Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

10-Q 1 d245560d10q.htm FORM 10-Q Form 10-Q

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, 2011

¨	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). x 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).

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 103,586,727 Common Shares, par value $1 per share, as of October 31, 2011.

NSTAR

Form 10-Q

Quarterly Period Ended September 30, 2011

Table of Contents


			Page No.
Glossary of Terms				2 - 3

Cautionary Statement Regarding Forward-Looking Information				4 - 5

Part I. Financial Information:
	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Income		6
		Consolidated Statements of Comprehensive Income		7
		Consolidated Statements of Common Shareholders’ Equity		7
		Consolidated Balance Sheets		8 - 9
		Consolidated Statements of Cash Flows		10 -11
		Notes to Consolidated Financial Statements		12 - 26
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26 - 46
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		46 - 47
	Item 4.	Controls and Procedures		47 - 48

Part II. Other Information:
	Item 1.	Legal Proceedings		48
	Item 1A.	Risk Factors		48
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
	Item 6.	Exhibits		50

	Signature			51

	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 on the SEC’s website at www.sec.gov or on NSTAR’s website at: www.nstar.com: Select “Investor Relations,” “Financial Information,” then select “SEC Filings” from the drop-down list. 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, 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 Officer or Chief Financial Officer or any other executive officer and that relates to any element of the Code of Ethics definition enumerated in Item 406(b) of Regulation S-K, in a press release, on our website or 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 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 (Holding 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.
NPT		Northern Pass Transmission LLC
NSTAR Com		NSTAR Communications, Inc.
Hopkinton		Hopkinton LNG Corp.
HEEC		Harbor Electric Energy Company
Unregulated operations		Represents non rate-regulated operations of NSTAR Com and Hopkinton
Discontinued operations		Represents discontinued operations of MATEP

Regulatory and Other Authorities
DOE		U.S. Department of Energy
DOER		Massachusetts Department of Energy Resources
DPU		Massachusetts Department of Public Utilities
DPUC		Connecticut Department of Public Utility Control
EFSB		Massachusetts Energy Facilities Siting Board
FERC		Federal Energy Regulatory Commission
IRS		U.S. Internal Revenue Service
ISO-NE		ISO (Independent System Operator) – New England Inc.
MPUC		Maine Public Utilities Commission
NHPUC		New Hampshire Public Utilities Commission
NRC		U.S. Nuclear Regulatory Commission
NYMEX		New York Mercantile Exchange
PURA		Connecticut Public Utilities Regulatory Authority
PCAOB		Public Company Accounting Oversight Board (United States)
SEC		U.S. Securities and Exchange Commission
S&P		Standard & Poor’s

Other
AFUDC		Allowance for Funds Used During Construction
AOCI		Accumulated Other Comprehensive Income
ASC		Financial Accounting Standards Board (U.S.) Accounting Standards Codification
BBtu		Billions of British thermal units
Bcf		Billion cubic feet
CAP		IRS Compliance Assurance Process
CGAC		Cost of Gas Adjustment Clause
CPSL		Capital Projects Scheduling List
CY		Connecticut Yankee Atomic Power Company
EERF		Energy Efficiency Reconciling Factor
EPS		Earnings Per Common Share
GAAP		Accounting principles generally accepted in the United States of America
GCA		Massachusetts Green Communities Act
HQ		Hydro-Quebec

Glossary of Terms (continued)


kW		Kilowatt (equal to one thousand watts)
kWh		Kilowatthour (the basic unit of electric energy equal to one kilowatt of power supplied for one hour)
LBR		Lost Base Revenues
LDAC		Local Distribution Adjustment Clause
LNG		Liquefied Natural Gas
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
MGP		Manufactured Gas Plant
MMbtu		Millions of British thermal units
MW		Megawatts
MWh		Megawatthour (equal to one million watthours)
MY		Maine Yankee Atomic Power Company
NETOs		New England Transmission Owners
NU		Northeast Utilities
OATT		New England ISO Open Access Transmission Tariff
PAM		Pension and PBOP Rate Adjustment Mechanism
PBOP		Postretirement Benefit Obligation other than Pensions
RCN		RCN Corporation
ROE		Return on Equity
SEMA		Southeastern Massachusetts Transmission Project
SIP		Simplified Incentive Plan
SQI		Service Quality Indicators
TSA		Transmission Service Agreement
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. These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are based on the current expectations, estimates or projections of management and are not guarantees of future performance. Some or all of these forward-looking statements may not turn out to be what NSTAR expected. Actual results could differ materially from these statements. Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

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

•

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, other state regulatory agencies, and the FERC) with respect to allowed rates of return, rate structure, continued recovery of regulatory assets and energy costs, financings, municipalization, and operation and construction of facilities

•

acquisition and disposition of assets

•

changes in tax laws and policies

•

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 and other natural events and disasters

•

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

•

failures in operational systems or infrastructure, or those of third parties, that disrupt business activities, result in the disclosure of confidential information or otherwise adversely affect financial reporting and/or the Company’s reputation

•

catastrophic events that could result from terrorism, cyber attacks, or attempts to disrupt the Company’s businesses, or the businesses of third parties, that may impact operations in unpredictable ways and adversely affect financial results and liquidity

•

impact of service quality performance measures; and

•

Impact of the expected timing and likelihood of completion of the pending merger with Northeast Utilities, any of which could be adversely affected by, among other things, (i) the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the pending merger; (ii) litigation brought in connection with the pending merger; (iii) the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses; and (iv) the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect.

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,” in Part II, Item 1A, “Risk Factors” and in the accompanying Part 1, Item 1, 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,
	2011			2010			2011			2010

Operating revenues	$	809,058		$	798,477		$	2,253,167		$	2,222,569

Operating expenses:
Purchased power and transmission		318,547			341,869			841,902			893,206
Cost of gas sold		27,668			20,022			173,985			170,691
Operations and maintenance		113,105			106,599			340,935			318,136
Depreciation and amortization		72,124			71,709			227,494			237,793
Energy efficiency programs		61,026			45,384			142,388			90,247
Property and other taxes		30,863			29,336			94,338			87,224

Total operating expenses		623,333			614,919			1,821,042			1,797,297


Operating income		185,725			183,558			432,125			425,272


Interest charges (income):
Long-term debt		29,793			29,841			89,454			94,379
Transition property securitization		1,891			2,781			6,228			9,395
Interest income and other, net		(6,211	)		(6,122	)		(21,452	)		(23,182	)

Total interest charges		25,473			26,500			74,230			80,592


Other income (deductions):
Interest – RCN tax settlement		—			(4,518	)		—			(4,518	)
Other income		884			1,408			3,420			2,755
Other deductions		(2,224	)		(388	)		(10,713	)		(1,594	)

Total other income (deductions)		(1,340	)		(3,498	)		(7,293	)		(3,357	)

Income from continuing operations before income taxes		158,912			153,560			350,602			341,323

Tax settlement – RCN		—			16,083			—			16,083
Income taxes		60,861			60,835			134,027			133,095

Total income taxes		60,861			76,918			134,027			149,178

Net income from continuing operations		98,051			76,642			216,575			192,145

(Loss) gain on sale of discontinued operations, net of tax		—			(509	)		—			108,600
(Loss) income from discontinued operations, net of tax		—			(105	)		—			7,005

Net income		98,051			76,028			216,575			307,750
Preferred stock dividends – noncontrolling interest		490			490			1,470			1,470

Net income attributable to common shareholders	$	97,561		$	75,538		$	215,105		$	306,280

Weighted average common shares outstanding:
Basic		103,587			103,587			103,587			105,451
Diluted		103,975			103,805			103,988			105,659
Earnings per common share – Basic (Note E)
Continuing operations	$	0.94		$	0.74		$	2.08		$	1.81
Discontinued operations		—			(0.01	)		—			1.09

Total earnings	$	0.94		$	0.73		$	2.08		$	2.90

Earnings per common share – Diluted (Note E)
Continuing operations	$	0.94		$	0.74		$	2.07		$	1.81
Discontinued operations		—			(0.01	)		—			1.09

Total earnings	$	0.94		$	0.73		$	2.07		$	2.90


Dividends declared per common share	$	0.425		$	0.40		$	1.275		$	1.20

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,
	2011			2010			2011			2010

Net income attributable to common shareholders	$	97,561		$	75,538		$	215,105		$	306,280

Other comprehensive income from continuing operations, net:
Pension and postretirement benefits		441			357			1,323			1,072
Deferred income tax expense		(178	)		(147	)		(534	)		(441	)

Total other comprehensive income from continuing operations, net		263			210			789			631

Comprehensive income from continuing operations		97,824			75,748			215,894			306,911

Other comprehensive income from discontinued operations, net:
Postretirement benefits		—			—			—			43
Deferred income tax expense		—			—			—			(18	)

Total other comprehensive income from discontinued operations, net		—			—			—			25

Comprehensive income	$	97,824		$	75,748		$	215,894		$	306,936

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

NSTAR

Consolidated Statements of Common Shareholders’ Equity

(Unaudited)

(in thousands, except share information)


	Common Shares Issued and Outstanding (200,000,000 shares authorized)		Par Value Issued ($1/Share)		Premium on Common Shares			Retained Earnings			Accumulated Other Comprehensive Loss			Total

Balance, December 31, 2010		103,586,727	$	103,587	$	790,574		$	1,054,987		$	(14,585	)	$	1,934,563
Equity compensation plans		—		—		(6,411	)		—			—			(6,411	)
Net income attributable to common shareholders		—		—		—			56,411			—			56,411
Dividends declared to common shareholders		—		—		—			(44,023	)		—			(44,023	)
Other comprehensive income:
Pension & postretirement benefits, net of tax		—		—		—			—			213			213

Balance, March 31, 2011		103,586,727		103,587		784,163			1,067,375			(14,372	)		1,940,753

Equity compensation plans		—		—		2,458			—			—			2,458
Net income attributable to common shareholders		—		—		—			61,133			—			61,133
Dividends declared to common shareholders		—		—		—			(44,024	)		—			(44,024	)
Other comprehensive income:
Pension & postretirement benefits net of tax		—		—		—			—			313			313

Balance, June 30, 2011		103,586,727		103,587		786,621			1,084,484			(14,059	)		1,960,633

Equity compensation plans		—		—		2,112			—			—			2,112
Net income attributable to common shareholders		—		—		—			97,561			—			97,561
Dividends declared to common shareholders		—		—		—			(44,025	)		—			(44,025	)
Other comprehensive income:
Pension & postretirement benefits net of tax		—		—		—			—			263			263

Balance, September 30, 2011		103,586,727	$	103,587	$	788,733		$	1,138,020		$	(13,796	)	$	2,016,544

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

NSTAR

Consolidated Balance Sheets

(Unaudited)

(in thousands)


	September 30,		December 31,
	2011		2010
Assets
Current assets:
Cash and cash equivalents	$	11,714	$	13,083
Restricted cash		—		17,007
Refundable income taxes		—		129,120
Accounts receivable, net of allowance of $33,146 and $35,765, respectively		298,969		272,673
Accrued unbilled revenues		51,702		55,366
Regulatory assets		292,059		389,549
Inventory, at average cost		55,704		51,362
Other		15,087		45,713

Total current assets		725,235		973,873


Utility plant:
Electric and gas, at original cost		6,472,508		6,274,123
Less: accumulated depreciation		1,721,865		1,625,564

Net electric and gas plant-in-service		4,750,643		4,648,559
Construction work in progress		169,378		106,710

Net utility plant		4,920,021		4,755,269


Other property and investments:
Unregulated property, at original cost, net		15,243		16,168
Electric equity investments		5,773		5,619
Other investments		75,352		77,157

Total other property and investments		96,368		98,944


Deferred debits:
Regulatory assets		1,926,203		2,054,426
Other deferred debits		40,298		51,413

Total deferred debits and other assets		1,966,501		2,105,839


Total assets	$	7,708,125	$	7,933,925

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

NSTAR

Consolidated Balance Sheets

(Unaudited)

(in thousands)


	September 30,			December 31,
	2011			2010
Liabilities and Capitalization

Current liabilities:
Long-term debt	$	1,100		$	687
Transition property securitization		68,872			46,955
Notes payable		217,500			387,500
Income taxes		135,819			105,403
Accounts payable		226,553			294,805
Power contract obligations		39,294			79,200
Accrued interest		34,455			24,025
Dividends payable		44,351			44,351
Accrued expenses		17,171			20,754
Other		63,586			73,761

Total current liabilities		848,701			1,077,441


Deferred credits and other liabilities:
Accumulated deferred income taxes		1,346,488			1,305,488
Unamortized investment tax credits		13,975			15,173
Power contract obligations		118,523			143,046
Pension and other postretirement liability		677,188			672,517
Regulatory liability – cost of removal		289,383			279,478
Other		153,573			161,936

Total deferred credits and other liabilities		2,599,130			2,577,638


Capitalization:
Long-term debt:
Long-term debt		2,157,257			2,173,423
Transition property securitization		43,493			127,860

Total long-term debt		2,200,750			2,301,283


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


Common equity:
Common shares, par value $1 per share, 200,000,000 shares authorized, 103,586,727 issued and outstanding		103,587			103,587
Premium on common shares		788,733			790,574
Retained earnings		1,138,020			1,054,987
Accumulated other comprehensive loss		(13,796	)		(14,585	)

Total common equity		2,016,544			1,934,563


Total capitalization		4,260,294			4,278,846


Commitments and contingencies

Total liabilities and capitalization	$	7,708,125		$	7,933,925

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,
	2011			2010
Operating activities:
Net income	$	216,575		$	307,750
Less: Income from discontinued operations		—			7,005
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of discontinued operations		—			(175,702	)
Depreciation and amortization		227,494			237,793
Debt amortization		4,266			4,231
Deferred income taxes		9,924			23,357
Noncash stock-based compensation		6,808			6,557
Net changes in:
Accounts receivable and accrued unbilled revenues		(22,632	)		(19,316	)
Refundable income taxes		129,120			—
Inventory, at average cost		(4,342	)		477
Other current assets		30,626			(21,715	)
Accounts payable		(71,358	)		2,780
Other current liabilities		51,630			131,028
Regulatory assets		144,753			89,530
Long-term power contract obligations		(63,340	)		(96,946	)
Net change from other miscellaneous operating activities		596			(38,580	)

Cash provided by operating activities of continuing operations		660,120			444,239
Cash used in operating activities of discontinued operations		—			(61,093	)

Net cash provided by operating activities		660,120			383,146


Investing activities:
Plant expenditures (including AFUDC)		(286,613	)		(240,519	)
Decrease (increase) in restricted cash		17,007			(8,784	)
Proceeds from sale of properties		188			—
Net change in other investment activities		4,384			(8,418	)

Cash used in investing activities of continuing operations		(265,034	)		(257,721	)
Cash provided by investing activities of discontinued operations		—			337,707

Net cash (used in) provided by investing activities		(265,034	)		79,986


Financing activities:
Long-term debt issuances, net		—			420,194
Debt issuance costs		—			(3,702	)
Transition property securitization redemptions		(62,450	)		(72,289	)
Long-term debt redemptions		(16,237	)		(626,238	)
Net change in notes payable		(170,000	)		43,500
Acquisition of common shares under accelerated repurchase program		—			(125,902	)
Common share dividends paid		(132,072	)		(126,881	)
Preferred stock dividends of subsidiary to the noncontrolling interest		(1,470	)		(1,470	)
Change in disbursement accounts		(8,089	)		(13,399	)
Cash received for exercise of equity compensation		1,991			15,501
Cash used to settle equity compensation		(9,890	)		(21,322	)
Windfall tax effect of settlement of equity compensation		1,762			2,150

Cash used in financing activities of continuing operations		(396,455	)		(509,858	)
Cash used in financing activities of discontinued operations		—			(86,776	)

Net cash used in financing activities		(396,455	)		(596,634	)


Net decrease in cash and cash equivalents		(1,369	)		(133,502	)
Adjustment for discontinued operations, net of dividends		—			2,599
Cash and cash equivalents at the beginning of the year		13,083			143,449

Cash and cash equivalents at the end of the period	$	11,714		$	12,546

NSTAR

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

(continued)


	Nine Months Ended
	September 30,
	2011			2010
Supplemental disclosures of cash flow information:
Continuing operations – Cash paid (received) during the period for:
Interest, net of amounts capitalized	$	85,690		$	117,522
Income taxes	$	(66,794	)	$	158,739

Continuing operations – Non-cash investing activity:
Plant additions included in accounts payable	$	31,540		$	13,494

Discontinued operations – Cash paid during the period for interest	$	—		$	1,525

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 2010 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 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 retail electric and natural gas transmission and distribution utility 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.

2.	Pending Merger with Northeast Utilities

On October 16, 2010, upon unanimous approval from their respective Boards of Trustees, NSTAR and Northeast Utilities (NU) entered into an Agreement and Plan of Merger (the Merger Agreement). The transaction will be a merger of equals in a stock-for-stock transfer. Upon the terms and subject to the conditions set forth in the Merger Agreement, at closing, NSTAR will become a wholly-owned subsidiary of NU. On March 4, 2011, shareholders of each company approved the merger and adopted the merger agreement. Under the terms of the agreement, NSTAR shareholders will receive 1.312 NU common shares for each NSTAR common share that they own. Following completion of the merger, it is anticipated that NU shareholders will own approximately 56 percent of the post-transaction company and former NSTAR shareholders will own approximately 44 percent of the post-transaction company.

The post-transaction company will provide electric and gas energy delivery services through six regulated electric and gas utilities in Connecticut, Massachusetts and New Hampshire serving nearly 3.5 million electric and gas customers. Completion of the merger is subject to various customary conditions, including receipt of required regulatory approvals. NSTAR believes that the merger can be completed in 2011, but it is possible that the closing of the merger may be delayed to early 2012. Acting pursuant to the terms of the Merger Agreement, on October 14, 2011, NU and NSTAR formally extended the date by which either party has the right to terminate the Merger Agreement should all required closing conditions not be satisfied, including receipt of all required regulatory approvals, from October 16, 2011 to April 16, 2012.

Regulatory Approvals on Pending Merger with Northeast Utilities

Federal

On January 4, 2011, NSTAR and NU received approval from the Federal Communications Commission, and on February 10, 2011, the applicable Hart-Scott-Rodino waiting period expired. On July 6, 2011, NSTAR and NU received approval from the Federal Energy Regulatory Commission (FERC). A filing was made with the Nuclear Regulatory Commission (NRC) on December 9, 2010 seeking NRC consent to the transfer of NSTAR’s indirect control of ownership interest in three decommissioned nuclear plants to NU. The NRC held a public meeting on September 20, 2011 at which time the NRC indicated it would complete its review by the end of November 2011. NRC consent is currently pending.

Massachusetts

harm” standard to a “net benefits” standard, meaning that the companies must demonstrate that the pending transaction provides benefits that outweigh the costs. Applicable state law provides that mergers of Massachusetts utilities and their respective holding companies must be “consistent with the public interest.” The order states that the DPU has flexibility in applying the factors applicable to the standard of review. NSTAR and NU filed supplemental testimony with the DPU on April 8, 2011 indicating the merger could provide post-transaction net savings of approximately $784 million in the first ten years following the closing of the merger and provide environmental benefits with respect to Massachusetts emissions reductions, global warming policies, and furthering the goals of Massachusetts’ Green Communities Act.

The DPU held public evidentiary hearings during July 2011. Upon conclusion of the public evidentiary hearings on July 28, 2011, the DPU issued a briefing schedule that arranged for a series of intervenor and Joint Petitioner briefs and reply briefs culminating in the delivery of the final Joint Petitioner reply briefs on September 19, 2011. Subsequently, the Joint Petitioners have agreed to different intervenor motions to extend the briefing schedule, and the DPU consented to these motions. The final Joint Petitioner reply briefs were filed on October 31, 2011.

On July 15, 2011, the Massachusetts Department of Energy Resources (DOER) filed a motion for an indefinite stay in the proceedings. On July 21, 2011, NSTAR and NU filed a response objecting to this motion. The DPU has scheduled Oral Arguments for November 17, 2011 regarding the DOER’s Motion to Stay the proceeding, at which time the Joint Petitioners and intervenors will be allowed the opportunity for oral argument of their positions regarding the Motion to Stay.

The Joint Petitioners have provided extensive information in the DPU proceeding including testimony, exhibits and submission of detailed written responses to nearly 1,000 information requests from the DPU and intervenors.

Connecticut

On June 1, 2011, the Connecticut Public Utilities Regulatory Authority (PURA), formerly the Connecticut Department of Public Utility Control (DPUC), issued a decision stating that it lacks jurisdiction to consider the NSTAR merger with NU. On June 30, 2011, the Connecticut Office of Consumer Counsel filed a Petition for Administrative Appeal in Connecticut Superior Court requesting that the Superior Court remand the decision back to the DPUC with instructions to reopen the docket and review the merger transaction. NSTAR cannot determine the outcome or timing of this action.

New Hampshire

On April 5, 2011, the New Hampshire Public Utilities Commission (NHPUC) issued an order finding that it does not have statutory authority to approve or reject the merger.

Maine

On May 11, 2011, the Maine Public Utilities Commission issued an order approving the merger contingent upon approval by the FERC. The FERC approval was received on July 6, 2011.

3.	Basis of Consolidation and Accounting

The accompanying consolidated financial information presented as of September 30, 2011 and for the three and nine-month periods ended September 30, 2011 and 2010, 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, 2010 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 statement of the financial information for the periods indicated, have been included. All

significant intercompany transactions have been eliminated in consolidation. Certain immaterial reclassifications have been made to prior year amounts to conform to the current year’s presentation. These include the classification of a portion of regulatory assets as of December 31, 2010 from current to non-current on the accompanying Consolidated Balance Sheets.

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. The accompanying Consolidated Financial Statements are prepared in conformity with GAAP. NSTAR’s utility subsidiaries are subject to the application of ASC 980, Regulated Operations, which 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 energy delivery business is subject to rate-regulation that is based on cost recovery and meets the criteria for application of ASC 980.

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, 2011 and 2010 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.

4.	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 2011 annual actuarial valuation.

NSTAR’s Pension Plan and PBOP Plan assets are affected by fluctuations in the financial markets. 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). Under the PAM, NSTAR recovers its pension and PBOP expense through a reconciling rate mechanism. The PAM removes the volatility in earnings that could result from fluctuations in market conditions and plan experience.

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, 2011, NSTAR contributed $68 million to the Plan. In addition, $6 million was contributed in October 2011. NSTAR currently anticipates making additional contributions of approximately $1 million to the Plan during the remainder of 2011. The actual level of funding may differ 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)	2011			2010			2011			2010
Service cost	$	6.8		$	6.1		$	20.3		$	18.4
Interest cost		15.9			16.2			47.8			48.4
Expected return on Plan assets		(17.8	)		(15.7	)		(53.5	)		(47.1	)
Amortization of prior service credit		(0.1	)		(0.1	)		(0.5	)		(0.5	)
Recognized actuarial loss		12.4			12.8			37.4			38.5

Net periodic pension benefit cost	$	17.2		$	19.3		$	51.5		$	57.7

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 cost of postretirement benefits. During the nine months ended September 30, 2011, NSTAR contributed $22.5 million to this plan. In addition, $2.7 million was contributed in October 2011. NSTAR currently anticipates contributing approximately $4.8 million for the remainder of 2011 toward these benefits. Postretirement benefit cost related to employees of the discontinued operations of MATEP for the nine months ended September 30, 2010 is not included in the following table.

Components of net periodic postretirement benefit cost were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions)	2011			2010			2011			2010
Service cost	$	1.6		$	1.5		$	4.7		$	4.4
Interest cost		8.8			9.4			26.3			28.3
Expected return on Plan assets		(6.1	)		(5.2	)		(18.4	)		(15.7	)
Amortization of prior service credit		(0.4	)		(0.4	)		(1.1	)		(1.1	)
Amortization of transition obligation		0.2			0.2			0.6			0.6
Recognized actuarial loss		3.4			4.2			10.3			12.8

Net periodic postretirement benefit cost	$	7.5		$	9.7		$	22.4		$	29.3

5.	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 holders of the NSTAR Common Shares. The liquidation preference for each outstanding series of Cumulative Preferred Stock is equal to the par value ($100.00 per share) plus accrued and unpaid dividends.

The dividends on NSTAR Electric’s Cumulative 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. During the year ended December 31, 2010 and during the nine months ended September 30, 2011, there were no changes in the noncontrolling interest of NSTAR Electric.

NSTAR Electric’s noncontrolling interest preferred stock is reflected 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 Cumulative Preferred Stock has not been classified within permanent equity.

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, 2011		December 31, 2010
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

6.	Interest Income and Other, Net

Major components of interest income and other, net were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2011			2010			2011			2010
Interest on regulatory deferrals	$	6,882		$	6,953		$	22,853		$	19,120
Income tax items		(82	)		372			(2,243	)		7,266
Other interest income (expense)		(624	)		(1,226	)		949			(3,246	)
Short-term debt		(65	)		(214	)		(377	)		(648	)
AFUDC		100			237			270			690

Total interest income and other, net	$	6,211		$	6,122		$	21,452		$	23,182

7.	Variable Interest Entities

NSTAR Electric has certain long-term purchase power agreements with energy facilities where it purchases substantially all of the output from a specified facility for a specified period. NSTAR has evaluated these agreements under the variable interest accounting guidance and has determined that these agreements represent variable interests. NSTAR Electric is not considered the primary beneficiary of these entities and does not consolidate the entities because it does not control the activities most relevant to the operating results of these entities and does not hold any equity interests in the entities. NSTAR Electric’s exposure to risks and financial support commitments with respect to these entities is limited to the purchase of the power generated at the prices defined under the contractual agreements. NSTAR Electric’s involvement with these variable interest entities has no material impact on NSTAR’s financial position, financial performance, or cash flows.

8.	Subsequent Events

Management has reviewed subsequent events through the date of this filing and concluded that no material subsequent events have occurred that are not accounted for in the accompanying Consolidated Financial Statements or disclosed in the accompanying Notes to Consolidated Financial Statements.

Note B. Sale of MATEP

On June 1, 2010, NSTAR completed the sale of its stock ownership interest in its district energy operations business, MATEP, for $343 million in cash, to a joint venture comprised of Veolia Energy North America, a Boston-based subsidiary of Veolia Environnement and Morgan Stanley Infrastructure Partners. The sale resulted in a non-recurring, after-tax gain of $108.6 million, including transaction costs, or $1.03 per share, for the nine-month period ended September 30, 2010. During the three-month period ended September 30, 2010, $0.5 million in expenses were incurred related to the sale. The proceeds from the sale were partially utilized to retire the $85.5 million outstanding principal amount of MATEP’s long-term Notes, together with a retirement premium of $18 million.

The operating results of MATEP through May 31, 2010 were separately classified and reported as discontinued operations on the accompanying Consolidated Statements of Income. A summary of discontinued operations was as follows:


	Three Months Ended			Nine Months Ended
(in thousands)	September 30, 2010			September 30, 2010
Operating revenues	$	—		$	52,232
Operating expenses		164			38,977
Interest charges		—			2,754
Other income		2			276
Income taxes		(57	)		3,772

(Loss) income from discontinued operations		(105	)		7,005
(Loss) gain on sale of discontinued operations, net of tax		(509	)		108,600

Net (loss) income from discontinued operations	$	(614	)	$	115,605

Note C. Derivative Instruments

Energy Contracts

NSTAR Electric has determined that it is not required to account for the majority of its electricity supply contracts as derivatives because they qualify for, and NSTAR Electric has elected, the normal purchases and sales exception. As a result, these agreements are not reflected on the accompanying Consolidated Balance Sheets. NSTAR Electric has one long-term renewable energy contract that does not qualify for the normal purchases and sales exception and is valued at an estimated $1.6 million and $2.4 million liability as of September 30, 2011 and December 31, 2010, respectively. NSTAR Electric has measured the difference between the cost of this contract and projected market energy costs over the life of the contract, and recorded a long-term derivative liability and a corresponding long-term regulatory asset for the value of this contract. Changes in the value of the contract have no impact on earnings.

NSTAR Gas has only one significant natural gas supply contract. This contract is an all-requirements portfolio asset management contract that expires in October 2012. This contract contains market based pricing terms and therefore no financial statement adjustments are required. The following costs were incurred and recorded to “Cost of gas sold” on the accompanying Consolidated Statements of Income:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2011		2010		2011		2010
Natural gas supply costs incurred on NSTAR Gas’ all- requirements contract	$	11	$	7	$	106	$	116

Refer to the accompanying Part 1, Item 3, “Quantitative and Qualitative Disclosure About Market Risk,” in this Quarterly Report for a further discussion.

Natural Gas Hedging Agreements

In accordance with a DPU order, 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 natural gas supply, and qualify as derivative financial instruments. 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 counterparties of NSTAR Gas, as if such contracts were settled as of the balance sheet date. All actual costs incurred or benefits realized when these contracts are settled are included in the CGAC of NSTAR Gas. NSTAR Gas records a regulatory asset or liability for the market price changes, in lieu of recording an adjustment to Other Comprehensive Income. These derivative contracts extend

through April 2012. As of September 30, 2011, these natural gas hedging agreements, representing eleven individual contracts, hedged 9,140 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. There were no financial contracts settled during the three-month periods ended September 30, 2011 and 2010. During the nine-month periods ended September 30, 2011 and 2010, $8 million and $5 million, respectively, of these financial contracts were settled and were recognized as additional charges to “Cost of gas sold” on the accompanying Consolidated Statements of Income.

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, 2011, NSTAR Gas has an “A+” Standard & Poors Credit Issuer credit 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 natural gas hedge contract counterparties as of September 30, 2011, should NSTAR Gas’ credit rating be downgraded the collateral obligations described below 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		324		324
BBB-/Baa3, or below investment grade		4		5,994		6,318

In addition, these agreements contain cross-default provisions that would allow NSTAR Gas and its counterparties to terminate and liquidate a natural 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.

Derivative Instruments and Hedging Activities

The following disclosures summarize the fair value of NSTAR Gas’ hedging agreements and NSTAR Electric’s renewable energy contract deemed to be derivatives, the balance sheet positions of these agreements and the related settlements of hedging agreements:


(in thousands)	September 30, 2011			December 31, 2010

Gas Hedging Agreements asset (liability) positions
Consolidated Balance Sheet Account:
Deferred debits – Other deferred debits	$	—		$	179
Current liabilities – Power contract obligations		(6,318	)		(6,646	)

Total net liability for derivative instruments	$	(6,318	)	$	(6,467	)


(in thousands)	September 30, 2011			December 31, 2010
Renewable Energy Contract – Non-hedging instrument
Consolidated Balance Sheet Account:
Deferred credits and other liabilities – Power contract obligations	$	(1,640	)	$	(2,400	)

Total liability for non-hedging derivative instrument	$	(1,640	)	$	(2,400	)


(in thousands)	Amount of Gain or (Loss) Recognized
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011			2010
Settlement of Gas Hedging Agreements
Consolidated Statement of Income Account:
Increase to Cost of gas sold	$	—	$	—	$	(8,197	)	$	(4,892	)
Increase to operating revenues reflecting recovery of settlements from customers		—		—		8,197			4,892

Net earnings impact	$	—	$	—	$	—		$	—

Note D. Income Taxes

Effective Tax Rate

The following table reconciles the statutory federal income tax rate to the annual estimated effective income tax rate for 2011 and the actual effective income tax rate for the year ended December 31, 2010:


	2011			2010
Statutory tax rate		35	%		35	%
State income tax, net of federal income tax benefit		4			4
Impact of IRS settlement		—			3
Other		(1	)		(1	)

Effective tax rate		38	%		41	%

Settlement with IRS Office of Appeals of RCN Corporation (RCN) Share Abandonment Issue

On September 30, 2010, NSTAR accepted a settlement offer from the IRS Office of Appeals (IRS Appeals) on issues related to its 2001-2007 Federal income tax returns. This development resolved all outstanding tax matters related to this period, including the RCN share abandonment issue.

As previously disclosed, on December 24, 2003, NSTAR formally abandoned 11.6 million shares of RCN common stock. NSTAR deducted the share abandonment on its 2003 Federal income tax return as an ordinary loss. The settlement with IRS Appeals included a resolution on the characterization of the loss related to the RCN share abandonment. During the third quarter of 2010, NSTAR recognized a one-time after-tax charge of $20.6 million, including interest, related to the settlement. The interest portion ($4.5 million) is recorded to the “Interest – RCN tax settlement” caption and the tax portion ($16.1 million) is recorded to the “Tax Settlement – RCN” caption on the accompanying Consolidated Statements of Income.

Receipt of Federal Tax Refund for 2001-2007 Tax Years

On April 21, 2011, NSTAR received a $143.3 million refund from the IRS relating to the 2001-2007 tax years. The approved settlement and receipt of the refund resolves all outstanding tax matters for these years.

Open Tax Years

The 2010 Federal income tax return is being reviewed under the IRS Compliance Assurance Process (CAP). CAP accelerates the examination of the return in order to resolve issues before the tax return is filed. The outcome and the timing of any potential audit adjustments are uncertain. All years prior to 2010 have been examined by the IRS.

Uncertain Tax Positions

NSTAR did not have a reserve for uncertain tax positions at September 30, 2011 and December 31, 2010.

Interest on Tax Positions

The total amounts of accrued interest receivable (payable) related to tax matters included in “Other current assets” or “Accrued interest” on the accompanying Consolidated Balance Sheets were as follows:


	September 30,			December 31,
(in millions)	2011			2010
Accrued tax interest (payable) receivable	$	(0.9	)	$	27.6

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 basic and diluted EPS:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in thousands, except per share amounts)	2011		2010			2011		2010
Net income attributable to common shareholders	$	97,561	$	75,538		$	215,105	$	306,280
Basic EPS:
Continuing operations (a)	$	0.94	$	0.74		$	2.08	$	1.81
Income from discontinued operations		—		—			—		0.06

		0.94		0.74			2.08		1.87
(Loss) gain on sale of discontinued operations		—		(0.01	)		—		1.03

Total earnings	$	0.94	$	0.73		$	2.08	$	2.90

Diluted EPS:
Continuing operations (a)	$	0.94	$	0.74		$	2.07	$	1.81
Income from discontinued operations		—		—			—		0.06

		0.94		0.74			2.07		1.87
(Loss) gain on sale of discontinued operations		—		(0.01	)		—		1.03

Total earnings	$	0.94	$	0.73		$	2.07	$	2.90


Weighted average common shares outstanding for basic EPS		103,587		103,587			103,587		105,451
Effect of dilutive shares:
Weighted average dilutive potential common shares		388		218			401		208

Weighted average common shares outstanding for diluted EPS		103,975		103,805			103,988		105,659

(a)

Basic and Diluted EPS from continuing operations for the three months and nine months ended September 30, 2010 includes a one-time after-tax charge of $20.6 million, or $0.20 per share. This charge resulted from the acceptance of the settlement offer with the IRS Office of Appeals regarding the characterization of the loss related to the RCN share abandonment. On April 21, 2011, NSTAR received a $143.3 million refund from the IRS relating to the 2001-2007 tax years. Refer to Note D. “Income Taxes” for a further discussion.

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 gas retail transmission and distribution utilities that provide energy delivery services in 107 cities and towns in Massachusetts.

NSTAR has aggregated the results of operations and assets of its telecommunications subsidiary with the electric utility operations, and aggregated the liquefied natural gas service subsidiary with gas utility operations. The telecommunications subsidiary, liquefied natural gas service subsidiary and MATEP were previously aggregated as unregulated operations for purposes of segment reporting. The segment presentation now reflects the ongoing profile of NSTAR’s operations as primarily comprised of electric and gas utility operations.

Amounts related to discontinued operations have been excluded from the data presented. Amounts shown on the following table for the three and nine-month periods ended September 30, 2011 and 2010 include the allocation of NSTAR’s (Holding Company) results of operations and assets to the two business segments, net of inter-company transactions that primarily consist of interest charges and investment assets, respectively. The allocation of Holding Company charges is based on an indirect allocation of the Holding Company’s investment relating to the two business segments.

Financial data for the segments of continuing operations were as follows:


(in thousands)	Utility Operations					Consolidated
	Electric		Gas			Total
Three months ended September 30,
2011
Operating revenues	$	755,790	$	53,268		$	809,058
Segment net income (loss)	$	101,248	$	(3,197	)	$	98,051
2010
Operating revenues	$	753,483	$	44,994		$	798,477
Segment net income (loss) (a)	$	81,419	$	(4,777	)	$	76,642

Nine months ended September 30,
2011
Operating revenues	$	1,933,782	$	319,385		$	2,253,167
Segment net income	$	202,751	$	13,824		$	216,575
2010
Operating revenues	$	1,921,027	$	301,542		$	2,222,569
Segment net income (a)	$	182,824	$	9,321		$	192,145

Total assets
September 30, 2011	$	6,882,393	$	825,732		$	7,708,125
December 31, 2010	$	7,040,326	$	893,599		$	7,933,925

(a)

Electric segment net income for the three months and nine months ended September 30, 2010 includes a one-time after-tax charge of $20.6 million. This charge resulted from the acceptance of the settlement offer with the IRS Office of Appeals regarding the characterization of the loss related to the RCN share abandonment. On April 21, 2011, NSTAR received a $143.3 million refund from the IRS relating to the 2001-2007 tax years. Refer to Note D. “Income Taxes” for a further discussion.

Note G. Fair Value Measurements

NSTAR follows 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 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.

Gas hedges were valued at calculated settlement prices. The renewable energy contract was valued based on the difference between the contracted price and the estimated fair value of remaining contracted supply to be purchased. Inputs used to develop the estimate included on-line regional generation and forecasted demand.

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, 2011 and December 31, 2010. 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, 2011
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Government Money Market Securities^(a)	$	1	$	—	$	—	$	1
Deferred Compensation Assets ⁽^b⁾		28		—		—		28
Investments ⁽^b⁾		11		—		—		11

Total	$	40	$	—	$	—	$	40

Liabilities:
Gas Hedges ⁽^c⁾	$	—	$	6	$	—	$	6
Renewable Energy Contract ⁽^d⁾		—		—		2		2

Total	$	—	$	6	$	2	$	8


	December 31, 2010
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Government Money Market Securities^(a)	$	1	$	—	$	—	$	1
Deferred Compensation Assets ⁽^b⁾		30		—		—		30
Investments ⁽^b⁾		11		—		—		11

Total	$	42	$	—	$	—	$	42


Liabilities:
Gas Hedges ⁽^c⁾	$	—	$	6	$	—	$	6
Renewable Energy Contract ^(d)		—		—		2		2

Total	$	—	$	6	$	2	$	8


(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” on the accompanying Consolidated Balance Sheets
(d)	–	Included in “Deferred credits and other liabilities: Power contract obligations” on the accompanying Consolidated Balance Sheets

Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, net accounts receivable, other current assets, certain current liabilities, and notes payable as of September 30, 2011 and December 31, 2010, respectively, approximate fair value due to the short-term nature of these securities.

The fair values of long-term indebtedness (excluding notes payable, including current maturities) are based on the quoted market prices of similar issues. Carrying amounts and fair values as of June 30, 2011 and December 31, 2010 were as follows:


	September 30, 2011				December 31, 2010
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term indebtedness of continuing operations (including current maturities)	$	2,270,722	$	2,608,360	$	2,348,925	$	2,545,200

Note H. Indebtedness

On August 1, 2011, NSTAR Electric redeemed $15 million of Massachusetts Industrial Finance Agency Bonds, 5.75%, due February 2014, at par.

Note I. Commitments and Contingencies

1.	Service Quality Indicators

SQI are established performance benchmarks for certain identified measures of service quality relating to customer service and billing performance, safety and reliability and DPU Consumer Division statistics performance for all Massachusetts utilities. NSTAR Electric and NSTAR Gas are required to report annually to the DPU concerning their performance as to each measure and are subject to maximum penalties of up to two and one-half percent of total transmission and distribution revenues should performance fail to meet the applicable benchmarks.

NSTAR monitors its service quality continuously, and if it is probable that a liability has been incurred and is estimable, a liability is accrued. Any settlement or rate order that would result in a different liability level from what has been accrued would be adjusted in the period that the DPU issues an order determining the amount of any such liability.

NSTAR Electric and NSTAR Gas service quality performance levels for 2010 were not in a penalty situation. The final performance reports were filed with the DPU on March 1, 2011.

2.	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, 2011 and December 31, 2010, NSTAR had liabilities of $1.4 million and $0.9 million, respectively, for these environmental sites. This estimated liability 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 sites to determine if and to what extent such sites have been 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, 2011 and December 31, 2010, NSTAR had liabilities of $12.4 million and $15.9 million, respectively, as an estimate for site cleanup costs for several MGP sites for which NSTAR Gas was identified as a potentially responsible party. A corresponding regulatory asset was recorded that reflects the future rate recovery for these costs.

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

3.	Regulatory Proceedings

DPU Safety and Reliability Programs (CPSL)

As part of the Rate Settlement Agreement, NSTAR Electric recovers incremental costs related to 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) billed costs is subject to DPU review and approval. From 2006 through 2010, NSTAR Electric incurred and billed cumulative incremental revenue requirements of approximately $67 million. During 2011, approximately $11 million has been incurred through September 30. These amounts include incremental operations and maintenance and revenue requirements on capital investments.

On May 28, 2010, the DPU issued an order on NSTAR Electric’s 2006 CPSL costs recovery filing. The expected recovery amount did not vary materially from the revenue previously recognized. On October 8, 2010, NSTAR Electric submitted a Compliance Filing with the DPU reconciling the recoverable CPSL Program revenue requirement for each year 2006 through 2009 with the revenues already collected to determine the proposed adjustment effective on January 1, 2011. The DPU allowed the proposed rates to go into effect on that date, subject to reconciliation of program costs. NSTAR cannot predict the timing of subsequent DPU orders related to this filing. Should an adverse DPU decision be issued, it could have a material adverse impact on NSTAR’s result 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 recover 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.

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. This adjustment to NSTAR Electric’s distribution rates would eliminate the fully reconciling nature of the Basic Service bad debt adder.

NSTAR Electric has not implemented the directives 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 filed a Motion for Reconsideration of the DPU’s order on July 18, 2007. On May 28, 2010, the DPU issued an order and reaffirmed that NSTAR Electric should reduce its distribution rates by the increase in its Basic Service bad debt charge-offs. On June 18, 2010, NSTAR Electric filed an appeal of the DPU’s order with the Massachusetts Supreme Judicial Court (SJC). Briefs were filed during the summer of 2011 and oral arguments are anticipated by the end of 2011. A decision by the SJC is expected in the first half of 2012. As of September 30, 2011, the potential pre-tax impact to earnings of eliminating the fully reconciling nature of the bad debt adder would be approximately $22 million. NSTAR cannot predict the exact timing of this appeals process or the ultimate outcome. NSTAR Electric continues to believe that its position is appropriate and that it is probable upon appeal that it will ultimately prevail.

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 adjustment factor and several other fully reconciling cost recovery items. Consistent with previous filings, the 2011 filings include a combination of actual and forecasted data for 2011 that NSTAR Electric will update during 2012 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.

4.	Yankee Companies Spent Fuel Litigation

NSTAR Electric is part owner of three decommissioned New England nuclear power plants, Connecticut Yankee (CY), Yankee Atomic (YA) and Maine Yankee (MY) (the Yankee Companies). The Yankee Companies have been party to ongoing litigation at the Federal level with respect to the alleged failure of the Department of Energy (DOE) to provide for a permanent facility to store spent nuclear fuel generated in years through 2001 for CY and YA, and through 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. The case has been going through the appeal process in the Federal courts, and a final decision on this appeal could be received by March 2012.

In 2009, the Yankee Companies also filed for additional damages related to the alleged failure of the DOE to provide for a permanent facility to store spent nuclear fuel generated in years after 2001 for CY and YA and after 2002 for MY (DOE Phase II Damages). Claim amounts applicable to Phase II for NSTAR Electric are $19 million, $12 million, and $1.7 million, respectively.

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

5.	FERC Proceeding Regarding Base ROE of New England Transmission Operators

On September 30, 2011, the Attorney General of Massachusetts, along with various ratepayer advocates representing the six New England states, filed a complaint with the FERC seeking to reduce the 11.14 percent base return on equity (Base ROE) used in calculating formula rates for transmission service under the ISO-NE Open Access Transmission Tariff (OATT). A change in the Base ROE would adversely impact the various investor-owned utilities (New England Transmission Owners, or NETOs), including NSTAR Electric, that provide transmission service to ISO-New England, which serves as the regional transmission organization for New England.

On October 20, 2011, NSTAR Electric along with the other NETOs, filed their response with the FERC. In that response, the NETOs defended the appropriateness of the current FERC-approved Base ROE. The NETOs requested that the FERC summarily dismiss the complaint. Should any unfavorable ruling by FERC result in a reduction of the Base ROE, the exposure would be limited to OATT rates assessed following the complaint date of September 30, 2011. NSTAR cannot predict the timing or outcome of this proceeding.

6.	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 potential 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 2010 Annual Report on Form 10-K.

Pending Merger with Northeast Utilities

Regulatory Approvals on Pending Merger with Northeast Utilities

Federal

Massachusetts

On November 24, 2010, NSTAR and NU (the Joint Petitioners) filed a joint petition requesting the DPU’s approval of their proposed merger. On March 10, 2011, the DPU issued an order that modified the standard of review to be applied in the review of mergers involving Massachusetts utilities from a “no net harm” standard to a “net benefits” standard, meaning that the companies must demonstrate that the pending transaction provides benefits that outweigh the costs. Applicable state law provides that mergers of Massachusetts utilities and their respective holding companies must be “consistent with the public interest.” The order states that the DPU has flexibility in applying the factors applicable to the standard of review. NSTAR and NU filed supplemental testimony with the DPU on April 8, 2011 indicating the merger could provide post-transaction net savings of approximately $784 million in the first ten years following the closing of the merger and provide environmental benefits with respect to Massachusetts emissions reductions, global warming policies, and furthering the goals of Massachusetts’ Green Communities Act.

Connecticut

New Hampshire

On April 5, 2011, the New Hampshire Public Utilities Commission (NHPUC) issued an order finding that it does not have statutory authority to approve or reject the merger.

Maine

On May 11, 2011, the Maine Public Utilities Commission issued an order approving the merger contingent upon approval by the FERC. The FERC approval was received on July 6, 2011.

Recent Major Storm Events and Service Restoration

In late August 2011, Tropical Storm Irene (Irene) presented a severe weather event of heavy rains and damaging winds to Massachusetts and the Eastern Seaboard. Irene caused considerable damage in NSTAR Electric’s service territory. Approximately 500,000 customer outages occurred on the NSTAR Electric system in the aftermath of Irene. This represents the most severe damage event on the NSTAR Electric system in nearly 20 years.

NSTAR Electric’s DPU-approved storm accounting mechanism helps to reduce the volatility of the earnings impact of severe storm restoration events. The Company is permitted to spread the incremental costs of severe storm restoration over several periods. NSTAR Electric currently estimates the incremental cost of Irene to be approximately $30 million.

On September 15, 2011, the DPU, on its own initiative, initiated an investigation into the efforts of NSTAR Electric and one other Massachusetts electric company to restore power to their customers in the aftermath of Irene. NSTAR Electric filed a Final Event Report with the DPU on October 3, 2011.

In late October 2011, an unprecedented early snow storm brought heavy, wet snow and strong winds to the region, impacting the electric service of approximately 200,000 customers. NSTAR Electric is still in the process of estimating the total cost of restoration for this event.

Business Overview

NSTAR (or 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 operations. For the nine months ended September 30, 2011, NSTAR derived 86% of its operating revenues from the transmission and distribution of electric energy through NSTAR Electric.

Gas operations. For the nine months ended September 30, 2011, NSTAR derived 14% of its operating revenues from the distribution of natural gas through NSTAR Gas.

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, 2011 was $97.6 million and $215.1 million, or $0.94 and $2.07 per diluted share, respectively, as compared to $75.5 million and $306.3 million, or $0.73 and $2.90 per diluted share, respectively, for the same periods in 2010. The three-month period ended September 30, 2010 includes the charge associated with the RCN Tax Settlement of $(20.6) million, or $(0.20) per diluted share. The nine-month period ended September 30, 2010 includes the gain on the sale of MATEP of $108.6 million, or $1.03 per diluted share, and the charge associated with the RCN Tax Settlement of $(20.6) million, or $(0.20) per diluted share. The three and nine-month periods of 2010 also include the (loss) income from discontinued operations of $(0.1) million and $7 million, respectively. The current quarter and nine-month

periods include a net benefit (charge) of $0.3 million and $(5.6) million, or less than $0.01 and $(0.05) per diluted share, respectively, for costs associated with the pending merger with Northeast Utilities. Excluding the merger-related costs in 2011, earnings for the three and nine-month periods ended September 30, 2011 were $97.3 million and $220.7 million, or $0.94 and $2.12 per diluted share, respectively.

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 2010 Form 10-K. There have been no substantive changes to those policies and estimates.

Rate and Regulatory Proceedings

Rate Structures

a.	Rate Settlement Agreement

NSTAR Electric is operating under a DPU-approved 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 rates including a productivity offset, that are generally offset by an equal and corresponding adjustment to transition rates. The adjustment will be 0.96% effective January 1, 2012. The adjustments as of January 1 were as follows:


	January 1,
	2011			2010			2009			2008
Annual inflation-adjusted distribution rate – SIP (decrease) increase		(0.19	)%		1.32	%		1.74	%		2.68	%

b.	Regulated Electric Distribution 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 programs costs), a Pension and PBOP Rate Adjustment Mechanism (PAM) to recover incremental pension and pension benefit costs, a reconciling rate adjustment mechanism to recover costs associated with the residential assistance adjustment clause, a net-metering reconciliation surcharge to collect the lost revenues and credits associated with net-metering facilities installed by customers, and an Energy Efficiency Reconciling Factor (EERF) to recover energy efficiency program costs and lost base revenues in addition to those charges recovered in the energy conservation charge;

•

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 to be collected 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 annual 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 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.

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 natural 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 natural gas infrastructure to deliver natural 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 natural 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 files interim changes to its CGAC factor when the actual costs of natural gas supply vary from projections by more than 5%; and

•

a local distribution adjustment clause (LDAC) primarily represents the collection of energy efficiency program 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 natural gas supply. All costs incurred or benefits realized when these contracts are settled are included in the CGAC.

d.	Regulatory Matters

DPU Safety and Reliability Programs (CPSL)

to go into effect on that date, subject to reconciliation of program costs. NSTAR cannot predict the timing of subsequent DPU orders related to this filing. Should an adverse DPU decision be issued, it could have a material adverse impact on NSTAR’s result of operations, financial position, and cash flows.

Basic Service Bad Debt Adder

Other

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 available and are decided on a case-by-case basis in accordance with the FERC’s most recent 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. A 100 basis point adder, when combined with the FERC’s approved ROEs described above, results in a 12.64% ROE for qualified regional investments. The incentive is intended to promote and accelerate investment in transmission projects that can significantly reduce congestion costs and enhance reliability in the region.

FERC Proceeding Regarding Base ROE of New England Transmission Operators

On October 20, 2011, NSTAR Electric along with the other NETOs, filed their response with the FERC. In that response, the NETOs vigorously defended the appropriateness of the current FERC-approved Base ROE. The NETOs requested that the FERC summarily dismiss the complaint. Should any unfavorable ruling by FERC result in a reduction of the Base ROE, the exposure would be limited to OATT rates assessed following the complaint date of September 30, 2011. NSTAR cannot predict the timing or outcome of this proceeding.

Other

a.	Energy Efficiency Plans

NSTAR Electric and NSTAR Gas administer demand-side management energy efficiency programs. The Massachusetts Green Communities Act (GCA) directed electric and natural gas distribution companies to develop three-year energy efficiency plans. The first three-year plan covering the period 2010 through 2012 was approved by the DPU and represents a significant expansion of energy efficiency activity in Massachusetts. Like the historical programs, the current three-year plan includes financial incentives based on energy efficiency program performance. In addition, the DPU has stated that it will permit distribution companies that do not yet have rate decoupling mechanisms in place to implement Lost Base Revenue (LBR) rate adjustment mechanisms that will partially offset reduced distribution rate revenues as a result of successful energy efficiency programs.

NSTAR Electric and NSTAR Gas incurred recoverable Energy Efficiency program expenses of $59.2 million and $1.8 million, respectively, during the third quarter of 2011. These program expenses for the nine months ended September 30, 2011 for NSTAR Electric and NSTAR Gas were $132.2 million and $10.2 million, respectively, inclusive of program administrator incentives. NSTAR Electric and NSTAR Gas anticipate that their separate 2011 Energy Efficiency Plans will amount to approximately $184.3 million and $20.1 million in recoverable expenses, inclusive of program administrator incentives, respectively.

b.	Northern Pass Transmission Project

On October 4, 2010, Northern Pass Transmission LLC (NPT) and H.Q. Hydro Renewable Energy, Inc. (Hydro Renewable Energy), an indirect, wholly-owned subsidiary of Hydro-Québec, entered into a Transmission Service Agreement (the TSA) in connection with the Northern Pass Transmission project (Northern Pass). NPT is a joint venture indirectly owned by NU and NSTAR, on a 75 percent and 25 percent basis, respectively. Northern Pass will be comprised of a new high voltage direct current (HVDC) transmission line from the Canadian border to Franklin, New Hampshire and an associated alternating current radial transmission line between Franklin, New Hampshire and Deerfield, New Hampshire. Northern Pass will interconnect at the U.S.-Canadian border with a planned HVDC transmission line to be constructed in Québec by Hydro-Québec TransÉnergie, the transmission division of Hydro-Québec.

Pursuant to the TSA, NPT will sell firm electric transmission rights to Hydro Renewable Energy over the 1,200 megawatt Northern Pass line for a forty-year term. The TSA was approved by the FERC on February 14, 2011 without modification. NPT will charge cost-based rates to Hydro Renewable Energy under the TSA for firm transmission service using a FERC approved formula rate. The projected cost-of-service

calculation includes a return on equity (ROE) of 12.56 percent through the construction phase of the project, after which the ROE will be tied to the ISO-New England regional rate base ROE (which is currently 11.14 percent) plus 142 basis points. The TSA rates will be based on a deemed capital structure for NPT of 50 percent debt and 50 percent equity. During the development phase and the construction phase under the TSA, NPT will be recording non-cash Allowance for Funds Used During Construction (AFUDC) earnings.

In October 2010, NPT filed the Northern Pass project design with ISO-New England Inc. for technical approval and filed a Presidential Permit application with the U.S. Department of Energy (DOE), which seeks permission to construct and maintain facilities that cross the Québec and New Hampshire border and connect to the HQ TransÉnergie facilities in Québec. During March 2011, the DOE held public meetings in New Hampshire seeking public comment on Northern Pass. In response to concerns raised at those meetings, on April 12, 2011, NPT revised its Presidential Permit application with the DOE. Since that hearing, NPT has undertaken a process of evaluating alternative routes, has selected a route, and is actively securing access to the route whether by ownership or by negotiating rights of way. NPT expects to file a new alternative route proposal with DOE later in 2011. DOE has indicated that the scoping comment period will be extended at least 45 days past the date the alternative route proposal is filed.

The extended route evaluation process is expected to result in the beginning of construction in 2014, and a completion date in the fourth quarter of 2016. The revised timing is not anticipated to have a material impact on the project budget. The estimated project costs are approximately $1.1 billion. NSTAR’s 25% share of the Northern Pass costs will total approximately $280 million.

On March 30, 2011, the New Hampshire House of Representatives approved House Bill 648, which would preclude non-reliability projects, such as Northern Pass, from using eminent domain to acquire property for construction of transmission lines. On June 2, 2011, the New Hampshire Senate voted to send House Bill 648 back to the Senate Judiciary Committee for further study. The New Hampshire Senate reconvenes in January 2012.

c.	Transmission Capital Improvement Project – Lower SEMA

The Lower Southeastern Massachusetts (SEMA) Project consists of an expansion and upgrade of existing transmission infrastructure, and construction of a new 31 mile, 345kV transmission line that will cross the Cape Cod Canal. On October 19, 2011, the Reliability Committee of the ISO voted to recommend approval for all costs associated with the project to be recovered from customers throughout the New England region under the ISO-NE regional transmission tariff. A pending application to the Massachusetts Energy Facilities Siting Board (EFSB) is in process. NSTAR must receive approval of the EFSB in order to proceed with construction. Hearings were held in the summer of 2011 and briefs have been filed. NSTAR awaits the decision of the EFSB, which is anticipated by year-end or early January 2012. NSTAR Electric anticipates completing the project in late 2012 at an approximate cost of $110 million.

Results of Continuing Operations

The following section of MD&A compares the results of continuing operations for each of the three and nine-month periods ended September 30, 2011 and 2010 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 2011 earnings guidance range of between $2.60 and $2.75 per share on a stand-alone basis. This range excludes merger-related costs.

Common Share Dividends

On September 29, 2011, NSTAR’s Board of Trustees declared a quarterly cash dividend of $0.425 per share to shareholders of record on October 21, 2011, payable November 1, 2011. NSTAR’s current cash dividend rate is $1.70 per share on an annualized basis.

Three Months Ended September 30, 2011 compared to Three Months Ended September 30, 2010

Executive Summary of Quarterly Results

Earnings per common share were as follows:


	Three Months Ended September 30,
	2011		2010			% Change
Basic and Diluted –
Continuing operations	$	0.94	$	0.93			1.1
Tax settlement, net		—		(0.20	)

Total earnings	$	0.94	$	0.73			28.8

Net income attributable to common shareholders was $97.6 million, or $0.94 per diluted share, for the quarter ended September 30, 2011 compared to $75.5 million, or $0.73 per diluted share, for the same period in 2010. The third quarter of 2010 includes a one-time charge related to an income tax settlement agreement of $20.6 million. Excluding merger-related items in 2011 and the tax settlement in 2010, earnings were $97.3 million and $96.1 million, or $0.94 and $0.93 per diluted share, in the third quarters of 2011 and 2010, respectively. Major factors on an after-tax basis that contributed to the $1.2 million, or 1.2%, increase in earnings include:

•

Higher transmission revenues ($4.2 million)

•

Higher lost base revenues related to the impacts of Energy Efficiency programs ($3.6 million)

•

Higher earnings contribution from NSTAR Communications ($1.1 million)

These increases in earnings factors were partially offset by:

•

Lower electric distribution revenues (2.1% decrease in sales) due to cooler summer weather and the impact of NSTAR’s Energy Efficiency programs ($5.2 million)

•

Higher depreciation and property taxes ($1.4 million)

•

Higher operations and maintenance expenses ($1.6 million)

Significant cash flow events during the quarter include the following:

•

Cash flows from continuing operating activities provided approximately $206.8 million, a decrease of $6.8 million as compared to the same period in 2010. The decrease primarily reflects the timing of energy supply payments and customer collections related to these energy costs, partly offset by lower income tax payments as a result of accelerated tax depreciation benefits in 2011

•

NSTAR invested approximately $99.8 million in capital projects to improve system reliability and capacity

•

NSTAR paid approximately $44 million in common share dividends, retired $37.1 million in long-term and securitized debt and reduced short-term borrowings by $41.5 million

Electric and Gas sales

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


Retail Electric Sales – MWh	Three Months Ended September 30,
Retail Electric Sales – MWh	2011		2010		% Change
Residential		1,952,728		2,032,255		(3.9	)
Commercial, Industrial, and Other		4,103,767		4,151,997		(1.2	)

Total retail sales		6,056,495		6,184,252		(2.1	)


Firm Gas and Transportation Sales – BBtu	Three Months Ended September 30,
Firm Gas and Transportation Sales – BBtu	2011		2010		% Change
Residential		1,340		1,284		4.4
Commercial and Industrial		2,821		2,830		(0.3	)
Municipal		176		182		(3.3	)

Total firm gas and transportation sales		4,337		4,296		0.9

NSTAR’s electric energy sales in the three months ended September 30, 2011 decreased 2.1% compared to 2010 primarily due to a cooler summer during 2011 as compared to 2010. Cooling degree-days in NSTAR’s service area for the three months ended September 30, 2011 were down 2.6% from the same period in 2010.

Weather and, to a lesser extent, 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, energy conservation, and other factors.

The demand for electricity and natural gas is affected by weather. Weather impacts electric sales primarily during the summer and, to a greater extent, natural 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 natural gas businesses are sensitive to variations in daily weather, are highly influenced by New England’s seasonal weather variations, and are susceptible to damage from major storms and other natural events and disasters 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 many degrees 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 table below shows weather conditions during the three-month period ended September 30, 2011 measured by heating and cooling degree-days, respectively. Cooling degree-days were 2.6% lower for 2011 as compared to 2010, unfavorably impacting revenues from electric sales. The third quarter is typically a very low volume sales quarter for gas. Weather conditions were warmer than the 30-year average by 29.8% and 33.1% for heating and cooling degree-days, respectively, during the third quarter of 2011. Refer to the “Electric Revenues” and “Gas Revenues” sections below for more detailed discussions.


Heating Degree-Days (Worcester, MA)
Three months ended September 30, 2011			113
Three months ended September 30, 2010			128
Normal 30-Year Average			161
Cooling Degree-Days (Boston, MA)
Three months ended September 30, 2011			789
Three months ended September 30, 2010			810
Normal 30-Year Average			593

Operating revenues

Operating revenues for the third quarter of 2011 increased $10.6 million, or 1.3%, from the same period in 2010 as follows:


(in millions)	Three Months Ended September 30,				Increase/(Decrease)
(in millions)	2011		2010		Amount			Percent
Electric revenues
Retail distribution and transmission	$	377.1	$	384.8	$	(7.7	)		(2.0	)%
Energy, transition and other		378.7		368.7		10.0			2.7	%

Total electric revenues		755.8		753.5		2.3			0.3	%
Gas revenues
Firm and transportation		18.2		16.6		1.6			9.6	%
Energy supply and other		35.1		28.4		6.7			23.6	%

Total gas revenues		53.3		45.0		8.3			18.4	%


Total operating revenues	$	809.1	$	798.5	$	10.6			1.3	%

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 decrease of $7.7 million, or 2%, in retail distribution and transmission revenues is primarily due to lower sales due to cooler weather and energy efficiency programs.

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. Uncollected transition costs as a result of the reductions in transition rates are deferred and collected through future rates with a carrying charge. The $10 million, or 2.7%, increase in energy, transition, and other revenues is primarily attributable to higher energy efficiency revenues due to the expansion of these programs, partially offset by lower sales and lower average Basic Service rates in effect due to lower energy costs. NSTAR recognized $5.9 million during the quarter ended September 30, 2011 of LBR relating to the impacts of the Energy Efficiency Programs implemented under the GCA. LBR is subject to DPU approval and NSTAR is collecting LBR in rates.

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 increased $1.6 million, or 9.6%, primarily due to an increase in gas sales volumes of 0.9%.

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 increase of $6.7 million, or 23.6%, primarily reflects an increase in the cost of gas supply. These revenues are fully reconciled with the costs recognized by the Company and, as a result, do not have an effect on NSTAR’s consolidated net income.

Operating expenses

Purchased power and transmission expense was $318.5 million in the third quarter of 2011 compared to $341.9 million in the same period of 2010, a decrease of $23.4 million, or 6.8%. The decrease in expense reflects lower Basic Service and other energy costs of $18.5 million and lower transmission costs of $4.9 million due to a decrease 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 $27.7 million in the third quarter of 2011 compared to $20 million in the same period of 2010, an increase of $7.7 million, or 38.5%. The increase in expense primarily reflects an increase in natural gas supply costs and higher sales of 0.9%. 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 $113.1 million in the third quarter of 2011 compared to $106.6 million in the same period of 2010, an increase of $6.5 million, or 6.1%. One significant component contributing to this increase in expense is higher pension and PBOP related PAM amortization costs ($3.6 million). Fluctuations in PAM amortization do not have an earnings impact as these costs are fully recovered from customers. Also contributing to the higher expense were transmission costs ($2.4 million) and storm-related expenses ($2.2 million).

Depreciation and amortization expense was $72.1 million in the third quarter of 2011 compared to $71.7 million in the same period of 2010, an increase of $0.4 million, or 0.6%. The increase primarily reflects higher depreciable distribution and transmission plant-in-service, offset by the lower amortization costs related to the pay-down of securitized debt.

Energy efficiency programs expense was $61 million in the third quarter of 2011 compared to $45.4 million in the same period of 2010, an increase of $15.6 million, or 34.4%. These costs are in accordance with the three-year plan program guidelines established by the DPU and are collected from customers on a fully reconciling basis plus a performance incentive. NSTAR anticipates a further increase in Energy Efficiency spending during 2011 and in future years driven by requirements of the GCA.

Property and other taxes expense was $30.9 million in the third quarter of 2011 compared to $29.3 million in the same period of 2010, an increase of $1.6 million, or 5.5%, reflecting higher overall property investments and higher tax rates.

Interest charges (income):

Long-term debt and transition property securitization certificate interest charges were $31.7 million in the third quarter of 2011 compared to $32.6 million in the same period of 2010, a decrease of $0.9 million, or 2.8%. The decrease in interest charges reflects scheduled principal pay downs of transition property securitization debt and the retirement of NSTAR Electric’s $15 million, 5.75% Massachusetts Industrial Finance Agency Bonds on August 1, 2011.

Interest income and other, net were $6.2 million of net interest income in the third quarter of 2011 compared to $6.1 million of net interest income in the same period of 2010, an increase of $0.1 million, or 1.6%, due to decreased interest expense on short-term debt, bank fees and other interest costs of $0.8 million, partially offset by lower interest income of $0.5 million and $0.1 million from income on tax issues and regulatory deferrals, respectively.

Other income (deductions):

Interest – RCN tax settlement reflects the interest expense accrual of $4.5 million resulting from the acceptance of a settlement offer with the IRS Office of Appeals regarding the characterization of the loss related to the RCN share abandonment.

Other income was $0.9 million in the third quarter of 2011 compared to $1.4 million in the same period of 2010. The decrease relates primarily to lower cash surrender values of insurance policies, partly offset by higher equity investment earnings.

Other deductions were $2.2 million in the third quarter of 2011 compared to $0.4 million in the same period of 2010, an increase in deductions of $1.8 million primarily related to merger-related costs of $0.9 million.

Income tax expense:

Tax settlement – RCN reflects the income tax expense accrual of $16.1 million resulting from the acceptance of a settlement offer with the IRS Office of Appeals regarding the characterization of the loss related to the RCN share abandonment.

Income tax expense was $60.9 million in the third quarter of 2011 compared to $60.8 million in the same period of 2010, an increase of $0.1 million, or 0.2%, reflecting higher pre-tax income.

Nine Months Ended September 30, 2011 compared to Nine Months Ended September 30, 2010

Executive Summary of Year to Date Results

Earnings per common share were as follows:


	Nine Months Ended September 30,
	2011		2010			% Change
Basic –
Continuing operations	$	2.13	$	2.00			6.5
Income from discontinued operations		—		0.07			—

		2.13		2.07			2.9
Gain on sale of discontinued operations		—		1.03
Tax settlement, net		—		(0.20	)
Merger-related costs, net		0.05		—			—

Total earnings	$	2.08	$	2.90			(28.3	)

Diluted –
Continuing operations	$	2.12	$	2.00			6.0
Income from discontinued operations		—		0.07

		2.12		2.07			2.4
Gain on sale of discontinued operations		—		1.03
Tax settlement, net		—		(0.20	)
Merger-related costs, net		0.05		—

Total earnings	$	2.07	$	2.90			(28.6	)

Net income attributable to common shareholders was $215.1 million, or $2.07 per diluted share, for the nine months ended September 30, 2011 compared to $306.3 million, or $2.90 per diluted share, for the same period in 2010. The nine-month period of 2010 includes a one-time gain on the sale of MATEP of $108.6 million, or $1.03 per diluted share. The current nine-month period in 2011 includes a net charge of $5.6 million, or $0.05 per share, for costs associated with the pending merger with Northeast Utilities. Excluding these costs in 2011, MATEP activity in 2010 and the IRS tax settlement in 2010, earnings were $220.7 million and $211.3 million, or $2.12 and $2.00 per diluted share, through September 30, 2011 and 2010, respectively. Major factors on an after-tax basis that contributed to the $9.4 million, or 4.4%, increase in earnings include:

•

Higher gas distribution revenues due to a 10.3% increase in sales ($4.5 million)

•

Higher lost base revenues related to the impacts of Energy Efficiency programs ($3.6 million)

•

Higher transmission revenues ($7.4 million)

•

Higher earnings contribution from NSTAR Communications ($2.7 million)

•

The absence in 2011 of the cumulative impact of a true-up adjustment resulting from a DPU order in May 2010 related to NSTAR Electric’s transition revenues for the years 2006-2009 ($3 million)

•

Lower net interest charges ($3.5 million)

These increases in earnings factors were partially offset by:

•

Lower electric revenues (0.3% decrease in sales) due to cooler summer weather and the impact of NSTAR’s Energy Efficiency programs ($3.2 million)

•

Higher depreciation and property taxes ($7 million)

•

Higher operations and maintenance expenses ($8 million)

Significant cash flow events during the nine months ended September 30, 2011 include the following:

•

Cash flows from continuing operating activities provided approximately $660.1 million, an increase of $215.9 million as compared to the same period in 2010. The increase primarily reflects receipt of a tax refund and the associated interest totaling $143.3 million. Other favorable impacts include the timing of energy supply payments and customer collections related to these energy costs and lower income tax payments as a result of accelerated tax depreciation benefits in 2011

•

NSTAR invested approximately $286.6 million in capital projects to improve system reliability and capacity

•

NSTAR paid approximately $132.1 million in common share dividends, retired $78.7 million in long-term and securitized debt and reduced short-term borrowings by $170 million.

Electric and Gas sales

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


Retail Electric Sales – MWh	Nine Months Ended September 30,
	2011		2010		% Change
Residential		5,198,800		5,216,176		(0.3	)
Commercial, Industrial, and Other		11,240,171		11,280,164		(0.4	)

Total retail sales		16,438,971		16,496,340		(0.3	)


Firm Gas and Transportation Sales – BBtu	Nine Months Ended September 30,
	2011		2010		% Change
Residential		14,786		13,259		11.5
Commercial and Industrial		16,187		14,910		8.6
Municipal		2,220		1,937		14.6

Total firm gas and transportation sales		33,193		30,106		10.3

NSTAR’s electric energy sales in the nine months ended September 30, 2011 decreased 0.3% compared to 2010 primarily due to a cooler second and third quarter of 2011, but offset by favorable weather conditions in the first quarter of 2011 resulting from a colder winter as compared to 2010. Heating degree-days in NSTAR’s service area for the nine months ended September 30, 2011 were up 14.7% from the same period in 2010.

The 10.3% increase in firm gas and transportation sales is primarily due to the colder winter and cooler spring weather during 2011 as compared to the prior year, with some impact from customer conversions from oil to gas.

Weather conditions

As shown in the table below, weather conditions during the nine-month period ended September 30, 2011 measured by heating degree-days and cooling degree-days, respectively, were 14.7% higher/colder relating to heating degree-days and 8.1% lower/cooler related to cooling degree-days as compared to the same period in 2010, favorably impacting gas revenues, but unfavorably impacting revenues from electric sales. Weather conditions during the nine-month period ended September 30, 2011 compared to the normal 30-year average for the same period, were 0.5% higher/colder and 27.7% higher/warmer for heating and cooling degree-days, respectively. Refer to the “Electric Revenues” and “Gas Revenues” sections below for more detailed discussions.


Heating Degree-Days (Worcester, MA)
Nine months ended September 30, 2011			4,406
Nine months ended September 30, 2010			3,842
Normal 30-Year Average			4,385

Cooling Degree-Days (Boston, MA)
Nine months ended September 30, 2011			982
Nine months ended September 30, 2010			1,069
Normal 30-Year Average			769

Operating revenues

Operating revenues for the nine months ended September 30, 2011 increased $30.6 million, or 1.4%, from the same period in 2010 as follows:


(in millions)	Nine Months Ended September 30,				Increase
(in millions)	2011		2010		Amount		Percent
Electric revenues
Retail distribution and transmission	$	930.0	$	925.5	$	4.5		0.5	%
Energy, transition and other		1,003.8		995.6		8.2		0.8	%

Total electric revenues		1,933.8		1,921.1		12.7		0.7	%
Gas revenues
Firm and transportation		111.7		101.0		10.7		10.6	%
Energy supply and other		207.7		200.5		7.2		3.6	%

Total gas revenues		319.4		301.5		17.9		5.9	%


Total operating revenues	$	2,253.2	$	2,222.6	$	30.6		1.4	%

Electric revenues

The increase of $4.5 million, or 0.5%, in retail distribution and transmission revenues primarily reflects:

•

Increased transmission revenues primarily due to the recovery of a higher transmission investment base, including higher depreciation and property taxes and recovery of higher regional network service and other costs ($3.2 million)

•

Increased PAM-related recovery revenues due to increased amortization of previously deferred costs ($6.9 million)

These increases were offset by:

•

Decreased distribution revenues due to decreased sales of 0.3% due to the impact of weather conditions and a negative annual inflation rate adjustment ($5.3 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. Uncollected transition costs as a result of the reductions in transition rates are deferred and collected through future rates with a carrying charge. The $8.2 million, or 0.8%, increase in energy, transition, and other revenues is primarily attributable to higher energy efficiency revenues due to the expansion of these programs, partially offset by lower average Basic Service rates in effect due to lower energy costs. NSTAR has recognized $5.9 million in the nine months ended September 30, 2011 of Lost Base Revenues (LBR) relating to the impacts of the Energy Efficiency Programs implemented under the GCA. LBR is subject to DPU approval and NSTAR is collecting LBR in rates.

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 increased $10.7 million, or 10.6%, primarily due to an increase in gas sales volumes of 10.3%, with some impact from customer conversions from oil to gas.

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 increase of $7.2 million, or 3.6%, is primarily due to the 10.3% increase in gas sales volume and the collection of previously deferred gas expense. These revenues are fully reconciled with the costs recognized by the Company and, as a result, do not have an effect on NSTAR’s consolidated net income.

Operating expenses

Purchased power and transmission expense was $841.9 million in the nine months ended September 30, 2011 compared to $893.2 million in the same period of 2010, a decrease of $51.3 million, or 5.7%. The decrease in expense reflects lower Basic Service and other energy costs of $56 million. These decreases were partially offset by higher transmission costs of $4.7 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 $174 million in the nine months ended September 30, 2011 compared to $170.7 million in the same period of 2010, an increase of $3.3 million, or 1.9%. The increase in expense primarily reflects higher sales of 10.3% and higher settlements of gas hedge contracts, partially offset by lower 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 $340.9 million in the nine months ended September 30, 2011 compared to $318.1 million in the same period of 2010, an increase of $22.8 million, or 7.2%. One significant component contributing to this increase in expense is higher pension and PBOP related PAM amortization costs ($10.8 million). Fluctuations in PAM amortization do not have an earnings impact as these costs are fully recovered from customers. Also contributing to the higher expense were transmission costs ($3 million), storm-related expenses ($4.4 million), higher maintenance costs ($1.9 million), and higher labor and labor-related costs ($3.1 million).

Depreciation and amortization expense was $227.5 million in the nine months ended September 30, 2011 compared to $237.8 million in the same period of 2010, a decrease of $10.3 million, or 4.3%. The decrease primarily reflects the lower amortization costs related to the pay-down of securitized debt, offset by higher depreciable distribution and transmission plant-in-service.

Energy efficiency programs expense was $142.4 million in the nine months ended September 30, 2011 compared to $90.2 million in the same period of 2010, an increase of $52.2 million, or 57.9%. These costs are in accordance with the three-year plan program guidelines established by the DPU and are collected from customers on a fully reconciling basis plus a performance incentive. NSTAR anticipates a further increase in Energy Efficiency spending during 2011 and in future years driven by requirements of the GCA.

Property and other taxes expense was $94.3 million in the nine months ended September 30, 2011 compared to $87.2 million in the same period of 2010, an increase of $7.1 million, or 8.1%, reflecting higher overall property investments and higher tax rates.

Interest charges (income):

Long-term debt and transition property securitization certificate interest charges were $95.7 million in the nine months ended September 30, 2011 compared to $103.8 million in the same period of 2010, a decrease of $8.1 million, or 7.8%. The decrease in interest charges reflects scheduled principal pay downs of transition property securitization debt and the retirements of NSTAR’s $500 million, 8% Notes in mid-February 2010 and NSTAR Electric’s $125 million, 7.80% Debentures in May 2010. These reductions in interest expense were partially offset by interest expense for NSTAR Electric’s $300 million, 5.50% Debentures issued in March 2010.

Interest income and other, net were $21.5 million of net interest income in the nine months ended September 30, 2011 compared to $23.2 million of net interest income in the same period of 2010, a decrease of $1.7 million, or 7.3%, due to decreased interest income on tax issues of $9.5 million, partially offset by higher interest income of $3.7 million from regulatory deferrals and $3.2 million in interest income from legal matters.

Other income (deductions):

Other income was $3.4 million in the nine months ended September 30, 2011 compared to $2.8 million in the same period of 2010, an increase of $0.6 million. The increase relates primarily to higher equity investment earnings.

Other deductions were $10.7 million in the nine months ended September 30, 2011 compared to $1.6 million in the same period of 2010, an increase in deductions of $9.1 million primarily related to merger-related costs of $8.2 million.

Income tax expense:

Income tax expense was $134 million in the nine months ended September 30, 2011 compared to $133.1 million in the same period of 2010, an increase of $0.9 million, or 0.7%, primarily reflecting a higher pre-tax operating income in 2011.

Liquidity and Capital Resources

Financial Market Impact

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 has been able to successfully access capital markets to issue long-term debt and facilitate short-term financing for working capital needs. 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 or 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, 2010, for a further discussion.

As a result of volatility in the securities markets and its 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 believes that it has adequate access to short-term credit markets to facilitate its working capital needs at favorable terms. As of September 30, 2011, NSTAR, NSTAR Electric, and NSTAR Gas had $175 million, $450 million, and $100 million, respectively, in available unused revolving credit facilities in order to meet working capital needs.

Current Cash Flow Activity

NSTAR’s primary uses of cash in the nine months ended September 30, 2011 included capital expenditures, dividend payments, payments on short-term debt and securitized debt redemptions. NSTAR’s primary sources of cash in the nine months ended September 30, 2011 included cash from electric and gas operations and receipt of a tax refund with associated interest.

Operating Activities

The net cash provided by operating activities of continuing operations was $660.1 million in 2011, as compared to $444.2 million in 2010, an increase of $215.9 million primarily due to receipt of a tax refund and associated interest of $143.3 million, the timing of energy supply payments and related recovery of these costs from customers, and lower estimated tax payments due to bonus depreciation benefits.

Investing Activities

The net cash used in investing activities of continuing operations in 2011 was $265 million, as compared to $257.7 million in the same period of 2010, an increase of $7.3 million. Plant expenditures in 2011 were $46.1 million higher than those in 2010. This increase was partially offset by the refund of restricted cash related to a modification of the ISO-NE’s financial assurance policy whereby NSTAR Electric was released from a requirement to deposit $17 million in an escrow account.

Financing Activities

Net cash used in financing activities of continuing operations in 2011 was $396.4 million compared to $509.9 million in the same period of 2010, a decrease of $113.5 million. Uses of cash primarily reflect long-term and securitized debt redemptions of $78.7 million in 2011 compared to $698.5 million in 2010 and payments on short-term borrowings of $170 million as compared to increased borrowings of $43.5 million in 2010. During the nine months ended September 30, 2010, sources of cash included proceeds from the issuance of long-term debt of $300 million and $125 million to NSTAR Electric and NSTAR Gas, respectively. In June 2010, $125 million was used to acquire treasury stock pursuant to an accelerated share repurchase program.

Income Tax Refunds and Payments

On April 21, 2011, NSTAR received a $143.3 million refund from the IRS comprised of an overpayment of tax and accrued interest thereon, relating to the 2001-2007 tax years. The approved settlement and receipt of the refund resolves all outstanding tax matters for these years.

During the nine months ended September 30, 2011 and 2010, NSTAR received net cash refunds and made income tax payments of $66.8 million and $158.7 million, respectively. The change from 2010 to 2011 is due to the settlement of the tax years 2001-2007 and the effects of bonus depreciation.

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. The prescribed ratio is calculated excluding both Transition Property Securitization Certificates from debt and accumulated other comprehensive income (loss) from common equity. The debt portion of the ratio includes unfunded vested benefits under postretirement benefit plans, contract liability positions (including swaps and hedges), capital lease liabilities, and corporate guarantees. NSTAR Gas must also maintain a total debt to capitalization ratio no greater than 65% at all times pursuant to its revolving credit agreement. NSTAR Gas was in compliance with its financial covenant requirements including a minimum equity requirement, under its long-term debt arrangements at September 30, 2011 and December 31, 2010. 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 is unsecured.

NSTAR currently has a $175 million revolving credit agreement that expires December 31, 2012. At September 30, 2011 and December 31, 2010, 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, 2011 and December 31, 2010, had $135 million and $160 million amounts 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. The prescribed ratio is calculated excluding both Transition Property Securitization Certificates from debt and accumulated other comprehensive income (loss) from common equity. The debt portion of the ratio includes unfunded vested benefits under postretirement benefit plans, contract liability positions (including swaps and hedges), capital lease liabilities, and corporate guarantees. Commitment fees must be paid on the total agreement amount. At September 30, 2011 and December 31, 2010, NSTAR was in full compliance with the aforementioned covenant as the ratios were 54.2% and 56.9%, respectively.

NSTAR Electric has approval from the FERC to issue short-term debt securities from time to time on or before October 22, 2012, with maturity dates no later than October 21, 2013, 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, 2011 and December 31, 2010, 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 $82.5 million and $227.5 million outstanding balances at September 30, 2011 and December 31, 2010, respectively. At September 30, 2011 and December 31, 2010, NSTAR Electric was in full compliance with its covenants in connection with its short-term credit facilities, as the total debt to capitalization ratios were 43.8% and 46.6%, respectively.

In connection with the pending merger with Northeast Utilities, NSTAR and NSTAR Electric received waivers and executed amendments to their respective revolving credit agreements necessary to allow completion of the merger.

NSTAR Gas has a $100 million revolving credit facility. This facility is due to expire on December 9, 2011. As of September 30, 2011 and December 31, 2010, NSTAR Gas had no amounts outstanding. At September 30, 2011 and December 31, 2010, NSTAR Gas was in full compliance with its covenant in connection with its credit facility, as the total debt to capitalization ratios were 49.8% and 53.3%, respectively.

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 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, 2011, NSTAR’s subsidiaries could declare and pay dividends of up to approximately $1.4 billion of their total common equity (approximately $2.5 billion) to NSTAR and remain in compliance with debt covenants. Based on NSTAR’s key cash resources available as previously discussed, management believes liquidity and capital resources are sufficient to meet current and projected cash requirements.

Commitments and Contingencies

NSTAR is exposed to certain matters as discussed further in this Quarterly Report’s MD&A section under the caption “Critical Accounting Policies and Estimates.”

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

Energy Risk Management

NSTAR’s Energy Procurement Policy governs all energy-related transactions for its regulated electric and gas subsidiaries. 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’s electric and gas distribution subsidiaries 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 mechanisms 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, Natural Gas Hedging Agreements,” for a further discussion.

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. At September 30, 2011 and December 31, 2010, respectively, all of NSTAR’s long-term debt had fixed interest rates. 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 0.33% and 0.39% for the nine months ended September 30, 2011 and 2010, 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 potential 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, 2010.

Risk Factor

The following risk factor has been added to this Form 10-Q since the filing of the Form 10-K:

NSTAR’s electric and gas operations could face negative impact from terrorism, cyber attacks, sabotage, acts of war, or other catastrophic events.

NSTAR’s electric and natural gas delivery infrastructure facilities and the generation and transmission infrastructure facilities of third parties could be direct targets of terrorism, cyber attacks, sabotage, or acts of war. The costs to repair any damage to operating facilities from destructive events could be substantial. Such actions could also result in political, economic and financial market instability, which could have a material adverse impact on the Company’s operations. While it is not possible to predict the impact of a particular event of this type, the impact that any threat of terrorism, cyber attack, act of war or other catastrophic event might have on the energy industry and on NSTAR’s business in particular could be material.

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 Long Term Incentive Plan and the NSTAR Savings Plan may consist of newly issued shares from the Company or shares purchased on the open market by the Company or an independent agent. During the three-month period ended September 30, 2011, the shares listed below were acquired in the open market for such purposes.


	Total Number of Common Shares Purchased		Average Price Paid Per Share
July		106,856	$	45.41
August		131,858	$	44.02
September		20,544	$	43.74

Total Third Quarter		259,258	$	44.57

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	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.



Exhibit	101.INS	-	XBRL Instance Document

Exhibit	101.SCH	-	XBRL Taxonomy Extension Schema Document

Exhibit	101.CAL	-	XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit	101.DEF	-	XBRL Taxonomy Extension Definition Linkbase Document

Exhibit	101.LAB	-	XBRL Taxonomy Extension Label Linkbase Document

Exhibit	101.PRE	-	XBRL Taxonomy Extension Presentation Linkbase

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.