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):

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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.

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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.