COMMITMENTS AND CONTINGENCIES	3 Months Ended
Mar. 31, 2012
COMMITMENTS AND CONTINGENCIES [Abstract]
COMMITMENTS AND CONTINGENCIES	NOTE 13 - COMMITMENTS AND CONTINGENCIES Long-Term Power Purchases Vermont Yankee PPA: We purchased our entitlement share of Vermont Yankee plant output through the VY PPA between Entergy-Vermont Yankee and VYNPC until our contract expired on March 21, 2012. Our total VYNPC purchases for the first three month ended March 31, 2012 were $15.2 million and $17.1 million for the three months ended March 31, 2011. Vermont Yankee - Cooling Towers: On June 22, 2010, we, along with GMP, made a claim to Entergy-Vermont Yankee under the September 6, 2001 VY PPA. The parties claim that Entergy-Vermont Yankee breached its obligations under the agreement by failing to detect and remedy the conditions that resulted in cooling tower-related failures at the Vermont Yankee nuclear plant in 2007 and 2008. Those failures caused us and GMP to incur substantial incremental replacement power costs. We are seeking recovery of the incremental costs from Entergy-Vermont Yankee under the terms of the VY PPA based upon the results of certain reports, including an NRC inspection, in which the inspection team found that Entergy-Vermont Yankee, among other things, did not have sufficient design documentation available to help it prevent problems with the cooling towers. The NRC released its findings on October 14, 2008. In considering whether to seek recovery, we also reviewed the 2007 and 2008 root cause analysis reports by Entergy-Vermont Yankee and a December 22, 2008 reliability assessment provided by Nuclear Safety Associates to the State of Vermont. Entergy-Vermont Yankee disputes our claim. On January 10, 2012, after failing to reach a resolution of the matter with Entergy-Vermont Yankee, we and GMP filed a lawsuit in Vermont Superior Court in Windham County. The lawsuit seeks compensatory damages of $6.6 million to cover increased power costs and lost capacity payments resulting from the tower failures, plus interest. Our portion of this claim is $4.3 million. On January 18, 2012, Entergy-Vermont Yankee filed a notice of removal of the case to the United States District Court for the District of Vermont, asserting diversity of citizenship and federal jurisdiction over a federal question. Entergy-Vermont Yankee also filed an answer to the complaint, and asserted affirmative defenses and demanded a jury trial. A scheduling order has been issued, and the parties are engaged in discovery. The case is now pending in the federal court. We cannot predict the outcome of this matter at this time. Vermont Yankee - License Renewal: On January 19, 2012 the U.S. District Court for the District of Vermont issued a decision ruling against the state of Vermont. The effect of the ruling is that the state is prohibited under federal law from taking any action to compel the plant to shut down after March 21, 2012 because it failed to obtain legislative approval (under the provisions of Act 160). The state of Vermont was precluded from shutting the plant down for safety-related reasons. On February 18, 2012, the state filed a notice of appeal with the 2nd U.S. Circuit Court of Appeals in New York. Meanwhile, Vermont Yankee still must obtain a Certificate of Public Good from the PSB to gain a 20-year license extension. We are participants in this docket due to a prior revenue-sharing agreement. That revenue-sharing arrangement provides in part that in the event that Entergy extends the operation of the plant pursuant to an extension of its NRC license, Entergy agrees to share with VYNPC 50 percent of the "Excess Revenue" for 10 years commencing on March 13, 2012. On February 27, 2012, Entergy filed notice with the U.S. District Court for the District of Vermont saying that it would ask the 2nd U.S. Circuit Court of Appeals to review a decision. It will appeal a federal judge's order allowing the plant to stay open past its originally scheduled shutdown date, and will ask the original judge to revisit his order and prevent the state of Vermont from barring the future storage of spent nuclear fuel at the plant. Entergy has informed the PSB that it intends to continue to operate the plant pending a final PSB ruling on its operation. On March 19, 2012, the U.S. District Court issued an order barring the Vermont state defendants from taking action to enforce a certain Vermont statute that would compel Vermont Yankee to shut down because the "cumulative total amount of spent fuel stored at Vermont Yankee" exceeds "the amount derived from the operation of the facility up to, but not beyond, March 21, 2012." On March 29, 2012, the PSB denied Entergy's motion for the immediate issuance of the Certificate of Public Good and ordered Entergy to file an amended petition that identifies the specific approval or approvals that it is seeking from the Board, and the state-law authority under which the Board would issue each approval that Entergy VY seeks. Entergy filed its petition for a CPG on April 16, 2012 and a new docket has been opened to consider Entergy VY's amended petition. Hydro-Québec: We continue to purchase power under the Hydro-Québec VJO power contract. The VJO power contract has been in place since 1987 and purchases began in 1990. Related contracts were subsequently negotiated between us and Hydro-Québec, altering the terms and conditions contained in the original contract by reducing the overall power requirements and related costs. The VJO power contract runs through 2020, but our purchases under the contract end in 2016. The average level of deliveries under the current contract decreases by approximately 20 percent after 2012, and by approximately 84 percent after 2015. Total purchases under the VJO power contract were $16.8 million for the three months ended March 31, 2012 and $16.5 million for the three months ended March 31, 2011. The annual load factor is 75 percent for the remainder of the VJO power contract, unless the contract is changed or there is a reduction due to the adverse hydraulic conditions described below. There are two sellback contracts with provisions that apply to existing and future VJO power contract purchases. The first resulted in the sellback of 25 MW of capacity and associated energy through April 30, 2012, which has no net impact currently since an identical 25 MW purchase was made in conjunction with the sellback. We have a 23 MW share of the sellback. However, since the sellback ends six months before the corresponding purchase ends, the first sellback will result in a 23 MW increase in our capacity and energy purchases for the period from May 1, 2012 through October 31, 2012. A second sellback contract provided benefits to us that ended in 1996 in exchange for two options to Hydro-Québec. The first option was never exercised and expired December 31, 2010. The second gives Hydro-Québec the right, upon one year's written notice, to curtail energy deliveries in a contract year (12 months beginning November 1) from an annual capacity factor of 75 to 50 percent due to adverse hydraulic conditions as measured at certain metering stations on unregulated rivers in Québec. This second option can be exercised five times through October 2015 but due to the notice provision there is a maximum remaining application of two times available. To date, Hydro-Québec has not exercised this option. We have determined that this second option is not a derivative because it is contingent upon a physical variable. There are specific contractual provisions providing that in the event any VJO member fails to meet its obligation under the contract with Hydro-Québec, the remaining VJO participants will "step-up" to the defaulting party's share on a pro-rata basis. As of March 31, 2012, our obligation is about 47 percent of the total VJO power contract through 2016, and represents approximately $208.7 million, on a nominal basis. In accordance with FASB's guidance for guarantees, we are required to disclose the "maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee." Such disclosure is required even if the likelihood is remote. With regard to the "step-up" provision in the VJO power contract, we must assume that all members of the VJO simultaneously default in order to estimate the "maximum potential" amount of future payments. We believe this is a highly unlikely scenario given that the majority of VJO members are regulated utilities with regulated cost recovery. Each VJO participant has received regulatory approval to recover the cost of this purchased power contract in its most recent rate applications. Despite the remote chance that such an event could occur, we estimate that our undiscounted purchase obligation would be an additional $247 million for the remainder of the contract, assuming that all members of the VJO defaulted by April 1, 2012 and remained in default for the duration of the contract. In such a scenario, we would then own the power and could seek to recover our costs from the defaulting members or our retail customers, or resell the power in the wholesale power markets in New England. The range of outcomes (full cost recovery, potential loss or potential profit) would be highly dependent on Vermont regulation and wholesale market prices at the time. Independent Power Producers: We receive power from several IPPs, primarily so-called small power producers. These plants use water or biomass as fuel. Starting in 2012, we will also purchase power from some larger independent producers, primarily wind projects. Total purchases from IPPs were $6.4 million for the three months ended March 31, 2012 and $6.3 million for the three months ended March 31, 2011. Nuclear Decommissioning Obligations We are obligated to pay our share of nuclear decommissioning costs for nuclear plants in which we have an ownership interest. We have an external trust dedicated to funding our joint-ownership share of future Millstone Unit #3 decommissioning costs. DNC has suspended contributions to the Millstone Unit #3 Trust Fund because the minimum NRC funding requirements have been met or exceeded. We have also suspended contributions to the Trust Fund, but could choose to renew funding at our own discretion as long as the minimum requirement is met or exceeded. If there is a need for additional decommissioning funding, we will be obligated to resume contributions to the Trust Fund. We have equity ownership interests in Maine Yankee, Connecticut Yankee and Yankee Atomic. These plants are permanently shut down and completely decommissioned except for the spent fuel storage at each location. Our obligations related to these plants are described in Note 4 - Investments in Affiliates. We also had a 35 percent ownership interest in the Vermont Yankee nuclear power plant through our equity investment in VYNPC, but the plant was sold in 2002. Our obligation for plant decommissioning costs ended when the plant was sold, except that VYNPC retained responsibility for the pre-1983 spent fuel disposal cost liability. VYNPC has a dedicated Trust Fund that meets most of the liability. Changes in the underlying interest rates that affect the earnings and the liability could cause the balance to be a surplus or deficit. Excess funds, if any, will be returned to us and the other former owners and must be applied to the benefit of retail customers. DOE Litigation We have a 1.7303 joint-ownership percentage in Millstone Unit #3, in which DNC is the lead owner with 93.4707 percent of the plant joint-ownership. In January 2004 DNC filed, on behalf of itself and the two minority owners, including us, a lawsuit against the DOE seeking recovery of costs related to the storage of spent nuclear fuel arising from the failure of the DOE to comply with its obligations to commence accepting such fuel in 1998. A trial commenced in May 2008. On October 15, 2008, the United States Court of Federal Claims issued a favorable decision in the case, including damages specific to Millstone Unit #3. The DOE appealed the court's decision in December 2008. On February 20, 2009, the government filed a motion seeking an indefinite stay of the briefing schedule. On March 18, 2009, the court granted the government's request to stay the appeal. On November 19, 2009, DNC filed a motion to lift the stay. On April 12, 2010, the stay was lifted and a staggered briefing schedule was proposed, to which DNC has responded with a request to expedite the briefing schedule so that the appeals of all parties can be heard concurrently. On June 30, 2010, the DOE filed its initial brief in the spent fuel damages litigation. This brief focuses on the costs awarded in connection with Millstone Unit #3. DNC replied to the government's brief in August, 2010. The government's reply brief was filed September 14, 2010 and briefing on the appeal is now complete. Oral argument on the government's appeal occurred before the Federal Circuit on January 12, 2011. On April 25, 2011 the U.S. Court of Appeals for the Federal Circuit issued a decision affirming the spent fuel damages award for damages incurred through June 30, 2006 in connection with DOE's failure to begin accepting spent fuel for disposal. The government had the option to seek rehearing of the Federal Circuit decision and to seek review by the U.S. Supreme Court. The time period for seeking rehearing was 45 days. On June 30, 2011, DNC informed us that the DOE decided not to seek rehearing and instead wishes to pay the awarded damages. In October 2011 we received $0.2 million and the amount was credited to our retail customers. Also, see Note 4 - Investments in affiliates for additional DOE litigation proceedings. Future Power AgreementsNew Hydro-QuébecAgreement: On August 12, 2010 we, along with GMP, VPPSA, Vermont Electric Cooperative, Inc., Vermont Marble, Town of Stowe Electric Department, City of Burlington, Vermont Electric Department, Washington Electric Cooperative, Inc. and the 13 municipal members of VPPSA (collectively, the "Buyers") entered into an agreement for the purchase of shares of 218 MW to 225 MW of energy and environmental attributes from HQUS commencing on November 1, 2012 and continuing through 2038. The HQUS PPA will replace approximately 65 percent of the existing VJO power contract discussed above. The rights and obligations of the Buyers under the HQUS PPA, including payment of the contract price and indemnification obligations, are several and not joint or joint and several. Therefore, we shall have no responsibility for the obligations, financial or otherwise, of any other party to the HQUS PPA. The parties have also entered into related agreements, including collateral agreements between each Buyer and HQUS, a Hydro-Québec guaranty, an allocation agreement among the Buyers, and an assignment and assumption agreement between us and Vermont Marble, related to the acquisition. On August 17, 2010, the Buyers filed a petition with the PSB asking for Certificates of Public Good under Section 248 of Title 30, Vermont Statutes Annotated. On April 15, 2011, the PSB issued an order approving the HQUS PPA. Under the HQUS PPA, we are entitled to purchase an energy quantity of up to 5 MW from November 1, 2012 to October 31, 2015; 90.4 MW from November 1, 2015 to October 31, 2016; 101.4 MW from November 1, 2016 to October 31, 2020; 103.4 MW from November 1, 2020 to October 31, 2030; 112.8 MW from November 1, 2030 to October 31, 2035; and 27.4 MW from November 1, 2035 to October 31, 2038. These quantities include assumption of Vermont Marble's allocations as a result of our September 1, 2011 purchase of Vermont Marble. Other Future Power Agreements: As we continue to build and diversify our power portfolio as planned and to comply with state law which establishes goals for including renewable power in our mix, we have signed several agreements for clean and competitively priced renewable energy. On September 9, 2010 we agreed to terms for purchasing output over nine years from Iberdrola Renewables' planned Deerfield Wind Project. The agreement was signed by the parties on December 13, 2010. Due to delays in receiving a necessary permit from the U.S. Forest Service, construction is not now scheduled to take place in a manner that would be sufficient for meeting the conditions precedent of the agreement and the project is now on hold. Conditions precedent not satisfied or waived on or before April 1, 2012 could result in termination of the contract by June 30, 2012. We are currently in discussions with Iberdrola, the parent company, with respect to terminating, reforming or replacing the agreement. Other agreements signed in 2010 include: two separate agreements to purchase 30.3 percent of the actual output from Granite Reliable Wind project for 20 years beginning April 1, 2012 and an additional 20 percent for 15 years beginning in November 2012; an agreement to purchase the entire 4.99 MW output of Ampersand Gilman Hydro for five years starting April 1, 2012; and 15 MW of around-the-clock energy from J.P. Morgan Ventures Energy for the calendar years 2013 through 2015. On July 27, 2011, in cooperation with an energy management firm, we conducted a highly structured Internet auction that involved a dozen pre-screened northeastern generators and energy marketers. When the bidding closed, we signed three contracts with an average price of approximately $47.50 per megawatt-hour, or 4.75 cents per kilowatt-hour. Two of the contracts will fill the 2012 gap in our portfolio created by the end of the VY PPA. One will supply energy 24 hours per day from April 1, 2012 through the end of the year, while the other will provide both peak and off-peak power during specific periods in 2012 when we have remaining supply gaps. The third contract filled our energy needs during the planned Vermont Yankee refueling outage that ended November 3, 2011. These purchase contracts will provide about 570,000 megawatt-hours of energy or about 20 percent of our power supply during the life of the contracts, for $27 million. The contracts are for so-called "system power," meaning they are not conditioned on the operation of individual power generation sources. In September 2011, we also used the auction process to sell small amounts of projected excess energy to hedge price risks during the first two months of 2012. Performance Assurance We are subject to performance assurance requirements through ISO-NE under the Financial Assurance Policy for NEPOOL members. At our current investment-grade credit rating, we have a credit limit of $3 million with ISO-NE. We are required to post collateral for all net power and transmission transactions in excess of this credit limit. Additionally, we purchase power in the wholesale market pursuant to contracts with third parties, and are required to post collateral under certain conditions defined in the contracts. At March 31, 2012, we had posted $4.1 million of collateral under performance assurance requirements for certain of our power and transmission transactions, $3.5 million of which was represented by a letter of credit and $0.6 million of which was represented by cash and cash equivalents. At December 31, 2011, we had posted $3.9 million of collateral under performance assurance requirements for certain of our power and transmission transactions, $3.5 million of which was represented by a letter of credit and $0.4 million of which was represented by cash and cash equivalents. Environmental Over the years, more than 100 companies have merged into or been acquired by CVPS. At least two of those companies used coal to produce gas for retail sale. Gas manufacturers, their predecessors and CVPS used waste disposal methods that were legal and acceptable then, but may not meet modern environmental standards and could represent a liability. These practices ended more than 50 years ago. Some operations and activities are inspected and supervised by federal and state authorities, including the EPA. We believe that we are in compliance with all laws and regulations and have implemented procedures and controls to assess and assure compliance. Corrective action is taken when necessary. The total reserve for environmental matters was $0.3 million as of March 31, 2012 and December 31, 2011. The reserve for environmental matters is included in current liabilities on the Condensed Consolidated Balance Sheets and represents our best estimate of the cost to remedy issues at these sites based on available information as of the end of the applicable reporting periods. Below is a brief discussion of the significant sites for which we have recorded reserves. Brattleboro Manufactured Gas Facility: In the 1940s, we owned and operated a manufactured gas facility in Brattleboro, Vermont. We ordered a site assessment in 1999 at the request of the State of New Hampshire. In 2001, New Hampshire indicated that no further action was required, although it reserved the right to require further investigation or remedial measures. In 2002, the VANR notified us that our corrective action plan for the site was approved. As of March 31, 2012, our estimate of the remaining obligation is $0.3 million. The Windham Regional Commission and the Town of Brattleboro are currently pursuing the redevelopment of the gas plant site and waterfront area into vehicle parking with green space. This concept calls for the removal of the remnant gas plant building plus covering and otherwise avoiding contaminated areas instead of removing contaminated soil and debris. We met with the Town of Brattleboro in 2011 and we agreed to an Amended and Restated Grant of Environmental Restrictions for the gas plant property. In November 2011, we contributed $0.2 million toward the remediation project, which will likely satisfy our obligation at this site. We will maintain a reserve until a corrective action plan has been implemented and green space has been constructed. Construction began in early 2012 and should be completed during the 2012 construction season. Salisbury Substation: We completed internal testing and found PCBs and TPH, in addition to small quantities of pesticides in the soil and concrete at this substation. The substation is located adjacent to the Salisbury hydroelectric power station and both facilities underwent modernization projects in late 2011 and early 2012. Test results indicated that PCB, TPH and pesticide concentrations exceed state and federal regulatory limits in portions of the substation. In late 2011 and early 2012, we removed the contaminated material from the substation in accordance with VANR and EPA-approved remediation plans. The work consisted of excavation and removal of soil and concrete and there was more contaminated material than estimated. The site work is complete and we will submit the requisite summary reports to the VANR and EPA early in the second quarter of 2012. As of March 31, 2012, our estimate of the remaining obligation is less than $0.1 million. To management's knowledge, there is no pending or threatened litigation regarding other sites with the potential to cause material expense. No government agency has sought funds from us for any other study or remediation. Catamount Indemnifications On December 20, 2005, we completed the sale of Catamount, our wholly owned subsidiary, to CEC Wind Acquisition, LLC, a company established by Diamond Castle Holdings, a New York-based private equity investment firm. Under the terms of the agreements with Catamount and Diamond Castle Holdings, we agreed to indemnify them, and certain of their respective affiliates, in respect of a breach of certain representations and warranties and covenants, most of which ended June 30, 2007, except certain items that customarily survive indefinitely. Indemnification is subject to a $1.5 million deductible and a $15 million cap, excluding certain customary items. Environmental representations are subject to the deductible and the cap, and such environmental representations for only two of Catamount's underlying energy projects survived beyond June 30, 2007. Our estimated "maximum potential" amount of future payments related to these indemnifications is limited to $15 million. We have not recorded any liability related to these indemnifications. To management's knowledge, there is no pending or threatened litigation with the potential to cause material expense. No government agency has sought funds from us for any study or remediation. Leases and support agreements Operating Leases: We have two master lease agreements for vehicles and related equipment. On October 30, 2009, we signed a vehicle lease agreement to finance many of the vehicles covered by a former agreement. Our guarantee obligation under this lease will not exceed 8 percent of the acquisition cost. The maximum amount of future payments under this guarantee at March 31, 2012 is approximately $0.3 million. The total future minimum lease payments required for all lease schedules under this agreement at March 31, 2012 is $2.0 million. As of March 31, 2012 there is no credit line in place for additions under this agreement. The total acquisition cost of all lease additions under this agreement at March 31, 2012 was $4.1 million. On October 24, 2008, we entered into an operating lease for new vehicles and other related equipment. Our guarantee obligation under this lease is limited to 5 percent of the acquisition cost. The maximum amount of future payments under this guarantee is approximately $0.1 million. The total future minimum lease payments required for all lease schedules under this agreement at March 31, 2012 is $1.6 million. As of March 31, 2012 there is no credit line in place for additions under this agreement. The total acquisition cost of all lease additions under this agreement at March 31, 2012 was $2.9 million. Legal Proceedings We are involved in legal and administrative proceedings, including civil litigation, in the normal course of business as well as a number of lawsuits relating to our pending merger agreement with Gaz Métro that are described in Note 1 - Business Organization, Litigation Related to Merger Agreement. We are unable to fully determine a range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs or legal liabilities that would be in excess of amounts accrued and amounts covered by insurance. Based on the information currently available, we do not believe that it is probable that any such legal liability will have a material impact on our consolidated financial position. It is reasonably possible that additional legal liabilities that may result from changes in estimates could have a material impact on our results of operations, financial condition or cash flows.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

Long-Term Power Purchases Vermont Yankee PPA: We purchased our entitlement share of Vermont Yankee plant output through the VY PPA between Entergy-Vermont Yankee and VYNPC until our contract expired on March 21, 2012. Our total VYNPC purchases for the first three month ended March 31, 2012 were $15.2 million and $17.1 million for the three months ended March 31, 2011.

Vermont Yankee - Cooling Towers: On June 22, 2010, we, along with GMP, made a claim to Entergy-Vermont Yankee under the September 6, 2001 VY PPA. The parties claim that Entergy-Vermont Yankee breached its obligations under the agreement by failing to detect and remedy the conditions that resulted in cooling tower-related failures at the Vermont Yankee nuclear plant in 2007 and 2008. Those failures caused us and GMP to incur substantial incremental replacement power costs.

We are seeking recovery of the incremental costs from Entergy-Vermont Yankee under the terms of the VY PPA based upon the results of certain reports, including an NRC inspection, in which the inspection team found that Entergy-Vermont Yankee, among other things, did not have sufficient design documentation available to help it prevent problems with the cooling towers. The NRC released its findings on October 14, 2008. In considering whether to seek recovery, we also reviewed the 2007 and 2008 root cause analysis reports by Entergy-Vermont Yankee and a December 22, 2008 reliability assessment provided by Nuclear Safety Associates to the State of Vermont. Entergy-Vermont Yankee disputes our claim.

On January 10, 2012, after failing to reach a resolution of the matter with Entergy-Vermont Yankee, we and GMP filed a lawsuit in Vermont Superior Court in Windham County. The lawsuit seeks compensatory damages of $6.6 million to cover increased power costs and lost capacity payments resulting from the tower failures, plus interest. Our portion of this claim is $4.3 million. On January 18, 2012, Entergy-Vermont Yankee filed a notice of removal of the case to the United States District Court for the District of Vermont, asserting diversity of citizenship and federal jurisdiction over a federal question. Entergy-Vermont Yankee also filed an answer to the complaint, and asserted affirmative defenses and demanded a jury trial. A scheduling order has been issued, and the parties are engaged in discovery. The case is now pending in the federal court. We cannot predict the outcome of this matter at this time.

Vermont Yankee - License Renewal: On January 19, 2012 the U.S. District Court for the District of Vermont issued a decision ruling against the state of Vermont. The effect of the ruling is that the state is prohibited under federal law from taking any action to compel the plant to shut down after March 21, 2012 because it failed to obtain legislative approval (under the provisions of Act 160). The state of Vermont was precluded from shutting the plant down for safety-related reasons. On February 18, 2012, the state filed a notice of appeal with the 2nd U.S. Circuit Court of Appeals in New York. Meanwhile, Vermont Yankee still must obtain a Certificate of Public Good from the PSB to gain a 20-year license extension. We are participants in this docket due to a prior revenue-sharing agreement. That revenue-sharing arrangement provides in part that in the event that Entergy extends the operation of the plant pursuant to an extension of its NRC license, Entergy agrees to share with VYNPC 50 percent of the "Excess Revenue" for 10 years commencing on March 13, 2012.

On February 27, 2012, Entergy filed notice with the U.S. District Court for the District of Vermont saying that it would ask the 2nd U.S. Circuit Court of Appeals to review a decision. It will appeal a federal judge's order allowing the plant to stay open past its originally scheduled shutdown date, and will ask the original judge to revisit his order and prevent the state of Vermont from barring the future storage of spent nuclear fuel at the plant. Entergy has informed the PSB that it intends to continue to operate the plant pending a final PSB ruling on its operation. On March 19, 2012, the U.S. District Court issued an order barring the Vermont state defendants from taking action to enforce a certain Vermont statute that would compel Vermont Yankee to shut down because the "cumulative total amount of spent fuel stored at Vermont Yankee" exceeds "the amount derived from the operation of the facility up to, but not beyond, March 21, 2012."

On March 29, 2012, the PSB denied Entergy's motion for the immediate issuance of the Certificate of Public Good and ordered Entergy to file an amended petition that identifies the specific approval or approvals that it is seeking from the Board, and the state-law authority under which the Board would issue each approval that Entergy VY seeks. Entergy filed its petition for a CPG on April 16, 2012 and a new docket has been opened to consider Entergy VY's amended petition.

Hydro-Québec: We continue to purchase power under the Hydro-Québec VJO power contract. The VJO power contract has been in place since 1987 and purchases began in 1990. Related contracts were subsequently negotiated between us and Hydro-Québec, altering the terms and conditions contained in the original contract by reducing the overall power requirements and related costs. The VJO power contract runs through 2020, but our purchases under the contract end in 2016. The average level of deliveries under the current contract decreases by approximately 20 percent after 2012, and by approximately 84 percent after 2015. Total purchases under the VJO power contract were $16.8 million for the three months ended March 31, 2012 and $16.5 million for the three months ended March 31, 2011.

The annual load factor is 75 percent for the remainder of the VJO power contract, unless the contract is changed or there is a reduction due to the adverse hydraulic conditions described below.

There are two sellback contracts with provisions that apply to existing and future VJO power contract purchases. The first resulted in the sellback of 25 MW of capacity and associated energy through April 30, 2012, which has no net impact currently since an identical 25 MW purchase was made in conjunction with the sellback. We have a 23 MW share of the sellback. However, since the sellback ends six months before the corresponding purchase ends, the first sellback will result in a 23 MW increase in our capacity and energy purchases for the period from May 1, 2012 through October 31, 2012.

A second sellback contract provided benefits to us that ended in 1996 in exchange for two options to Hydro-Québec. The first option was never exercised and expired December 31, 2010. The second gives Hydro-Québec the right, upon one year's written notice, to curtail energy deliveries in a contract year (12 months beginning November 1) from an annual capacity factor of 75 to 50 percent due to adverse hydraulic conditions as measured at certain metering stations on unregulated rivers in Québec. This second option can be exercised five times through October 2015 but due to the notice provision there is a maximum remaining application of two times available. To date, Hydro-Québec has not exercised this option. We have determined that this second option is not a derivative because it is contingent upon a physical variable.

There are specific contractual provisions providing that in the event any VJO member fails to meet its obligation under the contract with Hydro-Québec, the remaining VJO participants will "step-up" to the defaulting party's share on a pro-rata basis. As of March 31, 2012, our obligation is about 47 percent of the total VJO power contract through 2016, and represents approximately $208.7 million, on a nominal basis.

In accordance with FASB's guidance for guarantees, we are required to disclose the "maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee." Such disclosure is required even if the likelihood is remote. With regard to the "step-up" provision in the VJO power contract, we must assume that all members of the VJO simultaneously default in order to estimate the "maximum potential" amount of future payments. We believe this is a highly unlikely scenario given that the majority of VJO members are regulated utilities with regulated cost recovery. Each VJO participant has received regulatory approval to recover the cost of this purchased power contract in its most recent rate applications. Despite the remote chance that such an event could occur, we estimate that our undiscounted purchase obligation would be an additional $247 million for the remainder of the contract, assuming that all members of the VJO defaulted by April 1, 2012 and remained in default for the duration of the contract. In such a scenario, we would then own the power and could seek to recover our costs from the defaulting members or our retail customers, or resell the power in the wholesale power markets in New England. The range of outcomes (full cost recovery, potential loss or potential profit) would be highly dependent on Vermont regulation and wholesale market prices at the time.

Independent Power Producers: We receive power from several IPPs, primarily so-called small power producers. These plants use water or biomass as fuel. Starting in 2012, we will also purchase power from some larger independent producers, primarily wind projects. Total purchases from IPPs were $6.4 million for the three months ended March 31, 2012 and $6.3 million for the three months ended March 31, 2011.

Nuclear Decommissioning Obligations We are obligated to pay our share of nuclear decommissioning costs for nuclear plants in which we have an ownership interest. We have an external trust dedicated to funding our joint-ownership share of future Millstone Unit #3 decommissioning costs. DNC has suspended contributions to the Millstone Unit #3 Trust Fund because the minimum NRC funding requirements have been met or exceeded. We have also suspended contributions to the Trust Fund, but could choose to renew funding at our own discretion as long as the minimum requirement is met or exceeded. If there is a need for additional decommissioning funding, we will be obligated to resume contributions to the Trust Fund.

We have equity ownership interests in Maine Yankee, Connecticut Yankee and Yankee Atomic. These plants are permanently shut down and completely decommissioned except for the spent fuel storage at each location. Our obligations related to these plants are described in Note 4 - Investments in Affiliates.

We also had a 35 percent ownership interest in the Vermont Yankee nuclear power plant through our equity investment in VYNPC, but the plant was sold in 2002. Our obligation for plant decommissioning costs ended when the plant was sold, except that VYNPC retained responsibility for the pre-1983 spent fuel disposal cost liability. VYNPC has a dedicated Trust Fund that meets most of the liability. Changes in the underlying interest rates that affect the earnings and the liability could cause the balance to be a surplus or deficit. Excess funds, if any, will be returned to us and the other former owners and must be applied to the benefit of retail customers.

DOE Litigation We have a 1.7303 joint-ownership percentage in Millstone Unit #3, in which DNC is the lead owner with 93.4707 percent of the plant joint-ownership. In January 2004 DNC filed, on behalf of itself and the two minority owners, including us, a lawsuit against the DOE seeking recovery of costs related to the storage of spent nuclear fuel arising from the failure of the DOE to comply with its obligations to commence accepting such fuel in 1998. A trial commenced in May 2008. On October 15, 2008, the United States Court of Federal Claims issued a favorable decision in the case, including damages specific to Millstone Unit #3. The DOE appealed the court's decision in December 2008. On February 20, 2009, the government filed a motion seeking an indefinite stay of the briefing schedule. On March 18, 2009, the court granted the government's request to stay the appeal. On November 19, 2009, DNC filed a motion to lift the stay. On April 12, 2010, the stay was lifted and a staggered briefing schedule was proposed, to which DNC has responded with a request to expedite the briefing schedule so that the appeals of all parties can be heard concurrently.

On June 30, 2010, the DOE filed its initial brief in the spent fuel damages litigation. This brief focuses on the costs awarded in connection with Millstone Unit #3. DNC replied to the government's brief in August, 2010. The government's reply brief was filed September 14, 2010 and briefing on the appeal is now complete. Oral argument on the government's appeal occurred before the Federal Circuit on January 12, 2011.

On April 25, 2011 the U.S. Court of Appeals for the Federal Circuit issued a decision affirming the spent fuel damages award for damages incurred through June 30, 2006 in connection with DOE's failure to begin accepting spent fuel for disposal. The government had the option to seek rehearing of the Federal Circuit decision and to seek review by the U.S. Supreme Court. The time period for seeking rehearing was 45 days.

On June 30, 2011, DNC informed us that the DOE decided not to seek rehearing and instead wishes to pay the awarded damages. In October 2011 we received $0.2 million and the amount was credited to our retail customers.

Also, see Note 4 - Investments in affiliates for additional DOE litigation proceedings.

Future Power AgreementsNew Hydro-QuébecAgreement: On August 12, 2010 we, along with GMP, VPPSA, Vermont Electric Cooperative, Inc., Vermont Marble, Town of Stowe Electric Department, City of Burlington, Vermont Electric Department, Washington Electric Cooperative, Inc. and the 13 municipal members of VPPSA (collectively, the "Buyers") entered into an agreement for the purchase of shares of 218 MW to 225 MW of energy and environmental attributes from HQUS commencing on November 1, 2012 and continuing through 2038. The HQUS PPA will replace approximately 65 percent of the existing VJO power contract discussed above.

The rights and obligations of the Buyers under the HQUS PPA, including payment of the contract price and indemnification obligations, are several and not joint or joint and several. Therefore, we shall have no responsibility for the obligations, financial or otherwise, of any other party to the HQUS PPA. The parties have also entered into related agreements, including collateral agreements between each Buyer and HQUS, a Hydro-Québec guaranty, an allocation agreement among the Buyers, and an assignment and assumption agreement between us and Vermont Marble, related to the acquisition.

On August 17, 2010, the Buyers filed a petition with the PSB asking for Certificates of Public Good under Section 248 of Title 30, Vermont Statutes Annotated. On April 15, 2011, the PSB issued an order approving the HQUS PPA.

Under the HQUS PPA, we are entitled to purchase an energy quantity of up to 5 MW from November 1, 2012 to October 31, 2015; 90.4 MW from November 1, 2015 to October 31, 2016; 101.4 MW from November 1, 2016 to October 31, 2020; 103.4 MW from November 1, 2020 to October 31, 2030; 112.8 MW from November 1, 2030 to October 31, 2035; and 27.4 MW from November 1, 2035 to October 31, 2038. These quantities include assumption of Vermont Marble's allocations as a result of our September 1, 2011 purchase of Vermont Marble.

Other Future Power Agreements: As we continue to build and diversify our power portfolio as planned and to comply with state law which establishes goals for including renewable power in our mix, we have signed several agreements for clean and competitively priced renewable energy. On September 9, 2010 we agreed to terms for purchasing output over nine years from Iberdrola Renewables' planned Deerfield Wind Project. The agreement was signed by the parties on December 13, 2010. Due to delays in receiving a necessary permit from the U.S. Forest Service, construction is not now scheduled to take place in a manner that would be sufficient for meeting the conditions precedent of the agreement and the project is now on hold. Conditions precedent not satisfied or waived on or before April 1, 2012 could result in termination of the contract by June 30, 2012. We are currently in discussions with Iberdrola, the parent company, with respect to terminating, reforming or replacing the agreement.

Other agreements signed in 2010 include: two separate agreements to purchase 30.3 percent of the actual output from Granite Reliable Wind project for 20 years beginning April 1, 2012 and an additional 20 percent for 15 years beginning in November 2012; an agreement to purchase the entire 4.99 MW output of Ampersand Gilman Hydro for five years starting April 1, 2012; and 15 MW of around-the-clock energy from J.P. Morgan Ventures Energy for the calendar years 2013 through 2015.

On July 27, 2011, in cooperation with an energy management firm, we conducted a highly structured Internet auction that involved a dozen pre-screened northeastern generators and energy marketers. When the bidding closed, we signed three contracts with an average price of approximately $47.50 per megawatt-hour, or 4.75 cents per kilowatt-hour.

Two of the contracts will fill the 2012 gap in our portfolio created by the end of the VY PPA. One will supply energy 24 hours per day from April 1, 2012 through the end of the year, while the other will provide both peak and off-peak power during specific periods in 2012 when we have remaining supply gaps. The third contract filled our energy needs during the planned Vermont Yankee refueling outage that ended November 3, 2011.

These purchase contracts will provide about 570,000 megawatt-hours of energy or about 20 percent of our power supply during the life of the contracts, for $27 million. The contracts are for so-called "system power," meaning they are not conditioned on the operation of individual power generation sources.

In September 2011, we also used the auction process to sell small amounts of projected excess energy to hedge price risks during the first two months of 2012.

Performance Assurance We are subject to performance assurance requirements through ISO-NE under the Financial Assurance Policy for NEPOOL members. At our current investment-grade credit rating, we have a credit limit of $3 million with ISO-NE. We are required to post collateral for all net power and transmission transactions in excess of this credit limit. Additionally, we purchase power in the wholesale market pursuant to contracts with third parties, and are required to post collateral under certain conditions defined in the contracts.

At March 31, 2012, we had posted $4.1 million of collateral under performance assurance requirements for certain of our power and transmission transactions, $3.5 million of which was represented by a letter of credit and $0.6 million of which was represented by cash and cash equivalents. At December 31, 2011, we had posted $3.9 million of collateral under performance assurance requirements for certain of our power and transmission transactions, $3.5 million of which was represented by a letter of credit and $0.4 million of which was represented by cash and cash equivalents.

Environmental Over the years, more than 100 companies have merged into or been acquired by CVPS. At least two of those companies used coal to produce gas for retail sale. Gas manufacturers, their predecessors and CVPS used waste disposal methods that were legal and acceptable then, but may not meet modern environmental standards and could represent a liability. These practices ended more than 50 years ago. Some operations and activities are inspected and supervised by federal and state authorities, including the EPA. We believe that we are in compliance with all laws and regulations and have implemented procedures and controls to assess and assure compliance. Corrective action is taken when necessary.

The total reserve for environmental matters was $0.3 million as of March 31, 2012 and December 31, 2011. The reserve for environmental matters is included in current liabilities on the Condensed Consolidated Balance Sheets and represents our best estimate of the cost to remedy issues at these sites based on available information as of the end of the applicable reporting periods. Below is a brief discussion of the significant sites for which we have recorded reserves.

Brattleboro Manufactured Gas Facility: In the 1940s, we owned and operated a manufactured gas facility in Brattleboro, Vermont. We ordered a site assessment in 1999 at the request of the State of New Hampshire. In 2001, New Hampshire indicated that no further action was required, although it reserved the right to require further investigation or remedial measures. In 2002, the VANR notified us that our corrective action plan for the site was approved. As of March 31, 2012, our estimate of the remaining obligation is $0.3 million.

The Windham Regional Commission and the Town of Brattleboro are currently pursuing the redevelopment of the gas plant site and waterfront area into vehicle parking with green space. This concept calls for the removal of the remnant gas plant building plus covering and otherwise avoiding contaminated areas instead of removing contaminated soil and debris.

We met with the Town of Brattleboro in 2011 and we agreed to an Amended and Restated Grant of Environmental Restrictions for the gas plant property. In November 2011, we contributed $0.2 million toward the remediation project, which will likely satisfy our obligation at this site. We will maintain a reserve until a corrective action plan has been implemented and green space has been constructed. Construction began in early 2012 and should be completed during the 2012 construction season.

Salisbury Substation: We completed internal testing and found PCBs and TPH, in addition to small quantities of pesticides in the soil and concrete at this substation. The substation is located adjacent to the Salisbury hydroelectric power station and both facilities underwent modernization projects in late 2011 and early 2012. Test results indicated that PCB, TPH and pesticide concentrations exceed state and federal regulatory limits in portions of the substation. In late 2011 and early 2012, we removed the contaminated material from the substation in accordance with VANR and EPA-approved remediation plans. The work consisted of excavation and removal of soil and concrete and there was more contaminated material than estimated. The site work is complete and we will submit the requisite summary reports to the VANR and EPA early in the second quarter of 2012. As of March 31, 2012, our estimate of the remaining obligation is less than $0.1 million.

To management's knowledge, there is no pending or threatened litigation regarding other sites with the potential to cause material expense. No government agency has sought funds from us for any other study or remediation.

Catamount Indemnifications On December 20, 2005, we completed the sale of Catamount, our wholly owned subsidiary, to CEC Wind Acquisition, LLC, a company established by Diamond Castle Holdings, a New York-based private equity investment firm. Under the terms of the agreements with Catamount and Diamond Castle Holdings, we agreed to indemnify them, and certain of their respective affiliates, in respect of a breach of certain representations and warranties and covenants, most of which ended June 30, 2007, except certain items that customarily survive indefinitely. Indemnification is subject to a $1.5 million deductible and a $15 million cap, excluding certain customary items. Environmental representations are subject to the deductible and the cap, and such environmental representations for only two of Catamount's underlying energy projects survived beyond June 30, 2007. Our estimated "maximum potential" amount of future payments related to these indemnifications is limited to $15 million. We have not recorded any liability related to these indemnifications. To management's knowledge, there is no pending or threatened litigation with the potential to cause material expense. No government agency has sought funds from us for any study or remediation.

Leases and support agreements Operating Leases: We have two master lease agreements for vehicles and related equipment. On October 30, 2009, we signed a vehicle lease agreement to finance many of the vehicles covered by a former agreement. Our guarantee obligation under this lease will not exceed 8 percent of the acquisition cost. The maximum amount of future payments under this guarantee at March 31, 2012 is approximately $0.3 million. The total future minimum lease payments required for all lease schedules under this agreement at March 31, 2012 is $2.0 million. As of March 31, 2012 there is no credit line in place for additions under this agreement. The total acquisition cost of all lease additions under this agreement at March 31, 2012 was $4.1 million.

On October 24, 2008, we entered into an operating lease for new vehicles and other related equipment. Our guarantee obligation under this lease is limited to 5 percent of the acquisition cost. The maximum amount of future payments under this guarantee is approximately $0.1 million. The total future minimum lease payments required for all lease schedules under this agreement at March 31, 2012 is $1.6 million. As of March 31, 2012 there is no credit line in place for additions under this agreement. The total acquisition cost of all lease additions under this agreement at March 31, 2012 was $2.9 million.

Legal Proceedings We are involved in legal and administrative proceedings, including civil litigation, in the normal course of business as well as a number of lawsuits relating to our pending merger agreement with Gaz Métro that are described in Note 1 - Business Organization, Litigation Related to Merger Agreement. We are unable to fully determine a range of reasonably possible court-ordered damages, settlement amounts, and related litigation costs or legal liabilities that would be in excess of amounts accrued and amounts covered by insurance. Based on the information currently available, we do not believe that it is probable that any such legal liability will have a material impact on our consolidated financial position. It is reasonably possible that additional legal liabilities that may result from changes in estimates could have a material impact on our results of operations, financial condition or cash flows.