Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

0001193125-12-222586.txt : 20120510 0001193125-12-222586.hdr.sgml : 20120510 20120509174929 ACCESSION NUMBER: 0001193125-12-222586 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20120331 FILED AS OF DATE: 20120510 DATE AS OF CHANGE: 20120509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NSTAR ELECTRIC CO CENTRAL INDEX KEY: 0000013372 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041278810 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02301 FILM NUMBER: 12827012 BUSINESS ADDRESS: STREET 1: 800 BOYLSTON ST STREET 2: P1600 CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6174242000 MAIL ADDRESS: STREET 1: 800 BOYLSTON ST STREET 2: P1600 CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: BOSTON EDISON CO DATE OF NAME CHANGE: 19920703 10-Q 1 d325730d10q.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 March 31, 2012

¨	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: 001-02301

NSTAR Electric Company

(Exact name of registrant as specified in its charter)


Massachusetts		04-1278810
(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 100 shares, par value $1 per share, as of May 7, 2012.

NSTAR Electric Company

Form 10-Q

Quarterly Period Ended March 31, 2012

Table of Contents


		Page No.

Glossary of Terms		2

Cautionary Statement Regarding Forward-Looking Information		3 - 4

Part I. Financial Information:
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Income	5
	Condensed Consolidated Statements of Retained Earnings	6
	Condensed Consolidated Balance Sheets	7 - 8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10 - 18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18 - 29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30 - 31

Part II. Other Information:
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 5.	Other Information	31 - 32
Item 6.	Exhibits	33

Signature		34

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 Information

Our website address is www.nu.com. We make available through our website a link to the SEC’s EDGAR website (http://www.sec.gov/edgar/searchedgar/companysearch.html), at which site NU’s, NSTAR Electric’s, CL&P’s, WMECO’s and PSNH’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports may be reviewed. Printed copies of these reports may be obtained free of charge by writing to our Investor Relations Department at Northeast Utilities, 56 Prospect Street, Hartford, CT 06103.

The certifications of NSTAR Electric’s Chief Executive Officer and Executive Vice President and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached to this Quarterly Report on Form 10-Q as Exhibits 31.1, 31.2, 32.1, and 32.2.

NSTAR Electric Company

Form 10-Q

Quarterly Period Ended March 31, 2012

Glossary of Terms

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


Northeast Utilities Companies
Northeast Utilities		Northeast Utilities (Holding company) or NU and its subsidiaries (as the context requires)
NSTAR		Parent Company of NSTAR Electric (prior to the merger with NU)
NSTAR LLC		A wholly-owned subsidiary of NU and parent company of NSTAR Electric (formerly NSTAR)
NSTAR Electric		NSTAR Electric Company (the Company)
NSTAR Gas		NSTAR Gas Company
NSTAR Electric & Gas		NSTAR Electric & Gas Corporation
HEEC		Harbor Electric Energy Company
CL&P		The Connecticut Light and Power Company
PSNH		Public Service Company of New Hampshire
WMECO		Western Massachusetts Electric Company

Regulatory and Other Authorities
CCC		Cape Cod Commission
DOE		U.S. Department of Energy
DOER		Massachusetts Department of Energy Resources
DPU		Massachusetts Department of Public Utilities
FERC		Federal Energy Regulatory Commission
IRS		U.S. Internal Revenue Service
ISO-NE		ISO (Independent System Operator) - New England, Inc
SEC		U.S. Securities and Exchange Commission
SJC		Massachusetts Supreme Judicial Court

Other
AFUDC		Allowance for Funds Used During Construction
ARO		Asset Retirement Obligation
ASC		Financial Accounting Standards Board (U.S.) Accounting Standards Codification
CPSL		Capital Projects Scheduling List
CY		Connecticut Yankee Atomic Power Company
EERF		Energy Efficiency Reconciling Factor
GAAP		Generally Accepted Accounting Principles in the United States of America
GCA		Massachusetts Green Communities Act
GWSA		Massachusetts Global Warming Solutions Act
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)
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
MW		Megawatts
MWh		Megawatthour (equal to one million watthours)
MY		Maine Yankee Atomic Power Company
PAM		Pension and PBOP Rate Adjustment Mechanism
PBOP		Postretirement Benefits Other than Pensions
ROE		Return on Equity
SIP		Simplified Incentive Plan
SQI		Service Quality Indicators
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 Electric 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

•

ability to continue cost control processes

•

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 or information 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 business, 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 standards of performance for emergency preparation and restoration of service; and

•

the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the merged businesses.

Any forward-looking statement speaks only as of the date of this filing and NSTAR Electric 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 Electric makes in its filings to the SEC. Other factors in addition to those listed here could also adversely affect NSTAR Electric. 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 Condensed Consolidated Financial Statements and NSTAR Electric encourages a review of these items.

Part I - Financial Information

Item 1.

Financial Statements

NSTAR Electric Company

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands)


	Three Months Ended March 31,
	2012			2011

Operating revenues	$	580,304		$	597,894


Operating expenses:
Purchased power and transmission		262,579			279,338
Operations and maintenance		145,383			92,831
Depreciation and amortization		69,975			68,521
Energy efficiency programs		46,904			40,091
Property and other taxes		30,817			29,022

Total operating expenses		555,658			509,803


Operating income		24,646			88,091


Interest charges (income):
Long-term debt		22,376			22,637
Transition property securitization		1,371			2,355
Interest income and other, net		(4,961	)		(7,417	)

Total interest charges		18,786			17,575


Other income (deductions):
Other income		1,383			1,018
Other deductions		(1,268	)		(566	)

Total other income		115			452


Income before income taxes		5,975			70,968
Income taxes		2,035			28,075

Net income	$	3,940		$	42,893

Per share data is not relevant because NSTAR Electric Company’s common stock is wholly-owned by NSTAR at March 31, 2012 and 2011.

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

NSTAR Electric Company

Condensed Consolidated Statements of Retained Earnings

(Unaudited)

(in thousands)


	Three Months Ended March 31,
	2012		2011

Balance at the beginning of the period	$	1,239,135	$	1,158,501
Net income		3,940		42,893

Subtotal		1,243,075		1,201,394


Dividends declared:
Common stock dividends declared to Parent		57,100		50,000
Preferred stock dividends declared		490		490

Subtotal		57,590		50,490


Balance at the end of the period	$	1,185,485	$	1,150,904

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

NSTAR Electric Company

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)


	March 31, 2012		December 31, 2011
Assets

Current assets:
Cash and cash equivalents	$	9,143	$	9,373
Accounts receivable, net of allowance of $41,684 and $27,118, respectively		222,231		232,827
Accrued unbilled revenues		33,875		40,380
Regulatory assets		305,142		312,133
Inventory, at average cost		37,907		31,222
Other		411		247

Total current assets		608,709		626,182


Utility plant:
Electric plant in service, at original cost		5,778,320		5,720,718
Less: accumulated depreciation		1,467,561		1,436,021

Net electric plant-in-service		4,310,759		4,284,697
Construction work in progress		189,879		162,050

Net utility plant		4,500,638		4,446,747


Other investments:
Equity and other investments		3,848		4,211
Restricted cash - securitization		3,373		3,373

Total other investments		7,221		7,584


Deferred debits:
Regulatory assets		1,595,569		1,680,596
Other deferred debits		41,270		30,241

Total deferred debits		1,636,839		1,710,837


Total assets	$	6,753,407	$	6,791,350

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

NSTAR Electric Company

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)


	March 31, 2012		December 31, 2011
Liabilities and Capitalization

Current liabilities:
Long-term debt	$	400,275	$	400,687
Transition property securitization		73,448		48,680
Notes payable		212,500		141,500
Power contract obligations		31,118		31,717
Accounts payable		162,891		182,035
Payable to affiliates, net		80,706		124,432
Income taxes		98,204		96,155
Accrued interest		26,214		18,956
Other		87,457		57,854

Total current liabilities		1,172,813		1,102,016


Deferred credits and other liabilities:
Accumulated deferred income taxes		1,302,891		1,310,180
Power contract obligations		106,879		112,010
Pension liability		363,751		357,685
Regulatory liability - cost of removal		237,617		235,762
Payable to affiliates		70,550		75,905
Other deferred credits		78,006		79,837

Total deferred credits		2,159,694		2,171,379


Capitalization:
Long-term debt:
Long-term debt		1,199,802		1,199,714
Transition property securitization		—		43,493

Total long-term debt		1,199,802		1,243,207


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


Common equity:
Common stock, par value $1 per share (100 shares issued and outstanding)		—		—
Premium on common stock		992,613		992,613
Retained earnings		1,185,485		1,239,135

Total common equity		2,178,098		2,231,748


Total capitalization		3,420,900		3,517,955


Commitments and contingencies

Total liabilities and capitalization	$	6,753,407	$	6,791,350

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

NSTAR Electric Company

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Three Months Ended March 31,
	2012			2011

Operating activities:
Net income	$	3,940		$	42,893
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		69,975			68,521
Debt amortization		1,086			1,198
Deferred income taxes		(19,786	)		5,796
Net changes in:
Current assets and liabilities		2,840			(78,026	)
Regulatory assets		73,055			25,851
Long-term power contract obligations		(7,750	)		(21,585	)
Deferred debits and credits, net		(19,570	)		3,256

Net cash provided by operating activities		103,790			47,904


Investing activities:
Plant expenditures (including AFUDC)		(98,668	)		(72,811	)
Decrease in restricted cash		—			17,007
Net change in other investment activities		375			—

Net cash used in investing activities		(98,293	)		(55,804	)


Financing activities:
Transition property securitization redemptions		(18,725	)		(21,336	)
Long-term debt redemptions		(412	)		(412	)
Net change in notes payable		71,000			79,000
Dividends paid		(57,590	)		(50,490	)

Net cash (used in) provided by financing activities		(5,727	)		6,762


Net decrease in cash and cash equivalents		(230	)		(1,138	)
Cash and cash equivalents at the beginning of the year		9,373			8,964

Cash and cash equivalents at the end of the period	$	9,143		$	7,826


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	16,107		$	17,605
Income taxes	$	7,176		$	13,100
Non-cash investing activity:
Plant additions included in accounts payable	$	29,470		$	13,498

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

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The accompanying notes should be read in conjunction with Notes to Consolidated Financial Statements included in NSTAR Electric’s 2011 Annual Report on Form 10-K.

Note A. Business Organization and Summary of Significant Accounting Policies

1.	About NSTAR Electric

NSTAR Electric Company (NSTAR Electric or the Company) is a regulated public utility incorporated in 1886 under Massachusetts law. On April 10, 2012, NSTAR Electric became an indirect wholly-owned subsidiary of Northeast Utilities (NU). NSTAR Electric serves approximately 1.1 million electric distribution customers in the City of Boston and 80 surrounding communities. NU is a holding company engaged through its subsidiaries in the energy delivery business serving approximately 3.5 million customers in Connecticut, Massachusetts and New Hampshire. NSTAR Electric & Gas provides management and support services to NSTAR Electric.

Harbor Electric Energy Company (HEEC), a wholly-owned subsidiary of NSTAR Electric, provides distribution service and ongoing support to its only customer, the Massachusetts Water Resources Authority’s wastewater treatment facility located on Deer Island in Boston, Massachusetts. NSTAR Electric consolidates two wholly-owned special purpose subsidiaries, BEC Funding II, LLC and CEC Funding, LLC. These entities were created to complete the sale of electric rate reduction certificates to a special purpose trust created by two Massachusetts state agencies. These financing transactions securitized the costs incurred related to the divestiture of generation assets and long-term power contracts. The activities of a third special purpose subsidiary, BEC Funding LLC, were substantially completed as of March 31, 2010 and the Company was dissolved on April 14, 2010.

2. NSTAR Merger with Northeast Utilities Completed

On April 10, 2012, NSTAR merged into NSTAR LLC, a direct wholly-owned subsidiary of NU, in accordance with the Agreement and Plan of Merger (the Merger Agreement) dated October 16, 2010 as approved by shareholders of each company on March 4, 2011. NSTAR LLC is the sole shareholder of the Company. The transaction with NU was structured as a merger of equals in a tax-free exchange of shares. As part of the merger, NSTAR shareholders received 1.312 NU common shares for each NSTAR common share owned as of the acquisition date.

Regulatory Approvals

On February 15, 2012, NU and NSTAR reached comprehensive settlement agreements with both the Massachusetts Attorney General and the Massachusetts Department of Energy Resources (DOER). The settlement with the Attorney General covered a variety of rate-making and rate design issues, including a base distribution rate freeze at least through 2015 for NSTAR Electric, NSTAR Gas and WMECO and $15 million, $3 million and $3 million rate credits to their respective customers. The settlement agreement with the DOER covered the same rate-making and rate design issues, as well as a variety of matters impacting the advancement of Massachusetts clean energy goals established by the Green Communities Act (GCA) and Global Warming Solutions Act (GWSA). On April 4, 2012, the Massachusetts Department of Public Utilities (DPU) issued a decision approving the settlement agreements and the merger of NU and NSTAR. Base distribution rates for the utilities would then be frozen until January 1, 2016 and would allow for a lost base revenue mechanism that provides significant levels of revenues to NSTAR Electric and NSTAR Gas for sales not achieved due to energy efficiency programs, compared to the alternative scenario of less certain increases in revenues through rate case filings. In addition, under the agreement with the DOER, the utilities pledge further environmental commitments to solar, wind, hydro, energy efficiency and electric vehicle development, including a memorandum of understanding to purchase clean power from Cape

Wind, expected to be the nation’s first operational off-shore, large-scale wind farm. These provisions provide material benefits for ratepayers, particularly in light of the goals and priorities framed by the Massachusetts Governor’s renewable energy targets, and the state’s GCA, the GWSA and the 2020 Clean Energy and Climate Plan.

The financial impacts of the settlement agreements related to NSTAR Electric will be recognized in the second quarter of 2012 in connection with the completion of the merger.

3. Basis of Consolidation and Accounting

The accompanying condensed consolidated financial information presented as of March 31, 2012 and for the three-month periods ended March 31, 2012 and 2011 has been prepared from NSTAR Electric’s books and records without audit by an independent registered public accounting firm. Financial information as of December 31, 2011 was derived from the audited consolidated financial statements of NSTAR Electric and all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial information for the periods indicated, have been included. All intercompany transactions have been eliminated in consolidation.

NSTAR Electric follows accounting policies prescribed by the FERC and the DPU. In addition, NSTAR Electric and its subsidiaries are subject to the accounting and reporting requirements of the SEC. NSTAR Electric is subject to generally accepted accounting principles that consider the effects of regulation resulting from differences in the timing of 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 accounting for regulated activities.

Effective January 1, 2012, NSTAR Electric has made changes in estimates with respect to certain reserves, including the allowance for doubtful accounts, incurred but not reported claims on medical benefits, general and workmen’s compensation liabilities and various compensation accruals. The total aggregate impact in the first quarter of these changes in estimates is approximately $11.4 million, after-tax.

The preparation of financial statements in conformity with GAAP requires management of NSTAR Electric 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-month periods ended March 31, 2012 and 2011 are not indicative of the results that may be expected for an entire year. The demand for electricity 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.

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

NSTAR Electric’s net periodic Pension Plan and PBOP Plan benefit costs for the first quarter are based on the latest available participant census data. The annual actuarial valuation will be finalized during the second quarter, and cost estimates will be adjusted based on the actual actuarial study results.

NSTAR Electric’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 arising from such factors as market conditions and plan experience is substantially mitigated by NSTAR Electric’s DPU-approved Pension and PBOP rate adjustment mechanism (PAM). Under the PAM, NSTAR Electric recovers its pension and PBOP expense through a reconciling rate mechanism.

Pension

NSTAR Electric sponsors a defined benefit retirement plan, the NSTAR Pension Plan (the Plan), that covers substantially all employees of NSTAR LLC. As its sponsor, NSTAR Electric allocates the costs of the Plan to NSTAR Electric & Gas. NSTAR Electric & Gas charges all of its benefit costs to the NSTAR LLC operating companies, including NSTAR Electric, on the proportion of total direct labor charged to its operating companies. During the three months ended March 31, 2012, NSTAR Electric did not contribute to the Plan. NSTAR Electric currently anticipates making contributions of approximately $25 million to the Plan during the second and third quarters of 2012. The actual level of funding may differ from this estimate.

Components of net periodic pension benefit cost were as follows:


	Three Months Ended March 31,
(in millions)	2012			2011
Service cost	$	7.8		$	6.9
Interest cost		14.8			15.2
Expected return on Plan assets		(16.5	)		(17.3	)
Amortization of prior service cost		(0.2	)		(0.2	)
Recognized actuarial loss		15.7			11.8

Net periodic pension benefit cost	$	21.6		$	16.4

Postretirement Benefits Other than Pensions

NSTAR LLC also provides health care and other benefits to retired employees who meet certain age and years of service eligibility requirements. Under certain circumstances, eligible retirees are required to contribute to the costs of postretirement benefits.

To fund these postretirement benefits, NSTAR LLC, on behalf of NSTAR Electric and other NSTAR LLC subsidiaries, makes contributions to various VEBA trusts that were established pursuant to section 501(c)(9) of the Internal Revenue Code.

NSTAR Electric participates in the Plan trusts with other NSTAR LLC subsidiaries. Plan assets are available to provide benefits for all Plan participants who are former employees of NSTAR Electric and other subsidiaries of NSTAR LLC. During the three months ended March 31, 2012, NSTAR LLC contributed $7.3 million to this plan. In addition, $2.5 million was contributed in April 2012 to the Plan. NSTAR LLC currently anticipates contributing approximately $20.2 million for the remainder of 2012 toward these benefits. NSTAR Electric will fund approximately $6 million, $2 million, and $16.6 million of these amounts, respectively.

The net periodic postretirement benefit cost allocated to NSTAR Electric for the three-month period ended March 31, 2012 was $9.0 million, as compared to $7.6 million in the three-month period ended March 31, 2011.

5.	Interest Income and Other, net

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


	Three Months Ended March 31,
(in thousands)	2012			2011
Regulatory deferrals carrying charges	$	5,801		$	7,941
Income tax related interest (expense) income		—			372
Other interest income (expense), short-term debt, and AFUDC		(840	)		(896	)

Total interest income and other, net	$	4,961		$	7,417

6. 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 Electric has evaluated these arrangements under the accounting guidance for variable interests 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 the Company’s financial position, financial performance, or cash flows.

7. Accounting Standards Recently Adopted

On January 1, 2012, NSTAR Electric adopted the following Accounting Standards Updates (ASUs):

•

ASU 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.GAAP and IFRSs. The ASU did not have an impact on NSTAR Electric’s financial position, results of operations or cash flows, but required additional financial statement disclosures related to fair value measurements.

•

ASU 2011-05- Presentation of Comprehensive Income. The ASU does not change existing guidance on which items should be presented in other comprehensive income but requires other comprehensive income to be presented as part of a single continuous statement of comprehensive income or in a statement of other comprehensive income immediately following the statement of net income. The ASU did not affect the calculation of net income, comprehensive income or EPS. The ASU did not have an impact on NSTAR Electric’s financial position or results of operations.

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 Condensed Consolidated Financial Statements or disclosed in the accompanying Notes to Condensed Consolidated Financial Statements.

Note B. Derivative Instruments

Energy Contracts

NSTAR Electric has determined that the majority of its electricity supply contracts qualify for, and NSTAR Electric has elected, the normal purchases and sales exception (normal) under accounting principles for derivative financial instruments. As a result, these electricity supply contracts are not reflected on the accompanying Condensed Consolidated Balance Sheets.

NSTAR Electric has a long-term renewable energy contract that does not qualify as normal and is valued in a liability position of approximately $5.4 million and $3.4 million as of March 31, 2012 and December 31, 2011, 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, as all amounts are recovered in rates charged to customers. The fair value of the renewable energy contract deemed to be a derivative and the balance sheet position of this agreement is as follows:


(in thousands)	March 31, 2012		December 31, 2011
Renewable Energy Contract – Non-hedging instrument
Consolidated Balance Sheet Account:
Deferred credits and other liabilities: Power contract obligations	$	5,396	$	3,376

Total liability for non-hedging derivative instrument	$	5,396	$	3,376

Note C. Fair Value Measurements

NSTAR Electric discloses fair value measurements pursuant to a framework for measuring fair value in accordance with GAAP. NSTAR Electric 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.

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. Level 3 inputs used to develop the estimate included on-line regional generation and forecasted demand. Significant increases or decreases in future power prices in isolation would decrease or increase, respectively, the value of the derivative liability. Changes in the fair value of the renewable energy contract are recorded as a regulatory asset and would not impact net income.

The financial liability that was recognized at fair value on a recurring basis as of March 31, 2012 and December 31, 2011 for this renewable energy contract was $5 million and $3 million, respectively. These amounts have been included in “Deferred credits and other liabilities: Power contract obligations” on the accompanying Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The change in fair value from December 31, 2011 to March 31, 2012 of $2 million resulted from changes in the long-term fair value of the renewable energy being valued.

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 March 31, 2012 and December 31, 2011, 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 Level 2 inputs within the fair value hierarchy consisting of quoted market prices of similar issues. Carrying amounts and fair values as of March 31, 2012 and December 31, 2011 were as follows:


	March 31, 2012				December 31, 2011
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Long-term indebtedness (including current maturities)	$	1,673,525	$	1,882,510	$	1,692,574	$	1,909,950

Note D. 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 is required to report annually to the DPU concerning its performance as to each measure and is 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 Electric 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’s service quality performance levels for 2011 were not in a penalty situation and the final performance report was filed with the DPU on March 1, 2012.

2.	Environmental Matters

NSTAR Electric faces 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 Electric generally expects to have only a small percentage of the total potential liability for these sites. As of March 31, 2012 and December 31, 2011, NSTAR Electric had liabilities of $1.5 million and $1.3 million, respectively, for these environmental sites. This estimated recorded liability is based on an evaluation of all currently available facts with respect to these sites.

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 Electric’s responsibilities for such sites evolve or are resolved. NSTAR Electric’s ultimate liability for future environmental remediation costs may vary from these estimates. Based on NSTAR Electric’s current assessment of its environmental responsibilities, existing legal requirements, and regulatory policies, NSTAR Electric does not believe that these environmental remediation costs will have a material adverse effect on NSTAR Electric’s consolidated results of operations, financial position, or cash flows.

3.	Regulatory and Legal Proceedings

DPU Safety and Reliability Programs (CPSL)

NSTAR Electric has incurred a cumulative incremental revenue requirement of approximately $83 million. 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 Electric 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 Electric’s result of operations, financial position, and cash flows.

The comprehensive settlement agreement with the Massachusetts Attorney General stipulates a revenue stream of up to $15 million per annum for 2012 through 2015 in order to continue these programs. CPSL revenues will end once NSTAR Electric has recovered its 2015-related CPSL revenues. Realization of these revenues is subject to maintenance of certain performance metrics and DPU approval.

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 2005 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 the 2005 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.

As of December 31, 2011, NSTAR Electric had not implemented the directives of the June 28, 2007 DPU order. 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). On October 10, 2010, the SJC allowed a stay of the DPU’s order pending appeal. Briefs were filed during the summer of 2011 and oral arguments were held on December 8, 2011. On April 11, 2012, the SJC issued a procedural order waiving its standing 130-day rule for issuance of an opinion on the matter. NSTAR Electric continues to believe that its position is appropriate. However, the delay by the SJC has caused management to reassess its position as to the outcome. As such, NSTAR Electric has concluded that a final ruling on the SJC matter in the company’s favor can no longer be determined as “probable”, but rather would be “more likely than not.” A decision by the SJC is expected in the second quarter of 2012.

Therefore, as of March 31, 2012, NSTAR Electric has recognized a change from a probable outcome of recovery to one of more likely than not of the previously recorded regulatory asset related to its Basic Service bad debt costs. This results in a $28 million charge ($17 million after-tax) to operations in the first quarter of 2012.

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 Simplified Incentive Plan (SIP) rate 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 Electric 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, 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, for CY, YA and MY, respectively. The case has been going through the appeal process in the Federal courts, oral arguments were held in November 2011 and a final decision on this appeal could be received by May 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, for CY, YA and MY, respectively.

NSTAR Electric 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 Transmission Base ROE Complaint

On September 30, 2011, several New England state attorneys general, state regulatory commissions, consumer advocates and other parties filed a joint complaint with the FERC under Sections 206 and 306 of the Federal Power Act alleging that the base ROE used in calculating formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by New England transmission owners, including NSTAR Electric, CL&P, PSNH and WMECO, is unjust and unreasonable. The complainants asserted that the current 11.14 percent rate, which became effective in 2006, is excessive due to changes in the capital markets and are seeking an order to reduce the rate to 9.2 percent, effective September 30, 2011. In response, the New England transmission owners filed testimony and analysis based on standard FERC methodology and precedent, justifying a base ROE of approximately 11.2 percent, thus demonstrating that the base ROE of 11.14 percent remained just and reasonable. On May 3, 2012, the FERC issued an order establishing hearing and settlement judge procedures for the complaint. In the order, FERC encouraged the parties to reach a settlement of the dispute before hearings commence. One of the commissioners dissented, stating that the complaint should have been rejected based on the record and FERC precedent. The FERC indicated that if a settlement was not reached, it would expect to render a decision in the third quarter of 2013, with changes, if any, effective October 1, 2011. NSTAR Electric cannot predict the outcome of this proceeding, or its impact on its financial position, results of operations or cash flows.

As of March 31, 2012, NSTAR Electric had approximately $500 million of aggregate shareholders equity invested in its transmission facilities. As a result, each 10 basis points change in the authorized base ROE would change annual consolidated earnings by an approximate $0.5 million.

6.	Legal Matters

In the normal course of its business, NSTAR Electric and its subsidiaries are involved in certain legal matters, including civil litigation, for which it has appropriately recognized legal liabilities. Management has reviewed the range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs (legal liabilities) that would be in excess of amounts accrued and amounts covered by insurance, and determined that the range of reasonably possible legal liabilities would not be material. Based on the information currently available, NSTAR Electric 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 Electric during the periods presented and should be read in conjunction with the accompanying condensed consolidated financial statements and related notes, and with the MD&A in NSTAR Electric’s 2011 Annual Report on Form 10-K.

Business Overview

NSTAR Electric Company is a regulated public utility incorporated in 1886 under Massachusetts law. On April 10, 2012, NSTAR Electric became an indirect wholly-owned subsidiary of Northeast Utilities (NU). NSTAR Electric serves approximately 1.1 million electric distribution customers in the City of Boston and 80 surrounding communities. NU is a holding company engaged through its subsidiaries in the energy delivery business serving approximately 3.5 million customers in Connecticut, Massachusetts and New Hampshire. NSTAR Electric & Gas provides management and support services to NSTAR Electric.

Harbor Electric Energy Company (HEEC), a wholly-owned-subsidiary of NSTAR Electric, provides distribution service and ongoing support to its only customer, the Massachusetts Water Resources Authority’s wastewater treatment facility located on Deer Island in Boston, Massachusetts. NSTAR Electric consolidated two wholly-owned special purpose subsidiaries, BEC Funding II, LLC and CEC Funding, LLC. These entities were created to complete the sale of electric rate reduction certificates to a special purpose thrust created by two Massachusetts state agencies. These financing transactions securitized the costs incurred related to the divestiture of generation assets and long-term power contracts. The activities of a third special purpose subsidiary BEC Funding LLC, were substantially completed as of March 31, 2010 and the Company was dissolved on April 14, 2010.

NSTAR Electric derives its operating revenues primarily from the sale of energy, distribution, transmission, and energy efficiency services to customers. However, NSTAR Electric’s earnings are impacted by fluctuations in unit sales of electric kWh, which have an effect on the level of distribution and transmission revenues recognized. In accordance with the regulatory rate structure in which NSTAR Electric operates, its recovery of energy and certain energy-related costs are fully reconciled with the level of energy revenues currently recorded and, therefore, do not have an impact on earnings. As a result of this rate structure, any variability in the cost of energy supply purchased will have an impact on purchased power and transmission expenses, but will not affect the

Company’s net income as the Company recognizes a corresponding change in revenues as these costs are fully recovered in rates charged to its customers.

NSTAR Merger with Northeast Utilities Completed

Regulatory Approvals

The financial impacts of the settlement agreements related to NSTAR Electric will be recognized in the second quarter of 2012 in connection with the completion of the merger.

Earnings

NSTAR Electric’s earnings are impacted by its customers’ requirements for energy in the form of unit sales of electricity, which have an effect on the level of retail distribution and transmission revenues recognized. In accordance with the regulatory rate structure in which NSTAR Electric operates, its recovery of energy costs are fully reconciled with the level of energy revenues currently recorded and, therefore, do not have an impact on earnings.

Net income for the three-month period ended March 31, 2012 was $3.9 million, as compared to $42.9 million for the same period in 2011, as further explained below.

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 Electric’s 2011 Form 10-K. There have been no substantive changes to those policies and estimates.

Rate and Regulatory Proceedings

Rate Structure

a.	Rate Settlement Agreements

NSTAR Electric is operating under a DPU-approved Rate Settlement Agreement (2005 Rate Settlement Agreement) that expires December 31, 2012. From 2007 through 2012, the 2005 Rate Settlement Agreement establishes for NSTAR Electric, among other things, annual inflation-adjusted distribution rates that are generally offset by an equal and corresponding reduction in transition rates. The rates as of January 1 were as follows:


	January 1,
	2012			2011			2010			2009
Annual inflation-adjusted distribution rate – SIP increase (decrease)		0.96	%		(0.19	)%		1.32	%		1.74	%

On February 15, 2012, NSTAR Electric reached a comprehensive settlement agreement with both the Massachusetts Attorney General and the DOER. On April 4, 2012, the DPU issued a decision approving the settlement agreements. NSTAR Electric’s base distribution rates in effect on January 1, 2012 will be frozen until January 1, 2016 (Base Rate Freeze Period). During this period, NSTAR Electric will not seek general increases to base distribution rates, unless specifically mandated by DPU statutes enacted in future periods. NSTAR Electric may pursue increases due to exogenous factors as defined in the settlement agreement. The rate freeze applies only to base distribution rates so that existing rate reconciling mechanisms and other formula rates will remain in effect.

During the Base Rate Freeze Period, NSTAR Electric will be allowed a lost base revenue mechanism that provides revenues related to sales not achieved due to energy efficiency programs implemented on or after January 1, 2012. This recovery mechanism will be based on energy efficiency savings verified through annual reports to the DPU made during the Base Rate Freeze Period.

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. The distribution charge also includes the recovery, on a fully reconciling basis, of 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, which 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. Additionally, the DPU has authorized the Company to recover the cost of its Dynamic Pricing Smart Grid Pilot Program through the Basic Service charge;

•

a transition charge, which 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, which represents the collection of annual costs of moving the electricity over high voltage lines from generating plants to substations located within NSTAR Electric’s service area including costs allocated to NSTAR Electric by ISO-NE to maintain the wholesale electric market;

•

an energy conservation charge, which represents a legislatively-mandated charge to collect costs for energy efficiency programs; and

•

a renewable energy charge, which represents a legislatively-mandated charge to collect the costs to support the development and promotion of renewable energy projects.

c.	Regulatory Matters

DPU Safety and Reliability Programs (CPSL)

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 2011, NSTAR Electric has incurred a cumulative incremental revenue requirement of approximately $83 million. These amounts include incremental operations and maintenance and revenue requirements on capital investments.

Basic Service Bad Debt Adder

Other

In the fourth quarter of each year, NSTAR Electric files proposed distribution rate adjustments for effect on the following January 1. These rate adjustments include a SIP rate factor and several other fully reconciling cost recovery items. Consistent with previous filings, the 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 Electric cannot predict the timing or the ultimate outcome of these filings.

FERC Transmission Base ROE Complaint

Other

a. Energy Efficiency Plans

NSTAR Electric administers demand-side management energy efficiency programs. The GCA directed electric distribution companies to develop three-year energy efficiency plans. The current 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. 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 in order to partially offset reduced distribution rate revenues as a result of successful energy efficiency programs.

During the first quarter of 2012, NSTAR Electric recognized recoverable Energy Efficiency program expenses of $26.8 million. In 2012, NSTAR Electric anticipates that its separate recoverable expenses, inclusive of program administrator incentives, will be $227 million.

b.	Emergency Preparation and Restoration of Service for Electric Customers

Under Massachusetts law and regulation, the DPU has established standards of performance for emergency preparation and restoration of service for electric companies. As a remedy to violation of those standards, the DPU is authorized to levy a penalty not to exceed $250,000 for each violation for each day that the violation persists up to a maximum penalty of $20 million for any related series of violations.

NSTAR Electric believes that it is not in a penalty situation with respect to its performance during declared emergency events to date.

c. Major Storm Events and Service Restoration

In late August 2011, Tropical Storm Irene (Irene) brought 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 its aftermath. This represents the most severe damage event on the NSTAR Electric system in nearly 20 years. 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 regarding Irene 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 NSTAR Electric customers. On November 8, 2011, the DPU opened an additional investigation to include NSTAR Electric and two other Massachusetts electric companies and their responses to the October snowstorm. NSTAR Electric filed a Final Event Report with the DPU regarding the October snowstorm on December 16, 2011.

On December 20, 2011, NSTAR Electric filed a Report of Emergency Response Plan Improvements with the DPU outlining steps that had been implemented prior to and also following the October snowstorm to improve restoration performance. The DPU has announced it will conduct further hearings regarding NSTAR Electric’s storm response starting on June 18, 2012.

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. The incremental cost incurred for Irene was approximately $24 million and the October snowstorm was approximately $14 million.

Pursuant to the February 15, 2012 merger Settlement Agreement with the DOER and the AG, which was approved by the DPU on April 4, 2012, these storm costs will be excluded from the DPU-approved storm fund calculation. Irene and October snowstorm restoration costs instead will be deferred, to be recoverable in rates over a five-year period beginning January 1, 2014. This regulatory asset will earn a rate of return at the prime interest rate. Before these storm costs may be recovered in rates, such costs will be subject to a DPU review.

d. 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 December 16, 2011, ISO-NE issued formal approval for the Lower SEMA 345 kV Transmission Project to be included in the Pool Transmission Facility regional rates. At a hearing held on January 12, 2012, the Massachusetts Energy Facilities Siting Board (EFSB) voted unanimously to direct the EFSB Staff to prepare tentative decisions for public comment based on the EFSB’s approval of the project subject to the conditions of NSTAR Electric providing reports to the EFSB every six months on project costs and schedule of construction. Further conditions may be imposed. The Cape Cod Commission (CCC) unanimously approved the project on January 19, 2012. On April 27, 2012, the EFSB issued its decision approving the project. The cost estimate of this project is approximately $110 million; NSTAR Electric anticipates starting construction in the second half of 2012 and completion by early 2013.

e. Electric Service Outage in the Back Bay/Prudential Area of Boston

On March 13, 2012, a substation that supplies the Back Bay/Prudential area of the City of Boston experienced a fire causing damage to certain equipment including a 115kV transformer. The fire was contained to the structure and the station’s fire suppression systems worked as designed.

This incident resulted in the need to shut off electric service in the affected area to minimize damage and to assist fire suppression efforts. This outage impacted approximately 21,000 customers. Power was restored to approximately 17,000 customers within 28 hours, with the remaining 4,000 customers restored within 54 hours.

NSTAR Electric incurred significant costs for the temporary cables and generators that were used for the restoration of service, to provide environmental cleanup and to repair paving that was disrupted by the temporary trenches needed to bury power cables.

The total impact of this event on first quarter results was an increase of approximately $9.5 million (pre-tax) in operations and maintenance expense. NSTAR Electric will also incur capital costs to replace the transformer and to implement system design enhancements that will create additional network redundancies in this section of the city of Boston. NSTAR Electric believes that a substantial portion of the capital replacement costs will be recovered through insurance proceeds.

Results of Operations

The following section of MD&A compares the results of operations for each of the three-month periods ended March 31, 2012 and 2011 and should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included elsewhere in this report.

Three Months Ended March 31, 2012 compared to Three Months Ended March 31, 2011

Executive Summary of Quarterly Results

Net income was $3.9 million for the quarter ended March 31, 2012 compared to $42.9 million for the same period in 2011. Major factors on an after-tax basis during the quarter include:

•

Adjustment recorded to establish a reserve against the regulatory asset related to Basic Service bad debt costs ($17 million)

•

Adjustments related to changes in accounting estimates of NSTAR Electric’s allowance for doubtful accounts, workers’ compensation, employee medical benefits, and general liability claims ($11.4 million)

•

Higher operations and maintenance expense, primarily related to a March incident involving a substation in the Back Bay/Prudential area of Boston ($4.1 million)

•

A reserve recorded relating to lost base revenues based on recent developments during hearings in the merger proceeding ($3.7 million)

•

Lower distribution revenues due to a warmer winter and the impact of NSTAR Electric’s Energy Efficiency programs, partially offset by the annual inflation rate adjustment ($3.1 million)

•

Higher depreciation and property taxes ($1.5 million)

These decreases in earnings factors were partially offset by:

•

Higher transmission revenues ($1.9 million)

Significant cash flow events during the quarter include the following:

•

Cash flows from operating activities provided approximately $103.8 million, an increase of $55.9 million as compared to the same period in 2011. The increase primarily reflects the absence of pension contributions due to funding status and the timing of energy supply payments and customer collections related to these energy costs

•

NSTAR Electric invested approximately $98.7 million in capital projects to improve system reliability and capacity

•

NSTAR Electric paid $57.1 million in common share dividends to NSTAR and retired approximately $18.7 million in securitized debt.

Energy sales

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


Retail Electric Sales - MWh	Three Months Ended March 31,
	2012		2011		% Change

Residential		1,660,755		1,741,812		(4.7	)
Commercial, Industrial, and Other		3,429,021		3,612,361		(5.1	)

Total retail sales		5,089,776		5,354,173		(4.9	)

NSTAR Electric’s energy sales in the three months ended March 31, 2012 decreased 4.9% compared to 2011 primarily due to unfavorable weather conditions resulting from a warmer winter during 2012 as compared to 2011. Heating degree-days in the Boston area for the three months ended March 31, 2012 were down 20.6% from the same period in 2011.

Weather and, to a lesser extent, fluctuations in fuel costs, conservation measures, and economic conditions affect sales to NSTAR Electric’s residential and small commercial customers. Economic conditions, fluctuations in fuel costs, and conservation measures affect NSTAR Electric’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 “Operating Revenues” section below for a more detailed discussion.

Weather conditions

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

The demand for electricity is affected by weather. Weather impacts electric sales primarily during the summer in NSTAR Electric’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 Electric’s business is sensitive to variations in daily weather, is highly influenced by New England’s seasonal weather variations, and is 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. As shown in the table below, weather conditions during the three-month period ended March 31, 2012 measured by heating degree-days were 20.6% warmer for 2012 as compared to 2011. Similarly, weather conditions were warmer than the 30-year average by 20.4% during the first quarter of 2012. Refer to the “Operating Revenues” section below for a more detailed discussion.


Heating Degree-Days
Three months ended March 31, 2012			2,313
Three months ended March 31, 2011			2,913
Normal 30-Year Average			2,906

Operating revenues

Operating revenues for the first quarter of 2012 decreased $17.6 million, or 2.9%, from the same period in 2011 as follows:


(in millions)	Three Months Ended March 31,				Increase (Decrease)
Operating revenues	2012		2011		Amount			Percent

Retail distribution and transmission	$	258.9	$	269.9	$	(11.0	)		(4.1	)%
Energy, transition, and other		321.4		328.0		(6.6	)		(2.0	)%

Total operating revenues	$	580.3	$	597.9	$	(17.6	)		(2.9	)%

NSTAR Electric’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 $11 million, or 4.1%, in retail distribution and transmission revenues primarily reflects:

•

Decreased transmission revenues primarily due to lower rates reflecting a lower under-recovered regulatory deferral balance at the beginning of the year and partially offset by the recovery of a higher transmission investment base, including higher depreciation and property taxes and recovery of higher regional network service and other costs ($5.9 million)

•

Decreased distribution revenues due to decreased sales of 4.9% due to the impact of weather conditions, partially offset by a positive annual inflation rate adjustment ($5.1 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 Electric’s consolidated net income. Energy, transition, and other revenues also reflect revenues related to the Company’s ability to effectively reduce stranded costs (incentive entitlements), rental revenue from electric property, and annual cost reconciliation true-up adjustments. The $6.6 million, or 2.0% decrease in energy, transition, and other revenues is primarily attributable to lower Basic Service rates in effect to lower energy costs along with a lower level of sales. Uncollected transition costs as a result of the reductions in transition rates are deferred and collected through future rates with a carrying charge.

Operating expenses

Purchased power and transmission expense was $262.6 million in the first quarter of 2012 compared to $279.3 million in the same period of 2011, a decrease of $16.7 million, or 6%. The decrease in expense reflects lower Basic Service and other energy costs of $12.9 million as well as lower transmission costs of $3.8 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.

Operations and maintenance expense was $145.4 million in the first quarter of 2012 compared to $92.8 million in the same period of 2011, an increase of $52.6 million, or 56.7%. The increase in expense primarily reflects a cumulative adjustment recorded to

reduce the regulatory asset for Basic Service bad debt costs ($27 million). Also, cumulative adjustments were recognized for changes in accounting estimates of NSTAR Electric related primarily to the allowance for doubtful accounts, workers’ compensation, employee medical benefits, and general liability claims ($18.7 million). In addition, costs were incurred related to a March incident involving a substation fire in the Back Bay/Prudential area of Boston ($9.5 million). These factors are partially offset by the timing of maintenance ($0.9 million) and lower storm-related expense ($0.7 million).

Depreciation and amortization expense was $70 million in the first quarter of 2012 compared to $68.5 million in the same period of 2011, an increase of $1.5 million, or 2.2%. The increase primarily reflects a higher depreciable distribution and transmission plant in-service.

Energy efficiency programs expense was $46.9 million in the first quarter of 2012 compared to $40.1 million in the same period of 2011, an increase of $6.8 million, or 17%. 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.

Property and other taxes expense was $30.8 million in the first quarter of 2012 compared to $29.0 million in the same period of 2011, an increase of $1.8 million, or 6.2%, reflecting higher overall property investments and higher tax rates.

Interest charges (income):

Long-term debt and transition property securitization interest charges were $23.7 million in the first quarter of 2012 compared to $25.0 million in the same period of 2011, a decrease of $1.3 million, or 5.2%. The decrease in interest charges reflects scheduled principal pay downs of transition property securitization debt.

Interest income and other, net were $5.0 million of net interest income in the first quarter of 2012 compared to $7.4 million of net interest income in the same period of 2011, a decrease of $2.4 million, or 32.4%, due to lower regulatory deferral net interest income ($2.1 million), which includes the impact of writing off the Basic Service Bad Debt Adder of $1.3 million due to the current quarter’s triggering event.

Other income (deductions):

Other income was approximately $1.4 million in the first quarter of 2012 compared to $1.0 million in the same period of 2011, an increase of $0.4 million, or 40%. The increase relates primarily to higher cash surrender values and proceeds from insurance policies.

Other deductions were $1.3 million in the first quarter 2012 compared to $0.6 million in the same period 2011, an increase of $0.7 million, or 116.7%, primarily due to write-off of software related costs.

Income tax expense:

Income tax expense was $2 million in the first quarter of 2012 compared to $28.1 million in the same period of 2011, a decrease of $26.1 million, or 93%, primarily reflecting lower pre-tax operating income.

Liquidity

NSTAR Electric had cash flows provided by operating activities in the first quarter of 2012 of $103.8 million, compared with cash flows provided by operating activities of $47.9 million in the first quarter of 2011. The increased cash flows were due primarily to the absence of pension contributions, recovery of regulatory assets and the timing of energy supply payments and customer collections related to these energy costs.

Cash capital expenditures included on the accompanying Condensed Consolidated Statements of Cash Flows in the first quarter of 2012 and 2011 reflect approximately $98.7 million and $72.8 million, respectively, in capital projects to improve system reliability and capacity.

NSTAR Electric believes that it has adequate access to short-term credit markets to facilitate its working capital needs at favorable terms. As of March 31, 2012, NSTAR Electric had $450 million in available unused revolving credit facilities in order to meet working capital needs, capital expenditures and contractual obligations.

NSTAR Electric paid $57.1 million and $50 million in common share dividends to NSTAR and retired approximately $18.7 million and $21.3 million in securitized debt in the quarters ended March 31, 2012 and 2011, respectively.

Short-Term Financing Activities

NSTAR Electric’s short-term debt increased by $71 million to $212.5 million at March 31, 2012 compared to $141.5 million at December 31, 2011. The increase resulted primarily from the higher level of CWIP, as well as a lower level of accounts payable.

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. On March 26, 2012, NSTAR Electric filed to extend this authorization until October 23, 2014, with maturity dates no later than October 23, 2015. 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 March 31, 2012 and December 31, 2011, 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 discussed above. At March 31, 2012 and December 31, 2011, 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 46.9% and 45.4%, respectively.

The banking arrangements in place require NSTAR Electric to make daily cash transfers to fund vendor checks that are presented for payment. These banking arrangements do not permit the right of offset among the Company’s cash accounts. In the event of a credit book balance in the Company’s cash accounts resulting from uncleared checks, the Company will adjust its disbursement cash account on the balance sheet accordingly.

Income Tax Payments

During the quarters ended March 31, 2012 and 2011, NSTAR Electric made estimated tax payments of $7.2 million and $13.1 million, respectively.

Long-Term Financing Activities

On April 19, 2012, NSTAR Electric filed an application for a new two-year financing plan with the DPU for an approval to issue long-term debt securities in an aggregate amount not to exceed $600 million prior to December 31, 2013. The Company intends to use the proceeds of such issuances for the payment of capital expenditures incurred by the Company for extensions, additions and improvements to plant and properties, for repayment of short-term debt, to refinance its existing $400 million 4.875% Debentures, due October 15, 2012, or for working capital purposes.

In connection with the merger with Northeast Utilities, NSTAR Electric received a waiver and executed an amendment to its revolving credit agreement necessary to allow NSTAR to complete the merger.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Energy Risk Management

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

In addition, NSTAR Electric 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 Electric’s 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 Electric earns a carrying charge on under-collected commodity balances that would mitigate any incremental short-term borrowing costs. NSTAR Electric 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.

Interest Rate Risk

NSTAR Electric 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 March 31, 2012 and December 31, 2011, respectively, all of NSTAR Electric’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 0.26% and 0.30% for the three months ended March 31, 2012 and 2011, respectively. On a long-term basis, NSTAR Electric mitigates its interest rate risk through the issuance of mostly fixed rate debt of various maturities.

Item 4. Controls and Procedures

Management evaluated the design and operation of the disclosure controls and procedures as of March 31, 2012 to determine whether they are effective in ensuring that the disclosure of required information is made timely and in accordance with the Securities Exchange Act of 1934 and the rules and regulations of the SEC. This evaluation was made under management’s supervision and with management’s participation, including the principal executive officers and principal financial officer as of the end of the period covered by this Quarterly Report on Form 10-Q. There are inherent limitations of disclosure controls and procedures, including the possibility of human error and the circumventing or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. The principal executive officer and principal financial officer have concluded, based on their review, that the disclosure controls and procedures of NSTAR Electric are effective to ensure that information required to be disclosed by NSTAR Electric in reports filed under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and

regulations and (ii) is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

There have been no changes in internal controls over financial reporting during the quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, NSTAR Electric’s internal controls over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

Investors or prospective investors should carefully consider the risk factors that were previously disclosed in NSTAR Electric’s Annual Report on Form 10-K for the year ended December 31, 2011.

Item 5. Other Information

a. Entry into Material Definitive Agreements

On February 15, 2012, NSTAR and Northeast Utilities reached comprehensive settlement agreements with both the Massachusetts Department of Energy Resources and the Office of the Attorney General of the Commonwealth of Massachusetts. The first Settlement Agreement, between NSTAR, Northeast Utilities, NSTAR’s wholly-owned subsidiaries NSTAR Electric Company and NSTAR Gas Company, and Northeast Utilities’ wholly-owned subsidiary Western Massachusetts Electric Company (WMECO), was reached with the Office of the Attorney General of the Commonwealth of Massachusetts and the Massachusetts Department of Energy Resources (collectively, the Settling Parties). This agreement covers a variety of rate-making and rate design issues, including a distribution rate freeze until 2016 for NSTAR Electric, NSTAR Gas and WMECO, and is attached hereto as Exhibit 10.1. NSTAR Electric Company, NSTAR Gas Company and WMECO also entered into a second Settlement Agreement with the Massachusetts Department of Energy Resources. This agreement covers a variety of matters impacting the advancement of Massachusetts clean energy goals established by the Green Communities Act and Global Warming Solutions Act, and is attached hereto as Exhibit 10.2.

The Massachusetts Department of Public Utilities approved these agreements and the merger of NU and NSTAR on April 4, 2012.

b. Ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred stock dividend requirements

The following is furnished for informational purposes:


Twelve months ended March 31, 2012:

Ratio of earnings to fixed charges			5.57

Ratio of earnings to fixed charges and preferred stock dividend requirements			5.34

Item 6.

Exhibits

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 Electric defining the rights of holders of any non-registered debt whose authorization does not exceed 10% of total assets.

Exhibits filed herewith:

Exhibit 10		Material Contracts

Exhibit 10.1		Settlement Agreement entered into by and among NSTAR Electric Company, NSTAR Gas Company, NSTAR, Western Massachusetts Electric Company, Northeast Utilities, the Attorney General of the Commonwealth of Massachusetts and the Massachusetts Department of Energy Resources, dated February 15, 2012

Exhibit 10.2		Settlement Agreement entered into by and among NSTAR Electric Company, NSTAR Gas Company, Western Massachusetts Electric Company, and the Massachusetts Department of Energy Resources, dated February 15, 2012

Exhibit 12	-	Statement re Computation of Ratios

12.1	-	Computation of Ratio of Earnings to Fixed Charges for the Twelve Months Ended March 31, 2012

12.2	-	Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements for the Twelve Months Ended March 31, 2012

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

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

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

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

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.LAB	-	XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE	-	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURE

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


	NSTAR Electric Company
	(Registrant)

Date: May 9, 2012	By:	/s/ JAY S. BUTH
	Jay S. Buth
	Vice President, Controller and Chief Accounting Officer
	(Principal Accounting Officer)

EX-10.1 2 d325730dex101.htm SETTLEMENT AGREEMENT Settlement Agreement

Exhibit 10.1

COMMONWEALTH OF MASSACHUSETTS

DEPARTMENT OF PUBLIC UTILITIES

SETTLEMENT AGREEMENT

SETTLEMENT AGREEMENT

WHEREAS, this Settlement Agreement (“Settlement” or “Settlement Agreement”) is entered into by and among NSTAR Electric Company (“NSTAR Electric”) and NSTAR Gas Company (“NSTAR Gas”), along with their holding company parent, NSTAR, and Western Massachusetts Electric Company (“WMECO”), along with its holding company parent Northeast Utilities (“NU”) (the corporate entities together, and their successors, the “Joint Petitioners”), the Department of Energy Resources (“DOER”), and the Attorney General of the Commonwealth (“Attorney General”) with regard to the proposed merger transactions as set forth in the Merger Agreement between the holding companies NU and NSTAR (“Proposed Merger”).

WHEREAS, NU and NSTAR filed the Proposed Merger before the Department of Public Utilities (“Department”) for approval pursuant to G.L. c. 164, § 96, and the Settling Parties have engaged in discovery, hearings, briefing and negotiations concerning the Proposed Merger.

WHEREAS, the Settling Parties have raised competing and disputed claims with regard to the various issues contained in the Proposed Merger but wish to resolve those matters on mutually agreeable terms, and without establishing any new precedent or principle applicable to any other proceedings.

WHEREAS, the Settling Parties intend that both customers and shareholders receive the full value of the settled issues, and not some substitute regulatory treatment of lesser value either now or in the future, and agree that no terms of this Settlement Agreement or supporting

workpapers, calculations, or proposed tariffs will be used or interpreted to diminish, in any way, the intended customer or shareholder benefit related to this Settlement Agreement.

WHEREAS, it is the objective of the Settling Parties to ensure that the impacts of the Proposed Merger to Massachusetts customers of the merged entity will operate in a way that achieves comparability with other states with respect to merger savings, service improvements and employment impacts, and the Settling Parties have structured this Settlement Agreement to achieve such comparability.

NOW THEREFORE, in consideration of the exchange of promises and covenants herein contained, the legal sufficiency of which is hereby acknowledged, the Settling Parties agree, subject to approval by the Department as follows:

ARTICLE I: INTRODUCTION

(1)	On November 24, 2010, the Joint Petitioners filed with the Department a petition for approval of the Proposed Merger as set forth in their Merger Agreement dated October 16, 2010, as amended on November 1, 2010 and December 16, 2010.

(2)	A copy of the supporting testimony, discovery responses and exhibits for the Proposed Merger is filed with the Department as the evidentiary record in this proceeding.

(3)	This Settlement Agreement is intended to resolve only those issues as specified in Article II and Article III.

ARTICLE II

(1)	APPROVAL OF THE PROPOSED MERGER: The Settling Parties agree that the Proposed Merger between NSTAR and NU set forth in the Merger Agreement and proposed to be approved by the Department in this proceeding is consistent with the public interest as

required by G.L. c. 164, § 96; that approval of the Proposed Merger does not constitute approval of the merger or consolidation of the separate Operating Companies, NSTAR Electric, NSTAR Gas or WMECO, each of which will remain legally and functionally separate companies and independently subject to the Department’s jurisdiction under G.L. c. 164, § 1 et seq. on and after the closing of the Proposed Merger, until such time that a proposal may be made to the Department under G.L. c. 164, § 96 for consolidation of one or more of the Operating Companies and the proposal is subsequently approved by the Department; that following the Proposed Merger, the Operating Companies will continue to be subject to the same obligations that were respectively held by each of those companies prior to the Proposed Merger; and that further action, pursuant to G.L. c. 164, § 21, is not required to consummate the Proposed Merger.

(2)

MERGER RATE CREDIT: The Operating Companies shall provide a one-time, non-recoverable $21 million rate credit to customers to be applied on the first billing cycle in the next billing month following the closing of the Proposed Merger. The Operating Companies shall allocate the credit as follows: $15 million for NSTAR Electric customers, $3 million for NSTAR Gas customers, and $3 million for WMECO customers. The credit at the Operating Company level will be allocated to retail customer classes (i.e., residential, small commercial & industrial and large commercial and industrial) based upon their proportional share of the monthly customer charges and will appear on the bill as a uniform dollar amount credit for each separate customer class as a separate line item, along with an explanatory bill message. For each individual Operating Company, all customers within a retail customer class shall receive the same

rate credit dollar amount. The application of this credit shall not prevent customers from enjoying any other rate reductions or benefits related to the Proposed Merger.

(3)

BASE DISTRIBUTION RATE FREEZE: The base distribution rates of the Operating Companies in effect on January 1, 2012, shall be frozen for forty-four (44) months, but in no event shall new rates go into effect earlier than January 1, 2016 (the “Base Rate Freeze Period”). Rate reconciling mechanisms and other formula rates now pending or approved by the Department as of January 1, 2012, will not be affected by this Settlement Agreement. The Operating Companies shall not file for approval of or propose new formula rates, tariffs, or other charges, including but not limited to: earning sharing mechanisms, capital trackers, or revenue decoupling mechanisms during the Base Rate Freeze Period under G.L. c. 164, § 94, or pursuant to the Settlement Agreement approved in D.T.E. 05-85, as applicable (“Prohibited Filings”), unless specifically mandated by statutes enacted after the date of this Settlement Agreement; provided that if a new formula rate, tariff, or other charge is implemented pursuant to a statutory mandate enacted after the date of this Settlement Agreement, no costs recoverable under the new formula rate, tariff, or other charge may be also recoverable as exogenous costs. The Operating Companies also hereby relinquish and waive any right to file for approval of Prohibited Filings from January 1, 2012, to the commencement of the Base Rate Freeze Period. Prohibited Filings by the Operating Companies exclude the filings made pursuant to Article II, §§ (4) through (9), below.

(4)	RATE CASE MANAGEMENT. No more than two of the Operating Companies may have base distribution rate proceedings for changes to distribution rates effective after December 31, 2015 filed pursuant to G.L. c. 164, § 94 pending before the Department. If

two of the Operating Companies have filings for a change in base distribution rates effective after December 31, 2015 pending before the Department, then the Operating Companies agree that a petition for a base-rate change for the third company shall be lagged for a period of at least six months from the later date of the initial filings for either of the first two Operating Companies, exclusive of the initial fourteen-day period after filing during which G.L. c. 164, § 94 prohibits schedules of rates, prices and charges from becoming effective. This provision on rate-case management shall apply only to the first base-rate cases filed for effect after the expiration of the Base Rate Freeze Period.

(5)

EXOGENOUS ADJUSTMENTS: During the Base Rate Freeze Period, distribution rates shall be subject to adjustment up or down for exogenous factors. Eligibility for exogenous cost recovery or rate credit shall be allowed in accordance with the exogenous factors established by the Department in Boston Gas Company, D.P.U. 96-50 (Phase I) (1996) and shall be applicable only for factors that occur after the approval of this Settlement Agreement. The dollar threshold for qualification as an exogenous factor in any calendar year covered by this Settlement Agreement shall be determined by multiplying the total distribution revenues of that year by a factor of 0.003212. Regarding property tax cost changes associated solely with the change in valuation methodology affirmed by the Massachusetts Supreme Judicial Court in Boston Gas Company v. Board of Assessors of Boston, 458 Mass. 715 (2011), and established by the Appellate Tax Board by ruling issued on April 21, 2011 in Docket F275055, F275056, the Companies are not precluded, despite the date of the Supreme Judicial Court ruling, from filing for exogenous cost recovery for these costs. The Attorney General and DOER reserve all rights regarding disputing the substance of any such exogenous cost filings made by the Companies.

(6)

CAPITAL PROJECTS SCHEDULING LIST: On the first of the month following the date of the Department’s approval of the Proposed Merger, the Capital Projects Scheduling List (“CPSL”) rate put into effect on January 1, 2012 in D.P.U. 11-90 shall be reduced to a rate of $0.00069 per kWh, which is designed to recover $15 million in annual CPSL costs. The CPSL program approved in the D.T.E. 05-85 Rate Settlement Agreement will be extended through the end of the Base Rate Freeze Period and will be limited to the recovery of no more than $15 million in annual costs. To demonstrate its CPSL activities, NSTAR Electric shall file a written report to the Department and submit copies to DOER and the Attorney General, annually, demonstrating that the annual cost of the CPSL program activities (including operating and maintenance expense and the revenue requirement for CPSL capital projects completed since January 1, 2006) is $15 million or greater; and (2) that over the four-year period 2012-2015, the aggregate number of inspections completed through CPSL for stray voltage, overhead utility poles and underground manholes shall equal the aggregate number of inspections completed over the four-year period 2007-2010, or 396,753 total inspections. If the aggregate number of inspections over the period 2012-2015 is less than 396,753 inspections, then NSTAR Electric shall credit customers with an amount equal to the percentage shortfall times $60 million. The CPSL rate shall be deemed to fully recover NSTAR Electric’s CPSL program costs and shall not be increased to collect any more than $15 million annually; provided that the CPSL rate may be reduced to recognize any disallowances of CPSL expenditures resulting from a finding that those expenditures were not reasonably or prudently incurred. The CPSL charge shall terminate with the implementation of new base rates for NSTAR Electric, and recovery of CPSL-type costs shall occur through base

rates thereafter; except that NSTAR Electric shall be entitled to recover its full $15 million allowance for CPSL-related activities performed in 2015 in 2016, and provided that, during the Base Rate Freeze Period, adjustments to the fixed CPSL rate shall be allowed to accommodate applicable Department decisions on currently outstanding annual CPSL program filings for the years 2006-2011.

(7)

LOST BASE REVENUES: During the Base Rate Freeze Period, NSTAR Electric shall recover lost base revenues (“LBR”) associated with energy efficiency savings through the Energy Efficiency Recovery Factor (“EERF”). LBR recoveries shall be based on energy efficiency savings verified through annual reports to the Department for installations made during the Base Rate Freeze Period. In order to comply substantially with the Department’s directives in D.P.U. 07-50-A to decouple base revenues from the effects of energy efficiency programs, LBR shall be calculated, beginning January 1, 2012 and for the duration of the Base Rate Freeze Period, as the product of: (1) the cumulative amount of the annual energy efficiency program kilowatt-hour savings beginning January 1, 2012, as determined, verified, and adopted by the Department in NSTAR Electric’s 2012 Energy Efficiency Annual Report (to be filed August 2013) and each Energy Efficiency Annual Report filed thereafter, multiplied by (2) the average respective rate by residential, low income and C&I segments, as approved by the Department. There shall be no offset to such savings made by subtracting savings achieved in a year prior to 2012 as is currently done in the recovery of LBRs sought by NSTAR Electric in D.P.U. 10-06 and D.P.U. 11-40. NSTAR Electric shall compute LBR based on monthly installations and shall exclude LBR associated with energy efficiency spending by Cape Light Compact. Nothing in this Settlement Agreement is intended to affect the Department’s

determination of LBR recovery by NSTAR Electric during the D.P.U. 05-85 Rate Settlement at issue in D.P.U. 10-06, D.P.U. 11-40 and D.P.U. 12-xx (to be filed on May 1, 2012 regarding LBR in 2011). Aside from the Department’s final determinations in D.P.U. 10-06, D.P.U. 11-40 and D.P.U. 12-xx, NSTAR Electric shall not recover LBRs associated with pre-2012 energy efficiency installations for any period after December 31, 2011, other than to recovery the normal recovery lag and true-up associated with these filings. For NSTAR Gas, LBR shall be calculated using the methodology currently in place for Massachusetts local natural gas distribution companies.

(8)

STORM COST RECOVERY: Storm costs incurred by NSTAR Electric in 2011 for Tropical Storm Irene and the snowstorm in October 2011 will be excluded from the storm fund calculation and will be deferred at Prime Rate, in recognition of the two year delay in recovery, to be recoverable in rates over a five-year period beginning January 1, 2014. Before those storm costs may be recovered in rates, such costs shall be subject to a Department adjudicatory hearing and reviewed for prudence and reasonableness. Storm Cost Recovery amounts shall only include incremental costs. For Storm Cost Recovery ratemaking purposes, an incremental cost is defined as those actual and required costs directly attributable to the emergency response and not otherwise represented or recoverable by the Operating Companies in any other rate, charge or tariff. Storm cost recovery for WMECO shall occur in conformance with the Department’s directives in D.P.U. 10-70; provided that WMECO shall not seek recovery for storm costs incurred in relation to the October 2011 snow storm until after the Department has issued a final order in D.P.U. 11-119-C.

(9)

RATE DESIGN: No later than November 1, 2012, WMECO shall file a revenue-neutral rate design plan with the Department to realign customer rates in a manner that coincides with the decline in the transition charge resulting from the termination of the pay-down of the securitized bonds, which is expected to occur during May of 2013, and in a manner that is consistent with the Department’s rate design principle of rate continuity and gradualism to address open rate design issues cited in the Department’s order in D.P.U. 10-70. Prior to filing with the Department, WMECO will consult with the Attorney General to develop a proposal so that the combination of this distribution rate realignment and the reduction in the transition charge preclude a cumulative increase in rates to any rate class. Furthermore, any distribution rate increase to a class shall be set on a uniform cents per kilowatt-hour basis, unless WMECO and the Attorney General agree prior to filing that customers would be more reasonably and equitably served by a different approach. WMECO shall consult with the Attorney General’s office at least 30 days prior to the filing to review and discuss the proposals that will be made in the rate design filing.

(10)

ACCOUNTING FOR GOODWILL: The transaction value recorded on the books of NSTAR LLC (the post-closing holding company that will be the sole shareholder of NSTAR Electric and NSTAR Gas) upon the close of the Proposed Merger will include goodwill as defined under generally accepted accounting principles. The Settling Parties agree that the goodwill resulting from the Proposed Merger will not be recorded on the books of Operating Companies unless required by rule or directive of the Securities Exchange Commission or generally accepted accounting principles. If so required, the Operating Companies shall quantify the goodwill and its effects recorded on the financial

books of account and shall exclude that amount from any ratemaking calculation used to set customer rates, tariffs or charges.

(11)	NET BOOK VALUE OF UTILITY ASSETS: In completing the Proposed Merger transaction, the Operating Companies shall not make any accounting adjustment that has the result of increasing the net book value of utility assets for ratemaking purposes.

(12)

ACCOUNTING TREATMENT OF MERGER-RELATED COSTS: No transaction costs incurred to negotiate, draft, or execute the merger agreement, or to obtain the regulatory and shareholder approvals required to consummate the Proposed Merger, shall be recorded on the books of the Operating Companies. Such transaction costs will be recorded at the parent company level and not allocated or assigned to the Operating Companies. Integration costs, such as costs incurred to identify cost-reduction opportunities, to reorganize operations, or to consolidate information systems, or that are otherwise incurred for the purpose of reducing operating costs of the Operating Companies, may be recorded on the books of the Operating Companies or charged to the Operating Companies by a service company, in an appropriate proportion.

(13)	AMORTIZATION OF COSTS FOR RATEMAKING PURPOSES: For ratemaking purposes, the Operating Companies shall amortize merger-related transaction and integration costs over a 10-year period following the approval of this Settlement Agreement.

(14)

FUTURE RATEMAKING FOR MERGER COSTS: Subject to Department review and approval, transaction and reasonable integration costs from the Proposed Merger shall be eligible for recovery in a future distribution rate proceeding through the retention of merger-related synergies to the extent that merger-related savings are demonstrated to equal or exceed those costs. The compensation for departing employees subsequently rehired or

retained as outside consultants shall be excluded from the merger-related savings calculations. Merger-related payments made to officers leaving the employ of NSTAR, NU, any of the temporary or surviving entities engaged in the proposed merger transactions, the Operating Companies, or their successors (together, the “post-merger organization”) in the category of “change of control” payments, or to executives remaining with the post-merger organization in the category of “retention payments,” shall be recorded at the parent company level upon the merger close and shall not be eligible for recovery as a merger-related cost or otherwise from customers.

(15)

MERGER-RELATED INTEGRATION REPORTING: Actual transaction costs by account shall be reported to the Department in a compliance filing made within ninety (90) days of the close of the Proposed Merger. In addition, the Operating Companies shall each provide to the Attorney General and to DOER, as of January 1, 2014 and 2015 (and each January 1 thereafter until each respective Operating Company files a base-rate proceeding), interim reports on the previous calendar year’s merger integration efforts organized by functional area, including but not limited to merger-related costs incurred, supporting documentation, any savings achieved attributable to the merger integration efforts and the effects the merger integration efforts had on the Operating Companies (“Annual Interim Reports”). At least 60 days prior to the filing of the first base-rate proceeding following the Base Rate Freeze Period for NSTAR Electric, NSTAR Gas or WMECo, the respective Operating Company shall submit a final merger integration report to the Attorney General and to DOER developed utilizing the same manner of information used to compile the Annual Interim Reports.

(16)

NOTICE OF FACILITY CLOSINGS OR LAYOFFS: In the event of a facility closing or layoff of employees by Operating Companies or the post-merger organization during the term of this agreement, such utility will provide 30 days’ advance notice of such action to the Attorney General and to DOER. Nothing in this Settlement Agreement shall be interpreted to abridge any collective bargaining rights regarding reductions to work force.

ARTICLE III: ADDITIONAL CONDITIONS

(1)

The making of this Settlement Agreement establishes no principles and shall not be deemed to foreclose any party from making any contention in any future proceeding or investigation, except as to those issues and proceedings that are stated in this Settlement Agreement as being specifically resolved and terminated by approval of this Settlement Agreement.

(2)

This Settlement Agreement shall not be deemed in any respect to constitute an admission by any party that any allegation or contention in this proceeding, or any facts relating to any other pending proceeding cited in this document, is true or false. Except as specified in this Settlement Agreement to accomplish the customer and shareholder benefits intended by this Settlement Agreement, the entry of an order by the Department approving the Settlement Agreement shall not in any respect constitute a determination by the Department as to the merits of any other issue raised in this proceeding or any proceeding cited in this document.

(3)

This Settlement Agreement is the product of settlement negotiations. The Settling Parties agree that the content of those negotiations (including any workpapers or documents produced in connection with the negotiations) are confidential to the extent permissible under the Massachusetts Public Records Law, G.L. c. 66, § 10 and G.L. c. 4, § 7,

cl. twenty-sixth, that all offers of settlement are without prejudice to the position of any party or participant presenting such offer or participating in such discussion, and, except to enforce rights related to this Settlement Agreement or defend against claims made under this Settlement Agreement, that they will not use the content of those negotiations in any manner in these or other proceedings involving one or more of the parties to this Settlement Agreement, or otherwise.

(4)

The provisions of this Settlement Agreement are not severable. This Settlement Agreement is conditioned on its approval in full by the Department on, but not prior to, April 4, 2012 (“Requested Approval Date”), and any supporting information or evidence provided to the Department during any proceeding to investigate this settlement shall not interpreted to vary the express terms of this Settlement Agreement. Notwithstanding any of the foregoing provisions, the Attorney General may, in her sole discretion, or DOER may, in its sole discretion, rescind the Settlement Agreement in its entirety prior to the Department’s issuance of an order approving the Settlement Agreement; provided that notice of such rescission must be filed, or submitted electronically, in writing with the Department. The Settling Parties agree that the Requested Approval Date of this Settlement Agreement may be extended upon the mutual consent of the Settling Parties and notification of such extension to the Department.

(5)

If the Department does not approve this Settlement Agreement in its entirety by the Requested Approval Date, or if, for any reason, the Proposed Merger is not consummated, this Settlement Agreement shall be null and void, even if already approved by the Department, and this Settlement Agreement and filed supporting documents shall

be deemed to be withdrawn and shall not constitute a part of the record in any proceeding or used for any other purpose.

(6)

To the extent permitted by law, the Department shall have its usual jurisdiction to implement the terms of this Settlement Agreement. Nothing in this Settlement Agreement, however, shall be construed to prevent or delay the Attorney General from pursuing any cause of action related to this Settlement Agreement in court under G.L. c. 93A or otherwise.

(7)

Under no circumstances shall: (1) any charge under this Settlement Agreement or tariffs promulgated hereunder recover costs that are collected by the Operating Companies more than once, or through some other rate, charge or tariff; or (2) any charge recover costs more than once in any other rate, charge or tariff collected by the Operating Companies, it being acknowledged by the Settling Parties that such collection(s), unless fully refunded with interest, as soon as reasonably possible, shall constitute a breach of this Settlement Agreement when discovered and generally known and be deemed to violate the involved tariffs.

(8)

Notwithstanding any provision in this Settlement Agreement to the contrary, no part of this Settlement Agreement shall be interpreted to interfere with the Attorney General’s rights to petition the Department under G.L. c. 164, § 93, or otherwise under law or regulation, for a review of the Operating Companies, the post-merger organization, or their successors for any reason.

(9)	Any number of counterparts of this agreement may be executed, and each shall have the same force and effect as an original instrument, and as if all the parties to all the counterparts had signed the same instrument.

The signatories listed below represent that they are authorized on behalf of their principals to enter into this Settlement Agreement.


MARTHA COAKLEY, COMMONWEALTH OF MASSACHUSETTS ATTORNEY GENERAL				COMMONWEALTH OF MASSACHUSETTS DEPARTMENT OF ENERGY RESOURCES

/s/ Jesse S. Reyes				/s/ Anna Blumkin
By: Jesse S. Reyes Chief, Office of Ratepayer Advocacy Office of the Attorney General One Ashburton Place Boston, MA 02108-1598				By: Anna Blumkin Acting General Counsel Department of Energy Resources 100 Cambridge Street, Suite 900 Boston, MA 02114


NSTAR NSTAR ELECTRIC COMPANY NSTAR GAS COMPANY				NORTHEAST UTILITIES WESTERN MASSACHUSETTS ELECTRIC COMPANY

/s/ James J. Judge				/s/ David R. McHale
By: James J. Judge Senior Vice President and Chief Financial Officer NSTAR 800 Boylston Street Boston, MA 02199				By: David R. McHale Executive Vice President and Chief Financial Officer Northeast Utilities 56 Prospect Street Hartford, CT 06103

Dated: February 15, 2012

EX-10.2 3 d325730dex102.htm SETTLEMENT AGREEMENT Settlement Agreement

Exhibit 10.2

COMMONWEALTH OF MASSACHUSETTS

DEPARTMENT OF PUBLIC UTILITIES

SETTLEMENT AGREEMENT

COMMONWEALTH OF MASSACHUSETTS

DEPARTMENT OF PUBLIC UTILITIES

SETTLEMENT AGREEMENT

WHEREAS, this Settlement Agreement is entered into by and between NSTAR Electric Company (“NSTAR Electric”), NSTAR Gas Company (“NSTAR Gas”) and Western Massachusetts Electric Company (“WMECO”) (together the “Companies”), and the Massachusetts Department of Energy Resources (“DOER”), collectively, the “Settling Parties”, with regard to the Joint Petitioners’ proposed merger application and ancillary matters pending before the Department of Public Utilities (“Department”) in the above-referenced proceeding:

WHEREAS, the Settling Parties have engaged in negotiations with regard to the matters specified in the articles of this Settlement Agreement; and

WHEREAS, the Settling Parties have raised competing and disputed claims with regard to the factors considered by the Department in reviewing a proposed merger application, including, but not limited to the impact of the merger on the advancement of the Commonwealth’s clean energy goals established by the Green Communities Act (“GCA”) and the Global Warming Solutions Act (“GWSA”); long-term strategies that will assure a reliable, cost-effective energy delivery system; the impact on rates, service quality, and post-merger financial integrity; the equitable allocation of merger benefits; the effect on competition, and societal and economic impacts, but wish to resolve those matters on mutually agreeable terms, and without establishing any new precedent or principle applicable to any other proceedings; and

WHEREAS, the Settling Parties have the mutual objective of resolving the competing and disputed claims with respect to DOER’s Renewed Motion for Stay of the Proceedings, filed with the Department on July 14, 2011, in this proceeding; and

WHEREAS, the Settling Parties have the mutual objective of establishing a regulatory framework to take effect upon the Department’s approval of the Proposed Merger in order to further the Commonwealth’s policies on the reduction of greenhouse gas emissions and to secure long-term cost savings available from the Proposed Merger for customers.

WHEREAS, it is the objective of the Settling Parties to allocate the impacts of the Proposed Merger among the various states in which the merged entity will operate in a way that achieves comparability among the states with respect to merger savings, service improvements and employment impacts, and the Settling Parties have structured this Settlement Agreement to achieve such comparability, and are committed to structuring any settlement agreements in other jurisdictions in a way that will maintain such comparability.

ARTICLE 1: MERGER-RELATED FINANCIAL BENEFITS

The Settling Parties recognize the value of providing merger savings to customers immediately, and of providing stable electric and natural gas prices over an extended period of time. Accordingly, the Settling Parties have agreed to the following provisions:

1.1.

Immediate Customer Rebate: The Companies shall provide a one-time, non-recoverable $21 million rate credit to customers to be applied on the first billing cycle in the next billing month following the closing of the Proposed Merger, as also provided in a separate settlement agreement between the Companies, DOER and the Commonwealth of Massachusetts, Office of the Attorney General (“Attorney General”) (the “AG-DOER Settlement”). The Companies shall allocate the credit as follows: $15 million for NSTAR Electric customers, $3 million for NSTAR Gas customers, and $3 million for WMECO customers. For each individual company, all customers within a retail customer class shall receive the same rate credit dollar amount. The application of this credit shall not prevent customers from enjoying any other rate reductions or benefits related to the Proposed Merger.

1.2.

Base-Rate Freeze: NSTAR Electric, NSTAR Gas and WMECO shall forego their opportunity under G.L. c. 164 § 94 to obtain a general increase in base distribution rates prior to January 1, 2016 (the “Base-Rate Freeze”), and their base distribution rates shall be frozen for a period of forty-four (44) months from the merger close for that purpose, as provided in the separate settlement agreement between the Companies, DOER and the Attorney General.

ARTICLE 2: CORPORATE LEADERSHIP ON CLIMATE CHANGE

The Settling Parties recognize that, as a result of the merger, the Companies will be part of a regional utility having significant size and substantial impact. As such, the Companies recognize their obligation to play a strong leadership role with respect to the advancement of the Commonwealth’s climate change policies. Therefore, the Settling Parties agree as follows:

2.1

Public Outreach Campaign: Within 90 days of the merger closing, NSTAR Electric shall conduct a public outreach campaign relating to its post-merger operations. The public outreach campaign will educate customers as to transparency of the Company’s operations and climate change goals, as well as its continued commitment to the communities it serves, the continued provision of safe and reliable service to customers and the importance of the Commonwealth’s climate change goals in terms of furtherance of renewable power procurement, solar power development, energy efficiency program implementation and other policies encompassed within the Green Communities Act of 2008. The outreach campaign shall be conducted through the print media, bill inserts and other modes of public communication. In addition, NSTAR Electric shall maintain the level and types of community involvement provided prior to the merger over the Base-Rate Freeze period. The Company shall report to the Department on its public-outreach activities on a quarterly basis for a 15-month period following the merger closing

2.2

Wind Power Procurement: The Settling Parties agree that NSTAR Electric will enter into a long-term renewable power contract with Cape Wind Associates, LLC (“Cape Wind”) for a term of 15 years, which obligates NSTAR Electric to purchase the energy associated with 129 MW of Cape Wind capacity. This total purchase shall count toward the three percent procurement obligation set forth under Section 83 and 220 C.M.R. § 17.00 et seq. of the GCA. The terms of the Cape Wind Contract, including but not limited to the purchase price for the power and the purchase of RECs, shall be substantially the same as those terms approved by the Department in National Grid, D.P.U. 10-54 (2010).

Notwithstanding the foregoing, NSTAR Electric shall include as a provision in its contract with Cape Wind, and the Department shall issue an Order in this proceeding to the effect that, if Cape Wind does not commence physical construction of the facility prior to December 31, 2015, then NSTAR Electric shall terminate the Cape Wind Contract as of December 31, 2015. If the Cape Wind Contract has been terminated, then NSTAR Electric shall issue a request for proposal (“RFP”) for new Massachusetts RPS Class-I qualified renewable contract(s) with a term of at least 15 years, for approximately 2.0 percent of its 2013 electric load requirement. The RFP shall be issued no later than March 31, 2016 in accordance with the provisions of procurement obligations under Section 83 of the GCA; provided, however, that in the event that Cape Wind, its successors or assigns, or another party representing its interests, challenges the

validity or effectiveness of NSTAR Electric’s termination of the Cape Wind Contract, NSTAR Electric shall issue such RFP, but shall not be required to execute a renewable contract(s) resulting from such RFP, until there has been a final determination that said contract has been terminated. The alternative renewable contract(s) resulting from the RFP will be proposed to the Department for review and approval. For purposes of this paragraph, “physical construction” shall mean any physical installation of equipment or materials into the seabed of the Cape Wind construction site that is integral to the assembly of the wind turbine generation units. The Cape Wind Contract shall provide that the determination as to whether physical construction has commenced shall be made by the Department, upon petition by NSTAR Electric.

2.2.1

Section 83 Remuneration: The Settling Parties agree that, consistent with the provisions of Section 83, NSTAR Electric shall receive annual remuneration equal to four percent of the annual payments under the Cape Wind Contract, or the alternative renewable contract(s) if executed, as remuneration for acceptance of the financial obligation of the long-term contract for renewable energy (“Section 83 Remuneration”). See, D.P.U. 10-54, at 316-317.

The costs associated with the Cape Wind Contract or any alternative long-term renewable contract entered into in accordance with paragraph 2.2 shall be recovered from NSTAR Electric distribution customers, with the difference between the contract price paid by NSTAR Electric and net revenues received to be charged or credited to distribution customers in accordance with Department practice.

2.2.2

Memorandum of Understanding: The Settling Parties agree that, within 20 days of the filing of this Settlement Agreement, NSTAR Electric shall file an executed Memorandum of Understanding (“MOU”) between NSTAR Electric, DOER and Cape Wind to commence the Department’s Section 83 proceeding for review and approval of a Cape Wind Contract. The terms of the MOU shall be as set forth in this Settlement Agreement.

2.2.3

Contract Approval: The Settling Parties agree that NSTAR Electric shall file an executed Cape Wind Contract with the Department, for review and approval in a Section 83 proceeding, no later than March 30, 2012; provided that the executed contract shall contain a provision stating that the contract shall not be effective until five business days from the date of the merger closing.

2.2.4

Conditions: If the Department rejects this Settlement Agreement; rejects the AG-DOER Settlement Agreement; renders a finding precluding consummation of the Proposed Merger; denies approval of the Proposed Merger, or otherwise does not issue an order in D.P.U. 10-170 consistent with this Settlement Agreement, then the MOU filed with the Department pursuant to paragraph 2.1.2, above shall be null and void, in accordance

with terms included therein, and NSTAR Electric shall not be required to execute the Cape Wind Contract.

2.2.5

Scope of Approval: The Settling Parties agree that the Department’s approval of this Settlement Agreement shall not be deemed to constitute any form of review of the Cape Wind Contract or approval or endorsement that the Cape Wind Contract is in the best interest of ratepayers for the purposes of this pending proceeding (D.P.U 10-170). Rather, the Settling Parties agree that execution and filing of this Settlement Agreement is a demonstration by NSTAR Electric of its commitment to advance the goals of the GWSA and the GCA, consistent with the standard of review required by the Department in the D.P.U. 10-170 proceeding.

2.3

Energy Efficiency: The Settling Parties agree that NSTAR Electric will take all steps necessary to achieve an increase to the 2012 energy efficiency savings targets applicable under the three-year energy efficiency plans in place for NSTAR Electric and WMECO in 2012, as filed in D.P.U. 11-106 and D.P.U. 11-12. The increase shall raise the energy efficiency savings from 544,408 MWh to 555,296 MWh. If, by December 31, 2012, the 2012 annual energy savings results for NSTAR Electric and WMECO in the aggregate does not equal 555,296 MWh, then a penalty shall apply. The penalty shall be a reduction in NSTAR Electric’s 2012 incentive in the amount of $24.40 per MWh for each additional committed MWh not achieved.

Commencing in 2013, NSTAR Electric and WMECO shall increase their aggregate energy efficiency savings target to at least 2.5% of retail sales annually through energy efficiency, so long as there is no material change in the framework for assessing the success of the program and associated incentives, or providing for program funding. This annual commitment will remain in place until the expiration of Base-Rate Freeze period. If the Energy Efficiency Advisory Council (“EEAC”) determines that the minimum target established in the 3-year plans during this period should be increased to a level above 2.5%, and the Department approves the EEAC’s minimum savings target, NSTAR Electric and WMECO shall be required to meet that higher standard, accordingly.

2.4

Solar Investment: The Settling Parties agree that NSTAR Electric will submit proposed solar contracts to the Department for approval, each with a term of up to ten years. The solar installations will be developed and owned by third parties. The solar contracts shall be identified through an RFP process involving the issuance of two RFPs. The RFPs shall seek a total of 10 megawatts (“MW”) of Massachusetts qualified solar renewable energy credits (“SRECs”), with each RFP soliciting requests for five MW. The scope, terms and conditions of the two RFPs for SRECs shall be substantially similar to the long-term renewable RFP approved by the Department in D.P.U. 10-58. The first RFP shall be issued within three months of the merger closing and NSTAR Electric shall submit said contract(s) to the Department no later than November 1, 2012, for review and approval consistent with Section 83 requirements for renewable power

procurement. The second RFP shall be issued no more than 30 days following the issuance of the Department’s order on the first contract and the resulting contract(s) shall be submitted to the Department for review and approval no later than 180 days after the RPF is issued.

2.5

Hydroelectric: Through December 31, 2016, neither NSTAR Electric nor WMECO shall seek to satisfy any Massachusetts Class I renewable portfolio standard obligation using power supplied by any large hydroelectric facility. Nor shall NSTAR Electric or WMECO seek to sell Massachusetts RPS Class I renewable energy credits into the Massachusetts market for electricity produced by such hydroelectric power. A large hydroelectric facility shall be defined as any hydroelectric facility with generating capacity over 25 MW. After December 31, 2016, NSTAR Electric and WMECO shall endeavor to keep energy supply costs competitive based on market conditions in the region and continue to pursue large scale hydro as a cost-competitive low carbon renewable alternative.

2.6

Electric Vehicle Pilot: The Settling Parties agree that NSTAR Electric shall develop and implement an Electric Vehicle Pilot Program (“EV Pilot”) and associated tariff in collaboration with DOER, for approval by the Department. The objective of the EV Pilot will be to identify the most cost-effective approach to establish EV charging infrastructure in the merged entity’s service area within the Commonwealth. The EV Pilot shall consider the option of collaborating with neighborhoods, municipal parking authorities and employers to set aside special areas for charging. The EV Pilot would also explore off-peak charging. The EV Pilot shall be proposed to the Department for approval within six months of the date of the Department’s approval of this Settlement Agreement.

2.7

Phase-out of Stand-by Rate Tariffs : The Settling Parties agree that, no later than six months from the date of the merger closing, NSTAR Electric shall petition the Department to open a docket to (1) review NSTAR Electric’s stand-by rate tariffs with the goal of phasing out SB-G2 and SB-G3 tariffs on a revenue neutral basis as determined by the Department and (2) evaluate, in collaboration with DOER, fall zone requirements for wind facilities. In addition, no later than six months from the date of the merger closing, NSTAR Electric will file a report with the Department for review and approval summarizing NSTAR Electric’s policies related to customer-funded upgrades for interconnection of distributed generation.

ARTICLE 3: EQUITY AND TRANSPARENCY

The Settling Parties believe that it is critical to maintain customer service levels while merger efficiencies are being achieved; that any merger-related workforce reductions should be shared equitably across the several states in which the utilities operate, and that post-merger utility reporting should meet high standards of accuracy. Accordingly, the Settling Parties commit to the following:

3.1

Massachusetts Service Quality: By December 31, 2015, measurable improvements in service quality levels for WMECO shall be achieved as compared to the current pre-merger service-quality benchmarks calculated in accordance with the Department’s service-quality guidelines. Through December 31, 2015, NSTAR Electric shall demonstrate that it has maintained the level of service quality provided in its service territory as compared to pre-merger service-quality benchmarks, calculated in accordance with the Department’s service-quality guidelines.

3.2

Post-Merger Employment Levels: The Settling Parties agree that, in connection with the achievement of synergies following the merger, reductions in the Massachusetts employee work force, and/or transfer of jobs or workforce functions, shall be made on a fair, and equitable basis, giving consideration to previous work history, job experience and qualifications, and further, such workforce reductions in the Commonwealth will not be disproportionate to other jurisdictions in which the merged entity conducts operations; nor will such workforce reductions diminish customer service operations or compliance with emergency response plans approved by the Department. In the event of a facility closing or layoff of employees by Operating Companies or the post-merger organization during the term of this agreement, such utility will provide 30 days’ advance notice of such action to the Department of Energy Resources. Nothing in this Settlement Agreement shall be interpreted to abridge any collective bargaining rights regarding reductions to work force.

3.3

Accurate and Transparent Reporting: Sixty days before filing its next rate case in accordance with the AG-DOER Settlement Agreement, NSTAR Electric shall present to the Department an independent study that includes: (1) an examination and verification of the Annual Returns to the Department for the four-year period ending December 31 of the test-year period, and (2) verification of the assets contained in NSTAR Electric’s distribution rate base as of the test-year end, which shall have been developed through a systematic review as described in the NARUC Rate Case and Audit Manual.¹ The systematic review shall provide a comprehensive listing of assets. The study shall be prepared by an independent accounting firm identified through an RFP process conducted by NSTAR Electric in consultation with DOER and the Attorney General, with the selection of the independent accounting firm to be made by DOER and the Attorney General, subject to the consent of NSTAR Electric. NSTAR Electric shall be responsible for all costs and expenses associated with retaining an independent accounting firm; provided, however, that said costs shall not be entitled to recovery in any subsequent rate proceeding before the Department. The RFP process shall be

The independent accounting firm selected to conduct the study shall employ the NARUC Rate Case and Audit Manual as the basis for conducting the verification of rate-base assets. The verification of rate-base assets will include: plant-in service, plant held for future use, construction work in progress, gains/losses from property sales and acquisition adjustments/goodwill.

conducted so as to allow for the commencement of the study work no later than 240 days prior to the filing of the rate case. In relation to the Annual Return, the selected independent accounting firm shall verify the mathematical accuracy of the Annual Return; verify that the operating costs reported in the Annual Return reconcile to the Company’s financial statements, including, but not limited to, the Company’s income statement and balance sheet, as audited by the Company’s external auditing firm; confirm that the Annual Return is rendered in accordance with regulatory accounting standards and requirements, as applicable.

ARTICLE 4: DEPARTMENT APPROVALS

4.1	Settlement Approval: The Settling Parties assert that, if the Department does not approve this Settlement Agreement in its entirety on April 4, 2012, this filing shall be deemed to be withdrawn and shall not constitute a part of the record in any proceeding or used for any other purpose.

4.2

Merger Approval: The Settling Parties agree that the merger proposed by the Joint Petitioners in this proceeding is consistent with the public interest as required by G.L. c. 164, § 96. Therefore, this Settlement Agreement is contingent upon the Department’s simultaneous approval of: (1) this Settlement Agreement, (2) the AG-DOER Settlement Agreement referenced in paragraph 4.3, below, and (3) the Proposed Merger, on April 4, 2012.

4.3

Post-Merger Rate Levels: The Settling Parties recognize that DOER has sought in this proceeding to ensure that customers receive the benefit of savings associated with the Proposed Merger. Accordingly, the Settling Parties assert that the provisions of this Settlement Agreement are contingent upon the Department’s simultaneous approval of the AG-DOER Settlement Agreement, simultaneously filed with the Department in this proceeding.

ARTICLE 5: OTHER CONDITIONS

5.1

The Settling Parties assert that the provisions of this Settlement Agreement are not severable. This Settlement Agreement is conditioned on its full approval by the Department without additional conditions or requirements. The Settling Parties Agree that the Department will undertake a thorough review of this Settlement Agreement, that the Department is not obligated to approve this settlement agreement and that its ruling will be based on a finding that the terms contained herein are consistent with the public interest as required by G.L. c. 164, § 96. Notwithstanding any of the foregoing provisions, DOER may, in its sole discretion, rescind the Settlement Agreement in its entirety prior to the Department’s issuance of an order approving the Settlement Agreement; provided that such rescission must be filed in writing with the Department. The Settling Parties agree that the expiration date for the Department’s review and approval of this Settlement Agreement may only be extended upon motion by DOER to the

Department seeking such extension for two (2) business days following a final determination rendered in other jurisdictions.

5.2	If, for any reason, the Proposed Merger is not consummated, the terms of this Settlement Agreement shall no longer apply even if already approved by the Department subject to the terms set forth herein.

5.3

This Settlement Agreement shall not be deemed in any respect to constitute an admission by any party that any allegation or contention in this proceeding is true or false. Except as specified in this Settlement Agreement to accomplish the customer benefit intended by this Settlement Agreement, the entry of an order by the Department approving the Settlement Agreement shall not in any respect constitute a determination by the Department as to the merits of any other issue raised in this proceeding.

5.4

5.5

This Settlement Agreement is the product of settlement negotiations. The Settling Parties agree that the content of those negotiations (including any workpapers or documents produced in connection with the negotiations) are confidential, that all offers of settlement are without prejudice to the position of any party or participant presenting such offer or participating in such discussion, and, except to enforce rights related to this Settlement Agreement, comply with the Public Records Law or defend against claims made under this Settlement Agreement, that they will not use the content of those negotiations in any manner in these or other proceedings involving one or more of the parties to this Settlement Agreement, or otherwise.

The signatories listed below represent that they are authorized on behalf of their principals to enter into this Settlement Agreement.


Commonwealth of Massachusetts Department of Energy Resources				For: NSTAR Electric Company NSTAR Gas Company

/s/ Anna Blumkin				/s/ James J. Judge
By: Anna Blumkin Acting General Counsel Department of Energy Resources 100 Cambridge Street, Suite 900 Boston, MA 02114				By: James J. Judge Senior Vice President and Chief Financial Officer NSTAR 800 Boylston Street Boston, MA 02199


				For: Western Massachusetts Electric Company

				/s/ David R. McHale
				By: David R. McHale Executive Vice President and Chief Financial Officer Northeast Utilities 56 Prospect Street Hartford, CT 06103

Dated: February 15, 2012

EX-12.1 4 d325730dex121.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Computation of Ratio of Earnings to Fixed Charges

Exhibit 12.1

NSTAR Electric Company

Computation of Ratio of Earnings to Fixed Charges

Twelve Months Ended March 31, 2012

(in thousands)


Net income from continuing operations	$	213,541
Less: equity income from investees		261
Plus: distributed income of equity investees		676
Income taxes		139,646
Fixed charges (including securitization certificates)		77,426

Total	$	431,028


Interest expense	$	70,819
Interest component of rentals (estimated as one-third of rental expense)		6,607

Total	$	77,426

Ratio of earnings to fixed charges		5.57

EX-12.2 5 d325730dex122.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Computation of Ratio of Earnings to Fixed Charges

Exhibit 12.2

NSTAR Electric Company

Computation of Ratio of Earnings to Fixed Charges

and Preferred Stock Dividend Requirements

Twelve Months Ended March 31, 2012

(in thousands)


Net income from continuing operations (before preferred stock dividend)	$	213,541
Less: equity income from investees		261
Plus: distributed income of equity investees		676
Income taxes		139,646
Fixed charges (including securitization certificates)		77,426

Total	$	431,028


Interest expense	$	70,819
Interest component of rentals (estimated as one-third of rental expense)		6,607

Subtotal		77,426
Preferred stock dividend requirements		3,242

Total	$	80,668


Ratio of earnings to fixed charges and preferred stock dividend requirements		5.34

EX-31.1 6 d325730dex311.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

Exhibit 31.1

Sarbanes - Oxley Section 302 Certification

I, Leon J. Olivier, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of NSTAR Electric Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 9, 2012	By:	/s/ LEON J. OLIVIER
		Leon J. Olivier
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2 7 d325730dex312.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

Exhibit 31.2

Sarbanes - Oxley Section 302 Certification

I, James J. Judge, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of NSTAR Electric Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 9, 2012	By:	/s/ JAMES J. JUDGE
		James J. Judge
		Executive Vice President
		and Chief Financial Officer
		(Principal Financial Officer)

EX-32.1 8 d325730dex321.htm SECTION 906 CEO CERTIFICAITON Section 906 CEO Certificaiton

Exhibit 32.1

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant To

Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of NSTAR Electric Company (the “Company”) on Form 10-Q for the quarter ending March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leon J. Olivier, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated: May 9, 2012	By:	/s/ LEON J. OLIVIER
		Leon J. Olivier
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2 9 d325730dex322.htm SECTION 906 CFO CERTIFICATION Section 906 CFO Certification

Exhibit 32.2

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant To

Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of NSTAR Electric Company (the “Company”) on Form 10-Q for the quarter ending March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James J. Judge, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated: May 9, 2012	By:	/s/ JAMES J. JUDGE
		James J. Judge
		Executive Vice President
		and Chief Financial Officer
		(Principal Financial Officer)

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<div> Note D. Commitments and Contingencies   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">1.</td> <td valign="top" align="left">Service Quality Indicators </td></tr></table> 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 is required to report annually to the DPU concerning its performance as to each measure and is 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 Electric 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's service quality performance levels for 2011 were not in a penalty situation and the final performance report was filed with the DPU on March 1, 2012.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">2.</td> <td valign="top" align="left">Environmental Matters </td></tr></table> NSTAR Electric faces 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 Electric generally expects to have only a small percentage of the total potential liability for these sites. As of March 31, 2012 and December 31, 2011, NSTAR Electric had liabilities of $1.5 million and $1.3 million, respectively, for these environmental sites. This estimated recorded liability is based on an evaluation of all currently available facts with respect to these sites. 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 Electric's responsibilities for such sites evolve or are resolved. NSTAR Electric's ultimate liability for future environmental remediation costs may vary from these estimates. Based on NSTAR Electric's current assessment of its environmental responsibilities, existing legal requirements, and regulatory policies, NSTAR Electric does not believe that these environmental remediation costs will have a material adverse effect on NSTAR Electric's consolidated results of operations, financial position, or cash flows.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">3.</td> <td valign="top" align="left">Regulatory and Legal Proceedings </td></tr></table> DPU Safety and Reliability Programs (CPSL) 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 2011, NSTAR Electric has incurred a cumulative incremental revenue requirement of approximately $83 million. 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 Electric 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 Electric's result of operations, financial position, and cash flows. The comprehensive settlement agreement with the Massachusetts Attorney General stipulates a revenue stream of up to $15 million per annum for 2012 through 2015 in order to continue these programs. CPSL revenues will end once NSTAR Electric has recovered its 2015-related CPSL revenues. Realization of these revenues is subject to maintenance of certain performance metrics and DPU approval. 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 2005 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 the 2005 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. As of December 31, 2011, NSTAR Electric had not implemented the directives of the June 28, 2007 DPU order. 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). On October 10, 2010, the SJC allowed a stay of the DPU's order pending appeal. Briefs were filed during the summer of 2011 and oral arguments were held on December 8, 2011. On April 11, 2012, the SJC issued a procedural order waiving its standing 130-day rule for issuance of an opinion on the matter. NSTAR Electric continues to believe that its position is appropriate. However, the delay by the SJC has caused management to reassess its position as to the outcome. As such, NSTAR Electric has concluded that a final ruling on the SJC matter in the company's favor can no longer be determined as "probable", but rather would be "more likely than not." A decision by the SJC is expected in the second quarter of 2012. Therefore, as of March 31, 2012, NSTAR Electric has recognized a change from a probable outcome of recovery to one of more likely than not of the previously recorded regulatory asset related to its Basic Service bad debt costs. This results in a $28 million charge ($17 million after-tax) to operations in the first quarter of 2012.   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 Simplified Incentive Plan (SIP) rate 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 Electric cannot predict the timing or the ultimate outcome of these filings.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">4.</td> <td valign="top" align="left">Yankee Companies Spent Fuel Litigation </td></tr></table> NSTAR Electric is part owner of three decommissioned New England nuclear power plants, 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, for CY, YA and MY, respectively. The case has been going through the appeal process in the Federal courts, oral arguments were held in November 2011 and a final decision on this appeal could be received by May 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, for CY, YA and MY, respectively. NSTAR Electric 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.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">5.</td> <td valign="top" align="left">FERC Transmission Base ROE Complaint </td></tr></table> On September 30, 2011, several New England state attorneys general, state regulatory commissions, consumer advocates and other parties filed a joint complaint with the FERC under Sections 206 and 306 of the Federal Power Act alleging that the base ROE used in calculating formula rates for transmission service under the ISO-NE Open Access Transmission Tariff by New England transmission owners, including NSTAR Electric, CL&P, PSNH and WMECO, is unjust and unreasonable. The complainants asserted that the current 11.14 percent rate, which became effective in 2006, is excessive due to changes in the capital markets and are seeking an order to reduce the rate to 9.2 percent, effective September 30, 2011. In response, the New England transmission owners filed testimony and analysis based on standard FERC methodology and precedent, justifying a base ROE of approximately 11.2 percent, thus demonstrating that the base ROE of 11.14 percent remained just and reasonable. On May 3, 2012, the FERC issued an order establishing hearing and settlement judge procedures for the complaint. In the order, FERC encouraged the parties to reach a settlement of the dispute before hearings commence. One of the commissioners dissented, stating that the complaint should have been rejected based on the record and FERC precedent. The FERC indicated that if a settlement was not reached, it would expect to render a decision in the third quarter of 2013, with changes, if any, effective October 1, 2011. NSTAR Electric cannot predict the outcome of this proceeding, or its impact on its financial position, results of operations or cash flows.   As of March 31, 2012, NSTAR Electric had approximately $500 million of aggregate shareholders equity invested in its transmission facilities. As a result, each 10 basis points change in the authorized base ROE would change annual consolidated earnings by an approximate $0.5 million.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">6.</td> <td valign="top" align="left">Legal Matters </td></tr></table> In the normal course of its business, NSTAR Electric and its subsidiaries are involved in certain legal matters, including civil litigation, for which it has appropriately recognized legal liabilities. Management has reviewed the range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs (legal liabilities) that would be in excess of amounts accrued and amounts covered by insurance, and determined that the range of reasonably possible legal liabilities would not be material. Based on the information currently available, NSTAR Electric 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. </div>

100

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<div> Note B. Derivative Instruments Energy Contracts NSTAR Electric has determined that the majority of its electricity supply contracts qualify for, and NSTAR Electric has elected, the normal purchases and sales exception (normal) under accounting principles for derivative financial instruments. As a result, these electricity supply contracts are not reflected on the accompanying Condensed Consolidated Balance Sheets.   NSTAR Electric has a long-term renewable energy contract that does not qualify as normal and is valued in a liability position of approximately $5.4 million and $3.4 million as of March 31, 2012 and December 31, 2011, 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, as all amounts are recovered in rates charged to customers. The fair value of the renewable energy contract deemed to be a derivative and the balance sheet position of this agreement is as follows:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="76%"> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" nowrap="nowrap"> (in thousands)</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">March 31, 2012</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31, 2011</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Renewable Energy Contract – Non-hedging instrument</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Consolidated Balance Sheet Account:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Deferred credits and other liabilities: Power contract obligations</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,396</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,376</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total liability for non-hedging derivative instrument</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,396</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,376</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> </div>

50490000

57590000

50000000

57100000

490000

124432000

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75905000

70550000

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4211000

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<div> Note C. Fair Value Measurements NSTAR Electric discloses fair value measurements pursuant to a framework for measuring fair value in accordance with GAAP. NSTAR Electric 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. 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. Level 3 inputs used to develop the estimate included on-line regional generation and forecasted demand. Significant increases or decreases in future power prices in isolation would decrease or increase, respectively, the value of the derivative liability. Changes in the fair value of the renewable energy contract are recorded as a regulatory asset and would not impact net income. The financial liability that was recognized at fair value on a recurring basis as of March 31, 2012 and December 31, 2011 for this renewable energy contract was $5 million and $3 million, respectively. These amounts have been included in "Deferred credits and other liabilities: Power contract obligations" on the accompanying Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The change in fair value from December 31, 2011 to March 31, 2012 of $2 million resulted from changes in the long-term fair value of the renewable energy being valued. 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 March 31, 2012 and December 31, 2011, 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 Level 2 inputs within the fair value hierarchy consisting of quoted market prices of similar issues. Carrying amounts and fair values as of March 31, 2012 and December 31, 2011 were as follows:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="56%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">March 31, 2012</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">December 31, 2011</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom" nowrap="nowrap"> (in thousands)</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Carrying Amount</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Fair Value</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Carrying Amount</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Fair Value</td> <td valign="bottom"> </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Long-term indebtedness (including current maturities)</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,673,525</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,882,510</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,692,574</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,909,950</td> <td valign="bottom" nowrap="nowrap"> </td></tr></table> </div>

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<div> Note A. Business Organization and Summary of Significant Accounting Policies   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">1.</td> <td valign="top" align="left">About NSTAR Electric </td></tr></table> NSTAR Electric Company (NSTAR Electric or the Company) is a regulated public utility incorporated in 1886 under Massachusetts law. On April 10, 2012, NSTAR Electric became an indirect wholly-owned subsidiary of Northeast Utilities (NU). NSTAR Electric serves approximately 1.1 million electric distribution customers in the City of Boston and 80 surrounding communities. NU is a holding company engaged through its subsidiaries in the energy delivery business serving approximately 3.5 million customers in Connecticut, Massachusetts and New Hampshire. NSTAR Electric & Gas provides management and support services to NSTAR Electric. Harbor Electric Energy Company (HEEC), a wholly-owned subsidiary of NSTAR Electric, provides distribution service and ongoing support to its only customer, the Massachusetts Water Resources Authority's wastewater treatment facility located on Deer Island in Boston, Massachusetts. NSTAR Electric consolidates two wholly-owned special purpose subsidiaries, BEC Funding II, LLC and CEC Funding, LLC. These entities were created to complete the sale of electric rate reduction certificates to a special purpose trust created by two Massachusetts state agencies. These financing transactions securitized the costs incurred related to the divestiture of generation assets and long-term power contracts. The activities of a third special purpose subsidiary, BEC Funding LLC, were substantially completed as of March 31, 2010 and the Company was dissolved on April 14, 2010. 2. NSTAR Merger with Northeast Utilities Completed On April 10, 2012, NSTAR merged into NSTAR LLC, a direct wholly-owned subsidiary of NU, in accordance with the Agreement and Plan of Merger (the Merger Agreement) dated October 16, 2010 as approved by shareholders of each company on March 4, 2011. NSTAR LLC is the sole shareholder of the Company. The transaction with NU was structured as a merger of equals in a tax-free exchange of shares. As part of the merger, NSTAR shareholders received 1.312 NU common shares for each NSTAR common share owned as of the acquisition date. Regulatory Approvals On February 15, 2012, NU and NSTAR reached comprehensive settlement agreements with both the Massachusetts Attorney General and the Massachusetts Department of Energy Resources (DOER). The settlement with the Attorney General covered a variety of rate-making and rate design issues, including a base distribution rate freeze at least through 2015 for NSTAR Electric, NSTAR Gas and WMECO and $15 million, $3 million and $3 million rate credits to their respective customers. The settlement agreement with the DOER covered the same rate-making and rate design issues, as well as a variety of matters impacting the advancement of Massachusetts clean energy goals established by the Green Communities Act (GCA) and Global Warming Solutions Act (GWSA). On April 4, 2012, the Massachusetts Department of Public Utilities (DPU) issued a decision approving the settlement agreements and the merger of NU and NSTAR. Base distribution rates for the utilities would then be frozen until January 1, 2016 and would allow for a lost base revenue mechanism that provides significant levels of revenues to NSTAR Electric and NSTAR Gas for sales not achieved due to energy efficiency programs, compared to the alternative scenario of less certain increases in revenues through rate case filings. In addition, under the agreement with the DOER, the utilities pledge further environmental commitments to solar, wind, hydro, energy efficiency and electric vehicle development, including a memorandum of understanding to purchase clean power from Cape Wind, expected to be the nation's first operational off-shore, large-scale wind farm. These provisions provide material benefits for ratepayers, particularly in light of the goals and priorities framed by the Massachusetts Governor's renewable energy targets, and the state's GCA, the GWSA and the 2020 Clean Energy and Climate Plan. The financial impacts of the settlement agreements related to NSTAR Electric will be recognized in the second quarter of 2012 in connection with the completion of the merger. 3. Basis of Consolidation and Accounting The accompanying condensed consolidated financial information presented as of March 31, 2012 and for the three-month periods ended March 31, 2012 and 2011 has been prepared from NSTAR Electric's books and records without audit by an independent registered public accounting firm. Financial information as of December 31, 2011 was derived from the audited consolidated financial statements of NSTAR Electric and all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial information for the periods indicated, have been included. All intercompany transactions have been eliminated in consolidation. NSTAR Electric follows accounting policies prescribed by the FERC and the DPU. In addition, NSTAR Electric and its subsidiaries are subject to the accounting and reporting requirements of the SEC. NSTAR Electric is subject to generally accepted accounting principles that consider the effects of regulation resulting from differences in the timing of 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 accounting for regulated activities. Effective January 1, 2012, NSTAR Electric has made changes in estimates with respect to certain reserves, including the allowance for doubtful accounts, incurred but not reported claims on medical benefits, general and workmen's compensation liabilities and various compensation accruals. The total aggregate impact in the first quarter of these changes in estimates is approximately $11.4 million, after-tax. The preparation of financial statements in conformity with GAAP requires management of NSTAR Electric 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-month periods ended March 31, 2012 and 2011 are not indicative of the results that may be expected for an entire year. The demand for electricity 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.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">4.</td> <td valign="top" align="left">Pension and Postretirement Benefits Other than Pensions (PBOP) Plans </td></tr></table> NSTAR Electric's net periodic Pension Plan and PBOP Plan benefit costs for the first quarter are based on the latest available participant census data. The annual actuarial valuation will be finalized during the second quarter, and cost estimates will be adjusted based on the actual actuarial study results. NSTAR Electric'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 arising from such factors as market conditions and plan experience is substantially mitigated by NSTAR Electric's DPU-approved Pension and PBOP rate adjustment mechanism (PAM). Under the PAM, NSTAR Electric recovers its pension and PBOP expense through a reconciling rate mechanism.   Pension NSTAR Electric sponsors a defined benefit retirement plan, the NSTAR Pension Plan (the Plan), that covers substantially all employees of NSTAR LLC. As its sponsor, NSTAR Electric allocates the costs of the Plan to NSTAR Electric & Gas. NSTAR Electric & Gas charges all of its benefit costs to the NSTAR LLC operating companies, including NSTAR Electric, on the proportion of total direct labor charged to its operating companies. During the three months ended March 31, 2012, NSTAR Electric did not contribute to the Plan. NSTAR Electric currently anticipates making contributions of approximately $25 million to the Plan during the second and third quarters of 2012. The actual level of funding may differ from this estimate. Components of net periodic pension benefit cost were as follows:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="82%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="6" align="center">Three Months Ended March 31,</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom" nowrap="nowrap"> (in millions)</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2011</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Service cost</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7.8</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6.9</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Interest cost</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">14.8</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">15.2</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Expected return on Plan assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(16.5</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(17.3</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr><td valign="top"> Amortization of prior service cost</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(0.2</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(0.2</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Recognized actuarial loss</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">15.7</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11.8</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Net periodic pension benefit cost</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">21.6</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16.4</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Postretirement Benefits Other than Pensions NSTAR LLC also provides health care and other benefits to retired employees who meet certain age and years of service eligibility requirements. Under certain circumstances, eligible retirees are required to contribute to the costs of postretirement benefits. To fund these postretirement benefits, NSTAR LLC, on behalf of NSTAR Electric and other NSTAR LLC subsidiaries, makes contributions to various VEBA trusts that were established pursuant to section 501(c)(9) of the Internal Revenue Code. NSTAR Electric participates in the Plan trusts with other NSTAR LLC subsidiaries. Plan assets are available to provide benefits for all Plan participants who are former employees of NSTAR Electric and other subsidiaries of NSTAR LLC. During the three months ended March 31, 2012, NSTAR LLC contributed $7.3 million to this plan. In addition, $2.5 million was contributed in April 2012 to the Plan. NSTAR LLC currently anticipates contributing approximately $20.2 million for the remainder of 2012 toward these benefits. NSTAR Electric will fund approximately $6 million, $2 million, and $16.6 million of these amounts, respectively. The net periodic postretirement benefit cost allocated to NSTAR Electric for the three-month period ended March 31, 2012 was $9.0 million, as compared to $7.6 million in the three-month period ended March 31, 2011.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">5.</td> <td valign="top" align="left">Interest Income and Other, net </td></tr></table> Major components of interest income and other, net were as follows:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="82%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="6" align="center">Three Months Ended March 31,</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom" nowrap="nowrap"> (in thousands)</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2011</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Regulatory deferrals carrying charges</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,801</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,941</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Income tax related interest (expense) income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">372</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Other interest income (expense), short-term debt, and AFUDC</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(840</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(896</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total interest income and other, net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,961</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,417</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   6. 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 Electric has evaluated these arrangements under the accounting guidance for variable interests 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 the Company's financial position, financial performance, or cash flows. 7. Accounting Standards Recently Adopted On January 1, 2012, NSTAR Electric adopted the following Accounting Standards Updates (ASUs):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="5%"> </td> <td valign="top" width="2%" align="left"></td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> ASU 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.GAAP and IFRSs. The ASU did not have an impact on NSTAR Electric's financial position, results of operations or cash flows, but required additional financial statement disclosures related to fair value measurements. </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="5%"> </td> <td valign="top" width="2%" align="left"></td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> ASU 2011-05- Presentation of Comprehensive Income. The ASU does not change existing guidance on which items should be presented in other comprehensive income but requires other comprehensive income to be presented as part of a single continuous statement of comprehensive income or in a statement of other comprehensive income immediately following the statement of net income. The ASU did not affect the calculation of net income, comprehensive income or EPS. The ASU did not have an impact on NSTAR Electric's financial position or results of operations. </td></tr></table> 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 Condensed Consolidated Financial Statements or disclosed in the accompanying Notes to Condensed Consolidated Financial Statements. </div>

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Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note C. Fair Value Measurements

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

The financial liability that was recognized at fair value on a recurring basis as of March 31, 2012 and December 31, 2011 for this renewable energy contract was $5 million and $3 million, respectively. These amounts have been included in "Deferred credits and other liabilities: Power contract obligations" on the accompanying Condensed Consolidated Balance Sheets. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The change in fair value from December 31, 2011 to March 31, 2012 of $2 million resulted from changes in the long-term fair value of the renewable energy being valued.

Fair Value of Financial Instruments


	March 31, 2012				December 31, 2011
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Long-term indebtedness (including current maturities)	$	1,673,525	$	1,882,510	$	1,692,574	$	1,909,950

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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Derivative Instruments

3 Months Ended

Mar. 31, 2012

Derivative Instruments [Abstract]

Derivative Instruments

Note B. Derivative Instruments

Energy Contracts


(in thousands)	March 31, 2012		December 31, 2011
Renewable Energy Contract – Non-hedging instrument
Consolidated Balance Sheet Account:
Deferred credits and other liabilities: Power contract obligations	$	5,396	$	3,376

Total liability for non-hedging derivative instrument	$	5,396	$	3,376

- Definition

The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items.

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+ Details

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Condensed Consolidated Statements Of Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Condensed Consolidated Statements Of Income [Abstract]
Operating revenues	$ 580,304	$ 597,894
Operating expenses:
Purchased power and transmission	262,579	279,338
Operations and maintenance	145,383	92,831
Depreciation and amortization	69,975	68,521
Energy efficiency programs	46,904	40,091
Property and other taxes	30,817	29,022
Total operating expenses	555,658	509,803
Operating income	24,646	88,091
Interest charges (income):
Long-term debt	22,376	22,637
Transition property securitization	1,371	2,355
Interest income and other, net	(4,961)	(7,417)
Total interest charges	18,786	17,575
Other income (deductions):
Other income	1,383	1,018
Other deductions	(1,268)	(566)
Total other income	115	452
Income before income taxes	5,975	70,968
Income taxes	2,035	28,075
Net income	$ 3,940	$ 42,893

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Operating activities:
Net income	$ 3,940	$ 42,893
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	69,975	68,521
Debt amortization	1,086	1,198
Deferred income taxes	(19,786)	5,796
Net changes in:
Current assets and liabilities	2,840	(78,026)
Regulatory assets	73,055	25,851
Long-term power contract obligations	(7,750)	(21,585)
Deferred debits and credits, net	(19,570)	3,256
Net cash provided by operating activities	103,790	47,904
Investing activities:
Plant expenditures (including AFUDC)	(98,668)	(72,811)
Decrease in restricted cash		17,007
Net change in other investment activities	375
Net cash used in investing activities	(98,293)	(55,804)
Financing activities:
Transition property securitization redemptions	(18,725)	(21,336)
Long-term debt redemptions	(412)	(412)
Net change in notes payable	71,000	79,000
Dividends paid	(57,590)	(50,490)
Net cash (used in) provided by financing activities	(5,727)	6,762
Net decrease in cash and cash equivalents	(230)	(1,138)
Cash and cash equivalents at the beginning of the year	9,373	8,964
Cash and cash equivalents at the end of the period	9,143	7,826
Cash paid during the period for:
Interest, net of amounts capitalized	16,107	17,605
Income taxes	7,176	13,100
Non-cash investing activity:
Plant additions included in accounts payable	$ 29,470	$ 13,498

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Business Organization And Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Business Organization And Summary Of Significant Accounting Policies [Abstract]

Business Organization And Summary Of Significant Accounting Policies

Note A. Business Organization and Summary of Significant Accounting Policies

1.	About NSTAR Electric

Harbor Electric Energy Company (HEEC), a wholly-owned subsidiary of NSTAR Electric, provides distribution service and ongoing support to its only customer, the Massachusetts Water Resources Authority's wastewater treatment facility located on Deer Island in Boston, Massachusetts. NSTAR Electric consolidates two wholly-owned special purpose subsidiaries, BEC Funding II, LLC and CEC Funding, LLC. These entities were created to complete the sale of electric rate reduction certificates to a special purpose trust created by two Massachusetts state agencies. These financing transactions securitized the costs incurred related to the divestiture of generation assets and long-term power contracts. The activities of a third special purpose subsidiary, BEC Funding LLC, were substantially completed as of March 31, 2010 and the Company was dissolved on April 14, 2010.

2. NSTAR Merger with Northeast Utilities Completed

Regulatory Approvals

The financial impacts of the settlement agreements related to NSTAR Electric will be recognized in the second quarter of 2012 in connection with the completion of the merger.

3. Basis of Consolidation and Accounting

The accompanying condensed consolidated financial information presented as of March 31, 2012 and for the three-month periods ended March 31, 2012 and 2011 has been prepared from NSTAR Electric's books and records without audit by an independent registered public accounting firm. Financial information as of December 31, 2011 was derived from the audited consolidated financial statements of NSTAR Electric and all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial information for the periods indicated, have been included. All intercompany transactions have been eliminated in consolidation.

Effective January 1, 2012, NSTAR Electric has made changes in estimates with respect to certain reserves, including the allowance for doubtful accounts, incurred but not reported claims on medical benefits, general and workmen's compensation liabilities and various compensation accruals. The total aggregate impact in the first quarter of these changes in estimates is approximately $11.4 million, after-tax.

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

NSTAR Electric's net periodic Pension Plan and PBOP Plan benefit costs for the first quarter are based on the latest available participant census data. The annual actuarial valuation will be finalized during the second quarter, and cost estimates will be adjusted based on the actual actuarial study results.

NSTAR Electric'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 arising from such factors as market conditions and plan experience is substantially mitigated by NSTAR Electric's DPU-approved Pension and PBOP rate adjustment mechanism (PAM). Under the PAM, NSTAR Electric recovers its pension and PBOP expense through a reconciling rate mechanism.

Pension

Components of net periodic pension benefit cost were as follows:


	Three Months Ended March 31,
(in millions)	2012			2011
Service cost	$	7.8		$	6.9
Interest cost		14.8			15.2
Expected return on Plan assets		(16.5	)		(17.3	)
Amortization of prior service cost		(0.2	)		(0.2	)
Recognized actuarial loss		15.7			11.8

Net periodic pension benefit cost	$	21.6		$	16.4

Postretirement Benefits Other than Pensions

5.	Interest Income and Other, net

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


	Three Months Ended March 31,
(in thousands)	2012			2011
Regulatory deferrals carrying charges	$	5,801		$	7,941
Income tax related interest (expense) income		—			372
Other interest income (expense), short-term debt, and AFUDC		(840	)		(896	)

Total interest income and other, net	$	4,961		$	7,417

6. 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 Electric has evaluated these arrangements under the accounting guidance for variable interests 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 the Company's financial position, financial performance, or cash flows.

7. Accounting Standards Recently Adopted

On January 1, 2012, NSTAR Electric adopted the following Accounting Standards Updates (ASUs):

•

ASU 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.GAAP and IFRSs. The ASU did not have an impact on NSTAR Electric's financial position, results of operations or cash flows, but required additional financial statement disclosures related to fair value measurements.

•

8. Subsequent Events

- Definition

The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

+ References+ Details

XML 23 R3.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Statements Of Retained Earnings (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Condensed Consolidated Statements Of Retained Earnings [Abstract]
Balance at the beginning of the period	$ 1,239,135	$ 1,158,501
Net income	3,940	42,893
Subtotal	1,243,075	1,201,394
Dividends declared:
Common stock dividends declared to Parent	57,100	50,000
Preferred stock dividends declared	490	490
Subtotal	57,590	50,490
Balance at the end of the period	$ 1,185,485	$ 1,150,904

- Definition

Equity impact of aggregate cash, stock, and paid-in-kind dividends declared for all securities (common shares, preferred shares, etc.) during the period.

+ References+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

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Document And Entity Information
3 Months Ended

Mar. 31, 2012

May 07, 2012

Document And Entity Information [Abstract]

Document Type 10-Q

Amendment Flag false

Document Period End Date Mar. 31, 2012

Document Fiscal Period Focus Q1

Document Fiscal Year Focus 2012

Entity Registrant Name NSTAR ELECTRIC CO

Entity Central Index Key 0000013372

Current Fiscal Year End Date --12-31

Entity Filer Category Non-accelerated Filer

Entity Common Stock, Shares Outstanding 100

XML 26 R4.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 9,143	$ 9,373
Accounts receivable, net of allowance of $41,684 and $27,118, respectively	222,231	232,827
Accrued unbilled revenues	33,875	40,380
Regulatory assets	305,142	312,133
Inventory, at average cost	37,907	31,222
Other	411	247
Total current assets	608,709	626,182
Utility plant:
Electric plant in service, at original cost	5,778,320	5,720,718
Less: accumulated depreciation	1,467,561	1,436,021
Net electric plant-in-service	4,310,759	4,284,697
Construction work in progress	189,879	162,050
Net utility plant	4,500,638	4,446,747
Other investments:
Equity and other investments	3,848	4,211
Restricted cash - securitization	3,373	3,373
Total other investments	7,221	7,584
Deferred debits:
Regulatory assets	1,595,569	1,680,596
Other deferred debits	41,270	30,241
Total deferred debits	1,636,839	1,710,837
Total assets	6,753,407	6,791,350
Current liabilities:
Long-term debt	400,275	400,687
Transition property securitization	73,448	48,680
Notes payable	212,500	141,500
Power contract obligations	31,118	31,717
Accounts payable	162,891	182,035
Payable to affiliates, net	80,706	124,432
Income taxes	98,204	96,155
Accrued interest	26,214	18,956
Other	87,457	57,854
Total current liabilities	1,172,813	1,102,016
Deferred credits and other liabilities:
Accumulated deferred income taxes	1,302,891	1,310,180
Power contract obligations	106,879	112,010
Pension liability	363,751	357,685
Regulatory liability - cost of removal	237,617	235,762
Payable to affiliates	70,550	75,905
Other deferred credits	78,006	79,837
Total deferred credits	2,159,694	2,171,379
Long-term debt:
Long-term debt	1,199,802	1,199,714
Transition property securitization		43,493
Total long-term debt	1,199,802	1,243,207
Cumulative non-mandatory redeemable preferred stock	43,000	43,000
Common equity:
Common stock, par value $1 per share (100 shares issued and outstanding)
Premium on common stock	992,613	992,613
Retained earnings	1,185,485	1,239,135
Total common equity	2,178,098	2,231,748
Total capitalization	3,420,900	3,517,955
Commitments and contingencies
Total liabilities and capitalization	$ 6,753,407	$ 6,791,350

XML 27 R5.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance	$ 41,684	$ 27,118
Common stock, par value	$ 1	$ 1
Common stock, shares issued	100	100
Common stock, shares outstanding	100	100

- Definition

Total number of shares of common stock held by shareholders. May be all or portion of the number of common shares authorized. These shares represent the ownership interest of the common shareholders. Shares outstanding equals shares issued minus shares held in treasury and other adjustments, if any.

+ References+ Details

XML 28 R10.htm IDEA: XBRL DOCUMENT

Commitments And Contingencies

3 Months Ended

Mar. 31, 2012

Commitments And Contingencies [Abstract]

Commitments And Contingencies

Note D. Commitments and Contingencies

1.	Service Quality Indicators

NSTAR Electric's service quality performance levels for 2011 were not in a penalty situation and the final performance report was filed with the DPU on March 1, 2012.

2.	Environmental Matters

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 Electric's responsibilities for such sites evolve or are resolved. NSTAR Electric's ultimate liability for future environmental remediation costs may vary from these estimates. Based on NSTAR Electric's current assessment of its environmental responsibilities, existing legal requirements, and regulatory policies, NSTAR Electric does not believe that these environmental remediation costs will have a material adverse effect on NSTAR Electric's consolidated results of operations, financial position, or cash flows.

3.	Regulatory and Legal Proceedings

DPU Safety and Reliability Programs (CPSL)

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 Electric 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 Electric's result of operations, financial position, and cash flows.

Basic Service Bad Debt Adder

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.

As of December 31, 2011, NSTAR Electric had not implemented the directives of the June 28, 2007 DPU order. 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). On October 10, 2010, the SJC allowed a stay of the DPU's order pending appeal. Briefs were filed during the summer of 2011 and oral arguments were held on December 8, 2011. On April 11, 2012, the SJC issued a procedural order waiving its standing 130-day rule for issuance of an opinion on the matter. NSTAR Electric continues to believe that its position is appropriate. However, the delay by the SJC has caused management to reassess its position as to the outcome. As such, NSTAR Electric has concluded that a final ruling on the SJC matter in the company's favor can no longer be determined as "probable", but rather would be "more likely than not." A decision by the SJC is expected in the second quarter of 2012.

Other

4.	Yankee Companies Spent Fuel Litigation

NSTAR Electric is part owner of three decommissioned New England nuclear power plants, 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, for CY, YA and MY, respectively. The case has been going through the appeal process in the Federal courts, oral arguments were held in November 2011 and a final decision on this appeal could be received by May 2012.

NSTAR Electric 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 Transmission Base ROE Complaint

6.	Legal Matters

- Definition

The entire disclosure for commitments and contingencies.

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