derived from the audited consolidated financial statements of NSTAR, but does not include all disclosures required by 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. Certain immaterial reclassifications have been made to the accompa nying prior period Consolidated Statement of Cash Flow amounts to conform to the current period’s presentation.

NSTAR's utility subsidiaries follow accounting policies prescribed by the FERC and the DPU. In addition, NSTAR and its subsidiaries are subject to the accounting and reporting requirements of the SEC. NSTAR's utility subsidiaries are subject to the application of an accounting standard that considers the effects of regulation resulting from differences in the timing of their recognition of certain revenues and expenses from those of other businesses and industries. The distribution and transmission businesses are subject to rate-regulation that is based on cost recovery and meets the criteria for application of this accounting standard.

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, 2009 and 2008 are not indicative of the results that may be expected for an entire year. The demand for electricity and natural gas is affected by weather conditions, economic conditions and consumer conservation behavior. Electric energy sales and revenues are typically higher in the winter and summer months than in the spring and fall months. Natural gas energy sales and revenues are typically higher in the winter months than during other periods of the year.

3. Pension and Postretirement Benefits Other than Pensions (PBOP) Plans

NSTAR’s net periodic Pension Plan and PBOP Plan benefit costs for the third quarter are based on the latest annual actuarial valuation.

NSTAR’s Pension Plan and PBOP Plan assets are affected by fluctuations in the financial markets. Net periodic pension and postretirement benefit costs for 2009 have increased over 2008 primarily due to the decline in the Plans’ asset values during 2008. Fluctuations in the fair value of the Pension Plan and PBOP Plan assets impact the funded status, accounting costs, and cash funding requirements of these Plans. The earnings impact of increased Pension and PBOP costs is mitigated by NSTAR’s DPU-approved Pension and PBOP rate adjustment mechanism (PAM).

Pension

NSTAR provides a defined benefit retirement plan, the NSTAR Pension Plan (the Plan), that covers substantially all employees. During the nine months ended September 30, 2009, NSTAR contributed approximately $30 million to the Plan. NSTAR currently anticipates contributing approximately $70 million of additional funds to the Plan during the remainder of 2009. The actual level of funding may be different from this estimate.

Components of net periodic pension benefit cost were as follows:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(in millions)		2009			2008			2009			2008
Service cost	$	5.5		$	5.3		$	16.6		$	15.9
Interest cost		16.0			15.9			48.2			47.7
Expected return on Plan assets		(14.5	)		(21.6	)		(43.6	)		(64.7	)
Amortization of prior service cost		(0.1	)		0.1			(0.5	)		0.2
Recognized actuarial loss		13.6			4.0			40.7			12.0
Net periodic pension benefit cost	$	20.5		$	3.7		$	61.4		$	11.1

Postretirement Benefits Other than Pensions

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 to the costs of postretirement benefits. During the nine months ended September 30, 2009, NSTAR contributed approximately $22 million to this plan and anticipates contributing approximately $8 million for the remainder of 2009 toward these benefits.

Components of net periodic postretirement benefit cost were as follows:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(in millions)		2009			2008			2009			2008
Service cost	$	1.5		$	1.5		$	4.6		$	4.4
Interest cost		9.0			9.1			27.1			27.2
Expected return on Plan assets		(4.5	)		(7.1	)		(13.5	)		(21.3	)
Amortization of prior service cost		(0.4	)		(0.4	)		(1.1	)		(1.2	)
Amortization of transition obligation		0.2			0.2			0.6			0.6
Recognized actuarial loss		4.9			2.2			14.5			6.7
Net periodic postretirement benefit cost	$	10.7		$	5.5		$	32.2		$	16.4

4. Noncontrolling Interest – Cumulative Non-Mandatory Redeemable Preferred Stock of Subsidiary

NSTAR Electric has two outstanding series of non-mandatory redeemable preferred stock. Both series are part of a class of NSTAR Electric’s Cumulative Preferred Stock. Upon any liquidation of NSTAR Electric, holders of the Cumulative Preferred Stock are entitled to receive the liquidation preference for their shares before any distribution to the holder of the common stock. The liquidation preference for each outstanding series of Cumulative Preferred Stock is equal to the par value plus accrued and unpaid dividends.

Non-mandatory redeemable series:

Par value $100 per share, 2,890,000 shares authorized and 430,000 shares issued and outstanding:


(in thousands, except per share amounts)

Series	Current Shares Outstanding	Redemption Price/Share		September 30, 2009		December 31, 2008
4.25%	180,000	$103.625	$	18,000	$	18,000
4.78%	250,000	$102.80		25,000		25,000
Total non-mandatory redeemable series			$	43,000	$	43,000

During the year ended December 31, 2008 and during the nine months ended September 30, 2009, there were no changes in the noncontrolling interest of NSTAR Electric.

Effective January 1, 2009, NSTAR prospectively adopted a new accounting standard, except for the retrospective presentation and disclosure requirements, related to noncontrolling interests. In connection with this adoption, NSTAR evaluated the requirements with respect to the presentation of preferred stock of its NSTAR Electric subsidiary. NSTAR is required to reflect NSTAR Electric’s noncontrolling interest preferred stock as noncontrolling interest of a subsidiary in the accompanying Consolidated Balance Sheets outside of permanent equity. Each of the two preferred stock series contains provisions relating to non-payment of preferred dividends that could potentially result in the preferred shareholders being granted the majority control of the Board of Directors of NSTAR Electric until all preferred dividends are paid. As a result, the preferred stock has not been classified within permanent equity. The dividends on NSTAR Electric ’s preferred stock to the noncontrolling interest are reflected separately after net income and before net income attributable to common shareholders on the accompanying Consolidated Statements of Income. The dividends are reported as comprehensive income attributable to the noncontrolling interest on the accompanying Consolidated Statements of Comprehensive Income.

5. Short-Term Debt and Other Interest Charges (Income), net

Major components of interest charges (income) related to short-term debt and other, net were as follows:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(in thousands)		2009			2008			2009			2008

Short-term debt	$	241		$	2,579		$	1,228		$	8,162
Regulatory assets		(5,493	)		(4,971	)		(16,514	)		(12,407	)
Interest on income tax items		(459	)		(873	)		(6,746	)		(3,609	)
Other		874			413			3,007			1,828
Total short-term debt and other, net	$	(4,837	)	$	(2,852	)	$	(19,025	)	$	(6,026	)

6. New Accounting Standards Updates

Disclosures about Pension and Other Postretirement Plan Assets

Effective December 31, 2009, the Company will implement additional disclosure requirements for pension and other postretirement plan assets. These additional disclosures include: how management makes investment allocation decisions, the major categories of plan assets, the valuation methodologies used to measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs, changes in plan assets for the period, and significant concentrations of risk within plan assets. Since this requirement relates only to disclosures about the Company’s pension and other postretirement plan assets, the additional disclosure requirements will not affect the Company’s financial position, results of operations, or cash flows.

Variable Interest Entities

Amended consolidation guidance applicable to variable interest entities will be effective for NSTAR beginning in fiscal year 2010. The Company continues to assess the potential impact of adoption.

7. Subsequent Events

Management has reviewed subsequent events through October 29, 2009 and concluded that no material subsequent events have occurred that are not accounted for in the accompanying financial statements or disclosed in the accompanying notes.

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, 2009 and December 31, 2008, the estimated amounts of the cost of removal included in regulatory liabilities were approximately $273 million and $265 million, respectively, and are reflected as “Deferred credits: Regulatory liability – cost of removal” on the accompanying Consolidated Balance Sheets. These estimates are based on the cost of removal component in current depreciation rates.

Note C. Derivative Instruments

Energy Contracts

NSTAR has determined that its electricity supply contracts qualify for, and NSTAR has elected, the normal purchases and sales exception of the applicable accounting standards and guidance. As a result, these agreements are not reflected on the accompanying Consolidated Balance Sheets. NSTAR Gas has only one significant gas supply contract. This contract is essentially an all-requirements portfolio asset management contract that expires in October 2010. This contract contains market-based pricing terms, and therefore no financial statement adjustments to mark the contracts to market are required. Gas supply costs incurred related to the gas asset management contract were approximately $9 million and $23 million for the three-month periods and $122 million and $196 million for the nine-month periods ended September 30, 2009 and 2008, respectively, and have been recorded to Cost of gas sold on the accompanying Consolidated Statements of Inco me. Refer to the accompanying Part 1, Item 3, “Quantitative and Qualitative Disclosures About Market Risks” for a further discussion.

Gas Hedging Agreements

In accordance with a DPU order, NSTAR Gas purchases financial contracts based upon NYMEX natural gas futures in order to reduce cash flow variability associated with the purchase price for approximately one-third of its natural gas purchases. This practice is designed to minimize the impact of fluctuations in prices to NSTAR’s firm gas customers. These financial contracts do not procure gas supply. These contracts qualify as derivative financial instruments under applicable accounting guidance. Accordingly, the fair value of these instruments is recognized on the accompanying Consolidated Balance Sheets as an asset or liability representing amounts due from or payable to the counter parties of NSTAR Gas, as if such contracts were settled as of the balance sheet date. All actual costs incurred or benefits realized are included in the CGAC of NSTAR Gas. As a result, NSTAR Gas records an offsetting regulatory asset or liability for the market price changes, in lieu of recording an adjustment to Other Comprehensive Income. Currently, these derivative contracts extend through April 2010.

Derivative Instruments and Hedging Activities

The following disclosures summarize the fair value of NSTAR Gas’ hedging agreements, the asset and liability positions of these hedging agreements and related settlements:


(in thousands)		September 30, 2009		December 31, 2008
Gas Hedging Agreements
Consolidated Balance Sheet Account:
Current liabilities – power contract obligations	$	962	$	32,275
Deferred credits – power contract obligations		-		600
Total potential liability for derivative instruments	$	962	$	32,875


	Amount of Gain or (Loss) Recognized
	Three Months Ended September 30,					Nine Months Ended September 30,
Settlement of Gas Hedging Agreements		2009			2008		2009			2008
Consolidated Statement of Income Account:
(Increase) decrease to Cost of gas sold	$	617		$	-	$	(42,343	)	$	(2,443	)
Increase (decrease) to revenues reflecting recovery of or return of settlements to customers		(617	)		-		42,343			2,443
Net earnings impact	$	-		$	-	$	-		$	-

As of September 30, 2009, these gas hedging agreements, representing eleven individual contracts, hedged approximately 9,360 BBtu. The settlement of these contracts may have a short-term cash flow impact. Over the long-term any such effects are mitigated by a regulatory recovery mechanism for those costs.

Potential counterparty credit risk is minimized by collateral requirements as specified in credit support agreements to the contracts that are based on the credit rating of the counterparty and the fair value exposure under each contract’s term. In the event of a downgrade in the credit rating of either party, these agreements may require that party to immediately collateralize, by either cash payment, letter of credit, or other qualifying security instrument, any exposure that exists for obligations in excess of specified threshold amounts.

NSTAR Gas is also subject to this credit risk-related contingent feature. Based on market conditions at the time of a downgrade, NSTAR Gas could be required to post collateral in an amount that could be equal to or less than the fair value of the liability at the time of the downgrade. As of September 30, 2009, NSTAR Gas has an A+ Standard & Poors Credit Issuer rating. Collateral obligations are required in the event of a downgrade below an A rating by Standard & Poors and/or if the fair value of the contract

exceeds established credit thresholds. Based on NSTAR Gas’ liability position with its gas hedge contract counterparties as of September 30, 2009, should NSTAR Gas’ credit rating be downgraded the following collateral obligations would result:


	Level Below	Incremental	Cumulative
Credit Ratings Downgraded to:	“A” Rating	Obligations	Obligations
(in thousands)
A-/A3	1	$ -	$ -
BBB+/Baa1	2	-	-
BBB/Baa2	3	-	-
BBB-/Baa3, or below investment grade	4	962	962

In addition, these agreements contain cross-default provisions that would allow NSTAR Gas and its counterparties to terminate and liquidate a gas hedge contract if either party is in default on other swap agreements with that same counterparty, or another unrelated agreement with that same counterparty in excess of stipulated threshold amounts.

Note D. Income Taxes

NSTAR recognizes 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. Pursuant to the application of certain accounting standards related to regulated companies and income taxes, net regulatory assets of $27.9 million and $29.2 million and corresponding net increases in accumulated deferred income taxes were recorded as of September 30, 2009 and December 31, 2008, respectively. The regulatory assets represent the additional future revenues to be collected from customers for deferred income taxes.

The following table reconciles the statutory federal income tax rate to the annual estimated effective income tax rate for 2009 and the actual effective income tax rate for the year ended December 31, 2008:


	2009		2008
Statutory tax rate	35	%	35	%
State income tax, net of federal income tax benefit	4	%	5	%
Other	(1	)%	(2	)%
Effective tax rate	38	%	38	%

Uncertain Tax Positions

NSTAR is continuing to pursue its appeal with the IRS appellate division related to the audit of Federal income tax returns of 2001-2007. NSTAR is appealing the disallowance of ordinary loss deductions related to its previous investment in RCN Corporation in 2003. NSTAR anticipates the completion of the appeals process within the next 12 months. Any agreement executed with the appellate division is subject to approval by the U.S. Congress’ Joint Committee on Taxation.

On January 1, 2007 NSTAR recorded a tax benefit of $39.6 million to retained earnings related to its investment in RCN Corporation upon the adoption of the accounting standard related to uncertain income tax positions. Upon the completion of the appeals process, the Company could be required to reverse all or a portion of that tax benefit. In addition, the Company could be subject to an interest obligation. NSTAR cannot predict the ultimate outcome resulting from this process.

Interest on tax positions

Unrecognized benefits associated with interest on construction-related uncertain tax positions from the use of SSCM were $4.4 million and $9 million as of September 30, 2009 and December 31, 2008, respectively. During the second quarter of 2009, NSTAR recognized $4.6 million of these previously unrecognized benefits. The likelihood that the amount of the remaining unrecognized benefits relating to

the deduction for these construction-related costs will be recognized in the form of interest income is remote.

Note E. Earnings Per Common Share

Basic EPS is calculated by dividing net income attributable to common shareholders, which includes a deduction for preferred dividends of a subsidiary, by the weighted average common shares outstanding during the respective period. 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 (nonvested) shares and stock options granted (stock-based compensation), in accordance with NSTAR’s Long Term Incentive Plan.

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)		2009		2008		2009		2008
Net income attributable to common shareholders	$	87,638	$	85,820	$	205,608	$	195,425
Basic EPS	$	0.82	$	0.80	$	1.93	$	1.83
Diluted EPS	$	0.82	$	0.80	$	1.92	$	1.83

Weighted average common shares
outstanding for basic EPS		106,808		106,808		106,808		106,808
Effect of diluted shares:
Weighted average dilutive potential common shares		173		230		179		222
Weighted average common shares outstanding for diluted EPS		106,981		107,038		106,987		107,030

Note F. Segment and Related Information

For the purpose of providing segment information, NSTAR's principal operating segments are its traditional core businesses of electric and natural gas retail transmission and distribution 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 liquefied natural gas service. Amounts shown on the following table for the three and nine-month periods ended September 30, 2009 and 2008 include the allocation of NSTAR's (Holding Company) results of operations (primarily interest costs) and assets (primarily investment assets) to each business segment, net of inter-company transactions. The allocation of Holding Company charges is based on an indirect allocation of the Holding Company’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,
2009
Operating revenues	$	699,162	$	42,370			$		29,943	$	771,475
Segment net income (loss)	$	89,289	$	(3,859	)		$		2,698	$	88,128
2008
Operating revenues	$	792,953	$	60,893		$		38,362		$	892,208
Segment net income (loss)	$	87,596	$	(5,392	)	$		4,106		$	86,310

Nine months ended September 30,
2009
Operating revenues	$	1,975,909	$	349,422		$		101,458		$	2,426,789
Segment net income	$	183,293	$	13,166		$		10,619		$	207,078
2008
Operating revenues	$	2,016,968	$	398,832		$		115,704		$	2,531,504
Segment net income	$	171,846	$	11,960		$		13,089		$	196,895

Total assets
September 30, 2009	$	7,079,184	$	739,343		$		195,483		$	8,014,010
December 31, 2008	$	7,214,780	$	855,555		$		199,154		$	8,269,489

Note G. Fair Value Measurement

NSTAR is obligated to disclose fair value measurement pursuant to the application of an amended accounting standard that defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. While the standard does not expand the use of fair value, it has applicability to several current accounting standards that require or permit measurement of assets and liabilities at fair value. The Company prospectively adopted this new accounting guidance on January 1, 2008, with no impact to its results of operations, financial position, or cash flows.

This applicable accounting standard establishes a fair value hierarchy that prioritizes the inputs used to determine fair value and requires the Company to classify assets and liabilities carried at fair value based on the observability of these inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy defined by this accounting standard are:

Level 1 – Unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date. Financial assets utilizing Level 1 inputs include active exchange-traded equity securities.

Level 2 – Quoted prices available in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are directly observable, and inputs derived principally from market data.

Level 3 – Unobservable inputs from objective sources. These inputs may be based on entity-specific inputs. Level 3 inputs include all inputs that do not meet the requirements of Level 1 or Level 2.

The following represents the fair value hierarchy of NSTAR’s financial assets and liabilities that were recognized at fair value on a recurring basis as of September 30, 2009 and December 31, 2008. As required by the applicable accounting standard, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.


Recurring Fair Value Measures:
		September 30, 2009
(in millions)		Level 1		Level 2		Total
Assets:
Government Money Market Securities^(a)	$	12	$	-	$	12
Deferred Compensation Assets ^(b)		25		-		25
Investments ^(b)		13		-		13
Total	$	50	$	-	$	50

Liabilities:
Gas Hedges^(c)	$	-	$	1	$	1
Total	$	-	$	1	$	1


		December 31, 2008
		Level 1		Level 2		Total
Assets:
Government Money Market Securities^(a)	$	10	$	-	$	10
Deferred Compensation Assets ^(b)		27		-		27
Investments ^(b)		13		-		13
Total	$	50	$	-	$	50

Liabilities:
Gas Hedges^(c)	$	-	$	33	$	33
Total	$	-	$	33	$	33

(a) - Included in “Cash and cash equivalents” on the accompanying Consolidated Balance Sheets

(b) - Included in “Other investments” on the accompanying Consolidated Balance Sheets

(c) - Included in “Current liabilities: Power contract obligations” and “Deferred credits: Power contract obligations” on the accompanying Consolidated Balance Sheets

Financial Instruments

The carrying amounts for cash and cash equivalents, accounts receivable-net, other current assets, certain current liabilities, and notes payable as of September 30, 2009 and December 31, 2008, respectively, approximate fair value due to their short-term nature.

The fair values of long-term indebtedness (excluding notes payable) are based on the quoted market prices of similar issues. Carrying amounts and fair values as of September 30, 2009 and December 31, 2008 were as follows:


		September 30, 2009				December 31, 2008
(in thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value

Long-term indebtedness (including current maturities)	$	2,429,193	$	2,531,130	$	2,441,700	$	2,474,960

Note H. Long-Term Debt Issuance

On February 13, 2009, NSTAR Electric sold, at a premium, $100 million of fixed rate (5.625%) Debentures due November 15, 2017 (effective rate of 4.976%). The Debentures form a single series and are fungible with NSTAR Electric’s 5.625% $300 million Debentures due November 15, 2017 issued on November 19, 2007.

Note I. 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. As of September 30, 2009 and December 31, 2008, NSTAR had a liability of approximately $0.7 million and $0.8 million, respectively, for these environmental sites. This estimated liability recorded is based on an evaluation of all currently available facts with respect to these sites.

NSTAR Gas is participating in the assessment or remediation of certain former MGP sites and alleged MGP waste disposal locations to determine if and to what extent such sites are contaminated and whether NSTAR Gas may be responsible to undertake remedial action. The DPU permits recovery of costs associated with MGP sites over a 7-year period, without carrying costs. As of September 30, 2009 and December 31, 2008, NSTAR had a liability of approximately $13.2 million and $13.3 million, respectively, as an estimate for site cleanup costs for several MGP sites for which NSTAR Gas has been identified as a potentially responsible party. A corresponding regulatory asset has been 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 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 results of operations, financial position, or cash flows.

2. Regulatory and Legal Matters

Wholesale Power Cost Savings Initiatives

The Rate Settlement Agreement includes incentives to encourage NSTAR Electric to continue its efforts to advocate on behalf of customers at the FERC to mitigate wholesale electricity cost inefficiencies that would be borne by regional customers. If NSTAR Electric's efforts to reduce customers’ costs are successful, it is allowed to retain a portion of those savings as an incentive, as well as recover related litigation costs. Under the terms of the Rate Settlement Agreement, NSTAR Electric was to share in 25% of the savings applicable to its customers. The recovery of NSTAR Electric's share of benefits is to be collected over three years. As a result of its role in two RMR cases, NSTAR Electric had sought to collect $9.8 million annually for three years and began collecting some of these incentive revenues from its customers effective January 1, 2007, subject to final DPU approval. Through September 30, 2009, approximately $17.3 million ha s been collected from customers for the Wholesale Power Cost Savings Initiatives. NSTAR is unable to predict the timing or ultimate outcome of this DPU proceeding. In the event an adverse decision is issued, it would not have a material impact on the Company's results of operations.

DPU Safety and Reliability Programs (CPSL)

review by the DPU. The incremental costs for the year 2008 are currently under review by the Company and are estimated to be approximately $15 million. NSTAR anticipates filing its final 2008 CPSL cost recovery reconciliation with the DPU in the fourth quarter of 2009. NSTAR cannot predict the timing of a DPU order related to these pending filings. Should an adverse decision be issued which disallows a significant portion of CPSL cost recovery, it could have a material adverse impact to NSTAR’s results of operations, financial position, and cash flows.

Basic Service Bad Debt Adder

On July 1, 2005, in response to a generic DPU order that required electric utilities in Massachusetts to reflect the cost of the energy-related portion of bad debt costs in their Basic Service rates, NSTAR Electric increased its Basic Service rates and reduced its distribution rates for those bad debt costs. In furtherance of this generic DPU order, NSTAR Electric included a bad debt cost recovery mechanism as a component of the Rate Settlement Agreement. This recovery mechanism (bad debt adder) allows NSTAR Electric to recover its Basic Service bad debt costs on a fully reconciling basis. These rates were implemented, effective January 1, 2006, as part of NSTAR Electric’s Rate Settlement Agreement.

On February 7, 2007, NSTAR Electric filed its 2006 Basic Service reconciliation with the DPU proposing an adjustment related to the increase of its Basic Service bad debt charge-offs. This proposed rate adjustment was anticipated to be implemented effective July 1, 2007. On June 28, 2007, the DPU issued an order approving the implementation of a revised Basic Service rate. However, the DPU instructed NSTAR Electric to reduce distribution rates by the increase in its Basic Service bad debt charge-offs. Such action would result in a further reduction to distribution rates from the adjustment NSTAR Electric made when it implemented the Settlement Agreement and effectively eliminates the fully reconciling nature of the Basic Service bad debt adder.

NSTAR Electric has not implemented the components of the June 28, 2007 DPU order. Implementation of this order would require NSTAR Electric to write-off a previously recorded regulatory asset related to its Basic Service bad debt costs. NSTAR Electric believes its position is appropriate and that it is probable that it will ultimately prevail. However, in the event the DPU does not rule in its favor, NSTAR Electric intends to pursue all legal options. As of September 30, 2009, the potential impact to earnings of a disallowance of the bad debt adder would be approximately $18.9 million, pre-tax. NSTAR cannot predict the timing of this proceeding.

Service Quality Indicators

NSTAR Electric filed its 2007 and 2008 Service Quality Reports with the DPU that demonstrated the Company achieved sufficient levels of service performance. The reports indicate that no penalty was assessable for 2007 or 2008.

Other

In the fourth quarter of each year, NSTAR Electric files proposed distribution rate adjustments for effect on the following January 1. These rate adjustments include a SIP rate factor and several other fully reconciling cost recovery items. Consistent with previous filings, the 2009 filings include a combination of actual and forecasted data for 2009 that NSTAR Electric will update during 2010 with year-end data to allow a final investigation and reconciliation. There are several case years that remain outstanding at the DPU. These cases are pending decisions at the DPU and NSTAR cannot predict the timing or the ultimate outcome of these filings.

3. Yankee Companies Spent Fuel Litigation

In October 2006, the U.S. Court of Federal Claims issued a judgment in a spent nuclear fuel litigation, in the amounts of $34.2 million, $32.9 million and $75.8 million for Connecticut Yankee Atomic Power Company (CY), Yankee Atomic Electric Company (YA) and Maine Yankee Atomic Power Company (MY),

respectively. This judgment in favor of these Yankee Companies relates to the alleged failure of the Department of Energy (DOE) to provide for a permanent facility to store spent nuclear fuel for years prior to 2001 for CY and YA, and prior to 2002 for MY (DOE Phase I Damages). NSTAR Electric’s portion of the Phase I judgments amounts to $4.8 million, $4.6 million and $3 million, respectively. On July 1, 2009, the Yankee Companies filed for additional damages related to the alleged failure of the DOE to provide for a permanent facility to store spent nuclear fuel for the years from January 2002 through December 2008 for CY and YA, and from January 2003 through December 2008 for MY (DOE Phase II Damages). This phase of the spent nuclear fuel litigation specifies damages in the amounts of $135.4 million, $86.1 million and $43 million for CY, YA and MY, respectively. Claim amounts applicable to NSTAR Electric are $19 million, $12 millio n and $1.7 million, respectively.

NSTAR cannot predict the ultimate outcome of these pending decisions for trial, appeal or the potential subsequent complaints. However, should the Yankee Companies ultimately prevail, NSTAR Electric’s share of the proceeds received would be refunded to its customers.

4. 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. 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, financial condition, and cash flows.

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 consolidated financial statements and related notes and with the MD&A in NSTAR's 2008 Annual Report on Form 10-K.

Business Overview

NSTAR (the Company) is a holding company engaged through its subsidiaries 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 a continued commitment for safe and reliable energy delivery to customers. NSTAR also focuses on providing accurate information and other helpful assistance to its customers, thereby providing a superior customer experience. NSTAR's strategy is to invest in transmission and distribution assets that will align with its core competencies.

Electric utility operations. For the nine months ended September 30, 2009, NSTAR derived 82% of its operating revenues from the transmission and distribution of electric energy through NSTAR Electric.

Gas operations. For the nine months ended September 30, 2009, NSTAR derived 14% of its operating revenues from the distribution of natural gas through NSTAR Gas.

Unregulated operations. For the nine months ended September 30, 2009, NSTAR derived 4% of its operating revenues from non-utility, unregulated operating subsidiaries involved in telecommunications and district energy operations.

Earnings. NSTAR's earnings are impacted by its customers' requirements for energy in the form of unit sales of electricity and natural gas, which directly determine the levels of electric retail distribution and transmission revenues and natural gas firm and transportation revenues recognized. In accordance with the regulatory rate structures in which NSTAR operates, its recovery of energy and energy-related costs are fully reconciled with the level of energy revenues currently recorded and, therefore, do not have an impact on earnings.

Net income attributable to common shareholders for the three and nine-month periods ended September 30, 2009 was $87.6 million and $205.6 million, or $0.82 and $1.92 diluted earnings per share, respectively, as compared to $85.8 million and $195.4 million, or $0.80 and $1.83 diluted earnings per share for the same periods in 2008, as further explained in this discussion.

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 2008 Form 10-K. There have been no substantive changes to those policies and estimates.

Rate Structure

a. Rate Settlement Agreement

NSTAR Electric is currently operating under a DPU-approved seven-year Rate Settlement Agreement ("Rate Settlement Agreement") that expires December 31, 2012. From 2007 through 2012, the Rate Settlement Agreement establishes for NSTAR Electric, among other things, annual inflation-adjusted distribution rate adjustments that are generally offset by an equal and corresponding reduction in transition rates. The increase adjustment will be 1.32% effective January 1, 2010; and corresponding adjustments were 1.74%, 2.68% and 2.64% effective January 1, 2009, 2008 and 2007, respectively. Uncollected transition charges as a result of the reductions in transition rates are deferred and collected through future rates with a carrying charge.

b. Electric Rates

Retail electric delivery rates are established by the DPU and are comprised of:


·		a distribution charge, which includes a fixed customer charge and a demand and/or energy charge (to collect the costs of building and expanding the infrastructure to deliver power to its destination, as well as ongoing operating costs and certain DPU-approved safety and reliability program costs), a Pension and PBOP Rate Adjustment Mechanism (PAM) to recover related costs and a reconciling rate adjustment mechanism to recover costs associated with the residential assistance adjustment clause,
·		a basic service charge represents the collection of energy costs, including costs related to charge-offs of uncollected energy costs, through DPU-approved rate mechanisms. Electric distribution companies in Massachusetts are required to obtain and resell power to retail customers through Basic Service for those who choose not to buy energy from a competitive energy supplier. 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 electric power,
·		a transition charge represents the collection of costs primarily from previously held investments in generating plants and costs related to existing above-market power contracts, and contract costs related to long-term power contracts buy-outs,


·		a transmission charge represents the collection of costs of moving the electricity over high voltage lines from generating plants to substations located within NSTAR’s service area including costs allocated to NSTAR Electric by ISO-NE to maintain the wholesale electric market,
·		an energy conservation charge represents a legislatively-mandated charge to collect costs for demand-side management programs and energy efficiency programs, and
·		a renewable energy charge represents a legislatively-mandated charge to collect the costs to support the development and promotion of renewable energy projects.

c. 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 have no impact on NSTAR Gas’ operating income because a substantial portion of the margin for such service is returned to its firm customers as rate reductions.

Retail gas delivery and supply rates are established by the DPU and are comprised of:


·		a distribution charge consists of a fixed customer charge and a demand and/or energy charge that collects the costs of building and expanding the gas infrastructure to deliver gas supply to its customers’ destination. This also includes collection of ongoing operating costs,
·		a seasonal cost of gas adjustment clause (CGAC) represents the collection of gas supply costs, pipeline and storage capacity, costs related to charge-offs of uncollected energy costs and working capital related costs. The CGAC is reset every six months. 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%,
·		a local distribution adjustment clause (LDAC) primarily represents the collection of demand-side management costs, environmental costs, PAM related costs, and costs associated with the residential assistance adjustment clause. The LDAC is reset annually and provides for the recovery of certain costs applicable to both sales and transportation customers.

NSTAR Gas purchases financial contracts based on NYMEX natural gas futures in order to reduce cash flow variability associated with the purchase price for approximately one-third of its natural gas purchases. This practice attempts to minimize the impact of fluctuations in prices to NSTAR’s firm gas customers. These financial contracts do not procure gas supply. All costs incurred or benefits realized when these contracts are settled are included in the CGAC of NSTAR Gas.

d. Regulatory Matters

Wholesale Power Cost Savings Initiatives

customers effective January 1, 2007, subject to final DPU approval. Through September 30, 2009, approximately $17.3 million has been collected from customers for the Wholesale Power Cost Saving Initiatives. NSTAR is unable to predict the timing or ultimate outcome of this DPU proceeding. In the event an adverse decision is issued, it would not have a material impact on the Company's results of operations.

DPU Safety and Reliability Programs (CPSL)

As part of the Rate Settlement Agreement, NSTAR Electric is allowed to recover incremental spending for the double pole inspection, replacement/restoration and transfer program and the underground electric safety program, which includes stray-voltage remediation and manhole inspections, repairs, and upgrades. Recovery of these Capital Program Scheduling List (CPSL) costs is subject to DPU review and approval. NSTAR Electric incurred incremental costs of $11.1 million and $13.1 million in 2006 and 2007, respectively. This includes incremental operations and maintenance and revenue requirements on capital investments. The final reconciliation of 2006 and 2007 CPSL costs recovery is currently under review by the DPU. The incremental costs for the year 2008 are currently under review by the Company and are estimated to be approximately $15 million. NSTAR anticipates filing its final 2008 CPSL cost recovery reconciliation with the DPU in the fourth quarter of 2009. NSTAR cannot predict the timing of a DPU order related to these pending filings. Should an adverse decision be issued which disallows a significant portion of CPSL cost recovery, it could have a material adverse impact to NSTAR’s results of operations, financial position, and cash flows.

Basic Service Bad Debt Adder

On July 1, 2005, in response to a generic DPU order that required electric utilities in Massachusetts to reflect the cost of the energy-related portion of bad debt costs in their Basic Service rates, NSTAR Electric increased its Basic Service rates and reduced its distribution rates for those bad debt costs. In furtherance of this generic DPU order, NSTAR Electric included a bad debt cost recovery mechanism as a component of its Rate Settlement Agreement. This recovery mechanism (bad debt adder) allows NSTAR Electric to recover its Basic Service bad debt costs on a fully reconciling basis. These rates were implemented, effective January 1, 2006, as part of NSTAR Electric’s Rate Settlement Agreement.

FERC Transmission ROE

NSTAR earns an 11.14% ROE on local transmission facility investments. The ROE on NSTAR’s regional transmission facilities is 11.64%. Additional incentive adders are determined on a case-by-case basis according to FERC’s national transmission incentive rules. The FERC may grant a variety of financial incentives, including ROE basis point incentive adders for qualified investments made in new regional

transmission facilities that can bring the ROE for NSTAR up to 12.64% for certain qualified regional investments. In addition, NSTAR may qualify for other incentives on future transmission projects based upon certain conditions that could bring the ROE to 13.1%.

Other

a. Energy Efficiency Plans - NSTAR Electric and NSTAR Gas

NSTAR Electric and NSTAR Gas administer demand-side management energy efficiency programs. The GCA directs electric and gas distribution companies to develop three-year energy efficiency plans. The first three-year plan is to be effective January 1, 2010, and is expected to lead to a significant expansion of energy efficiency activity in Massachusetts. Like the historical programs, the new three-year plans may include financial incentives based on energy efficiency program performance. In addition, the DPU has stated that it will permit distribution companies that do not as yet have rate decoupling mechanisms in place to implement lost base revenue rate adjustment mechanisms that will offset reduced distribution rate revenues as a result of successful energy efficiency programs.

During 2009, NSTAR Electric anticipates spending approximately $74.2 million. For 2010, NSTAR Electric anticipates that the program will constitute $130 million in spending, subject to DPU approval.

During 2009, NSTAR Gas anticipates spending approximately $6.1 million. For 2010, NSTAR Gas anticipates that the program will constitute $15.7 million in spending, subject to DPU approval.

b. American Recovery and Reinvestment Act of 2009 (ARRA)

The American Recovery and Reinvestment Act of 2009 (ARRA) provides resources for significant increases in spending in several energy-related areas that have relevance to NSTAR, including energy efficiency, smart grid funding, renewable energy financing and transmission projects. These initiatives are largely directed through federal and state governmental agencies and not-for-profit public agencies. NSTAR continues to evaluate the impact of this legislation on its business initiatives in these areas. Any action will require regulatory approval.

NSTAR Electric is in the process of pursuing U.S. Department of Energy (DOE) Funding Opportunities made available under the ARRA. In August 2009, NSTAR applied for Federal grants for its Smart Grid Programs. The requested funding represents 50% of the estimated total project costs. On October 27, 2009, NSTAR Electric received notice from the DOE that it had been awarded a $10 million grant related to a distribution automation proposal. NSTAR Electric anticipates that most of the remaining costs not recovered through the grant process will be recovered from customers. These projects are anticipated to enhance information technology, communications and monitoring functions and improve reliability and efficiency on NSTAR Electric’s distribution network.

c. Potential Transmission Investment

On May 21, 2009, NSTAR and Northeast Utilities announced that the FERC issued a declaratory judgment that ruled favorably on the proposed structure of a transmission arrangement for a new participant-funded transmission line between New England and Quebec. Under this arrangement, firm transmission rights would be assigned to Hydro-Quebec, and the proposed line would transmit at least 1,200 megawatts of power. NSTAR, Northeast Utilities and Hydro-Quebec have agreed to develop this project, and are currently negotiating long-term transmission service and purchase power agreements.

Results of Operations

The following section of MD&A compares the results of operations for each of the three and nine-month periods ended September 30, 2009 and 2008 and should be read in conjunction with the accompanying

Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this report.

Earnings Outlook

NSTAR is maintaining its earnings guidance of between $2.33 and $2.43 per share for 2009.

Common Share Dividends

NSTAR's current quarterly cash dividend rate is $0.375 per share or $1.50 per share on an annualized basis. On September 24, 2009, NSTAR's Board of Trustees declared a quarterly cash dividend of $0.375 per share to shareholders of record on October 9, 2009, payable November 2, 2009.

Three Months Ended September 30, 2009 compared to Three Months Ended September 30, 2008

Executive Summary of Quarterly Results

Earnings per common share were as follows:


	Three Months Ended September 30,
		2009		2008	% Change
Basic and Diluted	$	0.82	$	0.80	2.5

Net income attributable to common shareholders was $87.6 million for the quarter ended September 30, 2009 compared to $85.8 million for the same period in 2008. Major factors (after-tax) that contributed to the $1.8 million, or 2.1%, increase in the three months ended September 30, 2009 include:


·	Lower operations and maintenance expense primarily due to milder weather in 2009 that led to fewer emergent restoration events, lower storm-related costs due to the absence of severe storms. Also contributing were control of outside services and lower administrative and other operating costs ($2.9 million)
·	Higher transmission margin primarily due to higher current earnings resulting from higher investment base ($1.3 million)
·	Higher other income due to changes in cash surrender value of executive life insurance policies ($1.4 million)

These increases in earnings factors were partially offset by:


·	Lower earnings from NSTAR’s unregulated businesses ($1.2 million)
·	Higher depreciation and amortization and property tax expenses in 2009 related to higher regulated electric and gas plant investments and higher municipal tax rates ($3.1 million)

Significant cash flow events during the quarter include the following:


·	Cash flows from operating activities provided approximately $227.9 million, an increase of $69.4 million as compared to the same period in 2008. The increase primarily reflects a decrease in relative accounts receivable balances driven by lower energy supply costs and a decrease in relative gas fuel inventory balances driven by a transition to a portfolio manager arrangement
·	NSTAR invested approximately $76 million in capital projects to improve system reliability and capacity
·	NSTAR paid approximately $40.1 million in common share dividends and retired approximately $42 million in long-term and securitized 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,
	2009	2008	% Change

Residential	1,760,094	1,795,946	(2.0)
Commercial, Industrial, and other	3,978,336	4,148,861	(4.1)
Total retail sales	5,738,430	5,944,807	(3.5)


Firm Gas Sales and Transportation - BBtu	Three Months Ended September 30,
	2009	2008	% Change

Residential	1,409	1,368	3.0
Commercial and Industrial	2,710	2,871	(5.6)
Municipal	217	162	34.0
Total firm sales	4,336	4,401	(1.5)

NSTAR’s electric energy sales in the three months ended September 30, 2009 declined 3.5% compared to 2008 primarily due to unfavorable weather conditions resulting from a cooler summer during 2009 as compared to 2008. Cooling degree-days in the Boston area for the three months ended September 30, 2009 were down 11.4%, from the same period in 2008. Electric sales were also impacted by economic conditions and customer conservation behavior.

The 1.5% decrease in firm gas and transportation sales is due to economic conditions and continued customer conservation efforts.

Weather, fluctuations in fuel costs, conservation measures, and economic conditions affect sales to NSTAR’s residential and small commercial customers. Economic conditions, fluctuations in fuel costs, and conservation measures affect NSTAR’s large commercial and industrial customers. In terms of customer sector characteristics, industrial sales are less sensitive to weather than residential and commercial sales, which are influenced by temperature variations. Refer to the “Electric Revenues” and “Gas Revenues” sections below for more detailed discussions.

Weather conditions

NSTAR forecasts its electric and natural gas sales based on normal weather conditions. Actual results may vary from those projected due to actual weather conditions, economic conditions, energy conservation, and other factors. Refer to the “Cautionary Statement Regarding Forward-Looking Information” section preceding Part 1 “Financial Information” of this Form 10-Q.

The demand for electricity and natural gas is affected by weather conditions. Weather conditions impact electric sales primarily during the summer and, to a greater extent, gas sales during the winter season in NSTAR’s service area. Customer heating or cooling usage may not directly correlate with historical levels or with the level of degree-days that occur (as further discussed below), particularly when weather patterns experienced are consistently colder or warmer. Also, NSTAR’s electric and gas businesses are sensitive to variations in daily weather, are highly influenced by New England’s seasonal weather variations, and are susceptible to severe storm-related incidents that could adversely affect the Company’s ability to provide energy.

Degree-days measure changes in daily mean temperature levels. A degree-day is a unit measuring how much the outdoor daily mean temperature falls below (in the case of heating) or rises above (in the case of cooling) a base of 65 degrees. The comparative information below relates to heating degree-days for the three months ended September 30, 2009 and 2008 and the number of heating degree-days in a “normal” year using a 30-year average. NSTAR uses the “normal 30-year average” degree-days data to

compare current temperature readings to a baseline or “normal” period, that is recalculated every ten years for the preceding 30 years (currently 1971-2000), as collected at the Worcester Regional Airport and Boston’s Logan Airport for heating degree-day data and cooling degree-day data, respectively. Weather conditions during the three months ended September 30, 2009 measured by heating and cooling degree-days, respectively, were 102.2% higher/colder related to heating degree-days and 11.4% lower/cooler related to cooling degree-days for 2009 as compared to 2008. Refer to the “Electric Revenues” and “Gas Revenues” sections below for more detailed discussions.


Heating Degree-Days
Three months ended September 30, 2009		271
Three months ended September 30, 2008		134
Normal 30-Year Average		177

Percentage that 2009 was colder than 2008		102.2%
Percentage that 2009 was colder than 30-year average		53.1%


Cooling Degree-Days
Three months ended September 30, 2009		512
Three months ended September 30, 2008		578
Normal 30-Year Average		593

Percentage that 2009 was cooler than 2008		11.4%
Percentage that 2009 was cooler than 30-year average		13.7%

Operating revenues

Operating revenues for the third quarter of 2009 decreased $120.7 million, or 13.5%, from the same period in 2008 as follows:


(in millions)	Three Months Ended September 30,						Increase/(Decrease)
			2009		2008	Amount			Percent
Electric revenues
Retail distribution and transmission		$	331.7	$	303.7	$	28.0			9.2	%
Energy, transition and other			367.4		489.3		(121.9	)		(24.9	%)
Total retail electric revenues			699.1		793.0		(93.9	)		(11.8	%)
Gas revenues
Firm and transportation			15.6		15.7		(0.1	)		(0.6	%)
Energy supply and other			26.8		45.2		(18.4	)		(40.7	%)
Total gas revenues			42.4		60.9		(18.5	)		(30.4	%)

Unregulated operations revenues			30.0		38.3		(8.3	)		(21.7	%)
Total operating revenues		$	771.5	$	892.2	$	(120.7	)		(13.5	%)

Electric revenues

NSTAR's largest earnings sources are the revenues derived from distribution and transmission rates approved by the DPU and the FERC. Electric retail distribution revenues primarily represent charges to customers for recovery of the Company's capital investment, including a return component, and operation and maintenance costs related to its electric distribution infrastructure. The transmission revenue component represents charges to customers for the recovery of similar costs to move the electricity over high voltage lines from the generator to the Company's distribution substations.

The increase of $28 million, or 9.2%, in retail distribution and transmission revenues primarily reflects:


·	Increased transmission revenues primarily due to the recovery of a higher transmission investment base and recovery of higher regional network service costs ($28 million)
·	Increased electric revenues resulting from the annual inflation rate adjustment ($3.7 million)

These increases were partially offset by:


·	Decreased energy sales of 3.5% due to the impact of weather conditions, economic conditions and customer conservation measures ($3.7 million)

Energy, transition, and other revenues primarily represent charges to customers for the recovery of costs incurred by the Company in order to acquire the energy supply on behalf of its customers and a transition charge for recovery of the Company's prior investments in generating plants and the costs related to long-term power contracts. The energy revenues relate to customers being provided energy supply under Basic Service. These revenues are fully reconciled to the costs incurred and have no impact on NSTAR's consolidated net income. Energy, transition, and other revenues also reflect revenues related to the Company's ability to effectively reduce stranded costs (incentive entitlements), rental revenue from electric property, and annual cost reconciliation true-up adjustments. The $121.9 million decrease in energy, transition, and other revenues is primarily attributable to lower demand and lower energy costs. Uncollected transition co sts as a result of the reductions in transition rates are deferred and collected through future rates with a carrying charge.

Gas Revenues

Firm and transportation gas revenues primarily represent charges to customers for the Company’s recovery of costs of its capital investment in gas infrastructure, including a return component, and for the recovery of costs for the ongoing operation and maintenance of that infrastructure. The transportation revenue component represents charges to customers for the recovery of costs to move the natural gas over pipelines from gas suppliers to take stations located within the Company's service area. Firm and transportation revenues decreased $0.1 million primarily attributable to the 1.5% decrease in BBtu sales.

Energy supply and other gas revenues primarily represent charges to customers for the recovery of costs to the Company in order to acquire the natural gas in the marketplace and a charge for recovery of the Company's gas supplier service costs. The energy supply and other revenues decrease of $18.4 million primarily reflects a decrease in the cost of gas supply. These revenues are fully reconciled with the costs currently recognized by the Company and, as a result, do not have an effect on NSTAR’s consolidated net income.

Unregulated Operations Revenues

Unregulated operating revenues are derived from NSTAR's district energy and telecommunications operations. Unregulated revenues were $30 million for the quarter ended September 30, 2009 compared to $38.3 million in 2008, a decrease of $8.3 million, or 21.7%. The decrease in unregulated revenues is primarily the result of decreases in energy sales due to weather conditions, lower recovery of fuel costs due to decreases in energy costs, and lower ISO-NE forward reserve revenues during 2009.

Operating expenses

Purchased power and transmission expense was $329.9 million in the third quarter of 2009 compared to $434.7 million in the same period of 2008, a decrease of $104.8 million, or 24.1%. The decrease in expense reflects NSTAR Electric’s lower energy sales of 3.5% and lower energy supply costs for both NSTAR’s regulated and unregulated companies of $144.9 million. These decreases are partially offset by higher transmission costs of $33.3 million due to an increase in regional network support costs. NSTAR

Electric adjusts its rates to collect the costs related to energy supply from customers on a fully reconciling basis. Due to this rate adjustment mechanism, changes in the amount of energy supply expense have no impact on consolidated net income.

Cost of gas sold, representing NSTAR Gas' supply expense, was $19.8 million in the third quarter of 2009 compared to $38.7 million in 2008, a decrease of $18.9 million, or 48.8%. The decrease in expense primarily reflects lower sales of 1.5% and a decrease in natural gas supply costs. NSTAR Gas maintains a flexible resource portfolio consisting of an all-requirements gas supply contract, 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 and therefore changes in the amount of energy supply expense have no impact on consolidated net income.

Operations and maintenance expense was $103 million in the third quarter of 2009 compared to $106.6 million in the same period of 2008, a decrease of $3.6 million, or 3.4%. Milder weather in 2009 led to lower storm-related costs ($0.8 million), also contributing was control of outside services and lower administrative and other operating costs ($2.4 million).

Depreciation and amortization expense was $91.6 million in the third quarter of 2009 compared to $91.7 million in the same period of 2008, a decrease of $0.1 million or less than 1%. The decrease primarily reflects an adjustment for the extension of an unregulated customer contract partially offset by higher depreciable distribution and transmission plant in service.

DSM and renewable energy programs expense was $26.4 million in the third quarter of 2009 compared to $19.8 million in the same period of 2008, an increase of $6.6 million, or 33%. The increase reflects higher spending levels during 2009 and is consistent with the collection of conservation and renewable energy revenues. These costs are in accordance with program guidelines established by the DPU and are collected from customers on a fully reconciling basis plus an incentive return. NSTAR anticipates a further increase in DSM spending during 2009 and in future years driven by requirements of the Massachusetts Green Communities Act (GCA). Those spending increases are expected to be funded partially through proceeds from the Regional Greenhouse Gas Initiative and through NSTAR’s participation in the Forward Capacity Market.

Property and other taxes expense was $26.3 million in the third quarter of 2009 compared to $23.7 million in the same period of 2008, an increase of $2.6 million, or 11%, reflecting higher overall property investments and higher tax rates.

Income tax expense attributable to operations was $53.7 million in both the third quarter of 2009 and 2008.

Total other income, net

Total other income, net was approximately $1.7 million in the third quarter of 2009 compared to $0.2 million in the same period of 2008, an increase of $1.5 million. The increase relates primarily to an increase in cash surrender value of executive life insurance policies in 2009 compared to a decrease of $1.6 million in 2008, reported as an other deduction.

Interest charges (income)

Long-term debt and transition property securitization certificates interest charges were $39.3 million in the third quarter of 2009 compared to $40.3 million in the same period of 2008, a decrease of $1 million, or 2.5%. This decrease in interest charges reflects:


·	Lower interest costs of $2.2 million on transition property securitization debt attributable to scheduled principal pay downs

This decrease was partially offset by:


·	Higher interest costs of $1.3 million associated with NSTAR Electric’s February 2009 $100 million issuance of 5.625% debentures

Short-term debt and other interest charges (income), net were $4.8 million of net interest income in the third quarter of 2009 compared to $2.9 million of net interest income in the same period of 2008, a change of $1.9 million. The change in short-term and other net interest charges (income) reflects:


·	Lower short-term borrowing costs of $2.3 million resulting from a 198 basis point decrease in the weighted average short-term borrowing rates for third quarter 2009 (0.32%) as compared to the third quarter 2008 (2.30%) and a slight decrease in the average level of borrowed funds as compared to the same period in 2008
·	Increased interest income of $0.4 million primarily related to the timing of collections from customers of certain regulatory assets

Nine Months Ended September 30, 2009 compared to Nine Months Ended September 30, 2008

Executive Summary of Year to Date Results

Earnings per common share were as follows:


	Nine Months Ended September 30,
		2009		2008	% Change
Basic	$	1.93	$	1.83	5.5
Diluted	$	1.92	$	1.83	4.9

Net income attributable to common shareholders was $205.6 million for the nine-month period ended September 30, 2009 compared to $195.4 million for the same period in 2008. Major factors (after-tax) that contributed to the $10.2 million, or 5.2%, increase in 2009 earnings include:


·	Lower operations and maintenance expense primarily due to milder weather in 2009 that led to fewer emergent restoration events, lower storm-related costs, and lower labor costs. Also contributing were lower liability claims, control of outside services, and lower administrative and other operating costs ($14.8 million)
·	Lower net interest charges primarily due to decreases in short-term interest rates, increased interest income on income tax items and increased interest income on regulatory deferrals ($3.9 million)
·	Higher firm gas revenues due to higher sales of 0.5% ($1.2 million)
·	Higher transmission revenues as a result of increased transmission investment base ($4.1 million)
·	Higher other income due to changes in cash surrender value of executive life insurance policies ($2.1 million)

These increases in earnings factors were partially offset by:


·	Lower electric distribution revenues due to a 3.7% decrease in sales offset by the annual inflation rate adjustment ($4.1 million)
·	Higher depreciation and amortization and property tax expenses in 2009 related to higher regulated electric and gas plant investment and higher municipal tax rates ($8.4 million)
·	The absence of income from an environmental settlement that occurred during the first half of 2008 ($2.9 million)
·	The absence of a cumulative impact in 2008 of implementing the March 29, 2008 FERC ROE order ($2.4 million)

Significant cash flow events during the nine months ended September 30, 2009 include the following:


·	Cash flows from operating activities provided approximately $596.8 million, an increase of $142.9 million, as compared to the same period in 2008. The increase primarily reflects a change in the timing of income tax payments, a decrease in relative accounts receivable balances driven by lower energy supply costs and a decrease in relative gas fuel inventory balances driven by a transition to a portfolio manager arrangement. These positive sources of cash were partially offset by the timing of payables and energy supply payments
·	NSTAR invested approximately $284 million in capital projects to improve system reliability and capacity
·	NSTAR paid approximately $120.2 million in common share dividends and retired approximately $117.7 million in long-term and securitized 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,
	2009	2008	% Change

Residential	4,876,682	4,969,744	(1.9)
Commercial, Industrial and other	11,001,807	11,516,459	(4.5)
Total retail sales	15,878,489	16,486,203	(3.7)


Firm Gas Sales and Transportation - BBtu	Nine Months Ended September 30,
	2009	2008	% Change

Residential	14,393	14,010	2.7
Commercial and Industrial	15,385	15,719	(2.1)
Municipal	2,113	2,019	4.7
Total firm sales	31,891	31,748	0.5

NSTAR’s electric energy sales in the nine months ended September 30, 2009 declined 3.7% compared to 2008. Electric sales were impacted by cooler weather in the third quarter of 2009 and by economic conditions.

Weather conditions positively impacted gas sales. The 0.5% increase in firm gas and transportation sales is attributable to the colder winter weather that directly impacts residential sales, which increased 2.7%. Gas sales were unfavorably impacted by economic conditions and continued customer conservation efforts.

Weather conditions

Refer to and consider for this nine-month period ended September 30, 2009 discussion, NSTAR’s disclosure on factors that affect its energy sales, including the effect of variable weather conditions, and a description and use of energy degree-days, as found in the “Three Months Ended September 30, 2009 compared to the Three Months Ended September 30, 2008 – Weather Conditions” section of this MD&A.

The following comparative information relates to heating and cooling degree-days for the nine months ended September 30, 2009 and 2008 and the number of heating and cooling degree-days in a “normal” year using a 30-year average. Weather conditions during the nine months ended September 30, 2009 measured by heating and cooling degree-days, respectively, were 8.8% higher/colder related to heating degree-days and 25% lower/cooler related to cooling degree-days for 2009 as compared to 2008. Refer to the “Electric Revenues” and “Gas Revenues” sections below for more detailed discussions.


Heating Degree-Days
Nine months ended September 30, 2009		4,561
Nine months ended September 30, 2008		4,194
Normal 30-Year Average		4,453

Percentage that 2009 was colder than 2008		8.8%
Percentage that 2009 was colder than 30-year average		2.4%


Cooling Degree-Days
Nine months ended September 30, 2009		591
Nine months ended September 30, 2008		788
Normal 30-Year Average		769

Percentage that 2009 was cooler than 2008		25.0%
Percentage that 2009 was cooler than 30-year average		23.1%

Operating revenues

Operating revenues for the nine months ended September 30, 2009 decreased $104.7 million or 4.1% from the same period in 2008 as follows:


(in millions)	Nine Months Ended September 30,						Increase/(Decrease)
			2009		2008	Amount			Percent
Electric revenues
Retail distribution and transmission		$	814.0	$	750.0	$	64.0			8.5	%
Energy, transition and other			1,161.9		1,267.0		(105.1	)		(8.3	%)
Total retail electric revenues			1,975.9		2,017.0		(41.1	)		(2.0	%)
Gas revenues
Firm and transportation			102.2		100.8		1.4			1.4	%
Energy supply and other			247.2		298.0		(50.8	)		(17.0	%)
Total gas revenues			349.4		398.8		(49.4	)		(12.4	%)

Unregulated operations revenues			101.5		115.7		(14.2	)		(12.3	%)
Total operating revenues		$	2,426.8	$	2,531.5	$	(104.7	)		(4.1	%)

Electric revenues

The increase of $64 million, or 8.5%, in retail distribution and transmission revenues primarily reflects:


·	Increased transmission revenues primarily due to the recovery of a higher transmission investment base and recovery of higher regional network service costs ($71 million)

This increase was partially offset by:


·	Decreased energy sales of 3.7% due to the impact of weather conditions, economic conditions, and customer conservation measures offset by increased electric revenues resulting from the annual inflation rate adjustment ($6.7 million)

Energy, transition, and other revenues primarily represent charges to customers for the recovery of costs incurred by the Company in order to acquire the energy supply on behalf of its customers and a transition charge for recovery of the Company's prior investments in generating plants and the costs related to long-term power contracts. The energy revenues relate to customers being provided energy supply under Basic Service. These revenues are fully reconciled to the costs incurred and have no impact on NSTAR's consolidated net income. Energy, transition, and other revenues also reflect revenues related to the Company's ability to effectively reduce stranded costs (incentive entitlements), rental revenue from electric property, and annual cost reconciliation true-up adjustments. The $105.1 million decrease in energy, transition, and other revenues is primarily attributable to lower demand and lower energy costs. Uncollected transition costs as a result of the reductions in transition rates are deferred and collected through future rates with a carrying charge.

Gas Revenues

Firm and transportation gas revenues primarily represent charges to customers for the Company’s recovery of costs of its capital investment in gas infrastructure, including a return component, and for the recovery of costs for the ongoing operation and maintenance of that infrastructure. The transportation revenue component represents charges to customers for the recovery of costs to move the natural gas over pipelines from gas suppliers to take stations located within the Company’s service area. The $1.4 million increase in firm and transportation revenues is primarily attributable to colder weather conditions in the first quarter partially offset by customers reduced usage as a result of economic concerns. These factors resulted in the increase in sales volumes of 0.5%.

Energy supply and other gas revenues primarily represent charges to customers for the recovery of costs to the Company in order to acquire the natural gas in the marketplace and a charge for recovery of the Company's gas supplier service costs. The energy supply and other revenues decrease of $50.8 million primarily reflects a decrease in the cost of gas supply. These revenues are fully reconciled with the cost currently recognized by the Company and, as a result, do not have an effect on NSTAR’s consolidated net income.

Unregulated Operations Revenues

Unregulated operating revenues are derived from NSTAR's district energy and telecommunications operations. Unregulated revenues were $101.5 million through September 30, 2009 compared to $115.7 million in 2008, a decrease of $14.2 million, or 12.3%. The decrease in unregulated revenues is primarily the result of decreases in energy sales due to weather conditions and customer conservation measures, lower energy sales prices and lower ISO-NE forward reserve revenues during 2009.

Operating expenses

Purchased power and transmission expense was $1,037.6 million in the nine months ended September 30, 2009 compared to $1,089.6 million in the same period of 2008, a decrease of $52 million, or 4.8%. The decrease in expense reflects NSTAR Electric’s lower energy sales of 3.7%, as well as lower basic service and other energy costs for both NSTAR’s supply regulated and unregulated companies of $157.6 million. These decreases are partially offset by higher transmission costs of $88.3 million primarily due to an increase in regional network support costs. NSTAR Electric adjusts its rates to collect the costs related to energy supply from customers on a fully reconciling basis. Due to this rate

adjustment mechanism, changes in the amount of energy supply expense have no impact on consolidated net income.

Cost of gas sold, representing NSTAR Gas' supply expense, was $219.9 million in the nine months ended September 30, 2009 compared to $271 million in the same period of 2008, a decrease of $51.1 million, or 18.9%. Despite slightly higher firm gas sales of 0.5%, the decrease in cost primarily reflects the lower costs of gas supply per therm. NSTAR Gas adjusts its rates to collect costs related to gas supply from customers on a fully reconciling basis and therefore changes in the amount of energy supply expense have no impact on consolidated net income.

Operations and maintenance expense was $311.1 million in the nine months ended September 30, 2009 compared to $332.9 million in the same period of 2008, a decrease of $21.8 million, or 6.5%. Milder weather in 2009 led to lower storm-related costs ($3.6 million). Other factors were lower liability claims cost ($2.4 million), lower labor and labor-related costs ($9.6 million), and control of outside services and lower administrative and other operating costs ($8.2 million).

Depreciation and amortization expense was $286.3 million in the nine months ended September 30, 2009 compared to $284.2 million in the same period of 2008, an increase of $2.1 million, or 0.7%. The increase primarily reflects higher depreciable distribution and transmission plant in service.

DSM and renewable energy programs expense was $64.7 million in the nine months ended September 30, 2009 compared to $54.8 million in the same period of 2008, an increase of $9.9 million, or 18.1%. The increase reflects higher spending levels during 2009 and is consistent with the collection of conservation and renewable energy revenues. These costs are in accordance with program guidelines established by the DPU and are collected from customers on a fully reconciling basis plus an incentive return. NSTAR anticipates a further increase in DSM spending during 2009 driven by requirements of the GCA. These spending increases are expected to be funded partially through proceeds from the Regional Greenhouse Gas Initiative and through NSTAR’s participation in the Forward Capacity Market.

Property and other taxes expense was $81.7 million in the nine months ended September 30, 2009 compared to $73.8 million in the same period of 2008, an increase of $7.9 million, or 10.7%, reflecting higher overall property investments and higher tax rates.

Income tax expense attributable to operations was $123.1 million in the nine months ended September 30, 2009 compared to $118.4 million in the same period of 2008, an increase of $4.7 million, or 4%, reflecting higher pre-tax operating income in 2009.

Total other income, net

Total other income, net was approximately $3.8 million in the nine months ended September 30, 2009 compared to $4.9 million in the same period of 2008, a decrease of $1.1 million, or 22.4%. The decrease relates primarily to the absence of income related to an environmental settlement in 2008 ($2.9 million), partially offset by an increase in the cash surrender value of executive life insurance policies in 2009 compared to a decrease in 2008 ($2.1 million).

Interest charges (income)

Long-term debt and transition property securitization certificates interest charges were $118.6 million in the nine months ended September 30, 2009 compared to $122.2 million in the same period of 2008, a decrease of $3.6 million, or 2.9%. This decrease in interest charges reflects:


·	Lower interest costs of $6.5 million on transition property securitization debt attributable to scheduled principal pay downs

This decrease was partially offset by:


·	Higher interest costs of $3.3 million associated with NSTAR Electric’s February 2009 $100 million issuance of 5.625% debentures

Short-term debt and other interest charges (income), net were $19 million of net interest income in the nine months ended September 30, 2009 compared to $6 million of net interest income in the same period of 2008, a change of $13 million. The change in short-term and other net interest charges (income) reflects:


·	Lower borrowing costs of $6.9 million resulting from a 227 basis point decrease in the weighted average short-term borrowing rates from the nine months ended September 30, 2008 (2.70%) to the comparable period of 2009 (0.43%). Partially offsetting the lower rates was an increase in the average level of borrowed funds as compared to the same period in 2008
·	Increased interest income of $6.1 million primarily related to the timing of collections from customers of certain regulatory assets and interest income on federal income tax-related items

AFUDC decreased $0.9 million in the nine months ended September 30, 2009 due to lower short-term borrowing rates.

Liquidity and Capital Resources

Financial Market Impact

Ongoing volatility and uncertainty in the financial markets may adversely impact the availability of credit and the cost of credit to NSTAR and its subsidiary companies. NSTAR and its subsidiaries utilize the commercial paper market to meet their short-term cash requirements. NSTAR and NSTAR Electric currently have Revolving Credit Agreements in place through December 2012. These Credit Agreements serve as a liquidity backup to the commercial paper program. Short-term commercial paper debt obligations are commonly refinanced to long-term obligations with fixed-rate bonds or notes as needed and when interest rates are considered favorable. Refer to Item 1A, Risk Factors, in NSTAR’s Annual Report on Form 10-K for the year ended December 31, 2008, for a further discussion.

As a result of declines in the financial markets and their impact on NSTAR’s Pension and PBOP Plan investments, NSTAR continues to evaluate the extent to which it may make additional cash contributions. Should NSTAR elect to increase its level of funding to these plans, NSTAR believes it has adequate access to capital resources to support its contributions.

Working Capital

NSTAR anticipates refinancing its current maturities of long-term debt obligations. NSTAR (parent company) has a $500 million note due in February 2010. NSTAR Electric has a $125 million note due in May 2010. Refinancing is likely to take the form of public debt offerings. NSTAR and NSTAR Electric filed a joint Registration Statement on Form S-3 on October 9, 2009 in preparation for possible public debt offerings.

Current Cash Flow Activity

Operating Activities

The net cash provided by operating activities was $596.8 million in the nine months ended September 30, 2009, as compared to $453.9 million in the same period in 2008, an increase of approximately $142.9 million primarily due to lower income tax payments related to higher bonus depreciation partially offset by higher contributions to the pension and postretirement plans. Also contributing are a relative decrease in

accounts receivable balances, and a decrease in gas fuel inventory associated with a transition to a portfolio manager arrangement, partially offset by higher payments of accounts payable. NSTAR anticipates making an additional $8 million of contributions to the PBOP Plan and additional $70 million in contributions to the Pension Plan during the remainder of 2009.

Investing Activities

The net cash used in investing activities in the nine months ended September 30, 2009 was $282.6 million, compared to $312.4 million during the same period in 2008. The majority of these expenditures were for system reliability improvements and capacity improvements in the NSTAR service territory.

Financing Activities

Net cash used in financing activities in the nine months ended September 30, 2009 was $312.8 million compared to $143.6 million in the same period in 2008. Uses of cash primarily reflect long-term and securitized debt redemptions of $117.7 million in 2009 compared to $120.3 million in 2008 and dividend payments of $121.6 million in 2009 compared to $113.6 million in 2008. In addition, NSTAR's short-term debt decreased by $168.1 million to $414.8 million at September 30, 2009 compared to $582.9 million at December 31, 2008. Sources of cash during the nine months ended September 30, 2009 included proceeds from NSTAR Electric's issuance, at a premium of $4.6 million, of $100 million in ten-year fixed-rate (5.625%) Debentures that were used to pay down short-term debt.

The banking arrangements in place require NSTAR and its subsidiaries to make daily cash transfers to fund vendor checks that are presented for payment. These banking arrangements do not permit the right of offset among the Company’s subsidiaries’ cash accounts. In the event of a credit book balance in any one of the Company’s cash accounts resulting from uncleared checks, the Company will adjust its disbursement cash account accordingly. Changes in the balances of the disbursement cash accounts are reflected in financing activities in the accompanying Consolidated Statements of Cash Flows.

Income Tax Payments

During the nine months ended September 30, 2009 and 2008, NSTAR made income tax payments of $69.7 million and $108.3 million, respectively. Lower required cash income tax payments are primarily attributable to benefits from bonus depreciation on assets placed in service during the year, and also tax benefits from anticipated pension contributions during the remainder of 2009.

Refundable Income Tax

The refundable income tax of $129.1 million related to the SSCM will be fully refunded to NSTAR including interest. Subject to timely completion of IRS appeals discussions this amount is expected by mid-2010.

Sources of Additional Capital and Financial Covenant Requirements

With the exception of bond indemnity agreements and gas hedging agreements, NSTAR has no financial guarantees, commitments, debt or lease agreements that would require a change in terms and conditions, such as acceleration of payment obligations, as a result of a change in its credit rating. However, in addition to the bond indemnity and gas hedging agreements, NSTAR's subsidiaries could be required to provide additional security for energy supply contract performance obligations, such as a letter of credit for their pro-rata share of the remaining value of such contracts.

NSTAR and NSTAR Electric have no financial covenant requirements under their respective long-term debt arrangements. Pursuant to a revolving credit agreement, NSTAR Electric must maintain a total debt to capitalization ratio no greater than 65% at all times, excluding Transition Property Securitization Certificates and excluding accumulated other comprehensive income (loss) from common equity. NSTAR Gas was in compliance with its financial covenant requirements including a minimum equity requirement,

under its long-term debt arrangements at September 30, 2009 and December 31, 2008. Under the minimum equity requirement, the outstanding long-term debt of NSTAR Gas must not exceed equity. NSTAR's long-term debt other than its secured debt, issued by NSTAR Gas and MATEP, is unsecured.

NSTAR (Holding Company) currently has a $175 million revolving credit agreement that expires December 31, 2012. At September 30, 2009 and December 31, 2008, 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, 2009 and December 31, 2008, had $175 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, 2009 and December 31, 2008, NSTAR was in full compliance with the aforementioned covenant as the ratios were 58.2% and 60.2%, respectively.

On April 6, 2009, the DPU approved NSTAR Electric’s new two-year financing plan to issue an additional $500 million in long-term debt securities. On October 9, 2009, in connection with this filing, NSTAR and NSTAR Electric filed a registration statement on Form S-3 with the SEC to issue debt securities from time to time in one or more series. NSTAR or NSTAR Electric may use the proceeds from the prospective issuance of these securities for the redemption or repayment of outstanding long-term debt and short-term debt balances and/or general working capital purposes.

NSTAR Electric has approval from the FERC to issue short-term debt securities from time to time on or before October 22, 2010, with maturity dates no later than October 21, 2011, in amounts such that the aggregate principal does not exceed $655 million at any one time. NSTAR Electric has a five-year, $450 million revolving credit agreement that expires December 31, 2012. However, unless NSTAR Electric receives necessary approvals from the DPU, the credit agreement will expire 364 days from the date of the first draw under the agreement. At September 30, 2009 and December 31, 2008, there were no amounts outstanding under the revolving credit agreement. This credit facility serves as backup to NSTAR Electric's $450 million commercial paper program that had $235.5 million and $354.6 million outstanding balances at September 30, 2009 and December 31, 2008, respectively. Under the terms of the revolving credit agreement, NSTAR Electric is requ ired 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, 2009 and December 31, 2008, NSTAR Electric was in full compliance with its covenants in connection with its short-term credit facilities, as the ratios were 46.4% and 47.6%, respectively.

NSTAR Gas has a $100 million line of credit. This line of credit is due to expire on December 11, 2009. NSTAR Gas anticipates that this line of credit will be renewed. As of September 30, 2009 and December 31, 2008, NSTAR Gas had $4.3 million and $53.3 million outstanding, respectively.

On July 24, 2009, NSTAR Gas filed an application with the DPU to seek approval to issue up to $125 million of long-term debt. A decision is expected from the DPU in the fourth quarter of 2009.

Historically, NSTAR and its subsidiaries have had a variety of external sources of financing available, as previously indicated, 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. As of September 30, 2009, NSTAR’s subsidiaries could declare and pay dividends of up to approximately $1.3 billion of their total common equity (approximately $2.4 billion) to NSTAR and remain in compliance with debt covenants. Based on NSTAR's key cash resources available as previously discussed, management believes its liquidity and capital resources are sufficient to meet its current and projected cash requirements.

Commitments and Contingencies

NSTAR is exposed to certain matters as discussed in this section under the caption "Critical Accounting Policies and Estimates."

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Risk Management

NSTAR’s Energy Procurement Policy governs all energy-related procurement transactions of NSTAR Electric and NSTAR Gas. This Policy is reviewed annually and is administered by NSTAR’s Risk Committee. The Committee is chaired by NSTAR’s chief executive officer and includes other senior officers. Items covered by this Policy and approved by the Committee are all new energy supply transactions, authorization limits, energy related derivative and hedging transactions, and counter-party credit profiles.

Commodity and Credit Risk

Although NSTAR has material energy commodity purchase contracts, any potential market risk, including counter-party credit risk, should not have an adverse impact on NSTAR’s results of operations, cash flows, or financial position. NSTAR Electric and NSTAR Gas have rate-making mechanisms that allow for the recovery of energy supply costs from those customers who make commodity purchases from NSTAR’s electric and gas subsidiaries rather than from the competitive market supplier. All energy supply costs incurred by NSTAR Electric and NSTAR Gas in providing energy to their retail customers are recovered on a fully reconciling basis.

In addition, NSTAR has minimal cash flow risk due to the short-term nature of these contracts and the rate-making mechanics that permit recovery of these costs in a timely manner. The majority of NSTAR’s electric and gas commodity purchase contracts range in term from three to twelve months. NSTAR Electric has the ability to seek cost recovery and adjust its rates as frequently as every three months for its large commercial and industrial customers and every six months for its residential customers. NSTAR Gas has the ability to seek cost recovery as required if costs exceed 5% of the current projected cost recovery level. Both NSTAR Electric and NSTAR Gas earn a carrying charge on under-collected commodity balances that would mitigate any incremental short-term borrowing costs. NSTAR believes it is unlikely that it would be exposed to a liquidity risk resulting from significant market price increases based on the recovery mechanisms currently in place.

To mitigate the cash flow and cost variability related to the commodity price risk on approximately one-third of its natural gas purchases, NSTAR Gas purchases financial futures contracts on behalf of its customers. NSTAR Gas has a rate-making mechanism that provides for recovery of the actual settlement value of these contracts on a fully reconciling basis. Refer to the accompanying Notes to Consolidated Financial Statements, Note C. Derivative Instruments, Gas Hedging Agreements for a further discussion.

Certain renewable energy requirements of the GCA may require NSTAR to enter into renewable energy supply contracts extending longer than twelve months, in order to satisfy renewable supply requirements.

Interest Rate Risk

NSTAR believes its interest risk primarily relates to short-term debt obligations and anticipated future long-term debt financing requirements to fund its capital programs. These short-term debt obligations are typically refinanced with fixed-rate long-term notes as needed and when market interest rates are favorable. The Company is exposed to changes in interest rates primarily based on levels of short-term commercial paper outstanding. The weighted average interest rates, including fees for short-term indebtedness, were 0.32% and 2.30% for the three months ended September 30, 2009 and 2008, respectively, and 0.43% and 2.70% for the nine months ended September 30, 2009 and 2008,

respectively. On a long-term basis, NSTAR mitigates its interest rate risk through the issuance of mostly fixed rate debt of various maturities.

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, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

As of the end of the period covered by this Quarterly Report on Form 10-Q, 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 Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e). 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.

There have been no changes in NSTAR's internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Securities Exchange Act of 1934) during NSTAR's most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, NSTAR's internal control over financial reporting.

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. 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, financial condition, or cash flows.

Item 1A. Risk Factors

Shareholders or prospective investors should carefully consider the risk factors that were previously disclosed in NSTAR's Annual Report on Form 10-K for the year ended December 31, 2008.

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 NSTAR Long Term 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, 2009, all shares listed below were acquired in the open market.


	Total Number of Common Shares Purchased	Average Price Paid Per Share

July	161,781	$31.80
August	131,438	$32.17
September	71,038	$32.34
Total third quarter	364,257	$32.04

Item 6. Exhibits


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 of NSTAR and its subsidiaries defining the rights of holders of any non-registered debt whose authorization does not exceed 10% of total assets.
Exhibits filed herewith:

Exhibit	3	-	Articles of Incorporation and By-Laws

	3.1		Declaration of Trust of NSTAR (dated April 20, 1999, as amended April 28, 2005 and April 30, 2009)

Exhibit	15	-	Letter Re Unaudited Interim Financial Information

	15.1		PricewaterhouseCoopers LLP Awareness Letter

Exhibit	31	-	Rule 13a - 14(a)/15d-14(a) 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*

		*	Rule 436(c) of the 1933 Act provides that a report on unaudited interim financial information shall not be considered part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Section 7 or 11 of the 1933 Act. Therefore, the accountant is not subject to the liability provisions of Section 11 of the 1933 Act.

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 October 29, 2009		By: /s/ R. J. WEAFER, JR.
		Robert J. Weafer, Jr. Vice President, Controller and Chief Accounting Officer

EX-3.1 2 nstar10qexh31.htm NSTAR FORM 10-Q EXHIBIT 3.1 NSTAR DECLARATION OF TRUST NSTAR Form 10Q Exhibit 3.1

Exhibit 3.1

DECLARATION OF TRUST

NSTAR

Dated April 20, 1999, as amended

April 28, 2005

April 30, 2009

TABLE OF CONTENTS

1. Name; Purpose

2. Definitions.

3. Limitations on Liability

4. Nonassessability of Shareholders

5. Reliance of Third Persons

6. Place of Business

7. Trust Estate; Conversion into Personal Estate

8. Powers of Trustees

9. Number and Election

10. Resignation; Vacancies; Removals

11. Vesting in New Trustees

12. Compensation

13. Unissued Shares.

14. Determination of Capital and Income

15. Dividends

16. Fiscal Year; Accounts

17. Action by Board; Quorum

18. Bylaws

19. Certificate Evidencing Votes

20. Trustees and Officers

21. Liability

22. Books and Reports

23. Advance of Expenses

24. Rights Not Exclusive; Definitions

25. Shareholders

26. Shareholders, Trustees, Officers and Agents

27. Authorization or Ratification by Shareholders

28. Number; Nonassessable

29. Shares Personal Property; Trust Only

30. Rights of Shareholders; Limitation on Rights of Action

31. Additional Shares.

32. Preferred Shares.

33. All Other Changes in Shares.

34. Consideration for Issue

35. No Preemptive or Preferential Rights of Subscription

36. Treasury Shares.

37. Transfer Books

38. Transfer Agent

39. Share Certificates

40. Lost, Stolen or Destroyed Share Certificates

41. Transfer of Shares.

42. Transfers by Operation of Law

43. Joint Owners

44. No Duty to Examine into Trusts, Pledges, etc., to Which Shares Are Subject

45. Annual Meeting

46. Special Meetings

47. Presiding Officer

48. Business to be Transacted

49. Notices

50. Voting; Quorum

51. Adjournment of Meeting

52. Requisite Vote to Act

53. Record Date for Voting, Dividends and Offerings.

54. Duration of Trust

55. Death of Shareholder or Trustee Not to Terminate Trust.

56. Termination; Combination; Affiliation.

57. Certain Transactions.

58. Amendments

59. Certificate of Termination or Amendment

60. Disposition of Trust Estate on Termination

61. Filing

62. Protection of Company, Stock of Which Held by Trust

63. Authority of the Trustees to Construe Terms Hereof

64. Effect of Captions and Table of Contents

65. Counterparts

66. Governing Law

67. Provisions in Conflict with Law or Regulations

DECLARATION OF TRUST

NSTAR

This DECLARATION OF TRUST is made in Boston in the County of Suffolk, The Commonwealth of Massachusetts, this 20^th day of April, 1999, by Thomas J. May of 107 Margery Lane, Westwood, MA 02090, and Russell D. Wright of 139 Bullivant Farm Road, Marion, MA 02731, who shall be collectively referred to as the Trustees, such term to include the Trustees for the time being hereunder as defined below.

WHEREAS it is desired to create under and in accordance with the provisions of this instrument a voluntary business association with transferable shares for the acquisition of property and the conduct of business as hereinafter set forth;

NOW, THEREFORE, this DECLARATION OF TRUST WITNESSETH that said Thomas J. May and Russell D. Wright, for themselves, their heirs, executors, administrators, successors and assigns, do hereby declare that they and their successors from time to time, as Trustees hereunder, will hold, manage and dispose of the trust estate, as hereinafter defined in trust in the manner and with and subject to the powers and provisions hereinafter contained concerning the same, for the benefit of the Shareholders (as hereinafter defined) according to the number and kind of shares held by them respectively.

Name; Purpose

1. Name; Purpose. The Trustees as trustees hereunder, though not in their individual capacities, shall be designated NSTAR and are hereinafter referred to as the "Company." So far as may be practicable, all things relating to the trust hereby created shall be done under such name. The purpose of the Company shall be to engage, either directly or through direct or indirect subsidiaries, joint ventures, partnerships, limited liability companies or other combinations or associations, in any manufacturing, mercantile, selling, management, service or other business, operation or activity related to energy generation, transmission or distribution, utilization, conservation or transportation, construction, telecommunications, or any other manufacturing, mercantile, selling, management, service or other business, operation or activity, whether or not related t o the foregoing enumerated areas, that a corporation organized under the Business Corporation Law of The Commonwealth of Massachusetts could carry on.

Definitions

2. Definitions. Except where the context otherwise requires, the following terms when used herein shall mean the following:

(a) "Trustee" or "Trustees" means the person which is the trustee hereunder for the time being, if there is only one, or if more than one, the persons who are the trustees hereunder for the time being, whether, in each case, original, additional or successor;

(b) "Trust estate" means the property at any time received by the Trustees or otherwise acquired and held on behalf of the Company as hereinafter provided;

(c) "Shareholder" or "Shareholders" means the person or persons, natural or corporate, at the time registered as the holder or holders of the shares of the Company and, except to the extent limited by any subscription or by any subscription certificate or part-paid shares accepted or issued, include the person or persons, natural or corporate, at the time registered as the holder or holders of such subscription certificates and part-paid shares; and

(d) "Share" or "shares" means the transferable share or shares of beneficial interest provided for in Article 29 and includes any subscription certificate or part-paid share issued except to the extent limited in such subscription certificate or part-paid share.

Rights of Third Persons

3. Limitations on Liability. The Trust estate shall be directly liable for the payment and satisfaction of all obligations and liabilities incurred in the carrying on of the business of the Company. No Trustee shall be held to any liability whatsoever for the payment of any sum of money, or for damages or otherwise under any contract, obligation or undertaking made, entered into or issued by the Company or by any Trustee, officer, agent or representative thereof, or in tort or otherwise, and no such contract, obligation or undertaking shall be enforceable against the Trustees, the Shareholders, or the officers, agents or other representatives of the Company or any of them in their, his or her individual capacities or capacity and all such contracts, obligations and undertakings shall be enforceable only against the Company; and every person, firm, association, trust and corporation shall look only to the Trust estate for t he payment or satisfaction of any liability, damages, claim or demand. In every agreement and obligation entered into and in every writing by or on behalf of the Company, reference shall be made to this Declaration of Trust, and the substance of such parts of the preceding sentence of this Article 3 as are applicable shall be set forth; and neither the Trustees nor any officer, agent or representative of the Company shall have any power or authority to enter into any agreement or obligation on behalf of the Company except in accordance with the provisions of this Article 3. Failure to comply with the provisions of this Article shall, however, in no event render any Trustee, Shareholder, officer, or agent personally liable to the Company or its Shareholders.

4. Nonassessability of Shareholders. No Trustee, officer, agent or representative of the Company shall be entitled to look to the Shareholders personally for indemnity against any liability incurred by them in the execution of this trust or to call upon the Shareholders for the payment of any sum of money or any assessment whatever, except when and to the extent that shares in the Company are by their express terms issued part-paid and assessable.

-4-

5. Reliance of Third Persons. The receipts of the Company for moneys or things paid or delivered to it shall be effective discharges to the person, firm, association, trust or corporation paying or delivering the same and from all liability to see to the application thereof. No purchaser or person, firm, association, trust or corporation dealing with the Company or with the Trustees, officers, agents or representatives of the Company shall be bound to ascertain or inquire whether any consent, resolution or other authorization of the Trustees or Shareholders, as is herein required or provided for, has been obtained or passed or as to the existence or occurrence of any event or purpose in or for which a sale, lease, mortgage, pledge or charge is herein authorized or directed, or otherwise as to the purpose or regularity of any of the acts of the Trustees or the officers, agents or representatives of the Company purporting to be done pursuant to the trust or powers herein contained, or as to the regularity of the removal, resignation or appointment of any Trustee or any officer, agent or representative; and a transfer of the Trust estate, or any part thereof, executed by the Trustees in whom the same shall be vested at the time of any such removal, resignation or appointment (including any retiring Trustee who shall be willing to act and shall act in executing such transfer but not otherwise including any such retiring Trustee) for the purpose of vesting the same in a successor Trustee or providing evidence of such vesting independently of such removal, resignation or appointment, shall, as to the property comprised in such transfer, be conclusive evidence in favor of any such purchaser or other person, firm, association, trust or corporation dealing with the Company of the validity of such transfer and of the matters therein recited relating to such removal, resignation or appointment or the occasion thereof or the occasio n of such transfer.

Place of Business; Trust Estate

6. Place of Business. The principal place of business of the Company shall be 800 Boylston Street, Boston, MA 02199, or at such other place in Massachusetts as the Trustees shall from time to time determine.

7. Trust Estate; Conversion into Personal Estate. All property at any time and from time to time subject to this trust shall, subject to the provisions of Articles 8(c) and 8(g), be transferred to and vested in such of the Trustees as are residents of Massachusetts. Notwithstanding any other provisions hereof, all real estate at any time forming part of the Trust estate shall be held upon trust for sale and conversion into personal estate at such time or times and in such manner and upon such terms as the Trustee shall approve, but the Trustees shall have power, until the termination of this trust, to postpone such conversion so long as they in their uncontrolled discretion shall think fit, and for the purpose of determining the nature of the interest of the Shareholders therein, all such real estate shall at all times be considered as personal estate; and the real estate and personal property comprised in the Trust estate shall constitute a single fund. For the purpose of such sale and conversion of real estate the Trustees shall have full power to sell or exchange the same and to execute and deliver proper deeds and instruments of conveyance thereof.

The Trustees

8. Powers of Trustees. Subject to the provisions and conditions contained herein, the Trustees shall have power from time to time, in addition to the specific powers and authorities herein expressly granted, to take any action which they deem to be necessary or convenient to carry out the business of the Company, including without limitation of the generality of the foregoing, the powers hereinafter specified:

(a) Hold Investments. To purchase, subscribe for or otherwise acquire stocks, shares, bonds or other securities, property or obligations of any corporation, wherever incorporated, or of any trust, association or other entity, or of any nation, state, municipality or other governmental or public agency, division or body or certificates or other evidences of interest in any real or personal property, and to be a member of any company, syndicate or joint undertaking, or the beneficiary of any trust, and all whether or not any such company be domestic or foreign, and whether or not the purposes of or character of business carried on or assets held by any such company, syndicate or joint undertaking, or comprised of any such real or personal property, be similar to the purposes of or business carried on or assets held by the Company,

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and whether or not any such securities, membership or beneficial interest might be considered speculative, hazardous, nonproductive or wasting or would ordinarily be considered a proper or prudent investment or activity for a trustee and, whether or not any contingent or other liability may arise or exist in respect thereof and irrespective of the proportion of the Trust estate invested in one or more of said securities, properties or companies, and to exercise all the rights and privileges of an owner thereof and, without limiting the generality of the foregoing, to acquire, by exchange, purchase or otherwise, the shares and dividend and profit rights in, and the bonds and other securities and obligations of, the Company;

(b) Assume Obligations. To assume any obligations or liabilities of any corporation, wherever incorporated, or of any trust, association or other entity, and to discharge or liquidate such obligations or liabilities

(c) Borrow. To borrow money for the purposes of the Company, and to issue, whether for borrowed money or for other consideration, bonds or other securities or obligations therefor if desired, which may mature at any time or times, and may be convertible or after the issuance thereof may be made convertible, with or without additional consideration for such conversion right, into other securities of the Company or into other securities, all for such periods and upon such terms as the Trustees may determine, and to secure the payment thereof if desired by mortgage, pledge, assignment, transfer or conveyance of or charge on the whole or any part of the Trust estate then owned or thereafter acquired, which bonds or other securities or obligations may be signed on behalf of the Company by the chairman, the president or a vice president and by the treasurer or an assistant treasurer, or by facsimiles of such signatures if the bonds o r other securities or obligations are authenticated or certified by a Trustee or by a registrar other than a Trustee, officer or employee of the Company, and may have affixed thereto the common seal of the Company or a facsimile thereof and may carry interest coupons authenticated by the facsimile signature of the treasurer; provided that no mortgage, pledge, assignment, transfer or conveyance of or charge on the Trust estate as a whole or substantially as a whole shall be made without authorization or approval by vote, at a meeting duly called and held, of the holders of a majority of the shares outstanding and entitled to vote thereon; and provided further that even though any officer who has signed or whose facsimile signature has been placed on any bond or other security or obligation shall have ceased to be such officer before such bond, security or obligation is issued, such bond, security or obligation may nonetheless be issued by the Company;

(d) Lend and Aid. To advance or lend money to, and otherwise aid by endorsement, guarantee or otherwise, and with or without security, and to make capital contributions to, any corporation, trust, association or other entity, any of the stocks, shares, bonds or other securities or obligations of which shall have been acquired or subscribed for by or on behalf of the Company or in which the Company has any business interest (including, without limitation of the generality of the foregoing, the power to guarantee the performance of any undertaking or obligation or the payment of dividends on stock), and to discharge and cancel without payment any indebtedness thus arising or to convert the same into stocks, shares, bonds, or other obligations of such corporation, trust association or other entity, or any other with or into which it may be consolidated or merged, or to which its property may be transferred or leased, and in like m anner to advance or lend money to and otherwise aid any person or company (whether or not a Shareholder), whenever the Trustees shall deem such action to be necessary or convenient in the business or conducive to the advantage of the Company;

(e) Exercise Powers of Holder of Investments. To exercise any and all powers and rights belonging to the holder of any stocks, shares, bonds, securities, property or obligations forming part of the Trust estate, whether by voting or by giving any consent, request or notice, or otherwise, either in person or by proxy or attorney, and to give proxies or powers of attorney therefor, with or without power of substitution, which proxies and powers of attorney may be for meetings or action generally or for any

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particular meeting, meetings or action, and may include the exercise of any discretionary powers; and, without limiting the generality of the foregoing, to vote in favor of or to consent to the creation of any mortgage, lien or other encumbrance upon all or part of the franchises and property, real and personal, then owned or thereafter acquired, of any or all of the corporations, trusts, associations and other entities, any of the stocks, shares, bonds, securities or obligations of which may at the time be subject to this trust, or to vote in favor of or to consent to the merger or consolidation of any such corporation, trust association or other entity with any other corporation, trust association or other entity, or the sale, lease, surrender or abandonment of all or part of the franchises and property, real and personal, of any such corporation, trust association or other entity;

(f) Sell. To sell at public auction or by private contract or otherwise use and deal in and with the whole or any part of the Trust estate, free and discharged of this trust, and to convert, exchange or refund the whole or any part of the Trust estate for or into any shares, bonds or other securities or obligations, property or effects in which the Company might, under the provisions hereof, invest any moneys; provided, however, that except as provided in Article 8(o), Article 57 or Article 60, no sale or other disposition of the Trust estate as a whole or substantially as a whole shall be made without authorization or approval by vote, at a meeting duly called and held, of the holders of two-thirds of the shares outstanding and entitled to vote thereon, but this proviso shall not apply to any disposition pursuant to any mortgage, pledge, or charge;

(g) Transfer Securities Into Names of Others. To cause any real or personal property, including without limitation of the generality of the foregoing, securities forming all or part of the Trust estate, to be transferred into the name of the Company or transferred into the name of or vested in the Trustees, or to cause or allow any real or personal property to remain in the name of, or to be transferred into the name of, any other person, firm, association, or other entity, trust, corporation or other entity and in any such case in such manner as not to give notice that the same are affected by any trust;

(h) Delegate Powers. To employ and act through and to delegate any or all of the powers and discretions of the Company to, and to permit any or all of such powers and discretions to be exercised by, any of the officers, agents or representatives of the Company or of the Trustees, including without limitation the officers, employees, agents and representatives referred to in the last paragraph of this Article 8 (except for the declaration of dividends and the filling of vacancies in the Trustees);

(i) Collect Funds. To collect, sue for, receive and receipt for all sums of money coming due to the Company, to consent to the extension of the time for payment, or to the renewal, of any bonds or other securities, property or obligations subject to this trust, and to prosecute, defend, compound, compromise, abandon or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, demands and things relating to the Trust estate, and to extend time, with or without security, for the payment or delivery of any debts or property and to execute and enter into releases, agreements and other instruments and to pay or satisfy any debts or claims upon any evidence that the Trustees shall think sufficient;

(j) Deposit Funds. To deposit any moneys included in the Trust estate in any bank or trust company including any bank or trust company that may at the time be the Trustee, and to entrust to any such bank or trust company for safekeeping any of the stock or share certificates, bonds or other securities, property or obligations and any documents and papers comprised in or relating to the Trust estate;

(k) Pay Taxes. To pay any and all taxes or liens of whatever nature or kind imposed upon or against the Company or the Trustee in connection with the Trust estate, or upon or against the Trust estate or any part thereof;

(l) Establish Surplus Funds. To set apart, from time to time, as surplus funds, such sums as the Trustees may deem proper out of any sources which according to generally accepted accounting principles may be considered surplus, which surplus funds shall be applicable to any purposes to which money forming part of the capital or income of the Trust estate may be applied, including the payment of dividends;

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(m) Adopt Seal. To adopt and use a common seal;

(n) Purchase Insurance. To take out and maintain insurance or establish self-insurance programs in such amounts and of such kinds and in such companies and through such brokers and agents as may be necessary, convenient or desirable, including insurance policies insuring the Trustees, officers, employees and agents of the Company against claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as a Trustee, officer, employee or agent, including any action taken or omitted that may be determined to constitute negligence, whether or not the Company would have the power to indemnify such person against such liability;

(o) Transfer to New Trust or Corporation. When authorized by a majority vote of Shareholders at a meeting, to sell and convey as an entirety and going concern all the property and assets of the Company to a corporation or a new association or trust organized for the purpose of acquiring the same and organized with the same authorized classes of shares as the Company shall then have with the same or substantially the same preferences, voting powers, restrictions and qualifications thereof as attach to the shares of the Company, the consideration for such sale and conveyance to be the assumption by such new corporation, association or trust of all liabilities and obligations of the Company then outstanding and the issuance and delivery by such new corporation or association or trust to the Company, or upon its order, for distribution as hereinafter provided for, of such shares as will enable the Company to exchange its shares, sh are for share and class for class, for the shares of such new corporation or association or trust and thereupon such exchange shall be made, and this trust shall be terminated, and each Shareholder of the Company by becoming a Shareholder shall agree to receive and accept in such case the shares of such new corporation or association or trust in exchange on the basis aforesaid as a full and final distributive share of the proceeds in liquidation of such sale and conveyance, and further agrees that in such case his or her shares in the Company shall thereafter have no rights and privileges whatsoever except the right and privilege of being exchanged for shares of such new corporation or association or trust on the basis aforesaid;

(p) Invest Capital. To invest and re-invest the capital or other funds of this trust in real or personal property of any kind, or in any interest therein;

(q) Establish Pension and Other Compensation Plans. To establish and carry out pension, profit-sharing, share bonus, share purchase, share option, savings, thrift and other retirement, incentive, health, welfare and benefit plans, trusts and provisions for any or all of the Trustees, officers, employees, agents and consultants of the Company or of any of its subsidiaries;

(r) Enter into Other Entities or Combinations. To enter into or become partners or members in joint ventures, general or limited partnerships, limited liability companies and any other combinations or associations;

(s) Acquire, Hold and Dispose of Other Business, Property or Rights. To purchase, acquire, hold, utilize, lease, carry on, sell, exchange and dispose of any other business or property, rights, or privileges which may be deemed to be suitable, convenient or profitable for or in connection with any of the purposes of the Company;

(t) Grant Options and Issue Warrants. To grant rights or options good for any period of time, including an unlimited period of time (but not exceeding the duration of the Company) to purchase from the Company any securities of the Company which have been authorized but remain unissued or are held in the treasury, at such prices and on such terms and conditions as may be fixed from time to time by the Trustees; and to create and issue warrants or other instruments representing such rights or options in such form as the trustees mat determine;

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(u) Perform Other Necessary Things. To do each and every thing necessary, suitable, desirable, convenient or proper for the accomplishment of any of the purposes or the attainment of any one or more of the objects hereinbefore enumerated or incidental to the powers herein named and, without limiting the generality of the foregoing, to deal with the Trust estate and manage and conduct the business of the trust hereunder as fully as if the Company were the absolute owner of the Trust estate and in so doing to execute all contracts, agreements, deeds, covenants and instruments, and do all such things as the Trustees may deem proper for the purposes of the Company, whether or not involving action of a kind or extent legal or customary for a trustee or for the management of trust funds.

The powers and authority, whether discretionary or otherwise, conferred upon the Trustees by this Article 8 and elsewhere in this Declaration of Trust may be delegated to committees consisting of one or more Trustees, and (except for the declaration of dividends and the filling of vacancies in the Trustees) to officers, employees, agents and representatives of the Company, and shall not be deemed to be mandatory but shall, together with any and all implied powers and discretions, be exercised by the Trustees from time to time to the extent deemed to be advantageous to the Company, and may be exercised either alone or in association with others and to the same extent and as fully as individuals might or could do as principals, agents, contractors or otherwise and either alone or in conjunction with or in partnership with others, and both within and without The Commonwealth of Massachusetts. The acts of any committee, officers and agents, within the scope of their respective authorities, shall be as agents and delegates of the Trustees, and shall be deemed to be the acts of the Trustees and not of the Shareholders. When authorized by the Trustees, mortgages, conveyances and other instruments of transfer of real or other property may be executed by any officer of the Company on behalf of the Trustees or, as authorized, such officers as are residents of Massachusetts.

The Trustees

9. Number and Election. The persons signing this Declaration of Trust shall be the original Trustees. At such time as the outstanding shares of the Company are not wholly owned by BEC Energy and Commonwealth Energy System (the "Transition Date"), the following provisions shall apply. The number of Trustees shall be determined from time to time by the Trustees but shall not be less than ten. Divided into classes and elected for terms as set forth below, the Trustees shall be elected at the annual meeting of the Shareholders by such Shareholders as have the right to vote at such election. The number of Trustees may be increased or decreased to any number not less than ten by the Shareholders or by the Trustees upon a vote of the majority of Trustees then in office. Subject to restrictions discussed below regarding class size, such changes in the number of Trustees may be underta ken at any time or from time to time, except that, other than in connection with the election of trustees at the annual meetings of Shareholders, the number of Trustees shall be decreased only to eliminate vacancies existing by reason of the death, resignation or removal of one or more Trustees.

The Trustees shall be elected as follows. The Trustees shall be divided as nearly equally as possible into three classes, with each class to consist of approximately one-third of the number of Trustees. The term of office of the Trustees of the first class shall continue until the first annual meeting of the Shareholders following the Transition Date, the term of office of the Trustees of the second class shall continue until the second annual meeting of the Shareholders following the Transition Date, and the term of office of the Trustees of the third class shall continue until the third annual meeting of the Shareholders following the Transition Date, and, in each case, until their respective successors are chosen and qualified (unless otherwise required by law) or until the Trustee sooner dies, resigns or is removed.

At each annual meeting beginning with the first annual meeting of the Shareholders following the Transition Date, the Trustees elected to succeed those whose terms expire shall be of one class and shall be elected for a term which shall continue until the third succeeding annual meeting, and until a successor shall be elected (unless otherwise required by law) or until the Trustee sooner dies, resigns or is removed. Any Trustee elected to fill a vacancy caused by death, resignation or removal shall be elected for a term which shall coincide with the term of the class of the vacant trusteeship. Any Trustee elected to fill an additional trusteeship resulting from an increase in the number of Trustees shall be of the class whose term continues and shall be elected to serve until the annual meeting

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of the Shareholders closest to three years from the date of the increase, and until a successor shall be elected and qualified (unless otherwise required by law) or until the Trustee sooner dies, resigns or is removed. The number of Trustees shall not be increased or decreased at a time when, or to the extent that, it would result in the Trustees not being divided as nearly equally as possible into three classes each consisting of approximately one-third of the number of Trustees. The total number of Trustees need not be an exact multiple of three. A Trustee may succeed himself or herself. Whenever the holders of any one or more classes or series of shares of the Company other than common shares shall have the right, voting separately by class or series, to elect Trustees at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such trusteeship s hall be governed by the terms of such class or series of shares, and such Trustees shall not be divided into classes pursuant to this Article 9 unless expressly provided by such terms. References in this Article 9 to an annual meeting of Shareholders shall be deemed to include a special meeting held in place of an annual meeting. This Article 9 may be amended only by vote of the holders of 80% of the shares issued and outstanding and entitled to vote generally in the election of Trustees; provided, however, that such 80% vote shall not be required for any alteration, amendment or repeal that has been recommended by 80% of the Trustees then in office.

10. Resignation; Vacancies; Removals. A Trustee may resign by presenting his or her resignation in writing at a meeting of the Trustees or delivering the same at the principal office of the Company, addressed to the chairman, president or clerk of the Company, and its acceptance by the Trustees shall not be required unless so stated in the resignation. Any vacancy in the number of Trustees not required to be filled by the Shareholders may be filled by the Trustees by vote of a majority of the remaining Trustees although less than a quorum. Any Trustees so chosen shall continue in office for the remainder of the full term of the class of Trustees in which the new trusteeship was created or the vacancy occurred and until his or her successor, if there be one, is chosen and qualified. The remaining Trustees may act notwithstanding any vacancy in their numbers. Except as otherwise provided in this Declaration of Trust, a Trustee (including persons elected by the Trustees to fill any vacancies) may be removed from office: (i) for cause by the vote of the holders of a majority of the shares issued and outstanding and entitled to vote generally in the election of Trustees; (ii) without cause by the vote of 80% of the shares issued and outstanding and entitled to vote generally in the election of Trustees; or (iii) for cause by vote of a majority of the Trustees then in office. A Trustee may be removed for cause only after reasonable notice and opportunity to be heard before the body proposing to remove him or her. Except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the Company, no Trustee resigning or removed shall have any right to any compensation as such Trustee for any period following his or her resignation or removal, or any right to damages on account of such removal, whether his or her compensation be by the month or by the year or otherwise, unless the body acting on the removal, shall in their or its discretion provide for compensation.

11. Vesting in New Trustees. Upon the resignation or removal of a Trustee hereunder and upon the election or appointment of a new Trustee hereunder, such instruments shall be executed, acknowledged and delivered as the remaining Trustees or the new Trustees shall deem necessary or convenient for confirming or providing evidence of the vesting of the Trust estate in the Trustees for the time being who are residents of Massachusetts. Notwithstanding the failure to execute any conveyance, the Trust estate shall always (not restricting the same to the above enumerated cases) vest in the Trustees for the time being hereunder and the Trust estate shall always vest in such Trustees as are residents of Massachusetts.

12. Compensation. Each Trustee shall receive such reasonable compensation as the Trustees may determine, and shall not be limited by any provision of law with regard to the compensation of trustees of an express trust.

13. Unissued Shares. In particular, and without limiting the generality of the foregoing, the Trustees may, subject to any requirement of law, at any time issue all or from time to time any part of the unissued shares of the Company from time to time authorized and may determine, subject to any requirements of law, the consideration for which such shares is to be issued and the manner of allocating such consideration between capital and surplus. Unless the Trustees otherwise specify, the excess of the consideration for any share with par value issued by it over such par value shall be paid-in surplus. The Trustees may allocate to capital stock less than

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all of the consideration for any share without par value issued by it, in which case the balance of such consideration shall be paid-in surplus. All surplus shall be available for any corporate purpose, including the payment of dividends.

14. Determination of Capital and Income. The Trustees shall have power to determine what constitutes capital or income, what constitutes the income of the Trust estate for any year or other period, in what manner any expenses or disbursements are to be allocated between capital and income, and the amount of the net earnings and of the earned surplus; and every such determination, whether express or implied in the acts or proceedings of the Trustees, shall be conclusive and binding upon all persons interested.

15. Dividends. The Trustees may from time to time in their discretion declare dividends out of the net earnings of the Trust estate or out of the earned surplus or capital surplus, payable out of the Trust estate, at any date fixed by the Trustees, in cash or property, including without limitation bonds or other obligations of and the shares in the Company, and for that purpose may capitalize all or any part of the earned surplus; but no Shareholder shall have any right to any dividends except when and as the same are declared by the Trustees, and no Trustee or Shareholder, officer, agent or representative of the Company shall be liable therefor, and any Shareholder entitled thereto shall look only to the Trust estate for the payment of any such dividends. The Company shall pay and distribute the said dividends so declared to the Shareholders according to the number of shares held by them respectively.

16. Fiscal Year; Accounts. The Trustees may determine the fiscal year for the Company, and the form in which the accounts of the Company shall be kept, and may from time to time change the fiscal year or form of accounts.

17. Action by Board; Quorum. The action of the Trustees in respect of any matter shall be by vote passed by the Trustees at a meeting or by a written vote without a meeting (with or without notice to the other Trustees) signed by at least a majority of the Trustees. At any meeting of the Trustees, a majority of the Trustees then in office shall constitute a quorum for the transaction of business. Any meeting may be adjourned from time to time by a majority of the votes cast on the question, and the meeting may be held as adjourned without further notice. Except as herein otherwise provided, when a quorum is present at any meeting a majority of the Trustees in attendance thereat shall decide any questions before such meeting. Nothing in this Article 17 shall be construed as limiting the delegation of any power to a committee of the Trustees.

18. Bylaws. The Trustees may by vote of a majority of the Trustees then in office, make and from time to time amend, add to or rescind bylaws for the Company (the "Bylaws"). The Bylaws may, subject to the provisions of this Declaration of Trust: (a) fix the fiscal year; (b) regulate the affairs of the Trustees, including provisions for the nomination thereof; (c) provide for such committees as the Trustees shall deem appropriate, including an executive committee which shall be vested with all of the powers and authorities of the Trustees in the intervals between meetings of the Trustees; (d) provide for the appointment of a chairman of the Trustees, a

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president, one or more vice presidents, a treasurer, a clerk and such other officers as the Trustees may deem appropriate, and the manner of their appointment and removal, and their respective powers and duties; (e) provide for the manner in which documents shall be executed, including share certificates; (f) provide for the appointment of transfer agents or officers and registrars, and (g) contain such further provisions relating to the above matters or otherwise, incidental or in addition to but not inconsistent with the provisions of this Declaration of Trust, as the Trustees shall deem appropriate.

19. Certificate Evidencing Votes. A certificate signed by the chairman, the president, the treasurer, the clerk or any assistant or temporary clerk, or one or more of the Trustees, shall be conclusive evidence, in favor of every person, firm, association, trust and corporation acting in good faith in reliance thereon, as to the contents of any vote of the Trustees, or any committee thereof, or of the Shareholders, and as to all matters in such certificate contained relating to the meeting, if any, at which any vote is therein certified to have been passed, including the regularity of the said meeting and the passage of any vote thereat, and as to all other matters and things stated in such certificate, and no person, firm, association, trust or corporation shall be obligated to make any inquiry as to any of the said matters, or as to the e lection or appointment of any person acting as a Trustee at such meeting, or as to the holding of any shares by any person, firm, association, trust or corporation acting as a Shareholder at such meeting, or be affected by actual or implied notice of any irregularity whatsoever therein.

Indemnification and Limitation of Liability

20. Trustees and Officers. To the extent legally permissible, each of the Company's Trustees and officers, as defined in Article 24, shall be indemnified by the Trust estate against any loss, liability or expense, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, imposed upon or reasonably incurred by such person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which such person may be involved or with which such person may be threatened, while in office or thereafter, by reason of such person's being or having been such a Trustee or officer, except with respect to any matter as to which such person shall have been adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Company; provided, however, that as to any matter disposed of by a compromise payment by such Trustee or officer, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interests of the Company, after notice that it involves such indemnification, (i) by a disinterested majority of the Trustees then in office, or (ii) by a majority of the disinterested Trustees then in office, provided that there has been obtained an opinion in writing of independent legal counsel to the effect that such Trustee or officer appears to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Company, or (iii) by the vote, at a meeting duly called and held, of the holders of a majority of the shares outstanding and entitled to vote thereon, exclusive of any shares owned by any interested Trustee or officer.

21. Liability. No Trustee, officer or agent of the Company shall be liable except for acts or failures to act which at the time would impose liability on him or her if this trust were a Massachusetts business corporation and he or she were a director, officer or agent thereof respectively. In determining what he or she reasonably believes to be in the best interests of the Company, a Trustee may consider the interests of the Company’s employees, suppliers, creditors and customers, the economy of the state, region and nation, community and societal considerations, and the long-term and short-term interests of the Company, its subsidiaries and its Shareholders, including the possibility that these interests may best be served by the continued independence of the Company. Notwithstanding any provision of law or this Article 21 or any other provision contained in this Declaration of Trust, a Trustee shall not be lia ble to the Company or any Shareholder for monetary damages for breach of fiduciary duty as a Trustee except with respect to any matter as to which such liability is imposed by

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applicable law and he or she shall have been adjudicated (i) to have breached his or her duty of loyalty to the Company or its Shareholders, (ii) to have acted not in good faith, or omitted to act in good faith, (iii) to have knowingly violated the law or intentionally engaged in misconduct, or (iv) to have derived any improper personal benefit from a transaction. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any Trustee for or with respect to any acts or omissions of such Trustee occurring prior to such amendment or repeal.

22. Books and Reports. In discharging his or her duties a Trustee or officer of the Company, when acting in good faith, shall be fully protected in relying upon the books of account of the Company or of another organization in which he or she serves as contemplated by Article 24, reports made to the Company or to such other organization by any of its officers or employees or by counsel, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees or similar governing body of such other organization, or upon other records of the Company or of such other organization.

23. Advance of Expenses. Expenses, including counsel fees, reasonably incurred by any Trustee or officer with respect to the defense or disposition of any action, suit or proceeding referred to in Article 20 may be advanced by the Company prior to the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the recipient to repay such amount unless it is ultimately determined that he or she is entitled to indemnification.

24. Rights Not Exclusive; Definitions. The rights of indemnification provided in Article 20 shall not be exclusive of or affect any other rights to which any Trustee or officer may be entitled and such rights shall inure to the benefit of his or her successors, heirs, executors, administrators and other legal representatives. Such other rights shall include all powers, immunities and rights of reimbursement which would be allowed under the laws of The Commonwealth of Massachusetts were the Company a business corporation organized under such laws. As used in Articles 20, 21, 22 and 23 and this Article 24, the terms "Trustee" and "officer" include persons who serve at the request of the Company as directors, officers, or trustees of another organization in which the Company has any direct or indirect interest as a shareholder, creditor or otherwise. An "interested" Trustee or officer is one against whom in such capacity the proceeding in question or another proceeding on the same or similar grounds is then pending. Nothing contained in Articles 20, 21, 22 and 23 and this Article 24 shall affect any rights to indemnification to which Company personnel other than Trustees and officers may be entitled by contract or otherwise under law. No Trustee shall be obligated to give any bond or other security for the performance of any of his or her duties.

25. Shareholders. In case any Shareholder shall at any time for any reason be held to or be under any personal liability solely by reason of his or her being or having been a Shareholder and not by reason of his or her acts or omissions as a Shareholder, then such Shareholder (or his or her heirs, executors, administrators, or other legal representatives) shall be entitled out of the Trust estate to be held harmless from, and indemnified against, all loss, liability or expense by reason of such liability.

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Interested Trustees, Shareholders, and Officers; Ratification by Shareholders

26. Shareholders, Trustees, Officers and Agents. No agreement, dealing, relationship or arrangement of any kind with the Company, or with any company which may be controlled by the Company or in which the Company may have any interest, in which any Shareholder, Trustee, officer, agent or other representative of the Company shall have a personal interest shall be void or voidable or otherwise affected by such interest nor shall such Shareholder, Trustee, officer, agent or other representative so interested be liable to account in respect thereof, except such effect or liability, if any, as would have resulted under the same circumstances had the Company been a business corporation organized under the laws of The Commonwealth of Massachusetts. No Trustee, officer, agent or other representative of the Company shall be precluded, by his or her office, from acquiring shares or stock in or bonds or other obligations of or from h olding any office or place of profit in the Company or any company in which the Company shall be interested as stockholder or otherwise. No Shareholder, by reason of his or her holding such shares, however great in amount, shall be precluded from holding any office or place of profit hereunder or under any company in which the Company or the Trustees shall be interested as stockholder or otherwise.

27. Authorization or Ratification by Shareholders. Regardless of whether the foregoing provisions have or have not been complied with, any agreement, dealing, relationship or arrangement entered into by or on behalf of the Company or by the Trustees, officers, agents or other representatives of the Company, or by or on behalf of any company in which the Company or the Trustees shall be interested as stockholder, or otherwise, shall not be voided by reason of the interest therein of any Shareholder, Trustee, officer, agent or other representative nor shall any Shareholder, Trustee, officer, agent or other representative being so interested be liable to account to the Company or to the Trustees, officers or Shareholders, or otherwise, for any profit or benefit realized through any such agreement, dealing, relationship or arrangement by reason of such Shareholder, Trustee, officer, agent or other representative holding that positio n or of the fiduciary relation thereby established, if such agreement, dealing, relationship or arrangement shall have been authorized or ratified by the Shareholders or by the stockholders of any such company, as the case may be, after notice of the fact of the interest therein (including a general statement of the nature and extent of such interest) of such Shareholder, Trustee, officer, agent or other representative, except that if such agreement, dealing, relationship or arrangement was with a Shareholder or Shareholders the authorization or ratification shall be by a majority vote of disinterested Shareholders at a meeting.

Shares of Beneficial Interest

28. Number; Nonassessable. The entire beneficial interest in the Trust estate and in all business conducted by the Company and all profits earned by it shall be, and during the continuance of this trust shall remain, in the owners from time to time of transferable shares of beneficial interest. The shares of beneficial interest shall consist of (i) 200,000,000 common shares all of the same class and each with a par value of one dollar ($1.00), and (ii) 10,000,000 preferred shares, each with a par value of one dollar ($1.00) and may be issued from time to time by the Trustees without the necessity of obtaining the consent of the Shareholders. Subject to the limitations prescribed by law and the provisions of this declaration of trust, the Trustees are authorized to issue the preferred shares from time to time in one or more series, each of such series to have such voting powers, full or limited, or no voting powers, p articipating, optional or other special rights, and such qualifications, limitations or restrictions thereof, as shall be determined by the Trustees in a resolution or resolutions providing for the issue of such preferred shares. Subject to the powers, preferences and rights of any preferred shares, including any series thereof, having any preference or priority over, or rights superior to, the common shares and except as otherwise provided by law, the holders of the common shares shall have and possess all powers and voting and other rights pertaining to the shares of this Company and each common share shall be

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entitled to one vote. All shares issued and to be issued shall be fully paid and nonassessable except to the extent

otherwise specifically provided in the certificates representing such shares. In any issue of common shares, fractional shares may be issued if authorized by the Trustees; and in lieu thereof the Trustees may issue transferable or nontransferable instruments representing or relating to fractional interests (on such terms and in such form as the Trustees shall determine) and may appoint an exchange agent or exchange agents to assist Shareholders in buying or selling such fractional interests.

29. Shares Personal Property; Trust Only. Shares shall be personal property entitling the holders only to the rights and interest in the Trust estate set forth in these presents, and it is expressly declared and agreed by and between the Shareholders, Trustees and officers of the Company that a trust and not a partnership is deemed to be created by this instrument and that irrespective of whether any different status may be held to exist as far as others are concerned, nevertheless as between the said Shareholders, Trustees and officers the Shareholders shall be deemed to hold only the relationship of cestuis que trustent to the Trustees, with only such rights as are conferred upon them as such cestuis que trustent hereunder.

30. Rights of Shareholders; Limitation on Rights of Action. No Shareholder shall have or acquire at any time any interest in any specific property, real or personal, at any time forming part of the Trust estate, or any right to any division or partition thereof or any other rights with reference thereto, except to have said property dealt with as herein provided, to receive dividends therefrom, as herein provided, and to share in the distribution of the cash proceeds thereof, or distributions in kind, or both, upon the termination of the trust, as herein provided. No action may be brought by a Shareholder on behalf of the Company unless a prior demand regarding such matter has been made on the Trustees and the Shareholders of the Company.

31. Additional Shares. Additional common shares may be authorized from time to time by a majority vote of the Shareholders at a meeting. Such additional common shares shall rank equally and be in all respects identical with the common shares originally authorized and may be issued from time to time by the Trustees without the necessity of obtaining the consent of the Shareholders.

32. Preferred Shares. Additional preferred shares may be authorized from time to time by vote, at a meeting duly called and held, of the holders of two-thirds of the shares outstanding and entitled to vote thereon, and such additional shares may be issued in one or more classes and in one or more series within a class and shall have such voting powers, full or limited, or no voting powers, participating, optional or other special rights, and such qualifications, limitations or restrictions thereof, as shall be determined in the vote authorizing them or by the Trustees pursuant to authority granted to it by such vote or as provided in Article 29.

33. All Other Changes in Shares. Any authorized shares, whether issued or unissued, may, by vote, at a meeting duly called and held, of the holders of a majority of the shares outstanding and entitled to vote thereon, be changed by increasing or decreasing their par value, be reduced in number, be changed into the same or a different number of shares of any class or classes with or without par value, or be classified or reclassified. In connection with any of the foregoing, the Trustees may increase, decrease or adjust the capital accounts of the Company.

34. Consideration for Issue. Unless otherwise prescribed by vote of the Shareholders, all shares may be issued for money, services or property (including other shares of the Company at the time outstanding), or as a distribution to Shareholders, and upon such terms as to valuation of shares, services or property and otherwise, as the Trustees may in their absolute discretion determine.

35. No Preemptive or Preferential Rights of Subscription. No holder of shares of any class and no holder of other securities of the Company, convertible or otherwise, shall have any preemptive or preferential right of subscription to, or purchase of, any securities of the Company.

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36. Treasury Shares. Shares in the Company acquired by the Company may be canceled and the number of shares issued may thereby be reduced, or such shares may be held in the treasury and be disposed of by the Company, when authorized by the Trustees, as the Trustees may from time to time determine; but such shares while so held in the treasury shall not be entitled to any voting rights or to any dividends and shall not be deemed outstanding in computing proportions or percentages of shares hereunder or for any other purpose hereof. Shares canceled pursuant to this Article 36 shall have the status of authorized but unissued shares.

37. Transfer Books. A register or registers shall be kept under the direction of the Trustees, which shall contain the names and addresses of the Shareholders and the number and kind of shares held by them respectively and a record of all transfers thereof. No Shareholder shall be entitled to receive payment of any dividend declared, nor to have any notice given to him or her as herein provided, until he or she has given his or her address to the transfer agent, or such other officer or agent of the Company as shall keep the said register, for entry thereon.

38. Transfer Agent. The Company, when authorized by the Trustees, may employ in the City of Boston or in any other cities the Trustees may designate a transfer agent or transfer agents and a registrar or registrars. The transfer agent or transfer agents shall keep the said registers and record therein the transfers of any of the said shares and countersign certificates of shares issued to the persons entitled to the same. The transfer agents and registrars shall perform the duties usually performed by transfer agents and registrars of certificates of stock in a corporation, except as modified by the Trustees.

39. Share Certificates. No certificates certifying the ownership of shares need be issued unless the Trustees otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of share certificates, the form thereof, and similar matters.

40. Lost, Stolen or Destroyed Share Certificates. In the event the Trustees authorize the issuance of share certificates, a new certificate may be issued to replace any certificate previously issued, on satisfactory evidence that the said certificate previously issued has been worn out, mutilated, lost or destroyed and on such terms, if any, as to indemnity and otherwise, as the Trustees shall deem proper.

41. Transfer of Shares. Every transfer of any certificated shares (otherwise than by operation of law) shall be signed by the transferor or by his or her agent thereunto duly authorized in writing, and upon delivery thereof to the Company or a transfer agent of the Company, accompanied by the existing certificate for such shares and such evidence of the genuineness of such transfer, authorization and other matters as may reasonably be required, shall be recorded in the register, and a new certificate therefor shall be issued to the transferee, and in case of a transfer of only a part of the shares represented by any certificate a new certificate for the residue thereof shall be issued to the transferor. A Shareholder of record shall be deemed to be the holder of the share or shares represented thereby for all purposes hereof, and neither the Trustees nor any transfer agent or registrar nor any officer or agent of the Compa ny shall be affected by any notice of a transfer until due presentment of the certificate for such share or shares for registration of transfer. The Trustees may determine from time to time procedures for the transfer of uncertificated shares.

42. Transfers by Operation of Law. Any person becoming entitled to any shares in consequence of the death, bankruptcy or insolvency of any Shareholder, or otherwise by operation of law, shall be recorded in the register as the holder of the said shares, and receive a new certificate for the same, upon production of the proper evidence thereof and delivery of the existing certificate to the Company or a transfer agent of the Company. Until such production of evidence and delivery of the existing certificate, the Shareholder of record shall be deemed to be the holder of such shares for all purposes hereof, and neither the Trustees nor any transfer agent or registrar nor any officer or agent of the Company shall be affected by any notice of such death, bankruptcy, insolvency or other event. The Trustees may determine from time to time procedures for the transfer by operation of law of uncertificated shares.

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43. Joint Owners. Any two or more persons in whose names any share is registered shall be treated as joint owners of the entire interest therein, and no entry shall be made in the register or in any certificate that any person is entitled to any future, limited or contingent interest in any share. However, any person registered as a holder of any share may, subject to the provisions hereinafter contained, be described in the register or in any certificate as a trustee or fiduciary of any kind, and appropriate words may be added to the description to identify such trust.

44. No Duty to Examine into Trusts, Pledges, etc., to Which Shares Are Subject. The Company shall not, nor shall the Trustees or the Shareholders or any officer of the Company or any transfer agent or other agents of the Company, or the Trustees, be bound to take notice or be affected by notice of any trust, whether express, implied or constructive, or of any charge, pledge or equity to which any of the said shares or the interest of any of the Shareholders in this trust may be subject, or to ascertain or inquire whether any sale or transfer of any such shares or interest by any such Shareholder or his or her personal representatives is authorized by such trust, charge, pledge or equity, or to recognize any person as having any interest therein, except the persons registered as such Shareholders. The receipt of the person in whose name any share is registered, or, if such share is registered in th e names of more than one person, the receipt of any one of such persons, or the receipt of the duly authorized agent of any such person, shall be a sufficient discharge for all dividends and other money and for all shares, bonds, obligations and other property payable, issuable or deliverable in respect of such share and from all liability to see to the application thereof.

Meetings of Shareholders

45. Annual Meeting. An annual meeting of the Shareholders shall be held on the last Tuesday of April in every year, or on such other date as the Trustees or the chairman or the president may from time to time fix, at the principal office of the Company or at such other place in Massachusetts as may be designated by the Trustees, the chairman or the president, for the purpose of electing Trustees and for such other purposes as may be prescribed by law and hereby or as may be specified in the notice by the Trustees or by the chairman or by the president of the Company. If such annual meeting is omitted on the day herein provided for, a special meeting may be held in lieu thereof, and any business transacted or election held at such special meeting shall have the same effect as if transacted or held at such annual meeting.

46. Special Meetings. The Trustees, chairman or president of the Company may, whenever any of them think fit, call or direct any officer of the Company to call a special meeting of the Shareholders to be held at the principal office of the Company or, in their discretion, at any other place in Massachusetts, and such special meeting shall be so called by the clerk, or in the case of the death, incapacity or refusal of the clerk, by another officer, upon written application of one or more Shareholders who hold at least forty percent in interest of the shares entitled to vote at such special meeting.

47. Presiding Officer. The chairman or, if there is no chairman or the chairman is absent, the president shall preside at every meeting of the Shareholders, but if neither the chairman nor the president is present at the commencement of the meeting or, being present, shall not be willing to preside, the Shareholders present in person or by proxy shall choose the chairman of such meeting.

48. Business to be Transacted. At any annual or special meeting of Shareholders, no business shall be transacted other than such as is referred to in the notice of the meeting.

49. Notices. A written or printed notice of each meeting of the Shareholders, whether annual or special, specifying the time, place and purposes thereof, shall be given as hereinafter provided by the clerk or any assistant clerk or by an officer designated by the Trustees to each of the Shareholders entitled to vote thereat at least seven (7) days (including Sundays and holidays) before such meeting. Every notice to any Shareholder required or provided for herein may be given to him or her personally or by mailing it to him or her, postage prepaid, at his or her address specified in the records of the Company. Notice shall be deemed to have been given at the time when it is so mailed. In respect of any share held jointly by several persons, notice so given to any one of them shall

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be sufficient notice to all of them. Any notice so sent to the address of any Shareholder shall be deemed to have been duly sent in respect of any such share whether held by him or her solely or jointly with others, notwithstanding he or she be then deceased or be bankrupt or insolvent or legally incompetent, and whether the Trustees or any person sending such notice have knowledge or not of his or her death, bankruptcy or insolvency or legal incompetence, until some other person or persons shall be registered as holders. The certificate of the person or persons giving such notice shall be sufficient evidence thereof, and shall protect all persons acting in good faith in reliance on such certificate. Whenever notice of meeting is required to be given to a Shareholder under any provision of Massachusetts law applicable to the Company or of this declaration of trust, a written waiver thereof, executed before or after the me eting by such Shareholder or Shareholder’s attorney thereunto authorized and filed with the records of the meeting, shall be deemed equivalent to such notice.

50. Voting; Quorum. At all meetings every Shareholder shall, subject to the provisions of Article 53, have one vote for each share held by him or her and may vote at any meeting or any adjournment or adjournments thereof in person or by proxy in writing dated not more than six months before the meeting named therein, which proxies shall be filed with the clerk or other person responsible to record the proceedings of the meeting before being voted; and, except as otherwise provided herein, the holders of a majority of all the shares issued and outstanding and entitled to vote shall constitute a quorum for the transaction of business. The delivery of a proxy on behalf of a Shareholder consistent with telephonic or electronically transmitted instructions obtained pursuant to procedures of the Company reasonably designed to verify that such instructions have been authorized by such Shareholder, shall constitute execution and d elivery of the proxy by or on behalf of the Shareholder. Shares owned directly or indirectly by the Company, if any, shall not be deemed outstanding for this purpose, and the Company shall not, directly or indirectly, vote any share of its own shares. When any share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such share. If the holder of any share is a minor or a person of unsound mind, or subject to guardianship or to the legal control of any other person as regards the charge or management of such share, he or she may vote by his or her guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. No ballot shall be required for any e lection unless requested by a Shareholder present or represented at the meeting and entitled to vote in the election.

51. Adjournment of Meeting. Any meeting (or portion thereof) may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present, and the meeting (or portion thereof) may be held as adjourned without further notice.

52. Requisite Vote to Act. A nominee for Trustee shall be elected as a Trustee if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided, however, that Trustees shall be elected by a plurality of the votes cast at any meeting of Shareholders for which (i) the clerk of the Company receives a notice that a Shareholder has nominated a person for election as a Trustee in compliance with the advance notice requirements for Shareholder nominees for Trustee set forth in the Bylaws of the Company and (ii) such nomination has not been withdrawn by such Shareholder on or prior to the day next preceding the date the Company first mails its notice of meeting for such meeting to the Shareholders. Except as otherwise herein provided, when a quorum is present at any meeting, a majority of the shares represented at the meeting and entitled to vote upon any question (other than the election of trustees) properly brought before the meeting shall decide such question. Provisions hereunder for a majority vote of Shareholders at a meeting mean a vote of the holders of a majority of those shares entitled to vote thereon which are represented in person or by proxy at such meeting."

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53. Record Date for Voting, Dividends and Offerings. For the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to receive payment of any dividend or of any other distribution or offering, the trustees may from time to time fix in advance a time, which shall be not more than sixty (60) days before the date of any meeting of Shareholders or the date for the payment of any dividend or of any other distribution or the date of the offering, as the record date for determining the Shareholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or such offering, and in such case only Shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the Company after the record date; or without fixing such record date the Trustees may for any of such purposes close the register or transfer books for all or any part of such period. If no record date is fixed and the transfer books are not closed, (i) the record date for determining Shareholders having the right to notice of or to vote at a meeting of Shareholders shall be at the close of business on the date next preceding the day on which notice is given, and (ii) the record date for determining Shareholders for any other purpose shall be at the close of business on the day on which the Trustees acts with respect thereto.

Duration and Termination of Trust;

Combination; Amendments

54. Duration of Trust. Unless terminated as provided in Article 8(o) or Article 56, this trust shall continue without limitation of time.

55. Death of Shareholder or Trustee Not to Terminate Trust. The death of a Trustee hereunder or of a Shareholder or the dissolution of a Shareholder hereunder during the continuance of this trust shall not operate to terminate this trust, nor shall it entitle the legal representatives of any such Trustee or Shareholder to an accounting or to take any action in the courts or otherwise.

56. Termination; Combination; Affiliation. Except as provided in Article 57 below, the Trustees may terminate this trust at any time, or may cause the Company to be merged, combined, consolidated or otherwise affiliated with another trust, association, corporation, limited liability company, or other company or entity, if such termination, merger, combination, consolidation, or affiliation has been authorized by vote, at a meeting duly called and held, of the holders of two-thirds of the shares outstanding and entitled to vote thereon or has been authorized pursuant to Article 8(o). Such termination, merger, combination, consolidation or affiliation shall become effective only upon presentation to the Trustees, as required by Article 59, of the counterpart of the certificate referred to in said Article 59, or at such later time as may be specified in the vote effecting such action.

57. Certain Transactions.

A. Higher Vote for Certain Business Transactions. In addition to any affirmative vote required by law

or otherwise in this declaration of trust, and except as otherwise expressly provided in Section C of this Article 57:

(1) any merger or consolidation of the Company or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other company (whether or not itself an Interested Shareholder) which is or after such merger or consolidation would be an Affiliate (as hereinafter defined) or Associate (as hereinafter defined) of an Interested Shareholder; or

(2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder involving any assets or securities of the Company, any Subsidiary or any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder having an aggregate Fair Market Value (as hereinafter defined) in excess of 5% of the total consolidated book value of the

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total assets of the Company and its Subsidiaries as of the end of the Company’s most recent fiscal year prior to the time the determination is made; or

(3) the adoption of any plan or proposal for the termination, liquidation or dissolution of the Company proposed by or on behalf of an Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

(4) any reclassification of securities (including any reverse stock split) or recapitalization of the Company or any merger or consolidation of the Company with any of its Subsidiaries or any other transaction (whether or not with or otherwise involving an Interested Shareholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock (as hereinafter defined), or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

(5) any tender offer or exchange offer made by the Company for shares of Capital Stock which may have the effect of increasing an Interested Shareholder’s percentage beneficial ownership (as hereinafter defined) so that following the completion of the tender offer or exchange offer the Interested Shareholder’s percentage beneficial ownership of the outstanding Capital Stock may exceed 110% of the Interested Shareholder’s percentage beneficial ownership immediately prior to the commencement of such tender offer or exchange offer; or

(6) any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (1) to (5);

shall require the affirmative vote of the holders of Voting Shares (as hereinafter defined) representing shares equal to the sum of (i) a majority of the then outstanding Voting Shares, excluding Voting Shares of which such Interested Shareholder is the beneficial owner, plus (ii) the number of Voting Shares of which such Interested Shareholder is the beneficial owner, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or any agreement with any national securities exchange or otherwise.

B. Definition of “Business Transaction”. For the purposes of this Article 57 the term “Business Transaction” shall mean any transaction that is referred to in any one or more of clauses (1) through (6) of Section A of this Article 57.

C. When Higher Vote is Not Required. The provisions of Section A of this Article 57 shall not be applicable to any direct or indirect purchase or other acquisition by the Company or any Subsidiary of any shares of Capital Stock from an Interested Shareholder. The provisions of Section A of this Article 57 shall also not be applicable to any particular Business Transaction involving an Interested Shareholder, and such Business Transaction shall require only such affirmative vote, if any, as is required by law or by any other provision of this declaration of trust if the Business Transaction shall have been approved by a majority of the Disinterested Trustees (whether such approval is made prior to or subsequent to the acquisition of beneficial ownership of the Voting Shares that caused the Interested Shareholder to become an Interested Shareholder).

D. Certain Definitions. For purposes of this Article 57:

(1) The term “Capital Stock” shall mean all the shares of beneficial interest of the Company authorized to be issued from time to time under Article 28 of this declaration of trust.

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(2) The term “person” shall mean any individual, firm, corporation or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock.

(3) The term “Interested Shareholder” shall mean any person (other than the Company or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Company or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which (a) is the beneficial owner of Voting Shares representing 5% or more of the votes entitled to be cast by the holders of all then outstanding Voting Shares; or (b) is an Affiliate of the Company and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Shares representing 5% or more of the votes entitled to be cast by the holders of all the outstanding Voting Shares.

(4) A person shall be a “beneficial owner” of any Capital Stock (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining w hether a person is an Interested Shareholder pursuant to Paragraph (3) above, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph (4), but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(5) An “Affiliate” of a specified person is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(6) The term “Associate” used to indicate a relationship with any person means (a) any company (other than the Company or any Subsidiary) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities, (b) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a Trustee or officer of the Company or any of its parents or subsidiaries.

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(7) The term “Subsidiary” means any company of which a majority of any class of equity security is beneficially owned by the Company, provided, however, that for the purposes of the definition of Interested Shareholder set forth in Paragraph (3) above and the definition of Associate set forth in Paragraph (6) above, the term “Subsidiary” shall mean only a company of which a majority of each class of equity security is beneficially owned by the Company.

(8) The term “Disinterested Trustee” means any Trustee who is not an Affiliate or Associate or representative of the Interested Shareholder and was a Trustee prior to the time that the Interested Shareholder became an Interested Shareholder, and any Trustee who is a successor of a Disinterested Trustee, is not an Affiliate or Associate or representative of the Interested Shareholder and is recommended or elected to succeed the Disinterested Trustee by a majority of the Disinterested Trustees.

(9) The term “Fair Market Value” means (a) in the case of cash, the amount of such cash, (b) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period immediately preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotation is available, the fair market val ue on the date in question of a share of such stock as determined by a majority of the Disinterested Trustees in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Disinterested Trustees.

(10) The term “Voting Shares” means all Capital Stock which by its terms may be voted generally in the election of Trustees of the Company.

E. Powers of the Disinterested Trustees. A majority of the Disinterested Trustees shall have the power and duty to determine for purposes of this Article 57, on the basis of information known to them after reasonable inquiry, (1) whether a person is an Interested Shareholder, (2) the number of shares of Capital Stock or other securities beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, and (4) whether the assets that are the subject of any Business Transaction have, or the consideration to be received for the issuance or transfer of securities by the Company or any Subsidiary in any Business Transaction has, an aggregate Fair Market Value in excess of the amount set forth in clause (2) of Section A of this Article 57. Any such determination made in good faith shall be binding and conclusive for all the purposes of this Article 57.

F. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article 57 shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law.

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G. Alteration, Amendment, Repeal. Notwithstanding any other provisions of this Declaration of Trust (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law or this Declaration of Trust), the affirmative vote of the holders of 80% of the then outstanding Voting Shares shall be required to alter, amend or repeal this Article 57; provided, however, that this Section G shall not apply to, and such 80% vote shall not be required for, any alteration, amendment or repeal recommended by a majority of the Disinterested Trustees.

58. Amendments. This Declaration of Trust may be altered, amended, added to or rescinded by an instrument in writing signed by a majority of the Trustees, if the same has been authorized by majority vote of the Shareholders at a meeting, and such other vote, if any, as may be required by the rights or preferences relating to any class or series of shares; provided that if such alteration, amendment, addition or rescission shall in the judgment of the Trustees be of a fundamental character it shall require authorization by vote, at such a meeting, of the holders of a majority of the shares outstanding and entitled to vote thereon; and provided further that any alteration, amendment, addition or rescission of any provision requiring a vote of the holders of a specified percentage of the shares shall be only by vote of the holders of such percentage; and provided further that the provisions of Articles 3 and 4 exempting from personal liability the Share holders, Trustees, officers, agents and other representatives of the Company may be amended only by unanimous vote of the holders of all shares entitled to vote at the time such vote is taken and such amendment shall take effect only prospectively. Such alteration, amendment, addition or rescission shall become effective at such time as may be specified in the vote effecting such action. Notwithstanding anything preceding in this Article to the contrary but subject to the provisions of Article 57, the vote of the holders of 80% of the shares issued and outstanding and entitled to vote generally in the election of Trustees shall be required for any alteration, amendment or repeal of Articles 9 and 10; provided, however, that such 80% vote shall not be required for any alteration, amendment or repeal adopted or recommended by 80% of the Trustees then in office. Amendments for the purpose of changing the name of the Company or of supplying any omission, curing any ambiguity or curing, correcti ng or supplementing any defective or inconsistent provision contained in this declaration of trust shall not require authorization by vote of the Shareholders.

59. Certificate of Termination or Amendment. In case this trust shall be terminated or any merger, combination, consolidation or affiliation shall be effected, or any of the terms, powers and provisions herein contained shall be altered, amended, added to or rescinded, pursuant to the provisions of Article 8(o), Article 56 or Article 58 or other authority, a certificate in any number of counterparts deemed desirable, setting forth such termination, alteration, amendment, addition or rescission or the terms of such merger, combination, consolidation or affiliation and either that the Shareholders have authorized the same in accordance with the provisions of said Article 8(o), Article 56 or Article 58, or the other authority pursuant to which the same has been made, shall be signed by the chairman or president and by the clerk or any assistant clerk and shall be acknowledged by either the chairman or president signing the same and shall be re corded or filed in the various public offices, if any, in which this Declaration of Trust is then recorded or filed and at the principal office of the Company and in such places as may be required by law, but failure to record or file any such vote or resolution shall not affect the validity thereof.

60. Disposition of Trust Estate on Termination. Upon the termination of this trust, the Trustees shall, upon such terms as shall be determined by the Trustees, sell and convert into money or into shares, bonds or other securities or obligations, whether of the purchaser or otherwise, the whole or any part of the Trust estate and shall apportion the proceeds thereof and any property forming part of the Trust estate excepted from such sale among all the Shareholders in accordance with their respective rights ratably according to the number and kind of shares held by them respectively. In making any sale under this provision the Trustees shall have power to sell by public auction or private contract and to buy in or rescind or vary any contract of sale and to resell, without being answerable for loss, and for the said purposes to execute or cause to be executed all proper

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deeds and instruments and to do all proper things. The Trustees may, after the distribution of the full amounts of money, if any, due upon liquidation or termination on any preferred shares of any class or series which may be outstanding, divide the whole or any part of the remaining Trust estate in its actual state of investment among the Shareholders in accordance with their respective rights ratably according to the number and kind of shares held by them respectively, and for such purposes the Trustees shall have power to determine the values of the property comprising said remaining Trust estate.

Miscellaneous

61. Filing. This instrument and any amendment hereto shall be filed with the Secretary of The Commonwealth of Massachusetts and in such other places as may be required under the laws of The Commonwealth of Massachusetts and may also be filed or recorded in such other places as the Trustees deem appropriate. Unless any such amendment sets forth some later time for the effectiveness of such amendment, such amendment shall be effective upon its filing with the Secretary of The Commonwealth of Massachusetts. A restated declaration of trust, integrating into a single instrument all of the provisions of this instrument which are then in effect and operative, may be executed from time to time by the Trustees and shall, upon filing with the Secretary of The Commonwealth of Massachusetts, be conclusive evidence of all amendments contained therein and may hereafter be referred to in lieu of this instrument and the various amendments thereto.

62. Protection of Company, Stock of Which Held by Trust. No corporation, trust, association or body politic shall be affected by notice that any of its shares or bonds or other securities or obligations are subject to this trust or be bound to see to the execution of this trust or to ascertain or inquire whether any transfer of any such shares, bonds or securities or obligations by the Company is authorized, notwithstanding such authority may be disputed by some other person, firm, association, trust or corporation.

63. Authority of the Trustees to Construe Terms Hereof. The Trustees shall have the authority to construe any of the terms, powers and provisions herein contained and to act on any such construction, and its construction of the same and any action taken pursuant thereto by the Trustees, or any committee, officer or agent in good faith shall be final and conclusive.

64. Effect of Captions and Table of Contents. The captions and Table of Contents are inserted for convenience of reference, and are not to be taken as any part of this instrument or to control or affect the meaning, construction or effect of the same.

65. Counterparts. This instrument may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.

66. Governing Law. This instrument is executed by the original Trustees and delivered in The Commonwealth of Massachusetts, and with reference to the statutes and law thereof, and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to the statutes and law of said Commonwealth.

67. Provisions in Conflict with Law or Regulations. The provisions of this instrument are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions would be inconsistent with any of the conditions necessary for qualification of the Company as an exempted holding company within the meaning of the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder or is inconsistent with other

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applicable laws and regulations, such provision shall be deemed never to have constituted a part of this instrument, provided that such determination shall not affect any

-25-

of the remaining provisions of this instrument or render invalid or improper any action taken or omitted prior to such determination. If any provision of this instrument shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this instrument in any jurisdiction.

[THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF we have hereunto set our hands and seals at Boston in The Commonwealth of Massachusetts on the date first above mentioned.

[SEAL]

/s/ THOMAS J. MAY

Thomas J. May

[SEAL]

/s/ RUSSELL D. WRIGHT

Russell D. Wright

COMMONWEALTH OF MASSACHUSETTS

COUNTY OF SUFFOLK, SS.

April 20, 1999

Then personally appeared before me the above-named Thomas J. May and acknowledged the foregoing instrument to be his free act and deed.

WITNESS MY HAND and official seal at Boston, Massachusetts.

NOTARIAL SEAL

/s/ THEODORA S. CONVISSER

My commission expires March 10, 2000

Notary Public in and for The Commonwealth of Massachusetts

COMMONWEALTH OF MASSACHUSETTS

COUNTY OF SUFFOLK, SS.

April 20, 1999

Then personally appeared before me the above-named Russell D. Wright and acknowledged the foregoing instrument to be his free act and deed.

WITNESS MY HAND and official seal at Boston, Massachusetts.

NOTARIAL SEAL

/s/ RICHARD J. MORRISON

My commission expires September 23, 1999

Notary Public in and for The Commonwealth of Massachusetts

EX-15.1 3 nstar10qexh151.htm NSTAR FORM 10-Q EXHIBIT 15.1 AWARENESS LETTER OF PWC NSTAR 10-Q Exhibit 15.1

Exhibit 15.1

October 29, 2009

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Commissioners:

We are aware that our report dated October 29, 2009 on our review of interim financial information of NSTAR for the three-month and nine-month periods ended September 30, 2009 and 2008 and included in the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2009 is incorporated by reference in its Registration Statements on Form S-3 (Nos. 333-162401 and 333-155779), Form S-4 (No. 333-78285) and on Form S-8 (Nos. 333-142595, 333-160263, and 333-87272).

Very truly yours,

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

EX-31.1 4 nstar10qexh311.htm CERTIFICATION 302 FOR THOMAS J. MAY NSTAR 10-Q Exhibit 31.1

Exhibit 31.1

Sarbanes - Oxley Section 302 Certification


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 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant'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 the registrant 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 the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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 the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
	d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	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 the registrant'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 the registrant's internal control over financial reporting.


Date: October 29, 2009	By:	/s/ THOMAS J. MAY
		Thomas J. May
		Chairman, President and
		Chief Executive Officer

EX-31.2 5 nstar10qexh312.htm CERTIFICATION 302 FOR JAMES J. JUDGE NSTAR 10-Q Exhibit 31.2

Exhibit 31.2

Sarbanes - Oxley Section 302 Certification


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 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant'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 the registrant 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 the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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 the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	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 the registrant'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 the registrant's internal control over financial reporting.


Date: October 29, 2009	By:	/s/ JAMES J. JUDGE
		James J. Judge
		Senior Vice President
		and Chief Financial Officer

EX-32.1 6 nstar10qexh321.htm CERTIFICATION 906 FOR THOMAS J. MAY NSTAR 10-Q Exhibit 32.1

Exhibit 32.1

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant To

Section 906 of The Sarbanes-Oxley Act of 2002


In connection with the Quarterly Report of NSTAR (the “Company”) on Form 10-Q for the quarter ending September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas J. May, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 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 Report 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 the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: October 29, 2009	By:	/s/ THOMAS J. MAY
		Thomas J. May
		Chairman, President and
		Chief Executive Officer

EX-32.2 7 nstar10qexh322.htm CERTIFICATION 906 FOR JAMES J. JUDGE NSTAR 10-Q Exhibit 32.2

Exhibit 32.2

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant To

Section 906 of The Sarbanes-Oxley Act of 2002


In connection with the Quarterly Report of NSTAR (the “Company”) on Form 10-Q for the quarter ending September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James J. Judge, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 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 Report 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 the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: October 29, 2009	By:	/s/ JAMES J. JUDGE
		James J. Judge
		Senior Vice President
		and Chief Financial Officer

EX-99.1 8 nstar10qexh991.htm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM NSTAR 10-Q Exhibit 99.1

Exhibit 99.1

Report of Independent Registered Public Accounting Firm

To the Shareholders of NSTAR:

We have reviewed the accompanying consolidated balance sheet of NSTAR and its subsidiaries (the "Company") as of September 30, 2009, and the related consolidated statements of income, retained earnings and comprehensive income for each of the three-month and nine-month periods ended September 30, 2009 and 2008 and the consolidated statement of cash flows for the nine-month periods ended September 30, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2008, and the related consolidated statements of income, comprehensive income, retained earnings, and cash flows for the year then ended (not presented herein), and in our report dated February 9, 2009, we expressed an unqualified opinion on those consolidated financial statements. As discussed in Note A to the accompanying consolidated financial statements, the Company changed its method of accounting for noncontrolling interests. The accompanying December 31, 2008 consolidated balance sheet reflects this change.

/s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts

October 29, 2009