Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

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